MORGAN STANLEY SPECTRUM STRATEGIC LP - 10-K Annual Report

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

FORM 10-K

[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required]
For the year ended December 31, 2004 or

[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from ________________to___________________

Commission File Number 0-26280

MORGAN STANLEY SPECTRUM STRATEGIC L.P.

(Exact name of registrant as specified in its Limited Partnership Agreement)

DELAWARE 13-3782225
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

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

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

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange
Title of each class on which registered

None None

Securities registered pursuant to Section 12(g) of the Act:

Units of Limited Partnership Interest

(Title of Class)

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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment of this Form 10-K. [X]

Indicate by check-mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes No X

State the aggregate market value of the Units of Limited Partnership Interest
held by non-affiliates of the registrant. The aggregate market value shall be
computed by reference to the price at which Units were sold as of the last
business day of the registrant?s most recently completed second fiscal quarter:
$161,663,052 at June 30, 2004.

DOCUMENTS INCORPORATED BY REFERENCE
(See Page 1)

MORGAN STANLEY SPECTRUM STRATEGIC L.P.
INDEX TO ANNUAL REPORT ON FORM 10-K
DECEMBER 31, 2004

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the following documents are incorporated by reference
as follows:

Documents Incorporated Part of Form 10-K

Partnership?s Prospectus dated
April 28, 2004 I

Partnership's Supplement to the
Prospectus dated October 19, 2004 I

Annual Report to Morgan Stanley
Spectrum Series Limited Partners
for the year ended December 31,
2004 II, III, and IV

PART I
Item 1. BUSINESS

(a) General Development of Business. Morgan Stanley Spectrum
Strategic L.P. (the "Partnership") is a Delaware limited
partnership organized in 1994 to engage primarily in the
speculative trading of futures contracts, options on futures
contracts, forward contracts, and options on 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
commenced trading operations on November 2, 1994. The Partnership
is one of the Morgan Stanley Spectrum series of funds, comprised
of the Partnership, Morgan Stanley Spectrum Currency L.P., Morgan
Stanley Spectrum Global Balanced L.P., Morgan Stanley Spectrum
Select L.P., and Morgan Stanley Spectrum Technical L.P.
(collectively, the ?Spectrum Series?).

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.?), Morgan Stanley & Co. International Limited (?MSIL?), and
Morgan Stanley Capital Group Inc. (?MSCG?). Demeter, Morgan
Stanley DW, MS & Co., MSIL, and MSCG are wholly-owned
subsidiaries of Morgan Stanley. The trading advisors to the
Partnership are Blenheim Capital Management, L.L.C.,
Eclipse Capital Management, Inc., and effective November 1, 2004
FX Concepts (Trading Advisor), Inc. (individually, a ?Trading
Advisor?, or collectively, the ?Trading Advisors?).

Effective April 30, 2004, Allied Irish Capital Management, Ltd.
was terminated as trading advisor for the Partnership.

Units of limited partnership interest (?Unit(s)?) are sold at
monthly closings at a purchase price equal to 100% of the net
asset value per Unit as of the close of business on the last day
of each month.

The managing underwriter for the Partnership is Morgan Stanley DW.

The Partnership's net asset value per Unit at December 31, 2004
was $14.56, representing an increase of 1.7 percent from the net
asset value per Unit of $14.31 on December 31, 2003. For a more
detailed description of the Partnership's business see
subparagraph (c).

(b) Financial Information about Segments. For financial infor-
mation reporting purposes, the Partnership is deemed to engage in
one industry segment, the speculative trading of futures,
forwards, and options on such contracts. The relevant financial
information is presented in Items 6 and 8.
(c) Narrative Description of Business. The Partnership is
in the business of speculative trading of futures, forwards, and
options pursuant to trading instructions provided by the Trading
Advisors. For a detailed description of the different facets of
the Partnership's business, see those portions of the
Partnership?s prospectus, dated April 28, 2004 (the ?Prospectus?),
and the Partnership's supplement to the Prospectus dated October
19, 2004 (the Supplement"), incorporated by reference in this Form
10-K, set forth below.

Facets of Business
1. Summary 1. "Summary" (Pages 1-9 of
the Prospectus and Pages
S-1 ? S-2 of the
Supplement).

2. Futures, Options, and 2. "The Futures, Options, and
Forwards Markets Forwards Markets" (Pages
140-144 of the Prospectus).

3. Partnership?s Trading 3. ?Use of Proceeds? (Pages
Arrangements and 26-28 of the Prospectus
Policies and Page S-6 of the
Supplement). ?The Trading
Advisors? (Pages 68-118
of the Prospectus and
Pages S-31 ? S-41 of the
Supplement).

4. Management of the Part- 4. ?The Trading Advisors ?
nership The Management Agree-
ments? (Page 68 of the
Prospectus), ?The
General Partner? (Pages
63-67 of the Prospectus
and Pages S-28 ? S-30 of
the Supplement), ?The Com-
modity Brokers? (Pages
121-122 of the Prospectus
and Page S-41 of the
Supplement) and ?The
Limited Partnership
Agreements?(Pages 123-
127 of the Prospectus).

5. Taxation of the Partner- 5. ?Material Federal Income
ship?s Limited Partners Tax Considerations? and
?State and Local Income Tax
Aspects? (Pages 133-139 of
the Prospectus).

(d) Financial Information about Geographic Areas. The Partnership
has not engaged in any operations in foreign countries; however,
the Partnership (through the commodity brokers) enters into
forward contract transactions where foreign banks are the
contracting party and trades futures, forwards, and options on
foreign exchanges.

(e) Available Information. The Partnership files annual reports
on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K, and all amendments to these reports with the Securities
and Exchange Commission (?SEC?). You may read and copy any
document filed by the Partnership at the SEC?s Public Reference
Room at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for information on
the Public Reference Room. The Partnership does not
maintain an internet website, however, the SEC maintains a website
that contains annual, quarterly, and current reports, proxy
statements, and other information that issuers (including the
Partnership) file electronically with the SEC. The SEC?s website
address is http://www.sec.gov.

Item 2. PROPERTIES
The Partnership?s executive and administrative offices are located
within the offices of Morgan Stanley DW. The Morgan Stanley DW
offices utilized by the Partnership are located at 330 Madison
Avenue, 8th Floor, New York, NY 10017.

Demeter changed its address in August 2004 from 825 Third Avenue,
9th Floor, New York, NY 10022 to 330 Madison Avenue, 8th Floor,
New York, NY 10017.

Item 3. LEGAL PROCEEDINGS
None.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II

Item 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP UNITS AND RELATED
SECURITY HOLDER MATTERS

(a) Market Information. There is no established public trading
market for Units of the Partnership.

(b) Holders. The number of holders of Units at December 31, 2004
was approximately 20,560.

(c) Distributions. No distributions have been made by the
Partnership since it commenced trading operations on November 2,
1994. Demeter has sole discretion to decide what distributions, if
any, shall be made to investors in the Partnership. Demeter
currently does not intend to make any distributions of
Partnership?s profits.

(d) Securities Sold; Consideration. 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 last day of
each month.

The aggregate price of the Units sold through December 31, 2004
was $255,723,547.

(e) Underwriter. The managing underwriter for the Partnership is
Morgan Stanley DW.
(f) Use of Proceeds.

Item 6. SELECTED FINANCIAL DATA (in dollars)

Item 7. 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., MSIL, and MSCG as
clearing brokers in separate futures, forwards, and options
trading accounts established for each Trading Advisor. Such
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 Commodity Futures Trading Commission
for investment of customer segregated or secured funds. Since the
Partnership?s sole purpose is to trade in futures, forwards, and
options, it is expected that the Partnership will continue to own
such liquid assets for margin purposes.

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

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

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

Capital Resources. The Partnership does not have, nor expects to
have, any capital assets. Redemptions, exchanges, and sales of
Units in the future will affect the amount of funds available for
investments in futures, forwards, and options in subsequent
periods. It is not possible to estimate the amount, and therefore
the impact, of future inflows and outflows of Units.
There are no known material trends, favorable or
unfavorable, that would affect, nor any expected material changes
to, the Partnership?s capital resource arrangements at the present
time.

Off-Balance Sheet Arrangements and Contractual Obligations. The
Partnership does not have any off-balance sheet arrangements, nor
does it have contractual obligations or commercial commitments to
make future payments that would affect its liquidity or capital
resources.

Results of Operations
General. The Partnership?s results depend on the Trading Advisors
and the ability of each Trading Advisor?s trading program to take
advantage of price movements in the futures, forwards, and options
markets. The following presents a summary of the Partnership?s
operations for each of the three years in the period ended
December 31, 2004, 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 during the period in question.
Past performance is no guarantee of future results.
The Partnership?s results of operations set forth in the financial
statements are prepared in accordance with accounting principles
generally accepted in the United States of America, which require
the use of certain accounting policies that affect the amounts
reported in these financial statements, including the following:
The contracts the Partnership trades are accounted for on a trade-
date basis and marked to market on a daily basis. The difference
between their cost and market value is recorded on the Statements
of Operations as ?Net change in unrealized trading profit (loss)?
for open (unrealized) contracts, and recorded as ?Realized trading
profit (loss)? when open positions are closed out. The sum of
these amounts, along with the ?Proceeds from Litigation
Settlement?, constitutes the Partnership?s trading results. The
market value of a futures contract is the settlement price on the
exchange on which that futures contract is traded on a particular
day. The value of foreign currency forward contracts is based on
the spot rate as of the close of business. Interest income, 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.

