Attached files
MORGAN STANLEY SMITH BARNEY
SPECTRUM SERIES
December 31, 2010
Annual Report
[LOGO]
TO THE LIMITED PARTNERS OF:
MORGAN STANLEY SMITH BARNEY SPECTRUM CURRENCY L.P.
MORGAN STANLEY SMITH BARNEY SPECTRUM GLOBAL BALANCED L.P.
MORGAN STANLEY SMITH BARNEY SPECTRUM SELECT L.P.
MORGAN STANLEY SMITH BARNEY SPECTRUM STRATEGIC L.P.
MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL L.P.
To the best of the knowledge and belief of the undersigned, the information
contained herein is accurate and complete.
By: /s/ Walter Davis
Walter Davis
President and Director
Ceres Managed Futures LLC,
General Partner of
Morgan Stanley Smith Barney Spectrum Currency L.P.
Morgan Stanley Smith Barney Spectrum Global Balanced L.P.
Morgan Stanley Smith Barney Spectrum Select L.P.
Morgan Stanley Smith Barney Spectrum Strategic L.P.
Morgan Stanley Smith Barney Spectrum Technical L.P.
MORGAN STANLEY SMITH BARNEY SPECTRUM SERIES
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Ceres Managed Futures LLC ("Ceres"), formerly Demeter Management LLC, the
general partner of Morgan Stanley Smith Barney Spectrum Currency L.P., Morgan
Stanley Smith Barney Spectrum Global Balanced L.P., Morgan Stanley Smith Barney
Spectrum Select L.P., Morgan Stanley Smith Barney Spectrum Strategic L.P., and
Morgan Stanley Smith Barney Spectrum Technical L.P. (individually, a
"Partnership", or collectively, the "Partnerships"), is responsible for the
management of the Partnerships.
Management of Ceres ("Management") is responsible for establishing and
maintaining adequate internal control over financial reporting. The internal
control over financial reporting is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally
accepted accounting principles.
The Partnerships' internal control over financial reporting includes those
policies and procedures that:
. Pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the
Partnerships;
. Provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally
accepted accounting principles, and that the Partnerships' transactions are
being made only in accordance with authorizations of Management and
directors of Ceres; and
. Provide reasonable assurance regarding prevention or timely detection and
correction of unauthorized acquisition, use or disposition of the
Partnerships' assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of each Partnership's internal control
over financial reporting as of December 31, 2010. In making this assessment,
Management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission in INTERNAL CONTROL--INTEGRATED
FRAMEWORK. Based on our assessment and those criteria, Management believes that
each Partnership maintained effective internal control over financial reporting
as of December 31, 2010.
/s/ Walter Davis
Walter Davis
President and Director
Ceres Managed Futures LLC
/s/ Jennifer Magro
Jennifer Magro
Chief Financial Officer
Ceres Managed Futures LLC
New York, New York
March 28, 2011
MORGAN STANLEY SMITH BARNEY SPECTRUM SERIES
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Limited Partners and the General Partner of Morgan Stanley Smith Barney
Spectrum Currency L.P., Morgan Stanley Smith Barney Spectrum Global Balanced
L.P., Morgan Stanley Smith Barney Spectrum Select L.P., Morgan Stanley Smith
Barney Spectrum Strategic L.P., and Morgan Stanley Smith Barney Spectrum
Technical L.P. :
We have audited the accompanying statements of financial condition of Morgan
Stanley Smith Barney Spectrum Currency L.P., Morgan Stanley Smith Barney
Spectrum Global Balanced L.P., Morgan Stanley Smith Barney Spectrum Select
L.P., Morgan Stanley Smith Barney Spectrum Strategic L.P., and Morgan Stanley
Smith Barney Spectrum Technical L.P. (collectively, the "Partnerships"),
including the condensed schedules of investments, as of December 31, 2010 and
2009, and the related statements of operations and changes in partners' capital
for each of the three years in the period ended December 31, 2010. These
financial statements are the responsibility of the Partnerships' management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. The Partnerships
are not required to have, nor were we engaged to perform, an audit of their
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Partnerships' internal
control over financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements present fairly, in all material
respects, the financial position of Morgan Stanley Smith Barney Spectrum
Currency L.P., Morgan Stanley Smith Barney Spectrum Global Balanced L.P.,
Morgan Stanley Smith Barney Spectrum Select L.P., Morgan Stanley Smith Barney
Spectrum Strategic L.P., and Morgan Stanley Smith Barney Spectrum Technical
L.P. as of December 31, 2010 and 2009, and the results of their operations and
changes in their partners' capital for each of the three years in the period
ended December 31, 2010, in conformity with accounting principles generally
accepted in the United States of America.
/s/ Deloitte & Touche LLP
New York, New York
March 28, 2011
MORGAN STANLEY SMITH BARNEY SPECTRUM CURRENCY L.P.
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31,
-------------------------
2010 2009
------------ ------------
$ $
ASSETS
Trading Equity:
Unrestricted cash 47,835,799 61,087,188
Restricted cash 88,858 620,523
------------ ------------
Total Cash 47,924,657 61,707,711
------------ ------------
Net unrealized gain/(loss) on open contracts (MS&Co.) 1,118,436 (462,626)
Options purchased (premiums paid $2,240 and $1,442, respectively) 4,459 121
------------ ------------
Total Trading Equity 49,047,552 61,245,206
Interest receivable (MSSB & MS&Co.) 3,168 853
------------ ------------
Total Assets 49,050,720 61,246,059
============ ============
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Redemptions payable 765,167 491,924
Accrued brokerage fees (MS&Co.) 183,824 239,572
Accrued management fees 79,923 104,162
------------ ------------
Total Liabilities 1,028,914 835,658
------------ ------------
PARTNERS' CAPITAL
Limited Partners (4,966,477.604 and 5,963,360.859 Units, respectively) 47,504,374 59,798,213
General Partner (54,096.343 and 61,050.343 Units, respectively) 517,432 612,188
------------ ------------
Total Partners' Capital 48,021,806 60,410,401
------------ ------------
Total Liabilities and Partners' Capital 49,050,720 61,246,059
============ ============
NET ASSET VALUE PER UNIT 9.57 10.03
============ ============
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------
2010 2009 2008
------------- ------------- -------------
$ $ $
INVESTMENT INCOME
Interest income (MSSB & MS&Co.) 48,130 59,638 1,120,873
------------- ------------- -------------
EXPENSES
Brokerage fees (MS&Co.) 2,485,116 3,288,790 4,550,496
Management fees 1,080,486 1,429,909 1,978,477
Incentive fee -- -- 355,472
------------- ------------- -------------
Total Expenses 3,565,602 4,718,699 6,884,445
------------- ------------- -------------
NET INVESTMENT LOSS (3,517,472) (4,659,061) (5,763,572)
------------- ------------- -------------
TRADING RESULTS
Trading profit (loss):
Realized (745,965) (2,992,672) 17,155,471
Net change in unrealized 1,584,602 (39,091) 1,139,401
------------- ------------- -------------
Total Trading Results 838,637 (3,031,763) 18,294,872
------------- ------------- -------------
NET INCOME (LOSS) (2,678,835) (7,690,824) 12,531,300
============= ============= =============
NET INCOME (LOSS) ALLOCATION
Limited Partners (2,651,894) (7,613,304) 12,396,509
General Partner (26,941) (77,520) 134,791
NET INCOME (LOSS) PER UNIT*
Limited Partners (0.46) (1.13) 1.32
General Partner (0.46) (1.13) 1.32
UNITS UNITS UNITS
------------- ------------- -------------
WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING 5,569,769.759 6,709,462.987 9,457,649.181
* Based on change in Net Asset Value per Unit.
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY SMITH BARNEY SPECTRUM GLOBAL BALANCED L.P.
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31,
------------------------
2010 2009
----------- -----------
$ $
ASSETS
Trading Equity:
Unrestricted cash 16,507,962 17,741,979
Restricted cash 1,670,616 950,387
----------- -----------
Total Cash 18,178,578 18,692,366
----------- -----------
Net unrealized gain on open contracts (MS&Co.) 1,625,744 1,347,276
Net unrealized gain (loss) on open contracts (MSIP) (68,187) 23,422
----------- -----------
Total net unrealized gain on open contracts 1,557,557 1,370,698
----------- -----------
Options purchased (premiums paid $1,356 and $1,034, respectively) 2,701 87
----------- -----------
Total Trading Equity 19,738,836 20,063,151
Interest receivable (MSSB & MS&Co.) 1,592 351
----------- -----------
Total Assets 19,740,428 20,063,502
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Redemptions payable 202,690 149,623
Accrued brokerage fees (MS&Co.) 73,533 78,937
Accrued management fees 23,698 25,592
----------- -----------
Total Liabilities 299,921 254,152
----------- -----------
PARTNERS' CAPITAL
Limited Partners (1,123,253.035 and 1,287,159.251 Units, respectively) 19,232,434 19,608,456
General Partner (12,152.331 and 13,187.331 Units, respectively) 208,073 200,894
----------- -----------
Total Partners' Capital 19,440,507 19,809,350
----------- -----------
Total Liabilities and Partners' Capital 19,740,428 20,063,502
=========== ===========
NET ASSET VALUE PER UNIT 17.12 15.23
=========== ===========
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------
2010 2009 2008
------------- ------------- -------------
$ $ $
INVESTMENT INCOME
Interest income (MSSB & MS&Co.) 22,423 25,062 445,255
------------- ------------- -------------
EXPENSES
Brokerage fees (MS&Co.) 905,997 1,104,183 1,449,871
Management fees 295,068 360,248 497,142
Incentive fee -- -- 789,211
------------- ------------- -------------
Total Expenses 1,201,065 1,464,431 2,736,224
------------- ------------- -------------
NET INVESTMENT LOSS (1,178,642) (1,439,369) (2,290,969)
------------- ------------- -------------
TRADING RESULTS
Trading profit (loss):
Realized 3,283,491 (451,631) 3,668,920
Net change in unrealized 189,151 (1,539,636) 1,960,397
Proceeds from Litigation 29,602 -- --
------------- ------------- -------------
Total Trading Results 3,502,244 (1,991,267) 5,629,317
------------- ------------- -------------
NET INCOME (LOSS) 2,323,602 (3,430,636) 3,338,348
============= ============= =============
NET INCOME (LOSS) ALLOCATION
Limited Partners 2,299,999 (3,396,166) 3,300,034
General Partner 23,603 (34,470) 38,314
NET INCOME (LOSS) PER UNIT*
Limited Partners 1.89 (2.27) 1.87
General Partner 1.89 (2.27) 1.87
UNITS UNITS UNITS
------------- ------------- -------------
WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING 1,234,612.751 1,465,622.529 2,018,745.064
* Based on change in Net Asset Value per Unit.
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY SMITH BARNEY SPECTRUM SELECT L.P.
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31,
-----------------------
2010 2009
----------- -----------
$ $
ASSETS
Trading Equity:
Unrestricted cash 362,360,920 422,998,843
Restricted cash 39,088,853 36,820,470
----------- -----------
Total Cash 401,449,773 459,819,313
----------- -----------
Net unrealized gain on open contracts (MS&Co.) 19,046,952 6,347,652
Net unrealized gain on open contracts (MSIP) 756,215 5,667,649
----------- -----------
Total net unrealized gain on open contracts 19,803,167 12,015,301
----------- -----------
Total Trading Equity 421,252,940 471,834,614
Interest receivable (MSSB & MS&Co.) 26,871 6,511
----------- -----------
Total Assets 421,279,811 471,841,125
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Redemptions payable 7,999,594 3,843,227
Accrued brokerage fees (MS&Co.) 1,972,489 2,423,620
Accrued incentive fee 1,305,062 --
Accrued management fees 751,806 929,231
----------- -----------
Total Liabilities 12,028,951 7,196,078
----------- -----------
PARTNERS' CAPITAL
Limited Partners (10,646,418.942 and 12,116,838.706 Units, respectively) 404,921,242 459,902,047
General Partner (113,836.769 and 124,961.769 Units, respectively) 4,329,618 4,743,000
----------- -----------
Total Partners' Capital 409,250,860 464,645,047
----------- -----------
Total Liabilities and Partners' Capital 421,279,811 471,841,125
=========== ===========
NET ASSET VALUE PER UNIT 38.03 37.96
=========== ===========
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------
2010 2009 2008
-------------- -------------- --------------
$ $ $
INVESTMENT INCOME
Interest income (MSSB & MS&Co.) 371,072 416,522 6,206,206
-------------- -------------- --------------
EXPENSES
Brokerage fees (MS&Co.) 24,726,203 30,514,021 34,013,929
Management fees 9,509,245 11,648,733 13,376,153
Incentive fees 2,487,064 822,023 17,391,827
-------------- -------------- --------------
Total Expenses 36,722,512 42,984,777 64,781,909
-------------- -------------- --------------
NET INVESTMENT LOSS (36,351,440) (42,568,255) (58,575,703)
-------------- -------------- --------------
TRADING RESULTS
Trading profit (loss):
Realized 25,513,507 16,042,877 195,783,856
Net change in unrealized 7,787,866 (14,030,463) 16,436,714
Proceeds from Litigation 337,120 -- --
-------------- -------------- --------------
Total Trading Results 33,638,493 2,012,414 212,220,570
-------------- -------------- --------------
NET INCOME (LOSS) (2,712,947) (40,555,841) 153,644,867
============== ============== ==============
NET INCOME (LOSS) ALLOCATION
Limited Partners (2,687,785) (40,147,610) 151,981,698
General Partner (25,162) (408,231) 1,663,169
NET INCOME (LOSS) PER UNIT*
Limited Partners 0.07 (2.84) 9.56
General Partner 0.07 (2.84) 9.56
UNITS UNITS UNITS
-------------- -------------- --------------
WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING 11,625,750.592 13,212,818.036 15,802,082.028
* Based on change in Net Asset Value per Unit.
