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EX-31.01 - EXHIBIT 31.01 - Polaris Futures Fund L.P.polarisex3101.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 June 30, 2011 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: 000-53115

 
POLARIS FUTURES FUND L.P.
 
 
(Exact name of registrant as specified in its charter)
 

 
Delaware
 
20-8528957
 
     (State or other jurisdiction of
      incorporation or organization)
 
(I.R.S. Employer
Identification No.)
       
    Ceres Managed Futures LLC
   
     522 Fifth Avenue, 14th Floor
   
New York, NY
 
10036
(Address of principal executive offices)
 
(Zip Code)

Registrant’s telephone number, including area code
 
(212) 296-1999

Managed Futures Profile HV, 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 x  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


 
 

 

POLARIS FUTURES FUND L.P.
(formerly, Managed Futures Profile HV, L.P.)
INDEX TO QUARTERLY REPORT ON FORM 10-Q

June 30, 2011



 
PART I. FINANCIAL INFORMATION
 
     
Item 1.
Financial Statements (Unaudited)
 
     
 
Statements of Financial Condition as of June 30, 2011 and December 31, 2010
2
     
 
Statements of Income and Expenses for the Three and Six Months Ended June 30, 2011 and 2010
3
     
 
Statements of Changes in Partners’ Capital for the Six Months Ended June 30, 2011 and 2010
4
     
 
Notes to Financial Statements
 5-19
     
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
20-28
     
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
29-40
     
Item 4.
Controls and Procedures
40-41
     
 
PART II. OTHER INFORMATION
 
     
Item 1A.
Risk Factors
42
     
Item 2.
Unregistered Sales of Securities and Use of Proceeds
42
     
Item 6.
Exhibits
42



 
 

 

PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements

POLARIS FUTURES FUND L.P.
(formerly, Managed Futures Profile HV, L.P.)
STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
 
June 30,
 
December 31,
 
2011
 
2010
ASSETS
$
 
$
       
Investments in Affiliated Trading Companies:
     
Investment in BHM I, LLC
80,002,414
 
61,727,592
Investment in Aspect I, LLC
44,197,916
 
44,642,277
Investment in Altis I, LLC
43,733,720
 
45,193,416
Investment in AHL I, LLC
35,648,642
 
Investment in Boronia I, LLC
29,845,529
 
25,903,543
Investment in WNT I, LLC
 
42,988,859
       
Total Investments in Affiliated Trading Companies, at fair value
  (cost $220,743,299 and $181,299,988, respectively)
233,428,221
 
220,455,687
Receivable from Affiliated Trading Companies
 
207,377
Subscriptions receivable
 
4,820,171
       
Total Assets
233,428,221
 
225,483,235
       
LIABILITIES
     
       
Redemptions payable
688,918
 
977,670
Payable to Affiliated Trading Companies
 
3,494,883
       
Total Liabilities
688,918
 
4,472,553
       
PARTNERS’ CAPITAL
     
Class A (110,740.130 and 93,726.780 Units, respectively)
137,464,476
 
128,430,583
Class B (23,858.029 and 19,502.516 Units, respectively)
30,198,822
 
27,180,755
Class C (37,180.265 and 39,260.116 Units, respectively)
47,988,269
 
55,652,694
Class D* (8,745.602 and 3,072.942 Units, respectively)
11,397,483
 
4,392,721
Class Z (4,240.206 and 3,651.080 Units, respectively)
5,690,253
 
5,353,929
       
Total Partners’ Capital
232,739,303
 
221,010,682
       
Total Liabilities and Partners’ Capital
233,428,221
 
225,483,235
       
NET ASSET VALUE PER UNIT
     
Class A
1,241.33
 
1,370.27
Class B
1,265.77
 
1,393.71
Class C
1,290.69
 
1,417.54
Class D*
1,303.22
 
1,429.48
Class Z
1,341.97
 
1,466.39


* Class D Units were issued beginning on March 1, 2009.


The accompanying notes are an integral part of these financial statements.

- 2 -

 
 

 

POLARIS FUTURES FUND L.P.
(formerly, Managed Futures Profile HV, L.P.)
STATEMENTS OF INCOME AND EXPENSES
(Unaudited)

 
For the Three Months
Ended June  30,
 
For the Six Months
 Ended June 30,
 
2011
 
2010
 
2011
 
2010
 
$
 
$
 
$
 
$
EXPENSES
             
Ongoing Placement Agent fees
976,951
 
738,694
 
1,883,814
 
1,436,348
General Partner fees
605,103
 
458,580
 
1,170,302
 
892,762
Administrative fees
180,701
 
183,432
 
406,780
 
357,105
               
Total Expenses
1,762,755
 
1,380,706
 
3,460,896
 
2,686,215
               
NET INVESTMENT LOSS
(1,762,755)
 
(1,380,706)
 
(3,460,896)
 
(2,686,215)
               
REALIZED/NET CHANGE IN UNREALIZED  DEPRECIATION
             
    ON INVESTMENTS
             
Realized
6,735,769
 
680,733
 
7,139,363
 
680,733
Net change in unrealized depreciation
             
  on investments
(19,494,308)
 
(6,830,796)
 
(26,470,777)
 
(3,936,150)
               
Total Realized/Net Change in
   Unrealized Depreciation on Investments
(12,758,539)
 
(6,150,063)
 
(19,331,414)
 
(3,255,417)
               
NET LOSS
(14,521,294)
 
(7,530,769)
 
(22,792,310)
 
(5,941,632)
               
NET LOSS ALLOCATION
             
Class A
(8,711,210)
 
(4,401,418)
 
(13,637,475)
 
(3,537,010)
Class B
(1,861,096)
 
(999,061)
 
(2,873,479)
 
(780,352)
Class C
(2,936,095)
 
(1,825,737)
 
(4,792,977)
 
(1,415,699)
Class D
(680,874)
 
(152,402)
 
(977,352)
 
(110,837)
Class Z
(332,019)
 
(152,151)
 
(511,027)
 
(97,734)
               
NET LOSS PER UNIT *
             
Class A
(78.35)
 
(51.78)
 
(128.94)
 
(42.56)
Class B
(78.19)
 
(50.94)
 
(127.94)
 
(40.02)
Class C
(77.98)
 
(50.06)
 
(126.85)
 
(37.41)
Class D
(77.86)
 
(49.60)
 
(126.26)
 
(36.07)
Class Z
(77.46)
 
(48.18)
 
(124.42)
 
(31.95)
               
 
Units
 
Units
 
Units
 
Units
WEIGHTED AVERAGE NUMBER
             
OF UNITS OUTSTANDING
             
Class A
107,574.103
 
84,710.852
 
101,906.465
 
82,547.588
Class B
22,887.964
 
19,557.896
 
21,552.461
 
19,282.042
Class C
37,273.358
 
36,193.565
 
37,224.196
 
35,741.034
Class D
8,745,602
 
3,072.942
 
7,774.041
 
3,072.942
Class Z
4,079.068
 
3,123.585
 
3,939.651
 
3,002.419

*Based on the change in net asset value per Unit.

