<DOCUMENT>
<TYPE>424B3
<SEQUENCE>1
<FILENAME>spec.txt
<DESCRIPTION>SPECTRUM CURRENCY
<TEXT>
MORGAN STANLEY
SPECTRUM SERIES
February 2002
Monthly Report
This Monthly Report supplements the Spectrum Funds' Prospectus dated March 23,
2001 and the Prospectus Supplement dated December 6, 2001.
Issued: March 29, 2002
[LOGO] 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>
Inception-
to-Date Annualized
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Return Return
Fund % % % % % % % % % % % % % %
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Spectrum Commodity -- -- -- -- -- -- -- (34.3) 15.8 3.2 (25.6) (1.2) (42.3) (12.4)
(2 mos.)
-----------------------------------------------------------------------------------------------------------------------------------
Spectrum Currency -- -- -- -- -- -- -- -- -- 11.7 11.1 (5.2) 17.7 10.3
(6 mos.) (2 mos.)
-----------------------------------------------------------------------------------------------------------------------------------
Spectrum Global Balanced -- -- _ (1.7) 22.8 (3.6) 18.2 16.4 0.7 0.9 (0.3) (2.9) 57.4 6.4
(2 mos.) (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 (8.1) 120.3 7.8
(5 mos.) (2 mos.)
-----------------------------------------------------------------------------------------------------------------------------------
Spectrum Strategic -- -- -- 0.1 10.5 (3.5) 0.4 7.8 37.2 (33.1) (0.6) 4.6 10.4 1.4
(2 mos.) (2 mos.)
-----------------------------------------------------------------------------------------------------------------------------------
Spectrum Technical -- -- -- (2.2) 17.6 18.3 7.5 10.2 (7.5) 7.8 (7.2) (5.2) 41.5 4.9
(2 mos.) (2 mos.)
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
DEMETER MANAGEMENT CORPORATION
-------------------------------------------------------------------------------
c/o Managed Futures Department,
825 Third Avenue, 8th Floor,
New York, NY 10022
Telephone (201) 876-4647
MORGAN STANLEY SPECTRUM SERIES
MONTHLY REPORT
FEBRUARY 2002
Dear Limited Partner:
The Net Asset Value per Unit for each of the six Morgan Stanley Spectrum
Funds as of February 28, 2002 was as follows:
Fund NAV % Change for Month
-------------------------------------------------------------------------------
Spectrum Commodity $ 5.77 1.31%
-------------------------------------------------------------------------------
Spectrum Currency $11.77 -1.76%
-------------------------------------------------------------------------------
Spectrum Global Balanced $15.74 -1.71%
-------------------------------------------------------------------------------
Spectrum Select $22.03 -6.90%
-------------------------------------------------------------------------------
Spectrum Strategic $11.04 2.52%
-------------------------------------------------------------------------------
Spectrum Technical $14.15 -3.41%
-------------------------------------------------------------------------------
Detailed performance information for each fund is located in the body of the
financial report. For each fund, we provide trading results by sector charts
that portray 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 a 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 Strategic are advised of a change in trading
personnel at one of the trading advisors employed by the Fund. Effective January
1, 2002, Allied Irish Capital Management, Ltd., a trading advisor to the Fund,
announced the retirement of Mr. David Tease, a Director of Allied Irish. Allied
Irish trades its allocated portion of Fund assets pursuant to the Worldwide
Financial Futures Program, a portion of which was traded by Mr. Tease, as
discussed on page 101 of the Prospectus dated March 23, 2001. Commencing on or
about January 17, 2002, that portion of the Worldwide Financial Futures Program
previously traded by Mr. Tease (approximately
<PAGE>
$8.1 million, or 11.8% of Fund assets) will be traded by Mr. Gerry Grimes. Mr.
Grimes is Managing Director and a founding member of Allied Irish, with nearly
twenty years of experience in investment management. Mr. Grimes will employ a
discretionary trading approach based upon his fundamental economic analysis of
markets. He believes that the positioning of individual markets is a critical
factor in determining trading opportunities. Hence, he will place strong
emphasis on the gathering of intelligence in relation to market sentiment and
trade flow indicators to determine how individual markets are positioned. Mr.
Grimes will attempt to profit from those instances in which he determines that a
market is positioned in a manner contrary to his own fundamental view.
Pre-determined stop loss levels will be applied to all trades in an effort to
manage trade risk. In addition to trading a portion of the Fund's assets, Mr.
