Attached files
file | filename |
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EX-4.S - EXHIBIT - MORGAN STANLEY SMITH BARNEY SPECTRUM SELECT LP | dwsfex3202.htm |
EX-1.S - EXHIBIT - MORGAN STANLEY SMITH BARNEY SPECTRUM SELECT LP | dwsfex3101.htm |
EX-3.S - EXHIBIT - MORGAN STANLEY SMITH BARNEY SPECTRUM SELECT LP | dwsfex3201.htm |
EX-2.S - EXHIBIT - MORGAN STANLEY SMITH BARNEY SPECTRUM SELECT LP | dwsfex3102.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
x QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
quarterly period ended September 30, 2009 or
o TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
transition period from __________________to__________________
Commission
File Number: 0-19511
MORGAN
STANLEY SMITH BARNEY SPECTRUM SELECT L.P.
|
||
(Exact
name of registrant as specified in its charter)
|
Delaware
|
13-3619290
|
|||
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S.
Employer
Identification
No.)
|
|||
Demeter
Management LLC
|
||||
522
Fifth Avenue, 13th Floor
|
||||
New
York, NY
|
10036
|
|||
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant’s
telephone number, including area code
|
(212)
296-1999
|
Morgan
Stanley Spectrum Select L.P.
(Former
name, former address and former fiscal year, if changed since last
report)
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes x No o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes o No o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer”,
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large
accelerated filer o
|
Accelerated
filer o
|
Non-accelerated
filer x
|
Smaller
reporting company o
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes 0 No
T
MORGAN
STANLEY SMITH BARNEY SPECTRUM SELECT L.P.
(formerly,
Morgan Stanley Spectrum Select L.P.)
INDEX TO QUARTERLY REPORT ON
FORM 10-Q
September 30,
2009
PART I. FINANCIAL
INFORMATION
|
||
Item
1.
|
Financial
Statements (Unaudited)
|
|
Statements
of Financial Condition as of September 30, 2009 and December 31, 2008
|
2
|
|
Statements
of Operations for the Three and Nine Months Ended September 30, 2009 and
2008
|
3
|
|
Statements
of Changes in Partners’ Capital for the Nine Months Ended September 30,
2009 and 2008
|
4
|
|
Statements
of Cash Flows for the Nine Months Ended September 30, 2009 and 2008
|
5
|
|
Condensed
Schedules of Investments as of September 30, 2009 and December 31,
2008
|
6
|
|
Notes
to Financial Statements
|
7-20
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
21-32
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
33-44
|
Item
4.
|
Controls
and Procedures
|
44
|
Item
4T.
|
Controls
and Procedures
|
45
|
PART II. OTHER INFORMATION
|
||
Item
1A.
|
Risk
Factors
|
46
|
Item
6.
|
Exhibits
|
46
|
PART I. FINANCIAL
INFORMATION
Item
1. Financial
Statements
MORGAN
STANLEY SMITH BARNEY SPECTRUM SELECT L.P.
(formerly,
Morgan Stanley Spectrum Select L.P.)
STATEMENTS
OF FINANCIAL CONDITION
(Unaudited)
September
30,
|
December
31,
|
||
2009
|
2008
|
||
ASSETS
|
$
|
$
|
|
Trading
Equity:
|
|||
Unrestricted
cash
|
415,562,337
|
601,638,653
|
|
Restricted
cash
|
52,211,318
|
8,756,170
|
|
Total
cash
|
467,773,655
|
610,394,823
|
|
Net
unrealized gain on open contracts (MS&Co.)
|
15,951,230
|
19,905,581
|
|
Net
unrealized gain on open contracts (MSIP)
|
2,134,761
|
6,140,183
|
|
Total
net unrealized gain on open contracts
|
18,085,991
|
26,045,764
|
|
Options
purchased (premiums paid $116,160 and $0, respectively)
|
139,260
|
–
|
|
Total
Trading Equity
|
485,998,906
|
636,440,587
|
|
Interest
receivable (MS&Co.)
|
19,633
|
4,300
|
|
Total
Assets
|
486,018,539
|
636,444,887
|
|
LIABILITIES
AND PARTNERS’ CAPITAL
|
|||
Liabilities
|
|||
Redemptions
payable
|
4,101,855
|
23,861,804
|
|
Accrued
brokerage fees (MS&Co.)
|
2,369,971
|
3,093,914
|
|
Accrued
management fees
|
904,932
|
1,175,736
|
|
Accrued
incentive fee
|
–
|
2,429,055
|
|
Total
Liabilities
|
7,376,758
|
30,560,509
|
|
Partners’
Capital
|
|||
Limited
Partners (12,394,041.013 and 14,700,689.307 Units,
respectively)
|
473,739,099
|
599,790,920
|
|
General
Partner (128,264.769 and 149,348.769, respectively)
|
4,902,682
|
6,093,458
|
|
Total
Partners’ Capital
|
478,641,781
|
605,884,378
|
|
Total
Liabilities and Partners’ Capital
|
486,018,539
|
636,444,887
|
|
NET
ASSET VALUE PER UNIT
|
38.22
|
40.80
|
The
accompanying notes are an integral part of these financial
statements.
- 2
-
MORGAN
STANLEY SMITH BARNEY SPECTRUM SELECT L.P.
(formerly,
Morgan Stanley Spectrum Select L.P.)
STATEMENTS
OF OPERATIONS
(Unaudited)
For
the Three Months
Ended September 30,
|
For
the Nine Months
Ended September 30,
|
||||||
2009
|
2008
|
2009
|
2008
|
||||
$
|
$
|
$
|
$
|
||||
INVESTMENT
INCOME
|
|||||||
Interest
income (MS&Co.)
|
113,773
|
1,689,047
|
378,889
|
5,908,454
|
|||
EXPENSES
|
|||||||
Brokerage
fees (MS&Co.)
|
7,113,733
|
8,468,944
|
23,376,556
|
25,192,631
|
|||
Management
fees
|
2,716,461
|
3,313,248
|
8,919,313
|
10,009,187
|
|||
Incentive
fees
|
–
|
282,117
|
391,898
|
10,823,949
|
|||
Total
Expenses
|
9,830,194
|
12,064,309
|
32,687,767
|
46,025,767
|
|||
NET
INVESTMENT LOSS
|
(9,716,421)
|
(10,375,262)
|
(32,308,878)
|
(40,117,313)
|
|||
TRADING
RESULTS
|
|||||||
Trading
profit (loss):
|
|||||||
Realized
|
14,806,393
|
(13,157,761)
|
2,985,744
|
110,794,298
|
|||
Net
change in unrealized
|
12,838,051
|
(31,746,625)
|
(7,936,673)
|
(5,832,352)
|
|||
Total
Trading Results
|
27,644,444
|
(44,904,386)
|
(4,950,929)
|
104,961,946
|
|||
NET
INCOME (LOSS)
|
17,928,023
|
(55,279,648)
|
(37,259,807)
|
64,844,633
|
|||
NET
INCOME (LOSS) ALLOCATION
|
|||||||
Limited
Partners
|
17,746,509
|
(54,662,655)
|
(36,887,890)
|
64,145,721
|
|||
General
Partner
|
181,514
|
(616,993)
|
(371,917)
|
698,912
|
|||
NET
INCOME (LOSS) PER UNIT
|
|||||||
Limited
Partners
|
1.41
|
(3.55)
|
(2.78)
|
3.84
|
|||
General
Partner
|
1.41
|
(3.55)
|
(2.78)
|
3.84
|
|||
Units
|
Units
|
Units
|
Units
|
||||
WEIGHTED
AVERAGE NUMBER
|
|||||||
OF
UNITS OUTSTANDING
|
12,707,370.755
|
15,551,875.104
|
13,386,324.026
|
15,984,286.313
|
The
accompanying notes are an integral part of these financial
statements.
– 3
–
MORGAN
STANLEY SMITH BARNEY SPECTRUM SELECT L.P.
(formerly,
Morgan Stanley Spectrum Select L.P.)
