MAN AHL DIVERSIFIED I LP - Quarter Report: 2019 June (Form 10-Q)

Large Accelerated Filer

Accelerated Filer

Non-Accelerated Filer

Smaller reporting company

Emerging growth company

Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2019

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

For the transition period from to

Commission File number: 000-53043

Man-AHL Diversified I L.P.

(Exact name of registrant as specified in charter)

Delaware

06-1496634

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

c/o Man Investments (USA) Corp.

452 5^th Avenue, 27^th Floor

New York, NY

10018

(Address of principal executive offices)

(Zip Code)

(212) 649-6600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act.

Title of each class

Trading

Symbol(s)

Name of each exchange

on which registered

none

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 every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

Man-AHL Diversified I L.P.

Financial Statements


STATEMENTS OF FINANCIAL CONDITION (a)			3
STATEMENTS OF OPERATIONS (b)			4
STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL (b)			5
STATEMENTS OF CASH FLOWS (b)			6
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)			7

(a)	At June 30, 2019 (unaudited) and December 31, 2018

(b)	For the three month periods ended June 30, 2019 and 2018 (unaudited) and for the six month periods ended June 30, 2019 and 2018 (unaudited)

(c)	For the six month periods ended June 30, 2019 and 2018 (unaudited)

MAN-AHL DIVERSIFIED I L.P.

(A Delaware Limited Partnership)

STATEMENTS OF FINANCIAL CONDITION


	June 30, 2019
	(Unaudited)			December 31, 2018
ASSETS
Investment in Man-AHL Diversified Trading Company L.P.	$	91,837,486		$	100,436,652
Due from Man-AHL Diversified Trading Company L.P.		1,896,322			5,471,154

Total assets	$	93,733,808		$	105,907,806

LIABILITIES AND PARTNERS’ CAPITAL
LIABILITIES:
Redemptions payable	$	1,896,322		$	5,471,154
Management fees payable		229,785			257,965
Servicing fees payable		76,870			86,479
Accrued expenses and other liabilities		452,729			355,424

Total liabilities		2,655,706			6,171,022

PARTNERS’ CAPITAL:
General Partner - Class A Series 1 (186.37 units outstanding at June 30, 2019 and December 31, 2018)		680,147			629,813
Limited Partners - Class A Series 1 (16,108.47 and 18,598.71 units outstanding at June 30, 2019 and December 31, 2018, respectively)		58,785,694			62,850,528
Limited Partners - Class A Series 2 (961.38 and 1,857.36 units outstanding at June 30, 2019 and December 31, 2018, respectively)		3,989,574			7,092,725
Limited Partners - Class B Series 1 (7,569.51 and 8,630.5 units outstanding at June 30, 2019 and December 31, 2018, respectively)		27,622,687			29,163,718

Total partners’ capital		91,078,102			99,736,784

Total liabilities and partners’ capital	$	93,733,808		$	105,907,806

NET ASSET VALUE PER OUTSTANDING UNIT OF PARTNERSHIP INTEREST - CLASS A Series 1	$	3,649.37	*	$	3,379.30	*

NET ASSET VALUE PER OUTSTANDING UNIT OF PARTNERSHIP INTEREST - CLASS A Series 2	$	4,149.84	*	$	3,818.72	*

NET ASSET VALUE PER OUTSTANDING UNIT OF PARTNERSHIP INTEREST - CLASS B Series 1	$	3,649.21	*	$	3,379.15	*

*	Difference in net asset value recalculation and net asset value stated is caused by rounding differences.

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

MAN-AHL DIVERSIFIED I L.P.

(A Delaware Limited Partnership)

STATEMENTS OF OPERATIONS (UNAUDITED)


	For the three months ended						For the six months ended
	June 30,						June 30,
	2019			2018			2019			2018
NET INVESTMENT INCOME (LOSS) ALLOCATED FROM MAN-AHL DIVERSIFIED TRADING COMPANY L.P.:
Interest income	$	485,296		$	424,476		$	960,992		$	762,378
Brokerage commissions		(56,069	)		(78,381	)		(95,818	)		(154,988	)
Interest expense		(40,481	)		(74,358	)		(75,301	)		(129,674	)
Administration fees		(16,964	)		(16,305	)		(33,729	)		(34,662	)
Prof essional fees		(39,601	)		(34,744	)		(105,038	)		(74,029	)
Shareholder expenses		(35,143	)		(39,322	)		(72,011	)		(88,046	)
Other expenses		(12,989	)		(22,077	)		(26,865	)		(43,265	)

Net investment income (loss) allocated from Man-AHL Diversified Trading Company L.P.		284,049			159,289			552,230			237,714

PARTNERSHIP EXPENSES:
Management fees		702,109			831,560			1,408,345			1,714,110
Servicing fees		235,354			278,832			472,215			574,744
Professional fees		58,170			40,349			128,660			95,965
Other expenses		45,736			45,786			91,388			93,644

Total partnership expenses		1,041,369			1,196,527			2,100,608			2,478,463

Net investment loss		(757,320	)		(1,037,238	)		(1,548,378	)		(2,240,749	)

REALIZED AND UNREALIZED GAINS (LOSSES) ON TRADING ACTIVITIES ALLOCATED FROM MAN-AHL DIVERSIFIED TRADING COMPANY L.P.:
Net realized trading gains (losses) on closed contracts/agreements and foreign currency transactions		7,710,494			(703,620	)		9,571,368			(5,324,878	)
Net change in unrealized trading gains (losses) on securities		12,925			24,373			49,414			35,885
Net change in unrealized trading gains (losses) on open contracts/agreeements and translation of foreign currency		(64,466	)		1,143,065			(915,575	)		1,981,743

Net gains (losses) on trading activities allocated from Man-AHL Diversified Trading Company L.P.		7,658,953			463,818			8,705,207			(3,307,250	)

NET INCOME (LOSS)	$	6,901,633		$	(573,420	)	$	7,156,829		$	(5,547,999	)

NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST (based on weighted average units outstanding during the period):
CLASS A Series 1	$	259.83		$	(17.43	)	$	257.59		$	(161.89	)

CLASS A Series 2	$	289.87		$	(8.15	)	$	291.53		$	(157.72	)

CLASS B Series 1	$	259.59		$	(16.97	)	$	255.77		$	(160.50	)

CLASS B Series 2	$	—		$	(7.19	)	$	—		$	(156.40	)

WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING DURING THE PERIOD:
CLASS A Series 1		16,979.93			22,065.35			17,775.62			22,196.50

CLASS A Series 2		1,547.14			2,103.36			1,701.35			2,103.48

CLASS B Series 1		7,863.11			10,097.95			8,140.02			10,071.37

CLASS B Series 2		—			41.15			—			41.15

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

MAN-AHL DIVERSIFIED I L.P.

(A Delaware Limited Partnership)

STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL

FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND 2018 (UNAUDITED)


	CLASS A Series 1											CLASS A Series 2						CLASS B Series 1						CLASS B Series 2					TOTAL
	Limited						General					Limited						Limited						Limited
	Partners						Partner					Partners						Partners						Partners
	Amount			Units			Amount			Units		Amount			Units			Amount			Units			Amount			Units		Amount			Units
PARTNERS’ CAPITAL January 1, 2019	$	62,850,528			18,599		$	629,813			186	$	7,092,725			1,857		$	29,163,718			8,630		$	—			—	$	99,736,784			29,272
Subscriptions		75,000			21			—			—		—			—			41,699			13			—			—		116,699			34
Transfers		32,658			10			—			—		—			—			(32,658	)		(10	)		—			—		—			—
Redemptions		(8,701,035	)		(2,522	)		—			—		(3,599,155	)		(896	)		(3,632,020	)		(1,063	)		—			—		(15,932,210	)		(4,481	)
Net income (loss)		4,528,543			—			50,334			—		496,004			—			2,081,948			—			—			—		7,156,829			—

PARTNERS’ CAPITAL June 30, 2019	$	58,785,694			16,108		$	680,147			186	$	3,989,574			961		$	27,622,687			7,570			—			—	$	91,078,102			24,825

PARTNERS’ CAPITAL January 1, 2018	$	76,114,706			22,063		$	642,973			186	$	8,121,018			2,109		$	34,560,968			10,018		$	158,432			41	$	119,598,097			34,417
Subscriptions		1,592,053			471			—			—		203,569			55			1,213,941			361			—			—		3,009,563			887
Redemptions		(4,451,374	)		(1,345	)		—			—		(304,882	)		(83	)		(1,908,079	)		(573	)		—			—		(6,664,335	)		(2,001	)
Net income (loss)		(3,563,356	)		—			(29,972	)		—		(331,753	)		—			(1,616,482	)		—			(6,436	)		—		(5,547,999	)		—

PARTNERS’ CAPITAL June 30, 2018	$	69,692,029			21,189		$	613,001			186	$	7,687,952			2,081		$	32,250,348			9,806		$	151,996			41	$	110,395,326			33,303

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.

MAN-AHL DIVERSIFIED I L.P.

(A Delaware Limited Partnership)

STATEMENTS OF CASH FLOWS (UNAUDITED)


	For the six months ended
	June 30,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	7,156,829		$	(5,547,999	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Purchases of investments in Man-AHL Diversified Trading Company L.P.		(57,657	)		(608,934	)
Sales of investments in Man-AHL Diversified Trading Company L.P.		21,489,092			6,086,422
Net gain (loss) on trading activities and net investment loss allocated from investment in Man-AHL Diversified Trading Company L.P.		(9,257,437	)		3,069,536
Changes in assets and liabilities:
Management fees payable		(28,180	)		(21,047	)
Servicing fees payable		(9,609	)		(7,046	)
Accrued expenses and other liabilities		97,305			18,125

Net cash provided by operating activities		19,390,343			2,989,057

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from subscriptions		116,699			3,009,563
Payments on redemptions		(19,507,042	)		(5,998,620	)

Net cash used in financing activities		(19,390,343	)		(2,989,057	)

NET INCREASE (DECREASE) IN CASH		—			—

CASH - Beginning of period		—			—


CASH - End of period	$	—		$	—

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

MAN-AHL DIVERSIFIED I L.P.

(A Delaware Limited Partnership)

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

The accompanying unaudited financial statements, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of Man-AHL Diversified I L.P.’s (a Delaware Limited Partnership) (the “Partnership”) financial condition at June 30, 2019, and the results of its operations for the three and six month periods ended June 30, 2019 and 2018. These financial statements present the results of interim periods. These financial statements should be read in conjunction with the audited financial statements and notes included in the Partnership’s annual report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) for the year ended December 31, 2018. The December 31, 2018 information has been derived from the audited financial statements as of December 31, 2018.

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 Limited, a United Kingdom private limited company that is part of Man Group plc, is the managing member 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.

The Bank of New York Mellon serves as the administrator to 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.

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 June 30, 2019 and December 31, 2018, the Partnership owned 5,473.39 and 6,606.11 units, respectively, of the Trading Company. The Partnership’s aggregate ownership percentage of the Trading Company at June 30, 2019 and December 31, 2018 was 77.89% and 79.94%, respectively.

The Partnership is able to redeem its investment from the Trading Company on a monthly basis. As of June 30, 2019 and December 31, 2018, 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 three and six month periods ended June 30, 2019 and 2018, 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 expense 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.

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 three and six month periods ended June 30, 2019 and 2018. 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 – 2016.

