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COMMODITY ADVISORS FUND L.P. - 10-K - Management's Discussion and Analysis of Financial Condition and Results of Operations.

Overview

The current objective of the Partnership is to achieve capital appreciation through speculative trading, directly and indirectly, in

U.S.
and international markets for currencies, interest rates, stock indices, agricultural and energy products and precious and base metals. The Partnership may employ futures, options on futures and forward contracts in those markets. The Partnership may also engage in spot, swap and other derivative transactions with the approval of the General Partner.

The General Partner manages all business of the Partnership and the Funds. The General Partner has delegated its responsibility for the investment of the Partnership's assets to the Advisors and may allocate the Partnership's assets to additional advisors. The Partnership has invested these assets in the Funds. The General Partner engages a team of approximately 30 professionals whose primary emphasis is on attempting to maintain quality control among the advisors to the funds operated or managed by the General Partner. A full-time staff of due diligence professionals use proprietary technology and on-site evaluations to monitor new and existing futures money managers. The accounting and operations staff provides processing of subscriptions and redemptions and reporting to limited partners and regulatory authorities. The General Partner also includes staff involved in marketing and sales support. In selecting the "established" advisors for the Partnership, the General Partner considered, among other things, the Advisors' past performance, trading style, volatility of markets traded and fee requirements. In selecting "emerging" advisors for the Partnership the General Partner conducts proprietary research and considers the background of the advisors' principals, as well as the advisors' trading styles, strategies and markets traded, expected volatility, trading results (to the extent available) and fee requirements. The General Partner may consider other factors in its sole discretion, including, but not limited to, (i) the quality of the advisor's risk control techniques, (ii) the quality of the advisor's research techniques and (iii) the advisor's company infrastructure and plan for development. Such information may be limited due to their "emerging" nature. The General Partner may modify or terminate the allocation of assets to an Advisor at any time and may allocate assets to additional advisors at any time.



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Responsibilities of the General Partner include:


  •   due diligence examinations of the Advisors;




  •   selection, appointment and termination of the Advisors;




  •   negotiation of the Management Agreements; and




  •   monitoring the activity of the Advisors.

In addition, the General Partner will prepare, or will assist the Administrator in preparing the books and records and will provide or will assist the Administrator in providing, the administrative and compliance services that are required by law or regulation, from time to time, in connection with the operation of the Partnership/Funds.

While the Partnership and the Funds have the right to seek lower commission rates from other commodity brokers at any time, the General Partner believes that the customer agreements and other arrangements with the commodity broker are fair, reasonable, and competitive.

For the year ended December 31, 2015, the programs traded by the major commodity trading advisors on behalf of the Partnership were: Aventis - Aventis Diversified Commodity Strategy and JE Moody - JEM Commodity Relative Value Program. The General Partner may modify or terminate the allocation of assets to an Advisor at any time and may allocate assets to additional advisors at any time. As of December 31, 2015, and as of September 30, 2015, the Partnership's assets were allocated among the Advisors in the following approximate percentages:


               Advisor       December 31, 2015           September 30, 2015
               Aventis         7,602,612       64 %         9,245,966       64 %
               JE Moody        4,323,517       36 %         5,168,768       36 %


Aventis Asset Management, LLC

Aventis will trade the Partnership's assets in accordance with its Aventis Diversified Commodity Strategy (formerly known as the Barbarian Program, and before that, the Misfit Barbarian Program), a proprietary and discretionary trading program developed and refined by Aventis, which is the synthesis of disparate fundamental views and technical indicators overlaid with strict risk management policies on a position, sector and portfolio basis. Aventis has traded its Aventis Diversified Commodity Strategy for client accounts since September 2006.

The Aventis Diversified Commodity Strategy has the following characteristics:


     •   Ensemble of Three Sub-Programs: The Aventis Diversified Commodity Strategy
         is based on an ensemble of three discretionary sub-programs: spreads,
         directional, and short-term trading. This type of trading is based
         primarily on the fundamentals of the market (i.e., changes in supply or
         demand of a commodity). It will also include supply and demand of the pit
         (i.e., discovery of over bought and over sold conditions).




