UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

☑(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) ~~OF THE~~

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, ~~2016~~ 2017

OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

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

For the ~~transition~~Transition period from to

Commission File Number 0-50272

Managed Futures Premier Energy Fund L.P. II

(Exact name of registrant as specified in its charter)

New York	~~03-0407557~~	03-0407557
(State or other jurisdiction of	(I.R.S. Employer
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
incorporation or organization)	Identification No.)

c/o Ceres Managed Futures LLC

522 Fifth Avenue

New York, New York 10036

(Address and Zip Code of principal executive offices)

(855) 672-4468

(Registrant’s telephone number, including area code)


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

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

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐ No ☑X

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes ☐ No ☑ X

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~~X ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive ~~Data~~ Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of ~~this~~the chapter) during the preceding 12 months (or for such shorter period that the registrant was required to to submit and post such files).

Yes ~~☑ No~~X ☐ No

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

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

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ~~☑ Smaller~~ ~~reporting~~X ~~company ☐~~

~~(Do~~Smaller ~~not check if a smaller~~ reporting company) Emerging growth company

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 ☑X

Limited Partnership Redeemable Units with an aggregate value of $4241,~~937~~738,~~429~~795 were outstanding and held by non-affiliates as of the last business day of the registrant’s most recently completed second fiscal quarter.

As of February 28, ~~2017~~2018, 1311,~~537~~192.~~2158~~1898 Limited Partnership Redeemable Units were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

[None]

PART I

Item 1. Business.

(a) General Development of Business. Managed Futures Premier Energy Fund L.P. II (the “Partnership”) is a limited partnership organized on March 25, 2002 under the partnership laws of the State of New York to engage, directly or indirectly, in the speculative trading of a diversified portfolio of commodity interests, including commodity options and commodity futures contracts on U.S. exchanges and certain foreign exchanges, and swaps. The Partnership intends to trade only energy and energy-related products, but is authorized to trade commodity futures, swap and option contracts of any kind. In addition, the Partnership may enter into swap transactions involving crude oil and other energy-related products. The commodity interests traded by the Partnership are volatile and involve a high degree of market risk. The General Partner may also determine to invest up to all of the Partnership’s assets in United States (“U.S.”) Treasury bills and/or money market mutual funds, including money market mutual funds managed by Morgan Stanley or its affiliates. During the initial offering period, the Partnership sold 93,975 redeemable units of limited partnership interest (“Redeemable Units”). The Partnership commenced trading on July 1, 2002. From July 1, 2002 to December 31, 2014, the Partnership engaged indirectly in the speculative trading of a diversified portfolio of commodity interests through its investment in AAA Master Fund LLC (the “Master”). Since February 1, 2015, the Partnership has engaged directly in such trading. The Partnership no longer offers Redeemable Units for sale.

A total of 150,000 ~~limited partner~~ Redeemable Units of ~~limited partnership interest in the Partnership (“Redeemable Units”)~~ have been offered to the public. Subscriptions and redemptions of limited partner Redeemable Units, Special Limited Partner Redeemable Units and General Partner redemptions for the years ended December 31, ~~2016~~2017, ~~2015~~2016 and ~~2014~~2015 are reported in the Statements of Changes in Partners’ Capital under “Item 8. Financial Statements and Supplementary Data.”

Ceres Managed Futures LLC, a Delaware limited liability company, acts as the general partner (the “General Partner”) and commodity pool operator of the Partnership. As of January 1, 2017, the General Partner became a wholly-owned subsidiary of Morgan Stanley Domestic Holdings, Inc. (“MSD Holdings”). MSD Holdings is ultimately owned by Morgan Stanley. Morgan Stanley is a publicly held company whose shares are listed on the New York Stock Exchange. Morgan Stanley is engaged in various financial services and other businesses. Prior to January 1, 2017, the General Partner was a wholly-owned subsidiary of Morgan Stanley Smith Barney Holdings LLC (“MSSB Holdings”). Prior to June 28, 2013, Morgan Stanley indirectly owned a majority equity interest in MSSB Holdings and Citigroup Inc. indirectly owned a minority equity interest in MSSB Holdings.

During the years ended December 31, ~~2016~~2017, ~~2015~~2016 and ~~2014~~2015, the Partnership’s~~/Master’s~~ commodity broker was Morgan Stanley & Co. LLC (“MS&Co.”), a registered futures commission merchant. During the prior periods included in this report, Citigroup Global Markets Inc. (“CGM”) also served as a commodity broker. The Partnership also deposits a portion of its cash in a non-trading account at JPMorgan Chase Bank, N.A.

All trading decisions for the Partnership are made by Pan Capital Management, LP, a registered commodity trading advisor (“Pan”, the “Advisor” or the “~~Advisor~~Special Limited Partner”).

On July 1, 2002, the Partnership allocated substantially all of its capital to the Master, a New York limited liability company. The Partnership purchased 64,945.0387 units of the Master with a fair value of $94,925,000. The Master permitted commodity pools managed by AAA Capital Management Advisors, Ltd. (“AAA”) using its Energy Program — Futures and Swaps, a proprietary, discretionary trading program, to invest together in one trading vehicle. Effective December 31, 2014, AAA ceased to act as the Partnership’s trading advisor, and the Partnership redeemed its entire investment in the Master for cash equal to $103,699,450. In addition, AAA was a ~~special~~Special ~~limited~~Limited ~~partner~~Partner of the Partnership ~~(in its capacity as special limited partner, the “Special Limited Partner”)~~. Effective December 31, 2014, AAA fully redeemed as a ~~special~~Special ~~limited~~Limited ~~partner~~Partner from the Partnership. The General Partner was the managing member of the Master (in such capacity, the “Managing Member”).

Effective January 1, 2015, the Partnership changed its name from AAA Capital Energy Fund L.P. II to Managed Futures Premier Energy Fund L.P. II.

For the period January 1, 2015 to January 31, 2015, the assets of the Partnership were not traded and no fees or expenses were charged to the Partnership, including the monthly ongoing selling agent fee. Effective February 1, 2015, the Partnership allocated $81,466,647 to Pan. As of that date, the Advisor commenced trading the Partnership’s assets directly pursuant to its Energy Trading Program, a proprietary, discretionary trading program. The Advisor will concentrate the Partnership’s trading in energy-related markets. Effective January 1, 2015, the Advisor became a special limited partner of the Partnership. References herein to the “Advisor” and the “Special Limited Partner” may include “Pan” or “AAA,” as applicable.

For the period January 1, 2016 through December 31, 2016, the approximate average market sector allocation for the Partnership was 100% energy.

At December 31, 2014, the Partnership owned approximately 67.0% of the Master, prior to its full redemption from the Master effective December 31, 2014. The performance of the Partnership was directly affected by the performance of the Master.

Effective January 1, 2015, the Partnership changed its name from AAA Capital Energy Fund L.P. II to Managed Futures Premier Energy Fund L.P. II.

For the period January 1, 2015 to January 31, 2015, the assets of the Partnership were not traded and no fees or expenses were charged to the Partnership, including the monthly ongoing selling agent fee. Effective February 1, 2015, the Partnership allocated $81,466,647 to Pan. As of that date, Pan commenced trading the Partnership’s assets directly pursuant to its Energy Trading Program, a proprietary, discretionary trading program. Pan will concentrate the Partnership’s trading in energy-related markets. Effective January 1, 2015, Pan became a special limited partner of the Partnership. References herein to the “Advisor” and the “Special Limited Partner” may include “Pan” or “AAA,” as applicable.

For the period January 1, 2017 through December 31, 2017, the approximate average market sector allocation for the Partnership was 100% energy.

The ~~Master~~Partnership’s trading of futures, swap and option contracts, if applicable, on commodities was done primarily on U.S. commodity exchanges and foreign commodity exchanges. The General Partner and each limited partner share in the profits and losses of the Partnership, after the allocation to the Special Limited Partner, if any, in proportion to the amount of Partnership interest owned by each, except that no limited partner shall be liable for obligations of the Partnership in excess of its initial capital contribution and profits, if any, net of distributions and losses, if any.

The Partnership will be liquidated upon the first to occur of the following: December 31, 2022; the net asset value per Redeemable Unit decreases to less than $400 per Redeemable Unit as of the close of any business day; or under certain other circumstances as ~~defined~~set forth in the limited partnership agreement of the Partnership (the “Limited Partnership Agreement”).

The General Partner administers the business and affairs of the Partnership, including selecting one or more advisors to make trading decisions for the Partnership. The Partnership pays the General Partner a monthly fee (the “General Partner fee”) in return for its services equal to 1/12^th of 0.75% (0.75% per year) of month-end net assets of the Partnership. Prior to October 1, 2014, the Partnership paid the General Partner a monthly General Partner fee of 1/12^th of 0.50% (0.50% per year) of month-end net assets of the Partnership. Month-end net assets, for the purpose of calculating General Partner fees, are net assets, as defined in the Limited Partnership Agreement, prior to the reduction of the current month’s profit share allocation accrual, the monthly management fee, the General Partner fee and any redemptions or distributions as of the end of such month. This fee may be increased or decreased at the discretion of the General Partner. The General Partner has agreed to make capital contributions, if necessary, so that its general partnership interest will be equal to the greater of (i) 1% of the partners’ contributions to the Partnership or (ii) $25,000.

The General Partner, on behalf of the Partnership, entered into a management agreement with AAA (the “AAA Management Agreement”), a registered commodity trading advisor. The Partnership paid AAA a monthly management fee equal to 1/~~12th~~12 of 1.5% (1.5% per year) of month-end net assets allocated to AAA. Month-end net assets, for the purpose of calculating management fees, are net assets, as defined in the Limited Partnership Agreement, prior to the reduction of the current month’s profit share allocation accrual, the monthly management fee, the General Partner fee and any redemption or distributions as of the end of such month.

In addition, AAA was a Special Limited Partner of the Partnership, prior to its full redemption effective December 31, 2014, and received a quarterly profit share allocation to its capital account in the Partnership in the form of Redeemable Units, the value of which was equal to 20% of New Trading Profits, as defined in the AAA Management Agreement, earned on behalf of the Partnership during each calendar quarter and issued as Special Limited Partner Redeemable Units. The AAA Management Agreement was in effect until December 31, 2014.

The General Partner, on behalf of the Partnership, entered into a management agreement with Pan (the “Pan Management Agreement”), a registered commodity trading advisor. The Partnership pays Pan a monthly management fee equal to 1/~~12th~~12 of 1.25% (1.25% per year) of month-end net assets. The Pan Management Agreement can be terminated upon notice by either party.

In addition, the Partnership also allocates to Pan, in its capacity as the Special Limited Partner, a profit share allocation of 20% of New Trading Profits earned by Pan each calendar quarter.

In allocating substantially all of the assets of the Partnership to Pan, the General Partner considers, among other factors, Pan’s past performance, trading style, volatility of markets traded and fee requirements. The General Partner can modify or terminate the allocation of assets to Pan at any time.

Effective January 1, 2015, the Partnership entered into a selling agreement with Morgan Stanley Smith Barney LLC, doing business as Morgan Stanley Wealth Management (“Morgan Stanley Wealth Management”), (as amended, the “Selling Agreement”). Pursuant to the Selling Agreement, the Partnership ceased paying an ongoing selling agent fee calculated by reference to the number of trades executed each month and, instead, began to pay an ongoing selling agent fee based on a percentage of the Partnership’s assets. Pursuant to the Selling Agreement, the Partnership pays Morgan Stanley Wealth Management a monthly ongoing selling agent fee equal to 2.0% per year of month-end ~~Net~~net assets. Month-end ~~Net~~net assets, for purposes of calculating ongoing selling agent fees, are ~~Net~~net assets, as defined in the Limited Partnership Agreement, prior to the reduction of the current month’s ongoing selling agent fees, management fees, profit share allocation accrued, the General Partner fees, professional fees and any redemptions or distributions as of the end of such month. The ongoing selling agent fee is no longer inclusive of floor brokerage fees.

Effective March 1, 2014, the Partnership entered into a customer agreement with MS&Co. (the “Customer Agreement”) and ceased paying brokerage commissions to MS&Co. Under the Customer Agreement, the Partnership pays MS&Co. trading fees for the clearing and, where applicable, the execution of transactions, as well as exchange, clearing, user, give-up and National Futures Association (“NFA”) fees (the “MS&Co. clearing fees” and together with the CGM clearing fees, the “clearing fees”). The Partnership’s cash is deposited by MS&Co. in segregated bank accounts to the extent required by Commodity Futures Trading Commission (“CFTC”) regulations. MS&Co. pays the Partnership interest on 80% of the average daily equity maintained in cash in the Partnership’s (or prior to the Partnership’s full redemption from the Master effective December 31, 2017 the Partnership’s allocable portion of the Master’s) brokerage account at the rate equal to the monthly average of the 4-week U.S. Treasury bill discount rate. All interest earned on U.S. Treasury bills will be retained by the Partnership. The Customer Agreement may generally be terminated upon notice by either party.

Effective that same date, the Partnership entered into a selling agreement with Morgan Stanley Wealth Management (the “Second MSWM Selling Agreement”). Pursuant to the Second MSWM Selling Agreement, Morgan Stanley Wealth Management received a monthly ongoing selling agent fee. Prior to October 1, 2014, the amount of the ongoing selling agent fee was calculated by multiplying the Partnership’s roundturn futures transactions by $18.00 each, swaps by up to an equivalent amount and options transactions by $9.00 each per side. Effective October 1, 2014, the ongoing selling agent fee was reduced to $15.00 each for futures transactions and up to an equivalent amount for swaps and $7.50 each per side for options transactions. The ongoing selling agent fee amount was reduced by applicable floor brokerage fees. Morgan Stanley Wealth Management pays a portion of its ongoing selling agent fees to financial advisers who have sold Redeemable Units in the Partnership. The Partnership has terminated the Second MSWM Selling Agreement.

~~Prior~~ transactions toby ~~and~~$9.00 ~~during~~each ~~part~~per ofside. ~~the~~Effective ~~fourth~~October 1, ~~quarter of 2013~~2014, the ~~Partnership~~ongoing ~~was~~selling ~~party to~~agent afee ~~customer~~was ~~agreement~~reduced ~~with~~to ~~CGM (the “CGM Customer Agreement”)~~$15.00 ~~During~~each ~~the~~for ~~fourth~~futures ~~quarter~~transactions ofand ~~2013,~~up ~~the~~to ~~Partnership~~an ~~entered~~equivalent ~~into~~amount afor ~~customer~~swaps ~~agreement with MS&Co~~and $7.50 ~~(the~~each ~~“Prior~~per ~~MS&Co.~~side ~~Customer~~for ~~Agreement”)~~options ~~and~~transactions. aThe ongoing selling agent ~~agreement~~ ~~with~~fee ~~Morgan~~amount ~~Stanley~~was ~~Smith~~reduced ~~Barney~~by ~~LLC,~~applicable ~~doing~~floor ~~business~~brokerage asfees. Morgan Stanley Wealth Management ~~(the~~pays ~~“First~~a ~~MSWM~~portion ~~Selling~~of ~~Agreement”).~~its ~~The~~ongoing ~~Partnership~~selling ~~has~~agent ~~terminated~~fees ~~the~~to ~~CGM~~financial ~~Customer~~advisers ~~Agreement,~~who ~~Prior~~have ~~MS&Co~~sold Redeemable Units in the Partnership. ~~Customer~~The ~~Agreement~~Partnership ~~and~~has terminated the ~~First~~ Second MSWM Selling Agreement.

Prior to and during part of the fourth quarter of 2013, the Partnership was party to a customer agreement with CGM (the “CGM Customer Agreement”). During the fourth quarter of 2013, the Partnership entered into a customer agreement with MS&Co. (the “Prior MS&Co. Customer Agreement”) and a selling agent agreement with Morgan Stanley Wealth Management (the “First MSWM Selling Agreement”). The Partnership has terminated the CGM Customer Agreement, the Prior MS&Co. Customer Agreement and the First MSWM Selling Agreement.

Under the CGM Customer Agreement, the Partnership paid CGM a monthly brokerage commission equal to $18.00 per round-turn on futures transactions, an equivalent amount for swaps and $9.00 per side on options transactions. The brokerage commissions were inclusive of applicable floor brokerage fees. The Partnership paid exchange, service, clearing, user, give-up and NFA fees (collectively the “CGM clearing fees”) through its investment in the Master. CGM clearing fees were allocated to the Partnership based on its proportionate share of the Master. During the term of the CGM Customer Agreement, all of the Partnership’s assets that were not held in the Master’s accounts at CGM were deposited in the Partnership’s account at CGM. The Partnership’s cash was deposited by CGM in segregated bank accounts to the extent required by CFTC regulations. CGM paid the Partnership interest on 80% of the average daily equity maintained in cash in the Partnership’s (or the Partnership’s allocable portion of the Master’s) brokerage account at a 30-day U.S. Treasury bill rate determined weekly by CGM based on the average non-competitive yield on 3-month U.S. Treasury bills maturing 30 days from the date on which such weekly rate is determined.

Under the Prior MS&Co. Customer Agreement, the Partnership paid MS&Co. a monthly brokerage commission equal to $18.00 per round-turn on futures transactions, an equivalent amount for swaps and $9.00 per side on options transactions. The brokerage commissions were inclusive of applicable floor brokerage fees. The Partnership also paid MS&Co. clearing fees through its investment in the Master. MS&Co. clearing fees were also allocated to the Partnership based on its proportionate share of the Master. During the term of the Prior MS&Co. Agreement, all of the Partnership’s assets not held in the Master’s accounts at MS&Co. were deposited in the Partnership’s account at MS&Co. The Partnership’s cash was also deposited by MS&Co. in segregated bank accounts to the extent required by CFTC regulations. MS&Co. also agreed to pay the Partnership interest on 80% of the average daily equity maintained in cash in the Partnership’s (or the Partnership’s allocable portion of the Master’s) brokerage account at the rate equal to the monthly average of the 4-week U.S. Treasury bill discount rate.

Clearing fees will be paid for the life of the Partnership, although the rate at which such fees are paid may be changed.

In July 2015, the General Partner delegated certain administrative functions to SS&C Technologies, Inc., a Delaware corporation, currently doing business as SS&C GlobeOp (the “Administrator”). Pursuant to a master services agreement, the Administrator furnishes certain administrative, accounting, regulatory reporting, tax and other services as agreed from time to time. In addition, the Administrator maintains certain books and records of the Partnership. The cost of retaining the Administrator is allocated among the pools operated by the General Partner, including the Partnership.

(b) Financial Information about Segments. The Partnership’s business consists of only one segment, speculative trading of commodity interests. The Partnership does not engage in sales of goods or services. The Partnership’s net income (loss) from operations for the years ended December 31, 2017, 2016, 2015, 2014, ~~2013~~ and ~~2012~~2013 are set forth under “Item 6. Selected Financial Data.” The Partnership’s capital as of December 31, ~~2016~~2017 was $4737,~~004~~555,~~152~~092.

(c)

Narrative Description of Business.

See Paragraphs (a) and (b) above.

(i) through (xii) — Not applicable.

(xiii) — The Partnership has no employees.

(d) Financial Information About Geographic Areas. The Partnership does not engage in sales of goods or services or own any long- lived assets, and therefore this item is not applicable.

(e)

Available Information. The Partnership does not have an Internet address. The Partnership will provide paper copies of its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to these reports free of charge upon request.

(f)

Reports to Security Holders. Not applicable.

(g)

Enforceability of Civil Liabilities Against Foreign Persons. Not applicable.

(h)

Smaller Reporting Companies. Not applicable.

Item 1A. Risk Factors.

As a result of leverage, small changes in the price of the Partnership’s positions may result in major losses.

The trading of commodity interests is speculative, volatile and involves a high degree of leverage. A small change in the market price of a commodity interest contract can produce major losses for the Partnership. Market prices can be influenced by, among other things, changing supply and demand relationships, governmental, agricultural, commercial and trade programs and policies, national and international political and economic events, weather and climate conditions, insects and plant disease, purchases and sales by foreign countries and changing interest rates.

An investor may lose all of its investment.

Due to the speculative nature of trading commodity interests, an investor could lose all of its investment in the Partnership.

The Partnership will pay substantial fees and expenses regardless of profitability.

Regardless of its trading performance, the Partnership will incur fees and expenses, including but not limited to clearing, General Partner, ongoing selling agent and management fees.

An investor’s ability to redeem or transfer Redeemable Units is limited.

An investor’s ability to redeem units is limited and no market exists for the Redeemable Units.

Conflicts of interest exist.

The Partnership is subject to numerous conflicts of interest including those that arise from the facts that:

The General Partner and the Partnership’s commodity broker are affiliates;

The Advisor, the Partnership’s commodity broker and their respective principals and affiliates may trade in commodity interests for their own accounts;

An investor’s financial advisor will receive ongoing compensation for providing services to the investor’s account; and

The General Partner, on behalf of the Partnership, may purchase money market mutual fund shares from mutual funds affiliated and/or unaffiliated with the General Partner.

Investing in Redeemable Units might not provide the desired diversification of an investor’s overall portfolio.

One of the Partnership’s objectives is to add an element of diversification to a traditional stock and bond portfolio, but any benefit of portfolio diversification is dependent upon the Partnership achieving positive returns and such returns being independent of stock and bond market returns.

Past performance is no assurance of future results.

The Advisor’s trading strategies may not perform as they have performed in the past. The Advisor has from time to time incurred substantial losses in trading on behalf of clients.

An investor’s tax liability may exceed cash distributions.

Investors are taxed on their share of the Partnership’s income, even though the Partnership does not intend to make any distributions.

Regulatory changes could restrict the Partnership’s operations and increase its operational costs.

Regulatory changes could adversely affect the Partnership by restricting its markets or activities, limiting its trading and/or increasing the costs or taxes to which investors are subject. Pursuant to the mandate of the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law on July 21, 2010, the CFTC and the Securities and Exchange Commission (the “SEC”) have promulgated rules to regulate swap dealers and to mandate additional reporting and disclosure requirements and continue to promulgate rules regarding capital and margin requirements, to require that certain swaps be traded on an exchange or a swap execution facility, to mandate additional reporting and disclosure requirements and to require that derivatives (such as those traded by the Partnership) be moved into central clearinghouses. The CFTC and the prudential regulators that oversee swap dealers have adopted rules regarding margin requirements for certain derivatives. In addition, the CFTC and such prudential regulators have proposed or adopted, respectively, rules regarding capital requirements for swap dealers. These rules may negatively impact the manner in which swap contracts are traded and/or settled, increase the cost of such trades, and limit trading by speculators (such as the Partnership) in futures and over-the-counter markets.

Speculative position and trading limits may reduce profitability.

The CFTC and U.S. exchanges have established speculative position limits on the maximum net long or net short positions which any person or a group of persons may hold or control in particular futures, options on futures and swaps that perform a significant price discovery function. Most exchanges also limit the amount of fluctuation in commodity futures contract prices on a single trading day. The Advisor believes that established speculative position and trading limits will not materially adversely affect trading for the Partnership. The trading instructions of an advisor, however, may have to be modified, and positions held by the Partnership may have to be liquidated, in order to avoid exceeding these limits. Such modification or liquidation could adversely affect the operations and profitability of the Partnership by increasing transaction costs to liquidate positions and limiting potential profits on the liquidated positions.

In December 2016, the CFTC re-proposed new rules regarding speculative position limits, replacing a prior proposal from November 2013. These rules, if adopted in substantially the same form, will impose position limits on certain futures and option contracts and physical commodity swaps that are “economically equivalent” to such contracts. If enacted, these rules could have an adverse effect on an Advisor’s trading for the Partnership.

4The General Partner, the Partnership and its service providers and their respective operations are potentially vulnerable to cyber-security attacks or incidents.

The General Partner, the Partnership and its Service Providers and their Respective Operations Are Potentially Vulnerable to Cyber-Security Attacks or Incidents.

Like other business enterprises, the use of the internet and other electronic media and technology exposes the General Partner, the Partnership and its service providers, and their respective operations, to potential risks from cyber-security attacks or incidents (collectively, “cyber events”). Cyber events may include, for example, unauthorized access to systems, networks or devices, infection from computer viruses or other malicious software code, mishandling or misuse of information and attacks which shut down, disable, slow or otherwise disrupt operations, business processes or website access or functionality. In addition to intentional cyber events, unintentional cyber events can occur. Unintentional cyber events may include, for example, the inadvertent release of confidential information, the mishandling or misuse of information and/or technological limitations or hardware failures (in the markets or otherwise) that constrain the Partnership’s ability to gather, process and communicate information efficiently and securely, without interruption.

