-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L25eWhVECCwC1LHcwSI6JE7Hm/EOdguu3oUDJQAJ+jhrpkSMs//Y5SiZahsqZk// fLLfF/gkHO8XH1EFCheJJg== 0000873799-04-000003.txt : 20040324 0000873799-04-000003.hdr.sgml : 20040324 20040324160900 ACCESSION NUMBER: 0000873799-04-000003 CONFORMED SUBMISSION TYPE: 424B3 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20040324 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN STANLEY SPECTRUM SELECT LP CENTRAL INDEX KEY: 0000873799 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 133619290 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-47829 FILM NUMBER: 04687508 BUSINESS ADDRESS: STREET 1: HARBORSIDE FINANCIAL CENTER PLAZA TWO CITY: JERSEY CITY STATE: NJ ZIP: 07311 BUSINESS PHONE: 2018764647 FORMER COMPANY: FORMER CONFORMED NAME: MORGAN STANLEY DEAN WITTER SPECTRUM SELECT LP DATE OF NAME CHANGE: 19990412 FORMER COMPANY: FORMER CONFORMED NAME: DEAN WITTER SPECTRUM SELECT LP DATE OF NAME CHANGE: 19980507 FORMER COMPANY: FORMER CONFORMED NAME: WITTER DEAN SELECT FUTURES FUND LP DATE OF NAME CHANGE: 19930328 424B3 1 spec.txt SPECTRUM SELECT MORGAN STANLEY SPECTRUM SERIES February 2004 Monthly Report This Monthly Report supplements the Spectrum Funds' Prospectus dated April 28, 2003 and the Prospectus Supplement dated December 17, 2003. Issued: March 31, 2004 [LOGO OMITTED] MORGAN STANLEY SPECTRUM SERIES - -------------------------------------------------------------------------------- HISTORICAL FUND PERFORMANCE - -------------------------------------------------------------------------------- Presented below is the percentage change in Net Asset Value per Unit from the start of every calendar year each Fund has traded. Also provided is the inception-to-date return and the compound annualized return since inception for each Fund. Past performance is not necessarily indicative of future results.
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 FUND % % % % % % % % % % - ---------------------------------------------------------------------------------------------------------------------------------- Spectrum Currency ....... -- -- -- -- -- -- -- -- -- 11.7 (6 mos.) - ---------------------------------------------------------------------------------------------------------------------------------- Spectrum Global Balanced -- -- -- (1.7) 22.8 (3.6) 18.2 16.4 0.8 0.9 (2 mos.) - ---------------------------------------------------------------------------------------------------------------------------------- Spectrum Select ......... 31.2 (14.4) 41.6 (5.1) 23.6 5.3 6.2 14.2 (7.6) 7.1 (5 mos.) - ---------------------------------------------------------------------------------------------------------------------------------- Spectrum Strategic ...... -- -- -- 0.1 10.5 (3.5) 0.4 7.8 37.2 (33.1) (2 mos.) - ---------------------------------------------------------------------------------------------------------------------------------- Spectrum Technical ...... -- -- -- (2.2) 17.6 18.3 7.5 10.2 (7.5) 7.8 (2 mos.) - ----------------------------------------------------------------------------------------------------------------------------------
INCEPTION- COMPOUND TO-DATE ANNUALIZED 2001 2002 2003 2004 RETURN RETURN FUND % % % % % % - ------------------------------------------------------------------------------- Spectrum Currency ...... 11.1 12.2 12.4 (0.5) 55.8 12.9 (2 mos.) - ------------------------------------------------------------------------------- Spectrum Global Balanced (0.3) (10.1) (6.2) 1.2 56.5 4.9 (2 mos.) - ------------------------------------------------------------------------------- Spectrum Select ........ 1.7 15.4 9.6 10.5 234.9 10.1 (2 mos.) - ------------------------------------------------------------------------------- Spectrum Strategic ..... (0.6) 9.4 24.0 8.4 55.1 4.8 (2 mos.) - ------------------------------------------------------------------------------- Spectrum Technical ..... (7.2) 23.3 23.0 12.9 155.5 10.6 (2 mos.) - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- DEMETER MANAGEMENT CORPORATION - -------------------------------------------------------------------------------- 825 Third Avenue, 9th Floor New York, NY 10022 Telephone (212) 310-6444 MORGAN STANLEY SPECTRUM SERIES MONTHLY REPORT FEBRUARY 2004 Dear Limited Partner: The Net Asset Value per Unit for each of the five Morgan Stanley Spectrum Funds as of February 29, 2004 was as follows: FUND N.A.V. % CHANGE FOR MONTH - -------------------------------------------------------------------------------- Spectrum Currency $15.58 0.37% - -------------------------------------------------------------------------------- Spectrum Global Balanced $15.65 2.03% - -------------------------------------------------------------------------------- Spectrum Select $33.49 8.16% - -------------------------------------------------------------------------------- Spectrum Strategic $15.51 7.84% - -------------------------------------------------------------------------------- Spectrum Technical $25.55 9.82% - -------------------------------------------------------------------------------- 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. 