     •   Spread Trading: Approximately 60% of trading activity will be based on
         calendar, intra-market and intermarket spreads. Intra-market spreads are
         where one is simultaneously long and short different delivery months of
         the same contract (i.e., long April Live Cattle versus short June Live
         Cattle). Intermarket spreads are where one is long one contract and
         simultaneously short a completely different contract (i.e., long December
         Natural Gas and short December Crude Oil).




     •   Directional Trading: Approximately 35% of the strategy is directional in
         nature utilizing outright and spread positions.




     •   Short-Term Trading: Approximately 5% of the strategy is involved in
         short-term trading.




     •   Markets Followed: The Aventis Diversified Commodity Strategy trades on
         behalf of the Partnership in the following markets, among others: grains,
         currencies, energies, softs, livestock and metals.




     •   Risk Management: Effective risk management is also a crucial aspect of the
         program. Account size, expectation, volatility of markets traded and the
         nature of other positions taken are all factors in deciding whether to
         take a position and determining the amount of equity committed to that
         position.




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Please note that the percentage of assets allocated to the three discretionary sub-programs (spreads, directional and short-term trading) will be made pursuant to Aventis's sole discretion and not in order to maintain any constant percentage allocation among the different sub-programs. As a result, the amount of assets allocated to each sub-program - both on a dollar amount and percentage basis - will vary greatly over the life of the Partnership. Trading decisions may require the exercise of judgment by Aventis. Therefore, successful trading may depend on Aventis' trading ability, knowledge and judgment. Aventis will exercise its judgment and discretion in interpreting the data generated by the Aventis Diversified Commodity Strategy, including selecting the markets which will be followed and actively traded. In addition, Aventis will determine the method by which orders are placed, the types of orders that are to be placed, the overall leverage for the portfolio, and, when applicable, the time at which orders are placed with, and executed by, a broker.

The trading program to be followed by Aventis does not assure successful trading. Investment decisions made in accordance with the Aventis Diversified Commodity Strategy will be based on an assessment of available market information. However, because of the large quantity of information at hand, the number of available facts that may be overlooked and the variables that may shift, any investment decision must, in the final analysis, be based on the judgment of Aventis.

The decision by Aventis not to trade certain markets or not to make certain trades may result at times in missing price moves and hence profits of great magnitude, which other trading advisors who are willing to trade these markets may be able to capture. Aventis's approach is dependent in part on the existence of certain technical or fundamental indicators. There have been periods in the past when there were no such market indicators, and those periods may recur. Aventis believes that the development of a trading strategy is a continual process. As a result of further analysis and research, changes have been made from time to time in the specific manner in which the Aventis Diversified Commodity Strategy evaluates price movements in various markets, and it is likely that similar revisions will be made in the future. As a result of such modifications, the program that may be used by Aventis in the future will differ from that used by Aventis in the past and might differ from that presently being used.

The Aventis Diversified Commodity Strategy is a proprietary and confidential program, and the foregoing description is, of necessity, general and is not intended to be exhaustive. Consequently, an investor will not be able to determine the full details of the program or whether the program is being followed. There can be no assurance that any trading strategy of Aventis will produce profitable results or will not result in losses.

J E Moody & Company LLC

The JEM Commodity Relative Value Program is a systematic program that uses quantitative models to detect and exploit price shifts and mispricings between related instruments in the energy, metal and agricultural markets, while employing hedging methods to maintain approximate market or sector neutrality. The strategies do not make un-hedged directional bets. Most trades are implemented using offsetting long and short positions in futures and futures options, thus reducing exposure to sudden changes in market direction. As examples, such offsetting positions may be in different delivery months of the same commodity market (e.g., calendar or butterfly spreads), in different but related markets (e.g., crude oil and unleaded gasoline) or between contracts traded on different exchanges (e.g.,

New York
and
London
copper).

