Ceres Tactical Global 10-Q 2015 Q2 Quarterly report

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 June 30, 2015

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                     

Commission File Number: 000-31563

MORGAN STANLEY SMITH BARNEY SPECTRUM CURRENCY AND COMMODITY L.P.

(Exact name of registrant as specified in its charter)

Delaware	13-4084211
(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.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	x	Smaller reporting company	¨

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 July 31, 2015, 1,445,439.321 Limited Partnership Units were outstanding.

MORGAN STANLEY SMITH BARNEY SPECTRUM CURRENCY AND COMMODITY L.P.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

June 30, 2015

	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Statements of Financial Condition as of June 30, 2015 (Unaudited) and December 31, 2014	2
	Statements of Income and Expenses for the Three and Six Months Ended June 30, 2015 and 2014 (Unaudited)	3
	Statements of Changes in Partners’ Capital for the Six Months Ended June 30, 2015 and 2014 (Unaudited)	4
	Notes to Financial Statements, including the Financial Statements of Cambridge Master Fund L.P. (Unaudited)	5-18
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19-22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22-26
Item 4.	Controls and Procedures	26-27
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	28-36
Item 1A.	Risk Factors	37
Item 4.	Mine Safety Disclosures	37
Item 6.	Exhibits	37

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

MORGAN STANLEY SMITH BARNEY SPECTRUM CURRENCY AND COMMODITY L.P.

STATEMENTS OF FINANCIAL CONDITION

	June 30, 2015 (Unaudited)		December 31, 2014
	$		$
ASSETS
Investment in Cambridge Master Fund		13,425,351		12,289,754
Redemptions receivable from KR Master Fund		—		1,882,328
Interest receivable		—		61
Total Assets		13,425,351		14,172,143
LIABILITIES AND PARTNERS’ CAPITAL
Liabilities:
Redemptions payable		206,246		238,966
Accrued ongoing placement agent fees		22,602		22,139
Accrued administrative fees		18,081		17,712
Accrued management fees		16,951		15,812
Accrued incentive fees		9,020		108,183
Total Liabilities		272,900		402,812
Partners’ Capital:
Limited Partners (1,460,525.446 and 1,604,009.847 Units, respectively)		12,999,195		13,623,087
General Partner (17,219.120 and 17,219.120 Units, respectively)		153,256		146,244
Total Partners’ Capital		13,152,451		13,769,331
Total Liabilities and Partners’ Capital		13,425,351		14,172,143
NET ASSET VALUE PER UNIT		8.90		8.49

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

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MORGAN STANLEY SMITH BARNEY SPECTRUM CURRENCY AND COMMODITY L.P.

STATEMENTS OF INCOME AND EXPENSES

(Unaudited)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2015			2014			2015			2014
	$			$			$			$
INVESTMENT INCOME
Interest income		198			502			419			1,609
EXPENSES
Ongoing placement agent fees		68,491			—			137,158			—
Administrative fees		54,793			—			109,726			—
Management fees		51,368			52,228			102,868			109,254
Incentive fees		9,020			—			115,506			—
Brokerage fees		—			137,741			—			336,127
Total Expenses		183,672			189,969			465,258			445,381
NET INVESTMENT LOSS		(183,474	)		(189,467	)		(464,839	)		(443,772	)
TRADING RESULTS
Trading profit (loss):
Net realized gain allocated from Cambridge Master Fund		413,585			502,901			2,203,442			398,015
Net realized loss allocated from KR Master Fund		—			(176,481	)		—			(417,421	)
Net change in unrealized depreciation allocated from Cambridge Master Fund		(178,801	)		(511,805	)		(1,083,649	)		(363,486	)
Net change in unrealized appreciation allocated from KR Master Fund		—			187,704			—			610,652
Total Trading Results		234,784			2,319			1,119,793			227,760
NET INCOME (LOSS)		51,310			(187,148	)		654,954			(216,012	)
NET INCOME (LOSS) ALLOCATION
Limited Partners		50,828			(183,651	)		647,942			(212,294	)
General Partner		482			(3,497	)		7,012			(3,718	)
NET INCOME (LOSS) PER UNIT *
Limited Partners		0.03			(0.10	)		0.41			(0.10	)
General Partner		0.03			(0.10	)		0.41			(0.10	)
	Units			Units			Units			Units
WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING		1,519,090.813			2,071,589.890			1,556,988.891			2,209,469.236

* 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 CURRENCY AND COMMODITY L.P.

STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL

For the Six Months Ended June 30, 2015 and 2014

(Unaudited)

	Units of
	Partnership			Limited			General
	Interest			Partners			Partner			Total
				$			$			$
Partners’ Capital, December 31, 2014		1,621,228.967			13,623,087			146,244			13,769,331
Net Income		—			647,942			7,012			654,954
Redemptions		(143,484.401	)		(1,271,834	)		—			(1,271,834	)
Partners’ Capital, June 30, 2015		1,477,744.566			12,999,195			153,256			13,152,451
Partners’ Capital, December 31, 2013		2,430,680.684			17,703,845			265,227			17,969,072
Net Loss		—	��		(212,294	)		(3,718	)		(216,012	)
Redemptions		(516,729.145	)		(3,802,336	)		—			(3,802,336	)
Partners’ Capital, June 30, 2014		1,913,951.539			13,689,215			261,509			13,950,724

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

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MORGAN STANLEY SMITH BARNEY SPECTRUM CURRENCY AND COMMODITY L.P.

NOTES TO FINANCIAL STATEMENTS

June 30, 2015

(Unaudited)

1.Organization

Morgan Stanley Smith Barney Spectrum Currency and Commodity L.P. (the “Partnership”) is a Delaware limited partnership organized in 1999 to engage primarily in the speculative trading of futures contracts, options on futures and forward contracts, and forward contracts on physical commodities and other commodity interests, including, but not limited to, foreign currencies, financial instruments, metals, energy, and agricultural products (collectively, “Futures Interests”) (refer to Note 6.Financial Instruments through the Partnership’s Investment in Affiliated Master Funds). The Partnership is one of the Morgan Stanley Spectrum series of funds, comprised of the Partnership, Morgan Stanley Smith Barney Spectrum Technical L.P., Morgan Stanley Smith Barney Spectrum Select L.P. and Morgan Stanley Smith Barney Spectrum Strategic 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.

During June 2015, the General Partner determined to invest a portion of the Partnership’s and Master Fund’s excess cash (the Partnership’s and Master Fund’s assets not used for futures interest trading or required margin for such trading) in United States (“U.S.”) Treasury bills and/or other permitted investments. The Partnership will receive interest on U.S. Treasury bills at the relevant coupon rate. There will be no change to the treatment of the excess cash not invested in U.S. Treasury bills or other permitted investments. The General Partner intends to hold the U.S. Treasury bills until maturity, but in the event that the General Partner is required to liquidate U.S. Treasury bills before they mature, to meet redemption requests or otherwise, the Partnership and Master Fund may incur a loss on such U.S. Treasury bills and/or may be subject to additional fees or other costs. The General Partner will endeavor to maintain sufficient cash in the Partnership’s and Master Fund’s accounts in order to avoid early liquidation of U.S. Treasury bills.

