CERES TACTICAL SYSTEMATIC L.P. - FORM 10-Q

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EX-32.1 - EX-32.1 - CERES TACTICAL SYSTEMATIC L.P.	d98730dex321.htm
EX-32.2 - EX-32.2 - CERES TACTICAL SYSTEMATIC L.P.	d98730dex322.htm
EX-31.1 - EX-31.1 - CERES TACTICAL SYSTEMATIC L.P.	d98730dex311.htm
EX-31.2 - EX-31.2 - CERES TACTICAL SYSTEMATIC L.P.	d98730dex312.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 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 000-50718

TACTICAL DIVERSIFIED FUTURES FUND L.P.

(Exact name of registrant as specified in its charter)


New York		13-4224248
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

c/o Ceres Managed Futures LLC

522 Fifth Avenue

New York, New York 10036

(Address of principal executive offices) (Zip Code)

(855) 672-4468

(Registrant’s telephone number, including area code)

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 the 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. (Check one):

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 October 31, 2015, 215,201.1418 Limited Partnership Redeemable Units were outstanding.

TACTICAL DIVERSIFIED FUTURES FUND L.P.

FORM 10-Q

INDEX


		Page Number

PART I - Financial Information:

Item 1.	Financial Statements:

	Statements of Financial Condition at September 30, 2015 (unaudited) and December 31, 2014	3

	Schedules of Investments at September 30, 2015 (unaudited) and December 31, 2014	4–5

	Statements of Income and Expenses and Changes in Partners’ Capital for the three and nine months ended September 30, 2015 and 2014 (unaudited)	6

	Notes to Financial Statements (unaudited)	7–19

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20–22

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	23–29

Item 4.	Controls and Procedures	30

PART II - Other Information:

Item 1.	Legal Proceedings	31-37

Item 1A.	Risk Factors	38

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38

Item 3.	Defaults Upon Senior Securities	38

Item 4.	Mine Safety Disclosures	38

Item 5.	Other Information	38

Item 6.	Exhibits	39-41

PART I

Item 1. Financial Statements

Tactical Diversified Futures Fund L.P.

Statements of Financial Condition


	(Unaudited) September 30, 2015		December 31, 2014

Assets:

Investment in Funds⁽¹⁾, at fair value	$	220,507,175	$	251,089,677
Redemptions receivable from Funds		-		8,902,959
Cash		345,123		308,426


Total assets	$	220,852,298	$	260,301,062


Liabilities and Partners’ Capital:
Liabilities:
Accrued expenses:
Ongoing selling agent fees	$	368,087	$	433,835
Management fees		220,927		271,280
Incentive fees		-		1,468,835
General Partner fees		183,490		216,340
Other		295,856		259,575
Redemptions payable to Limited Partners		3,548,900		4,546,211

Total liabilities		4,617,260		7,196,076


Partners’ Capital:
General Partner, 2,477.6854 and 2,835.6594 Redeemable Units outstanding at September 30, 2015 and December 31, 2014, respectively		2,422,854		2,864,272
Limited Partners, 218,650.9618 and 247,740.9758 Redeemable Units outstanding at September 30, 2015 and December 31, 2014, respectively		213,812,184		250,240,714

Total partners’ capital		216,235,038		253,104,986

Total liabilities and partners’ capital	$	220,852,298	$	260,301,062


Net asset value per unit	$	977.87	$	1,010.09

⁽¹⁾ Defined in Note 1

See accompanying notes to financial statements.

Tactical Diversified Futures Fund, L.P.

Schedule of Investments

September 30, 2015

(Unaudited)


	Fair value		% of Partners’ Capital
Investment in Funds
CMF Willowbridge Master Fund L.P.	$	64,257,507		29.72	%
CMF Aspect Master Fund L.P.		33,897,832		15.68
CMF Graham Capital Master Fund L.P.		38,911,019		17.99
CMF Altis Partners Master Fund L.P.		24,885,317		11.51
JEM Master Fund L.P.		9,513,184		4.40
Morgan Stanley Smith Barney Boronia I, LLC		49,042,316		22.68

Total investment in Funds, at fair value	$	220,507,175		101.98	%

See accompanying notes to financial statements.

Tactical Diversified Futures Fund L.P.

Schedule of Investments

December 31, 2014


	Fair value		% of Partners’ Capital
Investment in Funds
CMF Willowbridge Master Fund L.P.	$	62,129,797		24.55	%
CMF Aspect Master Fund L.P.		44,990,232		17.77
CMF Graham Capital Master Fund L.P.		35,625,655		14.07
CMF Altis Partners Master Fund L.P.		34,598,755		13.67
JEM Master Fund L.P.		21,079,026		8.33
Morgan Stanley Smith Barney Boronia I, LLC		52,666,212		20.81

Total investment in Funds, at fair value	$	251,089,677		99.20	%

See accompanying notes to financial statements.

Tactical Diversified Futures Fund L.P.

Statements of Income and Expenses and Changes in Partners’ Capital

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Investment income:
Interest income allocated from Funds	$	12,278	$	5,544	$	18,455	$	30,958

Total investment income		12,278		5,544		18,455		30,958


Expenses:
Ongoing selling agent fees		1,111,598		1,951,856		3,582,647		8,895,160
Expenses allocated from Funds		834,084		2,123,865		3,342,163		4,737,917
General Partner fees		554,074		-		1,785,803		-
Management fees		668,486		831,046		2,158,608		2,872,148
Incentive fees		-		-		1,694,935		-
Other		198,079		134,669		528,551		421,331

Total expenses		3,366,321		5,041,436		13,092,707		16,926,556

Net investment income (loss)		(3,354,043)		(5,035,892)		(13,074,252)		(16,895,598)


Trading results:
Net realized gains (losses) on investments allocated from Funds		7,714,128		8,782,652		11,989,610		5,823,846
Net change in unrealized gains (losses) on investments allocated from Funds		7,796,581		6,642,903		(6,236,115)		853,208

Total trading results allocated from Funds		15,510,709		15,425,555		5,753,495		6,677,054

Net income (loss)		12,156,666		10,389,663		(7,320,757)		(10,218,544)
Subscriptions — Limited Partners		-		139,437		1,209,286		2,432,437
Redemptions — Limited Partners		(9,187,149)		(42,073,076)		(30,379,571)		(114,351,544)
Redemptions — General Partner		-		(1,914,039)		(378,906)		(1,914,039)

Net increase (decrease) in Partners’ Capital		2,969,517		(33,458,015)		(36,869,948)		(124,051,690)

Partners’ Capital, beginning of period		213,265,521		274,782,889		253,104,986		365,376,564

Partners’ Capital, end of period	$	216,235,038	$	241,324,874	$	216,235,038	$	241,324,874


Net asset value per unit (221,128.6472 and 271,623.2872 units outstanding at September 30, 2015 and 2014, respectively)	$	977.87	$	888.45	$	977.87	$	888.45

Net income (loss) per unit*	$	52.89	$	37.76	$	(32.22)	$	(11.83)

Weighted average units outstanding		227,362.5445		302,149.4865		236,824.7012		351,507.0553

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

See accompanying notes to financial statements.

Tactical Diversified Futures Fund L.P.

Notes to Financial Statements

September 30, 2015

(Unaudited)

1.	Organization:

Tactical Diversified Futures Fund L.P. (the “Partnership”) is a limited partnership organized under the partnership laws of the State of New York on December 3, 2002 to engage, directly or indirectly, in the speculative trading of a diversified portfolio of commodity interests including futures, option, swap and forward contracts. The sectors traded include currencies, energy, grains, indices, U.S. and non-U.S. interest rates, livestock, lumber, metals and softs. The commodity interests that are traded by the Partnership directly and through its investments in the Funds (as defined below) are volatile and involve a high degree of market risk. The General Partner (as defined below) may also determine to invest up to all of the Partnership’s assets in United States (“U.S.”) Treasury bills.

Between March 27, 2003 (commencement of the public offering period) and April 30, 2003, 36,616 redeemable units of partnership interest (“Redeemable Units”) were publicly offered at $1,000 per Redeemable Unit. The proceeds of the initial public offering were held in an escrow account until April 30, 2003, at which time they were turned over to the Partnership for trading. The Partnership was authorized to publicly offer 300,000 Redeemable Units during the initial public offering period. As of December 4, 2003, the Partnership was authorized to publicly offer an additional 700,000 Redeemable Units. As of October 7, 2004, the Partnership was authorized to publicly offer an additional 1,000,000 Redeemable Units. As of June 30, 2005, the Partnership was authorized to publicly offer the 2,000,000 Redeemable Units previously registered. The public offering of Redeemable Units terminated on November 30, 2008. The Partnership currently privately and continuously offers Redeemable Units to qualified investors. There is no maximum number of Redeemable Units that may be sold by the Partnership.

Ceres Managed Futures LLC, a Delaware limited liability company, acts as the general partner (the “General Partner”) and commodity pool operator of the Partnership. The General Partner is wholly owned by Morgan Stanley Smith Barney Holdings LLC (“MSSB Holdings”). MSSB Holdings is ultimately owned by Morgan Stanley. Morgan Stanley is a publicly held company whose shares are listed on the New York Stock Exchange. Morgan Stanley is engaged in various financial services and other businesses. Prior to June 28, 2013, Morgan Stanley indirectly owned a majority equity interest in MSSB Holdings and Citigroup Inc. indirectly owned a minority equity interest in MSSB Holdings. Prior to July 31, 2009, the date as of which MSSB Holdings became its owner, the General Partner was wholly owned by Citigroup Financial Products Inc., a wholly owned subsidiary of Citigroup Global Markets Holdings Inc., the sole owner of which is Citigroup Inc.

As of September 30, 2015, all trading decisions were made for the Partnership by Graham Capital Management, L.P., (“Graham”), Willowbridge Associates Inc. (“Willowbridge”), Aspect Capital Limited (“Aspect”), Altis Partners (Jersey) Limited (“Altis”), J E Moody & Company LLC (“J E Moody”) and Boronia Capital Pty. Ltd. (“Boronia”) (each an “Advisor” and collectively, the “Advisors”), each of which is a registered commodity trading advisor or exempt from registration. Krom River Trading AG and Krom River Investment Management (Cayman) Limited (collectively, “Krom River”) was terminated as an advisor to the Partnership as of December 31, 2014. Drury Capital, Inc. (“Drury”) and Kaiser Trading Company Pty. Ltd. (“Kaiser”) were terminated as advisors to the Partnership as of June 30, 2014. References herein to “Advisors,” may include, as relevant, Krom River, Drury and Kaiser. Each Advisor is allocated a portion of the Partnership’s assets to manage. The Partnership invests the portion of its assets allocated to each of the Advisors indirectly through investments in the Funds.

As of September 30, 2015, the Partnership’s/Funds’ commodity broker was Morgan Stanley & Co. LLC (“MS&Co.” or the “Company”), a registered futures commission merchant.

