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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 2002 or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to__________________
Commission File Number 0-26280
MORGAN STANLEY SPECTRUM STRATEGIC L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-3782225
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Demeter Management Corporation
c/o Managed Futures Department
Harborside Financial Center,
Plaza Two, 1st Floor, Jersey City, NJ 07311
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201) 209-8400
825 Third Ave., 8th Floor, New York, NY 10022
(Former name, former address, and former fiscal year, if changed
since last report)
Indicate by check-mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No___________
MORGAN STANLET SPECTRUM STRATEGIC L.P.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
September 30, 2002
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Financial Condition as of September 30,
2002 (Unaudited) and December 31, 2001.....................2
Statements of Operations for the Quarters Ended
September 30, 2002 and 2001 (Unaudited)....................3
Statements of Operations for the Nine Months Ended
September 30, 2002 and 2001 (Unaudited)....................4
Statements of Changes in Partners' Capital for the
Nine Months Ended September 30, 2002 and 2001 (Unaudited)..5
Statements of Cash Flows for the Nine Months Ended
September 30, 2002 and 2001 (Unaudited) ...................6
Notes to Financial Statements (Unaudited)...............7-12
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......13-22
Item 3. Quantitative and Qualitative Disclosures about
Market Risk.........................................23-36
Item 4. Controls and Procedures................................36
Part II. OTHER INFORMATION
Item 1. Legal Proceedings......................................37
Item 2. Changes in Securities and Use of Proceeds...........37-38
Item 5. Other Information...................................39-41
Item 6. Exhibits and Reports on Form 8-K....................41-43
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MORGAN STANLEY SPECTRUM STRATEGIC L.P.
STATEMENTS OF FINANCIAL CONDITION
September 30, December 31,
2002 2001
$ $
(Unaudited)
ASSETS
Equity in futures interests trading accounts:
Cash 77,444,617 65,967,662
Net unrealized gain on open contracts (MS & Co.) 2,945,229 4,515,344
Net unrealized loss on open contracts (MSIL) (135,679) (23,578)
Total net unrealized gain on open contracts 2,809,550 4,491,766
Net option premiums 1,073,796 288,552
Total Trading Equity 81,327,963 70,747,980
Subscriptions receivable 1,350,452 651,936
Interest receivable (Morgan Stanley DW) 88,263 89,359
Total Assets 82,766,678 71,489,275
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable 861,886 2,072,098
Accrued brokerage fees (Morgan Stanley DW) 471,418 424,242
Accrued incentive fees 253,228 -
Accrued management fees 195,069 175,549
Total Liabilities 1,781,601 2,671,889
Partners' Capital
Limited Partners (6,340,569.226 and
6,449,326.013 Units, respectively) 80,021,484 68,012,216
General Partner (76,351.101 Units) 963,593 805,170
Total Partners' Capital 80,985,077 68,817,386
Total Liabilities and Partners' Capital 82,766,678 71,489,275
NET ASSET VALUE PER UNIT 12.62 10.55
The accompanying notes are an integral part
of these financial statements.
MORGAN STANLEY SPECTRUM STRATEGIC L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
For the Quarters Ended September 30,
2002 2001
$ $
REVENUES
Trading profit (loss):
Realized 7,532,650 (13,421)
Net change in unrealized (1,793,914) 2,509,622
5,738,736 2,496,201
Other revenue 17,556 -
Total Trading Results 5,756,292 2,496,201
Interest income (Morgan Stanley DW) 266,800 479,338
Total 6,023,092 2,975,539
EXPENSES
Brokerage fees (Morgan Stanley DW) 1,384,718 1,243,306
Management fees 572,986 514,471
Incentive fees 264,827 -
Total 2,222,531 1,757,777
NET INCOME 3,800,561 1,217,762
NET INCOME ALLOCATION
Limited Partners 3,754,936 1,204,123
General Partner 45,625 13,639
NET INCOME PER UNIT
Limited Partners 0.60 0.18
General Partner 0.60 0.18
The accompanying notes are an integral part
of these financial statements.
MORGAN STANLEY SPECTRUM STRATEGIC L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
For the Nine Months Ended September 30,
2002 2001
$ $
REVENUES
Trading profit (loss):
Realized 19,963,552 820,083
Net change in unrealized (1,682,216) 753,821
18,281,336 1,573,904
Other revenue 17,556 -
Total Trading Results 18,298,892 1,573,904
Interest income (Morgan Stanley DW) 753,917 1,917,113
Total 19,052,809 3,491,017
EXPENSES
Brokerage fees (Morgan Stanley DW) 3,926,301 3,883,127
Management fees 1,624,676 1,658,233
Incentive fees 264,827 -
Total 5,815,804 5,541,360
NET INCOME (LOSS) 13,237,005 (2,050,343)
NET INCOME (LOSS) ALLOCATION
Limited Partners 13,078,582 (2,027,424)
General Partner 158,423 (22,919)
NET INCOME (LOSS) PER UNIT
Limited Partners 2.07 (0.30)
General Partner 2.07 (0.30)
The accompanying notes are an integral part
of these financial statements.
MORGAN STANLEY SPECTRUM STRATEGIC L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Nine Months Ended September 30, 2002 and 2001
(Unaudited)
Units of
Partnership Limited General
Interest Partners Partner Total
$ $ $
Partners' Capital,
December 31, 2000 6,994,953.429 73,433,119 801,330 74,234,449
Offering of Units 719,490.962 7,420,938 9,000 7,429,938
Net Loss - (2,027,424) (22,919) (2,050,343)
Redemptions (940,931.300) (9,758,656) - (9,758,656)
Partners' Capital,
September 30, 2001 6,773,513.091 69,067,977 787,411 69,855,388
Partners' Capital,
December 31, 2001 6,525,677.114 68,012,216 805,170 68,817,386
Offering of Units 760,450.098 8,899,154 - 8,899,154
Net Income - 13,078,582 158,423 13,237,005
Redemptions (869,206.885) (9,968,468) - (9,968,468)
Partners' Capital,
September 30, 2002 6,416,920.327 80,021,484 963,593 80,985,077
The accompanying notes are an integral part
of these financial statements.
