Attached files
file | filename |
---|---|
EX-10.S - EXHIBIT - Meritage Futures Fund L.P. | glc.htm |
EX-31.S - EXHIBIT - Meritage Futures Fund L.P. | mvex3102.htm |
EX-32.S - EXHIBIT - Meritage Futures Fund L.P. | mvex3202.htm |
EX-32.S - EXHIBIT - Meritage Futures Fund L.P. | mvex3201.htm |
EX-10.S - EXHIBIT - Meritage Futures Fund L.P. | augustus.htm |
EX-31.S - EXHIBIT - Meritage Futures Fund L.P. | mvex3101.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
x QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
quarterly period ended September 30, 2009 or
o TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
transition period from __________________to__________________
Commission
File Number: 000-53113
MANAGED
FUTURES PROFILE MV, L.P.
|
||
(Exact
name of registrant as specified in its charter)
|
Delaware
|
20-8529352
|
|||
(State or other jurisdiction of
inrporation or organization)
|
(I.R.S.
Employer
Identification
No.)
|
|||
Demeter
Management LLC
|
||||
522
Fifth Avenue, 13th
Floor
|
||||
New
York, NY
|
10036
|
|||
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant’s
telephone number, including area code
|
(212)
296-1999
|
Morgan
Stanley Managed Futures MV, L.P.
(Former
name, former address and former fiscal year, if changed since last
report)
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 x No o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes o No o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer”,
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large
accelerated filer o
|
Accelerated
filer o
|
Non-accelerated
filer x
|
Smaller
reporting company o
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes 0 No
T
MANAGED
FUTURES PROFILE MV, L.P.
(formerly,
Morgan Stanley Managed Futures MV, L.P.)
INDEX TO QUARTERLY REPORT ON
FORM 10-Q
September 30,
2009
PART I. FINANCIAL
INFORMATION
|
||
Item
1.
|
Financial
Statements (Unaudited)
|
|
Statements
of Financial Condition as of September 30, 2009 and December 31, 2008
|
2
|
|
Statements
of Operations for the Three and Nine Months Ended September 30, 2009 and
2008
|
3
|
|
Statements
of Changes in Partners’ Capital for the Nine Months Ended September 30,
2009 and 2008
|
4
|
|
Statements
of Cash Flows for the Nine Months Ended September 30, 2009 and 2008
|
5
|
|
Notes
to Financial Statements
|
6-23
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
24-33
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
34-48
|
Item
4T.
|
Controls
and Procedures
|
49
|
PART II. OTHER INFORMATION
|
||
Item
1A.
|
Risk
Factors
|
50
|
Item
2.
|
Unregistered
Sales of Securities and Use of Proceeds
|
50
|
Item
6.
|
Exhibits
|
50
|
PART I. FINANCIAL
INFORMATION
Item
1. Financial
Statements
MANAGED
FUTURES PROFILE MV, L.P.
(formerly,
Morgan Stanley Managed Futures MV, L.P.)
STATEMENTS
OF FINANCIAL CONDITION
(Unaudited)
September
30,
|
December
31,
|
||
2009
|
2008
|
||
ASSETS
|
$
|
$
|
|
Investments
in Affiliated Trading Companies:
|
|||
Investment
in Kaiser I, LLC
|
10,371,662
|
6,339,110
|
|
Investment
in TT II, LLC
|
10,371,662
|
6,339,110
|
|
Investment
in Aspect I, LLC
|
9,814,831
|
6,339,110
|
|
Investment
in WNT I, LLC
|
9,814,831
|
5,904,563
|
|
Investment
in Chesapeake I, LLC
|
8,651,354
|
5,433,523
|
|
Investment
in GLC I, LLC
|
4,325,677
|
–
|
|
Investment
in Augustus I, LLC
|
4,325,677
|
–
|
|
Investment
in Strategic, L.L.C.
|
–
|
4,082,311
|
|
Total
Investments in Affiliated Trading Companies, at fair value
(cost
$55,672,463 and $30,233,608, respectively)
|
57,675,694
|
34,437,727
|
|
Subscriptions
receivable
|
2,471,883
|
–
|
|
Receivable
from Affiliated Trading Companies
|
8,769,391
|
1,689,803
|
|
Total
Assets
|
68,916,968
|
36,127,530
|
|
LIABILITIES
|
|||
Payable
to Affiliated Trading Companies
|
10,761,950
|
–
|
|
Redemptions
payable
|
327,649
|
1,068,224
|
|
Total
Liabilities
|
11,089,599
|
1,068,224
|
|
PARTNERS’
CAPITAL
|
|||
Class
A (37,689.753 and 22,051.766 Units, respectively)
|
41,463,451
|
25,973,353
|
|
Class
B (4,998.058 and 3,158.253 Units, respectively)
|
5,558,181
|
3,746,101
|
|
Class
C (8,705.656 and 3,944.412 Units, respectively)
|
9,786,313
|
4,711,520
|
|
Class
Z (887.499 and 518.705 Units, respectively)
|
1,019,424
|
628,332
|
|
Total
Partners’ Capital
|
57,827,369
|
35,059,306
|
|
Total
Liabilities and Partners’ Capital
|
68,916,968
|
36,127,530
|
|
NET
ASSET VALUE PER UNIT
|
|||
Class
A
|
1,100.12
|
1,177.84
|
|
Class
B
|
1,112.07
|
1,186.13
|
|
Class
C
|
1,124.13
|
1,194.48
|
|
Class
Z
|
1,148.65
|
1,211.35
|
The
accompanying notes are an integral part of these financial
statements.
- 2
-
MANAGED
FUTURES PROFILE MV, L.P.
(formerly,
Morgan Stanley Managed Futures MV, L.P.)
STATEMENTS
OF OPERATIONS
(Unaudited)
For
the Three Months
Ended September 30,
|
For
the Nine Months
Ended September 30,
|
||||||
2009
|
2008
|
2009
|
2008
|
||||
$
|
$
|
$
|
$
|
||||
EXPENSES
|
|||||||
Ongoing
Placement Agent fees
|
230,176
|
102,353
|
581,817
|
251,073
|
|||
General
Partner fees
|
131,932
|
58,595
|
331,203
|
145,318
|
|||
Administrative
fees
|
52,773
|
23,437
|
132,481
|
58,127
|
|||
Total
Expenses
|
414,881
|
184,385
|
1,045,501
|
454,518
|
|||
NET
INVESTMENT LOSS
|
(414,881)
|
(184,385)
|
(1,045,501)
|
(454,518)
|
|||
REALIZED/NET
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON
INVESTMENTS
|
|||||||
Realized
|
486,123
|
148,833
|
777,856
|
(157,038)
|
|||
Net
change in unrealized appreciation (depreciation) on
investments
|
953,944
|
(1,914,381)
|
(2,200,888)
|
430,796
|
|||
Total
Realized/Net Change in Unrealized Appreciation (Depreciation) on
Investments
|
1,440,067
|
(1,765,548)
|
(1,423,032)
|
273,758
|
|||
NET
INCOME (LOSS)
|
1,025,186
|
(1,949,933)
|
(2,468,533)
|
(180,760)
|
|||
NET
INCOME (LOSS) ALLOCATION
|
|||||||
Class
A
|
706,225
|
(1,388,901)
|
(1,857,587)
|
(194,319)
|
|||
Class
B
|
85,662
|
(268,486)
|
(265,115)
|
9,428
|
|||
Class
C
|
210,746
|
(237,314)
|
(315,072)
|
13,997
|
|||
Class
Z
|
22,553
|
(55,232)
|
(30,759)
|
(9,866)
|
|||
NET
INCOME (LOSS) PER UNIT
|
|||||||
Class
A
|
20.08
|
(94.79)
|
(64.90)
|
11.69
|
|||
Class
B
|
19.34
|
(93.86)
|
(69.21)
|
15.66
|
|||
Class
C
|
25.47
|
(92.92)
|
(50.71)
|
19.66
|
|||
Class
Z
|
25.58
|
(91.01)
|
(45.92)
|
27.75
|
|||
Units
|
Units
|
Units
|
Units
|
||||
WEIGHTED
AVERAGE NUMBER
|
|||||||
OF
UNITS OUTSTANDING
|
|||||||
Class
A
|
35,170.542
|
15,287.680
|
28,624.171
|
12,285.420
|
|||
Class
B
|
4,429.326
|
3,017.888
|
3,830.331
|
2,698.689
|
|||
Class
C
|
8,275.534
|
2,652.479
|
6,212.958
|
2,524.376
|
|||
Class
Z
|
881.523
|
616.202
|
669.898
|
484.522
|
The
accompanying notes are an integral part of these financial
statements.
– 3
–
MANAGED
FUTURES PROFILE MV, L.P.
(formerly,
Morgan Stanley Managed Futures MV, L.P.)
STATEMENTS
OF CHANGES IN PARTNERS’ CAPITAL
For the
Nine Months Ended September 30, 2009 and 2008
(Unaudited)
Class A
|
Class B
|
Class C
|
Class Z
|
Total
|
|||||
$
|
$
|
$
|
$
|
$
|
|||||
Partners’
Capital,
|
|||||||||
December
31, 2007
|
7,228,792
|
1,874,202
|
1,747,204
|
228,054
|
11,078,252
|
||||
Subscriptions
|
10,688,489
|
2,349,940
|
1,393,863
|
453,536
|
14,885,828
|
||||
Net
Income (Loss)
|
(194,319)
|
9,428
|
13,997
|
(9,866)
|
(180,760)
|
||||
Redemptions
|
(1,051,639)
|
(1,210,003)
|
(165,312)
|
–
|
(2,426,954)
|
||||
Partners’
Capital,
|
|||||||||
September
30, 2008
|
16,671,323
|
3,023,567
|
2,989,752
|
671,724
|
23,356,366
|
||||
Partners’
Capital,
|
|||||||||
December
31, 2008
|
25,973,353
|
3,746,101
|
4,711,520
|
628,332
|
35,059,306
|
||||
Subscriptions
|
23,644,117
|
3,918,173
|
6,613,509
|
539,878
|
34,715,677
|
||||
Net
Loss
|
(1,857,587)
|
(265,115)
|
(315,072)
|
(30,759)
|
(2,468,533)
|
||||
Redemptions
|
(6,296,432)
|
(1,840,978)
|
(1,223,644)
|
(118,027)
|
(9,479,081)
|
||||
Partners’
Capital,
|
|||||||||
September
30, 2009
|
41,463,451
|
5,558,181
|
9,786,313
|
1,019,424
|
57,827,369
|
||||
Class A
|
Class B
|
Class C
|
Class Z
|
Total
|
|||||
Units
|
Units
|
Units
|
Units
|
Units
|
|||||
Beginning
Units,
|
|||||||||
December
31, 2007
|
6,965.765
|
1,802.277
|
1,676.682
|
217.947
|
10,662.671
|
||||
Subscriptions
|
9,896.863
|
2,268.790
|
1,282.431
|
407.417
|
13,855.501
|
||||
Redemptions
|
(976.858)
|
(1,108.507)
|
(143.172)
|
–
|
(2,228.537)
|
||||
Ending
Units,
|
|||||||||
September
30, 2008
|
15,885.770
|
2,962.560
|
2,815.941
|
625.364
|
22,289.635
|
||||
Beginning
Units,
|
|||||||||
December
31, 2008
|
22,051.766
|
3,158.253
|
3,944.412
|
518.705
|
29,673.136
|
||||
Subscriptions
|
21,169.254
|
3,479.515
|
5,850.012
|
468.226
|
30,967.007
|
||||
Redemptions
|
(5,531.267)
|
(1,639.710)
|
(1,088.768)
|
(99.432)
|
(8,359.177)
|
||||
Ending
Units,
|
|||||||||
September
30, 2009
|
37,689.753
|
4,998.058
|
8,705.656
|
887.499
|
52,280.966
|
The
accompanying notes are an integral part of these financial
statements.
