<DOCUMENT>
<TYPE>424B3
<SEQUENCE>1
<FILENAME>c25377.txt
<DESCRIPTION>SPECTRUM CURRENCY
<TEXT>
-------------------
PRESORTED
FIRST CLASS MAIL
U.S. POSTAGE
PAID
PERMIT #664
S. HACKENSACK, N.J.
-------------------
Morgan Stanley
Attention:Managed Futures, 7th Floor
Harborside Financial Center, Plaza Two
Jersey City, NJ 07311
ADDRESS SERVICE REQUESTED
[logo] printed on recycled paper
MORGAN STANLEY
SPECTRUM SERIES
July 2002
Monthly Report
This Monthly Report supplements the Spectrum Funds' Prospectus dated April 30,
2002.
Issued: August 30, 2002
Morgan Stanley
<PAGE>
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 annualized return since inception for each
Fund. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
FUND % % % % % % % % % % % %
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Spectrum Commodity ............... -- -- -- -- -- -- -- (34.3) 15.8 3.2 (25.6) 4.1
(7 mos.)
---------------------------------------------------------------------------------------------------------------------------
Spectrum Currency ................ -- -- -- -- -- -- -- -- -- 11.7 11.1 6.6
(6 mos.) (7 mos.)
---------------------------------------------------------------------------------------------------------------------------
Spectrum Global Balanced ......... -- -- -- (1.7) 22.8 (3.6) 18.2 16.4 0.7 0.9 (0.3) (4.4)
(2 mos.) (7 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 12.1
(5 mos.) (7 mos.)
---------------------------------------------------------------------------------------------------------------------------
Spectrum Strategic ............... -- -- -- 0.1 10.5 (3.5) 0.4 7.8 37.2 (33.1) (0.6) 13.5
(2 mos.) (7 mos.)
---------------------------------------------------------------------------------------------------------------------------
Spectrum Technical ............... -- -- -- (2.2) 17.6 18.3 7.5 10.2 (7.5) 7.8 (7.2) 18.7
(2 mos.) (7 mos.)
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
INCEPTION-
TO-DATE ANNUALIZED
RETURN RETURN
% %
---------------------
(39.2) (10.3)
---------------------
32.3 14.4
---------------------
54.9 5.8
---------------------
168.7 9.4
---------------------
19.7 2.4
---------------------
77.2 7.7
---------------------
--------------------------------------------------------------------------------
DEMETER MANAGEMENT CORPORATION
--------------------------------------------------------------------------------
c/o Managed Futures Department
825 Third Avenue, 8th Floor
New York, NY 10022
Telephone (201) 209-8400
MORGAN STANLEY SPECTRUM SERIES
MONTHLY REPORT
JULY 2002
Dear Limited Partner:
The Net Asset Value per Unit for each of the six Morgan Stanley Spectrum
Funds as of July 31, 2002 was as follows:
FUND N.A.V. % CHANGE FOR MONTH
--------------------------------------------------------------------------------
Spectrum Commodity $ 6.08 -0.52%
--------------------------------------------------------------------------------
Spectrum Currency $13.23 -4.37%
--------------------------------------------------------------------------------
Spectrum Global Balanced $15.49 -0.87%
--------------------------------------------------------------------------------
Spectrum Select $26.87 4.67%
--------------------------------------------------------------------------------
Spectrum Strategic $11.97 -0.42%
--------------------------------------------------------------------------------
Spectrum Technical $17.72 9.65%
--------------------------------------------------------------------------------
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 previous month and
year-to-date 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.
<PAGE>
The trading results by sector charts indicate the monthly and year-to-date
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
previous month.