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY SMITH BARNEY SPECTRUM STRATEGIC L.P.
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31,
-----------------------
2010 2009
----------- -----------
$ $
ASSETS
Investment in BHM I, LLC (cost $22,166,858 and $58,545,568, respectively) 89,755,278 109,611,896
----------- -----------
Trading Equity:
Unrestricted cash 77,030,039 71,151,586
Restricted cash 9,784,572 1,546,618
----------- -----------
Total Cash 86,814,611 72,698,204
----------- -----------
Net unrealized gain (loss) on open contracts (MS&Co.) 5,754,543 (651,964)
Net unrealized gain on open contracts (MSIP) 1,223,220 415,967
----------- -----------
Total net unrealized gain (loss) on open contracts 6,977,763 (235,997)
----------- -----------
Options purchased (premiums paid $0 and $4,010,926, respectively) -- 3,483,054
----------- -----------
Total Trading Equity 183,547,652 185,557,157
Receivable from Investment in BHM I, LLC 1,828,119 2,950,173
Interest receivable (MSSB & MS&Co.) 11,589 2,470
----------- -----------
Total Assets 185,387,360 188,509,800
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Redemptions payable 3,309,081 1,547,780
Accrued incentive fees 1,386,865 1,411,766
Accrued brokerage fees (MS&Co.) 814,385 880,164
Accrued management fees 366,473 421,690
Options written (premiums received $0 and $4,597,583, respectively) -- 3,985,295
----------- -----------
Total Liabilities 5,876,804 8,246,695
----------- -----------
PARTNERS' CAPITAL
Limited Partners (8,263,198.237 and 9,328,321.804 Units, respectively) 177,594,148 178,420,459
General Partner (89,167.692 and 96,338.692 Units, respectively) 1,916,408 1,842,646
----------- -----------
Total Partners' Capital 179,510,556 180,263,105
----------- -----------
Total Liabilities and Partners' Capital 185,387,360 188,509,800
=========== ===========
NET ASSET VALUE PER UNIT 21.49 19.13
=========== ===========
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------
2010 2009 2008
------------- -------------- --------------
$ $ $
INVESTMENT INCOME
Interest income (MSSB & MS&Co.) 147,814 149,472 2,333,858
------------- -------------- --------------
EXPENSES
Brokerage fees (MS&Co.) 9,956,090 11,170,576 12,935,032
Management fees 4,589,666 5,321,165 5,908,748
Incentive fees 3,117,691 1,783,508 3,578,609
------------- -------------- --------------
Total Expenses 17,663,447 18,275,249 22,422,389
------------- -------------- --------------
NET INVESTMENT LOSS (17,515,633) (18,125,777) (20,088,531)
------------- -------------- --------------
TRADING RESULTS
Trading profit (loss):
Realized 11,512,792 (15,530,111) 10,690,368
Net change in unrealized 7,129,344 (1,945,071) 3,575,155
Realized gain on investment in BHM I, LLC 1,679,125 1,148,140 966,654
Unrealized appreciation on investment in BHM I, LLC 16,522,092 36,225,357 14,840,971
Proceeds from Litigation 220,755 -- --
------------- -------------- --------------
Total Trading Results 37,064,108 19,898,315 30,073,148
------------- -------------- --------------
NET INCOME 19,548,475 1,772,538 9,984,617
============= ============== ==============
NET INCOME ALLOCATION
Limited Partners 19,344,514 1,752,399 9,880,297
General Partner 203,961 20,139 104,320
NET INCOME PER UNIT*
Limited Partners 2.36 0.31 0.81
General Partner 2.36 0.31 0.81
UNITS UNITS UNITS
------------- -------------- --------------
WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING 8,988,248.355 10,166,429.664 11,773,848.462
* Based on change in Net Asset Value per Unit.
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL L.P.
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31,
------------------------
2010 2009
----------- ------------
$ $
ASSETS
Trading Equity:
Unrestricted cash 309,023,347 337,112,125
Restricted cash 22,476,248 38,759,401
----------- ------------
Total Cash 331,499,595 375,871,526
----------- ------------
Net unrealized gain on open contracts (MS&Co.) 19,487,234 8,183,798
Net unrealized gain on open contracts (MSIP) 1,107,988 2,511,873
----------- ------------
Total net unrealized gain on open contracts 20,595,222 10,695,671
----------- ------------
Options purchased (premiums paid $231,217 and $192,906, respectively) 314,450 185,397
----------- ------------
Total Trading Equity 352,409,267 386,752,594
Interest receivable (MSSB & MS&Co.) 22,413 5,334
----------- ------------
Total Assets 352,431,680 386,757,928
=========== ============
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Redemptions payable 6,788,911 3,332,464
Accrued brokerage fees (MS&Co.) 1,637,276 1,955,857
Accrued management fees 602,381 586,118
Options written (premiums received $56,970 and $67,908, respectively) 147,085 55,219
----------- ------------
Total Liabilities 9,175,653 5,929,658
----------- ------------
PARTNERS' CAPITAL
Limited Partners (15,924,830.135 and 18,367,153.109 Units, respectively) 339,644,475 376,999,886
General Partner (169,334.001 and 186,516.001 Units, respectively) 3,611,552 3,828,384
----------- ------------
Total Partners' Capital 343,256,027 380,828,270
----------- ------------
Total Liabilities and Partners' Capital 352,431,680 386,757,928
=========== ============
NET ASSET VALUE PER UNIT 21.33 20.53
=========== ============
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------
2010 2009 2008
-------------- -------------- --------------
$ $ $
INVESTMENT INCOME
Interest income (MSSB & MS&Co.) 314,509 354,698 6,519,455
-------------- -------------- --------------
EXPENSES
Brokerage fees (MS&Co.) 20,908,735 25,764,849 34,167,890
Management fees 7,663,963 9,505,272 12,727,391
Incentive fees -- 184,642 11,646,915
-------------- -------------- --------------
Total Expenses 28,572,698 35,454,763 58,542,196
Management fee waived (80,743) (409,373) --
-------------- -------------- --------------
Net Expenses 28,491,955 35,045,390 58,542,196
-------------- -------------- --------------
NET INVESTMENT LOSS (28,177,446) (34,690,692) (52,022,741)
-------------- -------------- --------------
TRADING RESULTS
Trading profit (loss):
Realized 29,840,644 (5,718,953) 114,853,874
Net change in unrealized 9,887,489 (6,062,972) 5,557,697
Proceeds from Litigation 164,828 -- --
-------------- -------------- --------------
Total Trading Results 39,892,961 (11,781,925) 120,411,571
-------------- -------------- --------------
NET INCOME (LOSS) 11,715,515 (46,472,617) 68,388,830
============== ============== ==============
NET INCOME (LOSS) ALLOCATION
Limited Partners 11,593,566 (46,005,221) 67,638,716
General Partner 121,949 (467,396) 750,114
NET INCOME (LOSS) PER UNIT*
Limited Partners 0.80 (2.23) 2.54
General Partner 0.80 (2.23) 2.54
UNITS UNITS UNITS
-------------- -------------- --------------
WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING 17,523,345.833 20,187,874.856 26,059,402.181
* Based on change in Net Asset Value per Unit.
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY SMITH BARNEY SPECTRUM CURRENCY L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009, AND 2008
UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
-------------- ----------- --------- -----------
$ $ $
Partners' Capital, December 31, 2007 10,912,868.181 106,178,308 1,149,436 107,327,744
Offering of Units 442,658.625 4,701,294 -- 4,701,294
Net income -- 12,396,509 134,791 12,531,300
Redemptions (3,432,372.833) (35,742,503) (394,697) (36,137,200)
-------------- ----------- --------- -----------
Partners' Capital, December 31, 2008 7,923,153.973 87,533,608 889,530 88,423,138
Net loss -- (7,613,304) (77,520) (7,690,824)
Redemptions (1,898,742.771) (20,122,091) (199,822) (20,321,913)
-------------- ----------- --------- -----------
Partners' Capital, December 31, 2009 6,024,411.202 59,798,213 612,188 60,410,401
Net loss -- (2,651,894) (26,941) (2,678,835)
Redemptions (1,003,837.255) (9,641,945) (67,815) (9,709,760)
-------------- ----------- --------- -----------
Partner's Capital, December 31, 2010 5,020,573.947 47,504,374 517,432 48,021,806
============== =========== ========= ===========
MORGAN STANLEY SMITH BARNEY SPECTRUM GLOBAL BALANCED L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009, AND 2008
UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
------------- ---------- -------- ----------
$ $ $
Partners' Capital, December 31, 2007 2,233,776.000 34,537,771 373,739 34,911,510
Offering of Units 130,955.133 2,053,979 -- 2,053,979
Net income -- 3,300,034 38,314 3,338,348
Redemptions (629,179.627) (9,819,883) (106,479) (9,926,362)
------------- ---------- -------- ----------
Partners' Capital, December 31, 2008 1,735,551.506 30,071,901 305,574 30,377,475
Net loss -- (3,396,166) (34,470) (3,430,636)
Redemptions (435,204.924) (7,067,279) (70,210) (7,137,489)
------------- ---------- -------- ----------
Partners' Capital, December 31, 2009 1,300,346.582 19,608,456 200,894 19,809,350
Net income -- 2,299,999 23,603 2,323,602
Redemptions (164,941.216) (2,676,021) (16,424) (2,692,445)
------------- ---------- -------- ----------
Partner's Capital, December 31, 2010 1,135,405.366 19,232,434 208,073 19,440,507
============= ========== ======== ==========
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY SMITH BARNEY SPECTRUM SELECT L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009, AND 2008
UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
-------------- ------------ ---------- ------------
$ $ $
Partners' Capital, December 31, 2007 16,744,490.009 517,496,723 5,681,832 523,178,555
Offering of Units 2,122,702.631 78,579,397 -- 78,579,397
Net income -- 151,981,698 1,663,169 153,644,867
Redemptions (4,017,154.564) (148,266,898) (1,251,543) (149,518,441)
-------------- ------------ ---------- ------------
Partners' Capital, December 31, 2008 14,850,038.076 599,790,920 6,093,458 605,884,378
Net loss -- (40,147,610) (408,231) (40,555,841)
Redemptions (2,608,237.601) (99,741,263) (942,227) (100,683,490)
-------------- ------------ ---------- ------------
Partners' Capital, December 31, 2009 12,241,800.475 459,902,047 4,743,000 464,645,047
Net loss -- (2,687,785) (25,162) (2,712,947)
Redemptions (1,481,544.764) (52,293,020) (388,220) (52,681,240)
-------------- ------------ ---------- ------------
Partners' Capital, December 31, 2010 10,760,255.711 404,921,242 4,329,618 409,250,860
============== ============ ========== ============
MORGAN STANLEY SMITH BARNEY SPECTRUM STRATEGIC L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009, AND 2008
UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
-------------- ----------- --------- -----------
$ $ $
Partners' Capital, December 31, 2007 11,969,437.368 213,167,590 2,360,471 215,528,061
Offering of Units 2,162,673.125 39,440,651 -- 39,440,651
Net income -- 9,880,297 104,320 9,984,617
Redemptions (2,718,236.809) (49,792,041) (304,344) (50,096,385)
-------------- ----------- --------- -----------
Partners' Capital, December 31, 2008 11,413,873.684 212,696,497 2,160,447 214,856,944
Net income -- 1,752,399 20,139 1,772,538
Redemptions (1,989,213.188) (36,028,437) (337,940) (36,366,377)
-------------- ----------- --------- -----------
Partners' Capital, December 31, 2009 9,424,660.496 178,420,459 1,842,646 180,263,105
Net income -- 19,344,514 203,961 19,548,475
Redemptions (1,072,294.567) (20,170,825) (130,199) (20,301,024)
-------------- ----------- --------- -----------
Partners' Capital, December 31, 2010 8,352,365.929 177,594,148 1,916,408 179,510,556
============== =========== ========= ===========
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009, AND 2008
UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
-------------- ------------ ---------- ------------
$ $ $
Partners' Capital, December 31, 2007 28,624,023.855 572,620,026 6,279,632 578,899,658
Offering of Units 2,124,231.354 46,288,957 -- 46,288,957
Net income -- 67,638,716 750,114 68,388,830
Redemptions (7,860,779.728) (170,977,587) (1,790,311) (172,767,898)
-------------- ------------ ---------- ------------
Partners' Capital, December 31, 2008 22,887,475.481 515,570,112 5,239,435 520,809,547
Net loss -- (46,005,221) (467,396) (46,472,617)
Redemptions (4,333,806.371) (92,565,005) (943,655) (93,508,660)
-------------- ------------ ---------- ------------
Partners' Capital, December 31, 2009 18,553,669.110 376,999,886 3,828,384 380,828,270
Net income -- 11,593,566 121,949 11,715,515
Redemptions (2,459,504.974) (48,948,977) (338,781) (49,287,758)
-------------- ------------ ---------- ------------
Partners' Capital, December 31, 2010 16,094,164.136 339,644,475 3,611,552 343,256,027
============== ============ ========== ============
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY SMITH BARNEY SPECTRUM CURRENCY L.P.