- 4
-
MANAGED
FUTURES PROFILE MV, L.P.
(formerly,
Morgan Stanley Managed Futures MV, L.P.)
STATEMENTS
OF CASH FLOWS
(Unaudited)
For the Nine Months Ended September
30,
|
|||
2009
|
2008
|
||
$
|
$
|
||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|||
Net
loss
|
(2,468,533)
|
(180,760)
|
|
Adjustments
to reconcile net loss:
|
|||
Purchase
of Investments in Affiliated Trading Companies
|
(34,753,850)
|
(15,558,965)
|
|
Proceeds
from sale of Investments in Affiliated Trading Companies
|
10,092,851
|
3,254,998
|
|
Realized
|
(777,856)
|
–
|
|
Net
change in unrealized (appreciation) depreciation on
investments
|
2,200,888
|
(430,796)
|
|
Increase
in operating assets:
|
|||
Receivable
from Affiliated Trading Companies
|
(7,079,588)
|
–
|
|
Increase
in operating liabilities:
|
|||
Payable
to Affiliated Trading Companies
|
10,761,950
|
–
|
|
Net cash
used for operating activities
|
(22,024,138)
|
(12,915,523)
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|||
Cash
received from offering of Units
|
32,243,794
|
14,885,828
|
|
Cash
paid for redemptions of Units
|
(10,219,656)
|
(1,970,305)
|
|
Net
cash provided by financing activities
|
22,024,138
|
12,915,523
|
|
Net
change in cash
|
–
|
–
|
|
Cash
at beginning of period
|
–
|
–
|
|
Cash
at end of period
|
–
|
–
|
The
accompanying notes are an integral part of these financial
statements.
- 5
-
MANAGED
FUTURES PROFILE MV, L.P.
(formerly,
Morgan Stanley Managed Futures MV, L.P.)
NOTES TO FINANCIAL
STATEMENTS
September
30, 2009
(Unaudited)
The
unaudited financial statements contained herein include, in the opinion of
management, all adjustments necessary for a fair presentation of the financial
condition and results of operations of Managed Futures Profile MV, L.P.
(formerly, Morgan Stanley Managed Futures MV, L.P.) (“Profile MV” or the
“Partnership”). The financial statements and condensed notes herein
should be read in conjunction with the Partnership’s Annual Report on Form 10-K
for the fiscal year ending December 31, 2008.
1. Organization
Managed
Futures Profile MV, L.P. (formerly, Morgan Stanley Managed Futures MV, L.P.) was
formed on February 22, 2007, under the Delaware Revised Uniform Limited
Partnership Act, as a multi-advisor commodity pool created to profit from the
speculative trading of domestic and foreign futures contracts, forward
contracts, foreign exchange commitments, options on physical commodities and
futures contracts, spot (cash) commodities and currencies, exchange of futures
contracts on physicals transactions and futures contracts transactions, and any
rights pertaining thereto (collectively, "Futures Interests") (refer to Note 4.
Financial Instruments
of the Trading Companies) through its investments in affiliated trading
companies (each a “Trading Company”, or collectively the “Trading
Companies”). Profile MV is one of the partnerships in the Managed
Futures Multi-Strategy Profile Series, comprised of the Profile MV, Managed
Futures Profile LV, L.P., and Managed Futures Profile HV, L.P. (collectively,
the “Profile Series”).
- 6
-
MANAGED
FUTURES PROFILE MV, L.P.
(formerly,
Morgan Stanley Managed Futures MV, L.P.)
NOTES TO FINANCIAL
STATEMENTS (CONTINUED)
The
Partnership allocates substantially all of its assets to multiple affiliated
Trading Companies, each of which allocates substantially all of its assets to
the trading program of an unaffiliated commodity trading advisor which makes
investment decisions for each respective Trading Company.
The
Partnership commenced trading operations on August 1, 2007, in accordance with
the terms of its Limited Partnership Agreement. The primary commodity
broker for each Trading Company is Morgan Stanley & Co. Incorporated
(“MS&Co.”), except that Morgan Stanley Smith Barney Kaiser I, LLC (“Kaiser
I, LLC”) uses Newedge Financial Inc. (“Newedge”) as its primary commodity
broker. Morgan Stanley & Co. International plc ("MSIP") acts as
each Trading Company’s commodity broker to the extent it trades on the London
Metal Exchange (except Kaiser I, LLC, which uses Newedge) (collectively,
MS&Co., MSIP, and Newedge are referred to as the “Commodity
Brokers”). Each Trading Company’s over-the-counter foreign exchange
spot, options, and forward contract counterparties are either MS&Co. and/or
Morgan Stanley Capital Group Inc. (“MSCG”) to the extent a Trading Company
trades options on over-the-counter foreign currency forward contracts (except
that Newedge serves in such capacity with respect to Kaiser I,
LLC).
Effective
October 1, 2009, Demeter Management LLC (“Demeter”), the general partner of the
Partnership and the trading manager of each Trading Company, changed the name of
the Partnership and its affiliated Trading Companies. Please refer to
Note 7. Subsequent
Events for name changes.
- 7
-
MANAGED
FUTURES PROFILE MV, L.P.
(formerly,
Morgan Stanley Managed Futures MV, L.P.)
NOTES TO FINANCIAL
STATEMENTS (CONTINUED)
Demeter
is a wholly-owned subsidiary of Morgan Stanley Smith Barney Holdings LLC
(“MSSB”). MSSB is majority-owned indirectly by Morgan Stanley and
minority-owned indirectly by Citigroup Inc. MS&Co., MSIP, and
MSCG are wholly-owned subsidiaries of Morgan Stanley.
The
financial statements of the Partnership have been prepared using the "Fund of
Funds" approach and accordingly all revenue and expense information from the
Trading Companies is reflected as a net change in unrealized appreciation
(depreciation) on investments on the Statements of Operations. The
Partnership maintains sufficient cash balances on hand to satisfy ongoing
operating expenses for the Partnership. The Trading Companies and their trading
advisors (each individually, a “Trading Advisor” or collectively, the "Trading
Advisors") for the Partnership at September 30, 2009, are as
follows:
Trading Company
|
Trading Advisor
|
Morgan
Stanley Smith Barney Aspect I, LLC
|
|
(“Aspect
I, LLC”)
|
Aspect
Capital Limited
|
Morgan
Stanley Smith Barney Chesapeake I, LLC
|
|
(“Chesapeake
I, LLC”)
|
Chesapeake
Capital Corporation
|
Morgan
Stanley Smith Barney Kaiser I, LLC
|
|
(“Kaiser
I, LLC”)
|
Kaiser
Trading Group Pty. Ltd.
|
Morgan
Stanley Smith Barney TT II, LLC
|
|
(“TT
II, LLC”)
|
Transtrend
B.V.
|
Morgan
Stanley Smith Barney, WNT I, LLC
|
|
(“WNT
I, LLC”)
|
Winton
Capital Management Limited
|
Morgan
Stanley Strategic Alternatives, L.L.C.
|
|
(“Strategic,
L.L.C.)
|
Bridgewater
Associates, Inc. (“Bridgewater”)
|
- 8
-
MANAGED
FUTURES PROFILE MV, L.P.
(formerly,
Morgan Stanley Managed Futures MV, L.P.)
NOTES TO FINANCIAL
STATEMENTS (CONTINUED)
Effective
upon the close of business on September 30, 2009, Bridgewater was terminated as
a Trading Advisor to the Partnership, and ceased its activities via investment
in Strategic, L.L.C.
Effective
as a start of business on October 1, 2009, GLC Limited was added as a Trading
Advisor to the Partnership. Effective October 1, 2009, GLC Limited
began trading the Partnership’s assets allocated to Morgan Stanley Smith Barney
GLC I, LLC (“GLC I, LLC”).
Effective
as a start of business on October 1, 2009, Augustus Asset Managers Limited was
added as a Trading Advisor to the Partnership. Effective October 1,
2009, Augustus Asset Managers Limited began trading the Partnership’s assets
allocated to in Morgan Stanley Smith Barney Augustus I, LLC (“Augustus I,
LLC”).
Demeter
may reallocate the Partnership’s assets to the different Trading Companies at
its sole discretion.
- 9
-
MANAGED
FUTURES PROFILE MV, L.P.
(formerly,
Morgan Stanley Managed Futures MV, L.P.)
NOTES TO FINANCIAL
STATEMENTS (CONTINUED)
Units of
limited partnership interest ("Units") of the Partnership are being offered in
four share classes in a private placement pursuant to Regulation D under the
Securities Act of 1933, as amended. Depending on the aggregate amount
invested in the Partnership, limited partners receive class A, B, C or D Units
in the Partnership (each a "Class" and collectively the
“Classes”). Certain limited partners who are not subject to the
ongoing placement agent fee are deemed to hold Class Z Units. Demeter
received Class Z Units with respect to its investment in the
Partnership.