Any cyber event could adversely affect the Partnership’s business, financial condition or results of operations and cause the Partnership to incur financial loss and expense, as well as face exposure to regulatory penalties or legal claims, reputational damage and additional costs associated with corrective measures. A cyber-security breach could also jeopardize a limited partner’s personal, confidential, proprietary or other information processed and stored in, and transmitted through, the General Partner’s or a service provider’s computer systems. A cyber event may cause the Partnership or its service providers to lose proprietary information, suffer data corruption, lose operational capacity (such as, for example, the loss of the ability to process transactions, calculate the Partnership’s net asset value, or allow investors to transact business) and/or fail to comply with applicable privacy and other laws. Among other potentially harmful effects, cyber events also may result in theft, unauthorized monitoring and failures in the physical infrastructure or operating systems that support the Partnership or its service providers.

The nature of malicious cyber-attacks is becoming increasingly sophisticated and neither the General Partner nor the Partnership can control the cyber systems and cyber-security systems of the Advisor or other third-party service providers.

Tax laws are subject to change at any time.

Tax laws and court and IRS interpretations thereof are subject to change at any time, possibly with retroactive effect.

On December 22, 2017, the Tax Cuts and Jobs Act was signed into law and is generally effective after December 31, 2017. The Tax Cuts and Jobs Act makes significant changes to the U.S. federal income tax rules for taxation of individuals and corporations, including, in the case of individuals, reducing the top federal income rate to 37%, and eliminating or limiting various deductions, including capping the deduction for state and local taxes at $10,000 per year. Most of the changes applicable to individuals are temporary and apply only to taxable years beginning after December 31, 2017 and before January 1, 2026. For corporations, the Tax Cuts and Jobs Act reduces the top corporate income tax rate to 21%.

The Partnership does not anticipate that a limited partner’s share of income from the Partnership will be eligible for the 20% deduction established by the Tax Cuts and Jobs Act for qualified business income. However, in certain limited circumstances unlikely to apply to the Partnership, a portion of a limited partner’s gain upon a taxable disposition of an interest in the Partnership or a complete withdrawal may be eligible for the deduction.

The Tax Cuts and Jobs Act makes numerous other large and small changes to the federal income tax rules that may affect the Partnership’s investors and may directly or indirectly affect the Partnership. Moreover, Congressional leaders have recognized that the process of adopting extensive tax legislation in a short amount of time without hearings and substantial time for review is likely to have led to drafting errors, issues needing clarification, and unintended consequences that will have to be reviewed in subsequent tax legislation. At this point, it is not clear when Congress will address these issues or when the Internal Revenue Service will issue administrative guidance on the changes made in the Tax Cuts and Jobs Act.

Prospective investors are urged to consult with their tax advisors with respect to the Tax Cuts and Jobs Act and any other regulatory or administrative developments and proposals, and their potential effects on them based on their unique circumstances.

Item 2. Properties.

The Partnership does not own or lease any properties. The General Partner operates out of facilities provided by Morgan Stanley and/or one of its subsidiaries.

Item 3. Legal Proceedings.

This section describes the major pending legal proceedings, other than ordinary routine litigation incidental to the business, to which MS&Co. or its subsidiaries is a party or to which any of their property is subject. There are no material legal proceedings pending against the Partnership or the General Partner.

On June 1, 2011, Morgan Stanley & Co. Incorporated converted from a Delaware corporation to a Delaware limited liability company. As a result of that conversion, Morgan Stanley & Co. Incorporated is now named Morgan Stanley & Co. LLC (“MS&Co.”).

MS&Co. is a wholly -owned, indirect subsidiary of Morgan Stanley, a Delaware holding company. Morgan Stanley files periodic reports with the SEC as required by the Exchange Act, which include current descriptions of material litigation and material proceedings and investigations, if any, by governmental and/or regulatory agencies or self-regulatory organizations concerning Morgan Stanley and its subsidiaries, including MS&Co. As a consolidated subsidiary of Morgan Stanley, MS&Co. does not file its own periodic reports with the SEC that contain descriptions of material litigation, proceedings and investigations. As a result, please refer to the “Legal Proceedings” section of Morgan Stanley’s SEC 10-K filings for 2017, 2016, 2015, 2014, ~~2013~~ and ~~2012~~2013. In addition, MS&Co. annually prepares an Audited, Consolidated Statement of Financial Condition (“Audited Financial Statement”) that is publicly available on Morgan Stanley’s website at www.morganstanley.com. Please refer to the Commitments, Guarantees and Contingencies – Legal section of MS&Co.’s ~~2016~~ 2017 Audited Financial ~~Statement~~.

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

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

Regulatory and Governmental Matters

MS&Co. has received subpoenas and requests for information from certain federal and state regulatory and governmental entities, including among others various members of the RMBS Working Group of the Financial Fraud Enforcement Task Force, such as the United States Department of Justice, Civil Division and several state Attorney General’s Offices, concerning the origination, financing, purchase, securitization and servicing of subprime and non-subprime residential mortgages and related matters such as residential mortgage-backed securities (“RMBS”), collateralized debt obligations (“CDOs”), structured investment vehicles (“SIVs”) and credit default swaps backed by or referencing mortgage pass-through certificates. These matters, some of which are in advanced stages, include, but are not limited to, investigations related to MS&Co.’s due diligence on the loans that it purchased for securitization, MS&Co.’s communications with ratings agencies, MS&Co.’s disclosures to investors, and MS&Co.’s handling of servicing and foreclosure related issues.

On February 25, 2015, MS&Co. reached an agreement in principle with the United States Department of Justice, Civil Division and the United States Attorney’s Office for the Northern District of California, Civil Division (collectively, the “Civil Division”) to pay $2.6 billion to resolve certain claims that the Civil Division indicated it intended to bring against MS&Co. That settlement was finalized on February 10, 2016.

In October 2014, the Illinois Attorney General’s Office (“ILAG”) sent a letter to MS&Co. alleging that MS&Co. knowingly made misrepresentations related to RMBS purchased by certain pension funds affiliated with the State of Illinois and demanding that MS&Co. pay ILAG approximately $88 million. MS&Co. and ILAG reached an agreement to resolve the matter on February 10, 2016.

On January 13, 2015, the New York Attorney General’s Office (“NYAG”), which is also a member of the RMBS Working Group, indicated that it intended to file a lawsuit related to approximately 30 subprime securitizations sponsored by MS&Co. NYAG indicated that the lawsuit would allege that MS&Co. misrepresented or omitted material information related to the due diligence, underwriting and valuation of the loans in the securitizations and the properties securing them and indicated that its lawsuit would be brought under the Martin Act. MS&Co. and NYAG reached an agreement to resolve the matter on February 10, 2016.

On7 June 5, 2012, MS&Co. consented to and became the subject of an Order Instituting Proceedings Pursuant to Sections 6(c) and 6(d) of the Commodity Exchange Act, as amended, Making Findings and Imposing Remedial Sanctions by the Commodity Futures Trading Commission (“CFTC”) to resolve allegations related to the failure of a salesperson to comply with exchange rules that prohibit off-exchange futures transactions unless there is an Exchange for Related Position (“EFRP”). Specifically, the CFTC found that from April 2008 through October 2009, MS&Co. violated Section 4c(a) of the Commodity Exchange Act and CFTC Regulation 1.38 by executing, processing and reporting numerous off-exchange futures trades to the Chicago Mercantile Exchange (“CME”) and Chicago Board of Trade (“CBOT”) as EFRPs in violation of CME and CBOT rules because those trades lacked the corresponding and related cash, OTC swap, OTC option, or other OTC derivative position. In addition, the CFTC found that MS&Co. violated CFTC Regulation 166.3 by failing to supervise the handling of the trades at issue and failing to have adequate policies and procedures designed to detect and deter the violations of the Commodity Exchange

On June 5, 2012, MS&Co. consented to and became the subject of an Order Instituting Proceedings Pursuant to Sections 6(c) and 6(d) of the Commodity Exchange Act, as amended, Making Findings and Imposing Remedial Sanctions by the Commodity Futures Trading Commission (“CFTC”) to resolve allegations related to the failure of a salesperson to comply with exchange rules that prohibit off-exchange futures transactions unless there is an Exchange for Related Position (“EFRP”). Specifically, the CFTC found that from April 2008 through October 2009, MS&Co. violated Section 4c(a) of the Commodity Exchange Act and CFTC Regulation 1.38 by executing, processing and reporting numerous off-exchange futures trades to the Chicago Mercantile Exchange (“CME”) and Chicago Board of Trade (“CBOT”) as EFRPs in violation of CME and CBOT rules because those trades lacked the corresponding and related cash, OTC swap, OTC option, or other OTC derivative position. In addition, the CFTC found that MS&Co. violated CFTC Regulation 166.3 by failing to supervise the handling of the trades at issue and failing to have adequate policies and procedures designed to detect and deter the violations of the Commodity Exchange Act and CFTC Regulations. Without admitting or denying the underlying allegations and without adjudication of any issue of law or fact, MS&Co. accepted and consented to entry of findings and the imposition of a cease and desist order, a fine of $5,000,000, and undertakings related to public statements, cooperation and payment of the fine. MS&Co. entered into corresponding and related settlements with the CME and CBOT in which the CME found that MS&Co. violated CME Rules 432.Q and 538 and fined MS&Co. $750,000 and CBOT found that MS&Co. violated CBOT Rules 432.Q and 538 and fined MS&Co. $1,000,000.

Act and CFTC Regulations. Without admitting or denying the underlying allegations and without adjudication of any issue of law or fact, MS&Co. accepted and consented to entry of findings and the imposition of a cease and desist order, a fine of $5,000,000, and undertakings related to public statements, cooperation and payment of the fine. MS&Co. entered into corresponding and related settlements with the CME and CBOT in which the CME found that MS&Co. violated CME Rules 432.Q and 538 and fined MS&Co. $750,000 and CBOT found that MS&Co. violated CBOT Rules 432.Q and 538 and fined MS&Co. $1,000,000.

On July 23, 2014, the SEC approved a settlement by MS&Co. and certain affiliates to resolve an investigation related to certain subprime RMBS transactions sponsored and underwritten by those entities in 2007. Pursuant to the settlement, MS&Co. and certain affiliates were charged with violating Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933, as amended, agreed to pay disgorgement and penalties in an amount of $275 million and neither admitted nor denied the SEC’s findings.

On April 21, 2015, the Chicago Board Options Exchange, Incorporated (“CBOE”) and the CBOE Futures Exchange, LLC (“CFE”) filed statements of charges against MS&Co. in connection with trading by one of MS&Co.’s former traders of EEM options contracts that allegedly disrupted the final settlement price of the November 2012 VXEM futures. CBOE alleged that MS&Co. violated CBOE Rules 4.1, 4.2 and 4.7, Sections 9(a) and 10(b) of the Exchange Act, and Rule 10b-5 thereunder. CFE alleged that MS&Co. violated CFE Rules 608, 609 and 620. The matters were resolved on June 28, 2016 without any findings of fraud.

On June 18, 2015, MS&Co. entered into a settlement with the SEC and paid a fine of $500,000 as part of the Municipalities Continuing Disclosure Cooperation Initiative to resolve allegations that MS&Co. failed to form a reasonable basis through adequate due diligence for believing the truthfulness of the assertions by issuers and/or obligors regarding their compliance with previous continuing disclosure undertakings pursuant to Rule 15c2-12 under the Exchange Act in connection with offerings in which MS&Co. acted as senior or sole underwriter.

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

On December 20, 2016, MS&Co. consented to and became the subject of an order by the SEC in connection with allegations that MS&Co. willfully violated Sections 15(c)(3) and 17(a)(1) of the Exchange Act and Rules 15c3-3(e), 17a-5(a), and 17a-5(d) thereunder, by inaccurately calculating its Reserve Account requirement under Rule 15c3-3 by including margin loans to an affiliate in its calculations, which resulted in making inaccurate records and submitting inaccurate reports to the SEC. Without admitting or denying the underlying allegations and without adjudication of any issue of law or fact, MS&Co. consented to a cease and desist order, a censure, and a civil monetary penalty of $7,500,000.

On September 28, 2017, the CFTC issued an order filing and simultaneously settling charges against MS&Co. regarding violations of CFTC Rule 166.3 by failing to diligently supervise the reconciliation of exchange and clearing fees with the amounts it ultimately charged customers for certain transactions on multiple exchanges. The order and settlement required MS&Co. to pay a $500,000 penalty and cease and desist from violating Rule 166.3.

On November 2, 2017, the CFTC issued an order filing and simultaneously settling charges against MS&Co. for non-compliance with applicable rules governing Part 17 Large Trader reports to the CFTC. The order requires MS&Co. to pay a $350,000 penalty and cease and desist from further violations of the Commodity Exchange Act.

Civil Litigation

On July 15, 2010, China Development Industrial Bank (“CDIB”) filed a complaint against MS&Co., styled China Development Industrial Bank v. Morgan Stanley & Co. Incorporated et al., which is pending in the Supreme Court of the State of New York, New York County (“Supreme Court of NY”). The complaint relates to a $275 million credit default swap referencing the super senior portion of the STACK 2006-1 CDO. The complaint asserts claims for common law fraud, fraudulent inducement and fraudulent concealment and alleges that MS&Co. misrepresented the risks of the STACK 2006-1 CDO to CDIB, and that MS&Co. knew that the assets backing the CDO were of poor quality when it entered into the credit default swap with CDIB. The complaint seeks compensatory damages related to the approximately $228 million that CDIB alleges it has already lost under the credit default swap, rescission of CDIB’s obligation to pay an additional $12 million, punitive damages, equitable relief, fees and costs. On February 28, 2011, the court denied MS&Co.’s motion to dismiss the complaint. Based on currently available information, MS&Co. believes it could incur a loss of up to approximately $240 million plus pre- and post-judgment interest, fees and costs.

On October 15, 2010, the Federal Home Loan Bank of Chicago filed a complaint against MS&Co. and other defendants in the Circuit Court of the State of Illinois, styled Federal Home Loan Bank of Chicago v. Bank of America Funding Corporation et al. A corrected amended complaint was filed on April 8, 2011, which alleges that defendants made untrue statements and material omissions in the sale to plaintiff of a number of mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans and asserts claims under Illinois law. The total amount of certificates allegedly sold to plaintiff by MS&Co. at issue in the action was approximately $203 million. The complaint seeks, among other things, to rescind the plaintiff’s purchase of such certificates. The defendants filed a motion to dismiss the corrected amended complaint on May 27, 2011, which was denied on September 19, 2012. On December 13, 2013, the court entered an order dismissing all claims related to one of the securitizations at issue. On January 18, 2017, the court entered an order dismissing all claims related to an additional securitization at issue. After ~~that dismissal~~those dismissals, the remaining amount of certificates allegedly issued by MS&Co. or sold to plaintiff by MS&Co. was approximately $78 65 million. At December 25, ~~2016~~2017, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $46 38 million, and the certificates had not yet incurred actual losses. Based on currently available information, MS&Co. believes it could incur a loss in this action up to the difference between the $46 38 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co., plus pre- and post-judgment interest, fees and costs. MS&Co. may be entitled to be indemnified for some of these losses and to an offset for interest received by the plaintiff prior to a judgment.

7On April 20, 2011, the Federal Home Loan Bank of Boston filed a complaint against MS&Co. and other defendants in the Superior Court of the Commonwealth of Massachusetts styled Federal Home Loan Bank of Boston v. Ally Financial, Inc. F/K/A GMAC LLC et al. An amended complaint was filed on June 29, 2012 and alleges that defendants made untrue statements and material omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly issued by MS&Co. or sold to plaintiff by MS&Co. was approximately $385 million. The amended complaint raises claims under the Massachusetts Uniform Securities Act, the Massachusetts Consumer Protection Act and common law and seeks, among other things, to rescind the plaintiff’s purchase of such certificates. On May 26, 2011, defendants removed the case to the United States District Court for the District of Massachusetts. The defendants’ motions to dismiss the amended complaint were granted in part and denied in part on September 30, 2013. On November 25, 2013, July 16, 2014, and May 19, 2015, respectively, the plaintiff voluntarily dismissed its claims against MS&Co. with respect to three of the securitizations at issue. After these voluntary dismissals, the remaining amount of certificates allegedly issued by MS&Co. or sold to plaintiff by MS&Co. was approximately $332 million. On February 6, 2017, the action was remanded to the Superior Court of the Commonwealth of Massachusetts. At December 25, 2017, the current unpaid balance of the mortgage pass-through certificates at issue remaining in this action was approximately $46 million, and the certificates had not yet incurred actual losses. Based on currently available information, MS&Co. believes it could incur a loss in this action up to the difference between the $46 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co., or upon sale, plus pre- and post-judgment interest, fees and costs. MS&Co. may be entitled to be indemnified for some of these losses and to an offset for interest received by the plaintiff prior to a judgment.

On9 April 20, 2011, the Federal Home Loan Bank of Boston filed a complaint against MS&Co. and other defendants in the Superior Court of the Commonwealth of Massachusetts styled Federal Home Loan Bank of Boston v. Ally Financial, Inc. F/K/A GMAC LLC et al. An amended complaint was filed on June 29, 2012 and alleges that defendants made untrue statements and material omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly issued by MS&Co. or sold to plaintiff by MS&Co. was approximately $385 million. The amended complaint raises claims under the Massachusetts Uniform Securities Act, the Massachusetts Consumer Protection Act and common law and seeks, among other things, to rescind the plaintiff’s purchase of such certificates. On May 26, 2011, defendants removed the case to the United States District Court for the District of Massachusetts. The defendants’ motions to dismiss the amended complaint were granted in part and denied in part on September 30, 2013. On November 25, 2013, July 16, 2014, and May 19, 2015, respectively, the plaintiff voluntarily dismissed its claims against MS&Co. with respect to three of the securitizations at issue. After these voluntary dismissals, the remaining amount of certificates allegedly issued by MS&Co. or sold to plaintiff by MS&Co. was approximately $332 million. At December 25, 2016, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $51 million, and the certificates had not yet incurred actual losses. Based on currently available information, MS&Co. believes it could incur a loss in this action up to the difference between the $51 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co., or upon sale, plus pre- and post-judgment interest, fees and costs. MS&Co. may be entitled to be indemnified for some of these losses and to an offset for interest received by the plaintiff prior to a judgment.

On May 3, 2013, plaintiffs in Deutsche Zentral-Genossenschaftsbank AG et al. v. Morgan Stanley et al. filed a complaint against MS&Co., certain affiliates, and other defendants in the Supreme Court of NY. The complaint alleges that defendants made material misrepresentations and omissions in the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by MS&Co. to plaintiff ~~currently at issue in this action~~ was approximately $~~644~~ 634 million. The complaint alleges causes of action against MS&Co. for common law fraud, fraudulent concealment, aiding and abetting fraud, negligent misrepresentation, and rescission and seeks, among other things, compensatory and punitive damages. On June 10, 2014, the court granted in part and denied in part MS&Co.’s motion to dismiss the complaint. On June 20, 2017 the Appellate Division, First Department, affirmed the lower court’s June 10, 2014 order. On July 28, 2017, MS&Co. ~~perfected~~filed ~~its~~a ~~appeal~~motion ~~from~~for leave to appeal that decision onto ~~June~~the New York Court of Appeals. 12On October 3, ~~2015~~2017, the Appellate Division, First Department denied MS&Co.’s motion for leave to appeal. At December 25, ~~2016~~2017, the ~~current~~ current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $~~247~~215 million, and the certificates had incurred actual losses of approximately $ 8688 million. Based on currently available information, MS&Co. believes it could incur a loss in this action up to the difference between the $~~247~~215 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co., or upon sale, plus pre- and post-judgment interest, fees and costs. MS&Co. may be entitled to be indemnified for some of these losses.

On May 17, 2013, plaintiff in IKB International S.A. in Liquidation, et al. v. Morgan Stanley, et al. filed a complaint against MS&Co. and certain affiliates in the Supreme Court of NY. The complaint alleges that defendants made material misrepresentations and omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by MS&Co. to plaintiff was approximately $~~132~~133 million. The complaint alleges causes of action against MS&Co. for common law fraud, fraudulent concealment, aiding and abetting fraud, and negligent misrepresentation, and seeks, among other things, compensatory and punitive damages. On October 29, 2014, the court granted in part and denied in part MS&Co.’s motion to dismiss. All claims regarding four certificates were dismissed. After these dismissals, the remaining amount of certificates allegedly issued by MS&Co. or sold to plaintiff by MS&Co. was approximately $116 million. On August ~~26,~~ ~~2015, MS&Co. perfected its appeal from the court’s October 29, 2014 decision. On August~~ 11, 2016, the Appellate Division, First Department affirmed the trial court’s decision denying in part MS&Co.’s motion to dismiss the complaint. At December 25, ~~2016~~2017, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $25 24 million, and the certificates had incurred actual losses of $58 million. Based on currently available information, MS&Co. believes it could incur a loss in this action up to the difference between the $25 24 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against MS&Co., or upon sale, plus pre- and post-judgment interest, fees and costs. MS&Co. may be entitled to be indemnified for some of these losses and to an offset for interest received by the plaintiff prior to a judgment.

On April 1, 2016, the California Attorney General’s Office filed an action against MS&Co. in California state court styled California v. Morgan Stanley, et al., on behalf of California investors, including the California Public Employees’ Retirement System and the California Teachers’ Retirement System. The complaint alleges that MS&Co. made misrepresentations and omissions regarding residential mortgage-backed securities and notes issued by the Cheyne SIV (defined below), and asserts violations of the California False Claims Act and other state laws and seeks treble damages, civil penalties, disgorgement, and injunctive relief. On September 30, 2016, the court granted MS&Co.’s demurrer, with leave to replead. On October 21, 2016, the California Attorney General filed an amended complaint. On January 25, 2017, the court denied MS&Co.’s demurrer with respect to the amended complaint.

Settled Civil Litigation

On August 25, 2008, MS&Co. and two ratings agencies were named as defendants in a purported class action related to securities issued by a structured investment vehicle called Cheyne Finance PLC and Cheyne Finance LLC (together, the “Cheyne SIV”). The case was styled Abu Dhabi Commercial Bank, et al. v. Morgan Stanley & Co. Inc., et al. The complaint alleged, among other things, that the ratings assigned to the securities issued by the Cheyne SIV were false and misleading, including because the ratings did not accurately reflect the risks associated with the subprime residential mortgage- backed securities held by the Cheyne SIV. The plaintiffs asserted allegations of aiding and abetting fraud and negligent misrepresentation relating to approximately $852 million of securities issued by the Cheyne SIV. On April 24, 2013, the parties reached an agreement to settle the case, and on April 26, 2013, the court dismissed the action with prejudice.

810

On December 23, 2009, the Federal Home Loan Bank of Seattle filed a complaint against MS&Co. and another defendant in the Superior Court of the State of Washington, styled Federal Home Loan Bank of Seattle v. Morgan Stanley & Co. Inc., et al. The amended complaint, filed on September 28, 2010, alleges that defendants made untrue statements and material omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sold to plaintiff by MS&Co. was approximately $233 million. The complaint raises claims under the Washington State Securities Act and seeks, among other things, to rescind the plaintiff’s purchase of such certificates. On January 23, 2017, the parties reached an agreement to settle the litigation.

On March 15, 2010, the Federal Home Loan Bank of San Francisco filed a complaint against MS&Co. and other defendants in the Superior Court of the State of California styled Federal Home Loan Bank of San Francisco v. Credit Suisse Securities (USA) LLC, et al. An amended complaint filed on June 10, 2010 alleged that defendants made untrue statements and material omissions in connection with the sale to plaintiff of a number of mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The amount of certificates allegedly sold to plaintiff by MS&Co. was approximately $704 million. The complaint raised claims under both the federal securities laws and California law and sought, among other things, to rescind the plaintiff’s purchase of such certificates. On January 26, 2015, as a result of a settlement with certain other defendants, the plaintiff requested and the court subsequently entered a dismissal with prejudice of certain of the plaintiff’s claims, including all remaining claims against MS&Co.

On March 15, 2010, the Federal Home Loan Bank of San Francisco filed a complaint against MS&Co. and other defendants in the Superior Court of the State of California styled Federal Home Loan Bank of San Francisco v. Deutsche Bank Securities Inc. et al. An amended complaint, filed on June 10, 2010, alleges that defendants made untrue statements and material omissions in connection with the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The amount of certificates allegedly sold to plaintiff by MS&Co. was approximately $276 million. The complaint raises claims under both the federal securities laws and California law and seeks, among other things, to rescind the plaintiff’s purchase of such certificates. On December 21, 2016, the parties reached an agreement to settle the litigation.