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 no guarantee of future results. Sincerely, /s/ Jeffrey A. Rothman Jeffrey A. Rothman Chairman and President Demeter Management Corporation General Partner for Morgan Stanley Spectrum Currency L.P. Morgan Stanley Spectrum Global Balanced L.P. Morgan Stanley Spectrum Select L.P. Morgan Stanley Spectrum Strategic L.P. Morgan Stanley Spectrum Technical L.P. - -------------------------------------------------------------------------------- SPECTRUM CURRENCY - -------------------------------------------------------------------------------- [THE FOLLOWING DATA IS PRESENTED AS A BAR GRAPH IN THE PRINTED DOCUMENT] MONTH ENDED YTD ENDED FEBRUARY 29, FEBRUARY 29, 2004 2004 ------------ ------------ AUSTRALIAN DOLLAR 0.36 0.83 BRITISH POUND 2.15 3.27 EURO 0.05 -0.04 JAPANESE YEN -0.68 -0.38 SWISS FRANC -0.13 0.3 MINOR CURRENCIES -0.84 -3.34 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: > Substantial gains were generated from long positions in the British pound versus the U.S. dollar. The pound's value moved higher versus the U.S. dollar amid an increase in U.K. interest rates. Expectations for further near-term increases of British interest rates sparked additional market demand for the pound, forcing its value higher. The U.S. dollar meanwhile, continued to decline as it was negatively impacted by huge U.S. trade and budget deficits, fears of terror attacks, and interest rate differentials between the U.S. and other G-7 nations. The dollar was also pressured lower after U.S. Federal Reserve Chairman Alan Greenspan expressed little concern for the dollar's decline during his testimony to Congress mid-month. > Gains were also contributed from long positions in the New Zealand and Australian dollars versus the U.S. dollar as the "Commodity Currencies" advanced on the back of a falling U.S. dollar. FACTORS INFLUENCING MONTHLY TRADING LOSSES: > Losses were experienced from short positions in the South African rand versus the U.S. dollar. The rand's value strengthened as higher consumer spending, lower inflation rates and lower interest rates fueled expectations for South African economic growth. > Long positions in the Japanese yen versus the U.S. dollar resulted in losses when the Bank of Japan intervened in the currency markets by buying dollars in an attempt to stem the yen's rise. The yen's value further declined under pressure from an elevation in Japan's security level. - -------------------------------------------------------------------------------- SPECTRUM GLOBAL BALANCED - -------------------------------------------------------------------------------- [THE FOLLOWING DATA IS PRESENTED AS A BAR GRAPH IN THE PRINTED DOCUMENT] MONTH ENDED YTD ENDED FEBRUARY 29, FEBRUARY 29, 2004 2004 ------------ ------------ CURRENCIES 0.01 -0.21 INTEREST RATES 1.00 0.81 STOCK INDICES 0.55 0.89 ENERGIES 0.30 0.09 METALS 0.49 0.15 AGRICULTURALS 0.11 0.19 Note: Reflects trading results only and does not include fees or interest income. FACTORS INFLUENCING MONTHLY TRADING GAINS: > The Fund generated gains across every sector in which it participates, with the largest gains achieved in the global interest rate sector. Within that sector, significant gains were produced from long positions in European and U.S. interest rate futures. During the month, a variety of governmental central banks, including the European Central Bank and U.S. Federal Reserve, reported that the global market environment did not present an inflationary atmosphere requiring a tightening of interest rates. As such, prices for global fixed income products rallied. Global bond prices received additional momentum later in the month when macro-economic data provided further evidence that interest rates would most likely remain unchanged. > Profits were also provided from long positions in the global stock index sector. Long positions in