Market coverage for the JEM Commodity Relative Value Program portfolio includes crude oil and petroleum distillates, natural gas, industrial metals, precious metals, grains, livestock, foodstuffs, fibers and potentially other commodities. JE Moody utilizes primarily exchange-traded futures and futures options to implement its relative value trades, although trades may also be made using other instruments, such as commodity swaps or OTC derivatives contracts.

The trading opportunities captured by the JEM Commodity Relative Value Program models are believed to arise due to various factors, including: changes in relative supply and demand of different commodity contracts, the idiosyncratic actions of market participants, external events that may disrupt production (e.g., droughts, hurricanes, labor unrest or geopolitics), and risk premia associated with general uncertainties in future supply or demand. By virtue of their relative value nature, JEM Commodity Relative Value Program trades may be interpreted as providing market liquidity to directional traders who need it, and earning a risk premium by doing so.

Relative value strategies are frequently employed by hedge funds in the equity, fixed income, convertible bond and option markets, but are relatively uncommon in the commodity or managed futures arenas. Over extended time periods, relative value strategies have been observed to produce more consistent returns and higher Sharpe ratios than un-hedged, directional trading strategies. With the high leverage often used, however, some relative value managers have experienced significant losses, particularly when extreme market events have occurred.



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JE Moody attempts to manage the risk of large losses by limiting the overall portfolio leverage and the degree of exposure to any single commodity market or sector. The JEM Commodity Relative Value Program portfolio typically includes about 15 to 25 active relative value trades, with the number of open positions depending on the arbitrage opportunities available. The JEM Commodity Relative Value Program trades have low mutual correlation, cover multiple markets and sectors and thus enable meaningful diversification within the JEM Commodity Relative Value Program portfolio.

When few favorable relative value trading opportunities arise in the commodity markets, or as JE Moody may determine, JE Moody may choose to make relative value trades in the financial futures, options, swap or derivatives markets. At times when many or few trading opportunities are available, JE Moody may increase or reduce the overall JEM Commodity Relative Value Program portfolio exposure.

To hedge offsetting long and short positions, JE Moody may use techniques such as static hedging, dynamic hedging and option overlays. Moreover, hedging may seek to achieve market or sector neutrality via various benchmarks, such as by being "contract neutral," "dollar neutral" or "delta neutral." No hedging strategy is perfect, but each has its costs, risks, advantages and limitations. Even with well-hedged positions, there is usually some residual exposure to directional market movements. JE Moody seeks to balance the advantages of the hedging strategy used in a particular relative value trade versus the costs and risks of implementing the trade. The General Partner and JE Moody have agreed that JE Moody will trade the Partnership's assets allocated to JE Moody at a level that is up to three times the amount of assets allocated.

No assurance can be given that the Advisors' strategies will be successful or that they will generate profits for the Partnership. Specific Fund level performance information is included in Note 6 to the Partnership's financial statements included in "Item 8 Financial Statements and Supplementary Data."

For the period January 1, 2015 through December 31, 2015, the average allocation by commodity market sector for each of the Funds was as follows:

                              MB Master Fund L.P.



                               Energy        34.7 %
                               Grains        33.6 %
                               Livestock      4.3 %
                               Metals        15.8 %
                               Softs         11.6 %


                              JEM Master Fund L.P.



                               Energy        63.2 %
                               Grains         7.9 %
                               Livestock     22.9 %
                               Metals         1.7 %
                               Softs          4.3 %


(a) Liquidity.

The Partnership does not engage in sales of goods or services. Its only assets are its investment in the Funds and cash. The Funds' assets consist only of (a) expense reimbursement (MB Master only) and (b) equity in trading account, consisting of cash and cash margin, net unrealized appreciation on open futures contracts, net unrealized appreciation on forward contracts,

U.S.
Treasury bills and 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. While substantial losses could lead to a material decrease in liquidity, no such illiquidity occurred during the year ended December 31, 2015.


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To minimize the risk relating to low margin deposits, the Funds follow certain trading policies, including:


    (i) The Funds invest their assets only in commodity interests that the
        respective Advisor believes are traded in sufficient volume to permit ease
        of taking and liquidating positions. Sufficient volume, in this context,
        refers to a level of liquidity that the respective Advisor believes will
        permit it to enter and exit trades without noticeably moving the market.




