MORGAN STANLEY
SPECTRUM SERIES
September 2008
Monthly Report
This Monthly Report supplements the Spectrum Funds' Prospectus dated May 1, 2008
and the Prospectus Supplement dated September 17, 2008.
Issued: October 31, 2008
MORGAN STANLEY
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 NO GUARANTEE OF FUTURE RESULTS.
1991 1992 1993 1994 1995 1996 1997 1998 1999
FUND % % % % % % % % %
- ----------------------------------------------------------------------
Spectrum
Currency -- -- -- -- -- -- -- -- --
- ----------------------------------------------------------------------
Spectrum
Global
Balanced -- -- -- (1.7) 22.8 (3.6) 18.2 16.4 0.8
(2 mos.)
- ----------------------------------------------------------------------
Spectrum
Select 31.2 (14.4) 41.6 (5.1) 23.6 5.3 6.2 14.2 (7.6)
(5 mos.)
- ----------------------------------------------------------------------
Spectrum
Strategic -- -- -- 0.1 10.5 (3.5) 0.4 7.8 37.2
(2 mos.)
- ----------------------------------------------------------------------
Spectrum
Technical -- -- -- (2.2) 17.6 18.3 7.5 10.2 (7.5)
(2 mos.)
Inception- Compound
to-Date Annualized
2000 2001 2002 2003 2004 2005 2006 2007 2008 Return Return
Fund % % % % % % % % % % %
- -----------------------------------------------------------------------------------------------------
Spectrum
Currency 11.7 11.1 12.2 12.4 (8.0) (18.3) (3.4) (13.5) 2.5 0.9 0.1
(6 mos.) (9 mos.)
- -----------------------------------------------------------------------------------------------------
Spectrum
Global
Balanced 0.9 (0.3) (10.1) 6.2 (5.6) 4.2 2.4 0.2 (6.7) 45.9 2.8
(9 mos.)
- -----------------------------------------------------------------------------------------------------
Spectrum
Select 7.1 1.7 15.4 9.6 (4.7) (5.0) 5.9 7.5 12.3 250.8 7.6
(9 mos.)
- -----------------------------------------------------------------------------------------------------
Spectrum
Strategic (33.1) (0.6) 9.4 24.0 1.7 (2.6) 20.9 5.0 (4.8) 71.4 3.9
(9 mos.)
- -----------------------------------------------------------------------------------------------------
Spectrum
Technical 7.8 (7.2) 23.3 23.0 4.4 (5.4) 5.4 (14.2) 0.7 103.6 5.2
(9 mos.)
Demeter Management Corporation
522 Fifth Avenue, 13th Floor
New York, NY 10036
Telephone (212) 296-1999
MORGAN STANLEY SPECTRUM SERIES
MONTHLY REPORT
SEPTEMBER 2008
Dear Limited Partner:
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The Net Asset Value per Unit for each of the five Morgan Stanley Spectrum
Funds as of September 30, 2008 was as follows:
FUND N.A.V. % CHANGE FOR MONTH
- ----------------------------------------------------------------
Spectrum Currency $10.09 0.22%
- ----------------------------------------------------------------
Spectrum Global Balanced $14.59 -0.24%
- ----------------------------------------------------------------
Spectrum Select $35.08 1.26%
- ----------------------------------------------------------------
Spectrum Strategic $17.14 -3.97%
- ----------------------------------------------------------------
Spectrum Technical $20.36 -3.86%
- ----------------------------------------------------------------
Detailed performance information for each Fund is located in the body of the
financial report. (Note: all returns are net of all fees). 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.
Demeter Management Corporation
- --------------------------------------------------------------------------------
AFTER THE NOVEMBER 30, 2008 MONTHLY CLOSE, DEMETER MANAGEMENT CORPORATION
WILL NO LONGER OFFER FOR PURCHASE OR EXCHANGE UNITS OF LIMITED PARTNERSHIP
INTEREST IN SPECTRUM CURRENCY, SPECTRUM GLOBAL BALANCED, SPECTRUM SELECT,
SPECTRUM STRATEGIC, AND SPECTRUM TECHNICAL. FOR MORE INFORMATION, PLEASE CONTACT
YOUR FINANCIAL ADVISOR AND REFER TO YOUR MORGAN STANLEY SPECTRUM SERIES
SUPPLEMENT DATED SEPTEMBER 17, 2008.
Should you have any questions concerning this report, please feel free to
contact Demeter Management Corporation, 522 Fifth Avenue, 13th Floor, New York,
NY 10036, 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/ Walter J. Davis
Walter J. Davis
Chairman of the Board of Directors and President
Demeter Management Corporation,
General Partner of
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.
[This page intentionally left blank]
Morgan Stanley Spectrum Currency L.P.
