<DOCUMENT>
<TYPE>424B3
<SEQUENCE>1
<FILENAME>spec.txt
<DESCRIPTION>SPECTRUM CURRENCY
<TEXT>
MORGAN STANLEY
SPECTRUM SERIES
January 2003
Monthly Report
This Monthly Report supplements the Spectrum Funds' Prospectus dated April 30,
2002 and the Prospectus Supplement dated January 24, 2003.
Issued: February 28, 2003
[MORGAN STANLEY LOGO]
<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>
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Fund % % % % % % % % % % % % %
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Spectrum Commodity.. -- -- -- -- -- -- -- (34.3) 15.8 3.2 (25.6) 16.6 0.1
(1 mo.)
----------------------------------------------------------------------------------------------------------------------------------
Spectrum Currency... -- -- -- -- -- -- -- -- -- 11.7 11.1 12.2 5.0
(6 mos.) (1 mo.)
----------------------------------------------------------------------------------------------------------------------------------
Spectrum Global
Balanced.......... -- -- -- (1.7) 22.8 (3.6) 18.2 16.4 0.7 0.9 (0.3) (10.1) 0.3
(2 mos.) (1 mo.)
----------------------------------------------------------------------------------------------------------------------------------
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 4.7
(5 mos.) (1 mo.)
----------------------------------------------------------------------------------------------------------------------------------
Spectrum Strategic.. -- -- -- 0.1 10.5 (3.5) 0.4 7.8 37.2 (33.1) (0.6) 9.4 13.8
(2 mos.) (1 mo.)
----------------------------------------------------------------------------------------------------------------------------------
Spectrum Technical.. -- -- -- (2.2) 17.6 18.3 7.5 10.2 (7.5) 7.8 (7.2) 23.3 12.8
(2 mos.) (1 mo.)
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Inception-
to-Date Annualized
Return Return
Fund % %
---------------------------------------------
Spectrum Commodity.. (31.8) (7.3)
---------------------------------------------
Spectrum Currency... 46.3 15.8
---------------------------------------------
Spectrum Global
Balanced.......... 46.2 4.7
---------------------------------------------
Spectrum Select .... 189.5 9.7
---------------------------------------------
Spectrum Strategic.. 31.3 3.4
---------------------------------------------
Spectrum Technical.. 107.6 9.3
---------------------------------------------
2
<PAGE>
--------------------------------------------------------------------------------
Demeter Management Corporation
--------------------------------------------------------------------------------
c/o Morgan Stanley Managed Futures
825 Third Avenue, 9th Floor
New York, NY 10022
Telephone (212) 310-6444
MORGAN STANLEY SPECTRUM SERIES
MONTHLY REPORT
JANUARY 2003
Dear Limited Partner:
The Net Asset Value per Unit for each of the six Morgan Stanley Spectrum
Funds as of January 31, 2003 was as follows:
FUND N.A.V. % CHANGE FOR MONTH
--------------------------------------------------------------------------------
Spectrum Commodity $ 6.82 .12%
Spectrum Currency $14.63 5.02%
Spectrum Global Balanced $14.62 .39%
Spectrum Select $28.95 4.68%
Spectrum Strategic $13.13 13.74%
Spectrum Technical $20.76 12.76%
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.
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.
Limited Partners of Spectrum Commodity are reminded that effective December
31, 2002, trading within the Fund terminated. Demeter Management Corporation,
the general partner of Spectrum Commodity, commenced dissolution of the Fund
effective January 31, 2003.
Should you have any questions concerning this report, please feel free to
contact Demeter Management Corporation c/o Morgan Stanley Managed Futures, 825
Third Avenue, 9th 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/ Jeffrey A. Rothman
Jeffrey A. Rothman
President
Demeter Management Corporation
General Partner
3
<PAGE>
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Spectrum Select
--------------------------------------------------------------------------------
(Data below is represented by a bar graph in the original report.)
Month ended YTD ended
January 31, 2003 January 31, 2003
---------------- ----------------
Australian dollar 0.81 0.81
British pound -1.04 -1.04
Euro 4.27 4.27
Japanese yen 0.13 0.13
Swiss franc 0.78 0.78
Minor currencies 1.07 1.07
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 GAINS:
> Gains were recorded from long positions in the euro, Swiss franc, and Czech
koruna versus the U.S. dollar as the dollar's value continued to weaken amid
renewed fears of a military conflict with Iraq, increased tensions with North
Korea, and weak U.S. economic data.