CONDENSED SCHEDULES OF INVESTMENTS
DECEMBER 31, 2010 AND 2009
LONG UNREALIZED PERCENTAGE OF SHORT UNREALIZED PERCENTAGE OF NET UNREALIZED
FUTURES AND FORWARD CONTRACTS: GAIN NET ASSETS LOSS NET ASSETS GAIN
------------------------------ --------------- ------------- ---------------- ------------- --------------
2010 PARTNERSHIP PARTNERS' CAPITAL: $48,021,806 $ % $ % $
Foreign currency 1,089,617 2.27 (79,464) (0.17) 1,010,153
--------- ---- ------- ----- ---------
Grand Total: 1,089,617 2.27 (79,464) (0.17) 1,010,153
========= ==== ======= =====
Unrealized Currency Gain 0.23 108,283
===== ---------
Total Net Unrealized Gain on Open Contracts 1,118,436
=========
OPTION CONTRACTS FAIR VALUE % OF NAV
---------------- --------------- -------------
$ %
Options purchased on Futures Contacts -- --
Options purchased on Forward Contracts 4,459 0.01
Options written on Futures Contracts -- --
Options written on Forward Contracts -- --
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY SMITH BARNEY SPECTRUM CURRENCY L.P.
CONDENSED SCHEDULES OF INVESTMENTS
DECEMBER 31, 2010 AND 2009 (CONTINUED)
LONG UNREALIZED PERCENTAGE OF SHORT UNREALIZED PERCENTAGE OF NET UNREALIZED
FUTURES AND FORWARD CONTRACTS: LOSS NET ASSETS LOSS NET ASSETS GAIN/(LOSS)
------------------------------ --------------- ------------- ---------------- ------------- --------------
2009 PARTNERSHIP PARTNERS' CAPITAL: $60,410,401 $ % $ % $
Foreign currency (349,025) (0.58) (191,918) (0.32) (540,943)
-------- ----- -------- ----- --------
Grand Total: (349,025) (0.58) (191,918) (0.32) (540,943)
======== ===== ======== =====
Unrealized Currency Gain 0.13 78,317
===== --------
Total Net Unrealized Loss on Open Contracts (462,626)
========
OPTION CONTRACTS FAIR VALUE % OF NAV
---------------- --------------- -------------
$ %
Options purchased on Futures Contacts -- --
Options purchased on Forward Contracts 121 --
Options written on Futures Contracts -- --
Options written on Forward Contracts -- --
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY SMITH BARNEY SPECTRUM GLOBAL BALANCED L.P.
CONDENSED SCHEDULES OF INVESTMENTS
DECEMBER 31, 2010 AND 2009
LONG UNREALIZED PERCENTAGE OF SHORT UNREALIZED PERCENTAGE OF NET UNREALIZED
FUTURES AND FORWARD CONTRACTS: GAIN NET ASSETS GAIN/(LOSS) NET ASSETS GAIN
------------------------------ --------------- ------------- ---------------- ------------- --------------
2010 PARTNERSHIP PARTNERS' CAPITAL: $19,440,507 $ % $ % $
Commodity 497,614 2.56 (280,791) (1.45) 216,823
Equity 3,491 0.02 4,962 0.03 8,453
Foreign currency 171,443 0.88 182,777 0.94 354,220
Interest rate 47,762 0.25 (27,407) (0.14) 20,355
------- ---- -------- ----- ---------
Grand Total: 720,310 3.71 (120,459) (0.62) 599,851
======= ==== ======== =====
Unrealized Currency Gain 4.92 957,706
===== ---------
Total Net Unrealized Gain on Open Contracts 1,557,557
=========
OPTION CONTRACTS FAIR VALUE % OF NAV
---------------- --------------- -------------
$ %
Options purchased on Futures Contacts -- --
Options purchased on Forward Contracts 2,701 0.01
Options written on Futures Contracts -- --
Options written on Forward Contracts -- --
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY SMITH BARNEY SPECTRUM GLOBAL BALANCED L.P.
CONDENSED SCHEDULES OF INVESTMENTS
DECEMBER 31, 2010 AND 2009 (CONTINUED)
LONG UNREALIZED PERCENTAGE OF SHORT UNREALIZED PERCENTAGE OF NET UNREALIZED
FUTURES AND FORWARD CONTRACTS: GAIN NET ASSETS GAIN/(LOSS) NET ASSETS GAIN
------------------------------ --------------- ------------- ---------------- ------------- --------------
2009 PARTNERSHIP PARTNERS' CAPITAL: $19,809,350 $ % $ % $
Commodity 186,850 0.94 (53,915) (0.27) 132,935
Equity 82,036 0.41 (961) -- 81,075
Foreign currency 19,583 0.10 26,941 0.14 46,524
Interest rate 90,053 0.45 13,882 0.07 103,935
------- ---- ------- ----- ---------
Grand Total: 378,522 1.90 (14,053) (0.06) 364,469
======= ==== ======= =====
Unrealized Currency Gain 5.08 1,006,229
===== ---------
Total Net Unrealized Gain on Open Contracts 1,370,698
=========
OPTION CONTRACTS FAIR VALUE % OF NAV
---------------- --------------- -------------
$ %
Options purchased on Futures Contacts -- --
Options purchased on Forward Contracts 87 --
Options written on Futures Contracts -- --
Options written on Forward Contracts -- --
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY SMITH BARNEY SPECTRUM SELECT L.P.
CONDENSED SCHEDULES OF INVESTMENTS
DECEMBER 31, 2010 AND 2009
LONG UNREALIZED PERCENTAGE OF SHORT UNREALIZED PERCENTAGE OF NET UNREALIZED
FUTURES AND FORWARD CONTRACTS: GAIN NET ASSETS GAIN/(LOSS) NET ASSETS GAIN/(LOSS)
------------------------------ --------------- ------------- ---------------- ------------- --------------
2010 PARTNERSHIP PARTNERS' CAPITAL: $409,250,860 $ % $ % $
Commodity 11,952,037 2.92 (1,310,915) (0.32) 10,641,122
Equity 262,033 0.06 234,676 0.05 496,709
Foreign currency 5,866,583 1.43 3,432,514 0.84 9,299,097
Interest rate 604,598 0.15 (502,535) (0.12) 102,063
---------- ----- ---------- ----- ----------
Grand Total: 18,685,251 4.56 1,853,740 0.45 20,538,991
========== ===== ========== =====
Unrealized Currency Loss (0.18) (735,824)
===== ----------
Total Net Unrealized Gain on Open Contracts 19,803,167
==========
LONG UNREALIZED PERCENTAGE OF SHORT UNREALIZED PERCENTAGE OF NET UNREALIZED
FUTURES AND FORWARD CONTRACTS GAIN/(LOSS) NET ASSETS GAIN/(LOSS) NET ASSETS GAIN/(LOSS)
----------------------------- --------------- ------------- ---------------- ------------- --------------
2009 PARTNERSHIP PARTNERS' CAPITAL: $464,645,047 $ % $ % $
Commodity 10,326,975 2.22 (1,557,740) (0.33) 8,769,235
Equity 3,424,570 0.74 15,569 -- 3,440,139
Foreign currency (1,335,800) (0.29) 434,606 0.09 (901,194)
Interest rate 1,261,198 0.27 212,876 0.05 1,474,074
---------- ----- ---------- ----- ----------
Grand Total: 13,676,943 2.94 (894,689) (0.19) 12,782,254
========== ===== ========== =====
Unrealized Currency Loss (0.17) (766,953)
===== ----------
Total Net Unrealized Gain on Open Contracts 12,015,301
==========
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY SMITH BARNEY SPECTRUM STRATEGIC L.P.
CONDENSED SCHEDULES OF INVESTMENTS
DECEMBER 31, 2010 AND 2009
LONG UNREALIZED PERCENTAGE OF SHORT UNREALIZED PERCENTAGE OF NET UNREALIZED
FUTURES AND FORWARD CONTRACTS: GAIN NET ASSETS LOSS NET ASSETS GAIN/(LOSS)
------------------------------ --------------- ------------- ---------------- ------------- --------------
2010 PARTNERSHIP PARTNERS' CAPITAL: $179,510,556 $ % $ % $
Commodity 4,859,982 2.71 (22,080) (0.01) 4,837,902
Equity 340,412 0.19 -- -- 340,412
Foreign currency 2,447,791 1.36 (152,812) (0.08) 2,294,979
Interest rate 217,612 0.12 (10,504) (0.01) 207,108
---------- ----- -------- ----- ---------
Grand Total: 7,865,797 4.38 (185,396) (0.10) 7,680,401
========== ===== ======== =====
Unrealized Currency Loss (0.39) (702,638)
===== ---------
Total Net Unrealized Gain on Open Contracts 6,977,763
=========
LONG UNREALIZED PERCENTAGE OF SHORT UNREALIZED PERCENTAGE OF NET UNREALIZED
FUTURES AND FORWARD CONTRACTS GAIN/(LOSS) NET ASSETS GAIN/(LOSS) NET ASSETS GAIN/(LOSS)
----------------------------- --------------- ------------- ---------------- ------------- --------------
2009 PARTNERSHIP PARTNERS' CAPITAL: $180,263,105 $ % $ % $
Commodity 402,309 0.22 -- -- 402,309
Equity 265,446 0.15 -- -- 265,446
Foreign currency 203,330 0.11 (326,746) (0.18) (123,416)
Interest rate (39,122) (0.02) 8,928 0.01 (30,194)
---------- ----- -------- ----- ---------
Grand Total: 831,963 0.46 (317,818) (0.17) 514,145
========== ===== ======== =====
Unrealized Currency Loss (0.42) (750,142)
===== ---------
Total Net Unrealized Loss on Open Contracts (235,997)
=========
OPTION CONTRACTS FAIR VALUE % OF NAV
---------------- --------------- -------------
$ %
Options purchased on Futures Contracts -- --
Options purchased on Forward Contracts 3,483,054 1.93
Options written on Futures Contracts -- --
Options written on Forward Contracts (3,985,295) (2.21)
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL L.P.
CONDENSED SCHEDULES OF INVESTMENTS
DECEMBER 31, 2010 AND 2009
LONG UNREALIZED PERCENTAGE OF SHORT UNREALIZED PERCENTAGE OF NET UNREALIZED
FUTURES AND FORWARD CONTRACTS: GAIN NET ASSETS GAIN/(LOSS) NET ASSETS GAIN/(LOSS)
------------------------------ --------------- ------------- ---------------- ------------- --------------
2010 PARTNERSHIP PARTNERS' CAPITAL: $343,256,027 $ % $ % $
Commodity 12,293,447 3.58 (930,820) (0.27) 11,362,627
Equity 969,327 0.28 16,882 0.01 986,209
Foreign currency 5,504,502 1.60 506,726 0.14 6,011,228
Interest rate 186,566 0.06 (757,797) (0.22) (571,231)
---------- ------ ---------- ----- ----------
Grand Total: 18,953,842 5.52 (1,165,009) (0.34) 17,788,833
========== ====== ========== =====
Unrealized Currency Gain 0.82 2,806,389
===== ----------
Total Net Unrealized Gain on Open Contracts 20,595,222
==========
OPTION CONTRACTS FAIR VALUE % NAV
---------------- --------------- -------------
$ %
Options purchased on Futures Contracts 2,775 --
Options purchased on Forward Contracts 311,675 0.09
Options written on Futures Contracts (5,500) --
Options written on Forward Contracts (141,585) (0.04)
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL L.P.
CONDENSED SCHEDULES OF INVESTMENTS
DECEMBER 31, 2010 AND 2009 (CONTINUED)
LONG UNREALIZED PERCENTAGE OF SHORT UNREALIZED PERCENTAGE OF NET UNREALIZED
FUTURES AND FORWARD CONTRACTS: GAIN/(LOSS) NET ASSETS GAIN/(LOSS) NET ASSETS GAIN/(LOSS)
------------------------------ --------------- ------------- ---------------- ------------- --------------
2009 PARTNERSHIP PARTNERS' CAPITAL: $380,828,270 $ % $ % $
Commodity 6,940,685 1.82 177,727 0.04 7,118,412
Equity 5,093,096 1.34 (4,468) -- 5,088,628
Foreign currency (2,142,450) (0.56) 152,960 0.04 (1,989,490)
Interest rate (2,917,670) (0.77) (7,311) -- (2,924,981)
---------- ------ ------- ---- ----------
Grand Total: 6,973,661 1.83 318,908 0.08 7,292,569
========== ====== ======= ====
Unrealized Currency Gain 0.89 3,403,102
==== ----------
Total Net Unrealized Gain on Open Contracts 10,695,671
==========
OPTION CONTRACTS FAIR VALUE % NAV
---------------- --------------- -------------
$ %
Options purchased on Futures Contracts 2,023 --
Options purchased on Forward Contracts 183,374 0.05
Options written on Futures Contracts (4,633) --
Options written on Forward Contracts (50,586) (0.01)
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY SMITH BARNEY SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1. ORGANIZATION
Morgan Stanley Smith Barney Spectrum Currency L.P. ("Spectrum Currency"),
Morgan Stanley Smith Barney Spectrum Global Balanced L.P. ("Spectrum Global
Balanced"), Morgan Stanley Smith Barney Spectrum Select L.P. ("Spectrum
Select"), Morgan Stanley Smith Barney Spectrum Strategic L.P. ("Spectrum
Strategic"), and Morgan Stanley Smith Barney 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") (refer to Note 6. Financial Instruments).
In 2009, Morgan Stanley and Citigroup Inc. combined certain assets of the
Global Wealth Management Group of Morgan Stanley & Co. Incorporated, including
Demeter Management LLC ("Demeter") and the Smith Barney division of Citigroup
Global Markets Inc., into a new joint venture, Morgan Stanley Smith Barney
Holdings LLC ("MSSBH"). As part of that transaction, Ceres Managed Futures LLC
("Ceres") and Demeter were contributed to MSSBH, and each became a wholly-owned
subsidiary of MSSBH.
Effective December 1, 2010, MSSBH, together with the unanimous support of the
respective Boards of Directors of Demeter and Ceres, combined the assets and
operations of Demeter and Ceres into a single commodity pool operator, Ceres.
Ceres will continue to be wholly-owned by MSSBH and replaced Demeter as the
general partner for the Partnerships.