In April, 2002, the proposed entitlement with regard to the Sumitomo Copper
class action litigation was unofficially approved by the court. Under the terms
of the proposed entitlement, 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. would receive approximately $208,284,
$4,143,065, $10,895, and $273,812 (which currently amounts to $0.06, $0.39,
$0.00, and $0.02 per Unit respectively). The parties have stated that they are
seeking to make such distributions in the near future, but this timetable is
still provisional and the Funds have no assurances yet when such distribution
will actually be made. Any amount ultimately received will be accounted for in
the period received, for the benefit of the limited partners at the date of
receipt.
<PAGE>
Should you have any questions concerning this report, please feel free to
contact Demeter Management Corporation c/o Managed Futures Department, 825 Third
Avenue, 8th Floor, New York, NY 10022 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 not a
guarantee of future results.
Sincerely,
/s/ Robert E. Murray
-----------------------
Robert E. Murray
Chairman
Demeter Management Corporation
General Partner
[This page intentionally left blank]
<PAGE>
--------------------------------------------------------------------------------
SPECTRUM COMMODITY
--------------------------------------------------------------------------------
[DATA BELOW REPRESENT BAR GRAPH IN THE PRINTED PIECE.]
Month ended July 31, 2002 YTD ended Juy 31, 2002
------------------------- ----------------------
Energies -0.07 2.3
Metals -3.71 -0.6
Agriculturals 3.74 5.73
Note: Reflects trading results only and does not include fees or interest
income.
FACTORS INFLUENCING MONTHLY TRADING LOSSES:
> In the metals futures markets, losses were recorded from previously
established long positions in copper, aluminum and nickle futures, as prices
reversed lower on fears that increased economic uncertainty may reduce demand
for industrial metals. Additional losses were recorded from long positions in
silver and gold futures, as prices moved lower amidst an unexpected rally in
U.S. equities and strength in the U.S. dollar late in the month.
FACTORS INFLUENCING MONTHLY TRADING GAINS:
> In the agricultural futures markets, grain prices trended higher on fears
that continued hot and dry weather may have adversely affected crops in the
U.S. midwest, resulting in gains from long positions in corn, wheat and
soybean futures. Additional gains were recorded from long positions in cocoa
and orange juice futures as prices trended higher on speculative buying and
supply and demand concerns.
--------------------------------------------------------------------------------
SPECTRUM CURRENCY
--------------------------------------------------------------------------------
[DATA BELOW REPRESENT BAR GRAPH IN THE PRINTED PIECE.]
Month ended July 31, 2002 YTD ended Juy 31, 2002
------------------------- ----------------------
Australian dollar 0.59 3.95
British pound -1.24 -4.45
Euro -0.65 7.58
Japanese yen 0.28 -2.62
Swiss franc -0.18 3.52
Minor currencies -2.74 5.21
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 and Norwegian krone.
FACTORS INFLUENCING MONTHLY TRADING LOSSES:
> Losses were recorded from long positions in the British pound, Polish zloty,
euro and New Zealand dollar as the value of these currencies reversed lower
relative to the U.S. dollar due to an emphasis on a "strong dollar" policy by
the Bush Administration and repatriation activity by U.S. companies
> Additional losses were recorded from short positions in the Mexican peso as
the previous downward trend in the value of the peso reversed higher versus
the U.S dollar amid a sharp increase in foreign investment.
FACTORS INFLUENCING MONTHLY TRADING GAINS:
> Gains were recorded from short positions in the Australian dollar as its
value trended lower versus the U.S. dollar amid news of higher-than-expected
unemployment in Australia.
<PAGE>
--------------------------------------------------------------------------------
SPECTRUM GLOBAL BALANCED
--------------------------------------------------------------------------------
[DATA BELOW REPRESENT BAR GRAPH IN THE PRINTED PIECE.]
Month ended July 31, 2002 YTD ended Juy 31, 2002
------------------------- ----------------------
Currencies -0.94 0.92
Interest Rates 3.9 5.04
Stock Indices -3.48 -7.21
Energies 0.04 -0.09
Metals 0.04 -0.08
Agriculturals -0.11 -0.67
Note: Reflects trading results only and does not include fees or interest
income.