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 June 30, 2015 and the results of its operations for the three and six months ended June 30, 2015 and 2014 and changes in partners’ capital for the six months ended June 30, 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.

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MORGAN STANLEY SMITH BARNEY SPECTRUM CURRENCY AND COMMODITY L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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.

Certain prior period amounts have been reclassified to conform to current period presentation. Amounts reported separately on the Statements of Income and Expenses and Changes in Partners’ Capital as ongoing selling agent fees and clearing fees were previously combined and presented as brokerage commissions.

Partnership’s Investment: The Partnership carries its affiliated investment in Cambridge Master Fund (the “Master Fund”) at fair value based on the Master Fund’s net asset value as calculated by the Master Fund.

Master Fund’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. U.S. Treasury bills are valued at the last available bid price received from independent pricing services.

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. Accordingly, the Partnership follows the investment company accounting and reporting guidance of Topic 946 and reflects its investments at fair value with unrealized gains and losses resulting from changes in fair value reflected in the Statements of Income and Expenses.

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. The General Partner 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, the 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 fund 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 removes the requirement to make certain

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MORGAN STANLEY SMITH BARNEY SPECTRUM CURRENCY AND COMMODITY L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. Rather, those disclosures are limited to investments for which the entity has elected to measure the fair value using the practical expedient. The standard is effective for public business entities for fiscal years beginning after December 15, 2015. Early adoption is permitted. The Partnership has elected to adopt the guidance as of June 30, 2015. As a result of this adoption, the investments that are measured at fair value based on the net asset value per share (or its equivalent) practical expedient have been removed from the fair value hierarchy in all periods presented in these 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.

3.Investments in Affiliated Master Fund

The clearing commodity broker for the Cambridge Master Fund, and indirectly the Partnership, is Morgan Stanley & Co. LLC (“MS&Co.”). MS&Co. also acts as the counterparty on all trading of foreign currency forward contracts. MS&Co. is a wholly-owned subsidiary of Morgan Stanley. The trading advisor to the Partnership is The Cambridge Strategy (Assets Management) Limited (“Cambridge” or the “Trading Advisor”).

On November 1, 2012, the Partnership allocated a portion of its assets to Cambridge for trading through investment in the Cambridge Master Fund L.P. (“Cambridge Master Fund”), a limited partnership organized under the partnership laws of the State of Delaware. Cambridge Master Fund was formed to permit accounts managed now and in the future by Cambridge using Cambridge Asian Markets Alpha Programme and, from October 1, 2013, Cambridge Emerging Markets Alpha Programme, to invest together in one trading vehicle. The General Partner is also the general partner of Cambridge Master Fund. Individual and pooled accounts currently managed by Cambridge, including the Partnership, are permitted to be limited partners of Cambridge Master Fund. The General Partner and Cambridge believe that trading through this structure should provide efficiency and economy in the trading process.

As of June 30, 2015 and December 31, 2014, the Partnership owned approximately 35.22% and 31.51% of Cambridge Master Fund, respectively. It is the Partnership’s intention to continue to invest in Cambridge Master Fund. The performance of the Partnership is directly affected by the performance of Cambridge Master Fund, and prior to termination on December 31, 2014, KR Master Fund.

Effective December 31, 2014, the Partnership fully redeemed its investment from KR Master Fund L.P. (“KR Master Fund”). In addition, Krom River Investment Management (Cayman) Limited and Krom River Trading AG (together, and each separately, “Krom River”) no longer act as commodity trading advisor to the Partnership. Effective on or about January 1, 2015, the Partnership reallocated the assets allocated to Krom River to the existing commodity trading advisor of the Partnership.

Cambridge Master Fund’s Statements of Financial Condition and Condensed Schedules of Investments as of June 30, 2015 and December 31, 2014, and Statements of Income and Expenses for the three and six months ended June 30, 2015 and 2014 and Changes in Partners’ Capital for the six months ended June 30, 2015 and 2014 are presented below:

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MORGAN STANLEY SMITH BARNEY SPECTRUM CURRENCY AND COMMODITY L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Cambridge Master Fund L.P.

Statements of Financial Condition

	June 30, 2015 (Unaudited)		December 31, 2014
	$		$
Assets:
Equity in trading account:
U.S. Treasury bills, at fair value (amortized cost $34,639,791 and $0, respectively)		34,639,791		—
Cash		—		26,503,935
Cash margin		18,011,796		9,794,931
Net unrealized appreciation on open forward contracts		—		2,739,853
Total Trading Equity		52,651,587		39,038,719
Expense Reimbursement		9,004		7,922
Total Assets		52,660,591		39,046,641
Liabilities and Partners’ Capital:
Net unrealized depreciation on open forward contracts		335,331		—
Cash overdraft		14,177,153		—
Accrued expenses:
Professional fees		41,116		48,456
Total Liabilities		14,553,600		48,456
Partners’ Capital:
General Partner		—		—
Limited Partners		38,106,991		38,998,185
Total Liabilities and Partners’ Capital		52,660,591		39,046,641

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MORGAN STANLEY SMITH BARNEY SPECTRUM CURRENCY AND COMMODITY L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Cambridge Master Fund L.P.

Condensed Schedules of Investments

June 30, 2015 (Unaudited)

	Notional		Fair Value			% of Partners’ Capital
	$		$			%
Unrealized Appreciation on Open Forward Contracts
Currencies		617,230,346		8,704,349			22.84
Total unrealized appreciation on open forward contracts				8,704,349			22.84
Unrealized Depreciation on Open Forward Contracts
Currencies		687,983,764		(9,039,680	)		(23.72	)
Total unrealized depreciation on open forward contracts				(9,039,680	)		(23.72	)

Investment in U.S. Treasury bills

Face Amount	Maturity Date		Description	Fair Value		% of Partners’ Capital
$34,640,000		09/17/2015	U.S. Treasury bills, 0.0025% (amortized cost of $34,639,791)		34,639,791		90.90
Net Fair Value					34,304,460		90.02

December 31, 2014

	Notional		Fair Value			% of Partners’ Capital
	$		$		��	%
Unrealized Appreciation on Open Forward Contracts
Currencies		391,686,862		5,969,177			15.31
Total unrealized appreciation on open forward contracts				5,969,177			15.31
Unrealized Depreciation on Open Forward Contracts
Currencies		284,639,685		(3,229,324	)		(8.28	)
Total unrealized depreciation on open forward contracts				(3,229,324	)		(8.28	)
Net fair value				2,739,853			7.03

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MORGAN STANLEY SMITH BARNEY SPECTRUM CURRENCY AND COMMODITY L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Cambridge Master Fund L.P.