The accompanying notes are an integral part of these financial statements.
- 3 -

 
 

 

POLARIS FUTURES FUND L.P.
(formerly, Managed Futures Profile HV, L.P.)
STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL
For the Six Months Ended June 30, 2011 and 2010
(Unaudited)

 
Class A
 
Class B
 
Class C
 
Class D
 
Class Z
 
Total
 
$
 
$
 
$
 
$
 
$
 
$
Partners’ Capital,
                     
December 31, 2010
128,430,583
 
27,180,755
 
55,652,694
 
4,392,721
 
5,353,929
 
   221,010,682
                       
Subscriptions
29,939,688
 
8,016,477
 
3,407,346
 
                           7,982,114
 
932,808
 
 50,278,433
                       
Net Loss
(13,637,475)
 
(2,873,479)
 
(4,792,977)
 
(977,352)
 
(511,027)
 
   (22,792,310)
                       
Redemptions
(7,268,320)
 
(2,124,931)
 
(6,278,794)
 
              –
 
(85,457)
 
    (15,757,502)
                       
Partners’ Capital,
                     
June 30, 2011
137,464,476
 
30,198,822
 
47,988,269
 
                       11,397,483
 
5,690,253
 
    232,739,303
                       
Partners’ Capital,
                     
December 31, 2009
97,264,166
 
23,606,083
 
45,405,413
 
3,929,404
 
3,594,596
 
       173,799,662
                       
Subscriptions
16,414,314
 
2,937,278
 
6,332,689
 
                –
 
608,496
 
 26,292,777
                       
Net Loss
(3,537,010)
 
(780,352)
 
(1,415,699)
 
(110,837)
 
(97,734)
 
 (5,941,632)
                       
Redemptions
(5,414,100)
 
(977,328)
 
(4,248,441)
 
                –
 
(50,226)
 
   (10,690,095)
                       
Partners’ Capital,
                     
June 30, 2010
104,727,370
 
24,785,681
 
46,073,962
 
                           3,818,567
 
4,055,132
 
   183,460,712
                       
 
Class A
 
Class B
 
Class C
 
Class D
 
Class Z
 
Total
 
Units
 
Units
 
Units
 
Units
 
Units
 
Units
Beginning Units,
                     
December 31, 2010
93,726.780
 
19,502.516
 
39,260.116
 
3,072.942
 
3,651.080
 
      159,213.434
                       
Subscriptions
22,506.211
 
5,898.592
 
2,441.016
 
                           5,672.660
 
651.166
  
37,169.645
                       
Redemptions
(5,492.861)
 
(1,543.079)
 
(4,520.867)
 
                –
 
(62.040)
 
   (11,618.847)
                       
Ending Units,
                     
June 30, 2011
110,740.130
 
23,858.029
 
37,180.265
 
                           8,745.602
 
4,240.206
 
  184,764.232
                       
Beginning Units,
                     
December 31, 2009
78,373.994
 
18,794.498
 
35,719.371
 
                          3,072.942
 
2,760.791
 
  138,721.596
                       
Subscriptions
13,437.000
 
2,385.623
 
5,029.208
 
                   –
 
471.531
 
21,323.362
                       
Redemptions
(4,426.418)
 
(796.979)
 
(3,404.340)
 
                   –
 
(39.474)
 
    (8,667.211)
                       
Ending Units,
                     
June 30, 2010
87,384.576
 
20,383.142
 
37,344.239
 
                         3,072.942
 
3,192.848
 
  151,377.747

The accompanying notes are an integral part of these financial statements.
- 4 -

 
 

 

POLARIS FUTURES FUND L.P.
(formerly, Managed Futures Profile HV, L.P.)
NOTES TO FINANCIAL STATEMENTS

June 30, 2011

(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 Polaris Futures Fund L.P. (formerly, Managed Futures Profile HV, L.P.) (“Polaris” 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, 2010.

1.  Organization
Polaris Futures Fund L.P. (formerly, Managed Futures Profile HV, 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”).  Prior to May 1, 2011, Polaris was one of the partnerships in the Managed Futures Multi-Strategy Profile Series, comprised of Polaris, LV Futures Fund L.P. (formerly, Managed Futures Profile LV, L.P.) (“LV”), and Meritage Futures Fund L.P. (formerly, Managed Futures Profile MV, L.P.) (“Meritage” and with Polaris and LV the “Profile Series”).   Effective May 1, 2011, the Profile Series is comprised of LV and Meritage.

- 5 -

 
 

 

POLARIS FUTURES FUND L.P.
(formerly, Managed Futures Profile HV, 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 “Limited Partnership Agreement”).  The non-clearing commodity broker for each Trading Company is Morgan Stanley Smith Barney LLC (“MSSB”).  Morgan Stanley & Co. Incorporated ("MS&Co.") and Morgan Stanley & Co. International plc (“MSIP”) act as each Trading Company’s clearing commodity broker (collectively, MS&Co. and MSIP are referred to as the “Commodity Brokers”).  MSIP serves as the commodity broker for trades on the London Metal Exchange.  Each Trading Company’s over-the-counter foreign exchange spot, options, and forward contract counterparties is 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.

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 Income and Expenses.  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 June 30, 2011, are as follows:

- 6 -

 
 

 

POLARIS FUTURES FUND L.P.
(formerly, Managed Futures Profile HV, L.P.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Trading Company
Trading Advisor
   
Morgan Stanley Smith Barney Altis I, LLC
 
  (“Altis I, LLC”)
Altis Partners (Jersey) Limited
Morgan Stanley Smith Barney Aspect I, LLC
 
(“Aspect I, LLC”)
Aspect Capital Limited
Morgan Stanley Smith Barney BHM I, LLC
 
  (“BHM I, LLC”)
Blenheim Capital Management, L.L.C.
Morgan Stanley Smith Barney Boronia I, LLC
 
(“Boronia I, LLC”)
Boronia Capital Pty. Ltd.
Morgan Stanley Smith Barney  AHL I, LLC
 
(“AHL I, LLC”)
Man-AHL (USA) Ltd.