CMF Graham Capital Master Fund L.P. (“Graham Master”), CMF Aspect Master Fund L.P. (“Aspect Master”), CMF Willowbridge Master Fund L.P. (“Willowbridge Master”), CMF Altis Partners Master Fund L.P. (“Altis Master”), Morgan Stanley Smith Barney Boronia I, LLC (“Boronia I, LLC” or “Boronia Trading Company”), and JEM Master Fund L.P. (“JEM Master”) entered in a futures brokerage account agreement with MS&Co. Graham Master, Aspect Master, Willowbridge Master, Altis Master, Boronia I, LLC, and JEM Master are collectively referred to as the “Funds”. References to Funds also include, as applicable, Drury Master, KR Master and Kaiser I, LLC. Prior to their liquidation, CMF Drury Capital Master Fund L.P. (“Drury Master”), KR Master Fund L.P. (“KR Master”) and Morgan Stanley Smith Barney Kaiser I, LLC (“Kaiser I, LLC” or “Kaiser Trading Company”) entered into a futures brokerage account agreement with MS&Co. Graham Master and Aspect Master have entered into a foreign exchange prime brokerage agreement with MS&Co. Prior to its liquidation, Drury Master also entered into a foreign exchange prime brokerage agreement. The Partnership also entered into a futures brokerage with MS&Co. The Partnership, through its investment in the Funds, pays MS&Co. trading fees for the clearing and, where applicable, execution of transactions.

Tactical Diversified Futures Fund L.P.

Notes to Financial Statements

September 30, 2015

(Unaudited)

The Partnership also entered into a selling agreement with Morgan Stanley Smith Barney LLC (d/b/a Morgan Stanley Wealth Management). Pursuant to the selling agreement, Morgan Stanley Wealth Management receives a selling agent fee equal to (2.0% per year) of the Partnership’s adjusted net assets. The selling agent fee received by Morgan Stanley Wealth Management was shared with the properly registered/licensed financial advisers of Morgan Stanley Wealth Management who sell Redeemable Units.

Effective April 1, 2014, the monthly ongoing selling agent fee was reduced from an annual rate of 5.5% to an annual rate of 3.0%.

Effective April 1, 2014, the management fee paid to Graham was reduced from 2.0% per year to 1.75% per year.

Effective October 1, 2014, the monthly ongoing selling agent fee was reduced from an annual rate of 3.0% to its current annual rate of 2.0%. As of the same date, the Partnership began paying a fee to the General Partner (formerly, the administrative fee) at an annual rate of 1.0%. The October 1, 2014 fee changes offset each other and, accordingly, there was no change to the aggregate fees incurred by the Partnership.

Effective August 1, 2015, the monthly management fee paid to Altis was reduced to 1/12 of 1.25% (1.25% per year).

In July 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. The costs of retaining the Administrator will be allocated among the pools operated by the General Partner, including the Partnership.

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 September 30, 2015, and the results of its operations for the three and nine months ended September 30, 2015 and 2014, and the changes in partners’ capital for the nine months ended September 30, 2015 and 2014. These financial statements present the results for interim periods and do not include all 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 annual report on 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.

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. In the financial highlights, the ongoing selling agent fees and clearing fees allocated from the Funds which were previously included in net realized and unrealized gains (losses) per unit and excluded from expenses per unit are now excluded from net realized and unrealized gains (losses) per unit and included in net investment loss per unit. This information was previously included as footnotes to the financial highlights table. The clearing fees and other expenses allocated from the Funds which were previously disclosed separately on the Statements of Income and Expenses and Changes in Partners’ Capital, are now disclosed in aggregate as expenses allocated from Funds.

The General Partner and each limited partner share in the profits and losses of the Partnership in proportion to the amount of Partnership interest owned by each except that no limited partner shall be liable for obligations of the Partnership in excess of its capital contribution and profits, if any, net of distributions or redemptions and losses, if any.

Due to the nature of commodity trading, the results of operations for the interim periods presented should not be considered indicative of the results that may be expected for the entire year.

Tactical Diversified Futures Fund L.P.

Notes to Financial Statements

September 30, 2015

(Unaudited)

Partnership’s Investments: The Partnership carries its investment in the Funds at fair value based on the Funds’ net asset value per unit as calculated by the Funds.

Funds’ Investments: Fair value of exchange-traded futures, options and forward contracts is determined by the various 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 inputs 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 as of the close of the last business day of the reporting period.

All commodity interests of the Funds (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 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 the trading account on the Funds’ Statements of Financial Condition. Net realized gains or losses and net change in unrealized gains or losses from the preceding period are reported on the Funds’ Statements of Income and Expenses and Changes in Partners’ Capital.

Investment Company Status: The Partnership adopted Accounting Standard Update (“ASU”) 2013-08, “Financial Services — Investment Companies (Topic 946): Amendments to the Scope, Measurement and Disclosure Requirements” and based on the General Partner’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 and Changes in Partners’ Capital.

Income Taxes: Income taxes have not been listed as each partner is individually liable for the taxes, if any, on its share of the Partnership’s income and expenses. The General Partner 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. The General Partner 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 is calculated in accordance with investment company guidance. See Note 3, “Financial Highlights”.

Recent Accounting Pronouncement: 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 (“NAV”) 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 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. The adoption did not have any impact on the Partnership’s fair value measurement disclosures.

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.

Tactical Diversified Futures Fund L.P.

Notes to Financial Statements

September 30, 2015

(Unaudited)

3. Financial

Highlights:

Financial highlights for the limited partner class as a whole for the three and nine months ended September 30, 2015 and 2014 were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014

Net realized and unrealized gains (losses)	$	67.63	$	54.55	$	22.52	$	36.18
Net investment loss		(14.74)		(16.79)		(54.74)		(48.01)

Increase (decrease) for the period		52.89		37.76		(32.22)		(11.83)
Net asset value per unit, beginning of period		924.98		850.69		1,010.09		900.28

Net asset value per unit, end of period	$	977.87	$	888.45	$	977.87	$	888.45


	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014

Ratio to average net assets:*
Net investment income (loss) **		(6.1)	%		(8.0)	%		(7.1)	%		(7.7)	%

Operating expenses		6.2	%		8.0	%		6.5	%		7.7	%
Incentive fees		-	%		-	%		0.7	%		-	%

Total expenses		6.2	%		8.0	%		7.2	%		7.7	%


Total return:
Total return before incentive fees		5.7	%		4.4	%		(2.5)	%		(1.3)	%
Incentive fees		-	%		-	%		(0.7)	%		-	%

Total return after incentive fees		5.7	%		4.4	%		(3.2)	%		(1.3)	%

*	Annualized (other than incentive fees).

**	Interest income less total expenses.

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 of the Partnership and includes the income and expenses allocated from the Funds.

Tactical Diversified Futures Fund L.P.

Notes to Financial Statements

September 30, 2015

(Unaudited)

4. Trading

Activities:

The Partnership was formed for the purpose of trading contracts in a variety of commodity interests, including derivative financial instruments and derivative commodity instruments. The Partnership invests substantially all of its assets through a “master/feeder” structure. The Partnership’s pro-rata share of the results of the Funds’ trading activities are shown on the Statements of Income and Expenses and Changes in Partners’ Capital.

The customer agreement among the Partnership, the Funds and MS&Co. gives the Partnership and the Funds the legal right to net unrealized gains and losses on open futures contracts and open forward contracts. The Partnership and the Funds net, for financial reporting purposes, the unrealized gains and losses on open futures and open forward contracts on the Statements of Financial Condition as the criteria under ASC 210-20, “Balance Sheet,” have been met.

All of the commodity interests owned by the Funds are held for trading purposes.

Trading and transaction fees are based on the number of trades executed by the Advisors for the Funds. All trading, exchange, clearing, user, give-up, floor brokerage and National Futures Association fees (collectively, the “clearing fees”) paid to MS&Co. are borne by the Funds and allocated to the limited partners, including the Partnership.

5. Fair

Value Measurements:

Funds’ 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.

The Funds consider prices for exchange-traded commodity futures, forward, swap and option contracts to be based on unadjusted quoted prices in active markets for identical assets and liabilities (Level 1). The values of U.S. Treasury bills, non-exchange-traded forwards, swaps and certain option contracts for which market quotations are not readily available are priced by broker-dealers or pricing services who derive fair values for those assets and liabilities from observable inputs (Level 2). As of and for the periods ended September 30, 2015 and December 31, 2014, the Funds’ investments were classified as either Level 1 or Level 2 and the Funds did not hold any derivative instruments 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. For the nine months ended September 30, 2015 and the year ended December 31, 2014, there were no transfers of assets and liabilities between Level 1 and Level 2.

6. Investment in Funds:

On March 1, 2005, the assets allocated to Aspect for trading were invested in Aspect Master, a limited partnership organized under the partnership laws of the State of New York. The Partnership purchased 131,340.8450 units of Aspect Master with cash equal to $122,786,448 and a contribution of open commodity futures and forward contracts with a fair value of $8,554,397. Aspect Master permits accounts managed by Aspect using its Diversified Program, a proprietary, systematic trading system, to invest together in one trading vehicle. The General Partner is also the general partner of Aspect Master. Individual and pooled accounts currently managed by Aspect, including the Partnership, are permitted to be limited partners of Aspect Master. The General Partner and Aspect believe that trading through this structure should promote efficiency and economy in the trading process.

Tactical Diversified Futures Fund L.P.

Notes to Financial Statements

September 30, 2015

(Unaudited)

On July 1, 2005, the assets allocated to Willowbridge for trading were invested in Willowbridge Master, a limited partnership organized under the partnership laws of the State of New York. The Partnership purchased 95,795.8082 units of Willowbridge Master with cash equal to $85,442,868 and a contribution of open commodity futures and forward contracts with a fair value of $10,352,940. Willowbridge Master permits accounts managed by Willowbridge using its wPraxis Futures Trading Approach, a proprietary, discretionary trading system, to invest together in one trading vehicle. The General Partner is also the general partner of Willowbridge Master. Individual and pooled accounts currently managed by Willowbridge, including the Partnership, are permitted to be limited partners of Willowbridge Master. The General Partner and Willowbridge believe that trading through this structure should promote efficiency and economy in the trading process. The General Partner and Willowbridge have agreed that Willowbridge will trade the assets allocated to Willowbridge at a level up to 3 times the amount of assets allocated. Prior to January 1, 2013, Willowbridge traded the Partnership’s assets pursuant to its Argo Trading System.

On August 1, 2005, the assets allocated to Drury for trading were invested in Drury Master, a limited partnership organized under the partnership laws of the State of New York. The Partnership purchased 120,720.7387 units of Drury Master with cash equal to $117,943,206 and a contribution of open commodity futures and forward contracts with a fair value of $2,777,533. Drury Master permits accounts managed by Drury using its Diversified Trend-Following Program, a proprietary, systematic trading system, to invest together in one trading vehicle. The Partnership fully redeemed its investment in Drury Master on June 30, 2014 for cash equal to $11,948,244.

On June 1, 2006, the assets allocated to Graham for trading were invested in Graham Master, a limited partnership organized under the partnership laws of the State of New York. The Partnership purchased 101,486.0491 units of Graham Master with cash equal to $103,008,482. Graham Master permits accounts managed by Graham using its K4D-15V Program, a proprietary, systematic trading program, to invest together in one trading vehicle. The General Partner is also the general partner of Graham Master. Individual and pooled accounts currently managed by Graham, including the Partnership, are permitted to be limited partners of Graham Master. The General Partner and Graham believe that trading through this structure should promote efficiency and economy in the trading process.

