**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, 2008**

 

**or**

 

**o****Transition Report Pursuant to Section 13or 15(d) of the Securities Exchange Act of 1934**

 

**Commission file number: 0-50269**

 

**ML SELECT FUTURES I  L.P.**

(Exact name of registrant as specified in its charter)

 

| **Delaware**                    | ** ** | **13-3879393**      |
|---------------------------------|------------|---------------------|
| (State or other jurisdiction of |       | (I.R.S. Employer    |
| incorporation or organization)  |       | Identification No.) |

** **

**c/oMerrill Lynch Alternative Investments LLCTwo World Financial Center, 7****th FloorNew York, New York 10281**

(Address of principal executive offices)(Zip Code)

 

**212-236-2063**

(Registrant’s telephone number, includingarea code)

 

Securities registered pursuant to Section 12(b) ofthe Act: **None**

 

Securities registered pursuant to Section 12(g) ofthe Act: **Limited Partnership Units**

 

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

 

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

 

Indicate by check mark if the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days.
|   |   | Yes x |   | No o |
|--------|--------|-------|--------|------|

 

Indicate by check mark if disclosure of delinquentfilers pursuant to Item 405 of Regulation S-K is not contained herein, and willnot be contained, to the best of registrant’s knowledge, in definitive proxy orinformation statements incorporated by reference in Part III of this Form 10-Kor any amendment to this Form 10-K. x

 

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

 
| Large  accelerated filer o                     |   | Accelerated  filer o       |
|------------------------------------------------|--------|----------------------------|
|                                           |   |                       |
| Non-accelerated  filer x                       |   | Small reporting  company o |
| (Do not check if  a smaller reporting company) |   |                       |

 

Indicate by checkmark whether the registrant is a shell company (as defined by Rule 12b-2of the Act).
|   |   | Yes o |   | No x |
|--------|--------|-------|--------|------|

 

The Units of thelimited liability company interest registrant are not publicly traded.Accordingly, there is no aggregate market value for the registrant’soutstanding equity that is readily determinable.

 

As of January 31, 2009, limited partnership units of with a NetAsset Value of $210,847,174 were held by non-affiliates.

 

**Documents Incorporated byReference**

 

The registrant’s 2008 Annual Report and Report ofIndependent Registered Public Accounting Firm, the annual report to securityholders for the fiscal year ended December 31, 2008, is incorporated byreference into Part II, Item 8, and Part IV hereof and filed as an Exhibit herewith.Copies of the annual report are available free of charge by contactingAlternative Investments Client Services at 1-866-MER-ALTS.

 

 

 

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**ML SELECT FUTURES I L. P.**

 

ANNUAL REPORT FOR 2008 ONFORM 10-K

 

Table of Contents

 
|          |                                                                                                                | **PAGE** |
|---------------|---------------------------------------------------------------------------------------------------------------------|----------|
| PART I   |
|          |                                                                                                                |     |
| Item 1.       | Business                                                                                                            | 1        |
|          |                                                                                                                |     |
| Item 1A.      | Risk Factors                                                                                                        | 7        |
|          |                                                                                                                |     |
| Item 1B.      | Unresolved Staff  Comments                                                                                          | 9        |
|          |                                                                                                                |     |
| Item 2.       | Properties                                                                                                          | 9        |
|          |                                                                                                                |     |
| Item 3.       | Legal Proceedings                                                                                                   | 9        |
|          |                                                                                                                |     |
| Item 4.       | Submission  of Matters to a Vote of Security Holders                                                                | 9        |
|          |                                                                                                                |     |
| PART II  |
|          |                                                                                                                |     |
| Item 5.       | Market for  Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases  of Equity Securities | 9        |
|          |                                                                                                                |     |
| Item 6.       | Selected Financial  Data                                                                                            | 11       |
|          |                                                                                                                |     |
| Item 7.       | Management’s Discussion and Analysis of  Financial Condition and Results of Operations                         | 14       |
|          |                                                                                                                |     |
| Item 7A.      | Quantitative  and Qualitative Disclosures about Market Risks                                                        | 21       |
|          |                                                                                                                |     |
| Item 8.       | Financial  Statements and Supplementary Data                                                                        | 26       |
|          |                                                                                                                |     |
| Item 9.       | Changes in  and Disagreements with Accountants on Accounting and Financial Disclosure                               | 26       |
|          |                                                                                                                |     |
| Item 9A(T).   | Controls and  Procedures                                                                                            | 27       |
|          |                                                                                                                |     |
| Item 9B.      | Other Information                                                                                                   | 28       |
|          |                                                                                                                |     |
| PART III |
|          |                                                                                                                |     |
| Item 10.      | Directors,  Executive Officers and Corporate Governance                                                             | 28       |
|          |                                                                                                                |     |
| Item 11.      | Executive  Compensation                                                                                             | 30       |
|          |                                                                                                                |     |
| Item 12.      | Security  Ownership of Certain Beneficial Owners and Management and Related Stockholder  Matters                    | 30       |
|          |                                                                                                                |     |
| Item 13.      | Certain  Relationships and Related Transactions and Director Independence                                           | 30       |
|          |                                                                                                                |     |
| Item 14.      | Principal  Accountant Fees and Services                                                                             | 31       |
|          |                                                                                                                |     |
| PART IV  |
|          |                                                                                                                |     |
| Item 15.      | Exhibits and  Financial Statement Schedules                                                                         | 33       |

