MAN AHL DIVERSIFIED I LP - Annual Report: 2016 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the Fiscal Year Ended: December 31, 2016

or

Commission File Number: 000-53043

Man-AHL Diversified I L.P.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (212) 649-6600    

Securities registered pursuant to Section 12(b) of the Act: None    

Securities registered pursuant to Section 12(g) of the Act: Units of Limited Partnership Interest

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☐    No  ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ☐    No  ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No  ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

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

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.

Not applicable.

Documents Incorporated by Reference

The report of the independent registered public accounting firm and the financial statements of the Registrant for the year ended December 31, 2016 are included herewith as Exhibit 13.1 and are incorporated by reference into Item 8 of this Annual Report on Form 10-K.

PART I

Item 1. Business

(a)    General development of business

Man-AHL Diversified I L.P., a Delaware limited partnership (the “Partnership”), was organized in September 1997 under the Delaware Revised Uniform Limited Partnership Act and commenced trading operations on April 3, 1998, for the purpose of engaging in the speculative trading of physical commodities, futures and forward contracts and related instruments. The Partnership was formerly named AHL Diversified (USA) L.P., but was renamed in February 2002. The Partnership is a “feeder” fund in a “master-feeder” structure, whereby the Partnership invests substantially all of its assets in Man AHL Diversified Trading Company L.P. (the “Trading Company”). AHL Partners LLP (the “Trading Advisor”), a United Kingdom limited liability partnership, is the Partnership’s and the Trading Company’s trading advisor. The Trading Advisor also serves as the Partnership’s commodity pool operator. Man Investments (USA) Corp. (the “General Partner”), a Delaware corporation, is the Partnership’s general partner. The Trading Advisor is an affiliate of the General Partner. Man Investments Holdings Limited, a United Kingdom holding company that is part of Man Group plc (“Man Group”), a United Kingdom public limited company, is the sole shareholder of the Trading Advisor, and Man Investments Holdings Inc., a Delaware corporation that is part of Man Group, is the sole shareholder of the General Partner.

On January 28, 2008, the Partnership filed a registration statement under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). The registration statement, which was subsequently amended, became effective on or about March 28, 2008. The Partnership offers two classes of units of limited partnership interest in the Partnership (“Units”): Class A Units are generally offered; Class B Units are offered to employee benefit plans, IRAs and other retirement plans and accounts. The two Classes of Units are identical to each other except that Class B Units may be purchased, transferred, held and redeemed in a minimum amount of $10,000. On April 1, 2009, the Partnership added two new series of Units: Class A Series 2 Units (“Class A-2”) and Class B Series 2 Units (“Class B-2”). Except as described in section (c) below, Class A-2 and Class B-2 units are identical to Class A and B units, respectfully.

Although the Partnership uses the term “class” to distinguish between certain interests in the Partnership, the Partnership does not believe that the differences between such interests are sufficient to make them separate “classes” under Section 12(g) of the Exchange Act, as all of the interests in the Partnership, regardless of “class,” are of substantially similar character and the holders of which enjoy substantially similar rights and privileges. The holders of interests in the Partnership (regardless of “class”) share pro rata in the Partnership’s profits and losses, enjoying no preferences over one another during the life of the Partnership or upon dissolution and otherwise have identical rights under the Limited Partnership Agreement, the only differences among the “classes” relating to fees and minimum investment.

The General Partner became the general partner of the Partnership as of April 1, 2005 when Man-AHL (USA) Corp., the Partnership’s original general partner and trading advisor (“Man-AHL”), appointed it as such. In addition to the appointment of the General Partner, Man-AHL appointed Man-AHL (USA) Limited to serve as the trading advisor to the Partnership commencing as of April 1, 2005. Following the appointments of the General Partner as a general partner and Man-AHL (USA) Limited as the trading advisor, Man-AHL resigned as a general partner and trading advisor of the Partnership. The General Partner agreed to continue the Partnership without interruption or change. On June 1, 2014, the General Partner appointed the Trading Advisor as trading advisor of the Partnership, and Man-AHL (USA) Limited resigned as trading advisor. The Trading Advisor implements the same trading program and employs substantively the same personnel as did Man-AHL (USA) Limited. The General Partner controls and manages the business of the Partnership, but has otherwise delegated its investment management authority and commodity pool operator responsibilities with respect to the Partnership to the Trading Advisor. Purchasers of Units, as the Partnership’s “Limited Partners,” have no right to participate in management or control of the Partnership. The offices of the Partnership, where its books and records are kept, are located at the office of the General Partner: HSBC Tower, 452 5^th Ave., 27^th Floor, New York, NY, 10018; telephone (212) 649-6600.

(b)    Financial information about segments

The Partnership’s business constitutes only one segment, i.e., a speculative commodity pool. The Partnership does not engage in sales of goods and services. Financial information regarding the Partnership’s business is set forth in the Partnership’s Financial Statements incorporated into Item 8 hereof and attached as Exhibit 13.1 hereto.

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(c)    Narrative description of business

The Partnership engages in speculative trading of physical commodities, futures contracts, spot and forward contracts, swaps and options and other related instruments, directly and indirectly through an investment in the Trading Company, pursuant to the trading strategies employed by the Trading Advisor. The Partnership invests substantially all of its assets in the Trading Company.

The investment objective of the AHL Diversified Program is to deliver capital growth for commensurate levels of volatility over the medium term, independent of the movement of the stock and bond markets, through the speculative trading, directly and indirectly, of futures, options and forward contracts, swaps and other financial derivatives both on and off exchange. The AHL Diversified Program trades globally in several market sectors, including, without limitation, currencies, bonds, energies, stocks indices, interest rates, credit, metals and agriculturals. In the future, the AHL Diversified Program may, to a limited extent, invest in stocks and volatility.

The AHL Diversified Program employs a systematic, statistically based investment strategy that is designed to identify and capitalize on trends and other inefficiencies in markets around the world. Trading signals are generated and executed via a finely tuned trading and implementation infrastructure. This process is quantitative, meaning that investment decisions are entirely driven by mathematical models based on quantitative analysis of historical relationships. It is underpinned by rigorous risk control, ongoing research, diversification and the constant quest for efficiency. Trading takes place around-the-clock and real-time price information is used to respond to price moves across a diverse range of global markets.

As well as emphasizing sector and market diversification, the AHL Diversified Program has been constructed to achieve diversification by combining various investment strategies. The AHL Diversified Program invests in a diversified portfolio of instruments which may include futures, options and forward contracts, swaps and other financial derivatives both on and off exchange. The AHL Diversified Program trades approximately 250 markets and these markets may be accessed directly or indirectly and include, without limitation, stock indices, bonds, currencies, short-term interest rates, energies, credits, metals, and agriculturals.

Another important aspect of diversification is the fact that the models generate signals across different timeframes, ranging from intra-day to several months. In line with the principle of diversification, the approach to portfolio construction and asset allocation is premised on the importance of deploying investment capital across the full range of sectors and markets. Particular attention is paid to correlation of markets and sectors, expected returns, trading costs and market liquidity. Portfolios are regularly reviewed and, when necessary, adjusted to reflect changes in these factors. The Trading Advisor also has a systematic process for adjusting its market risk exposure in real time to reflect changes in the volatility of individual markets.

As the success of the AHL Diversified Program is largely dependent on its systems, the Trading Advisor is committed to investing in leading computer technology. The Trading Advisor (inclusive of affiliates) also maintains a disaster recovery site where a back-up trading system runs permanently and in parallel with the main system.

The AHL Diversified Program uses margin and considerable leverage to reach model allocations.

The AHL Diversified Program is supported by a dedicated team of investment specialists that continually seek to extend the range and versatility of the original investment techniques. As such, the Trading Advisor may increase the number and diversity of markets, strategies and instruments traded directly or indirectly by the AHL Diversified Program.

The Trading Advisor is paid a monthly management fee, payable in arrears, in an amount equal to 0.1667% of the month-end Net Asset Value of the Partnership (as defined in the Partnership’s Sixth Amended and Restated Limited Partnership Agreement, as the same may be amended or supplemented from time to time (the “Agreement”)) whether or not the Partnership is profitable (approximately 2% annually). The General Partner is paid a monthly general partner administrative fee in an amount equal to 0.0833% of the month-end Net Asset Value of the Partnership whether or not the Partnership is profitable (approximately 1% annually). The Trading Advisor may pay a portion of its management fee to the General Partner, and the General Partner may share a portion of its administrative fee with the Placement Agent (as defined below).

The Partnership will pay the Trading Advisor an incentive fee equal to 20% of the Net New Appreciation (as defined in the Agreement), if any, achieved by the Partnership as of the end of such calendar month. Net New Appreciation achieved during a calendar month means the excess, if any, of (a) the Net Asset Value of the Partnership as of the end of a calendar month (without reduction for any incentive fees accrued or paid to the Trading Advisor for the calendar month or for any redemptions or distributions effected during or as of the end of such calendar month and without increase for any additional capital contributions effected during or as of the end of such calendar month) over (b) the Net Asset Value of the Partnership as of the end of the most recent prior calendar month for which an incentive fee was accrued or paid to the Trading Advisor, with clause

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(b) reduced by the amount of the incentive fee accrued or paid for such prior calendar month and also reduced by any redemptions or distributions, and increased by any contributions, effected as of or subsequent to the end of such prior calendar month through the first day of the calendar month referred to in clause (a), above.

Man Investments Inc., an affiliate of the General Partner and Trading Advisor, is the lead placement agent for the Partnership (the “Placement Agent”). In connection with various services provided by the Placement Agent to the Partnership related to the offer and sale of interests in the Partnership and the ongoing servicing of its investors, the Partnership will pay the Placement Agent a servicing fee equal to, in respect to Class A Units and Class B Units, 0.0833% of the month-end Net Asset Value of such Units (approximately 1% annually), and in respect of Class A-2 Units and Class B-2 Units, 0.0625% of the month-end Net Asset Value of such Units (approximately 0.75% annually), whether or not the Partnership is profitable as of the end of each month. The Placement Agent may pass all or a portion of the servicing fee on to certain other selling and services agents. In addition, Units purchased through such selling and services agents may be subject to the payment of an additional upfront selling commission of up to 3% of the purchase price of the Units.

The Partnership’s organizational and initial offering fees and expenses were approximately $50,000 (including its pro-rata share of the Trading Company’s organizational fees and expenses) and have been paid by the Partnership. Such organizational fees and expenses (excluding promotional and offering fees and expenses) have been completely amortized. The Partnership pays all of its expenses incurred in the ordinary course of its business. The Partnership also pays its extraordinary expenses, if any.

The Trading Company utilizes a number of brokers in the performance of its trading activities. Credit Suisse Securities (USA), J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated serve as the Trading Company’s futures brokers; the Royal Bank of Scotland, HSBC, and Deutsche Bank AG, London Branch serve as the Trading Company’s foreign exchange prime brokers; J.P. Morgan Securities LLC and Credit Suisse Securities (USA) also act as the clearing members for centrally cleared credit default swap index transactions engaged in by the Trading Company; and the Trading Company conducts certain over-the-counter (“OTC”) interest rate swap trading through JPMorgan UK and Deutsche Bank AG, London Branch (collectively, the “Brokers”). The Partnership is charged brokerage commissions at institutional rates, inclusive of all applicable National Futures Association (the “NFA”), exchange, clearing and other transaction fees. In connection with trading spot and forward contracts in the interbank foreign currency markets, the Partnership pays clearing fees of between $3.25 and $4.00 per transaction as well as dealer profits, which cannot be quantified, embedded in dealer quotes.

The Partnership invests substantially all of its assets in the Trading Company. Most of the Trading Company’s assets will be held in cash or United States (“U.S.”) government securities in accounts in the name of the Trading Company at the Brokers or a bank, which currently is The Bank of New York Mellon, and in order to conduct futures trading activities, will be transferred, as necessary, into segregated accounts at the Brokers. Approximately 10% to 40% of the Trading Company’s assets will be committed as margin for derivative positions. The Brokers may receive compensating balance treatment and excess interest income on the Partnership’s assets, through the Trading Company, held at the Brokers in the form of cash.

The Trading Company engages in trading on non-U.S. exchanges and markets. In connection with trading on non-U.S. exchanges and markets, the brokers may either maintain Trading Company assets in accordance with the requirements of the Commodity Futures Trading Commission (the “CFTC”) Rule 30.7 or may redeposit Trading Company assets with non-U.S. banks and brokers which may not be subject to regulatory schemes comparable to those applicable to the Brokers.

