MORGAN STANLEY
SPECTRUM SERIES
March 2008
Monthly Report
This Monthly Report supplements the Spectrum Funds' Prospectus dated November 9,
2007.
Issued: April 30, 2008
MORGAN STANLEY
MORGAN STANLEY SPECTRUM SERIES
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HISTORICAL FUND PERFORMANCE
- --------------------------------------------------------------------------------
Presented below is the percentage change in Net Asset Value per Unit from the
start of every calendar year each Fund has traded. Also provided is the
inception-to-date return and the 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 2000 2001 2002 2003 2004 2005 2006
FUND % % % % % % % % % % % % % % % %
=================================================================================================================================
Spectrum
Currency -- -- -- -- -- -- -- -- -- 11.7 11.1 12.2 12.4 (8.0) (18.3) (3.4)
(6 mos.)
=================================================================================================================================
Spectrum
Global
Balanced -- -- -- (1.7) 22.8 (3.6) 18.2 16.4 0.8 0.9 (0.3) (10.1) 6.2 (5.6) 4.2 2.4
(2 mos.)
=================================================================================================================================
Spectrum
Select 31.2 (14.4) 41.6 (5.1) 23.6 5.3 6.2 14.2 (7.6) 7.1 1.7 15.4 9.6 (4.7) (5.0) 5.9
(5 mos.)
=================================================================================================================================
Spectrum
Strategic -- -- -- 0.1 10.5 (3.5) 0.4 7.8 37.2 (33.1) (0.6) 9.4 24.0 1.7 (2.6) 20.9
(2 mos.)
=================================================================================================================================
Spectrum
Technical -- -- -- (2.2) 17.6 18.3 7.5 10.2 (7.5) 7.8 (7.2) 23.3 23.0 4.4 (5.4) 5.4
(2 mos.)
=================================================================================================================================
INCEPTION- COMPOUND
TO-DATE ANNUALIZED
2007 2008 RETURN RETURN
FUND % % % %
================================================
Spectrum
Currency (13.5) 7.4 5.7 0.7
(3 mos.)
=============================================
Spectrum
Global
Balanced 0.2 (0.9) 54.9 3.3
(3 mos.)
=============================================
Spectrum
Select 7.5 13.1 253.2 7.9
(3 mos.)
=============================================
Spectrum
Strategic 5.0 3.4 86.3 4.7
(3 mos.)
=============================================
Spectrum
Technical (14.2) 8.8 119.9 6.1
(3 mos.)
=============================================
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DEMETER MANAGEMENT CORPORATION
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522 Fifth Avenue, 13th Floor
New York, NY 10036
Telephone (212) 296-1999
MORGAN STANLEY SPECTRUM SERIES
MONTHLY REPORT
MARCH 2008
Dear Limited Partner:
The Net Asset Value per Unit for each of the five Morgan Stanley Spectrum
Funds as of March 31, 2008 was as follows:
FUND N.A.V. % CHANGE FOR MONTH
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Spectrum Currency $10.57 4.62%
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Spectrum Global Balanced $15.49 -3.71%
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Spectrum Select $35.32 -1.60%
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Spectrum Strategic $18.63 -3.96%
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Spectrum Technical $21.99 -2.72%
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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.
