MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL LP - FORM 10-Q

MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL LP - FORM 10-Q - May 13, 2015

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MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL LP Reports

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EXCEL - IDEA: XBRL DOCUMENT - MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL LP	Financial_Report.xls
EX-31.02 - EX-31.02 - MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL LP	d907754dex3102.htm
EX-31.01 - EX-31.01 - MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL LP	d907754dex3101.htm
EX-32.02 - EX-32.02 - MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL LP	d907754dex3202.htm
EX-32.01 - EX-32.01 - MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL LP	d907754dex3201.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 March 31, 2015

¨ 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: 000-26338

MORGAN STANLEY SMITH BARNEY

SPECTRUM TECHNICAL L.P.

(Exact name of registrant as specified in its charter)


Delaware		13-3782231
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Ceres Managed Futures LLC 522 Fifth Avenue New York, NY		10036
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (855) 672-4468

(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 ¨

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 x No ¨

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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of March 31, 2015, 5,430,787.487 Limited Partnership Units were outstanding.

MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL L.P.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

March 31, 2015


	PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Statements of Financial Condition as of March 31, 2015 and December 31, 2014	2

	Condensed Schedule of Investments as of March 31, 2015	3

	Condensed Schedule of Investments as of December 31, 2014	4

	Statements of Income and Expenses for the Three Months Ended March 31, 2015 and 2014	5

	Statements of Changes in Partners’ Capital for the Three Months Ended March 31, 2015 and 2014	6

	Notes to Financial Statements	7-28

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29-39

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39-47

Item 4.	Controls and Procedures	47-48

	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	49-55

Item 1A.	Risk Factors	56

Item 4.	Mine Safety Disclosures	56

Item 6.	Exhibits	56

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL L.P.

STATEMENTS OF FINANCIAL CONDITION


	March 31,			December 31,
	2015			December 31,
	(Unaudited)			2014
	$			$
ASSETS

Trading Equity:
Investment in SECOR Master Fund		18,986,435			—
Investment in Blackwater Master Fund		15,063,095			16,901,955

Unrestricted cash		70,812,023			87,743,638
Restricted cash		9,300,720			7,277,235

Total cash		80,112,743			95,020,873

Net unrealized gain (loss) on open contracts		(531,555	)		604,870

Total Trading Equity		113,630,718			112,527,698

Interest receivable		608			536

Total Assets		113,631,326			112,528,234

LIABILITIES AND PARTNERS’ CAPITAL

Liabilities:

Redemptions payable to Limited Partners		1,470,089			2,596,957
Redemptions payable to General Partner		76,589			50,005
Accrued incentive fees		379,310			50,229
Accrued ongoing placement agent fees		183,601			182,210
Accrued administrative fees		183,601			182,210
Accrued management fees		135,822			117,826

Total Liabilities		2,429,012			3,179,437

Partners’ Capital:
Limited Partners (5,430,787.487 and 5,670,382.719 Units, respectively)		109,979,942			108,125,693
General Partner (60,360.508 and 64,142.656 Units, respectively)		1,222,372			1,223,104

Total Partners’ Capital		111,202,314			109,348,797

Total Liabilities and Partners’ Capital		113,631,326			112,528,234

NET ASSET VALUE PER UNIT		20.25			19.07

The accompanying notes are an integral part of these financial statements.

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MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL L.P.

CONDENSED SCHEDULE OF INVESTMENTS

March 31, 2015 (Unaudited)


Futures and Forward Contracts Purchased	Net unrealized gain/(loss) on open contracts			% of Partners’ Capital
	$
Commodity		(136,945	)		(0.12	)
Equity		150,080			0.13
Foreign currency		(150,937	)		(0.14	)
Interest rate		1,423,863			1.28

Total Futures and Forward Contracts Purchased		1,286,061			1.15

Futures and Forward Contracts Sold

Commodity		840,097			0.76
Equity		(5,843	)		(0.01	)
Foreign currency		446,981			0.40
Interest rate		(48,871	)		(0.04	)

Total Futures and Forward Contracts Sold		1,232,364			1.11

Unrealized Currency Loss		(3,049,980	)		(2.74	)

Net fair value		(531,555	)		(0.48	)

The accompanying notes are an integral part of these financial statements.

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MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL L.P.

CONDENSED SCHEDULE OF INVESTMENTS

December 31, 2014


Futures and Forward Contracts Purchased	Net unrealized gain/(loss) on open contracts			% of Partners’ Capital
	$
Commodity		(605,582	)		(0.55	)
Equity		539,849			0.49
Foreign currency		(775,708	)		(0.71	)
Interest rate		1,680,723			1.54

Total Futures and Forward Contracts Purchased		839,282			0.77

Futures and Forward Contracts Sold

Commodity		1,735,517			1.58
Equity		(58,649	)		(0.05	)
Foreign currency		1,565,204			1.43
Interest rate		(10,887	)		(0.01	)

Total Futures and Forward Contracts Sold		3,231,185			2.95

Unrealized Currency Loss		(3,465,597	)		(3.17	)

Net fair value		604,870			0.55

The accompanying notes are an integral part of these financial statements.

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MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL L.P.

STATEMENTS OF INCOME AND EXPENSES

(Unaudited)


	For the Three Months Ended March 31,
	2015			2014
	$			$
INVESTMENT INCOME
Interest income		1,979			8,129

EXPENSES
Ongoing placement agent fees		554,365			—
Management fees		401,715			397,325
Administrative fees		554,365			—
Incentive fees		715,096			—
Brokerage fees		—			1,916,380

Total Expenses		2,225,541			2,313,705

NET INVESTMENT LOSS		(2,223,562	)		(2,305,576	)

TRADING RESULTS
Trading profit (loss) on investments:
Net realized		9,005,818			(229,301	)
Net change in unrealized		(1,136,425	)		(3,527,017	)
Net realized gain (loss) allocated from Blackwater Master Fund		663,282			(1,453,431	)
Net realized allocated from SECOR Master Fund		1,614,854			—
Net change in unrealized depreciation allocated from Blackwater Master Fund		(487,375	)		(679,944	)
Net change in unrealized depreciation allocated from SECOR Master Fund		(716,405	)		—

Total Trading Results		8,943,749			(5,889,693	)

NET INCOME (LOSS)		6,720,187			(8,195,269	)

NET INCOME (LOSS) ALLOCATION

Limited Partners		6,644,330			(8,092,658	)
General Partner		75,857			(102,611	)

NET INCOME (LOSS) PER UNIT*

Limited Partners		1.18			(1.02	)
General Partner		1.18			(1.02	)

	Units			Units
WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING		5,653,518.422			7,952,914.317

*	Represents the change in net asset value per Unit during the period.

The accompanying notes are an integral part of these financial statements.

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MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL L.P.

STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL

For the Three Months Ended March 31, 2015 and 2014

(Unaudited)


	Units of
	Partnership			Limited			General
	Interest			Partners			Partner			Total
				$			$			$
Partners’ Capital, December 31, 2014		5,734,525.375			108,125,693			1,223,104			109,348,797
Net Income		—			6,644,330			75,857			6,720,187
Redemptions		(243,377.380	)		(4,790,081	)		(76,589	)		(4,866,670	)

Partners’ Capital, March 31, 2015		5,491,147.995			109,979,942			1,222,372			111,202,314

Partners’ Capital, December 31, 2013		8,153,402.231			133,281,088			1,664,783			134,945,871
Net Loss		—			(8,092,658	)		(102,611	)		(8,195,269	)
Redemptions		(715,531.327	)		(11,235,065	)		—			(11,235,065	)

Partners’ Capital, March 31, 2014		7,437,870.904			113,953,365			1,562,172			115,515,537

The accompanying notes are an integral part of these financial statements.

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MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL L.P.

NOTES TO FINANCIAL STATEMENTS

March 31, 2015

(Unaudited)

1. Organization

Morgan Stanley Smith Barney Spectrum Technical L.P. (the “Partnership”) is a Delaware limited partnership organized in 1994 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 5. Financial Instruments). The Partnership is one of the Morgan Stanley Spectrum series of funds, comprised of the Partnership, Morgan Stanley Smith Barney Spectrum Currency and Commodity L.P., Morgan Stanley Smith Barney Spectrum Strategic L.P. and Morgan Stanley Smith Barney Spectrum Select L.P.

Ceres Managed Futures LLC, a Delaware limited liability company, acts as the general partner (“Ceres” or the “General Partner”) and commodity pool operator for the Partnership. Ceres is a wholly-owned subsidiary of Morgan Stanley Smith Barney Holdings LLC (“MSSBH”). MSSBH is wholly-owned indirectly by Morgan Stanley. Morgan Stanley Smith Barney LLC is doing business as Morgan Stanley Wealth Management (“Morgan Stanley Wealth Management”). Morgan Stanley Wealth Management is a principal subsidiary of MSSBH.

