March 28, 2016 - 8:56 AM EDT
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MANAGED FUTURES PREMIER ABINGDON L.P. - 10-K - Management's Discussion and Analysis of Financial Condition and Results of Operations.

Overview

The Partnership, through its investment in the Master, aims to achieve substantial capital appreciation through speculative trading, directly and indirectly, in

U.S.
and international markets for currencies, interest rates, stock indices, softs, agricultural and energy products and precious and base metals. The Partnership, through its investment in the Master, may employ futures, options on futures, forward and swap contracts in those markets.

The General Partner manages all business of the Partnership and the Master. The General Partner has delegated its responsibility for the investment of the Partnership's assets to the Advisor. The Partnership has invested these assets in the Master. 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 uses proprietary technology and on-site evaluations to identify, select and monitor new and existing futures money managers. The accounting and operations staff provide processing of subscriptions and redemptions and reporting to limited partners and regulatory authorities. The General Partner also engages staff involved in marketing and sales support. In selecting the Advisor for the Partnership/Master, the General Partner considered, among other things, past performance, trading style, volatility of markets traded and fee requirements. The General Partner may modify or terminate the allocation of assets to the Advisor at any time.

Responsibilities of the General Partner include:


  •   due diligence examinations of the Advisor;




  •   selection, appointment and termination of the Advisor;




  •   negotiation of the Management Agreement; and




  •   monitoring the activity of the Advisor.

In addition, the General Partner prepares, or assists the Administrator in preparing, the books and records and provides or assists 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/Master.



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While the Partnership and the Master have the right to seek lower commission rates and fees 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.

The Partnership's assets allocated to the Advisor for trading are not invested in commodity interests directly. The Advisor's allocation of the Partnership's assets is currently invested in the Master. The Advisor trades the Master's, and thereby the Partnership's, assets in accordance with its Winton Futures Program, a proprietary, systematic trading system.

The investment objective of the Winton Futures Program is to achieve long-term capital appreciation through compound growth by pursuing diversified investment strategies subject to certain investment constraints. These constraints may be imposed by the Advisor or may be required by regulations or rules.

The key investment constraint of the Winton Futures Program as applied to the Partnership through its investment in the Master is that it does not invest in equities (although it may gain indirect exposure to equity markets via investments in equity index futures). It may invest long and short using leverage in non-equity markets that the Advisor believes are sufficiently liquid, and for which there is sufficient data available. The Winton Futures Program is subject to a long-term gross volatility target of 10%.

The Winton Futures Program currently invests in over 100 futures markets, currency forwards and related instruments.

The Advisor generally expects the holding periods for the Winton Futures Program's portfolio to be long-term with the average holding period across all instruments expected to be 3-8 months.

The Winton Futures Program follows a disciplined investment process that is based on statistical analysis of past data. The initial stage of the process involves collecting, cleaning and organizing large amounts of data. The Winton Futures Program uses a wide variety of data inputs including factors that are intrinsic to markets, such as price, volume and open interest; and those that are external to markets, such as economic statistics, industrial and commodity data and public company financial data. The Advisor conducts statistical research into the data in an attempt to quantify the probability of particular markets rising or falling, conditional on a variety of quantifiable factors. The Advisor's research is used to develop mathematical models that attempt to forecast market returns, the variability or volatility associated with such returns (often described as "risk"), correlation between markets and transaction costs. These forecasts are used in investment strategies that determine what positions should be held to maximize profit within a certain range of risk. As a result of the Advisor's research, the Advisor expects that the investments made in accordance with this process will have an improved chance of being successful, which is expected to lead to profits over the long-term.

The Advisor's investment strategies are operated as an automated, computer-based system. This system is modified over time as the Advisor monitors its operation and undertakes further research. Changes to the system occur as a result of, amongst other things, the discovery of new relationships, changes in market liquidity, the availability of new data or the reinterpretation of existing data.

Most of the Advisor's investment decisions are made strictly in accordance with the output of the system. However, the Advisor may, in exceptional circumstances, (such as the occurrence of events that fall outside the input parameters of the system), make investment decisions based on other factors and take action to override the output of the system to seek to protect the interests of investors. For example, if there is a market crash or if trading is suspended on a market or exchange, the Advisor may attempt to reduce risk by decreasing leverage or liquidating or hedging positions in certain markets.