FACTORS INFLUENCING MONTHLY TRADING LOSSES:
> Long positions in U.S. and European stock index futures resulted in losses,
as prices finished the month lower amid suspicions regarding corporate
accounting practices and skepticism regarding a global economic recovery.
> In the currency markets, losses were recorded short positions in the Mexican
peso as the previous downward trend in the value of peso reversed higher
versus the U.S. dollar. Additional losses were recorded from long Swiss
franc/ Japanese yen and euro/Japanese yen crossrate positions.
FACTORS INFLUENCING MONTHLY TRADING GAINS:
> In the global interest rate futures markets, gains were recorded from long
positions in European and U.S. interest rate futures as prices trended
higher, drawing strong support from falling equity prices and increased
economic uncertainty.
--------------------------------------------------------------------------------
SPECTRUM SELECT
--------------------------------------------------------------------------------
[DATA BELOW REPRESENT BAR GRAPH IN THE PRINTED PIECE.]
Month ended July 31, 2002 YTD ended Juy 31, 2002
------------------------- ----------------------
Currencies -1.47 9.68
Interest Rates 5.34 4.5
Stock Indices 1.07 1.51
Energies -0.1 0.67
Metals -0.45 -0.57
Agriculturals 0.88 1.12
Note: Reflects trading results only and does not include fees or interest
income.
FACTORS INFLUENCING MONTHLY TRADING GAINS:
> In the global interest rate futures markets, gains were recorded from long
positions in European and U.S. interest rate futures as prices trended
higher, drawing strong support from falling equity prices and increased
economic uncertainty.
> Short positions in U.S. and European stock index futures were profitable as
prices finished the month lower amid suspicions regarding corporate
accounting practices and skepticism regarding a global economic recovery.
> Grain prices trended higher on fears that continued hot and dry weather may
have adversely affected crops in the U.S. midwest, resulting in gains from
long positions in wheat, soybean and corn futures.
FACTORS INFLUENCING MONTHLY TRADING LOSSES:
> In the currency markets, losses were recorded from long positions in most
major currencies as the value of these currencies reversed lower relative to
the U.S. dollar, due to an emphasis on a "strong dollar" policy by the Bush
Administration and repatriation activity by U.S. companies.
<PAGE>
--------------------------------------------------------------------------------
SPECTRUM STRATEGIC
--------------------------------------------------------------------------------
[DATA BELOW REPRESENT BAR GRAPH IN THE PRINTED PIECE.]
Month ended July 31, 2002 YTD ended Juy 31, 2002
------------------------- ----------------------
Currencies -0.94 4.29
Interest Rates 2.24 -0.2
Stock Indices -0.26 -2.19
Energies -0.29 0.9
Metals -4.37 -1.53
Agriculturals 4 18.04
Note: Reflects trading results only and does not include fees or interest
income.
FACTORS INFLUENCING MONTHLY TRADING GAINS:
> Grain prices trended higher on fears that continued hot and dry weather may
have adversely affected crops in the U.S. midwest, resulting in gains from
long positions in wheat, soybean and corn futures. Additional gains were
recorded from long positions in sugar futures as prices increased amid
speculative buying and supply and demand concerns.
> In the global interest rate futures markets, gains were recorded from long
positions in European and U.S. interest rate futures as prices trended
higher, drawing strong support from falling equity prices and increased
economic uncertainty.
FACTORS INFLUENCING MONTHLY TRADING LOSSES:
> In the metals futures markets, losses were recorded from previously
established long positions in copper, tin and zinc futures as prices reversed
lower on fears that increased economic uncertainty may reduce demand for
industrial metals.
> In the currency markets, losses were recorded from long positions in the
Canadian dollar as its value weakened relative to the U.S. dollar along with
most major currencies, due to an emphasis on a "strong dollar" policy by the
Bush Administration and repatriation activity by U.S. companies.