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DEMETER MANAGEMENT CORPORATION
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EFFECTIVE SEPTEMBER 1, 2007, CHESAPEAKE CAPITAL CORPORATION ("CHESAPEAKE")
AGREED TEMPORARILY TO WAIVE THE MANAGEMENT FEE IT RECEIVES FROM SPECTRUM
TECHNICAL. THE WAIVER OF THE MANAGEMENT FEE REMAINED IN EFFECT THROUGH DECEMBER
31, 2007. EFFECTIVE JANUARY 1, 2008, CHESAPEAKE, IN CONSULTATION WITH THE
GENERAL PARTNER, HAS AGREED TO A FURTHER TEMPORARY PARTIAL WAIVER OF THE
MANAGEMENT FEE IT RECEIVES FROM SPECTRUM TECHNICAL. THE GENERAL PARTNER WILL
NOTIFY YOU PRIOR TO THE END OF THIS MANAGEMENT FEE WAIVER. DUE TO CHESAPEAKE'S
PARTIAL WAIVER OF THE MANAGEMENT FEE, EFFECTIVE JANUARY 1, 2008, SPECTRUM
TECHNICAL PAYS CHESAPEAKE A MONTHLY MANAGEMENT FEE EQUAL TO 1/6 OF 1% OF
SPECTRUM TECHNICAL'S NET ASSETS ALLOCATED TO CHESAPEAKE AS OF THE BEGINNING OF
EACH MONTH (A 2% ANNUAL RATE). PRIOR TO THE MANAGEMENT FEE WAIVER, SPECTRUM
TECHNICAL PAID CHESAPEAKE A MONTHLY MANAGEMENT FEE EQUAL TO 1/4 OF 1% OF
SPECTRUM TECHNICAL'S NET ASSETS ALLOCATED TO CHESAPEAKE AS OF THE BEGINNING OF
EACH MONTH (A 3% ANNUAL RATE).
EFFECTIVE FEBRUARY 29, 2008, DEMETER TERMINATED THE MANAGEMENT AGREEMENT BY
AND AMONG DEMETER, SPECTRUM GLOBAL BALANCED, AND CORNERSTONE QUANTITATIVE
INVESTMENT GROUP, INC. ("CORNERSTONE"). CONSEQUENTLY, CORNERSTONE CEASED ALL
FUTURES INTERESTS TRADING ON BEHALF OF SPECTRUM GLOBAL BALANCED AS OF FEBRUARY
29, 2008. EFFECTIVE MARCH 1, 2008, THE ESTIMATED PERCENTAGE OF NET ASSETS
ALLOCATED TO EACH TRADING ADVISOR OF SPECTRUM GLOBAL BALANCED WAS AS FOLLOWS:
SSARIS ADVISORS, LLC (33.34%); ALTIS PARTNERS (JERSEY) LIMITED (33.33%); AND
C-VIEW INTERNATIONAL LIMITED (33.33%).
EFFECTIVE FEBRUARY 29, 2008, DEMETER TERMINATED THE MANAGEMENT AGREEMENT BY
AND AMONG DEMETER, SPECTRUM STRATEGIC, AND CORNERSTONE. CONSEQUENTLY,
CORNERSTONE CEASED ALL FUTURES INTERESTS TRADING ON BEHALF OF SPECTRUM STRATEGIC
AS OF FEBRUARY 29, 2008. EFFECTIVE MARCH 1, 2008, THE ESTIMATED PERCENTAGE OF
NET ASSETS ALLOCATED TO EACH TRADING ADVISOR OF SPECTRUM STRATEGIC WAS AS
FOLLOWS: BLENHEIM CAPITAL MANAGEMENT, L.L.C. (52.50%); ECLIPSE CAPITAL
MANAGEMENT LIMITED (27.50%); AND FX CONCEPTS TRADING ADVISOR, INC. (20%).
THE PERCENTAGE OF NET ASSETS ALLOCATED TO EACH TRADING ADVISOR OF SPECTRUM
GLOBAL BALANCED AND SPECTRUM STRATEGIC AS OF MARCH 1, 2008, AS SET FORTH ABOVE,
SUPPLEMENTS THE TABLE UNDER "USE OF PROCEEDS" ON PAGE 30 OF THE SPECTRUM FUNDS'
PROSPECTUS DATED NOVEMBER 9, 2007.
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DEMETER MANAGEMENT CORPORATION
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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.
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MORGAN STANLEY SPECTRUM CURRENCY L.P.