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The Advisor does not take any responsibility for the accuracy or completeness of the contents of this document, any representations made herein, or the performance of the Partnership/Master. The Advisor disclaims any liability for any direct, indirect, consequential or other losses or damages, including loss of profits incurred by limited partners or by any third party that may arise from any reliance on this document. The Advisor is neither responsible for, nor involved in, the marketing, distribution or sales of shares or interests in the Partnership and is not responsible for compliance with any marketing or promotion laws, rules or regulations; and no third party other than the Advisor is authorized to make any statement about any of the Advisor's products or services in connection with any such marketing, distribution or sales. Past performance by any other fund advised by the Advisor is not indicative of any future performance by the Partnership/Master.

(a) Liquidity.

The Partnership does not engage in sales of goods or services. Its only assets are its investment in the Master and cash. The Master does not engage in sales of goods of services. The Master's only assets are its equity in its trading accounts, consisting of cash and cash margin, net unrealized appreciation on open futures contracts, net unrealized appreciation on open forward contracts and investment in

U.S.
Treasury bills, if applicable. 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 investment in the Master. 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 Master follows certain trading policies, including:

(i) The Master invests its assets only in commodity interests that the 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 Advisor believes will permit it to enter and exit
    trades without noticeably moving the market.



(ii) The Advisor will not initiate additional positions in any commodity if these

     positions would result in aggregate positions requiring a margin of more
     than 66 2/3% of the Master's net assets allocated to the Advisor.



(iii) The Master 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 Master does not employ the trading technique commonly known as

     "pyramiding," in which the speculator uses unrealized profits on existing
     positions as margin for the purchase or sale of additional positions in the
     same or related commodities.



(v) The Master does not utilize borrowings other than short-term borrowings if

    the Master takes delivery of any cash commodities.



(vi) The Advisor may, from time to time, employ trading strategies such as

     spreads or straddles on behalf of the Master. "Spreads" and "straddles"
     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 Master will not permit the churning of its commodity trading account.

      The term "churning" refers to the practice of entering and exiting trades
      with a frequency unwarranted by legitimate efforts to profit from the
      trades, indicating 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 15.3%. 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 Master.

In the normal course of business, the Partnership, through its investment in the Master, is party to financial instruments with off-balance-sheet risk, including derivative financial instruments and derivative commodity instruments. These financial instruments may include futures, forwards, 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, 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 over-the-counter ("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 relating to the underlying financial instrument, 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.

Market risk is the potential for changes in the value of the financial instruments traded by the Master 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 Master is 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 and the Master's 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 and the Master's risk of loss is reduced through the use of legally enforceable master netting agreements with counterparties that permit the Partnership and the Master to offset unrealized gains and losses and other assets and liabilities with such counterparties upon the occurrence of certain events. The Partnership and the Master had credit risk and concentration risk, as MS&Co. and/or CGM or their affiliates were the sole counterparties or brokers with respect to the Partnership's and the Master's assets. Credit risk with respect to exchange-traded instruments was reduced to the extent that, through MS&Co. and/or CGM, the Partnership's and the Master's counterparty was an exchange or clearing organization. The Partnership and the Master continue to be subject to such risks with respect to MS&Co.

The General Partner monitors and attempts to control the Partnership's and the Master's risk exposure on a daily basis through financial, credit and risk management monitoring systems, and accordingly, believes that it has effective procedures for evaluating and limiting the credit and market risks to which the Partnership and the Master 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 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 consequence of the organization of the Partnership as a limited partnership under

New York
law.


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(See also "Item 8. Financial Statements and Supplementary Data" for further information on financial instrument risk included in the notes to financial statements.)

Other than the risks inherent in commodity futures, forwards, options and swaps trading, 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. The Limited Partnership Agreement provides that the General Partner may cause the Partnership to cease trading operations under certain circumstances, including a decrease in net asset value per Redeemable Unit of any Class to less than $400 as of the close of business on any business day. In addition, the General Partner may, in its sole discretion, cause the Partnership to dissolve if the aggregate net assets of the Partnership decline to less than $1,000,000.

(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, 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 Advisor 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, clearing, ongoing selling agent, management and General Partner fees. The level of these expenses is dependent upon trading performance and 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.

