<DOCUMENT>
<TYPE>424B3
<SEQUENCE>1
<FILENAME>spec.txt
<DESCRIPTION>SPECTRUM CURRENCY
<TEXT>
MORGAN STANLEY
SPECTRUM SERIES
June 2003
Monthly Report
This Monthly Report supplements the Spectrum Funds' Prospectus
dated April 28, 2003.
Issued: July 31, 2003
[MORGAN STANLEY LOGO]
<PAGE>
MORGAN STANLEY SPECTRUM SERIES
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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 2003 RETURN RETURN
FUND % % % % % % % % % % % % % % %
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Spectrum Currency .... -- -- -- -- -- -- -- -- -- 11.7 11.1 12.2 7.2 49.3 14.3
(6 mos.) (6 mos.)
------------------------------------------------------------------------------------------------------------------------------------
Spectrum Global
Balanced ........... -- -- -- (1.7) 22.8 (3.6) 18.2 16.4 0.7 0.9 (0.3) (10.1) 7.3 56.4 5.3
(2 mos.) (6 mos.)
------------------------------------------------------------------------------------------------------------------------------------
Spectrum Select ...... 31.2 (14.4) 41.6 (5.1) 23.6 5.3 6.2 14.2 (7.6) 7.1 1.7 15.4 6.0 193.2 9.5
(5 mos.) (6 mos.)
------------------------------------------------------------------------------------------------------------------------------------
Spectrum Strategic ... -- -- -- 0.1 10.5 (3.5) 0.4 7.8 37.2 (33.1) (0.6) 9.4 7.1 23.6 2.5
(2 mos.) (6 mos.)
------------------------------------------------------------------------------------------------------------------------------------
Spectrum Technical ... -- -- -- (2.2) 17.6 18.3 7.5 10.2 (7.5) 7.8 (7.2) 23.3 9.1 100.8 8.4
(2 mos.) (6 mos.)
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
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DEMETER MANAGEMENT CORPORATION
--------------------------------------------------------------------------------
825 Third Avenue, 9th Floor
New York, NY 10022
Telephone (212) 310-6444
MORGAN STANLEY SPECTRUM SERIES
MONTHLY REPORT
JUNE 2003
Dear Limited Partner:
The Net Asset Value per Unit for each of the five Morgan Stanley Spectrum
Funds as of June 30, 2003 was as follows:
FUND N.A.V. % CHANGE FOR MONTH
--------------------------------------------------------------------------------
Spectrum Currency $14.93 -3.96%
--------------------------------------------------------------------------------
Spectrum Global Balanced $15.64 -0.19%
Spectrum Select $29.32 -2.93%
--------------------------------------------------------------------------------
Spectrum Strategic $12.36 -1.21%
--------------------------------------------------------------------------------
Spectrum Technical $20.08 -7.44%
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 are advised of the following changes to the Board of
Directors of Demeter Management Corporation (the "General Partner"), effective
June 30, 2003:
Mr. Robert E. Murray resigned the position of Chairman of the Board of
Directors of the General Partner. Mr. Jeffrey A. Rothman, President and Director
of the General Partner, was named Chairman of the Board of
Directors of the General Partner.
Should you have any questions concerning this report, please feel free to
contact Demeter Management Corporation, 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
Chairman and President
Demeter Management Corporation
General Partner
<PAGE>
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SPECTRUM CURRENCY
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[The table below represents a bar chart in the printed report.]
Month ended YTD ended
June 30, 2003 June 30, 2003
------------- -------------
Australian dollar 1.35 7.26
British pound -1.12 -3.65
Euro -1.52 12.63
Japanese yen 0.2 -3.83
Swiss franc -0.21 0.41
Minor| currencies -2.17 0.02
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 resulted from long positions in the Mexican peso, Czech koruna, Thai
baht, and Singapore dollar versus the U.S. dollar as the value of the U.S.
dollar strengthened amid the release of a better-than-expected U.S.
employment report.