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[Data below represents bar chart in the printed piece]
Australian dollar -0.02 1.02
British pound 0.19 -0.2
Euro 1.11 3.01
Japanese yen 0.61 -0.33
Swiss franc 1.06 1.77
Minor Currencies 2.03 3.97
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 long positions in the euro,
Swiss franc, Japanese yen, and British pound versus the U.S. dollar, as well as
short positions in the Korean won, South African rand, and Canadian dollar
versus the U.S. dollar. These gains were partially offset by losses from long
positions in the Brazilian real and New Zealand dollar versus the U.S. dollar.
Gains were experienced from long positions in the euro, Swiss franc, Japanese
yen, and British pound versus the U.S. dollar as the value of the U.S. dollar
declined against its major rivals following news of an unexpected rise in
unemployment in February, weaker-than-expected U.S. retail sales, and U.S.
consumer confidence at a 16-year low. In addition, the value of the British
pound climbed higher during the beginning of the month after the Bank of England
held interest rates steady at its policy meeting amid concerns of rising
inflation in the United Kingdom. Meanwhile, short positions in the Korean won
and South African rand versus the U.S. dollar resulted in gains as the value of
these currencies were pressured lower during the beginning of the month amid
news of a widening Current-Account deficit out of Korea and South Africa.
Finally, short positions in the Canadian dollar versus the U.S. dollar
experienced gains as the value of the Canadian dollar was pressured lower due to
a sharp drop in commodity prices.
Losses were incurred from long positions in the Brazilian real versus the U.S.
dollar as the value of the Brazilian real reversed lower due to forecasts for
weaker economic growth in the near term. Elsewhere, losses were recorded from
long positions in the New Zealand dollar versus the U.S. dollar as the value of
the New Zealand dollar weakened due to the decline in commodity prices that
affected the value of the Canadian dollar.
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MORGAN STANLEY SPECTRUM GLOBAL BALANCED L.P.
- --------------------------------------------------------------------------------
[Data below represents bar chart in the printed piece]
Currencies 1.03 1.45
Global Interest Rates 0.18 -0.76
Global Stock Indices -0.01 -2.35
Energies -0.05 -1.03
Metals -1.29 0.5
Agriculturals -2.74 3.87
Note: Reflects trading results only and does not include fees or interest
income.
During the month, the Fund incurred losses in the agricultural and metals
sectors. These losses were partially offset by gains recorded in the currency
and global interest rate sectors. Trading results in the global stock index and
energy sectors were essentially flat and had no material effect on overall Fund
performance during the month.
Within the agricultural markets, long futures positions in the soybean complex
incurred losses as prices reversed sharply lower on concerns that overseas
buyers, particularly China, may cancel imports. Meanwhile, long positions in
coffee futures resulted in losses as prices fell to the lowest level in almost
two months due to forecasts that Brazil's crop may be larger than previously
estimated. Further losses were experienced from long positions in cocoa futures
as prices moved lower after workers suspended a strike in the Ivory Coast, the
world's largest supplier. Lastly, long positions in sugar futures resulted in
losses as prices declined amid speculation that falling energy costs may weaken
demand for sugar cane-based ethanol.
Additional losses were recorded in the metals markets from long positions in
platinum, silver, and gold futures as prices reversed lower during the second
half of the month due to speculative selling. Elsewhere in the metals complex,
long futures positions in nickel, lead, and copper resulted in losses as prices
decreased amid speculation that a slumping U.S. economy may lead to a decline in
global demand for base metals.
Within the currency sector, long positions in the euro and Japanese yen versus
the U.S. dollar recorded gains as the value of the U.S. dollar weakened against
these currencies towards the end of the month following news of an unexpected
rise in unemployment in February, weaker-than-expected U.S. retail sales, and
U.S. consumer confidence at a 16-year low. Meanwhile, short positions in the
Korean won versus the U.S. dollar resulted in gains as the value of the Korean
won decreased relative to the U.S. dollar at the beginning of the month amid
news of a widening current account deficit out of Korea.