On July 9, 2010 and February 11, 2011, Cambridge Place Investment Management Inc. filed two separate complaints against MS&Co. and/or its affiliates and other defendants in the Superior Court of the Commonwealth of Massachusetts, both styled Cambridge Place Investment Management Inc. v. Morgan Stanley & Co., Inc., et al. The complaints asserted claims on behalf of certain clients of plaintiff’s affiliates and alleged that defendants made untrue statements and material omissions in the sale of a number of mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly issued by MS&Co. and/or its affiliates or sold to plaintiff’s affiliates’ clients by MS&Co. and/or its affiliates in the two matters was approximately $263 million. On February 11, 2014, the parties entered into an agreement to settle the litigation. On February 20, 2014, the court dismissed the action.

On October 25, 2010, MS&Co., certain affiliates and Pinnacle Performance Limited, a special purpose vehicle (“SPV”), were named as defendants in a purported class action in the United States District Court for the Southern District of New York (“SDNY”), styled Ge Dandong, et al. v. Pinnacle Performance Ltd., et al. On January 31, 2014, the plaintiffs in the action, which related to securities issued by the SPV in Singapore, filed a second amended complaint, which asserted common law claims of fraud, aiding and abetting fraud, fraudulent inducement, aiding and abetting fraudulent inducement, and breach of the implied covenant of good faith and fair dealing. On July 17, 2014, the parties reached an agreement to settle the litigation, which received final court approval on July 2, 2015.

On July 5, 2011, Allstate Insurance Company and certain of its affiliated entities filed a complaint against MS&Co. in the Supreme Court of NY, styled Allstate Insurance Company, et al. v. Morgan Stanley, et al. An amended complaint was filed on September 9, 2011, and alleged that the defendants made untrue statements and material omissions in the sale to the plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly issued and/or sold to the plaintiffs by MS&Co. was approximately $104 million. The complaint raised common law claims of fraud, fraudulent inducement, aiding and abetting fraud, and negligent misrepresentation and seeks, among other things, compensatory and/or recessionary damages associated with the plaintiffs’ purchases of such certificates. On January 16, 2015, the parties reached an agreement to settle the litigation.

On July 18, 2011, the Western and Southern Life Insurance Company and certain affiliated companies filed a complaint against MS&Co. and other defendants in the Court of Common Pleas in Ohio, styled Western and Southern Life Insurance Company, et al. v. Morgan Stanley Mortgage Capital Inc., et al. An amended complaint was filed on April 2, 2012 and alleged that defendants made untrue statements and material omissions in the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The amount of the certificates allegedly sold to plaintiffs by MS&Co. was approximately $153 million. On June 8, 2015, the parties reached an agreement to settle the litigation.

On September 2, 2011, the Federal Housing Finance Agency, as conservator for Fannie Mae and Freddie Mac, filed 17 complaints against numerous financial services companies, including MS&Co. and certain affiliates. A complaint against MS&Co. and certain affiliates and other defendants was filed in the Supreme Court of NY, styled Federal Housing Finance Agency, as Conservator v. Morgan Stanley et al. The complaint alleged that defendants made untrue statements and material omissions in connection with the sale to Fannie Mae and Freddie Mac of residential mortgage pass-through certificates with an original unpaid balance of approximately $11 billion. The complaint raised claims under federal and state securities laws and common law and sought, among other things, rescission and compensatory and punitive damages. On February 7, 2014, the parties entered into an agreement to settle the litigation. On February 20, 2014, the court dismissed the action.

On April 25, 2012, Metropolitan Life Insurance Company and certain affiliates filed a complaint against MS&Co. and certain affiliates in the Supreme Court of NY, styled Metropolitan Life Insurance Company, et al. v. Morgan Stanley, et al. An amended complaint was filed on June 29, 2012, and alleged that the defendants made untrue statements and material omissions in the sale to the plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten, and/or sold by MS&Co. was approximately $758 million. The amended complaint raised common law claims of fraud, fraudulent inducement, and aiding and abetting fraud and sought, among other things, rescission, compensatory, and/or rescissionary damages, as well as punitive damages, associated with the plaintiffs’ purchases of such certificates. On April 11, 2014, the parties entered into a settlement agreement.

On April 25, 2012, The Prudential Insurance Company of America and certain affiliates filed a complaint against MS&Co. and certain affiliates in the Superior Court of the State of New Jersey, styled The Prudential Insurance Company of America, et al. v. Morgan Stanley, et al. On October 16, 2012, plaintiffs filed an amended complaint. The amended complaint alleged that defendants made untrue statements and material omissions in connection with the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by MS&Co. was approximately $1.073 billion. The amended complaint raised claims under the New Jersey Uniform Securities Law, as well as common law claims of negligent misrepresentation, fraud, fraudulent inducement, equitable fraud, aiding and abetting fraud, and violations of the New Jersey Racketeer Influenced and Corrupt Organizations Act, and included a claim for treble damages. On January 8, 2016, the parties reached an agreement to settle the litigation.

In re Morgan Stanley Mortgage Pass-Through Certificates Litigation, which had been pending in the SDNY, was a putative class action involving allegations that, among other things, the registration statements and offering documents related to the offerings of certain mortgage pass-through certificates in 2006 and 2007 contained false and misleading information concerning the pools of residential loans that backed these securitizations. On December 18, 2014, the parties’ agreement to settle the litigation received final court approval, and on December 19, 2014, the court entered an order dismissing the action.

On November 4, 2011, the Federal Deposit Insurance Corporation, as receiver for Franklin Bank S.S.B, filed two complaints against MS&Co. in the District Court of the State of Texas. Each was styled Federal Deposit Insurance Corporation as Receiver for Franklin Bank, S.S.B v. Morgan Stanley & Company LLC F/K/A Morgan Stanley & Co. Inc. and alleged that MS&Co. made untrue statements and material omissions in connection with the sale to plaintiff of mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The amount of certificates allegedly underwritten and sold to plaintiff by MS&Co. in these cases was approximately $67 million and $35 million, respectively. On July 2, 2015, the parties reached an agreement to settle the litigation.

On February 14, 2013, Bank Hapoalim B.M. filed a complaint against MS&Co. and certain affiliates in the Supreme Court of NY, styled Bank Hapoalim B.M. v. Morgan Stanley et al. The complaint alleged that defendants made material misrepresentations and omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by MS&Co. to plaintiff was approximately $141 million. On July 28, 2015, the parties reached an agreement to settle the litigation, and on August 12, 2015, the plaintiff filed a stipulation of discontinuance with prejudice.

On September 23, 2013, the plaintiff in National Credit Union Administration Board v. Morgan Stanley & Co. Inc., et al. filed a complaint against MS&Co. and certain affiliates in the SDNY. The complaint alleged that defendants made untrue statements of material fact or omitted to state material facts in the sale to the plaintiff of certain mortgage pass-through certificates issued by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by MS&Co. to plaintiffs in the matter was approximately $417 million. The complaint alleged violations of federal and various state securities laws and sought, among other things, rescissionary and compensatory damages. On November 23, 2015, the parties reached an agreement to settle the matter.

On September 16, 2014, the Virginia Attorney General’s Office filed a civil lawsuit, styled Commonwealth of Virginia ex rel. Integra REC LLC v. Barclays Capital Inc., et al., against MS&Co. and several other defendants in the Circuit Court of the City of Richmond related to RMBS. The lawsuit alleged that MS&Co. and the other defendants knowingly made misrepresentations and omissions related to the loans backing RMBS purchased by the Virginia Retirement System. The complaint asserted claims under the Virginia Fraud Against Taxpayers Act, as well as common law claims of actual and constructive fraud, and sought, among other things, treble damages and civil penalties. On January 6, 2016, the parties reached an agreement to settle the litigation. An order dismissing the action with prejudice was entered on January 28, 2016.

Additional lawsuits containing claims similar to those described above may be filed in the future. In the course of its business, MS&Co., as a major futures commission merchant, is party to various civil actions, claims and routine regulatory investigations and proceedings that the General Partner believes do not have a material effect on the business of MS&Co. MS&Co. may establish reserves from time to time in connections with such actions.

1013

Item 4. Mine Safety Disclosures. Not applicable.

PART II

(a)

Market Information. The Partnership has issued no stock. There is no public market for the Redeemable Units.

(b) Holders. The number of holders of Redeemable Units as of February 28, ~~2017~~2018 was ~~523~~438.

(c) Dividends. The Partnership did not declare any distributions in ~~2016~~2017 and ~~2015~~2016. The Partnership does not intend to declare distributions in the foreseeable future.

(d)

Securities Authorized for Issuance Under Equity Compensation Plans. None.

(e)

Performance Graph. Not applicable.

(f) Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities. ~~For~~There ~~the twelve months ended December 31, 2016 and 2015, there~~ were no additional subscriptions of Redeemable Units. ~~For~~for the twelve months ended December 31, ~~2014~~2017, ~~there~~2016 were additional subscriptions of 618.3640 Redeemable Units totaling $2,183,662. The Redeemable Units were issued in reliance upon applicable exemptions from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and ~~Rule 506 of Regulation D promulgated thereunder~~2015. The ~~Redeemable~~Partnership ~~Units~~no ~~were~~longer ~~purchased~~offers ~~by accredited investors as described in Regulation D. In determining the applicability of the exemption, the General Partner relied on the fact that the~~ Redeemable Units ~~were~~for ~~purchased by accredited investors in a private offering~~sale.

Proceeds from the additional subscriptions of Redeemable Units are used in the trading of commodity interests including futures, swaps, and options contracts and any other interests pertaining thereto, including interests in commodity pools.

The Partnership no longer offers Redeemable Units.

(g)

Purchases of Equity Securities by the Issuer and Affiliated Purchasers.

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

Period	(a) Total Numberof ~~Redeemable~~RedeemableUnits ~~Units~~ Purchased*		(b) AveragePrice Paid per Redeemable Unit**	(cb) ~~Total~~Average ~~Numberof~~Price ~~Redeemable~~Paid ~~UnitsPurchased~~per asRedeemable ~~Part of Publicly Announced Plans or Programs~~Unit**		~~(d) Maximum Number (or ApproximateDollar Value) of Redeemable Units that May Yet BePurchased Under thePlans or Programs~~	(c) Total Number of Redeemable Units Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Redeemable Units thatMay Yet Be Purchased Under the Plans or Programs
October 1, 2016 - October 31, 2016	47.1320		$ 3,446.83	N/A		N/A
October 1, 2017 - October 31, 2017		163.3120		$	3,111.66		N/A	N/A
November 1, 2016 - November 30, 2016	89.0340		$ 3,348.69	N/A		N/A
November 1, 2017 - November 30, 2017		65.7500		$	3,376.09		N/A	N/A
December 1, 2016 - December 31, 2016	29.9860		$ 3,366.10	N/A		N/A
December 1, 2017 - December 31, 2017		219.3070		$	3,187.11		N/A	N/A
	166.1520		$ 3,379.67	N/A		N/A
		448.3690		$	3,187.34		N/A	N/A

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

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

1114

Item 6. Selected Financial Data.

Total ~~trading~~investment ~~results~~income, total ~~investment income~~expenses, total ~~expenses~~trading results, net income (loss) and increase (decrease) in net asset value per Redeemable Unit for the years ended December 31, 2017, 2016, 2015, 2014, ~~2013~~ and ~~2012~~2013 and net asset value per Redeemable Unit and total assets at December 31, 2017, 2016, 2015, 2014, ~~2013~~ and ~~2012~~2013 were as follows:

	2016		2015		2014		2013		2012
	2017		2016		2015		2014		2013
Total trading results	$	5,146,609	$	(1,976,332)	$	(1,236,399)	$	(21,343,271)	$	3,573,842
Total investment income	$	278,823	$	97,255	$	5,591	$	18,911	$	55,339
Total investment income		97,255		5,591		18,911		55,339		126,208
Total expenses		(2,171,715)		(2,672,580)		(3,558,186)		(4,484,036)		(8,081,860)
Total expenses		(2,672,580)		(3,558,186)		(4,484,036)		(8,081,860)		(13,685,849)
Total trading results		(423,923)		5,146,609		(1,976,332)		(1,236,399)		(21,343,271)
Net income (loss)	$	(2,~~571~~316,~~284~~815)	$	(52,~~528~~571,~~927)~~284	$	(5,~~701~~528,~~524~~927)	$	(295,~~369~~701,~~792~~524)	$	(929,~~985~~369,~~799~~792)
Increase (decrease) in net asset value per Redeemable Unit	$	~~204~~(178.0199)	$	~~(262~~204.~~14)~~01	$	(~~148~~262.7114)	$	(~~482~~148.5671)	$	(~~120~~482.9956)
Net asset value per Redeemable Unit	$	3,~~366~~187.1011	$	3,~~162~~366.0910	$	3,~~424~~162.2309	$	3,~~572~~424.9423	$	43,~~055~~572.5094
Total assets	$	4739,~~421~~198,~~514~~745	$	5547,~~275~~421,~~882~~514	$	~~103~~55,~~833~~275,~~556~~882	$	~~151~~103,~~393~~833,~~408~~556	$	~~276~~151,~~066~~393,~~193~~408

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

Overview

The Partnership seeks to achieve capital appreciation through speculative trading, directly or indirectly, in commodity interests, including commodity futures and commodity option contracts traded on United States exchanges and certain foreign exchanges and swaps. The Partnership intends to trade only energy and energy-related products, but is authorized to trade commodity futures, swaps and option contracts of any kind. The Partnership had invested substantially all of its capital in the Master prior to its full redemption from the Master effective December 31, 2014. AAA was authorized to trade forward contracts on behalf of the Partnership but did not do so (certain swaps that the Advisor traded were, however, the substantial economic equivalent of forward contracts.)

The General Partner manages all business of the Partnership. The General Partner has delegated its responsibility for the investment of the Partnership’s assets to the Advisor. The General Partner engages a team of approximately 3025 professionals whose primary emphasis is on attempting to maintain quality control among the advisors to the funds operated or managed by the General Partner. A full-time staff of due diligence professionals uses proprietary technology and on-site evaluations to monitor new and existing futures money managers. The accounting and operations staff provides processing of subscriptions and redemptions and reporting to limited partners and regulatory authorities. The General Partner also includes staff involved in marketing and sales support. In selecting the Advisor for the Partnership, as applicable, the General Partner considered past performance, trading style, volatility of markets traded and fee requirements. The General Partner may modify or terminate the allocation of assets to the Advisor at any time.

Responsibilities of the General Partner/Managing Member include or included, as applicable:

•

due diligence examinations of the Advisor;

•

selection, appointment and termination of the Advisor;

•

negotiation of the Management Agreement; and

•

monitoring the activity of the Advisor.

In addition, the General Partner provides, or will assist SS&C in providing, and the Managing Member provided, the administrative and compliance services that are required by law or regulation from time to time in connection with operation of the Partnership/Master.

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

Pan Capital Management, LP

Effective February 1, 2015, Pan commenced trading the Partnership’s assets directly pursuant to its Energy Trading Program, a proprietary, discretionary trading program. Pan will concentrate the Partnership’s trading in energy-related markets. Risk management is an integrated part of Pan’s goal of identifying favorable risk/reward trading opportunities for its Energy Trading Program. Pan will monitor risks of all positions and will attempt to prevent over-concentration of particular investment asset or strategy.

1215

AAA Capital Management Advisors, Ltd.

From inception to December 31, 2014, the Partnership’s and the Master’s sole trading advisor was AAA. The Partnership’s assets allocated to AAA for trading were not invested in commodity interests directly, prior to its full redemption effective December 31,2014. AAA’s allocation of the Partnership’s assets was invested in the Master. AAA traded the Master’s, and thereby the Partnership’s, assets in accordance with its Energy Program — Futures and Swaps.

The Master traded energy futures contracts and options on energy futures contracts on domestic and international exchanges, as well as the Goldman Sachs Commodity Index (an index future comprised of energy and other products) traded on the Chicago Mercantile Exchange. The Master also engaged in swap transactions involving crude oil and other energy-related products. References herein to energy and energy-related products include all of the foregoing.

AAA generally based its trading decisions on “fundamental” factors, namely supply and demand for a particular group or type of commodity. AAA attempted to buy undervalued commodities and sell overvalued commodities, often but not always simultaneously. AAA used options to attempt either to reduce or define risks.

AAA was aware of price trends but did not trade upon trends. AAA often took profits in positions with specific trends even though that trend may still have been intact or perhaps even strong. AAA occasionally established positions that were countertrend.

Effective risk management was a crucial aspect of AAA’s trading program. Account size, expectation, volatility of the market traded and the nature of other positions taken were all factors in determining the amount of equity committed to each trade. The Master was AAA’s largest account.

(a) Liquidity.

The Partnership does not engage in sales of goods or services. Its assets are its (i) equity in its trading account, consisting of ~~cash~~unrestricted ~~at MS&Co.~~ and ~~cash~~restricted ~~margin~~cash, net unrealized appreciation on open futures contracts, options purchased at fair value and investment in U.S. Treasury bills at fair value, if applicable, (ii) cash at bank and (iii) interest receivable. Because of the low margin deposits normally required in commodity futures trading, relatively small price movements may result in substantial losses to the Partnership, through its investments in the Funds and direct investments. While substantial losses could lead to a material decrease in liquidity, no such illiquidity occurred during the year ended December 31, ~~2016~~2017.

To minimize the risk relating to low margin deposits, the Partnership and the Master, prior to the Master’s full redemption, followed certain trading policies, including:

(i)

The Partnership invested its assets only in commodity interests that the Advisor believed were traded in sufficient volume to permit ease of taking and liquidating positions. Sufficient volume, in this context, referred to a level of liquidity that the Advisor believed permitted it to enter and exit trades without noticeably moving the market.

(ii)

The Advisor did not initiate additional positions in any commodity if these positions would have resulted in aggregate positions requiring a margin of more than 66 2/3% of the Partnership’s net assets allocated to the Advisor.

(iii)

The Partnership may have occasionally accepted delivery of a commodity. Unless such delivery was disposed of promptly by retendering the warehouse receipt representing the delivery to the appropriate clearinghouse, the physical commodity position was fully hedged.

(iv)

The Partnership did not employ the trading technique commonly known as “pyramiding,” in which the speculator uses unrealized profits on existing positions as margin for the purchases or sale of additional positions in the same or related commodities.

(v)

The Partnership did not utilize borrowings other than short-term borrowings if the Partnership took delivery of any cash commodities.

(vi)

The Advisor may have, from time to time, employed trading strategies such as spreads or straddles on behalf of the Partnership. “Spreads” and “straddles” describe commodity futures trading strategies involving the simultaneous buying and selling of futures contracts on the same commodity but involving different delivery dates or markets.

(vii)

The Partnership did not permit the churning of its commodity trading account. The term “churning” refers to the practice of entering and exiting trades with a frequency unwarranted by legitimate efforts to profit from the trades, driven by the desire to generate commission income.

From January 1, ~~2016~~2017 through December 31, ~~2016~~2017, the Partnership’s average margin to equity ratio (i.e., the percentage of assets on deposit required for margin) was approximately 58.30%.

1316

In the normal course of business, the Partnership is party to financial instruments with off-balance sheet risk, including derivative financial instruments and derivative commodity instruments. These financial instruments may include futures, options, and swaps, whose values are based upon an underlying asset, index, or reference rate, and generally represent future commitments to exchange currencies or cash balances, or to purchase or sell other financial instruments at specific terms at specified future dates, or, in the case of derivative commodity instruments, to have a reasonable possibility to be settled in cash, through physical delivery or with another financial instrument. These instruments may trade on an exchange or over-the-counter (“OTC”). Exchange-traded instruments include futures and certain standardized forward, option and swap contracts. Certain swap contracts may also trade on a swap execution facility or OTC. OTC contracts are negotiated between contracting parties and also include certain forward and option contracts. Specific market movements of commodities or futures contracts underlying an option cannot accurately be predicted. The purchaser of an option may lose the entire premium paid for the option. The writer, or seller, of an option has unlimited risk. Each of these instruments is subject to various risks similar to those related to the underlying financial instruments, including market and credit risk. In general, the risks associated with OTC contracts are greater than those associated with exchange-traded instruments because of the greater risk of default by the counterparty to an OTC contract. None of the Partnership’s current contracts are traded OTC, although contracts may be traded OTC in the future.

As both a buyer and seller of options, the Partnership ~~and/or~~pays ~~the Master, as applicable, paid~~ or ~~received~~receives a premium at the outset and then ~~assumed~~bears the risk of unfavorable changes in the price of the contract underlying the option. Written options ~~exposed~~expose the Partnership~~/Master~~ to potentially unlimited liability; for purchased options, the risk of loss ~~was~~is limited to the premiums paid. Certain written put options ~~permitted~~permit cash settlement and ~~did~~do not require the option holder to own the reference asset. The Partnership~~/Master~~ ~~did~~does not consider these contracts to be guarantees.

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

Credit risk is the possibility that a loss may occur due to the failure of a counterparty to perform according to the terms of a contract. In the event of a counterparty default, the Partnership’s risk of loss is typically limited to the amounts recognized in the Statements of Financial Condition and is not represented by the contract or notional amounts of the instruments. The Partnership’s risk of loss is reduced through the use of legally enforceable master netting agreements with counterparties that permit the Partnership to offset unrealized gains and losses and other assets and liabilities with such counterparties upon the occurrence of certain events. The Partnership~~/Master~~ ~~had~~has credit risk and concentration risk ~~during the reporting period and prior periods,~~ as MS&Co. ~~and/~~or ~~CGM~~an orMS&Co. ~~their~~affiliate ~~affiliates~~is ~~were~~ the ~~counterparties~~counterparty or ~~brokers~~ broker with respect to the Partnership’s~~/Master’s~~ assets. ~~During~~Credit ~~the reporting period and prior periods, credit~~ risk with respect to exchange-traded instruments ~~was~~is reduced to the extent that, through MS&Co.~~/CGM~~ or an MS&Co. affiliate, the Partnership’s~~/Master’s~~ counterparty ~~was~~is an exchange or clearing organization. ~~The Partnership continues to be subject to such risks with respect to MS&Co.~~

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

During the reporting period and prior periods, the Advisor concentrated the Partnership’s/Master’s trading in energy-related markets. Concentration in a limited number of commodity interests may have subjected the Partnership’s/Master’s account to greater volatility than if a more diversified portfolio of contracts had been traded on behalf of the Partnership/Master. The Partnership continues to be subject to such risk.

The General Partner monitors and attempts to ~~control~~mitigate the Partnership’s risk exposure on a daily basis through financial, credit and risk management monitoring systems, and accordingly, believes that it had effective procedures for evaluating and limiting the credit and market risks to which the Partnership may have been subject. These monitoring systems generally allowed the General Partner to statistically analyze actual trading results with risk-adjusted performance indicators and correlation statistics. In addition, online monitoring systems provided account analysis of futures, forward and option contracts by sector, margin requirements, gain and loss transactions and collateral positions. (See also “Item 8. Financial Statements and Supplementary Data” for further information on financial instrument risks included in the notes to financial statements.)

The majority of these instruments matured within one year of the inception date. However, due to the nature of the Partnership’s business, these instruments may not have been held to maturity.

Other than the risks inherent in U.S. Treasury bills, money market mutual fund securities, commodity futures, options and swaps trading, the Partnership/Master knew of no trends, demands, commitments, events or uncertainties which would have resulted in or which are reasonably likely to have resulted in the Partnership’s/Master’s liquidity increasing or decreasing in any material way. The Limited Partnership Agreement provides that the General Partner may cause the Partnership to cease trading operations and liquidate all open positions under certain circumstances, including a decrease in net asset value per Redeemable Unit to less than $400 as of the close of business on any business day.

1417

(b) Capital Resources.

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

(ii) The Partnership’s capital consists of the capital contributions of the partners as increased or decreased by gains or losses on trading and by expenses, interest income, redemptions of Redeemable Units and distributions of profits, if any. Gains or losses on trading cannot be predicted. Market movements in commodities are dependent upon fundamental and technical factors which the Advisor may or may not be able to identify, such as changing supply and demand relationships, weather, government, agricultural, commercial and trade programs and policies, national and international political and economic events and changes in interest rates. Partnership expenses consist of, among other things, clearing, ongoing selling agent, management and General Partner fees. The level of these expenses is dependent upon the level of trading and the ability of the Advisor to identify and take advantage of price movements in the commodity markets, in addition to the level of net assets maintained. In addition, the amount of interest income earned by the Partnership is dependent upon (1) the average daily equity maintained in cash in the Partnership’s account, (2) the amount of U.S. Treasury bills and/or money market mutual fund securities held by the Partnership, and (3) interest rates over which ~~neither~~none of the Partnership, ~~nor~~ MS&Co. or JPMorgan has no control.