 

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**PART I**

 

**Item 1:****          Business**

 

(a)                                  GeneralDevelopment of Business:

 

ML Select Futures I L.P.  (the “Partnership”) was organized under theDelaware Revised Uniform Limited Partnership Act on August 4, 1995 underthe name ML Chesapeake L.P.  ThePartnership began trading on April 16, 1996 and trades in theinternational futures and forward markets applying proprietary tradingstrategies under the direction of Sunrise Capital Partners, LLC (“Sunrise”).  The Partnership’s objective is to achieve,through speculative trading, substantial capital appreciation over time.

 

Merrill Lynch AlternativeInvestments LLC (“MLAI”), the sponsor (“Sponsor”) and general partner of thePartnership, is an indirect wholly-owned subsidiary of Merrill Lynch &Co., Inc. (“Merrill Lynch”). Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”),a wholly-owned subsidiary of Merrill Lynch, is the Partnership’s commoditybroker. As used herein, the capitalized term “MLAI” also refers to the generalpartner at times when its name was MLIM Alternative Strategies LLC, asapplicable. On September 15, 2008, Merrill Lynch & Co., Inc.(“Merrill Lynch” or the “Company”) entered into an Agreement and Plan of Merger(as amended by Amendment No. 1 dated as of October 21, 2008, the “MergerAgreement”) with Bank of America Corporation (“Bank of America”). Pursuant tothe Merger Agreement, on January 1, 2009, a wholly-owned subsidiary ofBank of America (“Merger Sub”) merged with and into Merrill Lynch, with MerrillLynch continuing as the surviving corporation and a subsidiary of Bank ofAmerica (the “Merger”).

 

The proceeds of the Partnership’s units of limitedpartnership interest (the “Units”) were initially allocated to the Partnership’sinitial trading adviser, Chesapeake Capital Corporation (“Chesapeake”).  On July 1, 1998, Sunrise replacedChesapeake as the Partnership’s sole trading advisor (“Advisor”).

 

As of December 31, 2008, the capitalization ofthe Partnership was $215,554,694 and the Net Asset Value per Unit, originally$100 as of April 1, 1996, had risen to $314.15

 

The highest month-end Net Asset Value per Unit sinceSunrise began trading the Partnership was $314.15 (December 31, 2008) andthe lowest was $127.01 (July 31, 1998).

 

(b)                                 FinancialInformation about Segments:

 

The Partnership’s business constitutes only onesegment for financial reporting purposes, i.e*.,*a speculative “commodity pool”. The Partnership does not engage in sales ofgoods or services.

 

(c)                                  NarrativeDescription of Business:

 

***General***

 

The Partnership trades in the international futuresand forward markets with the objective of achieving substantial capitalappreciation.

 

The Partnership has entered into an advisory agreementwith Sunrise whereby Sunrise trades the Partnership’s assets through a managedaccount using its Expanded Diversified Program. In the Expanded Diversified Program, Sunrise applies its trend-followingsystems to a broadly-diversified portfolio of futures and forward markets,including, but not limited to, precious and industrial metals, grains,petroleum products, soft commodities, domestic and foreign interest ratefutures, domestic and foreign stock indices (including S&P 500, DAX, andNikkei 225), currencies and their cross rates, and minor currency markets.