> Additional gains stemmed from long positions in the Australian dollar and New
Zealand dollar relative to the U.S. dollar as the value of these currencies
strengthened on the heels of higher gold prices.
FACTORS INFLUENCING MONTHLY TRADING LOSSES:
> Short positions in the British pound versus the U.S. dollar resulted in
losses as the pound's value increased amid news of a stronger-than-expected
British consumer confidence report and improved British housing sales data.
4
<PAGE>
--------------------------------------------------------------------------------
Spectrum Global Balanced
--------------------------------------------------------------------------------
(Data below is represented by a bar graph in the original report.)
Month ended YTD ended
January 31, 2003 January 31, 2003
---------------- ----------------
Currencies 0.91 0.91
Interest Rates 0.4 0.4
Stock Indices -1.29 -1.29
Energies 0.76 0.76
Metals 0.22 0.22
Agriculturals -0.24 -0.24
Note: Reflects trading results only and does not include fees or interest
income.
FACTORS INFLUENCING MONTHLY TRADING GAINS:
> Long positions in most major currencies versus the U.S. dollar resulted in
gains as the dollar fell throughout a majority of the month amid domestic
economic concerns and renewed fears of a military conflict with Iraq.
Additional gains were recorded from long positions in the New Zealand dollar
versus the U.S. dollar as its value strengthened on the heels of higher gold
prices.
> Long positions in crude oil futures experienced gains as prices trended
higher on concerns that a potential military conflict with Iraq could curb
market supply. Additional gains were recorded from long positions in natural
gas futures as prices rallied in response to prolonged frigid temperatures in
the northeastern and midwestern U.S.
FACTORS INFLUENCING MONTHLY TRADING LOSSES:
> Long positions in European, U.S., and Japanese stock index futures resulted
in losses as global equity prices declined amid ongoing fears concerning
increased global tensions.
5
<PAGE>
--------------------------------------------------------------------------------
Spectrum Select
--------------------------------------------------------------------------------
(Data below is represented by a bar graph in the original report.)
Month ended YTD ended
January 31, 2003 January 31, 2003
---------------- ----------------
Currencies 3.71 3.71
Interest Rates -0.3 -0.3
Stock Indices -0.72 -0.72
Energies 1.97 1.97
Metals 1.04 1.04
Agriculturals -0.15 -0.15
Note: Reflects trading results only and does not include fees or interest
income.
FACTORS INFLUENCING MONTHLY TRADING GAINS:
> Gains were recorded from long positions in the euro and Swiss franc as the
value of the European currencies strengthened against the U.S. dollar amid
renewed fears of a military conflict with Iraq, increased tensions with
North Korea, and weak U.S. economic data.
> Long positions in crude oil futures resulted in gains as prices trended
higher amid fears that a potential military conflict with Iraq could curb
market supply. Additional gains were recorded from long positions in
natural gas futures as prices rallied in response to prolonged frigid
temperatures in the northeastern and midwestern U.S.
> In the metals futures markets, gains were recorded from long positions in
gold futures as prices increased in response to continued weakness in the
U.S. dollar, worries regarding corporate earnings announcements, and the
prospect of military conflict with Iraq.
FACTORS INFLUENCING MONTHLY TRADING LOSSES:
> Losses were incurred from long positions in U.S. stock index futures as
equity prices decreased amid strong investor demand for bonds, rising oil
prices, and the possibility of military conflict in the Persian Gulf.
> Losses in global interest rate futures resulted from long positions in U.S.
interest rate futures as prices declined early in the month amid a
temporary increase in manufacturing activity in the U.S. midwest.
6
<PAGE>
--------------------------------------------------------------------------------
Spectrum Strategic
--------------------------------------------------------------------------------
(Data below is represented by a bar graph in the original report.)
Month ended YTD ended
January 31, 2003 January 31, 2003
---------------- ----------------
Currencies 1.67 1.67
Interest Rate 1.12 1.12
Stock Indices 0.39 0.39
Energies 0.65 0.65
Metals 2.07 2.07
Agriculturals 9.03 9.03
Note: Reflects trading results only and does not include fees or interest
income.