>> Losses were experienced from long positions in the euro versus the U.S.
dollar as the value of the dollar reversed higher, after a period of
prolonged weakness, amid encouraging comments from Federal Reserve Chairman
Greenspan concerning the prospects for a U.S. economic recovery.
>> Additional losses stemmed from short positions in the British pound versus
the U.S. dollar as the pound strengthened early in the month amid
expectations that the Bank of England would likely leave interest rates
unchanged. Losses were also experienced later in the month from long
positions in the pound as its value reversed lower following comments from
the British Finance Minister concerning the U.K.'s prospects for entry into
the European Monetary Union.
FACTORS INFLUENCING MONTHLY TRADING GAINS:
>> Gains resulted from long positions in the Australian dollar as its value
strengthened to a four-year high versus the U.S. dollar amid speculation
that the Reserve Bank of Australia would likely leave interest rates
unchanged.
<PAGE>
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SPECTRUM GLOBAL BALANCED
--------------------------------------------------------------------------------
[The table below represents a bar chart in the printed report.]
Month ended YTD ended
June 30, 2003 June 30, 2003
------------- -------------
Currencies -0.74 1.4
Interest Rates 0.05 5.8
Stock Indices 1.23 1.65
Energies -0.02 1.44
Metals -0.23 -0.25
Agriculturals -0.01 -0.49
Note: Reflects trading results only and does not include fees or interest
income.
FACTORS INFLUENCING MONTHLY TRADING GAINS:
>> In the global stock index markets, long positions in European stock index
futures recorded gains as global equity prices strengthened amid the
release of positive economic data and renewed expectations for a U.S.
interest rate cut. Additional gains were provided from long positions in
Japanese stock index futures as prices rallied amid increased foreign
demand for Japanese equities.
FACTORS INFLUENCING MONTHLY TRADING LOSSES:
>> In the currency markets, losses resulted from long positions in the Swiss
franc versus the Japanese yen as the value of the yen strengthened relative
to the franc in response to a rally in Japanese equity prices. Additional
losses stemmed from long positions in the Swiss franc versus the U.S.
dollar as the value of the dollar reversed higher amid encouraging comments
from Federal Reserve Chairman Greenspan concerning the prospects for a U.S.
economic recovery.
>> In the metals markets, losses were recorded from long positions in nickel
futures as prices declined amid easing supply concerns.
<PAGE>
--------------------------------------------------------------------------------
SPECTRUM SELECT
--------------------------------------------------------------------------------
[The table below represents a bar chart in the printed report.]
Month ended YTD ended
June 30, 2003 June 30, 2003
------------- -------------
Currencies -1.1 6.5
Interest Rates -0.39 3.92
Stock Indices 0.61 -0.13
Energies 0.02 3.52
Metals -0.48 -1.53
Agriculturals -0.38 -0.8
Note: Reflects trading results only and does not include fees or interest
income.
FACTORS INFLUENCING MONTHLY TRADING LOSSES:
>> In the currency markets, losses were recorded from long positions in the
Swiss franc and the euro versus the U.S. dollar as the value of the dollar
strengthened amid the release of a better-than-expected U.S. employment
report and heightened expectations for a U.S. economic recovery.
>> In the metals markets, losses resulted from long positions in aluminum
futures as prices declined in anticipation of an interest rate cut by the
U.S. Federal Reserve.
>> In the global interest rate markets, losses stemmed from long positions in
U.S. interest rate futures as prices generally reversed lower amid hopes
for a U.S.-led global economic recovery.
>> In the agricultural markets, losses were recorded from long futures
positions in soybeans and its related products as prices declined amid
favorable weather conditions in the major growing regions.
FACTORS INFLUENCING MONTHLY TRADING GAINS:
>> In the global stock index markets, gains were provided from long positions
in U.S. stock index futures as U.S. equity prices strengthened amid the
release of positive economic data and renewed expectations for a U.S.
interest rate cut.