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MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The clearing commodity broker for the Partnership is Morgan Stanley & Co. LLC (“MS&Co.”). 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. MS&Co. and MSCG are wholly-owned subsidiaries of Morgan Stanley.

The trading advisors to the Partnership are Campbell & Company, Inc. (“Campbell”), Winton Capital Management Limited (“Winton”), Aspect Capital Limited (“Aspect”), Blackwater Capital Management LLC (“Blackwater”) and SECOR Capital Advisors, L.P. (“SECOR”) (each individually, a “Trading Advisor”, or collectively, the “Trading Advisors”).

Blackwater manages the assets of the Partnership through its investment in Blackwater Master Fund L.P. (“Blackwater Master Fund”), a limited partnership organized under the partnership laws of the State of Delaware. Ceres is the general partner of Blackwater Master Fund.

Ceres, SECOR and the Partnership entered into a management agreement pursuant to which, as of January 1, 2015, SECOR serves as a trading advisor to the Partnership and trades its allocated portion of the Partnership’s net assets through the Partnership’s investment in SECOR Master Fund L.P. (“SECOR Master Fund”), a limited partnership organized under the partnership laws of the State of Delaware, pursuant to the SECOR Alpha Program. Ceres is the general partner of SECOR Master Fund.

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MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2. Basis of Presentation and Summary of Significant Accounting Policies

The accompanying financial statements and accompanying notes are unaudited but, in the opinion of the General Partner, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Partnership’s financial condition at March 31, 2015 and December 31, 2014 and the results of its operations and changes in partners’ capital for the three months ended March 31, 2015 and 2014. These financial statements present the results of interim periods and do not include all of the disclosures normally provided in annual financial statements. These financial statements should be read together with the financial statements and notes included in the Partnership’s December 31, 2014, Annual Report on Form 10-K (the “Form 10-K”) filed with the Securities and Exchange Commission (the “SEC”) for the year ended December 31, 2014. The December 31, 2014 information has been derived from the audited financial statements as of and for the year ended December 31, 2014.

Use of Estimates: The preparation of financial statements and accompanying notes in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires the General Partner to make estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses, and related disclosures of contingent assets and liabilities in the financial statements and accompanying notes. As a result, actual results could differ from these estimates.

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MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Partnership’s Investments: The fair value of exchange-traded futures, options and forward 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.) on 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.

The Partnership carries its investments in Blackwater Master Fund and SECOR Master Fund (collectively, the “Master Funds”) at fair value based on its proportionate interest in the respective fund’s net asset value as calculated by the funds.

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 contracts and offset unrealized losses only on the offsetting 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.

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MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Investment Company Status: The Partnership adopted Accounting Standards Update (“ASU”) 2013-08, “Financial Services — Investment Companies (Topic 946): Amendments to the Scope, Measurement and Disclosure Requirements” and based on management’s assessment, the Partnership has been deemed to be an investment company since inception.

Income Taxes: Income taxes have not been provided as each partner is individually liable for the taxes, if any, on its share of the Partnership’s income and expenses. Management has concluded that no provision for income tax is required in the Partnership’s financial statements. The Partnership files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The 2011 through 2014 tax years remain subject to examination by U.S. federal and most state tax authorities. Management does not believe that there are any uncertain tax positions that require recognition of a tax liability.

Net Income (Loss) per Unit: Net income (loss) per unit of limited partnership interest (“Unit(s)”) is calculated in accordance with investment company guidance. See Note 3. Financial Highlights.

New Accounting Pronouncements: In May 2015 Financial Accounting Standards Board issued ASU 2015-07 “Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)” which relates to disclosures for investments that calculate net asset value per share (potentially funds of fund structures). The ASU requires investments for which the practical expedient is used to measure fair value at net asset value be removed from the fair value hierarchy. Instead, an entity is required to include those investments as a reconciling line item so that the total fair value amount of investments in the disclosure is consistent with the amount on the balance sheet. Further, the ASU requires entities to provide the disclosures in Accounting Standards Codification 820-10-50-6A only for investments for which they elect to use the net asset value practical expedient to determine fair value. The standard is effective for public business entities for fiscal years beginning after December 15, 2015, early adoption is permitted. Management is currently evaluating the impact that the new pronouncement would have on the Partnership’s financial statements.

There have been no material changes with respect to the Partnership’s critical accounting policies as reported in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2014.

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MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

3. Financial Highlights

Financial highlights for the limited partner class for the three months ended March 31, 2015 and 2014 were as follows:


	For the Three Months Ended March 31,
	2015			2014
Per Unit operating performance:
Net asset value, January 1:	$	19.07		$	16.55

Interest Income		—	⁽²⁾		—	⁽²⁾
Expenses		(0.40	)		(0.30	)
Realized/Unrealized Gains (Losses)		1.58			(0.72	)

Net Income (Loss)		1.18			(1.02	)

Net asset value, March 31:	$	20.25		$	15.53

Ratios to average net assets:
Net Investment Loss ⁽¹⁾		(6.1	)%		(7.7	)%
Expenses before Incentive Fees ⁽¹⁾		5.5	%		7.7	%
Expenses after Incentive Fees ⁽¹⁾		6.1	%		7.7	%
Total return before incentive fees		6.9	%		(6.2	)%
Total return after incentive fees		6.2	%		(6.2	)%

⁽¹⁾	Annualized (except for incentive fees if applicable).

⁽²⁾	Amount less than $0.005 per Unit.

The above ratios and total return may vary for individual investors based on the timing of capital transactions during the period. Additionally, these ratios are calculated for the limited partner class using the limited partners’ share of income, expenses and average net assets.

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MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

4. Related Party Transactions

The Partnership’s cash is on deposit in commodity brokerage accounts with Morgan Stanley. Monthly, MS&Co. pays the Partnership interest income on 100% of the average daily equity maintained in the Partnership’s account during each month at a rate equal to 80% of the monthly average of the 4-week U.S. Treasury bill discount rate. MS&Co. retains any interest earned in excess of the interest paid to the Partnership. For purposes of such interest payments, net assets do not include monies due to the Partnership on Futures Interests that have not been received. The Partnership pays a general partner administrative fee to the General Partner and an ongoing placement agent fee to Morgan Stanley Wealth Management. Prior to October 2014, a flat rate brokerage fee was payable to MS&Co. The General Partner pays or reimburses the Partnership for all fees and costs charged or incurred by MS&Co., the General Partner and/or its affiliates or any other entity acting as a commodity broker for the Partnership. For the three months ended March 31, 2015, the fees were $124,557.

5. Financial Instruments

The Partnership and the Master Funds trade 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 the 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 “Net change in unrealized” trading

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MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

profit (loss) and “Net change in unrealized depreciation allocated from Blackwater Master Fund” and “Net change in unrealized depreciation allocated from SECOR Master Fund” on open contracts from one period to the next on the Statements of Income and Expenses. The Partnership’s contracts are accounted for on a trade-date basis. 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 an exchange-traded contract 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 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
	$			$		$
Mar. 31, 2015		(770,627	)		239,072		(531,555	)		Jun. 2018		Sep. 2015
Dec. 31, 2014		172,160			432,710		604,870			Mar.2018		Jun. 2015

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MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

In general, the risks associated with off-exchange-traded contracts are greater than those associated with exchange-traded contracts because of the greater risk of default by the counterparty to an off-exchange-traded contract. The Partnership has credit risk associated with counterparty nonperformance. 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 (loss) amounts reflected in the Partnership’s Statements of Financial Condition. The net unrealized gains (losses) on open contracts are further disclosed gross by type of contract and corresponding fair value level in Note 7. Fair Value Measurements.

The Partnership also has credit risk because MS&Co. and/or MSCG act as the commodity futures brokers, or the counterparties, with respect to most of the Partnership’s assets. Exchange-traded futures, exchange-traded forward, and exchange-traded futures-styled options contracts are fair valued on a daily basis, with variations in value settled on a daily basis. MS&Co., which is acting as a commodity futures broker for the Partnership’s exchange-traded futures, exchange-traded forward, and exchange-traded futures-styled options contracts, is required, pursuant to regulations of the Commodity Futures Trading Commission (“CFTC”), to segregate from its own assets, and for the sole benefit of its commodity customers, total cash held by it 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 in the aggregate, totaled $79,342,116 and $95,193,033 at March 31, 2015 and December 31, 2014, respectively. With respect to the

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MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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’s accounts with the counterparty, which is accomplished by daily maintenance of the cash balance in a custody account held at MS&Co., for the benefit of 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. The primary terms are based on industry standard master netting agreements. These agreements, which seek to reduce both the Partnership’s and the counterparties’ exposure on off-exchange-traded forward currency contracts, should materially decrease the Partnership’s credit risk in the event of MS&Co.’s or MSCG’s bankruptcy or insolvency.