Smaller gains were experienced within the global interest rate sector from long
positions in U.S. and Japanese fixed-income futures as prices moved higher at
the beginning of the month amid weakness in the global equity markets and news
of continued corporate losses, which spurred demand for the relative "safety" of
government bonds. Furthermore, prices of Japanese fixed-income futures increased
on speculation that the Bank of Japan may cut interest rates this year.
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MORGAN STANLEY SPECTRUM SELECT L.P.
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[Data below represents bar chart in the printed piece]
Currencies 2.25 3.29
Global Interest Rates -0.35 2.97
Global Stock Indices 0.57 1.69
Energies 0.69 0.74
Metals -1.36 1.9
Agriculturals -2.61 5.06
Note: Reflects trading results only and does not include fees or interest
income.
During the month, the Fund incurred losses in the agricultural, metals, and
global interest rate sectors. These losses were partially offset by gains
recorded in the currency, energy, and global stock index sectors.
Within the agricultural markets, long futures positions in the soybean complex
incurred losses as prices reversed sharply lower on concerns that overseas
buyers, particularly China, may cancel imports. Meanwhile, long positions in
coffee futures resulted in losses as prices fell to the lowest level in almost
two months due to forecasts that Brazil's crop may be larger than previously
estimated. Further losses were experienced from long positions in cocoa futures
as prices moved lower after workers suspended a strike in the Ivory Coast, the
world's largest supplier. Lastly, long positions in sugar futures resulted in
losses as prices declined amid speculation that falling energy costs may weaken
demand for sugar cane-based ethanol.
Additional losses were recorded in the metals markets from long positions in
gold, silver, and platinum futures as prices reversed lower during the second
half of the month due to speculative selling. Elsewhere in the metals complex,
long futures positions in copper and aluminum resulted in losses as prices
decreased amid speculation that a slumping U.S. economy may lead to a decline in
global demand for base metals.
Smaller losses were experienced in the global interest rate sector from long
positions in European fixed-income futures as prices reversed lower during the
second half of the month after policy makers at the European Central Bank
expressed concern that inflation pressures may increase, thereby reducing
speculation that they may lower interest rates this year.
Within the currency sector, long positions in the euro, Swiss franc, and
Japanese yen versus the U.S. dollar recorded gains as the value of the U.S.
dollar weakened against these currencies towards the end of the month following
news of an unexpected rise in unemployment in February, weaker-than-expected
U.S. retail sales, and U.S. consumer confidence at a 16-year low. Meanwhile,
short positions in the Korean won versus the U.S. dollar resulted in gains as
the value of the Korean won decreased relative to the U.S. dollar at the
beginning of the month amid news of a widening Current-Account deficit out of
Korea.
Smaller gains were experienced in the energy markets from long futures positions
in crude oil and its related products as prices rose to another record high on
the New York Mercantile Exchange due to a decline in the value of the U.S.
dollar, constrained supply conditions, and strong demand for physical
commodities as an inflation hedge.
Finally, gains were recorded within the global stock index sector from short
positions in European and Japanese equity index futures as prices decreased
after companies continued to report weaker-than-expected earnings due to a
slowing global economy and further losses related to the collapse of the U.S.
sub-prime mortgage market.
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MORGAN STANLEY SPECTRUM STRATEGIC L.P.
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[Data below represents bar chart in the printed piece]
Currencies -0.48 -0.6
Global Interest Rates -0.68 1.7
Global Stock Indices 0.15 -2.51
Energies -0.03 0.08
Metals -1.2 1.86
Agriculturals -1.6 5.21
Note: Reflects trading results only and does not include fees or interest
income.
During the month, the Fund incurred losses in the agricultural, metals, global
interest rate, and currency sectors. These losses were partially offset by gains
recorded in the global stock index sector. Trading results in the energy sector
were essentially flat and had no material effect on overall Fund performance
during the month.