Demeter
is not required to maintain any investment in the Partnership, and may withdraw
any portion of its interest in the Partnership at any time, as permitted by the
Limited Partnership Agreement. In addition, Class Z shares are only
held by certain individuals affiliated with Morgan Stanley at Demeter’s sole
discretion. Class Z Units are not subject to paying the placement
agent fee.
On July
1, 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards (“SFAS”) No. 168, The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles
(“GAAP”), also known as FASB Accounting Standards Codification (“ASC”)
105-10, Generally Accepted
Accounting Principles (“ASC 105-10” or the
“Codification”). ASC 105-10 established the exclusive authoritative
reference for U.S. GAAP for use in financial statements except for Securities
and Exchange Commission (“SEC”) rules and interpretive releases, which are also
authoritative GAAP for SEC registrants. The Codification supersedes
all existing non-SEC accounting and reporting
- 10
-
MANAGED
FUTURES PROFILE MV, L.P.
(formerly,
Morgan Stanley Managed Futures MV, L.P.)
NOTES TO FINANCIAL
STATEMENTS (CONTINUED)
standards. The
Codification became the single source of authoritative accounting principles
generally accepted in the United States and is effective for financial
statements issued for interim and annual periods ending after September 15,
2009.
2. Related Party
Transactions
The cash
held by each Trading Company is on deposit with MS&Co. and MSIP in futures
interest trading accounts to meet margin requirements as
needed. MS&Co. pays each Trading Company at each month end
interest income on 100% of its average daily funds held at MS&Co. Assets
deposited with MS&Co. as margin are credited with interest income at a rate
approximately equivalent to what MS&Co. pays or charges other customers on
such assets deposited as margin. Assets not deposited as margin with
MS&Co. are credited with interest income at a rate equal to the monthly
average of the 4-week U.S. Treasury bill discount rate less 0.15% during such
month but in no event less than zero. For purposes of such interest
payments, net assets do not include monies owed to the Trading Company on
Futures Interests.
The
Partnership pays monthly administrative fees and general partner fees to
Demeter. The Partnership pays placement agent fees to MSSB equal to a
percentage of beginning net assets adjusted for additional subscriptions and
redemptions.
- 11
-
MANAGED
FUTURES PROFILE MV, L.P.
(formerly,
Morgan Stanley Managed Futures MV, L.P.)
NOTES TO FINANCIAL
STATEMENTS (CONTINUED)
3. Income
Taxes
No
provision for income taxes has been made in the accompanying financial
statements, as limited partners are individually responsible for reporting
income or loss based upon their respective share of the Partnership’s revenues
or expenses for income tax purposes. The Partnership files U.S.
federal and state tax returns.
ASC
740-10 Income Taxes
(which incorporates former FASB No. 109 and FASB Interpretation No. 48, Income Taxes), clarifies the
accounting for uncertainty in income taxes recognized in a Partnership's
financial statements, and prescribes a recognition threshold and measurement
attribute for financial statement recognition and measurement of a tax position
taken or expected to be taken. The 2007 through 2008 tax
years generally remain subject to examination by U.S. federal and most state tax
authorities.
- 12
-
MANAGED
FUTURES PROFILE MV, L.P.
(formerly,
Morgan Stanley Managed Futures MV, L.P.)
NOTES TO FINANCIAL
STATEMENTS (CONTINUED)
4. Financial Instruments of the
Trading Companies
The
Trading Advisors trade Futures Interests on behalf of the Trading
Companies. Futures and forwards represent contracts for delayed
delivery of an instrument at a specified date and price. Futures
Interests are open commitments until settlement date, at which time they are
realized. They are valued at fair value, generally on a daily basis,
and the unrealized gains and losses on open contracts (the difference between
contract trade price and market price) are reported in the Statements of
Financial Condition as net unrealized gains or losses on open
contracts. The resulting net change in unrealized gains and losses is
reflected in the change in unrealized trading profit (loss) on open contracts
from one period to the next on the Statements of Operations. The fair
value of exchange-traded futures, options and forwards contracts is determined
by the various futures 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.) of the last business day of the reporting
period. The fair value of non-exchange-traded foreign currency
option contracts is calculated by applying an industry standard model
application for options valuation of foreign currency options, using as input,
the spot prices, interest rates, and option implied volatilities quoted as of
approximately 3:00 P.M. (E.T.) on the last business day of the reporting
period. Risk arises from changes in the value of these contracts and
the potential inability of counterparties to perform under the terms of the
contracts. There are numerous factors which may significantly
influence the fair value of these contracts, including interest rate
volatility.
- 13
-
MANAGED
FUTURES PROFILE MV, L.P.
(formerly,
Morgan Stanley Managed Futures MV, L.P.)
NOTES TO FINANCIAL
STATEMENTS (CONTINUED)
The fair
value of exchange-traded contracts is based on the settlement price quoted by
the exchange on the day with respect to which fair value is being
determined. If an exchange-traded contract could not have been
liquidated on such day due to the operation of daily limits or other rules of
the exchange, the settlement price shall be the settlement price on the first
subsequent day on which the contract could be liquidated. The fair
value of off-exchange-traded contracts is based on the fair value quoted by the
counterparty.
The
Trading Companies’ contracts are accounted for on a trade-date basis and marked
to market on a daily basis. The Trading Companies account for their derivative
investments as required by ASC 815-10-15, Derivative and Hedging
(formerly, SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities). A derivative is defined
as a financial instrument or other contract that has all three of the following
characteristics:
1)
|
One
or more underlying notional amounts or payment
provisions;
|
2)
|
Requires
no initial net investment or a smaller initial net investment than would
be required relative to changes in market
factors;
|
3)
|
Terms
require or permit net settlement.
|
Generally,
derivatives include futures, forward, swap or options contracts, and other
financial instruments with similar characteristics such as caps, floors, and
collars.
- 14
-
MANAGED
FUTURES PROFILE MV, L.P.
(formerly,
Morgan Stanley Managed Futures MV, L.P.)
NOTES TO FINANCIAL
STATEMENTS (CONTINUED)
The
futures, forwards and options traded by the Trading Advisors on behalf of the
Trading Companies involve varying degrees of related market
risk. Market risk is often dependent upon changes in the level or
volatility of interest rates, exchange rates, and prices of financial
instruments and commodities, factors that result in frequent changes in the fair
value of the Trading Companies’ open positions, and consequently in their
earnings, whether realized or unrealized, and cash flow. Gains and
losses on open positions of exchange-traded futures, exchange-traded forward,
and exchange-traded futures-styled options contracts are settled daily through
variation margin. Gains and losses on off-exchange-traded forward
currency contracts and forward currency options contracts are settled upon
termination of the contract. However, the Trading Companies are required to meet
margin requirements equal to the net unrealized loss on open forward currency
contracts in the Trading Companies’ accounts with the counterparty, which is
accomplished by daily maintenance of the cash balance in a custody account held
at MS&Co.
5. Fair Value Measurements and
Disclosures
As
defined by ASC 820-10-55, Fair
Value Measurements and Disclosures (formerly, SFAS No. 157, Fair Value Measurements), fair
value is the amount that would be recovered when an asset is sold or an amount
paid to transfer a liability, in an ordinary transaction, between market
participants at the measurement date (exit price). Market price
observability is impacted by a number of factors, including the types of
investments, the characteristics specific to the investment, and the state of
the market (including the existence and the transparency of transactions between
market participants). Investments with readily available actively
quoted prices in an ordinary market will generally have a higher degree of
market price observability and a lesser degree of judgment used in measuring
fair value.
- 15
-
MANAGED
FUTURES PROFILE MV, L.P.
(formerly,
Morgan Stanley Managed Futures MV, L.P.)
NOTES TO FINANCIAL
STATEMENTS (CONTINUED)
ASC
820-10-55 requires use of a fair value hierarchy that prioritizes the inputs to
valuation techniques used to measure fair value into three levels: Level 1 -
unadjusted quoted market prices in active markets for identical assets and
liabilities; Level 2 - inputs other than unadjusted quoted market prices that
are observable for the asset or liability, either directly or indirectly
(including quoted prices for similar investments, interest rates,
credit risk); and Level 3 - unobservable inputs for the asset or liability
(including the Partnership’s own assumptions used in determining the fair value
of investments).
In
certain cases, the inputs used to measure fair value may fall into different
levels of the fair value hierarchy. In such cases, an investment’s
level within the fair value hierarchy is based on the lowest level of input that
is significant to the fair value measurement. The Partnership’s
assessment of the significance of a particular input to the fair value
measurement in its entirety requires judgment, and considers factors specific to
the investment.
The
following tables summarize the valuation of the Partnership’s investments by the
above ASC 820-10-55 fair value hierarchy as of September 30, 2009 and December
31, 2008:
- 16
-
MANAGED
FUTURES PROFILE MV, L.P.
(formerly,
Morgan Stanley Managed Futures MV, L.P.)
NOTES TO FINANCIAL
STATEMENTS (CONTINUED)
September 30,
2009
Assets
|
Quoted
Prices in
Active Markets for
Identical Assets
(Level 1)
|
Significant
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
Total
|
|
$
|
$
|
$
|
|||
Investment
in Kaiser I, LLC
|
–
|
10,371,662
|
n/a
|
10,371,662
|
|
Investment
in TT II, LLC
|
–
|
10,371,662
|
n/a
|
10,371,662
|
|
Investment
in Aspect I, LLC
|
–
|
9,814,831
|
n/a
|
9,814,831
|
|
Investment
in WNT I, LLC
|
–
|
9,814,831
|
n/a
|
9,814,831
|
|
Investment
in Chesapeake I, LLC
|
–
|
8,651,354
|
n/a
|
8,651,354
|
|
Investment
in GLC I, LLC
|
–
|
4,325,677
|
n/a
|
4,325,677
|
|
Investment
in Augustus I, LLC
|
–
|
4,325,677
|
n/a
|
4,325,677
|
December 31,
2008
Assets
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
Significant
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
Total
|
$
|
$
|
|
$
|
|
Investment
in Aspect I, LLC
|
–
|
6,339,110
|
n/a
|
6,339,110
|
Investment
in Kaiser I, LLC
|
–
|
6,339,110
|
n/a
|
6,339,110
|
Investment
in TT II, LLC
|
–
|
6,339,110
|
n/a
|
6,339,110
|
Investment
in WNT I, LLC
|
–
|
5,904,563
|
n/a
|
5,904,563
|
Investment
in Chesapeake I, LLC
|
–
|
5,433,523
|
n/a
|
5,433,523
|
Investment
in Strategic, L.L.C.
|
–
|
4,082,311
|
n/a
|
4,082,311
|
- 17
-
MANAGED
FUTURES PROFILE MV, L.P.