Regulation

Under the Commodity Exchange Act, as amended (the “CEA”), commodity exchanges and trading in futures and swaps (as defined in the CEA) are subject to regulation by the CFTC. The NFA, a “registered futures association” under the CEA, is the only non-exchange self-regulatory organization for futures industry professionals. The CFTC has delegated to the NFA responsibility for the registration of “commodity trading advisors,” “commodity pool operators,” “futures commission merchants,” “swap dealers,” “introducing brokers” and their respective associated persons and “floor brokers” and “floor traders.” The CEA requires commodity pool operators and commodity trading advisors, such as the General Partner and Trading Advisor, respectively, and commodity brokers, swap dealers, or futures commission merchants to be registered and to comply with various reporting and record keeping requirements. The CFTC may suspend a commodity pool operator’s or trading advisor’s registration if it finds that its trading practices tend to disrupt orderly market conditions or in certain other situations. In the event that the registration of the Trading Advisor as a commodity pool operator or commodity trading advisor were terminated or suspended, the Trading Advisor would be unable to fulfill its obligations as the Partnership’s commodity pool operator or implement the AHL Diversified Program on behalf of the Partnership. Should the Trading Advisor’s registrations be suspended, termination of the Partnership might result.

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In addition to such registration requirements, the CFTC and certain commodity exchanges have established limits on the maximum net long or net short position which any person may hold or control in particular commodities. Most exchanges also limit the changes in futures contract prices that may occur during a single trading day.

The CFTC adopted a separate position limits rule for 28 so-called “exempt” (i.e. metals and energy) and agricultural futures and options contracts and their economically equivalent swap contracts. Limits in spot months were generally to be set at 25% of the official estimated deliverable supply of the underlying commodity and, in a non-spot month, a percentage of the average aggregate 12-month rolling open interest in all months (swaps and futures) for each contract. Although substantial portions of this rule were vacated by court action, the CFTC, in November 2013, proposed substantially similar rules to its prior position limits regime, and in response to comments to such proposal, reproposed similar rules on December 5, 2016. It is as yet unclear whether the Trading Advisor will be required to modify its trading on behalf of its clients, including the Trading Company, with respect to certain futures contracts which may have an adverse affect on the Partnership.

(d)    Financial Information about Geographic Areas

The Partnership does not engage in material operations in foreign countries.

The Trading Company may trade on a number of foreign commodity exchanges and may also trade OTC derivatives with foreign risk exposure. Neither the Trading Company nor the Partnership engage in the sales of goods or services.

Item 1A. Risk Factors.

Risk of Loss. Investing in the Partnership is speculative and involves substantial risks. You should not invest unless you can afford to lose your entire investment.

General. The transactions in which the Trading Advisor generally will engage on behalf of the Partnership involve significant risks. Growing competition may limit the Trading Advisor’s ability to take advantage of trading opportunities in rapidly changing markets. No assurance can be given that investors will realize a profit on their investment. Moreover, investors may lose all or some of their investment. Because of the nature of the trading activities, the results of the Partnership’s operations may fluctuate from month to month and from period to period. Accordingly, investors should understand that the results of a particular period will not necessarily be indicative of results in future periods.

Markets Are Volatile and Difficult to Predict. Trading in futures is a speculative activity. Futures prices may be highly volatile. Market prices are difficult to predict and are influenced by many factors, including: changes in interest rates; governmental, agricultural, trade, fiscal, monetary and exchange control programs and policies; weather and climate conditions; changing supply and demand relationships; national and international political and economic events; and the changing philosophies and emotions of market participants. In addition, governments intervene in particular markets from time to time, both directly and by regulation, often with the intent to influence prices. The effects of government intervention may be particularly significant in the financial instrument and currency markets, and may cause such markets to move rapidly.

Trading Is Highly Leveraged. The low margin deposits normally required in futures trading permit an extremely high degree of leverage. A relatively small movement in the price of a futures contract may result in immediate and substantial loss or gain to a trader holding a position in such contract. For example, if at the time of purchase 10% of the price of a futures contract is deposited as margin, a 10% decrease in the price of the futures contract would, if the contract were then closed out, result in a total loss of the margin deposit before any deduction for brokerage commissions. Consequently, like other leveraged investments, a futures trade may result in losses in excess of the amount invested. Forward contracts involve similar leverage and also may require deposits of margin as collateral. Swaps and OTC derivative instruments are also highly leveraged transactions.

Markets May Be Illiquid. At times, it may not be possible for the Trading Advisor to obtain execution of a buy or sell order at the desired price or to liquidate an open position, either due to market conditions on exchanges or due to the operation of “daily price fluctuation limits” or “circuit breakers.” For example, most U.S. commodity exchanges limit fluctuations in most futures contract prices during a single day by regulations referred to as “daily price fluctuation limits” or “daily limits.” During a single trading day, no trades may be executed at prices beyond the daily limit. Futures contract prices occasionally have moved to the daily limit for several consecutive days with little or no trading.

Even when futures prices have not moved to the daily limit, the Trading Advisor might not be able to obtain execution of trades at favorable prices if little trading in the contracts which the Trading Advisor wishes to trade is taking place. Also, an exchange or governmental authority may suspend or restrict trading on an exchange (or in particular futures traded on an exchange) or order the immediate settlement of a particular instrument.

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Options trading may be restricted in the event that trading in the underlying instrument becomes restricted. Options trading also may be illiquid at times regardless of the condition of the market in the underlying instrument. In either event, it will be difficult for the Trading Advisor to realize gains or limit losses on option positions by offsetting them or to change positions in the market.

Trading in OTC derivative instruments is conducted with individual counterparties rather than on organized exchanges. There have been periods during which forward and swap contract dealers have refused to quote prices for forward and swap contracts or have quoted prices with an unusually wide spread between the bid and asked price.

Speculative Position Limits May Restrict Futures Trading. Speculative position limits prescribe the maximum net long or short futures contract and options positions which any person or group may hold or control in particular futures contracts. All futures contracts and options on futures contracts traded on commodity exchanges located in the United States, with the exception of contracts on certain major non-U.S. currencies, are subject to speculative position limits established either by the CFTC or the relevant exchange.

All trading accounts owned or managed by the Trading Advisor and its principals will be combined for the purposes of speculative position limits. Such limits could adversely affect the profitability of the Trading Company and, consequently, of the Partnership. For example, the Trading Advisor could be required to liquidate futures positions at an unfavorable time in order to comply with such limits. However, the Trading Advisor does not believe that existing speculative position limits will materially adversely affect its ability to manage the Trading Company’s account.

Cash Flow. Futures contract gains and losses are marked-to-market daily for purposes of determining margin requirements. Option positions generally are not, although short option positions will require additional margin if the market moves against the position. Due to these differences in margin treatment between futures and options, there may be periods in which positions on both sides must be closed down prematurely due to short term cash flow needs. If this were to occur during an adverse move in a spread or straddle relationship, a substantial loss could occur.

Decisions Based on Trends and Technical Analysis. The trading decisions of the Trading Advisor will be based in part on trading strategies which utilize mathematical analyses of technical factors relating to past market performance. The buy and sell signals generated by a technical, trend-following trading strategy are based upon a study of actual daily, weekly and monthly price fluctuations, volume variations and changes in open interest in the markets. The profitability of any technical, trend-following trading strategy depends upon the occurrence in the future of significant, sustained price moves in some of the markets traded. The Trading Company and, consequently, the Partnership may incur substantial trading losses:

In the past there have been prolonged periods without sustained price moves in various markets. Presumably, such periods will recur. A series of volatile reverses in price trends may generate repeated entry and exit signals in trend-following systems, resulting in unprofitable transactions and increased brokerage commission expenses. Technical, trend-following trading systems are used by many other traders. At times, the use of such systems may:

Model and Data Risk. The Trading Advisor relies heavily on proprietary mathematical quantitative models (each a “Model” and collectively, “Models”) and data developed both by the Trading Advisor and those supplied by third parties (collectively, “Data”) rather than granting trade-by-trade discretion to the Trading Advisor’s investment professionals. In combination, Models and Data are used to construct investment decisions, to value both current and potential investments (including, without limitation, for trading purposes, and for the purposes of determining the Net Asset Value of the Partnership), to provide risk management insights and to assist in hedging the Partnership’s positions and investments. Models and Data are known to have errors, omissions, imperfections and malfunctions (collectively, “System Events”).

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The Trading Advisor seeks to reduce the incidence and impact of System Events, to the extent feasible, through a combination of internal testing, simulation, real-time monitoring, use of independent safeguards in the overall portfolio management process and often in the software code itself. Despite such testing, monitoring and independent safeguards, System Events will result in, among other things, the execution of unanticipated trades, the failure to execute anticipated trades, delays in the execution of anticipated trades, the failure to properly allocate trades, the failure to properly gather and organize available data, the failure to take certain hedging or risk reducing actions and/or the taking of actions which increase certain risk(s) – all of which may have materially adverse effects on the Partnership. System Events in third-party provided Data is generally entirely outside of the control of the Trading Advisor.

The research and modeling processes engaged in by the Trading Advisor on behalf of its managed funds is extremely complex and involves the use of financial, economic, econometric and statistical theories, research and modeling; the results of this investment approach must then be translated into computer code. Although the Trading Advisor seeks to hire individuals skilled in each of these functions and to provide appropriate levels of oversight and employ other mitigating measures and processes, the complexity of the individual tasks, the difficulty of integrating such tasks, and the limited ability to perform “real world” testing of the end product, even with simulations and similar methodologies, raise the chances that Model code may contain one or more coding errors, thus potentially resulting in a System Event and further, one or more of such coding errors could adversely affect the Partnership’s investment performance.

The investment strategies of the Trading Advisor are highly reliant on the gathering, cleaning, culling and performing of analysis of large amounts of Data. Accordingly, Models rely heavily on appropriate Data inputs. However, it is impossible and impracticable to factor all relevant, available Data into forecasts, investment decisions and other parameters of the Models. The Trading Advisor will use its discretion to determine what Data to gather with respect to each investment strategy and what subset of that Data the Models take into account to produce forecasts which may have an impact on ultimate investment decisions. In addition, due to the automated nature of Data gathering, the volume and depth of Data available, the complexity and often manual nature of Data cleaning, and the fact that the substantial majority of Data comes from third-party sources, it is inevitable that not all desired and/or relevant Data will be available to, or processed by, the Trading Advisor at all times. Irrespective of the merit, value and/or strength of a particular Model, it will not perform as designed if incorrect Data is fed into it which may lead to a System Event potentially subjecting the Partnership to a loss. Further, even if Data is input correctly, “model prices” anticipated by the Data through the Models may differ substantially from market prices, especially for financial instruments with complex characteristics, such as derivatives, in which the Partnership may invest.

Where incorrect or incomplete Data is available, the Trading Advisor may, and often will, continue to generate forecasts and make investment decisions based on the Data available to it. Additionally, the Trading Advisor may determine that certain available Data, while potentially useful in generating forecasts and/or making investment decisions, is not cost effective to gather due to, among other factors, the technology costs or third-party vendor costs and, in such cases, the Trading Advisor will not utilize such Data. The Trading Advisor has full discretion to select the Data it utilizes. The Trading Advisor may elect to use or may refrain from using any specific Data or type of Data in generating forecasts or making trading decisions with respect to the Models. The Data utilized in generating forecasts or making trading decisions underlying the Models may not be (i) the most accurate data available or (ii) free of errors. The Data set used in connection with the Models is limited. The foregoing risks associated with gathering, cleaning, culling and analysis of large amounts of Data are an inherent part of investing with a quantitative, process-driven, systematic adviser such as the Trading Advisor.

When Models and Data prove to be incorrect, misleading or incomplete, any decisions made in reliance thereon expose the Partnership to potential losses and such losses may be compounded over time. For example, by relying on Models and Data, the Trading Advisor may be induced to buy certain investments at prices that are too high, to sell certain other investments at prices that are too low, or to miss favorable opportunities altogether. Similarly, any hedging based on faulty Models and Data may prove to be unsuccessful and when determining the Net Asset Value of the Partnership, any valuations of the Partnership’s investments that are based on valuation Models may prove to be incorrect. In addition, Models may incorrectly forecast future behavior, leading to potential losses on a cash flow and/or a mark-to-market basis. Furthermore, in unforeseen or certain low-probability scenarios (often involving a market event or disruption of some kind), Models may produce unexpected results which may or may not be System Events.