No forecast can be made as to the level of redemptions in any given period. A limited partner may require the Partnership to redeem its Redeemable Units at their net asset value as of the last day 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 Master. For the year ended December 31, 2015, 19,628.7880 Redeemable Units were redeemed of Class A totaling $26,736,281. For the year ended December 31, 2014, 43,633.4960 Redeemable Units were redeemed out of Class A totaling $51,494,981, 5,033.7730 Redeemable Units of Class D were redeemed totaling $5,311,637, 144.8280 Redeemable Units of Class Z were redeemed totaling $152,169 and 616.0930 General Partner Redeemable Units of Class Z were redeemed totaling $701,492. For the year ended December 31, 2013, 58,457.0180 Redeemable Units of Class A were redeemed totaling $65,360,235, 185.5080 Redeemable Units of Class Z were redeemed totaling $192,255 and 200.0000 General Partner Redeemable Units of Class Z were redeemed totaling $200,824.

For the year ended December 31, 2015, there were additional subscriptions of 37,257.7740 Redeemable Units of Class A totaling $51,738,630, 3,449.7730 Redeemable Units of Class D totaling $4,720,000, 38.1430 Redeemable Units of Class Z totaling $50,000 and 216.9500 General Partner Redeemable Units of Class Z totaling $300,000. For the year ended December 31, 2014, there were additional subscriptions of 16,861.5740 Redeemable Units of Class A totaling $20,181,812 and 2,444.7210 Redeemable Units of Class D totaling $3,098,520. For the year ended December 31, 2013, there were additional subscriptions of 39,818.8570 Redeemable Units of Class A totaling $43,972,521, subscriptions of 3,030.7590 Redeemable Units of Class D totaling $3,051,148 and subscriptions of 57.0880 Redeemable Units of Class Z totaling $60,623.

(c) Results of Operations.

For the year ended December 31, 2015, the net asset value per Redeemable Unit for Class A decreased 2.1% from $1,379.28 to $1,351.03. For the year ended December 31, 2015, the net asset value per Redeemable Unit for Class D decreased 0.8% from $1,280.58 to $1,270.21. For the year ended December 31, 2015, the net asset value per Redeemable Unit for Class Z decreased 0.1% from $1,290.15 to $1,289.37. For the year ended December 31, 2014, the net asset value per Redeemable Unit for Class A increased 18.9% from $1,159.61 to $1,379.28. For the year ended December 31, 2014, the net asset value per Redeemable Unit for Class D increased 20.9% from $1,059.55 to $1,280.58. For the year ended December 31, 2014, the net asset value per Redeemable Unit for Class Z increased 21.8% from $1,059.49 to $1,290.15. For the year ended December 31, 2013, the net asset value per Redeemable Unit for Class A increased 7.9% from $1,075.06 to $1,159.61. For the year ended December 31, 2013, the net asset value per Redeemable Unit for Class D increased 10.7% from $956.76 to $1,059.55. For the year ended December 31, 2013, the net asset value per Redeemable Unit for Class Z increased 11.6% from $949.54 to $1,059.49.

The Partnership, through its investment in the Master, experienced a net trading gain before fees and expenses of $8,689,147 for the year ended December 31, 2015. Gains were primarily attributable to the Master's trading of energy,

U.S.
and non-
U.S.
interest rates, livestock, metals and softs, and were partially offset by losses in currencies, grains and indices. The net trading gain (or loss)realized from the Partnership's investment in the Master is disclosed on page 34 under "Item 8. Financial Statements and Supplementary Data."


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The most significant losses were incurred within the global stock index markets during August from long positions in