The Partnership recorded total trading results including interest
totaling $17,867,892 and expenses totaling $16,619,078, resulting
in net income of $1,248,814 for the year ended December 31, 2004.
The Partnership?s net asset value per Unit increased from $14.31
at December 31, 2003 to $14.56 at December 31, 2004. Total
redemptions and subscriptions for the year were $13,839,146
and $74,561,018, respectively, and the Partnership?s ending
capital was $183,241,125 at December 31, 2004, an increase of
$61,970,686 from ending capital at December 31, 2003 of
$121,270,439.

The most significant trading gains of approximately 8.3% were
recorded in the agricultural markets, primarily during the first
five months of the year, from long futures positions in soybeans,
soybean-related products, corn, and sugar. During the first
quarter, soybean and corn prices finished higher, especially
during February, due to increased exports abroad and greater
demand from Asia. Long futures positions in sugar also benefited
as prices rallied during April and June amid diminished market
supply, increased demand, and inflation concerns. In the metals
markets, gains of approximately 4.7% were recorded primarily
during the first quarter and the final two months of the year,
from long futures positions in base metals. During the first
quarter, prices trended higher due to a declining U.S. dollar and
increased demand from Asia. During September, long base metals
futures positions benefited as prices moved higher in
response to continued demand from China and reports of lower-
than-expected inventories. During November and December, long
base metals positions continued to profit from the decline in
the U.S. dollar. Relatively smaller Partnership gains of
approximately 1.0% achieved in the global interest rate markets
occurred primarily during the first and third quarter of the year
from long positions in European interest rate futures. During
the first quarter, long positions profited as global bond prices
rallied in response to a lack of inflation and no increases in
interest rates by the European Central Bank. Prices also trended
higher during March amid uncertainty in the equity markets,
disappointing U.S. economic data, and ?safe-haven? buying
following the terrorist attack in Madrid. During the third
quarter, long European interest rate futures positions profited
after prices trended higher amid rising oil prices, a drop in
equity prices, and concern for economic growth. A portion of the
Partnership?s overall gains for the year was offset by losses of
approximately 2.0% incurred in the global stock index markets,
primarily during the first and third quarter of the year. During
the first quarter, long European and Japanese equity index
futures positions were unprofitable as equity prices dropped
during February and early March amid weakness in the U.S.
technology sector and growing geopolitical uncertainty. During
the third quarter, long European, Asian, and U.S. stock index
futures experienced losses as prices reversed lower during July
due to the release of disappointing U.S. employment data,
surging energy prices, and concern for potential terrorist
attacks. Losses of approximately 0.7% in the currency markets
resulted primarily during the first and third quarter. During
the first quarter, long positions in the Japanese yen versus the
U.S. dollar resulted in losses after the Bank of Japan weakened
the yen through currency market intervention activity. During
the third quarter, long European currency positions, such as the
Swiss franc and Norwegian krone versus the U.S. dollar, generated
negative performance as the U.S. dollar reversed higher amid
upbeat market sentiment. Smaller losses of approximately 0.6%
were recorded in the energy markets, primarily during the second
quarter and the month of November. During the second quarter,
losses resulted from long futures positions in crude oil and its
related products, and natural gas as energy prices declined in
response to increases in output and energy reserves. During
November, long positions in natural gas experienced losses as
prices reversed sharply lower amid hefty reserves and seasonally
moderate temperatures.

The Partnership recorded total trading results including interest
totaling $31,984,167 and expenses totaling $11,470,755, resulting
in net income of $20,513,412 for the year ended December 31,
2003. The Partnership's net asset value per Unit increased from
$11.54 at December 31, 2002 to $14.31 at December 31, 2003. Total
redemptions and subscriptions for the year were $11,168,017 and
$36,555,972, respectively, and the Partnership's ending
capital was $121,270,439 at December 31, 2003, an increase of
$45,901,367 from ending capital at December 31, 2002 of
$75,369,072.

The most significant trading gains of approximately 11.1% were
recorded in the currency markets, primarily during September,
from long euro positions against the U.S. dollar. The U.S.
dollar?s weakness was caused by concerns about the strength of
the U.S. economy and the potential impact of a statement by the
G-7 countries supporting ?more flexible exchange rates.? The G-7
countries consist of France, the U.S., Britain, Germany, Japan,
Italy, and Canada. The G-7?s statement was viewed as part of an
effort by the Bush administration to allow the U.S. dollar to
weaken against its counterparts. The U.S. dollar tumbled during
the month, falling to three-month lows against the euro. During
May, long positions in the euro versus the U.S. dollar generated
gains as the value of the euro strengthened to an all-time high
amid uncertainty regarding the Bush administration?s economic
policy, renewed fears of potential terrorist attacks against
American interests, and investor preference for non-U.S. dollar
assets. Additional gains were recorded from long positions in
the Australian dollar versus the U.S. dollar as its value
strengthened during January, April, and May in response to
continued weakness in the U.S. dollar and higher interest rates
in Australia relative to those in the U.S. Gains of
approximately 8.3% in the metals markets stemmed from long
futures positions in nickel, copper, and zinc. Base metals
prices climbed higher during January following the release of
positive U.S. manufacturing data and continued supply and demand
concerns. Long futures positions in nickel and copper provided
further gains in this sector as prices trended higher during July
amid renewed optimism concerning a U.S. economic recovery and
hopes for increased industrial production. During the fourth
quarter, prices rallied during October in response to growing
investor sentiment that the global economy was on the path to
recovery and increased demand, especially from China. During
December, nickel and copper prices rose to fourteen and six-year
highs, respectively, benefiting from increased demand from China
and the strengthening of the global economy. Additional profits
of approximately 8.3% were achieved in the agricultural markets.
During January, long positions in sugar futures yielded gains as
prices rose amid speculative buying ahead of the Brazilian
harvest. Gains were also provided from long positions in cocoa
futures during August as prices rallied amid short-covering,
tight U.S. cocoa reserves, and dry weather in the Ivory Coast,
the world?s top cocoa producer. Cocoa prices rallied again
during the first two weeks of December in response to political
developments in the Ivory Coast, thereby, generating profits for
long cocoa positions. Meanwhile, long futures positions in
cotton benefited as prices rallied to their highest level in
seven years during December following an increase in export
orders from China. Further gains in the agricultural
sector stemmed from long futures positions in soybeans and cotton
during April as increased demand from China and tight market
supplies lifted prices. Rough rice futures positions profited
during April as prices rose in response to the Iraqi war and the
potential for increased Iraqi demand after the war. In the
global stock index markets, gains of approximately 5.5% were
contributed during May and June from long positions in U.S. and
European stock index futures as prices moved higher amid
increased optimism regarding the U.S. economic recovery and a
rise in investor sentiment. Long positions in Japanese stock
index futures also returned gains as Japanese equity markets
tracked gains in global stock indices during September. During
December, the Partnership generated gains from long U.S. and
European stock index futures positions as strong U.S.
manufacturing data and the strongest U.S. quarterly growth rate
in twenty years resulted in higher prices. A portion of the
Partnership?s overall gains for the year was offset by losses of
approximately 0.1% in the energy markets, primarily during May,
from short positions in crude oil futures and its related
products as prices moved higher amid supply concerns and renewed
fears concerning security at Middle Eastern refining facilities.
Long positions in natural gas futures experienced losses during
June as prices reversed sharply lower following news of larger-
than-expected U.S. reserves.

The Partnership recorded total trading results including
interest totaling $14,078,687 and expenses totaling $7,764,271,
resulting in net income of $6,314,416 for the year ended December
31, 2002. The Partnership's net asset value per Unit increased
from $10.55 at December 31, 2001 to $11.54 at December 31, 2002.
Total redemptions and subscriptions for the year were $13,238,629
and $13,475,899, respectively, and the Partnership's ending
capital was $75,369,072 at December 31, 2002, an increase of
$6,551,686 from ending capital at December 31, 2001 of
$68,817,386.

The most significant trading gains of approximately 18.3% were
recorded in the agricultural markets primarily from long futures
positions in cocoa as political unrest in the Ivory Coast
threatened supplies throughout much of the year. Additional
gains were recorded in the agricultural markets from long futures
positions in coffee as technical factors and concerns regarding
supplies placed upward pressure on prices. Further gains
resulted from long positions in wheat, soybean, and corn futures,
as weather-related concerns threatened crops in the U.S. Midwest.
In the currency markets, gains of approximately 7.6% were
recorded from long positions in the euro and Swiss franc versus
the U.S. dollar as the U.S. dollar?s value weakened amid
investors? fears concerning increased global tensions and
prolonged uncertainty regarding the U.S. economy. A portion of
the Partnership?s overall gains was offset by losses of
approximately 2.9% recorded in the global stock index futures
markets from long positions in U.S. and European stock index
futures as prices continued to weaken throughout a majority of
the year amid ongoing concerns regarding the global economic
recovery, corporate accounting scandals, and geopolitical
concerns. Additional losses were incurred from short positions in
U.S. and European stock index futures as global equity prices
reversed higher during the fourth quarter amid temporary economic
optimism. In the metals futures markets, losses of approximately
2.9% were experienced from long positions in copper, aluminum,
and zinc futures as prices reversed lower during April and July
amid growing inventory levels and weak industrial demand.

For an analysis of unrealized gains and (losses) by contract type
and a further description of 2004 trading results, refer to the
Partnership?s Annual Report to Limited Partners for the year ended
December 31, 2004, which is incorporated by reference to Exhibit
13.01 of this Form 10-K.

The Partnership's gains and losses are allocated among its
partners for income tax purposes.