--------------------------------------------------------------------------------
SPECTRUM TECHNICAL
--------------------------------------------------------------------------------
[DATA BELOW REPRESENT BAR GRAPH IN THE PRINTED PIECE.]
Month ended July 31, 2002 YTD ended Juy 31, 2002
------------------------- ----------------------
Currencies -1.4 13.37
Interest Rates 7.11 6.87
Stock Indices 4.31 3.46
Energies 0.21 0.7
Metals -0.58 -1.44
Agriculturals 0.62 0.29
Note: Reflects trading results only and does not include fees or interest
income.
FACTORS INFLUENCING MONTHLY TRADING GAINS:
> In the global interest rate futures markets, gains were recorded from long
positions in European and U.S. interest rate futures as prices trended
higher, drawing strong support from falling equity prices and increased
economic uncertainty.
> Short positions in U.S. and European stock index futures were profitable as
prices finished the month lower amid suspicions regarding corporate
accounting practices and skepticism regarding a global economic recovery.
> Grain prices trended higher on fears that continued hot and dry weather may
have adversely affected crops in the U.S. midwest, resulting in gains from
long positions in corn and soybean futures.
FACTORS INFLUENCING MONTHLY TRADING LOSSES:
> In the currency markets, losses were recorded from long positions in the
Canadian, Australian and New Zealand dollar as the value of these currencies
weakened relative to the U.S. dollar due to the decline in gold prices and
repatriation activity by U.S. companies.
<PAGE>
MORGAN STANLEY SPECTRUM SERIES
--------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
FOR THE MONTH ENDED JULY 31, 2002 (UNAUDITED)
<TABLE>
<CAPTION>
MORGAN STANLEY MORGAN STANLEY MORGAN STANLEY
SPECTRUM COMMODITY SPECTRUM CURRENCY SPECTRUM GLOBAL BALANCED
-------------------------- --------------------------- ---------------------------
PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
JULY 1, 2002 JULY 1, 2002 JULY 1, 2002
BEGINNING BEGINNING BEGINNING
AMOUNT NET ASSET VALUE AMOUNT NET ASSET VALUE AMOUNT NET ASSET VALUE
---------- --------------- ---------- --------------- ---------- ---------------
$ % $ % $ %
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Trading profit (loss):
Realized 203,562 1.55 47,766 .06 975,418 1.75
Net change in unrealized (209,845) (1.60) (3,034,452) (3.99) (1,268,334) (2.28)
---------- ----- ---------- ----- ---------- -----
Total Trading Results (6,283) (.05) (2,986,686) (3.93) (292,916) (.53)
Interest income (Note 2) 15,833 .12 80,616 .11 80,437 .14
---------- ----- ---------- ----- ---------- -----
Total Revenues 9,550 .07 (2,906,070) (3.82) (212,479) (.39)
---------- ----- ---------- ----- ---------- -----
EXPENSES
Brokerage fees (Note 2) 50,422 .38 291,655 .38 213,313 .38
Management fees (Note 2 & 3) 27,404 .21 126,807 .17 57,966 .10
---------- ----- ---------- ----- ---------- -----
Total Expenses 77,826 .59 418,462 .55 271,279 .48
---------- ----- ---------- ----- ---------- -----
NET LOSS (68,276) (.52) (3,324,532) (4.37) (483,758) (.87)
========== ===== ========== ===== ========== =====
</TABLE>
MORGAN STANLEY SPECTRUM SERIES
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSET VALUE
--------------------------------------------------------------------------------
FOR THE MONTH ENDED JULY 31, 2002 (UNAUDITED)
<TABLE>
<CAPTION>
MORGAN STANLEY MORGAN STANLEY MORGAN STANLEY
SPECTRUM COMMODITY SPECTRUM CURRENCY SPECTRUM GLOBAL BALANCED
--------------------------------- ---------------------------------- ----------------------------------
PER PER PER
UNITS AMOUNT UNIT UNITS AMOUNT UNIT UNITS AMOUNT UNIT
------------- ---------- ---- ------------- ---------- ----- ------------- ---------- -----
$ $ $ $ $ $
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
July 1, 2002 2,153,677.556 13,153,571 6.11 5,497,778.403 76,083,810 13.84 3,561,868.487 55,647,334 15.62