Statements of Income and Expenses

for the Three and Six Months ended June 30, 2015 and 2014

(Unaudited)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2015			2014			2015			2014
	$			$			$			$
INVESTMENT INCOME
Interest income		672			1,450			1,433			4,427
EXPENSES
Clearing fees		31,202			—			34,525			42,791
Professional fees		26,179			32,927			51,208			56,573
Total Expenses		57,381			32,927			85,733			99,364
Expense reimbursements		(19,940	)		(9,704	)		(29,925	)		(28,218	)
Net expenses		37,441			23,223			55,808			71,146
Net investment gain (loss)		(36,769	)		(21,773	)		(54,375	)		(66,719	)
TRADING RESULTS:
Net gains (losses) on trading of commodity interests:
Net realized gains (losses) on closed contracts		1,172,092			1,576,372			6,275,389			1,199,900
Net change in unrealized gains (losses) on open contracts		(484,030	)		(1,399,773	)		(3,075,184	)		(867,226	)
Total Trading Results		688,062			176,599			3,200,205			332,674
NET INCOME		651,293			154,826			3,145,830			265,955

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MORGAN STANLEY SMITH BARNEY SPECTRUM CURRENCY AND COMMODITY L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Cambridge Master Fund L.P.

Statements of Changes in Partners’ Capital

for the Six Months ended June 30, 2015 and 2014

(Unaudited)

	Partners’ Capital
	$
Partners’ Capital at December 31, 2014		38,998,185
Net income		3,145,830
Subscriptions		1,636,080
Redemptions		(5,671,671	)
Distribution of interest income to feeder funds		(1,433	)
Partners’ Capital at June 30, 2015		38,106,991
Partners’ Capital at December 31, 2013		37,521,384
Net income		265,955
Subscriptions		3,000,000
Redemptions		(6,524,728	)
Distribution of interest income to feeder funds		(4,427	)
Partners’ Capital at June 30, 2014		34,258,184

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MORGAN STANLEY SMITH BARNEY SPECTRUM CURRENCY AND COMMODITY L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

4.Financial Highlights

Financial highlights of the limited partner class for the Partnership and Cambridge Master Fund for the three and six months ended June 30, 2015 and 2014 were as follows:

Financial Highlights of the Partnership:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2015			2014			2015			2014
Per Unit operating performance:
Net asset value at the beginning of period:	$	8.87		$	7.39		$	8.49		$	7.39
Net Investment Loss(2)		(0.12	)		(0.10	)		(0.30	)		(0.21	)
Realized/Unrealized Gain		0.15			—	(2)		0.71			0.11
Net Gain/(Loss)		0.03			(0.10	)		0.41			(0.10	)
Net asset value, June 30:	$	8.90		$	7.29		$	8.90		$	7.29
Ratios to average net assets:(1)
Net Investment Loss (2)		(5.2	)%		(5.2	)%		(6.0	)%		(5.7	)%
Expenses before Incentive Fees		5.2	%		5.2	%		5.2	%		5.8	%
Incentive Fees		0.1	%		—	(3)		0.9	%		—	(3)
Expenses after Incentive Fees		5.3	%		5.2	%		6.1	%		5.8	%
Total return before Incentive Fees		0.4	%		(1.4	)%		5.7	%		(1.4	)%
Incentive Fees		0.1	%		—	(3)		0.9	%		—	(3)
Total return after Incentive Fees		0.3	%		(1.4	)%		4.8	%		(1.4	)%

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

⁽²⁾  Interest income less total expenses.

⁽³⁾  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, and includes the income and expenses allocated from the Master Fund.

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MORGAN STANLEY SMITH BARNEY SPECTRUM CURRENCY AND COMMODITY L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Financial Highlights of Cambridge Master Fund:

Ratios to average net assets for the three and six months ended June 30, 2015 and 2014 were as follows:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2015			2014			2015			2014
Ratios to average net assets:(1)
Net investment income (loss)(2)		(0.4	)%		(0.2	)%		(0.3	)%		(0.3	)%
Operating expenses		0.4	%		0.2	%		0.3	%		0.4	%
Total return		1.6	%		0.4	%		8.1	%		0.7	%

⁽¹⁾  Annualized

⁽²⁾  Interest income less total expenses.

The above ratios and the 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.

5.Related Party Transactions

The Master Fund’s cash is on deposit in commodity brokerage accounts with Morgan Stanley. For excess cash which is not invested by the General Partner in U.S. Treasury bills and/or other permitted investments, monthly, MS&Co. pays the Master Fund’s interest income on 100% of the average daily equity maintained in cash in the Master Fund’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 by MS&Co. to the Master Fund. For purposes of such interest payments, net assets do not include monies due to the Master Fund 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 paid to MS&Co. The General Partner pays or reimburses the Partnership for all brokerage 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.

6.Financial Instruments through the Partnership’s Investment in Affiliated Master Funds

Cambridge Master Fund, and indirectly the Partnership, trades Futures Interests. Futures and forwards represent contracts for delayed delivery of an instrument at a specified date and price. Futures Interests are open commitments until the settlement date, at which time they are realized. They are valued at fair value,

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MORGAN STANLEY SMITH BARNEY SPECTRUM CURRENCY AND COMMODITY L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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 profit (loss) and “Net change in unrealized depreciation allocated from Cambridge Master Fund” on open contracts from one period to the next on the Statements of Income and Expenses. The Cambridge Master Fund’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 U.S. Treasury bills futures, forwards and options traded by the Partnership through its investment in the Master Fund, 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.

7.Derivatives and Hedging

The Partnership’s objective, through its investment in the Master Fund, is to profit from speculative trading in Futures Interests. Therefore, the Trading Advisor for the Partnership will take speculative positions in Futures Interests where it feels the best profit opportunities exist for its 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.

The monthly average notional values of currency forward contracts traded during the three and six months ended June 30, 2015 and 2014 were $3,633,929,625 and $2,571,910,590 and $1,692,098,366 and $1,727,005,333, respectively.

The following tables summarize the gross and net amounts recognized relating to assets and liabilities of Cambridge Master Fund’s derivative instruments and transactions eligible for offset subject to master netting agreements or similar agreements as of June 30, 2015 and December 31, 2014, respectively.