Recent Accounting Pronouncement — In August 2018, the FASB issued Accounting Standards Update (“ASU”) No. 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The amendments in ASU 2018-13 modify the disclosure requirements in Topic 820 of the disclosure framework. The modifications include the removal to disclose the amount of and reason for transfers between Level I and Level II of the fair value hierarchy, the policy for timing of transfers between levels, the valuation processes for Level III fair value measurements, and the changes in unrealized gains and losses for the period included in earnings for recurring Level III fair value measurements held at the end of the reporting period. Also, in lieu of a roll forward for Level III fair value measurements, a nonpublic entity is required to disclose transfers into and out of Level III of the fair value hierarchy and purchases and issues of Level III assets and liabilities. Additionally, for investments for certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an investee’s assets and the date when restrictions from redemptions might lapse only if the investee has communicated the timing to the entity or announced the timing publicly. ASU 2018-13 is effective for fiscal years beginning December 15, 2019 with early adoption permitted. Management is currently evaluating the impact, if any, of applying ASU 2018-13.

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 three or six month periods ended June 30, 2019 and 2018.

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.

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 three and six month periods ended June 30, 2019 and 2018:


	For the three months ended June 30, 2019									For the three months ended June 30, 2018
	Class A			Class A			Class B			Class A			Class A			Class B			Class B
	Series 1			Series 2			Series 1			Series 1			Series 2			Series 1			Series 2
Per unit operating performance:
Beginning net asset value	$	3,391.30		$	3,844.32		$	3,391.15		$	3,305.83		$	3,700.74		$	3,305.68		$	3,700.80

Income (loss) from investment operations:
Net investment income (loss)		(29.50	)		(22.07	)		(29.54	)		(30.95	)		(22.99	)		(30.95	)		(22.96	)
Net realized and unrealized gains (losses) on trading activities		287.57			327.59			287.60			14.21			15.82			14.22			15.78

Total income (loss) from investment operations		258.07			305.52			258.06			(16.74	)		(7.17	)		(16.73	)		(7.18	)

Ending net asset value	$	3,649.37		$	4,149.84		$	3,649.21		$	3,289.09		$	3,693.57		$	3,288.95		$	3,693.62

Ratios to average partners’ capital¹:
Expenses other than incentive fees		5.42	%		4.59	%		5.41	%		5.29	%		3.99	%		5.27	%		3.96	%

Total expenses		5.42	%		4.59	%		5.41	%		5.29	%		3.99	%		5.27	%		3.96	%

Net investment income (loss)		(3.34	)%		(2.21	)%		(3.34	)%		(3.77	)%		(2.50	)%		(3.77	)%		(2.50	)%

Total return²:
Total return before incentive fees		7.61	%		7.95	%		7.61	%		(0.51	)%		(0.19	)%		(0.51	)%		(0.19	)%

Total return after incentive fees		7.61	%		7.95	%		7.61	%		(0.51	)%		(0.19	)%		(0.51	)%		(0.19	)%


	For the six months ended June 30, 2019									For the six months ended June 30, 2018
	Class A			Class A			Class B			Class A			Class A			Class B			Class B
	Series 1			Series 2			Series 1			Series 1			Series 2			Series 1			Series 2
Per unit operating performance:
Beginning net asset value	$	3,379.30		$	3,818.72		$	3,379.15		$	3,449.91		$	3,849.96		$	3,449.76		$	3,850.01

Income (loss) from investment operations:
Net investment income (loss)		(57.75	)		(42.47	)		(57.70	)		(66.44	)		(50.41	)		(66.31	)		(50.38	)
Net realized and unrealized gains (losses) on trading activities		327.82			373.59			327.76			(94.38	)		(105.98	)		(94.50	)		(106.01	)

Total income (loss) from investment operations		270.07			331.12			270.06			(160.82	)		(156.39	)		(160.81	)		(156.39	)

Ending net asset value	$	3,649.37		$	4,149.84		$	3,649.21		$	3,289.09		$	3,693.57		$	3,288.95		$	3,693.62

Ratios to average partners’ capital¹:
Expenses other than incentive fees		5.41	%		4.39	%		5.39	%		5.25	%		3.97	%		5.24	%		3.94	%

Total expenses		5.41	%		4.39	%		5.39	%		5.25	%		3.97	%		5.24	%		3.94	%

Net investment income (loss)		(3.37	)%		(2.20	)%		(3.37	)%		3.94	%		(2.67	)%		(3.93	)%		(2.67	)%

Total return²:
Total return before incentive fees		7.99	%		8.67	%		7.99	%		(4.66	)%		(4.06	)%		(4.66	)%		(4.06	)%

Total return after incentive fees		7.99	%		8.67	%		7.99	%		(4.66	)%		(4.06	)%		(4.66	)%		(4.06	)%

¹	Includes amounts allocated from the Trading Company. Ratios have been annualized.

²	Total return is for the period indicated and has not been annualized.

Financial highlights are calculated for limited partners taken as a whole for each series. An individual partner’s returns and ratios may vary from these returns and ratios based on the timing of capital transactions.

6.	SUBSEQUENT EVENTS

For the period subsequent to June 30, 2019, through August 14, 2019, the date the financial statements were issued, the Partnership recorded limited partner subscriptions of $58,201 and limited partner redemptions of $589,258.

The General Partner has evaluated the impact of subsequent events on the Partnership through August 14, 2019, the date financial statements were issued, and noted no subsequent events that require adjustment to or disclosure in these financial statements, except as noted above.

Man-AHL Diversified Trading Company L.P.

Financial Statements


STATEMENTS OF FINANCIAL CONDITION (a)			12
CONDENSED SCHEDULES OF INVESTMENTS (a)			13
STATEMENTS OF OPERATIONS (b)			15
STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL (b)			16
STATEMENTS OF CASH FLOWS (c)			17
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)			18

(a)	At June 30, 2019 (unaudited) and December 31, 2018

(b)	For the three months periods ended June 30, 2019 and 2018 (unaudited) and for the six months periods ended June 30, 2019 and 2018 (unaudited)

(c)	For the six months periods ended June 30, 2019 and 2018 (unaudited)

MAN-AHL DIVERSIFIED TRADING COMPANY L.P.

(A Delaware Limited Partnership)

STATEMENTS OF FINANCIAL CONDITION


	June 30, 2019
	(Unaudited)		December 31, 2018
ASSETS
Equity in trading accounts:
Net unrealized trading gains on open futures contracts	$	7,058,228	$	6,596,048
Net unrealized trading gains on open forward contracts		—		1,390,649
Net unrealized trading gains on open swap agreements		5,722,727		3,409,208
Net premiums paid on credit default swap agreements		5,566,426		—
Due from brokers		16,640,886		14,621,567

Total equity in trading accounts		34,988,267		26,017,472
Cash and cash equivalents		5,370,339		7,258,493
Investment in securities, at fair value (cost $82,475,738 and $100,492,099 at June 30, 2019 and December 31, 2018, respectively)		82,542,434		100,496,680

Total assets	$	122,901,040	$	133,772,645

LIABILITIES AND PARTNERS’ CAPITAL
LIABILITIES:
Net unrealized trading losses on open forward contracts	$	2,742,304	$	—
Net unrealized trading losses on open swap agreements		—		223,991
Net premiums received on credit default swap agreements		—		1,171,839
Redemptions payable to Man-AHL Diversified I L.P.		1,896,322		5,471,154
Redemptions payable to Man-AHL Diversified II L.P.		—		890,984
Accrued expenses and other liabilities		361,992		375,777

Total liabilities		5,000,618		8,133,745

PARTNERS’ CAPITAL:
Limited Partners (7,026.7 and 8,263.75 units outstanding at June 30, 2019 and December 31, 2018, respectively)		117,900,422		125,638,900

Total partners’ capital		117,900,422		125,638,900

Total liabilities and partners’ capital	$	122,901,040	$	133,772,645

NET ASSET VALUE PER OUTSTANDING UNIT OF PARTNERSHIP INTEREST	$	16,778.91	$	15,203.61

See notes to financial statements.

MAN-AHL DIVERSIFIED TRADING COMPANY L.P.

(A Delaware Limited Partnership)

CONDENSED SCHEDULES OF INVESTMENTS


	June 30, 2019 (Unaudited)						December 31, 2018
				Percent of						Percent of
				Partners’						Partners’
	Fair Value			Capital			Fair Value			Capital
FUTURES CONTRACTS - Long:
Agricultural	$	(103,049	)		(0.1	)	$	50,531			0.0
Currencies		(72,354	)		(0.1	)		(36,231	)		(0.0	)
Energy		120,489			0.1			(378,353	)		(0.3	)
Indices		1,094,039			0.9			399,777			0.3
Interest Rates		4,988,184			4.3			3,682,036			3.0
Metals		829,010			0.7			244,730			0.2

Total futures contracts - long		6,856,319			5.8			3,962,490			3.2

FUTURES CONTRACTS - Short:
Agricultural	$	192,700			0.2			477,626			0.4
Currencies		(861	)		(0.0	)		1,609			0.0
Energy		257,341			0.2			1,206,914			0.9
Indices		41,259			0.0			824,586			0.7
Interest Rates		—			—			(530	)		(0.0	)
Metals		(288,530	)		(0.2	)		123,353			0.1

Total futures contracts - short		201,909			0.2			2,633,558			2.1

NET UNREALIZED TRADING GAINS (LOSSES) ON OPEN FUTURES CONTRACTS	$	7,058,228			6.0		$	6,596,048			5.3

FORWARD CONTRACTS - Long:
Australian dollars	$	378,806			0.3		$	(260,370	)		(0.2	)
Brazilian real		333,765			0.3			(11,038	)		(0.0	)
Mexican peso		(10,141	)		(0.0	)		346,308			0.3
Turkish lira		137,906			0.1			28,240			0.0
Metal		268,618			0.2			116,062			0.1
New Zealand dollars		592,495			0.5			(63,678	)		(0.1	)
South African rand		281,249			0.2			(51,666	)		(0.0	)
South Korean won		40,905			0.0			94,082			0.1
U.K. pound		256,401			0.2			49,189			0.0
Other		1,890,390			1.7			1,405,662			1.1

Total long forward contracts vs USD		4,170,394			3.5			1,652,791			1.3

FORWARD CONTRACTS - Short:
Australian dollars	$	(596,404	)		(0.5	)	$	430,295			0.3
Brazilian real		(707,440	)		(0.6	)		(55,752	)		(0.0	)
Mexican peso		(895,799	)		(0.8	)		(437,397	)		(0.3	)
Turkish lira		(39,640	)		(0.0	)		(10,202	)		(0.0	)
Metal		(17,256	)		(0.0	)		(95,391	)		(0.1	)
New Zealand dollars		(859,184	)		(0.7	)		63,395			0.1
South African rand		(156,486	)		(0.1	)		(10,572	)		(0.0	)
South Korean won		(543,088	)		(0.5	)		(179,312	)		(0.1	)
U.K. pound		(289,044	)		(0.2	)		(124,243	)		(0.1	)
Other		(2,763,738	)		(2.4	)		(612,335	)		(0.6	)

Total short forward contracts vs USD		(6,868,079	)		(5.8	)		(1,031,514	)		(0.8	)

Forward contracts - Cross currencies		107,294			0.1			373,092			0.3
Forward contracts - Metal non USD		(151,913	)		(0.1	)		396,280			0.3

		(44,619	)		0.0			769,372			0.6

NET UNREALIZED TRADING GAINS (LOSSES) ON OPEN FORWARD CONTRACTS	$	(2,742,304	)		(2.3	)	$	1,390,649			1.1

See notes to financial statements.

MAN-AHL DIVERSIFIED TRADING COMPANY L.P.