FACTORS INFLUENCING MONTHLY TRADING GAINS:
> Gains were recorded from long positions in cocoa futures as continued
political instability and fighting in the Ivory Coast resulted in supply
concerns and higher prices. Additional gains resulted from long positions
in sugar futures as prices rose on speculative buying ahead of the
Brazilian harvest.
> Long positions in copper futures resulted in gains as prices reached a
twenty-month high following the release of positive U.S. manufacturing data
and continued supply and demand concerns. Long positions in gold futures
provided additional gains as prices increased amid strong demand among
investors who sought the security of the safe-haven metal.
> In the currency markets, gains were recorded from long positions in the
Australian dollar as its value climbed to a two-and-a-half year high
relative to the U.S. dollar on the heels of higher gold prices.
> Gains were recorded from long positions in Japanese interest rate futures
as prices increased amid continued uncertainty concerning the Japanese
economy.
> Long positions in natural gas futures experienced gains as prices rallied
in response to prolonged frigid temperatures in the northeastern and
midwestern U.S. Additional gains resulted from long positions in crude oil
futures as prices trended higher amid fears that a potential military
conflict with Iraq could curb market supply.
7
<PAGE>
--------------------------------------------------------------------------------
Spectrum Technical
--------------------------------------------------------------------------------
(Data below is represented by a bar graph in the original report)
Month ended YTD ended
January 31, 2003 January 31, 2003
---------------- ----------------
Currencies 4.69 4.69
Interest Rates 2.21 2.21
Stock Indices 0.93 0.93
Energies 3.65 3.65
Metals 1.76 1.76
Agriculturals 0.81 0.81
Note: Reflects trading results only and does not include fees or interest
income.
FACTORS INFLUENCING MONTHLY TRADING GAINS:
> In the currency markets, long positions in the euro resulted in gains as
its value rose to a three-year high versus the U.S. dollar amid renewed
fears of a military conflict with Iraq, increased tensions with North
Korea, and weak U.S. economic data.
> Long positions in natural gas futures experienced gains in response to
prolonged frigid temperatures in the northeastern and midwestern U.S.
Additional gains were provided from long positions in crude oil futures as
prices trended higher amid fears that a potential military conflict with
Iraq could curb market supply.
> In the global interest rate futures markets, gains were recorded early in
the month from short positions in U.S. interest rate futures as prices
declined amid a temporary increase in U.S. manufacturing activity.
Additional gains were recorded late in the month from long positions in
European and U.S. interest rate futures as strong demand from investors
seeking the security of fixed income investments sent prices higher.
Additional gains were recorded from long positions in Japanese interest
rate futures as prices increased amid continued uncertainty concerning the
Japanese economy.
< Long positions in gold futures resulted in gains as prices increased amid
strong demand among investors who sought the security of the safe-haven
metal. Long positions in copper futures provided additional gains as prices
reached a twenty-month high following the release of positive U.S.
manufacturing data and continued supply and demand concerns.
> Short positions in European stock index futures resulted in gains as prices
were driven lower amid higher energy prices, fears of a military conflict
with Iraq, and strong investor demand for fixed income investments.
> Gains were also recorded from long positions in sugar futures as prices
rose on speculative buying ahead of the Brazilian harvest.