Market Risk.
Financial Instruments. The Partnership is a party to financial
instruments with elements of off-balance sheet market and credit
risk. The Partnership may trade futures contracts, options on
futures contracts, forward contracts, and options on
forward contracts on physical commodities and other commodity
interests, including, but not limited to, foreign currencies,
financial instruments, metals, energies, and agricultural
products. In entering into these contracts, the Partnership is
subject to the market risk that such contracts may be
significantly influenced by market conditions, such as interest
rate volatility, resulting in such contracts being less valuable.
If the markets should move against all of the positions held by
the Partnership at the same time, and if the Trading Advisors
were unable to offset positions of the Partnership, the
Partnership could lose all of its assets and the limited partners
would realize a 100% loss.

In addition to the Trading Advisors? internal controls, the
Trading Advisors must comply with the Partnership?s trading
policies that include standards for liquidity and leverage that
must be maintained. The Trading Advisors and Demeter monitor the
Partnership's trading activities to ensure compliance with the
trading policies and Demeter can require the Trading Advisors to
modify positions of the Partnership if Demeter believes they
violate the Partnership's trading policies.

Credit Risk.
In addition to market risk, in entering into futures, forward, and
options contracts there is a credit risk to the Partnership that
the counterparty on a contract will not be able to meet its
obligations to the Partnership. The ultimate counterparty or
guarantor of the Partnership for futures, forward, and options
contracts traded in the United States and most foreign exchanges
on which the Partnership trades is the clearinghouse associated
with such exchange. In general, a clearinghouse is backed by the
membership of the exchange and will act in the event of non-
performance by one of its members or one of its member?s
customers, which should significantly reduce this credit risk.
There is no assurance that a clearinghouse, exchange, or other
exchange member will meet its obligations to the Partnership, and
Demeter and the commodity brokers will not indemnify the
Partnership against a default by such parties. Further, the law is
unclear as to whether a commodity broker has any obligation to
protect its customers from loss in the event of an exchange or
clearinghouse defaulting on trades effected for the broker?s
customers. In cases where the Partnership trades off-exchange
forward contracts with a counterparty, the sole recourse of the
Partnership will be the forward contract?s counterparty.

Demeter deals with these credit risks of the Partnership in
several ways. First, it monitors the Partnership?s credit
exposure to each exchange on a daily basis. The commodity
brokers inform the Partnership, as with all their customers, of
its net margin requirements for all its existing open positions
and Demeter has installed a system which permits it to monitor
the Partnership?s potential net credit exposure, exchange
by exchange, by adding the unrealized trading gains on each
exchange, if any, to the Partnership?s margin liability thereon.

Second, the Partnership?s trading policies limit the amount of its
net assets that can be committed at any given time to futures
contracts and require a minimum amount of diversification in the
Partnership?s trading, usually over several different products and
exchanges. Historically, the Partnership?s exposure to any one
exchange has typically amounted to only a small percentage of its
total net assets and on those relatively few occasions where the
Partnership?s credit exposure climbs above such level, Demeter
deals with the situation on a case by case basis, carefully
weighing whether the increased level of credit exposure remains
appropriate. Material changes to the trading policies may be made
only with the prior written approval of the limited partners
owning more than 50% of Units then outstanding.

Third, with respect to forward and options on forward contract
trading, the Partnership trades with only those counterparties
which Demeter, together with Morgan Stanley DW, have determined to
be creditworthy. The Partnership presently deals with MS & Co. as
the sole counterparty on forward and options on forward contracts.

For additional information, see the ?Financial Instruments?
section under ?Notes to Financial Statements? in the
Partnership?s Annual Report to Limited Partners for the year
ended December 31, 2004, which is incorporated by reference to
Exhibit 13.01 of this Form 10-K.

Inflation has not been a major factor in the Partnership?s
operations.

Item 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Introduction

The Partnership is a commodity pool engaged primarily in the
speculative trading of futures, forwards, and options. The
market-sensitive instruments held by the Partnership are acquired
for speculative trading purposes only and, as a result, all or
substantially all of the Partnership?s assets are at risk of
trading loss. Unlike an operating company, the risk of market-
sensitive instruments is inherent to the primary business activity
of the Partnership.

The futures, forwards, and options traded by the Partnership
involve varying degrees of related market risk. Market risk is
often dependent upon changes in the level or volatility of
interest rates, exchange rates, and prices of financial
instruments and commodities, factors that result in frequent
changes in the fair value of the Partnership?s open positions, and
consequently in its earnings, whether realized or unrealized, and
cash flow. Gains and losses on open positions of exchange-traded
futures, forwards, and options are settled daily through
variation margin. Gains and losses on off-exchange-traded forward
currency contracts are settled upon termination of the contract,
however, the Partnership is required to meet margin requirements
equal to the net unrealized loss on open contracts in the
Partnership accounts with the counterparty, which is accomplished
by daily maintenance of the cash balance in a custody account held
at Morgan Stanley DW for the benefit of MS & Co.

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

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

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

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

Quantifying the Partnership?s Trading Value at Risk
The following quantitative disclosures regarding the 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 and cash flow.

The Partnership?s risk exposure in the market sectors
traded by the Trading Advisors is estimated below in terms of VaR.
The Partnership estimates VaR using a model based upon historical
simulation (with a confidence level of 99%) which involves
constructing a distribution of hypothetical daily changes in the
value of a trading portfolio. The VaR model takes into account
linear exposures to risks 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 continuously evolving
as trading portfolios become more diverse and modeling techniques
and systems capabilities improve. Please note that the VaR model
is used to numerically quantify market risk for historic reporting
purposes only and is not utilized by either Demeter or the Trading
Advisors in their daily risk management activities. Please
further note that VaR as described above may not be comparable to
similarly titled measures used by other entities.

The Partnership?s Value at Risk in Different Market Sectors
The following table indicates the VaR associated with the
Partnership?s open positions as a percentage of total net assets
by primary market risk category at December 31, 2004 and 2003.
At December 31, 2004 and 2003, the Partnership?s total
capitalization was approximately $183 million and $121 million,
respectively.

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

Currency (5.47)% (0.93)%

Equity (1.09) (1.69)

Interest Rate (0.46) (0.24)

Commodity (1.01) (1.67)

Aggregate Value at Risk (6.00)% (2.61)%

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 December 31, 2004 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 January 1, 2004 through December 31, 2004.

Primary Market Risk Category High Low Average
Currency (5.47)% (0.08)% (1.59)%
Equity (1.21) - (0.68)
Interest Rate (1.73) (0.21) (0.95)
Commodity (1.31) (0.52) (0.96)
Aggregate Value at Risk (6.00) (1.44)% (2.94)%

Limitations on Value at Risk as an Assessment of Market Risk
VaR models permit estimation of a portfolio?s aggregate market
risk exposure, incorporating a range of varied market risks;
reflect risk reduction due to portfolio diversification or hedging
activities; and can cover a wide range of portfolio assets.
However, VaR risk measures should be viewed in light of the
methodology?s limitations, which include, but may not be limited
to the following:

* past changes in market risk factors will not always result in
accurate predictions of the distributions and correlations of
future market movements;
* changes in portfolio value caused by market movements may
differ from those of the VaR model;
* VaR results reflect past market fluctuations applied to current
trading positions while future risk depends on future
positions;

* VaR using a one-day time horizon does not fully capture the
market risk of positions that cannot be liquidated or hedged
within one day; and
* the historical market risk factor data used for VaR estimation
may provide only limited insight into losses that could be
incurred under certain unusual market movements.

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

The VaR tables provided present the results of the Partnership?s
VaR for each of the Partnership?s market risk exposures and on an
aggregate basis at December 31, 2003, and for the four quarter-end
reporting periods during calendar year 2004. VaR is not
necessarily representative of the Partnership?s historic risk, nor
should it be used to predict the Partnership?s future financial
performance or its ability to manage or monitor risk. There can
be no assurance that the Partnership?s actual losses on a
particular day will not exceed the VaR amounts indicated above or
that such losses will not occur more than once in 100 trading
days.

Non-Trading Risk
The Partnership has non-trading market risk on its foreign cash
balances. These balances and any market risk they may represent
are immaterial.

The Partnership also maintains a substantial portion
(approximately 88% as of December 31, 2004) of its available
assets in cash at Morgan Stanley DW. A decline in short-term
interest rates would result in a decline in the Partnership?s cash
management income. This cash flow risk is not considered to be
material.

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

Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnership?s
market risk exposures ? except for (A) those disclosures that are
statements of historical fact and (B) the descriptions of how the
Partnership manages its primary market risk exposures ? constitute
forward-looking statements within the meaning of Section 27A of
the Securities Act and Section 21E of the Securities Exchange Act.
The Partnership?s primary market risk exposures, as well as
the strategies used and to be used by Demeter and the Trading
Advisors for managing such exposures, are subject to numerous
uncertainties, contingencies and risks, any one of which could
cause the actual results of the Partnership?s risk controls to
differ materially from the objectives of such strategies.
Government interventions, defaults and 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 December 31, 2004, by market sector. It may be
anticipated, however, that these market exposures will vary
materially over time.

Currency. The primary market exposure of the Partnership at
December 31, 2004 was to the currency sector. The Partnership?s
currency exposure is to exchange rate fluctuations, primarily
fluctuations which disrupt the historical pricing relationships
between different currencies and currency pairs. Interest rate
changes, as well as political and general economic conditions
influence these fluctuations. The Partnership trades a
large number of currencies, including cross-rates ? i.e.,
positions between two currencies other than the U.S. dollar. At
December 31, 2004, the Partnership?s major exposures were to the
euro, Japanese yen, Australian dollar, British pound, and Swiss
franc currency crosses, as well as to outright U.S. dollar
positions. Outright positions consist of the U.S. dollar vs.
other currencies. These other currencies include major and minor
currencies. Demeter does not anticipate that the risk associated
with the Partnership?s currency trades will change significantly
in the future.