No forecast can be made as to the level of redemptions in any given period. A limited partner may require the Partnership to redeem its Redeemable Units at their net asset value as of the end of a month on three business days’ notice to the General Partner. There is no fee charged to limited partners in connection with redemptions. Redemptions generally are funded out of the Partnership’s cash holdings. For the ~~years~~year ended December 31, ~~2016~~2017, ~~and 2015~~2,162.2290 ~~there~~limited partner Redeemable Units were noredeemed ~~additional~~totaling ~~subscriptions~~$7,072,244 ofand 18.3360 General Partner Redeemable Units were redeemed totaling $60,001. For the year ended December 31, ~~2014~~2016, ~~there~~3,117.2810 limited partner Redeemable Units were ~~additional~~redeemed ~~subscriptions~~totaling of$9,564,202 ~~618~~and 82.~~3640~~0610 General Partner Redeemable Units were redeemed totaling $2275,~~183~~000. For the year ended December 31,~~662~~ 2015, 7,478.0770 limited partner Redeemable Units were redeemed totaling $24,577,583 and 36.7020 General Partner Redeemable Units were redeemed totaling $124,863.

No forecast can be made as to the level of redemptions in any given period. A limited partner may require the Partnership to redeem its Redeemable Units at their net asset value as of the end of a month on three business days’ notice to the General Partner. There is no fee charged to limited partners in connection with redemptions. Redemptions generally are funded out of the Partnership’s cash holdings. For the year ended December 31, 2016, 3,117.2810 limited partner Redeemable Units were redeemed totaling $9,564,202 and 82.0610 General Partner Redeemable Units were redeemed totaling $275,000. For the year ended December 31, 2015, 7,478.0770 limited partner Redeemable Units were redeemed totaling $24,577,583 and 36.7020 General Partner Redeemable Units were redeemed totaling $124,863. For the year ended December 31, 2014, 16,433.1240 limited partner Redeemable Units were redeemed totaling $56,783,495, 293.8710 General Partner Redeemable Units were redeemed totaling $992,661 and 464.0795 Special Limited Partner Redeemable Units were redeemed totaling $1,589,117.

Redeemable Units were sold to persons and entities who are accredited investors as that term is defined in Rule 501(a) of Regulation D under the Securities Act.

For the year ended December 31, ~~2016~~2017, the net asset value per Redeemable Unit ~~increased~~decreased 6.5.3% from $3,~~162~~366.0910 to $3,~~366~~187.1011. For the year ended December 31, ~~2015~~2016, the net asset value per Redeemable Unit ~~decreased~~increased 76.75% from $3,~~424~~162.2309 to $3,~~162~~366.0910. For the year ended December 31, ~~2014~~2015, the net asset value per Redeemable Unit decreased 47.27% from $3,~~572~~424.9423 to $3,~~424~~162.2309.

The Partnership experienced a net trading ~~gain~~loss of $5423,~~146,609~~923 before fees and expenses for the year ended December 31, ~~2016~~2017. ~~Gains~~Trading ~~were~~losses ~~primarily~~incurred ~~attributable~~during tothe second and fourth quarter more than offset trading gains recorded during the first and third quarters. Overall, the Partnership’s experienced net trading oflosses ~~commodity~~from ~~futures~~positions in ~~natural~~the natural gas markets. The net trading gain (or loss) realized from the Partnership is disclosed under “Item 8. Financial Statements and Supplementary Data.”

During the first quarter, the most notable gains were recorded during March from long positions in natural gas futures as prices rallied higher. Gains were also recorded during early January as a plunge in natural gas prices benefitted the Partnership’s net short positioning. The Partnership continued to record gains during January after the Partnership’s advisor reversed to a net long positioning in natural gas futures and a harsh cold spell in the U.S. West and Northern Plains pushed prices higher. The Partnership’s first quarter gains were partially offset by losses incurred during February from long natural gas positions as the release of very mild weather forecasts resulted in a precipitous drop in natural gas prices.

During the second quarter, the most meaningful losses were recorded from long natural gas positions during the latter half of May as natural gas prices moved lower. The fall in prices culminated over the final two days of May as prices plunged amid mild weather in much of the U.S., significantly reducing demand from homes and businesses. The Partnership’s net long positioning also experienced losses during June as natural gas futures prices fell to their lowest level in three months after the release of National Oceanic and Atmospheric Administration (NOAA) projections indicating moderate temperatures for late June. Smaller losses were incurred during April.

During the third quarter, the most significant gains were achieved during August as rising natural gas prices early in the month benefitted the Partnership’s net long positioning. Reports indicating national natural gas stocks were running well below their recent historical averages and speculation that markets had been oversold helped to push natural gas prices higher. A portion of the Partnership’s gains for the third quarter was offset by losses incurred primarily during July from long natural gas positions amid very choppy and volatile price actions in the natural gas markets. The release of reports indicating potentially weaker future home and business demand and flat supply totals resulted in a subsequent plunge in natural gas prices during early July. Smaller losses were experienced during September.

During the fourth quarter, the Partnership recorded losses during October from long positions in natural gas futures as prices fell amid weak heating demand from homes and businesses, spurred by mild weather throughout much of the U.S. Additional losses were also recorded during December as mild weather negatively affected the Partnership’s net long natural gas positioning. The Partnership’s losses for the fourth quarter were partially offset by gains achieved during November due to long natural gas positions as industry reports showing lower-than-expected U.S. natural gas inventories helped to push prices higher.

The Partnership experienced a net trading gain of $5,146,609 before fees and expenses for the year ended December 31, 2016. Gains were primarily attributable to the Partnership’s trading of commodity futures in natural gas.

The Partnership recorded its most significant gains during the last week of July as the Partnership benefitted from a move from net short positioning in natural gas futures to net long. Driven by increasingly hot, dry weather in the U.S., a seasonably weak increase in inventories, and growing demand from power generation, natural gas prices rallied strongly in the final days of the month. Gains were also achieved during September from the Partnership’s long positioning as a surge in natural gas prices during the second week of the month provided most of the Partnership’s gains for the month. The release of industry reports which showed a flattening supply outlook combined with increased demand nationally for natural gas drove prices higher in September. The Partnership also recorded gains throughout the latter half of August as the Partnership’s advisor increased overall long exposure at the same time that natural gas prices began to rally, spurred by extremely hot temperatures in the U.S. which bolstered cooling demand from homes and businesses. During October, gains were achieved late in the month as mild weather patterns in the U.S. caused natural gas prices to plunge, benefitting the Partnership’s short positions. Gains were also achieved during May as prices fell dramatically over the first several days of the month and followed with choppy price action closing out a volatile first week, benefitting the Partnership’s short positioning. A portion of the Partnership’s gains for the year was offset by losses incurred during February from long positions in natural gas futures as mild weather throughout much of the U.S. limited demand for natural gas and moved prices dramatically lower. The Partnership’s net long positioning was also negatively affected during February after the release of U.S. Energy Information Administration (the “EIA”) reports which indicated that output from U.S. shale formations was overwhelming demand for fuel and inflated the largest natural gas supply glut in the U.S. in four years. Losses were recorded during November from the Partnership’s net short natural gas positioning as prices rallied sharply over the month’s final days. Additional losses were experienced during April as choppy price actions dominated natural gas markets during the first half of the month. A spike in natural gas prices due to unseasonably cold weather in the Northeastern U.S. during the latter half of April also adversely affected the Partnership’s positions. Smaller losses were recorded during the early days of March as a sharp drop in natural gas prices negatively affected the Partnership’s long positions.

Interest income on 80% of the Partnership’s average daily equity maintained in cash during each month is earned at the monthly average of the 4-week U.S. Treasury bill discount rate. Any interest earned on the Partnership’s account in excess of the amount described above, if any, will be retained by MS&Co. and/or shared with the General Partner. All interest earned on U.S. Treasury bills and money market mutual fund securities will be retained by the Partnership. Interest income earned for the three and twelve months ended December 31, 2017 increased by $54,358 and $181,568, respectively, as compared to the corresponding periods in 2016. The increase in interest income is primarily due to higher 4-week U.S. Treasury bill discount rates along with additional interest income earned on U.S. Treasury bills during the three and twelve months ended December 31, 2017 as compared to the corresponding periods in 2016. Interest earned by the Partnership will increase the net asset value of the Partnership. The amount of interest income earned by the Partnership depends on (i) the average daily equity maintained in cash in the Partnership’s account, (ii) the amount of U.S. Treasury bills and/or money market mutual fund securities held by the Partnership and (iii) interest rates over which none of the Partnership, MS&Co., or JPMorgan has control.

Clearing fees are based on the number of trades executed by the Advisor for the Partnership. Accordingly, they must be compared in relation to the number of trades executed during the period. Clearing fees for the three and twelve months ended December 31, 2017 decreased by $45,981 and $267,624, respectively, as compared to the corresponding periods in 2016. The decrease is primarily due to a decrease in the number of trades made by the Advisor during the three and twelve months ended December 31, 2017 as compared to the corresponding periods in 2016.

Ongoing selling agent fees are calculated as a percentage of the Partnership’s net asset value as of the end of each month and are affected by trading performance and redemptions. Accordingly, they must be analyzed in relation to the fluctuations in the monthly net asset values. Ongoing selling agent fees for the three and twelve months ended December 31, 2017 decreased by $43,456 and $101,684, respectively, as compared to the corresponding periods in 2016. The decrease is primarily due to lower average net assets during the three and twelve months ended December 31, 2017 as compared to the corresponding periods in 2016.

Management fees are calculated as a percentage of the Partnership’s net asset value as of the end of each month and are affected by trading performance and redemptions. Accordingly, they must be analyzed in relation to the fluctuations in the monthly net asset values. Management fees for the three and twelve months ended December 31, 2017 decreased by $27,113 and $63,528, respectively, as compared to the corresponding periods in 2016. The decrease is primarily due to lower average net assets during the three and twelve months ended December 31, 2017 as compared to the corresponding periods in 2016.

General Partner fees are paid to the General Partner for administering the business and affairs of the Partnership, including, among other things, (i) selecting, appointing and terminating the Partnership’s Advisor and (ii) monitoring the activities of the Advisor. These fees are calculated as a percentage of the Partnership’s net asset value as of the end of each month and are affected by trading performance and redemptions. Accordingly, they must be analyzed in relation to the fluctuations in monthly net asset values. General Partner fees for the three and twelve months ended December 31, 2017 decreased by $16,268 and $38,117, respectively, as compared to the corresponding periods in 2016. The decrease is primarily due to lower average net assets during the three and twelve months ended December 31, 2017 as compared to the corresponding periods in 2016.

Special Limited Partner profit share allocations are based on the new trading profits generated by the Advisor at the end of the quarter, as defined in the advisory agreement among the Partnership, the General Partner and the Advisor. There were no profit share allocations made for the twelve months ended December 31, 2017 and 2016. The Special Limited Partner will not receive a profit share allocation until the Advisor recovers the net loss incurred and earns additional new trading profits for the Partnership.

The Partnership pays professional fees, which generally include legal, accounting expenses, administrative, filing, reporting and data processing fees. Professional fees for the years ended December 31, 2017 and 2016 were $198,964 and $228,876, respectively.

The Partnership experienced a net trading loss of $1,976,332 before fees and expenses for the year ended December 31, 2015. Losses were primarily attributable to the Partnership’s trading of commodity futures in natural gas.

The Partnership recorded the most significant losses during February. Losses were incurred at the start of ~~the~~ February due to short positions in natural gas futures after severe weather in the U.S. Midwest and Northeast spurred demand for heating from homes and businesses. In the middle of February, weather again drove natural gas prices higher as much of the country faced colder-than- normal temperatures. Additionally, an industry report released in mid-February indicated that the number of working natural gas rigs in the U.S. decreased during January adding further upward pressure to gas prices. During December, losses were experienced as milder-than-normal weather throughout much of the U.S. pushed natural gas prices lower, negatively affecting the Partnership’s net long positioning. Additional losses were recorded during June as an increase in prices early in the month resulted in losses for the Fund’s short-biased positions. Later in June, following a move to a net long positioning, the Fund recorded further losses as prices moved lower on weak cooling demand driven by mild weather in much of the U.S. Losses were also incurred during July as falling natural gas prices driven by robust supplies, mild temperatures, and low demand in the U.S. negatively affected the Partnership’s net long bias during the month. The Partnership’s natural gas positions also recorded smaller losses during April, May, and October. A portion of the Partnership’s losses during the year was offset by gains achieved during March as a fall in natural gas prices at the start of the month positively affected short positions. The Partnership’s short positioning bias also benefitted from the release of an Energy Information Agency report in the middle of March which indicated that residential and business natural gas consumption fell during the early stages of the month. Mild weather that blanketed many of the major gas-consuming regions in the U.S. throughout March combined with the release of a report which showed that natural gas inventories advanced from the same period in the previous year to help the Partnership’s short positions record profits during the latter half of March. Smaller gains were recorded during November.

and businesses. In the middle of February, weather again drove natural gas prices higher as much of the country faced colder-than-normal temperatures. Additionally, an industry report released in mid-February indicated that the number of working natural gas rigs in the U.S. decreased during January adding further upward pressure to gas prices. During December, losses were experienced as milder-than-normal weather throughout much of the U.S. pushed natural gas prices lower, negatively affecting the Partnership’s net long positioning. Additional losses were recorded during June as an increase in prices early in the month resulted in losses for the Fund’s short-biased positions. Later in June, following a move to a net long positioning, the Fund recorded further losses as prices moved lower on weak cooling demand driven by mild weather in much of the U.S. Losses were also incurred during July as falling natural gas prices driven by robust supplies, mild temperatures, and low demand in the U.S. negatively affected the Partnership’s net long bias during the month. The Partnership’s natural gas positions also recorded smaller losses during April, May, and October. A portion of the Partnership’s losses during the year was offset by gains achieved during March as a fall in natural gas prices at the start of the month positively affected short positions. The Partnership’s short positioning bias also benefitted from the release of an Energy Information Agency report in the middle of March which indicated that residential and business natural gas consumption fell during the early stages of the month. Mild weather that blanketed many of the major gas-consuming regions in the U.S. throughout March combined with the release of a report which showed that natural gas inventories advanced from the same period in the previous year to help the Partnership’s short positions record profits during the latter half of March. Smaller gains were recorded during November.

Interest income on 80% of the Partnership’s average daily equity maintained in cash during each month was earned at the monthly average of the 4-week U.S. Treasury bill discount rate. Any interest earned on the Partnership’s account in excess of the amount described above, if any, will be retained by MS&Co. and/or shared with the General Partner. All interest earned on U.S. Treasury bills and money market fund securities will be retained by the Partnership. Interest income earned for the three and twelve months ended December 31, 2016 increased by $28,948 and $91,664, respectively, as compared to the corresponding periods in 2015. The increase in interest income is primarily due to higher 4-week U.S. Treasury bill discount rates along with additional interest income earned on U.S. Treasury bills during the three and twelve months ended December 31, 2016 as compared to the corresponding periods in 2015. Interest earned by the Partnership will increase the net asset value of the Partnership. The amount of interest income earned by the Partnership depends on (i) the average daily equity maintained in cash in the Partnership’s account, (ii) the amount of U.S. Treasury bills and/or money market mutual fund securities held by the Partnership and (iii) interest rates over which neither the Partnership nor MS&Co. has control.

Clearing fees are based on the number of trades executed by the Advisor for the Partnership. Accordingly, they must be compared in relation to the number of trades executed during the period. Clearing fees for the three and twelve months ended December 31, 2016 decreased by $25,300 and $164,042, respectively, as compared to the corresponding periods in 2015. The decrease is primarily due to a decrease in the number of trades made by the Advisor during the three and twelve months ended December 31, 2016 as compared to the corresponding periods in 2015.

Ongoing selling agent fees are calculated as a percentage of the Partnership’s net asset value as of the end of each month and are affected by trading performance and redemptions. Accordingly, they must be analyzed in relation to the fluctuations in the monthly net asset values. Ongoing selling agent fees for the three and twelve months ended December 31, 2016 decreased by $42,501 and $301,129, respectively, as compared to the corresponding periods in 2015. The decrease is primarily due to lower average net assets during the three and twelve months ended December 31, 2016 as compared to the corresponding periods in 2015.

Management fees are calculated as a percentage of the Partnership’s net asset value as of the end of each month and are affected by trading performance and redemptions. Accordingly, they must be analyzed in relation to the fluctuations in the monthly net asset values. Management fees for the three and twelve months ended December 31, 2016 decreased by $26,498 and $188,277, respectively, as compared to the corresponding periods in 2015. The decrease is primarily due to lower average net assets during the three and twelve months ended December 31, 2016 as compared to the corresponding periods in 2015. In addition, no management fee was charged to the Partnership for the period January 1, 2015 to January 31, 2015.

General Partner fees are paid to the General Partner for administering the business and affairs of the Partnership, including, among other things, (i) selecting, appointing and terminating the Partnership’s Advisor and (ii) monitoring the activities of the Advisor. These fees are calculated as a percentage of the Partnership’s net asset value as of the end of each month and are affected by trading performance and redemptions. Accordingly, they must be analyzed in relation to the fluctuations in monthly net asset values. General Partner fees for the three and twelve months ended December 31, 2016 decreased by $15,899 and $112,967, respectively, as compared to the corresponding periods in 2015. The decrease is primarily due to lower average net assets during the three and twelve months ended December 31, 2016 as compared to the corresponding periods in 2015. In addition, no General Partner fees were charged to the Partnership for the period from January 1, 2015 to January 31, 2015.

Special Limited Partner profit share allocations are based on the new trading profits generated by the Advisor at the end of the quarter, as defined in the advisory agreement among the Partnership, the General Partner and the Advisor. There were no profit share allocations made for the twelve months ended December 31, 2016 and 2015. The Special Limited Partner will not receive a profit share allocation until the Advisor recovers the net loss incurred and earns additional new trading profits for the Partnership.

The Partnership pays professional fees, which generally include legal, accounting expenses, administrative, filing, reporting and data processing fees. Professional fees for the years ended December 31, 2016 and 2015 were $228,876 and $348,067, respectively.

The Partnership, through its investment in the Master, prior to its full redemption effective December 31, 2014, experienced a net trading loss of $ 1,236,399 before fees and expenses for the year ended December 31, 2014. Losses were primarily attributable to the Master’s trading of commodity futures in Brent crude oil, gasoline and gasoil futures and were partially offset by gains in heating oil, WTI crude oil and natural gas futures.

The most significant losses were recorded within the gasoline markets during October and November from long futures positions as prices moved lower after the U.S. Energy Department released a report showing gasoline inventories advanced during the third quarter while consumption in the U.S. was lower than analysts previously predicted. During July, August, and September further losses were recorded from long positions in RBOB gasoline futures as prices declined as U.S. refineries increased production at near record rates. Losses were also experienced during September from long positions in Brent crude oil futures as prices moved lower on weakening global demand and increased oil production in the U.S. and the Middle East. Additional losses were incurred during May from short positions in Brent crude oil futures as prices advanced as tensions between Ukraine and Russia increased speculation of potential sanctions against Russia. Losses during June were experienced from short positions in Brent crude oil futures as prices rose after uprisings in Iraq and Libya threatened to curtail exports from the Middle East. The Partnership’s losses during the year were offset by trading gains achieved during September from short positions in heating oil futures as prices declined on news that fuel inventory levels were higher than previous estimates predicted during the second quarter. During February, gains were recorded from long positions in heating oil futures as prices advanced on increased demand in the U.S. due to persistent, prolonged cold weather throughout much of the country. Additional gains in the heating oil market were achieved during November and December. During July and September, gains were experienced from short WTI crude oil positions as prices moved lower as government reports showed continued growth in U.S. oil production. During February, gains were recorded from long natural gas positions as prices rallied early in the month after cold weather in the U.S. increased demand for heating homes and businesses. Additional gains were recorded during April from long positions in natural gas futures as prices moved higher after government data indicated fuel inventories fell to an 11-year-low.

Commodity markets are highly volatile. Broad and rapid price fluctuations and rapid inflation increase the risks involved in commodity trading, but also increase the possibility for profit or loss. The profitability of the Partnership depends on the Advisor’s ability to forecast price changes in energy and energy-related commodities. Such price changes are influenced by, among other things, changing supply and demand relationships, weather, governmental, agricultural, commercial and trade programs and policies, national and international political and economic events and changes in interest rates. To the extent that the Advisor correctly makes such forecasts, the Partnership expects to increase capital through operations.

In allocating substantially all of the assets of the Partnership to Pan, and prior to December 31, 2014, to AAA, the General Partner considers, among other factors, the background of the Advisor’s ~~principles~~principals, as well as the Advisor’s trading styles, strategies and markets traded, expected volatility, trading results (to the extent available) and fee requirements. The General Partner may modify or terminate the allocation of assets to Pan at any time. Pan’s trading program is described in the “Overview” section of this Item 7.

(d) Off-Balance Sheet Arrangements. None.

(e) Contractual Obligations. None.

(f) Operational Risk.

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

Such risks include:

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

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

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

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

(g) Critical Accounting Policies.

The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires the General Partner to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. As a result, actual results could differ from these estimates. A summary of the Partnership’s significant accounting policies is described in Note 2 to the Partnership’s financial statements included in “Item 8. Financial Statements and Supplementary Data.”

The Partnership’s most significant accounting policy is the valuation of its investments in futures, option and forward contracts and U.S. Treasury bills, as applicable. The fair value of exchange-traded futures, option and forward contracts is determined by the various exchanges, and reflects the settlement price for each contract as of the close of business on the last business day of the reporting period. The fair value of foreign currency forward contracts is extrapolated on a forward basis from the spot prices quoted as of approximately 3:00 P.M. (E.T.) on the last business day of the reporting period from various exchanges. The fair value of non-exchange-traded foreign currency option contracts is calculated by applying an industry standard model application for options valuation of foreign currency options, using as inputs the spot prices, interest rates, and option implied volatilities quoted as of approximately 3:00 P.M. (E.T.) on the last business day of the reporting period. U.S. Treasury bills are valued at the last available bid price received from independent pricing services as of the close of the last business day of the reporting period.

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

All of the Partnership’s assets are subject to the risk of trading loss directly and, in prior periods, were subject to the risk of trading loss indirectly through its investment in the Master prior to its full redemption effective December 31, 2014. The Partnership is, and the Master was, a speculative commodity pool. The market sensitive instruments held by the Partnership are acquired for speculative trading purposes, and all or substantially all of the Partnership’s assets are, and by the Master were, subject to the risk of trading loss. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Partnership’s main line of business.

The limited partners will not be liable for losses exceeding the current net asset value of their investment.

Market movements result and resulted, respectively, in frequent changes in the fair value of the Partnership’s and the Master’s open positions and, consequently, in their earnings and cash balances. The Partnership’s market risk is, and the Master’s market risk was, 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/Master’s open contracts and the liquidity of the markets in which the Partnership trades and Master traded.

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

“Value at Risk” is a measure of the maximum amount which the Partnership could reasonably be and the Master reasonably could have been expected to lose in a given market sector. However, the inherent uncertainty of the Partnership’s/Master’s speculative trading and the recurrence in the markets traded by the Partnership/Master of market ~~movements~~ movements far exceeding expectations could result in actual trading or non-trading losses far beyond the indicated Value at Risk or the Partnership’s/Master’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 in this section should not be considered to constitute any assurance or representation that the Partnership’s losses in any market sector will be, or that the Master’s losses in any market sector would have been, ~~will be~~ limited to Value at Risk or by the Partnership’s/Master’s attempts to manage its market risk.

Materiality as used in this section 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/Master’s market sensitive instruments.

Quantifying the Partnership’s Trading Value at Risk

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~~ Securities Exchange Act of 1934 (the “Exchange Act”)). All quantitative disclosures in this section are deemed to be forward-looking statements for purposes of the safe harbor except for statements of historical fact (such as the terms of particular contracts and the number of market risk sensitive instruments held during or at the end of the reporting period).

The Partnership’s risk exposure in the various market sectors traded by the Advisor 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).

Exchange margin requirements have been used by the Partnership as the measure of its Value at Risk. Margin requirements are set by exchanges to equal or exceed the maximum losses reasonably expected to be incurred in the fair value of any given contract in 95% - 99% of any one-day interval. The margin levels are established by dealers and exchanges using historical price studies as well as an assessment of current market volatility (including the implied volatility of the options on a given futures contract) and economic fundamentals to provide a probabilistic estimate of the maximum expected near-term one-day price fluctuation.

In the case of market sensitive instruments which are not exchange-traded, the margin requirements for the equivalent futures positions have been used as Value at Risk. In those rare cases in which a futures-equivalent margin is not available, dealers’ margins have been used.

