-----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, K0j7zjws2lSpgkle6kWA4znuCrNBrBwjBjeaaluDXM1OXxKlzNKzQg/eyCe7P1tg VngsDq/1qFnrQXHC58QQUg== 0000925266-04-000004.txt : 20040629 0000925266-04-000004.hdr.sgml : 20040629 20040629092550 ACCESSION NUMBER: 0000925266-04-000004 CONFORMED SUBMISSION TYPE: 424B3 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20040629 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: 04886946 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 May 2004 Monthly Report This Monthly Report supplements the Spectrum Funds' Prospectus dated April 28, 2004. Issued: June 30, 2004 [MORGAN STANLEY LOGO] 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.
INCEPTION- COMPOUND TO-DATE ANNUALIZED 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 RETURN RETURN FUND % % % % % % % % % % % % % % % % - ------------------------------------------------------------------------------------------------------------------------------------ Spectrum Currency ... -- -- -- -- -- -- -- -- -- 11.7 11.1 12.2 12.4 (15.8) 31.8 7.3 (6 mos.) (5 mos.) - ------------------------------------------------------------------------------------------------------------------------------------ Spectrum Global Balanced .......... -- -- (1.7) 22.8 (3.6) 18.2 16.4 0.8 0.9 (0.3) (10.1) (6.2) (5.3) 46.5 4.1 (2 mos.) (5 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 9.6 (6.0) 184.8 8.5 (5 mos.) (5 mos.) - ------------------------------------------------------------------------------------------------------------------------------------ Spectrum Strategic .. -- -- -- 0.1 10.5 (3.5) 0.4 7.8 37.2 (33.1) (0.6) 9.4 24.0 2.7 46.9 4.1 (2 mos.) (5 mos.) - ------------------------------------------------------------------------------------------------------------------------------------ Spectrum Technical .. -- -- -- (2.2) 17.6 18.3 7.5 10.2 (7.5) 7.8 (7.2) 23.3 23.0 (5.0) 115.1 8.3 (2 mos.) (5 mos.) - ------------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- DEMETER MANAGEMENT CORPORATION - -------------------------------------------------------------------------------- 825 Third Avenue, 9th Floor New York, NY 10022 Telephone (212) 310-6444 MORGAN STANLEY SPECTRUM SERIES MONTHLY REPORT MAY 2004 Dear Limited Partner: The Net Asset Value per Unit for each of the five Morgan Stanley Spectrum Funds as of May 31, 2004 was as follows: FUND N.A.V. % CHANGE FOR MONTH - -------------------------------------------------------------------------------- Spectrum Currency $13.18 -3.54% - -------------------------------------------------------------------------------- Spectrum Global Balanced $14.65 -1.11% - -------------------------------------------------------------------------------- Spectrum Select $28.48 -3.92% Spectrum Strategic $14.69 -0.99% - -------------------------------------------------------------------------------- Spectrum Technical $21.51 -2.78% - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- MONTH ENDED YTD ENDED MAY 31, 2004 MAY 31, 2004 ------------ ------------ Australian dollar 0.03 -0.91 British pound 0.16 1.1 Euro -0.57 0.49 Japanese yen -0.79 -5.45 Swiss franc 0.24 0.73 Minor currencies -2.48 -10.01 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, Singapore dollar, Mexican peso, New Zealand dollar and Norwegian krone. FACTORS INFLUENCING MONTHLY TRADING LOSSES: >> Fund losses were largely incurred from short positions in a variety of foreign currencies, such as the Japanese yen, South African rand, Norwegian krone, euro and both the Singapore and New Zealand dollars, versus the U.S. dollar during the final week of the month. The U.S. dollar's value declined versus most currencies in response to fears of potential terrorist attacks, expanding energy prices, and the release of weaker-than-expected economic data during the latter half of May. Short positions in the South African rand and New Zealand dollar versus the U.S. dollar also incurred losses during mid-month as the commodity-linked currencies reversed higher in response to rising gold prices. FACTORS INFLUENCING MONTHLY TRADING GAINS: >> Gains were recorded primarily during the final week of the month from long positions in the Swiss franc and British pound versus the U.S. dollar as the dollar's value declined in response to surging energy prices and weaker-than-expected economic data relating to U.S. consumer sentiment, durable goods, and new home sales. - -------------------------------------------------------------------------------- SPECTRUM GLOBAL BALANCED - -------------------------------------------------------------------------------- MONTH ENDED YTD ENDED MAY 31, 2004 MAY 31, 2004 ------------ ------------ Currencies -0.37 -2.6 Interest Rates 0.18 -1.04 Stock Indices -0.77 0.08 Energies 0.56 0.47 Metals -0.26 -0.28 Agriculturals -0.19 -0.15 Note: Reflects trading results only and does not include fees or interest income. FACTORS INFLUENCING MONTHLY TRADING LOSSES: >> Long positions in Japanese and European equity index futures resulted in losses