Equity. At December 31, 2004, there was market exposure to
equity price risk in the G-7 countries. The stock index futures
traded by the Partnership are by law limited to futures on
broadly-based indices. At December 31, 2004, the Partnership?s
primary exposures were to the NASDAQ (U.S.), S&P 500 (U.S.), Hang
Seng (China), and DAX (Germany) stock indices. The Partnership
is exposed to the risk of adverse price trends or static markets
in the U.S., Chinese, European, and Japanese stock indices.
Static markets would not cause major market changes, but would
make it difficult for the Partnership to avoid trendless price
movements, resulting in numerous small losses.

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

Commodity.
Energy. The second largest market exposure of the
Partnership at December 31, 2004 was to energy sector. The
Partnership?s energy exposure was shared primarily by
futures contracts in crude oil and its related products, and
natural gas. Price movements in these markets result from
geopolitical developments, particularly in the Middle East,
as well as weather patterns and other economic fundamentals.
Significant profits and losses, which have been experienced
in the past, are expected to continue to be experienced in
the futures. Natural gas has exhibited volatility in
prices resulting from weather patterns and supply and demand
factors and will likely continue in this choppy pattern.

Metals. At December 31, 2004, the Partnership had market
exposure in the metals sector. The Partnership's metals
exposure at December 31, 2004 was to fluctuations in the
price of base metals, such as copper, aluminum, nickel,
lead, and zinc, and precious metals, such as gold and
silver. Economic forces, supply and demand inequalities,
geopolitical factors, and market expectations influence
price movements in these markets. The Trading Advisors
utilize the trading system(s) to take positions when market
opportunities develop, and Demeter anticipates that the
Partnership will continue to do so.

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

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

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

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

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

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements are incorporated by reference to the
Partnership's Annual Report, which is filed as Exhibit 13.01
hereto.

Supplementary data specified by Item 302 of Regulation S-K:

Summary of Quarterly Results (Unaudited)

Quarter Total Trading Results Net Net Income/
Ended including interest Income/(Loss) (Loss) Per Unit

2004
March 31 $ 19,386,598 $ 14,056,323 $ 1.56
June 30 (9,056,217) (12,686,034) (1.26)
September 30 773,705 (2,350,517) (0.23)
December 31 6,763,806 2,229,042 0.18

Total $ 17,867,892 $ 1,248,814 $ 0.25

2003
March 31 $ 7,634,556 $ 4,781,178 $ 0.75
June 30 2,970,073 442,228 0.07
September 30 7,306,514 4,972,399 0.67
December 31 14,073,024 10,317,607 1.28

Total $ 31,984,167 $ 20,513,412 $ 2.77

Item 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE

None.

Item 9A. CONTROLS AND PROCEDURES
(a) As of the end of the period covered by this annual report,
the President and Chief Financial Officer of Demeter, the
general partner of the Partnership, have evaluated the
effectiveness of the Partnership?s disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) of
the Exchange Act), and have judged such controls and
procedures to be effective.

(b) There have been no material changes during the period covered
by this annual report in the Partnership?s internal controls
or in other factors that could significantly affect these
controls subsequent to the date of their evaluation.

Management?s Report on Internal Control Over Financial Reporting
Demeter is responsible for the management of the Partnership.

Management of Demeter (?Management?) is responsible for
establishing and maintaining adequate internal control over
financial reporting. The internal control over financial
reporting is designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles.

The Partnership?s internal control over financial reporting
includes those policies and procedures that:

* Pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and
dispositions of the assets of the Partnership;

* Provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and
that the Partnership?s transactions are being made only in
accordance with authorizations of Management and directors;
and

* Provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of
the Partnership?s assets that could have a material effect on
the financial statements.

Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Partnership?s
internal control over financial reporting as of December 31,
2004. In making this assessment, Management used the criteria
set forth by the Committee of Sponsoring Organizations of the
Treadway Commission in Internal Control-Integrated Framework.
Based on our assessment and those criteria, Management believes
that the Partnership maintained effective internal control over
financial reporting as of December 31, 2004.

Deloitte & Touche LLP, the Partnership?s independent registered
public accounting firm, has issued an audit report on Management?s
assessment of the Partnership?s internal control over financial
reporting and on the effectiveness of the Partnership?s internal
control over financial reporting. This report, which expresses
unqualified opinions on Management?s assessment and on the
effectiveness of the Partnership?s internal control over financial
reporting, appears under ?Report of Independent Registered Public
Accounting Firm? in the Partnership?s Annual Report to Limited
Partners for the year ended December 31, 2004.

Item 9B. OTHER INFORMATION
The Board of Directors of Demeter, the general partner of the
registrant, approved the engagement of Ernst & Young LLP as the
registrant?s principal accountant for tax purposes. Ernst & Young
LLP was engaged by the registrant on November 1, 2004. Deloitte &
Touche LLP will continue as the registrant?s principal accountant
and audit the financial statements of the registrant.
There have been no material disagreements with Deloitte &
Touche LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure.

PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
There are no directors or executive officers of the Partnership.
The Partnership is managed by Demeter.

Directors and Officers of the General Partner
The directors and executive officers of Demeter are as follows:

Mr. Jeffrey D. Hahn resigned his position as Chief Financial
Officer and Director of Demeter.

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

Mr. Jeffrey A. Rothman, age 43, is the Chairman of the Board of
Directors and President of Demeter. Mr. Rothman is the Managing
Director of Morgan Stanley Managed Futures, responsible for
overseeing all aspects of the firm?s managed futures department.
Mr. Rothman has been with the managed futures department for
eighteen years. Throughout his career, Mr. Rothman has helped
with the development, marketing, and administration of
approximately 40 commodity pools. Mr. Rothman is an active member
of the Managed Funds Association and has recently served on its
Board of Directors. Mr. Rothman has a B.A. degree in Liberal Arts
from Brooklyn College, New York.

Mr. Richard A. Beech, age 53, is a Director of Demeter.
Mr. Beech has been associated with the futures industry for over
25 years. He has been at Morgan Stanley DW since August 1984 where
he is presently an Executive Director and head of Futures, Forex &
Metals. Mr. Beech began his career at the Chicago Mercantile
Exchange, where he became the Chief Agricultural Economist doing
market analysis, marketing, and compliance. Prior to joining
Morgan Stanley DW, Mr. Beech worked at two investment banking
firms in operations, research, managed futures, and sales
management. Mr. Beech has a B.S. degree in Business
Administration from Ohio State University and an M.B.A. degree
from Virginia Polytechnic Institute and State University.

Mr. Raymond A. Harris, age 48, is a Director of Demeter. Mr.
Harris is currently Managing Director and head of Client Solutions
for Morgan Stanley Individual Investor Group (?IIG?), a Board
Member of Morgan Stanley DW Inc., and Director of Morgan Stanley
Trust. Mr. Harris joined Morgan Stanley in 1982 and served in
financial and operational assignments for Dean Witter Reynolds.
In 1994, he joined the Discover Financial Services division,
leading restructuring and product development efforts. Mr. Harris
became Chief Administrative Officer for Morgan Stanley Investment
Management in 1999. In 2001, he was named head of Global Products
and Services for Investment Management. Mr. Harris has an M.B.A.
in Finance from the University of Chicago and a B.A. degree from
Boston College.
Mr. Frank Zafran, age 50, is a Director of Demeter. Mr.
Zafran is an Executive Director of Morgan Stanley and, in
September 2002, was named Chief Administrative Officer of Morgan
Stanley?s Client Solutions Division. Mr. Zafran joined the firm in
1979 and has held various positions in Corporate Accounting and
the Insurance Department, including Senior Operations Officer ?
Insurance Division, until his appointment in 2000 as Director of
401(k) Plan Services, responsible for all aspects of 401(k) Plan
Services including marketing, sales, and operations. Mr. Zafran
received a B.S. degree in Accounting from Brooklyn College, New
York.

Mr. Douglas J. Ketterer, age 39, is a Director of Demeter. Mr.
Ketterer is a Managing Director and has had responsibility for
managing a number of departments at Morgan Stanley over the years,
most recently as head of the Investment Solutions Group, which is
comprised of a number of departments which offer products and
services through Morgan Stanley?s IIG (including Managed Futures,
Alternative Investments, Insurance Services, Personal Trust,
Corporate Services, and others). Mr. Ketterer joined the firm in
1990 in the Corporate Finance Division as a part of the Retail
Products Group. He later moved to the origination side of
Investment Banking, and then, after the merger between Morgan
Stanley and Dean Witter, served in the Product Development Group
at Morgan Stanley Dean Witter Advisors (now known as Morgan
Stanley Funds). From the summer of 2000 to the summer of 2002, Mr.
Ketterer served as the Chief Administrative Officer for
Morgan Stanley Investment Management, where he headed the
Strategic Planning & Administrative Group. Mr. Ketterer received
his M.B.A. from New York University?s Leonard N. Stern School of
Business and his B.S. in Finance from the University at Albany?s
School of Business.

Mr. Todd Taylor, age 42, is a Director of Demeter. Mr. Taylor
began his career with Morgan Stanley in June 1987 as a Financial
Advisor in the Dallas office. In 1995, he joined the Management
Training Program in New York and was appointed Branch Manager of
the Missouri and southern Illinois branch offices in 1997. Three
years later, in 2000, Mr. Taylor was appointed to a newly created
position, Director of IIG Learning and Development, before
becoming the Director of IIG Strategy in 2002. Most recently, Mr.
Taylor has taken on a new role as the High Net Worth Segment
Director. Mr. Taylor graduated from Texas Tech University with a
B.B.A. in Finance.