STATEMENTS
OF CHANGES IN PARTNERS’ CAPITAL
For the
Nine Months Ended September 30, 2009 and 2008
(Unaudited)
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
|
1,395,138.653
|
49,580,029
|
–
|
49,580,029
|
|||
Net
Income
|
–
|
64,145,721
|
698,912
|
64,844,633
|
|||
Redemptions
|
(2,559,789.702)
|
(90,813,009)
|
(296,829)
|
(91,109,838)
|
|||
Partners’
Capital,
|
|||||||
September
30, 2008
|
15,579,838.960
|
540,409,464
|
6,083,915
|
546,493,379
|
|||
Partners’
Capital,
|
|||||||
December
31, 2008
|
14,850,038.076
|
599,790,920
|
6,093,458
|
605,884,378
|
|||
Net
Loss
|
–
|
(36,887,890)
|
(371,917)
|
(37,259,807)
|
|||
Redemptions
|
(2,327,732.294)
|
(89,163,931)
|
(818,859)
|
(89,982,790)
|
|||
Partners’
Capital,
|
|||||||
September
30, 2009
|
12,522,305.782
|
473,739,099
|
4,902,682
|
478,641,781
|
The
accompanying notes are an integral part of these financial
statements.
- 4
-
MORGAN
STANLEY SMITH BARNEY SPECTRUM SELECT L.P.
(formerly,
Morgan Stanley Spectrum Select L.P.)
STATEMENTS
OF CASH FLOWS
(Unaudited)
For the Nine Months Ended September
30,
|
|||
2009
|
2008
|
||
$
|
$
|
||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|||
Net
income (loss)
|
(37,259,807)
|
64,844,633
|
|
Noncash
item included in net income (loss):
|
|||
Net
change in unrealized
|
7,936,673
|
5,832,352
|
|
(Increase)
decrease in operating assets:
|
|||
Restricted
cash
|
(43,455,148)
|
13,977,953
|
|
Net
premiums paid for options purchased
|
(116,160)
|
378,156
|
|
Interest
receivable (MS&Co.)
|
(15,333)
|
721,057
|
|
Increase
(decrease) in operating liabilities:
|
|||
Accrued
brokerage fees (MS&Co.)
|
(723,943)
|
60,095
|
|
Accrued
management fees
|
(270,804)
|
(2,439)
|
|
Accrued
incentive fees
|
(2,429,055)
|
(16,603)
|
|
Net
cash provided by (used for) operating activities
|
(76,333,577)
|
85,795,204
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|||
Cash
received from offering of Units
|
–
|
45,557,203
|
|
Cash
paid for redemptions of Units
|
(109,742,739)
|
(91,407,195)
|
|
Net
cash used for financing activities
|
(109,742,739)
|
(45,849,992)
|
|
Net
increase (decrease) in unrestricted cash
|
(186,076,316)
|
39,945,212
|
|
Unrestricted
cash at beginning of period
|
601,638,653
|
475,137,768
|
|
Unrestricted
cash at end of period
|
415,562,337
|
515,082,980
|
The
accompanying notes are an integral part of these financial
statements.
- 5
-
MORGAN
STANLEY SMITH BARNEY SPECTRUM SELECT L.P.
(formerly,
Morgan Stanley Spectrum Select L.P.)
CONDENSED
SCHEDULES OF INVESTMENTS
September
30, 2009 and December 31, 2008 (Unaudited)
Futures and Forward
Contracts
|
Long
Unrealized
Gain
|
Percentage
of
Net Assets
|
Short Unrealized
Gain/(Loss)
|
Percentage
of
Net Assets
|
Net
Unrealized
Gain/(Loss)
|
$
|
%
|
$
|
%
|
$
|
|
September 30, 2009, Partnership Net Assets: $478,641,781
|
|||||
Commodity
|
4,160,218
|
0.87
|
1,917,742
|
0.40
|
6,077,960
|
Equity
|
875,185
|
0.18
|
(14,175)
|
–
|
861,010
|
Foreign currency
|
4,576,395
|
0.96
|
1,597,514
|
0.33
|
6,173,909
|
Interest rate
|
5,740,307
|
1.20
|
83,060
|
0.02
|
5,823,367
|
Grand
Total:
|
15,352,105
|
3.21
|
3,584,141
|
0.75
|
18,936,246
|
Unrealized
Currency Loss
|
(0.18)
|
(850,255)
|
|||
Total Net Unrealized Gain on Open Contracts
|
18,085,991
|
||||
Options Contracts
|
Fair Value
|
Percentage
of
Net Assets
|
|||
$
|
%
|
||||
Options
purchased on Futures Contracts
|
139,260
|
0.03
|
|||
Options
purchased on Forward Contracts
|
–
|
–
|
|||
Options
written on Futures Contracts
|
–
|
–
|
|||
Options
written on Forward Contracts
|
–
|
–
|
|||
Futures and Forward
Contracts
|
Long
Unrealized
Gain/(Loss)
|
Percentage
of
Net Assets
|
Short Unrealized
Gain/(Loss)
|
Percentage
of
Net Assets
|
Net
Unrealized
Gain/(Loss)
|
$
|
%
|
$
|
%
|
$
|
|
December
31, 2008, Partnership Net Assets: $605,884,378
|
|||||
Commodity
|
838,755
|
0.14
|
11,613,498
|
1.92
|
12,452,253
|
Equity
|
145,512
|
0.02
|
(39,608)
|
(0.01)
|
105,904
|
Foreign currency
|
(318,118)
|
(0.05)
|
453,250
|
0.07
|
135,132
|
Interest rate
|
14,885,639
|
2.46
|
2,078
|
–
|
14,887,717
|
Grand
Total:
|
15,551,788
|
2.57
|
12,029,218
|
1.98
|
27,581,006
|
Unrealized
Currency Loss
|
(0.25)
|
(1,535,242)
|
|||
Total
Net Unrealized Gain on Open Contracts
|
26,045,764
|
The
accompanying notes are an integral part of these financial
statements.
- 6
-
MORGAN
STANLEY SMITH BARNEY SPECTRUM SELECT L.P.
(formerly,
Morgan Stanley Spectrum Select L.P.)
NOTES TO FINANCIAL
STATEMENTS
September
30, 2009
(Unaudited)
The
unaudited financial statements contained herein include, in the opinion of
management, all adjustments necessary for a fair presentation of the financial
condition and results of operations of Morgan Stanley Smith Barney Spectrum
Select L.P. (formerly, Morgan Stanley Spectrum Select L.P.) (the
“Partnership”). The financial statements and condensed notes herein
should be read in conjunction with the Partnership’s Annual Report on Form 10-K
for the fiscal year ending December 31, 2008.
1. Organization
Morgan
Stanley Smith Barney Spectrum Select L.P. (formerly, Morgan Stanley Spectrum
Select L.P.) is a Delaware limited partnership organized in 1991 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 4. Financial
Instruments). The Partnership is one of the Morgan Stanley
Smith Barney Spectrum series of funds, comprised of the Partnership, Morgan
Stanley Smith Barney Spectrum Currency L.P., Morgan Stanley Smith Barney
Spectrum Global Balanced L.P., Morgan Stanley Smith Barney Spectrum Strategic
L.P., and Morgan Stanley Smith Barney Spectrum Technical L.P. (collectively, the
“Spectrum Series”).
- 7
-
MORGAN
STANLEY SMITH BARNEY SPECTRUM SELECT L.P.
(formerly,
Morgan Stanley Spectrum Select L.P.)
NOTES TO FINANCIAL
STATEMENTS (CONTINUED)
Effective
September 29, 2009, Demeter Management LLC (“Demeter”), the general partner of
the Partnership, changed the name of Morgan Stanley Spectrum Select L.P. to
Morgan Stanley Smith Barney Spectrum Select L.P.
The
Partnership 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 or 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 market price of the
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 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 the
option and the premiums received/premiums paid is treated as an unrealized gain
or loss.
The Partnership’s
general partner is Demeter. The commodity brokers are Morgan Stanley
& Co. Incorporated (“MS&Co.”) and Morgan Stanley & Co. International
plc (“MSIP”). MS&Co. also acts as the counterparty on
all trading of foreign currency forward contracts. Morgan
Stanley Capital Group Inc. (“MSCG”) acts as the counterparty on all trading of
options on foreign currency forward contracts. MSIP serves as the
commodity broker
- 8
-
MORGAN
STANLEY SMITH BARNEY SPECTRUM SELECT L.P.
(formerly,
Morgan Stanley Spectrum Select L.P.)
NOTES TO FINANCIAL
STATEMENTS (CONTINUED)
for
trades on the London Metal Exchange (“LME”). Demeter is a wholly-owned
subsidiary of Morgan Stanley Smith Barney Holdings LLC (“MSSB”). MSSB
is majority-owned indirectly by Morgan Stanley and minority-owned indirectly by
Citigroup Inc. MS&Co., MSIP, and MSCG are wholly-owned
subsidiaries of Morgan Stanley. The trading advisors to the Partnership are EMC
Capital Management, Inc., Northfield Trading L.P., Rabar Market Research, Inc.,
Sunrise Capital Management, Inc., Graham Capital Management, L.P., and Altis
Partners (Jersey) Limited (each individually, a “Trading Advisor”, or
collectively, the “Trading Advisors”).