The fair value of the Partnership’s futures positions did not have any optionality component. However, the Advisor did trade commodity options. The Value at Risk associated with options reflected in the following table as the margin requirement attributable to the instrument underlying each option. Where this instrument is a futures contract, the futures margin has been used, and where this instrument is a physical commodity, the futures-equivalent margin has been used. This calculation is conservative in that it assumes that the fair value of an option will decline by the same amount as the fair value of the underlying instrument, whereas, in fact, the fair values of the options traded by the Partnership in almost all cases fluctuate to a lesser extent than those of the underlying instruments.

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 added 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

Value at Risk tables represent a probabilistic assessment of the risk of loss in market risk sensitive instruments. The following table indicates the trading Value at Risk associated with the Partnership’s open positions by market category as of December 31, ~~2016~~2017, and the highest, lowest and average value at any point during the year. All open position trading risk exposures of the Partnership have been included in calculating the figures set forth below.

As of December 31, 2017, the Partnership’s total capitalization was $37,555,092. The Partnership’s Value at Risk as of December 31, 2017 was as follows:


						Twelve Months Ended December 31, 2017
Market Sector	Value at Risk		% of Total Capitalization			High Value at Risk		Low Value at Risk		Average Value at Risk*
Energy	$	2,803,701		7.47	%	$	7,912,763	$	765,917	$	3,730,670

Total	$	2,803,701		7.47	%

* Annual average month-end Values at Risk.

As of December 31, 2016, the Partnership’s total capitalization was $47,004,152. The Partnership’s Value at Risk as of December 31, 2016 was as follows:

						Twelve Months Ended December 31, 2016
Market Sector	Value at Risk		% of ~~Total Capitalization~~TotalCapitalization			~~High~~HighValue ~~Value~~ at Risk		~~Low~~LowValue ~~Value~~ at Risk		~~Average~~AverageValue ~~Value~~ at Risk*
Energy	$	2,304,147		4.90	%	$	6,627,196	$	43,143	$	2,654,406
Total	$	2,304,147		4.90	%

* Annual average month-end Values at Risk.

As22 ~~of December 31, 2015, the Partnership’s total capitalization was $54,272,070. The Partnership’s Value at Risk as of December 31, 2015 was as follows:~~

						Twelve Months Ended December 31, 2015
Market Sector	Value at Risk		% of Total Capitalization			High Value at Risk		Low Value at Risk		Average Value at Risk*
Energy	$	182,462		0.34	%	$	6,621,154	$	-	$	1,114,860
Total	$	182,462		0.34	%

* Annual average month-end Values at Risk.

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

The face value of the market sector instruments held directly by the Partnership was typically many times the applicable margin requirement (margin requirements generally range between 1% and 15% of contract face value, although an exchange may increase margin requirements on short notice) as well as many times the capitalization of the Partnership. The magnitude of the Partnership’s open positions created 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 have caused 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 and the Master — gives no indication of this “risk of ruin.”

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 Partnership managed its primary market risk exposures — constitute forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. The Partnership’s primary market risk exposures, as well as the strategies used and to be used by the General Partner and the Advisor for managing such exposures, were subject to numerous uncertainties, contingencies and risks, any one of which could cause the actual results of the Partnership’s risk control 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 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 at December 31, ~~2016~~2017 by market sector. ~~It may be anticipated, however, that these market exposures will vary materially over time.~~

Energy. The Partnership’s primary energy market exposure is to natural gas price movements, often resulting from supply/demand factors and weather conditions. Natural gas prices can be volatile and substantial profits and losses, which have been experienced in the past, are expected to continue to be experienced in these markets in the future.

Qualitative Disclosures Regarding Means of Managing Risk Exposure

The General Partner monitors and attempts to ~~control~~mitigate, including through ~~its~~the Partnership’s investment in the Master prior to its full redemption effective December 31, 2014, the Partnership’s risk exposure on a daily basis through financial, credit and risk management monitoring systems and accordingly, believes that it had effective procedures for evaluating and limiting the credit and market risks to which the Partnership may be subject or the Master may have been subject.

The General Partner monitors the Partnership’s performance and monitored the Master’s performance and the concentration of ~~its~~their open positions, and consulted with the Advisor concerning the overall risk profile of the Partnership or the Master, as applicable. If the General Partner felt it necessary to do so, the General Partner could require the Advisor to close out individual positions as well as enter programs traded on behalf of the Partnership or the Master, as applicable. However, any such intervention would be a highly unusual event. The General Partner primarily relies and has relied on the Advisor’s own risk control policies while maintaining a general supervisory overview of the market risk exposures of the Partnership or the Master, as applicable.

The Advisor applies its own risk management policies to its trading. The Advisor generally follows diversification guidelines, margin limits and stop loss points to exit a position. The Advisor’s research of risk management often suggests ongoing modifications to its trading programs.

As part of the General Partner’s risk management, the General Partner periodically meets with the Advisor to discuss its risk management and to look for any material changes to the Advisor’s portfolio balance and trading techniques. The Advisor is required to notify the General Partner of any material changes to its programs.

2023

Item 8. Financial Statements and Supplementary Data.

Managed Futures Premier Energy Fund L.P. II

The following financial statements and related items of the Partnership are filed under this Item 8: Oath or Affirmation, Management’s Report on Internal Control over Financial Reporting, Report of Independent Registered Public Accounting Firm, for the years ended December 31, ~~2016~~2017, ~~2015~~2016 and ~~2014~~2015; Statements of Financial Condition at December 31, ~~2016 and~~2017 ~~2015~~and 2016; Condensed Schedule of Investments at December 31, ~~2016~~2017 and ~~2015~~2016; Statements of Income and Expenses for the years ended December 31, ~~2016~~2017, ~~2015~~2016 and ~~2014~~2015; Statements of Changes in Partners’ Capital for the years ended December 31, 2017, 2016, ~~2015~~ and ~~2014~~2015; and Notes to Financial Statements.

2124

To the Limited Partners of

Managed Futures Premier Energy Fund L.P. II

To the best of the knowledge and belief of the undersigned, the information contained herein is accurate and complete.




By:		Patrick T. Egan
		President and Director
		Ceres Managed Futures LLC
		General Partner,
		Managed Futures Premier Energy Fund L.P. II

Ceres Managed Futures LLC
522 Fifth Avenue
New York, NY 10036
(855) 672-4468

2225

Management’s Report on Internal Control Over

Financial Reporting

The management of Managed Futures Premier Energy Fund L.P. II (the “Partnership”), Ceres Managed Futures LLC, is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a - 15(f) and 15d -15(f) under the Securities Exchange Act of 1934 and for our assessment of internal control over financial reporting. The Partnership’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. The Partnership’s internal control over financial reporting includes those policies and procedures that:

(i)

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

(ii)

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Partnership are being made only in accordance with authorizations of management and directors of the Partnership; and

(iii)

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

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

The management of Managed Futures Premier Energy Fund L.P. II has assessed the effectiveness of the Partnership’s internal control over financial reporting as of December 31, ~~2016~~2017. In making this assessment, management used the criteria set forth in the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our assessment, management concluded that the Partnership maintained effective internal control over financial reporting as of December 31, ~~2016~~2017 based on the criteria referred to above.

Patrick T. Egan Steven Ross President and Director Chief Financial Officer and Director Ceres Managed Futures LLC Ceres Managed Futures LLC General Partner, General Partner, Managed Futures Premier Energy Fund L.P. II ~~Steven Ross Chief Financial Officer and Director Ceres~~ Managed Futures ~~LLC General Partner, Managed Futures~~ Premier Energy Fund L.P. II

2326

Report of Independent Registered Public Accounting Firm

To the Partners of Managed Futures Premier Energy Fund L.P. II,

Opinion on the Financial Statements

We have audited the accompanying statement of financial condition of Managed Futures Premier Energy Fund L.P. II (the “Partnership”), including the condensed schedule of investments, as of December 31, 2017, and the related statements of income and expenses and changes in partners’ capital for the year ended December 31, 2017, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Partnership at December 31, 2017, and the results of its operations and the changes in its partners’ capital for the year ended December 31, 2017, in conformity with U.S. generally accepted accounting principles.

The statement of financial condition, including the condensed schedule of investments, as of December 31, 2016, and the related statements of income and expenses and changes in partners’ capital for the years ended December 31, 2016 and 2015 were audited by another independent registered public accounting firm whose report, dated March 24, 2017, expressed an unqualified opinion on those statements.

Basis for Opinion

These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on the Partnership’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Partnership is not required to have, nor were we engaged to perform, an audit of the Partnership’s internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers and others were not received. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the auditor of the Partnership since 2017.

Boston, MA

March 22, 2018

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Partners of Managed Futures Premier Energy Fund L.P. II:

We have audited the accompanying statements of financial condition of Managed Futures Premier Energy Fund L.P. II (the “Partnership”), including the condensed schedules of investments, as of December 31, 2016 and 2015, and the related statements of income and expenses and changes in partners’ capital for ~~each of~~ the ~~three~~ years inthen ~~the period~~ ended ~~December 31, 2016~~. These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material respects, the financial position of Managed Futures Premier Energy Fund L.P. II as of December 31, 2016 and 2015, and the results of its operations and changes in its partners’ capital for ~~each of~~ the ~~three~~ years inthen ~~the period~~ ended ~~December 31~~, ~~2016,~~ in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

New York, New York

March 24, 2017

2428

Managed Futures Premier Energy Fund L.P. II

Statements of Financial Condition

December 31, ~~2016~~2017 and ~~2015~~2016

	December 31, 2016		December 31, 2015
	December 31,		December 31,
	2017		2016
Assets:
Equity in trading account:
Investment in U.S. Treasury bills, at fair value (amortized cost $0 and $33,248,949 at December 31, 2016 and 2015, respectively)	$	-	$	33,247,818
Unrestricted cash (Note 3c)	$	36,909,040	$	43,772,284
Cash (Note 3c)		43,772,284		21,750,445
Restricted cash (Note 3c)		2,258,201		2,290,116
Cash margin (Note 3c)		2,290,116		182,462
Net unrealized appreciation on open futures contracts		-		1,353,548
Net unrealized appreciation on open futures contracts		1,353,548		49,781
Total equity in trading account		39,167,241		47,415,948
Options purchased, at fair value (cost $0 and $53,820 at December 31, 2016 and 2015, respectively)		-		43,407
Cash at bank (Note 1)		437		218
Total equity in trading account		47,415,948		55,273,913
Interest receivable (Note 3c)		31,067		5,348
Cash at bank (Note 1)		218		-
Total assets	$	39,198,745	$	47,421,514
Interest receivable (Note 3c)		5,348		1,969
Total assets	$	47,421,514	$	55,275,882
Liabilities and Partners’ Capital:
Liabilities:
Options written, at fair value (premiums received $291,918 and $0 at December 31, 2016 and 2015, respectively)	$	14,031	$	-
Net unrealized depreciation on open futures contracts	$	128,353	$	-
Options written, at fair value (premiums received $583,818 and $ 291,918 at December 31, 2017 and 2016, respectively)		545,500		14,031
Accrued expenses:
Ongoing selling agent fees (Note 3d)		7964,~~012~~208		9279,~~126~~012
Management fees (Note 3b)		4939,~~155~~914		5749,~~327~~155
General Partner fees (Note 3a)		2923,~~493~~949		3429,~~396~~493
Professional fees		~~139~~142,~~736~~773		~~149~~139,~~391~~736
Redemptions payable to General Partner (Note 6)		~~4,999~~-		-4,999
Redemptions payable to Limited Partners (Note 6)		~~100~~698,~~936~~956		~~670~~100,~~572~~936
Total liabilities		~~417~~1,~~362~~643,653		1417,~~003,812~~362
Partners’ Capital (Notes 1 and 6):
General Partner, 154.9039 and 236.9649 Redeemable Units outstanding at December 31, 2016 and 2015, respectively		521,421		749,305
General Partner, 136.5679 and 154.9039 Redeemable Units outstanding at December 31, 2017 and 2016, respectively		435,257		521,421
Special Limited Partner, 0.0000 Redeemable Units outstanding at December 31, 2016 and 2015		-		-
Limited Partners, 11,646.8598 and 13,809.0888 Redeemable Units outstanding at December 31, 2017 and 2016, respectively		37,119,835		46,482,731
Limited Partners, 13,809.0888 and 16,926.3698 Redeemable Units outstanding at December 31, 2016 and 2015, respectively		46,482,731		53,522,765
Total partners’ capital (net asset value)		37,555,092		47,004,152
Total partners’ capital (net asset value)		47,004,152		54,272,070
Total liabilities and partners’ capital	$	39,198,745	$	47,421,514
Total liabilities and partners’ capital	$	47,421,514	$	55,275,882
Net asset value per Redeemable Unit	$	3,187.11	$	3,366.10
Net asset value per Redeemable Unit	$	3,366.10	$	3,162.09

See accompanying notes to financial statements.

2529

Managed Futures Premier Energy Fund L.P. II

Condensed Schedule of Investments

December 31, ~~2016~~2017

	Number of Contracts		Fair Value				% of Partners’ Capital
	Number of									% of Partners’
Futures Contracts Purchased
	Contracts				Fair Value					Capital
Energy		3,036	$	3,877,448				8.25	%
Futures Contracts Purchased
Total futures contracts purchased				3,877,448				8.25
Energy		2,108			$	820,227					2.18	%
Futures Contracts Sold
Total futures contracts purchased						820,227					2.18
Energy		2,305		(2,523,900)				(5.37)
Futures Contracts Sold
Total futures contracts sold				(2,523,900)				(5.37)
Energy		1,423				(948,580)					(2.52)
Net unrealized appreciation on open futures contracts			$	1,353,548				2.88	%
Total futures contracts sold						(948,580)					(2.52)
Options Written
Net unrealized depreciation on open futures contracts					$	(128,353)					(0.34)	%
Puts
Options Written
Energy		146	$	(14,031)				(0.03)	%
Calls
Total options written (premiums received $291,918)			$	(14,031)				(0.03)	%
Energy		125			$	(276,500)					(0.74)	%
Puts
Energy		125				(269,000)					(0.71)
Total options written (premiums received $583,818)					$	(545,500)					(1.45)	%

See accompanying notes to financial statements.

2630

Managed Futures Premier Energy Fund L.P. II

Condensed Schedule of Investments

December 31, ~~2015~~2016

				Number of Contracts				Fair Value		% of Partners’ Capital
	Number of									% of Partners’
	Contracts					Fair Value				Capital
Futures Contracts Purchased
Energy		3,036			~~353~~	$	3,877,448	$	~~118,394~~		08.2225	%
Total futures contracts purchased							3,877,448		~~118,394~~		08.2225
Futures Contracts Sold
Energy		2,305			48		(2,523,900)		~~(68,613)~~		(05.1337)
Total futures contracts sold							(2,523,900)		~~(68,613)~~		(05.1337)
Net unrealized appreciation on open futures contracts						$	1,353,548	$	~~49,781~~		02.0988	%
Options Purchased
Options Written
Puts
Energy		146			~~117~~	$	(14,031)	$	~~43,407~~		(0.0803)	%
Total options purchased (cost $53,820)								$	43,407		0.08	%
Total options written (premiums received $291,918)						$	(14,031)				(0.03)	%
U.S. Government Securities
										% of Partners’
Face Amount	Maturity Date		Description					Fair Value		Capital
$33,250,000	1/21/16		U.S. Treasury bills, 0.0125%* (Amortized cost of $33,248,949)					$	33,247,818		61.26	%

* Liquid non-cash held as collateral.

See accompanying notes to financial statements.

2731

Managed Futures Premier Energy Fund L.P. II

Statements of Income and Expenses

For the Years Ended December 31, ~~2016~~2017, ~~2015~~2016 and ~~2014~~2015

	2016			2015				2014
	2017					2016				2015
Investment Income:
Interest income (Note 3c)	$	97278,~~255~~823		$	~~5,591~~	$	97,255	$	-	$	5,591
Interest income allocated from the Master (Note 3c)		-			-				18,911
Expenses:
Total investment income		97,255			5,591				18,911
Clearing fees (Note 3c)		257,048					524,672				688,714
Expenses:
Ongoing selling agent fees (Note 3d)		860,064					961,748				1,262,877
Expenses allocated from the Master		-			-				362,324
Management fees (Note 3b)		534,775					598,303				786,580
Clearing fees (Note 3c)		524,672			688,714				-
General Partner fees (Note 3a)		320,864					358,981				471,948
Ongoing selling agent fees (Note 3d)		961,748			1,262,877				1,326,342
Professional fees		198,964					228,876				348,067
Management fees (Note 3b)		598,303			786,580				1,813,255
Total expenses		2,171,715					2,672,580				3,558,186
General Partner fees (Note 3a)		358,981			471,948				687,918
Net investment loss		(1,892,892)					(2,575,325)				(3,552,595)
Professional fees		228,876			348,067				294,197
Trading Results:
Total expenses		2,672,580			3,558,186				4,484,036
Net gains (losses) on trading of commodity interests:
Net investment loss		(2,575,325	)		(3,552,595	)			(4,465,125	)
Net realized gains (losses) on closed contracts		1,297,547					3,554,542				(2,015,700)
Trading Results:
Net change in unrealized gains (losses) on open contracts		(1,721,470)					1,592,067				39,368
Net gains (losses) on trading of commodity interests and investment in the Master:
Total trading results		(423,923)					5,146,609				(1,976,332)
Net realized gains (losses) on closed contracts		3,554,542			(2,015,700	)			-
Net income (loss)	$	(2,316,815)				$	2,571,284			$	(5,528,927)
Net realized gains (losses) on closed contracts allocated from the Master		-			-				(1,963,645	)
Net income (loss) per Redeemable Unit (Note 7) *	$	(178.99)				$	204.01			$	(262.14)
Net change in unrealized gains (losses) on open contracts		1,592,067			39,368				-
Weighted average Redeemable Units outstanding		13,019.8574					15,149.6767				21,206.6559
Net change in unrealized gains (losses) on open contracts allocated from the Master		-			-				727,246
Total trading results		5,146,609			(1,976,332	)			(1,236,399	)
Net income (loss)	$	2,571,284		$	(5,528,927	)		$	(5,701,524	)
Net income (loss) per Redeemable Unit (Note 7) *	$	204.01		$	(262.14	)		$	(148.71	)
Weighted average Redeemable Units outstanding		15,149.6767			21,206.6559				35,790.0277

Represents the change in net asset value per Redeemable Unit.

See accompanying notes to financial statements.

2832

Managed Futures Premier Energy Fund L.P. II

Statements of Changes in Partners’ Capital

For the Years Ended December 31, ~~2016~~2017, ~~2015~~2016 and ~~2014~~2015

	LimitedPartners			SpecialLimitedPartner			GeneralPartner			Total
				Limited			General
Partners’ Capital, December 31, 2013	$	143,700,671		$	1,658,128		$	2,027,779		$	147,386,578
	Redeemable Units			Partners			Partner			Total
Subscriptions of 618.3640 Redeemable Units		2,183,662			-			-			2,183,662
Partners’ Capital, December 31, 2014		24,678.1137		$	83,566,345		$	937,098		$	84,503,443
Redemptions of 16,433.1240 Redeemable Units		(56,783,495	)		-			-			(56,783,495	)
Redemptions - General Partner		(36.7020)			-			(124,863)			(124,863)
Redemptions of 464.0795 Special Limited Partner Redeemable Units		-			(1,589,117	)		-			(1,589,117	)
Redemptions - Limited Partners		(7,478.0770)			(24,577,583)			-			(24,577,583)
Redemptions of 293.8710 General Partner Redeemable Units		-			-			(992,661	)		(992,661	)
Allocation of net income (loss) for the year ended December 31, 2014:
Net income (loss)		(5,534,493	)		(69,011	)		(98,020	)		(5,701,524	)
Partners’ Capital, December 31, 2014		83,566,345			-			937,098			84,503,443
Redemptions of 7,478.0770 Redeemable Units		(24,577,583	)		-			-			(24,577,583	)
Redemptions of 36.7020 General Partner Redeemable Units		-			-			(124,863	)		(124,863	)
Allocation of net income (loss) for the year ended December 31, 2015:
Net income (loss)		~~(5,465,997~~-	)		-(5,465,997)			(62,930)	)		(5,528,927)	)
Partners’ Capital, December 31, 2015		5317,~~522,765~~163.3347			-53,522,765			749,305			54,272,070
Redemptions of 3,117.2810 Redeemable Units		(9,564,202	)		-			-			(9,564,202	)
Redemptions - General Partner		(82.0610)			-			(275,000)			(275,000)
Redemptions of 82.0610 General Partner Redeemable Units		-			-			(275,000	)		(275,000	)
Redemptions - Limited Partners		(3,117.2810)			(9,564,202)			-			(9,564,202)
Allocation of net income (loss) for the year ended December 31, 2016:
Net income (loss)		~~2,524,168~~-			-2,524,168			47,116			2,571,284
Partners’ Capital, December 31, 2016	$	4613,~~482,731~~963.9927		$	-46,482,731		$	521,421		$	47,004,152
Redemptions - General Partner		(18.3360)			-			(60,001)			(60,001)
Redemptions - Limited Partners		(2,162.2290)			(7,072,244)			-			(7,072,244)
Allocation of net income (loss) for the year ended December 31, 2017:
Net income (loss)		-			(2,290,652)			(26,163)			(2,316,815)
Partners’ Capital, December 31, 2017		11,783.4277		$	37,119,835		$	435,257		$	37,555,092

Net asset value per Redeemable Unit:

2014:	$	3,424.23
2015:			$	3,162.09
2015:	$	3,162.09
2016:			$	3,366.10
2016:	$	3,366.10
2017:			$	3,187.11

See accompanying notes to financial statements.

2933

Managed Futures Premier Energy Fund L.P. II

Notes to Financial Statements

1. Organization:

Managed Futures Premier Energy Fund L.P. II (~~formerly, AAA Capital Energy Fund L.P. II) (~~the “Partnership”) is a limited partnership organized on March 25, 2002 under the partnership laws of the State of New York to engage, directly or indirectly, in the speculative trading of a diversified portfolio of commodity interests, including commodity options and commodity futures contracts on U.S. exchanges and certain foreign exchanges~~, and swaps~~. The Partnership ~~intends to trade only energy and energy-related products, but~~ is authorized to trade commodity futures, ~~swap~~ and option contracts of any kind. In addition, the Partnership may enter into swap ~~transactions~~contracts ~~involving~~on ~~crude oil and other~~ energy-related products. The commodity interests traded by the Partnership are volatile and involve a high degree of market risk. The General Partner may also determine to invest up to all of the Partnership’s assets in United States (“U.S.”) Treasury bills and/or money market mutual funds, including money market mutual funds managed by Morgan Stanley or its affiliates. During the initial offering period, the Partnership sold 93,975 redeemable units of limited partnership interest (“Redeemable Units”). The Partnership commenced trading on July 1, 2002. ~~From~~Since ~~July~~February 1, ~~2002 to December 31~~2015, ~~2014,~~ the Partnership has engaged ~~indirectly~~directly in the speculative trading of a diversified portfolio of commodity interests ~~through its investment in AAA Master Fund LLC (the “Master”)~~. ~~Since February 1, 2015, the Partnership has engaged directly in such trading.~~ The Partnership no longer offers Redeemable Units for sale.

Ceres Managed Futures LLC, a Delaware limited liability company, acts as the general partner (the “General Partner”) and commodity pool operator of the Partnership. AtAs ~~December~~of January 311, ~~2016,~~2017 the General Partner ~~was~~became a wholly-owned subsidiary of Morgan Stanley ~~Smith~~Domestic ~~Barney~~ Holdings, ~~LLC~~ Inc. (“~~MSSB~~MSD Holdings”). ~~MSSB~~MSD Holdings ~~was~~is ultimately owned by Morgan Stanley. Morgan Stanley is a publicly held company whose shares are listed on the New York Stock Exchange. Morgan Stanley is engaged in various financial services and other businesses. Prior to January 1, 2017, the General Partner was a wholly-owned subsidiary of Morgan Stanley Smith Barney Holdings LLC.

AsAll ~~of December 31, 2016, all~~ trading decisions are made for the Partnership ~~are made~~ by Pan Capital Management, LP, ~~a registered commodity trading advisor~~ (“Pan”, the “Advisor” or the “~~Advisor~~Special Limited Partner”), a registered commodity trading advisor.