Errors in Models and Data are often extremely difficult to detect, and, in the case of Models, the difficulty of detecting System Events may be exacerbated by the lack of design documents or specifications. Regardless of how difficult their detection appears in retrospect, some System Events may go undetected for long periods of time and some may never be detected. Finally, the Trading Advisor will detect certain System Events that it chooses, in its sole discretion, not to address or fix, and the third party software will lead to System Events known to the Trading Advisor that it chooses, in its sole discretion, not to address or fix. The degradation or impact caused by these System Events can compound over time. The Trading Advisor generally will not perform a materiality analysis on the potential impact of a System Event. The Trading Advisor believes that the testing and monitoring performed on Models will enable the Trading Advisor to identify and address those System Events that a prudent person managing a quantitative, systematic and computerized investment program would identify and address by

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correcting the underlying issue(s) giving rise to the System Events, however there is no guarantee of the success of such processes. Investors should assume that System Events and their ensuing risks and impact are an inherent part of investing with a process-driven, systematic investment manager such as the Trading Advisor.

Accordingly, the Trading Advisor does not expect to disclose discovered System Events to its investors. The Partnership will bear the risks associated with the reliance on Models and Data including bearing all losses related to System Events other than in relation to losses arising from the Trading Advisor’s willful misconduct, negligence or breach of fiduciary obligations.

Trade Systems and Execution of Orders. The Trading Advisor relies extensively on computer programs, systems, technology, Data and Models to implement its execution strategies and algorithms. The Trading Advisor’s investment strategies, trading strategies and algorithms depend on its ability to establish and maintain an overall market position in a combination of financial instruments selected by the Trading Advisor. There is a risk that the Trading Advisor’s proprietary algorithmic trading systems may not be able to adequately react to a market event without serious disruption. Further, trading strategies and algorithms may malfunction causing severe losses. While the Trading Advisor has employed tools to allow for human intervention to respond to significant system malfunctions, it cannot be guaranteed that losses will not occur in such circumstances as unforeseen market events and disruptions and execution system issues.

Orders may not be executed in a timely and efficient manner due to various circumstances, including, without limitation, trading volume surges or systems failures attributable to the Trading Advisor, the Trading Advisor’s counterparties, brokers, dealers, agents or other service providers. In such event, the Trading Advisor might only be able to acquire or dispose of some, but not all, of the components of such position, or if the overall position were to need adjustment, the Trading Advisor might not be able to make such adjustment. As a result, the Partnership would not be able to achieve the market position selected by the Trading Advisor, which may result in a loss.

Trade Error Risk. The complex execution modalities operated by the Trading Advisor and the speed and volume of trading invariably result in occasional trades being executed which, with the benefit of hindsight, were not required or intended by the execution strategy or occasional trades not being executed when they should have been. To the extent a trade error is caused by counterparty, such as a broker, the Trading Advisor generally, to the extent reasonable and practical, attempts to recover any loss associated with such trade error from such counterparty. To the extent a trade error is caused by the Trading Advisor, a formalized process is in place for the documentation and resolution of such trade errors. Given the volume, diversity and complexity of transactions executed by the Trading Advisor on behalf of the Partnership, investors should assume that trade errors will occur on occasion. If such trade errors result in gains to the Partnership, such gains will be retained by the Partnership. However, if a trade error result in losses, they will be borne by the Trading Advisor in accordance with its internal policies unless otherwise determined by the General Partner.

Trading in OTC Markets Will Expose the Partnership to Risks Not Applicable to Trading on Organized Exchanges. The Partnership, through the Trading Company, may engage in OTC derivative transactions, such as: currency forward contracts traded in the interbank market; options on currency forward contracts; and swap transactions.

In general, there is much less governmental regulation and supervision of transactions in the OTC markets than of transactions entered into on organized exchanges. Most of the protections afforded to participants on U.S. and certain non-U.S. exchanges, such as daily price fluctuation limits and the performance guarantee of an exchange clearinghouse, will not be available in connection with OTC transactions. Consequently, the Partnership will be exposed to greater risk of loss through default than if it confined its trading to organized exchanges.

A portion of the Partnership’s assets may be traded in forward contracts. Such forward contracts are generally not traded on exchanges and are executed directly through forward contract dealers. However, certain forward currency exchange contracts are regulated as swaps by the CFTC and have begun being voluntarily traded on swap execution facilities. Some of these contracts may be required to be centrally cleared by a regulated U.S. clearinghouse, and may be required to be traded on a regulated exchange in the future. There is no limitation on the daily price moves of forward contracts, and a dealer is not required to continue to make markets in such contracts. There have been periods during which forward contract dealers have refused to quote prices for forward contracts or have quoted prices with an unusually wide spread between the bid and asked price. Arrangements to trade forward contracts may therefore experience liquidity problems. The Partnership therefore will be subject to the risk of credit failure or the inability of or refusal of a forward contract dealer to perform with respect to its forward contracts.

When trading currency forward contracts, the Trading Company may hedge the foreign currencies in order to limit the Trading Company’s exposure to fluctuations in exchange rates. However, there is no guarantee that such hedging will be successful.

Enhanced Regulation of the OTC Derivatives Markets. The European Market Infrastructure Regulation (“EMIR”) seeks comprehensively to regulate the OTC derivatives market in Europe for the first time including, in particular, imposing mandatory

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central clearing, trade reporting and, for non-centrally cleared trades, risk management obligations on counterparties. Similarly, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Reform Act”), enacted in July 2010, includes provisions that substantially increase the regulation of the OTC derivatives markets for the first time. The Reform Act requires that a substantial portion of OTC derivatives must be executed in regulated markets and be submitted for clearing to regulated clearinghouses. For example, certain interest rate swaps, certain forwards defined as swaps by the CFTC, and credit default index swaps are required by the CFTC to be submitted for clearing if traded by U.S. persons. These OTC trades submitted for clearing will be subject to minimum initial and variation margin requirements set by the relevant clearinghouse, as well as possible CFTC-mandated margin requirements. OTC derivative dealers also are required to post margin to the clearinghouses through which they clear their customers’ trades instead of using such margin in their operations as was widely permitted before the Reform Act. Taken together, these regulatory developments have increased and will continue to increase the OTC derivative dealers’ costs, and these increased costs are generally passed through to other market participants in the form of higher upfront and mark-to-market margin, less favorable trade pricing, and the imposition of new or increased fees including clearing account maintenance fees.

The CFTC also now requires certain derivatives transactions that were previously executed on a bilateral basis in the OTC markets to be executed through a regulated futures or swap exchange or execution facility. The SEC is also expected to impose similar requirements on certain security-based derivatives in the near future, though it is not yet clear when these parallel SEC requirements will go into effect. If the Trading Company executes derivatives transactions through such exchanges or execution facilities, the Trading Company would be subject to all of the rules of the exchange or execution facility, which would bring additional risks and liabilities, and potential additional requirements under applicable regulations and under rules of the relevant exchange or execution facility. Similarly, under EMIR, European regulators may require a substantial proportion of such derivatives transactions to be bought on exchange and/or centrally cleared. Such requirements may make it more difficult and costly for investment funds, including the Partnership and/or the Trading Company, to enter into highly tailored or customized transactions. They may also render certain strategies in which the Partnership might otherwise engage impossible or so costly that they will no longer be economical to implement. They may also increase the overall costs for OTC derivative dealers, which are likely to be passed along, at least partially, to market participants in the form of higher fees or less advantageous dealer marks. The overall impact of EMIR and the Reform Act on the Partnership remains uncertain and it is unclear how the OTC derivatives markets will adapt to these new regulatory regimes.

The “Volcker Rule” component of the Reform Act materially restricts proprietary speculative trading by banks, “bank holding companies” and other regulated entities. As a result, there has been a significant influx of new portfolio managers into private investment funds who had previously traded institutional proprietary accounts. Such influx can only increase the competition for the Partnership from other talented portfolio managers trading in the Partnership’s investment sector.

Exchanges for Physicals/Swaps/Risk. While not a regular practice for the Trading Company, it may in rare instances engage in transactions known as exchanges for physicals (“EFP”), exchanges for swaps (“EFS”), or exchanges for risk/OTC derivatives (“EFR”). An EFP/EFS/EFR is a purchase or sale of a spot commodity/swap/derivative, as applicable, in conjunction with an offsetting sale or purchase of a corresponding futures contract involving the same or equivalent underlying commodity or instrument, without making an open and competitive trade for the futures contract on the exchange. EFPs, EFSs and EFRs are a permitted exception to the general requirement of the CEA that all futures contracts must be competitively executed on an exchange. They are permitted pursuant to the rules of the relevant exchanges, which vary from exchange to exchange. If the EFP, EFS or EFR does not comply with specific exchange requirements, particularly regarding possessing documentation evidencing possession of the underlying commodity or instrument, then the CFTC or the exchange may deem the transaction to be an illegal off-exchange futures contract. In addition, every EFP, EFS or EFR involves the transfer of an underlying commodity or entry into a swap or derivative on a bilateral basis, as applicable, with a counterparty in exchange for a related cleared futures contract. There is, therefore, counterparty credit risk if the counterparty or its clearing member on the futures leg fails to perform. Unlike other futures contracts that are deemed cleared by the clearinghouse upon trade matching or at the end of the business day, futures contracts arising out of EFPs, EFSs or EFRs may, under various clearinghouse rules, not be deemed accepted by the clearinghouse until the next business day.

Options on Futures Contracts Are More Volatile Than Futures Contracts. The Trading Advisor may trade options on futures contracts. Options are speculative in nature and are highly leveraged. The purchaser of an option risks losing the entire purchase price of the option. The seller (writer) of an option risks losing the difference between the premium received for the option and the price of the underlying futures contract that the writer must purchase upon exercise of the option. Additionally, the seller and writer of the options lose any commissions and fees associated with such transactions. This could subject the writer to unlimited risk in the event of an increase in the price of the contract to be purchased or delivered. Successful trading of options on futures contracts requires a trader to accurately determine near-term market volatility because it often has an immediate impact on the price of outstanding options. Accurate determination of near-term volatility is more important to successful options trading than it is to long-term futures contract trading strategies because such volatility generally does not have as significant an effect on the prices of futures contracts.

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Trading on Non-U.S. Exchanges and Markets Will Expose the Partnership to Risks Not Applicable to Trading on U.S. Exchanges and Markets. The Partnership, through the Trading Company, may engage in trading on non-U.S. exchanges and markets. The Partnership will be subject to the risk of fluctuations in the currency exchange rate between the local currency and the U.S. dollar and to the possibility of exchange controls. Trading on such exchanges and markets generally involves other risks not applicable to trading on U.S. exchanges and markets. For example, such exchanges and markets:

Institutional Risks. Institutions, such as the banks and brokers, will have custody of the assets of the Partnership. These firms may encounter financial difficulties that impair the operating capabilities or the capital position of the Partnership, the Trading Company or the General Partner.

Counterparty Risk. The Partnership will be subject to the risk of the inability of counterparties to perform with respect to transactions, particularly uncleared swap and currency forward transactions, whether due to insolvency, bankruptcy or other causes, which could subject the Partnership to substantial losses. In an effort to mitigate such risks, the General Partner and Trading Advisor will attempt to limit transactions to counterparties, which are established, well-capitalized and creditworthy.

Affiliated Parties – Conflicts of Interest. Under the terms of the Limited Partnership Agreement, the General Partner has the authority to engage trading advisors to make trading decisions for the Partnership. Since the Trading Advisor is an affiliate of the General Partner, the General Partner has a conflict of interest with respect to its responsibilities to manage the Partnership for the benefit of the Limited Partners, and to prevent violations of the Partnership’s trading policies and to monitor for excessive trading by the Trading Advisor. In addition, the General Partner has a conflict of interest with respect to its responsibility to review the trading performance of the Partnership and a disincentive to terminate the advisory relationship between the Trading Advisor and the Partnership. There have been no arm’s-length negotiations with respect to the management and incentive fees that the Trading Advisor will charge the Trading Company or with respect to the other terms of the advisory agreement entered into with the Trading Advisor.

Item 1B. Unresolved Staff Comments.

Not applicable.

Item 2. Properties.