On July
1, 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards (“SFAS”) No. 168, The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles
(“GAAP”), also known as FASB Accounting Standards Codification (“ASC”)
105-10, Generally Accepted
Accounting Principles (“ASC 105-10” or the
“Codification”). ASC 105-10 established the exclusive authoritative
reference for U.S. GAAP for use in financial statements except for Securities
and Exchange Commission (“SEC”) rules and interpretive releases, which are also
authoritative GAAP for SEC registrants. The Codification supersedes
all existing non-SEC accounting and reporting standards. The
Codification became the single source of authoritative accounting principles
generally accepted in the United States and is effective for financial
statements issued for interim and annual periods ending after September 15,
2009.
2. Related Party
Transactions
|
The
Partnership’s cash is on deposit with MS&Co. and MSIP in futures, forward
and options trading accounts to meet margin requirements as
needed. MS&Co. pays the Partnership at each month end interest
income on 80% of
- 9
-
MORGAN
STANLEY SMITH BARNEY SPECTRUM SELECT L.P.
(formerly,
Morgan Stanley Spectrum Select L.P.)
NOTES TO FINANCIAL
STATEMENTS (CONTINUED)
the the funds on deposit with the commodity
brokers at a rate equal to the monthly average of the 4-week U.S. Treasury bill
discount rate during such month. The Partnership
pays
brokerage fees to MS&Co. MSCG acts as the
counterparty on all trading of options on foreign currency forward
contracts.
3. 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 the Partnership’s revenues or expenses for income tax
purposes. The Partnership files U.S. federal and state tax
returns.
ASC 740-10, Income
Taxes (which incorporates former FASB No. 109 and FASB Interpretation No.
48, 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 2005 through 2008 tax years generally
remain subject to examination by U.S. federal and most state tax
authorities.
4.
|
Financial
Instruments
|
The Partnership trades Futures Interests. Futures and forwards
represent contracts for delayed delivery of an instrument at a specified date
and price. Futures Interests are
open commitments until settlement date, at which
- 10
-
MORGAN
STANLEY SMITH BARNEY SPECTRUM SELECT L.P.
(formerly,
Morgan Stanley Spectrum Select L.P.)
NOTES TO FINANCIAL
STATEMENTS (CONTINUED)
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 net
unrealized gains or losses 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. 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. 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
shall be 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.
- 11
-
MORGAN
STANLEY SMITH BARNEY SPECTRUM SELECT L.P.
(formerly,
Morgan Stanley Spectrum Select L.P.)
NOTES TO FINANCIAL
STATEMENTS (CONTINUED)
The Partnership’s contracts are accounted for on a trade-date basis and marked
to market on a daily basis. The Partnership accounts for its
derivative investments as required by ASC
815-10-15, Derivative and Hedging
(formerly, SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities). A derivative is defined
as a financial instrument or other
contract that has all three of the following characteristics:
1)
|
One
or more underlying notional amounts or payment
provisions;
|
2)
|
Requires
no initial net investment or a smaller initial net investment than would
be required relative to changes in market
factors;
|
3)
|
Terms
require or permit net settlement.
|
Generally, derivatives include futures, forward, 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, reported as a component of
“Trading Equity” on the Statements of Financial Condition, and their longest
contract maturities were as
follows:
Net Unrealized Gains/(Losses) on Open
Contracts
|
Longest Maturities
|
||||
Date
|
Exchange-Traded
|
Off-Exchange-Traded
|
Total
|
Exchange-Traded
|
Off-Exchange-Traded
|
$
|
$
|
$
|
|||
Sep.
30, 2009
|
16,209,879
|
1,876,112
|
18,085,991
|
Sep.
2011
|
Dec.
2009
|
Dec.
31, 2008
|
27,202,139
|
(1,156,375)
|
26,045,764
|
Jun.
2010
|
Mar.
2009
|
- 12
-
MORGAN
STANLEY SMITH BARNEY SPECTRUM SELECT L.P.
(formerly,
Morgan Stanley Spectrum Select L.P.)
NOTES TO FINANCIAL
STATEMENTS (CONTINUED)
The Partnership has credit risk associated with counterparty
non-performance. As of the date of the financial statements, the
credit risk associated with the instruments in which the
Partnership
trades is limited to the unrealized gain amounts reflected in the Partnership’s
Statements of Financial Condition.
The Partnership also has credit risk because MS&Co., MSIP, and/or MSCG act
as the futures commission merchants or the counter-parties, with respect to most
of the Partnership’s
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 the
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 (“CFTC”), to segregate from their own assets, and for
the sole benefit of their
commodity customers, all funds held by them with respect to exchange-traded
futures, 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 $483,983,534 and $637,596,962 at September 30, 2009
and December 31, 2008, respectively. With respect to the 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,
the 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
- 13
-
MORGAN
STANLEY SMITH BARNEY SPECTRUM SELECT L.P.
(formerly,
Morgan Stanley Spectrum Select L.P.)
NOTES TO FINANCIAL
STATEMENTS (CONTINUED)
held at MS&Co. With respect to those off-exchange-traded forward
currency contracts, the Partnership is at risk to the ability of MS&Co., the
sole counterparty on all such contracts, to
perform. With
respect to those off-exchange-traded forward currency options contracts, the
Partnership is at risk to the ability of MSCG, the sole counterparty on all such
contracts, to
perform. The Partnership has a netting agreement with each
counterparty. These agreements, which seek to reduce both the
Partnership’s and the counterparties’ exposure on off-
exchange-traded forward currency contracts, including options on such contracts,
should materially decrease the Partnership’s credit risk in the event of
MS&Co.’s or MSCG’s
bankruptcy or insolvency.
The futures, forwards and options on such contracts traded by the Partnership
involve varying degrees of related market risk. Market risk is often
dependent upon changes in the level
or volatility of interest rates, exchange rates, and prices of financial
instruments and commodities, factors that result in frequent changes in the fair
value of the Partnership’s
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 and forward
currency options contracts are settled upon termination of the
contract. However, the 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 MS&Co.
- 14
-
MORGAN
STANLEY SMITH BARNEY SPECTRUM SELECT L.P.
(formerly,
Morgan Stanley Spectrum Select L.P.)
NOTES TO FINANCIAL
STATEMENTS (CONTINUED)
5. Derivative and
Hedging
|
ASC
815-10-65, Derivative and
Hedging (formerly, SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities – an amendment of SFAS No.
133), which was issued in March 2008, is intended to improve
financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand how
those Instruments and activities are accounted for; how and why they are used;
and their effects on a Partnership’s financial position, financial performance,
and cash flows. ASC 815-10-65 is effective as of January 1, 2009, for
the Partnership.
The
Partnership’s objective is to profit from speculative trading in Futures
Interests. Therefore, the Trading Advisors for the Partnership will
take speculative positions in Futures Interests where they feel the best profit
opportunities exist for their trading strategy. As such, the 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. In regards to foreign
currency forward trades, each notional quantity amount has been converted to an
equivalent contract based upon an industry convention.
The
following table summarizes the valuation of the Partnership’s investments as
required by ASC 815-10-65 as of September 30, 2009 and reflects the contracts
outstanding at such time.
- 15
-
MORGAN
STANLEY SMITH BARNEY SPECTRUM SELECT L.P.
(formerly,
Morgan Stanley Spectrum Select L.P.)
NOTES TO FINANCIAL
STATEMENTS (CONTINUED)
The
Effect of Trading Activities on the Statements of Financial Condition as
of September 30, 2009:
|
Futures and Forward
Contracts
|
Long
Unrealized
Gain
|
Long
Unrealized
Loss
|
Short
Unrealized
Gain
|
Short
Unrealized
Loss
|
Net Unrealized
Gain/(Loss)
|
Total number
of outstanding
contracts
(absolute
quantity)
|
$
|
$
|
$
|
$
|
$
|
||
Commodity
|
7,382,239
|
(3,222,021)
|
2,705,329
|
(787,587)
|
6,077,960
|
6,400
|
Equity
|
1,746,181
|
(870,996)
|
–
|
(14,175)
|
861,010
|
4,072
|
Foreign
currency
|
5,101,205
|
(524,810)
|
1,969,945
|
(372,431)
|
6,173,909
|
11,438
|
Interest
rate
|
5,815,510
|
(75,203)
|
83,060
|
–
|
5,823,367
|
9,878
|
Total
|
20,045,135
|
(4,693,030)
|
4,758,334
|
(1,174,193)
|
18,936,246
|
|
Unrealized
currency loss
|
(850,255)
|
|||||
Total
net unrealized gain on open contracts
|
18,085,991
|
Option
Contracts at Fair Value
|
||||||
Options
purchased
|
$139,260
|
|||||
Options
written
|
–
|
The
following tables summarize the net trading results of the Partnership during the
three and nine month periods as required by the disclosures about Derivative and
Hedging Topics of ASC 815-10-65.