Asian, European and U.S. stock index futures recorded gains as global equity prices advanced amid upbeat corporate profit reports, merger and acquisition activity and a low-interest rate environment. > In the metals markets, gains were achieved from long futures positions in base metals. Copper prices trended higher prompted by an increase in industrial metal demand from Asia. > Within the energy sector, gains were generated from long futures positions in crude oil and its related products. Low market supply, falling inventory levels and an announcement from OPEC stating that they would cut production caused prices to increase during mid-month. During the final week of the month, prices moved even higher following the release of a report showing that U.S. inventories were lower than expected. > Smaller gains were recorded in the agricultural sector from long futures positions in corn as prices for the grain followed soybean prices higher. - -------------------------------------------------------------------------------- SPECTRUM SELECT - -------------------------------------------------------------------------------- [THE FOLLOWING DATA IS PRESENTED AS A BAR GRAPH IN THE PRINTED DOCUMENT] MONTH ENDED YTD ENDED FEBRUARY 29, FEBRUARY 29, 2004 2004 ------------ ------------ CURRENCIES 0.23 1.21 INTEREST RATES 2.89 1.71 STOCK INDICES 0.30 1.27 ENERGIES 1.45 1.16 METALS 3.61 5.08 AGRICULTURALS 1.37 2.38 Note: Reflects trading results only and does not include fees or interest income. FACTORS INFLUENCING MONTHLY TRADING GAINS: > The Fund generated gains across every sector in which it participates, with the largest gains achieved in the metals sector. Within that sector, significant gains were achieved from long futures positions in base metals. Copper, aluminum and zinc prices all trended higher prompted by an increase in industrial metal demand from Asia. > Gains were achieved in the global interest rate sector from long positions in European and U.S. interest rate futures. During the month, a variety of governmental central banks, including the European Central Bank and U.S. Federal Reserve, reported that the global market environment did not present an inflationary atmosphere requiring a tightening of interest rates. As such, prices for global fixed income products rallied. Global bond prices received additional momentum later in the month when macro-economic data provided further evidence that interest rates would most likely remain unchanged. > Within the energy sector, gains were generated from long futures positions in crude oil and its related products. Low market supply, falling inventory levels and an announcement from OPEC stating that they would cut production caused prices to increase during mid-month. During the final week of the month, prices moved even higher following the release of a report showing that U.S. inventories were lower than expected. > Additional gains were achieved in the agricultural sector from long futures positions in soybeans and its related products. Heightened demand from Asia amid lower harvest results pushed soybean prices to multi-year highs. Corn prices edged higher during the month as it followed soybean prices. Thus, long futures positions in corn provided additional profits in this sector. > Profits were also provided from long positions in the global stock index sector. Long positions in European and U.S. stock index futures recorded gains as global equity prices advanced amid upbeat corporate profit reports, merger and acquisition activity and a low-interest rate environment. - -------------------------------------------------------------------------------- SPECTRUM STRATEGIC - -------------------------------------------------------------------------------- [THE FOLLOWING DATA IS PRESENTED AS A BAR GRAPH IN THE PRINTED DOCUMENT] MONTH ENDED YTD ENDED FEBRUARY 29, FEBRUARY 29, 2004 2004 ------------ ------------ CURRENCIES -0.66 -1.56 INTEREST RATES 2.58 1.47 STOCK INDICES -0.76 0.52 ENERGIES 0.72 0.50 METALS 3.92 4.93 AGRICULTURALS 3.48 5.02 Note: Reflects trading results only and does not include fees or interest income. FACTORS INFLUENCING MONTHLY TRADING GAINS: > The Fund experienced gains in the metals markets from long futures positions in base metals. Copper, zinc, lead and aluminum prices all trended higher prompted by an increase in industrial metal demand from Asia. > Gains were also recorded in the agricultural sector from long futures positions in soybeans and its related products. Heightened demand from