MORGAN STANLEY SPECTRUM STRATEGIC L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended September 30,
2002 2001
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) 13,237,005 (2,050,343)
Noncash item included in net income (loss):
Net change in unrealized 1,682,216 (753,821)
(Increase) decrease in operating assets:
Net option premiums (785,244) 90,215
Interest receivable (Morgan Stanley DW) 1,096 161,229
Increase (decrease) in operating liabilities:
Accrued brokerage fees (Morgan Stanley DW) 47,176 979
Accrued incentive fees 253,228 (289,687)
Accrued management fees 19,520 (16,810)
Net cash provided by (used for) operating activities 14,454,997 (2,858,238)
CASH FLOWS FROM FINANCING ACTIVITIES
Offering of Units 8,899,154 7,429,938
(Increase) decrease in subscriptions receivable (698,516) 136,247
Decrease in redemptions payable (1,210,212) (339,897)
Redemptions of Units (9,968,468) (9,758,656)
Net cash used for financing activities (2,978,042) (2,532,368)
Net increase (decrease) in cash 11,476,955 (5,390,606)
Balance at beginning of period 65,967,662 73,445,827
Balance at end of period 77,444,617 68,055,221
The accompanying notes are an integral part
of these financial statements.
MORGAN STANLEY SPECTRUM STRATEGIC L.P.
NOTES TO FINANCIAL STATEMENTS
September 30, 2002
(Unaudited)
The unaudited financial statements contained herein include, in
the opinion of management, all adjustments necessary for a fair
presentation of the results of operations and financial condition
of Morgan Stanley Spectrum Strategic L.P. (the "Partnership").
The financial statements and condensed notes herein should be read
in conjunction with the Partnership's December 31, 2001 Annual
Report on Form 10-K.
1. Organization
Morgan Stanley Spectrum Strategic L.P. is a Delaware limited
partnership 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.
The Partnership is one of the Morgan Stanley Spectrum Series of
funds, comprised of the Partnership, Morgan Stanley Spectrum
Commodity L.P., Morgan Stanley Spectrum Currency L.P., Morgan
Stanley Spectrum Global Balanced L.P., Morgan Stanley Spectrum
Select L.P., and Morgan Stanley Spectrum Technical L.P.
MORGAN STANLEY SPECTRUM STRATEGIC L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Partnership's general partner is Demeter Management
Corporation ("Demeter"). The non-clearing commodity broker is
Morgan Stanley DW Inc. ("Morgan Stanley DW"). The clearing
commodity brokers are Morgan Stanley & Co., Inc. ("MS & Co.") and
Morgan Stanley & Co. International Limited ("MSIL"). Demeter,
Morgan Stanley DW, MS & Co., and MSIL are wholly-owned
subsidiaries of Morgan Stanley. The trading advisors to the
Partnership are Allied Irish Capital Management, Ltd., Blenheim
Capital Management, L.L.C., and Eclipse Capital Management, Inc.
(collectively, the "Trading Advisors").
On February 27, 2002, the Partnership received notification of a
preliminary entitlement to payment from the Sumitomo Copper
Litigation Settlement Administrator. The Partnership received
payment of this settlement award in the amount of $17,556 as of
August 31, 2002.
2. Related Party Transactions
The Partnership's cash is on deposit with Morgan Stanley DW, MS &
Co., and MSIL in futures, forwards, and options trading accounts
to meet margin requirements as needed. Morgan Stanley DW pays
interest on these funds based on a prevailing rate on U.S.
Treasury bills. The Partnership pays brokerage fees to Morgan
Stanley DW.
MORGAN STANLEY SPECTRUM STRATEGIC L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. Financial Instruments
The Partnership trades 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. Futures and forwards represent contracts for delayed
delivery of an instrument at a specified date and price. Risk
arises from changes in the value of these contracts and the
potential inability of counterparties to perform under the terms
of the contracts. There are numerous factors which may
significantly influence the market value of these contracts,
including interest rate volatility.
The market value of contracts is based on closing prices quoted
by the exchange, bank or clearing firm through which the
contracts are traded.
The Partnership's contracts are accounted for on a trade-date
basis and marked to market on a daily basis. The Partnership
accounts for its derivative investments in accordance with the
provisions of Statement of Financial Accounting Standard No. 133,
"Accounting for Derivative Instruments and Hedging Activities"
MORGAN STANLEY SPECTRUM STRATEGIC L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
("SFAS No. 133"). SFAS No. 133 defines a derivative as a
financial instrument or other contract that has all three of the
following characteristics:
1) One or more underlying notional amounts or payment
provisions;
2) Requires no initial net investment or a smaller initial net
investment than would be required relative to changes in
market factors;
3) Terms require or permit net settlement.
Generally derivatives include futures, forward, swaps or options
contracts, and other financial instruments with similar
characteristics such as caps, floors and collars.
The net unrealized gains (losses) on open contracts, reported as a
component of "Equity in futures interests trading accounts" on the
statements of financial condition, and their longest contract
maturities were as follows:
MORGAN STANLEY SPECTRUM STRATEGIC L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Net Unrealized Gains (Losses)
on Open Contracts Longest Maturities
Exchange- Off-Exchange- Exchange- Off-Exchange-
Date Traded Traded Total Traded Traded
$ $ $
Sep. 30, 2002 2,810,586 (1,036) 2,809,550 Jul. 2004 Oct. 2002
Dec. 31, 2001 4,491,712 54 4,491,766 Dec. 2002 Jan. 2002
The Partnership has credit risk associated with counterparty non-
performance. The credit risk associated with the instruments in
which the Partnership is involved is limited to the amounts
reflected in the Partnership's statements of financial condition.
The Partnership also has credit risk because Morgan Stanley DW, MS
& Co., and MSIL act as the futures commission merchants or the
counterparties with respect to most of the Partnership's assets.
Exchange-traded futures and futures-styled options contracts are
marked to market on a daily basis, with variations in value
settled on a daily basis. Each of Morgan Stanley DW, MS & Co.,
and MSIL, as a futures commission merchant for the Partnership's
exchange-traded futures and futures-styled options contracts, are
required, pursuant to regulations of the Commodity Futures Trading
Commission ("CFTC"), to segregate from their own assets, and for
the sole benefit of their commodity customers, all funds held by
them with respect to exchange-traded futures and futures-styled
MORGAN STANLEY SPECTRUM STRATEGIC L.P.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
options contracts, including an amount equal to the net unrealized
gains (losses) on all open futures and futures-styled options
contracts, which funds, in the aggregate, totaled $80,255,203 and
$70,459,374 at September 30, 2002 and December 31, 2001,
respectively. With respect to the Partnership's off-exchange-
traded forward currency contracts, there are no daily settlements
of variations in value nor is there any requirement that an amount
equal to the net unrealized gains (losses) on open forward
contracts be segregated. With respect to those off-exchange-traded
forward currency contracts, the Partnership is at risk to the
ability of MS & Co., the sole counterparty on all of such
contracts, to perform. The Partnership has a netting agreement
with MS & Co. This agreement, which seeks to reduce both the
Partnership's and MS & Co.'s exposure on off-exchange-traded
forward currency contracts, should materially decrease the
Partnership's credit risk in the event of MS & Co.'s bankruptcy or
insolvency.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity. The Partnership deposits its assets with Morgan
Stanley DW as non-clearing broker, and MS & Co. and MSIL as
clearing brokers in separate futures, forwards, and options
trading accounts established for each Trading Advisor, which
assets are used as margin to engage in trading. The assets are
held in either non-interest bearing bank accounts or in securities
and instruments permitted by the CFTC for investment of customer
segregated or secured funds. The Partnership's assets held by the
commodity brokers may be used as margin solely for the
Partnership's trading. Since the Partnership's sole purpose is to
trade in futures, forwards, and options, it is expected that the
Partnership will continue to own such liquid assets for margin
purposes.