The
Effect of Trading Activities on the Statements of Operations for the Three and
Nine Months Ended September 30, 2009 included in Total Trading
Results:
For
the Three Months
|
For
the Nine Months
|
|
Ended September, 2009
|
Ended September 30, 2009
|
|
Type of Instrument
|
$
|
$
|
Commodity
|
4,875,653
|
(3,215,963)
|
Equity
|
18,802,589
|
19,718,191
|
Foreign
currency
|
4,142,651
|
(7,056,575)
|
Interest
rate
|
(402,204)
|
(15,081,569)
|
Unrealized
currency gain
|
225,755
|
684,987
|
Total
|
27,644,444
|
(4,950,929)
|
Line
Items on the Statements of Operations for the Three and Nine Months Ended
September 30, 2009:
|
For
the Three Months
|
For
the Nine Months
|
|
Ended September 30, 2009
|
Ended September 30, 2009
|
|
Trading Results
|
$
|
$
|
Realized
|
14,806,393
|
2,985,744
|
Net
change in unrealized
|
12,838,051
|
(7,936,673)
|
Total
Trading Results
|
27,644,444
|
(4,950,929)
|
- 16
-
MORGAN
STANLEY SMITH BARNEY SPECTRUM SELECT L.P.
(formerly,
Morgan Stanley Spectrum Select L.P.)
NOTES TO FINANCIAL
STATEMENTS (CONTINUED)
6. Fair Value Measurements and
Disclosures
As
defined by ASC 820-10-55, Fair
Value Measurements and Disclosures (formerly, SFAS No. 157, Fair Value Measurements),
fair value is the amount that would be recovered when an asset is sold or an
amount paid to transfer a liability, in an ordinary transaction, between market
participants at the measurement date (exit price). Market price
observability is impacted by a number of factors, including the types of
investments, the characteristics specific to the investment, and the state of
the market (including the existence and the transparency of transactions between
market participants). Investments with readily available actively
quoted prices in an ordinary market will generally have a higher degree of
market price observability and a lesser degree of judgment used in measuring
fair value.
ASC
820-10-55 requires use of a fair value hierarchy that prioritizes the inputs to
valuation techniques used to measure fair value into 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 quoted prices for similar investments, interest rates, credit risk);
and Level 3 - unobservable inputs for the asset or liability (including the
Partnership’s own assumptions used in determining the fair value of
investments).
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
- 17
-
MORGAN
STANLEY SMITH BARNEY SPECTRUM SELECT L.P.
(formerly,
Morgan Stanley Spectrum Select L.P.)
NOTES TO FINANCIAL
STATEMENTS (CONTINUED)
significant
to the fair value measurement. The Partnership’s 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
following tables summarize the valuation of the Partnership’s investments by the
above ASC 820-10-55 fair value hierarchy as of September 30, 2009 and December
31, 2008:
September 30,
2009
|
Quoted
Prices in Active Markets for Identical Assets
(Level 1)
|
Significant
Other Observable Inputs
(Level 2)
|
Significant
Unobservable Inputs
(Level 3)
|
Total
|
||
$
|
$
|
$
|
|||
Assets
|
|||||
Net
unrealized gain on open contracts
|
16,209,879
|
1,876,112
|
n/a
|
18,085,991
|
|
Options
purchased
|
139,260
|
–
|
n/a
|
139,260
|
December 31,
2008
|
Quoted
Prices in Active Markets for Identical Assets
(Level 1)
|
Significant
Other Observable Inputs
(Level 2)
|
Significant
Unobservable Inputs
(Level 3)
|
Total
|
||
$
|
$
|
$
|
|||
Assets
|
|||||
Net
unrealized gain (loss) on open contracts
|
27,202,139
|
(1,156,375)
|
n/a
|
26,045,764
|
- 18
-
MORGAN
STANLEY SMITH BARNEY SPECTRUM SELECT L.P.
(formerly,
Morgan Stanley Spectrum Select L.P.)
NOTES TO FINANCIAL
STATEMENTS (CONTINUED)
7. Recent Accounting
Pronouncements
(a) Fair Value
Measurements
ASC
820-10-65, Fair Value
Measurements (formerly, FASB Staff Position (“FSP”) SFAS No. 157-4, Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly), was issued
in April 2009. ASC 820-10-65
provides additional guidance for determining fair value and requires new
disclosures regarding the categories of fair value instruments, as well as the
inputs and valuation techniques utilized to determine fair value and any changes
to the inputs and valuation techniques during the period. ASC
820-10-65 is effective for the interim and annual periods ending after June 15,
2009. The adoption of ASC 820-10-65 did not have a material impact on
the Partnership’s financial statements.
(b) Financial
Instruments
ASC
825-10-65, Financial
Instruments (formerly, FSP SFAS No. 107-1 and Accounting Principals Board
No. 28-1, Interim Disclosures
About Fair Value of Financial Instruments), was issued in April
2009. ASC 825-10-65 requires fair value disclosures of financial
instruments on a quarterly basis, as well as new disclosures regarding the
methodology and significant assumptions underlying the fair value measures and
any changes to the methodology and assumptions during the reporting
period. ASC 825-10-65 is effective for the interim and annual periods
ending after June 15, 2009. The adoption of ASC 825-10-65 did not
have a material impact on the Partnership’s financial statements.
- 19
-
MORGAN
STANLEY SMITH BARNEY SPECTRUM SELECT L.P.
(formerly,
Morgan Stanley Spectrum Select L.P.)
NOTES TO FINANCIAL
STATEMENTS (CONCLUDED)
(c) Subsequent
Events
The
Partnership adopted ASC 855-10, Subsequent Events (formerly,
SFAS No. 165, Subsequent
Events), which was issued in May 2009. ASC 855-10 establishes
general standards of accounting for and disclosure of events that occur after
the balance sheet date but before financial statements are issued or are
available to be issued. It requires the disclosure of the date
through which an entity has evaluated subsequent events and the basis for that
date; that is, whether that date represents the date the financial statements
were issued or were available to be issued. ASC 855-10 is effective
for the interim and annual periods ending after June 15,
2009. Management has performed its evaluation of subsequent events
through November 13, 2009, the date these financial statements were issued, and
has determined that there were no subsequent events requiring adjustment or
disclosure in the financial statements.
8. Restricted and
Unrestricted Cash
|
As
reflected on the Partnership’s 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 LME positions. All of these amounts are
maintained separately. Cash that is not classified as restricted cash
is therefore classified as unrestricted cash.
– 20
–
Item
2. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
|
RESULTS OF
OPERATIONS
Liquidity. The
Partnership deposits its assets with MS&Co. and MSIP as commodity brokers in
separate futures, forward and options trading accounts established for each
Trading Advisor. Such assets are used as margin to engage in trading
and may be used as margin solely for the Partnership’s trading. The
assets are held in either non-interest bearing bank accounts or in securities
and instruments permitted by the CFTC for investment of customer segregated or
secured funds. Since the Partnership’s sole purpose is to trade in
futures, forwards and options, it is expected that the Partnership will continue
to own such liquid assets for margin purposes.
The
Partnership’s investment in futures, forwards and options may, from time to
time, be illiquid. Most U.S. futures exchanges limit fluctuations in
prices during a single day by regulations referred to as “daily price
fluctuations limits” or “daily limits”. Trades may not be executed at
prices beyond the daily limit. If the price for a particular futures
or options contract has increased or decreased by an amount equal to the daily
limit, positions in that futures or options contract can neither be taken nor
liquidated unless traders are willing to effect trades at or within the
limit. Futures prices have occasionally moved the daily limit for
several consecutive days with little or no trading. These market
conditions could prevent the Partnership from promptly liquidating their futures
or options contracts and result in restrictions on redemptions.
There is
no limitation on daily price movements in trading forward contracts on foreign
currencies. The markets for some world currencies have low trading
volume and are illiquid, which may prevent the Partnership from trading in
potentially profitable markets or prevent the Partnership from promptly
liquidating unfavorable
- 21
-
positions
in such markets, subjecting it to substantial losses. Either of these
market conditions could result in restrictions on redemptions. For
the periods covered by this report, illiquidity has not materially affected the
Partnership’s assets.