(formerly,
Morgan Stanley Managed Futures MV, L.P.)
NOTES TO FINANCIAL
STATEMENTS (CONTINUED)
The
Partnership’s assets identified as “Investments in Affiliated Trading Companies”
reflected on the Statements of Financial Condition represents the net asset
value of the Partnership’s pro rata share of each Trading
Company. The net assets of each Trading Company is equal to the total
assets of the Trading Company (including, but not limited to all cash and cash
equivalents, accrued interest and amortization of original issue discount, and
the fair value of all open Futures Interests contract positions and other
assets) less all liabilities of the Trading Company (including, but not limited
to, brokerage commissions that would be payable upon the closing of open Futures
Interest positions, management fees, incentive fees, and extraordinary
expenses), determined in accordance with accounting principles generally
accepted in the United States of America.
The
Partnership’s investment in the Trading Companies represents approximately:
Kaiser I, LLC 18.0%; TT II, LLC 18.0%; Aspect I, LLC 17.0%; WNT I, L.L.C. 17.0%;
Chesapeake I, LLC 15.0%, Augustus I, LLC 7.5% and GLC I, LLC 7.5% of the total
investments of the Partnership, respectively.
Summarized
information for the Partnership’s pro-rata investment in the Trading Companies
for the nine months ended September 30, 2009, is as follows:
- 18
-
MANAGED
FUTURES PROFILE MV, L.P.
(formerly,
Morgan Stanley Managed Futures MV, L.P.)
NOTES TO FINANCIAL
STATEMENTS (CONTINUED)
Investment
|
%
of Profile
MV’s
Partners’
Capital
|
Fair Value
|
Profile
MV’s pro-rata
Net Income/(Loss)
|
Management
Fees
|
Incentive
Fees
|
Administrative
Fees
|
%
|
$
|
$
|
$
|
$
|
$
|
|
Kaiser
I, LLC
|
18.0
|
10,371,662
|
(78,168)
|
117,317
|
464
|
20,530
|
TT
II, LLC
|
18.0
|
10,371,662
|
(515,119)
|
116,349
|
–
|
20,361
|
Aspect
I, LLC
|
17.0
|
9,814,831
|
(656,634)
|
113,988
|
334
|
19,948
|
WNT
I, LLC
|
17.0
|
9,814,831
|
(541,370)
|
113,337
|
400
|
19,834
|
Chesapeake
I, LLC
|
15.0
|
8,651,354
|
223,397
|
99,313
|
36,531
|
17,380
|
Augustus
I
|
7.5
|
4,325,677
|
–
|
–
|
–
|
–
|
GLC
I, LLC
|
7.5
|
4,325,677
|
–
|
–
|
–
|
–
|
Strategic,
L.L.C.
|
–
|
–
|
144,862
|
100,360
|
36,932
|
17,563
|
For all
Trading Companies, Contributions and Withdrawals are permitted on a monthly
basis.
The table
below represents summarized Income Statement information for the Partnership’s
Investment in the Trading Companies for the nine months ended September 30, 2009
and 2008, respectively, to meet the requirements of Regulation S-X rule 3-09, as
follows:
September 30, 2009
|
Investment Income
|
Net
Investment Loss
|
Total Trading Results
|
Net
Income(Loss)
|
$
|
$
|
$
|
$
|
|
TT
II, LLC
|
4,675
|
(776,221)
|
(1,587,045)
|
(2,363,266)
|
Aspect
I, LLC
|
5,958
|
(694,365)
|
(2,342,538)
|
(3,036,903)
|
WNT
I, LLC
|
5,056
|
(650,239)
|
(1,899,105)
|
(2,549,344)
|
September 30, 2008
|
Investment Income
|
Net
Investment Loss
|
Total Trading Results
|
Net
Income(Loss)
|
$
|
$
|
$
|
$
|
|
Kaiser
I, LLC
|
321,647
|
(486,790)
|
1,111,644
|
624,854
|
TT
II, LLC
|
312,791
|
(1,215,947)
|
5,274,170
|
4,058,223
|
WNT
I, LLC
|
204,343
|
(687,148)
|
1,088,565
|
401,417
|
Chesapeake
I, LLC
|
299,688
|
(934,253)
|
(2,576,972)
|
(3,511,225)
|
Cornerstone
I, LLC
|
23,300
|
4,990
|
(541,778)
|
(536,788)
|
- 19
-
MANAGED
FUTURES PROFILE MV, L.P.
(formerly,
Morgan Stanley Managed Futures MV, L.P.)
NOTES TO FINANCIAL
STATEMENTS (CONTINUED)
6. Recent Accounting
Pronouncements
(a) Fair Value
Measurements
ASC
820-10-65, Fair Value
Measurements (formerly, FASB Staff Position (“FSP”) SFAS No. 157-4, Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly),was issued
in April 2009. ASC 820-10-65 provides additional guidance for
determining fair value and requires new disclosures regarding the categories of
fair value instruments, as well as the inputs and valuation techniques utilized
to determine fair value and any changes to the inputs and valuation techniques
during the period. ASC 820-10-65 is effective for the interim and
annual periods ending after June 15, 2009. The adoption of ASC
820-10-65 did not have a material impact on the Partnership’s financial
statements.
(b) Financial
Instruments
ASC
825-10-65, Financial
Instruments (formerly, FSP SFAS No. 107-1 and Accounting Principals Board
No. 28-1, Interim Disclosures
About Fair Value of Financial Instruments), was issued in April
2009. ASC 825-10-65 requires fair value
disclosures of financial instruments on a quarterly basis, as well as new
disclosures regarding the methodology and significant assumptions underlying the
fair value measures and any changes to the methodology and assumptions during
the reporting period. ASC 825-10-65 is effective for the interim and
annual periods ending after June 15, 2009. The adoption of ASC
825-10-65 did not have a material impact on the Partnership’s financial
statements.
- 20
-
MANAGED
FUTURES PROFILE MV, L.P.
(formerly,
Morgan Stanley Managed Futures MV, L.P.)
NOTES TO FINANCIAL
STATEMENTS (CONTINUED)
(c) Subsequent
Events
The
Partnership adopted ASC 855-10, Subsequent Events (formerly,
SFAS No. 165, Subsequent
Events), which was issued in May 2009. ASC 855-10 establishes
general standards of accounting for and disclosure of events that occur after
the balance sheet date but before financial statements are issued or are
available to be issued. It requires the disclosure of the date
through which an entity has evaluated subsequent events and the basis for that
date; that is, whether that date represents the date the financial statements
were issued or were available to be issued. ASC 855-10 is effective
for the interim and annual periods ending after June 15,
2009. Management has performed its evaluation of subsequent events
through November 16, 2009, the date these financial statements were
issued.
(d) Investment in Certain
Entities That Calculate Net Asset Value per Share (or Its
Equivalent)
In
September 2009, the FASB issued Accounting Standards Update No. 2009-12
(“Update”) addressing Fair
Value Measurement and Disclosures Topic, ASC 820. This Update
amended Subtopic 820-10, Fair
Value Measurement and Disclosures-Overall, for the fair value measurement
of investments in certain entities that calculate net asset value per share or
its equivalent. The amendments in the Update permit, as a practical
expedient, a reporting entity to measure the fair value of an investment that is
within the scope of the amendments in this Update on the basis of the net asset
value per share of the investment or its equivalent. Additionally, this
Update require disclosures by major category of investment about the attributes
of the investments within the scope of the amendments, such as the nature of any
restrictions on redemptions, any
- 21
-
MANAGED
FUTURES PROFILE MV, L.P.
(formerly,
Morgan Stanley Managed Futures MV, L.P.)
NOTES TO FINANCIAL
STATEMENTS (CONTINUED)
unfunded
commitments and the investment strategies of the investees. The amendments
in this Update are effective for interim and annual periods ending after
December 15, 2009. Management is currently evaluating if the adoption
of this Update will have an impact on the financial statements of the
Partnership.
(e) Consolidation
In June
2009, the FASB issued ASC 810-10, Consolidation of Variable Interest
Entities (formerly, SFAS 167, Amendments to FASB Interpretation
No. 46(R), Consolidation of Variable Interest Entities). ASC
810-10 eliminates Interpretation 46(R)’s exception to consolidating qualifying
special-purpose entities, contains new criteria for determining the primary
beneficiary, and increases the frequency of required reassessments to determine
whether a company is the primary beneficiary of a variable interest
entity. ASC 810-10 also contains a new requirement that any term,
transaction, or arrangement that does not have a substantive effect on an
entity’s status as a variable interest entity, a company’s power over a variable
interest entity, or a company’s obligation to absorb losses or its right to
receive benefits of an entity must be disregarded in applying Interpretation
46(R)’s provisions. ASC 810-10 is applicable for annual periods after
November 15, 2009, and interim periods thereafter. The Partnership is
currently evaluating the impact of the adoption of ASC 810-10 on the
Partnership’s financial statements.
7. Subsequent
Events
Effective
October 1, 2009, the name of the Partnership was changed from Morgan Stanley
Managed Futures MV, L.P. to Managed Futures Profile MV, L.P. The name
change does not have any impact on the operation of the Partnership or its
limited partners.
- 22
-
MANAGED
FUTURES PROFILE MV, L.P.
(formerly,
Morgan Stanley Managed Futures MV, L.P.)
NOTES TO FINANCIAL
STATEMENTS (CONCLUDED)
Effective
October 1, 2009, Demeter changed the name of Morgan Stanley Managed Futures
Aspect I, LLC to Morgan Stanley Smith Barney Aspect I, LLC.
Effective
October 1, 2009, Demeter changed the name of Morgan Stanley Managed Futures
Chesapeake I, LLC to Morgan Stanley Smith Barney Chesapeake Diversified I,
LLC.
Effective
October 1, 2009, Demeter changed the name of Morgan Stanley Managed Futures
Kaiser I, LLC to Morgan Stanley Smith Barney Kaiser I, LLC.
Effective
October 1, 2009, Demeter changed the name of Morgan Stanley Managed Futures
Transtrend II, LLC to Morgan Stanley Smith Barney TT II, LLC.
Effective
October 1, 2009, Demeter changed the name of Morgan Stanley Managed Futures WCM
I, LLC to Morgan Stanley Smith Barney WNT I, LLC.