On May 1, 2011, the assets allocated to Krom River for trading were invested in KR Master, a limited partnership organized under the partnership laws of the State of Delaware. The Partnership purchased an interest in KR Master with cash equal to $65,000,000. KR Master permits accounts managed by Krom River using the Krom River Commodity Program, a proprietary, discretionary system which will be traded both on a fundamental and technical basis, to invest together in one trading vehicle. The General Partner and Krom River agreed that Krom River would trade the Partnership’s assets allocated to Krom River at a level up to 1.5 times the amount of assets allocated. The Partnership fully redeemed its investment in the KR Master on December 31, 2014 for cash equal to $8,902,959.

On May 1, 2011, the assets allocated to Altis for trading were invested in Altis Master, a limited partnership organized under the partnership laws of the State of New York. The Partnership purchased 21,851.9469 units of Altis Master with cash equal to $70,000,000. Altis Master permits accounts managed by Altis using its Global Futures Portfolio trading system, a proprietary, systematic trading system, to invest together in one trading vehicle. The General Partner is also the general partner of Altis Master. Individual and pooled accounts currently managed by Altis, including the Partnership, are permitted to be limited partners of Altis Master. The General Partner and Altis believe that trading through this structure should promote efficiency and economy in the trading process.

On January 1, 2013, the assets allocated to Boronia for trading were invested in Boronia I, LLC or the Boronia Trading Company, a limited liability company organized under the partnership laws of the State of Delaware. The Partnership purchased an interest in Boronia I, LLC with cash equal to $36,000,000. Boronia I, LLC permits accounts managed by Boronia using the Boronia Diversified Program, a proprietary, systematic trading system, to invest together in one trading vehicle. The General Partner is also the manager of Boronia I, LLC. Individual and pooled accounts currently managed by Boronia, including the Partnership, are permitted to be members of Boronia I, LLC. The General Partner and Boronia believe that trading through this structure should promote efficiency and economy in the trading process. The General Partner and Boronia agreed that Boronia will trade the Partnership’s assets allocated to Boronia at a level up to 1.5 times the amount of assets allocated.

Tactical Diversified Futures Fund L.P.

Notes to Financial Statements

September 30, 2015

(Unaudited)

On January 1, 2013, the assets allocated to Kaiser for trading were invested in Kaiser I, LLC or the Kaiser Trading Company, a limited liability company organized under the partnership laws of the State of Delaware. The Partnership purchased an interest in Kaiser I, LLC with cash equal to $30,000,000. Kaiser I, LLC permits accounts managed by Kaiser using the Global Diversified Trading Program, a proprietary, systematic trading system, to invest together in one trading vehicle. The General Partner and Kaiser agreed that Kaiser would trade the Partnership’s assets allocated to Kaiser at a level up to 2 times the amount of assets allocated. The Partnership fully redeemed its investment in Kaiser Trading Company on June 30, 2014 for cash equal to $29,367,227.

On August 1, 2013, the assets allocated to J E Moody for trading were invested in JEM Master, a limited partnership organized under the partnership laws of the State of Delaware. The Partnership purchased 11,968.0895 units of JEM Master with cash equal to $15,820,000. JEM Master permits accounts managed by J E Moody using the JEM Commodity Relative Value Program, a proprietary, systematic trading program, to invest together in one trading vehicle. The General Partner is also the general partner of JEM Master. Individual and pooled accounts currently managed by J E Moody, including the Partnership, are permitted to be limited partners of JEM Master. The General Partner and J E Moody believe that trading through this structure should promote efficiency and economy in the trading process. The General Partner and JE Moody agreed that JE Moody will trade the Partnership’s assets allocated to JE Moody at a level that is up to 3 times the amount of assets allocated.

The General Partner is not aware of any material changes to the trading programs discussed above during the fiscal quarter ended September 30, 2015.

The Funds’ trading of futures, forward and option contracts, if applicable, on commodities is done primarily on U.S. commodity exchanges and foreign commodity exchanges. During the nine months ended September 30, 2015, the Funds engaged in such trading through commodity brokerage accounts maintained with MS&Co.

A limited partner/non-managing member of the Funds may withdraw all or part of its capital contribution and undistributed profits, if any, from the Funds as of the end of any day (the “Redemption Date”) after a request for redemption has been made to the General Partner/manager at least three business days in advance of the Redemption Date. Such withdrawals are classified as a liability when the limited partner/non-managing member elects to redeem and informs the Funds.

Management and incentive fees are charged at the Partnership level, with the exception of Boronia I, LLC and Kaiser I, LLC (prior to its redemption on June 30, 2014) (together the “Trading Companies”), where the Partnership paid, indirectly, its pro rata portion of the management and incentive fees of the Trading Companies. The clearing fees are borne by the Funds and allocated to their limited partners/non-managing members including the Partnership. All other fees are charged at the Partnership level.

As of September 30, 2015, the Partnership owned approximately 15.3% of Willowbridge Master, 54.3% of Aspect Master, 72.3% of Graham Master, 61.6% of Altis Master, 63.9% of JEM Master and 51.9% of Boronia I, LLC. At December 31, 2014, the Partnership owned approximately 19.7% of Willowbridge Master, 57.4% of Aspect Master, 73.5% of Graham Master, 73.4% of KR Master (prior to its redemption on December 31, 2014), 67.4% of Altis Master, 70.6% of JEM Master and 50.5% of Boronia I, LLC. It is the Partnership’s intention to continue to invest in the Funds. The performance of the Partnership is directly affected by the performance of the Funds. Expenses to investors as a result of investment in the Funds are approximately the same as they would be if the Partnership traded directly and the redemption rights are not affected.

Tactical Diversified Futures Fund L.P.

Notes to Financial Statements

September 30, 2015

(Unaudited)

Summarized information reflecting the total assets, liabilities and partners’ capital for the Funds is shown in the following tables.


	September 30, 2015
	Total Assets		Total Liabilities		Total Partners’ Capital
Willowbridge Master	$	425,873,553	$	5,034,529	$	420,839,024
Aspect Master		62,591,665		221,586		62,370,079
Graham Master		53,873,372		33,878		53,839,494
Altis Master		40,613,833		200,817		40,413,016
JEM Master		14,924,173		32,222		14,891,951
Boronia I, LLC		94,688,522		141,731		94,546,791
	December 31, 2014
	Total Assets		Total Liabilities		Total Partners’ Capital
Willowbridge Master	$	332,179,217	$	16,638,854	$	315,540,363
Aspect Master		78,421,434		50,766		78,370,668
Graham Master		68,175,989		19,684,323		48,491,666
KR Master		12,415,386		12,415,386		-
Altis Master		51,413,912		51,279		51,362,633
JEM Master		29,918,670		42,666		29,876,004
Boronia I, LLC		106,126,940		1,864,006		104,262,934

Summarized information reflecting the net investment income (loss), total trading results and net income (loss) for the Funds is shown in the following tables.


	For the three months ended September 30, 2015
	Net Investment Income (Loss)		Total Trading Results		Net Income (Loss)
Willowbridge Master	$	(145,834)	$	28,756,543	$	28,610,709
Aspect Master		(55,404)		8,636,148		8,580,744
Graham Master		(45,272)		283,163		237,891
Altis Master		(79,868)		2,601,937		2,522,069
JEM Master		(205,158)		172,874		(32,284)
Boronia I, LLC		(1,075,317)		8,917,469		7,842,152

Tactical Diversified Futures Fund L.P.

Notes to Financial Statements

September 30, 2015

(Unaudited)


	For the nine months ended September 30, 2015
	Net Investment Income (Loss)		Total Trading Results		Net Income (Loss)
Willowbridge Master	$	(636,638)	$	15,134,368	$	14,497,730
Aspect Master		(182,077)		6,261,137		6,079,060
Graham Master		(154,142)		3,536,460		3,382,318
Altis Master		(222,930)		675,898		452,968
JEM Master		(724,097)		1,191,983		467,886
Boronia I, LLC		(4,665,174)		(7,844,128)		(12,509,302)


	For the three months ended September 30, 2014
	Net Investment Income (Loss)		Total Trading Results		Net Income (Loss)
Willowbridge Master	$	(166,398)	$	3,692,929	$	3,526,531
Aspect Master		(73,201)		3,932,169		3,858,968
Graham Master		(60,034)		4,158,083		4,098,049
KR Master		(35,293)		339,818		304,525
Altis Master		(91,952)		4,221,875		4,129,923
JEM Master		(225,547)		331,225		105,678
Boronia I, LLC		(3,213,470)		11,747,109		8,533,639


	For the nine months ended September 30, 2014
	Net Investment Income (Loss)		Total Trading Results		Net Income (Loss)
Drury Master	$	(89,782)	$	(1,655,418)	$	(1,745,200)
Willowbridge Master		(379,676)		2,654,368		2,274,692
Aspect Master		(207,332)		3,350,986		3,143,654
Graham Master		(174,742)		2,662,483		2,487,741
KR Master		(125,271)		1,438,550		1,313,279
Altis Master		(265,430)		973,102		707,672
JEM Master		(773,522)		(3,409,281)		(4,182,803)
Boronia I, LLC		(5,320,505)		15,863,418		10,542,913
Kaiser I, LLC		(868,868)		(5,469,979)		(6,338,847)

Tactical Diversified Futures Fund L.P.

Notes to Financial Statements

September 30, 2015

(Unaudited)

Summarized information reflecting the Partnership’s investment in, and the Partnership’s pro rata share of the results of operations of, the Funds is shown in the following tables.


	September 30, 2015				For the three months ended September 30, 2015
	% of						Expenses
Funds	Partnership’s Net Assets		Fair Value		Income (Loss)		Clearing fees		Other		Management Fee		Incentive Fee		Net Income (Loss)		Investment Objective	Redemptions Permitted
Willowbridge Master		29.72%	$	64,257,507	$	4,379,446	$	22,968	$	3,463	$	-	$	-	$	4,353,015	Commodity Portfolio	Monthly
Aspect Master		15.68%		33,897,832		4,773,360		15,579		15,084		-		-		4,742,697	Commodity Portfolio	Monthly
Graham Master		17.99%		38,911,019		207,824		17,081		15,844		-		-		174,899	Commodity Portfolio	Monthly
Altis Master		11.51%		24,885,317		1,608,832		35,894		14,286		-		-		1,558,652	Commodity Portfolio	Monthly
JEM Master		4.40%		9,513,184		102,625		122,436		14,685		-		-		(34,496)	Commodity Portfolio	Monthly
Boronia I, LLC		22.68%		49,042,316		4,450,900		329,232		43,046		184,486		-		3,894,136	Commodity Portfolio	Monthly


Total			$	220,507,175	$	15,522,987	$	543,190	$	106,408	$	184,486	$	-	$	14,688,903


	September 30, 2015				For the nine months ended September 30, 2015
	% of						Expenses
Funds	Partnership’s Net Assets		Fair Value		Income (Loss)		Clearing fees		Other		Management Fee		Incentive Fee		Net Income (Loss)		Investment Objective	Redemptions Permitted
Willowbridge Master		29.72%	$	64,257,507	$	2,347,693	$	101,103	$	13,179	$	-	$	-	$	2,233,411	Commodity Portfolio	Monthly
Aspect Master		15.68%		33,897,832		3,416,617		55,997		46,397		-		-		3,314,223	Commodity Portfolio	Monthly
Graham Master		17.99%		38,911,019		2,467,199		59,641		52,519		-		-		2,355,039	Commodity Portfolio	Monthly
Altis Master		11.51%		24,885,317		629,239		93,877		50,121		-		-		485,241	Commodity Portfolio	Monthly
JEM Master		4.40%		9,513,184		931,189		431,113		49,406		-		-		450,670	Commodity Portfolio	Monthly
Boronia I, LLC		22.68%		49,042,316		(4,019,987)		1,142,117		149,616		641,217		455,860		(6,408,797)	Commodity Portfolio	Monthly


Total			$	220,507,175	$	5,771,950	$	1,883,848	$	361,238	$	641,217	$	455,860	$	2,429,787

Tactical Diversified Futures Fund L.P.