8
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9
<PAGE>
MORGAN STANLEY SPECTRUM SERIES
--------------------------------------------------------------------------------
Statements of Operations
--------------------------------------------------------------------------------
FOR THE MONTH ENDED JANUARY 31, 2003 (UNAUDITED)
MORGAN STANLEY
SPECTRUM COMMODITY
--------------------------
PERCENTAGE OF
JANUARY 1, 2003
BEGINNING
AMOUNT NET ASSET VALUE
--------------------------
$ %
REVENUES
Trading profit (loss):
Realized -- --
Net change in unrealized -- --
------- -------
Total Trading Results -- --
Interest income (Note 2) 10,215 .12
------- -------
Total Revenues 10,215 .12
------- -------
EXPENSES
Incentive fees (Note 3) -- --
Brokerage fees (Note 2) -- --
Management fees (Note 2 & 3) -- --
------- -------
Total Expenses -- --
------- -------
NET INCOME 10,215 .12
======= =======
MORGAN STANLEY SPECTRUM SERIES
-----------------------------------------------------------------
Statement of Changes in Net Asset Value
-----------------------------------------------------------------
FOR THE MONTH ENDED JANUARY 31, 2003 (UNAUDITED)
MORGAN STANLEY
SPECTRUM COMMODITY
-----------------------------------
PER
UNITS AMOUNT UNIT
-------------- ----------- ------
$ $
Net Asset Value,
January 1, 2003 1,286,548.090 8,760,779 6.81
Net Income -- 10,215 .01
Redemptions (1,286,548.090) (8,770,994) (6.82)
Subscriptions -- -- --
-------------- -----------
Net Asset Value,
January 31, 2003 -- -- --
============== ===========
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
MORGAN STANLEY MORGAN STANLEY
SPECTRUM CURRENCY SPECTRUM GLOBAL BALANCED
----------------------------- --------------------------
PERCENTAGE OF PERCENTAGE OF
JANUARY 1, 2003 JANUARY 1, 2003
BEGINNING BEGINNING
AMOUNT NET ASSET VALUE AMOUNT NET ASSET VALUE
--------- ---------------- ------- ----------------
$ % $ %
-- -- 310,107 .62
5,789,995 6.02 83,881 .17
---------- ------- -------- -------
5,789,995 6.02 393,988 .79
71,166 .07 50,070 .10
---------- ------- -------- -------
5,861,161 6.09 444,058 .89
---------- ------- -------- -------
503,240 .52 -- --
368,611 .38 193,219 .38
160,266 .17 52,504 .12
---------- ------- -------- -------
1,032,117 1.07 245,723 .50
---------- ------- -------- -------
4,829,044 5.02 198,335 .39
========== ======= ======== =======
-----------------------------------------------------------------------------
MORGAN STANLEY MORGAN STANLEY
SPECTRUM CURRENCY SPECTRUM GLOBAL BALANCED
----------------------------------- -----------------------------------
PER PER
UNITS AMOUNT UNIT UNITS AMOUNT UNIT
------------- ----------- ------ ------------- ---------- -----
$ $ $ $
6,902,618.107 96,159,452 13.93 3,460,180.682 50,405,432 14.57
-- 4,829,044 .70 -- 198,335 .05
(59,583.276) (871,703) 14.63 (72,220.486) (1,055,864) 14.62
450,172.420 6,586,023 14.63 49,437.367 722,774 14.62
------------- ----------- ------------- ----------
7,293,207.251 106,702,816 14.63 3,437,397.563 50,270,677 14.62
============= =========== ============= ==========
11
<PAGE>
MORGAN STANLEY SPECTRUM SERIES
--------------------------------------------------------------------------------
Statements of Operations
--------------------------------------------------------------------------------
FOR THE MONTH ENDED JANUARY 31, 2003 (UNAUDITED)
MORGAN STANLEY
SPECTRUM SELECT
-----------------------------
PERCENTAGE OF
JANUARY 1, 2003
BEGINNING
AMOUNT NET ASSET VALUE
-----------------------------
$ %
REVENUES
Trading profit (loss):
Realized 6,873,624 2.33
Net change in unrealized 9,691,751 3.28
---------- --------
Total Trading Results 16,565,375 5.61
Interest income (Note 2) 231,972 .08
---------- --------
Total Revenues 16,797,347 5.69
---------- --------
EXPENSES
Brokerage fees (Note 2) 1,784,575 .60
Management fees (Note 2 & 3) 738,444 .26
Incentive fees (Note 3) 447,140 .15
---------- --------
Total Expenses 2,970,159 1.01
---------- --------
NET INCOME 13,827,188 4.68
========== ========
MORGAN STANLEY SPECTRUM SERIES
---------------------------------------------------------------
Statement of Changes in Net Asset Value
-----------------------------------------------------------------
FOR THE MONTH ENDED JANUARY 31, 2003 (UNAUDITED)
MORGAN STANLEY
SPECTRUM SELECT
-----------------------------------------
PER
UNITS AMOUNT UNIT
-------------- ------------ -------
$ $
Net Asset Value,
January 1, 2003 10,681,668.047 295,377,799 27.65
Net Income -- 13,827,188 1.30
Redemptions (83,232.108) (2,409,570) 28.95
Subscriptions 351,877.390 10,186,849 28.95
-------------- ------------ -----
Net Asset Value,
January 31, 2003 10,950,313.329 316,982,266 28.95
============== ============ =====
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