<PAGE>
--------------------------------------------------------------------------------
Spectrum Strategic
--------------------------------------------------------------------------------
[The table below represents a bar chart in the printed report.]
Month ended YTD ended
June 30, 2003 June 30, 2003
------------- -------------
Currencies -0.25 6.28
Interest Rates -1.88 2.51
Stock Indices 1.02 2.41
Energies -0.52 -0.16
Metals -0.91 -0.18
Agriculturals 1.96 1.84
Note: Reflects trading results only and does not include fees or interest
income.
FACTORS INFLUENCING MONTHLY TRADING LOSSES:
>> In the global interest rate markets, losses resulted from long positions in
Japanese interest rate futures as prices reversed sharply lower amid a rise
in Japanese industrial production and stronger equity prices.
>> In the metals markets, long positions in copper futures experienced losses
as prices declined in anticipation of an interest rate cut by the U.S.
Federal Reserve. Additional losses were provided by long positions in gold
futures as prices declined in response to the rise of the U.S. dollar.
>> In the energy markets, long positions in natural gas futures experienced
losses as prices reversed sharply lower following news of
larger-than-expected U.S. reserves.
>> In the currency markets, long positions in the Swiss franc and the euro
versus the U.S. dollar sustained losses as the value of the dollar
strengthened amid the release of a better-than-expected U.S. employment
report and heightened expectations for a U.S. economic recovery.
FACTORS INFLUENCING MONTHLY TRADING GAINS:
>> In the agricultural markets, gains were recorded from long positions in
cotton futures as increased exports and weather-related supply concerns
forced prices higher.
>> In the global stock index markets, long positions in Japanese stock index
futures produced gains as prices rallied amid increased foreign demand for
Japanese equities. Additional gains were recorded from long positions in
European and U.S. stock index futures as prices strengthened amid the
release of positive economic data and renewed expectations for a U.S.
interest rate cut.
<PAGE>
--------------------------------------------------------------------------------
SPECTRUM TECHNICAL
--------------------------------------------------------------------------------
[The table below represents a bar chart in the printed report.]
Month ended YTD ended
June 30, 2003 June 30, 2003
------------- -------------
Currencies -0.72 10.89
Interest Rates -2.73 6.21
Stock Indices 0.51 0.94
Energies -0.65 3.77
Metals -1.46 -2.53
Agriculturals -1.42 -2.42
Note: Reflects trading results only and does not include fees or interest
income.
FACTORS INFLUENCING MONTHLY TRADING LOSSES:
>> In the global interest rate markets, losses resulted from long positions in
Japanese interest rate futures as prices reversed sharply lower amid a rise
in Japanese industrial production and stronger equity prices. Additional
losses were recorded from long positions in European, U.S., and Australian
interest rate futures as prices generally reversed lower amid hopes for a
U.S.-led global economic recovery.
>> In the metals markets, long positions in aluminum and copper futures
experienced losses as prices declined in anticipation of an interest rate
cut by the U.S. Federal Reserve. Additional losses resulted from long
positions in gold futures as prices declined in response to the rise of the
U.S. dollar.
>> In the agricultural markets, losses were recorded from short positions in
cotton futures as increased exports and weather-related supply concerns
forced prices higher. Additional losses were experienced from long
positions in lean hog futures as prices declined in response to a potential
outbreak of Mad Cow Disease.
>> In the currency markets, long positions in the euro versus the U.S. dollar
recorded losses as the value of the dollar strengthened amid the release of
a better-than-expected U.S. employment report and growing optimism
concerning the U.S. economy.
>> In the energy markets, long positions in natural gas futures experienced
losses as prices reversed sharply lower following news of
larger-than-expected U.S. reserves.
FACTORS INFLUENCING MONTHLY TRADING GAINS:
>> In the global stock index markets, long positions in Japanese stock index
futures produced gains as prices rallied amid increased foreign demand for
Japanese equities.