Ceres Managed Futures LLC (“Ceres”), the general partner of the Partnership and the trading manager of each Trading Company, is a wholly-owned subsidiary of Morgan Stanley Smith Barney Holdings LLC (“MSSBH”).  MSSBH is majority-owned indirectly by Morgan Stanley and minority-owned indirectly by Citigroup Inc.  MSSB is the principal subsidiary of MSSBH.  MS&Co., MSIP, and MSCG are wholly-owned subsidiaries of Morgan Stanley.

Ceres may reallocate the Partnership’s assets to the different Trading Companies at its sole discretion.

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.  Ceres received Class Z Units with respect to its investment in the Partnership.
- 7 -

 
 

 

POLARIS FUTURES FUND L.P.
(formerly, Managed Futures Profile HV, L.P.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Ceres 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 being offered to certain individuals affiliated with Morgan Stanley at Ceres’ sole discretion.  Class Z Unit holders are not subject to paying the placement agent fee.


Effective April 18, 2011 the Partnership changed its name to Polaris Futures Fund L.P.  In addition, as of May 1, 2011, the Partnership shifted from Profile Series and became a stand alone fund.  The Partnership’s primary trading focus remains the same.


Effective at the close of business on May 31, 2011, Winton Capital Management Limited was terminated as a Trading Advisor to the Partnership.

Effective June 1, 2011, the Partnership through its investment in Morgan Stanley Smith Barney AHL I, LLC added Man-AHL (USA) Ltd. as a Trading Advisor to the Partnership.


2.  Related Party Transactions
The cash held by each Trading Company is on deposit with MSSB, MS&Co., and MSIP in futures interest trading accounts to meet margin requirements as needed.  MSSB pays each Trading Company at each month end interest income on 100% of its average daily funds held at MSSB.  Assets deposited with MS&Co. and MSIP as margin are credited with interest income at a rate approximately equivalent to what MS&Co. and MSIP pay or

- 8 -
 
 
 

 
POLARIS FUTURES FUND L.P.
(formerly, Managed Futures Profile HV, L.P.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 

 


charge other customers on such assets deposited as margin.  Assets not deposited as margin with MS&Co. and MSIP 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 each Trading Company on Futures Interests.  MSSB and MS&Co. will retain any excess interest not paid to each Trading Company.

The Partnership pays monthly administrative fees and general partner fees to Ceres.  The Partnership pays to MSSB, ongoing placement agent fees on a monthly basis equal to a percentage of the net asset value of a limited partners’ Units as of the beginning of each month.












- 9 -

 
 

 

POLARIS FUTURES FUND L.P.
(formerly, Managed Futures Profile HV, L.P.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

 
3.  Financial Highlights
 
Changes in the net asset value per Unit for three and six months ended June 30, 2010 and 2011 were as follows:
 
 Class A
 
   Class B
 
Class C
 
Class D
 
Class Z
 
           
PER UNIT OPERATING PERFORMANCE:
         
NET ASSET VALUE,
         
  APRIL 1, 2011:
$       1,319.68
$        1,343.96
$     1,368.67
$          1,381.08 
$  $       1,419.43 
           
NET OPERATING RESULTS:
         
   Net investment loss
(10.90)           
              (9.42)
            (7.89)
             (7.10)
                (4.62)
   Net realized/unrealized loss
               (67.45)
            (68.77) 
          (70.09)      
           (70.76)
              (72.84)
   Net loss
            (78.35)
            (78.19) 
      (77.98)
           (77.86)
              (77.46)
           
NET ASSET VALUE,
         
  JUNE 30, 2011:
      1,241.33
$        1,265.77
$     1,290.69
$   1,303.22 
$     1,341.97 
RATIOS TO AVERAGE NET ASSETS:
         
   Net investment loss (2)
-3.31%
-2.81%
  -2.30%
-2.05%
-1.30%
   Partnership expenses (1) (2)
 3.31%
 2.81%
    2.30%
 2.05%
 1.30%
           
TOTAL RETURN:
-5.94%
-5.82%
   -5.70%
-5.64%
-5.46%
           
PER UNIT OPERATING PERFORMANCE:
         
NET ASSET VALUE,
         
  JANUARY 1, 2011:
$        1,370.27
$        1,393.71
$     1,417.54
$            1,429.48 
$  $           1,466.39 
           
NET OPERATING RESULTS:
         
   Net investment loss
(22.40)
             (19.40)
            (16.32)
             (14.70)
                 (9.70)
   Net realized/unrealized loss
              (106.54)
           (108.54) 
          (110.53)
           (111.56)
              (114.72)
   Net loss
           (128.94)
           (127.94) 
      (126.85)
           (126.26)
              (124.42)
           
NET ASSET VALUE,
         
  JUNE 30, 2011:
     1,241.33
$        1,265.77
$       1,290.69
$    1,303.22 
$        1,341.97 
RATIOS TO AVERAGE NET ASSETS:
         
   Net investment loss (2)
-3.37%
-2.87%
      -2.37%
-2.12%
 -1.36%
   Partnership expenses (1) (2)
 3.37%
 2.87%
        2.37%
 2.12%
  1.36%
           
TOTAL RETURN:
-9.41%
-9.18%
      -8.95%
-8.83%
 -8.48%
           






- 10 -

 
 

 

POLARIS FUTURES FUND L.P.
(formerly, Managed Futures Profile HV, L.P.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


PER UNIT OPERATING PERFORMANCE:
         
NET ASSET VALUE,
         
  APRIL 1, 2010:
$        1,250.25
$         1,266.93
$     1,283.82
   $       1,292.24 
$  $      1,318.25 
           
NET OPERATING RESULTS:
         
   Net investment loss
(10.52)
               (9.10)
            (7.63)
             (6.88)
            (4.57)
   Net realized/unrealized loss
               (41.26)
             (41.84) 
          (42.43)       
           (42.72)
          (43.61)
   Net loss
            (51.78)
             (50.94) 
      (50.06)
           (49.60)
          (48.18)
           