- 23
-
Item
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
Liquidity. MS&Co.
and its affiliates act as custodians of each Trading Company’s assets pursuant
to customer agreements and foreign exchange customer agreement. The
Partnership allocates substantially all of its assets to multiple Trading
Companies. Such assets are deposited in the Trading Companies’ trading accounts
with MS&Co. or its affiliates. The funds in such accounts are
available for margin and are used to engage in Futures Interest trading pursuant
to instructions provided by the Trading Advisors. The assets are held
in either non-interest bearing bank accounts or in securities and instruments
permitted by the Commodity Futures Trading Commission for investment of customer
segregated or secured funds. Since the Partnership’s sole purpose is
to trade Futures Interests indirectly through the investment in the Trading
Companies, it is expected that the Trading Companies will continue to own such
liquid assets for margin purposes.
The
Trading Companies investment in Futures Interests may, from time to time, be
illiquid. Most U.S. futures exchanges limit fluctuations in prices
during a single day by regulations referred to as "daily price fluctuations
limits" or "daily limits". Trades may not be executed at prices
beyond the daily limit. If the price for a particular futures or
options contract has increased or decreased by an amount equal to the daily
limit, positions in that futures or options contract can neither be taken nor
liquidated unless traders are willing to effect trades at or within the
limit. Futures prices have occasionally moved the daily limit for
several consecutive days with little or no trading. These market
conditions could prevent the Trading Companies from promptly liquidating their
futures or options contracts and result in restrictions on
redemptions.
- 24
-
There is
no limitation on daily price movements in trading forward contracts on foreign
currencies. The markets for some world currencies have low trading
volume and are illiquid, which may prevent the Trading Companies from trading in
potentially profitable markets or prevent the Trading Companies from promptly
liquidating unfavorable positions in such markets, subjecting them to
substantial losses. Either of these market conditions could result in
restrictions on redemptions. For the periods covered by this report,
illiquidity has not materially affected the Partnership’s assets.
There are
no known material trends, demands, commitments, events, or uncertainties at the
present time that are reasonably likely to result in the Partnership’s liquidity
increasing or decreasing in any material way.
Capital
Resources. The Partnership does not have, nor does it expect
to have, any capital assets. Redemptions, exchanges, and sales of
Units in the future will affect the amount of funds available for investments in
Futures Interests in subsequent periods. It is not possible to
estimate the amount, and therefore the impact, of future inflows and outflows of
Units.
There are
no known material trends, favorable or unfavorable, that would affect, nor any
expected material changes to, the Partnership’s capital resource arrangements at
the present time.
Results of
Operations
General. The
Partnership’s results depend on the Trading Advisors and the ability of each
Trading Advisor’s trading program to take advantage of price movements in the
futures, forward and options markets. The following presents a
summary of the Partnership’s operations for the three and nine month periods
ended
- 25
-
September
30, 2009 and 2008, and a general discussion of its trading activities during
each period. It is important to note, however, that the Trading
Advisors trade in various markets at different times and that prior activity in
a particular market does not mean that such market will be actively traded by
the Trading Advisors or will be profitable in the
future. Consequently, the results of operations of the Partnership
are difficult to discuss other than in the context of the Trading Advisors’
trading activities on behalf of the Partnership during the period in
question. Past performance is no guarantee of future
results.
The
Partnership’s results of operations set forth in the Financial Statements on
pages 2 through 23 of this report are prepared in accordance with U.S. GAAP,
which require the use of certain accounting policies that affect the amounts
reported in these Financial Statements, including the following: the
contracts the Trading Companies trade are accounted for on a trade-date basis
and marked to market on a daily basis. The difference between their
original contract value and fair value is recorded on the Statements of
Operations as “Net change in unrealized gain (loss)” for open contracts, and
recorded as “Realized trading gain (loss)” when open positions are closed
out. The sum of these amounts constitutes the Trading Company’s
trading results. The fair value of a futures contract is the
settlement price on the exchange on which that futures contract is traded on a
particular day. The value of a foreign currency forward contract is
based on the spot rate as of the close of business.
- 26
-
For the Three and Nine
Months Ended September 30, 2009
The
Partnership recorded total realized/net change in unrealized appreciation
(depreciation) on investments of $1,440,067 and expenses totaling $414,881,
resulting in net income of $1,025,186 for the three months ended September 30,
2009. The Partnership’s net asset value per Unit by share Class is
provided in the table below.
Share Class
|
NAV at 6/30/09
|
NAV at 9/30/09
|
A
|
$1,081.10
|
$1,100.12
|
B
|
$1,091.48
|
$1,112.07
|
C
|
$1,101.95
|
$1,124.13
|
Z
|
$1,123.19
|
$1,148.65
|
The most
significant trading gains of approximately 1.2% were recorded within the
agricultural markets, primarily during August, from long futures positions in
sugar as prices moved sharply higher following reports of damaged crops in India
and reduced yields in Brazil. Sugar prices continued to climb
throughout August, reaching a 28-year high, on deepening concerns that
unfavorable weather in producing countries and rising import demand may worsen
the global supply shortfall. Additional gains were experienced from
short positions in wheat futures as prices declined during August and September
amid favorable weather forecasts in the U.S. Midwest and reports that global
wheat inventories may increase next year. Within the global stock
index sector, gains of approximately 1.1% were experienced primarily during
August and September from long positions in U.S., European, and Australian
equity index futures as prices rose due to positive economic data, as well as
increased merger and acquisition activity in the technology
sector. Within the currency sector, gains of approximately 0.9% were
recorded primarily during September from long positions in the Australian
dollar, New Zealand dollar, and Japanese yen versus the U.S. dollar as the value
of the U.S. dollar moved lower against these currencies amid speculation that
the U.S. Federal Reserve might keep borrowing rates low after the
U.S.
- 27
-
central
bank indicated that it remained committed to its quantitative easing
program. Meanwhile, the value of the Australian dollar and New
Zealand dollar also moved higher in the wake of stronger gold prices, while the
Japanese yen was bolstered by better-than-expected economic data out of
Japan. Within the global interest rate sector, gains of approximately
0.8% were experienced primarily during August and September from long positions
in European and short-term U.S. fixed-income futures as prices increased on
investor sentiment that the slow pace of the global economic recovery and signs
of moderate inflation might lead central banks in these regions to maintain low
interest rates in the near term. Additional gains of approximately
0.5% were recorded in the metals markets, primarily during August and September,
from long futures positions in gold and silver as prices rose amid a decline in
the value of the U.S. dollar. Smaller gains were experienced from
long positions in copper futures as prices moved higher during August following
news that China’s economy expanded during the second quarter of 2009 and Chinese
manufacturing jumped in July, thereby spurring speculation that demand for base
metals might rise. A portion of the Partnership’s gains for the
quarter was offset by losses of approximately 1.0% incurred within the energy
markets, primarily during July and September, from short futures positions in
crude oil and its related products as prices increased after positive economic
data spurred optimism that energy demand might rebound.
The
Partnership recorded total realized/net change in unrealized appreciation
(depreciation) on investments of $(1,423,032) and expenses totaling $1,045,501,
resulting in a net loss of $2,468,533 for the nine months ended September 30,
2009. The Partnership’s net asset value per Unit by share Class is
provided in the table below.
Share Class
|
NAV at 12/31/08
|
NAV at 9/30/09
|
A
|
$1,177.84
|
$1,100.12
|
B
|
$1,186.13
|
$1,112.07
|
C
|
$1,194.48
|
$1,124.13
|
Z
|
$1,211.35
|
$1,148.65
|
- 28
-
The most
significant trading losses of approximately 1.7% were recorded within the global
interest rate sector, primarily during January, April, June, and
July. During January, losses were experienced from long positions in
U.S., Australian, and Japanese fixed-income futures as prices dropped following
news that debt sales might increase as governments around the world boosted
spending in an effort to ease the deepening economic slump. During
the second quarter, long positions in U.S. interest-rate futures resulted in
additional losses as prices moved lower after a pledge from G-20 leaders to
support the global economy and rising investor confidence sapped demand for the
“safe haven” of government bonds. Furthermore, short positions in
Japanese fixed-income futures also recorded losses during June as prices
increased after the Bank of Japan indicated that they remain cautious about the
Japanese economy. Lastly, losses were incurred during July from short
positions in U.S. fixed-income futures as prices increased after a government
report showed the U.S. unemployment rate rose more than expected in
June. Within the energy markets, losses of approximately 1.7% were
experienced primarily during May, June, July, and September from short futures
positions in crude oil and its related products as prices increased on optimism
that a rebound in global economic growth might boost energy
demand. Within the currency sector, losses of approximately 1.1% were
recorded primarily during February, March, April, June, and
August. During February and March, long positions in the Japanese yen
versus the U.S. dollar resulted in losses as the value of the Japanese yen
reversed lower against most of its rivals amid speculation that the Bank of
Japan would intervene to weaken the currency, as well as on news that Japan’s
trade deficit substantially increased. Additional losses were
incurred primarily during March, April, and May from short positions in the euro
and British pound versus the U.S. dollar as the value of the U.S. dollar moved
lower relative to most of its rivals following the U.S. Federal Reserve’s
surprise plans to begin a more aggressive phase of quantitative
easing. During June and August, further losses were recorded from
long
- 29
-
positions
in the Japanese yen, euro, and British pound versus the U.S. dollar as the value
of the U.S. dollar reversed higher against these currencies amid
better-than-expected economic data out of the U.S. Within the metals
markets, losses of approximately 0.6% were experienced primarily during March,
April, and June from short futures positions in aluminum as prices rose amid
speculation that economic stimulus plans in the U.S. and China might help boost
demand for base metals. A portion of the Partnership’s losses for the
first nine months of the year was offset by gains of approximately 1.5% recorded
within the agricultural sector, primarily during second and third quarters, from
long positions in sugar futures as prices increased on expectations of a drop in
global production. Sugar prices continued to climb throughout August,
reaching a 28-year high, on deepening concerns that unfavorable weather in
producing countries and rising import demand may worsen the global supply
shortfall. Additional gains were experienced from short futures
positions in lean hogs as prices fell during April and June amid speculation of
a drop in demand due to ongoing swine flu concerns. Further gains
were recorded from short positions in wheat futures as prices declined during
August and September amid favorable weather forecasts in the U.S. Midwest and
reports that global wheat inventories may increase next year. Within
the global stock index sector, gains of approximately 1.4% were experienced
during January, February, May, June, August, and September. Gains
were recorded during January and February from short positions in U.S. equity
index futures as prices declined due to disappointing corporate earnings
reports. Additional gains were experienced during May and June from
long positions in Pacific Rim and U.S. equity index futures as prices rose amid
better-than-expected corporate earnings reports and news that G-20 leaders
pledged more than $1 trillion to cushion the global economy from further
financial turmoil. Lastly, during August and September, long
positions in U.S., European, and Australian equity index futures resulted in
gains as prices rose due to positive economic data, as well as increased merger
and acquisition activity in the technology sector.