Grimes will continue in his role as trading controller for all three programs
employed in the Worldwide Financial Futures Program.
On February 27, 2002, Morgan Stanley Spectrum Global Balanced L.P., Morgan
Stanley Spectrum Select L.P., Morgan Stanley Spectum Strategic L.P., and Morgan
Stanley Spectrum Technical L.P. received notification of a preliminary
entitlement to payment from the Sumitomo Copper Litigation Settlement
Administrator. Under the terms of the preliminary entitlement, the Funds would
receive $208,284, $4,143,065, $10,895, and $273,812 (which currently amounts to
$0.06, $0.40, $0.00, and $0.02 per Unit) respectively. Such preliminary award,
however, is subject to a court hearing scheduled on April 10, 2002 and is
entirely contingent on the court's final approval. Any amount ultimately
received will be accounted for in the period received, for the benefit of the
limited partners at the date of receipt. It should be emphasized, however, that
the Funds have no assurances yet when the distribution, if any, will be made.
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
<PAGE>
[Representation of bar graph in printed piece.]
--------------------------------------------------------------------------------
SPECTRUM COMMODITY
--------------------------------------------------------------------------------
Month ended YTD ended
February 28, 2002 February 28, 2002
------------------ -----------------
Energies 0.95 -0.21
Metals 1.24 1.26
Agriculturals -0.4 -1.2
Note: Reflects trading results only and does not include fees or
interest income.
Factors influencing monthly trading gains:
o Silver and gold prices rallied early in the month following a drop in
equity prices and concerns regarding accounting practices, thus resulting
in profits from long futures positions.
o Natural gas prices moved higher on expectations for below-average
temperatures in the U.S. Northeast and a drop in supplies, thereby gains
were recorded from long futures positions.
Factors influencing monthly trading losses:
o Wheat prices moved lower, thereby losses were experienced from long futures
positions.
[Representation of bar graph in printed piece.]
--------------------------------------------------------------------------------
SPECTRUM CURRENCY
--------------------------------------------------------------------------------
Month ended YTD ended
February 28, 2002 February 28, 2002
------------------ -----------------
Australian dollar 0.57 -0.39
British pound -0.09 -1.42
Euro -0.42 -1.45
Japanese yen -0.94 1.41
Swiss franc -0.4 -0.24
Minor currencies -0.03 -2.29
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:
o The Japanese yen reversed higher versus the U.S. dollar amid yen
repatriation and hopes for a Japanese anti-deflation plan, thereby
recording losses from previously established short yen positions.
o The euro and Swiss franc reversed higher versus the U.S. dollar due to the
weakness in equities during the first half of February and improved
economic confidence in Europe, thus resulting in losses from previously
established short positions in European currencies.
Factors influencing monthly trading gains:
o During mid-month, the Australian dollar continued to strengthen versus the
U.S. dollar on stronger-than-expected Australian jobs data, thereby
recording profits from previously established long Australian dollar
positions.
<PAGE>
[Representation of bar graph in printed piece.]
--------------------------------------------------------------------------------
SPECTRUM GLOBAL BALANCED
--------------------------------------------------------------------------------
Month ended YTD ended
February 28, 2002 February 28, 2002
------------------ -----------------
Currencies -0.21 -0.43
Interest Rates -0.31 -0.4
Stock Indices -0.5 -1.18
Energies -0.1 -0.2
Metals -0.08 0.04
Agriculturals -0.2 -0.12
Note: Reflects trading results only and does not include fees or
interest income.
Factors influencing monthly trading losses:
o German stock index futures prices reversed lower early in the month, thereby
recording losses from previously established long positions.
o Japanese government bond prices reversed higher amid the possibility of an
anti-deflation plan from the Japanese government, resulting in losses from
previously established short futures positions.
[Representation of bar graph in printed piece.]
--------------------------------------------------------------------------------
SPECTRUM SELECT
--------------------------------------------------------------------------------
Month ended YTD ended
February 28, 2002 February 28, 2002
------------------ -----------------
Currencies -2.63 -2.28
Interest Rates -1.6 -2.21
Stock Indices -0.65 -0.93
Energies -0.81 -0.45
Metals -0.23 -0.34
Agriculturals -0.3 -0.65
Note: Reflects trading results only and does not include fees or interest
income.