NET ASSET VALUE,
         
  JUNE 30, 2010:
$       1,198.47
$        1,215.99
$     1,233.76
$   1,242.64 
$   1,270.07 
RATIOS TO AVERAGE NET ASSETS:
         
   Net investment loss (2)
-3.41%
-2.91%
  -2.41%
-2.16%    
-1.40%          
   Partnership expenses (1) (2)
 3.41%
 2.91%
   2.41%
 2.16%    
 1.40%          
           
TOTAL RETURN:
-4.14%
-4.02%
  -3.90%
-3.84%    
-3.65%          
           
PER UNIT OPERATING PERFORMANCE:
         
NET ASSET VALUE,
         
  JANUARY 1, 2010:
$       1,241.03
$         1,256.01
$     1,271.17
   $        1,278.71 
$  $       1,302.02 
           
NET OPERATING RESULTS:
         
   Net investment loss
(20.92)
                 (18.08)
          (15.16)
            (13.67)
              (9.07)
   Net realized/unrealized loss
               (21.64)
             (21.94) 
           (22.25)
            (22.40)
            (22.88)
   Net loss
            (42.56)
             (40.02) 
       (37.41)
            (36.07)
            (31.95)
           
NET ASSET VALUE,
         
  JUNE 30, 2010:
$       1,198.47
$        1,215.99
$     1,233.76
$    1,242.64 
$   1,270.07 
RATIOS TO AVERAGE NET ASSETS:
         
   Net investment loss (2)
-3.43%      
-2.92%
  -2.42%
-2.17%
-1.41%    
   Partnership expenses (1) (2)
 3.43%      
 2.92%
    2.42%
 2.17%
 1.41%   
             
TOTAL RETURN:
-3.43%      
-3.19%
   -2.94%
-2.82%
-2.45%

 
(1) Annualized
 
(2) Does not include the expenses of the Trading Companies in which the Partnership invests.

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

- 11 -

 
 

 

POLARIS FUTURES FUND L.P.
(formerly, Managed Futures Profile HV, L.P.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

price and market price) are reported in the Statements of Financial Condition as net unrealized gain or loss on open contracts.  The resulting net change in unrealized gains and losses is reflected in the net change in unrealized trading profit (loss) from one period to the next on the Statements of Income and Expenses.  The fair value of exchange-traded futures, options and forward 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.

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 will be equal to the settlement price on the first subsequent day on which the contract could be liquidated.  The fair value of non-exchange-traded contracts is based on the fair value quoted by the counterparty.






- 12 -

 
 

 
POLARIS FUTURES FUND L.P.
(formerly, Managed Futures Profile HV, L.P.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The Trading Companies’ contracts are accounted for on a trade-date basis and marked to market on a daily basis. A derivative is defined as a financial instrument or other contract that has all three of the following characteristics:

1)  
a) One or more “underlyings” and b) one or more “notional amounts” or payment provisions;
2)  
Requires no initial net investment or a smaller initial net investment than would be required for other types of contracts that would be expected to have a similar response relative to changes in market factors; and
3)  
Terms require or permit net settlement.

Generally, derivatives include futures, forwards, swaps or options contracts, and other financial instruments with similar characteristics such as caps, floors, and collars.

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 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.

- 13 -
 
 
 

 
POLARIS FUTURES FUND L.P.
(formerly, Managed Futures Profile HV, L.P.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)




Gains and losses on non-exchange-traded forward currency contracts are settled upon termination of the contract. Gains and losses of off-exchange-traded forward currency options contracts are settled upon an agreed upon settlement date.  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 MSSB for the benefit of MS&Co.

5.  Fair Value Measurements and Disclosures
Financial instruments are carried at fair value, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.  Assets and liabilities carried at fair value are classified and disclosed in the following 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 unadjusted quoted market 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


- 14 -
 
 
 

 
POLARIS FUTURES FUND L.P.
(formerly, Managed Futures Profile HV, L.P.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

input to the fair value measurement in its entirety requires judgment, and consideration of the factors specific to the investment.


The Partnership’s assets and liabilities measured at fair value on a recurring basis are summarized in the following tables by the type of inputs applicable to the fair value measurements.

June 30, 2011
 
 
 
Assets
   Unadjusted
          Quoted Prices in
        Active Markets for
              Identical Assets
                    (Level 1)
 
              Significant Other
                 Observable
                      Inputs
                    (Level 2)
 
          Significant
        Unobservable
              Inputs
             (Level 3)
 
 
 
 
 
               Total
   
 $
   
$          
Investment in BHM I, LLC
80,002,414
 
80,002,414
Investment in Aspect I, LLC
44,197,916
 
    44,197,916
Investment in Altis I, LLC
43,733,720
 
43,733,720
Investment in AHL I, LLC
35,648,642
 
    35,648,642
Investment in Boronia I, LLC
29,845,529
 
    29,845,529



December 31, 2010
 
     
 
Assets
    Unadjusted
             Quoted Prices in
           Active Markets for
              Identical Assets
                      (Level 1)
 
              Significant Other
                Observable
                    Inputs
                    (Level 2)
 
         Significant
     Unobservable
            Inputs
           (Level 3)
 
 
 
 
 
             Total
   
   $
   
 $
Investment in BHM I, LLC
61,727,592
 
61,727,592
Investment in Aspect I, LLC
44,642,277
 
44,642,277
Investment in WNT I, LLC
42,988,859
 
42,988,859
Investment in Altis I, LLC
45,193,416
 
45,193,416
Investment in Boronia I, LLC
25,903,543
 
25,903,543







- 15 -
 
 
 

 
POLARIS FUTURES FUND L.P.
(formerly, Managed Futures Profile HV, 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 (“U.S. GAAP”).

At June 30, 2011, the Partnership’s investment in the Trading Companies represented approximately: BHM I, LLC 34.40%; Altis I, LLC 18.80%; Aspect I, LLC 19.00%; AHL I, LLC 15.30%; and Boronia I, LLC 12.80% of Polaris’ Partners’ Capital, respectively.

At December 31, 2010, the Partnership’s investment in the Trading Companies represented approximately: BHM I, LLC 28.00%; Aspect I, LLC 20.25%; Altis I, LLC 20.50%; WNT I, LLC 19.50%; and Boronia I, LLC 11.75% of Polaris’ Partners’ Capital, respectively.