(A Delaware Limited Partnership)

CONDENSED SCHEDULES OF INVESTMENTS (CONTINUED)


			June 30, 2019 (Unaudited)						December 31, 2018
						Percent of						Percent of
						Partners’						Partners’
	Principal		Fair Value			Capital			Fair Value			Capital
SWAP AGREEMENTS - Long:
Credit default swaps - Buy protection centrally cleared (upfront premiums received $nil and $1,171,839, as of June 30, 2019 and December 31, 2018, respectively)			$	—			—		$	(129,311	)		(0.1	)
Interest rate swaps
Brazilian Real (range of expirations: January 4, 2021 - January 4, 2021 and January 2, 2019 - January 4, 2021, as of June 30, 2019 and December 31, 2018, respectively)				24,671,181			20.9			22,028,139			17.5
Other interest rate swaps				4,476,689			3.8			1,655,690			1.3

Total swap agreements - long				29,147,870			24.7			23,554,518			18.7

SWAP AGREEMENTS - Short:
Credit default swaps - Sell protection centrally cleared (upfront premiums paid $5,566,426 and $nil, as of June 30, 2019 and December 31, 2018, respectively)				601,347			0.5			—			—
Interest rate swaps
Brazilian Real (range of expirations: January 4, 2021 - January 4, 2021 and January 2, 2019 - January 4, 2021, as of June 30, 2019 and December 31, 2018, respectively)				(20,882,862	)		(17.7	)		(18,548,398	)		(14.8	)
Other interest rate swaps				(3,143,628	)		(2.7	)		(1,820,903	)		(1.4	)

Total swap agreements - short				(23,425,143	)		(19.9	)		(20,369,301	)		(16.2	)

NET UNREALIZED TRADING GAINS/(LOSSES) ON OPEN SWAP AGREEMENTS			$	5,722,727			4.8		$	3,185,217			2.5

NET UNREALIZED TRADING GAINS/(LOSSES) ON OPEN CONTRACTS/AGREEMENTS			$	10,038,651			8.5		$	11,171,914			8.9

U.S. GOVERNMENT SECURITIES - Long:
United States Treasury Bill 0% 06/20/19		8,000,000	$	—			—		$	7,909,098			6.3
United States Treasury Bill 0% 01/10/19		10,000,000		—			—			9,995,142			8.0
United States Treasury Bill 0% 02/21/19		32,000,000		—			—			31,895,549			25.4
United States Treasury Bill 0% 03/14/19		40,000,000		—			—			39,816,449			31.6
United States Treasury Bill 0% 06/13/19		11,000,000		—			—			10,880,442			8.7
United States Treasury Bill 0% 10/10/19		42,000,000		41,757,082			35.4			—			—
United States Treasury Bill 0% 11/07/19		4,000,000		3,970,817			3.4			—			—
United States Treasury Bill 0% 08/22/19		25,000,000		24,925,277			21.1			—			—
United States Treasury Bill 0% 12/12/19		12,000,000		11,889,258			10.1			—			—

Total U.S. government securities - long				82,542,434			70.0			100,496,680			80.0

TOTAL INVESTMENT IN SECURITIES (COST $82,475,738 and $100,492,099 at June 30, 2019 and December 31, 2018, respectively)			$	82,542,434			70.0		$	100,496,680			80.0

See notes to financial statements.

MAN-AHL DIVERSIFIED TRADING COMPANY L.P.

(A Delaware Limited Partnership)

STATEMENTS OF OPERATIONS (UNAUDITED)


	For the three months ended						For the six months ended
	June 30,						June 30,
	2019			2018			2019			2018
NET INVESTMENT INCOME:
Interest income	$	615,865		$	507,074		$	1,211,754		$	906,951

Total investment income		615,865			507,074			1,211,754			906,951

EXPENSES
Brokerage commissions		71,204			93,576			121,008			184,226
Interest expense - brokers		51,434			88,962			95,132			154,426
Administration fees		21,530			19,482			42,532			41,206
Professional fees		50,267			41,500			132,187			87,987
Shareholder expenses		44,606			46,969			90,787			104,625
Other expenses		16,487			26,338			33,868			51,416

Total expenses		255,528			316,827			515,514			623,886

Net investment income (loss)		360,337			190,247			696,240			283,065

NET REALIZED AND UNREALIZED GAINS (LOSSES) ON TRADING ACTIVITIES:
Net realized trading gains (losses) on closed contracts/agreements and foreign currency transactions		9,813,826			(837,605	)		12,189,143			(6,267,242	)
Net change in unrealized gains (losses) on translation of foreign currency		(8,924	)		(82,059	)		(41,889	)		(262,186	)
Net change in unrealized trading gains (losses) on investments in securities		16,405			29,115			62,115			42,738
Net change in unrealized trading gains (losses) on open contracts/agreements		(74,058	)		1,475,086			(1,133,263	)		2,587,207

Net gain (loss) on trading activities		9,747,249			584,537			11,076,106			(3,899,483	)

NET INCOME (LOSS)	$	10,107,586		$	774,784		$	11,772,346		$	(3,616,418	)

NET INCOME (LOSS) PER UNIT OF PARTNERSHIP INTEREST (based on weighted average units outstanding during the period)	$	1,311.07		$	81.19		$	1,479.26		$	(378.32	)

WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING DURING THE PERIOD		7,709.40			9,543.25			7,958.29			9,559.11

See notes to financial statements.

MAN-AHL DIVERSIFIED TRADING COMPANY L.P.

(A Delaware Limited Partnership)

STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL (UNAUDITED)

FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND 2018


	Limited Partners						General Partner				Total
	Amount			Units			Amount		Units		Amount			Units
PARTNERS’ CAPITAL - January 1, 2019	$	125,638,900			8,264		$	—		—	$	125,638,900			8,264

Subscriptions		267,658			17			—		—		267,658			17
Redemptions		(19,778,482	)		(1,254	)		—		—		(19,778,482	)		(1,254	)
Net income (loss)		11,772,346			—			—		—		11,772,346			—

PARTNERS’ CAPITAL - June 30, 2019	$	117,900,422			7,027		$	—		—	$	117,900,422			7,027

PARTNERS’ CAPITAL - January 1, 2018	$	142,156,033			9,569		$	—		—	$	142,156,033			9,569

Subscriptions		3,644,000			252			—		—		3,644,000			252
Redemptions		(7,247,061	)		(501	)		—		—		(7,247,061	)		(501	)
Net income (loss)		(3,616,418	)		—			—		—		(3,616,418	)		—

PARTNERS’ CAPITAL - June 30, 2018	$	134,936,554			9,320		$	—		—	$	134,936,554			9,320

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

See notes to financial statements.

MAN-AHL DIVERSIFIED TRADING COMPANY L.P.

(A Delaware Limited Partnership)

STATEMENTS OF CASH FLOWS (UNAUDITED)


	For the six months ended
	June 30,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	11,772,346		$	(3,616,418	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Purchases of investments in securities		(85,913,911	)		(145,887,494	)
Amortization of premium/discount on securities		(1,041,008	)		(769,505	)
Sales of investments in securities		104,971,280			137,000,000
Net change in unrealized trading (gains) losses on investments in securities		(62,115	)		(42,738	)
Net change in unrealized trading (gains) losses on open contracts/agreements		1,133,263			(2,587,207	)
Changes in assets and liabilities:
Due from brokers		(2,019,319	)		5,745,409
Net premiums paid on credit default swap agreements		(5,566,426	)		5,906,211
Net premiums received on credit default swap agreements		(1,171,839	)		828,640
Due to brokers		—			2,690,331
Accrued expenses and other liabilities		(13,785	)		44,211

Net cash provided by (used in) operating activities		22,088,486			(688,560	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from subscriptions		267,658			3,644,000
Payments on redemptions		(24,244,298	)		(6,581,346	)

Net cash used in financing activities		(23,976,640	)		(2,937,346	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(1,888,154	)		(3,625,906	)

CASH AND CASH EQUIVALENTS - Beginning of period		7,258,493			12,210,925

CASH AND CASH EQUIVALENTS - End of period	$	5,370,339		$	8,585,019

SUPPLEMENTAL DISCLOSURE OF CASH ACTIVITY:
Cash paid for interest during the period	$	95,132		$	154,426

See notes to financial statements.

MAN-AHL DIVERSIFIED TRADING COMPANY L.P.

(A Delaware Limited Partnership)

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

The accompanying unaudited financial statements, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of Man-AHL Diversified Trading Company L.P.’s (a Delaware Limited Partnership) (the “Trading Company”) financial condition at June 30, 2019, and the results of its operations for the three and six month periods ended June 30, 2019 and 2018. These financial statements present the results of interim periods. These financial statements should be read in conjunction with the audited financial statements and notes included in Man-AHL Diversified I L.P.’s annual report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2018. The December 31, 2018 information has been derived from the audited financial statements as of December 31, 2018.

1.	ORGANIZATION OF THE TRADING COMPANY

Man-AHL Diversified Trading Company L.P. (a Delaware Limited Partnership) (the “Trading Company”) was organized in November 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. Man Investments (USA) Corp. (the “General Partner”), a Delaware corporation, serves as the Trading Company’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 Trading Company.

The Trading Company was formed to serve as a trading vehicle for certain limited partnerships sponsored by the General Partner in a “master-feeder” structure. The limited partners, Man-AHL Diversified I L.P. and Man-AHL Diversified II L.P., are limited partnerships whose general partner is the General Partner.

AHL Partners LLP (the “Advisor”), a limited liability partnership established in England and Wales, acts as the trading advisor to the Trading Company. 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.

The Bank of New York Mellon serves as the administrator to the Trading Company.

2.	SIGNIFICANT ACCOUNTING POLICIES

The Trading Company 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 Trading Company and determined that the Trading Company meets the characteristics of an investment company. As such, these financial statements have applied the guidance as set forth in the 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.

Due from Brokers — Due from brokers consists of balances due from Credit Suisse Securities (USA) (“CS”), J.P. Morgan Chase Bank, N.A. and J.P. Morgan Securities LLC (“JPM”), Royal Bank of Scotland (“RBS”), Deutsche Bank AG, London Branch (“DB”), Merrill Lynch, Pierce, Fenner & Smith Incorporated (“ML”), BNP Paribas (“BNP”) HSBC and Goldman Sachs (“GS”). In general, the brokers pay the Trading Company interest monthly, based on agreed upon rates, on the Trading Company’s average daily balance.

Amounts due from brokers include cash held at brokers and cash posted as collateral. The amount of cash held as collateral and included in due from brokers on the statements of financial condition is $11,654,456 and $8,825,790 as of June 30, 2019 and December 31, 2018, respectively.

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

Realized gains and losses from periodic payments and settlements and unrealized changes in fair values are included in realized and unrealized gains and losses on contracts/agreements, respectively, in the statements of operations. All trading activities are accounted for on a trade-date basis.

Premiums and discounts on debt securities are amortized using the effective interest method and included within interest income on the statements of operations.

Derivative Contracts — In the normal course of business, the Trading Company enters into derivative contracts (“derivatives”) for trading purposes. Derivatives traded by the Trading Company include futures and forward contracts and swap agreements. The Trading Company records derivatives at fair value. Futures contracts, which are traded on a national exchange, are valued at the close price as of the valuation day, or if no sale occurred on such day, at the close price on the most recent date on which a sale occurred. Forward contracts, which are not traded on a national exchange, are valued at fair value using independent pricing services, which mainly use market observable inputs in their valuations. Swaps are contractual agreements between two parties to exchange streams of payments over time based on specified notional amounts. The Trading Company’s swap agreements consist of interest rate swaps and credit default swaps. Swap agreements are valued at fair value using independent pricing services. Upfront premiums paid or received by the Trading Company upon entering a credit default swap agreement are treated as part of the cost/proceeds of the credit default swap agreement and are reflected as part of net premiums paid or received on the Statement of Financial Condition. Upon termination of a credit default swap transaction, the amount included in the cost is reversed and becomes part of realized gain or loss.

Foreign Currency — All assets and liabilities of the Trading Company denominated in foreign currencies are translated into U.S. dollar amounts at the mean between the bid and ask market rates for such currencies on the date of valuation. Purchases and sales of foreign investments are converted at the prevailing rate of exchange on the respective date of such transactions. The Trading Company does not isolate that portion of realized gains and losses on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such changes are included with the net realized gains or losses on trading activities.