 

1

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One of the aims of the Partnership is to providediversification to a limited portion of the risk segment of the LimitedPartners’ portfolios into an investment field that has historically oftendemonstrated a low degree of performance correlation with traditional stock andbond holdings.

 

***Employees***

 

The Partnership has no employees.

 

***Sunrise and its Expanded Diversified Program***

 

Sunrise currently offers five trading programs, one ofwhich, the Expanded Diversified Trading Program is used in managing thePartnership’s assets.  In the ExpandedDiversified Trading Program, Sunrise applies its trend-following systems to abroadly-diversified portfolio of futures and forward markets, including, butnot limited to, precious and industrial metals, grains, petroleum products,soft commodities, domestic and foreign interest rate futures, domestic andforeign stock indices (including S&P 500, DAX and Nikkei 225), currenciesand their cross rates, and minor currency markets (collectively, “CommodityInterests”).  Sunrise may trade thesemarkets on any U.S. or non-U.S. exchange. Sunrise may also trade options for the Partnership in the future; in theevent that it does, these options will be considered Commodity Interests.  As of December 31, 2008, Sunrise wasmanaging approximately $1.125 billion (excluding “notional” funds) in thefutures and forward markets.

 

###### Sunrise’s ProgramsAre Technical and Trend-Following Systems

######  

The mathematical models used by Sunrise’s programs aretechnical systems, generating trading signals on the basis of statisticalresearch into past market prices. Sunrise does not attempt to predict or forecast changes in price throughfundamental economic analysis.  Thetrading methodologies employed by Sunrise are based on programs analyzing alarge number of interrelated mathematical and statistical formulas and techniques,which are quantitative and proprietary in nature.

 

As a trend-following advisor, Sunrise’s objective isto participate in major price trends—sustained price movements either up ordown.  Such price trends may berelatively infrequent.  Sometrend-following advisors have anticipated that over half of their positionswill be unprofitable.  Their strategy isbased on making sufficiently large profits from the trends which they identifyand follow to generate overall profits despite the more numerous but, hopefully,smaller losses incurred on the majority of their positions.

 

The Markets Traded by Sunrise for the Partnership

 

The Partnershiptrades on a variety of United States and foreign futures exchanges.  Applicable exchange rules differsignificantly among different countries and exchanges.  The Partnership’s entire off-exchange tradingtakes place substantially in the highly liquid, institutionally based currencyforward markets.  The forward markets aregenerally unregulated, and in its forward trading the Partnership does notdeposit margin with respect to its positions. Spot and forward currency contracts currently are the only non-exchangetraded instruments held by the Partnership.

 

To date, approximately 20% to 30% of the Partnership’strades by volume have been in forward currency contracts, but from time to timethe percentage of the Partnership’s trading represented by forward currencytrades may fall substantially outside this range.  Because the Partnership need not deposit anymargin with Merrill Lynch in respect of the Partnership’s forward trading, thePartnership’s additional risk in trading in such unregulated markets should belimited to a possible loss of unrealized profits on open forward positionswhich a counterparty accessed through Merrill Lynch would not, in the event ofits bankruptcy, be able to pay to Merrill Lynch for the account of thePartnership.

 

As in the case ofits market sector allocations, the Partnership’s commitments to different typesof markets — U.S. and non-U.S., regulated and unregulated — differ substantiallyfrom time to time as well as over 

 

2

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time.  The Partnership has no policy restricting itsrelative commitment to any of these different types of markets, althoughgenerally the bulk of the Partnership’s trading takes place on regulatedexchanges.

 

ThePartnership’s financial statements contain information relating to the types ofmarkets traded by the Partnership.  Therecan, however, be no assurance as to which markets the Partnership may trade orin which markets the Partnership’s trading may be concentrated at any one timeor over time.

 

***Use of Proceeds and Cash Management Income***

 

Subscription Proceeds

 

The Partnership’s cash isused as security for and to pay the Partnership’s trading losses as well as itsexpenses and redemptions. The primary use of the proceeds of the sale of theUnits is to permit Sunrise to trade on a speculative basis in a wide range ofdifferent futures and forwards markets on behalf of the Partnership.  While being used for this purpose, thePartnership’s assets are also generally available for cash management, as morefully described below under “Available Assets”.