The Partnership's investment in futures, forwards, and options
may, from time to time, be illiquid. Most U.S. futures exchanges
limit fluctuations in prices during a single day by regulations
referred to as "daily price fluctuations limits" or "daily
limits". Trades may not be executed at prices beyond the daily
limit. If the price for a particular futures or options contract
has increased or decreased by an amount equal to the daily limit,
positions in that futures or options contract can neither be taken
nor liquidated unless traders are willing to effect trades at or
within the limit. Futures prices have occasionally moved the
daily limit for several consecutive days with little or no
trading. These market conditions could prevent the Partnership
from promptly liquidating its futures or options contracts and
result in restrictions on redemptions.
There is no limitation on daily price moves in trading forward
contracts on foreign currency. The markets for some world
currencies have low trading volume and are illiquid, which may
prevent the Partnership from trading in potentially profitable
markets or prevent the Partnership from promptly liquidating
unfavorable positions in such markets, subjecting it to
substantial losses. Either of these market conditions could
result in restrictions on redemptions.
There are no material trends, demands, commitments, events or
uncertainties known at the present time that will result in or
that are reasonably likely to result in the Partnership's
liquidity increasing or decreasing in any material way.
The Partnership has never had illiquidity affect a material
portion of its assets.
Capital Resources. The Partnership does not have, nor expect to
have, any capital assets. Redemptions, exchanges, and sales of
additional units of limited partnership interest ("Unit(s)") in
the future will affect the amount of funds available for
investment in futures, forwards, and options in subsequent
periods. It is not possible to estimate the amount and therefore,
the impact of future redemptions of Units.
There are no known material trends, favorable or unfavorable, nor
any expected material changes to the Partnership's capital
resource arrangements at the present time.
The Partnership has no off-balance sheet arrangements, nor
contractual obligations or commercial commitments to make future
payments that would affect the Partnership's liquidity or capital
resources. The contracts traded by the Partnership are accounted
for on a trade-date basis and marked to market on a daily basis.
The value of foreign currency forward contracts is based on the
spot rate as of the close of business, New York City time, on a
given day.
Results of Operations
General. The Partnership's results depend on the Trading Advisors
and the ability of the Trading Advisors' trading programs to take
advantage of price movements or other profit opportunities in the
futures, forwards, and options markets. The following presents a
summary of the Partnership's operations for the three and nine
month periods ended September 30, 2002 and 2001, and a general
discussion of its trading activities during each period. It is
important to note, however, that the Trading Advisors trade in
various markets at different times and that prior activity in a
particular market does not mean that such market will be actively
traded by the Trading Advisors or will be profitable in the
future. Consequently, the results of operations of the Partnership
are difficult to discuss other than in the context of the Trading
Advisors' trading activities on behalf of the Partnership and how
the Partnership has performed in the past.
The Partnership's results of operations are set forth in
financial statements prepared in accordance with United States
generally accepted accounting principles, which require the use
of certain accounting policies that affect the amounts reported
in these financial statements, including the following: The
contracts the Partnership trades are accounted for on a trade-
date basis and marked to market on a daily basis. The difference
between their cost and market value is recorded on the Statements
of Operations as "Net change in unrealized profit/loss" for open
(unrealized) contracts, and recorded as "Realized profit/loss"
when open positions are closed out, and the sum of these amounts
constitutes the Partnership's trading revenues. Earned interest
income revenue, as well as management fees, incentive fees and
brokerage fees expenses of the Partnership are recorded on an
accrual basis.
Demeter believes that, based on the nature of the operations of
the Partnership, no assumptions other than those presently used
relating to the application of critical accounting policies are
reasonably plausible that could affect reported amounts.
For the Quarter and Nine Months Ended September 30, 2002
For the quarter ended September 30, 2002, the Partnership recorded
total trading revenues, including interest income, of $6,023,092
and posted an increase in net asset value per Unit. The most
significant gains of approximately 7.9% were recorded in the
agricultural markets, primarily during July, from long positions
in grain futures as prices trended higher amid weather related
concerns. Additional gains of approximately 6.1% were recorded in
the global interest rate futures markets from long positions
primarily established in July as prices trended higher amid
retreating equity markets and continued pessimism concerning a
global economic recovery. A portion of the Partnership's overall
gains for the quarter was offset by losses of approximately 5.3%
in the metals markets primarily from previously established long
positions in copper futures as prices decreased amid increased
fears that the weak economy would dampen demand for industrial
metals. Additional losses of approximately 1.2% were recorded in
the currency markets from long Canadian dollar positions as its
value continued to fall versus the U.S. dollar in response to the
Bush Administration's "strong-dollar" policy. On February 27,
2002, the Partnership received notification of a preliminary
entitlement to payment from the Sumitomo Copper Litigation
Settlement Administrator. The Partnership received payment of
this settlement award in the amount of $17,556 as of August 31,
2002. Total expenses for the three months ended September 30,
2002 were $2,222,531, resulting in net income of $3,800,561. The
net asset value of a Unit increased from $12.02 at June 30, 2002
to $12.62 at September 30, 2002.
For the nine months ended September 30, 2002, the Partnership
recorded total trading revenues, including interest income, of
$19,052,809 and posted an increase in net asset value per Unit.