- 30
-
For the Three and Nine
Months Ended September 30, 2008
The
Partnership recorded total realized/net change in unrealized appreciation
(depreciation) on investments of $(1,765,548) and expenses totaling $184,385,
resulting in a net loss of $1,949,933 for the three months ended September 30,
2008. The Partnership’s net asset value per Unit by share Class is
provided in the table below.
Share Class
|
NAV at 6/30/08
|
NAV at 9/30/08
|
A
|
$1,144.24
|
$1,049.45
|
B
|
$1,149.43
|
$1,055.57
|
C
|
$1,154.64
|
$1,061.72
|
Z
|
$1,165.14
|
$1,074.13
|
The most
significant trading losses of approximately 3.2% were incurred within the energy
markets throughout the majority of the quarter from long futures positions in
crude oil and its related products as prices moved lower amid signs that the
U.S. economic slump may extend into 2009 and curb future energy
demand. Meanwhile, long positions in natural gas futures resulted in
losses as prices sharply decreased in July amid rising inventories and news that
the Atlantic hurricane season's first storm avoided the gas-producing fields in
the Gulf of Mexico. Within the agricultural markets, losses of
approximately 2.9% were experienced primarily during July and August from long
futures positions in the soybean complex and corn as prices declined on news
that favorable weather may improve crop conditions in the U.S.
Midwest. Prices also moved lower amid speculation that a slowing U.S.
economy may reduce demand for alternative biofuels. Additional losses
were recorded in July from long positions in cocoa futures as prices decreased
following news of a rise in exports from the Ivory Coast, the world’s largest
cocoa producer. Within the currency sector, losses of approximately
2.1% were incurred primarily during August and September from long positions in
the euro, Mexican peso, and Australian dollar versus the U.S. dollar as the
value of the U.S. dollar reversed higher against these currencies
in
- 31
-
tandem
with surging U.S. Treasury prices amid a worldwide “flight-to-quality” due to
fears of an intense credit crunch and subsequent global
recession. Within the metals markets, losses of approximately 0.6%
were experienced primarily during July and August from long positions in gold
and silver futures as prices dropped due to a rise in the value of the U.S.
dollar. Additional losses were recorded during July from long
positions in copper futures as prices declined on concerns that slowing economic
growth may erode demand for base metals. Smaller losses of
approximately 0.5% were incurred within the global interest rate sector,
primarily during July, from short positions in European fixed-income futures as
prices increased amid a worldwide “flight-to-quality” due to a sharp drop in the
global equity markets and worries regarding the fundamental health of the
world’s financial system. A portion of the Partnership’s losses for
the quarter was offset by gains of approximately 1.9% recorded within the global
stock index sector, primarily during September, from short positions in U.S.,
European, and Pacific Rim equity index futures as prices moved sharply lower
amid unprecedented U.S. financial market volatility and turmoil following news
of the collapse of a major U.S. investment bank and the government rescue of a
U.S. insurance giant. Furthermore, global equity prices plunged after
the U.S. House of Representatives rejected the Economic Stabilization Act of
2008, which would have allowed the U.S. Treasury to purchase troubled
mortgage-backed securities from U.S. financial institutions.
The
Partnership recorded total realized/net change in unrealized appreciation
(depreciation) on investments of $273,758 and expenses totaling $454,518,
resulting in a net loss of $180,760 for the nine months ended September 30,
2008. The Partnership’s net asset value per Unit by share Class is
provided in the table below.
Share Class
|
NAV at 12/31/07
|
NAV at 9/30/08
|
A
|
$1,037.76
|
$1,049.45
|
B
|
$1,039.91
|
$1,055.57
|
C
|
$1,042.06
|
$1,061.72
|
Z
|
$1,046.38
|
$1,074.13
|
- 32
-
The most
significant trading gains of approximately 3.5% were experienced within the
global stock index sector, primarily during February, March, June, and July,
from short positions in U.S., European, and Pacific Rim equity index futures as
prices declined on concerns that a persistent U.S. housing slump, mounting
losses linked to U.S. sub-prime mortgage investments, rising commodity prices,
and a weakening job market may restrain consumer spending, erode corporate
earnings, and curb global economic growth. Additional gains were
experienced in September from short positions in global stock index futures as
prices dropped sharply amid unprecedented U.S. financial market volatility and
turmoil. Within the energy markets, gains of approximately 3.0% were
recorded primarily during February, March, April, May, and June from long
futures positions in crude oil and its related products as prices moved higher
due to speculation that OPEC may cut production, ongoing geopolitical concerns
in the Middle East, growing Asian fuel consumption, and strong demand for
physical commodities as an inflation hedge. Within the agricultural
sector, gains of approximately 1.2% were experienced primarily during January,
February and June from long futures positions in cocoa as prices rose on
speculation that crops in the Ivory Coast, the world’s largest producer, were
developing more slowly than anticipated. Additional gains were
recorded from short positions in cotton futures, primarily during the third
quarter, as prices decreased after the U.S. Department of Agriculture reported
exports remained below average
due to a
drop in demand. Elsewhere, long positions in wheat futures resulted
in further gains as prices increased during January and February due to
diminishing stockpiles and rising global demand. Smaller gains of
approximately 0.1% were experienced within the global interest rate sector,
primarily during January, February, May, June, and August from long positions in
U.S. and Australian fixed-income futures as prices moved higher in a worldwide
“flight-to-quality” following the aforementioned drop in the global equity
markets throughout most of the year and worries regarding the fundamental health
of the global economy and financial system.
- 33
-
Item 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
Introduction
All of
the Partnership’s assets are subject to the risk of trading loss through its
investments in the Trading Companies, each of which invests substantially all of
its assets in the trading program of an unaffiliated Trading
Advisor. The market-sensitive instruments held by the Trading
Companies are acquired for speculative trading purposes, and substantially all
of the respective Trading Companies’ assets are subject to the risk of trading
loss. Unlike an operating company, the risk of market-sensitive
instruments is integral, not incidental, to the Trading Companies’ main line of
business.
The
futures, forwards and options traded by the Trading Companies involve varying
degrees of related market risk. Market risk is often dependent upon
changes in the level or volatility of interest rates, exchange rates, and prices
of financial instruments and commodities. These factors result in
frequent changes in the fair value of the Trading Companies’ open positions, and
consequently in their earnings, whether realized or unrealized, and cash
flow. Gains and losses on open positions of exchange-traded futures,
exchange-traded forward, and exchange-traded futures-styled options contracts
are settled daily through variation margin. Gains and losses on
off-exchange-traded forward currency contracts and forward currency options
contracts are settled upon termination of the contract. However, the
Trading Companies are required to meet margin requirements equal to the net
unrealized loss on open forward currency contracts in the Trading Companies’
accounts with the counterparty, which is accomplished by daily maintenance of
the cash balance in a custody account held at MS&Co.
- 34
-
The total
market risk of the respective Trading Companies may increase or decrease as it
is influenced by a wide variety of factors, including, but not limited to, the
diversification among the Trading Companies’ open positions, the volatility
present within the markets, and the liquidity of the markets.
The face
value of the market sector instruments held by the Trading Companies is
typically many times the applicable margin requirements. Margin
requirements generally range between 2% and 15% of contract face
value. Additionally, the use of leverage causes the face value of the
market sector instruments held by the Trading Companies typically to be many
times the total capitalization of the Trading Companies.
The
Partnership’s and the Trading Companies’ past performance are no guarantee of
their future results. Any attempt to numerically quantify the Trading
Companies’ market risk is limited by the uncertainty of their speculative
trading. The Trading Companies’ speculative trading and use of
leverage may cause future losses and volatility (i.e., “risk of ruin”) that
far exceed the Trading Companies’ experiences to date disclosed under the
"Trading Companies’ Value at Risk in Different Market Sectors" section and
significantly exceed the Value at Risk (“VaR”) tables disclosed
below.
Limited
partners will not be liable for losses exceeding the current net asset value of
their investment.
Quantifying the Trading
Companies’ Trading Value at Risk
The
following quantitative disclosures regarding the Trading Companies’ market risk
exposures contain “forward-looking statements” within the meaning of the safe
harbor from civil liability provided for such statements by the
- 35
-
Private
Securities Litigation Reform Act of 1995 (set forth in Section 21E of the
Securities Exchange Act of 1934). All quantitative disclosures in this section
are deemed to be forward-looking statements for purposes of the safe harbor,
except for statements of historical fact.
The
Trading Companies account for open positions on the basis of mark to market
accounting principles. Any loss in the market value of the Trading Companies’
open positions is directly reflected in the Trading Companies’ earnings and cash
flow.
The
Trading Companies’ risk exposure in the market sectors traded by the Trading
Advisors is estimated below in terms of VaR. VaR for a particular
market sector is estimated by Demeter using a model based upon historical
simulation (with a confidence level of 99%) which involves constructing a
distribution of hypothetical daily changes in the value of a trading
portfolio. The VaR model takes into account linear exposures to risks
including equity and commodity prices, interest rates, foreign exchange rates,
and correlation among these variables. The hypothetical daily changes
in the value of a Trading Company’s portfolio are based on daily percentage
changes observed in key market indices or other market factors ("market risk
factors") to which the portfolio is sensitive. The one-day 99% confidence level
of the Trading Companies’ VaR corresponds to the reliability of the expectations
that the Trading Company’s trading losses in one day will not exceed the maximum
loss indicated by the VaR. The 99% one-day confidence level is not an
indication of probability of such losses, nor does VaR typically represent the
worst case outcome. Demeter uses approximately four years of daily market data
and re-values its portfolio for each of the historical market moves that
occurred over this period. This enables Demeter to generate a distribution of
daily "simulated profit and loss" outcomes.
- 36
-
The
Trading Companies’ VaR computations are based on the risk representation of the
underlying benchmark for each instrument or contract and do not distinguish
between exchange and non-exchange dealer-based instruments. They are
also not based on exchange and/or dealer-based maintenance margin
requirements.