 

Market Sectors

 

In the Expanded Diversified Program, Sunrise appliesits trend-following systems to a broadly diversified portfolio of futures andforward markets.  Commodity interestscurrently included in the Expanded Diversified Program are: currencies (majors,minors, and crossrates), metals (gold, silver, copper, aluminum, nickel, andzinc), indices (S&P 500, DAX, and Nikkei 225), interest rates (T-bonds,T-Notes, Eurodollars, Euro-Bund, three-month Euro Futures, Euro BOBL, JapaneseGovernment Bond, Euroyen, 90-day Australian Bank Accepted Bill (“Aussie Bill”)and three-month Canadian Bankers’ Acceptance Note), energy (crude oil andnatural gas) and agriculturals (soybeans, soymeal, corn, wheat, coffee andsugar and cotton).

 

Market Types

 

The Partnership trades on a variety of United Statesand foreign futures exchanges. Substantially all of the Partnership’s off-exchange trading takes placein the highly liquid, institutionally based currency forward markets.

 

Many of the Partnership’s currency trades are executedin the spot and forward foreign exchange markets (the “FX Markets”) where thereare no direct execution costs.  Instead,the participants, banks and dealers in the FX Markets take a “spread” betweenthe prices at which they are prepared to buy and sell a particular currency andsuch spreads are built into the pricing of the spot or forward contracts withthe Partnership.

 

As in the case of its market sector allocations, thePartnership’s commitments to different types of markets — U.S. and non-U.S.regulated and non-regulated differ substantially from time to time, as well asover time.  The Partnership has no policyrestricting its relative commitment to any of these different types of markets.

 

Custody of Assets

 

All of the Partnership’strading assets are currently held in Commodity Futures Trading Commission (“CFTC”)regulated customer accounts at MLPF&S.

 

Available Assets

 

The Partnership earns income, as described below, onits “Available Assets”, which can be generally described as the cash actuallyheld by the Partnership.   AvailableAssets are held primarily in U.S. dollars and are comprised of the Partnership’scash balances held in the offset accounts (as described below) — which include “opentrade equity” (unrealized gain and loss on open positions) on United Statesfutures contracts, which is paid into or out of the Partnership’s account on adaily basis; the Partnership’s cash balance in foreign currencies derived fromits trading in non-U.S. dollar denominated futures and options contracts, whichincludes open trade equity on those exchanges which settle gains and losses onopen positions in such contracts prior to closing out such

 

3

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positions.  Available Assets do not include and thePartnership does not earn interest income on the Partnership’s  unrealized gains or losses on its open forward,commodity option and certain foreign futures positions since such gains andlosses are not collected or paid until such positions are closed out.

 

The Partnership’s Available Assets may be greaterthan, less than or equal to the Partnership’s Net Asset Value (on which theredemption value of the Units is based) primarily because Net Asset Valuereflects all gains and losses on open positions as well as accrued but unpaidexpenses.

 

Interest Earned on the Partnership’s U.S. DollarAvailable Assets

 

The Partnership’s U.S. dollar Available Assets areheld in cash in offset accounts.

 

Offset accounts are non-interest bearing demanddeposit accounts maintained with banks unaffiliated with Merrill Lynch.  An integral feature of the offsetarrangements is that the participating banks specifically acknowledge that theoffset accounts are MLPF&S customer accounts, not subject to any MerrillLynch liability.

 

MLPF&S credits the Partnership, as of the end ofeach month, with interest at the effective daily 91-day Treasury bill rate onthe average daily U.S. dollar Available Assets held in the offset accountsduring such month.

 

The use of the offset account arrangements for thePartnership’s U.S. dollar Available Assets may be discontinued by Merrill Lynchat any time.  If Merrill Lynch were toterminate the offset arrangements, it would attempt to invest all of thePartnership’s U.S. dollar Available Assets to the maximum practicable extent inshort-term Treasury bills.  All interestearned on the U.S. dollar Available Assets so invested would be paid to thePartnership but MLAI would expect the amount of such interest to be less thanthat available to the Partnership under the offset account arrangements.  The remaining U.S. dollar Available Assets ofthe Partnership would be kept in cash to meet variation margin payments and payexpenses, but would not earn interest for the Partnership.