The most significant gains of approximately 22.4% were recorded in
the agricultural markets from long positions in cocoa and grain
futures as prices trended higher throughout a majority of the year
amid concerns of supply deficits due to harsh weather. Additional
gains of approximately 4.0% were recorded in the currency markets,
primarily during March and June, from previously established long
positions in the euro and Swiss franc relative to the U.S. dollar
as the value of these currencies strengthened against the dollar
amid falling equity prices, concerns regarding corporate
accounting integrity, and weak economic data. Gains of
approximately 3.6% were provided from long interest rate futures
positions in July and August as economic data pointed to further
deterioration of the economic environment in Europe, the U.S., and
Asia. A portion of the Partnership's overall gains was offset by
losses of approximately 2.5% in the metals markets from previously
established long futures positions in copper, tin, and zinc as
prices declined further due to diminished demand. Additional
losses of approximately 1.5% were recorded in the global stock
index futures markets from long positions in S&P 500 Index
futures, as prices decreased during April amid concerns regarding
a sustainable and robust economic recovery. Total expenses for
the nine months ended September 30, 2002 were $5,815,804,
resulting in net income of $13,237,005. The net asset value of a
Unit increased from $10.55 at December 31, 2001 to $12.62 at
September 30, 2002.
For the Quarter and Nine Months Ended September 30, 2001
For the quarter ended September 30, 2001, the Partnership
recorded total trading revenues, including interest income, of
$2,975,539 and posted an increase in net asset value per Unit.
The most significant gains of approximately 2.0% were recorded in
the soft commodities markets primarily during September from long
cocoa futures positions as prices moved higher on expectations
that global demand would outpace production. In the global
interest rate futures markets, profits of approximately 1.7% were
recorded primarily during September from long positions in U.S.
and European interest rate futures as prices continued trending
higher amid continued concerns for the sluggish U.S. economy,
interest rate cuts by the U.S. Federal Reserve and as investors
sought a safe haven from declining stock prices. In the energy
markets, profits of approximately 1.5% were recorded primarily
during July from long positions in crude oil futures as prices
rose on the back of a 1-million-barrel-per-day OPEC production
cut. During September, gains were recorded from short positions
in crude oil futures as oil prices moved lower due to near-term
concerns over the effects of a global economic slowdown on oil
demand. In the metals markets, gains of approximately 0.9% were
recorded primarily during July and September from short positions
in aluminum and copper futures as prices declined due to higher
inventories and weak demand. These gains were partially offset
by losses of approximately 2.9% recorded primarily during August
in the currency markets from short positions in the Japanese yen
as the value of the yen strengthened versus the U.S. dollar due
to U.S. economic weakness. During September, losses were
recorded from long positions in the Japanese yen as its value
weakened and the U.S. dollar strengthened amid newly released
optimistic U.S. economic data and the Bank of Japan's surprise
interventions. Additional losses were recorded from trading in
New Zealand and Australian dollar positions. Total expenses for
the three months ended September 30, 2001 were $1,757,777,
resulting in net income of $1,217,762. The net asset value of a
Unit increased from $10.13 at June 30, 2001 to $10.31 at
September 30, 2001.
For nine months ended September 30, 2001, the Partnership
recorded total trading revenues, including interest income, of
$3,491,017 and, after expenses, posted a decrease in net asset
value per Unit. The most significant losses of approximately
4.5% were recorded in the currency markets from long positions in
the New Zealand dollar as its value weakened relative to the U.S.
dollar following a decline in the value of the Australian dollar.
In the agricultural markets, losses of approximately 2.2% were
experienced primarily during May and June from long wheat futures
positions as prices declined amid favorable weather forecasts in
the U.S. midwest and weak global demand. In the global stock
index futures markets, losses of approximately 1.5% were
experienced throughout a majority of the first quarter from long
positions in U.S. stock index futures as U.S. stock prices
continued to decline after discouraging corporate earnings
warnings, inflationary news and on worries of a U.S. economic
slowdown. These losses were partially offset by gains of
approximately 6.0% recorded in the soft commodities markets
primarily during April and May from long lumber futures positions
as prices soared higher amid low inventories combined with warmer
weather in northern Canada. Additional gains were recorded
during September from long cocoa futures positions as prices
moved higher on expectations that global demand would outpace
production. In the global interest rate futures markets, gains
of approximately 4.1% were recorded throughout a majority of the
first quarter from long positions in eurodollar futures as prices
rose amid a rattled stock market, shaky consumer confidence,
positive inflation data and interest rate cuts by the U.S.
Federal Reserve. During September, profits were recorded from
long positions in U.S. and European interest rate futures as
prices continued trending higher amid continued concerns for the
sluggish U.S. economy, interest rate cuts by the U.S. Federal
Reserve and as investors sought a safe haven from declining stock
prices. In the energy markets, profits of approximately 1.3%
were recorded primarily during July from long positions in crude
oil futures as prices rose on the back of a 1-million-barrel-per-
day OPEC production cut. During September, gains were recorded
from short positions in crude oil futures as oil prices moved
lower due to near-term concerns over the effects of a global
economic slowdown on oil demand. Total expenses for the nine
months ended September 30, 2001 were $5,541,360, resulting in a
net loss of $2,050,343. The net asset value of a Unit decreased
from $10.61 at December 31, 2000 to $10.31 at September 30, 2001.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Introduction
The Partnership is a commodity pool engaged primarily in the
speculative trading of futures, forwards, and options. The
market-sensitive instruments held by the Partnership are acquired
for speculative trading purposes only and, as a result, all or
substantially all of the Partnership's assets are at risk of
trading loss. Unlike an operating company, the risk of market-
sensitive instruments is central, not incidental, to the
Partnership's main business activities.
The futures, forwards, and options traded by the Partnership
involve varying degrees of related market risk. Market risk is
often dependent upon changes in the level or volatility of
interest rates, exchange rates, and prices of financial
instruments and commodities. Fluctuations in market risk based
upon these factors result in frequent changes in the fair value of
the Partnership's open positions, and, consequently, in its
earnings and cash flow.
The Partnership's total market risk is influenced by a wide
variety of factors, including the diversification among the
Partnership's open positions, the volatility present within the
markets, and the liquidity of the markets. At different times,
each of these factors may act to increase or decrease the market
risk associated with the Partnership.
The Partnership's past performance is not necessarily indicative
of its future results. Any attempt to numerically quantify the
Partnership's market risk is limited by the uncertainty of its
speculative trading. The Partnership's speculative trading may
cause future losses and volatility (i.e., "risk of ruin") that
far exceed the Partnership's experience to date or any reasonable
expectations based upon historical changes in market value.
Quantifying the Partnership's Trading Value at Risk
The following quantitative disclosures regarding the
Partnership's market risk exposures contain "forward-looking
statements" within the meaning of the safe harbor from civil
liability provided for such statements by the Private Securities
Litigation Reform Act of 1995 (set forth in Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934). All quantitative disclosures in this section are
deemed to be forward-looking statements for purposes of the safe
harbor, except for statements of historical fact.
The Partnership accounts for open positions on the basis of mark-
to-market accounting principles. Any loss in the market value of
the Partnership's open positions is directly reflected in the
Partnership's earnings, whether realized or unrealized, and its
cash flow. Profits and losses on open positions of exchange-
traded futures, forwards, and options are settled daily through
variation margin.