Notes to Financial Statements

September 30, 2015

(Unaudited)


	December 31, 2014				For the three months ended September 30, 2014
	% of						Expenses
Funds	Partnership’s Net Assets		Fair Value		Income (Loss)		Clearing fees		Other		Management Fee		Incentive Fee		Net Income (Loss)		Investment Objective	Redemptions Permitted
Willowbridge Master		24.55%	$	62,129,797	$	1,666,146	$	86,981	$	21,799	$	-	$	-	$	1,557,366	Commodity Portfolio	Monthly
Aspect Master		17.77%		44,990,232		2,277,625		21,348		23,318		-		-		2,232,959	Commodity Portfolio	Monthly
Graham Master		14.07%		35,625,655		2,009,860		18,773		11,857		-		-		1,979,230	Commodity Portfolio	Monthly
KR Master		0.00%		-		262,314		10,995		21,312		-		-		230,007	Commodity Portfolio	Monthly
Altis Master		13.67%		34,598,755		2,868,302		42,130		25,320		-		-		2,800,852	Commodity Portfolio	Monthly
JEM Master		8.33%		21,079,026		232,735		138,259		22,792		-		-		71,684	Commodity Portfolio	Monthly
Boronia I, LLC		20.81%		52,666,212		6,114,117		319,525		39,432		211,240		1,108,784		4,435,136	Commodity Portfolio	Monthly


Total			$	251,089,677	$	15,431,099	$	638,011	$	165,830	$	211,240	$	1,108,784	$	13,307,234


	December 31, 2014				For the nine months ended September 30, 2014
	% of						Expenses
Funds	Partnership’s Net Assets		Fair Value		Income (Loss)		Clearing fees		Other		Management Fee		Incentive Fee		Net Income (Loss)		Investment Objective	Redemptions Permitted
Drury Master		0.00%	$	-	$	(1,532,410)	$	30,208	$	49,587	$	-	$	-	$	(1,612,205)	Commodity Portfolio	Monthly
Willowbridge Master		24.55%		62,129,797		864,803		217,181		54,285		-		-		593,337	Commodity Portfolio	Monthly
Aspect Master		17.77%		44,990,232		1,771,094		84,487		55,840		-		-		1,630,767	Commodity Portfolio	Monthly
Graham Master		14.07%		35,625,655		1,370,648		47,704		35,781		-		-		1,287,163	Commodity Portfolio	Monthly
KR Master		0.00%		-		1,039,067		58,328		53,580		-		-		927,159	Commodity Portfolio	Monthly
Altis Master		13.67%		34,598,755		239,239		150,745		54,530		-		-		33,964	Commodity Portfolio	Monthly
JEM Master		8.33%		21,079,026		(2,377,567)		491,817		54,268		-		-		(2,923,652)	Commodity Portfolio	Monthly
Boronia I, LLC		20.81%		52,666,212		8,299,887		803,655		98,947		530,073		1,375,148		5,492,064	Commodity Portfolio	Monthly
Kaiser Trading Company		0.00%		-		(2,966,749)		157,986		49,710		284,057		-		(3,458,502)	Commodity Portfolio	Monthly


Total			$	251,089,677	$	6,708,012	$	2,042,111	$	506,528	$	814,130	$	1,375,148	$	1,970,095

Tactical Diversified Futures Fund L.P.

Notes to Financial Statements

September 30, 2015

(Unaudited)

7.	Financial Instrument Risks:

In the normal course of business, the Partnership, indirectly through its investments in the Funds, is a party to financial instruments with off-balance sheet risk, including derivative financial instruments and derivative commodity instruments. These financial instruments may include forwards, futures, options and swaps, whose values are based upon an underlying asset, index or reference rate, and generally represent future commitments to exchange currencies or cash balances, to purchase or sell other financial instruments on specific terms at specified future dates, or, in the case of derivative commodity instruments, to have a reasonable possibility to be settled in cash, through physical delivery or with another financial instrument. These instruments may be traded on an exchange, a swap execution facility or over-the-counter (“OTC”). Exchange-traded instruments include futures and certain standardized forwards, option and swap contracts. Certain swap contracts may also be traded on a swap execution facility or OTC. OTC contracts are negotiated between contracting parties and also include certain forward and option contracts. Specific market movements of commodities or futures contracts underlying an option cannot accurately be predicted. The purchaser of an option may lose the entire premium paid for the option. The writer or seller of an option has unlimited risk. Each of these instruments is subject to various risks similar to those related to the underlying financial instruments, including market and credit risk. In general, the risks associated with OTC contracts are greater than those associated with exchange-traded instruments because of the greater risk of default by the counterparty to an OTC contract. The General Partner estimates that at any given time approximately 25.83% to 42.62%.

The Funds trade futures contracts. A futures contract is a firm commitment to buy or sell a specified quantity of investments, currency or a standardized amount of a deliverable grade commodity, at a specified price on a specified future date, unless the contract is closed before the delivery date or if the delivery quantity is something where physical delivery cannot occur (such as the S&P 500 Index), whereby such contract is settled in cash. Payments (“variation margin”) may be made or received by the Funds each business day, depending on the daily fluctuations in the value of the underlying contracts, and are recorded as unrealized gains or losses by the Funds. When each contract is closed, the Funds record a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Transactions in futures contracts require participants to make both initial margin deposits of cash or other assets and variation margin deposits, through the futures broker, directly with the exchange on which the contracts are traded. Net realized gains (losses) and net change in unrealized gains (losses) on futures contracts are included in the Funds’ Statements of Income and Expenses and Changes in Partners’ Capital.

Forward foreign currency contracts are those contracts where the Funds agree to receive or deliver a fixed quantity of foreign currency for an agreed-upon price on an agreed future date. Forward foreign currency contracts are valued daily, and the Funds’ net equity therein, representing unrealized gain or loss on the contracts as measured by the difference between the forward foreign exchange rates at the dates of entry into the contracts and the forward rates at the reporting date, is included in the Funds’ Statements of Financial Condition. Net realized gains (losses) and net changes in unrealized gains (losses) on forward foreign currency contracts are recognized in the period in which the contract is closed or the changes occur, respectively, and are included in the Funds’ Statements of Income and Expenses and Changes in Partners’ Capital.

The Funds do not isolate that portion of the results of operations arising from the effect of changes in foreign exchange rates on investments from fluctuations due to changes in market prices of investments held. Such fluctuations are included in total trading results in investments in the Funds’ Statements of Income and Expenses and Changes in Partners’ Capital.

Metal contracts traded on the London Metals Exchange (“LME”) represent a firm commitment to buy or sell a specified quantity of aluminum, copper, lead, nickel, tin or zinc. LME contracts traded by the Funds are cash settled based on prompt dates published by the LME. Payments (“variation margin”) may be made or received by the Funds each business day, depending on the daily fluctuations in the value of the underlying contracts, and are recorded as unrealized gains or losses by the Funds. A contract is considered offset when all long positions have been matched with a like number of short positions settling on the same prompt date. When the contract is closed at the prompt date, the Funds record a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Transactions in LME contracts require participants to make both initial margin deposits of cash or other assets and variation margin deposits, through the broker, directly with the LME. Net realized gains (losses) and net change in unrealized gains (losses) on metal contracts are included in the Funds’ Statements of Income and Expenses and Changes in Partners’ Capital.

The risk to the limited partners that have purchased Redeemable Units is limited to the amount of their share of the Partnership’s net assets and undistributed profits. This limited liability is a result of the organization of the Partnership as a limited partnership under New York law.

Tactical Diversified Futures Fund L.P.

Notes to Financial Statements

September 30, 2015

(Unaudited)

Market risk is the potential for changes in the value of the financial instruments traded by the Funds due to market changes, including interest and foreign exchange rate movements and fluctuations in commodity or security prices. Market risk is directly impacted by the volatility and liquidity in the markets in which the related underlying assets are traded. The Funds are exposed to a market risk equal to the value of futures and forward contracts purchased and unlimited liability on such contracts sold short.

Credit risk is the possibility that a loss may occur due to the failure of a counterparty to perform according to the terms of a contract. The Partnership’s/Funds’ risk of loss in the event of a counterparty default is typically limited to the amounts recognized in the Statements of Financial Condition and is not represented by the contract or notional amounts of the instruments. The Partnership’s/Funds’ risk of loss is reduced through the use of legally enforceable master netting agreements with counterparties that permit the Partnership/Funds to offset unrealized gains and losses and other assets and liabilities with such counterparties upon the occurrence of certain events. The Partnership/Funds have credit risk and concentration risk as MS&Co. or an MS&Co. affiliate is the sole counterparty or broker with respect to the Partnership’s/Funds’ assets. Credit risk with respect to exchange-traded instruments is reduced to the extent that through MS&Co., the Partnership’s/Funds’ counterparty is an exchange or clearing organization.

As both a buyer and seller of options, the Funds pay and receive a premium at the outset and then bear the risk of unfavorable changes in the price of the contract underlying the option. Written options expose the Funds to potentially unlimited liability; for purchased options, the risk of loss is limited to the premiums paid. Certain written put options permit cash settlement and do not require the option holder to own the reference asset. The Funds do not consider these contracts to be guarantees.

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

The majority of these financial instruments mature within one year of the inception date. However, due to the nature of the Funds’ businesses, these instruments may not be held to maturity.

8.	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 determined that there were no subsequent events requiring adjustment of or disclosure in the financial statements.

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

Liquidity and Capital Resources

The Partnership does not engage in the sale of goods or services. Its only assets are its investment in Funds and cash. The Funds’ only assets are their equity in trading accounts, consisting of cash and cash margin, net unrealized appreciation on open futures contracts, net unrealized appreciation on open forward contracts and commodity options purchased, if applicable. Because of the low margin deposits normally required in commodity futures trading, relatively small price movements may result in substantial losses to the Partnership, through its investments in the Funds. While substantial losses could lead to a material decrease in liquidity, no such illiquidity occurred during the third quarter of 2015.