There are
no known material trends, demands, commitments, events, or uncertainties at the
present time that are reasonably likely to result in the Partnership’s liquidity
increasing or decreasing in any material way.
Capital
Resources. The Partnership does not have, nor does it expect
to have, any capital assets. Redemptions of units of limited
partnership interest (“Unit(s)”) in the future will affect the amount of funds
available for investments in futures, forwards and options in subsequent
periods. It is not possible to estimate the amount, and therefore the impact, of
future outflows of Units.
There are
no known material trends, favorable or unfavorable, that would affect, nor any
expected material changes to the Partnership’s capital resource arrangements at
the present time.
Off-Balance Sheet
Arrangements and Contractual Obligations. The Partnership does
not have any off-balance sheet arrangements, nor does it have contractual
obligations or commercial commitments to make future payments that would affect
its liquidity or capital resources.
- 22
-
Results of
Operations
General. The
Partnership’s results depend on the Trading Advisors and the ability of each
Trading Advisor’s trading program to take advantage of price movements in the
futures, forward and options markets. The following presents a
summary of the Partnership’s operations for the three and nine month periods
ended September 30, 2009 and 2008, and a general discussion of its trading
activities during each period. It is important to note, however, that the
Trading Advisors trade in various markets at different times and that prior
activity in a particular market does not mean that such market will be actively
traded by the Trading Advisors or will be profitable in the
future. Consequently, the results of operations of the Partnership
are difficult to discuss other than in the context of the Trading Advisors’
trading activities on behalf of the Partnership during the period in
question. Past performance is no guarantee of future
results.
The
Partnership’s results of operations set forth in the Financial Statements on
pages 2 through 20 of this report are prepared in accordance with U.S. GAAP,
which require the use of certain accounting policies that affect the amounts
reported in these Financial Statements, including the following: the
contracts the Partnership trades are accounted for on a trade-date basis and
marked to market on a daily basis. The difference between their
original contract value and market value is recorded on the Statements of
Operations as “Net change in unrealized trading profit (loss)” for open
(unrealized) contracts, and recorded as “Realized trading profit (loss)” when
open positions are closed out. The sum of these amounts constitutes
the Partnership’s trading results. The market value of a futures
contract is the settlement price on the exchange on which that futures contract
is traded on a particular day. The value of a foreign currency forward contract
is based on the spot rate as of the close of business. Interest
income, as well as management fees, incentive fees, and brokerage fees of the
Partnership are recorded on an accrual basis.
- 23
-
For the Three and Nine
Months Ended September 30, 2009
The
Partnership recorded total trading results including interest income totaling
$27,758,217 and expenses totaling $9,830,194, resulting in net income of
$17,928,023 for the three months ended September 30, 2009. The
Partnership’s net asset value per Unit increased from $ 36.81 at June 30, 2009,
to $38.22 at September 30, 2009.
The most
significant trading gains of approximately 4.0% were experienced in the global
stock index sector throughout a majority of the quarter from long positions in
European, U.S., Hong Kong, and Taiwanese equity index futures as prices
increased due to positive economic data and increased merger and acquisition
activity in the technology sector. Within the metals sector, gains of
approximately 1.3% were achieved primarily during July and August from long
futures positions in copper, zinc, and lead as prices rose following news of an
economic expansion in China during the second quarter of 2009, thereby spurring
speculation that China’s demand for base metals might
rise. Elsewhere, gains were experienced from long positions in silver
and gold futures as prices rose during September amid a decline in the value of
the U.S. dollar. Additional gains of 0.8% were recorded within the
currency sector primarily during September from long positions in the Australian
dollar, New Zealand dollar, and Japanese yen versus the U.S. dollar as the value
of the U.S. dollar moved lower against these currencies on speculation that the
U.S. Federal Reserve might keep borrowing rates low after the U.S. central bank
indicated that it remained committed to its quantitative easing
program. Meanwhile, short positions in the British pound versus the
Australian dollar achieved gains, primarily during September, as the value of
the Australian dollar moved higher in the wake of stronger gold
prices. Smaller gains of approximately 0.8% were experienced in the
agricultural complex throughout a majority of the quarter from long
futures
- 24
-
positions
in sugar as prices moved sharply higher amid speculation that a global
production deficit might continue for two consecutive years, triggered by
increasing demand from India, the world’s largest consumer. Sugar
prices continued to climb throughout August, reaching a 28-year high, on
deepening concerns that unfavorable weather in producing countries and rising
import demand might worsen the global supply shortfall. Elsewhere in
the agricultural complex, short positions in wheat futures resulted in gains as
prices declined during August and September amid favorable weather forecasts in
the U.S. Midwest. Smaller gains were also recorded from long futures
positions in cocoa, primarily during July and September, as prices rose
following news of a smaller-than-average crop this year and a decline in global
inventories. A portion of the Partnership’s gains during the quarter
was offset by losses of approximately 1.1% incurred in the energy markets during
July from short futures positions in crude oil and its related products as
prices moved higher during the latter half of the month amid
better-than-expected quarterly earnings reports and positive economic data,
which spurred optimism that energy demand might rebound. During
August, newly established long futures positions in crude oil and its related
products recorded additional losses as prices reversed lower due to
above-average U.S. stockpiles. Smaller losses of approximately 0.1%
were recorded in the global interest rate sector, primarily during July, from
short positions in U.S., European, and Pacific Rim fixed-income futures as
prices moved higher on investor sentiment that the slow pace of the global
economic recovery and signs of moderate inflation might lead central banks in
these regions to maintain low interest rates in the near
term. Additional losses were recorded during August from newly
established long positions in European fixed-income futures as prices reversed
lower at the beginning of the month amid a rise in the European equity markets,
thus reducing demand for the relative “safety” of government bonds.
- 25
-
The
Partnership recorded total trading results including interest income totaling
$(4,572,040) and expenses totaling $32,687,767, resulting in a net loss of
$37,259,807 for the nine months ended September 30, 2009. The
Partnership’s net asset value per Unit decreased from $40.80 at December 31,
2008, to $38.22 at September 30, 2009.
The most
significant trading losses of approximately 2.9% were recorded in the global
interest rate sector during January, March, and April from long positions in
U.S., European, and Japanese fixed-income futures as prices dropped following
news that debt sales might increase as governments around the world boosted
spending in an effort to ease the deepening economic
slump. Additional losses were recorded in June from long positions in
short-term U.S. and European interest rate futures as prices declined amid
rising investor confidence due to better-than-expected economic
data. Newly established short positions in European, U.S., and
Japanese fixed-income futures resulted in further losses, primarily during July,
as prices moved higher on investor sentiment that the slow pace of the global
economic recovery and signs of moderate inflation might lead central banks in
these regions to maintain low interest rates in the near
term. Additional losses were recorded during August from newly
established long positions in European fixed-income futures as prices reversed
lower at the beginning of the month amid a rise in the European equity markets,
thus reducing demand for the relative “safety” of government
bonds. Within the energy sector, losses of approximately 0.7% were
incurred during July from short futures positions in crude oil and its related
products as prices moved higher during the latter half of the month amid
better-than-expected quarterly earnings reports and positive economic data,
which spurred optimism that energy demand may rebound. During August,
newly established long futures
- 26
-
positions
in crude oil and its related products recorded additional losses as prices
reversed lower due to above-average U.S. stockpiles. Additional
losses of approximately 0.4% were experienced in the currency sector, primarily
during March, from short positions in the Swiss franc and euro versus the U.S.
dollar as the value of the U.S. dollar decreased relative to most of its rivals
following the U.S. Federal Reserve’s surprise plans to begin a more aggressive
phase of quantitative easing and economic stimulus spending. Additional losses
were recorded during June and July from long positions in the Swiss franc and
euro versus the U.S. dollar as the value of the U.S. dollar reversed higher
against these currencies following better-than-expected U.S. payrolls and
durable goods data. Elsewhere, long positions in the Mexican peso
versus the U.S. dollar incurred losses, primarily during July and August, as the
value of the Mexican peso declined on concerns that Mexico might take longer to
recover from a recession than investors previously estimated. Long positions in
the British pound versus the U.S. dollar also experienced losses as the British
pound fell during August and September on news that U.K. consumer confidence
rose to the highest level in more than a year and Bank of England officials
indicated inflation might remain low. Smaller losses of approximately
0.3% were recorded in the agricultural complex primarily during March from short
futures positions in the corn and coffee as prices rose on speculation that
government bailouts might help revive the world economy and boost demand for
these commodities. Coffee futures prices reversed lower in June and
fell throughout a majority of the third quarter amid expectations of higher
global output due to favorable weather conditions in the world’s major growing
regions, thus resulting in losses for long positions. Elsewhere,
losses were recorded from long and short futures positions in soybeans as prices
moved without consistent direction during July and August amid conflicting
reports regarding supply and demand. A portion of the Partnership’s
losses in the first nine months of the year was offset by gains of approximately
3.2% achieved in the global stock index sector throughout July,
August,
- 27
-
and
September from long positions in European, Hong Kong, and U.S. equity index
futures as prices increased due to positive economic data and increased merger
and acquisition activity in the technology sector. Within the metals
complex, additional gains of approximately 0.5% were experienced primarily
during July and August from long futures positions in copper as prices rose
following news of an economic expansion in China during the second quarter of
2009, thereby spurring speculation that China’s demand for base metals might
rise.