The non-clearing commodity broker is Morgan Stanley Smith Barney LLC ("MSSB")
as of May 1, 2010, the principal subsidiary of MSSBH. The clearing commodity
brokers for Spectrum Global Balanced, Spectrum Select, Spectrum Strategic, and
Spectrum Technical are Morgan Stanley & Co. Incorporated ("MS&Co.") and Morgan
Stanley & Co. International plc ("MSIP"). Spectrum Currency's commodity broker
is MS&Co. MS&Co. also acts as the counterparty on all trading of foreign
currency forward contracts. MSIP serves as the commodity broker for trades on
the London Metal Exchange ("LME"). Morgan Stanley Capital Group Inc. ("MSCG")
acts as the counterparty on all trading of options on foreign currency forward
contracts. MS&Co., MSIP, and MSCG are wholly-owned subsidiaries of Morgan
Stanley.
MORGAN STANLEY SMITH BARNEY SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Effective September 29, 2009, Demeter changed the name 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., and
Morgan Stanley Spectrum Technical L.P., respectively, to Morgan Stanley Smith
Barney Spectrum Currency L.P., Morgan Stanley Smith Barney Spectrum Global
Balanced L.P., Morgan Stanley Smith Barney Spectrum Select L.P., Morgan Stanley
Smith Barney Spectrum Strategic L.P., and Morgan Stanley Smith Barney Spectrum
Technical L.P., respectively. The name change did not have any impact on the
operation of each Partnership or its limited partners.
Effective March 1, 2010, Spectrum Strategic, Demeter and DKR entered into a
management agreement pursuant to which, effective March 1, 2010, DKR serves as
a Trading Advisor for Spectrum Strategic and trades its allocated portion of
net assets pursuant to DKR's Quantitative Strategies 2X trading program.
Effective February 19, 2010, Demeter notified FX Concepts Trading Advisor,
Inc. ("FX Concepts") that the Management Agreement dated as of October 9, 2007
and any amendments or revisions subsequently made thereto, among Spectrum
Strategic, Demeter and FX Concepts, pursuant to which FX Concepts traded a
portion of Spectrum Strategic's assets in commodity interest contracts, would
be terminated effective February 26, 2010. Consequently, FX Concepts ceased all
commodity interest trading on behalf of Spectrum Strategic effective February
26, 2010.
Effective February 19, 2010, Demeter notified FX Concepts that the Management
Agreement dated as of October 9, 2007 and any amendments or revisions
subsequently made thereto, among Spectrum Currency, Demeter and FX Concepts,
pursuant to which FX Concepts traded a portion of the Spectrum Currency's
assets in commodity interest contracts, would be terminated effective February
26, 2010. Consequently, FX Concepts ceased all commodity interest trading on
behalf of Spectrum Currency effective February 26, 2010.
Effective January 1, 2008, the portion of Spectrum Strategic's assets which
is managed by Blenheim Capital Management, L.L.C. ("Blenheim") was initially
invested as capital in Morgan Stanley Smith Barney BHM I, LLC ("BHM I, LLC").
BHM I, LLC was formed in order to permit commodity pools operated by Ceres and
managed by Blenheim to invest together in one trading vehicle and to promote
efficiency and economy in the trading process. Ceres is the trading manager of
BHM I, LLC. Spectrum Strategic's allocation to Blenheim is effected by
investing substantially all of the capital that is allocated to Blenheim in BHM
I, LLC. There is no material change to the investors as a result of the
investment in BHM I, LLC.
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.
MORGAN STANLEY SMITH BARNEY SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
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 December 1, 2008, the Partnerships no long offer units of limited
partnership interest ("Unit(s)") for purchase or exchange in.
Ceres is required to maintain a 1% minimum interest in the equity of each
Partnership and income (losses) are shared by Ceres and the limited partners
based upon their proportional ownership interests.
--------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES. The financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America ("U.S.
GAAP"), 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.
VALUATION. Futures Interests are open commitments until settlement date, at
which time they are realized. They are valued at fair value, generally on a
daily basis, and the unrealized gains and losses on open contracts (the
difference between contract trade price and market price) are reported in the
Statements of Financial Condition as a net unrealized gain or loss on open
contracts. 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. The fair value of
exchange-traded futures, options and forwards contracts is determined by the
various futures exchanges, and reflects the settlement price for each contract
as of the close of business on the last business day of the reporting period.
The fair value of foreign currency forward contracts is extrapolated on a
forward basis from the spot prices quoted as of approximately 3:00 P.M. (E.T.)
of the last business day of the reporting period from various exchanges. The
fair value of non-exchange-traded foreign currency option contracts is
calculated by applying an industry standard model application for options
valuation of foreign currency options, using as input, the spot prices,
interest rates, and option implied volatilities quoted as of approximately 3:00
P.M. (E.T.) on the last business day of the reporting period.
MORGAN STANLEY SMITH BARNEY SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
The Partnerships may buy or write put and call options through listed
exchanges and the over-the-counter market. The buyer of an option has the right
to purchase (in the case of a call option) or sell (in the case of a put
option) a specified quantity of a specific Futures Interest on the underlying
asset at a specified price prior to or on a specified expiration date. The
writer of an option is exposed to the risk of loss if the fair value of a
Futures Interest on the underlying asset declines (in the case of a put option)
or increases (in the case of a call option). The writer of an option can never
profit by more than the premium paid by the buyer but can potentially lose an
unlimited amount.
Premiums received/premiums paid from writing/purchasing options are recorded
as liabilities/assets on the Statements of Financial Condition and are
subsequently adjusted to fair values. The difference between the fair value of
an option and the premiums received/premiums paid is treated as an unrealized
gain or loss.
REVENUE RECOGNITION. Monthly, MSSB 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% of the funds on deposit
in the case of Spectrum Global Balanced. MSSB retains any interest earned in
excess of the interest paid by MSSB to the Partnership. For purposes of such
interest payments, net assets do not include monies owed to the Partnerships on
Futures Interests.
FAIR VALUE OF FINANCIAL INSTRUMENTS. The fair value of the Partnerships'
assets and liabilities that qualify as financial instruments under the
Financial Accounting Standards Board ("FASB") Accounting Standards Codification
("ASC" or the "Codification"), approximates the carrying amount presented in
the Statements of Financial Condition.
FOREIGN CURRENCY TRANSLATION. 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 rate in
effect at the date of the Statements of Financial Condition. Income and expense
items denominated in currencies other than the U.S. dollar are translated into
U.S. dollars at the rate 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 is computed in
accordance with the specialized accounting for Investment Companies as
illustrated in the Financial Highlights Footnote (See Note 9. Financial
Highlights).
MORGAN STANLEY SMITH BARNEY SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
TRADING EQUITY. The Partnerships' asset "Trading Equity," reflected on the
Statements of Financial Condition, consists of (A) cash on deposit with MSSB,
MS&Co., and MSIP for Spectrum Global Balanced, Spectrum Select, Spectrum
Strategic, and Spectrum Technical, and with MSSB and MS&Co. for Spectrum
Currency, to be used as margin for trading and (B) net unrealized gains or
losses on futures and forward contracts, which are valued at fair value and
calculated as the difference between original contract value and fair value;
and for Partnerships which trade in options, (C) options purchased at fair
value. Options written at fair value are recorded in "Liabilities".
The Partnerships, in their normal course of business, enter into various
contracts with MSSB, MS&Co., and MSIP acting as their commodity brokers.
Pursuant to brokerage agreements with MSSB, MS&Co., and MSIP, to the extent
that such trading results in unrealized gains or losses, these amounts are
offset and reported on a net basis on the Partnerships' Statements of Financial
Condition.
The Partnerships have offset the fair value amounts recognized for forward
contracts executed with the same counterparty as allowable under the terms of
their master netting agreement with MS&Co., as the counterparty on such
contracts. The Partnerships have consistently applied their right to offset.
RESTRICTED AND UNRESTRICTED CASH. As reflected on the Partnerships' Statements
of Financial Condition, restricted cash equals the cash portion of assets on
deposit to meet margin requirements plus the cash required to offset unrealized
losses on foreign currency forwards and options and offset losses on offset
London Metal Exchange positions. All of these amounts are maintained
separately. Cash that is not classified as restricted cash is therefore
classified as unrestricted cash.
BROKERAGE AND RELATED TRANSACTION FEES AND COSTS. The brokerage fees for
Spectrum Currency and Spectrum Global Balanced are currently 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 currently 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.
CONTINUING OFFERING. Units of each Partnership were 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 were paid by the limited partners or the Partnerships. MS&Co.
paid all such costs.
MORGAN STANLEY SMITH BARNEY SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Effective December 1, 2008, the Partnerships no longer offer Units for
purchase or exchange in.
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 became a limited
partner. The request for redemption must be delivered to a limited partner's
local Morgan Stanley Smith Barney Branch Office in time for it to be forwarded
and received by Ceres 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.
The aggregate amounts of redemption charges paid to MS&Co. for the years
ended December 31 2010, 2009, and 2008 were as follows:
2010 2009 2008
------ ------ ------
$ $ $
Spectrum Currency 1,653 14,053 19,670
Spectrum Global Balanced 767 6,792 10,005
Spectrum Select 25,528 154,095 231,902
Spectrum Strategic 8,019 69,135 116,803
Spectrum Technical 9,992 123,590 286,696
EXCHANGES. On the last day of the first month which occurred more than six
months after a person first became a limited partner in any of the
Partnerships, and at the end of each month thereafter, limited partners were
able to exchange their Units among the Partnerships (subject to certain
restrictions outlined in the Limited Partnership Agreements) without paying
additional charges.
Effective December 1, 2008, the Partnerships no longer offer Units for
purchase or exchange in.
DISTRIBUTIONS. Distributions, other than redemptions of Units, are made on a
pro-rata basis at the sole discretion of Ceres. No distributions have been made
to date. Ceres does not intend to make any distributions of the Partnerships'
profits.
MORGAN STANLEY SMITH BARNEY SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
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. The Partnerships file U.S. federal and
state tax returns.
The guidance issued by the FASB on income taxes clarifies the accounting for
uncertainty in income taxes recognized in a Partnership's financial statements,
and prescribes a recognition threshold and measurement attribute for financial
statement recognition and measurement of a tax position taken or expected to be
taken. The Partnerships have concluded there were no significant uncertain tax
positions that would require recognition in the financial statements as of
December 31, 2010 and 2009. If applicable, the Partnerships recognize interest
accrued related to unrecognized tax benefits in interest expense and penalties
in other expenses in the Statements of Operations. Generally, 2007 through 2010
tax years remain subject to examination by U.S. federal and most state tax
authorities. No income tax returns are currently under examination.
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.
LITIGATION SETTLEMENT. On July 28, 2010, Spectrum Global Balanced, Spectrum
Select, Spectrum Strategic, and Spectrum Technical, respectively, received a
settlement award payment in the amounts of $29,602, $337,120, $220,755, and
$164,828, respectively, from the Natural Gas Litigation Settlement
Administrator. This settlement represents each Partnership's portion of the
2006 Net Settlement Fund and the 2007 Net Settlement Fund. The proceeds from
settlement were accounted for in the period they were received for the benefit
of the partners in each Partnership.
STATEMENT OF CASH FLOWS. The Partnership is not required to provide a
Statement of Cash Flows.
MORGAN STANLEY SMITH BARNEY SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
OTHER PRONOUNCEMENTS
Improving Disclosures about Fair Value Measurements
In January 2010, the FASB issued guidance, which, among other things, amends
fair value measurements and disclosures to require entities to separately
present purchases, sales, issuances, and settlements in their reconciliation of
Level 3 fair value measurements (i.e., to present such items on a gross basis
rather than on a net basis), and which clarifies existing disclosure
requirements regarding the level of disaggregation and the inputs and valuation
techniques used to measure fair value for measurements that fall within either
Level 2 or Level 3 of the fair value hierarchy. This guidance is effective for
interim and annual periods beginning after December 15, 2009, except for the
disclosures about purchases, sales, issuances, and settlements in the roll
forward of activity in Level 3 fair value measurements which are effective for
fiscal years beginning after December 15, 2010, and for interim periods within
those fiscal years. The adoption of this guidance did not have a material
impact on the Partnership's financial statements.
--------------------------------------------------------------------------------
3. INVESTMENT IN BHM I, LLC
Effective January 1, 2008, Spectrum Strategic invested a portion of its assets
in BHM I, LLC. Spectrum Strategic's investment in BHM I, LLC represents
approximately 50.00% and 60.81% of the net asset value of Spectrum Strategic at
December 31, 2010 and 2009, respectively.
Summarized information for Spectrum Strategic's investment in BHM I, LLC as
of December 31, 2010 and 2009, is as follows:
DECEMBER 31, 2010
% OF
PARTNERSHIP FAIR TOTAL MANAGEMENT INCENTIVE ADMINISTRATIVE
INVESTMENT NET ASSETS VALUE INCOME FEES FEES FEES
---------- ----------- ---------- ---------- ---------- --------- --------------
% $ $ $ $ $
BHM I,
LLC 50.0 89,755,278 18,201,217 n/a n/a n/a
DECEMBER 31, 2009
% OF
PARTNERSHIP FAIR TOTAL MANAGEMENT INCENTIVE ADMINISTRATIVE
INVESTMENT NET ASSETS VALUE INCOME FEES FEES FEES
---------- ----------- ----------- ---------- ---------- --------- --------------
% $ $ $ $ $
BHM I,
LLC 60.81 109,611,896 37,373,497 n/a n/a n/a
Spectrum Strategic's investment into BHM I, LLC does not pay any management,
incentive, or administrative fee. Those fees are paid by Spectrum Strategic.
For BHM I, LLC, contributions and withdrawals are permitted on a monthly
basis.