The General Partner monitors and attempts to control the Partnership’s risk exposure on a daily basis through financial, credit and risk management monitoring systems, and, accordingly, believes that it has effective procedures for evaluating and limiting the credit and market risks to which the Partnership may be subject. These monitoring systems generally allow the General Partner to statistically analyze actual trading results with risk adjusted performance indicators and correlation statistics. In addition, online monitoring systems provide account analysis of futures, forwards and options positions by sector, margin requirements, gain and loss transactions and collateral positions.

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MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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. Gains and losses on off-exchange-traded forward currency options contracts are settled on an agreed-upon settlement date.

6. Derivatives and Hedging

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 strategies. As such, the average number of contracts outstanding in absolute quantities (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.

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MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The following tables summarize the gross and net amounts recognized relating to the assets and liabilities of the Partnership’s derivative instruments and transactions eligible for offset subject to master netting agreements or similar agreements as of March 31, 2015 and December 31, 2014, respectively.

Offsetting of Derivative Assets and Liabilities as of March 31, 2015:


	Gross Amounts Recognized			Gross Amounts Offset in the Statements of Financial Condition			Net Amounts Presented in the Statements of Financial Condition			Gross amounts not offset in the Statements of Financial Condition
	Gross Amounts Recognized									Financial Instruments		Cash Collateral Received/Pledged**		Net Amount
	$			$			$			$		$		$
Assets
Futures		3,130,594			(798,776	)		2,331,818	*		—		—		2,331,818
Forwards		1,658,113			(1,471,506	)		186,607	*		—		—		186,607

Total Assets		4,788,707			(2,270,282	)		2,518,425			—		—		2,518,425

Liabilities
Futures		(798,776	)		798,776			—			—		—		—
Forwards		(1,471,506	)		1,471,506			—			—		—		—

Total Liabilities		(2,270,282	)		2,270,282			—			—		—		—

Unrealized currency loss								(3,049,980	)*						(3,049,980	)

Total net unrealized loss on open contracts								(531,555	)						(531,555	)**

- 18 -

MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Offsetting of Derivative Assets and Liabilities as of December 31, 2014:


	Gross Amounts Recognized			Gross Amounts Offset in the Statements of Financial Condition			Net Amounts Presented in the Statements of Financial Condition			Gross amounts not offset in the Statements of Financial Condition
	Gross Amounts Recognized									Financial Instruments		Cash Collateral Received/Pledged**		Net Amount
	$			$			$			$		$		$
Assets
Futures		4,533,559			(797,767	)		3,735,792	*		—		—		3,735,792
Forwards		2,011,895			(1,677,220	)		334,675	*		—		—		334,675

Total Assets		6,545,454			(2,474,987	)		4,070,467			—		—		4,070,467

Liabilities
Futures		(797,767	)		797,767			—			—		—		—
Forwards		(1,677,220	)		1,677,220			—			—		—		—

Total Liabilities		(2,474,987	)		2,474,987			—			—		—		—

Unrealized currency loss								(3,465,597	)*						(3,465,597	)

Total net unrealized gain on open contracts								604,870							604,870	**

*	Included as a component of “Net unrealized gain (loss) on open contracts” on the Statements of Financial Condition.

In the event of default by the Partnership, MS&Co., the sole counterparty to the Partnership’s derivative contracts, has the right to offset the Partnership’s obligation with the cash held by the Partnership, thereby minimizing the counterparty’s risk of loss. There is no collateral posted by MS&Co. and as such, in the event of default by MS&Co., the Partnership is exposed to the amount shown on the Statements of Financial Condition.

- 19 -

MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The effect of Trading Activities on the Statements of Financial Condition as of March 31, 2015:


Futures and Forward Contracts	Long Unrealized Gain		Long Unrealized Loss			Short Unrealized Gain		Short Unrealized Loss			Net Unrealized Gain/(Loss)			Average number of contracts outstanding for the three months (absolute quantity)
	$		$			$		$			$
Commodity		92,101		(229,046	)		1,354,288		(514,191	)		703,152			1,305
Equity		394,419		(244,339	)		17,687		(23,530	)		144,237			792
Foreign currency		402,012		(552,949	)		1,026,884		(579,903	)		296,044			899
Interest rate		1,501,230		(77,367	)		86		(48,957	)		1,374,992			3,161

Total		2,389,762		(1,103,701	)		2,398,945		(1,166,581	)		2,518,425

Unrealized currency loss												(3,049,980	)

Total net unrealized loss on open contracts												(531,555	)

The effect of Trading Activities on the Statements of Financial Condition as of December 31, 2014:


Futures and Forward Contracts	Long Unrealized Gain		Long Unrealized Loss			Short Unrealized Gain		Short Unrealized Loss			Net Unrealized Gain/(Loss)			Average number of contracts outstanding for the year (absolute quantity)
	$		$			$		$			$
Commodity		35,163		(640,745	)		1,817,116		(81,599	)		1,129,935			1,561
Equity		713,684		(173,835	)		17,967		(76,616	)		481,200			1,203
Foreign currency		267,933		(1,043,641	)		18,555,362		(290,158	)		789,496			1,355
Interest rate		1,829,953		(149,230	)		8,276		(19,163	)		1,669,836			4,328

Total		2,846,733		(2,007,451	)		3,698,721		(467,536	)		4,070,467

Unrealized currency loss												(3,465,597	)

Total net unrealized gain on open contracts												604,870

- 20 -

MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The following tables summarize the net trading results of the Partnership for the three months ended March 31, 2015 and 2014, respectively.

The effect of Trading Activities on the Statements of Income and Expenses for the Three Months Ended March 31, 2015, included in Total Trading Results:


Type of Instrument	$
Commodity		221,038
Equity		1,973,412
Foreign currency		3,320,543
Interest rate		3,013,139
Unrealized currency gain		415,617

Total		8,943,749

Line items on the Statements of Income and Expenses for the Three Months Ended March 31, 2015:


Trading Results	$
Net realized		9,005,818
Net change in unrealized		(1,136,425	)
Net realized gain allocated from Blackwater Master Fund		663,282
Net realized gain allocated from SECOR Master Fund		1,614,854
Net change in unrealized depreciation allocated from Blackwater Master Fund		(487,375	)
Net change in unrealized depreciation allocated from SECOR Master Fund		(716,405	)

Total Trading Results		8,943,749

The effect of Trading Activities on the Statements of Income and Expenses for the Three Months Ended March 31, 2014, included in Total Trading Results:


Type of Instrument	$
Commodity		(4,775,388	)
Equity		2,731,354
Foreign currency		(12,898,291	)
Interest rate		9,033,965
Unrealized currency gain		18,667

Total		(5,889,693	)

- 21 -

MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Line items on the Statements of Income and Expenses for the Three Months Ended March 31, 2014:


Trading Results	$
Net realized		(229,301	)
Net change in unrealized		(3,527,017	)
Net realized loss allocated from Blackwater Master Fund		(1,453,431	)
Net change in unrealized depreciation allocated from Blackwater Master Fund		(679,944	)

Total Trading Results		(5,889,693	)

7. Fair Value Measurements

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 and credit risk) and if the Partnership has the ability to redeem its investment in an underlying fund at the net asset value per share (or its equivalent) at the measurement date or within the near term and there are no other liquidity restrictions, the Partnership’s investment in the underlying fund is considered Level 2; and Level 3 - unobservable inputs for the asset or liability (including the Partnership’s own assumptions used in determining the fair value of investments) and any investment in an underlying fund that is currently subject to liquidity restrictions that will not be lifted in the near term is considered Level 3.

- 22 -

MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL L.P.

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 Partnership’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and consideration of factors specific to the investment.

Transfers between levels are recognized at the end of the reporting period. During the period from January 1, 2015 to March 31, 2015, and the twelve months ended December 31, 2014, there were no Level 3 assets and liabilities and there were no transfers of assets or liabilities between Level 1 and Level 2.

The Partnership’s 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.

- 23 -

MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)


March 31, 2015	Level 1		Level 2		Level 3		Total
	$		$		$		$
Assets
Investment in Blackwater Master Fund		—		15,063,095		n/a		15,063,095
Investment in SECOR Master Fund		—		18,986,435		n/a		18,986,435
Futures		3,130,594		—		n/a		3,130,594
Forwards		374,956		1,283,157		n/a		1,658,113

Total Assets		3,505,550		35,332,687		n/a		38,838,237

Liabilities
Futures		798,776		—		n/a		798,776
Forwards		427,421		1,044,085		n/a		1,471,506

Total Liabilities		1,226,197		1,044,085		n/a		2,270,282

Unrealized currency loss								(3,049,980	)

*Net fair value		2,279,353		34,288,602		n/a		33,517,975


December 31, 2014	Level 1		Level 2		Level 3		Total
	$		$		$		$
Assets
Investment in Blackwater Master Fund		—		16,901,955		n/a		16,901,955
Futures		4,533,559		—		n/a		4,533,559
Forwards		274,957		1,736,938		n/a		2,011,895

Total Assets		4,808,516		18,638,893		n/a		23,447,409

Liabilities
Futures		797,767		—		n/a		797,767
Forwards		372,992		1,304,228		n/a		1,677,220

Total Liabilities		1,170,759		1,304,228		n/a		2,474,987

Unrealized currency loss								(3,465,597	)

*Net fair value		3,637,757		17,334,665		n/a		17,506,825

*	This amount comprises the “Net unrealized gain (loss) on open contracts” and “Investment in Blackwater Master Fund” and “Investment in SECOR Master Fund” on the Statements of Financial Condition.