 

The banks at which the offset accounts are maintainedmake available to Merrill Lynch interest-free overnight credits, loans or overdraftsin the amount of the Partnership’s U.S. dollar Available Assets held in theoffset accounts, charging Merrill Lynch a small fee for this service.  The economic benefits derived by MerrillLynch — net of the interest credits paid to the Partnership and the fee paid tothe offset banks — from the offset accounts have not exceeded 0.75% per annumof the Partnership’s average daily U.S. dollar Available Assets held in theoffset accounts.  These revenues toMerrill Lynch are in addition to the Brokerage Commissions and AdministrativeFees paid by the Partnership to MLPF&S and MLAI, respectively.

 

Interest Paid by Merrill Lynch on the Partnership’sNon-U.S. Dollar Available Assets

 

Under the single currencymargining system implemented for the Partnership, the Partnership does notdeposit foreign currencies to margin trading in non-U.S. dollar denominatedfutures contracts and options, if any. MLPF&S provides the necessary margin, permitting the Partnership toretain the monies which would otherwise be required for such margin as part ofthe Partnership’s U.S. dollar Available Assets. The Partnership does not earn interest on foreign margin depositsprovided by MLPF&S. The Partnership does, however, earn interest on itsnon-U.S. dollar Available Assets. Specifically, the Partnership is credited by Merrill Lynch with interestat prevailing short-term local rates on assets and net gains on non-U.S. dollardenominated positions for such gains actually held in cash by thePartnership.  Merrill Lynch charges thePartnership Merrill Lynch’s cost of financing realized and unrealized losses onsuch positions.

 

The Partnership holdsforeign currency gains and finances foreign currency losses on an interim basisuntil converted into U.S. dollars and either paid into or out of thePartnership’s U.S. dollar Available Assets. Foreign currency gains or losses on open positions are not convertedinto U.S. dollars until the positions are closed.  Assets of the Partnership while held inforeign currencies are subject to exchange rate risk.

 

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***Charges***

 

The following tablesummarizes the charges incurred by the Partnership during 2008, 2007, and 2006.

 
| ** **                      | ** ** | **2008**           | ** ** | **2007**                                               | ** ** | **2006**           |       |
|---------------------------------|------------|--------------------|------------|--------------------------------------------------------|------------|--------------------|------------|
| **Charges**                     | ** ** | **Dollar  Amount** | ** ** | **% of Average  Month-End  Net Assets** | ** ** | **Dollar  Amount** | ** ** | **% of Average  Month-End  Net Assets** | ** ** | **Dollar  Amount** | ** ** | **% of Average  Month-End  Net Assets** |   |
|                            |       |               |       |                                                   |       |               |       |   |   |   |   |   |   |
| Brokerage Commissions      |       | $                  | 13,184,374 |                                                   | 5.87       | %                  | $          | 16,351,736 |   | 5.66 | % | $ | 19,872,678 |   | 5.61 | % |
| Administrative  and Filing Fees |       | 600,956            |       | 0.27                                                   | %          | 993,261            |       | 0.35 | % | 1,153,304 |   | 0.33 | % |
| Profit Shares                   |       | 15,939,202         |       | 7.10                                                   | %          | 671,266            |       | 0.23 | % | 49,055 |   | 0.01 | % |
| Total Expenses                  |       | $                  | 29,724,532 |                                                   | 13.24      | %                  | $          | 18,016,263 |   | 6.24 | % | $ | 21,075,037 |   | 5.95 | % |

 

The foregoing table does not reflect the bid-askspreads paid by the Partnership on its forward trading, or the benefits whichmay be derived by Merrill Lynch from the deposit of certain of the Partnership’sU.S. dollar assets maintained at MLPF&S.

 

Each Unit is subject tothe same charges.  The Partnership’saverage month-end Net Assets during 2008, 2007 and 2006 equaled $224,567,351,$288,689,351 and $354,244,209 respectively.

 

During 2008, 2007 and 2006, the Partnership earned$3,585,936, $13,248,150 and $17,187,972 in interest income, or approximately1.60%, 4.59% and 4.85% of the Partnership’s average month-end Net Assets.