<PAGE>
[This page intentionally left blank]
<PAGE>
MORGAN STANLEY SPECTRUM SERIES
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STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
FOR THE MONTH ENDED JUNE 30, 2003 (UNAUDITED)
<TABLE>
<CAPTION>
MORGAN STANLEY MORGAN STANLEY
SPECTRUM CURRENCY SPECTRUM GLOBAL BALANCED
------------------------ ------------------------
PERCENTAGE OF PERCENTAGE OF
JUNE 1, 2003 JUNE 1, 2003
BEGINNING BEGINNING
AMOUNT NET ASSET VALUE AMOUNT NET ASSET VALUE
------ --------------- ------ ---------------
<S> <C> <C> <C> <C>
$ % $ %
REVENUES
Trading profit (loss):
Realized 7,159,915 5.25 3,327,178 6.47
Net change in unrealized (11,901,339) (8.73) (3,221,741) (6.27)
----------- ---- ---------- ----
Total Trading Results (4,741,424) (3.48) 105,437 .20
Interest income (Note 2) 89,054 .07 46,919 .09
----------- ---- ---------- ----
Total Revenues (4,652,370) (3.41) 152,356 .29
----------- ---- ---------- ----
EXPENSES
Brokerage fees (Note 2) 522,803 .38 197,061 .38
Management fees (Note 3) 227,304 .17 53,549 .10
----------- ---- ---------- ----
Total Expenses 750,107 .55 250,610 .48
----------- ---- ---------- ----
NET LOSS (5,402,477) (3.96) (98,254) (.19)
=========== ==== ========== ====
</TABLE>
MORGAN STANLEY SPECTRUM SERIES
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSET VALUE
--------------------------------------------------------------------------------
FOR THE MONTH ENDED JUNE 30, 2003 (UNAUDITED)
<TABLE>
<CAPTION>
MORGAN STANLEY MORGAN STANLEY
SPECTRUM CURRENCY SPECTRUM GLOBAL BALANCED
--------------------------------------- ------------------------------------------
PER PER
UNITS AMOUNT UNIT UNITS AMOUNT UNIT
------------- ----------- ----- ------------- ------------ -------
<S> <C> <C> <C> <C> <C> <C>
$ $ $ $
Net Asset Value,
June 1, 2003 8,770,581.095 136,383,296 15.55 3,281,577.356 51,407,602 15.67
Net Loss -- (5,402,477) (.62) -- (98,254) (.03)
Redemptions (70,870.146) (1,058,091) 14.93 (59,221.909) (926,231) 15.64
Subscriptions 565,432.841 8,441,914 14.93 55,805.096 872,792 15.64
------------- ----------- ------------- ------------
Net Asset Value,
June 30, 2003 9,265,143.790 138,364,642 14.93 3,278,160.543 51,255,909 15.64
============= =========== ============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
MORGAN STANLEY SPECTRUM SERIES
--------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
FOR THE MONTH ENDED JUNE 30, 2003 (UNAUDITED)
<TABLE>
<CAPTION>
MORGAN STANLEY MORGAN STANLEY MORGAN STANLEY
SPECTRUM SELECT SPECTRUM STRATEGIC SPECTRUM TECHNICAL
--------------------------- --------------------------- ---------------------------
PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
JUNE 1, 2003 JUNE 1, 2003 JUNE 1, 2003
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 24,837,481 6.78 (28,086) (.03) 29,116,325 6.66
Net change in unrealized (32,713,436) (8.93) (354,342) (.40) (58,344,242) (13.36)
----------- ----- ----------- ----- ----------- -----
Total Trading Results (7,875,955) (2.15) (382,428) (.43) (29,227,917) (6.70)
Interest income (Note 2) 258,790 .07 64,013 .07 301,707 .07
----------- ----- ----------- ----- ----------- -----
Total Revenues (7,617,165) (2.08) (318,415) (.36) (28,926,210) (6.63)
----------- ----- ----------- ----- ----------- -----
EXPENSES
Brokerage fees (Note 2) 2,214,376 .60 534,219 .60 2,639,378 .60
Management fees (Note 3) 916,293 .25 221,056 .25 937,995 .21
----------- ----- ----------- ----- ----------- -----
Total Expenses 3,130,669 .85 755,275 .85 3,577,373 .81
----------- ----- ----------- ----- ----------- -----
NET LOSS (10,747,834) (2.93) (1,073,690) (1.21) (32,503,583) (7.44)
=========== ===== =========== ===== =========== =====
</TABLE>
<PAGE>
--------------------------------------------------------------------------------
MORGAN STANLEY SPECTRUM SERIES
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSET VALUE
--------------------------------------------------------------------------------
FOR THE MONTH ENDED JUNE 30, 2003 (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,