Cash and Cash Equivalents — Cash and cash equivalents include cash, short-term interest-bearing money market accounts and U.S. government securities with original maturities of 90 days or less, held with The Bank of New York Mellon. As of June 30, 2019 and December 31, 2018, the Trading Company maintains cash balances with The Bank of New York Mellon. As of June 30, 2019, the Trading Company held foreign cash balances of $609,467 with a cost of $607,122, which are included in cash and cash equivalents. As of December 31, 2018, the Trading Company did not hold any foreign cash balances. As of June 30, 2019 and December 31, 2018, the Trading Company did not hold any U.S. Treasury Bills in cash and cash equivalents. As of June 30, 2019 and December 31, 2018, all U.S. Treasury Bills are classified as Level 2 investments in the fair value hierarchy.

Investments in Securities — Investments in Securities include U.S. government securities with original maturities of more than 90 days, held with The Bank of New York Mellon. As of June 30, 2019, the Trading Company holds $82,542,434 of U.S. Treasury Bills in securities. These U.S. Treasury Bills, with maturity dates ranging from August 22, 2019 to December 12, 2019, have a total face value of $83,000,000. As of December 31, 2018, the Trading Company holds $100,496,680 of U.S. Treasury Bills in securities. These U.S. Treasury Bills, with a maturity date ranging from January 10, 2019 to June 20, 2019, have a total face value of $101,000,000. As of June 30, 2019 and December 31, 2018, all U.S. Treasury Bills are classified as Level 2 investments in the fair value hierarchy.

Income Taxes — The Trading Company is treated as a partnership for tax purposes and therefore 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 Trading Company has evaluated tax positions taken or expected to be taken in the course of preparing the Trading Company’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 three or six month periods ended June 30, 2019 and 2018. To the extent that the Trading Company 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 – 2016.

Net Income (Loss) Per Unit — Net income (loss) per unit of partnership interest is equal to the net income (loss) divided by the weighted average number of units outstanding. Weighted average number of units outstanding is the average of the units outstanding for each day during the period.

Recent Accounting Pronouncement — In August 2018, the FASB issued Accounting Standards Update (“ASU”) No. 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The amendments in ASU 2018-13 modify the disclosure requirements in Topic 820 of the disclosure framework. The modifications include the removal to disclose the amount of and reason for transfers between Level I and Level II of the fair value hierarchy, the policy for timing of transfers between levels, the valuation processes for Level III fair value measurements, and the changes in unrealized gains and losses for the period included in earnings for recurring Level III fair value measurements held at the end of the reporting period. Also, in lieu of a roll forward for Level III fair value measurements, a nonpublic entity is required to disclose transfers into and out of Level III of the fair value hierarchy and purchases and issues of Level III assets and liabilities. Additionally, for investments for certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an investee’s assets and the date when restrictions from redemptions might lapse only if the investee has communicated the timing to the entity or announced the timing publicly. ASU 2018-13 is effective for fiscal years beginning December 15, 2019 with early adoption permitted. Management is currently evaluating the impact, if any, of applying ASU 2018-13.

3.	LIMITED PARTNERSHIP AGREEMENT

The General Partner and limited partners share in the profits and losses of the Trading Company in proportion to the amount of capital held by each partner. However, no limited partner is liable for obligations of the Trading Company in excess of its capital contribution and net profits or losses, if any. The General Partner owned no direct interest in the Trading Company during the periods ended June 30, 2019 and December 31, 2018.

Distributions (other than redemption 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 three or six month periods ended June 30, 2019 and 2018.

Partner contributions occur as of the first day of any month at the opening net asset value. Limited partners may redeem any or all of their units as of the end of any month at the net asset value per unit with 10 days prior written notice to the General Partner. The General Partner may suspend redemptions of units of the Trading Company if the Trading Company’s ability to withdraw capital from any investment is restricted. The Trading Company will be dissolved on December 31, 2037, or upon the occurrence of certain events, as specified in the Trading Company’s limited partnership agreement.

4.	FAIR VALUE MEASUREMENTS

The Trading Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants at the measurement date under current market conditions. The fair value of the Trading Company’s assets and liabilities which qualify as financial instruments approximates the carrying amounts presented on the statements of financial condition.

The inputs used to determine the fair value of the Trading Company’s investments are summarized in the three broad levels listed below:

•

Level 1 — quoted prices in active markets for identical assets or liabilities

•

Level 2 — investments with significant market observable inputs

•

Level 3 — investments with significant unobservable inputs, which may include the Trading Company’s own assumptions in determining the fair value of investments

Futures contracts are valued based on end of day quoted prices from the exchange and are categorized as Level 1 investments in the fair value hierarchy. Forward contracts and swap agreements are valued at fair value using independent pricing services, which use market observable inputs in their valuations, and are categorized as Level 2 investments in the fair value hierarchy. As of June 30, 2019 and December 31, 2018, the Trading Company did not have any positions categorized as Level 3 investments in the fair value hierarchy. The following is a summary categorization as of June 30, 2019 and December 31, 2018, of the Trading Company’s investments based on the level of inputs utilized in determining the value of such investments:


	Fair Value Measurements
	As of
Investments	June 30, 2019			Level 1			Level 2			Level 3
Assets
Treasury bills	$	82,542,434		$	—		$	82,542,434		$	—
Futures contracts		8,235,819			8,235,819			—			—
Forward contracts		6,644,803			—			6,644,803			—
Swap agreements		29,766,628			—			29,766,628			—

Total Assets		127,189,684			8,235,819			118,953,865			—

Liabilities
Futures contracts		(1,177,591	)		(1,177,591	)		—			—
Forward contracts		(9,387,107	)		—			(9,387,107	)		—
Swap agreements		(24,043,901	)		—			(24,043,901	)		—

Total Liabilities		(34,608,599	)		(1,177,591	)		(33,431,008	)		—

Net Fair Value	$	92,581,085		$	7,058,228		$	85,522,857		$	—


	Fair Value Measurements
	As of
Investments	December 31, 2018			Level 1			Level 2			Level 3
Assets
Treasury bills	$	100,496,680		$	—		$	100,496,680		$	—
Futures contracts		7,529,667			7,529,667			—			—
Forward contracts		8,965,462			—			8,965,462			—
Swap agreements		24,142,418			—			24,142,418			—

Total Assets		141,134,227			7,529,667			133,604,560			—

Liabilities
Futures contracts		(933,619	)		(933,619	)		—			—
Forward contracts		(7,574,813	)		—			(7,574,813	)		—
Swap agreements		(20,957,201	)		—			(20,957,201	)		—

Total Liabilities		(29,465,633	)		(933,619	)		(28,532,014	)		—

Net Fair Value	$	111,668,594		$	6,596,048		$	105,072,546		$	—

The Trading Company discloses the amounts of transfers and reasons for those transfers between levels of the fair value hierarchy, based on the levels assigned under the hierarchy at the reporting period end. There were no transfers between levels as of June 30, 2019 or 2018 based on the levels assigned at December 31, 2018 or 2017.

5.	DERIVATIVE FINANICIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK

The Trading Company seeks to achieve its investment objective by participation in the AHL Diversified Program directed on behalf of the Trading Company by the Advisor. The AHL Diversified Program is a price trend-following trading system, entirely quantitative in nature, and implements trading positions on the basis of statistical analyses of past price histories. The objective of the AHL Diversified Program is to deliver substantial 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 physical commodities, futures contracts, spot and forward contracts, swaps and options on the foregoing, exchanges of futures for physical transactions and other investments on domestic and international exchanges and markets (including the interbank and over-the-counter markets (“OTC”)). The AHL Diversified Program trades globally in several market sectors, including, without limitation, currencies, bonds, energies, stock indices, interest rates, metals and agriculture.

All of the strategies and systems of the AHL Diversified Program are designed to target defined volatility levels rather than returns, and the investment process is underpinned by computer-supported analytical instruments and disciplined real-time risk and management information systems. A proprietary risk measurement method similar to the industry standard “value-at-risk” helps ensure that the rule-based decisions that drive the investment process remain within pre-defined risk parameters. Margin-to-equity ratios are monitored daily, and the level of exposure in each market is quantifiable at any time and is adjusted in accordance with market volatility. Market correlation is closely monitored to prevent over-concentration of risk and ensure optimal portfolio weightings. Market liquidity is examined with the objective of ensuring that the Trading Company will be able to initiate and close out trades as indicated by AHL Diversified Program’s systems at market prices, while brokerage selection and trade execution are continually monitored with the objective of ensuring quality market access.

Futures contracts, forward contracts and swap agreements are recorded on the trade date. Upon entering into futures contracts, forward contracts and swap agreements, the Trading Company may be required to deposit cash or collateral with the brokers. Gains or losses are realized when contracts are matured or closed. Unrealized gains or losses on open contracts and agreements (the difference between contract trade price and fair value) are reported in the statements of financial condition.

Interest rate swaps relate to agreements taken out by the Trading Company with major brokers in which the Trading Company either receives or pays a floating rate of interest in return for paying or receiving, respectively, a fixed rate of interest, on the same notional amount for a specified period of time. In the normal course of business, the payment flows are netted against each other, with the difference being paid by one party to the other. Changes in the value of the interest rate swap agreements and amounts received or paid in connection with those changes, are recognized as realized trading gains (losses) on closed contracts/agreements in the statements of operations. The risks related to trading in interest rate swaps include changes in market value and the possible inability of the counterparty to fulfill its obligations under the agreement.

The Trading Company may enter into short sales. In order to facilitate a short sale, the Trading Company borrows the applicable financial instrument from a broker or counterparty and delivers it to a buyer. A short sale by the Trading Company creates an obligation on the part of the Trading Company to thereafter purchase the financial instrument in the market at the prevailing market price and deliver it to the broker or counterparty from which it was borrowed. The Trading Company is exposed to the risk of loss to the extent that the price of a financial instrument sold short by the Trading Company increases from the time the Trading Company borrows the financial instrument to the time the Trading Company purchases it in the market to satisfy the Trading Company’s delivery obligation. Consequently, the ultimate cost to the Trading Company to acquire a financial instrument sold short may exceed the amount recognized in financial statements.

The Trading Company may enter into credit default swap agreements to provide a measure of protection against the default of an issuer (as buyer of protection) and/or gain credit exposure to an issuer to which it is not otherwise exposed (as seller of protection). Credit default swaps are agreements in which one party pays fixed periodic payments to a counterparty in consideration for a guarantee from the counterparty to make a specific payment should a negative credit event take place (e.g. default, bankruptcy, debt restructuring, etc.). The Trading Company may either buy or sell (write) credit default swaps. As a buyer, upon the occurrence of a specified negative credit event, the Trading Company will either receive from the seller an amount equal to the notional amount of the swap and deliver the referenced security or underlying securities comprising an index or receive a net settlement of cash equal to the notional amount of the swap less the agreed upon recovery value of the security or underlying securities comprising an index. As a seller (writer), upon the occurrence of a specified negative credit event, the Trading Company will either pay the buyer an amount equal to the notional amount of the swap and take delivery of the referenced security or underlying securities comprising an index or pay a net settlement of cash equal to the notional amount of the swap less the agreed upon recovery value of the security or underlying securities comprising an index. In the event of default by the counterparty, the Trading Company may recover amounts paid under the agreement either partially or in total by offsetting any payables and/or receivables with collateral held or pledged. The counterparty risk for centrally-cleared credit default swap agreements is generally lower than for credit default swap agreements not centrally-cleared. However, there can be no assurance that the clearing organization, or its members, will satisfy its obligations to the Trading Company.

These periodic payments received or made under swap agreements by the Trading Company are included in net realized trading gains (losses) on closed contracts/agreements in the statements of operations. When the swap is terminated, the Trading Company will record a realized gain (loss) equal to the difference between the proceeds from (or cost of) closing the transaction and the Trading Company’s basis in the contract, if any.