 

**Description of Current Charges**

 
| **Recipient** |   | **Nature of Payment**      |   | **Amount of Payment**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|---------------|--------|----------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| MLPF&S    |   | Brokerage  Commissions     |   | A flat-rate  monthly brokerage commission of 0.458 of 1% (a 5.5% annual rate) of the  Partnership’s month-end assets (including the monthly interest credit and  before reduction for accrued month-end redemptions, distributions, brokerage  commissions, administrative fees or Profit Shares, in each case as of the end  of the month of determination). Such commissions cover Sunrise’s monthly consulting  fee as well as all floor brokerage and exchange, clearing and National  Futures Association (“NFA”) fees incurred in the Partnership’s trading. |
|          |   |                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| MLPF&S    |   | Use of  Partnership assets |   | Merrill Lynch  may derive an economic benefit from the deposit of certain of the  Partnership’s U.S. dollar assets in accounts maintained at MLPF&S.                                                                                                                                                                                                                                                                                                                                                                                                                               |

 

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| MLAI                                                                                         |   | Administrative  Fees                                                                                |   | A flat-rate  monthly charge of 0.021 of 1% (0.25% annual rate) of the Partnership’s  month-end assets (including the monthly interest credit and before reduction  for accrued month-end redemptions, distributions, brokerage commissions,  administrative fees or Profit Shares, in each case as of the end of the month  of determination). Additionally, the Partnership reimburses MLAI the actual  cost of the State of New Jersey annual filing fee assessed on a per partner  basis. The administrative fees cover the Partnership’s routine administrative  expenses and MLAI will absorb any administrative costs incurred during any  calendar year in excess of the foregoing amount. |
|----------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                         |   |                                                                                                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| Merrill Lynch  International Bank (“MLIB”) (or an affiliate); Other counterparties |   | Bid—ask spreads                                                                                |   | Bid—ask spreads  on forward and related trades.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                                                         |   |                                                                                                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| MLIB (or an  affiliate); Other counterparties                                                |   | EFP  differentials                                                                                  |   | Certain of the  Partnership’s currency trades may be executed in the form of “exchange of  futures for physical” transactions, in which a counterparty (which may be  MLIB or an affiliate) receives an additional “differential” spread for  exchanging the Partnership’s cash currency positions for equivalent futures  positions.                                                                                                                                                                                                                                                                                                                                         |
|                                                                                         |   |                                                                                                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| Sunrise                                                                                      |   | Annual profit  shares                                                                               |   | 23% of any New  Trading Profits generated by the Partnership as a whole, excluding interest  income and after reduction for a portion of the Brokerage Commissions, as of  the end of each calendar year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                                                                         |   |                                                                                                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| Sunrise                                                                                      |   | Consulting Fees                                                                                     |   | MLPF&S pays  Sunrise monthly Consulting Fees of 0.083 of 1% of the Partnership’s month-end  assets (a 1% annual rate), after reduction for a portion of the Brokerage  Commissions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                                                                                         |   |                                                                                                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| MLPF&S;  Others                                                                          |   | Reimbursement of  delivery, insurance, storage and any other extraordinary charges; taxes (if  any) |   | Actual payments  to third parties, which are expected to be negligible.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                                                                                         |   |                                                                                                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| MLPF&S;  Others                                                                          |   | Extraordinary  expenses                                                                             |   | Actual costs  incurred; none paid to date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |

 

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***Regulation***

 

MLAI, thePartnership and MLPF&S are each subject to regulation by the CommodityFutures Trading Commission (“CFTC”) and the National Futures Association (“NFA”).  Other than in respect of the registrationrequirements pertaining to the Partnership’s securities under Section 12(g) ofthe Securities Exchange Act of 1934, the Partnership is generally not subjectto regulation by the Securities and Exchange Commission (the “SEC”).  However, MLAI itself is registered as an “investmentadviser” under the Investment Advisers Act of 1940.  MLPF&S is also regulated by the SEC andthe Financial Industry Regulatory Authority (the “FINRA”).

 

(d)                                 FinancialInformation about Geographic Areas

 

The Partnershipdoes not engage in material operations in foreign countries, nor is a materialportion of the Partnership’s revenue derived from customers in foreigncountries. The Partnership trades on a number of foreign commodityexchanges.  The Partnership does notengage in the sales of goods or services.