The Partnership's risk exposure in the market sectors traded by
the Trading Advisors is estimated below in terms of Value at Risk
("VaR"). The VaR model used by the Partnership includes many
variables that could change the market value of the Partnership's
trading portfolio. The Partnership estimates VaR using a model
based upon historical simulation with a confidence level of 99%.
Historical simulation involves constructing a distribution of
hypothetical daily changes in the value of a trading portfolio.
The VaR model takes into account linear exposures to price and
interest rate risk. Market risks that are incorporated in the VaR
model include equity and commodity prices, interest rates, foreign
exchange rates, and correlation among these variables. The
hypothetical changes in portfolio value are based on daily
percentage changes observed in key market indices or other market
factors ("market risk factors") to which the portfolio is
sensitive. The historical observation period of the Partner-
ship's VaR is approximately four years. The one-day 99%
confidence level of the Partnership's VaR corresponds to the
negative change in portfolio value that, based on observed market
risk factors, would have been exceeded once in 100 trading days.
In other words, one-day VaR for a portfolio is a number such that
losses in this portfolio are estimated to exceed the VaR only one
day in 100.
VaR is calculated using historical simulation. Demeter uses
approximately four years of daily market data (1,000 observations)
and revalues its portfolio (using delta-gamma approximations) for
each of the historical market moves that occurred over this time
period. This generates a probability distribution of daily
'simulated profit and loss' outcomes. The VaR is the appropriate
percentile of this distribution. For example, the 99% one-day VaR
would represent the 10th worst outcome from Demeter's simulated
profit and loss series.
VaR models, including the Partnership's, are continuously evolving
as trading portfolios become more diverse and modeling techniques
and systems capabilities improve. Please note that the VaR model
is used to numerically quantify market risk for historic reporting
purposes only and is not utilized by either Demeter or the Trading
Advisors in their daily risk management activities. Please
further note that VaR as described above may not be comparable to
similarly titled measures used by other entities.
The Partnership's Value at Risk in Different Market Sectors
The following table indicates the VaR associated with the
Partnership's open positions as a percentage of total net assets
by primary market risk category at September 30, 2002 and 2001.
At September 30, 2002 and 2001, the Partnership's total
capitalization was approximately $81 million and $70 million,
respectively.
Primary Market September 30, 2002 September 30, 2001
Risk Category Value at Risk Value at Risk
Interest Rate (0.85)% (0.32)%
Currency (0.73) (0.31)
Equity (0.64) (0.15)
Commodity (1.87) (0.93)
Aggregate Value at Risk (2.49)% (0.99)%
The VaR for a market category represents the one-day downside risk
for the aggregate exposures associated with this market category.
The aggregate VaR, listed above for the Partnership, represents
the aggregate VaR of the Partnership's open positions across all
the market categories, and is less than the sum of the VaRs for
all such market categories due to the diversification benefit
across asset classes.
The table above represents the VaR of the Partnership's open
positions at September 30, 2002 and 2001 only and is not
necessarily representative of either the historic or future risk
of an investment in the Partnership. Because the Partnership's
only business is the speculative trading of futures, forwards, and
options, the composition of its trading portfolio can change
significantly over any given time period, or even within a single
trading day. Any changes in open positions could positively or
negatively materially impact market risk as measured by VaR.
The table below supplements the quarter-end VaR by presenting the
Partnership's high, low, and average VaR, as a percentage of
total net assets for the four quarterly reporting periods from
October 1, 2001 through September 30, 2002.
Primary Market Risk Category High Low Average
Interest Rate (0.85)% (0.23)% (0.51)%
Currency (1.38) (0.38) (0.83)
Equity (0.64) (0.17) (0.30)
Commodity (2.33) (1.87) (2.05)
Aggregate Value at Risk (2.51)% (2.20)% (2.42)%
Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the
Partnership is typically many times the applicable margin
requirements. Margin requirements generally range between 2% and
15% of contract face value. Additionally, the use of leverage
causes the face value of the market sector instruments held by the
Partnership to typically be many times the total capitalization of
the Partnership. The value of the Partnership's open positions
thus creates a "risk of ruin" not typically found in other
investments. The relative size of the positions held may cause
the Partnership to incur losses greatly in excess of VaR within a
short period of time, given the effects of the leverage employed
and market volatility. The VaR tables above, as well as the past
performance of the Partnership, give no indication of such "risk
of ruin". In addition, VaR risk measures should be viewed in light
of the methodology's limitations, which include the following:
? past changes in market risk factors will not always result in
accurate predictions of the distributions and correlations of
future market movements;
? changes in portfolio value caused by market movements may
differ from those of the VaR model;
? VaR results reflect past trading positions while future risk
depends on future positions;
? VaR using a one-day time horizon does not fully capture the
market risk of positions that cannot be liquidated or hedged
within one day; and
? the historical market risk factor data used for VaR estimation
may provide only limited insight into losses that could be
incurred under certain unusual market movements.
The VaR tables above present the results of the Partnership's VaR
for each of the Partnership's market risk exposure and on an
aggregate basis at September 30, 2002 and 2001, and for the end of
the four quarterly reporting periods from October 1, 2001 through
September 30, 2002. Since VaR is based on historical data, VaR
should not be viewed as predictive of the Partnership's future
financial performance or its ability to manage or monitor risk.
There can be no assurance that the Partnership's actual losses on
a particular day will not exceed the VaR amounts indicated above
or that such losses will not occur more than once in 100 trading
days.
Non-Trading Risk
The Partnership has non-trading market risk on its foreign cash
balances not needed for margin. These balances and any market
risk they may represent are immaterial.
At September 30, 2002, the Partnership's cash balance at Morgan
Stanley DW was approximately 87% of its total net asset value. A
decline in short-term interest rates will result in a decline in
the Partnership's cash management income. This cash flow risk is
not considered to be material.
Materiality, as used throughout this section, is based on an
assessment of reasonably possible market movements and any
associated potential losses, taking into account the leverage,
optionality and multiplier features of the Partnership's market-
sensitive instruments in relation to the Partnership's net assets.
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnership's
market risk exposures-except for (A) those disclosures that are
statements of historical fact and (B) the descriptions of how the
Partnership manages its primary market risk exposures-constitute
forward-looking statements within the meaning of Section 27A of
the Securities Act and Section 21E of the Securities Exchange Act.