during the first half of the month as global equity prices were negatively impacted by geopolitical concerns and expanding energy prices. >> In the currency markets, losses were incurred during mid-month from long positions in the U.S. dollar versus the South African rand as the commodity-linked rand reversed higher in response to rising gold prices. Later in the month, long positions in the U.S. Dollar Index, as well as short positions in both the Singapore and New Zealand dollars added to sector losses due to a decline in the U.S. dollar's value caused by fears of potential terrorist attacks, expanding energy prices, and the release of weaker-than-expected economic data. >> In the metals markets, prices increased during the last week of the month due to the weaker U.S. dollar and strong Asian demand. As a result, losses were experienced from short positions in copper and nickel futures. >> Losses were also incurred in the agricultural sector from short futures positions in corn as prices moved higher during the final week of the month due to delayed planting caused by inclement weather. FACTORS INFLUENCING MONTHLY TRADING GAINS: >> The Fund generated gains within the energy markets from long futures positions in crude oil and its related products. Crude oil prices surged past $41 a barrel, reaching 21-year highs, amid fears of terrorist attacks on Saudi Arabian oil facilities and disruptions in Iraqi oil production. Additional gains were generated from long positions in natural gas futures as prices strengthened due to higher crude oil prices and news of a decrease in supply as reported by the Energy Information Administration. - -------------------------------------------------------------------------------- SPECTRUM SELECT - -------------------------------------------------------------------------------- MONTH ENDED YTD ENDED MAY 31, 2004 MAY 31, 2004 ------------ ------------ Currencies -1.31 -3.67 Interest Rates -0.71 -2.03 Stock Indices -1.78 -2.02 Energies 1.74 3.27 Metals -0.5 2.56 Agriculturals -0.68 1.47 Note: Reflects trading results only and does not include fees or interest income. FACTORS INFLUENCING MONTHLY TRADING LOSSES: >> Losses in the global stock indices were from long positions in Japanese, U.S. and European equity index futures during the first half of the month as global equity prices were negatively impacted by geopolitical concerns and expanding energy prices. Newly established short positions in these markets experienced additional losses as prices rebounded later in May due to a slight pullback in oil prices and strong earnings from technology companies. >> Losses in the currency markets were largely incurred late in the month from short positions in a variety of foreign currencies, such as the Japanese yen and euro, versus the U.S. dollar. The U.S. dollar's value declined in response to fears of potential terrorist attacks, expanding energy prices, and the release of weaker-than-expected economic data. Short positions in the New Zealand dollar versus the U.S. dollar also resulted in losses during mid-month as the commodity-linked New Zealand currency reversed higher in response to rising gold prices. >> Within the global interest rate markets, short positions in U.S. and Australian global bond futures experienced losses as prices moved higher during the latter half of the month due to uncertainty in global equity prices, weaker-than-expected economic data, stronger energy prices and geopolitical concerns. >> Within the agricultural markets, long futures positions in the soybean complex, corn and wheat generated losses as prices declined due to heavy speculative selling. Prices were also negatively impacted by U.S. Department of Agriculture reports which forecasted an increase in soybean supply due to a rise in planting. >> In the metals markets, prices increased during the last week of the month resulting in losses from short futures positions. The weaker U.S. dollar and strong Asian demand helped pull up industrial metals prices. Gold prices also increased as investor interest was reignited by a weaker U.S. dollar and fears of potential terrorist attacks. As a result, short futures positions in aluminum, nickel and gold accounted for the majority of sector losses. FACTORS INFLUENCING MONTHLY TRADING GAINS: >> The Fund generated gains within the energy markets from long futures positions in crude oil and its related products. Crude oil prices surged past $41 a barrel, reaching 21-year highs, amid fears of terrorist attacks on Saudi Arabian oil facilities and disruptions in Iraqi oil production. Additional gains were generated from long positions in natural gas futures as prices strengthened due to higher crude oil prices and news of a decrease in supply as reported by the Energy Information Administration. - -------------------------------------------------------------------------------- SPECTRUM STRATEGIC - -------------------------------------------------------------------------------- MONTH ENDED YTD ENDED MAY 