    (ii) An Advisor will not initiate additional positions in any commodity
         interest if these positions would result in aggregate positions requiring
         a margin of more than 66 2/3% of the Funds' net assets allocated to that
         Advisor.




    (iii) The Funds may occasionally accept delivery of a commodity. Unless such
          delivery is disposed of promptly by retendering the warehouse receipt
          representing the delivery to the appropriate clearinghouse, the physical
          commodity position is fully hedged.




    (iv) The Funds do not employ the trading technique commonly known as
         "pyramiding," in which the speculator uses unrealized profits on existing
         positions as margin for the purchases or sale of additional positions in
         the same or related commodities.




    (v) The Funds do not utilize borrowings other than short-term borrowings if
        the Funds take delivery of any cash commodities.




    (vi) The Advisors may, from time to time, employ trading strategies such as
         spreads or straddles on behalf of the Funds. The terms "spread" and
         "straddle" describe commodity futures trading strategies involving the
         simultaneous buying and selling of futures contracts on the same
         commodity but involving different delivery dates or markets.




    (vii) The Funds will not permit the churning of their commodity trading
          accounts. The term "churning" refers to the practice of entering and
          exiting trades with a frequency unwarranted by legitimate efforts to
          profit from the trades, driven by the desire to generate commission
          income.

From January 1, 2015 through December 31, 2015, the Partnership's average margin to equity ratio (i.e., the percentage of assets on deposit required for margin) was approximately 7.2%. The foregoing margin to equity ratio takes into account cash held in the Partnership's name, as well as the allocable value of the positions and cash held on behalf of the Partnership in the name of the Funds.

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 futures, forwards,

U.S.
Treasury bills, swaps and options, whose values are based upon an underlying asset, index, or reference rate, and generally represent future commitments to exchange currencies or cash balances, or to purchase or sell other financial instruments at 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 OTC. Exchange-traded instruments include futures and certain standardized forward, 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. Since May 1, 2011, none of the Funds' contracts have traded OTC, although contracts may be traded OTC in the future.

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

Delaware
law.


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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 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 had credit risk and concentration risk during the reporting period and prior periods included in this report, as MS&Co. and/or CGM or their affiliates were the sole counterparties or brokers 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. and/or CGM, the counterparty was an exchange or clearing organization. The Partnership/Funds continue to be subject to such risks with respect to MS&Co.

The General Partner monitors and attempts to control the risk exposure on a daily basis through financial, credit and risk management monitoring systems and, accordingly, believes that it has effective procedures for evaluating and limiting the credit and market risks to which the Partnership/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. (See also "Item 8. Financial Statements and Supplementary Data." for further information on financial instrument risk included in the notes to the financial statements.)

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

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.

Other than the risks inherent in

U.S.
Treasury bills, money market mutual fund securities, commodity futures and other derivatives, the Partnership knows of no trends, demands, commitments, events or uncertainties which will result in, or which are reasonably likely to result in, the Partnership's liquidity increasing or decreasing in any material way.

(b) Capital Resources.

(i) The Partnership has made no material commitments for capital expenditures.

(ii) The Partnership's capital consists of the capital contributions of the partners as increased or decreased by gains or losses on trading and by expenses, interest income, subscriptions and redemptions of Redeemable Units and distributions of profits, if any. Gains or losses on trading cannot be predicted. Market movements in commodities are dependent upon fundamental and technical factors which the Advisors may or may not be able to identify, such as changing supply and demand relationships, weather, government agricultural, commercial and trade programs and policies, national and international political and economic events and changes in interest rates. Partnership expenses consist of, among other things, ongoing selling agent fees, management fees and General Partner fees. The level of these expenses is dependent upon trading performance and the ability of the Advisors to identify and take advantage of price movements in the commodity markets, in addition to the level of net assets maintained. In addition, the amount of interest income payable by the Partnership's commodity broker is dependent upon interest rates over which neither the Partnership nor the commodity broker has control.