 

**Item 1A: RiskFactors**

 

***The LargeSize of the Partnership’s Trading Positions Increases the Risk of Sudden, MajorLosses***

 

The Partnership takes positions with values up toapproximately 15 times its total equity. Consequently, even small price movements can cause major losses.

 

***Not Necessarily Indicative of FutureResults***

 

Sunrise’s past performance may not be representativeof how it may trade in the future for the Partnership.

 

***Volatile Markets; Highly LeveragedTrading***

*** ***

Futures and forward trading is highly leveraged, andmarket price levels are volatile and materially affected by unpredictablefactors such as weather and governmental intervention. The combination ofleverage and volatility creates a high degree of risk.

 

***Importance of General MarketConditions***

*** ***

Overall market or economic conditions which neitherMLAI nor the Sunrise advisor can predict or control have a material effect onthe performance of any managed futures strategy.

 

***Possibility of Additional Governmentor Market Regulation***

*** ***

Market disruptions and the dramatic increase in thecapital allocated to alternative investment strategies during recent years haveled to increased governmental as well as self-regulatory scrutiny of thealternative investment funds industry in general.  In addition, certain legislation proposinggreater regulation of the industry periodically is considered by the U.S.Congress, as well as the governing bodies of foreign jurisdictions. It isimpossible to predict what, if any, changes in the regulations applicable tothe Partnership, its general partner (MLAI), the markets in which they tradeand invest or the counterparties with which they do business may be institutedin the future. Any such regulation could have a material adverse impact on theprofit potential of the Partnership, as well as require increased transparencyas to the identity of the Partnership’s limited partners.

 

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**Forward Tradin*g***

 

The Partnership will trade in the forward markets inaddition to trading in the futures markets. The forward markets are over-the-counter, non-exchange traded markets,and in trading in these markets, the Fund will be dependent on the creditstanding of the counterparties with which they trade, without the financialsupport of any clearinghouse system.  Inaddition, the prices offered for the same forward contract may varysignificantly among different forward market participants.  Forward markets counterparties are under noobligation to enter into forward transactions with the Partnership, includingtransactions through which the Partnership is attempting to liquidate openpositions.

 

**Increased Assets Under Management**

 

There appears to be atendency for the rates of return achieved by managed futures advisors todecline as assets under management increase. Sunrise has not agreed to limit the amount of additional equity which itmay manage.

 

**TradingAdvisor Risk**

 

The Partnership issubject to the risk of the bad judgment, negligence or misconduct of itsAdvisor. There have been a number of instances in recent years in which privateinvestment funds have incurred substantial losses due to trading advisormisconduct.

 

**Changes in Trading Strategy**

 

Sunrise may make materialchanges in its trading strategies without the knowledge of MLAI.

 

***I***lliquidMarkets

 

Certain positions held bythe Partnership may become illiquid, preventing Sunrise from acquiringpositions otherwise indicated by its strategy or making it impossible for thetrading advisor to close out positions against which the market is moving.

 

Certain futures marketsare subject to “daily price limits,” restricting the maximum amount by whichthe price of a particular contract can change during any given tradingday.  Once a contract’s price has moved “thelimit,” it may be impossible or economically non-viable to execute trades insuch contract.  From time to time, priceshave moved “the limit” for a number of consecutive days, making it impossiblefor traders against whose positions the market was moving to prevent largelosses.

 

**Trading on Non-U.S. Exchanges**

 

Sunrise may tradeextensively on non-U.S. exchanges.  Theseexchanges are not regulated by any United States governmental agency.  The Partnership could incur substantiallosses trading on foreign exchanges to which it would not have been subject hadits trading advisor limited its trading to U.S. markets.

 

The profits and lossesderived from trading foreign futures and forwards will generally be denominatedin foreign currencies; consequently, the Partnership will be subject to acertain degree of exchange-rate risk in trading such contracts.

 

8

----

 

**The Partnership Could Lose Assetsand Have Its Trading Disrupted Due to the Bankruptcy of One of the Parties**

 

The Partnership issubject to the risk of insolvency of a counterparty, an exchange, aclearinghouse or MLPF&S.  ThePartnership assets could be lost or impounded during lengthy bankruptcyproceedings.  Were a substantial portionof the Partnership’s capital tied up in a bankruptcy, MLAI might suspend orlimit trading, perhaps causing the Partnership to miss significant profitopportunities.  There are increased risksin dealing with unregulated trading counterparties including the risk thatassets may not benefit from the protection afforded to “customer funds”deposited with regulated dealers and brokers.