VaR
models, including the models used by Morgan Stanley and Demeter, are continually
evolving as trading portfolios become more diverse and modeling techniques and
systems capabilities improve. Please note that the VaR model is used to quantify
market risk for historic reporting purposes only and is not utilized by either
Demeter or the Trading Advisors in their daily risk management activities.
Please further note that VaR as described above may not be comparable to
similarly-titled measures used by other entities.
The Trading Companies’ Value
at Risk in Different Market Sectors
As of
September 30, 2009 and 2008, Aspect I, LLC’s total capitalization was
$44,225,925 and $24,591,171, respectively. The Partnership owned
approximately 22% and 17%, respectively, of Aspect I, LLC.
Aspect I,
LLC
September
30,
2009
|
September
30,
2008
|
||
Primary Market Risk
Category
|
VAR
|
VAR
|
|
Currency
|
(0.61)%
|
(0.16)%
|
|
Interest
Rate
|
(1.34)
|
(0.66)
|
|
Equity
|
(1.64)
|
(0.19)
|
|
Commodity
|
(0.90)
|
(0.60)
|
|
Aggregate
Value at Risk
|
(2.16)%
|
(0.97)%
|
As of
September 30, 2009 and 2008, Chesapeake I, LLC’s total capitalization was
$28,474,572 and $31,971,829, respectively. The Partnership owned
approximately 30% and 12%, respectively, of Chesapeake I, LLC.
- 37
-
Chesapeake I,
LLC
September
30, 2009
|
September
30, 2008
|
||
Primary Market Risk
Category
|
VAR
|
VAR
|
|
Currency
|
(0.54)%
|
(0.43)%
|
|
Interest
Rate
|
(0.60)
|
(0.42)
|
|
Equity
|
(3.51)
|
(0.18)
|
|
Commodity
|
(2.10)
|
(0.59)
|
|
Aggregate
Value at Risk
|
(4.71)%
|
(0.83)%
|
As of
September 30, 2009 and 2008, Kaiser I, LLC’s total capitalization was
$43,418,346 and $39,677,959, respectively. The Partnership owned
approximately 24% and 12%, respectively, of Kaiser I, LLC.
Kaiser I,
LLC
September
30, 2009
|
September
30,
2008
|
||
Primary Market Risk
Category
|
VAR
|
VAR
|
|
Currency
|
(0.19)%
|
(0.01)%
|
|
Interest
Rate
|
(0.81)
|
(0.02)
|
|
Equity
|
(0.36)
|
(0.09)
|
|
Commodity
|
(0.08)
|
(0.04)
|
|
Aggregate
Value at Risk
|
(0.81)%
|
(0.12)%
|
As of
September 30, 2009 and 2008, TT II, LLC’s total capitalization was $41,609,700
and $40,291,246, respectively. The Partnership owned approximately
25% and 12%, respectively, of TT II, LLC.
- 38
-
TT II,
LLC
September
30,
2009
|
September
30, 2008
|
||
Primary Market Risk
Category
|
VAR
|
VAR
|
|
Currency
|
(1.12)%
|
(0.21)%
|
|
Interest
Rate
|
(1.08)
|
(0.42)
|
|
Equity
|
(0.91)
|
(0.36)
|
|
Commodity
|
(0.87)
|
(0.87)
|
|
Aggregate
Value at Risk
|
(1.92)%
|
(1.24)%
|
As of
September 30, 2009 and 2008, Strategic, L.L.C.’s total capitalization was $0 and
$31,324,568, respectively. The Partnership owned approximately 0% and
8%, respectively, of Strategic, L.L.C.
Strategic,
L.L.C.
September
30, 2009
|
September
30,
2008
|
||
Primary Market Risk
Category
|
VAR
|
VAR
|
|
Currency
|
–
|
(0.69)%
|
|
Interest
Rate
|
–
|
(0.94)
|
|
Equity
|
–
|
(0.36)
|
|
Commodity
|
–
|
(0.22)
|
|
Aggregate
Value at Risk
|
–
|
(1.03)%
|
As of
September 30, 2009 and 2008, WNT, L.L.C.’s total capitalization was $42,792,826
and $24,038,828, respectively. The Partnership owned approximately
23% and 16%, respectively, of WNT I, LLC.
WNT I,
LLC
September
30, 2009
|
September
30,
2008
|
||
Primary Market Risk
Category
|
VAR
|
VAR
|
|
Currency
|
(0.82)%
|
(0.15)%
|
|
Interest
Rate
|
(0.79)
|
(0.36)
|
|
Equity
|
(0.94)
|
(0.30)
|
|
Commodity
|
(0.39)
|
(0.16)
|
|
Aggregate
Value at Risk
|
(1.48)%
|
(0.59)%
|
- 39
-
As of
September 30, 2009, Augustus I, LLC’s total capitalization was
$18,136,050. The Partnership owned 24% of Augustus I,
LLC.
Augustus
I, LLC began trading assets for Profile MV effective October 1,
2009.
As of
September 30, 2009, GLC I, LLC’s total capitalization was
$18,136,050. The Partnership owned 24% of GLC I, LLC.
GLC I,
LLC began trading assets for Profile MV effective October 1, 2009.
The VaR
for a market category represents the one-day downside risk for the aggregate
exposures associated with this market category. The Aggregate Value
at Risk listed above represents the VaR of the respective Trading Companies’
open positions across all the market categories, and is less than the sum of the
VaRs for all such market categories due to the diversification benefit across
asset classes.
Because
the business of the Trading Companies is the speculative trading of futures,
forwards and options, the composition of its trading portfolio can change
significantly over any given time period, or even within a single trading
day. Such changes could positively or negatively materially impact
market risk as measured by VaR.
The
tables below supplement the quarter-end VaR set forth above by presenting the
Trading Companies’ high, low, and average VaR, as a percentage of total Net
Assets for the four quarter-end periods from October 1, 2008 through September
30, 2009.
- 40
-
Aspect I,
LLC
Primary Market Risk
Category
|
High
|
Low
|
Average
|
Currency
|
(0.61)%
|
(0.13)%
|
(0.36)%
|
Interest
Rate
|
(1.34)
|
(0.54)
|
(0.98)
|
Equity
|
(1.64)
|
(0.04)
|
(0.52)
|
Commodity
|
(0.90)
|
(0.45)
|
(0.64)
|
Aggregate
Value at Risk
|
(2.16)%
|
(0.96)%
|
(1.42)%
|
Chesapeake
I, LLC
Primary Market Risk
Category
|
High
|
Low
|
Average
|
Currency
|
(0.54)%
|
(0.39)%
|
(0.45)%
|
Interest
Rate
|
(0.60)
|
(0.31)
|
(0.46)
|
Equity
|
(3.51)
|
–
|
(0.90)
|
Commodity
|
(2.10)
|
(0.34)
|
(1.05)
|
Aggregate
Value at Risk
|
(4.71)%
|
(0.74)%
|
(1.90)%
|
Kaiser I,
LLC
Primary Market Risk
Category
|
High
|
Low
|
Average
|
Currency
|
(0.25)%
|
– %
|
(0.12)%
|
Interest
Rate
|
(0.81)
|
(0.11)
|
(0.38)
|
Equity
|
(0.41)
|
(0.05)
|
(0.27)
|
Commodity
|
(0.08)
|
–
|
(0.05)
|
Aggregate
Value at Risk
|
(0.81)%
|
(0.12)%
|
(0.56)%
|
TT II,
LLC
Primary Market Risk
Category
|
High
|
Low
|
Average
|
Currency
|
(1.12)%
|
(0.09)%
|
(0.64)%
|
Interest
Rate
|
(1.08)
|
(0.32)
|
(0.74)
|
Equity
|
(0.91)
|
(0.09)
|
(0.42)
|
Commodity
|
(0.87)
|
(0.32)
|
(0.62)
|
Aggregate
Value at Risk
|
(2.54)%
|
(0.50)%
|
(1.44)%
|
- 41
-
Strategic,
L.L.C.
Primary Market Risk
Category
|
High
|
Low
|
Average
|
Currency
|
(0.64)%
|
–
|
(0.38)%
|
Interest
Rate
|
(0.70)
|
–
|
(0.43)
|
Equity
|
(0.28)
|
–
|
(0.11)
|
Commodity
|
(0.68)
|
–
|
(0.32)
|
Aggregate
Value at Risk
|
(1.36)%
|
–
|
(0.72)%
|
WNT I,
LLC
Primary Market Risk
Category
|
High
|
Low
|
Average
|
Currency
|
(0.87)%
|
(0.18)%
|
(0.56)%
|
Interest
Rate
|
(0.79)
|
(0.37)
|
(0.51)
|
Equity
|
(0.94)
|
(0.05)
|
(0.39)
|
Commodity
|
(0.39)
|
(0.20)
|
(0.27)
|
Aggregate
Value at Risk
|
(1.48)%
|
(0.57)%
|
(0.87)%
|
Limitations on Value at Risk
as an Assessment of Market Risk
VaR
models permit estimation of a portfolio’s aggregate market risk exposure,
incorporating a range of varied market risks, reflect risk reduction due to
portfolio diversification or hedging activities, and can cover a wide range of
portfolio assets. However, VaR risk measures should be viewed in
light of the methodology’s limitations, which include, but may not be limited to
the following:
·
|
past
changes in market risk factors will not always result in accurate
predictions of the distributions and correlations of future market
movements;
|
·
|
changes
in portfolio value caused by market movements may differ from those of the
VaR model;
|
·
|
VaR
results reflect past market fluctuations applied to
current trading positions while future risk depends on future
positions;
|
- 42
-
·
|
VaR
using a one-day time horizon does not fully capture the market risk of
positions that cannot be liquidated or hedged within one day;
and
|
·
|
the
historical market risk factor data used for VaR estimation may provide
only limited insight into losses that could be incurred under certain
unusual market movements.
|
In
addition, the VaR tables above, as well as the past performance of the
Partnership and the Trading Companies, give no indication of the Partnership’s
potential "risk of ruin".
The VaR
tables provided present the results of the Partnership’s VaR for each of the
Trading Companies’ market risk exposures and on an aggregate basis at September
30, 2009 and 2008, and for the four quarter-end reporting periods from October
1, 2008, through September 30, 2009. VaR is not necessarily
representative of the Trading Companies’ historic risk, nor should it be used to
predict the Partnership or the Trading Companies’ future financial performance
or their ability to manage or monitor risk. There can be no assurance that the
Trading Companies’ actual losses on a particular day will not exceed the VaR
amounts indicated above or that such losses will not occur more than once in 100
trading days.