Factors influencing monthly trading losses:
o The Japanese yen reversed higher versus the U.S. dollar amid yen repatriation
and hopes for a Japanese anti-deflation plan, thereby recording losses from
previously established short yen positions.
o Japanese government bond prices reversed higher amid the possibility of an
anti-deflation plan from the Japanese government, resulting in losses from
previously established short futures positions.
o Crude oil prices climbed higher on rising tensions in the Middle East and
supply concerns, thereby experiencing losses from previously established
short futures positions.
<PAGE>
[Representation of bar graph in printed piece.]
--------------------------------------------------------------------------------
SPECTRUM STRATEGIC
--------------------------------------------------------------------------------
Month ended YTD ended
February 28, 2002 February 28, 2002
------------------ -----------------
Currencies -0.44 0.13
Interest Rates -0.7 -0.88
Stock Indices 0.15 0.09
Energies -0.17 -0.3
Metals 0.82 2.27
Agriculturals 3.46 4.67
Note: Reflects trading results only and does not include fees or interest
income.
Factors influencing monthly trading gains:
o Cocoa prices moved higher on supply concerns and technically-based factors,
thus resulting in gains from long futures positions.
o Lumber prices moved higher amid an increase in demand, thereby recording
profits from long futures positions.
o Zinc and copper prices increased later in the month on positive economic
data and rise in demand for industrial metals, which produced gains from
long positions.
Factors influencing monthly trading losses:
o U.S. interest rate futures prices reversed lower early in the month after
weak auction demand for U.S. intermediate-term notes, thereby generating
losses from long positions.
[Representation of bar graph in printed piece.]
--------------------------------------------------------------------------------
SPECTRUM TECHNICAL
--------------------------------------------------------------------------------
Month ended YTD ended
February 28, 2002 February 28, 2002
------------------ -----------------
Currencies -0.9 -0.25
Interest Rates -0.56 -1.21
Stock Indices -1.08 -1.23
Energies -0.11 0.28
Metals 0.08 -0.5
Agriculturals -0.12 -0.94
Note: Reflects trading results only and does not include fees or interest
income.
Factors influencing monthly trading losses:
o Nikkei Index futures prices reversed higher on hopes for a government backed
economic plan to help combat deflation and address bad bank loans, thereby
experiencing losses from previously established short positions.
o The Japanese yen reversed higher versus the U.S. dollar amid yen repatriation
and hopes for a Japanese anti-deflation plan, thereby recording losses from
previously established short yen positions.
<PAGE>
MORGAN STANLEY SPECTRUM SERIES
--------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
FOR THE MONTH ENDED FEBRUARY 28, 2002(UNAUDITED)
<TABLE>
<CAPTION>
MORGAN STANLEY MORGAN STANLEY MORGAN STANLEY
SPECTRUM COMMODITY SPECTRUM CURRENCY SPECTRUM GLOBAL BALANCED
--------------------------- -------------------------- ------------------------
PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
FEBRUARY 1, 2002 FEBRUARY 1, 2002 FEBRUARY 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 211,575 1.68 -- -- (250,892) (.44)
Net change in unrealized 13,912 .11 (668,204) (1.31) (526,608) (.92)
------ --- -------- ----- -------- ----
Total Trading Results 225,487 1.79 (668,204) (1.31) (777,500) (1.36)
Interest income (Note 2) 13,306 .11 48,070 .09 73,861 .13
------- --- ------ --- ------ ---
Total Revenues 238,793 1.90 (620,134) (1.22) (703,639) (1.23)
------- ---- -------- ----- -------- -----
EXPENSES
Brokerage fees (Note 2) 48,182 .38 196,020 .38 220,042 .38
Management fees (Note 2 & 3) 26,186 .21 85,226 .16 59,794 .10
------- ---- -------- ----- -------- -----
Total Expenses 74,368 .59 281,246 .54 279,836 .48
------- ---- -------- ----- -------- -----
NET INCOME (LOSS) 164,425 1.31 (901,380) (1.76) (983,475) (1.71)
======= ==== ======== ===== ======== =====
</TABLE>
MORGAN STANLEY SPECTRUM SERIES
-------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSET VALUE
-------------------------------------------------------------------------------
FOR THE MONTH ENDED FEBRUARY 28, 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,
February 1, 2002 2,206,847.937 12,569,143 5.70 4,269,011.553 51,135,586 11.98 3,584,746.484 57,402,747 16.01