MORGAN STANLEY MORGAN STANLEY
SPECTRUM STRATEGIC SPECTRUM TECHNICAL
----------------------------- --------------------------
PERCENTAGE OF PERCENTAGE OF
JANUARY 1, 2003 JANUARY 1, 2003
BEGINNING BEGINNING
AMOUNT NET ASSET VALUE AMOUNT NET ASSET VALUE
---------- ---------------- -------- ---------------
$ % $ %
5,768,956 7.65 12,249,083 3.65
5,590,609 7.42 34,960,439 10.41
---------- --------- ---------- --------
11,359,565 15.07 47,209,522 14.06
62,048 .08 272,577 .08
---------- --------- ---------- --------
11,421,613 15.15 47,482,099 14.14
---------- --------- ---------- --------
455,355 .60 2,028,922 .60
188,423 .25 717,598 .21
424,554 .56 1,898,384 .57
---------- --------- ---------- --------
1,068,332 1.41 4,644,904 1.38
---------- --------- ---------- --------
10,353,281 13.74 42,837,195 12.76
========== ========= ========== ========
MORGAN STANLEY MORGAN STANLEY
SPECTRUM STRATEGIC SPECTRUM TECHNICAL
---------------------------------- -------------------------------------
PER PER
UNITS AMOUNT UNIT UNITS AMOUNT UNIT
------------- ---------- ---- -------------- ---------- ----
$ $ $ $
6,530,775.305 75,369,072 11.54 18,239,525.857 335,821,626 18.41
-- 10,353,281 1.59 -- 42,837,195 2.35
(65,957.079) (866,016) 13.13 (179,698.516) (3,730,541) 20.76
155,726.442 2,044,688 13.13 497,739.701 10,333,075 20.76
------------- ---------- -------------- -----------
6,620,544.668 86,901,025 13.13 18,557,567.042 385,261,355 20.76
============= ========== ============== ===========
13
<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 Partnerships' general partner 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"). Demeter, Morgan Stanley DW, MS &
Co. and MSIL are wholly-owned subsidiaries of Morgan Stanley.
Effective December 31, 2002, Demeter terminated trading in Spe ctrum
Commodity and commenced dissolution of the Partnership effective January 31,
2003, pursuant to its Limited Partnership Agreement.
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.
REVENUE RECOGNITION. Futures interests are open commitments until settlement
date. They are valued at market
14
<PAGE>
MORGAN STANLEY SPECTRUM SERIES
--------------------------------------------------------------------------------
Notes to Financial Statements
--------------------------------------------------------------------------------
(CONTINUED)
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 Currency, Spectrum Select, Spectrum Strategic and Spectrum
Technical, and on 100% in the case of Spectrum Global Balanced and Spectrum
Commodity. 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 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.
15
<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 terminated trading on
December 31, 2002 and commenced dissolution of the Partnership effective January
31, 2003, pursuant to the Fund's Limited
16
<PAGE>
MORGAN STANLEY SPECTRUM SERIES
--------------------------------------------------------------------------------
Notes to Financial Statements
--------------------------------------------------------------------------------
(CONTINUED)
Partnership Agreement. Spectrum Currency, Spectrum Global Balanced, 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.
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 Currency L.P.
John W. Henry & Company, Inc. ("JWH")
Sunrise Capital Partners, LLC
Morgan Stanley Spectrum Global Balanced L.P.
SSARIS Advisors, LLC
Effective as of December 2002, SSARIS has assumed all of RXR's responsibilities
with respect to acting as a trading advisor of the Partnership.
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.
17
<PAGE>
MORGAN STANLEY SPECTRUM SERIES
--------------------------------------------------------------------------------
Notes to Financial Statements
--------------------------------------------------------------------------------
(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 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 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 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.
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MORGAN STANLEY SPECTRUM SERIES
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Notes to Financial Statements
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(CONCLUDED)
For all Partnerships, when trading losses are incurred, no incentive fees are
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.
19
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Demeter Management Corporation
c/o Morgan Stanley Managed Futures
825 Third Avenue, 9th Floor
New York, NY 10022
[MORGAN STANLEY LOGO]
ADDRESS SERVICE REQUESTED
[LOGO] printed on recycled paper
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