The Partnership’s capital consists of the capital contributions of the partners as increased or decreased by gains or losses on trading and by subscriptions, expenses, interest income, redemptions of Redeemable Units and distributions of profits, if any.

For the nine months ended September 30, 2015, the Partnership capital decreased 14.6% from $253,104,986 to $216,235,038. This decrease was attributable to redemptions of 30,241.5660 Redeemable Units resulting in an outflow of $30,379,571 and the redemptions of 357.9740 General Partner Redeemable Units totaling $378,906, coupled with the net loss of $7,320,757, which was partially offset by the subscriptions of 1,151.5520 Redeemable Units totaling $1,209,286. Future redemptions could impact the amount of funds available for investment in funds in subsequent periods.

Critical Accounting Policies

The preparation of financial statements in conformity with GAAP requires the General Partner to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. The General Partner believes that the estimates and assumptions utilized in preparing the financial statements are reasonable. Actual results could differ from those estimates. The Partnership’s significant accounting policies are described in detail in Note 2 of the Financial Statements.

The Partnership records all investments at fair value in its financial statements, with changes in fair value reported as net change in unrealized gains (losses) in the Statements of Income and Expenses and Changes in Partners’ Capital.

Results of Operations

During the third quarter of 2015, the Partnership’s net asset value per unit increased 5.7% from $924.98 to $977.87 as compared to an increase of 4.4% in the same period of 2014. The Partnership experienced a net trading gain before fees and expenses in the third quarter of 2015 of $15,510,709. Gains were primarily attributable to the Funds’ trading in energy, global interest rate, metals, and currency markets and were partially offset by losses in global stock index and agricultural markets. The Partnership experienced a net trading gain before fees and expenses in the third quarter of 2014 of $15,425,555. Gains were primarily attributable to Funds’ trading in currencies, grains, indices, metals, softs and non-U.S. interest rates and were partially offset by losses in energy, livestock and U.S. interest rate.

The most significant gains were achieved within the energy markets during July, August, and September from short positions in crude oil and its related products as prices fell as increased oil production in the U.S. and Middle East added to a growing global supply glut. Within the global interest rate sector, gains were recorded primarily during September from long positions in European and U.S. fixed income futures as prices rallied after the U.S. Federal Reserve Bank’s FOMC decided to leave interest rates unchanged following its September meeting. Within the metals markets, gains were experienced during July from short positions in gold and silver futures as prices moved lower as a strengthening U.S. dollar curbed demand for precious metals as a store of value. Additional gains within the metals sector were recorded during July from short positions in copper and aluminum futures as prices declined amid investor concern of slowing demand from China. Within the currency markets, gains were achieved during July from short positions in the Canadian dollar versus the U.S. dollar as the relative value of the Canadian currency weakened amid falling commodity prices, monetary easing by the Bank of Canada, and potential interest rate increases by the U.S. Federal Reserve. A portion of the Partnership’s gains for the quarter was offset by losses incurred within the global stock index sector during August from long positions in U.S., and European equity index futures as prices fell amid concern a slowdown in Chinese economic growth would adversely affect the global economy. Additional losses in this sector were experienced during September from long positions in Asian equity index futures as continued concern of potential weakness in the Chinese economy pushed prices lower. Within the agricultural complex, losses were recorded during September from short positions in sugar futures as prices rallied after poor weather disrupted harvests in Brazil, the world’s top sugar producer and exporter. Additional losses during September were experienced from short positions in wheat futures as prices moved higher amid concern of potential weather-related crop damage in the U.S. Midwest.

During the Partnership’s nine months ended September 30, 2015, the net asset value per unit decreased 3.2% from $1,010.09 to $977.87 as compared to a decrease of 1.3% in the same period of 2014. The Partnership experienced a net trading gain before fees and expenses in the nine months ended September 30, 2015 of $5,753,495. Gains were primarily attributable to the Funds’ trading in currency, global interest rate, energy, and metals markets and were offset by trading losses in global stock index and agricultural futures. The Partnership experienced a net trading gain before fees and expenses in the nine months ended September 30, 2014 of $6,677,054. Gains were primarily attributable to the Funds’ trading in currencies, grains, livestock, softs and non-U.S. interest rates and were partially offset by losses in energy, indices, metals and U.S. interest rates.

The most significant losses were incurred within the global stock index sector primarily during June from long positions in U.S., European, and Asian equity index futures as prices declined as concerns over Greece’s efforts to avoid a default weighed on global financial markets. Additional losses were incurred within the global stock index sector during January from long positions in U.S. equity index futures as prices fell amid concern a tumble in oil prices and slowing overseas growth would adversely affect U.S. economic output. Losses were recorded within the agricultural markets during June from short positions in corn, soybeans, and wheat futures as prices rallied after heavy rainfall in the U.S. Midwest raised the potential for crop damage. Additional losses were incurred during April from short positions in sugar and coffee futures as prices advanced as wet weather slowed harvests in Brazil. A portion of the Partnership’s losses for the first nine months of the year was offset by gains achieved within the currency sector during January from short positions in the Canadian dollar versus the U.S. dollar as the value of the Canadian currency moved lower over concerns falling oil prices would adversely affect the Canadian economy. Additional gains in this sector were also experienced during May from short positions in the Japanese yen versus the U.S. dollar as the relative value of the yen fell after the release of strong U.S. employment figures and as the Bank of Japan pledged to continue its quantitative easing measures. Within the global interest rate markets, gains were recorded during January from long positions in European fixed income futures as prices advanced on increased speculation the European Central Bank would increase its quantitative easing measures to stimulate the Eurozone’s stagnant economy. Long positions in U.S. Treasury note futures were also profitable during January as prices advanced over investor concern a fall in crude oil prices would dampen inflation in the U.S. Additional gains were recorded from long positions in Canadian fixed income futures. Gains within the energy markets were primarily experienced during July from short positions in crude oil and its related products as prices declined amid a growing global supply glut. Within the metals markets, gains were achieved during July from short positions in gold and silver futures as prices moved lower as a strengthening U.S. dollar curbed demand for precious metals as a store of value.

Ongoing selling agent fees are calculated as a percentage of the Partnership’s adjusted net asset value on the last day of each month and are affected by trading performance, subscriptions and redemptions. Accordingly, they must be compared in relation to the fluctuations in the monthly net asset values. Ongoing selling agent fees for the three and nine months ended September 30, 2015 decreased $840,258 and $5,312,513, respectively, as compared to the corresponding periods in 2014. The decrease in ongoing selling agent fees is due to a decrease in average net assets for the three and nine months ended September 30, 2015, as compared to the corresponding periods in 2014.

Certain clearing fees are based on the number of trades executed by the Advisors for the Partnership/Funds. Accordingly, they must be compared in relation to the number of trades executed during the periods. Clearing fees for the three and nine months ended September 30, 2015 decreased $94,821 and $158,263, respectively, as compared to the corresponding periods in 2014. The decrease in clearing fees is primarily due to a decrease in the number of trades during the three and nine months ended September 30, 2015, as compared to the corresponding periods in 2014.

General Partner fees are calculated as a percentage of the Partnership’s adjusted net asset value as of the end of each month and are affected by trading performance, subscriptions and redemptions. Accordingly, they must be compared in relation to the fluctuations in the monthly net asset values. General Partner fees for the three and nine months ended September 30, 2015 were $554,074 and $1,785,803, respectively. This is a new fee implemented by the Partnership effective October 1, 2014.

Management fees are calculated as a percentage of the Partnership’s adjusted net asset value as of the end of each month and are affected by trading performance, subscriptions and redemptions. Accordingly, they must be compared in relation to the fluctuations in the monthly net asset values. Management fees for the three and nine months ended September 30, 2015 decreased $162,560 and $713,540, respectively, as compared to the corresponding periods in 2014. The decrease in management fees is due to a decrease in average net assets for the three and nine months ended September 30, 2015, as compared to the corresponding periods in 2014.

Incentive fees are based on the new trading profits generated by each Advisor at the end of the quarter as defined in the respective management agreements between the Partnership, the General Partner and each Advisor. Trading performance for the three and nine months ended September 30, 2015 resulted in incentive fees of $0 and $1,694,935, respectively. Trading performance for the three and nine months ended September 30, 2014 resulted in incentive fees of $0 and $0, respectively. To the extent an Advisor incurs a loss for the Partnership, the Advisor will not be paid incentive fees until such Advisor recovers any net loss incurred by the Advisor and earns additional new trading profits for the Partnership.

In allocating the assets of the Partnership among the Advisors, the General Partner considers past performance, trading style, volatility of markets traded and fee requirements. The General Partner may modify or terminate the allocation of assets among the Advisors and may allocate assets to additional advisors at any time.

As of September 30, 2015 and June 30, 2015, the Partnership’s assets were allocated among the trading Advisors in the following approximate percentages:


Advisor	September 30, 2015				June 30, 2015
Graham Capital Management, L.P.		18	%	$ 38,772,888		15	%	$ 31,547,337
Aspect Capital Limited		16	%	$ 33,794,949		17	%	$ 35,990,973
Willowbridge Associates Inc.		29	%	$ 64,027,190		28	%	$ 60,448,354
Altis Partners (Jersey) Limited		11	%	$ 24,817,350		11	%	$ 23,547,614
J E Moody & Company LLC.		3	%	$ 5,919,876		6	%	$ 12,605,730
Boronia Capital Pty. Ltd.		23	%	$ 48,902,785		23	%	$ 49,125,513

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Partnership/Funds are speculative commodity pools. The market sensitive instruments held by them are acquired for speculative trading purposes, and all or substantially all of the Partnership’s/Funds’ assets are subject to the risk of trading loss. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Partnership’s main line of business.

The limited partners will not be liable for losses exceeding the current net asset value of their investment. Market movements result in frequent changes in the fair value of the Partnership’s/Funds’ open positions and, consequently, in their earnings and cash balances. The Partnership’s/Funds’ market risk is influenced by a wide variety of factors, including the level and volatility of interest rates, exchange rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Partnership’s/Funds’ open contracts and the liquidity of the markets in which they trade.

The Partnership/Funds rapidly acquire and liquidate both long and short positions in a wide range of different markets. Consequently, it is not possible to predict how a particular future market scenario will affect performance, and the Partnership’s/Funds’ past performance is not necessarily indicative of their future results.

“Value at Risk” is a measure of the maximum amount which the Partnership/Funds could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Partnership’s/Funds’ speculative trading and the recurrence in the markets traded by the Partnership/Funds of market movements far exceeding expectations could result in actual trading or non-trading losses far beyond the indicated Value at Risk or the Partnership’s/Funds’ 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/Funds’ losses in any market sector will be limited to Value at Risk or by the Partnership’s/Funds’ attempts to manage their market risk.

Exchange margin requirements have been used by the Partnership/Funds as the measure of their Value at Risk. 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. The margin levels are established by dealers and exchanges using historical price studies as well as an assessment of current market volatility (including the implied volatility of the options on a given futures contract) and economic fundamentals to provide a probabilistic estimate of the maximum expected near-term one-day price fluctuation.