The tables below represent summarized Income Statement information for the Trading Companies that the Partnership invests in for the three and six months ended June 30, 2011 and 2010, respectively, in accordance with Rule 3-09 of Regulation S-X, as follows:
- 16 -
 
 
 

 

POLARIS FUTURES FUND L.P.
(formerly, Managed Futures Profile HV, L.P.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


For the Three Months Ended June 30, 2011
 
 
Investment Loss
Net
  Investment Loss
 
Total Trading Results
 
 
Net Loss
 
 
$
$
$
$
BHM I, LLC
(9,126)
(1,724,433)
 (29,242,375)
 (30,966,808)
Altis I, LLC
(4,738)
  (224,835)
(4,335,671)
(4,560,506)

For the Six Months Ended June 30, 2011
 
 
Investment Loss
Net
  Investment Loss
 
Total Trading Results
 
 
Net Loss
 
 
$
$
$
$
BHM I, LLC
(8,477)
(2,930,606)
 (25,029,608)
 (27,960,214)
Altis I, LLC
(3,514)
  (461,756)
(11,194,194)
 (11,655,950)


For the Three Months Ended June 30, 2010
 
 
Investment
Income/(Loss)
Net
  Investment Loss
 
Total Trading Results
 
Net
Income/(Loss)
 
 
$
$
$
$
BHM I, LLC
(3,362)
(310,861)
(12,888,335)
     (13,199,196)
WNT I, LLC
268
(473,865)
1,525,950
1,052,085
Aspect I, LLC
(680)
(322,174)
219,680
(102,494)
Altis I, LLC
14,152
(162,846)
(2,470,516)
(2,633,362)



For the Six Months Ended June 30, 2010
 
 
Investment
Income/(Loss)
Net
  Investment Loss
 
Total Trading Results
 
Net
Income/(Loss)
 
 
$
$
$
$
BHM I, LLC
(6,150)
(600,902)
(17,575,716)
     (18,176,618)
WNT I, LLC
348
(770,738)
3,790,747
3,020,009
Aspect I, LLC
(2,097)
(628,146)
2,213,764
1,585,618
Altis I, LLC
20,613
(313,402)
  (478,530)
 (791,932)







- 17 -
 
 
 

 
POLARIS FUTURES FUND L.P.
(formerly, Managed Futures Profile HV, L.P.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

6.  Other Pronouncements
In May 2011, FASB issued Accounting Standards Update (“ASU”) 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (“IFRSs”).” The amendments within this ASU change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements to eliminate unnecessary wording differences between U.S. GAAP and IFRSs. However, some of the amendments clarify the FASB’s intent about the application of existing fair value measurement requirements and other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The ASU is effective for annual and interim periods beginning after December 15, 2011 for public entities. This new guidance is not expected to have a material impact on the Partnership’s financial statements.

7.  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.




- 18 -
 
 
 

 
POLARIS FUTURES FUND L.P.
(formerly, Managed Futures Profile HV, L.P.)
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)

The guidance issued by Financial Accounting Standards Board on income taxes clarifies the accounting for uncertainty in income taxes recognized in the 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 Partnership has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements as of June 30, 2011.  If applicable, the Partnership recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in other expenses in the Statements of Income and Expenses.  Generally, the 2007 through 2010 tax years remain subject to examination by U.S. federal and most state tax authorities.  No income tax returns are currently under examination.

8.  Subsequent Events
Management of Ceres performed its evaluation of subsequent events through the date of filing, and has determined that there were no subsequent events requiring adjustment of or disclosure in the financial statements.







- 19 -
 
 
 

 
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 fluctuation 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.



- 20 -

 
 

 

There is no limitation on daily price moves 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 six month periods ended

- 21 -

 
 

 

June 30, 2011 and 2010, 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 19 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 Income and Expenses 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 approximately 3:00 P.M. (E.T.) the close of the business day.

For the Three and Six Months Ended June 30, 2011
The Partnership recorded total realized/net change in unrealized depreciation on investments of $(12,758,539) and expenses totaling $1,762,755, resulting in a net loss of $14,521,294 for the three months ended June 30, 2011.  The Partnership’s net asset value per Unit by share Class is provided in the table below.
- 22 -

 
 

 
Share Class
       NAV at 6/30/11    
      NAV at 3/31/11
     
A
$1,241.33
$1,319.68
B
$1,265.77
$1,343.96
C
$1,290.69
$1,368.67
D
$1,303.22
$1,381.08
Z
$1,341.97
$1,419.43

The most significant trading losses were recorded within the agricultural complex, primarily during May, from long positions in cocoa futures as prices declined amid speculation that global supplies are rising. Additional losses were experienced during June from long positions in wheat futures as prices fell on speculation that warm weather would aid U.S. crops. Within the global interest rate sector, losses were incurred primarily in April due to short positions in European fixed-income futures as prices moved higher after Standard & Poor’s put a “negative” outlook on the United States’ AAA credit rating, prompting demand for an alternative to U.S. Treasuries. Within the global stock index markets, losses were experienced primarily during May and June from long positions in U.S., European, and Pacific Rim equity index futures as prices moved lower after worse-than-expected economic reports stoked concern the global economic recovery is faltering. Losses were recorded within the metals sector, primarily during May and June, from long positions in aluminum futures as prices fell on spurring speculation China’s anti-inflation policies may slow growth in the world’s second-biggest economy and biggest purchaser of base metals. Within the energy complex, losses were incurred primarily during May and June due to long futures positions in crude oil and its related products as prices moved lower on concern energy demand may weaken. A portion of the Partnership’s losses for the quarter was offset by gains achieved within the currency markets, primarily during April, due to long positions in the Australian dollar, euro, and Swiss franc versus the U.S. dollar as the value of these currencies rose against the U.S. dollar after better-than-expected corporate earnings reports and signs of global growth spurred demand for higher-yielding currencies.

- 23 -
 
 
 

 
The Partnership recorded total realized/net change in unrealized depreciation on investments of $(19,331,414) and expenses totaling $3,460,896, resulting in a net loss of $22,792,310 for the six months ended June 30, 2011.  The Partnership’s net asset value per Unit by share Class is provided in the table below.