Asia amid lower harvest results pushed soybean prices to multi-year highs. Corn and rough rice prices edged higher during the month as they followed soybean prices. Thus, long futures positions in corn and rough rice provided additional profits in this sector. > Gains were achieved in the global interest rate sector from long positions in European and U.S. interest rate futures. During the month, a variety of governmental central banks, including the European Central Bank and U.S. Federal Reserve, reported that the global market environment did not present an inflationary atmosphere requiring a tightening of interest rates. As such, prices for global fixed income products rallied. Global bond prices received additional momentum later in the month when macro-economic data provided further evidence that interest rates would most likely remain unchanged. FACTORS INFLUENCING MONTHLY TRADING LOSSES: > Fund losses were experienced in the global stock index markets. Long positions in Asian, U.S. and European stock index futures experienced losses as prices declined during the final week of the month, in response to a drop in German and U.S. consumer confidence figures. > Losses were also incurred in the currency sector. Long positions in the Japanese yen versus the U.S. dollar resulted in losses when the Bank of Japan intervened in the currency markets by buying dollars in an attempt to stem the yen's rise. The yen's value further declined under pressure from an elevation in Japan's security level. > Additional currency sector losses stemmed from short positions in the Australian dollar versus the U.S. dollar early in the month. The U.S. dollar's value declined amid heightened dollar-selling prompted by huge U.S. trade and budget deficits, fears of terror attacks, and interest rate differentials between U.S. Treasury securities and relatively high-yielding government bonds of several developed countries, including Australia. - -------------------------------------------------------------------------------- SPECTRUM TECHNICAL - -------------------------------------------------------------------------------- [THE FOLLOWING DATA IS PRESENTED AS A BAR GRAPH IN THE PRINTED DOCUMENT] MONTH ENDED YTD ENDED FEBRUARY 29, FEBRUARY 29, 2004 2004 ------------ ------------ CURRENCIES 2.18 5.00 INTEREST RATES 4.17 5.24 STOCK INDICES 1.11 1.65 ENERGIES 2.64 2.16 METALS 1.52 2.15 AGRICULTURALS 0.51 0.00 Note: Reflects trading results only and does not include fees or interest income. FACTORS INFLUENCING MONTHLY TRADING GAINS: > The Fund generated gains across every sector in which it participates, with the largest gains achieved in the global interest rate sector. Within that sector, significant gains were produced from long positions in European and U.S. interest rate futures. During the month, a variety of governmental central banks, including the European Central Bank and U.S. Federal Reserve, reported that the global market environment did not present an inflationary atmosphere requiring a tightening of interest rates. As such, prices for global fixed income products rallied. Global bond prices received additional momentum later in the month when macro-economic data provided further evidence that interest rates would most likely remain unchanged. > Within the energy sector, gains were generated from long futures positions in crude oil and its related products. Low market supply, falling inventory levels and an announcement from OPEC stating that they would cut production caused prices to increase during mid-month. During the final week of the month, prices moved even higher following the release of a report showing that U.S. inventories were lower than expected. > Substantial gains were also generated in the currency sector from long positions in the British pound versus the U.S. dollar. The pound's value moved higher versus the U.S. dollar amid an increase in U.K. interest rates. Expectations for further near-term increases of British interest rates sparked additional market demand for the pound, forcing its value higher. The U.S. dollar meanwhile, continued to decline as it was negatively impacted by huge U.S. trade and budget deficits, fears of terror attacks, and interest rate differentials between the U.S. and other G-7 nations. The dollar was also pressured lower after U.S. Federal Reserve Chairman Alan Greenspan expressed little concern for the dollar's decline during his testimony to Congress mid-month. > Gains were achieved in the metals markets from long futures positions in base metals. Copper, aluminum and zinc prices all trended higher prompted by an increase in industrial metal demand from Asia. > In the global stock index markets, profits were recorded from long positions in Asian stock index futures. Asian equity prices finished the month higher due to continued optimism regarding an economic recovery in Japan. MORGAN STANLEY SPECTRUM SERIES - -------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS - -------------------------------------------------------------------------------- FOR THE MONTH ENDED FEBRUARY 29, 2004 (UNAUDITED)