Net Income (Loss) -- 164,425 .07 -- (901,380) (.21) -- (983,475) (.27)
Redemptions (33,287.421) (192,068) 5.77 (32,816.534) (386,251) 11.77 (49,229.964) (774,880) 15.74
Subscriptions 25,580.589 147,600 5.77 266,791.050 3,140,130 11.77 43,755.855 688,717 15.74
------------- ---------- ------------- ---------- ------------- -------- -----
Net Asset Value,
February 28, 2002 2,199,141.105 12,689,100 5.77 4,502,986.069 52,988,085 11.77 3,579,272.375 56,333,109 15.74
============= ========== ============== ============ ============= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
MORGAN STANLEY SPECTRUM SERIES
-------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
-------------------------------------------------------------------------------
FOR THE MONTH ENDED FEBRUARY 28, 2002(UNAUDITED)
<TABLE>
<CAPTION>
MORGAN STANLEY MORGAN STANLEY MORGAN STANLEY
SPECTRUM SELECT SPECTRUM STRATEGIC SPECTRUM TECHNICAL
-------- --------------- ------------------------- -------------------------
PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
FEBRUARY 1, 2002 FEBRUARY 1, 2002 FEBRUARY 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 (8,102,604) (3.36) 2,220,299 3.21 (3,524,743) (1.38)
Net change in unrealized (6,717,591) (2.79) 45,063 .07 (3,278,098) (1.29)
------------ ------ --------- ------ ---------- ------
Total Trading Results (14,820,195) (6.15) 2,265,362 3.28 (6,802,841) (2.67)
Interest income (Note 2) 241,171 .10 72,520 .10 253,095 .10
------------ ------ --------- ------ ---------- ------
Total Revenues (14,579,024) (6.05) 2,337,882 3.38 (6,549,746) (2.57)
------------ ------ --------- ------ ---------- ------
EXPENSES
Brokerage fees (Note 2) 1,456,449 .60 418,503 .60 1,537,722 .60
Management fees (Note 2 & 3) 602,668 .25 173,173 .26 586,649 .24
------------ ------ --------- ------ ---------- ------
Total Expenses 2,059,117 .85 591,676 .86 2,124,371 .84
------------ ------ --------- ------ ---------- ------
NET INCOME (LOSS) (16,638,141) (6.90) 1,746,206 2.52 (8,674,117) (3.41)
============ ====== ========= ====== ========== ======
</TABLE>
MORGAN STANLEY SPECTRUM SERIES
-------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSET VALUE
-------------------------------------------------------------------------------
FOR THE MONTH ENDED FEBRUARY 28, 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,
February 1, 2002 10,189,393.404 241,067,274 23.66 6,431,482.037 69,269,382 10.77 17,370,679.325 254,519,445 14.65
Net Income (Loss) -- (16,638,141) (1.63) -- 1,746,206 .27 -- (8,674,117) (.50)
Redemptions (56,918.326) (1,253,911) 22.03 (91,108.280) (1,005,835) 11.04 (157,815.069) (2,233,083) 14.15
Subscriptions 202,400.712 4,458,888 22.03 64,896.138 716,453 11.04 324,340.040 4,589,412 14.15
------------ ---------- ------------- ---------- ------------ ----------
Net Asset Value,
February 28, 2002 10,334,875.790 227,634,110 22.03 6,405,269.895 70,726,206 11.04 17,537,204.296 248,201,657 14.15
============== =========== ============= ========== ============== ===========
</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 Dean Witter & Co. 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
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 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.
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, 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.
Rabar Market Research, Inc.
Sunrise Capital Management, Inc.
Northfield Trading L.P.
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.
<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 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 1/12 of 4% of
Net Assets allocated to Chesapeake on the first day of each month (annual rates
of 2%, 3% and 4% 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 Assets allocated to Chesapeake as of the end of each
calendar month.
MORGAN STANLEY SPECTRUM SERIES
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(CONCLUDED)
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.
<PAGE>
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PRESORTED
FIRST CLASS MAIL
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PERMIT #664
S. HACKENSACK, N.J.
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[LOGO] MORGAN STANLEY
c/o Morgan Stanley Trust Company,
Attention:Managed Futures, 7th Floor,
Harborside Financial Center, Plaza Two
Jersey City, NJ 07311-3977
ADDRESS SERVICE REQUESTED
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