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MORGAN STANLEY SMITH BARNEY SPECTRUM CURRENCY AND COMMODITY L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Offsetting of Derivative Assets and Liabilities as of June 30, 2015:

										Gross amounts not offset in the Statements of Financial Condition
	Gross Amounts Recognized			Gross Amounts Offset in the Statements of Financial Condition			Net Amounts Presented in the Statements of Financial Condition			Financial Instruments		Cash Collateral Received/Pledged*		Net Amount
	$			$			$			$		$		$
Assets
Forwards		8,704,349			(8,704,349	)		—			—		—		—
Total Assets		8,704,349			(8,704,349	)		—			—		—		—
Liabilities
Forwards		(9,039,680	)		8,704,349			(335,331	)		—		—		(335,331	)
Total Liabilities		(9,039,680	)		8,704,349			(335,331	)		—		—		(335,331	)
Net unrealized depreciation on open forwards contracts								(335,331	)						(335,331	)*

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

									Gross amounts not offset in the Statements of Financial Condition
	Gross Amounts Recognized			Gross Amounts Offset in the Statements of Financial Condition			Net Amounts Presented in the Statements of Financial Condition		Financial Instruments		Cash Collateral Received/Pledged*		Net Amount
	$			$			$		$		$		$
Assets
Forwards		5,969,177			(3,229,324	)		2,739,853		—		—		2,739,853
Total Assets		5,969,177			(3,229,324	)		2,739,853		—		—		2,739,853
Liabilities
Forwards		(3,229,324	)		3,229,324			—		—		—		—
Total Liabilities		(3,229,324	)		3,229,324			—		—		—		—
Net unrealized appreciation on open forwards contracts								2,739,853						2,739,853	*

* In the event of default by the Partnership, MS&Co., the Partnership’s commodity futures broker and the sole counterparty to the Partnership’s off exchange-traded contracts, as applicable, has the right to offset the Partnership’s obligation with the Partnership’s cash held by MS&Co., thereby minimizing MS&Co.’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. In the case of exchange-traded contracts, the Partnership’s exposure to counterparty risk may be reduced since the exchange’s clearinghouse interposes its credit between buyer and seller and the clearinghouse’s guarantee fund may be available in the event of a default.

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MORGAN STANLEY SMITH BARNEY SPECTRUM CURRENCY AND COMMODITY L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The following tables indicate the gross fair values of derivative instruments of forward contracts as separate assets and liabilities as of June 30, 2015 and December 31, 2014.

	June 30, 2015
	$
Assets
Forward Contracts
Currencies		8,704,349
Total unrealized appreciation on open forward contracts		8,704,349
Liabilities
Forward Contracts
Currencies		(9,039,680	)
Total unrealized depreciation on open forward contracts		(9,039,680	)
Net unrealized depreciation on open forward contracts		(335,331	)

* This amount is included in “Net unrealized depreciation on open forward contracts” on the Cambridge Master Fund’s Statements of Financial Condition.

	December 31, 2014
	$
Assets
Forward Contracts
Currencies		5,969,177
Total unrealized appreciation on open forward contracts		5,969,177
Liabilities
Forward Contracts
Currencies		(3,229,324	)
Total unrealized depreciation on open forward contracts		(3,229,324	)
Net unrealized appreciation on open forward contracts		2,739,853	*

* This amount is included in “Net unrealized appreciation on open forward contracts” on the Cambridge Master Funds’s Statements of Financial Condition.

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MORGAN STANLEY SMITH BARNEY SPECTRUM CURRENCY AND COMMODITY L.P.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The following tables indicate the trading gains and losses, by market sector, on derivative instruments for the three and six months ended June 30, 2015 and 2014.

	Three Months				Six Months
Sector	June 30, 2015		June 30, 2014		June 30, 2015		June 30, 2014
	$		$		$		$
Currencies		688,062		176,599		3,200,205		332,674
Total		688,062		176,599		3,200,205		332,674

** This amount is included in “Total trading results” on the Cambridge Master Fund’s Statements of Income and Expenses.

8.Fair Value Measurements

Cambridge Master Fund’s Investments:

All commodity interests of the Cambridge Master Fund, including derivative financial instruments and derivative commodity instruments, are held for trading purposes. The commodity interests are recorded on trade date and open contracts are recorded at fair value (as described below) at the measurement date. Investments in commodity interests denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement date. Gains or losses are realized when contracts are liquidated. Unrealized gains or losses on open contracts are included as a component of equity in trading account on the Statements of Financial Condition. Net realized gains or losses and net change in unrealized gains or losses are included in the Statements of Income and Expenses.

Cambridge Master Fund’s Fair Value Measurements:

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to fair values derived from unobservable inputs (Level 3). The level in the fair value hierarchy within which the fair value measurement in its entirety falls shall be determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Cambridge Master Fund considers prices for exchange-traded commodity futures, forwards, swaps and option contracts to be based on unadjusted quoted prices in active markets for identical assets and liabilities (Level 1). The values of non-exchange-traded forwards, swaps and certain options contracts for which market quotations are not readily available are priced by broker-dealers that derive fair values for those assets and liabilities from observable inputs (Level 2). As of and for the periods ended June 30, 2015 and for the year ended December 31, 2014, Cambridge Master Fund did not hold any derivative

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MORGAN STANLEY SMITH BARNEY SPECTRUM CURRENCY AND COMMODITY L.P.

NOTES TO FINANCIAL STATEMENTS (CONCLUDED)

instruments that were based on unadjusted quoted prices in active markets for identical assets and liabilities (Level 1) or that were priced at fair value using unobservable inputs through the application of the General Partner’s assumptions and internal valuation pricing models (Level 3). Transfers between levels are recognized at the end of the reporting period. During the period from January 1, 2015 to June 30, 2015, and for the twelve months ended December 31, 2014, there were no transfers of assets or liabilities between Level 1 and Level 2.

June 30, 2015	Level 1		Level 2			Level 3		Total
	$		$			$		$
Assets
Investment in U.S. Treasury bills		—		34,639,791			—		34,639,791
Forwards		—		8,704,349			—		8,704,349
Total Assets		—		43,344,140			—		43,344,140
Liabilities
Forwards		—		(9,039,680	)		—		(9,039,680	)
Total Liabilities		—		(9,039,680	)		—		(9,039,680	)
Net fair value		—		34,304,460			—		34,304,460
December 31, 2014	Level 1		Level 2			Level 3		Total
	$		$			$		$
Assets
Forwards		—		5,969,177			—		5,969,177
Total Assets		—		5,969,177			—		5,969,177
Liabilities
Forwards		—		(3,229,324	)		—		(3,229,324	)
Total Liabilities		—		(3,229,324	)		—		(3,229,324	)
Net fair value		—		2,739,853			—		2,739,853

9.Subsequent Events

The General Partner evaluates events that occur after the balance sheet date but before financial statements are issued. The General Partner has assessed the subsequent events through the date of issuance and has determined that, other than the event listed below, there were no subsequent events requiring adjustment of, or disclosure in, the financial statements.