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No forecast can be made as to the level of redemptions in any given period. A limited partner may require the Partnership to redeem some or all of their Redeemable Units at the net asset value per Redeemable Unit as of the end of any month on three business days' notice to the General Partner. There is no fee charged to limited partners in connection with redemptions. Redemptions are generally funded out of the Partnership's cash holdings and/or redemptions from the Funds. For the year ended December 31, 2015, 4,295.8170 Class A Redeemable Units were redeemed totaling $5,416,401, 25.3060 Class Z Redeemable Units were redeemed totaling $24,024 and 48.9960 Class Z General Partner Redeemable Units were redeemed totaling $44,768. For the year ended December 31, 2014, 8,458.6440 Class A Redeemable Units were redeemed totaling $11,253,309, 71.4170 Class Z Redeemable Units were redeemed totaling $63,569 and 112.2640 Class Z General Partner Redeemable Units were redeemed totaling $99,977. For the year ended December 31, 2013, 7,400.1910 Class A Redeemable Units were redeemed totaling $10,500,783 and 1,718.0000 Class Z General Partner Redeemable Units were redeemed totaling $1,600,861.

For the year ended December 31, 2015, there were additional subscriptions of 426.8410 Class A Redeemable Units totaling $565,997. For the year ended December 31, 2014, there were additional subscriptions of 2,791.0570 Class A Redeemable Units totaling $3,723,628. For the year ended December 31, 2013, there were additional subscriptions of 3,932.0890 Class A Redeemable Units totaling $5,592,487.

(c) Results of Operations.

For the year ended December 31, 2015, the net asset value per Redeemable Unit for Class A decreased 7.7% from $1,304.97 to $1,204.03. For the year ended December 31, 2015, the net asset value per Redeemable Unit for Class Z decreased 5.9% from $889.87 to $837.69. For the year ended December 31, 2014, the net asset value per Redeemable Unit for Class A decreased 7.5% from $1,411.10 to $1,304.97. For the year ended December 31, 2014, the net asset value per Redeemable Unit for Class Z decreased 5.6% from $943.14 to $889.87. For the year ended December 31, 2013, the net asset value per Redeemable Unit for Class A decreased 2.9% from $1,452.61 to $1,411.10. For the year ended December 31, 2013, the net asset value per Redeemable Unit for Class Z decreased 0.9% from $951.57 to $943.14.

The Partnership, through its investment in the Funds, experienced a net trading loss before fees and expenses of $211,675 for the year ended December 31, 2015. Losses were primarily attributable to the Funds' trading of grains, livestock, metals and softs, and were partially offset by gains in energy. The net trading gain (or loss) from the Partnership's investment in the Funds is disclosed on page 39 under "Item 8. Financial Statements and Supplementary Data."

The most significant losses were incurred in the metals markets during June, August, and September from long positions in nickel futures as prices moved lower on reports of high global inventories and weakening industrial demand in

China
. Within the livestock sector, losses were recorded during March from short positions in live cattle futures as prices moved higher after industry reports indicated
U.S.
cattle herds shrank during the first quarter. Additional losses were experienced from short positions in lean hog futures during April and long live cattle futures positions during September. Within the grains sector, losses were incurred during April from long positions in soybean and wheat futures as prices moved lower after the Department of Agriculture released a report which indicated
U.S.
grain stockpiles were at their highest levels in 28 years. During October, losses were experienced from long positions in soybean and corn futures as prices weakened following the release of
U.S.
government forecasts which predicted that global grain inventories will reach record levels in 2016. Additional losses in this sector were experienced during September from choppy price action in soybean futures. The Partnership's trading losses during the year were offset by gains achieved within the energy markets during February from long positions in crude oil and its related products as prices rallied as cold weather blanketed much of the
U.S.
and OPEC released a bullish monthly oil-market report. Additional gains during February were recorded from long positions in heating oil futures as prices spiked as severe cold weather in the
U.S.
boosted demand from homes and businesses. During July, gains within the energies were experienced from short positions in crude oil and its related products as prices dropped as investors weighed the prospect of easing restrictions on Iranian oil exports adding supply to an oversaturated world market. Within the soft commodity markets, gains were recorded during September from long positions in sugar futures as prices advanced after adverse weather disrupted the harvest in
Brazil
. Gains in this sector were also experienced during October from long positions in cocoa futures as extreme dry weather in
West Africa
threatened the region's cocoa crops and pushed prices higher.