Net Loss -- (68,276) (.03) -- (3,324,532) (.61) -- (483,758) (.13)
Redemptions (36,562.498 (222,300) 6.08 (59,515.200 (787,386) 13.23 (81,312.492 (1,259,531) 15.49
Subscriptions 33,778.779 205,375 6.08 423,118.993 5,597,864 13.23 46,311.176 717,360 15.49
------------- ---------- ------------- ---------- ------------- ----------
Net Asset Value,
July 31, 2002 2,150,893.837 13,068,370 6.08 5,861,382.196 77,569,756 13.23 3,526,867.171 54,621,405 15.49
============= ========== ============= ========== ============= ==========
</TABLE>
<PAGE>
MORGAN STANLEY SPECTRUM SERIES
--------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
FOR THE MONTH ENDED JULY 31, 2002 (UNAUDITED)
<TABLE>
<CAPTION>
MORGAN STANLEY MORGAN STANLEY MORGAN STANLEY
SPECTRUM SELECT SPECTRUM STRATEGIC SPECTRUM TECHNICAL
-------------------------- --------------------------- ---------------------------
PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
JULY 1, 2002 JULY 1, 2002 JULY 1, 2002
BEGINNING BEGINNING BEGINNING
AMOUNT NET ASSET VALUE AMOUNT NET ASSET VALUE AMOUNT NET ASSET VALUE
---------- --------------- ---------- --------------- ---------- ---------------
$ % $ % $ %
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Trading profit (loss):
Realized 11,738,390 4.32 4,427,270 5.86 9,015,786 3.20
Net change in unrealized 2,938,698 1.08 (4,191,741) (5.55) 20,130,167 7.14
----------- ----- ----------- ----- ---------- -----
Total Trading Results 14,677,088 5.40 235,529 .31 29,145,953 10.34
Interest income (Note 2) 323,005 .12 90,490 .12 336,942 .12
----------- ----- ----------- ----- ---------- -----
Total Revenues 15,000,093 5.52 326,019 .43 29,482,895 10.46
----------- ----- ----------- ----- ---------- -----
EXPENSES
Brokerage fees (Note 2) 1,640,912 .60 456,247 .60 1,702,801 .60
Management fees (Note 2 & 3) 678,997 .25 188,793 .25 595,440 .21
----------- ----- ----------- ----- ---------- -----
Total Expenses 2,319,909 .85 645,040 .85 2,298,241 .81
----------- ----- ----------- ----- ---------- -----
NET INCOME (LOSS) 12,680,184 4.67 (319,021) (.42) 27,184,654 9.65
=========== ===== =========== ===== ========== =====
</TABLE>
MORGAN STANLEY SPECTRUM SERIES
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSET VALUE
--------------------------------------------------------------------------------
FOR THE MONTH ENDED JULY 31, 2002 (UNAUDITED)
<TABLE>
<CAPTION>
MORGAN STANLEY MORGAN STANLEY MORGAN STANLEY
SPECTRUM SELECT SPECTRUM STRATEGIC SPECTRUM TECHNICAL
--------------------------------- ---------------------------------- ----------------------------------
PER PER PER
UNITS AMOUNT UNIT UNITS AMOUNT UNIT UNITS AMOUNT UNIT
------------- ---------- ---- ------------- ---------- ----- ------------- ---------- -----
$ $ $ $ $ $
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
July 1, 2002 10,580,371.946 271,599,031 25.67 6,281,036.859 75,516,796 12.02 17,444,005.058 281,842,923 16.16
Net Income (Loss) -- 12,680,184 1.20 -- (319,021) (.05) -- 27,184,654 1.56
Redemptions (104,580.298) (2,810,073) 26.87 (82,165.585) (983,522) 11.97 (231,703.994) (4,105,795) 17.72
Subscriptions 185,807.659 4,992,652 26.87 119,960.270 1,435,925 11.97 235,624.711 4,175,270 17.72
-------------- ----------- ------------- ---------- -------------- -----------
Net Asset Value,
July 31, 2002 10,661,599.307 286,461,794 26.87 6,318,831.544 75,650,178 11.97 17,447,925.775 309,097,052 17.72
============== =========== ============= ========== ============== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
MORGAN STANLEY SPECTRUM SERIES
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(UNAUDITED)
--------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION. Morgan Stanley Spectrum Commodity L.P. ("Spectrum Commodity"),
Morgan Stanley Spectrum Currency L.P. ("Spectrum Currency"), Morgan Stanley
Spectrum Global Balanced L.P. ("Spectrum Global Balanced"), Morgan Stanley
Spectrum Select L.P. ("Spectrum Select"), Morgan Stanley Spectrum Strategic L.P.