On or about July 31, 2015, the General Partner delegated certain administrative functions to SS&C Technologies, Inc., a Delaware corporation, currently doing business as SS&C GlobeOp (the “Administrator”). Pursuant to a Master Services Agreement, the Administrator will furnish certain administrative, accounting, regulatory, reporting, tax and other services as agreed from time to time. In addition, the Administrator will maintain certain books and records of the Partnership and Fund. The costs of retaining the Administrator will be allocated among the pools operated by the General Partner, including the Partnership. The General Partner does not expect that such additional expense will have a material impact on the Partnership’s break even point.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

As of June 30, 2015, 100% of assets was allocated to the Currency market.

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.

There is no limitation on daily price movements in trading forward contracts on foreign currencies. The markets for some world currencies have low trading volume and are illiquid, which may prevent the Partnership from trading in potentially profitable markets or prevent the Partnership from promptly liquidating unfavorable 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 June 30, 2015, approximately 100% of the Partnership’s total investment exposure through investments in Master Funds is forward contracts which are off-exchange traded.

Capital Resources. The Partnership does not have, nor does it expect to have, any capital assets. The Partnership’s only asset is its investment in Cambridge Master Fund. Cambridge Master Fund’s only assets are its equity in its trading accounts, consisting of cash, cash margin, net unrealized appreciation on open futures contracts, net unrealized appreciation on open forward contracts and investment in U.S. Treasury bills, if applicable. 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.

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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. Cambridge employs a series of systematic proprietary decision tools to identify trading opportunities in the global currency markets. The process combines three types of trading strategies: a systematic technical strategy, a systematic fundamental strategy and a Market Information Strategy. These trading tools are utilized in a set of systematic strategies which are combined into investment portfolios and are designed to perform across diverse market environments. The Systematic Fundamental Strategy is used in the Asian currency section of the Cambridge portfolios and reflects a predetermined set of positions designed to reflect “market” views on the relative attractiveness of Asian currencies versus the US dollar. Assets are allocated to the Systematic Fundamental Strategy based on a proprietary measure of volatility in the global currency markets (in highly volatile markets the allocation is reduced and when volatility is low the allocation is increased). The Market Information Strategy leverages the experience and global network of the portfolio managers to understand and exploit the behavior of other market participants and to participate in hedging and investment flows. Cambridge believes that long run success is achieved through successful mitigation of downside returns with risk controlled at the portfolio, strategy and individual trade levels.

The following presents a summary of the Partnership’s operations for the three and six months ended June 30, 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 18 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 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 “Net change in unrealized appreciation allocated from Cambridge Master Fund” on open contracts, and recorded as “Net realized gain (loss) allocated from Cambridge 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.

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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 and Six Months Ended June 30, 2015

The Partnership recorded total trading results including interest income totaling $234,982 and expenses totaling $183,672, resulting in net income of $51,310 for the three months ended June 30, 2015. The Partnership’s net asset value per Unit increased from $8.87 at March 31, 2015 to $8.90 at June 30, 2015.

During the second quarter, the Partnership posted a gain in net asset value due to trading within the currency sector. The most significant gains were experienced in April from long positions in the Singapore dollar as the value of Singapore’s dollar strengthened after the Monetary Authority of Singapore refrained from easing monetary policy again following its surprise move in January. Elsewhere, gains were experienced from long positions in the Korean won versus the U.S. dollar as the value of the U.S. dollar weakened after disappointing U.S. output data reinforced expectations that the U.S. Federal Reserve may take a dovish stance on the timing of an interest rate hike. Additional gains were recorded in the New Zealand dollar, Chilean peso, Russian ruble, Hungarian forint, and Malaysian ringgit. A portion of these gains was offset by losses incurred from positions in the euro and Indian rupee.

The Partnership recorded total trading results including interest income totaling $1,120,212 and expenses totaling $465,258, resulting in net income of $654,954 for the six months ended June 30, 2015. The Partnership’s net asset value per Unit increased from $8.49 at December 31, 2014 to $8.90 at June 30, 2015.

During the first six months of the year, the Partnership posted a gain in net asset value due to trading within the currency sector. The most significant 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. Additional gains were recorded during March from short euro positions and long Russian ruble positions versus the U.S. dollar. Elsewhere, gains were experienced during March from long positions in the Chinese renminbi as China started March on a positive note with a large upside surprise to export data while imports dropped off sharply. Additional gains were recorded from positions in the New Zealand dollar, Singapore dollar, Chilean peso, and Korean won. A portion of these gains was offset by losses incurred from positions in the Brazilian real, Taiwan dollar, and Philippine peso.

For the Three and Six Months Ended June 30, 2014

The Partnership recorded total trading results including interest income totaling $2,821 and expenses totaling $189,969, resulting in a net loss of $187,148 for the three months ended June 30, 2014. The Partnership’s net asset value per Unit decreased from $7.39 at March 31, 2014 to $7.29 at June 30, 2014.

During the second quarter, the Partnership posted a loss in net asset value as gains in the metals and currency sectors were offset by trading losses in the agricultural sector. Trading results in the energy sector were relatively flat for the quarter and had no material impact on the Partnership’s performance. The most significant losses were recorded within the agricultural markets in April from short positions in soybean futures as prices advanced to their highest level in more than 10 months after inventories in the U.S. fell to the lowest level in a decade. Smaller losses were recorded during the quarter from trading in sugar and cotton futures. The Partnership’s trading losses for the quarter were offset by trading gains experienced within the metals markets, primarily during May, from long positions in nickel and copper futures as prices advanced on speculation that demand will climb after gauges of manufacturing advanced more than estimated in China, the world’s largest consumer of the metals. Additional gains in metals were recorded from long positions in palladium futures during April. Within the currency sector, gains were achieved primarily in May from short positions in the euro as its value declined as a gauge of German business confidence fell, adding to signs that may prompt the European Central Bank to boost stimulus. Additional gains in this sector were recorded from positions in the Malaysian ringgit, New Zealand dollar, Korean won, and Turkish lira.

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The Partnership recorded total trading results including interest income totaling $229,369 and expenses totaling $445,381, resulting in a net loss of $216,012 for the six months ended June 30, 2014. The Partnership’s net asset value per Unit decreased from $7.39 at December 31, 2013 to $7.29 at June 30, 2014.

During the first six months of the year, the Partnership posted a loss in net asset value per Unit as gains in the metals and agricultural sectors were offset by trading losses in the currency and energy sectors. The most significant losses were recorded within the currency markets during June from short positions in the Thai baht as its value advanced as Thailand’s junta pledged to boost spending to revive economic growth. Additional losses in this sector were recorded during January and February from short Japanese yen positions. Within the energy complex, losses were experienced during January from short positions in natural gas futures as prices advanced following a U.S. government report that showed a record drop in U.S. inventories after cold weather boosted heating demand. The Partnership’s losses during the first six months of the year were offset by gains experienced within the metals markets, primarily during May, from long positions in nickel and copper futures as prices advanced on speculation that demand will climb after gauges of manufacturing advanced more than estimated in China, the world’s largest consumer of the metals. Additional gains in metals were recorded from long positions in palladium futures during February, March, and April as prices rose amid concerns regarding supplies. Within the agricultural sector, gains were recorded in March from long positions in wheat futures as prices advanced to a 10-month high on speculation that cold, dry weather is reducing yield potential in the U.S., the world’s biggest exporter of wheat. Additional gains were recorded in January from long positions in live cattle futures as prices in this market climbed sharply higher. Smaller gains were recorded from trading in coffee and sugar futures.