The Partnership's primary market risk exposures as well as the
strategies used and to be used by Demeter and the Trading Advisors
for managing such exposures are subject to numerous uncertainties,
contingencies and risks, any one of which could cause the actual
results of the Partnership's risk controls to differ materially
from the objectives of such strategies. Government interventions,
defaults and expropriations, illiquid markets, the emergence of
dominant fundamental factors, political upheavals, changes in
historical price relationships, an influx of new market
participants, increased regulation and many other factors could
result in material losses as well as in material changes to the
risk exposures and the risk management strategies of the
Partnership. Investors must be prepared to lose all or
substantially all of their investment in the Partnership.
The following were the primary trading risk exposures of the
Partnership at September 30, 2002 by market sector. It may be
anticipated, however, that these market exposures will vary
materially over time.
Interest Rate. At September 30, 2002, the Partnership's exposure
to the global interest rate market complex was primarily spread
across the U.S. and European interest rate sectors. Interest rate
movements directly affect the price of the sovereign bond futures
positions held by the Partnership and indirectly affect the value
of its stock index and currency positions. Interest rate
movements in one country, as well as relative interest rate
movements between countries, materially impact the Partnership's
profitability. The Partnership's primary interest rate exposure
is generally to interest rate fluctuations in the U.S. and the
other G-7 countries. The G-7 countries consist of France, the
U.S., Britain, Germany, Japan, Italy, and Canada. The
Partnership also takes futures position in the government debt of
smaller nations - e.g., Australia. Demeter anticipates that G-7
and Australian interest rates will remain the primary interest
rate exposure of the Partnership for the foreseeable future. The
speculative futures positions held by the Partnership range from
short to long-term instruments. Consequently, changes in short,
medium or long-term interest rates may have an effect on the
Partnership.
Currency. The Partnership's currency exposure at September 30,
2002, was to exchange rate fluctuations, primarily fluctuations
which disrupt the historical pricing relationships between
different currencies and currency pairs. Interest rate changes
as well as political and general economic conditions influence
these fluctuations. The Partnership trades a large number of
currencies, including cross-rates - i.e., position between two
currencies other than the U.S. dollar. At September 30, 2002,
the Partnership's exposures were to the euro and Japanese yen
cross-rates and outright U.S. dollar positions. Outright
positions consist of the U.S. dollar vs. other currencies. These
other currencies include major and minor currencies. Demeter
does not anticipate that the risk profile of the Partnership's
currency sector will change significantly in the future. The
currency trading VaR figure includes foreign margin amounts
converted into U.S. dollars with an incremental adjustment to
reflect the exchange rate risk inherent to the U.S.-based
Partnership in expressing VaR in a functional currency other than
U.S. dollars.
Equity. The Partnership's equity exposure at September 30, 2002
was to equity price risk in the G-7 countries. The stock index
futures traded by the Partnership are by law limited to futures
on broadly-based indices. At September 30, 2002, the
Partnership's primary exposures were to the S&P 500(U.S.) and
NASDAQ(U.S.) stock indices. The Partnership is primarily exposed
to the risk of adverse price trends or static markets in the U.S.
and European indices. Static markets would not cause major
market changes but would make it difficult for the Partnership to
avoid being "whipsawed" into numerous small losses.
Commodity.
Soft Commodities and Agriculturals. At September 30, 2002,
the Partnership had exposure to the markets that comprise
these sectors. Most of the exposure was to the cocoa,
coffee and cotton markets. Supply and demand inequalities,
severe weather disruptions, and market expectations affect
price movements in these markets.
Metals. The Partnership's metals exposure at September 30,
2002 was to fluctuations in the price of precious metals,
such as gold, and base metals, such as copper, aluminum and
tin. Economic forces, supply and demand inequalities,
geopolitical factors and market expectations influence price
movements in these markets. The Trading Advisors, from time
to time, take positions when market opportunities develop.
Demeter anticipates that the Partnership will continue to be
exposed to the precious and base metals markets.
Energy. At September 30, 2002, the Partnership's energy
exposure was shared primarily by futures contracts in crude
oil and its related products, and natural gas. Price
movements in these markets result from political
developments in the Middle East, weather patterns and other
economic fundamentals. Significant profits and losses,
which have been experienced in the past, are expected to
continue to be experienced in these markets. Natural gas
has exhibited volatility in prices resulting from weather
patterns and supply and demand factors and may continue in
this choppy pattern.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the
Partnership at September 30, 2002:
Foreign Currency Balances. The Partnership's primary
foreign currency balances at September 30, 2002, were in
British pounds, euros, and Japanese yen. The Partnership
controls the non-trading risk of these balances by regularly
converting them back into U.S. dollars upon liquidation of
their respective positions.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The Partnership and the Trading Advisors, separately, attempt to
manage the risk of the Partnership's open positions in
essentially the same manner in all market categories traded.
Demeter attempts to manage market exposure by diversifying the
Partnership's assets among different Trading Advisors, each of
whose strategies focus on different market sectors and trading
approaches, and by monitoring the performance of the Trading
Advisors daily. In addition, the Trading Advisors establish
diversification guidelines, often set in terms of the maximum
margin to be committed to positions in any one market sector or
market-sensitive instrument.
Demeter monitors and controls the risk of the Partnership's non-
trading instrument, cash. Cash is the only Partnership
investment directed by Demeter, rather than the Trading Advisors.
Item 4. CONTROLS AND PROCEDURES
(a) As of a date within 90 days of the filing date of this
quarterly report, the President and Chief Financial
Officer of the general partner, Demeter, have evaluated
the Partnership's disclosure controls and procedures,
and have judged such controls and procedures to be
effective.
(b) There have been no significant changes in the
Partnership's internal controls or in other factors
that could significantly affect these controls
subsequent to the date of their evaluation.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Partnership, Morgan Stanley Spectrum Technical L.P.
("Spectrum Technical") and Morgan Stanley Spectrum Global
Balanced L.P. ("Spectrum Global Balanced"), collectively
registered 10,000,000 Units, pursuant to a Registration Statement
on a Form S-1, which became effective on September 15, 1994 (SEC
File Number 33-80146). While such Units were not allocated to
the Partnership, Spectrum Technical, and Spectrum Global Balanced
at that time, they were subsequently allocated for convenience
purposes as follows: the Partnership 4,000,000, Spectrum
Technical 4,000,000, and Spectrum Global Balanced 2,000,000. The
Partnership, Spectrum Technical, and Spectrum Global Balanced
collectively registered an additional 20,000,000 Units pursuant
to the new Registration Statement on Form S-1, which became
effective on January 31, 1996 (SEC File Number 333-00494); such
Units were allocated to the Partnership, Spectrum Technical, and
Spectrum Global Balanced as follows: the Partnership 6,000,000,
Spectrum Technical 9,000,000, and Spectrum Global Balanced
5,000,000. The Partnership, Spectrum Technical, and Spectrum
Global Balanced collectively registered an additional 8,500,000
Units pursuant to another Registration Statement on Form S-1,
which became effective on April 30, 1996 (SEC File Number 333-
3222); such Units were allocated to the Partnership, Spectrum
Technical, and Spectrum Global Balanced as follows: the
Partnership 2,500,000, Spectrum Technical 5,000,000, and Spectrum
Global Balanced 1,000,000.