For the Three and Nine
Months Ended September 30, 2008
The
Partnership recorded total trading results including interest income totaling
$(43,215,339) and expenses totaling $12,064,309, resulting in a net loss of
$55,279,648 for the three months ended September 30, 2008. The
Partnership’s net asset value per Unit decreased from $38.63 at June 30, 2008,
to $35.08 at September 30, 2008.
The most
significant trading losses of approximately 3.3% were incurred within the energy
markets, primarily during July, from long futures positions in crude oil and its
related products as prices reversed lower amid signs that the U.S. economic
slump might extend into 2009 and curb future energy
demand. Meanwhile, long positions in natural gas futures resulted in
losses as prices sharply decreased in July amid rising inventories and news that
the Atlantic hurricane season's first storm had avoided the gas-producing fields
in the Gulf of Mexico. Within the currency sector, losses of approximately 3.2%
were experienced during August and September from long positions in the euro,
Swiss franc, South African rand, and Brazilian real versus the U.S. dollar as
the value of the U.S. dollar reversed higher against most of its rivals in
August after the U.S. Commerce Department
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-
reported
a larger than previously estimated increase in Gross Domestic Product during the
second quarter of 2008. The U.S. dollar then moved sharply higher
against these currencies during September in tandem with surging U.S. Treasury
prices amid a worldwide "flight-to-quality". Additional losses of approximately
1.8% were incurred within the agricultural sector throughout the majority of the
quarter from long futures positions in the soybean complex and corn as prices
declined on news that favorable weather might improve crop conditions in the
U.S. Midwest. Prices also moved lower amid speculation that a slowing
U.S. economy would reduce demand for alternative biofuels. Smaller
losses were recorded in July from long positions in cocoa futures as prices
decreased following news of a rise in exports from the Ivory Coast, the world’s
largest cocoa producer. Finally, losses were incurred, primarily during July,
from long positions in coffee futures as prices moved lower following news that
Brazil, the world’s largest grower, had accelerated exports. Further losses of
approximately 1.1% were experienced within the global interest rate sector,
primarily during July and August, from short positions in European fixed-income
futures as prices increased amid a decline in the global equity markets and
growing speculation that the European Central Bank would not raise interest
rates due to weak economic growth. Within the metals sector, losses of
approximately 1.0% were recorded during July from long positions in gold futures
as prices fell due to a rise in the value of the U.S. dollar. Newly established
short positions in gold futures incurred further losses as prices reversed
sharply higher during September on "safe haven" buying amid global credit-market
turmoil and uncertainty regarding the U.S. financial
system. Elsewhere, long positions in copper and aluminum futures
experienced losses, primarily during July and August, as prices declined amid
speculation that slowing economic growth would reduce demand for the base
metals. A portion of the Partnership’s losses during the quarter was offset by
gains of approximately 3.1% experienced in the global stock index sector,
primarily during September, from short positions in U.S., European, and Pacific
Rim
- 29
-
equity
index futures as prices moved sharply lower amid unprecedented U.S. financial
market volatility and turmoil. Furthermore, global equity prices
plunged after the U.S. House of Representatives rejected the Economic
Stabilization Act of 2008, which would have allowed the U.S. Treasury to
purchase troubled mortgage-backed securities from U.S. financial
institutions.
The
Partnership recorded total trading results including interest income totaling
$110,870,400 and expenses totaling $46,025,767, resulting in net income of
$64,844,633 for the nine months ended September 30, 2008. The
Partnership’s net asset value per Unit increased from $31.24 at December 31,
2007, to $35.08 at September 30, 2008.
The most
significant trading gains of approximately 6.9% were recorded in the energy
sector throughout a majority of the first half of the year from long futures
positions in crude oil and its related products as prices moved higher amid
increasing global supply concerns and strong demand in Asia. Furthermore,
futures prices for crude oil and its related products were also pressured higher
due to continued weakness in the U.S. dollar. Within the global equity markets,
gains of approximately 5.7% were achieved during January, February, March, and
June from short positions in European and Pacific Rim equity index futures as
prices decreased on concerns that mounting losses linked to U.S. sub-prime
mortgage investments would continue to erode corporate earnings and curb global
economic growth. Additional gains were recorded during September from
short positions in U.S., European, and Pacific Rim equity index futures as
prices continued to move sharply lower amid unprecedented U.S. financial market
volatility and turmoil in light of the credit crisis. Gains of approximately
3.7% were experienced within the agricultural sector, primarily during January
and February, from long positions in wheat futures as prices increased to a
record high amid diminishing stockpiles and consistently
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-
rising
global demand. Further gains were achieved during January, February, and June
from long positions in corn futures as prices moved higher on supply concerns
and rising demand for alternative biofuels. Meanwhile, long futures
positions in the soybean complex resulted in gains primarily during June as
prices increased after a government report showed a rise in demand for U.S.
supplies. Elsewhere, gains were experienced from long positions in cocoa futures
primarily during January, February, and June as prices moved higher amid supply
disruptions in the Ivory Coast. Within the global interest rate
sector, gains of approximately 2.8% were recorded primarily during January and
February from long positions in U.S. fixed-income futures as prices moved higher
amid a sharp decline in global equity prices and fears of a recession in the
United States. During May and June, additional gains were recorded
from short positions in European fixed-income futures as prices decreased after
the European Central Bank left its benchmark interest rate unchanged at 4% and
signaled it was considering raising borrowing costs in July in order to combat
accelerating inflation in the Euro-Zone. Smaller gains of 0.9% were
experienced within the metals sector, primarily during January and February,
from long positions in platinum and silver futures as prices moved higher amid
continued uncertainty in the direction of the U.S. dollar and further "safe
haven" buying due to weakness in global equity markets. Meanwhile, short
positions in nickel futures resulted in gains during May and September as prices
fell amid rising inventories and speculation that a slowing global economy would
reduce demand for the base metals. A portion of the Partnership’s gains in the
first nine months of the year was offset by losses of approximately 0.2%
incurred within the currency sector, primarily during June, July, August, and
September, from both short and long positions in the Canadian dollar versus the
U.S. dollar as the value of the Canadian dollar moved without consistent
direction following conflicting economic data out of Canada. Meanwhile, short
positions in the New Zealand dollar versus the U.S. dollar incurred losses,
primarily during June, as the value of the New Zealand
- 31
-
dollar
moved higher against the U.S. dollar amid rising commodity prices. Additional
losses were recorded during the latter half of September from short positions in
the New Zealand dollar versus the U.S. dollar as the value of the U.S. dollar
moved lower on concerns that a U.S. proposal to buy troubled assets from
financial institutions would widen the U.S. budget
deficit. Elsewhere, losses were incurred, primarily during August,
from long positions in the South African rand versus the U.S. dollar as the
value of the U.S. dollar reversed higher against most of its rivals after the
aforementioned weak U.S. economic data, as well as in response to a worldwide
"flight-to-quality".
|
-
32 -
|
Item
3.
|
QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
Introduction
The
Partnership is a commodity pool engaged primarily in the speculative trading of
futures, forwards and options. The market-sensitive instruments held
by the Partnership are acquired for speculative trading purposes only and, as a
result, all or substantially all of the Partnership’s assets are at risk of
trading loss. Unlike an operating company, the risk of
market-sensitive instruments is inherent to the primary business activity of the
Partnership.
The
futures, forwards and options traded by the Partnership involve varying degrees
of related market risk. Market risk is often dependent upon changes
in the level or volatility of interest rates, exchange rates, and prices of
financial instruments and commodities, factors that result in frequent changes
in the fair value of the Partnership’s 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. However, the 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
MS&Co.