Swap transactions involve, to varying degrees, elements of credit and market risk in excess of the amounts recognized on the statements of financial condition. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty or the clearing organization to the agreements may default on its obligation to perform or disagree as to the meaning of the contractual terms in the agreements, and that there may be unfavorable changes in interest rates and/or market values associated with these transactions.

As of June 30, 2019 and December 31, 2018, the total fair value and notional amounts of credit default swaps on indices where the Trading Company is the seller is presented in the following table by contract terms:


	Fair Value and Notional Amounts by Contract Term
	June 30, 2019				December 31, 2018
	Greater than 5 years				Greater than 5 years
Credit spread (in basis points)	Fair Value		Notional Amount		Fair Value		Notional Amount
0-100	$	567,683	$	125,000,000	$	—	$	—
101-250		—		—		—		—
251-350		33,664		30,000,000		—		—
351-450		—		—		—		—
450+		—		—		—		—

Total	$	601,347	$	155,000,000	$	—	$	—

The notional amount represents the maximum potential pay out that the Trading Company could be required to make if a credit event were to occur under each agreement. The maximum payout amount may be offset by the subsequent sale, if any, of assets obtained via the execution of a payout event, upfront fees received upon entering into the contracts, or net amounts received from the settlement of offsetting purchased protection in credit default swap contracts entered into by the Trading Company for the same reference entity or entities. As of June 30, 2019 and December 31, 2018, all credit default swap contracts entered into by the Trading Company are on indices. The credit spread of the underlying indices, derived from the fair value at June 30, 2019 of each credit default swap where the Trading Company is a seller, ranged between 52 basis points and 324 basis points. As of December 31, 2018, the Trading Company did not hold any credit default swaps where the Trading Company is a seller. The credit spread is generally indicative of the status of the underlying risk of default by the applicable reference entity or index and is likely to be different than the contractual spread on the credit default swap. Higher credit spreads are indicative of a higher likelihood of non-performance by the Trading Company. As of June 30, 2019 the Trading Company posted cash collateral of $1,186,784, and as of December 31, 2018, the Trading Company posted cash collateral of $8,478,832, with respective counterparties on these agreements in the normal course of business. As of June 30, 2019, open credit default swap agreements on selling protection have a maturity date of June 20, 2014. As of December 31, 2018, there were no open credit default swap agreements on selling protection.

During the three months ended June 30, 2019, the Trading Company traded 24,564 exchange-traded futures contracts and settled 58,503 forward contracts and 247 swap agreements. During the six months ended June 30, 2019, the Trading Company traded 49,988 exchange-traded futures contracts and settled 109,054 forward contracts and 641 swap agreements. During the three months ended June 30, 2018, the Trading Company traded 36,097 exchange-traded futures contracts and settled 53,808 forward contracts and 774 swap agreements. During the six months ended June 30, 2018, the Trading Company traded 73,968 exchange-traded futures contracts and settled 111,048 forward contracts and 1,589 swap agreements.

As of June 30, 2019, the gross notional value of open forward contracts is $97,799,151,581 and the gross notional value of open swap contracts is $288,191,144. As of December 31, 2018, the gross notional value of open forward contracts was $110,610,989,818 and the gross notional value of open swap contracts was $202,675,262. The trading activity of open forward and swap contracts as of June 30, 2019 and 2018 is indicative of the trading activity throughout the period.

The Trading Company trades derivative financial instruments that involve varying degrees of market and credit risk. Market risks may arise from unfavorable changes in interest rates, foreign exchange rates, or the fair values of the instruments underlying the contracts. All contracts are stated at fair value, and changes in those values are reflected in the net change in unrealized trading gains (losses) on open contracts/agreements in the statements of operations. Credit risk arises from the potential inability of counterparties to perform in accordance with the terms of a contract. The credit risk for OTC derivative contracts is limited to the net unrealized gain plus any collateral posted net of unrealized losses or upfront fees posted, if any, for each counterparty for which a netting agreement exists and is included in the statements of financial condition. Upfront fees are listed on the statements of financial condition as net premiums paid/received on credit default swap agreements and are shown net by counterparty for which a netting agreement exists. Counterparty relationships are governed by various contracts. These contracts can be based on industry standard agreements, such as International Swap and Derivatives Association agreements for OTC contracts. These agreements set forth each party’s basic rights, responsibilities, and duties. These agreements also contain information regarding financial terms and

conditions, as well as termination and events of default provisions. Certain agreements contain provisions that require the Trading Company to post additional collateral upon the occurrence of specific credit risk related events or upon notice from the counterparty. As the Trading Company’s trading strategies are dependent upon the existence of these agreements, the Trading Company’s counterparties usually have multiple specified events under which they can terminate individual transactions or the entire agreement. These are most commonly related to declines in assets under management and performance below certain thresholds during a specified period. It is not guaranteed that counterparties will move to terminate individual transactions or entire agreements if a “trigger event” were to occur; however, it is their right to do so, and such a move could severely impact the Trading Company’s portfolio. At June 30, 2019 and December 31, 2018, the OTC contracts subject to such trigger events in a net liability position were the foreign currency forward contracts, interest rate swap agreements and credit default swap agreements. The details of the net liability positions by counterparty are disclosed later in this note on the additional disclosures regarding the offsetting of derivative liabilities table. The ultimate amounts that may be required as payment to settle the derivative instruments in connection with the triggering of such credit contingency features as of June 30, 2019 and December 31, 2018, may differ from the net liability amounts recorded as of June 30, 2019 and December 31, 2018, and such differences can be material.

For exchange-traded futures contracts, the clearing organization functions as the central counterparty for each transaction and, therefore, bears the risk of settlement to and from counterparties, which mitigates the credit risk of these instruments.

As of June 30, 2019 and December 31, 2018, all credit default swaps held by the Trading Company are centrally cleared swaps.

The following table presents the fair value of the Trading Company’s derivative instruments and net presentation on statements of financial condition:


	June 30, 2019
	Asset Derivatives			Liability Derivatives
Primary Risk Exposure	Statements of Financial Condition	Fair Value		Statements of Financial Condition	Fair Value
Open forward contracts	Gross unrealized trading gains on open forward contracts			Gross unrealized trading losses on open forward contracts
Currencies		$	6,343,483		$	(9,185,236	)
Metals			301,320			(201,871	)

Total open forward contracts			6,644,803			(9,387,107	)

Open futures contracts	Gross unrealized trading gains on open futures contracts			Gross unrealized trading losses on open futures contracts
Agricultural			347,617			(257,966	)
Currencies			169			(73,384	)
Energy			811,774			(433,944	)
Indices			1,253,259			(117,961	)
Interest rates			4,993,990			(5,806	)
Metals			829,010			(288,530	)

Total open futures contracts			8,235,819			(1,177,591	)

Open swap agreements	Gross unrealized trading gains on open swap agreements			Gross unrealized trading losses on open swap agreements
Credit			601,347			—
Interest rates			29,165,281			(24,043,901	)

Total open swap agreements			29,766,628			(24,043,901	)

Total Derivatives		$	44,647,250		$	(34,608,599	)


	December 31, 2018
	Asset Derivatives			Liability Derivatives
Primary Risk Exposure	Statements of Financial Condition	Fair Value		Statements of Financial Condition	Fair Value
Open forward contracts	Gross unrealized trading gains on open forward contracts			Gross unrealized trading losses on open forward contracts
Currencies		$	8,356,301		$	(7,382,603	)
Metals			609,161			(192,210	)

Total open forward contracts			8,965,462			(7,574,813	)

Open futures contracts	Gross unrealized trading gains on open futures contracts			Gross unrealized trading losses on open futures contracts
Agricultural			635,664			(107,507	)
Currencies			3,397			(38,019	)
Energy			1,360,263			(531,702	)
Indices			1,463,170			(238,807	)
Interest rates			3,682,705			(1,199	)
Metals			384,468			(16,385	)

Total open futures contracts			7,529,667			(933,619	)

Open swap agreements	Gross unrealized trading gains on open swap agreements			Gross unrealized trading losses on open swap agreements
Credit			2,744			(132,055	)
Interest rates			24,139,674			(20,825,146	)

Total open swap agreements			24,142,418			(20,957,201	)

Total Derivatives		$	40,637,547		$	(29,465,633	)

The following table presents the impact of derivative instruments on the statements of operations:


	For the three months ended June 30,						For the six months ended June 30,
	2019			2018			2019			2018
Location of gain or loss recognized in income on derivatives	Gain (Loss) on derivatives			Gain (Loss) on derivatives			Gain (Loss) on derivatives			Gain (Loss) on derivatives
Forward contracts
Currencies	$	539,098		$	2,738,034		$	(812,282	)	$	521,276
Metals		330,445			(852,918	)		(326,836	)		(1,022,415	)

Net realized trading gains (losses) on closed contracts/agreements	$	869,543		$	1,885,116		$	(1,139,118	)	$	(501,139	)

Currencies	$	(2,191,395	)	$	735,422		$	(3,815,451	)	$	2,270,966
Metals		65,413			211,941			(317,502	)		(754,753	)

Net change in unrealized trading gains (losses) on open contracts/agreements	$	(2,125,982	)	$	947,363		$	(4,132,953	)	$	1,516,213

Futures contracts
Agricultural	$	(488,809	)	$	(841,562	)	$	(302,522	)	$	(1,836,576	)
Currencies		72,731			(33,784	)		14,442			426,222
Energy		1,341,182			2,408,977			650,227			642,843
Indices		(615,364	)		(2,326,244	)		(2,776,209	)		(3,125,104	)
Interest rates		8,214,263			(136,786	)		13,914,429			1,575,551
Metals		(574,728	)		(888,323	)		(325,023	)		(1,660,879	)

Net realized trading gains (losses) on closed contracts/agreements	$	7,949,275		$	(1,817,722	)	$	11,175,344		$	(3,977,943	)

Agricultural	$	(811,368	)	$	306,220		$	(438,506	)	$	406,196
Currencies		(188,764	)		58,621			(38,593	)		(129,007	)
Energy		137,663			1,363,018			(450,731	)		1,168,926
Indices		466,538			124,995			(89,065	)		(1,601,377	)
Interest rates		270,893			39,901			1,306,678			1,822,019
Metals		857,435			66,038			172,397			(756,855	)

Net change in unrealized trading gains (losses) on open contracts/agreements	$	732,397		$	1,958,793		$	462,180		$	909,902

Swap agreements
Credit default swaps	$	359,837		$	(637,871	)	$	1,240,615		$	(860,659	)
Interest rate swaps		744,064			(135,603	)		1,056,255			(1,144,561	)

Net realized trading gains (losses) on closed contracts/agreements	$	1,103,901		$	(773,474	)	$	2,296,870		$	(2,005,220	)

Credit default swaps	$	552,946		$	(43,589	)	$	730,658		$	(397,046	)
Interest rate swaps		766,581			(1,387,481	)		1,806,852			558,138

Net change in unrealized trading gains (losses) on open contracts/agreements	$	1,319,527		$	(1,431,070	)	$	2,537,510		$	161,092

Amounts in the table above exclude foreign exchange spot contracts.

As described above, the Trading Company may enter into netting agreements with its derivative contract counterparties whereby the Trading Company may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. As of June 30, 2019 and December 31, 2018, the Trading Company was subject to netting agreements that allowed for amounts owed between the Trading Company and its counterparty to be netted. The party that has the larger payable pays the excess of the larger amount over the smaller amount to the other party. The netting agreements do not apply to amounts owed to or from different counterparties.