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 and Cambridge Master Fund are acquired for speculative trading purposes only and, as a result, all or substantially all of the Partnership’s and Cambridge Master Fund’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 and Cambridge Master Fund.

The futures, forwards and options on such contracts traded by the Partnership and Cambridge Master Fund 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 and Cambridge Master Fund’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.

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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 and Cambridge Master Fund’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 and Cambridge Master Fund 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 and Cambridge Master Fund typically to be many times the total capitalization of the Partnership and Cambridge Master Fund.

The Partnership’s past performance is no guarantee of its future results. Any attempt to numerically quantify the Partnership’s and Cambridge Master Fund’s market risk is limited by the uncertainty of its speculative trading. The Partnership’s and Cambridge Master Fund’s speculative trading and use of leverage may cause future losses and volatility (i.e., “risk of ruin”) that far exceed the Partnership’s and Cambridge Master Fund’s experience to date as discussed under the “Partnership’s and Cambridge Master Fund’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 and Cambridge Master Fund’s Trading Value at Risk

The following quantitative disclosures regarding the Partnership’s and Cambridge Master Fund’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 and Cambridge Master Fund accounts for open positions on the basis of fair value accounting principles. Any loss in the market value of the Partnership’s and Cambridge Master Fund’s open positions is directly reflected in the Partnership’s and Cambridge Master Fund’s earnings and cash flow. The Partnership’s and Cambridge Master Fund’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.

VaR is a measure of the maximum amount which the Partnership and Cambridge Master Fund could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Partnership’s and Cambridge Master Fund’s speculative trading and the recurrence of market movements far exceeding expectations in the markets traded by the Partnership and Cambridge Master Fund 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 and Cambridge Master Fund’s losses in any market sector will be limited to VaR or by the Partnership’s and Cambridge Master Fund’s attempts to manage its market risk.

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Exchange maintenance margin requirements have been used by the Partnership and Cambridge Master Fund 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.

The Partnership’s Value at Risk in Different Market Sectors

The following tables indicate the trading VaR associated with the Cambridge Master Fund’s open positions by market category as of June 30, 2015 and the Partnership’s open positions by market category as of December 31, 2014, and the highest, lowest and average values during the three months ended June 30, 2015 and for the twelve months ended December 31, 2014, respectively. All open position trading risk exposures of the Partnership and Cambridge Master Fund 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 June 30, 2015, Cambridge Master Fund’s total capitalization was approximately $38 million, and the Partnership owned approximately 35.22% of Cambridge Master Fund. The Partnership invest substantially all its assets in Cambridge Master Fund. Cambridge Master Fund’s VaR was as follows:

	June 30, 2015
Primary Market Risk Category	VaR		% of Total Capitalization
Currency	$	18,011,796		47.27	%
Total	$	18,011,796		47.27	%

	Three Months Ended June 30, 2015
Market Sector	High VaR		Low VaR		Average VaR*
Currency	$	23,300,437	$	14,810,310	$	18,435,194

* Average of month-end VaR.

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As of December 31, 2014, the Partnership’s total capitalization was approximately $14 million.

	December 31, 2014
Primary Market Risk Category	VaR		% of Total Capitalization
Currency	$	3,086,285		22.41	%
Total	$	3,086,285		22.41	%

	Twelve Months Ended December 31, 2014
Market Sector	High VaR		Low VaR		Average VaR*
Currency	$	8,155,128	$	1,579,172	$	4,829,691
Commodity	$	558,037		—	$	160,725

*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;

• 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.

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Materiality, as used throughout this section, is based on an assessment of reasonably possible market movements and any associated potential losses, taking into account the leverage, optionality, and multiplier features of the Partnership’s market-sensitive instruments, in relation to the Partnership’s net assets.

Qualitative Disclosures Regarding Primary Trading Risk Exposures

The following qualitative disclosures regarding the Partnership’s market risk exposures - except for (A) those disclosures that are statements of historical fact and (B) the descriptions of how the Partnership manages its primary market risk exposures - constitute forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the 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.

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 General Partner, 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 June 30, 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 June 30, 2015.

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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.

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, as updated by the Partnership’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015.

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.” or the “Company”).

MS&Co. is a wholly-owned, indirect subsidiary of Morgan Stanley, a Delaware holding company. Morgan Stanley files periodic reports with the U.S. Securities and Exchange Commission (“SEC”) as required by the Securities Exchange Act of 1934, 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, we refer you 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.

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Regulatory and Governmental Matters. 

The Company has received subpoenas and requests for information from certain federal and state regulatory and governmental entities, including among others various members of the RMBS Working Group of the Financial Fraud Enforcement Task Force, such as the United States Department of Justice, Civil Division and several state Attorney General’s Offices, concerning the origination, financing, purchase, securitization and servicing of subprime and non-subprime residential mortgages and related matters such as residential mortgage backed securities (“RMBS”), collateralized debt obligations (“CDOs”), structured investment vehicles (“SIVs”) and credit default swaps backed by or referencing mortgage pass-through certificates. These matters, some of which are in advanced stages, include, but are not limited to, investigations related to the Company’s due diligence on the loans that it purchased for securitization, the Company’s communications with ratings agencies, the Company’s disclosures to investors, and the Company’s handling of servicing and foreclosure related issues.

On February 25, 2015, the Company reached an agreement in principle with the United States Department of Justice, Civil Division and the United States Attorney’s Office for the Northern District of California, Civil Division (collectively, the “Civil Division”) to pay $2.6 billion to resolve certain claims that the Civil Division indicated it intended to bring against the Company. While the Company and the Civil Division have reached an agreement in principle to resolve this matter, there can be no assurance that the Company and the Civil Division will agree on the final documentation of the settlement.

In May 2014, the California Attorney General’s Office (“CAAG”), which is one of the members of the RMBS Working Group, indicated that it has made certain preliminary conclusions that the Company made knowing and material misrepresentations regarding RMBS and that it knowingly caused material misrepresentations to be made regarding the Cheyne SIV, which issued securities marketed to the California Public Employees Retirement System. The CAAG has further indicated that it believes the Company’s conduct violated California law and that it may seek treble damages, penalties and injunctive relief. The Company does not agree with these conclusions and has presented defenses to them to the CAAG.