Within the agricultural sector, long futures positions in the soybean complex
incurred losses as prices reversed sharply lower on concerns that overseas
buyers, particularly China, may cancel imports. Elsewhere, long positions in
cocoa futures resulted in losses as prices moved lower after workers suspended a
strike in the Ivory Coast, the world's largest supplier. Further losses were
recorded from long positions in sugar futures as prices declined amid
speculation that falling energy costs may weaken demand for sugar cane-based
ethanol.
Additional losses were experienced in the metals markets from long futures
positions in zinc and aluminum as prices decreased amid speculation that a
slumping U.S. economy may lead to a decline in global demand for base metals.
Elsewhere, long positions in gold and palladium futures resulted in losses as
prices reversed lower during the second half of the month due to speculative
selling.
Smaller losses were recorded within the global interest rate sector from long
positions in European fixed-income futures as prices reversed lower during the
second half of the month after policy makers at the European Central Bank
expressed concern that inflation pressures may increase, thereby reducing
speculation that they may lower interest rates this year.
Lastly, within the currency sector, short positions in the Japanese yen versus
the U.S. dollar resulted in losses as the value of the U.S. dollar weakened
towards the end of the month following news of an unexpected rise in
unemployment in February, weaker-than-expected U.S. retail sales, and U.S.
consumer confidence at a 16-year low. Meanwhile, losses were also incurred from
long positions in the Canadian dollar and Australian dollar versus the U.S.
dollar as the value of these currencies were pressured lower relative to the
U.S. dollar due to a sharp decline in commodity prices during the middle of the
month.
Within the global stock index sector, gains were experienced from short
positions in Japanese, European, and U.S. equity index futures as prices
decreased after companies continued to report weaker-than-expected earnings due
to a slowing global economy and further losses related to the collapse of the
U.S. sub-prime mortgage market.
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MORGAN STANLEY SPECTRUM TECHNICAL L.P.
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[Data below represents bar chart in the printed piece]
Currencies 1.54 3.21
Global Interest Rates -0.62 2.31
Global Stock Indices 0.36 1.09
Energies 0.23 1.53
Metals -0.57 1.01
Agriculturals -3.07 2.52
Note: Reflects trading results only and does not include fees or interest
income.
During the month, the Fund incurred losses across the agricultural, global
interest rate, and metals sectors. These losses were partially offset by gains
recorded in the currency, global stock index, and energy sectors.
Within the agricultural sector, long futures positions in the soybean complex
incurred losses as prices reversed sharply lower on concerns that overseas
buyers, particularly China, may cancel imports. Elsewhere, long positions in
coffee futures resulted in losses as prices fell to the lowest level in almost
two months due to forecasts that Brazil's crop may be larger than previously
estimated. Further losses were recorded from long positions in sugar futures as
prices declined amid speculation that falling energy costs may weaken demand for
sugar cane-based ethanol.
Additional losses were experienced within the global interest rate sector from
long positions in European fixed-income futures as prices reversed lower during
the second half of the month after policy makers at the European Central Bank
expressed concern that inflation pressures may increase, thereby reducing
speculation that they may lower interest rates this year. Elsewhere, short
positions in Australian interest rates futures resulted in losses as prices
reversed higher amid speculation that slowing exports may prompt the Reserve
Bank of Australia to stop raising interest rates in the near term.
Smaller losses were recorded in the metals markets from long positions in gold
and silver futures as prices reversed lower during the second half of the month
due to speculative selling. Elsewhere in the metals complex, long futures
positions in aluminum resulted in losses as prices decreased amid speculation
that a slumping U.S. economy may lead to a decline in global demand for base
metals.
Within the currency sector, long positions in the euro, Swiss franc, and
Japanese yen versus the U.S. dollar experienced gains as the value of the U.S.
dollar weakened against these currencies towards the end of the month following
news of an unexpected rise in unemployment in February, weaker-than-expected
U.S. retail sales, and U.S. consumer confidence at a 16-year low.