The following table provides additional disclosures regarding the offsetting of derivative assets presented in the statements of financial condition:


								Gross Amounts Not Offset in
			Gross Amount			Net Amounts of		the Statements of Financial
			Offset in the			Assets presented		Condition
	Gross Amounts		Statements of			in the Statements				Cash
	of Recognized		Financial			of Financial		Financial		Collateral
	Assets		Condition			Condition		Instruments		Received		Net Amount
As of June 30, 2019
Open futures contracts
Bank of America Merrill Lynch	$	2,867,852	$	(915,538	)	$	1,952,314	$	—	$	—	$	1,952,314
Credit Suisse		2,892,658		(12,885	)		2,879,773		—		—		2,879,773
JPMorgan Chase		2,475,309		(249,168	)		2,226,141		—		—		2,226,141

Total open futures contracts	$	8,235,819	$	(1,177,591	)	$	7,058,228	$	—	$	—	$	7,058,228

Open forward contracts
Deutsche Bank	$	1,413,422	$	(1,413,422	)	$	—	$	—	$	—	$	—
HSBC		2,981,063		(2,981,063	)		—		—		—		—
JPMorgan Chase		31,105		(31,105	)		—		—		—		—
Royal Bank of Scotland		2,219,213		(2,219,213	)		—		—		—		—

Total open forward contracts	$	6,644,803	$	(6,644,803	)	$	—	$	—	$	—	$	—

Open swap agreements
Credit Suisse	$	359,038	$	—		$	359,038	$	—	$	—	$	359,038
Deutsche Bank		3,947,151		(3,078,315	)		868,836		—		—		868,836
Goldman Sachs		40,118		—			40,118		—		—		40,118
JPMorgan Chase		25,420,321		(20,965,586	)		4,454,735		—		—		4,454,735

Total open swap agreements	$	29,766,628	$	(24,043,901	)	$	5,722,727	$	—	$	—	$	5,722,727


As of December 31, 2018
Open futures contracts
Bank of America Merrill Lynch	$	3,380,098	$	(468,352	)	$	2,911,746	$	—	$	—	$	2,911,746
Credit Suisse		2,319,355		(63,237	)		2,256,118		—		—		2,256,118
JPMorgan Chase		1,830,214		(402,030	)		1,428,184		—		—		1,428,184

Total open futures contracts	$	7,529,667	$	(933,619	)	$	6,596,048	$	—	$	—	$	6,596,048

Open forward contracts
Deutsche Bank	$	1,550,579	$	(1,224,657	)	$	325,922	$	—	$	—	$	325,922
HSBC		5,289,739		(4,655,627	)		634,112		—		—		634,112
JPMorgan Chase		473,342		(77,061	)		396,281		—		—		396,281
Royal Bank of Scotland		1,651,802		(1,617,468	)		34,334		—		—		34,334

Total open forward contracts	$	8,965,462	$	(7,574,813	)	$	1,390,649	$	—	$	—	$	1,390,649

Open swap agreements
Deutsche Bank	$	2,110,140	$	(2,110,140	)	$	—	$	—	$	—	$	—
JPMorgan Chase		22,032,278		(18,623,070	)		3,409,208		—		—		3,409,208

Total open swap agreements	$	24,142,418	$	(20,733,210	)	$	3,409,208	$	—	$	—	$	3,409,208

The following table provides additional disclosures regarding the offsetting of derivative liabilities presented in the statements of financial condition:


								Gross Amounts Not Offset in
			Gross Amount					the Statements of Financial
			Offset in the			Net Amounts of		Condition
	Gross Amounts		Statements of			Liabilities Presented				Cash
	of Recognized		Financial			in the Statements of		Financial		Collateral
	Liabilities		Condition			Financial Condition		Instruments		Pledged		Net Amount
As of June 30, 2019
Open futures contracts
Bank of America Merrill Lynch	$	915,538	$	(915,538	)	$	—	$	—	$	—	$	—
Credit Suisse		12,885		(12,885	)		—		—		—		—
JPMorgan Chase		249,168		(249,168	)		—		—		—		—

Total open futures contracts	$	1,177,591	$	(1,177,591	)	$	—	$	—	$	—	$	—

Open forward contracts
Deutsche Bank	$	1,482,452	$	(1,413,422	)	$	69,030	$	—	$	69,030	$	—
HSBC		3,798,253		(2,981,063	)		817,190		—		817,190		—
JPMorgan Chase		183,018		(31,105	)		151,913		—		151,913		—
Royal Bank of Scotland		3,923,384		(2,219,213	)		1,704,171		—		1,704,171		—

Total open forward contracts	$	9,387,107	$	(6,644,803	)	$	2,742,304	$	—	$	2,742,304	$	—

Open swap agreements
Deutsche Bank	$	3,078,315	$	(3,078,315	)	$	—	$	—	$	—	$	—
JPMorgan Chase		20,965,586		(20,965,586	)		—		—		—		—

Total open swap agreements	$	24,043,901	$	(24,043,901	)	$	—	$	—	$	—	$	—

As of December 31, 2018
Open futures contracts
Bank of America Merrill Lynch	$	468,352	$	(468,352	)	$	—	$	—	$	—	$	—
Credit Suisse		63,237		(63,237	)		—		—		—		—
JPMorgan Chase		402,030		(402,030	)		—		—		—		—

Total open futures contracts	$	933,619	$	(933,619	)	$	—	$	—	$	—	$	—

Open forward contracts
Deutsche Bank	$	1,224,657	$	(1,224,657	)	$	—	$	—	$	—	$	—
HSBC		4,655,627		(4,655,627	)		—		—		—		—
JPMorgan Chase		77,061		(77,061	)		—		—		—		—
Royal Bank of Scotland		1,617,468		(1,617,468	)		—		—		—		—

Total open forward contracts	$	7,574,813	$	(7,574,813	)	$	—	$	—	$	—	$	—

Open swap agreements
Credit Suisse	$	58,778	$	—		$	58,778	$	—	$	58,778	$	—
Deutsche Bank		2,275,353		(2,110,140	)		165,213		—		165,213		—
JPMorgan Chase		18,623,070		(18,623,070	)		—		—		—		—

Total open swap agreements	$	20,957,201	$	(20,733,210	)	$	223,991	$	—	$	223,991	$	—

Only the amount of the collateral up to the net amount of liabilities presented on the statements of financial condition is disclosed above. The table below lists additional amounts of collateral pledged:


	Additional Collateral Pledged
As of June 30, 2019
Open forward contracts
Deutsche Bank	$	2,948,885
HSBC	$	3,270,439
JPMorgan Chase	$	604,649
Royal Bank of Scotland	$	2,088,179
As of December 31, 2018
Open swap agreements
Credit Suisse	$	5,511,777
Deutsche Bank	$	3,090,022

6.	FINANCIAL GUARANTEES

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

7.	FINANCIAL HIGHLIGHTS

The following represents the ratios to average partners’ capital and other information for the three and six month periods ended June 30, 2019 and 2018:


	For the three months ended June 30,						For the six months ended June 30,
	2019			2018			2019			2018
Per unit operating performance:
Beginning net asset value	$	15,428.50		$	14,392.37		$	15,203.61		$	14,855.39
Income (loss) from investment operations:
Net investment gain (loss)		47.59			20.15			88.73			29.82
Net realized and unrealized gains (losses) on trading activities and translation of foreign currency		1,302.82			65.40			1,486.57			(407.29	)

Total income (loss) from investment operations		1,350.41			85.55			1,575.30			(377.47	)

Ending net asset value	$	16,778.91		$	14,477.92		$	16,778.91		$	14,477.92

Ratios to average partners’ capital¹:
Expenses		0.84	%		0.93	%		0.84	%		0.89	%

Net investment gain (loss)		1.18	%		0.56	%		1.14	%		0.41	%

Total return²		8.75	%		0.59	%		10.36	%		(2.54	)%

¹	Ratios have been annualized.

²	Total return is for the period indicated and has not been annualized.

Financial highlights are calculated for all partners taken as a whole. An individual partner’s returns and ratios may vary from these returns and ratios based on the timing of capital transactions.

8.	SUBSEQUENT EVENTS

For the period subsequent to June 30, 2019 through August 14, 2019, the date the financial statements were issued, the Trading Company recorded limited partner subscriptions of $83,201, and limited partner redemptions of $589,258.

The General Partner has evaluated the impact of subsequent events on the Trading Company through August 14, 2019, the date the financial statements were issued, and noted no subsequent events that require adjustment to or disclosure in these financial statements, except as noted above.

ITEM 2.

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

Introduction

Reference is made to Item 1, “Financial Statements.” The information contained therein is essential to, and should be read in conjunction with, the following analysis.

Operational Overview

Man-AHL Diversified I L.P. (the “Partnership”) is a fund which engages in speculative trading of futures and forward contracts and related instruments through its investment in Man-AHL Diversified Trading Company L.P. (the “Trading Company”) pursuant to the AHL Diversified Program, directed on behalf of the Trading Company by AHL Partners LLP (the “Trading Advisor”). The Trading Advisor also serves as the Partnership’s commodity pool operator. The AHL Diversified Program is a price trend-following trading system, entirely quantitative in nature, and implements trading positions on the basis of statistical analyses of past price histories. The 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, stock indices, interest rates, credit, metals, agriculturals and volatility. In the future, the AHL Diversified Program may, to a limited extent, invest in stocks.

The AHL Diversified Program is proprietary and confidential, so that substantially the only information that can be furnished regarding the Partnership’s results of operations is contained in the performance record of its trading through the Trading Company. Past performance is not necessarily indicative of its future results. Man Investments (USA) Corp., the general partner of the Partnership (the “General Partner”) does believe, however, that there are certain market conditions, for example, markets with pronounced price trends, in which the Partnership has a greater likelihood of being profitable than in other market environments.

Capital Resources and Liquidity

Units of limited partnership interests (“Units”) of the Partnership may be offered for sale as of the beginning, and may be redeemed as of the end, 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 level 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 over-the-counter (“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.

There have been no material changes with respect to the Partnership’s critical accounting policies, off-balance sheet arrangements or disclosure of contractual obligations as reported in the Partnership’s Form 10-K filed March 29, 2019.

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 June 30, 2019. The Partnership’s capitalization was $91,078,102 as of June 30, 2019. See also Item 3, “Quantitative and Qualitative Disclosures About Market Risk,” below.


	Quarter-End as of June 30^th
Market Sector	Margin Allocation		% of Capitalization
Agriculturals	$	1,308,807		1.44	%
Bonds	$	2,308,703		2.53	%
Credit	$	2,845,718		3.12	%
Currencies	$	6,080,290		6.68	%
Energy	$	1,433,228		1.57	%
Interest rates	$	2,121,499		2.33	%
Metals	$	1,724,747		1.89	%
Stock indices	$	5,958,842		6.54	%
Total	$	23,781,834		26.11	%

Results of Operations

Due to the nature of the Partnership’s trading, the results of operations for the interim period presented should not be considered indicative of the results that may be expected for the entire year.

Periods Ended June 30, 2019:


	30-June-19
Ending Equity	$	91,078,102

Six months ended June 30, 2019:

Net assets decreased $8,658,682 for the six months ended June 30, 2019. This decrease was attributable to subscriptions in the amount of $116,699, redemptions in the amount of $15,932,210 and a net gain from operations of $7,156,829.

Management fees of $1,408,345 and servicing fees of $472,215 were paid or accrued, and interest of $960,992 was earned or accrued on the Partnership’s share of the Trading Company’s cash and cash equivalents and broker balances, for the six months ended June 30, 2019.

The Partnership’s other expenses paid or accrued for the six months ended June 30, 2019 were $628,810.

Three months ended June 30, 2019:

Net assets decreased $2,070,765 for the three months ended June 30, 2019. This decrease was attributable to subscriptions in the amount of $75,000, redemptions in the amount of $9,047,398 and a net gain from operations of $6,901,633.

Management Fees of $702,109 and servicing fees of $235,354 were paid or accrued, and interest of $485,296 was earned or accrued on the Partnership’s share of the Trading Company’s cash and cash equivalent investments and broker balances, for the three months ended June 30, 2019.

The Partnership’s other expenses paid or accrued for the three months ended June 30, 2019 were $305,153.