Mr. William D. Seugling, age 35, is a Director of Demeter. Mr.
Seugling is a Managing Director at Morgan Stanley and currently
serves as Director of Client Solutions for U.S. Private Wealth
Management. Mr. Seugling joined Morgan Stanley in June 1993 as an
Associate in Equity Structured Products having previously worked
in research and consulting for Greenwich Associates from October
1991 to June 1993. Since 1994, he has focused broadly on
analysis and solutions for wealthy individuals and
families culminating in his current role within the division. He
was named Vice President in 1996 and an Executive Director in
1999. Mr. Seugling graduated cum laude from Bucknell University
with a B.S. in Management and a concentration in Chemistry.

Ms. Louise M. Wasso-Jonikas, age 51, is a Director. Ms. Wasso-
Jonikas is a Managing Director of Morgan Stanley and the Director
of Alternative Investments for the IIG of Morgan Stanley. Ms.
Wasso-Jonikas was Co-Founder, President, and Chief Operating
Officer of Graystone Partners, an objective consulting firm, from
1993 to 1999, when Graystone was acquired by Morgan Stanley.
Prior to founding Graystone, Ms. Wasso-Jonikas was a Senior Vice
President at Bessemer Trust and opened their Chicago office. She
also was a Vice President at the Northern Trust in their Wealth
Management Services Group where she worked exclusively with their
largest private clients and family offices throughout the U.S.
and abroad, serving their broad investment and custody needs.
Ms. Wasso-Jonikas also worked as an equity block trader with
Goldman Sachs and with Morgan Stanley advising and managing money
for private clients. Ms. Wasso-Jonikas? focus is on developing a
robust external manager platform utilizing alternative managers
for Morgan Stanley?s IIG private clients as well as overseeing
some of the Morgan Stanley?s largest client relationships. Ms.
Wasso-Jonikas holds a B.A. in Economics from Mount Holyoke
College and an M.B.A in Finance from the University of Chicago
Graduate School of Business.
Mr. Kevin Perry, age 35, is the Chief Financial Officer of
Demeter. Mr. Perry currently serves as an Executive Director and
Controller within the IIG at Morgan Stanley. Mr. Perry joined
Morgan Stanley in October 2000 and is also Chief Financial
Officer of Morgan Stanley Trust National Association, Van Kampen
Funds Inc., and Morgan Stanley Distribution, Inc. Prior to
joining Morgan Stanley, Mr. Perry worked as an auditor and
consultant in the financial services practice of Ernst & Young
LLP from October 1991 to October 2000. Mr. Perry received a B.S.
degree in Accounting from the University of Notre Dame in 1991
and is a Certified Public Accountant.

All of the foregoing directors have indefinite terms.

The Audit Committee
The Partnership is operated by its general partner, Demeter, and
does not have an audit committee. The entire Board of Directors
of Demeter serves as the audit committee. None of the directors
are considered to be ?independent? as that term is used in Item
7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of
1934, as amended. The Board of Directors of Demeter has
determined that Mr. Kevin Perry is the audit committee financial
expert.

Code of Ethics
The Partnership has not adopted a code of ethics that applies to
the Partnership?s principal executive officer, principal financial
officer, principal accounting officer or controller, or persons
performing similar functions. The Partnership is operated by its
general partner, Demeter. The President, Chief Financial Officer,
and each member of the Board of Directors of Demeter are
employees of Morgan Stanley and are subject to the code of ethics
adopted by Morgan Stanley, the text of which can be viewed on
Morgan Stanley?s website at http://www.morganstanley.com/our
commitment/codeofconduct.html.

Item 11. EXECUTIVE COMPENSATION
The Partnership has no directors and executive officers. As a
limited partnership, the business of the Partnership is managed by
Demeter, which is responsible for the administration of the
business affairs of the Partnership but receives no compensation
for such services.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

(a) Security Ownership of Certain Beneficial Owners - At December
31, 2004, there were no persons known to be beneficial owners of
more than 5 percent of the Units.

(b) Security Ownership of Management - At December 31, 2004,
Demeter owned 138,896.135 Units of general partnership interest,
representing a 1.10 percent interest in the Partnership.

(c) Changes in Control ? None.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Refer to Note 2 - "Related Party Transactions" of "Notes to
Financial Statements", in the accompanying Annual Report to
Limited Partners for the year ended December 31, 2004, which is
incorporated by reference to Exhibit 13.01 of this Form 10-K. In
its capacity as the Partnership?s retail commodity broker, Morgan
Stanley DW received commodity brokerage fees (paid and accrued by
the Partnership) of $9,860,579 for the year ended December 31,
2004.

Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Morgan Stanley DW, on behalf of the Partnership, pays all
accounting fees. The Partnership reimburses Morgan Stanley DW
through the brokerage fees it pays, as discussed in the Notes to
Financial Statements in the Annual Report to the Limited Partners
for the year ended December 31, 2004.

(1) Audit Fees. The aggregate fees for professional
services rendered by Deloitte & Touche LLP in connection with
their audit of the Partnership?s financial statements and reviews
of the financial statements included in the Quarterly Reports on
Form 10-Q, and in connection with statutory and regulatory
filings for the year ended December 31, 2004 were approximately
$50,000 and for the year ended December 31, 2003 were $46,338.

(2) Audit-Related Fees. There were no fees for assurance and
related services rendered by Deloitte & Touche LLP for the years
ended December 31, 2004 and 2003.

(3) Tax Fees. The aggregate fees for tax compliance services
rendered by Ernst & Young LLP were approximately $30,446 and
Deloitte & Touche LLP were $29,559 for the years ended December
31, 2004 and 2003, respectively.

(4) All Other Fees. None.

As of the date of this Report, the Board of Directors of Demeter
has not adopted pre-approval policies and procedures. As a
result, all services provided by Ernst & Young LLP and Deloitte &
Touche LLP must be directly pre-approved by the Board of Directors
of Demeter. Additionally, all services provided by Deloitte &
Touche LLP are borne by Morgan Stanley through the brokerage fees
paid by the Partnership. Such services must be directly pre-
approved by Morgan Stanley?s Audit Director and Principal
Accounting Officer. All services provided by Ernst & Young LLP
must be communicated to Morgan Stanley?s Audit Director.
PART IV
Item 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K

(a) 1. Listing of Financial Statements
The following financial statements and report of independent
registered public accounting firm, all appearing in the
accompanying Annual Report to Limited Partners for the year ended
December 31, 2004, are incorporated by reference to Exhibit 13.01
of this Form 10-K:
- - Report of Deloitte & Touche LLP, independent registered public
accounting firm, for the years ended December 31, 2004, 2003,
and 2002.

- - Statements of Financial Condition, including the Schedules of
Investments, as of December 31, 2004 and 2003.

- - Statements of Operations, Changes in Partners? Capital, and
Cash Flows for the years ended December 31, 2004, 2003, and
2002.

- - Notes to Financial Statements.

With the exception of the aforementioned information and the
information incorporated in Items 7, 8, and 13, the Annual Report
to Limited Partners for the year ended December 31, 2004 is not
deemed to be filed with this report.

2. Listing of Financial Statement Schedules
No financial statement schedules are required to be filed with
this report.

(c) Exhibits
Refer to Exhibit Index on Page E-1 to E-4.

SIGNATURES

Pursuant to the requirements of Sections 13 or 15(d) 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 STRATEGIC L.P.
(Registrant)

BY: Demeter Management Corporation,
General Partner

March 31, 2005 BY: /s/ Jeffrey A. Rothman
Jeffrey A. Rothman,
President

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.

Demeter Management Corporation.

BY: /s/ Jeffrey A. Rothman March 31, 2005
Jeffrey A. Rothman, President

/s/ Richard A. Beech March 31, 2005
Richard A. Beech, Director

/s/ Raymond A. Harris March 31, 2005
Raymond A. Harris, Director

/s/ Frank Zafran March 31, 2005
Frank Zafran, Director

/s/ Douglas J. Ketterer March 31, 2005
Douglas J. Ketterer, Director

/s/ Todd Taylor March 31, 2005
Todd Taylor, Director

/s/ William D. Seugling March 31, 2005
William D. Seugling, Director

/s/ Louise M. Wasso-Jonikas March 31, 2005
Louise M. Wasso-Jonikas, Director

/s/ Kevin Perry March 31, 2005
Kevin Perry, Chief Financial Officer

EXHIBIT INDEX
ITEM

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.

3.04 Certificate of Amendment of Certificate of Limited
Partnership of the Partnership, dated April 6, 1999,
(changing its name from Dean Witter Spectrum Strategic
L.P.), is incorporated by reference to Exhibit 3.04 of
the Partnership?s Registration Statement (File No. 333-
3222) filed with the Securities and Exchange Commission
on April 12, 1999.

3.05 Certificate of Amendment of Certificate of Limited
Partnership, dated November 1, 2001 (changing its name
from Morgan Stanley Dean Witter Spectrum Strategic
L.P.), is incorporated by reference to Exhibit 3.01 of
the Partnership?s Form 8-K (File No. 0-26280) filed with
the Securities and Exchange Commission on November 1,
2001.
10.02 Management Agreement, dated as of November 1, 1994,
among the Partnership, Demeter, and Blenheim Invest-
ments, Inc., is incorporated by reference to Exhibit
10.01 of the Partnership's Form 10-K (File No. 0-26280)
for fiscal year ended December 31, 1998 filed with the
Securities and Exchange Commission on June 30, 1999.