("Spectrum Strategic") and Morgan Stanley Spectrum Technical L.P. ("Spectrum
Technical") (individually, a "Partnership" or collectively, the "Partnerships"),
are limited partnerships organized to engage primarily in the speculative
trading of futures contracts, options on futures contracts and forward contracts
on physical commodities and other commodity interests, including, but not
limited to foreign currencies, financial instruments, metals, energy and
agricultural products (collectively, "futures interests").
The general partner for each Partnership is Demeter Management Corporation
("Demeter"). The non-clearing commodity broker for the Partnerships is Morgan
Stanley DW Inc. ("Morgan Stanley DW"). The clearing commodity brokers for the
Partnerships are Morgan Stanley & Co. Incorporated ("MS & Co.") and Morgan
Stanley & Co. International Limited ("MSIL"). Morgan Stanley Commodities
Management, Inc. ("MSCM") is the trading advisor to Spectrum Commodity. Demeter,
Morgan Stanley DW, MS & Co., MSIL and MSCM are wholly-owned subsidiaries of
Morgan Stanley.
Effective June 20, 2002, Morgan Stanley Dean Witter & Co. changed its name to
Morgan Stanley.
Demeter is required to maintain a 1% minimum interest in the equity of each
Partnership and income (losses) are shared by Demeter and the Limited Partners
based upon their proportional ownership interests.
USE OF ESTIMATES. The financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America, which
require management to make estimates and assumptions that affect the reported
amounts in the financial statements and related disclosures. Management believes
that the estimates utilized in the preparation of the financial statements are
prudent and reasonable. Actual results could differ from those estimates.
MORGAN STANLEY SPECTRUM SERIES
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(CONTINUED)
REVENUE RECOGNITION. Futures interests are open commitments until settlement
date. They are valued at market on a daily basis and the resulting net change in
unrealized gains and losses is reflected in the change in unrealized profits
(losses) on open contracts from one period to the next in the statements of
operations. Monthly, Morgan Stanley DW pays each Partnership interest income on
80% of the month's average daily "Net Assets" (as defined in the limited
partnership agreements) for the month in the case of Spectrum Commodity,
Spectrum Currency, Spectrum Select, Spectrum Strategic and Spectrum Technical,
and on 100% in the case of Spectrum Global Balanced. The interest rate is equal
to a prevailing rate on U.S. Treasury bills. For purposes of such interest
payments, Net Assets do not include monies due the Partnerships on futures
interests, but not actually received.
NET INCOME (LOSS) PER UNIT. Net income (loss) per unit of limited partnership
interest ("Unit(s)") is computed using the weighted average number of Units
outstanding during the period.