The Partnership does not own or use any physical properties in the conduct of its business. The General Partner and various service providers perform services for the Partnership from their offices.

Item 3. Legal Proceedings.

The General Partner is not aware of any pending legal proceedings to which either the Partnership is a party or to which any of its assets are subject. In addition there are no pending material legal proceedings involving either the General Partner or Trading Advisor.

Item 4. Mine Safety Disclosures.

Not applicable.

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PART II

Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

(a)    Market Information.

There is no trading market for the Units, and none is likely to develop. Units may be redeemed upon 10 days written notice to the General Partner at their Net Asset Value as of the last business day of each calendar month; provided, however, that each Limited Partner must maintain a minimum investment of $25,000 and $10,000, respectively of Class A Units (or Class A-2 Units) and Class B Units (or Class B-2 Units), in the Partnership following any redemption initiated by such Limited Partner in order to remain invested in the Partnership.

(b)    Holders.

As of December 31, 2016, there were 635 holders of Class A Units, 43 holders of Class A-2 Units, 685 holders of Class B Units and 1 holders of Class B-2 Units.

(c)    Dividends.

No distributions or dividends have been made on the Units, and the General Partner has no present intention to make any.

(d)    Securities Authorized for Issuance Under Equity Compensation Plans.

None.

(e)    Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities.

The Partnership may admit additional Limited Partners to the Partnership and permit additional capital contributions to be made to the Partnership as of the first business day of any calendar month or at such other times as the General Partner may determine. On the first business day of October 2016, November 2016 and December 2016, the Partnership sold Class A-1 Units to existing and new Limited Partners in the amount of $265,000, $0 and $100,000, respectively; Class A-2 Units to existing and new Limited Partners in the amount of $100,000, $0 and $0, respectively; Class B-1 Units to existing and new Limited Partners in the amount of $80,000, $102,800 and $0, respectively; and Class B-2 Units to existing and new Limited Partners in the amount of $0, $0 and $0, respectively. There were no underwriting discounts or commissions in connection with the sales of the Units described above.

(f)    Issuer Purchases of Equity Securities.

Pursuant to the Partnership’s Limited Partnership Agreement, a Limited Partner may redeem some or all of its Units as of the last business day of each calendar month at the then current month-end Net Asset Value. The redemption of Units has no impact on the value of Units that remain outstanding, and Units are not reissued once redeemed. The following table summarizes the amount of Units redeemed during the three months ended December 31, 2016:

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Item 6. Selected Financial Data.

The following is a summary of operations for the fiscal years 2016, 2015, 2014, 2013 and 2012 and total assets of the Partnership at December 31, 2016, 2015, 2014, 2013 and 2012.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Reference is made to “Item 8. Financial Statements and Supplementary Data.” The information contained therein is essential to, and should be read in conjunction with, the following analysis.

Capital Resources and Liquidity

Units may be offered for sale as of the first business day, and may be redeemed as of the last business day, of each month.

The Partnership raises additional capital only through the sale of Units and capital is increased through trading profits (if any) and interest income. The Partnership does not engage in borrowing. The Partnership, not being an operating company, does not incur capital expenditures. It functions solely as a passive trading vehicle, investing the substantial majority of its assets in the Trading Company. Its remaining capital resources are used only as assets available to make further investments in the Trading Company and to pay Partnership expenses. Accordingly, the amount of capital raised for the Partnership should not have a significant impact on its operations.

Partnership assets not invested in the Trading Company are maintained in cash and cash equivalents in bank accounts or accounts with The Bank of New York Mellon and are readily available to the Partnership. The Partnership may redeem any part or all of its limited partnership interest in the Trading Company at any month-end at the net asset value per unit of the Trading Company. The Trading Company’s assets are generally held as cash or cash equivalents which are used to margin futures and provide collateral for forward contracts and other OTC contract positions and are withdrawn, as necessary, to pay redemptions (to the Partnership and other investors in the Trading Company). Other than potential market-imposed limitations on liquidity, due, for example, to limited open interest in certain futures markets or to daily price fluctuation limits, which are inherent in the Trading Company’s futures trading, the Trading Company’s assets are highly liquid and are expected to remain so.

During its operations through December 31, 2016, the Partnership experienced no meaningful periods of illiquidity in any of the numerous markets in which it trades.

Critical Accounting Policies

The Partnership records its transactions in futures contracts, forward contracts and other derivatives, including related income and expenses, on a trade-date basis. Open futures contracts traded on an exchange are valued at fair value, which is based on the closing settlement price on the exchange where the futures contract is traded by the Partnership on the day with respect to which the Partnership’s Net Asset Value is being determined. Open forward contracts and other derivatives are valued at fair value using independent pricing services, which use market observable inputs in their valuations. If the General Partner determines the fair value of an investment cannot be accurately determined pursuant to the foregoing methods, such investment shall be assigned such fair value as the General Partner may determine in its sole discretion.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions, such as accrual of expenses, that affect the amounts and disclosures reported in the financial statements. Based on the nature of the business and operations engaged in by the Partnership, the General Partner believes that the estimates utilized in preparing the Partnership’s financial statements are appropriate and reasonable; however, actual results could differ from the estimates. The estimates do not provide a range of possible results that would require the exercise of subjective judgment. The General Partner further believes that, based on the nature of the business and operations of the Partnership, no other reasonable assumptions relating to the application of the Partnership’s critical accounting estimates other than those to be used would likely result in materially different amounts from those reported. The Partnership’s significant accounting policies are described in detail in Note 2 to the Financial Statements.

Off-Balance Sheet Arrangements

The Trading Company trades derivative financial instruments. Such transactions may expose the Partnership to significant off-balance sheet risk in the event margin deposits and collateral investments are not sufficient to cover losses incurred. The Trading Advisor manages the risk associated with these transactions by maintaining margin deposits and collateral investments with its brokers in compliance with individual exchange regulations and internal guidelines. The Trading Advisor also takes an active role in managing and controlling the Trading Company’s market and counterparty risks and monitoring trading activities and margin levels daily, and, as necessary, deposits, additional collateral or reduces positions.

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Contractual Obligations

The Partnership does not enter into contractual obligations or commercial commitments to make future payments of a type that would be typical for an operating company or that would affect its liquidity or capital resources. The Partnership’s sole business is trading futures contracts, forward currency and other OTC contracts, both long (contracts to buy) and short (contracts to sell), and investing in cash and cash equivalents. All of the Partnership’s futures, forward and OTC contracts, other than certain currency forward contracts, are settled by offset, not delivery. The substantial majority of such contracts are for settlement within four to six months of the trade date and the substantial majority of such contracts are held by the Partnership for less than four to six months before being offset or rolled over into new contracts with similar maturities. The Partnership’s annual audited financial statements with the attached Trading Company’s annual audited financial statements, included as Exhibit 13.1 of this report, present a Condensed Schedule of Investments setting forth net unrealized appreciation (depreciation) of the Partnership’s open positions, both long and short, at December 31, 2016 fiscal year-end.

Allocations by Market Sector

The following table indicates the percentage of the Partnership’s assets allocated to initial margin for the Partnership’s open trading positions by market sector as of December 31, 2016. The Partnership’s capitalization was $139,406,484 as of December 31, 2016. Also see Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” below.

Results of Operations

Due to the nature of the Partnership’s trading, the Partnership’s income or loss from operations may vary widely from period to period. Management cannot predict whether the Partnership’s future Net Asset Value per Unit will increase or experience a decline. The Partnership was organized in September 1997 under the Delaware Revised Uniform Limited Partnership Act and commenced operations on April 3, 1998.

Performance Summary

The Partnership is a speculative managed futures fund which trades pursuant to the AHL Diversified Program, indirectly through its investment in the Trading Company. The AHL Diversified Program is a futures and forward OTC price trend-following, trading system. The AHL Diversified Program is entirely quantitative in nature and implements trading positions on the basis of statistical analyses of past price histories. The AHL Diversified Program, like most trend-following systems, is designed in the anticipation that most of its trades will be unprofitable; the objective of overall profitability depends on the system identifying certain major trends which occur and recognizing significant profits from participating in such trends.

The past performance of the AHL Diversified Program is not necessarily indicative of its future results. This is the case with all speculative trading strategies. Moreover, the markets in which the AHL Diversified Program is active have seen major changes in recent years, including the influx of entirely different classes of market participants. These changed circumstances may mean that the markets in which the Trading Advisor has previously traded on behalf of the Trading Company are not necessarily representative of those in which it trades on behalf of the Trading Company currently.

As a speculative futures fund, the Partnership (through the Trading Company) effectively maintains all of its capital in reserve. The Trading Company does not “buy” or “sell” futures or forward contracts in the traditional sense; rather, through taking positions in these markets, the Trading Company, and thus the Partnership indirectly, acquires loss/profit exposure and uses its capital to cover losses and provide margin (which constitutes a good faith deposit towards the Trading Company’s (but not the Partnership’s) obligation to pay such losses) to support its open positions. Each of the Partnership and the Trading Company maintains most of its capital in cash and cash equivalents.

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Futures trading programs are proprietary and confidential. As is the case with any speculative futures fund, it is impossible to predict how the Partnership will perform. It is not possible, as it is in the case of an operating business, to predict performance trends, analyze future market conditions or evaluate the likely success or failure of the Partnership.

There are certain general market conditions in which the Partnership is more likely to be profitable than in others. For example, in trendless or stagnant markets, the AHL Diversified Program is unlikely to be profitable. On the other hand, trending markets with substantial price change momentum can be favorable to the AHL Diversified Trading Program. However, because of the continually changing population of market participants as well as supply and demand characteristics, it cannot be predicted how the AHL Diversified Program, and thus the Partnership, will perform in any given market conditions.

Net assets decreased $33,694,950 for the year ended December 31, 2016. This decrease was attributable to subscriptions in the amount of $13,169,003, redemptions in the amount of $31,611,680 and net loss from operations of $15,252,273.

For the year ended December 31, 2016, the Partnership accrued or paid total expenses of $8,256,925, including $1,588,234 in servicing fees, $4,734,252 in General Partner administrative fees and Trading Advisor management fees, and $1,934,439 in other expenses. Interest of $0 was earned or accrued on the Partnership’s cash and cash equivalent investments.

The Net Asset Value of a Class A Unit decreased by $323.92 to $3,120.88. The Net Asset Value of a Class B Unit decreased by $324.08 to $3,120.74. The Net Asset Value of a Class A-2 Unit decreased by $309.73 to $3,439.38. The Net Asset Value of a Class B-2 Unit decreased by $309.73 to $3,439.44.

The Partnership generated losses in 2016 as the year proved to be a relatively challenging investment period across the Partnership’s asset classes.

Equity trading started off on a positive note in January with short positions in most major indices generating profits. The Partnership’s bearish equity positioning continued to be profitable in February as equity markets fell to new two-year lows. March equity trading, however, served as a drag on performance as rallies in several South Asian markets hurt the Partnership’s shorts in the Kospi and Hang Seng indices. Trading in the second quarter, thereafter, produced lackluster results. In May, the Partnership’s profitable short volatility position in the VIX index was insufficient to outrun the negative equity returns experienced earlier in the month, while in June, the Partnership’s losses on long U.S. positions outweighed gains from short positions in Japan and elsewhere. Third quarter and fourth quarter equity trading was more mixed. During the third quarter, gains achieved from long positions in index futures and short VIX positions were offset by short positioning in European and Japanese equities and the Partnership’s S&P index positions. And despite initial fourth quarter losses, the Partnership’s December trading subsequently provided notable gains with long positions in Australian and European indices leading performance.

Fixed income trading produced mixed results over the year. During the first quarter, long positions in French, UK and Japanese bonds and other instruments generated profits for the Partnership in January and February, but thereafter produced losses in March. Losses continued into the second quarter as the Partnership’s long positions were in tension with April’s rising yields on longer-maturity instruments in developed markets and a subsequent large selloff in May of fixed income instruments. Although fixed income trading ended the second quarter on a positive note with the Partnership’s safe-haven bond positions generating profits, the theme of seesawing performance continued in the third and fourth quarters. Initially realizing gains during the third quarter on account of long positions in UK gilts and Italian government bonds, the Partnership sustained losses in September due in large part to its long Australian and Italian bond positions. The timing of results were reversed in the fourth quarter where the Partnership’s losses from its October positions in Italian, German and UK bond futures were offset in the later part of the year through its holding of German bunds and other instruments.