Share Class
       NAV at 6/30/11
    NAV at 12/31/10
     
A
$1,241.33
$1,370.27
B
$1,265.77
$1,393.71
C
$1,290.69
$1,417.54
D
$1,303.22
$1,429.48
Z
$1,341.97
$1,466.39

The most significant trading losses were incurred in the global interest rate sector, primarily during February, from short positions in U.S. fixed-income futures as prices increased amid concern over unrest in the Middle East, which spurred demand for the relative “safety” of government debt. Further losses were experienced during April from short positions in European fixed-income futures as prices moved higher. Within the global stock index markets, losses were recorded primarily during March from long positions in Japanese and European equity index futures as prices reversed lower amid concern that the natural disaster and subsequent nuclear crisis in Japan was going to threaten the global economic recovery. Additional losses were experienced in this sector during May and June from long positions in U.S., European, and Pacific Rim equity index futures. Within the agricultural complex, losses were incurred primarily during March due to long positions in cocoa futures as prices fell on signs the political turmoil that hampered exports may be easing in the Ivory Coast, the world’s biggest producer of cocoa.





- 24 -
 
 
 

 
In June, long positions in wheat futures resulted in losses as prices fell. Losses were experienced within the metals markets, primarily during March, from long positions in copper and nickel futures as prices moved lower amid concern that rising energy costs would possibly slow the global economy and reduce demand for base metals. Further losses were incurred within this sector during May and June from long positions in aluminum futures. A portion of the Partnership’s losses during the first half of the year was offset by gains recorded within the energy markets, primarily during February, from long futures positions in RBOB (unleaded) gas, gas oil, and brent crude as prices rose after protests in Egypt turned violent, causing concern that crude oil supplies may be disrupted. In April, long futures positions in crude oil and its related products also resulted in gains as prices continued to increase amid concern that unrest may spread to other crude-producing parts of the Middle East and curtail energy supplies.

For the Three and Six Months Ended June 30, 2010
The Partnership recorded total realized/net change in unrealized depreciation on investments of $(6,150,063)   and expenses totaling $1,380,706, resulting in net a loss of $7,530,769 for the three months ended June 30, 2010.  The Partnership’s net asset value per Unit by share Class is provided in the table below.
 
Share Class
    NAV at 6/30/10
    NAV at 3/31/10
     
A
$1,198.47
$1,250.25
B
$1,215.99
$1,266.93
C
$1,233.76
$1,283.82
D
$1,242.64
$1,292.24
Z
$1,270.07
$1,318.25

The most significant trading losses of approximately 2.4% were recorded within the global stock index sector during May and June from long positions in U.S., European, and Pacific Rim equity index futures as prices reversed lower on growing concerns that Greece’s sovereign debt crisis might spread throughout Europe.

- 25 -
 
 
 

 
Prices also fell due to concerns over weakening growth in China and a slump in U.S. consumer confidence.  Within the metals complex, losses of approximately 2.3% were incurred throughout the quarter from long positions in copper, aluminum, and zinc futures as prices were pressured lower on concern that demand for base metals might be slipping after reports signaled a deteriorating economic outlook in China and the U.S., the world’s top base metals consumers.  Elsewhere, long positions in palladium futures resulted in losses as prices dropped in May and June on the aforementioned concerns regarding China’s economic impact on metals demand.  Losses of approximately 1.6% were incurred within the energy sector primarily during May from long futures positions in crude oil and its related products as prices declined on continued worries that Europe’s aforementioned debt troubles might slow down the global economic recovery and thereby weaken energy demand. Elsewhere, short positions in natural gas futures resulted in losses as prices reversed higher during the first half of the month after a U.S. government report showed that stockpiles grew less than forecast. During June, additional losses were incurred from short futures positions in crude oil and its related products, as well as in natural gas, as prices reversed higher following news that crude inventories dropped the most in six months and on speculation that the first tropical storm of the hurricane season may form and disrupt production in the Gulf of Mexico.  Within the agricultural complex, losses of approximately 0.9% were experienced during April and May from long positions in sugar futures as prices fell on speculation that higher production in Brazil and India may help leave ample global supplies.  Lastly, short futures positions in wheat, corn, and soybeans experienced losses primarily during April and June as prices rose amid supply concerns.  A portion of the Partnership’s losses for the quarter was offset by gains of approximately 4.7% achieved in the global interest rate sector from long positions in U.S., European, and Pacific Rim fixed-income futures as prices trended higher throughout the quarter due to increased “safe haven” demand as investors remained concerned about the stability of the economic recovery. Prices also rose as the European

- 26 -
 
 
 

 
Central Bank left interest rates at a record low after Europe’s sovereign debt crisis forced it to start buying government bonds.  Smaller gains of 0.2% were experienced in the currency sector throughout the quarter from short positions in the euro versus the U.S. dollar and Japanese yen as the value of the euro declined against these currencies amid concern Greece might struggle to raise further funds and after reports of political discord in Europe, thus reigniting worries about the stability of the region’s economy.

The Partnership recorded total realized/net change in unrealized depreciation on investments of $(3,255,417) and expenses totaling $2,686,215, resulting in a net loss of $5,941,632 for the six months ended June 30, 2010.  The partnership’s net asset value per Unit by share Class is provided in the table below.

Share Class
NAV at 6/30/10
NAV at 12/31/09
     
A
$1,198.47
$1,241.03
B
$1,215.99
$1,256.01
C
$1,233.76
$1,271.17
D
$1,242.64
$1,278.71
Z
$1,270.07
$1,302.02

The most significant trading losses of approximately 2.5% were recorded in the agricultural complex, primarily during February, March, April, and May, from long futures positions in sugar as prices reversed lower and continued to fall amid easing supply concerns following news that production might rise in Brazil, India, and Thailand, three of the world’s largest sugar producers.  Additional losses were recorded, primarily during January and March, from long positions in corn futures as prices fell on speculation that warmer weather in the central U.S. may improve planting conditions.  Losses were also incurred during May as corn prices declined after the Chinese government said it might toughen measures to curb speculation in agricultural commodities and stabilize prices.  Within the global stock index sector, losses of approximately