Value at Risk tables represent a probabilistic assessment of the risk of loss in market risk sensitive instruments. The Advisors currently trade the Partnership’s assets indirectly in master fund managed accounts established in the name of the masters funds over which they have been granted limited authority to make trading decisions. The first two trading Value at Risk tables reflects the market sensitive instruments held by the Partnership indirectly, through its investment in the Funds. The remaining trading Value at Risk tables reflect the market sensitive instruments, held by each Fund separately. There have been no material changes in the trading Value at Risk information previously disclosed in the Partnership’s Annual Reports on Form 10-K for the year ended December 31, 2014.

The following tables indicate the trading Value at Risk associated with the Partnership’s open positions by market category, through its investment in the Funds, as of September 30, 2015 and December 31, 2014. As of September 30, 2015, the Partnership’s total capitalization was $216,235,038.


	September 30, 2015
Market Sector	Value at Risk		% of Total Capitalization
Commodities	$	11,007,666		5.09	%
Currencies		17,519,475		8.10	%
Equity		3,648,144		1.69	%
Interest Rates		6,377,752		2.96	%

Total	$	38,553,037		17.84	%

As of December 31, 2014, the Partnership’s total capitalization was $253,104,986.


	December 31, 2014
Market Sector	Value at Risk		% of Total Capitalization
Commodities	$	10,776,711		4.25	%
Currencies		10,289,872		4.07	%
Indices		4,679,301		1.85	%
Interest Rates		6,897,711		2.73	%

Total	$	32,643,595		12.90	%

The following tables indicate the trading Value at Risk associated with the Partnership’s investments in Funds by market category as of September 30, 2015 and December 31, 2014 and the highest and lowest value at any point and the average value during the three months ended September 30, 2015 and for the twelve months ended December 31, 2014. All open position trading risk exposures of the Funds have been included in calculating the figures set forth below.

As of September 30, 2015, Willowbridge Master’s total capitalization was $420,839,024. The Partnership owned approximately 15.3% of Willowbridge Master. As of September 30, 2015, Willowbridge Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Willowbridge for trading) was as follows:

September 30, 2015


						Three Months Ended September 30, 2015
Market Sector	Value at Risk		% of Total Capitalization			High Value at Risk		Low Value at Risk		Average Value at Risk*
Currencies	$	62,412,798		14.83	%	$	63,123,816	$	22,020,457	$	47,022,246
Energy		7,337,774		1.75	%		8,966,578		2,001,737		5,373,423
Indices		4,251,069		1.01	%		5,262,987		344,080		1,417,023
Interest Rates U.S.		3,407,089		0.81	%		6,150,738		589,871		2,302,515
Interest Rates Non-U.S.		510,242		0.12	%		528,790		510,242		170,081

Total	$	77,918,972		18.52	%

*	Average of month-end Values at Risk.

As of December 31, 2014, Willowbridge Master’s total capitalization was $315,540,363. The Partnership owned approximately 19.7% of Willowbridge Master. As of December 31, 2014, Willowbridge Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Willowbridge for trading) was as follows:

December 31, 2014


						Twelve Months Ended December 31, 2014
Market Sector	Value at Risk		% of Total Capitalization			High Value at Risk		Low Value at Risk		Average Value at Risk*

Currencies	$	12,241,960		3.88	%	$	17,429,568	$	12,311	$	3,182,580
Energy		3,022,878		0.96	%		3,022,878		59,187		876,114
Interest Rates U.S.		4,491,327		1.42	%		10,074,313		537,550		3,058,860

Total	$	19,756,165		6.26	%

*	Annual average of month-end Value at Risk.

As of September 30, 2015, Aspect Master’s total capitalization was $62,370,079. The Partnership owned approximately 54.3% of Aspect Master. As of September 30, 2015, Aspect Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Aspect for trading) was as follows:


September 30, 2015
						Three Months Ended September 30, 2015
Market Sector	Value at Risk		% of Total Capitalization			High Value at Risk		Low Value at Risk		Average Value at Risk*
Currencies	$	2,753,010		4.42	%	$	4,226,097	$	1,388,429	$	2,744,697
Energy		881,650		1.41	%		1,698,510		660,660		1,139,626
Grains		336,297		0.54	%		384,202		171,893		300,508
Indices		563,703		0.90	%		1,033,416		476,501		686,356
Interest Rates U.S.		506,248		0.81	%		642,125		344,520		555,711
Interest Rates Non-U.S.		1,517,915		2.43	%		1,576,512		805,406		1,398,546
Livestock		65,175		0.11	%		123,057		42,240		59,098
Metals		1,352,288		2.17	%		2,140,747		1,157,264		1,578,796
Softs		348,468		0.56	%		537,929		278,649		390,921

Total	$	8,324,754		13.35	%

*	Average of month-end Values at Risk.

As of December 31, 2014, Aspect Master’s total capitalization was $78,370,668. The Partnership owned approximately 57.4% of Aspect Master. As of December 31, 2014, Aspect Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Aspect for trading) was as follows:


December 31, 2014
						Twelve Months Ended December 31, 2014
Market Sector	Value at Risk		% of Total Capitalization			High Value at Risk		Low Value at Risk		Average Value at Risk*
Currencies	$	5,363,857		6.84	%	$	8,988,668	$	4,216,734	$	6,042,682
Energy		1,391,555		1.78	%		2,217,050		350,285		1,038,970
Grains		177,860		0.23	%		1,084,329		177,860		478,736
Indices		1,694,021		2.16	%		3,786,974		433,618		2,147,069
Interest Rates U.S.		278,316		0.35	%		802,798		81,696		376,114
Interest Rates Non-U.S.		2,657,992		3.39	%		3,729,772		757,202		2,139,887
Livestock		115,830		0.15	%		217,350		29,040		109,643
Metals		641,723		0.82	%		1,569,663		534,577		901,895
Softs		453,010		0.58	%		478,791		169,885		351,314

Total	$	12,774,164		16.30	%

*	Annual average of month-end Value at Risk.

As of September 30, 2015, Graham Master’s total capitalization was $53,839,494. The Partnership owned approximately 72.3% of Graham Master. As of September 30, 2015, Graham Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Graham for trading) was as follows:


September 30, 2015
						Three Months Ended September 30, 2015
Market Sector	Value at Risk		% of Total Capitalization			High Value at Risk		Low Value at Risk		Average Value at Risk*
Currencies	$	3,491,295		6.48	%	$	4,306,895	$	1,890,410	$	2,803,324
Energy		688,050		1.28	%		837,100		251,269		672,245
Grains		582,560		1.08	%		583,000		132,024		378,165
Interest Rates U.S.		740,465		1.38	%		978,753		244,465		652,428
Interest Rates Non-U.S.		1,358,053		2.52	%		1,372,836		500,440		939,330
Metals		1,339,846		2.49	%		1,525,931		881,435		1,237,990
Softs		396,679		0.74	%		435,002		278,309		381,998
Indices		819,324		1.52	%		1,985,112		819,324		1,335,348

Total	$	9,416,272		17.49	%

*	Average of month-end Values at Risk.

As of December 31, 2014, Graham Master’s total capitalization was $48,491,666. The Partnership owned approximately 73.5% of Graham Master. As of December 31, 2014, Graham Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Graham for trading) was as follows:


December 31, 2014
						Twelve Months Ended December 31, 2014
Market Sector	Value at Risk		% of Total Capitalization			High Value at Risk		Low Value at Risk		Average Value at Risk*
Currencies	$	3,524,892		7.27	%	$	7,408,178	$	160,727	$	4,099,735
Energy		994,978		2.05	%		1,183,518		161,238		757,584
Grains		230,806		0.48	%		710,585		226,314		447,027
Indices		3,197,084		6.59	%		4,267,882		1,802,855		3,229,694
Interest Rates U.S.		684,915		1.41	%		922,384		375,684		646,928
Interest Rates Non-U.S.		2,292,571		4.73	%		2,318,863		695,485		1,720,207
Metals		658,941		1.36	%		2,154,978		360,017		1,169,173
Softs		333,883		0.69	%		584,007		137,321		266,647

Total	$	11,918,070		24.58	%

*	Annual average of month-end Value at Risk.

As of September 30, 2015, Altis Master’s total capitalization was $40,413,016. The Partnership owned approximately 61.6% of Altis Master. As of September 30, 2015, Altis Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Altis for trading) was as follows:


September 30, 2015
						Three Months Ended September 30, 2015
Market Sector	Value at Risk		% of Total Capitalization			High Value at Risk		Low Value at Risk		Average Value at Risk*
Currencies	$	2,685,889		6.65	%	$	2,876,402	$	2,095,691	$	2,579,500
Energy		807,776		2.00	%		807,776		317,820		644,089
Grains		619,112		1.53	%		1,584,736		376,689		541,629
Indices		1,290,899		3.19	%		2,594,991		1,219,244		1,854,718
Interest Rates U.S.		1,032,027		2.55	%		1,118,118		262,214		885,425
Interest Rates Non-U.S.		880,232		2.18	%		881,350		511,998		720,670
Livestock		220,242		0.54	%		666,600		208,032		332,794
Metals		1,367,872		3.39	%		1,872,507		1,020,019		1,468,623
Softs		1,178,047		2.92	%		1,178,047		598,232		967,631

Total	$	10,082,096		24.95	%

*	Average of month-end Values at Risk.

As of December 31, 2014, Altis Master’s total capitalization was $51,362,633. The Partnership owned approximately 67.4% of Altis Master. As of December 31, 2014, Altis Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Altis for trading) was as follow:


December 31, 2014
						Twelve Months Ended December 31, 2014
Market Sector	Value at Risk		% of Total Capitalization			High Value at Risk		Low Value at Risk		Average Value at Risk*
Currencies	$	762,004		1.49	%	$	2,500,488	$	676,543	$	1,240,735
Energy		795,517		1.55	%		2,239,925		225,837		1,246,149
Grains		1,413,845		2.75	%		3,309,847		105,669		1,160,262
Indices		853,780		1.66	%		4,747,619		490,193		2,482,617
Interest Rates U.S.		261,305		0.51	%		1,592,113		33,462		332,514
Interest Rates Non-U.S.		1,659,921		3.23	%		2,147,638		159,067		874,705
Livestock		129,685		0.25	%		636,728		80,245		332,206
Metals		1,952,797		3.80	%		4,399,127		992,841		2,878,470
Softs		762,762		1.49	%		1,336,257		553,594		890,767

Total	$	8,591,616		16.73	%

*	Annual average month-end Value at Risk.

As of September 30, 2015, JEM Master’s total capitalization was $14,891,951. The Partnership owned approximately 63.9% of JEM Master. As of September 30, 2015 JEM Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to JE Moody for trading) was as follows:


September 30, 2015
						Three Months Ended September 30, 2015
Market Sector	Value at Risk		% of Total Capitalization			High Value at Risk		Low Value at Risk		Average Value at Risk*
Energy	$	775,324		5.21	%	$	3,330,448	$	430,716	$	637,336
Grains		207,185		1.39	%		237,490		7,700		154,000
Livestock		166,100		1.12	%		823,845		80,135		372,313
Softs		55,550		0.37	%		122,375		21,780		68,365

Total	$	1,204,159		8.09	%

*	Average of month-end Values at Risk.