The
Partnership’s total market risk may increase or decrease as it is influenced by
a wide variety of factors, including, but not limited to, the diversification
among the Partnership’s open positions, the volatility present within the
markets, and the liquidity of the markets.
- 33
-
The face
value of the market sector instruments held by the Partnership is typically many
times the applicable margin requirements. Margin requirements
generally range between 2% and 15% of contract face
value. Additionally, the use of leverage causes the face value of the
market sector instruments held by the Partnership typically to be many times the
total capitalization of the Partnership.
The
Partnership’s past performance is no guarantee of its future
results. Any attempt to numerically quantify the Partnership’s market
risk is limited by the uncertainty of their speculative trading. The
Partnership’s speculative trading and use of leverage may cause future losses
and volatility (i.e.,
“risk of ruin”) that far exceed the Partnership’s experiences to date under the
“Partnership’s Value at Risk in Different Market Sectors” section and
significantly exceed the Value at Risk (“VaR”) tables disclosed.
Limited
partners will not be liable for losses exceeding the current net asset value of
their investment.
Quantifying the
Partnership’s Trading Value at Risk
The
following quantitative disclosures regarding the Partnership’s market risk
exposures contain “forward-looking statements” within the meaning of the safe
harbor from civil liability provided for such statements by the Private
Securities Litigation Reform Act of 1995 (set forth in Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934). All quantitative disclosures in this section are deemed to be
forward-looking statements for purposes of the safe harbor, except for
statements of historical fact.
- 34
-
The
Partnership accounts for open positions on the basis of mark to market
accounting principles. Any loss in the market value of the
Partnership’s open positions is directly reflected in the Partnership’s earnings
and cash flow.
The
Partnership’s risk exposure in the market sectors traded by the Trading Advisors
is estimated below in terms of VaR. The Partnership estimates VaR using a model
based upon historical simulation (with a confidence level of 99%) which involves
constructing a distribution of hypothetical daily changes in the value of a
trading portfolio. The VaR model takes into account linear exposures
to risk including equity and commodity prices, interest rates, foreign exchange
rates, and correlation among these variables. The hypothetical changes in
portfolio value are based on daily percentage changes observed in key market
indices or other market factors (“market risk factors”) to which the portfolio
is sensitive. The one-day 99% confidence level of the Partnership’s
VaR corresponds to the negative change in portfolio value that, based on
observed market risk factors, would have been exceeded once in 100 trading days,
or one day in 100. VaR typically does not represent the worst case
outcome. Demeter uses approximately four years of daily market
data (1,000 observations) and re-values its portfolio (using delta-gamma
approximations) for each of the historical market moves that occurred over this
time period. This generates a probability distribution of daily
“simulated profit and loss” outcomes. The VaR is the appropriate
percentile of this distribution. For example, the 99% one-day VaR
would represent the 10th worst outcome from Demeter’s simulated profit and loss
series.
The
Partnership’s VaR computations are based on the risk representation of the
underlying benchmark for each instrument or contract and do not distinguish
between exchange and non-exchange dealer-based instruments. They are also not
based on exchange and/or dealer-based maintenance margin
requirements.
- 35
-
VaR
models, including the Partnership’s, are continually evolving as trading
portfolios become more diverse and modeling techniques and systems capabilities
improve. Please note that the VaR model is used to numerically
quantify market risk for historic reporting purposes only and is not utilized by
either Demeter or the Trading Advisors in their daily risk management
activities. Please further note that VaR as described above may not
be comparable to similarly-titled measures used by other entities.
The Partnership’s Value at
Risk in Different Market Sectors
The
following table indicates the VaR associated with the Partnership’s open
positions as a percentage of total net assets by primary market risk category at
September 30, 2009 and 2008. At September 30, 2009 and 2008, the Partnership’s
total capitalization was approximately $479 million and $546 million,
respectively.
Primary
Market
|
September
30, 2009
|
September
30, 2008
|
Risk Category
|
Value at Risk
|
Value at Risk
|
Equity
|
(2.48)%
|
(0.28)%
|
Currency
|
(0.98)
|
(0.12)
|
Interest
Rate
|
(0.86)
|
(0.21)
|
Commodity
|
(1.55)
|
(0.54)
|
Aggregate
Value at Risk
|
(3.73)%
|
(0.81)%
|
The VaR
for a market category represents the one-day downside risk for the aggregate
exposures associated with this market category. The Aggregate Value
at Risk listed above represents the VaR of the Partnership’s open positions
across all the market categories, and is less than the sum of the VaRs for all
such market categories due to the diversification benefit across asset
classes.
- 36
-
Because
the business of the Partnership is the speculative trading of futures, forwards
and options on such contracts, the composition of its trading portfolio can
change significantly over any given time period, or even within a single trading
day. Such changes could positively or negatively materially impact
market risk as measured by VaR.
The table
below supplements the quarter-end VaR set forth above by presenting the
Partnership’s high, low, and average VaR, as a percentage of total net assets
for the four quarter-end reporting periods from October 1, 2008, through
September 30, 2009.
Primary Market Risk
Category
|
High
|
Low
|
Average
|
Equity
|
(2.48)%
|
(0.03)%
|
(0.89)%
|
Currency
|
(0.98)
|
(0.10)
|
(0.47)
|
Interest
Rate
|
(0.86)
|
(0.25)
|
(0.56)
|
Commodity
|
(1.55)
|
(0.27)
|
(0.77)
|
Aggregate
Value at Risk
|
(3.73)%
|
(0.57)%
|
(1.76)%
|
Limitations on Value at Risk
as an Assessment of Market Risk
VaR
models permit estimation of a portfolio’s aggregate market risk exposure,
incorporating a range of varied market risks, reflect risk reduction due to
portfolio diversification or hedging activities, and can cover a wide range of
portfolio assets. However, VaR risk measures should be viewed in
light of the methodology’s limitations, which include, but may not be limited to
the following:
- 37
-
·
|
past
changes in market risk factors will not always result in accurate
predictions of the distributions and correlations of future market
movements;
|
·
|
changes
in portfolio value caused by market movements may differ from those of the
VaR model;
|
·
|
VaR
results reflect past market fluctuations applied to current trading
positions while future risk depends on future
positions;
|
·
|
VaR
using a one-day time horizon does not fully capture the market risk of
positions that cannot be liquidated or hedged within one day;
and
|
·
|
the
historical market risk factor data used for VaR estimation may provide
only limited insight into losses that could be incurred under certain
unusual market movements.
|
In
addition, the VaR tables above, as well as the past performance of the
Partnership, give no indication of the Partnership’s potential “risk of
ruin”.
The VaR
tables provided present the results of the Partnership’s VaR for each of the
Partnership’s market risk exposures and on an aggregate basis at September 30,
2009 and 2008, and for the four quarter-end reporting periods from October 1,
2008 through September 30, 2009. VaR is not necessarily
representative of the Partnership’s historic risk, nor should it be used to
predict the Partnership’s future financial performance or its ability to manage
or monitor risk. There can be no assurance that the Partnership’s
actual losses on a particular day will not exceed the VaR amounts indicated
above or that such losses will not occur more than once in 100 trading
days.
- 38
-
Non-Trading
Risk
The
Partnership has non-trading market risk on its foreign cash
balances. These balances and any market risk they may represent are
immaterial.
The
Partnership also maintains a substantial portion of its available assets in cash
at MS&Co.; as of September 30, 2009, such amount was equal to approximately
86% of the Partnership’s net asset value. A decline in short-term
interest rates would result in a decline in the Partnership’s cash management
income. This cash flow risk is not considered to be material.
Materiality,
as used throughout this section, is based on an assessment of reasonably
possible market movements and any associated potential losses, taking into
account the leverage, optionality, and multiplier features of the Partnership’s
market-sensitive instruments, in relation to the Partnership’s net
assets.
Qualitative Disclosures
Regarding Primary Trading Risk Exposures
The
following qualitative disclosures regarding the Partnership’s market risk
exposures - except for (A) those disclosures that are statements of historical
fact and (B) the descriptions of how the Partnership manages its primary market
risk exposures - constitute forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act. The Partnership’s primary market risk exposures, as well as the strategies
used and to be used by Demeter and the Trading Advisors for managing such
exposures, are subject to numerous uncertainties, contingencies and risks, any
one of which could cause the actual results of the Partnership’s risk controls
to differ materially from the objectives of such
strategies. Government interventions,
- 39
-
defaults
and expropriations, illiquid markets, the emergence of dominant fundamental
factors, political upheavals, changes in historical price relationships, an
influx of new market participants, increased regulation, and many other factors
could result in material losses, as well as in material changes to the risk
exposures and the risk management strategies of the Partnership.