June 1, 2003 12,135,738.219 366,517,192 30.20 7,065,156.407 88,422,530 12.52 20,137,258.988 436,862,610 21.69
Net Loss -- (10,747,834) (.88) -- (1,073,690) (.16) -- (32,503,583) (1.61)
Redemptions (115,437.884) (3,384,639) 29.32 (109,265.202) (1,350,518) 12.36 (232,504.028) (4,668,681) 20.08
Subscriptions 467,220.900 13,698,920 29.32 260,728.492 3,222,605 12.36 737,062.706 14,800,218 20.08
-------------- ----------- ------------- ---------- -------------- -----------
Net Asset Value,
June 30, 2003 12,487,521.235 366,083,639 29.32 7,216,619.697 89,220,927 12.36 20,641,817.666 414,490,564 20.08
============== =========== ============= ========== ============== ===========
</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 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 is Morgan Stanley DW Inc.
("Morgan Stanley DW"). The clearing commodity brokers are Morgan Stanley & Co.
Incorporated ("MS & Co.") and Morgan Stanley & Co. International Limited
("MSIL"). Demeter, Morgan Stanley DW, MS & Co. and MSIL are wholly-owned
subsidiaries of Morgan Stanley.
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 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
based upon 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,
<PAGE>
--------------------------------------------------------------------------------
MORGAN STANLEY SPECTRUM SERIES
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(CONTINUED)
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 owed to the Partnerships on futures interests.
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 the
Partnerships.
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.
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 are paid by the Limited Partners or the Partnerships. Morgan
Stanley DW pays all such costs.
<PAGE>
--------------------------------------------------------------------------------
MORGAN STANLEY SPECTRUM SERIES
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(CONTINUED)
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 Agreements) without paying additional charges.
DISSOLUTION OF THE PARTNERSHIPS. 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
<PAGE>
--------------------------------------------------------------------------------
MORGAN STANLEY SPECTRUM SERIES
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(CONTINUED)
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
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.
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% per month of Net Assets allocated to each trading advisor 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% per month 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%
per month of Net Assets allocated to each trading advisor on the first day of
each month (a 3% annual rate).
<PAGE>
--------------------------------------------------------------------------------
MORGAN STANLEY SPECTRUM SERIES
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(CONCLUDED)
The management fee for Spectrum Strategic is accrued at a rate of 1/12 of
3% per month of Net Assets allocated to each trading advisor 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% per month of Net Assets allocated to JWH on the first day of each month, 1/12
of 3% per month of Net Assets allocated to Campbell on the first day of each
month and 1/12 of 3% per month 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 represent the amount by which profits from futures,
forwards and options trading exceed losses after brokerage and management fees
are deducted.
For all Partnerships with trading losses, no incentive fee is 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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Demeter Management Corporation
825 Third Avenue, 9th Floor
New York, NY 10022
[MORGAN STANLEY LOGO]
ADDRESS SERVICE REQUESTED
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[RECYCLE LOGO] printed on recycled paper
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