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Table below represents a bar chart in the printed piece
[ ] Month ended September 30, 2008 [ ] YTD ended September 30, 2008
AUSTRALIAN DOLLAR 1.09 1.59
BRITISH POUND -0.07 -0.51
EURO -0.38 2.47
JAPANESE YEN -0.01 -0.41
SWISS FRANC -0.53 0.25
MINOR CURRENCIES 0.63 6.07
Note: Reflects trading results only and does not include fees or interest
income.
Minor currencies may include, but are not limited to, the South African
rand, Thai baht, Singapore dollar, Mexican peso, New Zealand dollar, Polish
zloty, Brazilian real, Norwegian krone, Swedish krona, Czech koruna,
Chilean peso, Russian ruble, and Taiwan dollar.
During the month, the Fund experienced gains from short positions in the
Australian dollar, New Zealand dollar, Korean won, Indian rupee, and Taiwan
dollar versus the U.S. dollar. A portion of these gains was offset by losses
recorded from both short and long positions in the Swiss franc, as well as short
positions in the euro. Smaller losses were incurred from long positions in the
Mexican peso and Turkish lira versus the U.S. dollar.
Gains were achieved from short positions in the Australian dollar, New Zealand
dollar, Korean won, Indian rupee, and Taiwan dollar versus the U.S. dollar as
the value of the U.S. dollar moved higher against these currencies in tandem
with surging U.S. Treasury prices amid a worldwide "flight-to-quality" due to
fears of an intense credit crunch and subsequent global recession.
Morgan Stanley Spectrum Currency L.P.
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(CONTINUED)
Losses were incurred from both short and long positions in the Swiss franc
versus the U.S. dollar as the value of the Swiss franc moved without consistent
direction amid conflicting economic data out of Switzerland. Additional losses
were recorded from short positions in the euro versus the U.S. dollar as the
value of the euro reversed higher during the middle of the month following news
that the European Central Bank injected additional liquidity into money markets
in an attempt to alleviate credit turmoil concerns. Finally, long positions in
the Mexican peso and Turkish lira versus the U.S. dollar resulted in losses as
the value of the U.S. dollar moved higher due to the aforementioned
"flight-to-quality".
Morgan Stanley Spectrum Global Balanced L.P.
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Table below represents a bar chart in the printed piece
[ ] Month ended September 30, 2008 [ ] YTD ended September 30, 2008
CURRENCIES -1.82 -1.82
GLOBAL INTEREST RATES -0.83 -1.8
GLOBAL STOCK INDICES 0.15 -2.05
ENERGIES 0.4 1.6
METALS 0.71 1.03
AGRICULTURALS 1.54 1.28
Note: Reflects trading results only and does not include fees or interest
income.
During the month, the Fund experienced losses across the currency and global
interest rate sectors. A majority of these losses was offset by gains recorded
in the agricultural, metal, energy, and global stock index sectors.
The most significant losses were incurred within the currency sector from long
positions in the euro versus the Hungarian forint and Norwegian krone as the
value of the euro declined following weaker-than-expected Euro-Zone data, which
ignited fears of a possible interest rate cut. Meanwhile, long positions in the
Brazilian real and Mexican peso versus the U.S. dollar resulted in losses as the
value of the U.S. dollar moved higher in tandem with surging U.S. Treasury
prices amid a worldwide "flight-to-quality" due to fears of an intense credit
crunch and subsequent global recession. Finally, long positions in the British
pound versus the Japanese yen incurred losses as the value of the Japanese yen
spiked higher at the beginning of the month after extreme volatility in global
financial markets resulted in a reduction of carry-trade positions.
Within the global interest rate sector, short positions in short-term European
interest rate futures resulted in losses as prices moved sharply higher after a
plunge in global equity markets and worries regarding the fundamental health of
the U.S. financial system resulted in a global "flight-to-safety". Losses were
also incurred from long positions in U.S., Japanese, and Canadian fixed-income
futures as prices reversed lower after news of a major U.S. government
intervention in the financial sector eased concerns that the credit crisis may
continue to deteriorate the growth of the global economy.
Morgan Stanley Spectrum Global Balanced L.P.
- --------------------------------------------------------------------------------
(CONTINUED)
Within the agricultural markets, gains were achieved from short futures
positions in the soybean complex and rapeseed as prices decreased amid growing
investor sentiment that a slowing U.S. economy would result in decreased demand
for alternative biofuels. Elsewhere, short positions in cotton futures resulted
in gains as prices declined to a one-year low after the U.S. Department of
Agriculture reported exports remained below average due to a drop in demand.
Meanwhile, prices of lean hog and live cattle futures moved lower on signs of
rising inventories in the U.S. and slowing demand.