On September 16, 2014, the Virginia Attorney General’s Office filed a civil lawsuit, styledCommonwealth of Virginia ex rel. Integra REC LLC v. Barclays Capital Inc., et al., against the Company and several other defendants in the Circuit Court of the City of Richmond related to RMBS. The lawsuit alleges that the Company and the other defendants knowingly made misrepresentations and omissions related to the loans backing RMBS purchased by the Virginia Retirement System (“VRS”). The complaint alleges VRS suffered total losses of approximately $384 million on these securities, but does not specify the amount of alleged losses attributable to RMBS sponsored or underwritten by the Company. The complaint asserts claims under the Virginia Fraud Against Taxpayers Act, as well as common law claims of actual and constructive fraud, and seeks, among other things, treble damages and civil penalties. On January 20, 2015, the defendants filed a demurrer to the complaint and a plea in bar seeking dismissal of the complaint.

In October 2014, the Illinois Attorney General’s Office (“IL AG”) sent a letter to the Company alleging that the Company knowingly made misrepresentations related to RMBS purchased by certain pension funds affiliated with the State of Illinois and demanding that the Company pay the IL AG approximately $88 million. The Company does not agree with these allegations and has presented defenses to them to the IL AG.

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On January 13, 2015, the New York Attorney General’s Office (“NYAG”), which is also a member of the RMBS Working Group, indicated that it intends to file a lawsuit related to approximately 30 subprime securitizations sponsored by the Company. NYAG indicated that the lawsuit would allege that the Company misrepresented or omitted material information related to the due diligence, underwriting and valuation of the loans in the securitizations and the properties securing them and indicated that its lawsuit would be brought under the Martin Act. The Company does not agree with NYAG’s allegations and has presented defenses to them to NYAG.

On June 5, 2012, the Company consented to and became the subject of an Order Instituting Proceedings Pursuant to Sections 6(c) and 6(d) of the Commodity Exchange Act, as amended, Making Findings and Imposing Remedial Sanctions by The Commodity Futures Trading Commission (“CFTC”) to resolve allegations related to the failure of a salesperson to comply with exchange rules that prohibit off-exchange futures transactions unless there is an Exchange for Related Position (“EFRP”). Specifically, the CFTC found that from April 2008 through October 2009, the Company violated Section 4c(a) of the Commodity Exchange Act and Commission Regulation 1.38 by executing, processing and reporting numerous off-exchange futures trades to the Chicago Mercantile Exchange (“CME”) and Chicago Board of Trade (“CBOT”) as EFRPs in violation of CME and CBOT rules because those trades lacked the corresponding and related cash, OTC swap, OTC option, or other OTC derivative position. In addition, the CFTC found that the Company violated CFTC Regulation 166.3 by failing to supervise the handling of the trades at issue and failing to have adequate policies and procedures designed to detect and deter the violations of the Act and Regulations. Without admitting or denying the underlying allegations and without adjudication of any issue of law or fact, the Company accepted and consented to entry of findings and the imposition of a cease and desist order, a fine of $5,000,000, and undertakings related to public statements, cooperation and payment of the fine. The Company entered into corresponding and related settlements with the CME and CBOT in which the CME found that the Company violated CME Rules 432.Q and 538 and fined the Company $750,000 and CBOT found that the Company violated CBOT Rules 432.Q and 538 and fined the Company $1,000,000.

On July 23, 2014, the SEC approved a settlement by MS&Co. and certain affiliates to resolve an investigation related to certain subprime RMBS transactions sponsored and underwritten by those entities in 2007. Pursuant to the settlement, MS&Co. and certain affiliates were charged with violating Sections 17(a)(2) and 17(a)(3) of the Securities Act, agreed to pay disgorgement and penalties in an amount of $275 million and neither admitted nor denied the SEC’s findings.

On April 21, 2015, the Chicago Board Options Exchange, Incorporated (“CBOE”) and the CBOE Futures Exchange, LLC (“CFE”) filed statements of charges against the Company in connection with trading by one of the Company’s former traders of EEM options contracts that allegedly disrupted the final settlement price of the November 2012 VXEM futures. CBOE alleged that the Company violated CBOE Rules 4.1, 4.2 and 4.7, Sections 9(a) and 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. CFE alleged that the Company violated CFE Rules 608, 609 and 620. Both matters are ongoing.

On June 18, 2015, the Company entered into a settlement with the SEC and paid a fine of $500,000 as part of the MCDC Initiative to resolve allegations that the Company failed to form a reasonable basis through adequate due diligence for believing the truthfulness of the assertions by issuers and/or obligors regarding their compliance with previous continuing disclosure undertakings pursuant to Rule 15c2-12 in connection with offerings in which the Company acted as senior or sole underwriter.

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Other Litigation

On December 23, 2009, the Federal Home Loan Bank of Seattle filed a complaint against the Company and another defendant in the Superior Court of the State of Washington, styledFederal Home Loan Bank of Seattle v. Morgan Stanley & Co. Inc., et al. The amended complaint, filed on September 28, 2010, 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 sold to plaintiff by the Company was approximately $233 million. The complaint raises claims under the Washington State Securities Act and seeks, among other things, to rescind the plaintiff’s purchase of such certificates. On October 18, 2010, defendants filed a motion to dismiss the action. By orders dated June 23, 2011 and July 18, 2011, the court denied defendants’ omnibus motion to dismiss plaintiff’s amended complaint and on August 15, 2011, the court denied the Company’s individual motion to dismiss the amended complaint. On March 7, 2013, the court granted defendants’ motion to strike plaintiff’s demand for a jury trial. At June 25, 2015, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $49 million, and the certificates had not yet incurred actual losses. Based on currently available information, the Company believes it could incur a loss in this action up to the difference between the $49 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against the Company, plus pre- and post-judgment interest, fees and costs. The Company 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 March 15, 2010, the Federal Home Loan Bank of San Francisco filed two complaints against the Company and other defendants in the Superior Court of the State of California. These actions are styledFederal Home Loan Bank of San Francisco v. Credit Suisse Securities (USA) LLC, et al., andFederal 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 the Company 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 the Company in theFederal 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 the Company have not yet been set for trial. At June 25, 2015, the current unpaid balance of the mortgage pass-through certificates at issue in these cases was approximately $63 million, and the certificates had incurred actual losses of approximately $1 million. Based on currently available information, the Company believes it could incur a loss for this action up to the difference between the $63 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against the Company, or upon sale, plus pre- and post-judgment interest, fees and costs. The Company 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 15, 2010, China Development Industrial Bank (“CDIB”) filed a complaint against the Company, styledChina Development Industrial Bank v. Morgan Stanley & Co. Incorporated et al., which is pending in the Supreme Court of the State of New York, New York County (“Supreme Court of NY”). The complaint relates to a $275 million credit default swap referencing the super senior portion of the STACK 2006-1 CDO. The complaint asserts claims for common law fraud, fraudulent inducement and fraudulent concealment and alleges that the Company misrepresented the risks of the STACK 2006-1 CDO to CDIB, and that the Company knew that the assets backing the CDO were of poor quality when it entered into the credit default swap with CDIB. The complaint seeks compensatory damages related to the approximately $228 million that CDIB alleges it has already lost under the credit default swap, rescission of CDIB’s obligation to pay an additional $12 million, punitive damages, equitable relief, fees and costs. On February 28, 2011, the court denied the Company’s motion to dismiss the complaint. Based on currently available information, the Company believes it could incur a loss of up to approximately $240 million plus pre- and post-judgment interest, fees and costs.