The Partnership, through its investment in the Funds, experienced a net trading loss before fees and expenses of $682,546 for the year ended December 31, 2014. Losses were primarily attributable to the Funds' trading of energy and softs, and were partially offset by gains in grains, livestock and metals.

The most significant losses were incurred within the energy markets during February from short positions in crude oil futures as prices rose after Energy Information Administration data indicated crude stockpiles declined during the month. Losses in the energy sector were also incurred during June from short positions in Brent crude oil futures as prices rallied on speculation that an escalation of internal fighting in

Iraq
would disrupt oil exports from the
Middle East
. Additional losses were experienced during March from long positions in crude oil and its related products as prices dropped after reports indicated
U.S.
crude oil supplies exceeded previous


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forecasts. Within the soft commodity markets, losses were recorded during September from long positions in cotton futures as prices declined after reports showed cotton inventories in the

U.S.
advanced to 30-year highs. Additional losses during September were experienced from long positions in sugar futures as prices moved lower after bumper crops in
Thailand
and
India
expanded the global supply glut. During October, losses within the soft commodity markets were recorded from long positions in coffee futures as prices retreated as rains brought relief to drought-stricken areas in
Brazil
. The Partnership's losses for the year were partially offset by gains achieved within the grains markets from short positions in soybean futures during June, July, August, and September as favorable weather in the Midwest increased speculation that
U.S.
crop totals would reach near record levels in 2014. Within the livestock markets, gains were achieved during June from long positions in lean hog futures as prices increased on speculation
U.S.
hog herds would remain low. Gains were also recorded during April from long positions in live cattle futures as prices advanced in the second half of the month after government reports indicated
U.S.
cattle herds shrank to their lowest levels in decades. During October, further gains were experienced from short positions in lean hog futures as prices moved lower as
U.S.
pig farms continued to recover from a virus that decimated hog herds earlier in the year. Within the metals complex, gains were recorded during March from short positions in copper futures as prices declined amid concern weak manufacturing data in
China
would limit demand for the industrial metal. Additional gains in the metals sector were achieved during February from long positions in gold futures as increased geo-political turmoil boosted demand and prices.

The Partnership is paid interest on 100% of the average daily equity maintained in cash in the Partnership's (or the Partnership's allocable portion of a Fund's) brokerage account at the monthly average of the 4-week

U.S.
Treasury bill discount rate. Any interest earned on the Partnership's account in excess of the amounts described above, if any, will be retained by MS&Co. and shared with the General Partner. All interest earned on
U.S.
Treasury bills and money market mutual fund securities will be retained by the Funds. Interest income for the three months ended December 31, 2015 increased by $394, as compared to the corresponding period in 2014. The increase in interest income was due to higher
U.S.
Treasury bill rates during the three months ended December 31, 2015, as compared to the corresponding period in 2014. Interest income for the twelve months ended December 31, 2015 decreased by $2,270, as compared to the corresponding period in 2014. The decrease in interest income was due to lower average daily equity during the twelve months ended December 31, 2015, as compared to the corresponding period in 2014. Interest earned by the Partnership will increase the net asset value of the Partnership. The amount of interest income earned by the Partnership depends on the average daily equity in the Partnership's and the Funds' accounts and upon interest rates over which neither the Partnership/Funds nor MS&Co. have control.