OnFor ~~July~~the period January 1, ~~2002,~~2015 ~~the Partnership allocated substantially all of its capital~~ to ~~the~~January 31, ~~Master~~2015, athe ~~New~~assets ~~York~~of ~~limited~~the ~~liability company. The~~ Partnership ~~purchased~~were ~~64,945.0387~~not ~~units~~traded ofand ~~the~~no ~~Master~~fees ~~with~~or expenses awere ~~fair~~charged ~~value~~to ofthe ~~$94~~Partnership,~~925,000.~~ ~~The~~including ~~Master~~the ~~permitted~~monthly ~~commodity~~ongoing ~~pools~~selling ~~managed~~agent ~~by AAA Capital Management Advisors, Ltd~~fee. ~~(“AAA”)~~Effective ~~using its Energy Program — Futures and Swaps~~January 1, ~~a proprietary~~2015, ~~discretionary~~the ~~trading~~Advisor ~~program,~~became toa ~~invest~~special ~~together~~limited inpartner ~~one~~of ~~trading~~the ~~vehicle~~Partnership. Effective ~~December~~February 311, ~~2014~~2015, ~~AAA ceased to act as~~ the Partnership’s ~~trading advisor~~allocated $81,466,647 ~~and the Partnership redeemed its entire investment in the Master for cash equal~~ to ~~$103,699,450~~Pan. InAs ~~addition,~~of ~~AAA~~that ~~was~~date, athe ~~special~~Advisor ~~limited~~commenced ~~partner~~trading of the Partnership’s ~~(in~~assets ~~its~~directly ~~capacity~~pursuant asto ~~special~~its ~~limited partner,~~Energy ~~the~~Trading ~~“Special Limited Partner”). Effective December 31~~Program, ~~2014, AAA fully redeemed as~~ a ~~special~~proprietary, ~~limited~~discretionary ~~partner~~trading ~~from the Partnership~~program. The ~~General~~Advisor ~~Partner~~will ~~was~~concentrate the ~~managing~~Partnership’s trading ~~member of the Master (~~in ~~such~~energy-related ~~capacity, the “Managing Member”)~~markets.

~~Effective~~During ~~January 1,~~the ~~2015~~periods covered by this report, the Partnership’s ~~changed~~commodity ~~its~~broker ~~name~~was Morgan ~~from~~Stanley & ~~AAA~~Co. ~~Capital~~LLC ~~Energy Fund~~(“MS&Co.”), La registered futures commission merchant.P. IIThe toPartnership ~~Managed~~also ~~Futures~~deposits ~~Premier~~a ~~Energy~~portion ~~Fund~~of Lits cash in a non-trading bank account at JPMorgan Chase Bank, N.PA. ~~II.~~

~~For~~The ~~the~~Partnership ~~period~~will ~~January 1,~~be ~~2015~~liquidated toupon ~~January 31, 2015,~~ the ~~assets~~first ~~of the Partnership were not traded and no fees or expenses were charged~~ to ~~the~~occur ~~Partnership,~~of ~~including~~ the ~~monthly~~following: ~~ongoing selling agent fee. Effective February~~December 131, ~~2015,~~2022; the ~~Partnership~~net ~~allocated $81,466,647 to Pan. As of that~~asset ~~date,~~value ~~the~~per ~~Advisor~~Redeemable ~~commenced~~Unit ~~trading~~decreases ~~the~~to ~~Partnership’s~~less ~~assets~~than ~~directly~~$400 ~~pursuant~~per toRedeemable ~~its~~Unit ~~Energy~~as ~~Trading~~of ~~Program,~~the aclose ~~proprietary,~~of ~~discretionary~~any ~~trading~~business ~~program.~~day; ~~The~~or ~~Advisor~~under ~~will~~certain ~~concentrate~~other ~~the~~circumstances ~~Partnership’s~~as ~~trading~~set forth in ~~energy-related markets. Effective January 1, 2015,~~ the ~~Advisor became a special~~ limited ~~partner~~partnership agreement of the Partnership. ~~References herein to~~ (the “~~Advisor” and the “Special~~ Limited ~~Partner~~Partnership Agreement” ~~may include “Pan” or “AAA,” as applicable~~).

30In July 2015, the General Partner delegated certain administrative functions to SS&C Technologies, Inc., a Delaware corporation, currently doing business as SS&C GlobeOp (the “Administrator”). Pursuant to a master services agreement, the Administrator furnishes certain administrative, accounting, regulatory reporting, tax and other services as agreed from time to time. In addition, the Administrator maintains certain books and records of the Partnership. The cost of retaining the Administrator is allocated among the pools operated by the General Partner, including the Partnership.

Managed Futures Premier Energy Fund L.P. II

Notes to Financial Statements

During the periods covered by this report, the Partnership’s commodity broker was Morgan Stanley & Co. LLC (“MS&Co.”), a registered futures commission merchant. The Partnership also deposits a portion of its cash in a non-trading account at JPMorgan Chase Bank, N.A.

The Partnership will be liquidated upon the first to occur of the following: December 31, 2022; the net asset value per Redeemable Unit decreases to less than $400 per Redeemable Unit as of the close of any business day; or under certain other circumstances as defined in the limited partnership agreement of the Partnership (the “Limited Partnership Agreement”).

2. Basis of Presentation and Summary of Significant Accounting Policies:

a. Use of Estimates. The preparation of financial statements and accompanying notes in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires the General Partner to make estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses, and related disclosures of contingent assets and liabilities in the financial statements and accompanying notes. As a result, actual results could differ from these estimates, and those differences could be material.

b. Profit Allocation. The General Partner and each limited partner share in the profits and losses of the Partnership, after the allocation to the Special Limited Partner, if any, in proportion to the amount of Partnership interest owned by each, except that no limited partner shall be liable for obligations of the Partnership in excess of its capital contributions and profits, if any, net of distributions or redemptions and losses, if any. The Partnership allocates to the Special Limited Partner a profit share allocation to its capital account in the Partnership, if any, in the form of Redeemable Units and/or partial Redeemable Units, the value of which shall be equal to 20% of New Trading Profits, as defined in the Limited Partnership Agreement, earned by Pan each calendar quarter end.

c. Statement of Cash Flows. The Partnership ishas not ~~required~~provided toa ~~provide~~Statement aof Cash Flows, as permitted by Accounting Standards Codification (“ASC”) 230, “Statement of Cash Flows.” The Statements of Changes in Partners’ Capital is included herein, and as of and for the years ended December 31, 2017, 2016 and 2015, the Partnership carried no debt and all the Partnership’s investments were carried at fair value and classified as Level 1 and Level 2 measurements.

d. Partnership Investments. All commodity interests ofheld by the Partnership, including derivative financial instruments and derivative commodity instruments, are held for trading purposes. The commodity interests are recorded on trade date and open contracts are recorded at fair value (as described in Note 5, “Fair Value Measurements”) at the measurement date. Investments in commodity interests denominated in foreign currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement date. Gains or losses are realized when contracts are liquidated and are determined using the first-in, first-out method. Unrealized gains or losses on open contracts are included as a component of equity in trading account in the Statements of Financial Condition. Net realized gains or losses and net change in unrealized gains or losses are included in the Statements of Income and Expenses.

e. Income Taxes. Income taxes have not been ~~listed~~recorded as each partner is individually liable for the taxes, if any, on its share of the Partnership’s income and expenses. The ~~General~~Partnership ~~Partner~~follows ~~concluded~~the ~~that~~guidance noof ~~provision~~ASC 740, “Income Taxes,” which prescribes a recognition threshold and measurement attribute for ~~income~~financial statement recognition and measurement of tax ispositions ~~required~~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” of being sustained “when challenged” or “when examined” by the applicable tax authority. Tax positions determined not to meet the more-likely-than-not threshold would be recorded as a tax benefit or liability in the Statements of Financial Condition for the current year. If a tax position does not meet the minimum statutory threshold to avoid the incurring of penalties, an expense for the amount of the statutory penalty and interest, if applicable, shall be recognized in the Statements of Income and Expenses in the years in which the position is claimed or expected to be claimed. The General Partner has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. The Partnership files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The ~~2013~~2014 through ~~2016~~2017 tax years remain subject to examination by U.S. federal and most state tax authorities. ~~The General Partner does not believe that there are any uncertain tax positions that require recognition of a tax liability.~~

3135

Managed Futures Premier Energy Fund L.P. II

Notes to Financial Statements

f. Investment Company Status. Effective January 1, 2014, the Partnership adopted Accounting Standards Update ~~(“ASU”)~~ 2013-08, “Financial Services — Investment Companies (Topic 946): Amendments to the Scope, Measurement and Disclosure Requirements” and based on the General Partner’s assessment, the Partnership has been deemed to be an investment company since inception. Accordingly, the Partnership followed the investment company accounting and reporting guidance of Topic 946 and reflected its investments at fair value with unrealized gains and losses resulting from changes in fair value reflected in the Statements of Income and Expenses.

g. Net Income (Loss) per Redeemable Unit. Net income (loss) per Redeemable Unit is calculated in accordance with ~~Accounting Standards Codification (“~~ASC”) 946, “Financial Services – Investment Companies.” See Note 7, “Financial Highlights.”

h. Fair Value of Financial Instruments. The carrying value of the Partnership’s assets and liabilities presented in the Statements of Financial Condition that qualify as financial instruments under the Financial Accounting Standards Board (“FASB”) ASC 825, “Financial Instruments,” approximates the fair value due to the short term nature of such balances.

i. Recent Accounting Pronouncement. In January 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities.” The amendments in this update address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments for all entities that hold financial assets or owe financial liabilities. One of the amendments in this update eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet or a description of changes in the methods and significant assumptions. Additionally, the update eliminates the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities. Investment companies are specifically exempted from ASU 2016-01’s equity investment accounting provisions and will continue to follow the industry specific guidance for investment accounting under Topic 946. For public business entities, this update is effective for fiscal years beginning after December 15, 2017, and interim periods therein. For other entities, it is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. The General Partner is currently evaluating the impact this guidance will have on the Partnership’s financial statements and related disclosures.

3. Agreements:

Limited Partnership Agreement:

The General Partner administers the business and affairs of the Partnership, including selecting one or more advisors to make trading decisions for the Partnership. The Partnership pays the General Partner a monthly fee in return for its services equal to 1/12th of 0.75% (0.75% per year) of month-end net assets of the Partnership. ~~Prior to October 1, 2014, the Partnership paid the General Partner a monthly General Partner fee of 1/12th of 0.50% (0.50% per year) of month-end net assets of the Partnership’s.~~ Month-end net assets, for purposes of calculating General Partner fees, are net assets, as defined in the Limited Partnership Agreement, prior to the reduction of the current month’s profit share allocation accrual, the ~~monthly~~ management fee, the General Partner fee and any redemptions or distributions as of the end of such month. This fee may be increased or decreased at the discretion of the General Partner. The General Partner has agreed to make capital contributions, if necessary, so that its general partnership interest will be equal to the greater of (i) 1% of the partners’ contributions to the Partnership or (ii) $25,000.

Managed Futures Premier Energy Fund L.P. II

Notes to Financial Statements

Management Agreement:

The General Partner, on behalf of the Partnership, entered into a management agreement ~~with AAA~~ (the “~~AAA~~ Management Agreement”) with Pan, a registered commodity trading advisor. The Partnership ~~paid~~pays ~~AAA~~Pan a monthly management fee equal to 1/12th of 1.525% (1.525% per year) of month-end net assets ~~allocated to AAA~~. Month-end net assets, for ~~purposes~~the purpose of calculating management fees, are ~~net~~Net ~~assets~~Assets, as defined in the Limited Partnership Agreement, prior to the reduction of the current month’s management fees, the current month’s profit share allocation accrual, the ~~monthly management fee, the~~ General Partner fee and any ~~redemption~~redemptions or distributions as of the end of such month. The Management Agreement can be terminated upon notice by either party.

In addition, ~~AAA~~the ~~was~~Partnership aalso ~~Special~~allocates ~~Limited~~to ~~Partner of the Partnership~~Pan, ~~prior~~in to its ~~full~~capacity ~~redemption~~as ~~effective~~the ~~December 31, 2014,~~Special ~~and~~Limited ~~received~~Partner, a ~~quarterly~~ profit share allocation ~~to its capital account in the Partnership in the form~~ of ~~Redeemable Units, the value of which was equal to~~ 20% of New Trading Profits, as defined in the ~~AAA~~Limited ~~Management~~Partnership Agreement, earned ~~on behalf~~by ofPan ~~the Partnership during~~ each calendar quarter ~~and issued as Special Limited Partner Redeemable Units~~. ~~The AAA Management Agreement was in effect until December 31, 2014.~~

The General Partner, on behalf of the Partnership, entered into a management agreement with Pan (the “Pan Management Agreement”), a registered commodity trading advisor. The Partnership pays Pan a monthly management fee equal to 1/12th of 1.25% (1.25% per year) of month-end net assets. The Pan Management Agreement can be terminated upon notice by either party.

In addition, the Partnership also allocates to Pan, in its capacity as the Special Limited Partner, a profit share allocation of 20% of New Trading Profits earned by Pan each calendar quarter.

Customer Agreement:

~~Effective~~The ~~March 1, 2014, the~~ Partnership entered into a customer agreement with MS&Co. (the “Customer Agreement”) and ceased paying brokerage commissions to MS&Co. Under the Customer Agreement, the Partnership pays MS&Co. trading fees for the clearing and, where applicable, the execution of transactions, as well as exchange, clearing, user, give-up and National Futures Association fees (the “clearing fees”). The Partnership’s cash is deposited by MS&Co. in segregated bank accounts to the extent required by Commodity ~~Futures~~ Futures Trading Commission ~~(“CFTC”)~~ regulations. At December 31, ~~2016~~2017 and ~~2015~~2016, the amount of cash held for margin requirements was $2,~~290~~258,~~116~~201 and $~~182~~2,~~462~~290,116, respectively. MS&Co. pays the Partnership interest on 80% of the average daily equity maintained in cash in the Partnership’s brokerage account at the rate equal to the monthly average of the 4-week U.S. Treasury bill discount rate. All other interest ~~earned~~income ~~on U.S. Treasury bills~~ will be retained by the Partnership. The Customer Agreement may generally be terminated upon notice by either party.

Managed Futures Premier Energy Fund L.P. II

Notes to Financial Statements

Prior to March 1, 2014, the Partnership was party to a Customer Agreement with MS&Co. (the “Prior Customer Agreement”). Under the Prior Customer Agreement, the Partnership paid MS&Co. a monthly brokerage commission equal to $18.00 per round-turn on futures transactions, an equivalent amount for swaps and $9.00 per side on options transactions. The brokerage commissions were inclusive of applicable floor brokerage fees. The Partnership also paid clearing fees through its investment in the Master. Clearing fees were also allocated to the Partnership based on its proportionate share of the Master. During the term of the Prior Customer Agreement, all of the Partnership’s assets not held in the Master’s accounts at MS&Co. were deposited in the Partnership’s account at MS&Co. The Partnership’s cash was also deposited by MS&Co. in segregated bank accounts to the extent required by CFTC regulations. MS&Co. also agreed to pay the Partnership interest on 80% of the average daily equity maintained in cash in the Partnership’s (or the Partnership’s allocable portion of the Master’s) brokerage account at the rate equal to the monthly average of the 4-week U.S. Treasury bill discount rate. The Partnership has terminated the Prior Customer Agreement.

Clearing fees will be paid for the life of the Partnership, although the rate at which such fees are paid may be changed.

d.36 ~~Selling Agent Agreement:~~

Effective January 1, 2015, the Partnership entered into a selling agent agreement with Morgan Stanley Smith Barney LLC (doing business as Morgan Stanley Wealth Management) (“Morgan Stanley Wealth Management”) (as amended, the “Selling Agreement”). Under the Selling Agreement, the Partnership pays Morgan Stanley Wealth Management a monthly ongoing selling agent fee equal to 2.0% per year of month-end Net Assets. Month-end Net Assets, for purposes of calculating ongoing selling agent fees, are Net Assets, as defined in the Limited Partnership Agreement, prior to the reduction of the current month’s ongoing selling agent fees, management fees, profit share allocation accrual, the General Partner fees, professional fees and any redemptions or distributions as of the end of such month.

Effective March 1, 2014, the Partnership entered into a Selling Agreement with Morgan Stanley Wealth Management (the “Second MSWM Selling Agreement”). Under the Second MSWM Selling Agreement, Morgan Stanley Wealth Management received a monthly ongoing selling agent fee. Prior to October 1, 2014, the amount of the ongoing selling agent fee was calculated by multiplying the Partnership’s round turn futures transactions by $18.00 each, swaps by up to an equivalent amount and options transactions by $9.00 each per side. Effective October 1, 2014, the ongoing selling agent fee was reduced to $15.00 each for futures transactions and up to an equivalent amount for swaps and $7.50 each per side for options transactions. The ongoing selling agent fee amount was reduced by applicable floor brokerage. Morgan Stanley Wealth Management pays a portion of its ongoing selling agent fees to financial advisers who have sold Redeemable Units in the Partnership. The Partnership has terminated the Second MSWM Selling Agreement.

Prior to March 1, 2014, the Partnership was party to a Selling Agreement with Morgan Stanley Wealth Management (the “First MSWM Selling Agreement”). The Partnership has terminated the First MSWM Selling Agreement.

Managed Futures Premier Energy Fund L.P. II

Notes to Financial Statements

Selling Agent Agreement:

Effective January 1, 2015, the Partnership entered into a selling agreement with Morgan Stanley Smith Barney LLC (doing business as Morgan Stanley Wealth Management) (“Morgan Stanley Wealth Management”) (as amended, the “Selling Agreement”). Pursuant to the Selling Agreement, the Partnership pays Morgan Stanley Wealth Management a monthly ongoing selling agent fee equal to 2.0% per year of month-end net assets. Month-end net assets, for purposes of calculating ongoing selling agent fees, are net assets, as defined in the Limited Partnership Agreement, prior to the reduction of the current month’s ongoing selling agent fees, management fees, profit share allocation accrued, the General Partner fees, professional fees and any redemptions or distributions as of the end of such month.

4. Trading Activities:

The Partnership was formed for the purpose of trading commodity interests, including derivative financial instruments and derivative commodity instruments. The Partnership invested substantially all of its assets through a “master-feeder” structure, prior to its full redemption from the Master effective December 31, 2014. The Partnership’s pro-rata share of the results of the Master’s trading activities is shown in the Statements of Income and Expenses.

The Customer Agreement with the Partnership gives, ~~and prior to~~ the Partnership’s ~~full redemption from~~ the ~~Master effective December 31, 2014 gave, the Partnership and the Master, respectively, the~~ legal right to net unrealized gains and losses on open futures and exchange-cleared swaps contracts. ~~The~~in ~~Partnership~~the ~~nets~~Statements ~~and~~of ~~the~~Financial ~~Master~~Condition. ~~netted~~The Partnership nets, for financial reporting purposes, the unrealized gains and losses on open futures ~~and exchange-cleared swaps~~ contracts in the Statements of Financial Condition as the criteria under ASC 210-20, “Balance Sheet,” have been met.

~~Trading~~All ~~and~~of ~~transaction~~the ~~fees~~commodity ~~are,~~interests ~~and~~owned ~~ongoing~~by ~~selling~~the ~~agent~~Partnership ~~fees~~are ~~and~~held ~~brokerage commissions~~for ~~were,~~trading ~~based~~purposes. onThe ~~the~~monthly average number of ~~trades~~futures contracts ~~executed~~traded byduring the ~~Advisor~~year ~~and,~~ended ~~prior to the Partnership’s full redemption from the Master effective~~ December 31, ~~2014,~~2017 ~~the~~and ~~Partnership’s~~2016 ~~ownership~~were ~~percentage~~4,958 ofand ~~the~~9,695, ~~Master~~respectively. ~~All~~The ~~fees, including~~monthly ~~professional~~average ~~fees~~number ~~and~~of ~~other~~options ~~expenses~~contracts ~~are~~traded ~~charged~~during to the ~~Partnership.~~years ~~Prior~~ended ~~to the Partnership’s full redemption from the Master~~December 31, ~~professional~~2017 ~~fees~~ and ~~other~~2016 ~~expenses~~ were ~~borne~~748 ~~by the Master~~ and ~~allocated to the Partnership and also~~1,034, ~~directly charged at the Partnership level~~respectively. ~~All other fees were charged at the Partnership level.~~

~~All~~Trading ofand ~~the~~transaction ~~commodity interests~~fees ~~owned by the Partnership~~ are, and by the Master were, held for trading purposes. The Partnership’s monthly average number of futures contracts traded during the year ended December 31, 2016 was 9,695. The Partnership’s monthly average number of futures contracts traded during the period February 1, 2015 to December 31, 2015 was 11,328. The Partnership’s monthly average number of options contracts traded during the year ended December 31, 2016 was 1,034. The Partnership’s monthly average number of options contracts traded during the period February 1, 2015 to December 31, 2015 was 2,047. For the period January 1, 2015 to January 31, 2015, the assets of the Partnership were not traded. Due to the change in structure of the Partnership from a “master-feeder” to direct trading, the calculation of the monthly average number of contracts traded as disclosed above is based on ~~each month’s average total number of contracts traded during~~ the ~~month for the Partnership, and for the Master was based on the average~~ number of ~~open~~trades ~~contracts~~executed asby of the ~~end of each month~~Advisor.

3537

Managed Futures Premier Energy Fund L.P. II

Notes to Financial Statements

The following tables summarize the gross and net amounts recognized relating to assets and liabilities of the Partnership’s derivatives and their offsetting subject to master netting or similar arrangements as of December 31, ~~2016~~2017 and ~~2015~~2016, respectively.

				Gross Amounts			Amounts			Gross Amounts Not Offset in the
December 31, 2017	Gross AmountsRecognized			Gross AmountsOffset inthe Statementsof FinancialCondition			AmountsPresented inthe Statementsof FinancialCondition			Gross Amounts Not Offset in theStatements of Financial Condition				Net Amount
				Offset in			Presented in			Statements of Financial Condition
										FinancialInstruments		Cash CollateralPledged/Received*
				the Statements			the Statements
	Gross Amounts			of Financial			of Financial			Financial		Cash Collateral
December 31, 2016	Recognized			Condition			Condition			Instruments		Pledged/Received *		Net Amount
Assets
Futures	$	41,~~219~~884,~~018~~990		$	(21,~~865~~884,~~470~~990)	)	$	~~1,353,548~~-		$	-	$	-	$	~~1,353,548~~-
Total assets	$	41,~~219~~884,~~018~~990		$	(21,~~865~~884,~~470~~990)	)	$	~~1,353,548~~-		$	-	$	-	$	~~1,353,548~~-
Liabilities
Futures	$	(2,~~865~~013,~~470~~343)	)	$	21,~~865~~884,~~470~~990		$	-(128,353)		$	-	$	-	$	-(128,353)
Options written		(14,031	)		-			(14,031	)		-		-		(14,031)
Total liabilities	$	(2,013,343)		$	1,884,990		$	(128,353)		$	-	$	-	$	(128,353)
Total liabilities	$	(2,879,501	)	$	2,865,470		$	(14,031	)	$	-	$	-	$	(14,031)
Net fair value														$	(128,353)	*
Net fair value														$	1,339,517	*
December 31, 2016	Gross AmountsRecognized			Gross AmountsOffset inthe Statementsof FinancialCondition			AmountsPresented inthe Statementsof FinancialCondition			Gross Amounts Not Offset in theStatements of Financial Condition				Net Amount
				Gross Amounts			Amounts			Gross Amounts Not Offset in the
										FinancialInstruments		Cash CollateralPledged/Received*
				Offset in			Presented in			Statements of Financial Condition
				the Statements			the Statements
	Gross Amounts			of Financial			of Financial			Financial		Cash Collateral
December 31, 2015	Recognized			Condition			Condition			Instruments		Pledged/Received *		Net Amount
Assets
Futures	$	~~152~~4,~~271~~219,018		$	(~~102~~2,~~490~~865,470)	)	$	491,~~781~~353,548		$	-	$	-	$	491,~~781~~353,548
Options purchased		43,407			-			43,407			-		-		43,407
Total assets	$	4,219,018		$	(2,865,470)		$	1,353,548		$	-	$	-	$	1,353,548
Total assets	$	195,678		$	(102,490	)	$	93,188		$	-	$	-	$	93,188
Liabilities
Futures	$	(~~102~~2,~~490~~865,470)	)	$	~~102~~2,~~490~~865,470		$	-		$	-	$	-	$	-
Total liabilities	$	(~~102~~2,~~490~~865,470)	)	$	~~102~~2,~~490~~865,470		$	-		$	-	$	-	$	-
Net fair value														$	931,~~188~~353,548	*

* In the event of default by the Partnership, MS&Co., the Partnership’s commodity futures broker and the sole counterparty to the Partnership’s ~~off~~non-exchange-traded contracts, as applicable, has the right to offset the Partnership’s obligation with the Partnership’s cash and/or U.S. Treasury bills held by MS&Co., thereby minimizing MS&Co.’s risk of loss. ~~There~~In iscertain noinstances, ~~collateral posted by~~ MS&Co. may not post collateral and as such, in the event of default by MS&Co., the Partnership is exposed to the amount shown in the Statements of Financial Condition. In the case of exchange-traded contracts, the Partnership’s exposure to counterparty risk may be reduced since the exchange’s clearinghouse interposes its credit between buyer and seller and the clearinghouse’s guarantee ~~fund~~funds may be available in the event of a default.

