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EX-99.2 - EXHIBIT - Meritage Futures Fund L.P.tr2tc.htm
EX-99.1 - EXHIBIT - Meritage Futures Fund L.P.as1tc.htm
EX-99.3 - EXHIBIT - Meritage Futures Fund L.P.wc1tc.htm
EX-31.02 - EXHIBIT - Meritage Futures Fund L.P.mvex3102.htm
EX-31.01 - EXHIBIT - Meritage Futures Fund L.P.mvex3101.htm
EX-32.02 - EXHIBIT - Meritage Futures Fund L.P.mvex3202.htm
EX-32.01 - EXHIBIT - Meritage Futures Fund L.P.mvex3201.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

x           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2010 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
     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
     
Securities registered pursuant to Section 12(b) of the Act:
   
     
Title of each class
 
Name of each exchange
   
on which registered
     
None
 
None
     
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of Class)

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes 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 Registration 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.404 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definition 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

State the aggregate market value of the Units of Limited Partnership Interest held by non-affiliates of the registrant.  The aggregate market value shall be computed by reference to the price at which Units were sold as of the last business day of the registrant’s most recently completed second fiscal quarter: $57,393,220 at June 30, 2010.



 
 

 

MANAGED FUTURES PROFILE MV, L.P.
INDEX TO ANNUAL REPORT ON FORM 10-K
December 31, 2010



Part I.
   
     
Item 1.
Business
1-5
     
Item 1A.
Risk Factors
6-23
     
Item 1B.
Unresolved Staff Comments
23
     
Item 2.
Properties
23
     
Item 3.
Legal Proceedings
23
     
Item 4.
(Removed and Reserved)
23
     
     
Part II.
   
     
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters  and Issuer Purchases of Equity Securities
24
     
Item 6.
Selected Financial Data
25
     
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
26-42
     
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
43-58
     
Item 8.
Financial Statements and Supplementary Data
58-92
     
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
93
     
Item 9A.
Controls and Procedures
93-94
     
Item 9B.
Other Information
94
     
     
Part III.
   
     
Item 10.
Directors, Executive Officers and Corporate Governance
95-104
     
Item 11.
Executive Compensation
104
     
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
104
     
Item 13.
Certain Relationships and Related Transactions, and Director Independence
105
     
Item 14.
Principal Accounting Fees and Services
105-106
     
Part IV.
   
     
Item 15.
Exhibits, Financial Statement Schedules
107



 
 

 


 
 

 

PART I
Item 1.  BUSINESS
(a) General Development of Business.  Managed Futures Profile MV, L.P. (“Profile MV” or the “Partnership”), 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 for physicals transactions and futures contracts transactions, and any rights pertaining thereto (collectively, “Futures Interests”) through the Partnership’s investments in its affiliated trading companies (each a “Trading Company” or collectively the “Trading Companies”).  The Partnership is one of the partnerships in the Managed Futures Multi-Strategy Profile Series, comprised of Profile MV, Managed Futures Profile LV, L.P., and Managed Futures Profile HV, L.P. (collectively, the “Profile Series”).

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 (each a “Trading Advisor” or collectively the “Trading Advisors”) registered with the Commodity Futures Trading Commission (“CFTC”), which makes investment decisions for each respective Trading Company.  The Trading Companies are each Delaware limited liability companies operated by Ceres Managed Futures LLC (“Ceres” or the “General Partner”).

The Partnership commenced trading operations on August 1, 2007, in accordance with the terms of the limited partnership agreement (the “Limited Partnership Agreement”).
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In 2009, Morgan Stanley and Citigroup Inc. (“Citigroup”) combined certain assets of the Global Wealth Management Group of Morgan Stanley & Co. Incorporated (“MS&Co.”), including Demeter Management LLC (“Demeter”), and the Smith Barney division of Citigroup Global Markets Inc., into a new joint venture, Morgan Stanley Smith Barney Holdings LLC (“MSSBH”).  Since their contribution to the joint venture, Demeter and Ceres, the commodity pool operator for various legacy Citigroup-sponsored commodity pools, have worked closely together to align the operations and management of the commodity pools they oversee.

As a result, MSSBH, together with the unanimous support of the respective Boards of Directors of Demeter and Ceres, determined that a combination of the assets and operations of Demeter and Ceres into a single commodity pool operator, Ceres, is in the best interest of the limited partners and believes that this combination will achieve the intended benefits of the joint venture.  The effective date of the combination was December 1, 2010.

As of May 1, 2010 the non-clearing commodity broker for each Trading Company is Morgan Stanley Smith Barney LLC (“MSSB” or the “Placement Agent”).  MS&Co., acts as each Trading Company’s clearing commodity broker, except that Morgan Stanley Smith Barney Kaiser I, LLC (“Kaiser I, LLC”), uses Newedge USA, LLC (formerly, Newedge Financial Inc.) (“Newedge”).  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 for 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 counterparty is either MS&Co. and/or Morgan Stanley Capital Group Inc. (“MSCG”) to the extent a Trading

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Company trades options on over-the-counter foreign currency forward contracts (except that Newedge serves in such capacity with respect to Kaiser I, LLC).

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.  As of December 31, 2010 and 2009, the Partnership’s cash balances were zero.

The Trading Companies and their Trading Advisors for the Partnership at December 31, 2010, are as follows:
 
Trading Company
 
Trading Advisor
Morgan Stanley Smith Barney Aspect I, LLC
Aspect Capital Limited
Morgan Stanley Smith Barney Augustus I, LLC
GAM International Management Limited
Morgan Stanley Smith Barney Chesapeake Diversified I, LLC
Chesapeake Capital Corporation
Morgan Stanley Smith Barney GLC I, LLC
GLC, Ltd.
Kaiser I, LLC
Kaiser Trading Group Pty Ltd.
Morgan Stanley Smith Barney TT II, LLC
Transtrend B.V.
Morgan Stanley Smith Barney WNT I, LLC
Winton Capital Management Limited

Ceres, the general partner of the Partnership and the trading manager (the “Trading Manager”) of each Trading Company is a wholly-owned subsidiary of MSSBH.  MSSBH is majority-owned indirectly by Morgan Stanley and minority-owned indirectly by Citigroup. MS&Co., MSIP, and MSCG are wholly-owned subsidiaries of Morgan Stanley.

Prior to December 1, 2010, the Partnership’s general partner was Demeter.  Demeter was a wholly-owned subsidiary of MSSBH.
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Ceres (Demeter, prior to December 1, 2010) may reallocate the Partnership’s assets to different Trading Companies in 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 either class A, B, C or D Units in the Partnership (each a “Class” and collectively the “Classes”).  As of December 31, 2010, 2009 and 2008, there were no Class D Units outstanding in the Partnership.  Certain limited partners who are not subject to the ongoing placement agent fee are deemed to hold Class Z Units. Ceres (Demeter, prior to December 1, 2010) received Class Z Units with respect to its investment in the Partnership.

Ceres (Demeter, prior to December 1, 2010) 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’ (Demeter’s, prior to December 1, 2010) sole discretion.  Class Z Unit holders are not subject to paying the placement agent fee.

The Partnership began the year at a net asset value per Unit of $1,071.20, $1,084.19, $1,097.34, and $1,124.10 and returned 5.01%, 5.53%, 6.06%, and 7.12% to $1,124.85, $1,144.18, $1,163.83 and $1,204.13 for Class A, Class B, Class C, and Class Z, respectively, on December 31, 2010.


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(b)  Financial Information about Segments.  The Partnership’s business consists of only one segment, which is the speculative trading of Futures Interest as discussed in Item 1(a).  The Partnership does not engage in the sale of goods or services.

(c)  Narrative Description of Business.  See Item 1(a) above for a complete description of the Partnership’s business.  The information requested in Section 101(c)(i) through (xiii) of Regulation    S-K is not applicable to the Partnership.  Additionally, the Partnership does not have any employees.  The directors and officers of the General Partner are listed in Part III Item 10. “Directors, Executive Officers and Corporate Governance”.

(d)  Financial Information about Geographic Areas.
Not applicable.

(e)  Available Information.  Effective with the Form 10 filed on October 2, 2008, the Partnership files an annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to these reports with the Securities and Exchange Commission (“SEC”).  You may read and copy any document filed by the Partnership at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C.  20549. Please call the SEC at 1-800-SEC-0330 for information on the Public Reference Room.  The Partnership does not maintain an internet website, however, the Partnership’s SEC filings are available to the public from the EDGAR database on the SEC’s website at “http://www.sec.gov”.  The Partnership’s CIK number is 0001428042.

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Item 1A.  RISK FACTORS
 
This section includes some of the principal risks that investors will face with an investment in the Partnership.   All trading activities take place at the Trading Company level, but since the Partnership invests substantially all of its assets in multiple Trading Companies, each of the risks applicable to the Trading Companies flow through to the Partnership.
 
THE UNITS IN THE PARTNERSHIP ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK.  THEY ARE SUITABLE ONLY FOR PERSONS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT.
 
Risks Relating to the Partnership and the Offering of Units
 
        You Should Not Rely on Past Performance of the General Partner or the Trading Advisors In Deciding To Purchase Units.   The past investment performance of other entities managed by the General Partner and the Trading Advisors is not necessarily indicative of a Partnership’s or a Trading Company’s future results.  No assurance can be given that the General Partner will succeed in meeting the investment objectives of the Partnership.  You may lose all or substantially all of your investment in the Partnership.
 
The Trading Companies and Partnership Incur Substantial Charges.  Each Trading Company must pay substantial charges, and must generate profits and interest income which exceed its fixed costs in order to avoid depletion of its assets.  Each Trading Company is required to pay brokerage commissions and monthly management fees to the Trading Advisors regardless of its performance.  In addition, each Trading Company pays its Trading Advisor an incentive fee of
 

 
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20% of new trading profits.  Each Trading Company pays a fee equal to 1/12 of 0.35% of the beginning of the month net assets to cover its administrative, operating, offering and organizational expenses.  As a limited partner in the Partnership, you will be indirectly responsible for the expenses paid by the Trading Companies in which the Partnership invests.
 
The Partnership pays the General Partner’s Fee, and pays the Placement Agent’s ongoing compensation.  In addition, the Partnership pays a fee equal to 1/12 of 0.40% of the beginning of the month net asset value to cover its administrative, operating, offering and organizational expenses.
 
Incentive Fees may be Paid by a Trading Company Even Though the Trading Company Sustains Trading Losses.  Each Trading Company pays its Trading Advisor an incentive fee based upon the new trading profits it generates for each account in the Trading Company.  These new trading profits include unrealized appreciation on open positions.  Accordingly, it is possible that a Trading Company will pay an incentive fee on new trading profits that do not become realized.  Also, each Trading Advisor will retain all incentive fees paid to it, even if it incurs a subsequent loss after payment of an incentive fee.  Due to the fact that incentive fees are paid quarterly, it is possible that an incentive fee may be paid to a Trading Advisor during a year in which the assets allocated to the Trading Advisor suffer a loss for the year.  Because each Trading Advisor receives an incentive fee based on the new trading profits earned by the Trading Advisor, the Trading Advisors may have an incentive to make investments that are riskier than would be the case in the absence of such an incentive fee being paid to the Trading Advisors based on new trading profits.  In addition, as incentive fees are calculated on a Trading Company-by-Trading Company basis, it is possible that one or more Trading Advisors could receive incentive fees during periods when a Partnership has a negative return as a whole.
 
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Restricted Investment Liquidity in the Units.  There is no secondary market for the Units, and you may not redeem your Units other than as of the third to last business day of each month.  Your right to receive payment for a redemption of some or all of your Units is dependent upon (a) the Partnership having sufficient assets to pay its liabilities on the redemption date, and (b) the General Partner’s receipt of your request for redemption in the form provided by the General Partner no later than 3:00 p.m., New York City time, on the third business day before the end of the month.  The General Partner will not permit a transfer, sale, pledge or assignment of Units unless it is satisfied that the transfer, sale, pledge or assignment would not be in violation of Delaware law or applicable federal, state, or foreign securities laws and notwithstanding any transfer, sale, pledge or assignment, the Partnership will continue to be classified as a partnership rather than as an association taxable as a corporation under the Internal Revenue Code of 1986, as amended (the “Code”).  No transfer, sale, pledge or assignment of Units will be effective or recognized by a Partnership if the transfer, sale, pledge or assignment would result in the termination of the Partnership for federal income tax purposes.  Any attempt to transfer, sell, pledge or assign Units in violation of the Limited Partnership Agreement will be ineffective.
 
General Partner Redemptions. The General Partner has a right to redeem all or part of its investment in the Partnership at any time without notice to the limited partners. For any such redemption, the General Partner will redeem its Units at the end of the month in the same manner as any limited partner would follow to redeem Units.  Additionally, the General Partner has the right to redeem Units it holds in the event redemptions for limited partners are suspended.
 

 
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The Partnership’s Structure Has Conflicts of Interest.
 
The General Partner, the Placement Agent, MS&Co., MSCG and MSIP are affiliates.  As a result, the fees and other compensation received by these parties and other terms relating to the operation of the Partnership and the sale of Units have not been negotiated independently.

“Bid-ask” spreads are incorporated in the price of all over-the-counter foreign exchange trades executed by the Trading Companies, and MS&Co. and MSCG will benefit from such spreads as the Trading Advisors execute a substantial portion of over-the-counter foreign exchange trades with MS&Co. and MSCG.

Employees of the Placement Agent receive a portion of the ongoing placement agent fee paid by the Partnership or, for consulting clients, they receive the fees and expenses described in such consulting client’s consulting agreement.  Therefore, these employees have a conflict of interest in making recommendations regarding the purchase or redemption of Units.

The Trading Advisors, MS&Co., MSCG, MSIP and the General Partner and their affiliates may trade futures, forwards and options for their own accounts, and thereby compete with the Trading Companies for positions.  Also, the other commodity pools managed by the General Partner and the Trading Advisors may compete with the Trading Companies for futures, forwards, options positions. These conflicts can result in less favorable prices on the Partnership’s transactions.

 
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An Investment in Units may not Diversify an Overall Portfolio.  Because futures, forwards and options have historically performed independently of traditional investments in equities and bonds, the General Partner believes that managed futures funds like the Partnership can diversify a traditional portfolio of equities and bonds.  However, the General Partner cannot assure you that the Partnership will perform with a significant degree of non- or low-correlation to limited partners’ other investments in the future.  You may lose your entire investment in the Partnership.
 
The Partnership nor the Trading Companies are Registered Investment Companies.  The Partnership and Trading Companies are not required to register, and are not registered, as investment companies under the Investment Company Act of 1940, as amended (the “Investment Company Act”).  Accordingly, investors will not have the protections afforded by the Investment Company Act (which, among other matters, requires investment companies to have a majority of disinterested directors and regulates the relationship between the advisor and the investment company).
 
The Federal Reserve Board's Regulation of Morgan Stanley Could Affect the Activities of the Partnership and the Trading Companies.  As a financial holding company (“FHC”) under the Bank Holding Company Act, Morgan Stanley and its affiliates are subject to the comprehensive, consolidated supervision and regulation of the Board of Governors of the Federal Reserve System (“Federal Reserve”). A significant focus of this regulatory framework is the operation of Morgan Stanley and its subsidiaries in a safe and sound manner, with sufficient capital, earnings and liquidity that Morgan Stanley may serve as a source of financial and managerial strength to Morgan Stanley Bank, N.A., Morgan Stanley Private Bank, National Association, and Morgan Stanley Trust, National Association (the “Banks”).  These Banks must remain well-capitalized and

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well-managed if Morgan Stanley is to maintain its FHC status and continue to engage in the widest range of permissible financial activities.  In addition, the general exercise by the Federal Reserve of its regulatory, supervisory and enforcement authority with respect to Morgan Stanley and certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act” or the “Act”) could result in changes to Morgan Stanley’s business practices or the scope of its current lines of business, including certain limited divestitures.  Although such changes could have an impact on and consequences for Morgan Stanley, the General Partner, the Partnership and the Trading Companies, any limited divestiture should not directly involve the General Partner, the Partnership or the Trading Companies.
 
The recent enactment of the Dodd-Frank Act will result in enhanced regulation by the Federal Reserve and, with respect to the Banks, may result in enhanced regulation by the Office of the Comptroller of the Currency (“OCC”).  The relevant provisions of the Act take effect in approximately one year.  The Act will require that, in order to maintain FHC status, Morgan Stanley
(as well as the Banks) be well-capitalized and well-managed, as those terms are defined by the Federal Reserve.  The Dodd-Frank Act also grants the Federal Reserve greater regulatory authority over the subsidiaries of a bank holding company.  Additionally, because it is a bank holding company with more than $50 billion in consolidated assets, Morgan Stanley is subject to enhanced supervision by and more stringent prudential standards to be established by the Federal Reserve.  The Federal Reserve is required to apply higher capital requirements to bank holding companies with more than $50 billion in consolidated assets than to other bank holding companies.


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The Units are not being offered by the Banks, and as such: (1) are not Federal Deposit Insurance Corporation (the “FDIC”) insured, (2) are not deposits or other obligations of the Banks, (3) are not guaranteed by the Banks, and (4) involve investment risks, including possible loss of principal.
 
Assets Held in Accounts at U.S. Banks May Not Be Fully Insured.  The assets of each Trading Company that are deposited with Commodity Brokers or their affiliates may be placed in deposit accounts at U.S. banks.  The FDIC insures deposits held at its member banks for up to $250,000 (including principal and accrued interest) for each insurable capacity (e.g., individual accounts, joint accounts, corporate accounts, etc.). If the FDIC were to become receiver of U.S. bank holding deposit accounts that were established by a Commodity Broker or one of its affiliates, then it is uncertain whether the Commodity Broker, the affiliate involved, the Trading Company, the Partnership, or the investor would be able to reclaim cash in the deposit accounts above $250,000.

 
THE UNITS ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK.  THEY ARE SUITABLE ONLY FOR PERSONS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT.
 
Risks Relating to Futures Interests Trading and the Futures Interests Markets
 
Futures Interests Trading is Speculative and Volatile.  The rapid fluctuations in the market prices of futures, forwards, and options make an investment in the Partnership volatile.  Volatility is caused by, among other things, changes in supply and demand relationships; weather; agricultural,
 

 
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trade, fiscal, monetary and exchange control programs; domestic and foreign political and economic
 
events and policies; and changes in interest rates.  If a Trading Advisor incorrectly predicts the direction of prices in futures, forwards, and options, large losses may occur.  The Partnership’s performance will be volatile (some more than others) on a monthly and an annual basis.  The Partnership could lose all or substantially all of its assets.  The multi-advisor feature of the Partnership, through the Trading Companies, may reduce the return volatility relative to the performance of single-advisor investment funds.
 
The Trading Companies’ Futures Interests Trading is Highly Leveraged.  The Trading Advisors for the Partnership use substantial leverage. Trading futures, forwards, and options involves substantial leverage, which could result in immediate and substantial losses.  Due to the low margin deposits normally required in trading futures, forwards, and options (typically between
 
2% and 15% of the value of the contract purchased or sold), an extremely high degree of leverage is typical of a futures interests trading account.  As a result, a relatively small price movement in futures, forwards, and options may result in immediate and substantial losses to the investor.  For example, if 10% of the face value of a contract is deposited as margin for that contract, a 10% decrease in the value of the contract would cause a total loss of the margin deposit.  A decrease of more than 10% in the value of the contract would cause a loss greater than the amount of the margin deposit.
 
The leverage employed by each Trading Advisor in its trading can vary substantially from month to month.  This leverage, expressed as the underlying value of each Trading Company’s positions compared to the average net assets of such Trading Company, is anticipated to range from
 
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two times the Trading Company’s net assets to ten times the Trading Company’s net assets.  Under
 
certain conditions, however, a Trading Company’s leverage could exceed (or be less than) such range.
 
Options Trading can be More Volatile than Futures Trading.  A Trading Company may trade options on futures.  Although successful options trading requires many of the same skills as successful futures trading, the risks are different.  Successful options trading requires a trader to assess accurately near-term market volatility because that volatility is immediately reflected in the price of outstanding options.  Correct assessment of market volatility can therefore be of much greater significance in trading options than it is in many long-term futures strategies where volatility does not have as great an effect on the price of a futures contract.
 
Market Illiquidity May Cause Less Favorable Trade Prices.  Although the Trading Advisors for each Trading Company generally will purchase and sell actively traded contracts where last trade price information and quoted prices are readily available, the prices at which a sale or purchase may differ from the prices expected because there may be a delay between receiving a quote and executing a trade, particularly in circumstances where a market has limited trading volume and prices are often quoted for relatively limited quantities.  In addition, most U.S. futures exchanges have established “daily price fluctuation limits” which preclude the execution of trades at prices outside of the limit, and, from time to time, the CFTC or the exchanges may suspend trading in market disruption circumstances.  In these cases it is possible that a Trading Company could be required to maintain a losing position that it otherwise would execute and incur significant losses or be unable to establish a position and miss a profit opportunity.
 

 
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Trading on Foreign Exchanges Presents Greater Risks to the Trading Companies than Trading on U.S. Exchanges.  Each Trading Company trades on exchanges located outside the United States. Trading on U.S. exchanges is subject to CFTC regulation and oversight, including, for example, minimum capital requirements for commodity brokers, segregation of customer funds, regulation of trading practices on the exchanges, prohibitions against trading ahead of customer orders, prohibitions against filling orders off exchanges, prescribed risk disclosure statements, testing and licensing of industry sales personnel and other industry professionals, and recordkeeping requirements.  Trading on foreign exchanges is not regulated by the CFTC or any other U.S. governmental agency or instrumentality and may be subject to regulations that are different from those to which U.S. exchange trading is subject, provide less protection to investors than trading on U.S. exchanges, and may be less vigorously enforced than regulations in the U.S.
 
The percentage of each Trading Company’s positions which are traded on foreign exchanges can vary significantly from month to month.  The average percentage of each Trading Company’s positions which are expected to be traded on foreign exchanges in any given month is anticipated to range from 30% to 65% of such Trading Company’s positions, but could be greater or less than such expected range during any time period.
 
Positions on foreign exchanges also are subject to the risk of, among other things, exchange controls, expropriation, excessive taxation or government disruptions.
 
A Trading Company may incur losses when determining the value of its foreign positions in U.S. dollars because of fluctuations in exchange rates.
 

 
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The Unregulated Nature of the Over-The-Counter (“OTC”) Markets Creates Counterparty Risks that Do Not Exist in Futures Trading on Exchanges.  Unlike futures contracts, over-the-counter “spot” and forward contracts are entered into between private parties off an exchange and are not regulated by the CFTC or by any other U.S. or foreign governmental agency.  Due to the fact that such contracts are not traded on an exchange, the performance of those contracts is not guaranteed by an exchange or its clearinghouse and a Trading Company is at risk with respect to the ability of the counterparty to perform on the contract, including the creditworthiness of the counterparty.  Trading in the over-the-counter foreign exchange markets is not regulated; therefore, there are no specific standards or regulatory supervision of trade pricing and other trading activities that occur in those markets.  The Trading Companies trade such contracts with MS&Co., MSCG and Newedge, are at risk with respect to the creditworthiness and trading practices of each of MS&Co., MSCG and Newedge as the counterparty to the contracts.
 
The Dodd-Frank Act will affect the manner in which OTC swap transactions are traded and the credit risk associated with such trading.  Depending upon actions taken by regulatory authorities, these changes may also affect the manner of trading of OTC foreign currency transactions.  The general effective date of the derivatives portion of the Dodd-Frank Act is one year following its enactment.  Transactions that have been entered into prior to implementation of the provisions of the Dodd-Frank Act will remain in effect.   Accordingly, even after the new regulatory framework is fully implemented, the risks of OTC foreign exchange transactions will continue to be considerations with respect to transactions entered into prior to the implementation of the provisions of the Dodd-Frank Act.


 
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The percentage of each Trading Company’s positions that are expected to constitute forward currency contracts can vary substantially from month to month.
 
Deregistration of the Commodity Pool Operator or Commodity Trading Advisors Could Disrupt Operations.  The General Partner is a registered commodity pool operator and except for GAM International Management Limited and GLC Ltd, each Trading Advisor is registered with the CFTC as a commodity trading advisor.  If the CFTC were to terminate, suspend, revoke or not renew the registration of the General Partner, the General Partner would withdraw as general partner of the Partnership.  The limited partners would then determine whether to select a replacement general partner or to dissolve the Partnership.  If the CFTC were to terminate, suspend, revoke or not renew the registration of any Trading Advisor, the General Partner would terminate the Trading Advisor’s advisory agreement(s) with the Partnership.  The General Partner could reallocate the Partnership’s assets managed by the relevant Trading Advisor to new Trading Advisor(s), or terminate the Partnership.  No action is currently pending or threatened against the General Partner or the Trading Advisors.

 
The Trading Companies are Subject to Speculative Position Limits.  The CFTC and U.S. futures exchanges have established speculative position limits (referred to as “position limits”) on the maximum position in certain Futures Interests contracts that may be held or controlled by any one person or group.  Therefore, a Trading Advisor may have to reduce the size of its position in one or more futures contracts in order to avoid exceeding such position limits, which could adversely affect the profitability of a Trading Company.  The CFTC or the futures exchange may amend or adjust these position limits or the interpretation of how such limits are applied, adversely affecting the profitability of a Trading Company.  The Dodd-Frank Act requires the CFTC to adopt
 
- 17 -
 
 
 

 
 
speculative position limits in certain commodities across futures markets, OTC transactions that perform a significant price discovery function and contracts traded on a foreign board of trade having direct market access from the U.S. that settle against the price of futures contracts traded on a U.S. market.  Such limits may adversely affect the profitability of the Trading Companies.
 
The Trading Companies have Credit Risk to the Commodity Brokers.  Each Trading Company has credit risk because the Commodity Brokers act as the futures commission merchants for futures transactions or the counterparties of OTC transactions, with respect to most of each Trading Company’s assets.  As such, in the event that the Commodity Brokers are unable to perform, the Trading Companys’ assets are at risk and, in such event, investors may only recover a pro rata share of their investment in the Partnership or nothing at all.  Exchange-traded futures and futures-styled option contracts are marked to market on a daily basis, with variations in value credited or charged to each Trading Companys’ account on a daily basis.  The Commodity Brokers, as futures commission merchants for each Trading Companys’ exchange-traded contracts, are required, pursuant to CFTC regulations, to segregate from their own assets, and for the sole benefit
 
of their commodity customers, all funds held by them with respect to exchange-traded futures and futures-styled options contracts, including an amount equal to the net unrealized gain on all open futures and futures-styled options contracts.  With respect to each Trading Company’s over-the-counter foreign exchange contracts with MS&Co., MSCG and Newedge, prior to the implementation of the Dodd-Frank Act’s provisions, there are no daily settlements of variations in value, and there is no requirement to segregate funds held with respect to such contracts.  In the event of a shortfall in segregated customer funds held by the futures commission merchant, the Trading Companys’ assets on account with the futures commission merchant may be at risk, and in
 

 
- 18 -
 
 
 

 
 
such event, the Trading Company may only recover a pro rata share of the available customer funds.
 
Risks Relating to the Trading Advisors
 
You should not rely on the past performance of the Trading Advisors in deciding to purchase Units.  Since the future performance of a Trading Advisor is unpredictable, each Trading Advisor’s past performance is not necessarily indicative of future results.
 
Reliance on the Trading Advisors to Trade Successfully.  Each Trading Advisor is responsible for making all futures, forwards, and options trading decisions on behalf of the applicable Trading Company.  The General Partner has no control over the specific trades the Trading Advisors may make, leverage used, risks and/or concentrations assumed or whether the Trading Advisors will act in accordance with the disclosure documents or descriptive materials furnished by them to the General Partner.  The General Partner can provide no assurance that the trading programs employed by the Trading Advisors will be successful.
 
Market Factors may Adversely Influence the Trading Programs.  Often, the most unprofitable market conditions for the Trading Companies are those in which prices “whipsaw,” that is, such price moves quickly upward (or downward), then reverses, then moves upward (or downward) again, then reverses again.  In such conditions, the Trading Advisors may establish positions based on incorrectly identifying both the brief upward or downward price movements as trends, where in fact no trends sufficient to generate profits develop.
 

 
- 19 -
 
 
 
 

 
Possible Consequences of Using Multiple Trading Advisors.  Each Trading Advisor makes trading decisions independent of the other Trading Advisors for the Partnership.  Thus, it is possible that the Partnership could hold opposite positions in the same or similar futures, forwards, and options, thereby offsetting any potential for profit from these positions.
 
Increasing Assets Managed by a Trading Advisor may Adversely Affect Performance.  The rates of return achieved by a Trading Advisor often diminish as the assets under its management increases.  This can occur for many reasons, including the inability of the Trading Advisor to execute larger position sizes at desired prices and because of the need to adjust the Trading Advisor’s trading program to avoid exceeding speculative position limits.  These are limits established by the CFTC and the exchanges on the number of speculative futures and options contracts in a commodity that one trader may own or control.  The Trading Advisors have not agreed to limit the amount of additional assets that they will manage.
 
You will not be Aware of Changes to Trading Programs.  Because of the proprietary nature of each Trading Advisor’s trading programs, you generally will not be advised if adjustments are made to a Trading Advisor’s trading program in order to accommodate additional assets under management or for any other reason.
 
A Trading Advisor may Terminate its Advisory Agreement.  Generally, the advisory agreements with the current Trading Advisors had an initial one-year term, which renew for additional one-year terms annually, unless terminated by the Trading Manager or the Trading Advisor.  One of the advisory agreements had a shorter initial term and has a three-month renewal term.  In the event that an advisory agreement is not renewed, the Trading Manager may not be able
 

 
- 20 -
 
 
 

 
 
enter into arrangements with that Trading Advisor or another trading advisor on terms substantially similar to the advisory agreements described in the Partnership’s private placement memorandum.
 
Disadvantages of Replacing or Switching Trading Advisors.  A Trading Advisor generally is required to recoup previous trading losses before it can earn performance-based compensation.  However, the Trading Manager may elect to replace a Trading Advisor that has a “loss carry-forward.”  In that case, the Trading Company would lose the “free ride” of any potential recoupment of the prior losses.  In addition, the new Trading Advisor would earn performance-based compensation on the first dollars of investment profits. The effect of the replacement of or the reallocation of assets away from Trading Advisors therefore could be significant.
 
Taxation Risks
 
You May Have Tax Liability Attributable To Your Interest in a Partnership Even If You Have Received No Distributions and Redeemed No Units and Even if the Partnership Generated a Loss.  If the Partnership has a profit for a taxable year, the profit will be includible in your taxable income, whether or not cash or other property is actually distributed to you by the Partnership.  The General Partner presently does not intend to make any distributions from the Partnership.  Accordingly, it is anticipated that federal income taxes on your allocable share of the Partnership’s profits will exceed the amount of distributions to you, if any, for a taxable year, so you must be prepared to fund any tax liability from redemptions of Units or other sources.  In addition, the Partnership may have capital losses from trading activities that cannot be deducted against the Partnership’s interest income so you may have to pay taxes on interest income even if the Partnership generates a net loss.
 
- 21 -
 
 
 

 
 
The Partnership’s Tax Returns Could be Audited.  The Internal Revenue Service (the “IRS”) could audit the Partnership’s federal income tax returns.  If an audit results in an adjustment to the Partnership’s tax return, limited partners in the Partnership could be required to file amended returns and pay additional tax.
 
You Will Recognize Short-Term Capital Gain.  Profits on futures contracts traded in regulated U.S. and some foreign exchanges, foreign currency contracts traded in the interbank market, and U.S. and some foreign exchange-traded options on commodities are generally taxed as short-term capital gain to the extent of 40% of gains with respect to Section 1256 contracts and at least 50% of the gain arising from a mixed straddle account and are taxed at ordinary income rates.
 
The IRS Could Challenge Allocations of Recognized Gains to Limited Partners who Redeem.  The Limited Partnership Agreement provides that recognized gains may be specially allocated for tax purposes to redeeming limited partners.  If the IRS were to successfully challenge such allocations, each remaining limited partner’s share of recognized gains would be increased.
 
The IRS Could Take the Position that Deductions for Certain Partnership Expenses Are Subject To Various Limitations.  Non-corporate taxpayers are subject to certain limitations for deductions for “investment advisory expenses” for federal income tax and alternative minimum tax purposes.   The IRS could argue that certain Partnership expenses are investment advisory expenses.  Prospective investors should discuss the tax consequences of an investment in the Partnership with their tax advisers. 
 

 

 
- 22 -
 
 
 

 
 
Tax Laws Are Subject To Change at Any Time, Including Already Enacted Changes Scheduled To Take Effect in 2011.  Tax laws, and court and IRS interpretations thereof, are subject to change at any time, possibly with retroactive effect.
 

Item 1B.  UNRESOLVED STAFF COMMENTS
Not applicable.


Item 2.  PROPERTIES
The Partnership does not own or lease any properties.  Ceres operates out of facilities operated by  Morgan Stanley.  The address is 522 Fifth Avenue, 14th Floor, New York, New York 10036.

Item 3.  LEGAL PROCEEDINGS
None.

Item 4.  (REMOVED AND RESERVED)








- 23 -
 
 
 

 
 

 
PART II
Item 5.
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES


(a)  Market Information.  There is no established public trading market for Units of the Partnership.

(b)  Holders.  The number of holders of Units at December 31, 2010, was approximately 865.

(c)  Distributions. No distributions have been made by the Partnership since it commenced trading operations on August 1, 2007.  Ceres (Demeter, prior to December 1, 2010) has sole discretion to decide what distributions, if any, shall be made to investors in the Partnership.  Ceres (Demeter, prior to December 1, 2010) currently does not intend to make any distributions of the Partnership’s profits until termination of the Partnership.

(d)  Securities Sold; Consideration.  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 December 31, 2010, was $79,374,900.  The Partnership received $570,000 in consideration from the sale of Units to Ceres.

(e)  Placement agent.  The placement agent for the Partnership is MSSB.


(f)  Use of Proceeds.
 
Not applicable.
- 24 -

 
 

 

Item 6.  SELECTED FINANCIAL DATA (in dollars)
                                 For the period from
                      August 1, 2007
                                   (commencement of
                           For the Years Ended December 31,                                operations) to
 
2010
2009
2008
   December 31, 2007
 
$
$
 $
$
Total Realized/Net Change in Unrealized Appreciation (Depreciation) on Investments
 
 
        4,788,910
 
 
       (2,462,992)
 
 
4,020,161
 
 
   472,131
Net Income (Loss)
        2,951,912
       (3,966,008)
3,320,837
   368,461
Net Income (Loss) per Unit by Share Class
       
A
   53.65     
(106.64)
140.08
  37.76
B
       59.99
    (101.94)
146.22
  39.91
C
   66.49
(97.14)
152.42
  42.06
Z
   80.03
(87.25)
164.97
  46.38
Total Assets
      59,684,539
     60,605,650
     36,127,530
     11,078,252
Total Partners’ Capital
      58,428,501
     58,933,830
     35,059,306
     11,078,252
Net Asset Value per Units by Share Class
       
A
1,124.85
1,071.20
1,177.84
1,037.76
B
1,144.18
1,084.19
1,186.13
1,039.91
C
1,163.83
1,097.34
1,194.48
1,042.06
Z
1,204.13
1,124.10
1,211.35
1,046.38






















- 25 -

 
 

 

Item 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
 
RESULTS OF OPERATIONS
 
 
Liquidity.  MS&Co. and its affiliates (Newedge with respect to Kaiser I, LLC) 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 (Newedge with respect to Kaiser I, LLC).  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 CFTC 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.

- 26 -

 
 

 

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, forwards and options

- 27 -

 
 

 

markets.  The following presents a summary of the Partnership’s operations for each of the three years in the period ended, 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 are prepared in accordance with accounting principles generally accepted in the United States of America (“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 that 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 approximately 3:00 P.M. (E.T.) of the business day.




- 28-
 
 
 

 
Ceres (Demeter, prior to December 1, 2010) believes that, based on the nature of the operations of the Partnership, no assumptions relating to the application of critical accounting policies other than those presently used could reasonably affect reported amounts.

Year Ended December 31, 2010
The Partnership recorded total realized/net change in unrealized appreciation on investments of $4,788,910 and expenses totaling $1,836,998, resulting in a net income of $2,951,912 for the year ended December 31, 2010.  The Partnership’s net asset value per Unit by share Class is provided in the table below.
Share Class
NAV at 12/31/10
NAV at 12/31/09
     
A
$1,124.85
$1,071.20
B
$1,144.18
$1,084.19
C
$1,163.83
$1,097.34
Z
$1,204.13
$1,124.10

Total subscriptions and redemptions across all share Classes for the year ended December 31, 2010, were $7,052,269 and $10,509,510, respectively, and the Partnership’s ending capital was $58,428,501 at December 31, 2010 a decrease of $505,329 from ending capital at December 31, 2009 of $58,933,830.

The most significant trading gains were achieved within the global interest rate sector from long positions in U.S., European, and Japanese fixed-income futures. Prices in this sector increased during the first quarter on concerns that lending restrictions in China, possible reductions in U.S. stimulus measures, and Greece’s fiscal struggles might stifle the global economic rebound. Prices were then pressured higher during the second quarter amid an unexpected drop in U.S. consumer


- 29 -
 
 
 

 
confidence, increased regulatory scrutiny of the financial industry, and the growing European debt crisis. During the third quarter, prices continued to climb higher due to concern that European governments might struggle to repay their debt and Chinese economic growth might be slowing.
 
Within the currency markets, gains were recorded primarily during February from short positions in the British pound, euro, and Swiss franc versus the U.S. dollar as the value of these currencies declined against the U.S. dollar amid concerns that Greece’s fiscal struggles might begin to spread throughout Europe. In March, gains were recorded from long positions in the Mexican peso and Canadian dollar versus the U.S. dollar as the value of these currencies moved higher against the U.S. dollar after signs of a global economic recovery caused investors to increase their risk appetite for higher-yielding currencies. During September, gains were achieved in the currency markets from long positions in the Australian dollar versus the U.S. dollar as the value of the Australian dollar appreciated to a 26-month high against the U.S. dollar amid speculation that the Reserve Bank of Australia may raise interest rates in October. Further gains were achieved in September from long positions in the Swiss franc, euro, and South African rand versus the U.S. dollar as the value of the U.S. dollar fell against these currencies amid renewed optimism regarding the global economic recovery. Within the metals complex, gains were recorded primarily during March from long futures positions in nickel, copper, aluminum, and zinc as prices rose after China indicated it might boost state reserves of base metals. During September, October, and December, long positions in silver and gold futures resulted in gains as prices rose amid increased demand for the precious metals due to a drop in the value of the U.S. dollar, with silver futures rallying to a 30-year high and gold prices reaching a new all-time high. Further gains were achieved during December from long positions in copper futures as prices reached an all-time high following strong Chinese import data and news of supply interruptions at a major Chilean copper mine. Within the

- 30 -
 
 
 

 
agricultural complex, gains were recorded primarily during September and October from long positions in corn futures after prices advanced to the highest level in almost two years as freezing weather threatened crops in China and Canada and a prolonged drought slowed planting in Russia.
 
Further gains were recorded during October from long positions in soybean futures as prices reached a 16-month high after U.S. exporters boosted sales to China, the world’s largest consumer and importer of soybeans. In December, additional gains in this sector were experienced due to long futures positions in corn and soybeans as prices reached a 29-month high and 28-month high, respectively, amid supply concerns due to drought-like conditions in Argentina, the world’s second-biggest exporter of corn and third-biggest exporter of soybeans. A portion of the Partnership’s gains for the year was offset by losses incurred within the energy markets primarily during January and May from long futures positions in crude oil and its related products as prices declined on continued worries that a slowdown in the global economic recovery might weaken energy demand. During July, short positions in natural gas futures resulted in additional losses in energies as prices rose after reports showed a smaller-than-forecast inventory increase due to above-average temperatures in the U.S. Within the global stock index markets, losses were experienced primarily during January, May, and July. During January, long positions in U.S., European, and Pacific Rim equity index futures incurred losses as prices reversed sharply lower amid disappointing U.S. corporate earnings reports, concerns regarding U.S. President Barack Obama’s proposed limits on risk-taking by banks, and speculation that China might raise interest rates. Losses were recorded in these markets during May as prices once again moved lower on growing concerns that Greece’s sovereign debt crisis might begin to spread throughout Europe. Equity prices then continued to fall throughout May due to uncertainty regarding policy actions in Europe and the impact on global economic growth. During July, newly established short positions in European and U.S. equity index
- 31 -
 
 
 

 
futures resulted in losses as prices were pressured higher amid unexpected growth in Europe’s manufacturing and service industries, rising U.K. retail sales, and positive U.S. corporate earnings reports.

Year Ended December 31, 2009
The Partnership recorded total realized/net change in unrealized depreciation on investments of $(2,462,992) and expenses totaling $1,503,016, resulting in a net loss of $3,966,008 for the year ended December 31, 2009.  The Partnership’s net asset value per Unit by share Class is provided in the table below.
Share Class
NAV at 12/31/09
NAV at 12/31/08
     
A
$1,071.20
$1,177.84
B
$1,084.19
$1,186.13
C
$1,097.34
$1,194.48
Z
$1,124.10
$1,211.35

Total subscriptions and redemptions across all share Classes for the year ended December 31, 2009, were $39,383,315 and $11,542,783, respectively, and the Partnership’s ending capital was $58,933,830 at December 31, 2009 an increase of $23,874,524 from ending capital at December 31, 2008 of $35,059,306.

The most significant trading losses of approximately 2.8% were experienced within the energy markets, 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.  Additional losses were experienced during October and December from newly established long futures positions in crude oil and its related products as prices reversed
lower amid speculation of waning energy demand after the U.S. government reported a rise in

- 32 -
 
 
 

 
inventories.  Within the global interest rate sector, losses of approximately 2.6% were recorded during January, April, June, July, October, and December.  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.  During the second quarter, long positions in U.S. interest-rate futures resulted in additional losses as prices moved lower after a pledge from Group of 20 (“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 October and December from long positions in U.S. and European fixed-income futures as prices decreased on concerns that an unprecedented supply of government debt might outweigh demand, as well as on forecasts that the U.S. economy would expand in 2010.  Within the currency markets, losses of approximately 1.6% were recorded primarily during February, March, April, June, August, and October.  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.  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 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

- 33 -
 
 
 

 

currencies amid better-than-expected economic data out of the U.S.  Lastly, losses were recorded during October from long positions in the Canadian dollar and Mexican peso versus the U.S. dollar as the value of the U.S. dollar increased relative to these currencies amid speculation that U.S. and European financial institutions may have to raise more capital, thereby spurring demand for the U.S. dollar as a “safe haven” currency.  A portion of the Partnership’s losses for the year was offset by gains of approximately 2.0% achieved within the global stock index sector, primarily during February, June, August, September, November, and December.  Gains were recorded during February from short positions in U.S. equity index futures as prices declined due to disappointing corporate earnings reports.  Additional gains were experienced during 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.  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.  Lastly, gains were recorded during November and December from long positions in U.S., European, and Pacific Rim equity index futures as prices continued to trend higher following a pledge from the G-20 leaders to maintain stimulus measures, as well as fundamental signs that the global economy might be recovering.  Gains of approximately 1.0% were experienced within the agricultural markets, primarily during the second and third quarters, from long positions in sugar futures as prices increased on expectations of a drop in global production and concerns that unfavorable weather in producing countries and rising import demand may worsen the global supply shortfall.  Gains were also experienced in December from long positions in sugar futures as



- 34 -
 
 
 

 
prices reached a 28-year high amid news that excess rain in Brazil, the world’s biggest producer of sugar, hampered harvesting and curbed output.  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.  Smaller gains of approximately 0.7% were recorded within the metals sector, primarily during November, from long futures positions in gold and silver as prices were supported higher amid a drop in the value of the U.S. dollar.

Year Ended December 31, 2008
The Partnership recorded total realized/net change in unrealized appreciation on investments of $4,020,161 and expenses totaling $699,324, resulting in net income of $3,320,837 for the year ended December 31, 2008.  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 12/31/07
     
A
$1,177.84
$1,037.76
B
$1,186.13
$1,039.91
C
$1,194.48
$1,042.06
Z
$1,211.35
$1,046.38

Total subscriptions and redemptions across all share Classes for the year ended December 31, 2008, were $25,268,145 and $4,607,928, respectively, and the Partnership’s ending capital was $35,059,306 at December 31, 2008 an increase of $23,981,054 from ending capital at December 31, 2007 of $11,078,252.

The most significant trading gains of approximately 6.6% were experienced within the global interest rate sector throughout the majority of the year from long positions in U.S., European, and

- 35 -

 
 

 

Australian fixed-income futures as prices moved higher in a worldwide “flight-to-quality” amid a consistent decline in the global equity markets, as well as worries regarding the fundamental health of the global economy and financial system.  Additionally, prices of U.S. fixed-income futures moved higher as the U.S. Federal Reserve cut interest rates to an unprecedented target range of 0% to 0.25%, while European and Australian interest rate futures prices increased after the European Central Bank and Reserve Bank of Australia lowered borrowing costs in an attempt to stimulate economic growth.  Within the global stock index sector, gains of approximately 5.5% were recorded primarily during February, March, and June from short positions in U.S., European, and Pacific Rim equity index futures as prices decreased during the first half of the year 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 might restrain consumer spending, erode corporate earnings, and curb global economic growth.  Additional gains were experienced during September, October, November, and December as prices dropped sharply amid unprecedented U.S. financial market turmoil and growing concerns that efforts by central banks and governments around the world to support the financial system might not prevent a global recession.  Within the energy markets, gains of approximately 4.4% were recorded primarily during the first half of the year from long futures positions in crude oil and its related products as prices moved consistently higher due to speculation that OPEC might cut production, ongoing geopolitical concerns in the Middle East, growing Asian fuel consumption, and strong demand for physical commodities as an inflation hedge.  Additional gains were recorded primarily during the fourth quarter from newly established short futures positions in crude oil and its related products as prices sharply decreased on concerns that a substantial global economic slowdown may erode energy demand.  Elsewhere,

- 36 -

 
 

 

long positions in natural gas futures also resulted in gains during February and March as prices increased on expectations of a rise in demand due to colder weather in the U.S. Northeast, news of a drop in U.S. inventories, and forecasts for an active hurricane season in the Atlantic.  Further gains were recorded during the fourth quarter from newly established short positions in natural gas futures as prices dropped amid rising U.S. inventories and slowing global energy demand.  Within the currency sector, gains of approximately 2.9% were experienced primarily during a majority of the first half of the year from long positions in the Australian dollar, New Zealand dollar, and Brazilian real versus the U.S. dollar as the value of the U.S. dollar decreased relative to most of its rivals amid speculation that signs of a slowing U.S. economy might spur the U.S. Federal Reserve to lower interest rates at a faster pace than other central banks around the world.  Additional gains were recorded primarily during October and November from short positions in the Australian dollar, New Zealand dollar, and British pound versus the U.S. dollar as the value of the U.S. dollar moved higher against most of its rivals in tandem with rising U.S. dollar-denominated Treasury bonds amid the aforementioned “flight-to-quality”. Within the agricultural markets, gains of approximately 1.8% were experienced primarily during January, February, and June, from long positions in cocoa futures as prices rose on speculation that crops in the Ivory Coast, the world’s largest cocoa producer, were developing more slowly than anticipated.  Additional gains were recorded primarily during October and November from short futures positions in live cattle, lean hogs, and cotton as prices declined amid rising inventories and growing concerns that slowing global economic growth might erode demand for food and raw materials.  Lastly, gains of approximately 1.5% were recorded within the metals sector primarily during January, February, and June from long positions in aluminum and copper futures as prices increased during the first half of the year due to falling

- 37 -

 
 

 

inventories and rising demand from China and India.  Further gains were recorded primarily during September, October, November, and December from short futures positions in aluminum, nickel, copper, and zinc as prices dropped amid ongoing worries that a global economic recession might erode demand for base metals.

For further sector trading information, please refer to the  Partnership’s Financial Statements for the year ended December 31, 2010, which are included in Item 8 of this Form 10-K.

The Partnership's income and losses are allocated among its partners for income tax purposes.

Off-Balance Sheet Arrangements and Contractual Obligations.
Not applicable.

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 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).


- 38 -
 
 
 

 
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 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.
 
 
 
 
Assets
  Unadjusted
Quoted Prices in
Active Markets for
  Identical Assets
        (Level 1)
 
       Significant Other
        Observable
            Inputs
           (Level 2)
 
     Significant
   Unobservable
        Inputs
         (Level 3)
 
 
 
 
 
        Total
December 31, 2010
$
   $
  $
 
 $
Investment in TT II, LLC
    –      
  11,800,671
    –      
 
  11,800,671
Investment in WNT I, LLC
    –      
  10,780,859
    –      
 
  10,780,859
Investment in Kaiser I, LLC
    –      
      10,489,485
    –      
 
      10,489,485
Investment in Aspect I, LLC
    –      
      10,343,798
    –      
 
     10,343,798
Investment in Chesapeake I, LLC
    –      
5,536,117
    –      
 
5,536,117
Investment in GLC I, LLC
    –      
4,661,993
    –      
 
4,661,993
Investment in Augustus I, LLC
    –      
4,661,993
    –      
 
4,661,993
 
 
December 31, 2009
         
Investment in Kaiser I, LLC
    –      
  10,332,670
    –      
 
10,332,670
Investment in WNT I, LLC
    –      
  10,215,847
    –      
 
10,215,847
Investment in Aspect I, LLC
    –      
9,966,139
    –      
 
9,966,139
Investment in TT II, LLC
    –      
9,881,734
    –      
 
9,881,734
Investment in Chesapeake I, LLC
    –      
9,259,009
    –      
 
9,259,009
Investment in GLC I, LLC
    –      
4,584,958
    –      
 
4,584,958
Investment in Augustus I, LLC
    –      
4,538,004
    –      
 
4,538,004





- 39 -
 
 
 

 
The Partnership’s assets identified as “Investments in Affiliated Trading Companies” reflected on the Statements of Financial Condition represent 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 U.S. GAAP.

At December 31, 2010, the Partnership’s investment in the Trading Companies represented approximately: Augustus I, LLC 8.00%; GLC I, LLC 8.00%; Aspect I, LLC 17.75%; Kaiser I, LLC 18.00%; TT II, LLC 20.25%; WNT I, LLC 18.50%; and Chesapeake I, LLC 9.50%; of the total investments of the Partnership, respectively.

At December 31, 2009, the Partnership’s investment in the Trading Companies represented approximately: Augustus I, L.L.C. 7.72%; GLC I, LLC 7.80%; Aspect I, LLC 16.96%; Kaiser I, LLC 17.58%; TT II, LLC 16.81%; WNT I, LLC 17.38%; and Chesapeake I, LLC, 15.75% of the total investments of the Partnership, respectively.

Summarized information for the Partnership’s pro-rata investment in Affiliated Trading Companies for the years ended December 31, 2010 and 2009 is as follows:


- 40 -
December 31, 2010
Investment
 
% of
 Profile MV’s
Partners’
Capital
 
  Fair Value
 
Profile MV’s  
  pro-rata
Net Income/
(Loss)
 
Management
 Fees
 
Incentive
Fees
 
Administrative
   Fees
 
   
$
$
   $             
    $
$
 
TT II, LLC
20.2
    11,800,671
1,931,179
206,323
   152,598
36,106
 
WNT I, LLC
18.5
     10,780,859
1,257,277
212,443
 190,591
37,178
 
Kaiser I, LLC
18.0
   10,489,485
    463,457
210,948
      136
 36,916
 
Aspect I, LLC
17.7
   10,343,798
    1,428,088
203,717
    147,516
      35,650
 
Chesapeake I, LLC
  9.5
   5,536,117
    47,960
141,248
    145,678
 24,718
 
GLC I, LLC
8.0
    4,661,993
 (428,774)
67,844
           84
    15,830
 
Augustus I, LLC
8.0
   4,661,993
  89,723
68,746
   45,317
     16,041
 

December 31, 2009
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
 17.5
10,332,670
  (502,833)
169,233
          464
29,616
 
WNT I, LLC
 17.3
10,215,847
  (504,601)
163,342
        400
28,585
 
Aspect I, LLC
 16.9
   9,966,139   
     (869,572)
163,465
       334
 28,606
 
TT II, LLC
 16.8
     9,881,734     
      (1,390,720)
167,755
       29,357
 
Chesapeake I, LLC
 15.7
9,259,009
      509,659
142,112
      108,966
 24,870
 
GLC I, LLC
7.8
4,584,958
       98,584
16,350
     24,642
    3,815
 
Augustus I, LLC
7.7
4,538,004
       51,630
16,562
     12,913
   3,865
 
Strategic Alternatives, L.L.C.
     144,863
100,360
    36,932
17,563
 

For all Trading Companies, Contributions and Withdrawals are permitted on a monthly basis.  As of December 31, 2010 and 2009, there have been no suspended redemptions, “lock up” periods or gate provisions imposed before a withdrawal can be made by the Partnership.

Statements of Cash Flows
The Partnership is not required to provide a Statement of Cash Flows.


- 41 -
 
 
 

 
Other Pronouncements
Improving Disclosures about Fair Value Measurements
In January 2010, the Financial Accounting Standards Board (“FASB”) issued accounting guidance under the FASB Accounting Standards Codification (“ASC” or the “Codification”), which, among other things, amends fair value measurements and disclosures to require entities to separately present purchases, sales, issuances, and settlements in their reconciliation of Level 3 fair value measurements (i.e., to present such items on a gross basis rather than on a net basis), and which clarifies existing disclosure requirements regarding the level of disaggregation and the inputs and valuation techniques used to measure fair value for measurements that fall within either Level 2 or Level 3 of the fair value hierarchy.  This guidance is effective for interim and annual periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements which are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years.  The adoption of this guidance did not have a material impact on the Partnership’s financial statements.

Subsequent Events
Management of Ceres (“Management”) performed its evaluation of subsequent events and has determined that there were no subsequent events requiring adjustment or disclosure in the financial statements.




- 42 -
 
 
 

 
Item 7A. 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 are settled upon termination of the contract.  Gains and losses on 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.

- 43 -
 
 
 

 
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 is 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


- 44 -
 
 
 

 
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 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 (Demeter, prior to December 1, 2010) 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 value 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 (Demeter, prior to December 1, 2010) uses approximately four years of daily market data and

- 45 -
 
 
 

 
re-values its portfolio for each of the historical market moves that occurred over this period.  This enables Ceres (Demeter, prior to December 1, 2010) to generate a distribution of daily “simulated profit and loss” outcomes.

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 (Demeter, prior to December 1, 2010), 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 (Demeter, prior to December 1, 2010) 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 December 31, 2010 and 2009, Aspect I, LLC’s total capitalization was $54,986,074 and $47,000,259, respectively.  The Partnership owned 19% and 21%, respectively, of Aspect I, LLC.

Aspect I, LLC
 
December 31, 2010               
 
December 31, 2009              
Primary Market Risk Category
VaR                 
 
VaR                   
Interest Rate
(0.27)%
 
(1.28)%
Currency
(0.91)
 
(0.37)
Equity
(1.48)
 
(2.03)
Commodity
(2.49)
 
(2.18)
Aggregate Value at Risk
(4.04)%
 
(3.10)%

- 46 -

 
 

 

As of December 31, 2010 and 2009, Augustus I, LLC’s total capitalization was $18,443,353 and $18,661,460.  The Partnership owned approximately 25%  and 24%, respectively of Augustus I, LLC.

Augustus I, LLC
   
 
December 31, 2010        
December 31, 2009          
Primary Market Risk Category
VaR             
VaR           
Interest Rate
     (0.35)%
    (0.28)%
Currency
 (1.12)%
 (1.25)
Aggregate Value at Risk
  (1.26)%
  (1.25)%     

Augustus I, LLC began trading assets for Profile MV effective October 1, 2009.

As of December 31, 2010 and 2009, Chesapeake I, LLC’s total capitalization was $15,637,106 and $30,224,170, respectively.  The Partnership owned 35% and 31%, respectively, of Chesapeake I, LLC.
Chesapeake I, LLC
     
 
December 31, 2010              
 
December 31, 2009            
Primary Market Risk Category
VaR                
 
VaR                
Interest Rate
(1.05)%
 
(0.83)%
Currency
(0.81)
 
(0.87)
Equity
(3.50)
 
(3.63)
Commodity
(5.49)
 
(3.89)
Aggregate Value at Risk
(7.91)%
 
(7.15)%

As of December 31, 2010 and 2009, GLC I, LLC’s total capitalization was $17,534,046 and $18,857,559.  The Partnership owned approximately 27% and 24% of GLC I, LLC.









- 47 -

 
 

 

GLC I, LLC
 
December 31, 2010                     
December 31, 2009                 
Primary Market Risk Category
VaR                  
VaR                    
Interest Rate
(0.30)%
(0.15)%
Currency
(0.83)
(1.13)
Equity
(1.12)
(0.62)
Commodity
   —
(0.28)
Aggregate Value at Risk
(1.82)%
(1.64)%

GLC I, LLC began trading assets for Profile MV effective October 1, 2009.

As of December 31, 2010 and 2009, Kaiser I, LLC’s total capitalization was $40,014,468 and $42,857,921, respectively.  The Partnership owned 26% and 24%, respectively, of Kaiser I, LLC.

Kaiser I, LLC
     
 
December 31, 2010             
 
December 31, 2009            
Primary Market Risk Category
VaR                 
 
VaR                
Interest Rate
(0.02)%
 
(0.08)%
Currency
(0.02)
 
(0.13)
Equity
(0.44)
 
(0.64)
Commodity
(0.11)
 
(0.01)
Aggregate Value at Risk
(0.47)%
 
(0.51)%

As of December 31, 2010 and 2009, TT II, LLC’s total capitalization was $43,741,623 and $39,138,289, respectively.  The Partnership owned 27% and 25%, respectively of TT II, LLC.

TT II, LLC
     
 
December 31, 2010                
 
December 31, 2009           
Primary Market Risk Category
VaR                 
 
VaR                  
Interest Rate
(0.32)%
 
(0.43)%
Currency
(1.68)
 
(1.00)
Equity
(1.89)
 
(2.20)
Commodity
(2.31)
 
(1.31)
Aggregate Value at Risk
(5.18)%
 
(3.66)%

- 48 -

 
 

 

As of December 31, 2010 and 2009 WNT I, LLC’s total capitalization was $53,769,718 and $46,704,449, respectively.  The Partnership owned 20% and 22%, respectively of WNT I, LLC.

Morgan Stanley Managed Futures WNT I, LLC
 
December 31, 2010                
 
December 31, 2009                 
Primary Market Risk Category
VaR                  
 
VaR                  
Interest Rate
(0.26)%
 
(0.34)%
Currency
(0.43)
 
(0.52)
Equity
(1.26)
 
(1.76)
Commodity
(1.44)
 
(0.75)
Aggregate Value at Risk
(2.85)%
 
(2.36)%


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 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 tables below supplement the December 31, 2010 and 2009 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 reporting periods from January 1, 2010 through December 31, 2010 and January 1, 2009 through December 31, 2009, respectively.

- 49 -

 
 

 

December 31, 2010
Aspect I, LLC
Primary Market Risk Category
High         
 
Low        
 
Average     
Currency
(1.34)%
 
(0.33)%
 
(0.83)%
Interest Rate
(1.65)
 
(0.27)
 
(1.10)
Equity
(2.14)
 
(0.22)
 
(1.21)
Commodity
(2.49)
 
(0.76)
 
(1.50)
Aggregate Value at Risk
(4.04)%
 
(1.56)%
 
(3.00)%




Augustus I, LLC
Primary Market Risk Category
High       
 
Low       
 
Average       
Interest Rate
(0.71)%
 
(0.35)%
 
(0.51)%
Currency
(1.69)
 
(1.07)
 
(1.31)
Aggregate Value at Risk
(1.85)%
 
(1.26)%
 
(1.54)%


Chesapeake I, LLC
Primary Market Risk Category
High        
 
Low  
 
Average   
Interest Rate
(2.17)%
 
(1.01)%
 
(1.40)%
Currency
(1.09)
 
(0.49)
 
(0.84)
Equity
(3.82)
 
(2.15)
 
(3.11)
Commodity
(6.43)
 
(2.25)
 
(4.48)
Aggregate Value at Risk
(7.91)%
 
(2.88)%
 
(6.39)%



GLC I, LLC

Primary Market Risk Category
High       
 
Low      
 
Average      
Interest Rate
(0.88)%
 
  —%
 
(0.42)%
Currency
(1.53)
 
(0.37)
 
(0.88)
Equity
(1.12)
 
(0.43)
 
(0.80)
Aggregate Value at Risk
(1.82)%
 
(0.76)%
 
(1.34)%



- 50 -

 
 

 

Kaiser I, LLC
Primary Market Risk Category
High       
 
Low        
 
Average
Interest Rate
(0.76)%
 
(0.02)%
 
(0.38)%
Currency
(0.27)
 
(0.02)
 
(0.18)
Equity
(1.44)
 
(0.27)
 
(0.79)
Commodity
(0.19)
 
(0.11)
 
(0.16)
Aggregate Value at Risk
(1.40)%
 
(0.47)%
 
(0.92)%


TT II, LLC
Primary Market Risk Category
High       
 
Low       
 
Average      
Interest Rate
(1.15)%
 
(0.32)%
 
(0.79)%
Currency
(2.29)
 
(0.67)
 
(1.70)
Equity
(3.55)
 
(0.25)
 
(2.17)
Commodity
(2.31)
 
(0.53)
 
(1.79)
Aggregate Value at Risk
(6.84)%
 
(1.03)%
 
(4.72)%


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)%


December 31, 2009
Aspect I, LLC
Primary Market Risk Category
High     
 
Low     
 
Average
Interest Rate
(1.34)%
 
(0.54)%
 
(1.11)%
Currency
(0.61)
 
(0.31)
 
(0.43)
Equity
(2.03)
 
(0.18)
 
(1.02)
Commodity
(2.18)
 
(0.45)
 
(1.06)
Aggregate Value at Risk
(3.10)%
 
(1.00)%
 
(1.95)%


Augustus I, LLC
Primary Market Risk Category
High       
 
Low
 
Average
Interest Rate
(0.28)%
 
 
(0.07)%
Currency
(1.25)
 
 
(0.31)
Aggregate Value at Risk
(1.25)%
 
 
(0.31)%

- 51 -

 
 

 

Chesapeake I, LLC
Primary Market Risk Category
                                        High
 
Low       
 
Average     
Interest Rate
(0.83)%
 
(0.31)%
 
(0.54)%
Currency
(0.87)
 
(0.40)
 
(0.57)
Equity
(3.63)
 
 
(1.81)
Commodity
(3.89)
 
(0.34)
 
(1.89)
Aggregate Value at Risk
(7.15)%
 
(0.74)%
 
(3.45)%

GLC I, LLC

Primary Market Risk Category
High     
 
Low      
 
Average      
Interest Rate
(0.15)%
 
 
(0.04)%
Currency
(1.13)
 
 
(0.28)
Equity
(0.62)
 
 
(0.15)
Commodity
(0.28)
 
 
(0.07)
Aggregate Value at Risk
(1.64)%
 
 
(0.41)%

Kaiser I, LLC
Primary Market Risk Category
High     
 
Low      
 
Average    
Interest Rate
(0.81)%
 
(0.08)%
 
(0.38)%
Currency
(0.25)
 
(0.03)
 
(0.15)
Equity
(0.64)
 
(0.26)
 
(0.42)
Commodity
(0.08)
 
(0.01)
 
(0.05)
Aggregate Value at Risk
(0.81)%
 
(0.51)%
 
(0.66)%

TT II, LLC
Primary Market Risk Category
High     
 
Low      
 
Average  
Interest Rate
(1.08)%
 
(0.32)%
 
(0.69)%
Currency
(1.12)
 
(0.42)
 
(0.87)
Equity
(2.20)
 
(0.10)
 
(0.95)
Commodity
(1.31)
 
(0.32)
 
(0.82)
Aggregate Value at Risk
(3.66)%
 
(0.50)%
 
(2.16)%



WNT I, LLC
Primary Market Risk Category
High     
 
Low       
 
Average
Interest Rate
(0.79)%
 
(0.34)%
 
(0.50)%
Currency
(0.87)
 
(0.37)
 
(0.64)
Equity
(1.76)
 
(0.09)
 
(0.81)
Commodity
(0.75)
 
(0.20)
 
(0.39)
Aggregate Value at Risk
(2.36)%
 
(0.66)%
 
(1.31)%



- 52 -
 
 
 

 

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.”

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 December 31, 2010 and 2009 and for the four quarter-end reporting periods during calendar years 2010 and 2009.  VaR is not

- 53 -

 
 

 


necessarily representative of the Trading Companies’ historic risk, nor should it be used to predict the Partnership and 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 not needed for margin.  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 December 31, 2010, such amounts are equal to:
·  
approximately 90% of Aspect I, LLC’s net assets.
·  
approximately 95% of Augustus I, LLC’s net assets.
·  
approximately 89% of Chesapeake I, LLC’s net assets.
·  
approximately 95% of GLC I, LLC’s net assets.
·  
approximately 100% of Kaiser I, LLC’s net assets.
·  
approximately 96% of TT II, LLC’s net assets.
·  
approximately 94% 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.

- 54 -
 
 
 

 
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 (Demeter, prior to December 1, 2010) 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.

The Trading Advisor for each Trading Company, in general, tends to utilize its trading system(s) to take positions when market opportunities develop, and Ceres (Demeter, prior to December 1, 2010) Ceres (Demeter, prior to December 1, 2010) anticipates that the Trading Advisors will continue to do so.
- 55 -
 
 
 

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

The following were the primary trading risk exposures of the Partnership at December 31, 2010 by market sector. It may be anticipated, however, that these market exposures will vary materially over time.

Equities.  The Partnership’s primary equity exposure is to equity price risk in the G-8 countries. The  G-8 countries consist of Canada, the Russian Federation, France, Germany, Japan, Italy, the United Kingdom, and the U.S.  The stock index futures traded by the Partnership are limited to futures on broadly based indices. As of December 31, 2010, the Partnership’s primary exposures were in the S&P 500 (U.S.), FTSE 100 (U.K.), DAX (Germany), Nasdaq (U.S.), OMX 30 (Sweden), S&P 60 (Canada), and Euro Stoxx 50 (Europe) stock indices. The Partnership is primarily exposed to the risk of adverse price trends or static markets in the major European, Pacific Rim, and North American indices. (Static markets would not cause major market changes but would make it difficult for the Partnership to avoid being “whipsawed” into numerous small losses.)

Currencies.  The Partnership’s currency exposure is to exchange rate fluctuations, primarily fluctuations which disrupt the historical pricing relationships between different currencies and currency pairs. These fluctuations are influenced by interest rate changes as well as political and general economic conditions. Ceres does not anticipate that the risk profile of the Partnership’s currency sector will change significantly in the future.


- 56 -
 
 
 

 
Interest Rates.  Interest rate movements directly affect the price of the futures positions held by the Partnership and indirectly the value of its stock index and currency positions. Interest rate movements in one country as well as relative interest rate movements between countries materially impact the Partnership’s profitability. The Partnership’s primary interest rate exposure is to interest rate fluctuations in the U.S. and the other G-8 countries. However, the Partnership also take futures positions on the government debt of smaller nations — e.g., Australia and New Zealand.

Commodity.
Energy.  The Partnership’s primary energy market exposure is to oil and natural gas price movements, often resulting from political developments in the Middle East and weather conditions. Energy prices can be volatile and substantial profits and losses, which have been experienced in the past, are expected to continue to be experienced in these markets in the future.

Metals.  The Partnership’s primary metal market exposure is to fluctuations in the price of copper, gold, silver, and aluminum.

Grains. The Partnership’s trading risk exposure in the grains is primarily to agricultural price movements which are often directly affected by severe or unexpected weather conditions. The soybean complex and corn accounted for the majority of the Partnership’s grain exposure as of December 31, 2010.


- 57 -
 
 
 

 
Softs.  The Partnership’s trading risk exposure in the soft commodities is primarily to agricultural-related price movements which are often directly affected by severe or unexpected weather conditions. Sugar and coffee accounted for the majority of the Partnership’s soft commodities exposure as of December 31, 2010.

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following financial statements and related items of the Partnership are filed under this Item 8: Report of Deloitte & Touche LLP, independent registered public accounting firm, for the years ended December 31, 2010, 2009 and 2008; Statements of Financial Condition as of December 31, 2010 and 2009; Statements of Operations for the years ended December 31, 2010, 2009, and 2008; Statements of Changes in Partners’ Capital for the years ended December 31, 2010, 2009, and 2008; and Notes to Financial Statements.  Additional financial information has been filed as Exhibit 99.1, 91.2, and 99.3 to this Form 10-K.











- 58 -
 
 
 

 





To the Limited Partners of:


Managed Futures Profile MV, L.P.

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





/s/ Walter Davis                                                                      
Walter Davis
President and Director
Ceres Managed Futures LLC,
General Partner of
Managed Futures Profile MV, L.P.






























- 59 -
 
 
 

 
Managed Futures Profile MV, L.P.
Management’s Report on Internal Control Over Financial Reporting

Ceres Managed Futures LLC (“Ceres”), formerly Demeter Management LLC, the general partner of Managed Futures Profile MV, L.P. (the “Partnership”) is responsible for the management of the Partnership.

Management of Ceres (“Management”) is responsible for establishing and maintaining adequate internal control over financial reporting.  The internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

The Partnership’s internal control over financial reporting includes those policies and procedures that:

·  
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Partnership:

·  
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that the Partnership’s transactions are being made only in accordance with authorizations of Management and directors of Ceres; and

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

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

















- 60 -
 
 
 

 



Management assessed the effectiveness of the Partnership’s internal control over financial reporting as of December 31, 2010.  In making this assessment, Management used the criteria set forth by the Committee of Sponsoring Organization of the Treadway commission in Internal Control – Integrated Framework.  Based on our assessment and those criteria, Management believes that the Partnership maintained effective internal control over financial reporting as of December 31, 2010.



/s/ Walter Davis                                                                      
Walter Davis
President and Director
Ceres Managed Futures LLC,



/s/ Jennifer Magro                                                                      
Jennifer Magro
Chief Financial Officer
Ceres Managed Futures LLC

New York, New York
March 29, 2010
























- 61 -
 
 
 

 

Managed Futures Profile MV, L.P.
Report of Independent Registered Public Accounting Firm



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Limited Partners and the General Partner of
Managed Futures Profile MV, L.P.:

We have audited the accompanying statements of financial condition of Managed Futures Profile MV, L.P. (the “Partnership”) as of December 31, 2010 and 2009, and the related statements of operations and changes in partners’ capital for each of the three years in the period ended December 31, 2010.  These financial statements are the responsibility of the Partnership’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements present fairly, in all material respects, the financial position of Managed Futures Profile MV, L.P. as of December 31, 2010 and 2009, and the results of its operations and changes in its partners’ capital for each of the three years in the period ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.



/s/ Deloitte & Touche LLP
   Deloitte & Touche LLP

New York, New York
March 29, 2011




- 62 -

 
 

 

MANAGED FUTURES PROFILE MV, L.P.
STATEMENTS OF FINANCIAL CONDITION

                                                  December 31, 
 
2010
 
2009
ASSETS
$
 
$
       
Investments in Affiliated Trading Companies:
     
Investment in TT II, LLC
11,800,671
 
9,881,734
Investment in WNT I, LLC
10,780,859
 
10,215,847
Investment in Kaiser I, LLC
10,489,485
 
10,332,670
Investment in Aspect I, LLC
10,343,798
 
9,966,139
Investment in Chesapeake I, LLC
5,536,117
 
9,259,009
Investment in GLC I, LLC
4,661,993
 
4,584,958
Investment in Augustus I, LLC
4,661,993
 
4,538,004
       
Total Investments in Affiliated Trading Companies, at fair value (cost $53,541,098 and $57,815,090, respectively)
58,274,916
 
58,778,361
Receivable from Affiliated Trading Companies
794,623
 
Subscriptions receivable
615,000
 
1,827,289
       
Total Assets
59,684,539
 
60,605,650
       
LIABILITIES
     
       
Payable to Affiliated Trading Companies
757,516
 
791,664
Redemptions payable
498,522
 
880,156
       
Total Liabilities
1,256,038
 
1,671,820
       
PARTNERS’ CAPITAL
     
Class A (37,461.613 and 40,464.124 Units, respectively)
42,138,662
 
43,345,191
Class B (5,513.195 and 5,330.595 Units, respectively)
6,308,090
 
5,779,409
Class C (7,529.287 and 7,924.148 Units, respectively)
8,762,829
 
8,695,492
Class Z (1,012.277 and 990.781 Units, respectively)
1,218,920
 
1,113,738
       
Total Partners’ Capital
58,428,501
 
58,933,830
       
Total Liabilities and Partners’ Capital
59,684,539
 
60,605,650
       
NET ASSET VALUE PER UNIT
     
Class A
1,124.85
 
1,071.20
Class B
1,144.18
 
1,084.19
Class C
1,163.83
 
1,097.34
Class Z
1,204.13
 
1,124.10









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

- 63 -

 
 

 

MANAGED FUTURES PROFILE MV, L.P.
STATEMENTS OF OPERATIONS

                           For the Years Ended December 31,
 
2010
 
     2009
 
                      2008
 
         $
 
       $
 
                   $
EXPENSES
         
Ongoing Placement Agent fees
1,025,096
 
836,158
 
387,423
General Partner fees
579,930
 
476,327
 
222,786
Administrative fees
       231,972
 
       190,531
 
          89,115
           
Total Expenses
    1,836,998
 
    1,503,016
 
        699,324
           
NET INVESTMENT LOSS
   (1,836,998)
 
   (1,503,016)
 
      (699,324)
           
REALIZED/NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS
         
Realized
1,018,361
 
777,856
 
288,173
Net change in unrealized appreciation
         
(depreciation) on investments
   3,770,549
 
   (3,240,848)
 
     3,731,988
           
Total Realized/Net Change in Unrealized Appreciation (Depreciation) on Investments
       4,788,910
 
    (2,462,992)
 
      4,020,161
           
NET INCOME (LOSS)
      2,951,912
 
      (3,966,008)
 
           3,320,837
           
NET INCOME (LOSS) ALLOCATION
         
Class A
2,059,666
 
(2,959,851)
 
2,296,385
Class B
339,764
 
(406,275)
 
424,993
Class C
472,300
 
(548,437)
 
529,074
Class Z
80,182
 
(51,445)
 
70,385
           
NET INCOME (LOSS) PER UNIT *
         
Class A
53.65
 
(106.64)
 
140.08
Class B
59.99
 
(101.94)
 
146.22
Class C
66.49
 
(97.14)
 
152.42
Class Z
80.03
 
(87.25)
 
164.97
           
 
Units
 
Units
 
Units
WEIGHTED AVERAGE NUMBER
         
OF UNITS OUTSTANDING
         
Class A
39,897.958
 
31,117.233
 
14,201.493
Class B
5,752.818
 
4,186.305
 
2,829.052
Class C
7,381.908
 
6,755.393
 
2,872.077
Class Z
1,002.029
 
742.006
 
504.908

* Based on the change in Net Asset Value per Unit.


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



- 64 -

 
 

 

MANAGED FUTURES PROFILE MV, L.P.
STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL
For the Years ended December 31, 2010, 2009 and 2008
 
 


 
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
18,882,556 
 
3,158,189 
 
2,693,863 
 
533,537 
 
25,268,145 
                   
Net Income
2,296,385 
 
424,993 
 
529,074 
 
70,385 
 
3,320,837 
                   
Redemptions
(2,434,380) 
 
(1,711,283)
 
(258,621)
 
(203,644)
 
 (4,607,928) 
                   
Partners’ Capital,
                 
December 31, 2008
25,973,353 
 
3,746,101 
 
4,711,520 
 
628,332 
 
35,059,306 
                   
Subscriptions
27,575,130 
 
4,539,798 
 
6,613,509 
 
654,878 
 
 39,383,315 
                   
Net Loss
(2,959,851) 
 
(406,275) 
 
(548,437) 
 
(51,445) 
 
(3,966,008)
                   
Redemptions
(7,243,441) 
 
(2,100,215) 
 
(2,081,100)
 
(118,027)
 
  (11,542,783)
                   
Partners’ Capital,
                 
December 31, 2009
43,345,191 
 
5,779,409 
 
8,695,492 
 
1,113,738 
 
58,933,830 
                   
Subscriptions
5,450,186 
 
983,828 
 
593,255 
 
25,000 
 
 7,052,269 
                   
Net Income
2,059,666 
 
339,764 
 
472,300 
 
80,182 
 
2,951,912 
                   
Redemptions
(8,716,381) 
 
(794,911)
 
(998,218)
 
 
  (10,509,510)
                   
Partners’ Capital,
                 
December 31, 2010
42,138,662 
 
6,308,090  
 
8,762,829 
 
1,218,920    
 
58,428,501 
















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

- 65 -

 
 

 


Managed Futures Profile MV, L.P.
Notes to Financial Statements
 
 
 
1.  Organization

 
Managed Futures Profile MV, L.P. (“Profile MV” or the “Partnership”) is one of the partnerships in the Managed Futures Multi-Strategy Profile Series, comprised of the Partnership, Managed Futures Profile LV, L.P., and Managed Futures Profile HV, L.P. (collectively, the “Profile Series”), and 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 for physicals transactions and futures contracts transactions, and any rights pertaining thereto (collectively, “Futures Interests”) (refer to Note 6.  Financial Instruments of the Trading Companies).  The Partnership allocates substantially all of its assets to multiple affiliated Trading Companies (each a “Trading Company” or collectively the “Trading Companies”) each of which allocates substantially all of its assets in the trading program of an unaffiliated commodity trading advisor (each a “Trading Advisor” or collectively, the “Trading Advisors”), each of which, except for GAM International Management Limited (formerly, Augustus Asset Management Limited) (“GAM”) and GLC Ltd. (“GLC”), is registered with the Commodity Futures Trading Commission, and which makes investment decisions for each respective Trading Company.
 

 
The Partnership commenced trading operations on August 1, 2007, in accordance with the terms of the limited partnership agreement of the Partnership (the “Limited Partnership Agreement”).


- 66 -

 
 

 

 
In 2009, Morgan Stanley and Citigroup Inc. (“Citigroup”) combined certain assets of the Global Wealth Management Group of Morgan Stanley & Co. Incorporated, including Demeter Management LLC (“Demeter”) and the Smith Barney division of Citigroup Global Markets Inc., into a new joint venture, Morgan Stanley Smith Barney Holdings LLC (“MSSBH”).  As part of that transaction, Ceres Managed Futures LLC (“Ceres”) and Demeter were contributed to MSSBH, and each became a wholly-owned subsidiary of MSSBH.
 

 
Effective December 1, 2010, MSSBH, together with the unanimous support of the respective Boards of Directors of Demeter and Ceres, combined the assets and operations of Demeter and Ceres into a single commodity pool operator, Ceres.  Ceres will continue to be wholly-owned by MSSBH and replaced Demeter as the general partner for the Partnership and the trading manager for each Trading Company.
 

 
MSSBH is majority-owned indirectly by Morgan Stanley and minority-owned indirectly by Citigroup.  Ceres may reallocate the Partnership’s assets to the different Trading Companies at its sole discretion.
 

 
Prior to June 1, 2009, Demeter was a wholly-owned subsidiary of Morgan Stanley.
 

 

 


- 67 -

 
 

 

 
Effective October 1, 2009, Morgan Stanley Smith Barney Augustus I, LLC (“Augustus I, LLC”) was added as a Trading Company to Profile MV.  Augustus I, LLC allocates substantially all of its assets to GAM as the sole Trading Advisor to Augustus I, LLC.  GAM began trading Profile MV’s assets allocated to Augustus I, LLC effective October 1, 2009.
 

 
Effective October 1, 2009, Morgan Stanley Smith Barney GLC I, LLC (“GLC I, LLC”) was added as a Trading Company to Profile MV.  GLC I, LLC allocates substantially all of its assets to GLC as the sole Trading Advisor to GLC I, LLC.  GLC began trading Profile MV’s assets allocated to GLC I, LLC effective October 1, 2009.
 

 
Effective October 1, 2009, Demeter changed the name of Morgan Stanley Managed Futures MV, L.P. to Managed Futures Profile MV, L.P.  The name change did not have any impact on the operation of the Partnership or its limited partners.

The financial statements 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.  As of December 31, 2010 and 2009, the Partnership’s cash balances were zero.
 

 

 

 
- 68 -
 
 
 

 
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 either class A, B, C or D Units in the Partnership (each a “Class” and collectively the “Classes”).  As of December 31, 2010 and 2009, there were no Class D Units outstanding in Profile MV.  Certain limited partners who are not subject to the ongoing placement agent fee (as described herein) are deemed to hold Class Z Units.  Ceres receives Class Z Units with respect to its investment in the Partnership.

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 (as defined in Note 2).
 

 
2.  Summary of Significant Accounting Policies
 
Use of Estimates – The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which require management to make estimates and assumptions that affect the reported amounts in the financial statements and related disclosures.  Management believes that the estimates utilized in the preparation of the financial statements are prudent and reasonable. Actual results could differ from these estimates.
 
- 69 -
 
 
 

 
 
Revenue Recognition – Net change in appreciation (depreciation) on investments in the Trading Companies is recorded based upon the proportionate share of the Partnership’s aggregate amount of the net performance recorded by each Trading Company.
 

 
Valuation of Investments in Affiliated Trading Companies – The Partnership’s investments in affiliated Trading Companies are stated at fair value which is based on (1) the Partnership’s net contribution to the Trading Companies and (2) its allocated share of the undistributed profits and losses, including realized and the net change in unrealized gains/losses of the Trading Company.
 

 
Net Income (Loss) per Unit – Net income (loss) per Unit is computed in accordance with the specialized accounting for Investment Companies as illustrated in the Financial Highlights Footnote (See Note 9. Financial Highlights) and is allocated to all partners at the end of each month in proportion to their respective opening capital accounts.
 

 
General Partner Fee – The Partnership pays Ceres a monthly administration fee equal to 1/12 of 1.0% (a 1.0% annual rate) of the net asset value of each Class in the Partnership at the beginning of each month for services in operating and managing the Partnership.
 

 
Placement Agent Fee – Morgan Stanley Smith Barney LLC (“MSSB”), currently serves as the placement agent (the “Placement Agent”) and may appoint affiliates or third parties as additional Placement Agents.  The Partnership pays the Placement Agent an ongoing compensation on a
 

 
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monthly basis equal to a percentage of the net asset value of a limited partner’s Units as of the beginning of each month.
 

 
The applicable rate payable by each limited partner will be determined by the Class of Units each limited partner may hold.  Each limited partner pays the Placement Agent the following percentage based on the aggregate amount invested in the Partnership (as adjusted) by each limited partner in accordance with the following schedule:
Class of Units
 
Aggregate Investment
 
Monthly/Annualized Rate (%)
 
A
Up to $249,999
     0.167%/2.0%
B
$250,000 - $499,999
     0.125%/1.5%
C
$500,000 - $4,999,999
     0.083%/1.0%
D
$5,000,000 and above
     0.063%/0.75%
 

 
Certain limited partners who are not subject to the ongoing Placement Agent fee (as described herein) are deemed to hold Class Z Units.  The Placement Agent pays a portion of the ongoing Placement Agent fee it receives from the Partnership to the Morgan Stanley Smith Barney
 
Financial Advisor or Private Wealth Management Investment Representative responsible for selling the Units to the limited partners.
 

 
Partnership Administrative Fee – The Partnership pays Ceres a monthly fee to cover all administrative, operating, offering, and organizational expenses. The monthly partnership administrative fee is equal to 1/12th of 0.40% (a 0.40% annual rate) of the beginning of the month net asset value of the Partnership.
 

 
- 71 -
 
 
 

 
 
Continuing Offering – Units of the Partnership are offered in four Classes, identical in all material respects except for the ongoing Placement Agent fees charged. Units within the Partnership Class were initially offered at $1,000 per Unit.  Thereafter, Units are offered on a continuous basis as of the last day of each month (a “Subscription Date”) at the net asset value per Unit for each Class as of the last day of the month.  The minimum subscription amount in the Partnership is $25,000, subject to the discretion of Ceres to accept a lower amount.  Prior to May 2009, the minimum subscription amount in the Partnership was $50,000.  The minimum subscription amount for ERISA/IRA investors is $10,000.  Additional subscriptions can be made in increments of $10,000 if a limited partner has already met the minimum subscription amount, subject to the discretion of Ceres to accept a lower amount.   The request for the subscriptions must be delivered to the limited
 
partner’s local Morgan Stanley Smith Barney Branch Office in time for it to be forwarded to and received by Ceres, no later than 3:00 p.m., New York City time, on the third business day before the end of the month.
 

 
Redemptions – Limited partners may redeem some or all of their Units at 100% of the net asset value per Unit as of the last day of any month (a “Redemption Date”).  The request for redemption must be delivered to a limited partner’s local Morgan Stanley Smith Barney Branch Office in time for it to be forwarded to and received by Ceres, no later than 3:00 p.m. New York City time, on the third business day before the end of the month in which the redemption is to be effective. Investors must maintain a minimum investment in the relevant Partnership of $10,000 unless an investor is withdrawing his or her entire investment.  Prior to May 2009, the minimum investment in the Partnership was $50,000, and $10,000 for ERISA/IRA investors.  Ceres may cause a limited
 

 
- 72 -
 
 
 

 
 
partner to withdraw (in whole or in part) from the Partnership at any time and for any reason.  Ceres will not cause a limited partner to withdraw if the value of his or her investment falls below the minimum described above due to the performance of the Partnership.  Ceres may also, in its sole discretion, permit redemptions by limited partners in any amount at any time.  There are no redemption charges.  Ceres endeavors to pay all redemptions within 10 business days after the applicable Redemption Date.  Ceres may suspend redemptions in certain circumstances.
 

 
Exchanges – Limited partners may redeem some or all of their Units in the Partnership on the Redemption Date and use the proceeds to purchase Units in any other commodity pool operated
 
by the General Partner and accepting subscriptions on the following subscription date; provided the limited partner meets the suitability criteria for the other commodity pool and has redeemed its Units according to the Limited Partnership Agreement.  Investors also may redeem their Units in any other commodity pool operated by the General Partner and use the proceeds to purchase Units in the Partnership on the following Subscription Date; provided the potential limited partner meets the suitability criteria for the Partnership and has redeemed its Unit in the other commodity pool(s) according to the applicable operating agreement.  In order to effect an exchange, the limited partner must send a subscription and exchange agreement and power of attorney to the limited partner’s local Morgan Stanley Smith Barney Financial Advisor or Private Wealth Advisor, and that agreement must be forwarded by the Morgan Stanley Smith Barney Branch Office in time for it to be received by Ceres no later than 3:00 p.m., New York City time, on the third business day before the end of the month.
 

- 73 -
 
 
 

 
Units Outstanding by Share Class – The table below shows the Units outstanding by share Class for the Partnership for the three years in the period ended December 31, 2010.

Share Class
 
A
 
B
 
C
 
Z  
 
Beginning Units
       
  January 1, 2008
 6,965.765
1,802.277
      1,676.682
               217.947         
         
Subscriptions
17,254.138
2,895.994
      2,490.902
       479.499
Redemptions
     (2,168.137)
 (1,540.018)
             (223.172)
         (178.741)
Ending Units
December 31, 2008
22,051.766
3,158.253
       3,944.412
      518.705
         
Subscriptions
24,823.274
4,051.158
        5,850.012
               571.508
Redemptions
    (6,410.916)
  (1,878.816)
            (1,870.276)
           (99.432)
Ending Units
December 31, 2009
40,464.124
5,330.595
       7,924.148
               990.781
         
Subscriptions
  5,111.285
  907.517
 528.629
                21.496
Redemptions
 (8,113.796)
     (724.917)
              (923.490)
            –     
         
Ending Units
December 31, 2010
     37,461.613
    5,513.195
            7,529.287
       1,012.277
 

 
Distributions – Distributions, other than redemptions of Units, are made on a pro-rata basis at the sole discretion of Ceres (Demeter, prior to December 1, 2010).  No distributions have been made to date. Ceres does not intend to make any distributions of the Partnership’s profits.

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 and expenses for income tax purposes. The Partnership files U.S. federal and state tax returns.

The guidance issued by the Financial Accounting Standards Board (“FASB”) on income taxes, clarifies the accounting for uncertainty in income taxes recognized in the Partnership’s financial

- 74 -
 
 
 

 
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 were no significant uncertain tax positions that would require recognition in the financial statements as of December 31, 2010 and 2009.  If applicable, the Partnership recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in other expenses in the Statements of Operations.  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.

 
Dissolution of the Partnership – The Partnership may be terminated upon any of the circumstances first to occur: (i) receipt by Ceres of a notice setting forth an election to terminate
 
and dissolve the Partnership by limited partners holding not less than a Majority of Units (as defined in the Limited Partnership Agreement), with or without cause, (ii) the withdrawal, insolvency, bankruptcy, dissolution, or liquidation of Ceres, (iii) the occurrence of an event which shall make it unlawful for the existence of the Partnership to be continued, or  (iv) a determination by Ceres upon 60 days notice to the limited partners to terminate the Partnership.
 

 

 
Statements of Cash Flows - The Partnership is not required to provide a Statement of Cash Flows.
 

 

 

 

 

 

 

 

 
- 75 -
 

 
 

 
 

 
 
Other Pronouncements
 
 
Improving Disclosures about Fair Value Measurements
 
In January 2010, the FASB issued accounting guidance under the FASB Accounting Standards Codification (“ASC” or the “Codification”), which, among other things, amends fair value measurements and disclosures to require entities to separately present purchases, sales, issuances, and settlements in their reconciliation of Level 3 fair value measurements (i.e., to present such items on a gross basis rather than on a net basis), and which clarifies existing disclosure requirements regarding the level of disaggregation and the inputs and valuation techniques used to measure fair value for measurements that fall within either Level 2 or Level 3 of the fair value hierarchy.  This guidance is effective for interim and annual periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements which are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The adoption of this guidance did not have a material impact on the Partnership’s financial statements.
 

 
3.  Trading Companies
 
Investments in Affiliated Trading Companies – The Partnership’s assets identified as “Investments in Affiliated Trading Companies” reflected on the Statements of Financial Condition represent the Partnership’s pro rata share of each Trading Company’s net asset value.  The net assets of each Trading Company are equal to the total assets of the Trading Company (including, but not limited to
 
all cash and cash equivalents, accrued interest, and the fair value of all open Futures Interests
 

 
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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 Interests positions, management fees, incentive fees, and extraordinary expenses), determined in accordance with U.S. GAAP.
 

 
As of May 1, 2010 the non-clearing commodity broker for the Trading Companies is MSSB.  The clearing commodity brokers for the Trading Companies, except for Morgan Stanley Smith Barney Kaiser I, LLC (“Kaiser I, LLC”), are currently Morgan Stanley & Co. Incorporated (“MS&Co.”) and Morgan Stanley & Co. International plc (“MSIP”).  MS&Co. acts as the counterparty on all trading of foreign currency forward contracts for all the Trading Companies except for Kaiser I, LLC. Morgan Stanley Capital Group Inc. (“MSCG”) acts as the counterparty on all trading of options on foreign currency forward contracts for all the Trading Companies except for Kaiser I, LLC.  MS&Co. and its affiliates act as custodians of the Trading Companies’ assets. MS&Co., MSIP, and MSCG are wholly-owned subsidiaries of Morgan Stanley.
 

 
Effective January 2, 2008, Kaiser I, LLC commenced using Newedge USA, LLC (“Newedge”) as its primary clearing commodity broker and MS&Co. as its non-clearing commodity broker with respect to the assets traded by Kaiser I, LLC on behalf of the Partnership by Kaiser Trading Group Pty. Ltd., the Trading Advisor for Kaiser I, LLC.  Newedge also acts as the counterparty on all trading of foreign currency forward contracts, including options on such contracts. Kaiser I, LLC continues to maintain an account with MSSB, where Kaiser I, LLC’s excess cash assets are held,
 

 
 
 
- 77 –
 
 
 
 

 
and Kaiser I, LLC maintains separate clearing accounts with Newedge where Kaiser, I, LLC’s futures, options, and foreign currency forward positions and margin funds related thereto are held.
 

Effective October 1, 2009, Demeter changed the name of Morgan Stanley Managed Futures Aspect I, LLC to Morgan Stanley Smith Barney Aspect I, LLC (“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 (“Chesapeake I, LLC”).

Effective October 1, 2009, Demeter change 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 (“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 (“WNT I, LLC”).

 
Each Trading Company pays a brokerage fee to MS&Co. (in the case of Kaiser I, LLC, to Newedge) as described below.  Each Trading Company’s cash is on deposit with MSSB, MS&Co., and MSIP (in the case of Kaiser I, LLC, with Newedge) in futures interests trading accounts to meet margin requirements as needed.
 
- 78 -
 
 
 

 
 
The following tables summarize the Partnership’s investments in affiliated Trading Companies as of December 31, 2010 and 2009.  The Trading Companies in which the Partnership invested more than 5% of its net assets are individually identified.  Each Trading Company pays each Trading Advisor a monthly management fee and a quarterly incentive fee equal to 20% of the trading profits earned (See Note 5 for further information).
 
    December 31, 2010
Investment
 
% of Profile
MV’s Partners’ Capital
 
Fair Value
 
Profile MV’s
pro-rata
Net
 Income/(Loss)
  Management
Fees
 
                   Incentive
                      Fees
 
 Administrative
Fees
 
   
    $
    $
$
               $
$
TT II, LLC
20.2
     11,800,671
        1,931,179
206,323
152,598
36,106
WNT I, LLC
18.5
     10,780.859
        1,257,277
212,443
190,591
37,178
Kaiser I, LLC
18.0
 10,489.485
       463,457
210,948
136
36,916
Aspect I, LLC
17.7
 10,343.798
    1,428,088
203,717
147,516
35,650
Chesapeake I, LLC
  9.5
   5,536.117
         47,960
141,248
145,678
24,718
GLC I, LLC
  8.0
           4,661.993
             (428,774)
67,844
84
15,830
Augustus I, LLC
  9.0
                   4,661.993
                         89,723
68,746
45,317
16,041
 
 
 
    December 31, 2009
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
17.5
     10,332,670
         (502,833)
169,233
464
29,616
WNT I, LLC
17.3
     10,215,847
         (504,601)
163,342
400
28,585
Aspect I, LLC
16.9
   9,966,139        
     (869,572)
163,465
334
28,606
TT II, LLC
16.8
   9,881,734
   (1,390,720)
167,755
    —
29,357
Chesapeake I, LLC
15.7
   9,259,009
       509,659
142,112
108,966
24,870
GLC I, LLC
  7.8
           4,584,958
                 98,584
16,350
24,642
 3,815
Augustus I, LLC
  7.7
                   4,538,004
                         51,630
16,562
12,913
 3,865
Strategic Alternatives, L.L.C.
  —
  —
                        144,863
100,360
36,932
17,563

The strategy for each Trading Company is disclosed in Note 5. Trading Advisors to the Trading     Companies.

For all Trading Companies, contributions and withdrawals are permitted on a monthly basis.  As of December 31, 2010 and 2009, there have been no suspended redemptions, “lock up” periods or gate provisions imposed before a withdrawal can be made by the Partnership.
- 79 -
 
 
 

 
 
Valuation – 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 resulting net change in unrealized gains and losses is reflected in the change in unrealized appreciation (depreciation) on investments 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 from various exchanges.  The fair value of non-exchange-traded foreign currency option contracts is calculated by applying an industry standard model application for options valuation of foreign currency options, using as 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.

The Trading Companies may buy or write put and call options through listed exchanges and the over-the-counter market. The buyer of an option has the right to purchase (in the case of a call option) or sell (in the case of a put option) a specified quantity of a specific Futures Interest on the underlying asset at a specified price prior to or on a specified expiration date. The writer of an option is exposed to the risk of loss if the fair value of a Futures Interest on the underlying asset declines (in the case of a put option) or increases (in the case of a call option). The writer of an option can never profit by more than the premium paid by the buyer but can potentially lose an unlimited amount.
- 80 -
 
 
 

 
Premiums received/premiums paid from writing/purchasing options are recorded as liabilities/assets on the Trading Companies’ Statements of Financial Condition and are subsequently adjusted to fair values. The difference between the fair value of an option and the premiums received/premiums paid is treated as an unrealized gain or loss.
 

 
Revenue Recognition – MSSB pays each Trading Company at each month end, except Kaiser I, LLC, 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 charge other customers on such assets deposited as margin.  Assets not deposited as margin with MS&Co. and MSIP will be credited with interest income at the 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.

For Kaiser I, LLC, Newedge credits the Trading Company with interest income on 100% of its average daily funds held at Newedge monthly. Assets deposited with Newedge as margin will be credited with interest income at a rate approximately equivalent to what Newedge pays or charges other customers on such assets deposited as margin.  Assets not deposited as margin with Newedge will be credited with interest income at the 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.
- 81 -
 
 
 

 
Fair Value of Financial Instruments – The fair value of each Trading Company’s assets and liabilities that qualify as financial instruments under the FASB ASC guidance relating to Financial Instruments, approximates the carrying amount presented in the Trading Company’s Statements of Financial Condition.

Foreign Currency Translation – The Trading Companies’ functional currency is the U.S. dollar; however, the Trading Companies may transact business in currencies other than the U.S. dollar.  Assets and liabilities denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rate in effect at the date of the Statements of Financial Condition.  Income and expense items denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rate in effect during the period. Gains and losses resulting from the translation to U.S. dollars are reported in income currently.

Brokerage, Clearing and Transaction Fees – Each Trading Company accrues and pays brokerage, clearing and transaction fees to MS&Co. (to Newedge in the case of Kaiser I, LLC).  Brokerage fees and transaction costs are paid as they are incurred on a half-turn basis at 100% of the rates MS&Co. (Newedge in the case of Kaiser I, LLC) charges retail commodity customers and parties that are not clearinghouse members.  In addition, the Trading Companies pay transactional and clearing fees as they are incurred.

Trading Company Administrative Fee – Each Trading Company pays Ceres a monthly fee to cover all administrative and operating expenses (the “Trading Company Administrative Fee”).  The

- 82 -
 
 
 

 
monthly Trading Company Administrative Fee is equal to 1/12th of 0.35% (a 035% annual rate) of the beginning of the month net assets of each Trading Company.

4.  Related Party Transactions
The Partnership pays monthly administrative fees and General Partner fees to Ceres as described in Note 2.  The Partnership pays monthly Placement Agent fees to MSSB as described in Note 2.

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 (except for Kaiser I, LLC) interest income at each month end as described in Note 3.  Each Trading Company pays MS&Co. brokerage fees and transactions costs as described in Note 3.  Each Trading Company pays Ceres a monthly Trading Company Administrative Fee as described in Note 3.

5.  Trading Advisors to the Trading Companies
Ceres retains certain commodity Trading Advisors to make all trading decisions for the Trading Companies.  The Trading Advisors and their strategies for each Trading Company as of December 31, 2010 are as follows:




- 83 -
 
 
 

 
Trading Company
 
 Trading Advisor
 
Strategy
 
Aspect I, LLC
Aspect Capital Limited
Aspect Diversified Program
     
Augustus I, LLC
GAM International Management
Limited
Global Rates Program – Futures/FX Only
     
Chesapeake I, LLC
Chesapeake Capital Corporation
Diversified Trading Program
     
GLC I, LLC
GLC, Ltd.
Global Macro Program
     
Kaiser I, LLC
Kaiser Trading Group Pty. Ltd.
Global Diversified Trading Program
     
TT II, LLC
Transtrend B.V.
Enhanced Risk Profile (USD) of
Diversified Trend Program
     
WNT I, LLC
Winton Capital Management
Limited
Diversified Trading Program

 
Compensation to the Trading Advisors by the Trading Companies consists of a management fee and an incentive fee as follows:
 

 

 
Management Fee – Each Trading Company pays its Trading Advisor a monthly management fee based on a percentage of net assets as described in the advisory agreement among each Trading Company, Ceres, and each Trading Advisor.
 

 
Incentive Fee – Each Trading Company pays each Trading Advisor a quarterly incentive fee equal to 20% of the trading profits earned by the applicable Trading Company.  Such fee is accrued on a monthly basis.
 

 
Trading profits represent the amount by which profits from Futures Interests trading exceed losses after management fees and administrative fees are deducted.  When a Trading Advisor experiences losses with respect to net assets as of the end of a calendar quarter, the Trading Advisor must recover such losses before that Trading Advisor is eligible for an incentive fee in the future.
 
- 84 -
 
 
 
 

 
6.  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.  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 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. 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 or both;
 

 

 

 
- 85 -
 
 
 

 
 
 
(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 that require or permit net settlement.
 

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

 
7.  Investment Risks
 
The Partnership’s investments in the affiliated Trading Companies expose the Partnership to various types of risks that are associated with Futures Interests trading and the markets in which the Trading Companies invest.  The significant types of financial risks to which the Trading Companies are exposed are market risk, liquidity risk, and counterparty credit risk.
 

 
The rapid fluctuations in the market prices of Futures Interests in which the Trading Companies invest make an investment in the Partnership volatile.  If a Trading Advisor incorrectly predicts the direction of prices in the Futures Interests in which it invests, large losses may occur.
 

 
Illiquidity in the markets in which the Trading Companies invest may cause less favorable trade prices.  Although the Trading Advisors for each Trading Company generally will purchase and sell actively traded contracts where last trade price information and quoted prices are readily available, the prices at which a sale or purchase occur may differ from the prices expected because there may
 

 
- 86 -
 
 
 

 
 
be a delay between receiving a quote and executing a trade, particularly in circumstances where a market has limited trading volume and prices are often quoted for relatively limited quantities.
 

 
The credit risk on Futures Interests arises from the potential inability of counterparties to perform under the terms of the contracts.  Each Trading Company has credit risk because the commodity brokers will act as the futures commission merchants or the counterparties with respect to most of each Trading Company’s assets. Each Trading Company’s exposure to credit risk associated with counterparty nonperformance is typically limited to the cash deposits with, or other form of collateral held by, the counterparty.  
 

8.  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).
 

 

 

 
- 87 -
 
 
 

 
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 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.
 

 
Assets
Unadjusted
Quoted Prices in
Active Markets for
Identical Assets
(Level 1) 
 
Significant Other
Observable
Inputs
      (Level 2) 
Significant
Unobservable
Inputs
    (Level 3) 
Total
 
December 31, 2010
   $
           $
   $
          $
 Investment in TT II, LLC
 11,800,671
      11,800,671
 Investment in WNT I, LLC
10,780,859
      10,780,859
 Investment in Kaiser I, LLC
 10,489,485
      10,489,485
 Investment in Aspect I, LLC
 10,343,798
      10,343,798
 Investment in Chesapeake I, LLC
   5,536,117
5,536,117
 Investment in GLC I, LLC
   4,661,993
4,661,993
 Investment in Augustus I, LLC
   4,661,993
4,661,993
 

         
         
December 31, 2009
       
 Investment in Kaiser I, LLC
10,332,670
     10,332,670
 Investment in WNT I, LLC
10,215,847
  10,215,847
 Investment in Aspect I, LLC
  9,966,139
9,966,139
 Investment in TT II, LLC
  9,881,734
9,881,734
 Investment in Chesapeake I, LLC
  9,259,009
9,259,009
 Investment in GLC I, LLC
  4,584,958
4,584,958
 Investment in Augustus I, LLC
  4,538,004
4,538,004
 

 
At December 31, 2010, Profile MV’s investment in the Trading Companies represented approximately:  Augustus I, LLC 8.00%; GLC I, LLC 8.00%; Aspect I, LLC 17.75%; Kaiser I, LLC
 

 
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18.00%; TT II, LLC 20.25%; WNT I, LLC 18.50%; and Chesapeake I, LLC 9.50% of the total investments of Profile MV, respectively.
 

 
At December 31, 2009, Profile MV’s investment in the Trading Companies represented approximately:  Augustus I, LLC 7.72%; GLC I, LLC 7.80%; Aspect I, LLC 16.96%; Kaiser I, LLC 17.58%; TT II, LLC 16.81%; WNT I, LLC 17.38%; and Chesapeake I, LLC 15.75% of the total investments of Profile MV, respectively.
 

 

 

 

 

 

 

 

 

 

 

 

 

 
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9.  Financial Highlights
 
 Class A
 
   Class B
 
Class C
 
Class Z
 
PER UNIT OPERATING PERFORMANCE:
       
NET ASSET VALUE,
       
  JANUARY 1, 2010:
$    1,071.20 
$  1,084.19
 $   1,097.34
$ 1,124.10
         
NET OPERATING RESULTS:
       
   Net investment loss
(36.25)
                 (31.36)
    (26.34)
(15.81)
   Net unrealized profit
          89.90
            91.35         
      92.83
   95.84
         
   Net income
                 53.65
       59.99
             66.49
   80.03
         
NET ASSET VALUE,
       
  DECEMBER 31, 2010:
$          1,124.85
 $  1,144.18
 $ 1,163.83
 $ 1,204.13
RATIOS TO AVERAGE NET ASSETS:
       
   Net investment loss
           -3.40%
      - 2.90%
                -2.40%
  -1.40%
   Partnership expenses (1)
             3.40%
                  2.90%
           2.40%
   1.40%
         
TOTAL RETURN:
           5.01%
                5.53%
             6.06%
        7.12%
INCEPTION-TO-DATE RETURN
          12.49%
              14.42%
   16.38%
 20.41%
   COMPOUND ANNUALIZED RETURN
          3.50%
                4.02%
     4.54%
   5.59%
         
PER UNIT OPERATING PERFORMANCE:
       
NET ASSET VALUE,
       
  JANUARY 1, 2009:
$    1,177.84 
$          1,186.13
 $    1,194.48
$ 1,211.35
         
NET OPERATING RESULTS:
       
   Net investment loss
(37.69)
         (32.49)
      (26.99)
     (16.10)
   Net unrealized loss
                 (68.95)
                 (69.45)
      (70.15)
      (71.15)
         
   Net loss
              (106.64)
                (101.94)
             (97.14)
           (87.25)
         
NET ASSET VALUE,
       
  DECEMBER 31, 2009:
$          1,071.20
 $          1,084.19
  $   1,097.34
  $  1,124.10
RATIOS TO AVERAGE NET ASSETS:
       
   Net investment loss
             -3.39%
      -2.90%
                 -2.39%
    -1.40%
   Partnership expenses (1)
           3.39%
                 2.90%
  2.39%  
       1.40%
         
TOTAL RETURN:
           -9.05%
               -8.59%
           -8.13%
             -7.20%
INCEPTION-TO-DATE RETURN
          7.12%
        8.42%  
9.73%
      12.41%
   COMPOUND ANNUALIZED RETURN
          2.88%
        3.40%
    3.91%
        4.95%
         
PER UNIT OPERATING PERFORMANCE:
       
NET ASSET VALUE,
       
  JANUARY 1, 2008:
$    1,037.76 
$      1,039.91
$ 1,042.06
    $  1,046.38
         
NET OPERATING RESULTS:
       
   Net investment loss
(37.06)
               (31.64)
  (26.36)
   (15.49)
   Net unrealized profit
        177.14
                  177.86
  178.78
      180.46
         
   Net income
                140.08
        146.22
          152.42
      164.97
         
NET ASSET VALUE,
       
  DECEMBER 31, 2008:
$         1,177.84
  $     1,186.13
$  1,194.48
 $  1,211.35
RATIOS TO AVERAGE NET ASSETS:
       
   Net investment loss
           -3.39%
     - 2.89%
              -2.39%
      -1.39%
   Partnership expenses (1)
             3.39%
                 2.89%
         2.39%
       1.39%
         
TOTAL RETURN:
           13.50%
              14.06%
           14.63%
        15.77%
INCEPTION-TO-DATE RETURN
          17.78%
             18.61%
   19.45%
   21.14%
   COMPOUND ANNUALIZED RETURN
          12.21%
             12.76%
   13.32%
   14.45%
         
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RATIOS TO AVERAGE NET ASSETS FOR TRADING COMPANIES AS OF
DECEMBER 31, 2010:

 
 
 
 
  Profile
    MV
 Interest Income
     -0.04%