Additional gains were experienced in the metals markets from short futures
positions in nickel and aluminum as prices moved lower on concerns that losses
in the financial markets may further weaken the global economy and erode demand
for base metals.
Gains were also recorded in the energy markets from short futures positions in
natural gas, brent crude, gasoline, and gas oil as prices declined amid news
that Hurricane Gustav did not significantly damage oil facilities in the Gulf of
Mexico and fears that stalling global economic growth may curtail energy demand.
Smaller gains were achieved in the global stock index sector from short
positions in Asian equity index futures as global equity prices moved sharply
lower amid unprecedented U.S. financial market turmoil following news of the
collapse of a major U.S. investment bank and the government rescue of a U.S.
insurance giant. Furthermore, U.S. equity markets plunged on Monday, September
29, 2008, after the U.S. House of Representatives rejected the Economic
Stabilization Act of 2008, which would have allowed the U.S. Treasury to
purchase troubled mortgage-backed securities from U.S. financial institutions.
As a result, the Dow Jones Industrial Average Index fell 777 points (-6.89%),
its largest point-loss in history, while the S&P 500 Index dropped 106 points
(-8.79%).
Morgan Stanley Spectrum Select L.P.
- --------------------------------------------------------------------------------
Table below represents a bar chart in the printed piece
[ ] Month ended September 30, 2008 [ ] YTD ended September 30, 2008
CURRENCIES -1.99 -0.22
GLOBAL INTEREST RATES -0.49 2.75
GLOBAL STOCK INDICES 3.24 5.7
ENERGIES 0.03 6.89
METALS 0.46 0.86
AGRICULTURALS 0.79 3.71
Note: Reflects trading results only and does not include fees or interest
income.
During the month, the Fund recorded gains across the global stock index,
agricultural, and metals sectors. A portion of these gains was offset by losses
incurred in the global interest rate and currency sectors. Trading results in
the energy markets were essentially flat and had no material effect on overall
Fund performance during the month.
Within the global stock index sector, short positions in U.S., European, and
Pacific Rim equity index futures resulted in gains as prices moved sharply lower
amid unprecedented U.S. financial market turmoil following news of the collapse
of a major U.S. investment bank and the government rescue of a U.S. insurance
giant. Furthermore, U.S. equity markets plunged on Monday, September 29, 2008,
after the U.S. House of Representatives rejected the Economic Stabilization Act
of 2008, which would have allowed the U.S. Treasury to purchase troubled
mortgage-backed securities from U.S. financial institutions. As a result, the
Dow Jones Industrial Average Index fell 777 points (-6.89%), its largest
point-loss in history, while the S&P 500 Index dropped 106 points (-8.79%).
Additional gains were experienced within the agricultural markets from short
positions in cotton futures as prices dropped to a one-year low after the U.S.
Department of Agriculture reported exports remained below average due to a
decline in demand. Further gains were recorded from short futures positions in
feeder cattle and live cattle as prices decreased on signs of rising inventories
in the U.S. and slowing demand.
Morgan Stanley Spectrum Select L.P.
- --------------------------------------------------------------------------------
(CONTINUED)
Within the metals markets, short futures positions in aluminum, nickel, and
copper recorded gains as prices declined on concerns that losses in the
financial markets may further weaken the global economy and erode demand for
base metals. Smaller gains were experienced from short positions in silver
futures as prices decreased due to a rise in the value of the U.S. dollar.
Within the currency sector, long positions in the euro, Brazilian real, Turkish
lira, South African rand, and Mexican peso versus the U.S. dollar resulted in
losses as the value of the U.S. dollar moved higher against these currencies in
tandem with surging U.S. Treasury prices amid a worldwide "flight-to-quality"
due to fears of an intense credit crunch and subsequent global recession.
Additional losses were incurred within the global interest rate sector from
short positions in European fixed-income futures as prices increased amid the
aforementioned drop in the global equity markets and worries regarding the
fundamental health of the U.S. financial system, thereby spurring a global
"flight-to-safety". Smaller losses were recorded from long positions in Japanese
interest rate futures as prices reversed lower after news of a major U.S.
government intervention in the financial sector eased concerns that the credit
crisis may continue to deteriorate the growth of the global economy.
Morgan Stanley Spectrum Strategic L.P.
- --------------------------------------------------------------------------------
Table below represents a bar chart in the printed piece
[ ] Month ended September 30, 2008 [ ] YTD ended September 30, 2008
CURRENCIES -0.9 -3.27
GLOBAL INTEREST RATES 0.83 -0.17
GOBAL STOCK INDICEs 2.31 -0.06
ENERGIES -0.79 -0.82
METALS -1.53 -1.45
AGRICULTURALS -3.23 7.39
Note: Reflects trading results only and does not include fees or interest
income.