MORGAN STANLEY MORGAN STANLEY SPECTRUM CURRENCY SPECTRUM GLOBAL BALANCED ----------------------------- ------------------------------- PERCENTAGE OF PERCENTAGE OF FEBRUARY 1, 2004 FEBRUARY 1, 2004 BEGINNING BEGINNING AMOUNT NET ASSET VALUE AMOUNT NET ASSET VALUE ---------- ------------------ ---------- ---------------- $ % $ % REVENUES Trading profit (loss): Realized -- -- 799,628 1.52 Net change in unrealized 1,852,494 .92 488,951 .93 --------- ---- --------- ---- Total Trading Results 1,852,494 .92 1,288,579 2.45 Interest income (Note 2) 105,376 .05 37,301 .07 --------- ---- --------- ---- Total Revenues 1,957,870 .97 1,325,880 2.52 --------- ---- --------- ---- EXPENSES Brokerage fees (Note 2) 775,440 .38 202,025 .38 Management fees (Note 3) 337,149 .17 54,898 .11 Incentive fees (Note 3) 105,614 .05 -- -- --------- ---- --------- ---- Total Expenses 1,218,203 .60 256,923 .49 --------- ---- --------- ---- NET INCOME 739,667 .37 1,068,957 2.03 ========= ==== ========= ====
MORGAN STANLEY SPECTRUM SERIES - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSET VALUE - -------------------------------------------------------------------------------- FOR THE MONTH ENDED FEBRUARY 29, 2004 (UNAUDITED)
MORGAN STANLEY MORGAN STANLEY SPECTRUM CURRENCY SPECTRUM GLOBAL BALANCED --------------------------------------- ------------------------------------------ PER PER UNITS AMOUNT UNIT UNITS AMOUNT UNIT ------- ------ ---- ------- ----- --- $ $ $ $ Net Asset Value, February 1, 2004 13,031,926.829 202,288,810 15.52 3,436,768.932 52,702,526 15.33 Net Income -- 739,667 .06 -- 1,068,957 .32 Redemptions (72,173.764) (1,124,467) 15.58 (79,530.161) (1,244,647) 15.65 Subscriptions 973,641.399 15,169,332 15.58 79,913.053 1,250,639 15.65 -------------- ----------- ------------- ---------- Net Asset Value, February 29, 2004 13,933,394.464 217,073,342 15.58 3,437,151.824 53,777,475 15.65 ============== =========== ============= ==========
The accompanying notes are an integral part of these financial statements. MORGAN STANLEY SPECTRUM SERIES - -------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS - -------------------------------------------------------------------------------- FOR THE MONTH ENDED FEBRUARY 29, 2004 (UNAUDITED)
MORGAN STANLEY MORGAN STANLEY MORGAN STANLEY SPECTRUM SELECT SPECTRUM STRATEGIC SPECTRUM TECHNICAL ----------------------------- ------------------------------ ------------------------------ PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF FEBRUARY 1, 2004 FEBRUARY 1, 2004 FEBRUARY 1, 2004 BEGINNING BEGINNING BEGINNING AMOUNT NET ASSET VALUE AMOUNT NET ASSET VALUE AMOUNT NET ASSET VALUE ---------- ----------------- ---------- ------------------ ---------- ------------------ $ % $ % $ % REVENUES Trading profit (loss): Realized 22,613,000 4.81 1,129,271 .88 11,804,186 2.05 Net change in unrealized 24,216,027 5.15 10,961,487 8.54 58,681,013 10.18 ----------- ----- ----------- ----- ----------- ------ Total Trading Results 46,829,027 9.96 12,090,758 9.42 70,485,199 12.23 Interest income (Note 2) 257,278 .05 69,805 .05 312,739 .05 ----------- ----- ----------- ----- ----------- ------ Total Revenues 47,086,305 10.01 12,160,563 9.47 70,797,938 12.28 ----------- ----- ----------- ----- ----------- ------ EXPENSES Incentive fees (Note 3) 4,742,937 1.01 998,672 .78 9,450,469 1.64 Brokerage fees (Note 2) 2,839,591 .60 775,888 .60 3,483,471 .60 Management fees (Note 3) 1,128,485 .24 321,057 .25 1,247,364 .22 ----------- ----- ----------- ----- ----------- ------ Total Expenses 8,711,013 1.85 2,095,617 1.63 14,181,304 2.46 ----------- ----- ----------- ----- ----------- ------ NET INCOME 38,375,292 8.16 10,064,946 7.84 56,616,634 9.82 =========== ===== =========== ===== =========== ======
MORGAN STANLEY SPECTRUM SERIES - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSET VALUE - -------------------------------------------------------------------------------- FOR THE MONTH ENDED FEBRUARY 29, 2004 (UNAUDITED)