Smaller gains were recorded within the global stock index sector from short
positions in European and Japanese equity index futures as prices decreased
after companies continued to report weaker-than-expected earnings due to a
slowing global economy and further losses related to the collapse of the U.S.
sub-prime mortgage market.
Lastly, within the energy markets, long futures positions in gas oil and heating
oil resulted in gains as prices rose to record highs due to a decline in the
value of the U.S. dollar, constrained supply conditions, and strong demand for
physical commodities as an inflation hedge.
MORGAN STANLEY SPECTRUM SERIES
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STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
FOR THE MONTH ENDED MARCH 31, 2008 (UNAUDITED)
MORGAN STANLEY MORGAN STANLEY
SPECTRUM CURRENCY SPECTRUM GLOBAL BALANCED
------------------------------ ------------------------------
PERCENTAGE OF PERCENTAGE OF
MARCH 1, 2008 MARCH 1, 2008
BEGINNING BEGINNING
AMOUNT NET ASSET VALUE AMOUNT NET ASSET VALUE
------------- --------------- ------------ ----------------
$ % $ %
INVESTMENT INCOME
Interest income (Note 2) 105,804 .10 43,245 .12
------------- ------- ------------ ------
EXPENSES
Brokerage fees (Note 2) 399,586 .38 133,164 .38
Management fees (Note 3) 173,733 .17 48,246 .13
Incentive fees (Note 3) 33,649 .03 13,577 .04
------------- ------- ------------ ------
Total Expenses 606,968 .58 194,987 .55
------------- ------- ------------ ------
NET INVESTMENT LOSS (501,164) (.48) (151,742) (.43)
------------- ------- ------------ ------
TRADING RESULTS
Trading profit (loss):
Realized 3,182,429 3.05 692,838 1.99
Net change in unrealized 2,136,686 2.05 (1,831,609) (5.27)
------------- ------- ------------ ------
Total Trading Results 5,319,115 5.10 (1,138,771) (3.28)
------------- ------- ------------ ------
NET INCOME (LOSS) 4,817,951 4.62 (1,290,513) (3.71)
============= ======= ============ ======
MORGAN STANLEY SPECTRUM SERIES
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STATEMENTS OF CHANGES IN NET ASSET VALUE
- --------------------------------------------------------------------------------
FOR THE MONTH ENDED MARCH 31, 2008 (UNAUDITED)
MORGAN STANLEY MORGAN STANLEY
SPECTRUM CURRENCY SPECTRUM GLOBAL BALANCED
-------------------------------------- -----------------------------------------
PER PER
UNITS AMOUNT UNIT UNITS AMOUNT UNIT
------- ------ ------ ------- ------- -----
$ $ $ $
Net Asset Value,
March 1, 2008 10,314,387.152 104,239,835 10.11 2,159,032.239 34,738,553 16.09
Net Income (Loss) -- 4,817,951 .46 -- (1,290,513) (.60)
Redemptions (247,212.449 (2,613,036) 10.57 (36,376.759 (563,476) 15.49
Subscriptions 32,715.081 345,798 10.57 9,660.775 149,645 15.49
-------------- ----------- ------------- ----------
Net Asset Value,
March 31, 2008 10,099,889.784 106,790,548 10.57 2,132,316.255 33,034,209 15.49
============== =========== ============= ==========
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY SPECTRUM SERIES
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
FOR THE MONTH ENDED MARCH 31, 2008 (UNAUDITED)
MORGAN STANLEY MORGAN STANLEY MORGAN STANLEY
SPECTRUM SELECT SPECTRUM STRATEGIC SPECTRUM TECHNICAL
------------------------------ ----------------------------- ------------------------------
PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
MARCH 1, 2008 MARCH 1, 2008 MARCH 1, 2008
BEGINNING BEGINNING BEGINNING
AMOUNT NET ASSET VALUE AMOUNT NET ASSET VALUE AMOUNT NET ASSET VALUE
------------ --------------- ------------ --------------- ------------ ---------------
$ % $ % $ %
INVESTMENT INCOME
Interest income (Note 2) 590,906 .10 222,319 .10 637,892 .10
------------ ----- ------------- ----- ------------ -----
EXPENSES
Brokerage fees (Note 2) 2,936,818 .50 1,147,594 .50 3,133,829 .50
Management fees (Note 3) 1,171,595 .20 535,544 .24 1,161,182 .18
Incentive fees (Note 3) 63,750 .01 -- -- -- --
------------ ----- ------------ ----- ----------- -----