The Partnership registered an additional 6,500,000 Units pursuant
to another Registration Statement on Form S-1, which became
effective on February 28, 2000 (SEC File Number 333-90487).
The managing underwriter for the Partnership is Morgan Stanley
DW.
Units are being sold at monthly closings at a price equal to 100%
of the net asset value of a Unit as of the last day of each
month.
Through September 30, 2002, 12,767,680.183 Units were sold,
leaving 6,232,319.817 Units unsold. The aggregate price of the
Units sold through September 30, 2002 was $140,929,813.
Since no expenses are chargeable against proceeds, 100% of the
proceeds of the offering have been applied to the working capital
of the Partnership for use in accordance with the "Use of
Proceeds" section of its Prospectus and Supplement to the
Prospectus.
Item 5. OTHER INFORMATION
Changes in Management
The following changes have been made to the Board of Directors and
Officers of Demeter Management Corporation, the general partner:
Mr. Robert E. Murray resigned the position of President of
Demeter. Mr. Murray however, retains his position as Chairman and
as a Director of Demeter.
Mr. Jeffrey A. Rothman, age 41, was named President and a
Director of Demeter. Mr. Rothman is the Executive Director of
Morgan Stanley Managed Futures, responsible for overseeing all
aspects of the firm's managed futures department. He is also
President and a Director of Morgan Stanley Futures & Currency
Management Inc., Morgan Stanley's internal commodity trading
advisor. Mr. Rothman has been with the Managed Futures
Department for sixteen years and most recently held the position
of National Sales Manager, assisting Branch Managers and
Financial Advisors with their managed futures education,
marketing, and asset retention efforts. Throughout his career,
Mr. Rothman has helped with the marketing, and administration of
approximately 33 commodity pool investments. Mr. Rothman is an
active member of the Managed Funds Association and serves on its
Board of Directors.
Mr. Frank Zafran, age 47, will become a Director of Demeter and of
Morgan Stanley Futures & Currency Management Inc. once he has
registered with the National Futures Association as an associated
person of both firms, which registration is currently pending.
Mr. Zafran is an Executive Director of Morgan Stanley and, in
September 2002, was named Chief Administrative Officer of Morgan
Stanley's Global Products and Services Division. Mr. Zafran
joined the firm in 1979 and has held various positions in
Corporate Accounting and the Insurance Department, including
Senior Operations Officer - Insurance Division, until his
appointment in 2000 as Director of 401(k) Plan Services,
responsible for all aspects of 401(k) Plan Services including
marketing, sales and operations. Mr. Zafran received a B.S.
degree in Accounting from Brooklyn College, New York.
Mr. Raymond E. Koch resigned the position of Chief Financial
Officer of Demeter.
Mr. Jeffrey D. Hahn, age 45, was named Chief Financial Officer of
Demeter. Mr. Hahn began his career at Morgan Stanley in 1992
and is currently an Executive Director responsible for the
management and supervision of the accounting, reporting, tax and
finance functions for the firm's private equity, managed futures,
and certain legacy real estate investing activities. He is also
Chief Financial Officer of Morgan Stanley Futures & Currency
Management Inc. From August 1984 through May 1992, Mr. Hahn held
various positions as an auditor at Coopers & Lybrand, specializing
in manufacturing businesses and venture capital organizations.
Mr. Hahn received his B.A. in economics from St. Lawrence
University in 1979, an M.B.A. from Pace University in 1984, and is
a Certified Public Accountant.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
3.01 Form of Amended and Restated Limited Partnership
Agreement of the Partnership is incorporated by reference
to Exhibit A of the Partnership's Prospectus, dated April
30, 2002, filed with the Securities and Exchange
Commission pursuant to Rule 424(b)(3) under the
Securities Act of 1933, on May 8, 2002.
3.02 Certificate of Limited Partnership, dated April 18, 1994,
is incorporated by reference to Exhibit 3.02 of the
Partnership's Registration Statement on Form S-1 (File
No. 33-80146) filed with the Securities and Exchange
Commission on June 10, 1994.
3.04 Certificate of Amendment of Certificate of Limited
Partnership of the Partnership, dated April 6, 1999
(changing its name from Dean Witter Spectrum Strategic
L.P.), is incorporated by reference to Exhibit 3.04 of
the Partnership's Registration Statement (No. 333-3222)
filed with the Securities and Exchange Commission on
April 12, 1999.
3.05 Certificate of Amendment of Certificate of Limited
Partnership, dated November 1, 2001 (changing its name
from Morgan Stanley Dean Witter Spectrum Strategic L.P.),
is incorporated by reference to Exhibit 3.01 of the
Partnership's Form 8-K (File No. 0-26280) filed with the
Securities and Exchange Commission on November 1, 2001.
10.02 Management Agreement, dated as of November 1, 1994, among
the Partnership, Demeter, and Blenheim Investments, Inc.
is incorporated by reference to Exhibit 10.01 of the
Partnership's Form 10-K (File No. 0-26280) for fiscal
year ended December 31, 1998 filed on June 30, 1999.
10.02(a) Amendment to the Management Agreement, among the
Partnership, Demeter, and Blenheim Investments, Inc. is
incorporated by reference to Exhibit 10.01 of the
Partnership's Form 8-K (File No. 0-26280), filed with the
Securities and Exchange Commission on April 25,2001.
10.03 Management Agreement, dated as of June 1, 2000, among the
Partnership, Demeter, and Eclipse Capital Management,
Inc. is incorporated by reference to Exhibit 10.09 of the
Partnership's Form 10-Q (File No. 0-26280) for the
quarterly period ended September 30, 2000 and filed with
the Securities and Exchange Commission on November 14,
2000.
10.04 Management Agreement, dated as of May 1, 1999, among the
Partnership, Demeter, and Allied Irish Capital Management
Ltd. is incorporated by reference to Exhibit 10.04 of the
Partnership's Registration Statement on Form S-1 (File
No. 333-90487) filed with the Securities and Exchange
Commission on December 29, 1999.