Ongoing selling agent fees are calculated as a percentage of the net asset value of each Class of Redeemable Units as of the end of each month and, therefore, are affected by trading performance, subscriptions and redemptions. Accordingly, they must be compared in relation to the fluctuations in monthly net asset values. Ongoing selling agent fees for the three and twelve months ended December 31, 2015 decreased by $24,419 and $98,627, respectively, as compared to the corresponding periods in 2014. The decrease in ongoing selling agent fees is due to lower average net assets per Class during the three and twelve months ended December 31, 2015, as compared to the corresponding periods in 2014.

Management fees are calculated as a percentage of the net asset value of each Class of Redeemable Units allocated to the respective Advisor at the end of the month and, therefore, are affected by trading performance, subscriptions and redemptions. Accordingly, they must be compared in relation to the fluctuations in monthly net asset values. Management fees for the three and twelve months ended December 31, 2015 decreased by $23,008 and $96,615, respectively, as compared to the corresponding periods in 2014. The decrease in management fees is due to lower average net assets per Class during the three and twelve months ended December 31, 2015, as compared to the corresponding periods in 2014.

General Partner fees are paid to the General Partner for administering the business and affairs of the Partnership. These fees are calculated as a percentage of the net asset value for each Class of Redeemable Units as of the end of each month and are affected by trading performance, subscriptions and redemptions. General Partner fees for the three and twelve months ended December 31, 2015 decreased by $12,513 and $51,133, respectively, as compared to the corresponding periods in 2014. The decrease in General Partner fees is due to lower average net assets per Class during the three and twelve months ended December 31, 2015, as compared to the corresponding periods in 2014.

Incentive fees are based on the new trading profits generated by each Advisor as defined in each Advisor's respective Management Agreement. There were no incentive fees earned for the three and twelve months ended December 31, 2015 and 2014.



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The Partnership pays professional fees and other expenses, which generally include legal and accounting expenses related to the offering, filing, reporting and data processing fees. Professional fees for the years ended December 31, 2015 and 2014 were $247,739 and $279,762, respectively.

In the General Partner's opinion, the Advisors continue to employ trading methods and produce results consistent with their expected performance given market conditions and the objectives of the Partnership. The General Partner continues to monitor the Advisors' performance on a daily, weekly, monthly and annual basis to ensure that these objectives are met.

Commodity markets are highly volatile. Broad price fluctuations and rapid inflation increase the risks involved in commodity trading, but also increases the possibility of profit. The profitability of the Partnership depends on the existence of major price trends and the ability of the Advisors to correctly identify those price trends. Price trends are influenced by, among other things, changing supply and demand relationships, weather, governmental, agricultural, commercial and trade programs and policies, national and international political and economic events and changes in interest rates. To the extent that market trends exist and the Advisors are able to identify them, the Partnership expects to increase capital through operations.

In selecting the "established" advisors for the Partnership, the General Partner considered, among other things, the Advisors' past performance, trading style, volatility of markets traded and fee requirements. In selecting "emerging" advisors for the Partnership, the General Partner conducts proprietary research and considers the background of the advisors' principals, as well as the advisors' trading styles, strategies and markets traded, expected volatility, trading results (to the extent available) and fee requirements. The General Partner may consider other factors in its sole discretion, including, but not limited to, (i) the quality of the advisor's risk control techniques, (ii) the quality of the advisor's research techniques and (iii) the advisor's company infrastructure and plan for development. Such information may be limited due to their "emerging" nature. The General Partner may modify or terminate the allocation of assets to an Advisor at any time and may allocate assets to additional advisors at any time.

(d) Off-Balance Sheet Arrangements. None.

(e) Contractual Obligations. None.

(f) Operational Risk.

The Partnership, through its investment in the Funds, is directly exposed to market risk and credit risk, which arise in the normal course of its business activities. Slightly less direct, but of critical importance, are risks pertaining to operational and back office support. This is particularly the case in a rapidly changing and increasingly global environment with increasing transaction volumes and an expansion in the number and complexity of products in the marketplace.

Such risks include:

Operational/Settlement Risk - the risk of financial and opportunity loss and legal liability attributable to operational problems, such as inaccurate pricing of transactions, untimely trade execution, clearance and/or settlement, or the inability to process large volumes of transactions. The Partnership/Funds are subject to increased risks with respect to their trading activities in emerging market instruments, where clearance, settlement and custodial risks are often greater than in more established markets.