MORGAN STANLEY SMITH BARNEY SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
The tables below represent summarized Income Statement information for BHM I,
LLC for the years ended December 31, 2010, 2009, and 2008 respectively, to meet
the requirements of Regulation S-X rule 3-09, as follows:
NET TOTAL
DECEMBER 31, INVESTMENT INVESTMENT TRADING NET
2010 INCOME LOSS RESULTS INCOME
------------ ---------- ---------- ---------- ----------
$ $ $ $
BHM I, LLC (8,738) (4,238,014) 34,087,359 29,849,345
NET TOTAL
DECEMBER 31, INVESTMENT INVESTMENT TRADING NET
2009 INCOME LOSS RESULTS INCOME
------------ ---------- ---------- ---------- ----------
$ $ $ $
BHM I, LLC 22,591 (2,554,661) 49,563,805 47,009,144
NET TOTAL
DECEMBER 31, INVESTMENT INVESTMENT TRADING NET
2008 INCOME LOSS RESULTS INCOME
------------ ---------- ---------- ---------- ----------
$ $ $ $
BHM I, LLC 241,409 (890,361) 16,786,894 15,896,533
--------------------------------------------------------------------------------
4. RELATED PARTY TRANSACTIONS
Spectrum Global Balanced, Spectrum Select, Spectrum Strategic, and Spectrum
Technical's cash is on deposit with MSSB, MS&Co., and MSIP, and Spectrum
Currency's cash is on deposit with MSSB and MS&Co., in futures interests
trading accounts to meet margin requirements as needed. MSSB, pays interest on
these funds as described in Note 2. Each Partnership pays brokerage fees to
MS&Co. as described in Note 2. MSCG acts as the counterparty on all trading of
options on foreign currency forward contracts.
--------------------------------------------------------------------------------
5. TRADING ADVISORS
Ceres, on behalf of each Partnership, retains certain commodity trading
advisors to make all trading decisions for the Partnerships. The trading
advisors for each Partnership at December 31, 2010 were as follows:
Morgan Stanley Smith Barney Spectrum Currency L.P.
C-View International Limited ("C-View")
DKR Fusion Management L.P. ("DKR")
John W. Henry & Company, Inc. ("JWH")
Sunrise Capital Partners, LLC ("Sunrise")
Morgan Stanley Smith Barney Spectrum Global Balanced L.P.
Altis Partners (Jersey) Limited ("Altis")
C-View International Limited
SSARIS Advisors, LLC ("SSARIS")
MORGAN STANLEY SMITH BARNEY SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Morgan Stanley Smith Barney 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 Capital")
Morgan Stanley Smith Barney Spectrum Strategic L.P.
Blenheim Capital Management, L.L.C. ("Blenheim")
DKR Fusion Management L.P. ("DKR")
Eclipse Capital Management, Inc. ("Eclipse")
Morgan Stanley Smith Barney Spectrum Technical L.P.
Aspect Capital Limited ("Aspect")
Campbell & Company, Inc. ("Campbell")
Chesapeake Capital Corporation ("Chesapeake")
John W. Henry & Company, Inc.
Rotella Capital Management, Inc. ("Rotella")
Winton Capital Management Limited ("Winton")
Compensation to the trading advisors by the Partnerships consists of a
management fee and an incentive fee as follows:
MANAGEMENT FEE. The management fee for Spectrum Currency is accrued at a rate
of 1/6 of 1% per month of net assets allocated to each trading advisor on the
first day of each month (a 2% annual rate).
The management fee for Spectrum Global Balanced is accrued at a rate of 5/48
of 1% per month of net assets allocated to SSARIS on the first day of each
month (a 1.25% annual rate), 1/12 of 1.25% per month of net assets allocated
to Altis on the first day of each month (a 1.25% annual rate), and 1/6 of 1%
per month of net assets allocated to C-View on the first day of each month (a
2% annual rate).
Prior to August 1, 2008, Spectrum Global Balanced accrued management fees at
a rate of 1/12 of 1.75% per month of net assets allocated to Altis on the
first day of each month (a 1.75% annual rate).
The management fee for Spectrum Select is accrued at a rate of 1/12 of 1.25%
per month of net assets allocated to Altis on the first day of each month (a
1.25% annual rate), 1/6 of 1% per month of net assets allocated to Graham on
the first day of each month (a 2% annual rate), 5/24 of 1% per month of net
assets allocated to EMC and Rabar on the first day of each month (a 2.5% annual
rate), and 1/4 of 1% per month of net assets allocated to Northfield and
Sunrise Capital on the first day of each month (a 3% annual rate).
Effective February 1, 2011, the monthly management fee payable to Sunrise
Capital will be reduced from 1/4 of 1% per month to 1/12 of 2% (a 2% annual
rate).
MORGAN STANLEY SMITH BARNEY SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Prior to August 1, 2008, Spectrum Select accrued management fees at a rate of
1/12 of 1.75% per month of net assets allocated to Altis on the first day of
each month (a 1.75% annual rate).
The management fee for Spectrum Strategic is accrued at a rate of 1/6 of 1%
per month of net assets allocated to DKR on the first day of each month (a 2%
annual rate), and 1/4 of 1% per month of net assets allocated to Blenheim and
Eclipse on the first day of each month (a 3% annual rate).
The management fee for Spectrum Technical is accrued at a rate of 1/6 of 1%
per month of net assets allocated to Aspect, Chesapeake, JWH, Rotella, and
Winton on the first day of each month (a 2% annual rate), and 1/4 of 1% per
month of net assets allocated to Campbell on the first day of each month (a 3%
annual rate).
For the period from August 1, 2010 through September 30, 2010, Chesapeake
temporarily reduced the management fee it receives from Spectrum Technical from
an annual rate of 2% of net assets as of the first day of the month, to an
annual rate of 1% of net assets as of the first day of the month.
Effective October 1, 2010 through October 31, 2010, Chesapeake's management
fee was increased from an annual rate of 1% of net assets as of the first day
of the month, to an annual rate of 1.5% of net assets as of the first day of
the month.
Effective November 1, 2010, Chesapeake's management fee was reinstated from
an annual rate of 1.5% of net assets as of the first day of the month to an
annual rate of 2% of net assets as of the first day of the month.
For the period from October 1, 2009, through December 31, 2009, Rotella
temporarily waived the management fee it receives from Spectrum Technical.
Effective January 1, 2010, Spectrum Technical pays Rotella a monthly management
fee equal to 1/6 of 1% of its net assets allocated to Rotella on the first day
of each month (a 2% annual rate). Prior to October 1, 2009, Spectrum Technical
paid Rotella a monthly management fee equal to 1/6 of 1% of its net assets
allocated to Rotella on the first day of each month (a 2% 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.
MORGAN STANLEY SMITH BARNEY SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
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 Capital 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.
Effective February 1, 2011, the monthly incentive fee rate paid to Sunrise
Capital, will increase from 15% to 20%.
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 DKR 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
redemptions.
--------------------------------------------------------------------------------
6. FINANCIAL INSTRUMENTS
The Partnerships trade Futures Interests. 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 fair value of these
contracts, including interest rate volatility.
The fair value of exchange-traded contracts is based on the settlement price
quoted by the exchange on the day with respect to which fair value is being
determined. If an exchange-traded contract could not have been liquidated on
such day due to the operation of daily limits or other rules of the exchange,
the settlement price will be equal to the settlement price on the first
subsequent day on which the contract could be liquidated. The fair value of
off-exchange-traded contracts is based on the fair value quoted by the
counterparty.
MORGAN STANLEY SMITH BARNEY SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
The Partnerships' contracts are accounted for on a trade-date basis and
marked to market on a daily basis. A derivative is defined as a financial
instrument or other contract that has all three of the following
characteristics:
(1)a) One or more "underlyings" and b) One or more "notional amounts" or
payment provisions or both;
(2)Requires no initial net investment or a smaller initial net investment than
would be required for other types of contracts that would be expected to
have a similar response relative to changes in market factors; and
(3)Terms that require or permit net settlement.
Generally, derivatives include futures, forward, swap or options contracts,
and other financial instruments with similar characteristics, such as caps,
floors, and collars.
The net unrealized gains (losses) on open contracts at December 31, 2010
reported as a component of "Trading Equity" on the Statements of Financial
Condition, and their longest contract maturities were as follows:
SPECTRUM CURRENCY
NET UNREALIZED GAINS/(LOSSES)
ON OPEN CONTRACTS LONGEST MATURITIES
------------------------------ --------------------
OFF- OFF-
EXCHANGE- EXCHANGE- EXCHANGE- EXCHANGE-
YEAR TRADED TRADED TOTAL TRADED TRADED
---- --------- --------- --------- ---------- ---------
$ $ $
2010 74,100 1,044,336 1,118,436 Mar. 2011 Mar. 2011
2009 -- (462,626) (462,626) -- Mar. 2010
SPECTRUM GLOBAL BALANCED
NET UNREALIZED GAINS
ON OPEN CONTRACTS LONGEST MATURITIES
----------------------------- -------------------
OFF- OFF-
EXCHANGE- EXCHANGE- EXCHANGE- EXCHANGE-
YEAR TRADED TRADED TOTAL TRADED TRADED
---- --------- --------- --------- --------- ---------
$ $ $
2010 1,494,155 63,402 1,557,557 Dec. 2012 Apr. 2011
2009 1,313,616 57,082 1,370,698 Dec. 2011 Mar. 2010
SPECTRUM SELECT
NET UNREALIZED GAINS/(LOSSES)
ON OPEN CONTRACTS LONGEST MATURITIES
-------------------------------- -------------------
OFF- OFF-
EXCHANGE- EXCHANGE- EXCHANGE- EXCHANGE-
YEAR TRADED TRADED TOTAL TRADED TRADED
---- ---------- --------- ---------- --------- ---------
$ $ $
2010 16,772,924 3,030,243 19,803,167 Mar. 2015 Mar. 2011
2009 12,929,342 (914,041) 12,015,301 Dec. 2011 Mar. 2010
MORGAN STANLEY SMITH BARNEY SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
SPECTRUM STRATEGIC
NET UNREALIZED GAINS/(LOSSES)
ON OPEN CONTRACTS LONGEST MATURITIES
------------------------------ -------------------
OFF- OFF-
EXCHANGE- EXCHANGE- EXCHANGE- EXCHANGE-
YEAR TRADED TRADED TOTAL TRADED TRADED
---- --------- --------- --------- --------- ---------
$ $ $
2010 6,503,745 474,018 6,977,763 Dec. 2011 Mar. 2011
2009 (88,269) (147,728) (235,997) Sep. 2010 Jul. 2010
SPECTRUM TECHNICAL
NET UNREALIZED GAINS/(LOSSES)
ON OPEN CONTRACTS LONGEST MATURITIES
-------------------------------- -------------------
OFF- OFF-
EXCHANGE- EXCHANGE- EXCHANGE- EXCHANGE-
YEAR TRADED TRADED TOTAL TRADED TRADED
---- ---------- --------- ---------- --------- ---------
$ $ $
2010 17,468,280 3,126,942 20,595,222 Mar. 2014 Mar. 2011
2009 11,576,454 (880,783) 10,695,671 Mar. 2013 Mar. 2010
The Partnerships have credit risk associated with counterparty
nonperformance. As of the date of the financial statements, the credit risk
associated with the instruments in which the Partnerships trade is limited to
the unrealized gain amounts reflected in the Partnerships' Statements of
Financial Condition.
MORGAN STANLEY SMITH BARNEY SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
The Partnerships also have credit risk because MS&Co., MSIP, and/or MSCG act
as the futures commission merchants or the counterparties, with respect to most
of the Partnerships' assets. Exchange-traded futures, exchange-traded forward,
and exchange-traded futures-styled options contracts are marked to market on a
daily basis, with variations in value settled on a daily basis. MS&Co. and
MSIP, each acting as a commodity broker for each Partnership's exchange-traded
futures, exchange-traded forward, and exchange-traded futures-styled options
contracts, are required, pursuant to regulations of the Commodity Futures
Trading Commission, 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, exchange-traded forward, and exchange-traded
futures-styled options contracts, including an amount equal to the net
unrealized gains (losses) on all open exchange-traded futures, exchange-traded
forward, and exchange-traded futures-styled options contracts, which funds, in
the aggregate, totaled at December 31, 2010 and 2009, respectively, $47,998,757
and $0 for Spectrum Currency, $19,672,733 and $20,005,982 for Spectrum Global
Balanced, $418,222,697 and $472,748,655 for Spectrum Select, $93,318,356 and
$72,609,935 for Spectrum Strategic, and $348,967,875 and $387,447,980 for
Spectrum Technical. With respect to each Partnership's off-exchange-traded
forward currency contracts and forward currency options contracts, there are no
daily settlements of variation in value, nor is there any requirement that an
amount equal to the net unrealized gains (losses) on such contracts be
segregated. However, each Partnership is required to meet margin requirements
equal to the net unrealized loss on open forward currency contracts in the
Partnership accounts with the counterparty, which is accomplished by daily
maintenance of the cash balance in a custody account held at MSSB for the
benefit of MS&Co. With respect to those off-exchange-traded forward currency
contracts, the Partnerships are at risk to the ability of MS&Co., the sole
counterparty on all such contracts, to perform. With respect to those
off-exchange-traded forward currency options contracts, the Partnerships are at
risk to the ability of MSCG, the sole counterparty on all such contracts, to
perform. Each Partnership has a netting agreement with each counterparty. These
agreements, which seek to reduce both the Partnerships' and the counterparties'
exposure on off-exchange-traded forward currency contracts, including options
on such contracts, should materially decrease the Partnerships' credit risk in
the event of MS&Co.'s or MSCG's bankruptcy or insolvency.