During the month, the Fund incurred losses across the agricultural, metals,
currency, and energy sectors. These losses were partially offset by gains
recorded in the global stock index and global interest rate sectors.
Within the agricultural markets, long futures positions in soybeans and corn
resulted in losses as prices decreased following news that rain in the main U.S.
growing region may aid crop development and on growing investor sentiment that a
slowing U.S. economy would result in decreased demand for alternative biofuels.
Meanwhile, long positions in cocoa futures experienced losses as prices reversed
lower following news of a rise in exports from the Ivory Coast, the world's
largest cocoa producer.
Within the metals markets, long futures positions in nickel, aluminum, copper,
and zinc incurred losses as prices moved lower on concerns that losses in the
financial markets may further weaken the global economy and erode demand for
base metals.
Morgan Stanley Spectrum Strategic L.P.
- --------------------------------------------------------------------------------
(CONTINUED)
Additional losses were recorded within the currency sector from long positions
in the Brazilian real, Turkish lira, Mexican peso, and Polish zloty versus the
U.S. dollar as the value of the U.S. dollar moved higher against most of its
rivals in tandem with surging U.S. Treasury prices amid a worldwide
"flight-to-quality" due to fears of an intense credit crunch and subsequent
global recession. Further losses were experienced from long positions in the
Japanese yen versus the U.S. dollar as the value of the Japanese yen decreased
relative to the U.S. dollar towards the end of the month following news that the
U.S. Federal Reserve, Bank of Japan, and European Central Bank joined with their
counterparts around the world in an effort to reverse the seizure in the global
credit markets, which encouraged investors to resume buying higher-yielding
assets funded by loans in Japan.
Smaller losses were incurred within the energy markets from long futures
positions in crude oil and its related products, as well as natural gas, as
prices declined amid news that Hurricane Gustav did not significantly damage oil
facilities in the Gulf of Mexico and fears that stalling global economic growth
may curtail energy demand.
Within the global stock index sector, short positions in U.S., European, and
Pacific Rim equity index futures resulted in gains as prices moved sharply lower
amid unprecedented U.S. financial market turmoil following news of the collapse
of a major U.S. investment bank and the government rescue of a U.S. insurance
giant. Furthermore, U.S. equity markets plunged on Monday, September 29, 2008,
after the U.S. House of Representatives rejected the Economic Stabilization Act
of 2008, which would have allowed the U.S. Treasury to purchase troubled
mortgage-backed securities from U.S. financial institutions. As a result, the
Dow Jones Industrial Average Index fell 777 points (-6.89%), its largest
point-loss in history, while the S&P 500 Index dropped 106 points (-8.79%).
Additional gains were recorded from long positions in U.S. fixed-income futures
as prices sharply increased amid the aforementioned drop in the global equity
markets and worries regarding the fundamental health of the U.S. financial
system, thereby spurring a global "flight-to-safety". Furthermore, U.S. interest
rate futures prices moved higher on speculation that the U.S. Federal Reserve
may lower borrowing costs at its next policy meeting due to the signs of a
possible economic recession in the U.S.
Morgan Stanley Spectrum Technical L.P.
- --------------------------------------------------------------------------------
Table below represents a bar chart in the printed piece
[ ] Month ended September 30, 2008 [ ] YTD ended September 30, 2008
CURRENCIES -1.26 0.46
GLOBAL INTEREST|RATES -2.31 -2.23
GLOBAL STOCK INDICES 1.96 4.21
ENERGIES -1.18 4.18
METALS 0.02 -0.07
AGRICULTURALS -0.59 1.48
Note: Reflects trading results only and does not include fees or interest
income.
During the month, the Fund recorded losses across the global interest rate,
currency, energy, and agricultural sectors. A portion of these losses was offset
by gains recorded in the global stock index sector. Trading results in the
metals markets were essentially flat and had no material effect on overall Fund
performance during the month.
Within the global interest rate sector, short positions in short-term European
interest rate futures resulted in losses as prices moved sharply higher after a
plunge in global equity markets and worries regarding the fundamental health of
the U.S. financial system resulted in a global "flight-to-safety". Losses were
also incurred from long positions in Japanese fixed-income futures as prices
reversed lower after news of a major U.S. government intervention in the
financial sector eased concerns that the credit crisis may continue to
deteriorate the growth of the global economy.
Within the currency sector, losses were incurred from short positions in the
Japanese yen versus the U.S. dollar and euro as the value of the Japanese yen
spiked higher against these currencies after extreme volatility in global
financial markets resulted in a reduction in carry-trade positions. Meanwhile,
long positions in the Mexican peso and Brazilian real versus the U.S. dollar
resulted in losses as the value of the U.S. dollar moved higher against these
currencies in tandem with surging U.S. Treasury prices amid a worldwide
"flight-to-quality" due to fears of an intense credit crunch and subsequent
global recession.