- 24 -

MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Investment in Blackwater Master Fund and SECOR Master Fund

On December 1, 2011, the Partnership invested a portion of its assets in Blackwater Master Fund. Blackwater Master Fund was formed to permit accounts managed now or in the future by Blackwater using the Global Program, a proprietary, systematic trading program, to invest together in one trading vehicle. Ceres is also the general partner for Blackwater Master Fund. Individual and pooled accounts currently managed by Blackwater, including the Partnership, are permitted to be limited partners of Blackwater Master Fund. The General Partner and Blackwater believe that trading through this structure should promote efficiency and economy in the trading process.

On January 1, 2015, the Partnership invested a portion of its assets in SECOR Master Fund. SECOR Master Fund permits accounts managed by SECOR using a variation of the program traded by SECOR Alpha Master Fund L.P., a proprietary, systematic trading program, to invest together in one trading vehicle. Individual and pooled accounts currently managed by SECOR, including the Partnership, are permitted to be limited partners of SECOR Master Fund. The General Partner and SECOR believe that trading through this structure should promote efficiency and economy in the trading process.

- 25 -

MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Summarized information reflecting the total assets, liabilities and capital of Blackwater Master Fund as of March 31, 2015, and December 31, 2014 and SECOR Master Fund as of March 31, 2015, is shown in the following tables.


	March 31, 2015
	Total Assets		Total Liabilities		Total Capital
Blackwater Master Fund	$	22,094,523	$	85,598	$	22,008,925
SECOR Master Fund	$	46,171,168	$	351,252	$	45,819,916

	December 31, 2014
	Total Assets		Total Liabilities		Total Capital
Blackwater Master Fund	$	24,973,305	$	43,208	$	24,930,097

Summarized information for the Partnership’s investment in, as of March 31, 2015 and December 31, 2014, and the operations of, Blackwater Master Fund for the three months ended March 31, 2015 and 2014, and investment in, as of March 31, 2015 and the operation of SECOR Master Fund for the three months ended March 31, 2015, is shown in the following tables:

March 31, 2015

For the three months ended March 31, 2015

% of
Partnership
Net Assets

Fair
Value

Partnership’s
pro rata
Net Income

Investment
Objective

Redemption
Permitted

Blackwater Master Fund

13.5

15,063,095

175,907

Commodity

Monthly

Portfolio

SECOR Master Fund

17.1

18,986,435

898,449

Commodity

Monthly

Portfolio

December 31, 2014

For the three months ended March 31, 2014

% of
Partnership
Net Assets

Fair
Value

Partnership’s
pro rata
Net Income

Investment
Objective

Redemption
Permitted

Blackwater Master Fund

15.5

16,901,955

31,766

Commodity

Monthly

Portfolio

- 26 -

MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Blackwater Master Fund and SECOR Master Fund do not pay any management or incentive fees related to the Partnership’s investment in the fund. These fees are accrued and paid by the Partnership. The Partnership reimburses Blackwater Master Fund and SECOR Master Fund for all brokerage related fees borne by Blackwater Master Fund and SECOR Master Fund on behalf of the Partnership’s investment.

As of March 31, 2015 and December 31, 2014, the Partnership owned approximately 68.4% and 67.8%, respectively, of Blackwater Master Fund and 41.4% and 0%, respectively, of SECOR Master Fund. It is the Partnership’s intention to continue to invest in Blackwater Master Fund and SECOR Master Fund. The performance of the Partnership is directly affected by the performance of Blackwater Master Fund and SECOR Master Fund.

The tables below represent summarized income statement information for Blackwater Master Fund for the three months ended March 31, 2015 and 2014 and SECOR Master Fund for the three months ended March 31, 2015, to meet the requirements of Regulation S-X rule 3-09:


For the Three Months Ended March 31, 2015	Investment Income		Net Investment Loss			Total Trading Results			Net Income
	$		$			$			$
Blackwater Master Fund		432		(10,233	)		245,808			235,575
SECOR Master Fund		806		(120,408	)		2,701,378			2,580,970

For the Three Months Ended March 31, 2014	Investment Income		Net Investment Loss			Total Trading Results			Net Loss
	$		$			$			$
Blackwater Master Fund		3,966		(23,138	)		(4,034,100	)		(4,057,238	)

- 27 -

MORGAN STANLEY SMITH BARNEY SPECTRUM TECHNICAL L.P.

NOTES TO FINANCIAL STATEMENTS (CONCLUDED)

8. Subsequent Events

Management of the Partnership performed its evaluation of subsequent events through the date of filing and has determined that there were no subsequent events requiring adjustment of or disclosure in the financial statements.

- 28 -

Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

As of March 31, 2015, the percentage of assets allocated to each market sector was approximately as follows: Interest Rate 15.21%; Currency 29.03%; Equity 35.53%; and Commodity 20.23%.

Liquidity. The Partnership deposits its assets with MS&Co. as its clearing commodity broker 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 either in 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 fluctuation limits” or “daily limits.” Trades may not be executed at prices beyond the daily limit. If the price for a particular futures or options contract has increased or decreased by an amount equal to the daily limit, positions in that futures or options contract can neither be taken nor liquidated unless traders are willing to effect trades at or within the limit. Futures prices have occasionally moved the daily limit for several consecutive days with little or no trading. These market conditions could prevent the Partnership from promptly liquidating its futures or options contracts and result in restrictions on redemptions.

- 29 -

There is no limitation on daily price moves 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 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.

As of March 31, 2015, approximately 74.53 % of the Partnership’s total investment exposure is futures contracts which are exchange-traded while approximately 25.47% is forward contracts which are off-exchange traded.

Capital Resources. The Partnership does not have, nor does it expect to have, any capital assets. Redemptions of Units 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.

- 30 -

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.

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.

Aspect trades the allocated portion of the Partnership’s assets in accordance with its Diversified Program, a proprietary, systematic trading system. The Diversified Program is a proprietary, systematic global futures trading program. Its goal is the generation of significant long-term capital growth independent of stock and bond market returns. This program continuously monitors price movements in a wide range of global financial, currency and commodity markets, searching for profit opportunities over periods ranging from a few hours to several months.

Aspect has designed the Diversified Program to have broad market diversification (subject to liquidity constraints). Aspect’s quantitative resources are sufficient to enable it to design and implement a broadly diversified portfolio with a significant allocation to numerous different markets.

Aspect’s Diversified Program trades in over 100 markets in the seven major sectors: currencies, energy, metals, stock indices, bonds, agricultural commodities and interest rates implementing momentum

- 31 -

strategies. Aspect is constantly examining new liquid and uncorrelated markets to incorporate in the program with the aim of improving its reward/risk ratio and capacity. Aspect has no market or sector preferences, believing that, allowing for liquidity effects, equal profitability can be achieved in the long-term in all markets. The key factors in determining the asset allocation are correlation and liquidity. Correlations are analyzed at the sector, sub-sector, economic block and market levels to design a portfolio which is highly diversified.

Blackwater trades its Global Program on behalf of the Partnership. Blackwater utilizes medium and long- term, systematic technical models to trade global futures and foreign exchange markets. The models are designed to establish positions when market behavior exhibits a high probability of an emerging sustained move. Blackwater seeks to aggressively protect open equity after profit targets have been reached, limiting sharp reversals and drawdowns. It incorporates strict money management techniques based on individual market, sector and portfolio levels in order to reduce volatility.

Campbell trades the allocated portion of the Partnership’s assets in accordance with its Financial, Metal Energy Large Portfolio, a proprietary, systematic trading program. Campbell’s trading models are designed to detect and exploit medium-term to long-term price changes, while also applying risk management and portfolio management principles.

- 32 -

Campbell believes that utilizing multiple trading models provides an important level of diversification, and is most beneficial when multiple contracts of each market are traded. Every trading model may not trade every market. It is possible that one trading model may signal a long position while another trading model signals a short position in the same market. It is Campbell’s intention to offset those signals to reduce unnecessary trading, but if the signals are not simultaneous, both trades will be taken and since it is unlikely that both positions would prove profitable, in retrospect, one or both trades will appear to have been unnecessary. It is Campbell’s policy to follow trades signaled by each trading model independently of the other models.

Winton trades the Partnership’s assets in accordance with its Diversified Program, a proprietary, systematic trading system. The Diversified Program trades approximately 95 futures and forward contracts on U.S. and non-U.S. exchanges and markets.