MORGAN STANLEY SMITH BARNEY SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
The futures, forwards and options traded by the Partnerships 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, factors that result in frequent changes
in the fair value of the Partnerships' open positions, and consequently in its
earnings, whether realized or unrealized, and cash flow. Gains and losses on
open positions of exchange-traded futures, exchange-traded forward, and
exchange-traded futures-styled options contracts are settled daily through
variation margin. Gains and losses on off-exchange-traded forward currency
contracts are settled upon termination of the contract. Gains and losses on
off-exchange-traded forward currency options contracts are settled on an
agreed-upon settlement date. However, the Partnerships are required to meet
margin requirements equal to the net unrealized loss on open forward currency
contracts in the Partnerships' accounts with the counterparty, which is
accomplished by daily maintenance of the cash balance in a custody account held
at MSSB for the benefit of MS&Co.
--------------------------------------------------------------------------------
7. DERIVATIVES AND HEDGING
The Partnerships' objective is to profit from speculative trading in Futures
Interests. Therefore, the trading advisor for each Partnership will take
speculative positions in Futures Interests where it feels the best profit
opportunities exist for its trading strategy. As such, the average number of
contracts outstanding in absolute quantity (the total of the open long and open
short positions) has been presented as a part of the volume disclosure, as
position direction is not an indicative factor in such volume disclosures. With
regard to foreign currency forward trades, each notional quantity amount has
been converted to an equivalent contract based upon an industry convention.
MORGAN STANLEY SMITH BARNEY SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
The following tables summarize the valuation of each Partnership's
investments as required by the disclosures about Derivatives and Hedging under
the FASB ASC as of December 31, 2010 and 2009, respectively.
SPECTRUM CURRENCY
The Effect of Trading Activities on the Statements of Financial Condition as
of December 31, 2010 and 2009:
AVERAGE NUMBER
OF CONTRACTS
OUTSTANDING
LONG LONG SHORT SHORT NET FOR THE YEAR
FUTURES AND UNREALIZED UNREALIZED UNREALIZED UNREALIZED UNREALIZED (ABSOLUTE
FORWARD CONTRACTS GAIN LOSS GAIN LOSS GAIN QUANTITY)
----------------- ---------- -------------- ---------- ---------- ---------- --------------
$ $ $ $ $
DECEMBER 31, 2010
-----------------
Foreign currency 1,132,624 (43,007) 169,153 (248,617) 1,010,153 6,867
--------- ------- ------- -------- ---------
Total 1,132,624 (43,007) 169,153 (248,617) 1,010,153
========= ======= ======= ========
Unrealized currency gain 108,283
---------
Total net unrealized
gain on open contracts 1,118,436
=========
AVERAGE NUMBER
OF CONTRACTS
OUTSTANDING
FOR THE YEAR
OPTION CONTRACTS (ABSOLUTE
AT FAIR VALUE QUANTITY)
------------- --------------
$
Options purchased 4,459 3
Options written -- 2
*AVERAGE NUMBER
OF CONTRACTS
OUTSTANDING
LONG LONG SHORT SHORT NET FOR THE YEAR
FUTURES AND UNREALIZED UNREALIZED UNREALIZED UNREALIZED UNREALIZED (ABSOLUTE
FORWARD CONTRACTS GAIN LOSS GAIN LOSS GAIN/(LOSS) QUANTITY)
----------------- ---------- --------------- ---------- ---------- ----------- ---------------
$ $ $ $ $
DECEMBER 31, 2009
-----------------
Foreign currency 322,002 (671,027) 178,089 (370,007) (540,943) 5,740
------- -------- ------- -------- --------
Total 322,002 (671,027) 178,089 (370,007) (540,943)
======= ======== ======= ========
Unrealized currency
gain 78,317
--------
Total net unrealized loss
on open contracts (462,626)
========
*AVERAGE NUMBER
OF CONTRACTS
OUTSTANDING
FOR THE YEAR
OPTION CONTRACTS (ABSOLUTE
AT FAIR VALUE QUANTITY)
------------- ---------------
$
Options purchased 121 2
Options written -- 1
MORGAN STANLEY SMITH BARNEY SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
SPECTRUM GLOBAL BALANCED
The Effect of Trading Activities on the Statements of Financial Condition as
of December 31, 2010 and 2009:
AVERAGE NUMBER
OF CONTRACTS
OUTSTANDING
LONG LONG SHORT SHORT NET FOR THE YEAR
FUTURES AND UNREALIZED UNREALIZED UNREALIZED UNREALIZED UNREALIZED (ABSOLUTE
FORWARD CONTRACTS GAIN LOSS GAIN LOSS GAIN QUANTITY)
----------------- ---------- -------------- ---------- ---------- ---------- --------------
$ $ $ $ $
DECEMBER 31, 2010
-----------------
Commodity 572,508 (74,894) 1,700 (282,491) 216,823 364
Equity 19,806 (16,315) 14,244 (9,282) 8,453 54
Foreign currency 202,991 (31,548) 222,394 (39,617) 354,220 1,998
Interest rate 61,518 (13,756) 1,842 (29,249) 20,355 417
------- -------- ------- -------- ---------
Total 856,823 (136,513) 240,180 (360,639) 599,851
======= ======== ======= ========
Unrealized currency gain 957,706
---------
Total net unrealized
gain on open contracts 1,557,557
=========
AVERAGE NUMBER
OF CONTRACTS
OUTSTANDING
FOR THE YEAR
OPTION CONTRACTS (ABSOLUTE
AT FAIR VALUE QUANTITY)
------------- --------------
$
Options purchased 2,701 2
Options written -- 1
*AVERAGE NUMBER
OF CONTRACTS
OUTSTANDING
LONG LONG SHORT SHORT NET FOR THE YEAR
FUTURES AND UNREALIZED UNREALIZED UNREALIZED UNREALIZED UNREALIZED (ABSOLUTE
FORWARD CONTRACTS GAIN LOSS GAIN LOSS GAIN QUANTITY)
----------------- ---------- --------------- ---------- ---------- ---------- ---------------
$ $ $ $ $
DECEMBER 31, 2009
-----------------
Commodity 290,387 (103,537) 24,773 (78,688) 132,935 278
Equity 83,030 (994) -- (961) 81,075 42
Foreign currency 81,951 (62,368) 75,615 (48,674) 46,524 952
Interest rate 159,043 (68,990) 15,050 (1,168) 103,935 357
------- -------- ------- -------- ---------
Total 614,411 (235,889) 115,438 (129,491) 364,469
======= ======== ======= ========
Unrealized currency gain 1,006,229
---------
Total net unrealized
gain on open contracts 1,370,698
=========
*AVERAGE NUMBER
OF CONTRACTS
OUTSTANDING
FOR THE YEAR
OPTION CONTRACTS (ABSOLUTE
AT FAIR VALUE QUANTITY)
------------- ---------------
$
Options purchased 87 2
Options written -- 1
MORGAN STANLEY SMITH BARNEY SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
SPECTRUM SELECT
The Effect of Trading Activities on the Statements of Financial Condition as
of December 31, 2010 and 2009:
AVERAGE NUMBER
OF CONTRACTS
OUTSTANDING
LONG LONG SHORT SHORT NET FOR THE YEAR
FUTURES AND UNREALIZED UNREALIZED UNREALIZED UNREALIZED UNREALIZED (ABSOLUTE
FORWARD CONTRACTS GAIN LOSS GAIN LOSS GAIN/(LOSS) QUANTITY)
----------------- ---------- ---------- ---------- ---------- ----------- ---------------
$ $ $ $ $
DECEMBER 31, 2010
-----------------
Commodity 13,583,270 (1,631,233) -- (1,310,915) 10,641,122 5,409
Equity 762,962 (500,929) 239,908 (5,232) 496,709 2,069
Foreign currency 6,060,140 (193,557) 3,957,095 (524,581) 9,299,097 7,961
Interest rate 662,741 (58,143) 330,713 (833,248) 102,063 7,714
---------- ---------- --------- ---------- ----------
Total 21,069,113 (2,383,862) 4,527,716 (2,673,976) 20,538,991
========== ========== ========= ==========
Unrealized currency loss (735,824)
----------
Total net unrealized
gain on open
contracts 19,803,167
==========
*AVERAGE NUMBER
OF CONTRACTS
OUTSTANDING
LONG LONG SHORT SHORT NET FOR THE YEAR
FUTURES AND UNREALIZED UNREALIZED UNREALIZED UNREALIZED UNREALIZED (ABSOLUTE
FORWARD CONTRACTS GAIN LOSS GAIN LOSS GAIN/(LOSS) QUANTITY)
----------------- ---------- ---------- ---------- ---------- ----------- ---------------
$ $ $ $ $
DECEMBER 31, 2009
-----------------
Commodity 13,176,127 (2,849,152) 344,940 (1,902,680) 8,769,235 5,839
Equity 3,532,600 (108,030) 15,569 -- 3,440,139 2,450
Foreign currency 1,015,082 (2,350,882) 650,586 (215,980) (901,194) 11,725
Interest rate 2,444,830 (1,183,632) 346,565 (133,689) 1,474,074 8,812
---------- ---------- --------- ---------- ----------
Total 20,168,639 (6,491,696) 1,357,660 (2,252,349) 12,782,254
========== ========== ========= ==========
Unrealized currency loss (766,953)
----------
Total net unrealized
gain on open
contracts 12,015,301
==========
MORGAN STANLEY SMITH BARNEY SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
SPECTRUM STRATEGIC
The Effect of Trading Activities on the Statements of Financial Condition as
of December 31, 2010 and 2009:
AVERAGE NUMBER
OF CONTRACTS
OUTSTANDING
LONG LONG SHORT SHORT NET FOR THE YEAR
FUTURES AND UNREALIZED UNREALIZED UNREALIZED UNREALIZED UNREALIZED (ABSOLUTE
FORWARD CONTRACTS GAIN LOSS GAIN LOSS GAIN/(LOSS) QUANTITY)
----------------- ---------- --------------- ---------- ---------- ----------- ---------------
$ $ $ $ $
DECEMBER 31, 2010
-----------------
Commodity 5,438,627 (578,645) -- (22,080) 4,837,902 1,039
Equity 514,170 (173,758) -- -- 340,412 520
Foreign currency 2,511,732 (63,941) 444,352 (597,164) 2,294,979 7,956
Interest rate 249,809 (32,197) 195,622 (206,126) 207,108 3,216
---------- ---------- --------- ---------- ---------
Total 8,714,338 (848,541) 639,974 (825,370) 7,680,401
========== ========== ========= ==========
Unrealized currency
loss (702,638)
---------
Total net unrealized
gain on open
contracts 6,977,763
=========
AVERAGE NUMBER
OF CONTRACTS
OUTSTANDING
FOR THE YEAR
OPTION CONTRACTS (ABSOLUTE
AT FAIR VALUE QUANTITY)
------------- ---------------
$
Options purchased -- 15
Options written -- 15
*AVERAGE NUMBER
OF CONTRACTS
OUTSTANDING
LONG LONG SHORT SHORT NET FOR THE YEAR
FUTURES AND UNREALIZED UNREALIZED UNREALIZED UNREALIZED UNREALIZED (ABSOLUTE
FORWARD CONTRACTS GAIN LOSS GAIN LOSS GAIN/(LOSS) QUANTITY)
----------------- ---------- --------------- ---------- ---------- ----------- ---------------
$ $ $ $ $
DECEMBER 31, 2009
-----------------
Commodity 415,967 (13,658) -- -- 402,309 109
Equity 265,446 -- -- -- 265,446 203
Foreign currency 2,436,578 (2,233,248) 1,589,017 (1,915,763) (123,416) 1,647
Interest rate 10,952 (50,074) 8,928 -- (30,194) 1,152
---------- ---------- --------- ---------- ---------
Total 3,128,943 (2,296,980) 1,597,945 (1,915,763) 514,145
========== ========== ========= ==========
Unrealized currency
loss (750,142)
---------
Total net unrealized
loss on open
contracts (235,997)
=========
*AVERAGE NUMBER
OF CONTRACTS
OUTSTANDING
FOR THE YEAR
OPTION CONTRACTS (ABSOLUTE
AT FAIR VALUE QUANTITY)
------------- ---------------
$
Options purchased 3,483,054 17
Options written (3,985,295) 14
MORGAN STANLEY SMITH BARNEY SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
SPECTRUM TECHNICAL
The Effect of Trading Activities on the Statements of Financial Condition as
of December 31, 2010 and 2009:
AVERAGE NUMBER
OF CONTRACTS
OUTSTANDING
LONG LONG SHORT SHORT NET FOR THE YEAR
FUTURES AND UNREALIZED UNREALIZED UNREALIZED UNREALIZED UNREALIZED (ABSOLUTE
FORWARD CONTRACTS GAIN LOSS GAIN LOSS GAIN/(LOSS) QUANTITY)
----------------- ---------- -------------- ---------- ---------- ----------- --------------
$ $ $ $ $
DECEMBER 31, 2010
-----------------
Commodity 13,124,335 (830,888) -- (930,820) 11,362,627 4,140
Equity 1,514,410 (545,083) 18,807 (1,925) 986,209 2,558
Foreign currency 5,887,120 (382,618) 1,445,278 (938,552) 6,011,228 9,351
Interest rate 420,990 (234,424) 24 (757,821) (571,231) 8,977
---------- ---------- --------- ---------- ----------
Total 20,946,855 (1,993,013) 1,464,109 (2,629,118) 17,788,833
========== ========== ========= ==========
Unrealized currency
gain 2,806,389
----------
Total net unrealized
gain on open
contracts 20,595,222
==========
AVERAGE NUMBER
OF CONTRACTS
OUTSTANDING
FOR THE YEAR
OPTION CONTRACTS (ABSOLUTE
AT FAIR VALUE QUANTITY)
------------- --------------
$
Options purchased 314,450 12
Options written (147,085) 12
*AVERAGE NUMBER
OF CONTRACTS
OUTSTANDING
LONG LONG SHORT SHORT NET FOR THE YEAR
FUTURES AND UNREALIZED UNREALIZED UNREALIZED UNREALIZED UNREALIZED (ABSOLUTE
FORWARD CONTRACTS GAIN LOSS GAIN LOSS GAIN/(LOSS) QUANTITY)
----------------- ---------- --------------- ---------- ---------- ----------- ---------------
$ $ $ $ $
DECEMBER 31, 2009
-----------------
Commodity 9,706,779 (2,766,094) 405,015 (227,288) 7,118,412 3,562
Equity 5,129,900 (36,804) -- (4,468) 5,088,628 2,350
Foreign currency 526,121 (2,668,571) 1,040,532 (887,572) (1,989,490) 4,883
Interest rate 376,281 (3,293,951) 242,196 (249,507) (2,924,981) 6,744
---------- ---------- --------- ---------- ----------
Total 15,739,081 (8,765,420) 1,687,743 (1,368,835) 7,292,569
========== ========== ========= ==========
Unrealized currency
gain 3,403,102
----------
Total net unrealized
gain on open
contracts 10,695,671
==========
*AVERAGE NUMBER
OF CONTRACTS
OUTSTANDING
FOR THE YEAR
OPTION CONTRACTS (ABSOLUTE
AT FAIR VALUE QUANTITY)
------------- ---------------
$
Options purchased 185,397 7
Options written (55,219) 7
* These amounts have been reclassified from the December 31, 2009 prior year
financial statements to conform to the current year presentation.