The Partnership ended April with notable gains overall, with positive returns from its stocks, commodities, currency and credit trading outweighing losses experienced in fixed income trading. The Partnership’s net long equities position saw large gains as several U.S. indices hit new highs and made equities the top performing asset class in April. In the commodity sector, the Partnership’s short positions in many of the markets experienced gains, notably in the wheat market, which outweighed the losses experienced by Partnership’s short position in UK natural gas. The Partnership’s credit trading positions were also profitable, with gains from investment grade indices in both the U.S. and Europe more than offsetting the losses generated from a long in the Korean KOSPI. While the strength of the U.S. dollar against many currencies suited the Fund’s net long position in the U.S. dollar, particularly against the South Korean Won, the Partnership’s top sector performer was surprisingly a long in the Mexican peso against the U.S. dollar. A loss was incurred trading the Japanese yen against the euro. In the fixed income sector, the Partnership experienced losses in its dominantly long fixed income positions, as nearly all of its positions finished at a loss, most notably Short Sterling and Israeli swaps. The Partnership’s position in Italian government bonds saw small gains.

In May, the Fund experienced an overall loss, as the significant gains in fixed income and minor gains in currency trading were negated by losses in stocks, commodities and credit. The Partnership’s losses were largely attributable to its stock trading, as a sharp reversal in the equity markets saw losses on the Partnership’s previously profitable long positions, which were further exacerbated by losses in the Partnership’s short positions in VIX futures. The Partnership’s commodity trading had mixed returns, and ultimately ended up down, as losses from short positions in grains outweighed gains from short positions in copper and both U.K. and U.S. natural gas markets. With respect to the credit markets, the Partnership reduced the number of its short protection positions, as they all were generating losses, due to the widening spread on the E.U. 5-year Crossover iTraxx. Currency trading experienced minor gains in May, as gains from long U.S. dollar positions against the South Korean Won and the Chilean Peso were mostly offset by losses generated from short positions in the Japanese Yen, which reached a four-month high against the U.S. Dollar. The Partnership’s April losses in its fixed income were driven largely by its positions in Interest Rate Future Contracts.

The Partnership generated notable gains in June, as fixed income once again generated a substantial portion of the Partnership’s profits. With additional gains in stocks and credit, losses generated in currency trading were more than made up for. The Partnership’s fixed income trading continued its strong performance from May to end the quarter as the Partnership’s strongest trading sector, as the Partnership experienced a strong performance from long positions in U.S. and European government bonds, particularly Italian and French bonds. In the commodity sector, trading was once again mixed, with short positions in sugar driving losses and offsetting profits from long positions in palladium and short positions in UK and U.S. natural gas markets. In the credit market, credit spreads tightened across all credit indices and the Partnership’s short protection positions generated gains across all markets. In the equity markets, long stock index positions recovered from their downturn in May and finished the month slightly positive. The Partnership’s currency trading was the main source of losses in June, as modest gains on long Russian Ruble positions were outweighed by losses from the Fund’s long positions in U.S. dollar against the South Korean Won, Chilean Peso, Euro and New Zealand Dollar, which were four of the Partnership’s five worst-performing markets in June.

Three months ended March 31, 2019

The Partnership realized moderate negative returns in January with losses sustained in the equity, commodities, currencies and credit sectors outweighing gains achieved in the fixed-income market. Equity trading served as the Partnership’s loss leader for the month as a sharp trend reversal in the equity markets battered the Partnership’s short positioning built up at the conclusion of 2018. With respect to commodities, short wheat positions contributed to the sector’s overall negative performance, and gains on long positions in palladium were outweighed by losses from short positions in copper and aluminum. The Partnership’s short exposure to oil further contributed to the sector’s monthly losses as oil prices reversed a 3-month trend that had seen crude fall by more than 40%. Currency trading similarly ended in negative performance territory for the month. Although the Partnership’s long positions in certain emerging market currencies, including those of South Africa, Brazil and Turkey, produced positive performance, the Partnership’s positions in developed markets, including Canada, Australia and the United Kingdom, provided offsetting losses. Credit trading was mixed and concluded the month with slightly negative results as losses stemming from long protection positions early in January edged out gains. On the positive side, fixed income trading produced some offsetting gains as the Partnership’s exposure to Israeli swaps and French and German bonds proved profitable.

In February, the Partnership generated modest gains as trading in the commodities, credit and equities markets outdistanced losses sustained from the Partnership’s fixed income and currency positions. With respect to commodities, long palladium positions and short wheat exposure were among the Partnership’s top performers. These gains were supplemented by the Partnership’s credit trading with long exposure to the European 5yr iTraxx Index providing notable gains. Currency trading was mixed in February but ended the month with negative performance as losses from long exposure to the South African rand and Brazilian Real outdistanced gains from short exposure to the Swedish Krona and Japanese Yen. In the fixed income markets, the Partnership also sustained losses with long exposure to U.S. treasuries and Italian bonds serving as the biggest detractors from performance.

The Partnership ended the quarter with notable gains in March as trading in the fixed income markets provided strong returns despite losses sustained from commodities and currency trading. Long positions in European and U.S. government bonds, particularly French OAT bonds, were among the Partnership’s top performers for the month and substantially outweighed a smaller number of losing fixed-income positions such as U.K. gilts and Brazilian swaps. Regarding commodities, the Partnership’s short positions in both the U.K. and U.S. gas markets were well positioned to take advantage of falling natural gas prices, but a collapse in palladium prices during the last week of March pummeled the Partnership’s long exposure to the metal and contributed to currency trading ending the month with negative overall returns. Currency trading in March also proved challenging as gains made in a short Euro position were outweighed by losses on a range of markets including the Mexican Peso and Turkish Lira. The Partnership’s equity and credit trading both finished the month in slightly positive territory. Long exposure to stock index positions and U.S. credit indices were the most positive for these sectors.

Periods Ended June 30, 2018:


	30-June-18
Ending Equity	$	110,395,326

Six months ended June 30, 2018:

Net assets decreased $9,202,771 for the six months ended June 30, 2018. This decrease was attributable to subscriptions in the amount of $3,009,563, redemptions in the amount of $6,664,335 and a net loss from operations of $5,547,999.

Management fees of $1,714,110 and servicing fees of $574,744 were paid or accrued, and interest of $762,378 was earned or accrued on the Partnership’s share of the Trading Company’s cash and cash equivalents and broker balances, for the six months ended June 30, 2018.

The Partnership’s other expenses paid or accrued for the six months ended June 30, 2018 were $714,273.

Three months ended June 30, 2018:

Net assets decreased $3,923,331 for the three months ended June 30, 2018. This decrease was attributable to subscriptions in the amount of $1,506,914, redemptions in the amount of $4,856,825 and a net loss from operations of $573,420.

Management Fees of $831,560 and servicing fees of $278,832 were paid or accrued, and interest of $424,476 was earned or accrued on the Partnership’s share of the Trading Company’s cash and cash equivalent investments and broker balances, for the three months ended June 30, 2018.

The Partnership’s other expenses paid or accrued for the three months ended June 30, 2018 were $351,322.

In April, trading produced moderate losses overall with negative returns sustained in the currency, equity and bond markets overshadowing positive returns achieved from commodities and credit trading. In the commodity sector, the Partnership’s energy trading proved the profit leader, in large part due to the Partnership’s long exposure to Brent crude and UK natural gas. The Partnership’s agricultural and metal positions otherwise each dragged on performance with losses in the metal sector driven substantially by the Partnership’s short exposure to aluminum. With respect to the credit markets, the Partnership’s long credit positions produced moderate gains with swap positions on iTraxx credit indices benefitting from rising equity indices. Currency trading yielded the weakest performance for the month. Some of the largest losses in this sector resulted from long exposure to the Mexican peso and Russian ruble against the U.S. dollar, and were partially offset by short exposure to the Swedish krona against both the U.S. dollar and euro. The Partnership’s equity and bond positions also dragged on overall performance. Short positions in the VIX volatility and Australian SPI 200 indices resulted in losses in the equity markets as did the Partnership’s long exposure to the U.S. 5 yr-Treasury notes and the German bund in the fixed-income sector.

In a month of pronounced political volatility, the Partnership ended May with marginal losses as negative returns on equities and agricultural positions were mostly balanced by gains achieved through currency and energy trading. Currency positions produced the best trading performance during the month. A long U.S. dollar position against the Turkish lira was particularly profitable as the lira fell to record lows mid-month. Other short positions in emerging currencies such as Brazil real and Mexican peso also generated positive results, while losses were sustained from long euro holdings against both the Swiss franc and Swedish krona. Commodity trading produced more modest positive returns as gains achieved from the Partnership’s long positions in Brent crude oil, gas oil, UK natural gas, nickel and cotton were partially offset by the Partnership’s positions in U.S. natural gas and intra-month price reversals for cocoa and sugar. In contrast, trading in the equities, credit and fixed-income markets each detracted from monthly performance. The Partnership’s equity positions served as the month’s loss leader with long exposure to the FTSE Italia All Share index and the Singapore MSCI outdistancing gains achieved from long exposure to the Russell 2000 and NASDAQ 100. With respect to the credit markets, all of the main European iTraxx indices experienced wider spreads, causing losses on investment grade, cross-over and senior financial swaps held by the Partnership. Short positions in Canadian and U.S. Treasuries also generated losses and resulted in the Partnership’s bond trading ending in negative territory for the month. The Partnership generated modest gains in June with profits from the currency and commodities sectors outweighing losses from equity and fixed-income trading. Of the month’s positive performers, currency trading served as the strongest contributor as the Partnership benefitted from long exposure to U.S. dollars against a range of both developed and emerging market currencies. Several notable positions included

shorts in Australian dollars and Brazilian real, which were partially offset by short exposure to euros, particularly against Japanese yen and Canadian dollars. Within the commodity sector, positions in the agricultural markets led the Partnership’s positive returns with a short position in corn well positioned in light of falling corn prices. Trading of soya beans and cotton served as a slight detractor on performance. Energies also made an overall positive contribution to performance, mainly from a long position in crude oil, while metals trading was unprofitable as losses sustained from long copper positions outweighed gains from shorts in precious metals, platinum and gold. Equity trading produced the largest net losses during the month, led by the Partnership’s long positioning in the Hang Seng index. Fixed-income and credit trading each produced net losses for the month. Losses sustained from long exposure to Brazilian swaps outweighed gains from long exposure to Taiwanese swaps while losses resulting from the Partnership’s positions in the U.S. CDX indices outdistanced gains achieved from the Partnership’s exposure to the European iTraxx.

Three months ended March 31, 2018:

The Partnership began the year on a strong footing with profits achieved in the equities, currencies, fixed-income and credit sectors significantly outdistancing losses sustained in the commodities markets. The Partnership’s long equity index positioning was particularly profitable with exposure to the NASDAQ 100 and H-Shares indices producing the largest gains during the month. In the currency sector, the Partnership’s long exposure to the currencies of several emerging market economies outpaced losses generated from the Partnership’s exposure to the Swiss Franc and Mexican Peso. Although long exposure to German bunds hurt the Partnership’s performance with respect to its fixed-income trading, gains accrued on short positions in Eurodollar and U.S. 10-year treasuries, and fixed-income trading overall reached positive performance territory for the month. The Partnership’s credit positions also contributed to the Partnership’s net profits as exposure to most credit indices, notably in the investment-grade space, generated gains. Commodity trading, however, weighed on performance as losses from U.S. natural gas and copper positions outweighed gains achieved from the trading of other energies such as crude oil.