Winton employs a fully systematic, computerized, technical, trend-following trading system developed by its principals. This system tracks the daily price movements from these markets around the world, and carries out certain computations to determine each day how long or short the portfolio should be in an attempt to maximize profit within a certain range of risk. If rising prices in a particular market are anticipated, a long position will be established in that market; if prices in a particular market are expected to fall, a short position in that market will be established.

- 33 -

SECOR’s investment objectives are to generate high risk-adjusted returns by: (i) investing across a diverse set of asset classes, geographies, factors, themes and time horizons, (ii) identifying and exploiting temporarily pronounced market inefficiencies or risk premia, (iii) employing dynamic risk-budgeting to minimize tail risk and potentially enable alpha to be generated through timing of exposures and (iv) utilizing sophisticated modeling techniques supported by straight-forward economic intuition and sound fundamentals. SECOR will seek to target long-term annualized volatility of 15% and low long-term correlation to other hedge fund strategies and broader markets. SECOR has a healthy respect for the general information efficiency of markets but believes that certain inefficiencies (or outsized risk premia) may exist in certain markets, and these or other inefficiencies (or risk premia) may periodically become more pronounced in particular market conditions. SECOR believes that it is feasible to construct an investment strategy that seeks to capture such inefficiencies (premia) in pursuit of high risk-adjusted returns (or excess returns for benchmarked mandates) that are lowly correlated with broad stock and bond market returns (alpha). SECOR employs statistical techniques and empirical analysis to help determine whether they believe that observed or conjectured alpha opportunities are real and, more importantly, likely to be sustained in the future. If properly employed, these techniques may have certain advantages versus a purely judgmental approach including the potential ability to: control for the impact of particular factors, evaluate phenomena over longer history, systematically assess confidence levels based on availability of data, evaluate performance over certain sub-periods and market cycles, identify certain possible causation and lead/lag effects, reduce certain common behavioral biases in human judgment and evaluate a range of factors in a systematic way.

- 34 -

The following chart sets forth the percentage and the amount of the Partnership’s net assets allocated to each Trading Advisor as of March 31, 2015 and December 31, 2014, respectively, and the change during the three months ended March 31, 2015.


Trading Advisor	Allocations as of March 31, 2015 (%)		Allocations as of December 31, 2014(%)		Allocations as of March 31, 2015 ($)		Allocations as of December 31, 2014 ($)		Change during the period (%)
Aspect		24.95		29.36		27,744,356		32,108,499		(13.59	)
Blackwater		13.49		15.39		15,002,839		16,833,969		(10.88	)
Winton		30.07		29.59		33,444,335		32,359,204		3.35
Rotella*		—		15.27		—		16,699,361		—
Campbell		14.62		10.38		16,255,058		11,347,764		43.24
SECOR		16.87		—		18,755,726		—		—

*	Prior to reallocation of assets by the General Partner from Rotella to the existing commodity trading advisors in the Partnership as of January 1, 2015.

The following presents a summary of the Partnership’s operations for the three months ended March 31, 2015, and 2014, 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 28 of this report are prepared in accordance with GAAP, which require the use of certain accounting policies that affect the amounts reported in these financial statements, including the following: the contracts the

- 35 -

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 Income and Expenses as “Net change in unrealized trading profit (loss)” and “Unrealized depreciation on Investment in Blackwater Master Fund and SECOR Master Fund” for open contracts, and recorded as “Net realized trading profit (loss)” and “Realized gain (loss) on Investment in Blackwater Master Fund and SECOR Master Fund” 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 approximately 3:00 P.M. (E.T.), the close of the business day. Interest income, as well as management fees, incentive fees, brokerage fees, administrative fees and ongoing placement agent fees of the Partnership are recorded on an accrual basis. The Partnership records its investment in Blackwater Master Fund at fair value on the basis of the net asset value of such investments.

Management of Ceres believes that, based on the nature of the operations of the Partnership, no assumptions relating to the application of critical accounting policies other than those presently used could reasonably affect reported amounts.

For the Three Months Ended March 31, 2015

The Partnership recorded total trading results including interest income totaling $8,945,728 and expenses totaling $2,225,541, resulting in net income of $6,720,187 for the three months ended March 31, 2015. The Partnership’s net asset value per Unit increased from $19.07 at December 31, 2014 to $20.25 at March 31, 2015.

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During the first quarter, the Partnership posted a gain in Net Asset Value as trading profits in global interest rates, global stock index, currencies, energy, and agriculturals more than offset losses in the metals sector. The most significant gains were recorded in the global interest rate sector during January from long positions in U.S. fixed income futures as prices rose as tumbling oil prices crimped the outlook for inflation and fueled speculation the U.S. Federal Reserve may delay an interest-rate increase. Additional gains were experienced in the global interest rate sector during March from long positions in European fixed income futures as prices rose amid concern that Greece’s solvency will erode, boosting demand for the relative safety of government debt. Within the global stock index sector, gains were recorded primarily during February from long positions in European, U.S., and Asian equity index futures as prices advanced after euro-area finance ministers reached a provisional deal to keep financial aid flowing to Greece for four more months if the nation meets conditions on economic reforms. Positive global macro-economic signals also spurred investor sentiment and boosted prices. Within the currency sector, gains were experienced in January from short positions in the euro versus the U.S. dollar as the value of the euro touched an 11-year low after European Central Bank (“ECB”) President Mario Draghi unveiled a program of sovereign-debt purchases to supplement existing easing measures. Further gains from short positions in the euro were recorded during March. Additional currency gains were recorded from positions in the Canadian dollar and Australian dollar. Within the energy sector, gains were experienced primarily during March from short positions in crude oil and its related products as prices declined amid speculation that a global supply surplus that drove prices into a bear market in 2014 may worsen. Gains within the agricultural markets were experienced during February and March from short positions in sugar and coffee futures as prices declined after rainy conditions in Brazil’s farming region boosted prospects for the nation’s crop harvests.

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The Partnership’s gains for the quarter were partially offset by losses incurred within the metals sector throughout the first quarter from positions in gold and silver futures as prices were volatile in reaction to various economic and geopolitical factors.

For the Three Months Ended March 31, 2014

The Partnership recorded total trading results including interest income totaling $(5,881,564) and expenses totaling $2,313,705, resulting in a net loss of $8,195,269 for the three months ended March 31, 2014. The Partnership’s net asset value per Unit decreased from $16.55 at December 31, 2013 to $15.53 at March 31, 2014.

During the first quarter, the Partnership posted a loss in net asset value as trading gains in the agricultural and global interest rate sectors were more than offset by trading losses in the global stock index, metals, energy, and currency sectors. The most significant losses were recorded within the global stock index sector during January from long positions in Pacific Rim and European equity index futures as prices declined amid growing concern the global economic recovery is faltering. Within the metals markets, losses were incurred primarily in January and February from short positions in gold and silver futures as prices moved higher after geo-political turmoil and concern over the strength of the U.S. economy increased demand for the precious metals. Within the energy complex, losses were incurred during March from long positions in crude oil and its related products as prices declined in the first half of March on speculation that U.S. inventories climbed higher. Within the currency sector, losses were incurred during January from long positions in the euro versus the U.S. dollar as the value of the euro

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declined after reports showed German industrial confidence during December was lower than previously forecast. Losses were also recorded from short positions in the Japanese yen as the relative value of the currency increased during January. Smaller losses in this sector were recorded from various crossrate currency positions.

The Partnership’s losses for the quarter were partially offset by gains experienced within the agricultural sector during January and February primarily from long positions in soybean and soybean meal futures as prices advanced after adverse weather conditions in the U.S. and Brazil lowered crop estimates. Additional gains were experienced in the agricultural sector throughout the quarter from long positions in hog futures as prices rose, heading for the biggest quarterly rally in 15 years. Within the global interest rate sector, gains were experienced during January from long positions in European fixed income futures as prices advanced, pushing Germany’s 30-year yields to the lowest since August, as slowing euro-area inflation boosted speculation the European Central Bank would take more measures to stimulate the economy.

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.

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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. Gains and losses on off-exchange-traded forward currency options contracts are settled on an agreed-upon settlement date.

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.

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 its speculative trading. The

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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 experience to date as discussed 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, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). All quantitative disclosures in this section are deemed to be forward-looking statements for purposes of the safe harbor, except for statements of historical fact.

The Partnership accounts for open positions on the basis of fair value 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. Please note that the VaR model is used to numerically quantify market risk for historic reporting purposes only and is not utilized by either Ceres or the Trading Advisors in their daily risk management activities.

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VaR is a measure of the maximum amount which the Partnership could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Partnership’s speculative trading and the recurrence of market movements far exceeding expectations in the markets traded by the Partnership could result in actual trading or non-trading losses far beyond the indicated VaR of the Partnership’s experience to date (i.e., “risk of ruin”). In light of the foregoing, as well as the risks and uncertainties intrinsic to all future projections, the inclusion of the quantification in this section should not be considered to constitute any assurance or representation that the Partnership’s losses in any market sector will be limited to VaR or by the Partnership’s attempts to manage its market risk.