Non-Trading
Risk
The
Trading Companies have non-trading market risk on their foreign cash balances.
These balances and any market risk they may represent are
immaterial.
- 43
-
The
Trading Companies also maintain a substantial portion of their available assets
in cash at MS&Co.; as of September 30, 2009, such amount was equal
to:
·
|
approximately
84% of Aspect I, LLC’s net assets.
|
·
|
approximately
87% of Chesapeake I, LLC’s net
assets.
|
·
|
approximately
92% of Kaiser I, LLC’s net assets.
|
·
|
approximately
82% of TT II, LLC’s net assets.
|
·
|
approximately
89% of WNT I, LLC.’s net assets.
|
A decline
in short-term interest rates would result in a decline in the Trading Companies’
cash management income. This cash flow risk is not considered to be
material.
Materiality,
as used throughout this section, is based on an assessment of reasonably
possible market movements and any associated potential losses, taking into
account the leverage, optionality, and multiplier features of the Trading
Companies’ market-sensitive instruments, in relation to the Trading Companies’
net assets.
Qualitative Disclosures
Regarding Primary Trading Risk Exposures
The
following qualitative disclosures regarding the Partnership’s market risk
exposures – except for (A) those disclosures that are statements of historical
fact and (B) the descriptions of how the Partnership manages its primary market
risk exposures – constitute forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934. The Partnership’s
primary market risk exposures, as well as the strategies used and to be used by
Demeter and the Trading Advisors for managing such exposures, are subject
to
- 44
-
numerous
uncertainties, contingencies and risks, any one of which could cause the actual
results of the Partnership’s risk controls to differ materially from the
objectives of such strategies. Government interventions, defaults and
expropriations, illiquid markets, the emergence of dominant fundamental factors,
political upheavals, changes in historical price relationships, an influx of new
market participants, increased regulation, and many other factors could result
in material losses, as well as in material changes to the risk exposures and the
risk management strategies of the Partnership.
The
Trading Advisor for each Trading Company, in general, tends to utilize its
trading system(s) to take positions when market opportunities develop, and
Demeter anticipates that the Trading Advisors will continue to do
so.
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
September 30, 2009, by market sector. It may be anticipated, however,
that these market exposures will vary materially over time.
Equity. The
largest market exposure of the Partnership at September 30, 2009, was to the
global stock index sector, primarily to equity price risk in the G-7
countries. The G-7 countries consist of France, the U.S., the United
Kingdom, Germany, Japan, Italy, and Canada. The stock index futures
traded by the Partnership are by law limited to futures on broadly-based
indices. At September 30, 2009, the Partnership’s primary market exposures were
to the FTSE 100 (United Kingdom), DAX (Germany), S&P 500 (U.S.), Canadian
S&P 60 (Canada), Euro Stox 50
- 45
-
(Europe),
SPI 200 (Australia), CAC 40 (France), NIKKEI 225 (Japan), NASDAQ 100
(U.S.), Hang Seng (Hong Kong), IBEX 35 (Spain), Taiwan (Taiwan), H-Shares (Hong
Kong), Russell 2000 (U.S.), AEX (The Netherlands), S&P Midcap (U.S.),
S&P MIB (Italy), OMX 30 (Sweden), Dow Jones (U.S.), S&P Nifty (India),
All Share (South Africa), TOPIX (Japan), and Euro Stox 600 (Europe) stock
indices. The Partnership is typically exposed to the risk of adverse
price trends or static markets in the U.S., European, and Pacific Rim stock
indices. Static markets would not cause major market changes, but would make it
difficult for the Partnership to avoid trendless price movements, resulting in
numerous small losses.
Interest
Rate. The third largest market exposure of the Partnership at
September 30, 2009, was to the global interest rate sector. Exposure
was primarily spread across the European, the U.S., Japanese, Australian, and
Canadian interest rate sectors. Interest rate movements directly
affect the price of the sovereign bond futures positions held by the Partnership
and indirectly affect the value of its stock index and currency
positions. Interest rate movements in one country, as well as
relative interest rate movements between countries, materially impact the
Partnership’s profitability. The Partnership’s interest rate exposure is
generally to interest rate fluctuations in the U.S. and the other G-7
countries. However, the Partnership also takes futures positions in
the government debt of smaller nations - e.g.,
Australia. Demeter anticipates that the G-7 countries’ and Australian
interest rates will remain the primary interest rate exposure of the Partnership
for the foreseeable future. The speculative futures positions held by
the Partnership may range from short to long-term
instruments. Consequently, changes in short, medium, or long-term
interest rates may have an effect on the Partnership.
- 46
-
Currency. At
September 30, 2009, the Partnership had market exposure to the currency
sector. The Partnership’s currency exposure is to exchange rate
fluctuations, primarily fluctuations which disrupt the historical pricing
relationships between different currencies and currency
pairs. Interest rate changes, as well as political and general
economic conditions influence these fluctuations. The Partnership
trades a large number of currencies, including cross-rates - i.e., positions between two
currencies other than the U.S. dollar. At September 30, 2009, the
Partnership’s major exposures were to the euro, Czech koruna, Hungarian forint,
Polish zloty, Norwegian krone, Swedish krona, Australian dollar, Canadian
dollar, Japanese yen, British pound, Swiss franc, New Zealand dollar, Russian
ruble, Taiwan dollar, Hong Kong dollar, and Romanian leu currency crosses, as
well as to outright U.S. dollar positions. Outright positions consist
of the U.S. dollar vs. other currencies. These other currencies
include major and minor currencies. Demeter does not anticipate that
the risk associated with the Partnership’s currency trades will change
significantly in the future.
Commodity.
Soft Commodities and
Agriculturals. The second largest market exposure of the
Partnership at September 30, 2009, was to the markets that comprise these
sectors. Most of the exposure was to the sugar, wheat, cocoa, soybean
meal, live cattle, corn, lean hogs, soybeans, coffee, cotton, soybean oil,
feeder cattle, and rapeseed markets. Supply and demand inequalities,
severe weather disruptions, and market expectations affect price movements in
these markets.
- 47
-
Metals. At
September 30, 2009, the Partnership had market exposure to the metals
sector. The Partnership's metals exposure was to fluctuations in the
price of precious metals, such as silver, gold, palladium, and platinum, as well
as base metals, such as copper, zinc, nickel, aluminum, lead, and
tin. Economic forces, supply and demand inequalities, geopolitical
factors, and market expectations influence price movements in these
markets.
Energy. At
September 30, 2009, the Partnership had market exposure to the energy
sector. The Partnership’s energy exposure was shared primarily by
futures contracts in crude oil and its related products, as well as in natural
gas. Price movements in these markets result from geopolitical
developments, particularly in the Middle East, as well as weather patterns, and
other economic fundamentals. Significant profits and losses, which
have been experienced in the past, are expected to continue to be experienced in
the future. Natural gas has exhibited volatility in prices resulting
from weather patterns and supply and demand factors and will likely continue in
this choppy pattern.
Qualitative Disclosures
Regarding Non-Trading Risk Exposure
The
following was the only non-trading risk exposure of the Partnership at September
30, 2009:
Foreign Currency
Balances. The Partnership’s primary foreign currency balances at
September 30, 2009, were in British pounds, Japanese yen, euros, Australian
dollars, Hungarian forint, South African rand, Norwegian kroner, Swedish kronor,
Czech koruny, Hong Kong dollars, Swiss francs, Turkish lira, New Zealand
dollars, Canadian dollars, and Singapore dollars. The Partnership
controls the non-trading risk of foreign currency balances by regularly
converting them back into U.S. dollars upon liquidation of their respective
positions.
- 48
-
Item
4T. CONTROLS AND
PROCEDURES
As of the
end of the period covered by this quarterly report, the President and Chief
Financial Officer of Demeter, have evaluated the effectiveness of the
Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e)
and 15d-15(e) of the Exchange Act), and have judged such controls and procedures
to be effective.
|
Changes in Internal
Control over Financial
Reporting
|
There
have been no changes during the period covered by this quarterly report in the
Partnership’s internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) of the Exchange Act) that have materially affected or
are reasonable likely to affect the Partnership’s internal control over
financial reporting.
Limitations on the
Effectiveness of Controls
Any
control system, no matter how well designed and operated, can provide reasonable
(not absolute) assurance that its objectives will be
met. Furthermore, no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any, have been
detected.
- 49
-
PART II. OTHER
INFORMATION
Item
1A. RISK
FACTORS
There
have been no material changes from the risk factors previously referenced in the
Partnership’s Report on Form 10-K for the fiscal year ended December 31,
2008.
Item
2. UNREGISTERED SALES OF
SECURITIES AND USE OF PROCEEDS
Units of
the Partnership are sold to persons and entities who are accredited investors as
the term is defined in Rule 501(a) of Regulation D.
The
aggregate proceeds of securities sold in all share Classes to the limited
partners through September 30, 2009, was $70,383,587. The Partnership
received $505,000 in consideration from the sale of Units to
Demeter.
Item
6. EXHIBITS
|
10.1*
|
Advisory
Agreement among Morgan Stanley Smith Barney Augustus I, LLC, Demeter
Management LLC and Augustus Asset Managers Limited, dated September 28,
2009.
|
|
10.2*
|
Advisory
Agreement among Morgan Stanley Smith Barney GLC I, LLC, Demeter Management
LLC and GLC Limited, dated October 1,
2009.
|
|
31.01
|
Certification
of President of Demeter Management LLC, the general partner of the
Partnership, pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
31.02
|
Certification
of Chief Financial Officer of Demeter Management LLC, the general partner
of the Partnership, pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
32.01
|
Certification
of President of Demeter Management LLC, the general partner of the
Partnership, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002.
|
32.02
|
Certification
of Chief Financial Officer of Demeter Management LLC, the general partner
of the Partnership, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
*
Confidential treatment has been requested with respect to the omitted
portions of this exhibit.
|
|
-
50 -
|
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
Managed
Futures Profile MV, L.P.
|
|||
(Registrant)
|
|||
By:
|
Demeter
Management LLC
|
||
(General
Partner)
|
|||
November
16, 2009
|
By:
|
/s/Christian
Angstadt
|
|
Christian
Angstadt
|
|||
Chief
Financial Officer
|
The
General Partner which signed the above is the only party authorized to act for
the registrant. The registrant has no principal executive officer,
principal financial officer, controller, or principal accounting officer and has
no Board of Directors.
- 51
-