MORGAN STANLEY SMITH BARNEY SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
The following tables summarize the net trading results of each Partnership
for the years ended December 31, 2010 and 2009, respectively, as required by
the disclosures about Derivatives and Hedging Topic.
SPECTRUM CURRENCY
The Effect of Trading Activities on the Statements of Operations for the
years ended December 31, 2010 and 2009 included in Total Trading Results:
DECEMBER 31, 2010
TYPE OF INSTRUMENT
------------------ $
Foreign currency 808,671
Unrealized currency gain 29,966
-------
Total 838,637
=======
DECEMBER 31, 2009
TYPE OF INSTRUMENT
------------------ $
Foreign currency (2,979,122)
Unrealized currency loss (52,641)
----------
Total (3,031,763)
==========
Line Items on the Statements of Operations for the years ended December 31,
2010 and 2009:
DECEMBER 31, 2010
TRADING RESULTS
--------------- $
Realized (745,965)
Net change in unrealized 1,584,602
---------
Total Trading Results 838,637
=========
DECEMBER 31, 2009
TRADING RESULTS
--------------- $
Realized (2,992,672)
Net change in unrealized (39,091)
----------
Total Trading Results (3,031,763)
==========
MORGAN STANLEY SMITH BARNEY SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
SPECTRUM GLOBAL BALANCED
The Effect of Trading Activities on the Statements of Operations for the
years ended December 31, 2010 and 2009 included in Total Trading Results:
DECEMBER 31, 2010
TYPE OF INSTRUMENT
------------------ $
Commodity 176,977
Equity (119,010)
Foreign currency 1,416,646
Interest rate 2,032,378
Unrealized currency loss (34,349)
Proceeds from Litigation 29,602
---------
Total 3,502,244
=========
DECEMBER 31, 2009
TYPE OF INSTRUMENT
------------------ $
Commodity (1,244,194)
Equity 303,714
Foreign currency (756,331)
Interest rate (608,998)
Unrealized currency gain 314,542
----------
Total (1,991,267)
==========
Line Items on the Statements of Operations for the years ended December 31,
2010 and 2009:
DECEMBER 31, 2010
TRADING RESULTS
--------------- $
Realized 3,283,491
Net change in unrealized 189,151
Proceeds from Litigation 29,602
---------
Total Trading Results 3,502,244
=========
DECEMBER 31, 2009
TRADING RESULTS
--------------- $
Realized (451,631)
Net change in unrealized (1,539,636)
----------
Total Trading Results (1,991,267)
==========
MORGAN STANLEY SMITH BARNEY SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
SPECTRUM SELECT
The Effect of Trading Activities on the Statements of Operations for the
years ended December 31, 2010 and 2009 included in Total Trading Results:
DECEMBER 31, 2010
TYPE OF INSTRUMENT
------------------ $
Commodity 10,078,791
Equity (14,372,116)
Foreign currency 13,050,193
Interest rate 24,513,376
Unrealized currency gain 31,129
Proceeds from Litigation 337,120
-----------
Total 33,638,493
===========
DECEMBER 31, 2009
TYPE OF INSTRUMENT
------------------ $
Commodity 10,512,655
Equity 23,140,270
Foreign currency (11,446,352)
Interest rate (20,962,448)
Unrealized currency gain 768,289
-----------
Total 2,012,414
===========
Line Items on the Statements of Operations for the years ended December 31,
2010 and 2009:
DECEMBER 31, 2010
TRADING RESULTS
--------------- $
Realized 25,513,507
Net change in unrealized 7,787,866
Proceeds from Litigation 337,120
----------
Total Trading Results 33,638,493
==========
DECEMBER 31, 2009
TRADING RESULTS
--------------- $
Realized 16,042,877
Net change in unrealized (14,030,463)
-----------
Total Trading Results 2,012,414
===========
MORGAN STANLEY SMITH BARNEY SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
SPECTRUM STRATEGIC
The Effect of Trading Activities on the Statements of Operations for the
years ended December 31, 2010 and 2009 included in Total Trading Results:
DECEMBER 31, 2010
TYPE OF INSTRUMENT
------------------ $
Commodity 27,847,302
Equity 1,553,897
Foreign currency 1,814,321
Interest rate 5,580,325
Unrealized currency gain 47,508
Proceeds from Litigation 220,755
----------
Total 37,064,108
==========
DECEMBER 31, 2009
TYPE OF INSTRUMENT
------------------ $
Commodity 25,868,905
Equity (3,666,716)
Foreign currency (9,779,702)
Interest rate 7,433,549
Unrealized currency gain 42,279
----------
Total 19,898,315
==========
Line Items on the Statements of Operations for the years ended December 31,
2010 and 2009:
DECEMBER 31, 2010
TRADING RESULTS
--------------- $
Realized 11,512,792
Net change in unrealized 7,129,344
Realized gain on investment in BHM I, LLC 1,679,125
Unrealized appreciation on investment in BHM I, LLC 16,522,092
Proceeds from Litigation 220,755
----------
Total Trading Results 37,064,108
==========
DECEMBER 31, 2009
TRADING RESULTS
--------------- $
Realized (15,530,111)
Net change in unrealized (1,945,071)
Realized gain on investment in BHM I, LLC 1,148,140
Unrealized appreciation on investment in BHM I, LLC 36,225,357
-----------
Total Trading Results 19,898,315
===========
MORGAN STANLEY SMITH BARNEY SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
SPECTRUM TECHNICAL
The Effect of Trading Activities on the Statements of Operations for the
years ended December 31, 2010 and 2009 included in Total Trading Results:
DECEMBER 31, 2010
TYPE OF INSTRUMENT
------------------ $
Commodity 5,109,902
Equity (8,075,989)
Foreign currency 8,722,783
Interest rate 34,568,150
Unrealized currency loss (596,713)
Proceeds from Litigation 164,828
----------
Total 39,892,961
==========
DECEMBER 31, 2009
TYPE OF INSTRUMENT
------------------ $
Commodity 4,000,782
Equity 9,428,097
Foreign currency (7,009,480)
Interest rate (17,252,226)
Unrealized currency loss (949,098)
-----------
Total (11,781,925)
===========
Line Items on the Statements of Operations for the years ended December 31,
2010 and 2009:
DECEMBER 31, 2010
TRADING RESULTS
--------------- $
Realized 29,840,644
Net change in unrealized 9,887,489
Proceeds from Litigation 164,828
----------
Total Trading Results 39,892,961
==========
DECEMBER 31, 2009
TRADING RESULTS
--------------- $
Realized (5,718,953)
Net change in unrealized (6,062,972)
-----------
Total Trading Results (11,781,925)
===========
--------------------------------------------------------------------------------
8. FAIR VALUE MEASUREMENTS AND DISCLOSURES
Financial instruments are carried at fair value, which is the price that would
be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants. Assets and liabilities carried at fair
value are classified and disclosed in the following three levels: Level
1--unadjusted quoted market prices in active markets for identical assets and
liabilities; Level 2--inputs other than unadjusted quoted market prices that
are observable for the asset or liability, either directly or indirectly
(including unadjusted quoted market prices for similar investments, interest
rates, credit risk); and Level 3--unobservable inputs for the asset or
liability (including the Partnerships' own assumptions used in determining the
fair value of investments).
MORGAN STANLEY SMITH BARNEY SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
In certain cases, the inputs used to measure fair value may fall into
different levels of the fair value hierarchy. In such cases, an investment's
level within the fair value hierarchy is based on the lowest level of input
that is significant to the fair value measurement. The Partnerships' assessment
of the significance of a particular input to the fair value measurement in its
entirety requires judgment, and considers factors specific to the investment.
The Partnerships' assets and liabilities measured at fair value on a
recurring basis are summarized in the following tables by the type of inputs
applicable to the fair value measurements.
SPECTRUM CURRENCY
UNADJUSTED
QUOTED PRICES
IN ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
(LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
------------- ----------- ------------ ---------
$ $ $ $
DECEMBER 31, 2010
-----------------
ASSETS
Futures 74,100 -- n/a 74,100
Forwards -- 1,227,677 n/a 1,227,677
Options Purchased -- 4,459 n/a 4,459
------ --------- ---------
Total Assets 74,100 1,232,136 n/a 1,306,236
------ --------- ---------
LIABILITIES
Futures -- -- n/a --
Forwards -- 291,624 n/a 291,624
------ --------- ---------
Total Liabilities -- 291,624 n/a 291,624
------ --------- ---------
Unrealized currency gain 108,283
---------
*Net fair value 74,100 940,512 n/a 1,122,895
====== ========= =========
DECEMBER 31, 2009**
-------------------
ASSETS
Futures -- -- n/a --
Forwards -- 500,091 n/a 500,091
Options Purchased -- 121 n/a 121
------ --------- ---------
Total Assets -- 500,212 n/a 500,212
------ --------- ---------
LIABILITIES
Futures -- -- n/a --
Forwards -- 1,041,034 n/a 1,041,034
------ --------- ---------
Total Liabilities -- 1,041,034 n/a 1,041,034
------ --------- ---------
Unrealized currency gain 78,317
---------
*Net fair value -- (540,822) n/a (462,505)
====== ========= =========
* This amount comprises of the net unrealized gain/(loss) on open contracts and
options purchased and options written on the Statements of Financial
Condition.
**The amounts have been reclassified from the December 31, 2009 prior year
financial statements to conform to current year presentation based on new
fair value guidance.
MORGAN STANLEY SMITH BARNEY SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
SPECTRUM GLOBAL BALANCED
UNADJUSTED
QUOTED PRICES
IN ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
(LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
------------- ----------- ------------ ---------
$ $ $ $
DECEMBER 31, 2010
-----------------
ASSETS
Futures 980,403 -- n/a 980,403
Forwards -- 116,589 n/a 116,589
Options Purchased -- 2,701 n/a 2,701
------- ------- ---------
Total Assets 980,403 119,290 n/a 1,099,693
------- ------- ---------
LIABILITIES
Futures 443,954 -- n/a 443,954
Forwards -- 53,187 n/a 53,187
------- ------- ---------
Total Liabilities 443,954 53,187 n/a 497,141
------- ------- ---------
Unrealized currency gain 957,706
---------
*Net fair value 536,449 66,103 n/a 1,560,258
======= ======= =========
DECEMBER 31, 2009**
-------------------
ASSETS
Futures 625,934 -- n/a 625,934
Forwards -- 103,915 n/a 103,915
Options Purchased -- 87 n/a 87
------- ------- ---------
Total Assets 625,934 104,002 n/a 729,936
------- ------- ---------
LIABILITIES
Futures 318,547 -- n/a 318,547
Forwards -- 46,833 n/a 46,833
------- ------- ---------
Total Liabilities 318,547 46,833 n/a 365,380
------- ------- ---------
Unrealized currency gain 1,006,229
---------
*Net fair value 307,387 57,169 n/a 1,370,785
======= ======= =========
* This amount comprises of the net unrealized gain/(loss) on open contracts and
options purchased and options written on the Statements of Financial
Condition.
**The amounts have been reclassified from the December 31, 2009 prior year
financial statements to conform to current year presentation based on new
fair value guidance.
MORGAN STANLEY SMITH BARNEY SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
SPECTRUM SELECT
UNADJUSTED
QUOTED PRICES
IN ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
(LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
------------- ----------- ------------ ----------
$ $ $ $
DECEMBER 31, 2010
-----------------
ASSETS
Futures 22,348,537 -- n/a 22,348,537
Forwards -- 3,248,292 n/a 3,248,292
---------- --------- ----------
Total Assets 22,348,537 3,248,292 n/a 25,596,829
---------- --------- ----------
LIABILITIES
Futures 4,839,789 -- n/a 4,839,789
Forwards -- 218,049 n/a 218,049
---------- --------- ----------
Total Liabilities 4,839,789 218,049 n/a 5,057,838
---------- --------- ----------
Unrealized currency loss (735,824)
----------
*Net fair value 17,508,748 3,030,243 n/a 19,803,167
========== ========= ==========
DECEMBER 31, 2009**
-------------------
ASSETS
Futures 20,671,980 -- n/a 20,671,980
Forwards -- 854,319 n/a 854,319
---------- --------- ----------
Total Assets 20,671,980 854,319 n/a 21,526,299
---------- --------- ----------
LIABILITIES
Futures 6,975,685 -- n/a 6,975,685
Forwards -- 1,768,360 n/a 1,768,360
---------- --------- ----------
Total Liabilities 6,975,685 1,768,360 n/a 8,744,045
---------- --------- ----------
Unrealized currency loss (766,953)
----------
*Net fair value 13,696,295 (914,041) n/a 12,015,301
========== ========= ==========
* This amount comprises of the net unrealized gain/(loss) on open contracts on
the Statements of Financial Condition.