BROKERAGE AND RELATED TRANSACTION FEES AND COSTS. The brokerage fees for
Spectrum Commodity, Spectrum Currency and Spectrum Global Balanced are accrued
at a flat monthly rate of 1/12 of 4.6% (a 4.6% annual rate) of Net Assets as of
the first day of each month.
Brokerage fees for Spectrum Select, Spectrum Strategic and Spectrum Technical
are accrued at a flat monthly rate of 1/12 of 7.25% (a 7.25% annual rate) of Net
Assets as of the first day of each month.
Such brokerage fees currently cover all brokerage commissions, transaction
fees and costs, and ordinary administrative and continuing offering expenses.
OPERATING EXPENSES. The Partnerships incur monthly management fees and may incur
incentive fees. All common administrative and continuing offering expenses
including legal, auditing, accounting, filing fees and other related expenses
are borne by Morgan Stanley DW through the brokerage fees paid by each
Partnership.
INCOME TAXES. No provision for income taxes has been made in the accompanying
financial statements, as partners are individually responsible for reporting
income or loss based upon their respective share of each Partnership's revenues
and expenses for income tax purposes.
<PAGE>
MORGAN STANLEY SPECTRUM SERIES
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(CONTINUED)
DISTRIBUTIONS. Distributions, other than redemptions of Units, are made on a
pro-rata basis at the sole discretion of Demeter. No distributions have been
made to date.
CONTINUING OFFERING. Units of each Partnership are offered at a price equal to
100% of the Net Asset Value per Unit as of the close of business on the last day
of the month. No selling commissions or charges related to the continuing
offering of Units will be paid by the Limited Partners or the Partnership.
Morgan Stanley DW will pay all such costs.
REDEMPTIONS. Limited Partners may redeem some or all of their Units at 100% of
the Net Asset Value per Unit as of the end of the last day of any month that is
at least six months after the closing at which a person becomes a Limited
Partner, upon five business days advance notice by redemption form to Demeter.
Thereafter, Units redeemed on or prior to the last day of the twelfth month
after such Units were purchased will be subject to a redemption charge equal to
2% of the Net Asset Value of a Unit on the date of such redemption. Units
redeemed after the last day of the twelfth month and on or prior to the last day
of the twenty-fourth month after which such Units were purchased will be subject
to a redemption charge equal to 1% of the Net Asset Value of a Unit on the date
of such redemption. Units redeemed after the last day of the twenty-fourth month
after which such Units were purchased will not be subject to a redemption
charge.
The foregoing redemption charges are paid to Morgan Stanley DW.
All redemptions must be made in whole Units, in a minimum amount of 50 Units,
unless a Limited Partner is redeeming his entire interest in a Partnership.
EXCHANGES. On the last day of the first month which occurs more than six months
after a person first becomes a Limited Partner in any of the Partnerships, and
at the end of each month thereafter, Limited Partners may exchange their
investment among the Partnerships (subject to certain restrictions outlined in
the Limited Partnership Agreement) without paying additional charges.
DISSOLUTION OF THE PARTNERSHIPS. Spectrum Commodity will terminate on December
31, 2027, Spectrum Currency, Spectrum Global Balanced,
MORGAN STANLEY SPECTRUM SERIES
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(CONTINUED)
Spectrum Strategic and Spectrum Technical will terminate on December 31, 2035
and Spectrum Select will terminate on December 31, 2025 regardless of financial
condition at such time, or at an earlier date if certain conditions occur as
defined in each Partnership's Limited Partnership Agreement.
--------------------------------------------------------------------------------
2. RELATED PARTY TRANSACTIONS
The Partnerships pay brokerage fees to Morgan Stanley DW as described in Note 1.
Spectrum Commodity pays management fees and incentive fees (if applicable) to
MSCM. Each Partnership's cash is on deposit with Morgan Stanley DW, MS & Co. and
MSIL in futures interests trading accounts to meet margin requirements as
needed. Morgan Stanley DW pays interest on these funds as described in Note 1.