Exchange maintenance margin requirements have been used by the Partnership as the measure of its VaR. Maintenance margin requirements are set by exchanges to equal or exceed the maximum losses reasonably expected to be incurred in the fair value of any given contract in 95% - 99% of any one-day interval.

Maintenance margin has been used rather than the more generally available initial margin, because initial margin includes a credit risk component, which is not relevant to VaR.

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The Partnership’s Value at Risk in Different Market Sectors

The following tables indicate the trading VaR associated with the Partnership’s open positions by market category as of March 31, 2015 and December 31, 2014, and the highest, lowest and average values during the three months ended March 31, 2015, and for the twelve months ended December 31, 2014. All open position trading risk exposures of the Partnership have been included in calculating the figures set forth below. There has been no material change in the trading VaR information previously disclosed in the Form 10-K.

As of March 31, 2015, the Partnership’s total capitalization was approximately $111 million.


	March 31, 2015
Primary Market Risk Category	VaR		% of Total Capitalization
Currency	$	5,769,620		5.19	%
Interest Rate		3,023,335		2.72	%
Equity		7,061,158		6.35	%
Commodity		4,021,256		3.62	%

Total	$	19,875,369		17.88	%


	Three Months Ended March 31, 2015
Market Sector	High VaR		Low VaR		Average VaR*
Currency	$	7,370,850	$	2,846,107	$	5,385,448
Interest Rate	$	3,799,464	$	2,517,798	$	3,087,048
Equity	$	7,415,285	$	1,936,232	$	4,966,758
Commodity	$	4,480,030	$	2,743,300	$	3,720,130

*	Average of month-end VaR.

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As of December 31, 2014, the Partnership’s total capitalization was approximately $109 million.


	December 31, 2014
Primary Market Risk Category	VaR		% of Total Capitalization
Currency	$	3,458,829		3.16	%
Interest Rate		2,716,455		2.48	%
Equity		1,936,232		1.77	%
Commodity		2,743,300		2.51	%

Total	$	10,854,816		9.92	%


	Twelve Months Ended December 31, 2014
Market Sector	High VaR		Low VaR		Average VaR*
Currency	$	8,221,918	$	3,216,424	$	5,832,489
Interest Rate	$	5,070,995	$	2,295,533	$	3,894,395
Equity	$	6,868,747	$	1,042,601	$	4,430,342
Commodity	$	5,631,963	$	2,676,762	$	3,745,905

*	Average of month-end VaR.

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:

•

past changes in market risk factors will not always result in accurate predictions of the distributions and correlations of future market movements;

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•

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.

Non-Trading Risk

The Partnership has non-trading market risk on its foreign cash balances not needed for margin. These balances and any market risk they may represent are immaterial.

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.

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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 Exchange Act. The Partnership’s primary market risk exposures, as well as the strategies used and to be used by Ceres and the Trading Advisors for managing such exposures, are subject to numerous uncertainties, contingencies and risks, any one of which could cause the actual results of the Partnership’s risk controls to differ materially from the objectives of such strategies. Government interventions, defaults and expropriations, illiquid markets, the emergence of dominant fundamental factors, political upheavals, changes in historical price relationships, an influx of new market participants, increased regulation, and many other factors could result in material losses, as well as in material changes to the risk exposures and the risk management strategies of the Partnership. Investors must be prepared to lose all or substantially all of their investment in the Partnership.

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. Ceres attempts to manage market exposure by diversifying the Partnership’s assets among different market sectors and trading approaches through the selection of the commodity trading advisors and by daily monitoring of 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.

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Ceres monitors and controls the risk of the Partnership’s non-trading instrument, cash. Cash is the only Partnership investment directed by Ceres, rather than the Trading Advisors.

Item 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of the management of Ceres, Ceres’ President (Ceres’ principal executive officer) and Chief Financial Officer (Ceres’ principal financial officer) have evaluated the effectiveness of the design and operation of the Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2015. The Partnership’s disclosure controls and procedures are designed to provide reasonable assurance that information the Partnership is required to disclose in the reports that the Partnership files or submits under the Exchange Act is recorded, processed, summarized and reported within the time period specified in the applicable rules and forms. Based on this evaluation, the President and Chief Financial Officer of Ceres have concluded that the disclosure controls and procedures of the Partnership were effective at March 31, 2015.

Changes in Internal Control over Financial Reporting

There have been no 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 materially affect the Partnership’s internal control over financial reporting.

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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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PART II. OTHER INFORMATION

Item 1.

LEGAL PROCEEDINGS

There are no material legal proceedings pending against the Partnership nor the General Partner.

The following information supplements and amends the discussion set forth under Part I, Item 3. “Legal Proceedings” in the Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

On June 1, 2011, Morgan Stanley & Co. Incorporated converted from a Delaware corporation to a Delaware limited liability company. As a result of that conversion, Morgan Stanley & Co. Incorporated is now named Morgan Stanley & Co. LLC (“MS&Co.”).

MS&Co. is a wholly-owned, indirect subsidiary of Morgan Stanley, a Delaware holding company. Morgan Stanley files periodic reports with the SEC as required by the Exchange Act, which include current descriptions of material litigation and material proceedings and investigations, if any, by governmental and/or regulatory agencies or self-regulatory organizations concerning Morgan Stanley and its subsidiaries, including MS&Co. As a consolidated subsidiary of Morgan Stanley, MS&Co. does not file its own periodic reports with the SEC that contain descriptions of material litigation, proceedings and investigations. As a result, please refer to the “Legal Proceedings” section of Morgan Stanley’s SEC 10-K filings for 2014, 2013, 2012, 2011 and 2010.

In addition to the matters described in those filings, in the normal course of business, each of Morgan Stanley and MS&Co. has been named, from time to time, as a defendant in various legal actions, including arbitrations, class actions, and other litigation, arising in connection with its activities as a global diversified financial services institution. Certain of the legal actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. Each of Morgan Stanley and MS&Co. is also involved, from time to time, in investigations and proceedings by governmental and/or regulatory agencies or self-regulatory organizations, certain of which may result in adverse judgments, fines or penalties. The number of these investigations and proceedings has increased in recent years with regard to many financial services institutions, including Morgan Stanley and MS&Co.

MS&Co. is a Delaware limited liability company with its main business office located at 1585 Broadway, New York, New York 10036. Among other registrations and memberships, MS&Co. is registered as a futures commission merchant and is a member of the National Futures Association.

Regulatory and Governmental Matters.

On April 21, 2015, the Chicago Board Options Exchange, Incorporated (“CBOE”) and the CBOE Futures Exchange, LLC (“CFE”) filed statements of charges against MS&Co. in connection with trading by one of MS&Co.’s former traders of EEM options contracts that allegedly disrupted the final settlement price of the November 2012 VXEM futures. CBOE alleged that MS&Co. violated CBOE Rules 4.1, 4.2 and 4.7, Sections 9(a) and 10(b) of the Exchange Act and Rule 10b-5 thereunder. CFE alleged that MS&Co. violated CFE Rules 608, 609 and 620. Both matters are ongoing.

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Other Litigation.

On March 15, 2010, the Federal Home Loan Bank of San Francisco filed two complaints against MS&Co. and other defendants in the Superior Court of the State of California. These actions are styled Federal Home Loan Bank of San Francisco v. Credit Suisse Securities (USA) LLC, et al., and Federal Home Loan Bank of San Francisco v. Deutsche Bank Securities Inc. et al., respectively. Amended complaints filed on June 10, 2010 allege that defendants made untrue statements and material omissions in connection with the sale to plaintiff of a number of mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The amount of certificates allegedly sold to plaintiff by MS&Co. in these cases was approximately $704 million and $276 million, respectively. The complaints raise claims under both the federal securities laws and California law and seek, among other things, to rescind the plaintiff’s purchase of such certificates. On August 11, 2011, plaintiff’s federal securities law claims were dismissed with prejudice. The defendants filed answers to the amended complaints on October 7, 2011. On February 9, 2012, defendants’ demurrers with respect to all other claims were overruled. On December 20, 2013, plaintiff’s negligent misrepresentation claims were dismissed with prejudice. On January 26, 2015, as a result of a settlement with certain other defendants, the plaintiff requested and the court subsequently entered a dismissal with prejudice of certain of the plaintiff’s claims, including all remaining claims against MS&Co. in the Federal Home Loan Bank of San Francisco v. Credit Suisse Securities (USA) LLC, et al. action. On February 18, 2015, the court entered an order setting a number of claims for trial throughout 2016. Claims against MS&Co. have not yet been set for trial. At March 25, 2015, the current unpaid balance of the mortgage pass-through certificates at issue in these cases was approximately $66 million, and the certificates had incurred actual losses of approximately $1 million. Based on currently available information, MS&Co. believes it could incur a loss for this action up to the difference between the $66 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co., or upon sale, plus pre- and post-judgment interest, fees and costs. MS&Co. may be entitled to be indemnified for some of these losses and to an offset for interest received by the plaintiff prior to a judgment.