Morgan Stanley Spectrum Technical L.P.
- --------------------------------------------------------------------------------
(CONTINUED)
Additional losses were recorded in the energy markets from long futures
positions in crude oil and its related products as prices declined amid news
that Hurricane Gustav did not significantly damage oil facilities in the Gulf of
Mexico and fears that stalling global economic growth may curtail energy demand.
Finally, losses were recorded in the agricultural markets from long futures
positions in the soybean complex and corn as prices decreased following news
that rain in the main U.S. growing region may aid crop development and on
growing investor sentiment that a slowing U.S. economy would result in decreased
demand for alternative biofuels. Elsewhere, long positions in cocoa futures
incurred losses as prices fell following news of a rise in exports from the
Ivory Coast, the world's largest cocoa producer.
Within the global stock index sector, gains were achieved from short positions
in European, U.S., and Pacific Rim equity index futures as prices moved sharply
lower amid unprecedented U.S. financial market turmoil following news of the
collapse of a major U.S. investment bank and the government rescue of a U.S.
insurance giant. Furthermore, U.S. equity markets plunged on Monday, September
29, 2008, after the U.S. House of Representatives rejected the Economic
Stabilization Act of 2008, which would have allowed the U.S. Treasury to
purchase troubled mortgage-backed securities from U.S. financial institutions.
As a result, the Dow Jones Industrial Average Index fell 777 points (-6.89%),
its largest point-loss in history, while the S&P 500 Index dropped 106 points
(-8.79%).
MORGAN STANLEY SPECTRUM SERIES
Statements of Operations
- --------------------------------------------------------------------------------
FOR THE MONTH ENDED SEPTEMBER 30, 2008 (UNAUDITED)
MORGAN STANLEY MORGAN STANLEY
SPECTRUM CURRENCY SPECTRUM GLOBAL BALANCED
------------------------------ ----------------------------
Percentage of Percentage of
September 1, 2008 September 1, 2008
Beginning Beginning
Amount Net Asset Value Amount Net Asset Value
------ --------------- ------ ---------------
$ % $ %
INVESTMENT INCOME
Interest income (Note 2) ........ 57,304 .06 23,211 .08
---------- ----- ------- ---
EXPENSES
Brokerage fees (Note 2) ......... 351,132 .38 111,578 .38
Management fees (Note 3) ........ 152,666 .17 36,917 .13
---------- ----- ------- ---
Total Expenses ................ 503,798 .55 148,495 .51
---------- ----- ------- ---
NET INVESTMENT LOSS ................ (446,494) (.49) (125,284) (.43)
---------- ----- ------- ---
TRADING RESULTS
Trading profit (loss):
Realized ........................ 2,253,513 2.46 (67,039) (.23)
Net change in unrealized ........ (1,607,390) (1.75) 123,201 .42
---------- ----- ------- ---
Total Trading Results ......... 646,123 .71 56,162 .19
---------- ----- ------- ---
NET INCOME (LOSS) .................. 199,629 .22 (69,122) (.24)
========== ===== ======= ===
MORGAN STANLEY SPECTRUM SERIES
Statements of Changes In Net Asset Value
- --------------------------------------------------------------------------------
FOR THE MONTH ENDED SEPTEMBER 30, 2008 (UNAUDITED)
MORGAN STANLEY MORGAN STANLEY
SPECTRUM CURRENCY SPECTRUM GLOBAL BALANCED
------------------------------- ---------------------------------
Per Per
Units Amount Unit Units Amount Unit
----- ------ ---- ----- ------ ----
$ $ $ $
Net Asset Value,
September 1, 2008 ..... 9,099,233.160 91,599,752 10.07 1,990,165.613 29,107,311 14.63
Net Income (Loss) ........ -- 199,629 .02 -- (69,122) (.04)
Redemptions .............. (201,417.141) (2,032,299) 10.09 (78,846.818) (1,150,375) 14.59
Subscriptions ............ 16,710.806 168,612 10.09 6,944.865 101,326 14.59
------------- ---------- ------------- ----------
Net Asset Value,
September 30, 2008 .... 8,914,526.825 89,935,694 10.09 1,918,263.660 27,989,140 14.59
============= ========== ============= ==========
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY SPECTRUM SERIES
Statements of Operations
- --------------------------------------------------------------------------------
FOR THE MONTH ENDED SEPTEMBER 30, 2008 (UNAUDITED)
MORGAN STANLEY MORGAN STANLEY MORGAN STANLEY
SPECTRUM SELECT SPECTRUM STRATEGIC SPECTRUM TECHNICAL