U.S.
, European, and Asian equity index futures as prices fell sharply amid concern a slowdown in Chinese economic growth would adversely affect the global economy. Additional losses in this sector were experienced during June from long positions in European,
U.S.
, and Asian equity index futures as prices declined as concerns over
Greece's
efforts to avoid a default weighed on global financial markets. Within the currency sector, losses were recorded during August from short positions in the euro and Japanese yen versus the
U.S.
dollar as the value of the
U.S.
dollar declined as fears over a hard landing in
China
and its impact on global growth outlook pushed back expectations for a
U.S.
Federal Reserve rate hike at the September FOMC meeting. Additional losses in this sector were recorded during April from short positions in the euro versus the
U.S.
dollar after the relative value of the dollar slumped following the release of lower-than-expected first quarter Gross Domestic Product totals in the
U.S.
Losses in the currency sector were also incurred during December from short positions in the euro and Swiss franc versus the
U.S.
dollar as the relative values of these European currencies reversed higher early in the month after the scale of the European Central Bank's stimulus measures disappointed investors. The Partnership's trading losses for the year were offset by trading gains achieved within the energy markets during November and December from short positions in crude oil and it related products as prices weakened as the OPEC nations added to a growing global supply glut by failing to agree on production cuts. Gains within the energies were also experienced during July and September from short positions in crude oil and its related products as prices dropped as record production in the
U.S.
and
Middle East
boosted global supplies. 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 that slow growth in Eurozone economies would spur the European Central Bank to increase its quantitative easing measures. Additional gains were experienced during January from long positions in
U.S.
Treasury note and Treasury bond futures as prices climbed higher over investor concern that record crude oil inventories could dampen inflation projections in the
U.S.
Gains were also recorded in this sector during September from long positions in European and
U.S.
fixed income futures. Within the metals markets, gains were achieved primarily during July from short positions in gold and silver futures as prices fell as a strengthening
U.S.
dollar curbed demand for precious metals as a store of value. Additional gains in this sector were recorded during July from short positions in copper futures as prices declined amid investor concern of slowing demand from
China
. Within the agricultural complex, gains were achieved during November from short positions in corn and wheat futures as prices weakened following the release of
U.S.
government forecasts which predicted that global grain inventories will reach record levels in 2016. Gains within the agricultural complex were also recorded during September from short positions in cattle futures as prices moved lower on signs of weaker-than-expected beef demand amid increased supplies.

The Partnership, through its investment in the Master, experienced a net trading gain before fees and expenses of $48,605,665 for the year ended December 31, 2014. Gains were primarily attributable to the Master's trading of currencies, energy,

U.S.
and non-
U.S.
interest rates and livestock, and were partially offset by losses in grains, indices, metals and softs.

The most significant gains were achieved within the global interest rate sector during August from long positions in European fixed income futures as prices advanced over investor speculation that the European Central Bank would continue stimulus measures after reports showed euro-area manufacturing expanded less than previously estimated during July. Additional gains during August were experienced from long positions in

U.S.
fixed income futures. During October and November, gains were recorded from long positions in European fixed income futures as prices rose as concern over the European economy spurred demand for the relative safety of government debt. Additional gains were achieved during May from long positions in
U.S.
Treasury bond and Treasury note futures as prices increased amid easing investor concern the
U.S.
Federal Reserve would raise borrowing costs. Within the energy markets, gains were achieved during September from short positions in crude oil and its related products as prices moved lower on news that fuel inventory levels in the
U.S.
were higher than previous estimates predicted. Gains were experienced during October, November, and December from short positions in crude oil and its related products as prices moved lower as
U.S.
oil production advanced and after the OPEC nations failed to cut output in response to the global supply glut. Additional gains were recorded during January from long positions in natural gas futures as prices advanced after a
U.S.
government report showed a record drop in
U.S.
inventories. Within the currency sector, gains were experienced during November from short positions in the Japanese yen versus the
U.S.
dollar as the relative value of the yen declined after economic indicators showed
Japan's
economy was growing at a slower pace than previously forecast. Additional gains were recorded during February from long positions in the British pound versus the
U.S.
dollar as the relative value of the pound increased after Bank of England policy makers expressed little concern that the strength of the currency would harm the British economy. During September, gains were achieved from short positions in the euro versus the
U.S.
dollar as the value of the dollar strengthened amid signs that the
U.S.
economy was outpacing its peers. The Partnership's gains for the year were partially offset by losses incurred within the agricultural sector during June and July from long positions in corn and soybean futures as prices declined as mild weather throughout much of the Midwest reinforced analysts' predictions that
U.S.
grain harvests would reach near record levels in 2014. Within the global stock index sector, losses were recorded during January from long positions in
U.S.
, European, and Asian equity index futures as prices declined as economic growth momentum in
China
weakened and the
U.S.
Federal Reserve announced measures to further taper its quantitative easing program. Additional losses were experienced during October from long positions in European equity index futures as prices declined amid concern that the region's central bank will face obstacles in its measures to revive the region's economy. Within the metals markets, losses were incurred during June from short positions in gold and silver futures as precious metals prices rallied as increased turmoil in the
Ukraine
and
Iraq
caused investors to seek the relative safety of the precious metals. During February, losses were incurred from short positions in silver and gold futures as prices moved higher as increased geo-political tensions and discouraging
U.S.
economic data spurred investor demand.