10.11 Form of Subscription and Exchange Agreement and Power of
Attorney to be executed by each purchaser of Units is
incorporated by reference to Exhibit B of the
Partnership's Prospectus dated April 30, 2002, as filed
with the Securities and Exchange Commission pursuant to
Rule 424(b)(3) under the Securities Act of 1933 on May 8,
2002.
10.13 Amended and Restated Escrow Agreement, dated as of March
10, 2000 among the Partnership, Morgan Stanley Spectrum
Select L.P., Morgan Stanley Spectrum Technical L.P.,
Morgan Stanley Spectrum Global Balanced L.P., Morgan
Stanley Spectrum Currency L.P., Morgan Stanley Spectrum
Commodity L.P., Morgan Stanley DW, and The Chase
Manhattan Bank, the escrow agent, is incorporated by
reference to Exhibit 10.13 of the Partnership's
Registration Statement on Form S-1 (File No. 333-90487)
filed with the Securities and Exchange Commission on
November 2, 2001.
10.14 Form of Subscription Agreement Update Form to be executed
by purchasers of Units is incorporated by reference to
Exhibit C of the Partnership's Prospectus, dated April
30, 2002, as filed with the Securities and Exchange
Commission pursuant to Rule 424(b)(3) under the
Securities Act of 1933 on May 8, 2002.
10.15 Amended and Restated Customer Agreement between the
Partnership and Morgan Stanley DW, dated as of October
16, 2000, is incorporated by reference to Exhibit 10.01
of the Partnership's Form 8-K (File 0-26280) filed with
the Securities and Exchange Commission on November 1,
2001.
10.16 Commodity Futures Customer Agreement between MS & Co. and
the Partnership, and acknowledged and agreed to by Morgan
Stanley DW, dated as of June 6, 2000, is incorporated by
reference to Exhibit 10.02 of the Partnership's Form 8-K
(File No. 0-26280) filed with the Securities and Exchange
Commission on November 1, 2001.
10.17 Customer Agreement between the Partnership and MSIL,
dated as of May 1, 2000, is incorporated by reference to
Exhibit 10.04 of the Partnership's Form 8-K (File No.
0-26280) filed with the Securities and Exchange
Commission on November 1, 2001.
10.18 Foreign Exchange and Options Master Agreement between MS
& Co. and the Partnership, dated as of April 30, 2000, is
incorporated by reference to Exhibit 10.05 of the
Partnership's Form 8-K (File No. 0-26280) filed with the
Securities and Exchange Commission on November 1, 2001.
10.19 Securities Account Control Agreement among the
Partnership, MS & Co., and Morgan Stanley DW, dated as of
May 1, 2000, is incorporated by reference to Exhibit
10.03 of the Partnership's Form 8-K (File No. 0-26280)
filed with the Securities and Exchange Commission on
November 1, 2001.
99.01 Certification of Periodic Report by Jeffrey A. Rothman,
President of Demeter Management Corporation, general
partner of the Partnership.
99.02 Certification of Periodic Report by Jeffrey D. Hahn,
Chief Financial Officer of Demeter Management
Corporation, general partner of the Partnership.
(B) Reports on Form 8-K. - None.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Morgan Stanley Spectrum
Strategic L.P. (Registrant)
By: Demeter Management Corporation
(General Partner)
November 14, 2002 By:/s/Jeffrey D. Hahn
Jeffrey D. Hahn
Chief Financial Officer
The General Partner which signed the above is the only party
authorized to act for the Registrant. The Registrant has no
principal executive officer, principal financial officer,
controller, or principal accounting officer and has no Board of
Directors.
CERTIFICATIONS
I, Jeffrey A. Rothman, President of Demeter Management
Corporation, the general partner of the Partnership, certify that:
1. I have reviewed this quarterly report on Form 10-Q of the
Partnership;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the Partnership as of,
and for, the periods presented in this quarterly report;
4. Demeter's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the
Partnership and we have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the
Partnership, including its consolidated subsidiaries,
is made known to us by others within those entities,
particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the Partnership's
disclosure controls and procedures as of a date within
90 days prior to the filing date of this quarterly
report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation
Date;
5. Demeter's other certifying officers and I have disclosed, based
on our most recent evaluation, to the Partnership's auditors
and the audit committee of Demeter's board of directors (or
persons performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
Partnership's ability to record, process, summarize and
report financial data and have identified for the
Partnership's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
Partnership's internal controls; and
6. Demeter's other certifying officers and I have indicated in
this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material
weaknesses.
Date: November 14, 2002 /s/Jeffrey A. Rothman
Jeffrey A. Rothman
President, Demeter Management
Corporation, general partner
of the Partnership
CERTIFICATIONS
I, Jeffrey D. Hahn, Chief Financial Officer of Demeter Management
Corporation, the general partner of the Partnership, certify that:
1. I have reviewed this quarterly report on Form 10-Q of the
Partnership;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
Partnership as of, and for, the periods presented in this
quarterly report;
4. Demeter's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-
14) for the Partnership and we have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the
Partnership, including its consolidated subsidiaries,
is made known to us by others within those entities,
particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the Partnership's
disclosure controls and procedures as of a date within
90 days prior to the filing date of this quarterly
report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation
Date;
5. Demeter's other certifying officers and I have disclosed,
based on our most recent evaluation, to the Partnership's
auditors and the audit committee of Demeter's board of
directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the
Partnership's ability to record, process, summarize and
report financial data and have identified for the
Partnership's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant
role in the Partnership's internal controls; and
6. Demeter's other certifying officers and I have indicated in
this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Date: November 14, 2002 /s/Jeffrey D. Hahn
Jeffrey D. Hahn
Chief Financial Officer,
Demeter Management Corporation,
general partner of the
Partnership
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Morgan Stanley Spectrum
Strategic L.P. (the "Partnership") on Form 10-Q for the period
ended September 30, 2002 as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, Jeffrey A.
Rothman, President, Demeter Management Corporation, general
partner of the Partnership, certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, that:
(1) The Report fully complies with the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents,
in all material respects, the financial condition and
results of operations of the Partnership.
By: /s/ Jeffrey A. Rothman
Name: Jeffrey A. Rothman
Title: President
Date: November 14, 2002
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Morgan Stanley Spectrum
Strategic L.P. (the "Partnership") on Form 10-Q for the period
ended September 30, 2002 as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, Jeffrey D. Hahn,
Chief Financial Officer, Demeter Management Corporation, general
partner of the Partnership, certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, that:
(1) The Report fully complies with the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents,
in all material respects, the financial condition and
results of operations of the Partnership.
By: /s/ Jeffrey D. Hahn
Name: Jeffrey D. Hahn
Title: Chief Financial Officer
Date: November 14, 2002