Although starting off the first quarter with positive gains, commodity trading produced net losses over the course of 2016. In January, the Partnership’s short positions in oil and derivative products were among the strongest drivers of performance as crude oil prices fell intra-month by nearly 30%. The Partnership’s February commodity positions remained profitable and were particularly buoyed by the Partnership’s short exposure to the U.S. natural gas market. The profits realized in March on account of short corn positions, however, were outweighed by losses sustained in the grains and energy sectors. Commodity trading over the rest of the year largely produced losses for the Partnership. In April, the Partnership’s short positions in agricultural commodities served as the Partnership’s loss leader for the month while losses from the Partnership’s long exposure to precious metals outweighed gains from sugar and soymeal positions in May. Although realizing gains from short positions in oil and related products in July and long exposure to precious metals in June and July, the Partnership’s cotton and cocoa holdings in August and September metals trading resulted in net losses for the third quarter. Fourth quarter commodity trading also resulted in losses on account of significant price reversals occurring in the oil and gas markets in October and November and in the metals sector in December.

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The Partnership’s currency positions in 2016 largely generated negative results for the Partnership. Despite ending the first quarter with several emerging economies generating profits in March, currency trading produced net losses for the Partnership during the second and third quarters. In April, losses sustained from long exposure to the Australian dollar and Euro overshadowed gains achieved from the Partnership’s long positions in the currencies of several emerging markets such as Brazil, Turkey and Columbia. Continued long exposure to the Turkish lira in May, however, produced losses as Turkey’s currency fell more than 5% in a two-day period against the U.S. dollar. The Partnership’s positions in UK sterling and the Euro thereafter detracted from June gains. Exposure to Turkish lira and Eurodollar achieved similar results in July. Although having continued mixed, yet negative results in August and September, currency trading ended the year on a positive note. Short positions in the U.K. pound and long exposure to the U.S. dollar helped to make currency trading profitable in October, and despite sustaining losses in the currency sector in November, December trading produced mild gains with the strengthening U.S. dollar.

Relative to the other asset classes traded by the Partnership, the credit sector had a largely neutral impact on Partnership performance in 2016. Some of the key themes in this sector included continuing growth of the U.S. economy, heightened concern over impending increases to U.S. interest rates, and anxiety over the potential retraction of monetary stimulus in Europe. Notable performance included gains realized from long credit protection positioning in February, June losses from credit positions suffering under increased market volatility, and profits achieved in December as short protection swaps benefitted from spreads falling nearly 15% with respect to the higher-yielding European cross-over index.

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2015

Net assets decreased $28,923,230 for the year ended December 31, 2015. This decrease was attributable to subscriptions in the amount of $16,867,462, redemptions in the amount of $43,053,561 and net loss from operations of $2,737,131.

For the year ended December 31, 2015, the Partnership accrued or paid total expenses of $9,810,584, including $2,000,360 in servicing fees, $5,952,076 in General Partner administrative fees and Trading Advisor management fees, and $1,858,148 in other expenses. Interest income of $149,041 was earned or accrued on the Partnership’s cash and cash equivalent investments.

The Net Asset Value of a Class A Unit decreased by $61.42 to $3,444.80. The Net Asset Value of a Class B Unit decreased by $61.41 to $3,444.82. The Net Asset Value of a Class A-2 Unit decreased by $19.30 to $3,749.11. The Net Asset Value of a Class B-2 Unit decreased by $19.31 to $3,749.17.

Partnership trading yielded mixed results in 2015 and ended the year overall in negative performance territory. In the equities sector, reversals in market sentiment predominated the first quarter. The Partnership started off the year sustaining losses from its stock indices shorts in January, subsequently achieved gains in February on account of long equity positioning and ended the quarter with additional losses driven by long exposure to the S&P 500. Second quarter equity trading entailed similar volatility. Although the Partnership’s long exposure to Heng Seng and H-share futures in April capitalized on buoyant equity markets in Hong Kong and China, the Partnership’s long exposure to the Eurozone suffered as uncertainty surrounding the Greek debt crises negotiations produced spikes in volatility. A shrinking global risk appetite as well as weakened business activity in China subsequently prompted selloffs in the Asian and U.S. markets which battered the Partnership’s long equity positions in both markets in the third quarter. Fourth quarter trading of equities also brought negative results as the news of a large and significant fall in the growth of the U.S. workforce accompanied by the European Central Bank’s (“ECB”) failure to expand its asset purchases ran counter to the Partnership’s long equity positions.

With respect to fixed-income trading, the Partnership started off the year with strong first quarter returns. In January, Canada’s surprise cut to its benchmark interest rate and collapsing U.S. bond yields contributed to making the Partnership’s bond and rate positions among the Partnership’s strongest profit drivers for the year. Despite moderate February losses on account of investor demand shifting from bonds to equities, March bond trading proved profitable as the ECB’s massive asset purchase program and accommodative remarks from U.S. Federal Reserve Chair, Janet Yellen, favored the Partnership’s long exposure to the U.S. and European bond markets. The second quarter, however, brought a reversal of fortunes as the Partnership suffered losses from strong swings in the German bond market, unprofitable short positions in Australian bonds and continuing investor uncertainty regarding the Greek debt crisis. The Partnership thereafter experienced a return to profitability in the fixed-income sector as the Partnership’s positions in Italian bonds and Eurodollars produced substantial positive returns and overshadowed July losses sustained from short U.S. Treasury positions. Although the Partnership’s European bond positions achieved gains in October, notable volatility in December resulted in losses for the Partnership’s German, Italian and French bond positions at the end of the year.

Relative to the Partnership’s experience in the equities and fixed-income sectors, commodity trading produced more favorable returns in 2015, but was similarly hampered by sharp price reversals throughout the year. In January, returns from the Partnership’s commodity positions were neutral as losses sustained in the agricultural sector offset gains achieved in the energy markets. This offsetting relationship subsequently reversed in February as short oil exposure suffered from substantial and swift price increases while the Partnership’s agricultural positions produced gains. The prices of oil and oil-related products reversed course again in March, falling significantly from a strong February rally and buoying the Partnership’s March results. Following a neutral month of commodity trading in April, quick reversals in the agricultural markets in May and June resulted in substantial losses for the Partnership. Long exposure to base metals and short agricultural positions produced particularly large losses during this period as zinc prices dropped around 10% following a 20% rally in March and mid-month heavy rains and flooding across growing regions damaged crops and generally reversed a steady price decline which had taken place during the first part of the year. In July, a subsequent long U.S. dollar trend and heightened prospects of Iranian oil entering the global markets supported the Partnership’s gold, energies, crude oil, gasoline and diesel shorts. The Partnership’s short exposure to coal and electricity generated gains in August as each maintained their downward trend despite short-term reversals in oil prices. September trading additionally produced profits as continued reports of weakened Chinese business activity and growing expectations of shrinking Chinese demand for commodities benefitted the Partnership’s short positions in oil and industrial metals. The theme of falling oil prices and overall depressed commodity demand continued to drive the Partnership’s trading successes during the fourth quarter as the Partnership realized gains from its shorts in natural gas, oil and metals. These profits were partially reduced by losses sustained from short positions in live cattle and December short-term trend reversals.

Although starting off the first quarter with positive momentum, currency trading produced net losses over the course of 2015 as heightened volatility and swift market corrections during the second and fourth quarters proved challenging for the

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Partnership’s trend-following approach. In January, long U.S. dollar positions against the Euro and UK pound each returned gains, which were augmented by positive returns from February trading in the foreign currency markets. This profitable run continued in March due to the Partnership’s short exposure to the Brazilian real which was negatively affected by the country’s continuing political scandals and economic troubles. The second quarter, however, produced a sharp reversal in trading returns. In April, the Partnership’s long U.S. dollar positions against several G10 markets suffered as the value of the Euro jumped approximately 6% from prior lows. Although gains realized from short exposure to the Japanese yen helped to offset these May losses, June trading experienced a continuing run of negative results on account of the Partnership’s U.S. dollar positioning. In July, the Partnership subsequently returned to profitability in the currencies sector as a long U.S. dollar trend arising from reports of favorable U.S. economic data and the prospect of higher U.S. interest rates benefitted the Partnership’s short positions in gold and foreign currencies relative to the U.S. dollar. With the U.S. dollar continuing to strengthen on account of investor flight from emerging market currencies to the comparative safety of the U.S., the Partnership’s continuing short exposure to foreign currencies, such as the Brazilian real, South Korean won and the Australian dollar, produced substantial returns in August. These gains were partially offset by losses sustained during September currency trading. The Partnership thereafter ended the year with moderately negative results from fourth-quarter currency trading as the Partnership experienced offsetting returns in October and November while December trading produced losses from a swift rallying of the Euro.

Trading in the credit sector, although having a neutral impact during most of the year, served as a slight drag on the Partnership’s overall performance during 2015. Protective positioning in investment and higher yield credit index swaps provided positive returns in February, but these gains were subsequently outweighed by moderate losses sustained during the remaining quarters of the year.

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2014

Net assets decreased $856,954 for the year ended December 31, 2014. This decrease was attributable to subscriptions in the amount of $3,190,548, redemptions in the amount of $51,478,138 and net income from operations of $47,430,636.

For the year ended December 31, 2014, the Partnership accrued or paid total expenses of $8,169,377, including $1,918,407 in servicing fees, $5,883,411 in General Partner administrative fees and Trading Advisor management fees, and $367,559 in other expenses. Interest of $212,816 was earned or accrued on the Partnership’s cash and cash equivalent investments.

The Net Asset Value of a Class A Unit increased by $798.40 to $3,506.22. The Net Asset Value of a Class B Unit increased by $798.40 to $3,506.23. The Net Asset Value of a Class A-2 Unit increased by $894.35 to $3,768.41. The Net Asset Value of a Class B-2 Unit increased by $894.39 to $3,768.48.

The Partnership’s investments produced overall noteworthy results in 2014, with particularly strong performance achieved in the fixed-income sector. The key themes that influenced the Partnership’s bond trading were the increasingly accommodative monetary policy of the ECB as well as the continued interventionist strategies employed by the United States and Japan. In January, existing long positions in French and Italian bond futures, as well as Euro-bund and Canadian contracts, provided the most significant returns. Long Italian and French positions thereafter buoyed the Partnership’s fixed-income results for March in the face of sharp reversals in both the Eurodollar and U.S. Treasury bond markets. Trading profits in the second quarter were similarly driven by the ECB’s accommodative stance relative to the continued stimulus tapering by the United States. As desire for higher yields increased investor demand back to the U.S. and other bond markets in May, the Partnership realized profits from its long U.S. and Australian bond positions. Although a long stake in U.S. Treasuries subsequently produced losses in June, corresponding long positions in European bonds offset these losses with the rallying of European markets. In July and August, the Partnership’s long positions in Europe and the United States generated positive returns as investors sought security in safe-haven assets and Federal Reserve Chair, Janet Yellen, and ECB President, Mario Draghi, respectively noted the commitment of the U.S. to low short-term interest rates and the ECB’s intention to pursue a more active interventionist stance to boost growth and prevent deflation. September and the first part of October subsequently brought notable volatility and losses, but bond trading ultimately ended the year on a strong note. The Partnership generated positive returns in each month of the fourth quarter from its long positions in the rallying Japanese and Canadian bond markets and as its investments proved well-timed to take advantage of the ECB’s first-ever purchases of asset-backed debt, continued deflationary risks, and increased stresses to oil producing countries from falling energy prices.

In contrast to the bond sector, the Partnership’s equity positions generated mixed results in 2014. Investor concern over the withdrawal of U.S. stimulus, the varied strategies of central banks, geopolitical developments and the arrival of lower input prices for energy and raw materials were the major performance drivers during this period. The Partnership started off the year with losses from its long positions as both the European and U.S. equity markets experienced declines and Germany’s DAX Index in particular was subject to sharp reversals due to the uncertainty borne out of the Russian-Ukrainian political conflict. After continuing to create losses in April following the bursting of a mini-stock bubble, equity trading provided substantial gains in the second quarter as the Partnership’s long positions in U.S. and European equities rose in conjunction with the S&P 500’s and the DAX index’s respective climbs to all-time highs. These long positions created losses in the third quarter, however, following the Argentine debt default that prompted a selloff in global equities and comments from Janet Yellen concerning stretched valuations in certain markets. The mixed-results pattern continued in the fourth quarter with its whipsaw market conditions. In October, investor anxiety over the end of the Federal Reserve’s asset purchasing program and the arrival of the first case of Ebola ever recorded in the United States brought a sharp fall in equity prices, which subsequently rebounded in November with the arrival of lower input prices for energy and raw materials. Conversely, lower energy prices and the resulting stresses they engendered for countries dependent on oil revenue prompted a global sell off in equities in December. By mid-month, equities once more rallied, this time on Janet Yellen’s remarks that there would be no upcoming surprises with respect to interest rates. The Partnership sustained losses during this volatile fourth quarter.