Total Expenses 4,172,163 .71 1,683,138 .74 4,295,011 .68
------------ ----- ------------ ----- ----------- -----
NET INVESTMENT LOSS (3,581,257) (.61) (1,460,819) (.64) (3,657,119) (.58)
------------ ----- ------------ ----- ----------- -----
TRADING RESULTS
Trading profit (loss):
Realized 49,175,263 8.37 1,808,428 .79 41,341,443 6.60
Net change in unrealized (54,997,066) (9.36) (9,433,833) (4.11) (54,760,705) (8.74)
------------ ----- ------------ ----- ----------- -----
Total Trading Results (5,821,803) (.99) (7,625,405) (3.32) (13,419,262) (2.14)
------------ ----- ------------ ----- ----------- -----
NET LOSS (9,403,060) (1.60) (9,086,224) (3.96) (17,076,381) (2.72)
============ ===== ============ ===== =========== =====
MORGAN STANLEY SPECTRUM SERIES
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSET VALUE
- --------------------------------------------------------------------------------
FOR THE MONTH ENDED MARCH 31, 2008 (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,
March 1, 2008 16,362,796.494 587,363,516 35.90 11,829,086.702 229,518,752 19.40 27,719,654.235 626,765,731 22.61
Net Loss -- (9,403,060) (.58) -- (9,086,224) (.77) -- (17,076,381) (.62)
Redemptions (250,806.703 (8,858,493) 35.32 (236,881.377 (4,413,100) 18.63 (379,323.664 (8,341,327) 21.99
Subscriptions 89,570.676 3,163,636 35.32 137,794.007 2,567,102 18.63 134,627.346 2,960,456 21.99
-------------- ----------- -------------- ----------- -------------- -----------
Net Asset Value,
March 31, 2008 16,201,560.467 572,265,599 35.32 11,729,999.332 218,586,530 18.63 27,474,957.917 604,308,479 21.99
============== =========== ============== =========== ============== ===========
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").
The general partner of each Partnership is Demeter Management Corporation
("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.
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. 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.
MORGAN STANLEY SPECTRUM SERIES
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NOTES TO FINANCIAL STATEMENTS
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(CONTINUED)
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.
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.
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 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 SERIES
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NOTES TO FINANCIAL STATEMENTS
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(CONTINUED)
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 1.75% per month of Net Assets allocated to Altis
on the first day of each month (a 1.75% 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).
The management fee for Spectrum Select is accrued 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), 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).
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, 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).
For the period of September 1, 2007 through December 31, 2007, Chesapeake
waived the management fee it receives from Spectrums Technical. Effective
January 1, 2008, Spectrum Technical pays Chesapeake a monthly management fee
equal to 1/6 of 1% of its Net Assets allocated to Chesapeake on the first day of
each month (a 2% annual rate). Prior to September 1, 2007, Spectrum Technical
paid Chesapeake a monthly management fee equal to 1/4 of 1% of its Net Assets
allocated to 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 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.
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.
MORGAN STANLEY SPECTRUM SERIES
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NOTES TO FINANCIAL STATEMENTS
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(CONCLUDED)
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
ADDRESS SERVICE REQUESTED
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