3638

Managed Futures Premier Energy Fund L.P. II

Notes to Financial Statements

The following tables indicate the gross fair values of derivative instruments of futures and option contracts as separate assets and liabilities as of December 31, ~~2016~~2017 and ~~2015~~2016, respectively.

	December 31, 2016
	December 31, 2017
Assets
Futures Contracts
Energy	$	41,~~219~~884,~~018~~990
Total unrealized appreciation on open futures contracts		41,~~219~~884,~~018~~990
Liabilities
Futures Contracts
Energy		(2,~~865~~013,~~470~~343)
Total unrealized depreciation on open futures contracts		(2,~~865~~013,~~470~~343)
Net unrealized appreciation on open futures contracts	$	1,353,548	*
Net unrealized depreciation on open futures contracts	$	(128,353)	*
Liabilities
Options Written
Energy	$	(14545,~~031~~500)
Total options written	$	(14545,~~031~~500)	**

* This amount is in “Net unrealized ~~appreciation~~depreciation on open futures contracts” in the Statements of Financial Condition.

**	This amount is in “Options written, at fair value” in the Statements of Financial Condition.

3739

Managed Futures Premier Energy Fund L.P. II

Notes to Financial Statements

	December 31, 2015
	December 31, 2016
Assets
Futures Contracts
Energy	$	~~152~~4,~~271~~219,018
Total unrealized appreciation on open futures contracts		~~152~~4,~~271~~219,018
Liabilities
Futures Contracts
Energy		(~~102~~2,~~490~~865,470)
Total unrealized depreciation on open futures contracts		(~~102~~2,~~490~~865,470)
Net unrealized appreciation on open futures contracts	$	491,~~781~~353,548	*
Assets
Liabilities
Options Purchased
Options Written
Energy	$	43(14,~~407~~031)
Total options purchased	$	43,407	**
Total options written	$	(14,031)	**

*	This amount is in “Net unrealized appreciation on open futures contracts” in the Statements of Financial Condition.

** This amount is in “Options ~~purchased~~written, at fair value” in the Statements of Financial Condition.

The following table indicates the trading gains and losses, by market sector, on derivative instruments for the years ended December 31, 2017, 2016 and 2015, respectively.

Sector	~~2016~~2017			~~2015~~2016			2015
Energy	$	5(423,~~146,609~~923)		$	(15,~~976~~146,~~332)~~609		$	(1,976,332)
Total	$	5(423,~~146,609~~923)	***	$	(15,~~976~~146,~~332)~~609	***	$	(1,976,332)	***

***	This amount is in “Total trading results” in the Statements of Income and Expenses.

5. Fair Value Measurements:

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

The fair value of exchange-traded futures, option and forward contracts is determined by the various exchanges, and reflects the settlement price for each contract as of the close of business on the last business day of the reporting period. The fair value of foreign currency forward contracts is extrapolated on a forward basis from the spot prices quoted as of approximately 3:00 P.M. (E.T.) on the last business day of the reporting period from various exchanges. The fair value of non-exchange-traded foreign currency option contracts is calculated by applying an industry standard model application for options valuation of foreign currency options, using as inputs the spot prices, interest rates, and option implied volatilities quoted as of approximately 3:00 P.M. (E.T.) on the last business day of the reporting period. U.S. Treasury bills are valued at the last available bid price received from independent pricing services as of the close of the last business day of the reporting period.

3840

Managed Futures Premier Energy Fund L.P. II

Notes to Financial Statements

The Partnership considers prices for ~~exchange-traded~~ commodity futures, ~~option~~ ~~contracts~~swap and ~~swaps~~option contracts to be based on unadjusted quoted prices in active markets for identical assets and liabilities (Level 1). The values of U.S. Treasury bills, non-exchange-traded swaps and certain option contracts for which market quotations are not readily available are priced by ~~broker quotes or~~ pricing services that derive fair values for those assets and liabilities from observable inputs (Level 2). As of and for the years ended December 31, ~~2016~~2017 and ~~2015~~2016, the Partnership did not hold any derivative instruments that were priced at fair value using unobservable inputs through the application of the General Partner’s assumptions and internal valuation pricing models (Level 3). Transfers between levels are recognized at the ~~end~~beginning of the reporting period. For the years ended December 31, ~~2016~~2017 and ~~2015~~2016, there were no transfers of assets or liabilities between Level 1 and Level 2.

December 31, 2017	Total		Level 1		Level 2		Level 3
Assets
Futures	$	1,884,990	$	1,884,990	$	-	$	-
Total assets	$	1,884,990	$	1,884,990	$	-	$	-
Liabilities
Futures	$	2,013,343	$	2,013,343	$	-	$	-
Options written		545,500		545,500		-		-
Total liabilities	$	2,558,843	$	2,558,843	$	-	$	-
December 31, 2016	Total		Level 1		Level 2		Level 3
Assets
Futures	$	4,219,018	$	4,219,018	$	-	$	-
Total assets	$	4,219,018	$	4,219,018	$	-	$	-
Liabilities
Futures	$	2,865,470	$	2,865,470	$	-	$	-
Options written		14,031		14,031		-		-
Total liabilities	$	2,879,501	$	2,879,501	$	-	$	-
December 31, 2015	Total		Level 1		Level 2		Level 3
Assets
Futures	$	152,271	$	152,271	$	-	$	-
Options purchased		43,407		43,407		-		-
U.S. Treasury bills		33,247,818		-		33,247,818		-
Total assets	$	33,443,496	$	195,678	$	33,247,818	$	-
Liabilities
Futures	$	102,490	$	102,490	$	-	$	-
Total liabilities	$	102,490	$	102,490	$	-	$	-

6. Distributions and Redemptions:

Distributions are made on a pro-rata basis at the sole discretion of the General Partner. No distributions have been made to date. The General Partner does not intend to make any distributions of the Partnership’s profits. A limited partner may require the Partnership to redeem its Redeemable Units at their net asset value as of the last day of each month on three business days’ notice to the General Partner. There is no fee charged to limited partners in connection with redemptions.

3941

Managed Futures Premier Energy Fund L.P. II

Notes to Financial Statements

7. Financial Highlights:

Financial highlights for the limited partner class as a whole for the years ended December 31, ~~2016~~2017, ~~2015~~2016 and ~~2014~~2015 were as follows:

	2016			2015			2014
	2017			2016			2015
Per Redeemable Unit Performance (for a unit outstanding throughout the year):*
Net realized and unrealized gains (losses)	$	~~374~~(33.0060)		$	~~(92~~374.~~07)~~00		$	(2392.3107)
Net investment loss		(~~169~~145.9939)			(~~170~~169.0799)			(~~125~~170.4007)
Increase (decrease) for the year		~~204~~(178.0199)			~~(262~~204.~~14)~~01			(~~148~~262.7114)
Net asset value per Redeemable Unit, beginning of year		3,~~162~~366.0910			3,~~424~~162.2309			3,~~572~~424.9423
Net asset value per Redeemable Unit, end of year	$	3,~~366~~187.1011		$	3,~~162~~366.0910		$	3,~~424~~162.2309
	2016			2015			2014
	2017			2016			2015
Ratios to Average Limited Partners’ Capital:
Net investment loss**		(5.4.5)	%		(5.14)	%		(35.71)	%
Operating expenses		5.61	%		5.16	%		35.71	%
Allocation to Special Limited Partner		-	%		-	%		-	%
Total expenses and allocation to Special Limited Partner		5.61	%		5.16	%		35.71	%
Total return:
Total return before allocation to Special Limited Partner		6.(5.3)	%		(76.7)5	%		(47.27)	%
Allocation to Special Limited Partner		-	%		-	%		-	%
Total return after allocation to Special Limited Partner		6.(5.3)	%		(76.7)5	%		(47.27)	%

* Net investment loss per Redeemable Unit is calculated by dividing the ~~expenses~~interest ~~net~~income ofless ~~interest~~total ~~income~~expenses by the average number of Redeemable Units outstanding during the ~~year~~period. The net realized and unrealized gains (losses) per Redeemable Unit is a balancing amount necessary to reconcile the change in net asset value per Redeemable Unit with the other per unit information.

**	Interest income less total expenses (exclusive of allocation to Special Limited Partner, if applicable).

The above ratios and total return may vary for individual investors based on the timing of capital transactions during the period. Additionally, these ratios are calculated for the limited partner class using the limited partners’ share of income, expenses and average partners’ capital of the Partnership ~~and includes the income and expenses allocated from the Master for the year ended December 31, 2014~~.

8. Financial Instrument Risks:

4042

Managed Futures Premier Energy Fund L.P. II

Notes to Financial Statements

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

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

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

~~The~~Market risk tois the ~~limited~~potential ~~partners~~for ~~that~~changes ~~have~~in ~~purchased~~the ~~Redeemable~~value ~~Units~~of isthe ~~limited~~financial instruments traded by the Partnership due to market changes, including interest and foreign exchange rate movements and fluctuations in commodity or security prices. Market risk is directly impacted by the ~~amount~~volatility ofand ~~their~~liquidity ~~share~~in ofthe markets in which the ~~Partnership’s~~ ~~net~~related underlying assets ~~and~~are ~~undistributed~~traded ~~profits~~by the Partnership. ~~This~~The ~~limited~~Partnership ~~liability~~ is aexposed ~~result~~to ofmarket risk equal to the ~~organization~~value of ~~the~~futures ~~Partnership~~contracts asheld aand ~~limited~~unlimited ~~partnership~~liability ~~under~~on ~~New~~such ~~York~~contracts ~~law~~sold short.

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

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

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

The Advisor concentrates the Partnership’s trading in energy related markets. Concentration in a limited number of commodity interests may have subjected the Partnership’s account to greater volatility than if a more diversified portfolio of contracts had been traded on behalf of the Partnership.

4143

Managed Futures Premier Energy Fund L.P. II

Notes to Financial Statements

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

The majority of these instruments matured within one year of the inception date. However, due to the nature of the Partnership’s business, these instruments may not have been held to maturity.

In the ordinary course of business, the Partnership enters into contracts and agreements that contain various representations and warranties and which provide general indemnifications. The Partnership’s maximum exposure under these arrangements cannot be determined, as this could include future claims that have not yet been made against the Partnership. The Partnership considers the risk of any future obligation relating to these indemnifications to be remote.

9. Subsequent Events:

AsThe ofGeneral ~~January 1,~~Partner ~~2017,~~evaluates ~~the~~events ~~General~~that ~~Partner~~occur ~~became~~after athe ~~wholly-owned~~balance ~~subsidiary~~sheet ofdate ~~Morgan~~but ~~Stanley~~before ~~Domestic~~and ~~Holdings,~~up ~~Inc.~~until financial ~~(“MSD~~statements ~~Holdings”).~~are ~~Prior~~available to ~~January 1,~~be ~~2017,~~issued. ~~the~~The General Partner ~~was~~has aassessed ~~wholly-owned~~the ~~subsidiary~~subsequent ofevents ~~MSSB~~through ~~Holdings.~~the ~~MSD~~date ~~Holdings~~the isfinancial ~~ultimately~~statements ~~owned~~were byissued ~~Morgan~~and ~~Stanley~~has determined that there were no subsequent events requiring adjustment to or disclosure in the financial statements.

~~The~~44 General Partner has evaluated the subsequent events through the date the financial statements are issued and has determined that there were no additional subsequent events requiring adjustment to or disclosure in the financial statements.

42Selected unaudited quarterly financial data for the Partnership for the years ended December 31, 2017 and 2016 are summarized below:

Selected unaudited quarterly financial data for the Partnership for the years ended December 31, 2016 and 2015 are summarized below:


	For the period from October 1, 2017 to December 31, 2017			For the period from July 1, 2017 to September 30, 2017		For the period from April 1, 2017 to June 30, 2017			For the period from January 1, 2017 to March 31, 2017
Total investment income	$	84,068		$	80,736	$	66,281		$	47,738
Total expenses		(524,166)			(505,507)		(549,890)			(592,152)
Total trading results		(1,093,605)			930,105		(861,265)			600,842

Net income (loss)	$	(1,533,703)		$	505,334	$	(1,344,874)		$	56,428

Increase (decrease) in net asset value per Redeemable Unit	$	(125.40	)	$	40.18	$	(100.78	)	$	7.01


	For the period from October 1, 2016 to December 31, 2016			For the period from July 1, 2016 to September 30, 2016		For the period from April 1, 2016 to June 30, 2016			For the period from January 1, 2016 to March 31, 2016
Total investment income	$	29,710		$	20,146	$	19,440		$	27,959
Total expenses		(660,088)			(660,352)		(640,276)			(711,864)
Total trading results		847,729			6,135,467		220,120			(2,056,707)

Net income (loss)	$	217,351		$	5,495,261	$	(400,716)		$	(2,740,612)

Increase (decrease) in net asset value per Redeemable Unit	$	15.22		$	379.15	$	(24.31)		$	(166.05)

	For the period from October 1, 2016 toDecember 31, 2016			For the period from July 1, 2016 toSeptember 30, 2016			For the period from April 1, 2016 toJune 30, 2016			For the period from January 1, 2016 toMarch 31, 2016
Total trading results	$	847,729		$	6,135,467		$	220,120		$	(2,056,707	)
Total investment income		29,710			20,146			19,440			27,959
Total expenses		(660,088	)		(660,352	)		(640,276	)		(711,864	)
Net income (loss)	$	217,351		$	5,495,261		$	(400,716	)	$	(2,740,612	)
Increase (decrease) in net asset value per Redeemable Unit	$	15.22		$	379.15		$	(24.31	)	$	(166.05	)
	For the period fromOctober 1, 2015 toDecember 31, 2015			For the period fromJuly 1, 2015 toSeptember 30, 2015			For the period fromApril 1, 2015 toJune 30, 2015			For the period fromJanuary 1, 2015 toMarch 31, 2015
Total trading results	$	(597,309	)	$	(84,903	)	$	(1,087,295	)	$	(206,825	)
Total investment income		762			2,244			1,120			1,465
Total expenses		(794,920	)		(1,032,792	)		(1,036,360	)		(694,114	)
Net income (loss)	$	(1,391,467	)	$	(1,115,451	)	$	(2,122,535	)	$	(899,474	)
Increase (decrease) in net asset value per Redeemable Unit	$	(79.34	)	$	(52.17	)	$	(93.83	)	$	(36.80	)

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

OnNot December 1, 2016, the Board of Directors of the General Partner dismissed Deloitte & Touche LLP (“Deloitte”) as the registered public accounting firm for the Partnership, effective as of the close of business on the day the Partnership’s audited financial statements for the 2016 fiscal year end, including this Form 10-K, are filedapplicable.

The audit reports of Deloitte on the Partnership’s financial statements as of and for the two most recent fiscal years (ending December 31, 2016 and December 31, 2015) did not contain an adverse opinion or a disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles.

During the Partnership’s three most recent fiscal years (ending December 31, 2016, December 31, 2015 and December 31, 2014), there were no disagreements between the Partnership and Deloitte on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Deloitte, would have caused it to make a reference to the subject matter thereof in its report on the financial statements of the Partnership for such periods. During the Partnership’s three most recent fiscal years (ending December 31, 2016, December 31, 2015 and December 31, 2014), there were no “reportable events” (as defined in Regulation S-K Item 304(a)(1)(v)).

On December 1, 2016, the Board of Directors of the General Partner, on behalf of the Partnership, approved the engagement of Ernst & Young LLP (“EY”) as the independent registered public accounting firm for the Partnership. During the Partnership’s fiscal years ending December 31, 2015 and December 31, 2014 and the interim period prior to engaging EY, neither the Partnership, the General Partner, nor anyone on their behalf consulted EY, on behalf of the Partnership, regarding the application of accounting principles to a specified transaction (either completed or proposed), the type of audit opinion that might be rendered on the Partnership’s financial statements, or any matter that was either the subject of a “disagreement,” as defined in Item 304(a)(1)(iv) of Regulation S-K and the instructions thereto, or a “reportable event,” as defined in Item 304(a)(1)(v) of Regulation S-K.

Item 9A. Controls and Procedures.

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

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

The General Partner’s President and CFO have evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, ~~2016~~2017 and, based on that evaluation, the General Partner’s President and CFO have concluded that at that date the Partnership’s disclosure controls and procedures were effective.

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

•

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

•

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

•

The report included in “Item 8. Financial Statements and Supplementary Data.” includes the General Partner’s report on internal control over financial reporting (“Management’s Report”).

There were no changes in the Partnership’s internal control over financial reporting during the fiscal quarter ended December 31, ~~2016~~2017 that materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

Item 9B. Other Information. None.

4446

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The Partnership has no directors or executive officers and its affairs are managed by its General Partner. Investment decisions are made by the Advisors.

The directors and executive officers of the General Partner are Patrick T. Egan (President and Chairman of the Board of Directors of the General Partner), Steven Ross (Chief Financial Officer and Director), Maureen O’Toole (Director), M. Paul Martin (Director), Feta Zabeli (Director) and Matthew R. Graver (Director). Each director holds office until the earlier of his or her death, resignation or removal. Vacancies on the board of directors may be filled by either (i) the majority vote of the remaining directors or (ii) MSD Holdings, as the sole member of the General Partner. The officers of the General Partner are designated by the General Partner’s board of directors. Each officer will hold office until his or her successor is designated and qualified or until his or her death, resignation or removal.

Directors of the General Partner are responsible for overall corporate governance of the General Partner and meet periodically to consider strategic decisions regarding the General Partner’s activities. Under CFTC rules, each Director of the General Partner is deemed to be a principal of the General Partner and, as a result, is listed as such with NFA. Patrick T. Egan, Steven Ross, Maureen O’Toole and Feta Zabeli serve on the General Partner’s Investment Committee and are the trading principals responsible for allocation decisions (or supervising those responsible).

Patrick T. Egan, age 4849, has been a Director of the General Partner since December 2010. Since December 2010, Mr. Egan has been a principal and registered as an associated person of the General Partner, and is an associate member of NFA. Since October 2014, Mr. Egan has served as President and Chairman of the Board of Directors of the ~~General~~ General Partner. Since August 2013, Mr. Egan has been registered as a swap associated person of the General Partner. From September 2013 to May 2014, Mr. Egan served as a Vice President of Morgan Stanley Strategies LLC, formerly known as ~~Morgan~~ Morgan Stanley GWM Feeder Strategies LLC, which acts as a general partner to multiple alternative investment entities, and Morgan Stanley AI GP LLC, formerly known as Morgan Stanley HedgePremier GP LLC, which acts as a general partner and ~~administrative~~ administrative agent to numerous hedge fund feeder funds. From September 2013 to May 2014, Mr. Egan was registered as an associated person and listed as a principal of each such entity. Since January 2013, each such entity has been registered as a commodity pool operator with the CFTC. Mr. Egan was responsible for overseeing the implementation of certain CFTC and NFA regulatory requirements applicable to such entities. From June 2009 to December 2014, Mr. Egan was employed by Morgan Stanley Smith Barney LLC, a financial services firm, where his responsibilities included serving as Executive Director and as Co-Chief Investment Officer for Morgan Stanley Managed Futures from June 2009 through June 2011 and as Chief Risk Officer for Morgan Stanley Managed Futures from June 2011 through October 2014. Since October 2014, Mr. Egan has been responsible for the day- to-day operations and management of Morgan Stanley Managed Futures. Since January 2015, Mr. Egan has been employed by the General Partner. From November 2010 to October 2014, Mr. Egan was registered as an associated person of Morgan Stanley Smith Barney LLC. From April 2007 through June 2009, Mr. Egan was employed by MS & Co., a financial services firm, where his responsibilities included serving as Head of Due Diligence and Manager Research for Morgan Stanley’s Managed Futures Department. From April 2007 through June 2009, Mr. Egan was registered as an associated person of MS & Co. From March 1993 through April 2007, Mr. Egan was employed by Morgan Stanley DW Inc., a financial services firm, where his initial responsibilities included serving as an analyst and manager within the Managed Futures Department (with primary responsibilities for product development, due diligence, investment analysis and risk management of the firm’s commodity pools) and later included serving as Head of Due Diligence and Manager Research for Morgan Stanley’s Managed Futures Department. From February 1998 through April 2007, Mr. Egan was registered as an associated person of Morgan Stanley DW Inc. From August 1991 through March 1993, Mr. Egan was employed by Dean Witter Intercapital, the asset management arm of Dean Witter Reynolds, Inc., where his responsibilities included serving as a mutual fund administration associate. Mr. Egan also served as a Director from November 2004 through October 2006, and from November 2006 through October 2008 of the Managed Funds Association’s Board of Directors, a position he was elected to by industry peers for two consecutive two-year terms. Mr. Egan earned his Bachelor of Business Administration degree with a concentration in Finance in May 1991 from the University of Notre Dame.

Steven Ross, age 4546, has been Chief Financial Officer and a principal of the General Partner since July 2014 and a Director of the General Partner since February 2016. Mr. Ross has been employed by Morgan Stanley Investment Management, a financial services firm, since September 2005, where his responsibilities include serving as an Assistant Treasurer of Morgan Stanley with respect to certain investment vehicles publicly offered by Morgan Stanley. Mr. Ross is also an Executive Director of the Morgan Stanley Fund Administration Group where he is responsible for finance and accounting matters for certain private funds offered by Morgan Stanley. Before joining Morgan Stanley Investment Management, Mr. Ross was employed by JPMorgan Investor Services Co., a financial services firm, from December 1997 through September 2005, where his responsibilities included serving as a Vice President responsible for the accounting of certain funds sponsored by JPMorgan Chase & Co. and other large fund families serviced by JPMorgan Investor Services Co. From April 1997 to December 1997, Mr. Ross was employed by Investors Bank & Trust, a financial services firm, where his responsibilities included performing mutual fund accounting for financial services firms. Mr. Ross began his career at Putnam Investments LLC, a financial services firm, where he was responsible for providing broker services for certain funds sponsored by Putnam Investments LLC from August 1996 to April 1997. Mr. Ross received a B.S. in Accounting from Rhode Island College in May 1995.

4547

Maureen O’Toole, age 5960, has been a Director, listed as a principal and registered as an associated person of the General Partner since May 2016. She has also been the Head of Managed Futures at Morgan Stanley Investment Management, a financial services firm, since May 2016 where she is responsible for developing and managing the managed futures business strategy. She joined Morgan Stanley Investment Management in June 2012 as Managing Director in charge of the intermediary alternative investment sales team. In this capacity she was responsible for the management of a team responsible for business development in managed futures, hedge funds and private investments. She has been registered as an associated person of Morgan Stanley Investment Management since June 2012. From April 2010 until June 2012, Ms. O’Toole was a managing director at K2 Advisors, L.L.C., a hedge fund investment advisory firm, where she was responsible for development of the firm’s investment funds. Between March 1993 and April 2010, Ms. O’Toole was employed by a variety of divisions within what became Citigroup Global Markets Inc., a financial services firm. Between August 2009 and April 2010, she worked in product development within Citi Private Bank, where she assisted in sourcing new investment platforms for its alternatives business. Between January 2002 and August 2009, Ms. O’Toole was Managing Director and Head of Sales and Client Service within Citigroup Alternative Investments. In this role she managed the high net worth sales team for Citigroup Alternative Investments through the Global Wealth Management channel, overseeing education and marketing. Prior to that, between November 1996 and January 2002, Ms. O’Toole was Director of Sales and Marketing within the managed futures department of Smith Barney. Prior to being named Director of Sales and Marketing, Ms. O’Toole was involved in the international development of the managed futures business within the managed futures department from March 1993 until November 1996. In this role, Ms. O’Toole oversaw due diligence and portfolio construction for the managed futures department. Ms. O’Toole served as a Director of Citigroup Managed Futures LLC (the predecessor entity to the General Partner) from August 2001 until October 2006, was listed as a principal of such entity from August 1998 until October 2006 and was registered as an associated person of such entity from January 2004 until October 2006. She was also registered as an associated person of Citigroup Global Markets Inc. from April 1993 until June 2010. Prior to Citigroup Global Markets Inc., Ms. O’Toole was employed at Rodman & Renshaw Inc., an investment bank, as head of managed futures manager research and portfolio construction between March 1989 and March 1993 and was registered as an associated person from June 1991 until March 1993. She was registered as an associated person of Rosenthal Collins Futures Management, Inc., a commodity pool operator and wholly owned subsidiary of Rodman & Renshaw, from January 1992 until March 1993. She began her investment career at Drexel Burnham Lambert Inc., an investment bank, in January 1982 where she worked as a research analyst, performing modeling on financial futures hedging and trading strategies until February 1989 and was registered as an associated person from December 1988 until February 1989. Ms. O’Toole obtained her Bachelor of Arts in Speech Pathology and Audiology from California State University Chico, in June 1979, and her Masters in Management from Kellogg Graduate School of Management at Northwestern University, in June 1989.