10.02(a) Amendment to the Management Agreement, among the
Partnership, Demeter, and Blenheim Investments, Inc., is
incorporated by reference to Exhibit 10.01 of the
Partnership?s Form 8-K (File No. 0-26280), filed with
the Securities and Exchange Commission on April 25,
2001.

10.03 Management Agreement, dated as of June 1, 2000, among the
Partnership, Demeter, and Eclipse Capital Management,
Inc., is incorporated by reference to Exhibit 10.09 of the
Partnership?s Form 10-Q (File No. 0-26280) for the
quarterly period ended September 30, 2000 and filed with
the Securities and Exchange Commission on November 14,
2000.
10.04 Management Agreement, dated as of October 7, 2004, among
the Partnership, Demeter, and FX Concepts (Trading
Advisors), Inc., is incorporated by reference to Exhibit
10.04 of the Partnership's Form 10Q (File No. 0-26280) for
the quarterly period ended September 30, 2004 and filed
with the Securities and Exchange Commission on
November 15, 2004.

10.11 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, 2004, as filed
with the Securities and Exchange Commission pursuant to
Rule 424 (b)(3) under the Securities Act of 1933 on May 4,
2004.
10.13 Amended and Restated Escrow Agreement, dated as of March
10, 2000, among the Partnership, Morgan Stanley Spectrum
Select L.P., Morgan Stanley Spectrum Technical L.P.,
Morgan Stanley Spectrum Global Balanced L.P., Morgan
Stanley Spectrum Currency L.P., Morgan Stanley Spectrum
Commodity L.P., Morgan Stanley DW, and The Chase Manhattan
Bank, the escrow agent, is incorporated by reference to
Exhibit 10.13 of the Partnership?s Registration Statement
on Form S-1 (File No. 333-90487) 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. 0-26280) 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. 0-26280) 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. 0-26280)
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. 0-26280) 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. 0-26280) filed
with the Securities and Exchange Commission on November 1,
2001.

10.20 Foreign Exchange and Options Master Agreement between
Morgan Stanley Capital Group Inc. and the Partnership,
dated as of September 27, 2004 is incorporated by reference
to Exhibit 10.20 of the Partnership?s Form 10Q (File No. 0-
26280) for the quarterly period ended September 30, 2004
and filed with the Security and Exchange Commission on
November 15, 2004.
13.01 December 31, 2004 Annual Report to Limited Partners is
filed herewith.
31.01 Certification of President of Demeter Management
Corporation, the general partner of the Partnership
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 Section 302 of the Sarbanes-Oxley
Act of 2002.

32.01 Certification of President of Demeter Management Corpor-
ation, 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.

Morgan Stanley
Spectrum Series

December 31, 2004
Annual Report

[LOGO] Morgan Stanley

MORGAN STANLEY SPECTRUM SERIES

HISTORICAL FUND PERFORMANCE

Presented below is the percentage change in Net Asset Value per Unit from the
start of every calendar year each Fund has traded. Also provided is the
inception-to-date return and the compound annualized return since inception for
each Fund. Past performance is no guarantee of future results.

INCEPTION-
TO-DATE
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 RETURN
FUND % % % % % % % % % % % % % % %
- ------------------------------------------------------------------------------------------------------------------------

Spectrum Currency. -- -- -- -- -- -- -- -- -- 11.7 11.1 12.2 12.4 (8.0) 44.1
(6 mos.)
- ------------------------------------------------------------------------------------------------------------------------
Spectrum Global
Balanced......... -- -- -- (1.7) 22.8 (3.6) 18.2 16.4 0.8 0.9 (0.3) (10.1) 6.2 (5.6) 46.1
(2 mos.)
- ------------------------------------------------------------------------------------------------------------------------
Spectrum Select... 31.2 (14.4) 41.6 (5.1) 23.6 5.3 6.2 14.2 (7.6) 7.1 1.7 15.4 9.6 (4.7) 188.8
(5 mos.)
- ------------------------------------------------------------------------------------------------------------------------
Spectrum Strategic -- -- -- 0.1 10.5 (3.5) 0.4 7.8 37.2 (33.1) (0.6) 9.4 24.0 1.7 45.6
(2 mos.)
- ------------------------------------------------------------------------------------------------------------------------
Spectrum Technical -- -- -- (2.2) 17.6 18.3 7.5 10.2 (7.5) 7.8 (7.2) 23.3 23.0 4.4 136.3
(2 mos.)
- ------------------------------------------------------------------------------------------------------------------------

COMPOUND
ANNUALIZED
RETURN
FUND %
- -----------------------------

Spectrum Currency. 8.5

- -----------------------------
Spectrum Global
Balanced......... 3.8

- -----------------------------
Spectrum Select... 8.2

- -----------------------------
Spectrum Strategic 3.8

- -----------------------------
Spectrum Technical 8.8

- -----------------------------

DEMETER MANAGEMENT CORPORATION

330 Madison Avenue, 8th Floor
New York, NY 10017
(212) 905-2700

MORGAN STANLEY SPECTRUM SERIES
ANNUAL REPORT
2004

Dear Limited Partner:

This marks the fifth annual report for Morgan Stanley Spectrum Currency L.P.,
the eleventh annual report for Morgan Stanley Spectrum Global Balanced L.P.,
Morgan Stanley Spectrum Strategic L.P., and Morgan Stanley Spectrum Technical
L.P., and the fourteenth annual report for Morgan Stanley Spectrum Select L.P.
The Net Asset Value per Unit for each of the five Morgan Stanley Spectrum Funds
("Fund(s)") as of December 31, 2004 was as follows:

% CHANGE
FUNDS N.A.V. FOR YEAR
----------------------------------------

Spectrum Currency $14.41 -8.0%
----------------------------------------
Spectrum Global Balanced $14.61 -5.6%
----------------------------------------
Spectrum Select $28.88 -4.7%
----------------------------------------
Spectrum Strategic $14.56 1.7%
----------------------------------------
Spectrum Technical $23.63 4.4%
----------------------------------------

Since its inception in July 2000, Spectrum Currency has increased by 44.1% (a
compound annualized return of 8.5%). Since their inception in November 1994,
Spectrum Global Balanced has increased by 46.1% (a compound annualized return
of 3.8%), Spectrum Strategic has increased by 45.6% (a compound annualized
return of 3.8%), and Spectrum Technical has increased by 136.3% (a compound
annualized return of 8.8%). Since its inception in August 1991, Spectrum Select
has increased by 188.8% (a compound annualized return of 8.2%).

Detailed performance information for each Fund is located in the body of the
financial report. For each Fund, we provide a trading results by sector chart
that portrays trading gains and trading losses for the year in each sector in
which the Fund participates. In the case of Spectrum Currency, we provide the
trading gains and trading losses

for the five major currencies in which the Fund participates, and composite
information for all other "minor" currencies traded within the Fund.

The trading results by sector charts indicate the year's composite percentage
returns generated by the specific assets dedicated to trading within each
market sector in which each Fund participates. Please note that there is not an
equal amount of assets in each market sector, and the specific allocations of
assets by a Fund to each sector will vary over time within a predetermined
range. Below each chart is a description of the factors that influenced trading
gains and trading losses within each Fund during the year.

Should you have any questions concerning this report, please feel free to
contact Demeter Management Corporation, 330 Madison Avenue, 8th Floor, New
York, NY 10017 or your Morgan Stanley Financial Advisor.

I hereby affirm, that to the best of my knowledge and belief, the information
contained in this report is accurate and complete. Past performance is no
guarantee of future results.

Sincerely,

/s/ Jeffrey A. Rothman
Jeffrey A. Rothman
Chairman of the Board of Directors and President
Demeter Management Corporation
General Partner for
Morgan Stanley Spectrum Currency L.P.
Morgan Stanley Spectrum Global Balanced L.P.
Morgan Stanley Spectrum Select L.P.
Morgan Stanley Spectrum Strategic L.P.
Morgan Stanley Spectrum Technical L.P.

SPECTRUM CURRENCY

[CHART]

Year ended December 31, 2004
----------------------------
Australian dollar 0.08
British pound -4.12
Euro 6.98
Japanese yen -8.81
Swiss franc 2.72
Minor currencies 2.30

Note: Reflects trading results only and does not include fees or interest
income. Minor currencies may include, but are not limited to, the South
African rand, Thai baht, Greek drachma, Singapore dollar, Mexican peso,
New Zealand dollar, Polish zloty, Brazilian real, and Norwegian krona.

FACTORS INFLUENCING ANNUAL TRADING GAINS:
.. Partnership gains were achieved from long positions in the euro, Swiss
franc, and Polish zloty versus the U.S. dollar, primarily during the fourth
quarter. The U.S. dollar's value trended lower throughout the quarter amid
rising oil prices, reports of weaker-than-expected U.S. economic data, a
growing U.S. Current-Account deficit, and the investment community's
perception that the Bush administration would not move to intervene in the
U.S. dollar's decline.

.. Additional gains resulted from long positions in the New Zealand dollar and
Brazilian real versus the U.S. dollar as both foreign currencies benefited
from a weaker U.S. dollar during the fourth quarter. Additionally, the New
Zealand dollar's value moved higher as it was propelled by stronger gold
prices.