--------------------------- --------------------------- ---------------------------
Percentage of Percentage of Percentage of
September 1, 2008 September 1, 2008 September 1, 2008
Beginning Beginning Beginning
Amount Net Asset Value Amount Net Asset Value Amount Net Asset Value
------ --------------- ------ --------------- ------ ---------------
$ % $ % $ %
INVESTMENT INCOME
Interest income (Note 2) .... 342,138 .06 125,185 .06 332,824 .06
---------- ---- --------- --- ----------- -----
EXPENSES
Brokerage fees (Note 2) ..... 2,696,713 .50 1,058,222 .50 2,680,965 .50
---------- ---- --------- --- ----------- -----
Management fees (Note 3) .... 1,046,715 .19 494,159 .23 1,003,424 .18
---------- ---- --------- --- ----------- -----
Total Expenses ............ 3,743,428 .69 1,552,381 .73 3,684,389 .68
---------- ---- --------- --- ----------- -----
NET INVESTMENT LOSS ............ (3,401,290) (.63) (1,427,196) (.67) (3,351,565) (.62)
---------- ---- --------- --- ----------- -----
TRADING RESULTS
Trading profit (loss):
Realized .................... 11,546,746 2.14 1,018,250 .48 (14,539,668) (2.71)
---------- ---- --------- --- ----------- -----
Net change in unrealized .... (1,345,364) (.25) (8,002,260) (3.78) (2,824,589) (.53)
---------- ---- --------- --- ----------- -----
Total Trading Results ..... 10,201,382 1.89 (6,984,010) (3.30) (17,364,257) (3.24)
---------- ---- --------- --- ----------- -----
NET INCOME (LOSS) .............. 6,800,092 1.26 (8,411,206) (3.97) (20,715,822) (3.86)
MORGAN STANLEY SPECTRUM SERIES
Statements of Changes In Net Asset Value
- --------------------------------------------------------------------------------
FOR THE MONTH ENDED SEPTEMBER 30, 2008 (UNAUDITED)
Morgan Stanley Morgan Stanley
Spectrum Select Spectrum Strategic
--------------------------------------- ------------------------------------------
Per Per
Units Amount Unit Units Amount Unit
----- ------ ---- ----- ------ ----
$ $ $ $
Net Asset Value,
September 1, 2008. 15,569,842.116 539,342,597 34.64 11,858,194.400 211,644,466 17.85
Net Income (Loss) .... -- 6,800,092 .44 -- (8,411,206) (.71)
Redemptions .......... (191,947.500) (6,733,518) 35.08 (147,371.676) (2,525,951) 17.14
Subscriptions ........ 201,944.344 7,084,208 35.08 171,253.872 2,935,291 17.14
-------------- ----------- -------------- -----------
Net Asset Value,
September 30, 2008. 15,579,838.960 546,493,379 35.08 11,882,076.596 203,642,600 17.14
============== =========== ============== ===========
MORGAN STANLEY
SPECTRUM TECHNICAL
------------------------------------------
Per
Units Amount Unit
----- ------ ----
$ $
Net Asset Value,
September 1, 2008.. 25,316,847.538 536,192,928 21.18
Net Income (Loss) .... -- (20,715,822) (.82)
Redemptions .......... (448,427.299) (9,129,980) 20.36
Subscriptions ........ 199,145.028 4,054,593 20.36
-------------- -----------
Net Asset Value,
September 30, 2008. 25,067,565.267 510,401,719 20.36
============== ===========
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 and forward
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").
On January 1, 2008, the portion of the Partnership's assets which are
managed by Blenheim Capital Management, L.L.C. ("Blenheim") were initially
invested as capital in Morgan Stanley Managed Futures BHM I, LLC ("BHM I, LLC").
BHM I, LLC was formed in order to permit commodity pools operated by Demeter
Management Corporation ("Demeter") and managed by Blenheim to invest together in
one trading vehicle and promote efficiency and economy in the trading process.
Demeter is the trading manager of BHM I, LLC. The Partnership's allocation to
Blenheim is effected by investing substantially all of the capital that is
allocated to Blenheim in the Trading Company. There is no material change to the
investors as a result of the investment in BHM I, LLC.
The general partner of each Partnership is Demeter. The 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 plc ("MSIP"). Spectrum Currency's sole commodity broker is
MS&Co. MS&Co. acts as the counterparty on all trading of foreign currency
forward contracts. Morgan Stanley Capital Group Inc. ("MSCG") acts as the
counterparty on all trading of options on foreign currency forward contracts.
Demeter, MS&Co., MSIP, and MSCG 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.