Commodity trading produced similarly mixed results. With respect to agriculturals, the Partnership realized modest gains overall with trading in specific months comprising a significant portion of the Partnership’s performance attribution from this sector. In June and July, long cattle and short corn and wheat positions were well-timed to take advantage of record-high futures prices for cattle and the downward trend of grain values which had spiked on earlier concerns over the harsh winter. Reversals in the grain markets, however, as well as in the longer trends seen in cocoa trading produced losses for the Partnership in October. With respect to energies, trading initially contributed modestly to the Partnership’s performance, but by the end of the third quarter, became increasingly profitable as fundamental demand and supply principles, in contrast to global risk appetite, appeared to drive the energy sector more than any other time since the financial crisis. The Partnership’s short positions in oil were particularly profitable during this period as energy prices, already suppressed in October on account of the strengthening U.S. dollar and weaker global growth, plummeted in November with OPEC’s decision to maintain levels of oil production despite the rapid decline in oil prices. The theme of falling energy prices persisted in December and the Partnership’s continued short positions remained favorable. In contrast to the Partnership’s favorable fourth-quarter run in the

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energy sector, metals trading accounted for a much smaller portion of the Partnership’s 2014 performance attribution and shorts in gold and silver produced losses due to fears of weakening growth and geopolitical instability in the Middle East.

Trading in currencies resulted in positive returns for the Partnership in 2014 with some of the key themes including the continuing growth of the U.S. economy, Europe’s and Japan’s stimulus initiatives and falling oil prices. Although currency trading started off to a slow start, the second half of the year yielded notable gains as short positions taken on the Japanese yen, Euro, and the currencies of other struggling economies added sizable returns in light of the currencies’ notable depreciation relative to the U.S. dollar.

The interest rates and credit sectors had a minor influence on performance in 2014 and, aside from metals, comprised the sectors with the smallest Partnership allocations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Introduction

Past Results Are Not Necessarily Indicative of Future Performance

The Partnership is a speculative commodity pool. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Partnership’s main line of business.

Market movements result in frequent changes in the fair market value of the Partnership’s open positions and, consequently, in its earnings and cash flow. The Partnership’s market risk is influenced by a wide variety of factors, including the level and volatility of interest rates, exchange rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Partnership’s open positions and the liquidity of the markets in which it trades.

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

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

Materiality, as used in this section “Quantitative and Qualitative Disclosures About Market Risk,” is based on an assessment of reasonably possible market movements and the potential losses caused by such movements, taking into account the leverage, optionality and multiplier features of the Partnership’s market sensitive instruments.

Quantifying the Partnership’s Trading Value at Risk

Quantitative Forward-Looking Statements

The following quantitative disclosures regarding the Partnership’s market risk exposures contain “forward-looking statements” within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act and Section 21E of the Exchange Act). All quantitative disclosures in this section are deemed to be forward-looking statements for purposes of the safe harbor, except for statements of historical fact.

The Partnership’s risk exposure in the various market sectors traded by the General Partner is quantified below in terms of Value at Risk. Due to the Partnership’s mark-to-market accounting, any loss in the fair value of the Partnership’s open positions is directly reflected in the Partnership’s earnings (realized or unrealized) and cash flow (at least in the case of exchange-traded contracts in which profits and losses on open positions are settled daily through variation margin).

For regulatory purposes, initial margin requirements have been used by the Partnership as the measure of its Value at Risk. For trading and internal risk monitoring purposes, a different approach based on simulated market movements is used. Initial

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margin requirements include a credit risk factor and a maintenance margin factor and thus overstate the maximum one-day loss reflected by the maintenance margin requirement by the amount of the credit risk factor used in setting initial margin requirements. Maintenance margin requirements are set by dealers, exchanges and OTC clearing counterparties to equal or exceed 95-99% of the maximum one-day losses in the fair value of any given contract incurred during the time period over which historical price fluctuations are researched for purposes of establishing margin levels. The maintenance margin levels are established by dealers, exchanges and OTC clearing counterparties using historical price studies as well as an assessment of current market volatility (including the implied volatility of the options on a given futures contract) and economic fundamentals to provide a probabilistic estimate of the maximum expected near-term one-day price fluctuation.

In the case of market sensitive instruments that are not exchange traded (almost exclusively currencies in the case of the Partnership), dealers’ margins have been used as Value at Risk.

The fair value of the Partnership’s futures and forward positions does not have any optionality component. However, the General Partner may also trade commodity options on behalf of the Partnership. The Value at Risk associated with options would be reflected in the margin requirement attributable to the instrument underlying each option.

In quantifying the Partnership’s Value at Risk, 100% positive correlation in the different positions held in each market risk category has been assumed. Consequently, the margin requirements applicable to the open contracts have simply been aggregated to determine each trading category’s aggregate Value at Risk. The diversification effects resulting from the fact that the Partnership’s positions are rarely, if ever, 100% positively correlated have not been reflected.

The Partnership’s Trading Value at Risk in Different Market Sectors

The following table indicates the average, highest and lowest amount of trading Value at Risk associated with the Partnership’s open positions by market category for the year ended December 31, 2016. During 2016, the Partnership’s average quarter-end capitalization was $157,262,652.

Average, highest and lowest Value at Risk amounts relate to the quarter-end amounts during the fiscal year. Average capitalization is the average of the Partnership’s capitalization at the end of each quarter during the fiscal year 2016.

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The following table indicates the average, highest and lowest amount of trading Value at Risk associated with the Partnership’s open positions by market category for the year ended December 31, 2015. During 2015, the Partnership’s average quarter-end capitalization was $195,664,056.

Average, highest and lowest Value at Risk amounts relate to the quarter-end amounts during the fiscal year. Average capitalization is the average of the Partnership’s capitalization at the end of each quarter during the fiscal year 2015.

Material Limitations on Value at Risk as an Assessment of Market Risk

The face value of the market sector instruments held by the Partnership is typically many times the applicable initial or maintenance margin requirement (maintenance margin requirements generally ranging between approximately 1% and 10% of contract face value) as well as many times the capitalization of the Partnership. The magnitude of the Partnership’s open positions creates a “risk of ruin” not typically found in most other investment vehicles. Because of the size of its positions, certain market conditions — unusual, but historically recurring from time to time — could cause the Partnership to incur severe losses over a short period of time. The foregoing Value at Risk table — as well as the past performance of the Partnership —gives no indication of this “risk of ruin.”

Non-Trading Risk

The Partnership has non-trading market risk on its foreign cash balances not needed for margin. However, these balances (as well as any market risk they represent) are immaterial.

The Partnership also has non-trading cash flow risk as a result of holding a substantial portion of its assets in U.S. government securities (Treasury Bills) and interest-bearing bank accounts. These cash and cash equivalents are placed with highly rated counterparties with a priority placed on preservation of capital and reputation (i.e., appropriate level of credit risk, market risk and reputation risk) and liquidity (i.e., appropriate level of liquidity risk).

Qualitative Disclosures Regarding Primary Trading Risk Exposures

The following qualitative disclosures regarding the Partnership’s market risk exposures — except for (i) those disclosures that are statements of historical fact and (ii) the descriptions of how the General Partner manages the Partnership’s primary market risk exposures — constitute forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. The Partnership’s primary market risk exposures as well as the strategies used and to be used by the General Partner for managing such exposures are subject to numerous uncertainties, contingencies and risks, any one of which could cause the actual results of the Partnership’s risk controls to differ materially from the objectives of such strategies. Government interventions, defaults and expropriations, illiquid markets, the emergence of dominant fundamental factors, political upheavals, changes in historical price relationships, an influx of new market participants, increased regulation and many other factors could result in material losses as well as in material changes to the risk exposures and the risk management strategies of the Partnership. There can be no assurance that the Partnership’s current market exposure and/or risk management strategies will not change materially or that any such strategies will be effective in either the short- or long-term. Investors must be prepared to lose all or substantially all of their investment in the Partnership.

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The following were the primary trading risk exposures of the Partnership as of December 31, 2016, by market sector.

Fixed Income. Interest rate movements directly affect the price of the sovereign bond futures positions held by the Partnership and indirectly the value of its stock index and currency positions. Interest rate movements in one country as well as relative interest rate movements between countries may materially impact the Partnership’s profitability. The Partnership’s primary interest rate exposure is to interest rate fluctuations in the United States, Germany, Australia, the UK and Japan. However, the Partnership also may take positions in futures contracts on the government debt of smaller nations. The General Partner anticipates that G-7 interest rates, both long-term and short-term, will remain the primary market exposure of the Partnership for the foreseeable future.

Currencies. Exchange rate risk is the principal market exposure of the Partnership. The Partnership’s currency exposure is to exchange rate fluctuations, primarily fluctuations which disrupt the historical pricing relationships between different currencies and currency pairs. These fluctuations are influenced by interest rate changes as well as political and general economic conditions. The Partnership trades in a large number of currencies, including cross-rates — i.e., positions between two currencies other than the U.S. dollar. As of December 31, 2016, the Partnership’s primary currency exposures were in the U.S. dollar versus the British Pound, Euro, Canadian Dollar, Australian Dollar, Korean Won, South African Rand, Brazilian Real and Swiss Franc. The primary exposure in the currency crosses were in the Australian Dollar versus Japanese Yen.

Stock Indices. The Partnership’s primary equity exposure, through stock index futures, is to equity price risk in the G-7 countries. As of December 31, 2016, the Partnership’s primary exposures were in the S&P 500, Nasdaq 100, Russell 2000, Korean Kospi and Australian SPI 200 Index. The Partnership is primarily exposed to the risk of adverse price trends or static markets in the major North American, European and Asian indices. (Static markets would not cause major market changes but could make it difficult for the Partnership to avoid numerous small losses.)

Metals. The AHL Diversified Program used for the Partnership trades precious and base metals. As of December 31, 2016, the Partnership’s primary metals market exposures were in gold, silver, platinum, copper, zinc, palladium and aluminum.

Agricultural. The Partnership’s primary commodities exposure is to agricultural price movements, which are often directly affected by severe or unexpected weather conditions. Cocoa, wheat, sugar, soyoil, soymeal and coffee accounted for the substantial bulk of the Partnership’s commodities exposure as of December 31, 2016.

Energy. The Partnership’s primary energy market exposure is to gas and oil price movements, often resulting from political developments in the Middle East and economic conditions worldwide. Energy prices are volatile and substantial profits and losses have been and are expected to continue to be experienced in this market. As of December 31, 2016, the main exposures were in natural gas, crude oil, heating oil, gasoline, and gas oil.

Qualitative Disclosures Regarding Non-Trading Risk Exposure

The following were the only non-trading risk exposures of the Partnership as of December 31, 2016.

Foreign Currency Balances. The Partnership’s primary foreign currency balance is in Euro. The Partnership controls the non-trading risk of these balances by regularly converting these balances back into U.S. dollars (no less frequently than twice a month).

Cash Positions. The Partnership’s only market exposure in instruments held other than for trading is in its cash portfolio. The Partnership holds only cash in U.S. Treasury Bills and interest-bearing bank accounts. This cash is placed with highly rated counterparties with a priority placed on preservation of capital and reputation (i.e., appropriate level of credit risk, market risk and reputation risk) and liquidity (i.e., appropriate level of liquidity risk) with durations no longer than 1 year.

Qualitative Disclosures Regarding Means of Managing Risk Exposure

Risk management is an essential component of AHL’s investment management process. AHL has put in place a risk management framework which is designed to identify, monitor and mitigate the portfolio, operational and outsourcing risks relevant to its operations. AHL’s risk management framework is part of, and is supported by, the overarching risk management framework of its parent company, Man Group plc. Key principles of AHL’s risk management framework include the segregation of functions and duties where material conflicts of interest may arise and having an appropriate degree of independent and senior management oversight of business activities. As part of this independent oversight, AHL’s activities are subject to regular review by an internal audit function.