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Interest income on 80% of the Partnership's average daily equity allocated to it by the Master was earned at a rate equal to the 4-week

U.S.
Treasury bill discount rate. All interest earned on
U.S.
Treasury bills and/or money market mutual fund securities will be retained by the Partnership. Interest income allocated from the Master for the three and twelve months ended December 31, 2015 increased by $32,410 and $25,720, respectively, as compared to the corresponding periods in 2014. The increase in interest income is primarily due to higher
U.S.
Treasury bill rates and higher average daily equity during the three and twelve months ended December 31, 2015, as compared to the corresponding periods 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 account and upon interest rates over which neither the Partnership nor MS&Co. has control.

Ongoing selling agent 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. Ongoing selling agent fees for the three months ended December 31, 2015 increased by $140,945, as compared to the corresponding period in 2014. The increase in ongoing selling agent fees is due to higher average net assets during the three months ended December 31, 2015, as compared to the corresponding period in 2014. Ongoing selling agent fees for the twelve months ended December 31, 2015 decreased $957,269, as compared to the corresponding period in 2014. The decrease is due to reduced ongoing selling agent fee rates for each Class effective October 1, 2014.

Management fees are calculated as a percentage of the Partnership's net asset value as of the end of each month and are affected by trading performance, subscriptions and redemptions. Management fees for the three and twelve months ended December 31, 2015 increased by $122,410 and $562,480, respectively, as compared to the corresponding periods in 2014. The increase in management fees is due to higher average net assets during the three and twelve months ended December 31, 2015, as compared to the corresponding periods in 2014.

General Partner fees are calculated as a percentage of the Partnership's net asset value as of the end of each month and are affected by trading performance, additions and redemptions. General Partner fees for the three and twelve months ended December 31, 2015 increased by $81,608 and $1,069,088, respectively, as compared to the corresponding periods in 2014. The increase in General Partner fees is due to an increase in the General Partner fee rate effective October 1, 2014 and higher average net assets during the three and twelve months ended December 31, 2015, as compared to the corresponding periods in 2014.

Incentive fees paid by the Partnership are based on the new trading profits generated by the Advisor at the end of the quarter, as defined in the management agreement. Trading performance for the three and twelve months ended December 31, 2015 resulted in incentive fees of $0 and $3,535,100, respectively. Trading performance for the three and twelve months ended December 31, 2014 resulted in incentive fees of $5,973,502 and $6,899,734, respectively. The Advisor will not be paid incentive fees until the Advisor recovers the net loss incurred and earns additional new profits for the Partnership.

The Partnership pays professional fees, which generally include legal and accounting expenses, certain offering costs and filing, reporting and data processing fees. Professional fees for the years ended December 31, 2015 and 2014 were $464,422 and $213,420, respectively.



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The Partnership, through its investment in the Master, experienced a net trading gain before fees and expenses of $30,398,646 for the year ended December 31, 2013. Gains were primarily attributable to the Master's trading of currencies, grains, indices, livestock, metals and softs, and were partially offset by losses in energy and

U.S.
and non-
U.S.
interest rates.

The most significant gains were achieved within the equity index markets as equity prices rose throughout a majority of the year. During January, profits were recorded from long positions in