MORGAN STANLEY SPECTRUM SERIES
Notes to Financial Statements
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(CONTINUED)
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, at which time they are realized. 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 trading profit (loss) on open contracts from one
period to the next on the Statements of Operations. Monthly, MS&Co. pays each
Partnership interest income at a rate equal to the monthly average of the 4-week
U.S. Treasury bill discount rate during such month on 80% of the funds on
deposit with the commodity brokers at each month-end in the case of Spectrum
Currency, Spectrum Select, Spectrum Strategic, and Spectrum Technical, and on
100% in the case of Spectrum Global Balanced. For purposes of such interest
payments, Net Assets do not include monies owed to the Partnerships on Futures
Interests.
The Partnerships' functional currency is the U.S. dollar; however, the
Partnerships may transact business in currencies other than the U.S. dollar.
Assets and liabilities denominated in currencies other than the U.S. dollar are
translated into U.S. dollars at the rates in effect at the date of the
Statements of Changes in Net Asset Value. Income and expense items denominated
in currencies other than the U.S. dollar are translated into U.S. dollars at the
rates in effect during the period. Gains and losses resulting from the
translation to U.S. dollars are reported in income currently.
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 6.0% (a 6.0% annual
rate) of Net Assets as of the first day of each month.
Such brokerage fees currently cover all brokerage fees, transaction fees and
costs, and ordinary administrative and continuing offering expenses.
MORGAN STANLEY SPECTRUM SERIES
Notes to Financial Statements
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(CONTINUED)
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 MS&Co. through the brokerage fees paid by the Partnerships.
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. MS&Co.
pays all such costs. Effective December 1, 2008, the Partnerships will no longer
offer units for purchase or exchange.
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 first becomes a limited
partner. The Request for Redemption must be delivered to a limited partner's
local Morgan Stanley Branch Office in time for it to be forwarded and received
by Demeter, no later than 3:00 p.m., New York City time, on the last day of the
month in which the redemption is to be effective. Redemptions must be made in
whole Units, in a minimum amount of 50 Units required for each redemption,
unless a limited partner is redeeming his entire interest in a Partnership.
Units redeemed on or prior to the last day of the twelfth month from the
date of purchase will be subject to a redemption charge equal to 2% of the Net
Asset Value of a Unit on the Redemption Date. Units redeemed after the last day
of the twelfth month and on or prior to the last day of the twenty-fourth month
from the date of purchase will be subject to a redemption charge equal to 1% of
the Net Asset Value of a Unit on the Redemption Date. Units redeemed after the
last day of the twenty-fourth month from the date of purchase will not be
subject to a redemption charge. The foregoing redemption charges are paid to
MS&Co.
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 Units
among the Partnerships (subject to certain restrictions outlined in the Limited
Partnership Agreements) without paying additional charges. Effective December 1,
2008, the Partnerships will no longer offer units for purchase or exchange.
MORGAN STANLEY SPECTRUM SERIES
Notes to Financial Statements
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(CONTINUED)
DISTRIBUTIONS. Distributions, other than redemptions of Units, are made on a
pro-rata basis at the sole discretion of Demeter. No distributions have been
made to date. Demeter does not intend to make any distributions of the
Partnerships' profits.
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.
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.
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2. RELATED PARTY TRANSACTIONS
The Partnerships pay brokerage fees to MS&Co. as described in Note 1. Spectrum
Global Balanced, Spectrum Select, Spectrum Strategic, and Spectrum Technical's
cash is on deposit with MS&Co. and MSIP, and Spectrum Currency's cash is on
deposit with MS&Co., in futures interests trading accounts to meet margin
requirements as needed. MS&Co. pays interest on these funds as described in Note
1.
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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.
C-View International Limited
DKR Fusion Management L.P.
FX Concepts Trading Advisor, Inc.
John W. Henry & Company, Inc.
Sunrise Capital Partners, LLC
Morgan Stanley Spectrum Global Balanced L.P.
Altis Partners (Jersey) Limited ("Altis")
C-View International Limited ("C-View")
SSARIS Advisors, LLC ("SSARIS")
MORGAN STANLEY SPECTRUM SERIES
Notes to Financial Statements
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(CONTINUED)
Morgan Stanley Spectrum Select L.P.
Altis Partners (Jersey) Limited
EMC Capital Management, Inc. ("EMC")
Graham Capital Management, L.P. ("Graham")
Northfield Trading L.P. ("Northfield")
Rabar Market Research, Inc. ("Rabar")
Sunrise Capital Management, Inc. ("Sunrise")
Morgan Stanley Spectrum Strategic L.P.
Blenheim Capital Management, L.L.C. ("Blenheim")
Eclipse Capital Management, Inc. ("Eclipse")
FX Concepts Trading Advisor, Inc. ("FX Concepts")
Morgan Stanley Spectrum Technical L.P.