As of December 31, 2014, JEM Master’s total capitalization was $29,876,004. The Partnership owned approximately 70.6% of JEM Master. As of December 31, 2014, JEM Master’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to JE Moody for trading) was as follows:


December 31, 2014
						Twelve Months Ended December 31, 2014
Market Sector	Value at Risk		% of Total Capitalization			High Value at Risk		Low Value at Risk		Average Value at Risk*
Energy	$	1,038,399		3.48	%	$	4,200,379	$	638,660	$	1,707,162
Grains		67,100		0.22	%		631,126		6,008		120,137
Livestock		821,645		2.75	%		1,089,315		24,750		336,630
Softs		119,955		0.40	%		267,465		4,290		65,936

Total	$	2,047,099		6.85	%

*	Annual average of month-end Value at Risk.

As of September 30, 2015 Boronia I, LLC’s total capitalization was $94,546,791. The Partnership owned approximately 51.9% of Boronia I, LLC. As of September 30, 2015 Boronia I, LLC’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Boronia for trading) was as follows:


September 30, 2015
						Three Months Ended September 30, 2015
Market Sector	Value at Risk		% of Total Capitalization			High Value at Risk		Low Value at Risk		Average Value at Risk*
Currencies	$	4,425,277		4.68	%	$	9,670,214	$	2,673,839	$	5,167,711
Interest Rates		3,822,929		4.04	%		6,694,425		1,793,941		3,497,622
Equity		2,512,668		2.66	%		7,040,494		1,217,103		3,005,205
Commodity		5,275,929		5.58	%		7,086,844		2,831,084		4,862,845

Total	$	16,036,803		16.96	%

*	Average of month-end Values at Risk.

As of December 31, 2014, Boronia I, LLC’s total capitalization was $104,262,934. The Partnership owned approximately 50.5% of Boronia I, LLC. As of December 31, 2014, Boronia I, LLC’s Value at Risk for its assets (including the portion of the Partnership’s assets allocated to Boronia for trading) was as follows:


December 31, 2014
						Twelve Months Ended December 31, 2014
Market Sector	Value at Risk		% of Total Capitalization			High Value at Risk		Low Value at Risk		Average Value at Risk*
Currencies	$	4,957,331		4.75	%	$	11,301,501	$	984,987	$	4,077,565
Interest Rates		2,965,947		2.84	%		5,475,674		647,220		2,547,225
Equity		2,889,921		2.77	%		9,013,937		712,546		3,468,454
Commodity		5,125,195		4.92	%		6,835,307		1,782,819		3,476,070

Total	$	15,938,394		15.28	%

*	Annual average of month-end Value at Risk.

Item 4.

Controls and Procedures.

The Partnership’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Partnership on the reports that it files or submits under the Securities Exchange Act of 1934 (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods expected in the SEC’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by the Partnership in the reports it files is accumulated and communicated to the General Partner, including the President and Chief Financial Officer (“CFO”) of the General Partner, to allow for timely decisions regarding required disclosure and appropriate SEC filings.

The General Partner is responsible for ensuring that there is an adequate and effective process for establishing, maintaining and evaluating disclosure controls and procedures for the Partnership’s external disclosures.

The General Partner’s President and CFO have evaluated the effectiveness 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 September 30, 2015 and, based on that evaluation, the General Partner’s President and CFO have concluded that, at that date, the Partnership’s disclosure controls and procedures were effective.

The Partnership’s internal control over financial reporting is a process under the supervision of the General Partner’s President and CFO to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. These controls include policies and procedures that:

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pertain to the maintenance of records, that in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Partnership;

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provide reasonable assurance that (i) transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and (ii) the Partnership’s receipts are handled and expenditures are made only pursuant to authorizations of the General Partner; and

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provide reasonable assurance regarding prevention or timely detection and correction of unauthorized acquisition, use or disposition of the Partnership’s assets that could have a material effect on the financial statements.

There were no changes in the Partnership’s internal control over financial reporting process during the fiscal quarter ended September 30, 2015 that materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting other than the engagement of an Administrator to provide the services described in Note 1 of Item 1 of this Part under the supervision of the General Partner.

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 Reports on Form 10-Q for the quarters ended March 31, 2015 and June 30, 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 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, please refer to the “Legal Proceedings” section of Morgan Stanley’s SEC 10-K filings for 2014, 2013, 2012, 2011 and 2010.

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

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

Regulatory and Governmental Matters.

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, styled Commonwealth 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.

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 (the “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 of 1933, as amended, 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 Municipalities Continuing Disclosure Cooperation 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.

On August 6, 2015, the Company consented to and became the subject of an order by the CFTC to resolve allegations that the Company violated CFTC Regulation 22.9(a) by failing to hold sufficient US Dollars in cleared swap segregated accounts in the United States to meet all US Dollar obligations to cleared swaps customers. Specifically, the CFTC found that while the Company at all times held sufficient funds in segregation to cover its obligations to its customers, on certain days during 2013 and 2014, it held currencies, such as euros, instead of US dollars, to meet its US dollar obligations. In addition, the CFTC found that the Company violated Regulation 166.3 by failing to have in place adequate procedures to ensure that it complied with Regulation 22.9(a). Without admitting or denying the findings or conclusions and without adjudication of any issue of law or fact, the Company accepted and consented to the entry of findings, the imposition of a cease and desist order, a civil monetary penalty of $300,000, and undertakings related to public statements, cooperation, and payment of the monetary penalty.

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, styled Federal 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 September 25, 2015, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $48 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 $48 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 styled Federal Home Loan Bank of San Francisco v. Credit Suisse Securities (USA) LLC, et al., and Federal Home Loan Bank of San Francisco v. Deutsche Bank Securities Inc. et al., respectively. Amended complaints filed on June 10, 2010 allege that defendants made untrue statements and material omissions in connection with the sale to plaintiff of a number of mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The amount of certificates allegedly sold to plaintiff by 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 the Federal Home Loan Bank of San Francisco v. Credit Suisse Securities (USA) LLC, et al. action. On February 18, 2015, the court entered an order setting a number of claims for trial throughout 2016. Claims against the Company have not yet been set for trial. At September 25, 2015, the current unpaid balance of the mortgage pass-through certificates at issue in these cases was approximately $61 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 $61 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 July 15, 2010, China Development Industrial Bank (“CDIB”) filed a complaint against the Company, styled China 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, styled Federal Home Loan Bank of Chicago v. Bank of America Funding Corporation et al. A corrected amended complaint was filed on April 8, 2011. The corrected amended complaint alleges that defendants made untrue statements and material omissions in the sale to plaintiff of a number of mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans and asserts claims under Illinois law. The total amount of certificates allegedly sold to plaintiff by 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 September 25, 2015, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $52 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 $52 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, styled The Prudential Insurance Company of America, et al. v. Morgan Stanley, et al. On October 16, 2012, plaintiffs filed an amended complaint. The amended complaint alleges that defendants made untrue statements and material omissions in connection with the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by 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 Racketeer Influenced and Corrupt Organizations Act, 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 September 25, 2015, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $581 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 $581 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 styled Federal Home Loan Bank of Boston v. Ally Financial, Inc. F/K/A GMAC LLC et al. An amended complaint was filed on June 29, 2012 and alleges that defendants made untrue statements and material omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly issued by 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 September 25, 2015, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $56 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 $56 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 in Deutsche 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 September 25, 2015, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $277 million, and the certificates had incurred actual losses of approximately $81 million. Based on currently available information, the Company believes it could incur a loss in this action up to the difference between the $277 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 May 17, 2013, the plaintiff in IKB International S.A. in Liquidation, et al. v. Morgan Stanley, et al. filed a complaint against the Company and certain affiliates in the Supreme Court of NY. 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 $132 million. The complaint alleges causes of action against the Company for common law fraud, fraudulent concealment, aiding and abetting fraud, and negligent misrepresentation, and seeks, among other things, compensatory and punitive damages. On October 29, 2014, the court granted in part and denied in part the Company’s motion to dismiss. All claims regarding four certificates were dismissed. After these dismissals, the remaining amount of certificates allegedly issued by the Company or sold to plaintiff by the Company was approximately $116 million. On August 26, 2015, the Company appealed from the portion of the Court’s decision denying the Company’s motion to dismiss. At September 25, 2015, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $29 million, and the certificates had incurred actual losses of $58 million. Based on currently available information, the Company believes it could incur a loss in this action up to the difference between the $29 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 September 23, 2013, the plaintiff in National 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 (“SDNY”). The complaint alleges that defendants made untrue statements of material fact or omitted to state material facts in the sale to the plaintiff of certain mortgage pass-through certificates issued by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by 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, as amended, 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, as amended 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 September 25, 2015, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $194 million, and the certificates had incurred actual losses of $31 million. Based on currently available information, the Company believes it could incur a loss in this action up to the difference between the $194 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 styled Abu Dhabi Commercial Bank, et al. v. Morgan Stanley & Co. Inc., et al. The complaint alleged, among other things, that the ratings assigned to the securities issued by the Cheyne 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 styled Cambridge Place Investment Management Inc. v. Morgan Stanley & Co., Inc., et al. The complaints asserted claims on behalf of certain clients of plaintiff’s affiliates and allege that defendants made untrue statements and material omissions in the sale of a number of mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly issued by 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 styled Ge 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, styled Allstate Insurance Company, et al. v. Morgan Stanley, et al. An amended complaint was filed on September 9, 2011, and alleges that the defendants made untrue statements and material omissions in the sale to the plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly issued and/or sold to the plaintiffs by 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, styled Western and Southern Life Insurance Company, et al. v. Morgan Stanley Mortgage Capital Inc., et al. An amended complaint was filed on April 2, 2012 and alleges that defendants made untrue statements and material omissions in the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The amount of the certificates allegedly sold to plaintiffs by 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, 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, styled Federal 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.

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, styled Metropolitan Life Insurance Company, et al. v. Morgan Stanley, et al. An amended complaint was filed on June 29, 2012, and alleges that the defendants made untrue statements and material omissions in the sale to the plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten, and/or sold by 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, 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 styled Federal Deposit Insurance Corporation as Receiver for Franklin Bank, S.S.B v. Morgan Stanley & Company LLC F/K/A Morgan Stanley & Co. Inc. and alleged that 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, styled Bank Hapoalim B.M. v. Morgan Stanley et al. The complaint alleges that defendants made material misrepresentations and omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Company to plaintiff was approximately $141 million. On July 28, 2015, the parties reached an agreement to settle the litigation, and on August 12, 2015, the plaintiff filed a stipulation of discontinuance with prejudice.

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.

Item lA.

Risk Factors.

There have been no material changes to the risk factors set forth under Part I, Item lA “Risk Factors” in the Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014 and under Part II, Item lA “Risk Factors” in the Partnership’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2015 and June 30, 2015.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

The public offering of Redeemable Units terminated on November 30, 2008.

For the three months ended September 30, 2015, there were no additional subscriptions. The Redeemable Units were issued in reliance upon applicable exemptions from registration under Section 4(a)(2) of the Securities Act of 1933, as amended, and Section 506 of Regulation D promulgated thereunder. The Redeemable Units were purchased by accredited investors as described in Regulation D. In determining the applicability of the exemption, the General Partner relied on the fact that the Redeemable Units were purchased by accredited investors in a private offering.