**The amounts have been reclassified from the December 31, 2009 prior year
financial statements to conform to current year presentation based on new
fair value guidance.
MORGAN STANLEY SMITH BARNEY SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
SPECTRUM STRATEGIC
UNADJUSTED
QUOTED PRICES
IN ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
(LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
------------- ----------- ------------ -----------
$ $ $ $
DECEMBER 31, 2010
-----------------
ASSETS
Investment in BHM -- 89,755,278 n/a 89,755,278
Futures 8,219,189 -- n/a 8,219,189
Forwards -- 1,135,107 n/a 1,135,107
--------- ----------- -----------
Total Assets 8,219,189 90,890,385 n/a 99,109,574
--------- ----------- -----------
LIABILITIES
Futures 1,012,806 -- n/a 1,012,806
Forwards -- 661,089 n/a 661,089
--------- ----------- -----------
Total Liabilities 1,012,806 661,089 n/a 1,673,895
--------- ----------- -----------
Unrealized currency loss (702,638)
-----------
*Net fair value 7,206,383 90,229,296 n/a 96,733,041
========= =========== ===========
DECEMBER 31, 2009**
-------------------
ASSETS
Investment in BHM -- 109,611,896 n/a 109,611,896
Futures 747,589 -- n/a 747,589
Forwards -- 3,979,301 n/a 3,979,301
Options Purchased -- 3,483,054 n/a 3,483,054
--------- ----------- -----------
Total Assets 747,589 117,074,251 n/a 117,821,840
--------- ----------- -----------
LIABILITIES
Futures 85,716 -- n/a 85,716
Forwards -- 4,127,029 n/a 4,127,029
Options Written -- 3,985,295 n/a 3,985,295
--------- ----------- -----------
Total Liabilities 85,716 8,112,324 n/a 8,198,040
--------- ----------- -----------
Unrealized currency loss (750,142)
-----------
*Net fair value 661,873 108,961,927 n/a 108,873,658
========= =========== ===========
* This amount comprises of the net unrealized gain/(loss) on open contracts and
options purchased and options written on the Statements of Financial
Condition.
**The amounts have been reclassified from the December 31, 2009 prior year
financial statements to conform to current year presentation based on new
fair value guidance.
MORGAN STANLEY SMITH BARNEY SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
SPECTRUM TECHNICAL
UNADJUSTED
QUOTED PRICES
IN ACTIVE SIGNIFICANT
MARKETS FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
(LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
------------- ----------- ------------ ----------
$ $ $ $
DECEMBER 31, 2010
-----------------
ASSETS
Futures 18,274,921 -- n/a 18,274,921
Forwards -- 4,136,044 n/a 4,136,044
Options Purchased 2,774 311,676 n/a 314,450
---------- --------- ----------
Total Assets 18,277,695 4,447,720 n/a 22,725,415
---------- --------- ----------
LIABILITIES
Futures 3,613,070 -- n/a 3,613,070
Forwards -- 1,009,062 n/a 1,009,062
Options Written 5,500 141,585 n/a 147,085
---------- --------- ----------
Total Liabilities 3,618,570 1,150,647 n/a 4,769,217
---------- --------- ----------
Unrealized currency gain 2,806,389
----------
*Net fair value 14,659,125 3,297,073 n/a 20,762,587
========== ========= ==========
DECEMBER 31, 2009**
-------------------
ASSETS
Futures 16,608,219 -- n/a 16,608,219
Forwards -- 818,605 n/a 818,605
Options Purchased 2,023 183,374 n/a 185,397
---------- --------- ----------
Total Assets 16,610,242 1,001,979 n/a 17,612,221
---------- --------- ----------
LIABILITIES
Futures 8,434,867 -- n/a 8,434,867
Forwards -- 1,699,388 n/a 1,699,388
Options Written 4,633 50,586 n/a 55,219
---------- --------- ----------
Total Liabilities 8,439,500 1,749,974 n/a 10,189,474
---------- --------- ----------
Unrealized currency gain 3,403,102
----------
*Net fair value 8,170,742 (747,995) n/a 10,825,849
========== ========= ==========
* This amount comprises of the net unrealized gain/(loss) on open contracts and
options purchased and options written on the Statements of Financial
Condition.
**The amounts have been reclassified from the December 31, 2009 prior year
financial statements to conform to current year presentation based on new
fair value guidance.
MORGAN STANLEY SMITH BARNEY SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
--------------------------------------------------------------------------------
9. FINANCIAL HIGHLIGHTS
SPECTRUM CURRENCY
2010 2009 2008
------- -------- -------
PER UNIT OPERATING PERFORMANCE:
NET ASSET VALUE, JANUARY 1: $ 10.03 $ 11.16 $ 9.84
------- -------- -------
NET OPERATING RESULTS:
Interest Income 0.01 0.01 0.12
Expenses (0.64) (0.71) (0.73)
Realized Profit (Loss)/(1)/ (0.12) (0.42) 1.81
Unrealized Profit (Loss) 0.29 (0.01) 0.12
------- -------- -------
Net Income (Loss) (0.46) (1.13) 1.32
------- -------- -------
NET ASSET VALUE, DECEMBER 31: $ 9.57 $ 10.03 $ 11.16
======= ======== =======
FOR THE CALENDAR YEAR:
RATIOS TO AVERAGE NET ASSETS:
Net Investment Loss (6.6)% (6.7)% (5.9)%
Expenses before Incentive Fees 6.7 % 6.8 % 6.7 %
Expenses after Incentive Fees 6.7 % 6.8 % 7.1 %
Net Income (Loss) (5.1)% (11.1)% 12.9 %
TOTAL RETURN BEFORE INCENTIVE FEES (4.6)% (10.1)% 13.8 %
TOTAL RETURN AFTER INCENTIVE FEES (4.6)% (10.1)% 13.4 %
INCEPTION-TO-DATE RETURN (4.3)%
COMPOUND ANNUALIZED RETURN (0.4)%
SPECTRUM GLOBAL BALANCED
2010 2009 2008
------- -------- -------
PER UNIT OPERATING PERFORMANCE:
NET ASSET VALUE, JANUARY 1: $ 15.23 $ 17.50 $ 15.63
------- -------- -------
NET OPERATING RESULTS:
Interest Income 0.02 0.02 0.22
Expenses (0.98) (1.01) (1.36)
Realized Profit (Loss)/(1)/ 2.70 (0.22) 2.04
Unrealized Profit (Loss) 0.15 (1.06) 0.97
------- -------- -------
Net Income (Loss) 1.89 (2.27) 1.87
------- -------- -------
NET ASSET VALUE, DECEMBER 31: $ 17.12 $ 15.23 $ 17.50
======= ======== =======
FOR THE CALENDAR YEAR:
RATIOS TO AVERAGE NET ASSETS:
Net Investment Loss (6.0)% (6.2)% (7.4)%
Expenses before Incentive Fees 6.1 % 6.3 % 6.3 %
Expenses after Incentive Fees 6.1 % 6.3 % 8.8 %
Net Income (Loss) 11.8 % (14.8)% 10.7 %
TOTAL RETURN BEFORE INCENTIVE FEES 12.4 % (13.0)% 14.5 %
TOTAL RETURN AFTER INCENTIVE FEES 12.4 % (13.0)% 12.0 %
INCEPTION-TO-DATE RETURN 71.2 %
COMPOUND ANNUALIZED RETURN 3.4 %
MORGAN STANLEY SMITH BARNEY SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
SPECTRUM SELECT
2010 2009 2008
-------- ------- --------
PER UNIT OPERATING PERFORMANCE:
NET ASSET VALUE, JANUARY 1: $ 37.96 $ 40.80 $ 31.24
-------- ------- --------
NET OPERATING RESULTS:
Interest Income 0.03 0.03 0.39
Expenses (3.18) (3.27) (4.10)
Realized Profit/(1)/ 2.55 1.47 12.23
Unrealized Profit (Loss) 0.67 (1.07) 1.04
-------- ------- --------
Net Income (Loss) 0.07* (2.84) 9.56
-------- ------- --------
NET ASSET VALUE, DECEMBER 31: $ 38.03 $ 37.96 $ 40.80
======== ======= ========
FOR THE CALENDAR YEAR:
RATIOS TO AVERAGE NET ASSETS:
Net Investment Loss (8.9)% (8.6)% (10.2)%
Expenses before Incentive Fees 8.4 % 8.5 % 8.3 %
Expenses after Incentive Fees 9.0 % 8.7 % 11.3 %
Net Income (Loss) (0.7)% (8.2)% 26.8 %
TOTAL RETURN BEFORE INCENTIVE FEES 0.8 % (6.8)% 34.1 %
TOTAL RETURN AFTER INCENTIVE FEES 0.2 % (7.0)% 30.6 %
INCEPTION-TO-DATE RETURN 280.3 %
COMPOUND ANNUALIZED RETURN 7.1 %
* The increase in the net asset value per Unit, while the Partnership incurred
a net loss for the year ended December 31, 2010, is due to the timing of
subscriptions and redemptions of units throughout the year.
SPECTRUM STRATEGIC
2010 2009 2008
-------- ------- -------
PER UNIT OPERATING PERFORMANCE:
NET ASSET VALUE, JANUARY 1: $ 19.13 $ 18.82 $ 18.01
-------- ------- -------
NET OPERATING RESULTS:
Interest Income 0.02 0.01 0.20
Expenses (1.98) (1.81) (1.90)
Realized Profit (Loss)/(1)/ 1.67 (1.28) 0.95
Unrealized Profit 2.65 3.39 1.56
-------- ------- -------
Net Income 2.36 0.31 0.81
-------- ------- -------
NET ASSET VALUE, DECEMBER 31: $ 21.49 $ 19.13 $ 18.82
======== ======= =======
FOR THE CALENDAR YEAR:
RATIOS TO AVERAGE NET ASSETS:
Net Investment Loss (10.6)% (9.9)% (9.3)%
Expenses before Incentive Fees 8.8 % 9.0 % 8.7 %
Expenses after Incentive Fees 10.6 % 10.0 % 10.4 %
Net Income 11.8 % 1.0 % 4.6 %
TOTAL RETURN BEFORE INCENTIVE FEES 14.2 % 2.6 % 6.2 %
TOTAL RETURN AFTER INCENTIVE FEES 12.3 % 1.6 % 4.5 %
INCEPTION-TO-DATE RETURN 114.9 %
COMPOUND ANNUALIZED RETURN 4.8 %
MORGAN STANLEY SMITH BARNEY SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
(CONCLUDED)
SPECTRUM TECHNICAL
2010 2009 2008
-------- -------- -------
PER UNIT OPERATING PERFORMANCE:
NET ASSET VALUE, JANUARY 1: $ 20.53 $ 22.76 $ 20.22
-------- -------- -------
NET OPERATING RESULTS:
Interest Income 0.02 0.02 0.25
Expenses (1.64)* (1.75)+ (2.25)
Realized Profit (Loss)/(1)/ 1.85 (0.20) 4.33
Unrealized Profit (Loss) 0.57 (0.30) 0.21
-------- -------- -------
Net Income (Loss) 0.80 (2.23) 2.54
-------- -------- -------
NET ASSET VALUE, DECEMBER 31: $ 21.33 $ 20.53 $ 22.76
======== ======== =======
FOR THE CALENDAR YEAR:
RATIOS TO AVERAGE NET ASSETS:
Net Investment Loss (8.2)% (8.3)% (9.2)%
Expenses before Incentive Fees 8.3 %** 8.3 %++ 8.3 %
Expenses after Incentive Fees 8.3 %** 8.4 %++ 10.4 %
Net Income (Loss) 3.4 % (11.1)% 12.1 %
TOTAL RETURN BEFORE INCENTIVE FEES 3.9 % (9.8)% 14.8 %
TOTAL RETURN AFTER INCENTIVE FEES 3.9 % (9.8)% 12.6 %
INCEPTION-TO-DATE RETURN 113.3 %
COMPOUND ANNUALIZED RETURN 4.8 %
* Expenses per Unit would have been $(1.64) had it not been for the management
fee waived by Chesapeake.
**Such percentage is after waiver of management fees. Chesapeake voluntarily
waived a portion of the management fees (equal to 0.02% of the average net
assets).
+ Expenses per Unit would have been $(1.77) had it not been for the management
fee waived by Rotella.
++Such percentage is after waiver of management fees. Rotella voluntarily
waived a portion of the management fees for the fourth quarter of 2009 (equal
to 0.1% of the average net assets).
(1)Realized Profit (Loss) is a balancing amount necessary to reconcile the
change in Net Asset Value per Unit with the other per Unit information.
--------------------------------------------------------------------------------
10. SUBSEQUENT EVENTS
Management of Ceres performed its evaluation of subsequent events and has
determined that there were no subsequent events requiring adjustment or
disclosure in the financial statements other than those disclosed below.
Effective February 1, 2011, the monthly management fee payable by Spectrum
Select to Sunrise Capital was reduced from 1/4 of 1% (a 3% annual rate) to
1/12 of 2% (a 2% annual rate).
Effective February 1, 2011, the monthly incentive fee rate paid by Spectrum
Select to Sunrise Capital equal to 15% was increased to a monthly incentive fee
rate equal to 20%.
PRE-SORTED
FIRST CLASS MAIL
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PERMIT #1
Ceres Managed Futures LLC
PO Box 340
New York, NY 10008-0340
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