FACTORS INFLUENCING ANNUAL TRADING LOSSES:
.. The most significant losses were recorded from positions in the Japanese yen
versus the U.S. dollar. Short yen positions against the U.S. dollar recorded
losses during March, as the yen reversed higher due to speculation that the
Bank of Japan was relaxing its efforts to weaken the yen. After reversing to
long yen positions, the U.S. dollar surged upwards against most currencies
during April following the release of stronger-than-expected U.S. jobs data,
thereby causing additional losses. The yen also came under pressure from
weakening efforts undertaken by the Japanese government. Short yen positions
incurred losses during May as the U.S. dollar's value declined amid fears of
potential terrorist attacks, expanding energy prices, and the

SPECTRUM CURRENCY

release of weaker-than-expected U.S. economic data. During June, short yen
positions experienced further losses due to the yen's rise prompted by
better-than-anticipated improvements in Japanese economic data. The yen
continued its rise later in the month in response to speculation that the
Bank of Japan would move to raise interest rates amid further confirmation
that Japan's economic recovery was on track. During August and September,
short yen positions also experienced losses as the U.S. dollar's value
declined under pressure from concerns for the rate of U.S. economic growth,
soft economic data, and record-high oil prices. Finally, long yen positions
incurred losses during December as the yen's value declined early in the
month due to weak Japanese machinery orders and temporary U.S. dollar
strength.

.. Additional losses resulted from positions in the British pound, primarily
during the fourth quarter. During both October and November, short pound
positions generated losses as the pound's value reversed higher amid a
decline in the U.S. dollar prompted by higher oil prices and concerns for
the growing U.S. Current-Account deficit. During December, long pound
positions recorded losses as the pound's value declined due to
weaker-than-expected U.K. economic data and the releases of dovish minutes
from the Bank of England's December meeting, which reflected the possibility
for future interest rate cuts.

.. Losses were also experienced from short positions in the Mexican peso versus
the U.S. dollar, primarily during the first quarter, as the peso reversed
higher in response to encouraging signs of a recovery in the Mexican economy.

.. Positions in the South African rand versus the U.S. dollar also incurred
losses during the first nine months of the year. During January and
February, long rand positions declined amid expectations for weaker gold
prices caused by improvements in the global economy. During April, long
South African rand positions versus the U.S. dollar experienced losses as
the U.S. dollar's value moved higher amid economic optimism. During May,
short South African rand positions incurred losses as the commodity-linked
currency reversed higher in response to rising gold prices. During July, the
U.S. dollar's upward reversal was prompted by upbeat market sentiment.
During August, long rand positions experienced further losses as the rand's
value moved lower due to a reduction in interest rates by the South African
Reserve Bank.

.. Long positions in the Norwegian krona versus the U.S. dollar incurred
smaller losses, primarily during the second and third quarter, as the value
of the U.S. dollar temporarily moved higher in response to growing
confidence in the U.S. economy.

SPECTRUM GLOBAL BALANCED

[CHART]

Year ended December 31, 2004
----------------------------
Currencies -1.96
Interest Rates 0.51
Stock Indices 1.92
Energies 0.61
Metals -1.44
Agriculturals -1.30

Note: Reflects trading results only and does not include fees or interest
income.

FACTORS INFLUENCING ANNUAL TRADING LOSSES:
.. Losses were recorded in the currency markets during the first nine months of
the year. During the first quarter, long cross-rate positions in the Swiss
franc versus the Japanese yen resulted in losses as the yen's value reversed
higher due to speculation that the Bank of Japan was relaxing its efforts to
weaken the yen. Long positions in the U.S. dollar index were also
unprofitable as the U.S. dollar's value declined due to a reduction in Bank
of Japan intervention activity. During the second quarter, losses were
incurred from long positions in the Japanese yen versus the U.S. dollar as
the U.S. dollar surged following the release of stronger-than-expected U.S.
jobs data. The yen also came under pressure from weakening efforts by
Japanese government currency market interventions. Losses were also incurred
from short U.S. dollar positions against the South African rand as the U.S.
dollar benefited from rising U.S. interest rates and the perception that the
U.S. economy was experiencing a sustainable recovery. During the third
quarter, short cross-rate positions in the Australian dollar versus the
Japanese yen incurred losses as the Australian currency reversed higher amid
speculation for increases in Australian interest rates. During August,
losses were experienced from short positions in the Japanese yen versus the
U.S. dollar, Swiss franc, Australian dollar, and the euro as the value of
the yen moved higher due to higher Japanese equity prices and the release of
positive Japanese economic data. During September, short positions in the
Mexican peso versus the U.S. dollar resulted in losses as the U.S. dollar
reversed lower amid perceptions that the U.S. Federal Reserve reformed their
outlook regarding aggressive increases in interest rates. Long positions in
the Japanese yen versus the U.S. dollar also resulted in losses during
September as the yen declined due to

SPECTRUM GLOBAL BALANCED

Japan's swelling national debt and a reversal of the U.S. dollar's value in
response to a hike in U.S. interest rates.

.. Additional losses were established in the metals markets from positions in
base metals. Long futures positions in nickel experienced losses as prices
fell due to a strengthening of the U.S. dollar during January. Short nickel
futures positions during May experienced losses as prices increased due to
weakness in the U.S. dollar and strong Asian demand. During the third
quarter, further sector losses resulted from long nickel futures positions
after prices declined amid a slowdown in demand from China. Newly
established long futures positions created further losses during the fourth
quarter as prices weakened amid concern for demand and an advancing U.S.
dollar.

.. In the agricultural markets, losses were incurred from positions in soybean
oil, sugar, and cocoa. Short futures positions in soybean oil generated
losses after prices reversed higher amid news of reduced supply, strong
Chinese export demand, and rumors that U.S. soybean crops were possibly
infected by a damaging fungus. Long futures positions in sugar incurred
losses during August, October, and November as prices for the commodity
moved lower in response to technically-based selling and news of weaker
demand. Losses were also experienced from positions in cocoa as a result of
"whipsawing" in prices due to supply and demand concerns throughout most of
the year.

FACTORS INFLUENCING ANNUAL TRADING GAINS:
.. Gains were achieved in the global stock index markets, primarily during
November and December from long positions in European and U.S. stock index
futures as prices advanced in response to a decline in oil prices, positive
consumer sentiment, and an increase in corporate earnings.

.. Partnership gains were achieved in the energy markets, primarily during the
third quarter, from long futures positions in crude oil and its related
products as prices trended higher amid heavy market demand and supply
concerns.

.. Gains achieved in the global interest rates markets resulted during the
first and third quarter of the year from long positions in U.S. and European
interest rate futures. During the first quarter, long positions benefited
from a rally in bond prices sparked by low inflation and reduced concerns
for increases in interest rates. Long positions also profited during the
third quarter as prices trended higher in response to a surge in oil prices,
a drop in equity prices, and a conflicted economic picture generated by U.S.
economic reports.

SPECTRUM SELECT

[CHART]

Year ended December 31, 2004
----------------------------
Currencies 0.76
Interest Rates -2.51
Stock Indices -0.45
Energies 4.74
Metals 1.54
Agriculturals 1.67

Note: Reflects trading results only and does not include fees or interest
income.

FACTORS INFLUENCING ANNUAL TRADING GAINS:
.. Gains were recorded in the energy markets, primarily during February, May,
throughout the third quarter, and in October, from long futures positions in
crude oil and its related products as prices advanced upwards amid concerns
for market supply, falling inventory levels, and heavy market demand.

.. Additional Partnership gains achieved in the agricultural markets, primarily
during the first quarter, resulted from long futures positions in corn,
soybeans, and soybean-related products as prices for these commodities
finished higher amid strong, steady demand from Asia.

.. In the metals markets, gains were recorded primarily during the first
quarter from long futures positions in base metals as prices moved higher in
response to increased demand from China coupled with a weaker U.S. dollar.
Long futures positions in industrial metals held during October were also
profitable due to the drop in the U.S. dollar prompted by the investment
community's perception that the Bush administration would not take steps to
stem the U.S. dollar's decline.

.. Relatively smaller Partnership gains resulted from trading in the currency
markets, primarily during October and November. Long positions in the euro
and Swiss franc versus the U.S. dollar benefited from a declining U.S.
dollar trend triggered by prospects for lower U.S. interest rates, higher
oil prices, concern for the growing U.S. Current-Account deficit, and
beliefs that the Bush administration would not act to curb the decline in
the U.S. dollar.

SPECTRUM SELECT

FACTORS INFLUENCING ANNUAL TRADING LOSSES:
.. Losses were incurred in the global interest rate sector, particularly during
the second and third quarter, from positions in U.S. and Australian interest
rate futures. During January, long positions in U.S. interest rate futures
experienced losses as prices declined following comments from the U.S.
Federal Reserve concerning a shift in the U.S. Federal Reserve's interest
rate policy. Short positions in Australian interest rate futures deepened
sector losses as prices reversed higher during the final week of January.
During April, long U.S. interest rate futures positions incurred losses as
prices tumbled following the release of stronger-than-expected U.S. jobs
data. During May, short positions in global bond futures experienced losses
as prices moved higher during the latter half of the month due to
uncertainty in global equity prices, weaker-than-expected economic data,
stronger energy prices, and geopolitical concerns. During June, short
positions experienced losses as prices rallied on weaker-than-expected
economic reports and expectations that the U.S. Federal Reserve would not
aggressively tighten U.S. interest rates. During July, short positions in
U.S. interest rate futures recorded losses as prices moved higher after the
release of disappointing U.S. unemployment data. Additional losses were
incurred from newly established long U.S. interest rate futures positions
after prices moved lower following Federal Reserve Chairman Alan Greenspan's
upbeat assessment of the U.S. economy. During September, long positions in
U.S. interest rate futures resulted in losses as prices declined due to
expectations for rising interest rates prompted by the release of positive
U.S. economic data.