The AHL Diversified Program employs a systematic, statistically based investment strategy that is designed to identify and capitalize on trends and other inefficiencies in markets around the world. Trading signals are generated and executed via a finely tuned trading and implementation infrastructure. This process is quantitative, meaning that investment decisions are

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entirely driven by mathematical models based on quantitative analysis of historical relationships. Portfolio risk management consists primarily of monitoring risk measures and ensuring the systems remain within prescribed limits. The major risk monitoring measures and focus areas include value-at-risk, stress testing, implied volatility, leverage, margin-to-equity ratios and net exposures to sectors and different currencies.

Diversification is also a key feature of AHL’s risk management, as well as its investment, process. As well as emphasizing sector and market diversification, the AHL Diversified Program has been constructed to achieve diversification by combining various investment strategies. The AHL Diversified Program is diversified across over 250 markets covering a wide range of sectors including, without limitation, currencies, bonds, energies, stock indices, interest rates, metals and agriculturals. Another important aspect of diversification is the fact that the various models generate signals across different timeframes, ranging from two to three days to several months. In line with the principle of diversification, the approach to portfolio construction and asset allocation is premised on the importance of deploying investment capital across the full range of sectors and markets. Particular attention is paid to correlation of markets and sectors, expected returns, trading costs and market liquidity. Portfolios are regularly reviewed and, when necessary, adjusted to reflect changes in these factors. AHL also has a systematic process for adjusting its market risk exposure in real time to reflect changes in the volatility, a measure of risk, of individual markets.

Item 8. Financial Statements and Supplementary Data.

Financial statements meeting the requirements of Regulation S-X are listed following this report as Exhibit 13.1 and are incorporated by reference into this Item 8.

The following summarized quarterly financial information presents the results of operations for the periods ended March 31, June 30, September 30 and December 31, 2016 and 2015. This information has not been audited.

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

On July 12, 2016, the General Partner, on behalf of the Partnership, transferred the Partnership’s audit work from Ernst & Young LLP, to an affiliate, Ernst & Young Ltd. This transfer was effective July 12, 2016.

There were no disagreements with respective independent registered public accounting firms on accounting and financial disclosure.

Item 9A. Controls and Procedures.

The General Partner, with the participation of the Partnership’s Principal Executive Officer and Principal Financial Officer, has evaluated the effectiveness of the design and operation of the Partnership’s disclosure controls and procedures as of the end of the fiscal year for which this Annual Report on Form 10-K is being filed. Based on such evaluation, the Partnership’s Principal Executive Officer and Principal Financial Officer have concluded that the Partnership’s disclosure controls and procedures were effective as of the fiscal year ended December 31, 2016.

Changes in Internal Control over Financial Reporting

Section 404 of the Sarbanes-Oxley Act of 2002 requires the General Partner to evaluate annually the effectiveness of its internal controls over financial reporting as of the end of each fiscal year, and to include a management report assessing the effectiveness of its internal control over financial reporting in all annual reports. There were no significant changes in the General Partner’s internal control over financial reporting during the three-month period ended December 31, 2016 that have materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

Management’s Annual Report on Internal Control over Financial Reporting

The General Partner is responsible for establishing and maintaining adequate internal control over the financial reporting of the Partnership. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, as a process designed by, or under the supervision of, a company’s principal executive and principal financial officers and effected by a company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the accounting principles generally accepted in the United States of America. The General Partner’s internal control over financial reporting includes those policies and procedures that:

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The management of the General Partner assessed the effectiveness of its internal control over financial reporting with respect to the Partnership as of December 31, 2016. In making this assessment, management used the criteria set forth by the

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Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013). Based on its assessment, management has concluded that, as of December 31, 2016, the General Partner’s internal control over financial reporting with respect to the Partnership is effective based on those criteria.

There were no significant changes in the General Partner’s internal controls with respect to the Partnership or in other factors applicable to the Partnership that could significantly affect these controls subsequent to the date of their evaluation.

Item 9B. Other Information.

None.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance.

(a, b)    Identification of Directors and Executive Officers

(i) As a limited partnership, the Partnership itself has no directors or executive officers. The Partnership’s affairs are managed by the General Partner. Man Investments (USA) Corp., a Delaware corporation, is the general partner of the Partnership.

Mr. Eric Burl is the president and principal executive officer of the General Partner and Mr. Michael Fagan is the principal financial officer of the General Partner. Their biographies are set forth below.

Eric Burl, born January, 1979, is Co-Head of Global Sales at Man Group. Additionally, Eric is a member of the Man Group Executive Committee and Head of Man Americas. He oversees all business and sales activities in North America. Previously he was Head of Managed Accounts at Man Group’s (“Man”) multi-manager business (which merged with FRM in 2012), where he led the teams responsible for business development, product management and structuring of Man’s proprietary managed account platform. Eric joined Man Investments in 2004 and has held a number of roles in Man’s multi-manager business including Head of structured products, portfolio construction, quantitative analysis and product strategy and business development. Prior to joining Man, Eric spent two years with UBS in London. Eric holds a BA (Hons) in management studies from the University of Nottingham and is CAIA certified.

Michael Fagan, born July 1978, joined Man in May 2014 and is Controller — Middle Office Accounting in the U.S. His main responsibilities are to oversee all accounting and investment management operations for single manager funds. Prior to joining Man, Michael worked at Continental Grain Company / The Arlon Group from 2011, with responsibility for all accounting & reporting aspects of their private equity and hedge funds. Prior to that Michael worked at Clearwater Capital Partners from 2007, a private equity firm focused on the Pan-Asian credit markets. Michael worked in the audit practice at McGladrey & Pullen starting in 2002, where he focused on a wide range of clients, and his career began at the Bank of New York. Michael holds a BS in Accountancy from Providence College. He is a Certified Public Accountant licensed in the State of New York.

(c)    Identification of Certain Significant Employees

None.

(d)    Family Relationships

None.

(e)    Business Experience

See Item 10 (a, b) above.

(f)    Involvement in Certain Legal Proceedings

None.

(g)    Promoters and Control Persons

Not applicable.

(h)    Code of Ethics

The Partnership has no employees, officers or directors and is controlled by the General Partner. The General Partner has adopted a Global Code of Ethics that applies to its principal executive officer and principal financial officer. A copy of this Global Code of Ethics may be obtained at no charge by written request to Man Investments (USA) Corp., 452 5^th Ave., 27^th Floor, New York, NY 10018 or by calling: (212) 649-6600 (ask for the Chief Legal Officer).

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(i)    Audit Committee Financial Expert

Because the Partnership has no employees or directors, the Partnership has no audit committee. The Partnership is managed by the General Partner. Mr. Michael Fagan, the principal financial officer for the General Partner, serves as the Partnership’s “audit committee financial expert.” Mr. Fagan is not independent of the management of the General Partner. The General Partner is not required to have, and does not have, independent directors.

Item 11. Executive Compensation.

The Partnership itself has no officers, directors or employees. None of the principals, officers or employees of the General Partner receive compensation from the Partnership. The General Partner invests all or substantially all of the Partnership’s assets in the Trading Company. The Trading Advisor makes all trading decisions for the Trading Company. The General Partner receives a monthly general partner administrative fee from the Partnership in an amount equal to 0.0833% of the month-end Net Asset Value of the Partnership (approximately a 1% annually). The Partnership pays the Trading Advisor, an affiliate of the General Partner, a monthly management fee in an amount equal to 0.1667% of the Partnership’s month-end Net Asset Value (approximately 2% annually) and 20% of any Net New Appreciation, described above under Item 1, achieved by the Partnership as of the end of each calendar month. The Trading Advisor may pay a portion of its management fees to the General Partner.

The officers and employees of the General Partner and Trading Advisor are compensated by the General Partner and Trading Advisor in their respective positions. These officers receive no other compensation from the Partnership. The Partnership has no compensation plans or arrangements relating to a change in control of either the Partnership, the General Partner or the Trading Advisor.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

(a)    Securities Authorized for Issuance under Equity Compensation Plans

None.

(b)    Security Ownership of Certain Beneficial Owners

The General Partner knows of no persons who own beneficially more than 5% of the Partnership’s Units. All of the Partnership’s general partner interest is held by the General Partner.

(c)    Security Ownership of Management

The Partnership has no officers or directors. Under the terms of the Limited Partnership Agreement, the Partnership’s affairs are managed by the General Partner. As of December 31, 2016, the General Partner’s interest in the Partnership was valued at $581,650 which constituted 0.42% of total partners’ capital.

As of December 31, 2016, no director, executive officer or member of the General Partner beneficially owned Units in the Partnership.

(d)    Changes in Control

There are no arrangements known to the Partnership or General Partner the operation of which would result in a change in control of the Partnership; provided, however, that pursuant to the Partnership’s Limited Partnership Agreement, the General Partner may admit additional or substitute general partners and may withdraw as general partner of the Partnership.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The Partnership paid the General Partner and Trading Advisor aggregate administrative and management fees of $4,744,252 for the year ended December 31, 2016. The Partnership paid the Trading Advisor $0 in incentive fees for the year ended

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December 31, 2016. The Partnership paid Man Investments Inc., an affiliate of the General Partner and Trading Advisor that serves as the lead placement agent for the Partnership, $1,588,234 in servicing fees for the year ended December 31, 2016. The General Partner’s interest in the Partnership earned net loss of $60,372 for the year ended December 31, 2016.

The Partnership has not and does not make any loans to the General Partner, its affiliates, their respective officers, directors or employees or the immediate family members of any of the foregoing, or to any entity, trust or other estate in which any of the foregoing has any interest, or to any other person (provided that the purchase of U.S. government instruments and the deposit of Partnership assets with banks, futures brokers and foreign exchange counterparties in connection with the trading operations of the Partnership are not considered to be loans).

None of the General Partner, its affiliates, their respective officers, directors and employees or the immediate family members of any of the foregoing, or any entity trust or other estate in which any of the foregoing has any interest has, to date, sold any asset, directly or indirectly, to the Partnership.

The Partnership has no directors, officers or employees and is managed by the General Partner. The General Partner is managed by its principals, none of whom is independent of the General Partner.

Item 14. Principal Accounting Fees and Services.

(1)    Audit Fees

The aggregate fees for professional services provided by Ernst & Young Ltd., and other member firms of the global Ernst and Young organization, the Partnership’s independent registered public accounting firm, for the audit of the Partnership’s annual financial statements and review of financial statements included in the Partnership’s quarterly reports for the years ended December 31, 2016 and 2015 were approximately $193,000 and $261,750, respectively.

(2)    Audit-Related Fees

There were no fees for assurance and related services rendered by Ernst & Young Ltd., and other member firms of the global Ernst and Young organization, for the years ended December 31, 2016 and 2015.

(3)    Tax Fees

The aggregate fees for services rendered by Ernst & Young Ltd., and other member firms of the global Ernst and Young organization for tax compliance, advice and planning services for the years ended December 31, 2016 and 2015 were approximately $136,000, respectively.

(4)    All Other Fees

None.

(5)    Pre-Approval Policies

Neither the Partnership nor the General Partner has an audit committee to pre-approve accountant and auditor fees and services. In lieu of an audit committee, the principals of the General Partner pre-approve all billings prior to the commencement of services.

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PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a)(1)    Financial Statements

The financial statements required by this Item are included herewith as Exhibit 13.1.

(a)(2)    Financial Statement Schedules

All Schedules are omitted for the reason that they are not required or are not applicable because equivalent information has been included in the financial statements or the notes thereto.

(a)(3)    Exhibits as required by Item 601 of Regulation S-K

The following exhibits are included herewith.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 29, 2017.

(Being the President, principal executive officer, and the principal financial officer of Man Investments (USA) Corp., in its capacity as the General Partner of the Registrant.)

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Man-AHL Diversified I L.P. Contents

Report of Independent Registered Public Accounting Firm

The General Partner and Limited Partners of Man-AHL Diversified I L.P.

We have audited the accompanying statement of financial condition of Man-AHL Diversified I L.P. (the “Partnership”) as of December 31, 2016, and the related statements of operations, changes in partners’ capital and cash flows for the year then ended. These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Partnership’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Man-AHL Diversified I L.P. at December 31, 2016, and the results of its operations, changes in its partners’ capital and its cash flows for the year then ended in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young Ltd.