Proceeds of net offering were used for the trading of commodity interests including futures contracts, options and forward contracts.

The following chart sets forth the purchases of Redeemable Units by the Partnership.


Period	(a) Total Number of Redeemable Units Purchased*		(b) Average Price Paid per Redeemable Unit**		(c) Total Number of Shares (or Redeemable Units) Purchased as Part of Publicly Announced Plans or Programs	(f) Maximum Number (or Approximate Dollar Value) of Shares (or Redeemable Units) that May yet be Purchased Under the Plans or Programs
July 1, 2015 - July 31, 2015		3,795.2850	$	973.03	N/A	N/A
August 1, 2015 - August 31, 2015		2,009.3810	$	968.12	N/A	N/A
September 1, 2015 -
September 30, 2015		3,629.2150	$	977.87	N/A	N/A
		9,433.8810	$	973.85

Generally, limited partners are permitted to redeem their Redeemable Units as of the end of each month on three business days’ notice to the General Partner. Under certain circumstances, the General Partner can compel redemption, although to date the General Partner has not exercised this right. Purchases of Redeemable Units by the Partnership reflected in the chart above were made in the ordinary course of the Partnership’s business in connection with effecting redemptions for limited partners.

**	Redemptions of Redeemable Units are effected as of the end of each month at the net asset value per Redeemable Unit as of that day. No fee will be charged for redemptions.

Item 3.

Defaults Upon Senior Securities - None.

Item 4.

Mine Safety Disclosures - Not Applicable.

Item 5.

Other Information - None.

Item 6. Exhibits


3.1		Certificate of Limited Partnership of the Partnership as filed in the office of the Secretary of State of the State of New York (filed as Exhibit 3.2 to the Registration Statement on Form S-1 filed on December 20, 2002 and incorporated herein by reference).

(a)		Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated May 21, 2003 (filed as Exhibit 99.2 to the Current Report on Form 8-K filed on November 3, 2009 and incorporated herein by reference).

(b)		Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated September 21, 2005 (filed as Exhibit 99.3 to the Current Report on Form 8-K filed on November 3, 2009 and incorporated herein by reference).

(c)		Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated September 19, 2008 (filed as Exhibit 99.4 to the Current Report on Form 8-K filed on November 3, 2009 and incorporated herein by reference).

(d)		Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated September 28, 2009 (filed as Exhibit 99.1 to the Current Report on Form 8-K filed on September 30, 2009 and incorporated herein by reference).

(e)		Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated June 29, 2010 (filed as Exhibit 3.1(e) to the Current Report on Form 8-K filed on July 2, 2010 and incorporated herein by reference).

(f)		Certificate of Amendment of the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated September 2, 2011 (filed as Exhibit 3.1 to the Current Report on Form 8-K filed on September 7, 2011 and incorporated herein by reference).

(g)		Certificate of Amendment to the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York dated August 7, 2013 (filed as Exhibit 3.1(g) to the Quarterly Report on Form 10-Q filed on August 14, 2013 and incorporated herein by reference).

3.2		Limited Partnership Agreement (filed as Exhibit A to the Post-Effective Amendment No. 5 to the Current Report on Registration on Form S-1 filed on April 22, 2008 and incorporated herein by reference).

(a)		Amendment to the Limited Partnership Agreement, dated May 31, 2009 (filed as Exhibit 99.1 to the Current Report on Form 8-K filed on November 3, 2009 and incorporated herein by reference).

(b)		Amendment No. 2 to the Limited Partnership Agreement dated as of August 8, 2014 and effective October 1, 2014 (filed as Exhibit 3.2(b) to the Quarterly Report on Form 10-Q filed August 13, 2014 and incorporated herein by reference)

10.1		Amended and Restated Customer Agreement between the Partnership and Salomon Smith Barney Inc. (filed as Exhibit 10.1 to the Pre-Effective Amendment No. 2 to the Registration Statement on Form S-1 filed on March 18, 2003 and incorporated herein by reference).

(a)		Commodity Futures Customer Agreement between the Partnership and MS&Co., effective September 24, 2013 (filed as exhibit 10.1(b) to the Quarterly Report on Form 10-Q filed on November 14, 2013 and incorporated herein by reference).

(b)		U.S. Treasury Securities Purchase Authorization Agreement, between the Partnership and MS&Co., effective June 1, 2015 (filed as Exhibit 10.1 to the Current Report on Form 8-K filed on November 4, 2015 and incorporated herein by reference).

10.2		Escrow Agreement among the Partnership, Morgan Stanley Smith Barney LLC and The Bank of New York (filed as Exhibit 10.2 to the Annual Report on the Form 10-K filed on March 27, 2013 and incorporated herein by reference).

(a)		Fifth amendment to the Escrow Agreement among The Bank of New York, the General Partner and Morgan Stanley Smith Barney LLC (filed as Exhibit 10.2(a) to the Annual Report on Form 10-K filed on March 27, 2013 and incorporated herein by reference).

10.3		Management Agreement among the Partnership, the General Partner and Graham (filed as Exhibit 10.5 to the Registration Statement on Form S-1 filed on December 20, 2002 and incorporated herein by reference).

(a)		Letter from the General Partner extending Management Agreement with Graham from June 30, 2014 through September 30, 2015 (filed as Exhibit 10.3(b) to the Annual Report on Form 10-K filed on March 30, 2015 and incorporated herein by reference).



(b)		Amendment No. 1 to the Management Agreement among the Partnership, the General Partner and Graham, effective April 1, 2014 (filed as Exhibit 10.3(b) to the Quarterly Report on the Form 10-Q filed on May 14, 2014 and incorporated herein by reference).

10.4		Management Agreement among the Partnership, the General Partner and Willowbridge (filed as Exhibit 10.7 to the Registration Statement on Form S-1 filed on December 20, 2002 and incorporated herein by reference).

(a)		Amendment to the Management Agreement, dated January 1, 2013, by and among the Partnership, the General Partner and Willowbridge (filed as Exhibit 10.1 to the Current Report on Form 8-K filed on January 7, 2013).

(b)		Letter from the General Partner extending Management Agreement with Willowbridge from June 30, 2014 through September 30, 2015 (filed as Exhibit 10.4(a) to the Annual Report on Form 10-K filed on March 30, 2015 and incorporated herein by reference).

10.5		Management Agreement among the Partnership, the General Partner and Drury (filed as Exhibit 10.4 to the Pre-Effective Amendment No. 1 to the Registration Statement on Form S-1 filed on February 14, 2003 and incorporated herein by reference).

(a)		Letter from the General Partner extending Management Agreement with Drury from June 30, 2013 through June 30, 2014 (filed as Exhibit 10.5(a) to the Annual Report on Form 10-K filed on March 31, 2014 and incorporated herein by reference).

10.8		Management Agreement among the Partnership, the General Partner and Aspect (filed as Exhibit 10.4 to the Annual Report on Form 10-K filed on March 16, 2005 and incorporated herein by reference).

(a)		Letter from the General Partner extending Management Agreement with Aspect from June 30, 2014 through September 30, 2015 (filed as Exhibit 10.8(a) to the Annual Report on Form 10-K filed on March 31, 2014 and incorporated herein by reference).

10.9		Management Agreement among the Partnership, the General Partner and Altis (filed as Exhibit 10.13 to the Current Report Form 8-K filed on May 3, 2011 and incorporated herein by reference).

(a)		Letter from the General Partner extending Management Agreement with Altis from June 30, 2014 through September 30, 2015 (filed as Exhibit 10.9(a) to the Annual Report on Form 10-K filed on March 31, 2014 and incorporated herein by reference).

(b)		Amendment to the Management Agreement dated August 1, 2015 (filed as Exhibit 10.1 to the Current Report on Form 8-K filed on August 6, 2015 and incorporated herein by reference).

10.10		Management Agreement among the Partnership, the General Partner and Krom River (filed as Exhibit 10.14 to the Current Report Form 8-K filed on May 3, 2011 and incorporated herein by reference).

(a)		Letter from the General Partner extending Management Agreement with Krom River from June 30, 2013 through June 30, 2014 (filed as Exhibit 10.10(a) to the Annual Report on Form 10-K filed on March 31, 2014 and incorporated herein by reference).

(b)		Amendment to the Management Agreement dated October 1, 2013 by and among the Partnership, the General Partner and Krom River (filed as Exhibit 10.1 to the Current Report on Form 8-K filed on October 7, 2013 and incorporated herein by reference).

10.11		Alternative Investment Selling Agent Agreement between the Partnership, the General Partner and Morgan Stanley Wealth Management effective October 1, 2013 (filed as Exhibit 10.11(b) to the Quarterly Report on Form 10-Q filed on November 13, 2013 and incorporated herein by reference).

(a)		Letter from the General Partner amending the Alternate Investment Selling Agent Agreement between the Partnership, the General Partner and Morgan Stanley Wealth Management, effective April 1, 2014 (filed as Exhibit 10.11(b) to the Quarterly Report on Form 10-Q filed on May 14, 2014 and incorporated herein by reference).

(b)		Letter from the General Partner amending Alternative Investment Selling Agent Agreement between the Partnership, the General Partner and Morgan Stanley Wealth Management dated as of August 8, 2014 and effective October 1, 2014 (filed as Exhibit 10.11(c) to the Quarterly Report on Form 10-Q filed August 13, 2014 and incorporated herein by reference).


10.12		Form of Subscription Agreement (filed as Exhibit 10.12 to the Quarterly Report on Form 10-Q filed on November 14, 2012 and incorporated herein by reference).

10.13		Management Agreement among the Partnership, the General Partner, and JE Moody (filed as Exhibit 10.1 to the Current Report on Form 8-K filed on August 7, 2013 and incorporated herein reference).

10.14		Amended and Restated Master Services Agreement by and among the Partnership, the General Partner and SS&C Technologies, Inc. (filed as Exhibit 10.2 to the Current Report on Form 8-K filed on August 6, 2015 and incorporated herein by reference).

31.1 — Rule 13a-14(a)/15d-14(a) Certification (Certification of President and Director) (filed herewith)

31.2 — Rule 13a-14(a)/15d-14(a) Certification (Certification of Chief Financial Officer) (filed herewith)

32.1 — Section 1350 Certification (Certification of President and Director) (filed herewith)

32.2 — Section 1350 Certification (Certification of Chief Financial Officer) (filed herewith)

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 Linkbase Document.

101. PRE XBRL Taxonomy Extension Presentation Linkbase Document.

101. DEF XBRL Taxonomy Extension Definition Linkbase Document.

SIGNATURES

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.


TACTICAL DIVERSIFIED FUTURES FUND L.P.

By:		Ceres Managed Futures LLC (General Partner)

By:		/s/ Patrick T. Egan
		Patrick T. Egan
		President and Director

Date:		November 12, 2015

By:		/s/ Steven Ross
		Steven Ross
		Chief Financial Officer
		(Principal Accounting Officer)

Date:		November 12, 2015

CERES TACTICAL SYSTEMATIC L.P. - FORM 10-Q - November 12, 2015

Attached files

CERES TACTICAL SYSTEMATIC L.P. Reports