.. Smaller Partnership losses resulted from trading in the global stock index
sector, primarily during the second and third quarter, via positions in
Asian equity index futures. During the second quarter, long positions in
these markets incurred losses as global equity prices were negatively
impacted by geopolitical concerns and expanding energy prices. Newly
established short Asian equity index positions experienced losses as prices
rebounded during the second quarter amid a slight pullback in oil prices and
strong earnings from technology companies. During the third quarter, long
Asian equity index positions experienced losses as prices reversed lower due
to the release of disappointing U.S. employment data, surging energy prices,
and new warnings concerning potential terrorist activity.

SPECTRUM STRATEGIC

[CHART]

Year ended December 31, 2004
----------------------------
Currencies -0.65
Interest Rates 0.96
Stock Indices -2.05
Energies -0.56
Metals 4.67
Agriculturals 8.31

Note: Reflects trading results only and does not include fees or interest
income.

FACTORS INFLUENCING ANNUAL TRADING GAINS:
.. The most significant gains were recorded in the agricultural markets,
primarily during the first five months of the year, from long futures
positions in soybeans, soybean-related products, corn, and sugar. During the
first quarter, soybean and corn prices finished higher, especially during
February, due to increased exports abroad and greater demand from Asia. Long
futures positions in sugar also benefited as prices rallied during April and
June amid diminished market supply, increasing demand and inflation concerns.

.. In the metals markets, gains were recorded primarily during the first
quarter and the final two months of the year, from long futures positions in
base metals. During the first quarter, prices trended higher due to a
declining U.S. dollar and increased demand from Asia. During September, long
base metals futures positions benefited as prices moved higher in response
to continued demand from China and reports of lower-than-expected
inventories. During November and December, long base metals positions
continued to profit from the decline in the U.S. dollar.

.. Relatively smaller Partnership gains achieved in the global interest rate
markets occurred primarily during the first and third quarter of the year
from long positions in European interest rate futures. During the first
quarter, long positions profited as global bond prices rallied in response
to a lack of inflation and no increases in interest rates by the European
Central Bank. Prices also trended higher during March amid uncertainty in
the equity markets, disappointing U.S. economic data and "safe-haven" buying
following the terrorist attack in Madrid. During the third quarter, long
European interest

SPECTRUM STRATEGIC

rate futures positions profited after prices trended higher amid rising oil
prices, a drop in equity prices, and concern for economic growth.

FACTORS INFLUENCING ANNUAL TRADING LOSSES:
.. Losses were incurred in the global stock index markets, primarily during the
first and third quarter of the year. During the first quarter, long European
and Japanese equity index futures positions were unprofitable as equity
prices dropped during February and early March amid weakness in the U.S.
technology sector and growing geopolitical uncertainty. During the third
quarter, long European, Asian, and U.S. stock index futures experienced
losses as prices reversed lower during July due to the release of
disappointing U.S. employment data, surging energy prices, and concern for
potential terrorist attacks.

.. Losses in the currency markets resulted primarily during the first and third
quarter. During the first quarter, long positions in the Japanese yen versus
the U.S. dollar resulted in losses after the Bank of Japan weakened the yen
through currency market intervention activity. During the third quarter,
long European currency positions, such as the Swiss franc and Norwegian
krone versus the U.S. dollar, generated negative performance as the U.S.
dollar reversed higher amid upbeat market sentiment.

.. Smaller losses were recorded in the energy markets, primarily during the
second quarter and the month of November. During the second quarter, losses
resulted from long futures positions in crude oil and its related products,
and natural gas as energy prices declined in response to increases in output
and energy reserves. During November, long positions in natural gas
experienced losses as prices reversed sharply lower amid hefty reserves and
seasonally moderate temperatures.

SPECTRUM TECHNICAL

[CHART]

Year ended December 31, 2004
----------------------------
Currencies -0.23
Interest Rates 9.48
Stock Indices -1.50
Energies 10.88
Metals 0.15
Agriculturals -1.96

Note: Reflects trading results only and does not include fees or interest
income.

FACTORS INFLUENCING ANNUAL TRADING GAINS:
.. The most significant gains were achieved in the energy markets throughout a
majority of the year from long futures positions in crude oil and its
related products as crude oil prices trended higher in response to rising
demand combined with geopolitical concerns and supply issues.

.. Additional gains resulted in the global interest rate markets during the
first, third, and fourth quarter from long positions in European, Asian, and
U.S. interest rate futures. During the first quarter, long positions
profited as bond prices rallied in response to weak economic data, a lack of
inflation and "safe-haven" buying following the terrorist attack in Madrid.
During the third quarter, long positions benefited from a surge in oil
prices, a drop in equity prices, and a conflicted economic picture. During
the fourth quarter, long positions in European and U.S. interest rate
futures benefited from rising global bond prices triggered by record high
oil prices, growth concerns prompted by weak economic data, and strength in
foreign currencies versus a weaker U.S. dollar. Additional gains were
recorded from long positions in Japanese interest rate futures, which
profited as prices increased amid higher values for the Japanese yen.

.. Smaller gains recorded in the metals markets resulted, primarily during the
first quarter, from long futures positions in base metals after prices
trended higher in response to greater demand from Asia and a declining U.S.
dollar.

SPECTRUM TECHNICAL

FACTORS INFLUENCING ANNUAL TRADING LOSSES:
.. Losses were incurred in the agricultural markets from futures positions in
cocoa and coffee. During January, short futures positions in coffee
experienced losses as prices reversed higher amid tight global supply. Long
coffee positions experienced additional losses as prices reversed lower
during June in response to an increase in Brazilian crop estimates and mild
weather in growing regions. During July, short cocoa futures positions
recorded losses as prices hit five-month highs amid speculative buying and
lower market supply. During September, long cocoa futures positions incurred
losses as prices reversed lower amid news of easing geopolitical tensions
from the Ivory Coast, the world's top cocoa producer. During October, long
futures positions in coffee incurred losses as prices declined due to larger
harvests and greater market supply.

.. Additional losses in the global stock index sector occurred primarily during
the second and third quarter of the year from positions in Asian and
European stock index futures. Long positions in Asian and European stock
index futures also incurred losses during March, April, and May as equity
prices fell in response to the terror attacks in Madrid, continuing
instability in Iraq, and concerns for higher interest rates. During July,
long positions in Asian and European stock index futures also recorded
losses as prices reversed lower due to the release of disappointing U.S.
employment data, surging energy prices, and new warnings concerning
potential terrorist attacks. During August, short positions in Asian and
European equity index futures recorded losses as prices reversed higher in
response to falling energy prices and better-than-expected U.S. Gross
Domestic Product and consumer sentiment data.

.. Smaller losses were incurred in the currency markets primarily from
positions in the Japanese yen between the months of March through August.
Losses were incurred during March from short positions in the Japanese yen
versus the U.S. dollar as the yen reversed higher due to speculation that
the Bank of Japan was relaxing its efforts to weaken the yen. During April,
long positions in the Japanese yen versus the U.S. dollar resulted in losses
as the U.S. dollar surged following the release of stronger-than-expected
U.S. jobs data. During May, short positions in the Japanese yen versus the
U.S. dollar sustained losses as the U.S. dollar's value declined in response
to fears of potential terrorist attacks, expanding energy prices, and the
release of weaker-than-expected economic data during the latter half of May.
During June, losses were experienced primarily from short positions in the
Japanese yen versus the U.S. dollar as the yen climbed higher in response to
better-than-anticipated improvements in Japanese economic data and
speculation that the Bank of Japan would move to raise interest rates.
During July, long positions in the Japanese yen, euro, Swiss franc, British
pound, and Australian dollar, all versus the U.S. dollar, resulted in losses
as the U.S. dollar's value strengthened in response to upbeat market
sentiment. During August, losses resulted from short positions in the
Japanese yen versus the U.S. dollar as the U.S. dollar's value decreased due
to concerns for the rate of U.S. economic growth caused by the release of
soft economic data.

MORGAN STANLEY SPECTRUM SERIES

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Demeter Management Corporation ("Demeter"), the general partner of Morgan
Stanley Spectrum Currency L.P., 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. (collectively, the "Partnerships"),
is responsible for the management of the Partnerships.

Management of Demeter ("Management") is responsible for establishing and
maintaining adequate internal control over financial reporting. The internal
control over financial reporting is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally
accepted accounting principles.

The Partnerships' internal control over financial reporting includes those
policies and procedures that:

.. Pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the
Partnerships;

.. Provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally
accepted accounting principles, and that the Partnerships' transactions are
being made only in accordance with authorizations of Management and
directors; and

.. Provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Partnerships' assets
that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of each Partnership's internal control
over financial reporting as of December 31, 2004. In making this assessment,
Management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission in Internal Control-Integrated
Framework. Based on our assessment and those criteria, Management believes that
each Partnership maintained effective internal control over financial reporting
as of December 31, 2004.

Deloitte & Touche LLP, the Partnerships' independent registered public
accounting firm, has issued an audit report on Management's assessment of the
Partnerships' internal control over financial reporting and on the
effectiveness of the Partnerships' internal control over financial reporting.
This report, which expresses unqualified opinions on Management's assessment
and on the effectiveness of the Partnerships' internal control over financial
reporting, appears under "Report of Independent Registered Public Accounting
Firm" on the following page.

New York, New York
March 11, 2005

MORGAN STANLEY SPECTRUM SERIES

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Limited Partners and the General Partner of Morgan Stanley Spectrum
Currency L.P., 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. :

We have audited management's assessment, included in the accompanying
Management's Report on Internal Control Over Financial Reporting, that Morgan
Stanley Spectrum Currency L.P., Morgan Stanley Spectrum Global Balanced L.P.,
Morgan Stanley Spectrum Select L.P., Morgan Stanley Spectrum Strategic L.P.,
and Morgan S