The Partnership’s positive run at the start of the quarter abruptly reversed course in February as the equity markets witnessed deep and sharp trend reversals particularly in the equities and credit markets. Besides fixed-income trading which produced mild gains during the month, the Partnership sustained losses in each asset class. Equity trading served as the month’s loss leader as the Partnership’s long positioning was battered by falling equity markets including the largest one-day points loss in the Dow Jones Industrial Average and the S&P 500 falling by 4.1% on February 5th. The Partnership’s long exposure to credit indices also suffered losses on account of widening credit spreads. With respect to the commodity sector, energies and metals trading generated losses while the Partnership’s agricultural positions produced more balanced returns. Loss leaders in this sector included long exposure to crude oil and related products as well as copper, gold and aluminum. Although some positive gains were achieved through short positioning of Swedish Krona against the Euro, trading in the currency markets also resulted in losses for the Partnership. The Partnership’s shorting of the U.S. Dollar against the currencies of India and Brazil was particularly unprofitable. Fixed-income trading served as the month’s silver lining with the continued upward direction of interest rates and bond yields benefitting the Partnership’s short exposure to U.S. 10-year treasuries and Eurodollar contracts. Short positions in Canadian and Japanese government bonds otherwise produced partially offsetting losses.

Although the Partnership received continued positive returns from its fixed-income trading and additional gains from its commodities positioning, March trading overall resulted in modest losses. Fixed-income trading continued to lead Partnership performance which benefitted most from its long positions in European 10-year bonds. Short positions in U.S. treasuries and U.K. 10-year gilts created partially offsetting losses. Credit positioning was more mixed and resulted in modest losses for the Partnership as reversals in spreads in the U.S. and European markets made this sector a difficult trading environment for the Partnership. Despite posting overall positive returns, commodities trading was also mixed during the month. Gains in this sector were largely attributable to long energy positioning in crude oil and heating oil and short agricultural positioning in sugar and wheat, while long positions in metals such as palladium

and zinc served as a drag on performance. In contrast, currency trading produced net losses in March as U.S. dollar shorts against the Brazilian Real and the Partnership’s exposure to British Pounds produced losses. Equity trading produced the largest losses during the month with long positioning in the Russell 2000 and NASDAQ futures indices, long exposure to the European consumer services sector and shorting of utilities each weighing on Partnership performance.

ITEM 3.

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 Securities Exchange Act of 1934). 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, exchange 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 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 exchanges 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 and exchanges using historical price studies as well as an assessment of current market volatility (including the implied volatility of the options on a given futures contract) and economic fundamentals to provide a probabilistic estimate of the maximum expected near-term one-day price fluctuation.

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 amount of trading Value at Risk associated with the Partnership’s open positions by market category as of June 30, 2019. As of June 30, 2019, the Partnership’s average quarter-end capitalization was $91,078,102.


Quarter-Ended June 30, 2019
Market Sector	Average Value at Risk		% of Average Capitalization			Highest Value at Risk		Lowest Value at Risk
Agriculturals	$	1,401,031		1.52	%	$	1,493,256	$	1,308,807
Bonds	$	2,471,058		2.68	%	$	2,633,413	$	2,308,703
Credit	$	2,950,295		3.20	%	$	3,054,873	$	2,845,718
Currencies	$	5,987,036		6.50	%	$	6,080,290	$	5,893,783
Energies	$	1,107,960		1.20	%	$	1,433,228	$	782,692
Interest rates	$	2,078,746		2.26	%	$	2,121,499	$	2,035,993
Metals	$	1,502,131		1.63	%	$	1,724,747	$	1,279,515
Stock indices	$	5,051,787		5.48	%	$	5,958,842	$	4,144,732
Total*	$	22,550,045		24.48	%	$	24,500,148	$	20,599,943

*	The total percentage and certain total amounts do not foot due to rounding.

Average, highest and lowest Value at Risk amounts relate to the quarter-end amounts for the six months ended June 30, 2019. Average capitalization is the Partnership’s average quarter-end capitalization at the end of the six months ended June 30, 2019.

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 Securities 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.

The following were the primary trading risk exposures of the Partnership as of June 30, 2019, 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 US, Germany, Australia and Italy. 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 June 30, 2019, the Partnership’s primary currency exposures were in the U.S. dollar versus the UK Sterling, South Korean Won, Turkish Lira, Euro and South African Rand.

Stock Indices. The Partnership’s primary equity exposure, through stock index futures, is to equity price risk in the G-7 countries. As of June 30, 2019, the Partnership’s primary exposures were in the S&P 500 Index, the Australian SPI 200 Index, the NASDAQ 100 Index and the FTSE 100 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 June 30, 2019, the Partnership’s primary metals market exposures were in palladium, gold and copper.

Agricultural. The Partnership’s primary commodities exposure is to agricultural price movements, which are often directly affected by severe or unexpected weather conditions. Cocoa, coffee, feeder cattle, sugar and live cattle accounted for the substantial bulk of the Partnership’s commodities exposure as of June 30, 2019.

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 June 30, 2019, the main exposures were in crude oil, gasoline and natural gas.

Qualitative Disclosures Regarding Non-Trading Risk Exposure

The following were the only non-trading risk exposures of the Partnership as of June 30, 2019.

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 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. 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 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 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 4.

Controls and Procedures.

The General Partner, with the participation of the General Partner’s Principal Executive Officer and Co-Principal Financial Officers, has evaluated the effectiveness of the design and operation of the Partnership’s disclosure controls and procedures as of the end of the fiscal quarter ended June 30, 2019. Based on such evaluation, the General Partner’s Principal Executive Officer and Co-Principal Financial Officers have concluded that the Partnership’s disclosure controls and procedures were effective as of the fiscal quarter ended June 30, 2019.

Changes in Internal Control over Financial Reporting

There were no significant changes in the Partnership’s internal control over financial reporting during the quarter ended June 30, 2019 that have materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

None.

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.

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 Commodity Futures Trading Commission (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:

•

during periods when markets are dominated by fundamental factors that are not reflected in the technical data analyzed by the program;

•

during prolonged periods without sustained moves in one or more of the markets traded; or

•

during “whip-saw” markets, in which potential price trends start to develop but reverse before actual trends are realized.

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:

•

result in traders attempting to initiate or liquidate substantial positions in a market at or about the same time;

•

alter historical trading patterns;

•

obscure developing price trends; or

•

affect the execution of trades.

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”).

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 and the use of independent safeguards in the overall portfolio management process, 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 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 generally 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 including, in particular, imposing mandatory 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. 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, subject to margin requirements. OTC derivative dealers are also required to post margin to the clearinghouses through which they clear their customers’ trades instead of using such margin in their operations, as they are allowed to do for uncleared OTC trades. This will further increase the dealers’ costs, which costs may be passed through to other market participants in the form of higher fees and less favorable dealer marks. Although the Reform Act includes limited exemptions from the clearing and margin requirements for so-called “end-users”, the Partnership may not be able to rely on such exemptions. In addition, the OTC derivative dealers with which the Partnership executes the majority of its OTC derivatives will not be able to rely on the end-user exemptions under the Reform Act and therefore such dealers will be subject to clearing and margin requirements notwithstanding whether the Partnership is subject to such requirements. 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 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. Similarly, under EMIR, European regulators may require a substantial proportion of such derivatives transactions to be bought on exchange and/or centrally cleared. The Securities and Exchange Commission (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. 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. The overall impact of EMIR and the Reform Act on the Partnership is highly uncertain and it is unclear how the OTC derivatives markets will adapt to these new regulatory regimes.

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 Commodity Exchange Act, as amended, 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 May Be 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.

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:

•

may not provide the same assurances of the integrity (financial and otherwise) of the marketplace and its participants as do U.S. exchanges and markets;

•

may exercise less regulatory oversight and supervision over transactions and participants in transactions;

•

may not afford all participants an equal opportunity to execute trades;

•

may be subject to a variety of political influences and the possibility of direct governmental intervention;

•

may have different clearance and settlement procedures for transactions than U.S. exchanges and markets. There have been times when settlement procedures have been unable to keep pace with the volume of transactions on certain exchanges and markets, making it difficult to conduct trades; and

•

may be “principals’ markets” in which performance is the responsibility only of the member with whom the trader has dealt (the counterparty) rather than the responsibility of an exchange or clearing association. Each transaction on such an exchange or market may subject the Partnership to the risk of the counterparty’s credit failure or inability or refusal to perform its obligations.

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 Partnership’s 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.

MiFID II. Each of the European Union’s re-cast Markets in Financial Instruments Directive (2014/65/EU) (the “MiFID II Directive”), the delegated and implementing European Union (“EU”) regulations made thereunder, the laws and regulations introduced by Member States of the EU to implement the MiFID II

Directive and the EU’s Markets in Financial Instruments Regulation (600/2014) (“MiFIR” and, together with the MiFID II Directive, “MiFID II”) impose new regulatory obligations on the Trading Advisor. These regulatory obligations may impact on, and constrain the implementation of, the investment strategy of the Partnership and lead to increased compliance obligations upon and accrued expenses for the Trading Advisor and/or the Partnership.

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

(a) The Partnership may sell Units of Limited Partnership Interests (“Units”) 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 April 2019, May 2019 and June 2019, the Partnership sold Class A Series 1 Units, exclusive of non-cash transfers, to existing and new Limited Partners in the amount of $0, $0 and $75,000, respectively. On the first business day of April 2019, May 2019 and June 2019, the Partnership sold Class A Series 2 Units, exclusive of non-cash transfers, to existing and new Limited Partners in the amount of $0, $0 and $0, respectively. On the first business day of April 2019, May 2019 and June 2019, the Partnership sold Class B Series 1 Units, exclusive of non-cash transfers, to existing and new Limited Partners in the amount of $0, $0 and $0, respectively. On the first business day of April 2019, May 2019 and June 2019, the Partnership sold Class B Series 2 Units, exclusive of non-cash transfers, 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.

(b) Not applicable.

(c) 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, exclusive of non-cash transfers, during the three months ended June 2019:


	Class A Units		Class A-2 Units		Class B Units		Class B-2 Units
Date of Redemption: (last business day)	Amount Redeemed:		Amount Redeemed:		Amount Redeemed:		Amount Redeemed:
April 2019	$	1,436,847		—	$	505,137	$	0
May 2019	$	1,372,374	$	3,570,042	$	266,677	$	0
June 2019	$	1,162,904		—	$	733,417	$	0
TOTAL	$	3,972,125	$	3,570,042	$	1,505,231	$	0

Item 3. Defaults upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

The following exhibits are included herewith:


Designation		Description

31.1		Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer

31.2		Rule 13a-14(a)/15d-14(a) Certification of Co-Principal Financial Officer

31.3		Rule 13a-14(a)/15d-14(a) Certification of Co-Principal Financial Officer

32.1		Section 1350 Certification of Principal Executive Officer

32.2		Section 1350 Certification of Co-Principal Financial Officer

32.3		Section 1350 Certification of Co-Principal Financial Officer

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

The following exhibits are incorporated by reference herein from the exhibits of the same description and number filed on January 28, 2008 with the Partnership’s Registration Statement on Form 10 (Reg. No. 000-53043).

3.1	Certificate of Limited Partnership of Man-AHL Diversified I L.P.

10.3	Form of Selling Agreement between Man Investments (USA) Corp. and Man Investments Inc.

The following exhibit is incorporated by reference herein from the exhibit of the same description and number filed on August 13, 2014, for the quarterly period ended June 30, 2014, with the Partnership’s Quarterly Report on Form 10-Q.

10.1	Form of Trading Advisor Agreement between Man-AHL Diversified Trading Company L.P., Man Investments (USA) Corp. and AHL Partners LLP.

The following exhibit is incorporated by reference herein from the exhibit of the same description and number filed on August 14, 2018, for the quarterly period ended June 30, 2018, with the Partnership’s Quarterly Report on Form 10-Q.

4.1	Seventh Amended Limited Partnership Agreement of Man-AHL Diversified I L.P.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on August 14, 2019.

Man-AHL Diversified I L.P.

(Registrant)

By: Man Investments (USA) Corp.

General Partner


By:		/s/ Eric Burl
President and Principal Executive Officer

By:		/s/ Colin Bettison
As Co-Principal Financial Officer

By:		/s/ Daniel Kennedy
As Co-Principal Financial Officer