On October 15, 2010, the Federal Home Loan Bank of Chicago filed a complaint against the Company and other defendants in the Circuit Court of the State of Illinois, styledFederal 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 the Company 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 the Company or sold to plaintiff by the Company was approximately $78 million. At June 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, the Company 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 the Company, plus pre- and post-judgment interest, fees and costs. The Company 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 25, 2012, The Prudential Insurance Company of America and certain affiliates filed a complaint against the Company and certain affiliates in the Superior Court of the State of New Jersey, styledThe 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 the Company 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 June 25, 2015, the current unpaid balance of the mortgage pass-through certificates at issue in this

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action was approximately $590 million, and the certificates had not yet incurred actual losses. Based on currently available information, the Company believes it could incur a loss in this action up to the difference between the $590 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against the Company, or upon sale, plus pre- and post-judgment interest, fees and costs. The Company 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 the Company and other defendants in the Superior Court of the Commonwealth of Massachusetts styledFederal 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 the Company or sold to plaintiff by the Company 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 the Company with respect to two of the securitizations at issue, such that the remaining amount of certificates allegedly issued by the Company or sold to plaintiff by the Company is approximately $358 million. At June 25, 2015, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $57 million, and the certificates had not yet incurred actual losses. Based on currently available information, the Company believes it could incur a loss in this action up to the difference between the $57 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against the Company, or upon sale, plus pre- and post-judgment interest, fees and costs. The Company 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 May 3, 2013, plaintiffs inDeutsche Zentral-Genossenschaftsbank AG et al. v. Morgan Stanley et al.filed a complaint against the Company, 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 the Company to plaintiff was approximately $694 million. The complaint alleges causes of action against the Company 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 the Company or sold to plaintiff by the Company was approximately $644 million. On September 12, 2014, the Company filed a notice of appeal from the denial of the motion to dismiss. On January 12, 2015, the Company filed an amended answer to the complaint. At June 25, 2014, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $283 million, and the certificates had incurred actual losses of approximately $80 million. Based on currently available information, the Company believes it could incur a loss in this action up to the difference between

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the $283 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against the Company, or upon sale, plus pre- and post-judgment interest, fees and costs. The Company may be entitled to be indemnified for some of these losses.

On September 23, 2013, the plaintiff inNational Credit Union Administration Board v. Morgan Stanley & Co. Inc., et al.filed a complaint against the Company and certain affiliates in the United States District Court for the Southern District of New York. 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 the Company to plaintiffs was approximately $417 million. The complaint alleges causes of action against the Company for violations of Section 11 and Section 12(a)(2) of the Securities Act of 1933, violations of the Texas Securities Act, and violations of the Illinois Securities Law of 1953 and seeks, among other things, rescissory and compensatory 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 of 1933 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 June 25, 2015, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $200 million, and the certificates had incurred actual losses of $28 million. Based on currently available information, the Company believes it could incur a loss in this action up to the difference between the $200 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against the Company, or upon sale, plus pre- and post-judgment interest, fees and costs. The Company 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, the Company 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 SIV”). The case was styledAbu 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 SIV 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 SIV. The plaintiffs asserted allegations of aiding and abetting fraud and negligent misrepresentation relating to approximately $852 million of securities issued by the Cheyne SIV. 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 the Company and/or its affiliates and other defendants in the Superior Court of the Commonwealth of Massachusetts, both styledCambridge 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

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allegedly issued by the Company and/or its affiliates or sold to plaintiff’s affiliates’ clients by the Company 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, the Company, certain affiliates and Pinnacle Performance Limited, a special purpose vehicle (“SPV”), were named as defendants in a purported class action related to securities issued by the SPV in Singapore, commonly referred to as “Pinnacle Notes.” The case is styledGe Dandong, et al. v. Pinnacle Performance Ltd., et al. and was pending in the SDNY. On January 31, 2014, the plaintiffs filed a second amended complaint, which asserted 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 to settle the litigation, which received final court approval on July 2, 2015.

On July 5, 2011, Allstate Insurance Company and certain of its affiliated entities filed a complaint against the Company in the Supreme Court of NY, NY County, styledAllstate 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 the Company 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 the Company appealed on April 11, 2013. On May 3, 2013, the Company filed its answer to the amended complaint. On January 16, 2015, the parties reached an agreement to settle the litigation.

On July 18, 2011, the Western and Southern Life Insurance Company and certain affiliated companies filed a complaint against the Company and other defendants in the Court of Common Pleas in Ohio, styledWestern 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 the Company was approximately $153 million. On June 8, 2015, the parties reached an agreement to settle the litigation.

On September 2, 2011, the Federal Housing Finance Agency (“FHFA”), as conservator for Fannie Mae and Freddie Mac, filed 17 complaints against numerous financial services companies, including the Company and certain affiliates. A complaint against the Company and certain affiliates and other defendants was filed in the Supreme Court of NY, styledFederal Housing Finance Agency, as Conservator v. Morgan Stanley et al. The complaint alleges that defendants made untrue statements and material omissions in connection with the sale to Fannie Mae and Freddie Mac of residential mortgage pass-through certificates with an original unpaid balance of approximately $11 billion. The complaint raised claims under federal and state securities laws and common law and seeks, among other things, rescission and compensatory and punitive damages. On February 7, 2014, the parties entered into an agreement to settle the litigation. On February 20, 2014, the court dismissed the action.

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On April 25, 2012, Metropolitan Life Insurance Company and certain affiliates filed a complaint against the Company and certain affiliates in the Supreme Court of NY, NY County styledMetropolitan 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 the Company 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.

On November 4, 2011, the Federal Deposit Insurance Corporation (“FDIC”), as receiver for Franklin Bank S.S.B, filed two complaints against the Company in the District Court of the State of Texas. Each was styledFederal 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 the Company 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 the Company in these cases was approximately $67 million and $35 million, respectively. On July 2, 2015, the parties reached an agreement to settle the litigation.

On February 14, 2013, Bank Hapoalim B.M. filed a complaint against the Company and certain affiliates in the Supreme Court of NY, styledBank 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 the Company to plaintiff was approximately $141 million. On July 28, 2015, the parties reached an agreement to settle the litigation.

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, as updated by the Partnership’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015.

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 Currency and Commodity L.P.
	(Registrant)
	By:	Ceres Managed Futures LLC
		(General Partner)
August 12, 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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