31, 2004 MAY 31, 2004 ------------ ------------ Currencies -1.31 -3.67 Interest Rates -0.71 -2.03 Stock Indices -1.78 -2.02 Energies 1.74 3.27 Metals -0.5 2.56 Agriculturals -0.68 1.47 Note: Reflects trading results only and does not include fees or interest income. FACTORS INFLUENCING MONTHLY TRADING LOSSES: >> Within the agricultural markets, long futures positions in the soybean complex and rough rice generated losses as prices declined due to heavy speculative selling. Prices were also negatively impacted by U.S. Department of Agriculture reports which forecasted an increase in soybean supply due to a rise in planting. FACTORS INFLUENCING MONTHLY TRADING GAINS: >> The Fund generated gains within the energy markets from long futures positions in crude oil and its related products. Crude oil prices surged past $41 a barrel, reaching 21-year highs, amid fears of terrorist attacks on Saudi Arabian oil facilities and disruptions in Iraqi oil production. Additional gains were generated from long positions in natural gas futures as prices strengthened due to higher crude oil prices and news of a decrease in supply as reported by the Energy Information Administration. >> Additional Fund gains were achieved in the metals markets from long futures positions in nickel, copper and aluminum as a weaker U.S. dollar and strong Asian demand helped boost prices for industrial metals. - -------------------------------------------------------------------------------- SPECTRUM TECHNICAL - -------------------------------------------------------------------------------- MONTH ENDED YTD ENDED MAY 31, 2004 MAY 31, 2004 ------------ ------------ Currencies -2.37 -4.87 Interest Rates -0.3 1.15 Stock Indices -1.24 -1.95 Energies 2.31 6.75 Metals -0.51 0.44 Agriculturals -0.23 -0.25 Note: Reflects trading results only and does not include fees or interest income. FACTORS INFLUENCING MONTHLY TRADING LOSSES: >> Losses in the currency markets were largely incurred late in the month from short positions in a variety of foreign currencies, such as the Swiss franc, Japanese yen and euro, versus the U.S. dollar. The U.S. dollar's value declined in response to fears of potential terrorist attacks, expanding energy prices, and the release of weaker-than-expected economic data during the latter half of May. Additional sector losses resulted from crossrate positions in the euro versus the Australian dollar and Czech koruna. >> In global stock indices, losses resulted from long positions in Japanese and European equity index futures as global equity prices were negatively impacted by geopolitical concerns and expanding energy prices during the first half of the month. >> In the metals markets, prices increased during the last week of the month resulting in losses from short futures positions. The weaker U.S. dollar and strong Asian demand helped boost industrial metals prices. Gold prices also increased as investor interest was reignited by a weaker U.S. dollar and fears of potential terrorist attacks. Short futures positions in copper, nickel and gold accounted for the majority of sector losses. >> In the global interest rate markets, short positions in Japanese interest rate futures incurred losses as prices were pushed higher by the Bank of Japan's decision to maintain current interest rate levels and strong results from an auction of Japanese Government bonds. FACTORS INFLUENCING MONTHLY TRADING GAINS: >> The Fund generated gains within the energy markets from long futures positions in crude oil and its related products. Crude oil prices surged past $41 a barrel, reaching 21-year highs, amid fears of terrorist attacks on Saudi Arabian oil facilities and disruptions in Iraqi oil production. Additional gains were generated from long positions in natural gas futures as prices strengthened due to higher crude oil prices and news of a decrease in supply as reported by the Energy Information Administration. [This page intentionally left blank]
MORGAN STANLEY SPECTRUM SERIES - ------------------------------------------------------------------------------------------------------------------ STATEMENTS OF OPERATIONS - ------------------------------------------------------------------------------------------------------------------ FOR THE MONTH ENDED MAY 31, 2004 (UNAUDITED) MORGAN STANLEY MORGAN STANLEY SPECTRUM CURRENCY SPECTRUM GLOBAL BALANCED ----------------------------- --------------------------- PERCENTAGE OF PERCENTAGE OF MAY 1, 2004 MAY 1, 2004 BEGINNING BEGINNING AMOUNT NET ASSET VALUE AMOUNT NET ASSET VALUE ---------- --------------- -------- --------------- $ % $ % REVENUES Trading profit (loss): Realized -- -- 150,550 .29 Net change in unrealized (6,666,842) (3.05) (515,744) (1.00) ---------- ----- -------- ----- Total Trading Results (6,666,842) (3.05) (365,194) (.71) Interest income (Note 2) 128,449 .06 40,276 .08 ---------- ----- -------- ----- Total Revenues (6,538,393) (2.99) (324,918) (.63) ---------- ----- -------- ----- EXPENSES Brokerage fees (Note 2) 838,718 .38 198,679 .38 Management fees (Note 3) 364,661 .17 53,989 .10 ---------- ----- -------- ----- Total Expenses 1,203,379 .55 252,668 .48 ---------- ----- -------- ----- NET LOSS (7,741,772) (3.54) (577,586) (1.11) ========== ===== ======== ===== MORGAN STANLEY SPECTRUM SERIES - ------------------------------------------------------------------------------------------------------------------------ STATEMENTS OF CHANGES IN NET ASSET VALUE - ------------------------------------------------------------------------------------------------------------------------ FOR THE MONTH ENDED MAY 31, 2004 (UNAUDITED) MORGAN STANLEY MORGAN STANLEY SPECTRUM CURRENCY SPECTRUM GLOBAL BALANCED --------------------------------------- -------------------------------------- PER PER UNITS AMOUNT UNIT UNITS AMOUNT UNIT -------------- ------------ ----- ------------- ------------ ----- $ $ $ $ Net Asset Value, May 1, 2004 16,010,536.303 218,796,051 13.67 3,499,429.105 51,829,814 14.81 Net Loss -- (7,741,772) (.49) -- (577,586) (.16) Redemptions (102,418.581) (1,349,877) 13.18 (62,049.304) (909,022) 14.65 Subscriptions 691,049.874 9,108,036 13.18 57,631.302 844,299 14.65 -------------- ------------ ------------- ------------ Net Asset Value, May 31, 2004 16,599,167.596 218,812,438 13.18 3,495,011.103 51,187,505 14.65 ============== ============ ============= ============
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY SPECTRUM SERIES - ------------------------------------------------------------------------------------------------------------------------------------ STATEMENTS OF OPERATIONS - ------------------------------------------------------------------------------------------------------------------------------------ FOR THE MONTH ENDED MAY 31, 2004 (UNAUDITED) MORGAN STANLEY MORGAN STANLEY MORGAN STANLEY SPECTRUM SELECT SPECTRUM STRATEGIC SPECTRUM TECHNICAL ----------------------------- ----------------------------- ----------------------------- PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF MAY 1, 2004 MAY 1, 2004 MAY 1, 2004 BEGINNING BEGINNING BEGINNING AMOUNT NET ASSET VALUE AMOUNT NET ASSET VALUE AMOUNT NET ASSET VALUE ----------- --------------- ---------- --------------- ---------- --------------- $ % $ % $ % REVENUES Trading profit (loss): Realized 614,135 .12 1,557,019 1.00 (9,973,052) (1.60) Net change in unrealized (16,708,703) (3.26) (2,205,595) (1.41) (2,577,432) (.41) ----------- ----- ---------- ----- ---------- ----- Total Trading Results (16,094,568) (3.14) (648,576) (.41) (12,550,484) (2.01) Interest income (Note 2) 307,913 .06 98,818 .06 373,075 .06 ----------- ----- ---------- ----- ---------- ----- Total Revenues (15,786,655) (3.08) (549,758) (.35) (12,177,409) (1.95) ----------- ----- ---------- ----- ---------- ----- EXPENSES Brokerage fees (Note 2) 3,096,970 .60 707,665 .45 3,759,433 .60 Management fees (Note 3) 1,221,636 .24 292,827 .19 1,342,702 .23 ----------- ----- ---------- ----- ---------- ----- Total Expenses 4,318,606 .84 1,000,492 .64 5,102,135 .83 ----------- ----- ---------- ----- ---------- ----- NET LOSS (20,105,261) (3.92) (1,550,250) (.99) (17,279,544) (2.78) =========== ===== ========== ===== ========== ===== MORGAN STANLEY SPECTRUM SERIES - ------------------------------------------------------------------------------------------------------------------------------------ STATEMENTS OF CHANGES IN NET ASSET VALUE - ------------------------------------------------------------------------------------------------------------------------------------ FOR THE MONTH ENDED MAY 31, 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, May 1, 2004 17,290,046.416 512,601,946 29.65 10,544,049.931 156,481,848 14.84 28,128,106.341 622,250,921 22.12 Net Loss -- (20,105,261) (1.17) -- (1,550,250) (.15) -- (17,279,544) (.61) Redemptions (93,071.088) (2,650,665) 28.48 (81,280.766) (1,194,014) 14.69 (156,296.537) (3,361,939) 21.51 Subscriptions 617,895.242 17,597,655 28.48 427,711.245 6,283,077 14.69 1,036,642.952 22,298,191 21.51 -------------- ----------- -------------- ----------- -------------- ----------- Net Asset Value, May 31, 2004 17,814,870.570 507,443,675 28.48 10,890,480.410 160,020,661 14.69 29,008,452.756 623,907,629 21.51 ============== =========== ============== =========== ============== ===========
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) month's average daily "Net Assets" (as defined in the Limited Partnership Agreements) in the case of 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 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. 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). The management fee for Spectrum Strategic is accrued at a rate of 1/12 of 3% per month of Net Assets allocated MORGAN STANLEY SPECTRUM SERIES - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (CONCLUDED) 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 [MORGAN STANLEY LOGO] ADDRESS SERVICE REQUESTED [RECYCLE LOGO] printed on recycled paper DWS 38221-09 -----END PRIVACY-ENHANCED MESSAGE-----