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2.5% were incurred during January from long positions in European, U.S., and Pacific Rim equity index futures as prices moved lower amid disappointing U.S. corporate earnings reports. Further losses were experienced during May and June from long positions in U.S., European, and Pacific Rim equity index futures as prices reversed lower on growing concerns that Greece’s sovereign debt crisis might spread throughout Europe. Prices also fell due to concerns over weakening growth in China and a slump in U.S. consumer confidence.  Losses of approximately 1.6% were experienced in the metals complex during January, April, May, and June from long positions in copper, aluminum, and zinc futures as prices were pressured lower on concern that demand for base metals might be slipping after reports signaled a deteriorating economic outlook in China and the U.S., the world’s top base metals consumers.  Within the energy sector, losses of approximately 1.3% were experienced primarily during January and May from long futures positions in crude oil and its related products as prices declined on continued worries that a slow down in the global economic recovery may weaken energy demand. During June, newly established short futures positions in crude oil and its related products resulted in losses as prices reversed higher following news that crude inventories dropped the most in six months.  A portion of the Partnership’s losses for the first six months of the year was offset by gains of approximately 6.1% achieved in the global interest rate sector from long positions in European, U.S., and Japanese fixed-income futures as prices trended higher throughout a majority of the first half of the year due to increased “safe haven” demand as investors remained concerned about the stability of the economic recovery.  Smaller gains of approximately 1.8% were experienced in the currency sector, primarily during January and February, from short positions in the euro and British pound versus the U.S. dollar and Japanese yen as the value of these European currencies decreased amid concerns regarding Greece’s mounting debt burden.  Additional gains were achieved as the value of the euro and British pound declined throughout a majority of the second quarter after reports of political discord in Europe, thus reigniting worries about the stability of the region’s economy.
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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 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 MSSB for the benefit of MS&Co.

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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 Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act

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of 1933 and Section 21E of the Securities Exchange Act of 1934). All quantitative disclosures in this section are deemed to be forward-looking statements for purposes of the safe harbor, except for statements of historical fact.

The 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 Ceres 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.  Ceres 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 Ceres to generate a distribution of daily “simulated profit and loss” outcomes.
 
 


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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 Ceres, 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 Ceres 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 June 30, 2011 and December 31, 2010, Altis I, LLC’s total capitalization was $48,540,074 and $45,193,416, respectively.  The Partnership owned approximately 90% and 100%, respectively, of Altis I, LLC.

Altis I, LLC
 
     June 30,  2011
 
  December 31, 2010
Primary Market Risk Category
VAR
 
VAR
       
Interest Rate
(0.86)%
 
(0.78)%
Currency
(1.92)
 
(2.14)
Equity
(0.46)
 
(0.36)
Commodity
(0.77)
 
(2.83)
Aggregate Value at Risk
(2.22)%
 
(4.33)%


As of June 30, 2011 and December 31, 2010, Aspect I, LLC’s total capitalization was $49,050,123 and $54,986,074, respectively.  The Partnership owned approximately 90% and 81%, respectively, of Aspect I, LLC.


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Aspect I, LLC
 
                     June 30, 2011 
 
         December 31, 2010
Primary Market Risk Category
VAR                              
 
VAR                                   
       
Interest Rate
(2.17)%
 
(0.27)%
Currency
(1.07)
 
(0.91)
Equity
(0.23)
 
(1.48)
Commodity
(0.75)
 
(2.49)
Aggregate Value at Risk
(2.59)%
 
(4.04)%

As of June 30, 2011 and December 31, 2010, BHM I, LLC’s total capitalization was $413,342,385 and $208,652,878, respectively.  The Partnership owned approximately 19% and 30%, respectively, of BHM I, LLC.

BHM I, LLC
 
                          June 30, 2011
 
                     December 31, 2010
Primary Market Risk Category
VAR       
 
VAR        
       
Interest Rate
 (0.40)%
 
 (0.39)%
Currency
(0.16)
 
(0.08)
Commodity
(3.42)
 
(3.79)
Aggregate Value at Risk
 (4.06)%
 
 (4.02)%

As of June 30, 2011 and December 31, 2010, Boronia I, LLC’s total capitalization was $43,853,560 and $40,286,523, respectively.  The Partnership owned approximately 68% and 64%, respectively, of Boronia I, LLC.

Boronia I, LLC
 
                           June 30, 2011
 
                     December 31, 2010
Primary Market Risk Category
VAR       
 
VAR       
       
Interest Rate
 (0.73)%
 
 (0.52)%
Currency
(1.27)
 
(1.39)
Equity
(2.17)
 
(0.65)
Commodity
(0.77)
 
(2.28)
Aggregate Value at Risk
 (4.06)%
 
 (2.68)%

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As of June 30, 2011 AHL I, LLC’s total capitalization was $39,564,376.  The Partnership owned approximately 90% of AHL I, LLC.  Effective June 1, 2011 AHL I, LLC was added as a Trading Company.

AHL I, LLC
 
                                              June 30, 2011
Primary Market Risk Category
VAR             
   
Interest Rate
(0.74)%
Currency
 (2.52)
Equity
 (0.41)
Commodity
     (0.52)
Aggregate Value at Risk
(2.14)%



As of December 31, 2010, WNT I, LLC’s total capitalization was $53,769,718.  The Partnership owned approximately 80% of WNT I, LLC.  Effective as of the close of business on May 31, 2011, WNT I, LLC was terminated as a Trading Advisor to the Partnership.

WNT I, LLC
 
                                           December 31, 2010
Primary Market Risk Category
VAR     
   
Interest Rate
 (0.26)%
Currency
(0.43)
Equity
(1.26)
Commodity
(1.44)
Aggregate Value at Risk
 (2.85)%


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.


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Because the business of the Trading Companies is the speculative trading of futures, forwards and options, the composition of their 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 table below supplements 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 July 1, 2010 through June 30, 2011 and January 1, 2010 through December 31, 2010, respectively.