MORGAN STANLEY MORGAN STANLEY MORGAN STANLEY SPECTRUM SELECT SPECTRUM STRATEGIC SPECTRUM TECHNICAL ---------------------------------- --------------------------------- ----------------------------------- PER PER PER UNITS AMOUNT UNIT UNITS AMOUNT UNIT UNITS AMOUNT UNIT -------------- ----------- ----- ------------- ----------- ----- -------------- ----------- ------ $ $ $ $ $ $ Net Asset Value, February 1, 2004 15,179,486.369 470,001,307 30.96 8,930,231.611 128,422,833 14.38 24,784,800.200 576,574,540 23.26 Net Income -- 38,375,292 2.53 -- 10,064,946 1.13 -- 56,616,634 2.29 Redemptions (110,590.053) (3,703,661) 33.49 (69,399.944) (1,076,393) 15.51 (215,865.521) (5,515,364) 25.55 Subscriptions 690,852.833 23,136,663 33.49 529,770.769 8,216,744 15.51 1,138,987.624 29,101,133 25.55 -------------- ----------- ------------- ----------- -------------- ----------- Net Asset Value, February 29, 2004 15,759,749.149 527,809,601 33.49 9,390,602.436 145,628,130 15.51 25,707,922.303 656,776,943 25.55 ============== =========== ============= =========== ============== ===========
The accompanying notes are an integral part of these financial statements. 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 for Spectrum Global Balanced, Spectrum Select, Spectrum Strategic and Spectrum Technical are Morgan Stanley & Co. Incorporated ("MS & Co.") and Morgan Stanley & Co. International Limited ("MSIL"). Spectrum Currency's clearing commodity broker is MS & Co. 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 profit (loss) 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) in the case of Spectrum Currency, MORGAN STANLEY SPECTRUM SERIES - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (CONTINUED) 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 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 each 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. REDEMPTIONS. Limited partners may redeem some or all of their Units at 100% of the Net Asset Value per Unit as MORGAN STANLEY SPECTRUM SERIES - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (CONTINUED) 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. Spectrum Global Balanced, Spectrum Select, Spectrum Strategic and Spectrum Technical's cash is on deposit with Morgan Stanley DW, MS & Co. and MSIL, and Spectrum Currency's cash is on deposit with Morgan Stanley DW and MS & Co., in futures interests trading accounts to meet margin requirements as needed. Morgan Stanley DW pays interest on these funds as described in Note 1. MORGAN STANLEY SPECTRUM SERIES - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (CONTINUED) - -------------------------------------------------------------------------------- 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. ("EMC") Northfield Trading L.P. ("Northfield") Rabar Market Research, Inc. ("Rabar") Sunrise Capital Management, Inc. ("Sunrise") Graham Capital Management, L.P. ("Graham") 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. Winton Capital Management Limited ("Winton") 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 allocated to its sole trading advisor 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 EMC, Northfield, Rabar and Sunrise on the first day of each month (a 3% annual rate) and 1/12 of 2% per month of Net Assets allocated to Graham on the first day of each month (a 2% annual rate). MORGAN STANLEY SPECTRUM SERIES - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (CONTINUED) 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 and Winton on the first day of each month (a 2% annual rate) and 1/12 of 3% per month of Net Assets allocated to Campbell and Chesapeake on the first day of each month (a 3% annual rate). 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 calendar month. Spectrum Global Balanced 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 Select pays a monthly incentive fee equal to 15% of the trading profits experienced with respect to the Net Assets allocated to EMC, Northfield, Rabar and Sunrise as of the end of each calendar month and 20% of the trading profits experienced with respect to the Net Assets allocated to Graham 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, JWH and Winton 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. Demeter Management Corporation 825 Third Avenue, 9th Floor New York, NY 10022 [LOGO OMITTED] ADDRESS SERVICE REQUESTED [LOGO OMITTED] printed on recycled paper DWS 38221-09 -----END PRIVACY-ENHANCED MESSAGE-----