On October 15, 2010, the Federal Home Loan Bank of Chicago filed a complaint against MS&Co. and other defendants in the Circuit Court of the State of Illinois, styled Federal Home Loan Bank of Chicago v. Bank of America Funding Corporation et al. A corrected amended complaint was filed on April 8, 2011. The corrected amended complaint alleges that defendants made untrue statements and material omissions in the sale to plaintiff of a number of mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans and asserts claims under Illinois law. The total amount of certificates allegedly sold to plaintiff by MS&Co. at issue in the action was approximately $203 million. The complaint seeks, among other things, to rescind the plaintiff’s purchase of such certificates. The defendants filed a motion to dismiss the corrected amended complaint on May 27, 2011, which was denied on September 19, 2012. On December 13, 2013, the court entered an order dismissing all claims related to one of the securitizations at issue. After that dismissal, the remaining amount of certificates allegedly issued by MS&Co. or sold to plaintiff by MS&Co. was approximately $78 million. At March 25, 2015, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $53 million, and the certificates had not yet incurred actual losses. Based on currently available information, MS&Co. believes it could incur a loss in this action up to the difference between the $53 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co., plus pre- and post-judgment interest, fees and costs. MS&Co. may be entitled to be indemnified for some of these losses and to an offset for interest received by the plaintiff prior to a judgment.

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On July 18, 2011, the Western and Southern Life Insurance Company and certain affiliated companies filed a complaint against MS&Co. and other defendants in the Court of Common Pleas in Ohio, styled Western and Southern Life Insurance Company, et al. v. Morgan Stanley Mortgage Capital Inc., et al. An amended complaint was filed on April 2, 2012 and alleges that defendants made untrue statements and material omissions in the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The amount of the certificates allegedly sold to plaintiffs by MS&Co. was approximately $153 million. The amended complaint raises claims under the Ohio Securities Act, federal securities laws, and common law and seeks, among other things, to rescind the plaintiffs’ purchases of such certificates. On May 21, 2012, the Morgan Stanley defendants filed a motion to dismiss the amended complaint, which was denied on August 3, 2012. MS&Co. filed its answer on August 17, 2012. MS&Co. filed a motion for summary judgment on January 20, 2015. At March 25, 2015, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $108 million, and the certificates had incurred actual losses of approximately $2 million. Based on currently available information, MS&Co. believes it could incur a loss in this action up to the difference between the $108 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co., or upon sale, plus pre- and post-judgment interest, fees and costs. MS&Co. may be entitled to an offset for interest received by the plaintiff prior to a judgment.

On November 4, 2011, the Federal Deposit Insurance Corporation (“FDIC”), as receiver for Franklin Bank S.S.B., filed two complaints against MS&Co. in the District Court of the State of Texas. Each was styled Federal Deposit Insurance Corporation as Receiver for Franklin Bank, S.S.B. v. Morgan Stanley & Company LLC F/K/A Morgan Stanley & Co. Inc. and alleged that MS&Co. made untrue statements and material omissions in connection with the sale to plaintiff of mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The amount of certificates allegedly underwritten and sold to plaintiff by MS&Co. in these cases was approximately $67 million and $35 million, respectively. The complaints each raised claims under both federal securities law and the Texas Securities Act and each seeks, among other things, compensatory damages associated with plaintiff’s purchase of such certificates. On June 7, 2012, the two cases were consolidated. MS&Co. filed a motion for summary judgment and special exceptions, which was denied in substantial part on April 26, 2013. The FDIC filed a second amended consolidated complaint on May 3, 2013. MS&Co. filed a motion for leave to file an interlocutory appeal as to the court’s order denying its motion for summary judgment and special exceptions, which was denied on August 1, 2013. On October 7, 2014, the court denied MS&Co.’s motion for reconsideration of the court’s order denying its motion for summary judgment and special exceptions and granted its motion for reconsideration of the court’s order denying leave to file an interlocutory appeal. On November 21, 2014, MS&Co. filed a motion for summary judgment, which was denied on February 10, 2015. The Texas Fourteenth Court of Appeals denied Morgan Stanley’s petition for interlocutory appeal on November 25, 2014. Trial is currently scheduled to begin in July 2015. At March 25, 2015, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $41 million, and the certificates had incurred actual losses of approximately $5 million. Based on currently available information, MS&Co. believes it could incur a loss in this action up to the difference between the $41 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co., or upon sale, plus pre-and post-judgment interest, fees and costs. MS&Co. may be entitled to be indemnified for some of these losses and to an offset for interest received by the plaintiff prior to a judgment.

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On April 25, 2012, The Prudential Insurance Company of America and certain affiliates filed a complaint against MS&Co. and certain affiliates in the Superior Court of the State of New Jersey, styled The Prudential Insurance Company of America, et al. v. Morgan Stanley, et al. On October 16, 2012, plaintiffs filed an amended complaint. The amended complaint alleges that defendants made untrue statements and material omissions in connection with the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by MS&Co. is approximately $1.073 billion. The amended complaint raises claims under the New Jersey Uniform Securities Law, as well as common law claims of negligent misrepresentation, fraud, fraudulent inducement, equitable fraud, aiding and abetting fraud, and violations of the New Jersey RICO statute, and includes a claim for treble damages. On March 15, 2013, the court denied the defendants’ motion to dismiss the amended complaint. On January 2, 2015, the court denied defendants’ renewed motion to dismiss the amended complaint. At March 25, 2015, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $598 million, and the certificates had not yet incurred actual losses. Based on currently available information, MS&Co. believes it could incur a loss in this action up to the difference between the $598 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co., or upon sale, plus pre- and post-judgment interest, fees and costs. MS&Co. may be entitled to be indemnified for some of these losses and to an offset for interest received by the plaintiff prior to a judgment.

On April 20, 2011, the Federal Home Loan Bank of Boston filed a complaint against MS&Co. and other defendants in the Superior Court of the Commonwealth of Massachusetts styled Federal Home Loan Bank of Boston v. Ally Financial, Inc. F/K/A GMAC LLC et al. An amended complaint was filed on June 29, 2012 and alleges that defendants made untrue statements and material omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly issued by MS&Co. or sold to plaintiff by MS&Co. was approximately $385 million. The amended complaint raises claims under the Massachusetts Uniform Securities Act, the Massachusetts Consumer Protection Act and common law and seeks, among other things, to rescind the plaintiff’s purchase of such certificates. On May 26, 2011, defendants removed the case to the United States District Court for the District of Massachusetts. On October 11, 2012, defendants filed motions to dismiss the amended complaint, which were granted in part and denied in part on September 30, 2013. The defendants filed an answer to the amended complaint on December 16, 2013. Plaintiff has voluntarily dismissed its claims against MS&Co. with respect to two of the securitizations at issue, such that the remaining amount of certificates allegedly issued by MS&Co. or sold to plaintiff by MS&Co. is approximately $358 million. At March 25, 2015, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $64 million, and the certificates had not yet incurred actual losses. Based on currently available information, MS&Co. believes it could incur a loss in this action up to the difference between the $64 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co., or upon sale, plus pre- and post-judgment interest, fees and costs. MS&Co. may be entitled to be indemnified for some of these losses and to an offset for interest received by the plaintiff prior to a judgment.

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On February 14, 2013, Bank Hapoalim B.M. filed a complaint against MS&Co. and certain affiliates in the Supreme Court of the State of New York, New York County (“Supreme Court of NY”), styled Bank Hapoalim B.M. v. Morgan Stanley et al. The complaint alleges that defendants made material misrepresentations and omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by MS&Co. to plaintiff was approximately $141 million. The complaint alleges causes of action against MS&Co. for common law fraud, fraudulent concealment, aiding and abetting fraud, and negligent misrepresentation, and seeks, among other things, compensatory and punitive damages. On April 22, 2014, the defendants’ motion to dismiss was denied in substantial part. On August 29, 2014, MS&Co. filed its answer to the complaint, and on September 18, 2014, MS&Co. filed a notice of appeal from the ruling denying defendants’ motion to dismiss. At March 25, 2015, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $71 million, and the certificates had not yet incurred actual losses. Based on currently available information, MS&Co. believes it could incur a loss in this action up to the difference between the $71 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co., or upon sale, plus pre- and post-judgment interest, fees and costs.