U.S.
, European, and Asian equity index futures as prices moved higher after German business confidence improved, economic reports in the
U.S.
and
China
beat estimates, and a weaker yen boosted
Japan's
exports. During April, gains were achieved from long positions in Asian equity index futures as prices rallied during the month as the Bank of Japan reinforced its commitment to reach aggressive inflation and currency devaluation targets. Additional gains in the global stock index sector were recorded during the last four months of the year from long positions in
U.S.
and European equity index futures as prices reached record levels in the
U.S.
on investor reaction to the U.S. Federal Reserve Bank continuing its quantitative easing measures unabated. Within the metals markets, gains were recorded from March through June, and again from September through December. The most significant gains in this sector recorded during June from short positions in gold and silver futures as prices slumped amid speculation that the
U.S.
Federal Reserve may scale back its debt-purchasing program, eroding the appeal of the metals as a store of value. Additional gains in metals were recorded from short positions in copper futures. Additional gains were achieved in April from short positions in gold futures as prices declined as positive economic news in the
U.S.
reduced demand for the precious metal. The Partnership also recorded gains during September from short positions in gold and silver futures, as prices declined early in the month over renewed investor concern that the
U.S.
Federal Reserve would curtail its quantitative easing program, eroding demand for the precious metals. Within the agricultural sector, gains were recorded during August from long positions in soybean futures as prices increased as persistent, dry weather in the
U.S.
Midwest threatened crop yields. Within the currency markets, gains were recorded during January, March, April, and from September through December. The most meaningful gains in this sector were recorded during January from a short Japanese yen position versus the
U.S.
dollar as the Japanese yen reached the weakest level versus the dollar since June 2010 amid speculation that Japanese Prime Minister Shinzo Abe would select a central-bank chief who will expand monetary easing, accelerating the currency's decline. During December, additional gains within the currency sector were achieved from short positions in the Japanese yen versus the
U.S.
dollar as the value of the yen fell amid speculation that the Bank of Japan would continue unprecedented stimulus measures, while the
U.S.
Federal Reserve began to pare quantitative easing amid the
U.S.
economic recovery. A portion of the Partnership's gains during the year was offset by losses incurred within the global interest rate markets, primarily during May, from long positions in
U.S.
and European fixed income futures as prices moved lower following a positive
U.S.
employment report and a rise in German sentiment. Additional losses in the sector were incurred during January from long positions in European and
U.S.
fixed income futures as prices fell amid positive economic reports and after European Central Bank President Mario Draghi said that the euro-area economy should gradually recover during 2013. Within the energy markets, losses were recorded during May through October, as energy prices remained volatile throughout much of the middle of 2013. The most notable losses in the energy complex were recorded during July from short positions in crude oil and heating oil futures as prices rallied after reports indicated that the
U.S.
economy was strengthening.


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In the General Partner's opinion, the Advisor continues to employ its trading methods in a consistent and disciplined manner and its results are consistent with the objectives of the Partnership and expectations for the Advisor's program. The General Partner continues to monitor the Advisor's 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 Advisor 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 Advisor is able to identify them, the Partnership expects to increase capital through operations.

In allocating substantially all of the assets of the Partnership to the Master, the General Partner considers the Advisor's past performance, trading style, volatility of markets traded and fee requirements. The General Partner may modify or terminate the allocation of assets to the Advisor at any time.

(d) Off-Balance Sheet Arrangements. None.

(e) Contractual Obligations. None.

(f) Operational Risk.

The Partnership, through its investment in the Master, 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/Master are subject to increased risks with respect to their trading activities in emerging market securities, 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/Master's ability to gather, process, and communicate information efficiently and securely, without interruption, to customers, and in the markets where the Partnership/Master 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 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 non-compliance 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 the General Partner'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.



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(g) Critical Accounting Policies.

Partnership's Investment. The Partnership carries its investment in the Master at fair value based on the Master's net asset value per Unit, as a practical expedient, as calculated by the Master.

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

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 Master considers 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 Master 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 years ended December 31, 2015 and 2014, there were no transfers of assets or liabilities between Level 1 and Level 2.

Futures Contracts. The Master trades 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 Master on 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 Master. When the contract is closed, the Master records 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 Master's Statements of Income and Expenses.

Forward Foreign Currency Contracts. Forward foreign currency contracts are those contracts where the Master agrees 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 Master's 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 Master's Statements of Financial Condition. Net realized gains (losses) and net change in unrealized gains (losses) on foreign currency contracts are recognized in the period in which the contract is closed or the changes occur, respectively, and are included in the Master's Statements of Income and Expenses.



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London Metals Exchange Forward Contracts. Metal contracts traded on the 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 Master are cash settled based on prompt dates published by the LME. Payments ("variation margin") may be made or received by the Master on 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 Master. 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 Master records 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 Master's Statements of Income and Expenses.

The Master does not isolate that portion of the results of operations arising from the effect of changes in foreign exchange rates on investments from fluctuations from changes in market prices of investments held. Such fluctuations are included in total trading results in the Master's Statements of Income and Expenses.

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Source: Equities.com News (March 28, 2016 - 8:56 AM EDT)

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