Grand Cayman, Cayman Islands

March 29, 2017

F-2

Report of Independent Registered Public Accounting Firm

To the General Partner and Limited Partners of Man-AHL Diversified I L.P.

We have audited the accompanying statement of financial condition of Man-AHL Diversified I L.P. (the “Partnership”) as of December 31, 2015, and the related statements of operations, changes in partners’ capital and cash flows for each of the two years in the period ended December 31, 2015. These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Partnership’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Man-AHL Diversified I L.P. at December 31, 2015, and the results of its operations, changes in its partners’ capital and its cash flows for each of the two years in the period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young LLP

Chicago, Illinois

March 28, 2016

F-3

Man-AHL Diversified I L.P. (A Delaware Limited Partnership) Statements of financial condition

See accompanying notes and attached financial statements of Man-AHL Diversified Trading Company L.P.

F-4

Man-AHL Diversified I L.P. (A Delaware Limited Partnership) Statements of operations For the years ended December 31, 2016, 2015 and 2014

See accompanying notes and attached financial statements of Man-AHL Diversified Trading Company L.P.

F-5

Man-AHL Diversified I L.P. (A Delaware Limited Partnership) Statements of changes in partners’ capital For the years ended December 31, 2016, 2015 and 2014

Units and dollars have been rounded to the nearest whole number.

See accompanying notes and attached financial statements of Man-AHL Diversified Trading Company L.P.

F-6

Man-AHL Diversified I L.P. (A Delaware Limited Partnership) Statements of cash flows For the years ended December 31, 2016, 2015 and 2014

See accompanying notes and attached financial statements of Man-AHL Diversified Trading Company L.P.

F-7

Man-AHL Diversified I L.P. (A Delaware Limited Partnership) Notes to financial statements As of and for the years ended December 31, 2016, 2015 and 2014

1.    Organization of the partnership

Man-AHL Diversified I L.P. (a Delaware Limited Partnership) (the “Partnership”) was organized in September 1997 under the Delaware Revised Uniform Limited Partnership Act, and commenced operations on April 3, 1998, for the purpose of engaging in the speculative trading of futures and forward contracts and related instruments. The Partnership is a “feeder” fund in a “master-feeder” structure, whereby the Partnership invests substantially all of its assets in Man-AHL Diversified Trading Company L.P. (the “Trading Company”). Man Investments (USA) Corp. (the “General Partner”), a Delaware corporation, serves as the Partnership’s General Partner. The General Partner is a subsidiary of Man Group plc, a United Kingdom public limited company that is listed on the London Stock Exchange. The General Partner oversees the operations and management of the Partnership.

AHL Partners LLP (the “Advisor”), a limited liability partnership established in England and Wales, acts as trading advisor to the Partnership. The Advisor is an affiliate of the General Partner and a subsidiary of Man Group plc. The Advisor is registered with the Commodity Futures Trading Commission (“CFTC”) as a commodity trading adviser and commodity pool operator and is a member of the National Futures Association (“NFA”) in such capacities, in addition to registration with the Financial Conduct Authority in the United Kingdom.

Man Investments Holdings Limited, a United Kingdom holding company that is part of Man Group plc, is the sole shareholder of the Advisor, and Man Investments Holdings Inc., a Delaware corporation that is part of Man Group plc, is the sole shareholder of the General Partner.

The Partnership’s units are distributed through the Partnership or other selling agents, including Man Investments Inc. (“MII”), an affiliate of the Advisor and General Partner. MII is a registered broker-dealer and a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”).

The Partnership filed a registration statement under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which became effective in March 2008. The Partnership’s units are not, however, registered for sale through a public offering, and the General Partner does not intend to cause them to be so registered.

The Partnership offers two classes of units of limited partnership interests; Class A units are generally offered and Class B units are offered to retirement plan investors. Within Class A and Class B, units are issued in two separate series. They are Class A Series 1, Class A Series 2, Class B Series 1 and Class B Series 2. Except as described in Note 2 below in respect of fees, the classes of units are identical.

Through March 31, 2015, Citibank N.A. served as the administrator of the Partnership. As of April 1, 2015, The Bank of New York Mellon assumed the role of administrator of the Partnership.

2.    Significant accounting policies

The Partnership prepares its financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The General Partner has evaluated the structure, objectives and activities of the Partnership and the Trading Company and determined that the Partnership and the Trading Company meet the characteristics of an investment company. As such, these financial statements have applied the guidance as set forth in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 946, Financial Services – Investment Companies. The following is a summary of the significant accounting and reporting policies used in preparing the financial statements.

Use of Estimates – The preparation of financial statements in conformity with U.S. GAAP requires the General Partner to make estimates and assumptions that affect the reported amounts of assets and liabilities (and disclosure of contingent assets and liabilities) at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

F-8

Man-AHL Diversified I L.P. (A Delaware Limited Partnership) Notes to financial statements As of and for the years ended December 31, 2016, 2015 and 2014

Investment in Man-AHL Diversified Trading Company L.P. – The Partnership’s investment in the Trading Company is valued at the fair value of the Partnership’s proportionate interest in the net assets of the Trading Company. The fair value of the Partnership’s investment in the Trading Company approximates the carrying amounts presented in the statements of financial condition. The Partnership records its proportionate share of the Trading Company’s income, expenses, and realized and unrealized gains and losses. Investment transactions are recorded on a trade-date basis. In addition, the Partnership accrues its own expenses. The performance of the Partnership is directly affected by the performance of the Trading Company. Attached are the financial statements of the Trading Company, including the condensed schedules of investments, which are an integral part of these financial statements. Valuation of investments held by the Trading Company is discussed in the Trading Company’s notes to financial statements.

At December 31, 2016 and 2015, the Partnership owned 10,888.73 and 12,823.68 units, respectively, of the Trading Company. The Partnership’s aggregate ownership percentage of the Trading Company at December 31, 2016 and December 31, 2015 was 84.47% and 87.42%, respectively.

The Partnership is able to redeem its investment from the Trading Company on a monthly basis. As of December 31, 2016, the Partnership could redeem its investment without restriction at the month-end net asset value of the Trading Company.

Due from Man-AHL Diversified Trading Company L.P. – The amounts Due from Man-AHL Diversified Trading Company L.P. represent redemption requests made by the Partnership relating to its investment in the Trading Company. The requests have been received and recorded by the Trading Company but the proceeds have not been received by the Partnership. These amounts are ultimately due to limited partners of the Partnership as redemptions payable.

Expenses – The Advisor earns a monthly management fee in an amount equal to 0.1667% (2% annually) of the Partnership’s month-end Net Asset Value, as defined in the Limited Partnership Agreement (the “Agreement”). In addition, the General Partner earns a monthly general partner fee in an amount equal to 0.0833% (1% annually) of the month-end Net Asset Value of Class A Series 1 and Class B Series 1 units. The general partner fee is included in management fees in the statements of operations.

The Advisor also earns a monthly incentive fee equal to 20% of any Net New Appreciation, as defined in the Agreement, achieved by the Partnership. The incentive fee is retained by the Advisor even if subsequent losses are incurred; however, no subsequent incentive fees will be paid to the Advisor until any such trading losses are recouped by the Partnership. During the years ended December 31, 2016, 2015 and 2014, no incentive fees were earned by the Advisor.

The Partnership pays a monthly servicing fee to MII in an amount equal to 0.0833% (1.00% annually) of the month-end Net Asset Value of Class A Series 1 and Class B Series 1 units and to 0.0625% (0.75% annually) of the month-end Net Asset Value of Class A Series 2 and Class B Series 2 units. For all classes of units, MII serves as the placement agent for the Partnership.

Revenue recognition – Income and expenses are recognized on an accrual basis in the period in which they are incurred.

Derivative Contracts – The Partnership’s operating activities involve trading, indirectly through its investment in the Trading Company, in derivative contracts that involve varying degrees of market and credit risk. With respect to the Partnership’s investment in the Trading Company, the Partnership has limited liability, and, therefore, its maximum exposure to either market or credit loss is limited to the carrying value of its investment in the Trading Company, as set forth in the statements of financial condition.

Cash – Cash balances are held with Citibank N.A and The Bank of New York Mellon.

Subscriptions Received in Advance – Subscriptions received in advance are comprised of cash received prior to the statements of financial condition date for which units were issued on the first day of the following month. Subscriptions received in advance do not participate in the earnings of the Partnership until the related units are issued.

F-9

Man-AHL Diversified I L.P. (A Delaware Limited Partnership) Notes to financial statements As of and for the years ended December 31, 2016, 2015 and 2014

Net Income (Loss) Per Unit – Net income (loss) per unit of Class A Series 1, Class A Series 2, Class B Series 1, or Class B Series 2 partnership interest is equal to the net income (loss) per class divided by the weighted average number of units outstanding per class. Weighted average number of units outstanding is the average of the units outstanding for each day during the period.

Income Taxes – The Partnership is not subject to federal, state, or local income tax. Such taxes are the liabilities of the individual partners and the amounts thereof will vary depending on the individual situation of each partner. Accordingly, there is no provision for income taxes in the accompanying financial statements. ASC 740, Income Taxes, defines how uncertain tax positions should be recognized, measured, presented, and disclosed in the financial statements and is applied to all open tax years. The Partnership has evaluated tax positions taken or expected to be taken in the course of preparing the Partnership’s tax returns to determine whether the tax positions are more-likely-than-not to be sustained by the applicable tax authority. Based on this analysis of all tax jurisdictions and all open tax years subject to examination, there were no material tax positions not deemed to meet a more-likely-than-not-threshold. Therefore, no tax expense, including interest or penalties, was recorded for the years ended December 31, 2016, 2015 and 2014. To the extent that the Partnership records interest and penalties, they would be included in interest expense and other expenses, respectively, on the statements of operations. The following is the major tax jurisdiction for the Trading Company and the earliest tax year subject to examination: United States – 2013.

New Accounting Pronouncement – In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements –Going Concern (Subtopic 205-40) (ASU 2014-15). The pronouncement determines management’s responsibility regarding assessment of the Partnership’s ability to continue as a going concern, even if the Partnership’s liquidation is not imminent. Under this guidance, during each period in which financial statements are prepared, management needs to evaluate whether there are conditions or events that, in aggregate, raise substantial doubt about the Partnership’s ability to continue as a going concern within one year after the date the financial statements are issued. Substantial doubt exists if these conditions or events indicate that the Partnership will be unable to meet its obligations as they become due. If such conditions or events exist, management should develop a plan to mitigate or alleviate these conditions or events. Regardless of management’s plan to mitigate, certain disclosures must be made in the financial statements. ASU 2014-15 is effective for annual periods ending after December 15, 2016, however, early adoption is permitted. The adoption of the update had no impact on the Partnership’s financial statements.

3.    Limited partnership agreement

The General Partner and each limited partner share in the profits and losses of the Partnership in proportion to the amount of capital held by each partner. However, no limited partner is liable for obligations of the Partnership in excess of its capital subscription and net profits or losses, if any.

The Partnership’s units are continuously offered as of the first business day of each month at Net Asset Value, as defined in the Agreement. Limited partners may redeem any or all of their units as of the end of any month at Net Asset Value per unit on 10 days prior written notice to the General Partner. The Partnership will be dissolved on December 31, 2037, or upon the occurrence of certain events, as specified in the Agreement.

The General Partner is required to make and maintain a general partner investment in the Partnership in an aggregate amount equal to the lesser of 1.01% of the net aggregate capital subscriptions of all partners, or $500,000.

Distributions (other than redemptions of units), if any, are made on a pro-rata basis at the sole discretion of the General Partner. No distributions were declared or paid during the years ended December 31, 2016, 2015 and 2014.

Under the terms of the Agreement, the Partnership is liable for all costs associated with executing its business strategy. These costs include, but are not limited to, expenses associated with operations of the Partnership, such as management and incentive fees and other operating expenses, such as legal, audit, and tax return preparation fees.

F-10

Man-AHL Diversified I L.P. (A Delaware Limited Partnership) Notes to financial statements As of and for the years ended December 31, 2016, 2015 and 2014

4.    Financial guarantees

The Partnership enters into administrative and other professional service contracts that contain a variety of indemnifications. The Partnership’s maximum exposure under these arrangements is not known; however, the Partnership has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.

5.    Financial highlights

The following represents the ratios to average limited partners’ capital and other information for the years ended December 31, 2016, 2015 and 2014: