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EX-32.01 - EXHIBIT - LV Futures Fund L.P.lvex3201.htm
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EX-32.02 - EXHIBIT - LV Futures Fund L.P.lvex3202.htm
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EXCEL - IDEA: XBRL DOCUMENT - LV Futures Fund L.P.Financial_Report.xls


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

x           QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2012 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: 000-53114

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

 
Delaware
 
20-8529012
 
(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



(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x  No o

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

Yes x  No o

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

Large accelerated filer o
Accelerated filer o
Non-accelerated filer x
Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes 0  No T


 
 

 




LV FUTURES FUND L.P.
INDEX TO QUARTERLY REPORT ON FORM 10-Q

March 31, 2012



 
PART I. FINANCIAL INFORMATION
 
     
Item 1.
Financial Statements (Unaudited)
 
     
 
Statements of Financial Condition as of March 31, 2012 and December 31, 2011
2
     
 
Statements of Income and Expenses for the Quarters Ended  March 31, 2012 and 2011
3
     
 
Statements of Changes in Partners’ Capital for the Quarters Ended March 31, 2012 and 2011
4
     
 
Notes to Financial Statements
  5-19
     
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
20-26
     
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
26-41
     
Item 4.
Controls and Procedures
42
     
 
PART II. OTHER INFORMATION
 
     
Item 1.
Legal Proceedings
43
     
Item 1A.
Risk Factors
43
     
Item 2.
Unregistered Sales of Securities and Use of Proceeds
43-45
     
Item 4.
Mine Safety Disclosures
45
     
Item 6.
Exhibits 
46



 
 

 

PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements

LV FUTURES FUND L.P.
STATEMENTS OF FINANCIAL CONDITION

 
(Unaudited)
   
 
March 31,
 
December 31,
 
2012
 
2011
ASSETS
$
 
$
       
Investments in Affiliated Trading Companies:
     
Investment in TT II, LLC
14,514,175
 
14,111,867
Investment in WNT I, LLC
8,851,794
 
8,959,457
Investment in Kaiser I, LLC
6,112,708
 
10,573,213
Investment in Chesapeake I, LLC
5,260,561
 
4,910,449
Investment in Rotella I, LLC
4,856,845
 
5,082,011
Investment in GLC I, LLC
4,216,111
 
3,942,919
Investment in Augustus I, LLC
3,704,881
 
5,112,295
       
Total Investments in Affiliated Trading Companies, at fair value
  (cost $48,919,164 and $54,509,713, respectively)
47,517,075
 
52,692,211
       
Total Assets
47,517,075
 
52,692,211
       
LIABILITIES
     
       
Redemptions payable
1,816,405
 
3,250,987
       
Total Liabilities
1,816,405
 
3,250,987
       
PARTNERS’ CAPITAL
     
Class A (31,311.024 and 34,210.600 Units, respectively)
29,880,951
 
32,837,331
Class B (5,781.064 and 6,075.289 Units, respectively)
5,647,400
 
5,961,752
Class C ( 9,132.728 and 9,546.728 Units, respectively)
9,132,325
 
9,577,626
Class D (59.829 and 59.829 Units, respectively)
60,536
 
60,698
Class Z (934.843 and 957.352 Units, respectively)
979,458
 
1,003,817
       
Total Partners’ Capital
45,700,670
 
49,441,224
       
Total Liabilities and Partners’ Capital
47,517,075
 
52,692,211
       
NET ASSET VALUE PER UNIT
     
Class A
954.33
 
959.86
Class B
976.88
 
981.31
Class C
999.95
 
1,003.23
Class D
1,011.82
 
1,014.52
Class Z
1,047.72
 
1,048.53
       









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

- 2 -

 
 

 

LV FUTURES FUND L.P.
STATEMENTS OF INCOME AND EXPENSES
(Unaudited)



 
For the Quarters Ended March 31,
       
 
2012
 
2011
 
$
 
$
EXPENSES
     
Ongoing Placement Agent fees
208,254
 
290,463
General Partner fees
122,260
 
178,386
Administrative fees
48,904
 
71,355
       
Total Expenses
379,418
 
540,204
       
NET INVESTMENT LOSS
(379,418)
 
(540,204)
       
REALIZED/NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS
     
Realized
(263,582)
 
409,766
Net change in unrealized appreciation (depreciation) on investments
415,413
 
(914,068)
       
Total Realized/Net Change in Unrealized Appreciation (Depreciation) on Investments
151,831
 
(504,302)
       
NET LOSS
(227,587)
 
(1,044,506)
       
NET LOSS ALLOCATION
     
Class A
(173,612)
 
(678,460)
Class B
(26,445)
 
(110,251)
Class C
(26,592)
 
(217,527)
Class D
(162)
 
(26,068)
Class Z
(776)
 
(12,200)
       
NET LOSS PER UNIT*
     
Class A
(5.53)
 
(17.05)
Class B
(4.43)
 
(15.99)
Class C
(3.28)
 
(14.90)
Class D
(2.70)
 
(14.33)
Class Z
(0.81)
 
(12.58)
       
 
Units
 
Units
WEIGHTED AVERAGE NUMBER
     
OF UNITS OUTSTANDING
     
Class A
33,663.789
 
39,590.128
Class B
6,039.511
 
7,664.576
Class C
9,356.618
 
15,920.275
Class D
59.829
 
1,818.843
Class Z
957.352
 
963.554

* Based on change in net asset value per Unit.

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

- 3 -

 
 

 


LV FUTURES FUND L.P.
STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL
For the Quarters Ended March 31, 2012 and 2011
(Unaudited)


 
    Class A
 
    Class B
 
    Class C
 
    Class D
 
    Class Z
 
    Total
 
    $
 
       $
 
       $
 
       $
 
         $
 
       $
Partners’ Capital,
                     
December 31, 2011
32,837,331
 
5,961,752
 
9,577,626
 
60,698
 
1,003,817
 
 49,441,224
                       
Subscriptions
178,000
 
125,000
 
       –
 
       –
 
            –
 
   303,000
                           
Net Loss
(173,612)
 
(26,445)
 
(26,592)
 
(162)
 
(776)
 
 (227,587)
                       
Redemptions
(2,960,768)
 
(412,907)
 
(418,709)
 
       –
 
(23,583)
 
(3,815,967)
                       
Partners’ Capital,
                     
March 31, 2012
29,880,951
 
5,647,400
 
9,132,325
 
60,536
 
979,458
 
45,700,670
                       
Partners’ Capital,
                     
December 31, 2010
42,648,264
 
8,463,247
 
18,178,357
 
2,028,255
 
1,115,979
 
 72,434,102
                       
Subscriptions
912,475
 
220,000
 
173,500
 
       –
 
            –
 
  1,305,975
                       
Net Loss
(678,460)
 
(110,251)
 
(217,527)
 
(26,068)
 
(12,200)
 
(1,044,506)
                       
Redemptions
(2,801,086)
 
(1,091,191)
 
(2,235,692)
 
       –
 
(20,444)
 
(6,148,413)
                       
Partners’ Capital,
                     
March 31, 2011
40,081,193
 
7,481,805
 
15,898,638
 
2,002,187
 
1,083,335
 
66,547,158
                       
 
Class A
 
Class B
 
Class C
 
Class D
 
Class Z
 
Total
 
Units
 
Units
 
Units
 
Units
 
Units
 
Units
Beginning Units,
                     
December 31, 2011
34,210.600
 
6,075.289
 
9,546.728
 
59.829
 
957.352
 
  50,849.798
                       
Subscriptions
184.907
 
126.801
 
       –
 
       –
 
       –
 
311.708
                           
Redemptions
(3,084.483)
 
(421.026)
 
(414.000)
 
       –
 
(22.509)
 
(3,942.018)
                       
Ending Units,
                     
March 31, 2012
31,311.024
 
5,781.064
 
9,132.728
 
59.829
 
934.843
 
47,219.488
                       
Beginning Units,
                     
December 31, 2010
39,904.989
 
7,784.920
 
16,438.640
 
1,818.843
 
975.359
 
  66,922.751
                       
Subscriptions
854.010
 
203.108
 
157.591
 
       –
 
       –
 
1,214.709
                       
Redemptions
(2,648.183)
 
(1,003.138)
 
(2,022.807)
 
       –
 
(18.007)
 
(5,692.135)
                       
Ending Units,
                     
March 31, 2011
38,110.816
 
6,984.890
 
14,573.424
 
1,818.843
 
957.352
 
62,445.325

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

- 4 -

 
 

 

LV FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS

March 31, 2012

(Unaudited)

The unaudited financial statements contained herein include, in the opinion of management, all adjustments necessary for a fair presentation of the financial condition and results of operations of LV Futures Fund L.P. (“LV” or the “Partnership”).  The financial statements and condensed notes herein should be read in conjunction with the Partnership’s Annual Report on Form 10-K for the fiscal year ending December 31, 2011.

1.  Organization
LV Futures Fund L.P. was formed on February 22, 2007, under the Delaware Revised Uniform Limited Partnership Act, as a multi-advisor commodity pool created to profit from the speculative trading of  commodities, domestic and foreign commodity 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, exchange of physicals for futures contracts transactions, and any rights pertaining thereto (collectively, “Futures Interests”) (refer to Note 4, Financial Instruments of the Trading Companies) through its investments in affiliated trading companies (each a “Trading Company”, or collectively the “Trading Companies”).  LV is one of the partnerships in the Managed Futures Multi-Strategy Profile Series, comprised of LV and Meritage Futures Fund L.P. (collectively, the “Profile Series”).

 
 


- 5 -

 
 

 

LV FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The Partnership allocates substantially all of its assets to multiple affiliated Trading Companies, each of which allocates substantially all of its assets in the trading program of an unaffiliated commodity trading advisor which makes investment decisions for each respective Trading Company.

The Partnership commenced trading operations on August 1, 2007, in accordance with the terms of its Limited Partnership Agreement (the “Limited Partnership Agreement”).  The non-clearing commodity broker for each Trading Company is Morgan Stanley Smith Barney LLC (“MSSB”).  Morgan Stanley & Co. LLC (“MS&Co.”) acts as each Trading Company’s clearing commodity broker.  Morgan Stanley & Co. International plc (“MSIP”) acts as each Trading Company’s commodity broker to the extent it trades on the London Metal Exchange (collectively, MS&Co. and MSIP 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 Company trades options on over-the-counter foreign currency forward contracts.

The financial statements of the Partnership have been prepared using the “Fund of Funds” approach and accordingly all revenue and expense information from the Trading Companies is reflected as a total net realized/net change in unrealized appreciation (depreciation) on investments on the Statements of Income and








- 6 -

 
 

 

LV FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Expenses.  The Partnership maintains sufficient cash balances on hand to satisfy ongoing operating expenses for the Partnership.

The Trading Companies and their trading advisors (each individually, a “Trading Advisor” or collectively, the “Trading Advisors”) for the Partnership at March 31, 2012, are as follows:

Trading Company
Trading Advisor
   
Morgan Stanley Smith Barney Augustus I, LLC
 
  (“Augustus I, LLC”)
GAM International Management Limited
Morgan Stanley Smith Barney Chesapeake Diversified I, LLC
 
  (“Chesapeake I, LLC”)
Chesapeake Capital Corporation
Morgan Stanley Smith Barney GLC I, LLC
 
(“GLC I, LLC”)
GLC Ltd.
Morgan Stanley Smith Barney Kaiser I, LLC
 
(“Kaiser I, LLC”)
Kaiser Trading Group Pty. Ltd.
Morgan Stanley Smith Barney Rotella I, LLC
 
(“Rotella I, LLC”)
Rotella Capital Management, Inc.
Morgan Stanley Smith Barney TT II, LLC
 
(“TT II, LLC”)
Transtrend B.V.
Morgan Stanley Smith Barney WNT I, LLC
 
(“WNT I, LLC”)
Winton Capital Management Limited



The trading system style of each Trading Advisor is as follows:
Commodity Trading Advisor
Trading System Style
   
Chesapeake Capital Corporation
Systematic
GAM International Management Limited
Discretionary
GLC Ltd.
Discretionary
Kaiser Trading Group Pty. Ltd.
Systematic
Rotella Capital Management, Inc.
Systematic
Transtrend B.V.
Systematic
Winton Capital Management Limited
Systematic



- 7 -
 
 
 

 
LV FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


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

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

Prior to February 29, 2012, units of limited partnership interest (“Units”) of the Partnership were offered in four 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 received class A, B, C or D Units in the Partnership  (each a “Class” and collectively the “Classes”).  Effective February 29, 2012, Class B and Class C Units are no longer being offered to new investors.  Certain limited partners who are not subject to the ongoing placement agent fee are deemed to hold Class Z Units.  Ceres received Class Z Units with respect to its investment in the Partnership.

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 ongoing placement agent fee.

-  8 -

 
 

 

LV FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)





2.  Related Party Transactions
The cash held by each Trading Company is on deposit with MSSB, MS&Co., and MSIP in futures interest trading accounts to meet margin requirements as needed.  MSSB pays each Trading Company at each month end interest income on 100% of its average daily funds held at MSSB.  Assets deposited with MS&Co. and MSIP as margin are credited with interest income at a rate approximately equivalent to what MS&Co. and MSIP pay or charge other customers on such assets deposited as margin.  Assets not deposited as margin with MS&Co. and MSIP are credited with interest income at a rate equal to the monthly average of the 4-week U.S. Treasury bill discount rate less 0.15% during such month but in no event less than zero.  For purposes of such interest payments, net assets do not include monies owed to each Trading Company on Futures Interests. MSSB and MS&Co. will retain any excess interest not paid to each Trading Company.
 
The Partnership pays monthly administrative fees and general partner fees to Ceres.  The Partnership pays to MSSB ongoing placement agent fees on a monthly basis equal to a percentage of the net asset value of a limited partners’ Units as of the beginning of each month.







- 9 -
 
 
 

 
LV FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)


 
3.  Financial Highlights
 
Financial Highlights for quarters ended March 31, 2012 and 2011 were as follows:
 
     Class A
 
       Class B
 
       Class C
 
       Class D
 
       Class Z
 
           
PER UNIT OPERATING PERFORMANCE:
         
NET ASSET VALUE,
         
  JANUARY 1, 2012:
$     959.86
$           981.31
$   1,003.23
$       1,014.52 
$  $    1,048.53 
           
NET OPERATING RESULTS:
         
   Net investment loss
     (8.19)
               (7.15)
                (6.05)
            (5.48)
             (3.69)
   Net realized/unrealized income
          2.66
            2.72
                  2.77
               2.78
              2.88
   Net loss
             (5.53)
          (4.43) 
                 (3.28)
            (2.70)
             (0.81)
           
NET ASSET VALUE,
         
 MARCH 31, 2012:
$         954.33
$          976.88
$        999.95
$   1,011.82 
$   1,047.72 
RATIOS TO AVERAGE NET ASSETS:
         
   Net investment loss  (1)  (2)
-3.42%
-2.92%
  -2.41%
-2.16%
-1.41%
   Partnership expenses (1) (2)
 3.42%
 2.92%
  2.41%
 2.16%
 1.41%
           
TOTAL RETURN:
-0.58%
-0.45%
 -0.33%
-0.27%
-0.08%
           
PER UNIT OPERATING PERFORMANCE:
         
NET ASSET VALUE,
         
  JANUARY 1, 2011:
$      1,068.75
$        1,087.13
$   1,105.83
$       1,115.12 
$  $    1,144.17 
           
NET OPERATING RESULTS:
         
   Net investment loss
     (9.08)
               (7.89)
                (6.64)
            (6.00)
            (4.01)
   Net realized/unrealized loss
        (7.97)
        (8.10)
                (8.26)
             (8.33)
            (8.57)
   Net loss
           (17.05)
       (15.99) 
              (14.90)
          (14.33)
           (12.58)
           
NET ASSET VALUE,
         
  MARCH 31, 2011:
$      1,051.70
$        1,071.14
$     1,090.93
$   1,100.79 
$   1,131.59 
RATIOS TO AVERAGE NET ASSETS:
         
   Net investment loss (1) (2)
-3.45%
-2.94%
  -2.43%
-2.18%
-1.42%
   Partnership expenses (1) (2)
 3.45%
 2.94%
  2.43%
 2.18%
 1.42%
           
TOTAL RETURN:
-1.60%
-1.47%
 -1.35%
-1.29%
-1.10%
           

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



- 10 -
 
 
 

 
LV FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

4.  Financial Instruments of the Trading Companies
The Trading Advisors trade Futures Interests on behalf of the Trading Companies.  Futures and forwards represent contracts for delayed delivery of an instrument at a specified date and price.  Futures Interests are open commitments until settlement date, at which time they are realized.  They are valued at fair value, generally on a daily basis, and the unrealized gains and losses on open contracts (the difference between contract trade price and market price) are reported in the Statements of Financial Condition as a net unrealized gain or loss on open contracts.  The resulting net change in unrealized gains and losses is reflected in the net change in unrealized trading profit (loss) from one period to the next on the Statements of Income and Expenses.  The fair value of exchange-traded futures, options and forward contracts is determined by the various futures exchanges, and reflects the settlement price for each contract as of the close of business on the last business day of the reporting period.  The fair value of foreign currency forward contracts is extrapolated on a forward basis from the spot prices quoted as of approximately 3:00 P.M. (E.T.) of the last business day of the reporting period 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.  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.






- 11 -
 
 
 

 

LV FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The fair value of exchange-traded contracts is based on the settlement price quoted by the exchange on the day with respect to which fair value is being determined.  If an exchange-traded contract could not have been liquidated on such day due to the operation of daily limits or other rules of the exchange, the settlement price will be equal to the settlement price on the first subsequent day on which the contract could be liquidated.

The Trading Companies’ contracts are accounted for on a trade-date 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;
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, forwards, swaps or options contracts, and other financial instruments with similar characteristics such as caps, floors, and collars.

The futures, forwards and options traded by the Trading Advisors on behalf of the Trading Companies involve varying degrees of related market risk.  Market risk is often dependent upon changes in the level or volatility of interest rates, exchange rates, and prices of financial instruments and commodities, factors that result in frequent changes in the fair value of the Trading Companies’ open positions, and consequently in

- 12 -
 
 
 

 
LV FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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.

5.  Fair Value Measurements and Disclosures
Effective January 1, 2012, the Partnership adopted ASU 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS.”  The amendments within this ASU change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements to eliminate unnecessary wording differences between U.S. GAAP and IFRS.  However, some of the amendments clarify the FASB’s intent about the application of existing fair value measurement requirements and other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements.  This new guidance did not have a significant impact on the Partnership’s financial statements.


- 13 -

 
 

 

LV FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)




Financial instruments are carried at fair value, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.  Assets and liabilities carried at fair value are classified and disclosed in the following three levels: Level 1 - unadjusted quoted market prices in active markets for identical assets and liabilities; Level 2 - inputs other than unadjusted quoted market prices that are observable for the asset or liability, either directly or indirectly (including unadjusted quoted market prices for similar investments, interest rates, credit risk); and Level 3 - unobservable inputs for the asset or liability (including the Partnership’s own assumptions used in determining the fair value of investments).

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.  In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.  The Partnership’s assessment of the significance of a particular 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.





- 14 -
 
 
 

 

LV FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

March 31, 2012
 
 
 
 
Assets
Unadjusted
Quoted Prices in
Active Markets for
  Identical Assets
        (Level 1)
 
 Significant Other
    Observable
         Inputs
       (Level 2)
 
  Significant
   Unobservable
     Inputs
   (Level 3)
 
 
 
 
                 Total
   
        $
 
                $
Investment in TT II, LLC
14,514,175
14,514,175
Investment in WNT I, LLC
8,851,794
8,851,794
Investment in Kaiser I, LLC
6,112,708
6,112,708
Investment in Chesapeake I, LLC
5,260,561
5,260,561
Investment in Rotella I, LLC
 4,856,845
 4,856,845
Investment in GLC I, LLC
4,216,111
4,216,111
Investment in Augustus I, LLC
3,704,881
3,704,881


December 31, 2011
 
 
 
 
Assets
Unadjusted
Quoted Prices in
Active Markets for
  Identical Assets
        (Level 1)
 
 Significant Other
   Observable
       Inputs
     (Level 2)
 
Significant
   Unobservable
     Inputs
   (Level 3)
 
 
 
 
     Total
   
          $
 
        $
Investment in TT II, LLC
14,111,867
14,111,867
Investment in Kaiser I, LLC
10,573,213
10,573,213
Investment in WNT I, LLC
8,959,457
8,959,457
Investment in Augustus I, LLC
5,112,295
5,112,295
Investment in Rotella I, LLC
 5,082,011
 5,082,011
Investment in Chesapeake I, LLC
4,910,449
4,910,449
Investment in GLC I, LLC
3,942,919
3,942,919

During the period January 1, 2012 to March 31, 2012, there were no Level 3 assets and liabilities, and there were no transfers of assets or liabilities between Level 1 and Level 2.



- 15 -

 
 

 

LV FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The Partnership’s assets identified as “Investments in Affiliated Trading Companies” reflected on the Statements of Financial Condition represents the net asset value of the Partnership’s pro rata share of each Trading Company.  The net assets of each Trading Company are equal to the total assets of the Trading Company (including, but not limited to all cash and cash equivalents, accrued interest and amortization of original issue discount, and the fair value of all open Futures Interests contract positions and other assets) less all liabilities of the Trading Company (including, but not limited to, brokerage commissions that would be payable upon the closing of open Futures Interest positions, management fees, incentive fees, and extraordinary expenses), determined in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).



At March 31, 2012, the Partnership’s investment in the Trading Companies represented approximately: TT II, LLC 30.55%; WNT I, LLC 18.65%; Kaiser I, LLC 12.85%; Chesapeake I, LLC 11.10%; Rotella I, LLC 10.20%; GLC I, LLC 8.85%; and Augustus I, LLC 7.80% of the total investments of the Partnership, respectively.



At December 31, 2011, the Partnership’s investment in the Trading Companies represented approximately: Kaiser I, LLC 20.05%; TT II, LLC 26.80%; Rotella I, LLC 9.65%; Augustus I, LLC 9.70%; GLC I, LLC 7.50%; Chesapeake I, LLC 9.30%  and WNT I, LLC 17.00% of the total investments of the Partnership, respectively.


The tables below represent summarized Income Statement information for the Trading Companies that the Partnership invests in for the three months ended March 31, 2012 and 2011, respectively, in accordance with Rule 3-09 of Regulation S-X, as follows:

- 16 -
 
 
 

 
LV FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

For the Three Months Ended March 31, 2012
 
 
Investment
Income/(Loss)
Net
  Investment Loss
 
Total Trading Results
 
Net
Income/(Loss)
 
 
    $
$
    $
$
TT II, LLC
9,119
(2,717,204)
  17,771,365
15,054,161
WNT I, LLC
   215
  (62,105)
      (86,620)
   (148,725)
Kaiser I, LLC
 (2,694)
(107,566)
    (242,613)
    (350,179)
Chesapeake I, LLC
     453
  (79,363)
    (642,542)
    (721,905)
Rotella I, LLC
     (18)
  (33,002)
    (279,103)
     (312,105)
GLC I, LLC
   (180)
  (53,055)
    776,396
     723,341
Augustus I, LLC
    (586)
  (57,951)
    700,762
     642,811


For the Three Months Ended March 31, 2011
 
 
Investment
Income/(Loss)
Net
  Investment Loss
 
Total Trading Results
 
Net
Income/(Loss)
 
 
    $
$
$
$
Kaiser I, LLC
(5,170)
(269,047)
  (491,104)
(760,151)
TT II, LLC
525
(291,121)
  (444,648)
(735,769)
Morgan Stanley Smith Barney DKR Fusion I, LLC
 
   (127)
(116,464)
   (179,513) 
  (295,977)
Rotella I, LLC
 (8,030)
 (143,127)
  (251,477)
(394,604)
Chesapeake I, LLC
(21,653)
(441,187)
1,688,266
 1,247,079



6.  Other Pronouncements
In December 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-11, “Disclosures about Offsetting Assets and Liabilities”, which creates a new disclosure requirement about the nature of an entity’s rights of setoff and the related arrangements associated with its financial instruments and derivative instruments. Entities are required to disclose both gross information and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. The objective of this disclosure is to facilitate comparison between those entities that prepare their financial statements on the basis of U.S. GAAP and those entities that prepare their financial statements on the basis of International


- 17 -
 
 
 

 
LV FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Financial Reporting Standards (“IFRS”). The disclosure requirements are effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Partnership should also provide the disclosures retrospectively for all comparative periods presented.  The Partnership is currently evaluating the impact that the pronouncement would have on the financial statements. 

In October 2011, the FASB issued a proposed ASU intended to improve and converge financial reporting by setting forth consistent criteria for determining whether an entity is an investment company.  Under longstanding U.S. GAAP, investment companies carry all of their investments at fair value, even if they hold a controlling interest in another company.  The primary changes being proposed by the FASB relate to which entities would be considered investment companies as well as certain disclosure and presentation requirements.  In addition to the changes to the criteria for determining whether an entity is an investment company, the FASB also proposes that an investment company be required to consolidate another investment company if it holds a controlling financial interest in the entity.  The Partnership will evaluate the impact that this proposed update would have on the financial statements once the pronouncement is issued.

7.  Income Taxes
No provision for income taxes has been made in the accompanying financial statements, as limited partners are individually responsible for reporting income or loss based upon their respective share of the Partnership’s revenues or expenses for income tax purposes.  The Partnership files U.S. federal and state tax returns.

- 18 -
 
 
 

 

LV FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)


The guidance issued by the FASB on income taxes clarifies the accounting for uncertainty in income taxes recognized in the Partnership's financial statements, and prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken.  The Partnership has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements as of March 31, 2012 and December 31, 2011.  If applicable, the Partnership recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in other expenses in the Statements of Income and Expenses.  Generally, the 2008 through 2011 tax years remain subject to examination by U.S. federal and most state tax authorities.  No income tax returns are currently under examination.


8.  Subsequent Events

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












- 19 -

 
 

 
 
 
Item 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


As of March 31, 2012, the percentage of assets allocated to each market sector was approximately as follows: Interest Rate 18.80%; Currency 32.68%; Equity 23.06%; and Commodity 25.46%.

Liquidity.  MS&Co. and its affiliates act as custodians of each Trading Company’s assets pursuant to customer agreements and foreign exchange customer agreements.  The Partnership allocates substantially all of its assets to multiple Trading Companies. Such assets are deposited in the Trading Companies’ trading accounts with MS&Co. or its affiliates.  The funds in such accounts are available for margin and are used to engage in Futures Interest trading pursuant to instructions provided by the Trading Advisors.  The assets are held in either non-interest bearing bank accounts or in securities and instruments permitted by the Commodity Futures Trading Commission for investment of customer segregated or secured funds.  Since the Partnership’s sole purpose is to trade Futures Interests indirectly through the investment in the Trading Companies, it is expected that the Trading Companies will continue to own such liquid assets for margin purposes.

The Trading Companies’ investment in Futures Interests may, from time to time, be illiquid.  Most U.S. futures exchanges limit fluctuations in prices during a single day by regulations referred to as “daily price fluctuation limits” or “daily limits.”  Trades may not be executed at prices beyond the daily limit.  If the price for a particular futures or options contract has increased or decreased by an amount equal to the daily limit, positions in that futures or options contract can neither be taken nor liquidated unless traders are willing to effect trades at or within the limit.  Futures prices have occasionally moved the daily limit for several consecutive days with little or no trading.  These market conditions could prevent the Trading Companies from promptly liquidating their futures or options contracts and result in restrictions on redemptions.
- 20 -

 
 

 

There is no limitation on daily price 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.

Off-Balance Sheet Arrangements and Contractual Obligations.  The Partnership does not have any off-balance sheet arrangements, nor does it have contractual obligations or commercial commitment to make future payments that would affect its liquidity or capital resources.


- 21 -
 
 
 

 
Results of Operations
General.  The Partnership’s results depend on the Trading Advisors and the ability of each Trading Advisor’s trading program to take advantage of price movements in the futures, forward and options markets.  The following presents a summary of the Partnership’s operations for the quarters ended March 31, 2012 and 2011, and a general discussion of its trading activities during each period.  It is important to note, however, that the Trading Advisors trade in various markets at different times and that prior activity in a particular market does not mean that such market will be actively traded by the Trading Advisors or will be profitable in the future.  Consequently, the results of operations of the Partnership are difficult to discuss other than in the context of the Trading Advisors’ trading activities on behalf of the Partnership during the period in question.  Past performance is no guarantee of future results.

The Partnership’s results of operations set forth in the financial statements on pages 2 through 19 of this report are prepared in accordance with U.S. GAAP, which require the use of certain accounting policies that affect the amounts reported in these financial statements, including the following:  the contracts the Trading Companies trade are accounted for on a trade-date basis and marked to market on a daily basis.  The difference between their original contract value and fair value is recorded on the Statements of Income and Expenses as “Net change in unrealized appreciation (depreciation) on investments” for open contracts, and recorded as “Realized” when open positions are closed out.  The sum of these amounts constitutes the Trading Companies’ trading results.  The fair value of a futures contract is the settlement price on the exchange on which that futures contract is traded on a particular day.  The value of a foreign currency forward contract is based on the spot rate as of approximately 3:00 P.M. (E.T.), the close of the business day.


- 22 -
 
 
 

 
Ceres 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.


For the Quarter Ended March 31, 2012
The Partnership recorded total realized/net change in unrealized appreciation on investments of $151,831 and expenses totaling $379,418, resulting in a net loss of $227,587 for the quarter ended March 31, 2012.  The Partnership’s net asset value per Unit by share Class is provided in the table below.
Share Class
                  
NAV at 3/31/12
            NAV at 12/31/11
     
A
 $954.33
 $959.86
B
 $976.88
 $981.31
C
$999.95
$1,003.23
D
$1,011.82
$1,014.52
Z
$1,047.72
$1,048.53

During the first quarter, the Partnership posted a loss in net asset value per Unit as losses in interest rates, agriculturals, currencies, and metals offset profits in energies and stock indices.

The most significant losses were incurred within the global interest rate sector in February and March from long positions in U.S., European, and Australian fixed-income futures as prices fell amid optimism that Greece would receive a second bailout and after the U.S. Federal Reserve upwardly revised its U.S. economic outlook. Within the agricultural complex, losses were recorded during January from long positions in corn futures as prices fell sharply early in the month after favorable weather boosted crop prospects in South America. Within the currency markets, losses were experienced during March from long positions in the Australian dollar, New Zealand dollar, and South African rand versus the U.S. dollar as the value of these commodity-linked currencies fell against the U.S. dollar after concern over earnings in China reduced demand for higher-yielding currency

- 23 -
 
 
 

 
assets. Within the metals sector, losses were recorded in January from short futures positions in nickel, zinc, and aluminum as base metals prices advanced on speculation demand will be supported by economic expansion in the U.S. and an easing credit policy in China. Additional losses were incurred in this sector during March from long positions in gold and silver futures as prices moved lower amid a rise in the value of the U.S. dollar, which reduced demand for the precious metals.

A portion of the Partnership’s losses for the quarter was offset by gains recorded within the energy markets during January and March from short positions in natural gas futures as prices dropped amid ample inventories and mild weather across the U.S. Additional gains were experienced in this market sector during February from long futures positions in Brent crude oil, RBOB (unleaded) gasoline, and heating oil as prices increased on concerns over inventory levels and rising tensions in the Middle East. Within the global stock index sector, gains were achieved during February from long positions in European, U.S., and Pacific Rim equity index futures as prices rose amid positive economic news, including a better-than-expected U.S. employment report and an expansion in manufacturing in China, Europe, and the U.S. Prices continued to advance after China cut banks’ reserve requirements to fuel lending and buoy growth.

For the Quarter Ended March 31, 2011
The Partnership recorded total realized/net change in unrealized depreciation on investments of $(504,302) and expenses totaling $540,204, resulting in a net loss of $1,044,506 for the quarter ended March 31, 2011.  The Partnership’s net asset value per Unit by share Class is provided in the table below.
Share Class
NAV at 3/31/11
NAV at 12/31/10
     
A
$1,051.70
$1,068.75
B
$1,071.14
$1,087.13
C
$1,090.93
$1,105.83
D
$1,100.79
$1,115.12
Z
$1,131.59
$1,144.17

- 24 -
 
 
 

 
The most significant trading losses were incurred within the global interest rate sector throughout a majority of the quarter. During January, long positions in U.S. and European fixed-income futures resulted in losses as prices fell amid optimism regarding the containment of Europe’s debt crisis. In February, short positions in short-term U.S. fixed-income futures recorded losses as prices increased amid concern over unrest in the Middle East, which spurred demand for the relative “safety” of government debt. Additional losses were experienced in March due to long positions in U.S. fixed-income futures as prices fell on speculation the U.S. Federal Reserve may withdraw monetary stimulus as the U.S. economy shows signs of a sustained recovery. Within the currency markets, losses were recorded primarily during January from long positions in the Australian dollar, Japanese yen, and South African rand versus the U.S. dollar as the value of these currencies declined against the U.S. dollar following the release of minutes from the latest U.S. Federal Reserve meeting that showed optimism about the U.S. economy.

A portion of the Partnership’s losses for the quarter was offset by gains achieved within the energy markets throughout the majority of the quarter from long futures positions in crude oil and its related products as prices rose amid an escalation in political instability in the Middle East and North Africa, prompting concerns that crude supplies may be disrupted. Within the metals complex, gains were recorded primarily during February from long futures positions in silver and gold as prices of silver futures extended a rally to a 30-year high and prices of gold futures approached an all-time high amid mounting unrest in the Middle East, which spurred “safe haven” demand for precious metals. Gains were experienced within the global stock index markets, primarily during February, from long positions in U.S. equity index futures as prices were supported higher throughout the first half of the month amid positive economic reports, including faster-than-expected global


- 25 -
 
 
 

 
growth, a rebound in U.S. retail sales, and strong corporate earnings reports. Lastly, smaller gains were contributed within the agricultural complex, primarily during January, due to long positions in corn futures as prices rose to the highest levels since July 2008 after the U.S. government lowered forecasts for domestic inventories as adverse weather slashed harvests.

Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Introduction
All of the Partnership’s assets are subject to the risk of trading loss through its investments in the Trading Companies, each of which invests substantially all of its assets in the trading program of an unaffiliated Trading Advisor. The market-sensitive instruments held by the Trading Companies are acquired for speculative trading purposes, and substantially all of the respective Trading Companies’ assets are subject to the risk of trading loss.  Unlike an operating company, the risk of market-sensitive instruments is integral, not incidental, to the Trading Companies’ main line of business.

The futures, forwards and options traded by the Trading Companies involve varying degrees of related market risk.  Market risk is often dependent upon changes in the level or volatility of interest rates, exchange rates, and prices of financial instruments and commodities.  These factors result in frequent changes in the fair value of the Trading Companies’ open positions, and consequently in their earnings, whether realized or unrealized, and cash flow.  Gains and losses on open positions of exchange-traded futures, exchange-traded forward, and exchange-traded futures-styled options contracts and forward currency options contracts are settled daily through variation margin.  Gains and losses on off-exchange-traded forward currency contracts


- 26 -
 
 
 

 
and forward currency options contracts are settled upon termination of the contract.  However, the Trading Companies are required to meet margin requirements equal to the net unrealized loss on open forward currency contracts in the Trading Companies’ accounts with the counterparty, which is accomplished by daily maintenance of the cash balance in a custody account held at MSSB for the benefit of MS&Co.

The total market risk of the respective Trading Companies may increase or decrease as it is influenced by a wide variety of factors, including, but not limited to, the diversification among the Trading Companies’ open positions, the volatility present within the markets, and the liquidity of the markets.

The face value of the market sector instruments held by the Trading Companies is typically many times the applicable margin requirements.  Margin requirements generally range between 2% and 15% of contract face value.  Additionally, the use of leverage causes the face value of the market sector instruments held by the Trading Companies typically to be many times the total capitalization of the Trading Companies.

The Partnership’s and the Trading Companies’ past performance are no guarantee of their future results.  Any attempt to numerically quantify the Trading Companies’ market risk is limited by the uncertainty of their speculative trading.  The Trading Companies’ speculative trading and use of leverage may cause future losses and volatility (i.e., “risk of ruin”) that far exceed the Trading Companies’ experiences to date as discussed 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.



- 27 -
 
 
 

 
Quantifying the Trading Companies’ Trading Value at Risk
The following quantitative disclosures regarding the Trading Companies’ market risk exposures contain “forward-looking statements” within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act 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 fair value 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.  Please note that the VaR model is used to quantify market risk for historic reporting purposes only and is not utilized by either Ceres or the Trading Advisors in their daily risk management activities.

VaR is a measure of the maximum amount which each Trading Company could reasonably be expected to lose in a given market sector.  However, the inherent uncertainty of each Trading Company’s speculative trading and the recurrence in the markets traded by the Trading Companies of market movements far exceeding expectations could result in actual trading or non-trading losses far beyond the indicated VaR of each Trading Company’s experience to date (i.e., “risk of ruin”).  In light of the foregoing as well as the risks and uncertainties intrinsic to all future projections, the inclusion of the quantification in this section should

- 28 -
 
 
 

 
not be considered to constitute any assurance or representation that the Trading Companies’ losses in any market sector will be limited to VaR or by the Trading Companies’ attempts to manage its market risk.

Exchange maintenance margin requirements have been used by the Trading Companies as the measure of its VaR.  Maintenance margin requirements are set by exchanges to equal or exceed the maximum losses reasonably expected to be incurred in the fair value of any given contract in 95% - 99% of any one-day interval.  Maintenance margin has been used rather than the more generally available initial margin, because initial margin includes a credit risk component, which is not relevant to VaR.




The Trading Companies’ Value at Risk in Different Market Sectors
As of March 31, 2012, Chesapeake I, LLC’s total capitalization was $12,612,527.  The Partnership owned approximately 42% of Chesapeake I, LLC.
   
% of Total
Market Sector
VaR
Capitalization
     
Currency
$303,632
2.41%
     
Interest Rate
201,983
1.60%
     
Equity
 338,520
2.68%
     
Commodity
    813,114
6.45%
     
Total
$1,657,249
13.14%











- 29 -
 
 
 

 

                                                                     Three Months Ended March 31, 2012
Market Sector
High VaR
           Low VaR
          Average VaR*
Currency
$460,983
$227,842
$317,717
Interest Rate
$421,156
$201,609
$345,638
Equity
$460,528
$158,395
$355,513
Commodity
$830,299
$576,110
$774,601
* Average of month-end VaR


As of March 31, 2012, Kaiser I, LLC’s total capitalization was $15,344,367.  The Partnership owned approximately   40% of Kaiser I, LLC.
   
% of Total
Market Sector
VaR
Capitalization
     
Currency
$96,099
0.63%
     
Interest Rate
68,817
0.45%
     
Equity
202,000
1.32%
     
Commodity
 36,045
0.23%
     
Total
$402,961
2.63%


   Three Months Ended March 31, 2012
Market Sector
High VaR
          Low VaR
          Average VaR*
Currency
$521,285
$29,787
$216,525
Interest Rate
$399,602
$49,024
$186,008
Equity
$856,581
$10,181
$240,585
Commodity
$102,938
$6,075
$44,505
* Average of month-end VaR
- 30 -
 
 
 

 
As of March 31, 2012, TT II, LLC’s total capitalization was $529,034,330.  The Partnership owned approximately   3% of TT II, LLC.
   
% of Total
Market Sector
VaR
Capitalization
     
Currency
$19,303,602
3.65%
     
Interest Rate
17,648,239
3.34%
     
Equity
13,506,783
2.55%
     
Commodity
 17,517,314
3.31%
     
Total
$67,975,938
12.85%


                                Three Months Ended March 31, 2012
Market Sector
High VaR
          Low VaR
          Average VaR*
Currency
$41,325,209
$10,128,961
          $29,804,545
Interest Rate
$20,024,732
$11,155,384
$16,408,509
Equity
$14,826,852
$4,231,868
$10,770,049
Commodity
$20,966,426
$13,667,931
$17,478,629
* Average of month-end VaR


As of March 31, 2012, Rotella I, LLC’s total capitalization was $6,726,655.  The Partnership owned approximately 72% of Rotella I, LLC.





- 31 -
 
 
 

 
   
% of Total
Market Sector
VaR
Capitalization
     
Currency
$194,380
2.89%
     
Interest Rate
145,031
2.16%
     
Equity
 250,255
3.72%
     
Commodity
  119,668
1.78%
     
Total
$709,334
 10.55%


   Three Months Ended March 31, 2012
Market Sector
High VaR
       Low VaR
          Average VaR*
Currency
$323,590
$109,815
$233,101
Interest Rate
$373,496
$140,608
$214,319
Equity
$405,560
$88,279
$243,449
Commodity
$182,129
$80,855
$141,751
* Average of month-end VaR

As of March 31, 2012, Augustus I, LLC’s total capitalization was $10,369,032.  The Partnership owned approximately 36% of Augustus I, LLC.
   
% of Total
Market Sector
VaR
Capitalization
     
Currency
$419,459
4.05%
     
Interest Rate
  22,275
0.21%
     
Total
$441,734
  4.26%





- 32 -
 
 
 

 
                                           Three Months Ended March 31, 2012
Market Sector
High VaR
Low VaR
Average VaR*
Currency
$2,984,508
$336,201
$1,571,281
Interest Rate
 $163,259
$22,275
$78,252
* Average of month-end VaR

As of March 31, 2012, GLC I, LLC’s total capitalization was $10,183,347.  The Partnership owned approximately    41% of GLC I, LLC.
   
% of Total
Market Sector
VaR
Capitalization
     
Currency
$525,540
5.16%
     
Interest Rate
12,599
0.12%
     
Equity
 106,236
1.04%
     
Total
$644,375
6.32%


                                                                             Three Months Ended March 31, 2012
Market Sector
High VaR
          Low VaR
          Average VaR*
Currency
$775,937
$101,024
$524,914
Interest Rate
$283,664
$12,498
$106,016
Equity
$227,652
$40,804
$115,748
* Average of month-end VaR



- 33 -
 
 
 

 
As of March 31, 2012, WNT I, LLC’s total capitalization was $12,259,595.  The Partnership owned approximately   72% of WNT I, LLC.
   
% of Total
Market Sector
VaR
Capitalization
     
Currency
$480,479
3.92%
     
Interest Rate
  245,813
2.01%
     
Equity
  383,122
3.13%
     
Commodity
   396,907
3.24%
     
Total
$1,506,321
  12.30%


                                   Three Months Ended March 31, 2012
Market Sector
High VaR
          Low VaR
       Average VaR*
Currency
$480,913
$316,730
$425,783
Interest Rate
$535,919
$225,412
$381,631
Equity
$504,132
$106,730
$356,444
Commodity
 $442,465
$231,204
$374,904
* Average of month-end VaR

As of December 31, 2011, Chesapeake I, LLC’s total capitalization was $10,859,791.  The Partnership owned approximately 45% of Chesapeake I, LLC.




- 34 -
 
 
 

 
Primary Market
 
% of
Risk Category
VaR
Total Capitalization
     
Currency
$389,541
3.59%
     
Interest Rate
355,542
3.27%
     
Equity
158,814
1.46%
     
Commodity
  575,673
5.30%
     
Total
$1,479,570
13.62%




                         Twelve Months Ended December 31, 2011
Market Sector
High VaR
Low VaR
Average VaR*
Currency
$459,497
$143,547
$252,159
Interest Rate
$379,708
$155,184
$231,456
Equity
$551,279
$75,094
$306,229
Commodity
$882,032
$429,419
$618,534

As of December 31, 2011, Kaiser I, LLC’s total capitalization was $27,734,037.  The Partnership owned approximately 38% of Kaiser I, LLC.
   
% of Total
Market Sector
                   VaR
Capitalization
     
Currency
$6,147
  0.02%
     
Interest Rate
80,677
0.29%
     
Equity
   70,976
 0.26%
     
Total
$157,800
0.57%


- 35 -
 
 
 

 

                         Twelve Months Ended December 31, 2011
Market Sector
High VaR
Low VaR
Average VaR*
Currency
$816,769
$6,147
$221,158
Interest Rate
$498,385
$229,132
Equity
$886,068
$182,840
Commodity
$389,614
$144,118

As of December 31, 2011, TT II, LLC’s total capitalization was $476,615,913.  The Partnership owned approximately 3% of TT II, LLC.

   
% of Total
Market Sector
VaR
Capitalization
     
Currency
$9,977,318
2.09%
     
Interest Rate
14,916,316
3.13%
     
Equity
4,335,111
0.91%
     
Commodity
  17,904,472
3.76%
     
Total
$47,133,217
9.89%



                         Twelve Months Ended December 31, 2011
Market Sector
High VaR
Low VaR
Average VaR*
Currency
$22,372,356
$688,683
$7,090,978
Interest Rate
$15,002,665
$398,638
$5,207,746
Equity
  $9,307,243
$778,042
$2,729,767
Commodity
$26,711,030
$512,564
$9,752,503

- 36 -
 
 
 

 
As of December 31, 2011, Rotella I, LLC’s total capitalization was $6,960,774.  The Partnership owned approximately 73% of Rotella I, LLC.

   
% of Total
Market Sector
VaR
Capitalization
     
Currency
$264,167
3.80%
     
Interest Rate
275,444
3.96%
     
Equity
113,818
1.64%
     
Commodity
  80,855
1.16%
     
Total
$734,284
10.56%

                         Twelve Months Ended December 31, 2011
Market Sector
High VaR
Low VaR
Average VaR*
Currency
$819,044
$78,222
$255,710
Interest Rate
$479,029
$83,022
$192,477
Equity
$424,761
$58,388
$160,825
Commodity
$268,327
$49,937
$138,984

As of December 31, 2011, Augustus I, LLC’s total capitalization was $12,936,533.  The Partnership owned approximately 40% of Augustus I, LLC.

   
% of Total
Market Sector
VaR
Capitalization
     
Currency
$1,615,546
12.49%
     
Interest Rate
  162,443
1.26%
     
Total
$1,777,989
13.75%

- 37 -
 
 
 

 
                         Twelve Months Ended December 31, 2011
Market Sector
High VaR
Low VaR
Average VaR*
Currency
$2,193,622
$229,785
$985,151
Interest Rate
$433,616
$11,222
$118,598

As of December 31, 2011, GLC I, LLC’s total capitalization was $10,399,401.  The Partnership owned approximately 38% of GLC I, LLC.

   
% of Total
Market Sector
VaR
Capitalization
     
Currency
$446,689
4.30%
     
Interest Rate
198,318
1.91%
     
Equity
  149,844
1.44%
     
Total
$794,851
7.65%

                         Twelve Months Ended December 31, 2011
Market Sector
High VaR
Low VaR
Average VaR*
Currency
$620,871
$2,036
$167,011
Interest Rate
$441,278
$4,738
$125,982
Equity
$349,678
$33,318
$134,083
Commodity
$13,017
 –
$2,537

As of December 31, 2011, WNT I, LLC’s total capitalization was $12,271,476.  The Partnership owned approximately 73% of WNT I, LLC.

- 38 -
 
 
 

 

   
% of Total
Market Sector
VaR
Capitalization
     
Currency
$300,739
2.45%
     
Interest Rate
297,714
2.43%
     
Equity
104,471
0.85%
     
Commodity
  231,173
1.88%
     
Total
$934,097
  7.61%

                         Twelve Months Ended December 31, 2011
Market Sector
High VaR
Low VaR
Average VaR*
Currency
$429,467
$90,742
$232,971
Interest Rate
$409,363
$136,938
$212,095
Equity
$512,198
$49,529
$204,206
Commodity
$679,393
$87,985
$294,411
* Average of month-end VaR.

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;

- 39 -
 
 
 

 
·  
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.



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 unrestricted cash at MSSB; as of March 31, 2012, such amount was equal to:
·  
approximately 94% of Kaiser I, LLC’s net assets.
·  
approximately 85% of TT II, LLC’s net assets.
·  
approximately 89% of Rotella I, LLC’s net assets.
·  
approximately 95% of Augustus I, LLC’s net assets.
·  
approximately 94% of GLC I, LLC’s net assets.
·  
approximately 85% of Chesapeake I, LLC’s net assets.
·  
approximately 87% of WNT I, LLC’s net assets.


- 40 -
 
 
 

 
A decline in short-term interest rates would result in a decline in the Trading Companies’ cash management income.  This cash flow risk is not considered to be material.

Materiality, as used throughout this section, is based on an assessment of reasonably possible market movements and any associated potential losses, taking into account the leverage, optionality, and multiplier features of the Trading Companies’ market-sensitive instruments, in relation to the Trading Companies’ net assets.

Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnership’s market risk exposures – except for (A) those disclosures that are statements of historical fact and (B) the descriptions of how the Partnership manages its primary market risk exposures – constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  The Partnership’s primary market risk exposures, as well as the strategies used and to be used by Ceres and the Trading Advisors for managing such exposures, are subject to numerous uncertainties, contingencies and risks, any one of which could cause the actual results of the Partnership’s risk controls to differ materially from the objectives of such strategies.  Government interventions, defaults and expropriations, illiquid markets, the emergence of dominant fundamental factors, political upheavals, changes in historical price relationships, an influx of new market participants, increased regulation, and many other factors could result in material losses, as well as in material changes to the risk exposures and the risk management strategies of the Partnership.

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


- 41 -
 
 
 

 
Item 4.   CONTROLS AND PROCEDURES


Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of the management of Ceres, at the time this quarterly report was filed, Ceres’ President (Ceres’ principal executive officer) and Chief Financial Officer (Ceres’ principal financial officer) have evaluated the effectiveness of the design and operation of the Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2012.  The Partnership’s disclosure controls and procedures are designed to provide reasonable assurance that information the Partnership is required to disclose in the reports that the Partnership files or submits under the Exchange Act are recorded, processed and summarized and reported within the time period specified in the applicable rules and forms.  Based on this evaluation, the President and Chief Financial Officer of Ceres have concluded that the disclosure controls and procedures of the Partnership were effective at March 31, 2012.

 
Changes in Internal Control over Financial Reporting
 
There have been no changes during the period covered by this quarterly report in the Partnership’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that have materially affected or are reasonably likely to materially affect the Partnership’s internal control over financial reporting.


Limitations on the Effectiveness of Controls

Any control system, no matter how well designed and operated, can provide reasonable (not absolute) assurance that its objectives will be met.  Furthermore, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.
- 42 -

 
 

 

PART II.  OTHER INFORMATION
Item 1.  LEGAL PROCEEDINGS
There were no additional information to supplement or amend the discussion set forth under Part I, Item 3, “Legal Proceedings” in the Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

Item 1A.  RISK FACTORS
There have been no material changes from the risk factors previously referenced in the Partnership’s Report on Form 10-K for the fiscal year ended December 31, 2011.

 
 
Item 2.  UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS

Units of the Partnership are sold to persons and entities who are accredited investors as the term is defined in Rule 501(a) of Regulation D.

The aggregate proceeds of securities sold in all share Classes to the limited partners, from inception through March 31, 2012, was $112,575,374.  Since inception, the Partnership received $805,000 in consideration from the sale of Units to the General Partner.

Proceeds of net offering were used for the trading of commodity interests including futures contracts, options, and forward and swap contracts.



- 43 -
 
 
 

 
The following chart sets forth the purchases of redeemable Units by the Partnership.
 
 
 
 
 
 
 
 
Period
 
 
 
 
 
 
(a) Total Number of Redeemable Units Purchased*
 
 
 
 
 
 
(b) Average
Price Paid
per Redeemable Unit**
 
 
 
(c) Total Number Of
Redeemable Units
Purchased as part
Of Publicly
Announced
Plans or Programs
 
 
 
 
      (d) Maximum Number
      (or Approximate Dollar Value)
of Redeemable Units that May
Yet Be Purchased Under the
       Plans or Programs
Class A
       
January 1, 2012 - January 31, 2012
609.873
963.84
N/A
 N/A
February 1, 2012 – February 29, 2012
841.624
967.82
N/A
N/A
March 1, 2012 - March 31, 2012
1,632.986
  954.33
 N/A
N/A
 
3,084.483
  959.89
   

 
 
 
 
 
 
 
 
Period
 
 
 
 
 
 
(a) Total Number of Redeemable Units Purchased*
 
 
 
 
 
 
(b) Average
Price Paid
per Redeemable Unit**
 
 
 
(c) Total Number Of
Redeemable Units
Purchased as part
Of Publicly
Announced
Plans or Programs
 
 
 
      
(d) Maximum Number
      (or Approximate Dollar Value)
of Redeemable Units that
May Yet Be Purchased
Under the
       Plans or Programs
Class B
       
January 1, 2012 - January 31, 2012
181.064
985.80
N/A
 N/A
February 1, 2012 – February 29, 2012
  –
  –
N/A
N/A
March 1, 2012 – March 31, 2012
239.962
  976.88
 N/A
N/A
 
421.026
  980.72
   


 
 
 
 
 
 
 
 
Period
 
 
 
 
 
 
 
(a) Total Number of Redeemable Units Purchased*
 
 
 
 
 
 
 
(b) Average
Price Paid
 per Redeemable Unit**
 
 
 
 
(c) Total Number Of
Redeemable Units
Purchased as part
Of Publicly
Announced
Plans or Programs
 
 
 
    
  (d) Maximum Number
      (or Approximate Dollar Value)
of Redeemable Units that 
May Yet Be Purchased
Under the
       Plans or Programs
Class C
       
January 1, 2012 – January 31, 2012
    154.000
1,008.24
N/A
 N/A
February 1, 2012 – February 29, 2012
260.000
1,013.23
N/A
N/A
March 1, 2012 - March 31, 2012
             –    
           –      
 N/A
N/A
 
  414.000
1,011.37
   
         





- 44 -
 
 
 

 
 
 
 
 
 
 
 
 
Period
 
 
 
 
 
 
(a) Total Number of Redeemable Units Purchased*
 
 
 
 
 
 
(b) Average
Price Paid
per Redeemable Unit**
 
 
 
(c) Total Number Of
Redeemable Units
Purchased as part
Of Publicly
Announced
Plans or Programs
 
 
 
      (d) Maximum Number
      (or Approximate Dollar Value)
 of Redeemable Units that
May Yet Be Purchased
 Under the
       Plans or Programs
Class D
       
January 1, 2012 – January 31, 2012
   –
   –
N/A
 N/A
February 1, 2012 – February 29, 2012
   –
   –
N/A
N/A
March 1, 2012 - March 31, 2012
        –    
         –      
 N/A
N/A
 
            –    
         –      
   
         

 
 
 
 
 
 
 
 
Period
 
 
 
 
 
 
(a) Total Number of Redeemable Units Purchased*
 
 
 
 
 
 
(b) Average
Price Paid
 per Redeemable Unit**
 
 
 
(c) Total Number Of
Redeemable Units
Purchased as part
Of Publicly
Announced
Plans or Programs
 
 
 
      (d) Maximum Number
      (or Approximate Dollar Value)
of Redeemable Units that
 May Yet Be Purchased
Under the
       Plans or Programs
Class Z
       
January 1, 2012 – January 31, 2012
  –
  –
N/A
 N/A
February 1, 2012 – February 29, 2012
  –
  –
N/A
N/A
March 1, 2012 - March 31, 2012
22.509
  1,047.72
 N/A
N/A
 
22.509
  1,047.72
   

*
 
Generally, limited partners are permitted to redeem their Redeemable Units as of the end of each month on three business days’ notice to the General Partner. Under certain circumstances, the General Partner can compel redemption, although to date the General Partner has not exercised this right. Purchases of Redeemable Units by the Partnership reflected in the chart above were made in the ordinary course of the Partnership’s business in connection with effecting redemptions for limited partners.
     
**
 
Redemptions of Redeemable Units are effected as of the last day of each month at the net asset value per Redeemable Unit as of that day.

Item 4.  MINE SAFETY DISCLOSURES
Not applicable.


 

 

 

 
 
- 45 -
 
 
 

 
Item 6.  EXHIBITS
31.01
Certification of President of Ceres Managed Futures LLC, the General Partner of the Partnership, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
31.02
Certification of Chief Financial Officer of Ceres Managed Futures LLC, the General Partner of the Partnership, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
32.01
Certification of President of Ceres Managed Futures LLC, the General Partner of the Partnership, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
32.02
Certification of Chief Financial Officer of Ceres Managed Futures LLC, the General Partner of the Partnership, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
101.INS*
XBRL Instance Document
 
101.SCH*
XBRL Taxonomy Extension Schema Document
 
101.CAL*
XBRL Taxonomy Extension Calculation Linkbase Document
 
101.LAB*
XBRL Taxonomy Extension Label Document
 
101.PRE*
XBRL Taxonomy Extension Presentation Document
 
101.DEF*
XBRL Taxonomy Extension Definition Document
 

 
 
Notes to Exhibits List
 
 
* Submitted electronically herewith.
 
 
Pursuant to applicable securities laws and regulations, the Partnership is deemed to have complied with the reporting obligation relating to the submission of interactive data files in Exhibit 101 to this report and is not subject to liability under any anti-fraud provisions of the federal securities laws as long as the Partnership has made a good faith attempt to comply with the submission requirements and promptly amends the interactive data files after becoming aware that the interactive data files fails to comply with the submission requirements. Users of this data are advised that, pursuant to Rule 406T, these interactive data files are deemed not filed and otherwise are not subject to liability.
 

 

 

 
- 46 -
 

 
 

 


 

 

 

 
SIGNATURE



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




 
LV Futures Fund L.P.
 
(Registrant)
     
 
By:
Ceres Managed Futures LLC
   
(General Partner)
     
May 15, 2012
By:
/s/Brian Centner
   
Brian Centner
   
Chief Financial Officer




The General Partner which signed the above is the only party authorized to act for the registrant.  The registrant has no principal executive officer, principal financial officer, controller, or principal accounting officer and has no Board of Directors.




















- 47 -