June 30, 2011
Altis I, LLC
Primary Market Risk Category
High      
Low                            
Average        
       
Interest Rate
(1.08)%
(0.56)%
(0.82)%  
Currency
 (2.14)
(1.38)
(1.80)
Equity
 (3.93)
(0.36)
(1.46)
Commodity
 (2.98)
(0.77)
(2.08)
Aggregate Value at Risk
  (4.41)%
(2.22)%
(3.38)%


Aspect I, LLC
Primary Market Risk Category
High
Low                              
Average           
       
Interest Rate
(2.17)%
(0.27)%
(1.19)%  
Currency
 (1.34)
(0.91)
(1.12)
Equity
 (1.48)
(0.23)
(0.92)
Commodity
 (2.52)
(0.75)
(1.77)
Aggregate Value at Risk
  (4.21)%
(2.59)%
(3.42)% 




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BHM I, LLC
Primary Market Risk Category
High          
Low                        
Average            
       
Interest Rate
(0.55)%
(0.34)%
(0.42)%
Currency
  (0.16)
(0.06)
 (0.10)
Commodity
  (3.90)
(3.33)
 (3.61)
Aggregate Value at Risk
    (4.45)%
(3.61)%
(4.03)%




Boronia I, LLC
Primary Market Risk Category
High
Low                         
Average            
       
Interest Rate
(0.73)%
(0.36)%
(0.54)% 
Currency
 (1.39)
(0.57)
(0.95)
Equity
 (2.17)
(0.65)
(1.37)
Commodity
 (2.57)
(0.77)
(1.90)
Aggregate Value at Risk
   (4.06)%
(2.68)%
(3.47)%  

AHL I, LLC
Primary Market Risk Category
High       
Low                      
Average           
       
Interest Rate
(0.74)%  
   –    %
(0.18)%  
Currency
(2.52)
   –
(0.63)
Equity
(0.41)
   –
(0.10)
Commodity
(0.52)
   –
(0.13)
Aggregate Value at Risk
 (2.14)%
   –    %
(0.54)%  















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December 31, 2010
Altis I, LLC
Primary Market Risk Category
High       
Low                            
Average         
             
Interest Rate
(1.57)%
(0.72)%
(1.04)% 
Currency
 (2.14)
(0.75)
(1.50)
Equity
 (3.93)
(0.36)
(2.12)
Commodity
 (2.98)
(1.16)
(2.22)
Aggregate Value at Risk
   (4.41)%
(2.43)%
(3.59)%  

 
Aspect I, LLC
Primary Market Risk Category
High        
Low                       
Average          
       
Interest Rate
(1.65)%  
(0.27)%
(1.10)%  
Currency
(1.34)
(0.33)
(0.83)
Equity
(2.14)
(0.22)
(1.21)
Commodity
(2.49)
(0.76)
(1.50)
Aggregate Value at Risk
 (4.04)%
(1.56)%
(3.00)% 

BHM I, LLC
Primary Market Risk Category
High       
Low                              
Average         
       
Interest Rate
(0.78)% 
(0.16)%
 (0.42)%   
Currency
(0.37)
(0.06)
(0.22)
Commodity
(3.90)
(2.52)
(3.33)
Aggregate Value at Risk
(4.45)% 
(2.41)%
(3.65)%

Boronia I, LLC
Primary Market Risk Category
High      
Low                                
Average         
       
Interest Rate
(2.08)% 
(0.36)%
(1.12)% 
Currency
(1.39)
(0.57)
(0.85)
Equity
(2.01)
(0.65)
(1.34)
Commodity
(2.57)
(0.69)
(1.72)
Aggregate Value at Risk
 (4.30)%
(2.68)%
(3.57)% 


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WNT I, LLC
Primary Market Risk Category
High          
Low                                      
Average             
       
Interest Rate
(1.13)%  
(0.26)%
(0.71)% 
Currency
(0.72)
(0.43)
(0.59)
Equity
(2.15)
(0.13)
(1.11)
Commodity
(1.44)
(0.58)
(1.02)
Aggregate Value at Risk
  (2.85)%
(1.45)%
(2.23)% 

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;
·  
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.”
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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 June 30, 2011 and December 31, 2010 and for the four quarter-end reporting periods from July 1, 2010 through June 30, 2011 and from January 1, 2010 through December 31, 2010, respectively.  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.

The Trading Companies also maintain a substantial portion of their available assets in cash at MSSB; as of June 30, 2011, such amount was equal to:
·  
approximately 88% of Altis I, LLC’s net assets.
·  
approximately 92% of Aspect I, LLC’s net assets.
·  
approximately 92% of BHM I, LLC’s net assets.
·  
approximately 91% of Boronia I, LLC’s net assets.
·  
approximately 94% of AHL 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.
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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 27A of the Securities Act of 1933 and 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 Ceres and the Trading Advisors for managing such exposures, are subject to numerous uncertainties, contingencies and risks, any one of which could cause the actual results of the Partnership’s risk controls to differ materially from the objectives of such strategies.  Government interventions, defaults and expropriations, illiquid markets, the emergence of dominant fundamental factors, political upheavals, changes in historical price relationships, an influx of new market participants, increased regulation, and many other factors could result in material losses, as well as in material changes to the risk exposures and the risk management strategies of the Partnership.

Investors must be prepared to lose all or substantially all of their investment in the Partnership.

Item 4.   CONTROLS AND PROCEDURES


Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of the management of Ceres, at the time this quarterly report was filed, Ceres’ President (Ceres’ principal executive officer) and Chief Financial Officer (Ceres’ principal

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financial officer) have evaluated the effectiveness of the design and operation 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 June 30, 2011.  The Partnership’s disclosure controls and procedures are designed to provide reasonable assurance that information the Partnership is required to disclose in the reports that the Partnership files or submits under the Exchange Act are recorded, processed and summarized and reported within the time period specified in the applicable rules and forms.  Based on this evaluation, the President and Chief Financial Officer of Ceres have concluded that the disclosure controls and procedures of the Partnership were effective at June 30, 2011.

 
Changes in Internal Control over Financial Reporting
There have been no significant 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 reasonably likely to materially 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.






- 41 -
 
 
 

 
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, 2010.

 
 
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 June 30, 2011 was $301,481,510.  The Partnership received $2,217,000 in consideration from the sale of Units to the General Partner.

Item 6.  EXHIBITS
10.1
Advisory Agreement among Morgan Stanley Smith Barney AHL I, LLC, Ceres Managed Futures LLC and Man-AHL (USA) Ltd. dated May 4, 2011.
 
31.01
Certification of President of Ceres Managed Futures 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 Ceres Managed Futures LLC, the general partner of the Partnership, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
32.01
Certification of President of Ceres Managed Futures 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 Ceres Managed Futures 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.
 

 

 
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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.




 
Polaris Futures Fund L.P.
 
(Registrant)
     
 
By:
Ceres Managed Futures LLC
   
(General Partner)
     
August 15, 2011
By:
/s/Jennifer Magro
   
Jennifer Magro
   
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.




















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