--------------------------------------------------------------------------------
3. TRADING ADVISORS
Demeter, on behalf of each Partnership, retains certain commodity trading
advisors to make all trading decisions for the Partnerships. The trading
advisors for each Partnership are as follows:
Morgan Stanley Spectrum Commodity L.P.
Morgan Stanley Commodities Management Inc.
Morgan Stanley Spectrum Currency L.P.
John W. Henry & Company, Inc. ("JWH")
Sunrise Capital Partners, LLC
Morgan Stanley Spectrum Global Balanced L.P.
RXR, Inc.
Morgan Stanley Spectrum Select L.P.
EMC Capital Management, Inc.
Northfield Trading L.P.
Rabar Market Research, Inc.
Sunrise Capital Management, Inc.
Morgan Stanley Spectrum Strategic L.P.
Allied Irish Capital Management, Ltd.
Blenheim Capital Management, L.L.C.
Eclipse Capital Management, Inc.
Morgan Stanley Spectrum Technical L.P.
Campbell & Company, Inc. ("Campbell")
Chesapeake Capital Corporation ("Chesapeake")
John W. Henry & Company, Inc.
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MORGAN STANLEY SPECTRUM SERIES
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NOTES TO FINANCIAL STATEMENTS
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(CONTINUED)
Compensation to the trading advisors by the Partnerships consists of a
management fee and an incentive fee as follows:
MANAGEMENT FEE. The management fee for Spectrum Commodity is accrued at a rate
of 5/24 of 1% of Net Assets on the first day of each month (a 2.5% annual rate).
The management fee for Spectrum Currency is accrued at a rate of 1/12 of 2%
of Net Assets on the first day of each month (a 2% annual rate).
The management fee for Spectrum Global Balanced is accrued at a rate of 5/48
of 1% of Net Assets on the first day of each month (a 1.25% annual rate).
The management fee for Spectrum Select is accrued at a rate of 1/4 of 1% of
Net Assets on the first day of each month (a 3% annual rate).
The management fee for Spectrum Strategic is accrued at a rate of 1/12 of 3%
of Net Assets on the first day of each month (a 3% annual rate).
The management fee for Spectrum Technical is accrued at a rate of 1/12 of 2%
of Net Assets allocated to JWH on the first day of each month, 1/12 of 3% of Net
Assets allocated to Campbell on the first day of each month and effective May 1,
2002, 1/12 of 3%, reduced from 1/12 of 4% charged in previous months), of Net
Assets allocated to Chesapeake on the first day of each month (annual rates of
2%, 3% and 3% respectively).
INCENTIVE FEE. Spectrum Commodity pays an annual incentive fee equal to 17.5% of
Partnership's trading profits, as determined from the end of the last period in
which an incentive fee was earned.
Spectrum Currency pays a monthly incentive fee equal to 20% of the trading
profits experienced with respect to each trading advisor's allocated Net Assets
as of the end of each month.
Spectrum Global Balanced, Spectrum Select and Spectrum Strategic each pay a
monthly incentive fee equal to 15% of the trading profits experienced with
respect to each trading advisor's allocated Net Assets as of the end of each
calendar month.
Spectrum Technical pays a monthly incentive fee equal to 20% of the trading
profits experienced with respect to the Net Assets allocated to Campbell and JWH
as of the end of each calendar month and 19% of the trading profits experienced
with respect to the Net
MORGAN STANLEY SPECTRUM SERIES
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NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(CONTINUED)
Assets allocated to Chesapeake as of the end of each calendar month.
Trading profits for the Partnerships represent the amount by which profits
from futures, forwards and options trading exceed losses after brokerage and
management fees are deducted.
For all Partnerships, when trading losses are incurred, no incentive fees
will be paid in subsequent months until all such losses are recovered.
Cumulative trading losses are adjusted on a pro-rata basis for the net amount of
each month's subscriptions and redemptions.
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