The
Trading Advisors, in general, tend to utilize their trading system(s) to take
positions when market opportunities develop, and Demeter anticipates that the
Trading Advisors will continue to do so.
Investors
must be prepared to lose all or substantially all of their investment in the
Partnership.
The
following were the primary trading risk exposures of the Partnership at
September 30, 2009, by market sector. It may be anticipated, however,
that these market exposures will vary materially over time.
Equity. The
largest market exposure of the Partnership at September 30, 2009, was to the
global stock index sector, primarily to equity price risk in the G-7 countries.
The G-7 countries consist of France, the U.S., the United Kingdom, Germany,
Japan, Italy, and Canada. The stock index futures traded by the
Partnership are by law limited to futures on broadly-based
indices. The Partnership’s primary market exposures were to the
S&P 500 (U.S.), DAX (Germany), Euro Stox 50 (Europe), NASDAQ 100 (U.S.), SPI
200 (Australia), FTSE 100 (United Kingdom), CAC 40 (France), IBEX 35 (Spain),
Nikkei 225 (Japan), S&P Midcap (U.S.), Hang Seng (Hong Kong), TOPIX (Japan),
Dow Jones (U.S.), S&P/MIB (Italy), Canadian S&P 60 (Canada), AEX (The
Netherlands), Taiwan Stock Index (Taiwan), OMX 30 (Sweden), Russell 2000 (U.S),
H-Shares (Hong Kong),
- 40
-
Dow Jones
(U.S.), and GS COMMODITY (U.S.) stock indices. The Partnership is
typically exposed to the risk of adverse price trends or static markets in the
European, U.S., Asian, and Australian stock indices. Static markets would not
cause major market changes, but would make it difficult for the Partnership to
avoid trendless price movements, resulting in numerous small
losses.
Currency. At
September 30, 2009, the Partnership had market exposure to the currency
sector. The Partnership’s currency market exposure was to exchange
rate fluctuations, primarily fluctuations which disrupt the historical pricing
relationships between different currencies and currency
pairs. Interest rate changes, as well as political and general
economic conditions influence these fluctuations. The Partnership
trades a large number of currencies, including cross-rates - i.e., positions between two
currencies other than the U.S. dollar. At September 30, 2009, the
Partnership’s major exposures were to the British pound, Australian dollar,
Canadian dollar, Japanese yen, euro, New Zealand dollar, Polish zloty, Swiss
franc, and Swedish krona currency crosses, as well as to outright U.S. dollar
positions. Outright positions consist of the U.S. dollar vs. other
currencies. These other currencies include major and minor
currencies. Demeter does not anticipate that the risk associated with
the Partnership’s currency trades will change significantly in the
future.
Interest
Rate. At September 30, 2009, the Partnership had exposure to
the global interest rate sector. Exposure was primarily spread across
the European, U.S., Japanese, Canadian, and Australian interest rate
sectors. Interest rate movements directly affect the price of the
sovereign bond futures positions held by the Partnership and indirectly affect
the value of its stock index and currency positions. Interest rate
movements in one country,
- 41
-
as well
as relative interest rate movements between countries, materially impact the
Partnership’s profitability. The Partnership’s interest rate exposure
is generally to interest rate fluctuations in the U.S. and the other G-7
countries’ interest rates. However, the Partnership also takes
futures positions in the government debt of smaller countries – e.g.,
Australia. Demeter anticipates that the G-7 countries’ interest rates
and Australian interest rates will remain the primary interest rate exposure of
the Partnership for the foreseeable future. The speculative futures
positions held by the Partnership may range from short to long-term
instruments. Consequently, changes in short, medium, or long-term
interest rates may have an effect on the Partnership.
Commodity.
Metals. The
second largest exposure of the Partnership at September 30, 2009, was to the
metals sector. The Partnership's metals exposure was to fluctuations
in the price of precious metals, such as gold, silver, platinum, and palladium,
as well as base metals, such as copper, zinc, nickel, lead, aluminum, and tin.
Economic forces, supply and demand inequalities, geopolitical factors, and
market expectations influence price movements in these markets.
Soft Commodities and
Agriculturals. The third largest market exposure of the
Partnership at September 30, 2009, was to the markets that comprise these
sectors. Most of the exposure was to the cocoa, sugar, wheat, cotton,
soybean meal, corn, coffee, soybeans, feeder cattle, live cattle, soybean oil,
rubber, and lean hogs markets. Supply and demand inequalities, severe
weather disruptions, and market expectations affect price movements in these
markets.
- 42
-
Energy. At
September 30, 2009, the Partnership had exposure to the energy
sector. The Partnership’s energy exposure was shared primarily by
futures contracts in crude oil and its related products, as well as in natural
gas. Price movements in these markets result from geopolitical developments,
particularly in the Middle East, as well as weather patterns and other economic
fundamentals. Significant profits and losses, which have been
experienced in the past, are expected to continue to be experienced in the
future. Natural gas has exhibited volatility in prices resulting from
weather patterns and supply and demand factors and will likely continue in this
choppy pattern.
Qualitative Disclosures
Regarding Non-Trading Risk Exposure
The
following was the only non-trading risk exposure of the Partnership at September
30, 2009:
Foreign Currency
Balances. The Partnership’s primary foreign currency balances at
September 30, 2009, were in euros, Japanese yen, Australian dollars, British
pounds, Hong Kong dollars, South African rands, Swedish kronor, Swiss francs,
Czech koruny, Canadian dollars, Hungarian forint, Singapore dollars, New Zealand
dollars, and Norwegian kroner. The Partnership controls the
non-trading risk of foreign currency balances by regularly converting them back
into U.S. dollars upon liquidation of their respective positions.
Qualitative Disclosures
Regarding Means of Managing Risk Exposure
The
Partnership and the Trading Advisors, separately, attempt to manage the risk of
the Partnership’s open positions in essentially the same manner in all market
categories traded. Demeter attempts to manage market
- 43
-
exposure
by diversifying the Partnership’s assets among different market sectors and
trading approaches through the selection of Commodity Trading Advisors and by
daily monitoring their performance. In addition, the Trading Advisors
establish diversification guidelines, often set in terms of the maximum margin
to be committed to positions in any one market sector or market-sensitive
instrument.
Demeter
monitors and controls the risk of the Partnership’s non-trading instrument,
cash. Cash is the only Partnership investment directed by Demeter, rather than
the Trading Advisors.
Item
4.
|
CONTROLS AND
PROCEDURES
|
As of the
end of the period covered by this quarterly report, the President and Chief
Financial Officer of Demeter have evaluated the effectiveness of the
Partnership’s disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) of the Exchange Act), and have judged
such controls and procedures to be effective.
Changes in Internal Control
over Financial Reporting
There
have been no material changes during the period covered by this quarterly report
in the Partnership’s internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that have materially affected
or are reasonably likely to affect the Partnership’s internal control over
financial reporting.
Limitations on the
Effectiveness of Controls
Any
control system, no matter how well designed and operated, can provide reasonable
(not absolute) assurance that its objectives will be
met. Furthermore, no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any, have been
detected.
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Item
4T. CONTROLS AND
PROCEDURES
Not
applicable.
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PART
II. OTHER
INFORMATION
Item
1A.
|
RISK
FACTORS
|
There
have been no material changes from the risk factors previously referenced in the
Partnership’s Report on Form 10-K for the fiscal year ended December 31,
2008.
Item
6.
|
EXHIBITS
|
31.01
|
Certification
of President of Demeter Management LLC, the general partner of the
Partnership, pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
31.02
|
Certification
of Chief Financial Officer of Demeter Management LLC, the general partner
of the Partnership, pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
32.01
|
Certification
of President of Demeter Management LLC, the general partner of the
Partnership, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002.
|
32.02
|
Certification
of Chief Financial Officer of Demeter Management LLC, the general partner
of the Partnership, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
– 46
–
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
Morgan
Stanley Smith Barney Spectrum Select L.P.
|
|||
(Registrant)
|
|||
By:
|
Demeter
Management LLC
|
||
(General
Partner)
|
|||
November
13, 2009
|
By:
|
/s/Christian
Angstadt
|
|
Christian
Angstadt
|
|||
Chief
Financial Officer
|
The
General Partner which signed the above is the only party authorized to act for
the registrant. The registrant has no principal executive officer,
principal financial officer, controller, or principal accounting officer and has
no Board of Directors.
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