Technological Risk - the risk of loss attributable to technological limitations or hardware failure that constrain the Partnership's/Funds' ability to gather, process, and communicate information efficiently and securely, without interruption, to customers, and in the markets where the Partnership/Funds participates. Additionally, the General Partner's computer systems may be vulnerable to unauthorized access, mishandling or misuse, computer viruses or malware, cyber attacks and other events that could have a security impact on such systems. If one or more of such events occur, this potentially could jeopardize a limited partner's personal, confidential, proprietary or other information processed and stored in, and transmitted through, the General Partner's computer systems, and adversely affect the Partnership's/Funds' business, financial condition or results of operations.

Legal/Documentation Risk - the risk of loss attributable to deficiencies in the documentation of transactions (such as trade confirmations) and customer relationships (such as master netting agreements) or errors that result in noncompliance with applicable legal and regulatory requirements.

Financial Control Risk - the risk of loss attributable to limitations in financial systems and controls. Strong financial systems and controls ensure that assets are safeguarded, that transactions are executed in accordance with management's authorization, and that financial information utilized by the General Partner and communicated to external parties, including the Partnership's Redeemable Unit holders, creditors, and regulators, is free of material errors.



                                       25

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(g) Critical Accounting Policies.

Partnership's Investments: The Partnership's investments in the Funds are stated at fair value, which are based on (1) the Partnership's net contribution to each Fund and (2) its allocated share of the undistributed profits and losses, including realized gains/losses and the change in net unrealized gains/losses, of each Fund. Accounting Standards Codification ("ASC") 820, "Fair Value Measurement," as amended, permits, as a practical expedient, the Partnership to measure the fair value of its investments in the Funds on the basis of the net asset value per share (or its equivalent) if the net asset value per share of such investments is calculated in a manner consistent with the measurement principles of ASC Topic 946 "Financial Services- Investment Companies" as of the Partnership's reporting date.

Funds' Investments. All commodity interests of the Funds, including derivative financial instruments and derivative commodity instruments, held by the Funds 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 and are determined using the first-in, firstout method. Unrealized gains or losses on open contracts are included as a component of equity in trading account in the Funds' Statements of Financial Condition. Net realized gains or losses and net change in unrealized gains or losses are reported in the Funds' Statements of Income and Expenses.

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 fair value of exchange-traded futures, option 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 input the spot prices, interest rates and option implied volatilities quoted as of approximately 3:00 P.M. (E.T.) on the last business day of the reporting period.

U.S.
Treasury bills are valued at the last available bid price received from independent pricing services as of the close of the last business day of the reporting period.

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 forward, swap and certain option contracts for which market quotations are not readily available are priced by broker quotes or pricing services that derive fair values for those assets and liabilities from observable inputs (Level 2). As of and for the years ended December 31, 2015 and 2014, 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. During the years ended December 31, 2015 and 2014, there were no transfers of assets or liabilities between Level 1 and Level 2.

Futures Contracts. 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 the 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.

London Metals Exchange Forward Contracts. 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.

Options. The Funds may purchase and write (sell) both exchange-listed and OTC options on commodities or financial instruments. An option is a contract allowing, but not requiring, its holder to buy (call) or sell (put) a specific or standard commodity or financial instrument at a specified price during a specified time period. The option premium is the total price paid or received for the option contract. When the Funds write an option, the premium received is recorded as a liability in the Funds' Statements of Financial Condition and marked-to market daily. When the Funds purchase an option, the premium paid is recorded as an asset in the Funds' Statements of Financial Condition and marked-to-market daily. Net realized gains (losses) and net change in unrealized gains (losses) on option contracts are included in the Funds' Statements of Income and Expenses. The Funds do not isolate the 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 the Funds' Statements of Income and Expenses.

As both a buyer and seller of options, the Funds pay or 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.

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Source: Equities.com News (March 28, 2016 - 8:38 AM EDT)

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