On May 3, 2013, plaintiffs in Deutsche Zentral-Genossenschaftsbank AG et al. v. Morgan Stanley et al. filed a complaint against MS&Co., certain affiliates, and other defendants in the Supreme Court of NY. The complaint alleges that defendants made material misrepresentations and omissions in the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by MS&Co. to plaintiff was approximately $694 million. The complaint alleges causes of action against MS&Co. for common law fraud, fraudulent concealment, aiding and abetting fraud, negligent misrepresentation, and rescission and seeks, among other things, compensatory and punitive damages. On June 10, 2014, the court denied the defendants’ motion to dismiss. On August 4, 2014, claims regarding two certificates were dismissed by stipulation. After these dismissals, the remaining amount of certificates allegedly issued by MS&Co. or sold to plaintiff by MS&Co. was approximately $644 million. On September 12, 2014, MS&Co. filed a notice of appeal from the denial of the motion to dismiss. On January 12, 2015, MS&Co. filed an amended answer to the complaint. At March 25, 2015, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $289 million, and the certificates had incurred actual losses of approximately $79 million. Based on currently available information, MS&Co. believes it could incur a loss in this action up to the difference between the $289 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co., or upon sale, plus pre- and post-judgment interest, fees and costs. MS&Co. may be entitled to be indemnified for some of these losses.

On September 23, 2013, the plaintiff in National Credit Union Administration Board v. Morgan Stanley & Co. Inc., et al. filed a complaint against MS&Co. and certain affiliates in the United States District Court for the Southern District of New York (“SDNY”). The complaint alleges that defendants made untrue statements of material fact or omitted to state material facts in the sale to the plaintiff of certain mortgage pass-through certificates issued by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by MS&Co. to plaintiffs was approximately $417 million. The complaint alleges causes of action against MS&Co. for violations of Section 11 and Section 12(a)(2) of the Securities Act, violations of the Texas Securities Act, and violations of the Illinois Securities Law of 1953 and seeks, among other things, rescissory and compensatory

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damages. The defendants filed a motion to dismiss the complaint on November 13, 2013. On January 22, 2014 the court granted defendants’ motion to dismiss with respect to claims arising under the Securities Act and denied defendants’ motion to dismiss with respect to claims arising under Texas Securities Act and the Illinois Securities Law of 1953. On November 17, 2014, the plaintiff filed an amended complaint. On December 15, 2014, defendants answered the amended complaint. At March 25, 2015, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $204 million, and the certificates had incurred actual losses of $28 million. Based on currently available information, MS&Co. believes it could incur a loss in this action up to the difference between the $204 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co., or upon sale, plus pre- and post-judgment interest, fees and costs. MS&Co. may be entitled to be indemnified for some of these losses and to an offset for interest received by the plaintiff prior to a judgment.

Settled Civil Litigation.

On August 25, 2008, MS&Co. and two ratings agencies were named as defendants in a purported class action related to securities issued by a structured investment vehicle called Cheyne Finance PLC and Cheyne Finance LLC (together, the “Cheyne structured investment vehicle”). The case was styled Abu Dhabi Commercial Bank, et al. v. Morgan Stanley & Co. Inc., et al. The complaint alleged, among other things, that the ratings assigned to the securities issued by the Cheyne structured investment vehicle were false and misleading, including because the ratings did not accurately reflect the risks associated with the subprime residential mortgage backed securities held by the Cheyne structured investment vehicle. The plaintiffs asserted allegations of aiding and abetting fraud and negligent misrepresentation relating to approximately $852 million of securities issued by the Cheyne structured investment vehicle. On April 24, 2013, the parties reached an agreement to settle the case, and on April 26, 2013, the court dismissed the action with prejudice. The settlement does not cover certain claims that were previously dismissed.

On July 9, 2010 and February 11, 2011, Cambridge Place Investment Management Inc. filed two separate complaints against MS&Co. and/or its affiliates and other defendants in the Superior Court of the Commonwealth of Massachusetts, both styled Cambridge Place Investment Management Inc. v. Morgan Stanley & Co., Inc., et al. The complaints asserted claims on behalf of certain clients of plaintiff’s affiliates and allege that defendants made untrue statements and material omissions in the sale of a number of mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly issued by MS&Co. and/or its affiliates or sold to plaintiff’s affiliates’ clients by MS&Co. and/or its affiliates in the two matters was approximately $263 million. On February 11, 2014, the parties entered into an agreement to settle the litigation. On February 20, 2014, the court dismissed the action.

On October 25, 2010, MS&Co., certain affiliates and Pinnacle Performance Limited, a special purpose vehicle, were named as defendants in a purported class action related to securities issued by the special purpose vehicle in Singapore, commonly referred to as “Pinnacle Notes.” The case is styled Ge Dandong, et al. v. Pinnacle Performance Ltd., et al. and is pending in the SDNY. An amended complaint was filed on October 22, 2012. The court denied the defendants’ motion to dismiss the amended complaint on August 22, 2013, and granted class certification on October 17, 2013. On October 30, 2013, the defendants filed a petition for permission to appeal the court’s decision granting class certification. On January 31, 2014, the plaintiffs filed a second amended complaint. The second amended complaint alleges that the defendants engaged in a

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fraudulent scheme to defraud investors by structuring the Pinnacle Notes to fail and benefited subsequently from the securities’ failure. In addition, the second amended complaint alleges that the securities’ offering materials contained material misstatements or omissions regarding the securities’ underlying assets and the alleged conflicts of interest between the defendants and the investors. The second amended complaint asserts common law claims of fraud, aiding and abetting fraud, fraudulent inducement, aiding and abetting fraudulent inducement, and breach of the implied covenant of good faith and fair dealing. On July 17, 2014, the parties reached an agreement in principle to settle the litigation, which received preliminary court approval December 2, 2014. The final approval hearing is scheduled for July 2, 2015.

On July 5, 2011, Allstate Insurance Company and certain of its affiliated entities filed a complaint against MS&Co. in the Supreme Court of NY, styled Allstate Insurance Company, et al. v. Morgan Stanley, et al. An amended complaint was filed on September 9, 2011, and alleges that the defendants made untrue statements and material omissions in the sale to the plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly issued and/or sold to the plaintiffs by MS&Co. was approximately $104 million. The complaint raised common law claims of fraud, fraudulent inducement, aiding and abetting fraud, and negligent misrepresentation and seeks, among other things, compensatory and/or recessionary damages associated with the plaintiffs’ purchases of such certificates. On March 15, 2013, the court denied in substantial part the defendants’ motion to dismiss the amended complaint, which order MS&Co. appealed on April 11, 2013. On May 3, 2013, MS&Co. filed its answer to the amended complaint. On January 16, 2015, the parties reached an agreement to settle the litigation.

On April 25, 2012, Metropolitan Life Insurance Company and certain affiliates filed a complaint against MS&Co. and certain affiliates in the Supreme Court of NY styled, Metropolitan Life Insurance Company, et al. v. Morgan Stanley, et al. An amended complaint was filed on June 29, 2012, and alleges that the defendants made untrue statements and material omissions in the sale to the plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten, and/or sold by MS&Co. was approximately $758 million. The amended complaint raised common law claims of fraud, fraudulent inducement, and aiding and abetting fraud and seeks, among other things, rescission, compensatory, and/or rescissionary damages, as well as punitive damages, associated with the plaintiffs’ purchases of such certificates. On April 11, 2014, the parties entered into a settlement agreement.

In re Morgan Stanley Mortgage Pass-Through Certificates Litigation, which had been pending in the SDNY, was a putative class action involving allegations that, among other things, the registration statements and offering documents related to the offerings of certain mortgage pass-through certificates in 2006 and 2007 contained false and misleading information concerning the pools of residential loans that backed these securitizations. On December 18, 2014, the parties’ agreement to settle the litigation received final court approval, and on December 19, 2014, the court entered an order dismissing the action.

Additional lawsuits containing claims similar to those described above may be filed in the future. In the course of its business, MS&Co., as a major futures commission merchant, is party to various civil actions, claims and routine regulatory investigations and proceedings that the General Partner believes do not have a material effect on the business of MS&Co. MS&Co. may establish reserves from time to time in connections with such actions.

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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.

Item 4.

MINE SAFETY DISCLOSURES

Not applicable.

Item 6.

EXHIBITS


31.01		Certification of President of Ceres Managed Futures 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 Ceres Managed Futures LLC, the General Partner of the Partnership, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.01		Certification of President of Ceres Managed Futures 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 Ceres Managed Futures 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.

101.INS*		XBRL Instance Document

101.SCH*		XBRL Taxonomy Extension Schema Document

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB*		XBRL Taxonomy Extension Label Document

101.PRE*		XBRL Taxonomy Extension Presentation Document

101.DEF*		XBRL Taxonomy Extension Definition Document

Notes to Exhibits List

*	Submitted electronically herewith.

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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 Technical L.P.
	(Registrant)

	By:	Ceres Managed Futures LLC
		(General Partner)

May 13, 2015	By:	/s/ Steven Ross
		Steven Ross
		Chief Financial Officer

	By:	/s/ Patrick T. Egan

		Patrick T. Egan
		President and Director

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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Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company