M. Paul Martin, age 5859, has been a Director of the General Partner since October 2014. Mr. Martin has also served as Managing Director – Global Operations of Morgan Stanley Investment Management, a financial services firm, since June 2006, where his responsibilities include managing all elements of in-sourced and out-sourced global operations, and serving as a senior member of Morgan Stanley Investment Management’s Management, Risk Management, & New Products Committees. Mr. Martin has been listed as a principal of the General Partner since October 2014. Mr. Martin previously served as the Managing Director and Chief Operating Officer of Morgan Stanley Fund Services, a financial services firm, where his responsibilities included launching the Hedge Fund Administration business and being responsible for operations, fund accounting and administration, technology and compliance, from May 2004 through May 2006. Previously, Mr. Martin served as Managing Director – Institutional Investment Operations of Morgan Stanley Investment Management from January 1995 until April 2004, where his responsibilities included trading room support, portfolio administration, service provider management, and derivatives processing and control. From April 1994 through January 1995, Mr. Martin served as Senior Vice President and Head of Custody Operations for Fidelity Investments, a financial services firm. From October 1989 through April 1994, Mr. Martin served as Executive Director and Head of Global Operations for Morgan Stanley Trust Company, a financial services firm. Mr. Martin also served as Vice President – Information Technology for MS & Co., a financial services firm, from June 1984 through October 1989, where his responsibilities included acting as Senior Developer and Programming Manager – Prime Brokerage and Securities Clearance Systems, and as Part-time Manager – IT Training Program. From February 1984 through May 1984, Mr. Martin served as a Senior Analyst in the Financial Control Group of Shearson Lehman Brothers, Inc., a financial services firm. From October 1980 through January 1984, Mr. Martin served as a Senior Consultant – Management Information Consulting Division at Arthur Andersen & Co., an accounting firm, where his responsibilities included programming and programming supervisory roles at large governmental agencies. Mr. Martin received a B.S. in Business Administration - Finance from Georgetown University in May 1980 and an M.B.A. in Finance from New York University in June 1993.

Feta Zabeli, age 5758, has been a Director of the General Partner since October 2014. Mr. Zabeli has also served as a director on the Board of Directors of Morgan Stanley Investment Management, a financial services firm, since January 2015 and has been listed as a principal since February 2015. Since May 2016, Mr. Zabeli is the Chief Risk Officer for Morgan Stanley Investment Management, responsible for all investment and operational risk management globally. From January 2012 to May 2016, Mr. Zabeli was Global Head of Risk for Morgan Stanley Investment Management’s Traditional Asset Management business where he was responsible for investment risk of all equity, fixed income, money market, multi-asset class and alternatives portfolios. He was also responsible for counterparty and quantitative model risk for the traditional asset management business. He joined Morgan Stanley in January 2012. Mr. Zabeli has been listed as a principal of the General Partner since October 2014. Mr. Zabeli was on garden leave in December 2011. From February 2006 to November 2011, Mr. Zabeli was Senior Vice President, and most recently Global Co-Head of Risk, for AllianceBernstein L.P., a global investment firm, with various risk management assignments in Hong Kong, Tokyo, London and New York. From August 2006 to April 2009, Mr. Zabeli was based in Hong Kong for AllianceBernstein as the Director of Risk Management for Asia Pacific. From April 2009 to July 2011, he was based in Tokyo for AllianceBernstein as both Director of Risk Management for Asia Pacific and Head of Risk Management for Japan. From July 2011 to November 2011, he was based in London

4648

York. From August 2006 to April 2009, Mr. Zabeli was based in Hong Kong for AllianceBernstein as the Director of Risk Management for Asia Pacific. From April 2009 to July 2011, he was based in Tokyo for AllianceBernstein as both Director of Risk Management for Asia Pacific and Head of Risk Management for Japan. From July 2011 to November 2011, he was based in London for AllianceBernstein as Global Head of Operational & Credit/Counterparty Risk. In these roles at AllianceBernstein he was responsible for the full range of risk management functions including investment, operational and credit/counterparty risk. Prior to his Risk Management roles at Morgan Stanley and AllianceBernstein, Mr. Zabeli held positions as a managing director at Citigroup Asset Management, the asset management division of Citigroup, an international financial services company, from April 1998 to January 2006, where he worked as a quantitative research analyst and portfolio manager, and director at BARRA Inc., a global provider of risk analytic tools to investment institutions, from September 1993 to March 1998, where he developed risk models and applications. Mr. Zabeli received a B.S. in Aerospace Engineering from Rensselaer Polytechnic Institute in May 1982, an M.S. in Electrical Engineering from the University of Southern California in May 1988 and an M.B.A. from the University of California at Los Angeles in August 1992.

Matthew R. Graver, age 4950, has been a Director of the General Partner and listed as a principal since November 2016. Since January 2008, Mr. Graver has served as Managing Director of Morgan Stanley Investment Management, a financial services firm, and Chief Operating Officer for Morgan Stanley AIP Fund of Hedge Funds, a business unit offering ~~managed~~ managed portfolios of hedge funds. Since November 2015, Mr. Graver has been listed as a principal and director of Morgan Stanley AIP Cayman GP Ltd., a commodity pool operator. From January 2005 to January 2008, Mr. Graver served as ~~Executive~~ Executive Director of Morgan Stanley Investment Management and from August 2003 to January 2005, Mr. Graver served as Vice President of Morgan Stanley Investment Management. From August 2003 to January 2008, Mr. Graver’s primary responsibilities included serving as Head of Operational Due Diligence for Morgan Stanley AIP Fund of Hedge Funds in which role he oversaw due diligence into operational factors of alternative investment entities. From July 1997 to July 2003, Mr. Graver was employed by PricewaterhouseCoopers LLP, an international auditing and professional services firm, where he served as a senior audit manager and was responsible for managing independent audits of financial services firms. From June 1993 to June 1997, Mr. Graver was employed by PNC Bank, a bank offering consumer and corporate services, where he served as a mutual fund accounting manager and was responsible for managing an accounting team that performed daily accounting functions and valuation calculations for a group of mutual funds. From July 1989 through June 1993, Mr. Graver was employed by Coopers & Lybrand LLP, a predecessor accounting firm to PricewaterhouseCoopers LLP, where he was a senior audit associate and was responsible for performing audits of financial services firms. Mr. Graver earned his Bachelor of Science degree in Accounting in May 1989 from Pennsylvania State University and Masters of Business Administration from Villanova University in May 2002.

The Partnership has not adopted a code of ethics that applies to officers because it has no officers. In addition, the Partnership has not adopted any procedures by which investors may recommend nominees to the Partnership’s board of directors and has not established an audit committee because it has no board of directors.

Item 11. Executive Compensation.

The Partnership has no directors or executive officers. As a limited partnership, the business of the Partnership is managed by the General Partner, which is responsible for the administration of the business affairs of the Partnership. The Partnership pays the General Partner a General Partner fee equal to an annual rate of 0.75% (paid monthly) of month-end net assets of the Partnership.

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

(a) Security ownership of certain beneficial owners. As of February 28, ~~2017~~2018, the Partnership knows of no person who beneficially ~~owns~~own more than 5% of the Redeemable Units outstanding.

(b) Security ownership of management. Under the terms of the Limited Partnership Agreement, the Partnership’s affairs are managed by the General Partner. The following table indicates securities owned by management as of December 31, ~~2016~~2017:

(1) Title of Class		(2) Name ofBeneficialOwner		(3) Amount andNature ofBeneficialOwnership		(4) Percent ofClass
Redeemable Units		General Partner		~~154~~136.~~9039~~5679		1.12%

4750

(a) Transactions with related persons. None.

(b) Review, approval or ratification of transactions with related persons. Not applicable.

(c) Promoters and certain control persons. MS&Co., Morgan Stanley Wealth Management and the General Partner would be considered promoters for purposes of Item 404(d) of Regulation S-K. The nature and the amounts of compensation each promoter will receive, if any, from the Partnership are set forth under “Item 1. Business” and “Item 11. Executive Compensation.”

Item 14. Principal Accountant Fees and Services.

(1) Audit Fees. The aggregate fees billed for each of the last two fiscal years for professional services rendered by ~~Deloitte~~Ernst & inYoung LLP (“EY”) for the ~~years~~year ended December 31, ~~2016~~2017 and ~~2015~~Deloitte & Touche LLP (“Deloitte”) for the year ended December 31, 2016 for the audit of the Partnership’s annual financial statements, review of financial statements included in the Partnership’s Forms 10-Q and 10-K and other services normally provided in connection with regulatory filings or engagements were:

2016		$	78,000
	2017			$	63,000
2015		$	73,800
	2016			$	78,000

(2)

Audit-Related Fees. None

(3) Tax Fees. The Partnership did not pay EY or Deloitte any amounts in ~~2016~~2017 and ~~2015~~2016, respectively for professional services in connection with tax compliance, tax advice and tax planning.

(4)

All Other Fees. None.

(5)

Not Applicable.

(6)

Not Applicable.

4851

PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a)(1)

Financial Statements:

Statements of Financial Condition at December 31, ~~2016~~2017 and ~~2015~~2016.

Condensed Schedule of Investments at December 31, ~~2016~~2017 and ~~2015~~2016.

Statements of Income and Expenses for the years ended December 31, ~~2016~~2017, ~~2015~~2016 and ~~2014~~2015.

Statements of Changes in Partners’ Capital for the years ended December 31, ~~2016~~2017, ~~2015~~2016 and ~~2014~~2015.

Notes to Financial Statements

(2) Exhibits:

~~3.1~~	3.1	Certificate of Limited Partnership of the Partnership as filed in the Office of the Secretary of State of the State of New York, dated March 21, 2002 (filed as Exhibit 3.1 to the general form for registration of securities on Form 10 filed on May 1, 2003 and incorporated herein by reference).	Certificate of Limited Partnership of the Partnership as filed in the Office of the Secretary of State of the State of New York, dated March 21, 2002 (filed as Exhibit 3.1 to the general form for registration of securities on Form 10 filed on May 1, 2003 and incorporated herein by reference).
	~~(a)~~	~~Certificate of Amendment to the Certificate of Limited Partnership as filed in the Office of the Secretary of State of the State of New York, dated May 21, 2003~~ (~~filed as Exhibit 3.1(~~a) ~~to the Quarterly Report on Form 10-Q filed on November 16, 2009 and incorporated herein by reference).~~	Certificate of Amendment to the Certificate of Limited Partnership as filed in the Office of the Secretary of State of the State of New York, dated May 21, 2003 (filed as Exhibit 3.1(a) to the Quarterly Report on Form 10-Q filed on November 16, 2009 and incorporated herein by reference).
	~~(b)~~	~~Certificate of Amendment to the Certificate of Limited Partnership as filed in the Office of the Secretary of State of the State of New York, dated September 21, 2005~~ (~~filed as Exhibit 3.1(~~b) ~~to the Quarterly Report on Form 10-Q filed on November 16, 2009 and incorporated herein by reference).~~	Certificate of Amendment to the Certificate of Limited Partnership as filed in the Office of the Secretary of State of the State of New York, dated September 21, 2005 (filed as Exhibit 3.1(b) to the Quarterly Report on Form 10-Q filed on November 16, 2009 and incorporated herein by reference).
	~~(c)~~	~~Certificate of Amendment to the Certificate of Limited Partnership as filed in the Office of the Secretary of State of the State of New York, dated September 19, 2008~~ (~~filed as Exhibit 3.1(~~c) ~~to the Quarterly Report on Form 10-Q filed on November 16, 2009 and incorporated herein by reference).~~	Certificate of Amendment to the Certificate of Limited Partnership as filed in the Office of the Secretary of State of the State of New York, dated September 19, 2008 (filed as Exhibit 3.1(c) to the Quarterly Report on Form 10-Q filed on November 16, 2009 and incorporated herein by reference).
	~~(d)~~	~~Certificate of Amendment to the Certificate of Limited Partnership as filed in the Office of the Secretary of State of the State of New York, dated August 27, 2008~~ (~~filed as Exhibit 99.1 to the Current Report on Form 8-K filed on September 2, 2008 and incorporated herein by reference~~d).	Certificate of Amendment to the Certificate of Limited Partnership as filed in the Office of the Secretary of State of the State of New York, dated August 27, 2008 (filed as Exhibit 99.1 to the Current Report on Form 8-K filed on September 2, 2008 and incorporated herein by reference).
	~~(e)~~	~~Certificate of Amendment to the Certificate of Limited Partnership as filed in the Office of the Secretary of State of the State of New York, dated September 28, 2009~~ (~~filed as Exhibit 99.1 to the Current Report on Form 8-K filed on September 30, 2009 and incorporated herein by reference~~e).	Certificate of Amendment to the Certificate of Limited Partnership as filed in the Office of the Secretary of State of the State of New York, dated September 28, 2009 (filed as Exhibit 99.1 to the Current Report on Form 8-K filed on September 30, 2009 and incorporated herein by reference).
	~~(f)~~	~~Certificate of Amendment to the Certificate of Limited Partnership as filed in the Office of the Secretary of State of the State of New York, dated June 29, 2010~~ (~~filed as Exhibit 3.1(~~f) ~~to the Current Report on Form 8-K filed on July 2, 2010 and incorporated herein by reference).~~	Certificate of Amendment to the Certificate of Limited Partnership as filed in the Office of the Secretary of State of the State of New York, dated June 29, 2010 (filed as Exhibit 3.1(f) to the Current Report on Form 8-K filed on July 2, 2010 and incorporated herein by reference).
	~~(g)~~	~~Certificate of Amendment to the Certificate of Limited Partnership as filed in the Office of the Secretary of State of the State of New York, dated September 2, 2011~~ (~~filed as Exhibit 3.1 to the Current Report on Form 8-K filed on September 7, 2011 and incorporated herein by reference~~g).	Certificate of Amendment to the Certificate of Limited Partnership as filed in the Office of the Secretary of State of the State of New York, dated September 2, 2011 (filed as Exhibit 3.1 to the Current Report on Form 8-K filed on September 7, 2011 and incorporated herein by reference).
	~~(h)~~	~~Certificate of Amendment to the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated August 7, 2013~~ (~~filed as Exhibit 3.1(~~h) ~~to the Quarterly Report on Form 10-Q filed on August 14, 2013 and incorporated herein by reference).~~	Certificate of Amendment to the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated August 7, 2013 (filed as Exhibit 3.1(h) to the Quarterly Report on Form 10-Q filed on August 14, 2013 and incorporated herein by reference).
	~~(j)~~	~~Certificate of Amendment to the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated January 7, 2015~~ (~~filed as Exhibit 3.1 to the Current Report on Form 8- K filed on January 13, 2015 and incorporated herein by reference~~j).	Certificate of Amendment to the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated January 7, 2015 (filed as Exhibit 3.1 to the Current Report on Form 8-K filed on January 13, 2015 and incorporated herein by reference).
~~3.2~~	~~(a)~~3.2	~~Fourth Amended and Restated Limited Partnership Agreement, dated and effective January 1, 2015~~ (~~filed as Exhibit 3.1 to the Current Report on Form 8-K filed on January 7, 2015 and incorporated herein by reference~~a).	Fourth Amended and Restated Limited Partnership Agreement, dated and effective January 1, 2015 (filed as Exhibit 3.1 to the Current Report on Form 8-K filed on January 7, 2015 and incorporated herein by reference).
	~~(b)~~	~~Amendment No. 1 to the Fourth Amended and Restated Limited Partnership Agreement, dated and effective January 1, 2016~~ (~~filed as Exhibit 3.1 to the Current Report on Form 8-K filed on January 6, 2016 and incorporated herein by reference~~b).	Amendment No. 1 to the Fourth Amended and Restated Limited Partnership Agreement, dated and effective January 1, 2016 (filed as Exhibit 3.1 to the Current Report on Form 8-K filed on January 6, 2016 and incorporated herein by reference).
10.1	(a)	Customer Agreement among the Partnership and Salomon Smith Barney Inc., and for limited purposes Smith Barney AAA Master Fund LLC, dated May 31, 2002 (filed as Exhibit 10 to the general form for registration of securities on Form 10 filed on May 1, 2003 and incorporated herein by reference).
		(c)	Amendment No. 2 to the Second Amended and Restated Limited Partnership Agreement, dated and effective December 8, 2017 (filed as Exhibit 3.1 to the Current Report on Form 8-K filed on December 13, 2017 and incorporated herein by reference).

4952

	(b)	Commodity Futures Customer Agreement between the Partnership and MS&Co., effective October 29, 2013 (filed as Exhibit 10.1 (b) to the Quarterly Report on Form 10-Q filed on November 14, 2013 and incorporated herein by reference).
	10.1	(a)	Customer Agreement among the Partnership and Salomon Smith Barney Inc., and for limited purposes Smith Barney AAA Master Fund LLC, dated May 31, 2002 (filed as Exhibit 10 to the general form for registration of securities on Form 10 filed on May 1, 2003 and incorporated herein by reference).
	(c)	Commodity Futures Customer Agreement between the Partnership and MS&Co., effective March 1, 2014 (filed as Exhibit 10.1(c) to the Annual Report on Form 10-K filed on March 28, 2014 and incorporated herein by reference).
		(b)	Commodity Futures Customer Agreement between the Partnership and MS&Co., effective October 29, 2013 (filed as Exhibit 10.1 (b) to the Quarterly Report on Form 10-Q filed on November 14, 2013 and incorporated herein by reference).
	(d)	U.S. Treasury Securities Purchase Authorization Agreement, between the Partnership and MS&Co., effective June 1, 2015 (filed as Exhibit 10.1 to the Current Report on Form 8-K filed on November 4, 2015 and incorporated herein by reference.)
		(c)	Commodity Futures Customer Agreement between the Partnership and MS&Co., effective March 1, 2014 (filed as Exhibit 10.1(c) to the Annual Report on Form 10-K filed on March 28, 2014 and incorporated herein by reference).
10.2		Form of Subscription Agreement (filed as Exhibit 10.2 to the Quarterly Report on Form 10-Q filed on November 14, 2012 and incorporated herein by reference).
		(d)	U.S. Treasury Securities Purchase Authorization Agreement, between the Partnership and MS&Co., effective June 1, 2015 (filed as Exhibit 10.1 to the Current Report on Form 8-K filed on November 4, 2015 and incorporated herein by reference.)
10.3		Advisory Agreement among the Partnership, the General Partner and AAA Capital Management Advisors, Ltd., dated April 3, 2006 (filed as Exhibit 10.3 to the Quarterly Report on Form 10-Q filed on November 16, 2009 and incorporated herein by reference).
	10.2		Form of Subscription Agreement (filed as Exhibit 10.2 to the Quarterly Report on Form 10-Q filed on November 14, 2012 and incorporated herein by reference).
	(a)	Letter extending the Management Agreements between the General Partner and AAA Capital Management Advisors, Ltd. from June 30, 2014 to June 30, 2015 (filed as Exhibit 10.3(a) to the Annual Report on Form 10-K filed on March 30, 2015 and incorporated herein by reference).
	10.3	(a)	Advisory Agreement among the Partnership, the General Partner and AAA Capital Management Advisors, Ltd., dated April 3, 2006 (filed as Exhibit 10.3 to the Quarterly Report on Form 10-Q filed on November 16, 2009 and incorporated herein by reference).
	~~(b)~~	~~Letter from the General Partner amending the Advisory Agreement by and among the Partnership, the General Partner and the Advisor, dated December 20, 2012~~ (~~filed as Exhibit 10.1 to the Current Report on Form 8-K filed on January 7, 2013 and incorporated herein by reference~~b).	Letter extending the Management Agreements between the General Partner and AAA Capital Management Advisors, Ltd. from June 30, 2014 to June 30, 2015 (filed as Exhibit 10.3(a) to the Annual Report on Form 10-K filed on March 30, 2015 and incorporated herein by reference).
	~~(c)~~	~~Management Agreement among the Partnership, the General Partner and Pan Capital Management, LP, dated January 6, 2015~~ (~~filed as Exhibit 10.1 to the Current Report on Form 8-K filed on January 7, 2015 and incorporated herein by reference~~c).	Letter from the General Partner amending the Advisory Agreement by and among the Partnership, the General Partner and the Advisor, dated December 20, 2012 (filed as Exhibit 10.1 to the Current Report on Form 8-K filed on January 7, 2013 and incorporated herein by reference).
~~10.4~~	10.4	Amended and Restated Alternative Investment Selling Agent Agreement between the Partnership, the General Partner and Morgan Stanley Wealth Management, effective March 3, 2016 (filed as Exhibit 10.1 to the Current Report on Form 8-K filed on March 8, 2016 and incorporated herein by reference).	Management Agreement among the Partnership, the General Partner and Pan Capital Management, LP, dated January 6, 2015 (filed as Exhibit 10.1 to the Current Report on Form 8-K filed on January 7, 2015 and incorporated herein by reference).
~~10.5~~	10.5	Amended and Restated Master Services Agreement, by and among the Partnership, the General Partner and SS&C Technologies, Inc. effective March 31, 2015 (filed as Exhibit 10.1 to the Current Report on Form 8-K filed on August 6, 2015 and incorporated herein by reference).	Amended and Restated Alternative Investment Selling Agent Agreement between the Partnership, the General Partner and Morgan Stanley Wealth Management, effective March 3, 2016 (filed as Exhibit 10.1 to the Current Report on Form 8-K filed on March 8, 2016 and incorporated herein by reference).
	10.6		Amended and Restated Master Services Agreement, by and among the Partnership, the General Partner and SS&C Technologies, Inc. effective March 31, 2015 (filed as Exhibit 10.1 to the Current Report on Form 8-K filed on August 6, 2015 and incorporated herein by reference).

The exhibits required to be filed by Item 601 of regulation S-K are incorporated herein by reference.

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

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

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

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


101. INS		XBRL Instance Document.

101. SCH		XBRL Taxonomy Extension Schema Document.

101. CAL		XBRL Taxonomy Extension Calculation Linkbase Document.

101. LAB		XBRL Taxonomy Extension Label Linkbase Document.

101. PRE		XBRL Taxonomy Extension Presentation Linkbase Document.

101. DEF		XBRL Taxonomy Extension Definition Linkbase Document.

5053

SIGNATURES

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

MANAGED FUTURES PREMIER ENERGY FUND L.P. II

By:		Ceres Managed Futures LLC
		(General Partner)
By:		/s/ Patrick T. Egan
		Patrick T. Egan
		President and Director
		Date: March 28, 2017
		Date: March 28, 2018

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.

/s/ Patrick T. Egan	~~/s/ Feta Zabeli~~	/s/ ~~Maureen~~Feta ~~O’Toole~~Zabeli	/s/ Maureen O’Toole
Patrick T. Egan	~~Feta Zabeli~~	~~Maureen~~Feta ~~O’Toole~~Zabeli	Maureen O’Toole
President and Director	~~Director~~	Director	Director
Ceres Managed Futures LLC	~~Ceres Managed Futures LLC~~	Ceres Managed Futures LLC	Ceres Managed Futures LLC
Date: March 28, 2017	Date: March 28, 2017	Date: March 28, 2017
Date: March 28, 2018		Date: March 28, 2018	Date: March 28, 2018
/s/ Steven Ross	~~/s/ M. Paul Martin~~	/s/ ~~Matthew R~~M. ~~Graver~~Paul Martin	/s/ Matthew R. Graver
Steven Ross	~~M. Paul Martin~~	~~Matthew R~~M. ~~Graver~~Paul Martin	Matthew R. Graver
Chief Financial Officer and Director	~~Director~~	Director	Director
(Principal Accounting Officer)	~~Ceres Managed Futures LLC~~	Ceres Managed Futures LLC	Ceres Managed Futures LLC
Ceres Managed Futures LLC	~~Date: March 28, 2017~~	Date: March 28, ~~2017~~2018	Date: March 28, 2018
Date: March 28, 2017
Date: March 28, 2018

Supplemental Information to be Furnished With Reports Filed Pursuant to Section 15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to Section 12 of the Act.

Annual Report to limited partners.

No proxy material has been sent to limited partners.

5154

Filing Compare · Managed Futures Premier Energy Fund L.P. II