Aspect Capital Limited ("Aspect")
Campbell & Company, Inc. ("Campbell")
Chesapeake Capital Corporation ("Chesapeake")
John W. Henry & Company, Inc. ("JWH")
Rotella Capital Management Inc. ("Rotella")
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
1/6 of 1% 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 SSARIS on the first day of each month
(a 1.25% annual rate), 1/12 of 1.25% per month of Net Assets allocated to Altis
on the first day of each month (a 1.25% annual rate), and 1/6 of 1% per month of
Net Assets allocated to C-View on the first day of each month (a 2% annual
rate).
Prior to August 1, 2008, Spectrum Global Balanced accrued management fees at
a rate of 1/12 of 1.75% per month of Net Assets allocated to Altis on the first
day of each month (a 1.75% annual rate).
The management fee for Spectrum Select is accrued at a rate of 1/12 of 1.25%
per month of Net Assets allocated to Altis on the first day of each month (a
1.25% annual rate), 1/6 of 1% per month of Net Assets allocated to Graham on the
first day of each month (a 2% annual rate), 5/24 of 1% per month of Net Assets
allocated to EMC and Rabar on the first day of each month (a 2.5% annual rate),
and 1/4 of 1% per month of Net Assets allocated to Northfield and Sunrise on the
first day of each month (a 3% annual rate).
MORGAN STANLEY SPECTRUM SERIES
Notes to Financial Statements
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(CONTINUED)
Prior to August 1, 2008, Spectrum Select accrued management fees at a rate
of 1/12 of 1.75% per month of Net Assets allocated to Altis on the first day of
each month (a 1.75% annual rate).
The management fee for Spectrum Strategic is accrued at a rate of 1/6 of 1%
per month of Net Assets allocated to FX Concepts on the first day of each month
(a 2% annual rate), and 1/4 of 1% per month of Net Assets allocated to Blenheim
and Eclipse on the first day of each month (a 3% annual rate).
The management fee for Spectrum Technical is accrued at a rate of 1/6 of 1%
per month of Net Assets allocated to Aspect, Chesapeake, JWH, Rotella, and
Winton on the first day of each month (a 2% annual rate), and 1/4 of 1% per
month of Net Assets allocated to Campbell 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 pays a monthly incentive fee equal to 15% of the
trading profits experienced with respect to the Net Assets allocated to SSARIS
as of the end of each calendar month, and 20% of the trading profits experienced
with respect to the Net Assets allocated to Altis and C-View 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 Northfield and
Sunrise as of the end of each calendar month, 17.5% of the trading profits
experienced with respect to the Net Assets allocated to EMC and Rabar as of the
end of each calendar month, and 20% of the trading profits experienced with
respect to the Net Assets allocated to Altis and Graham as of the end of each
calendar month.
Spectrum Strategic pays a monthly incentive fee equal to 15% of the trading
profits experienced with respect to the Net Assets allocated to Blenheim and
Eclipse as of the end of each calendar month, and 20% of the trading profits
experienced with respect to the Net Assets allocated to FX Concepts as of the
end of each calendar month.
Spectrum Technical pays a monthly incentive fee equal to 19% of the trading
profits experienced with respect to the Net Assets allocated to Chesapeake as of
the end of each calendar month, and 20% of the trading profits experienced with
respect to the Net Assets allocated to each of Aspect, Campbell, JWH, Rotella,
and Winton as of the end of each calendar month.
MORGAN STANLEY SPECTRUM SERIES
Notes to Financial Statements
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(CONCLUDED)
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 trading advisors 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.
MANAGED FUTURES INVESTMENTS ARE SPECULATIVE, INVOLVE A HIGH DEGREE OF RISK, USE
SIGNIFICANT LEVERAGE, ARE GENERALLY ILLIQUID, HAVE SUBSTANTIAL CHARGES, ARE
SUBJECT TO CONFLICTS OF INTEREST, AND ARE SUITABLE ONLY FOR THE RISK CAPITAL
PORTION OF AN INVESTOR'S PORTFOLIO. BEFORE INVESTING IN ANY MANAGED FUTURES
INVESTMENT, QUALIFIED INVESTORS SHOULD READ THE PROSPECTUS OR OFFERING DOCUMENTS
CAREFULLY FOR ADDITIONAL INFORMATION WITH RESPECT TO CHARGES, EXPENSES, AND
RISKS. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
THIS REPORT IS BASED ON INFORMATION FROM MULTIPLE SOURCES AND MORGAN STANLEY
MAKES NO REPRESENTATION AS TO THE ACCURACY OR COMPLETENESS OF INFORMATION FROM
SOURCES OUTSIDE OF MORGAN STANLEY.
Demeter Management Corporation
522 Fifth Avenue, 13th Floor
New York, NY 10036
MORGAN STANLEY
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