 

**Item 1B: UnresolvedStaff Comments**

 

Not applicable.

 

**Item 2:****          Properties**

 

The Partnershipdoes not use any physical properties in the conduct of its business.

 

The Partnership’soffices are the administrative offices of MLAI (Merrill Lynch AlternativeInvestments LLC, Two World Financial Center, 7th Floor, New York, New York 10281. MLAI performsadministrative services for the Fund from MLAI’s offices.

 

**Item 3:****          Legal Proceedings**

 

None.

 

**Item 4:****          Submission of Mattersto a Vote of Security Holders**

 

None.

 

**PART II**

 

**Item 5:****          Market for Registrant’sCommon Equity, Related Stockholder Matters and Issuer Purchases of EquitySecurities**

 

Item 5(a)

 

(a)                                  MarketInformation:

 

There is noestablished public trading market for the Units, and none is likely todevelop.  Limited Partners may redeemUnits on ten days written notice to MLAI as of the last day of each month attheir Net Asset Value, subject to certain early redemption charges.

 

(b)                                 Holders:

 

As of December 31,2008, there were 2,131 holders of Units, including MLAI.

 

(c)                                  Dividends:

 

MLAI has not madeand does not contemplate making any distributions on the Units.

 

9

----

 

(d)                                 SecuritiesAuthorized for Issuance Under Equity Compensation Plans:

 

Not applicable.

 

(e)                                  RecentSales of Unregistered Securities:

 

Issuance to accreditedinvestors pursuant to Regulation D and Section 4(6) under theSecurities Act. The selling agent of the following Class of Units wasMLPF&S.

 

During2008, the Fund issued Units as set forth in the following chart.

 
| ** ** | ** ** | **Amount** | ** ** | **Units** | ** ** | **NAV** | ** ** |
|------------|------------|------------|------------|-----------|------------|---------|------------|
| Jan-08     |       | $          | 2,355,170  |      | 9,400      |    | $          | 250.55 |   |
| Feb-08     |       | —     |       | —    |       | 263.68  |       |
| Mar-08     |       | 9,738      |       | 34        |       | 286.40  |       |
| Apr-08     |       | —     |       | —    |       | 281.89  |       |
| May-08     |       | —     |       | —    |       | 275.75  |       |
| Jun-08     |       | 24,953     |       | 88        |       | 283.56  |       |
| Jul-08     |       | 49,787     |       | 172       |       | 289.46  |       |
| Aug-08     |       | 499,882    |       | 1,803     |       | 277.25  |       |
| Sep-08     |       | 118,641    |       | 440       |       | 269.64  |       |
| Oct-08     |       | 9,849      |       | 36        |       | 273.58  |       |
| Nov-08     |       | 146,779    |       | 480       |       | 305.79  |       |
| Dec-08     |       | 1,934,468  |       | 6,181     |       | 312.97  |       |
| Jan-09     |       | 719,404    |       | 2,290     |       | 314.15  |       |
| Feb-09     |       | 2,329,321  |       | 7,491     |       | 309.54  |       |
|            |            |            |            |           |            |         |            |  |  |

 

Item 5(b)

 

Not applicable.

 

Item 5(c)

 

Not applicable.

 

10

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**Item 6:****          Selected FinancialData**

 

The followingselected financial data has been derived from the audited financial statementsof the Partnership.

 
| **Statements of Operations** | ** ** | **For the Year  Ended  December 31,   2008** | ** ** | **For the Year  Ended  December 31,  2007** | ** ** | **For the Year  Ended  December 31,  2006** | ** ** | **For the Year  Ended  December 31,  2005** | ** **  | **For the Year  Ended  December 31,  2004** | ** **  |
|----------------------------------------|------------|------------------------------------------------------------------|------------|------------------------------------------------------------|------------|------------------------------------------------------------|------------|------------------------------------------------------------|-------------|------------------------------------------------------------|-------------|
|                                   |       |                                                             |       |                                                       |       |                                                       |       |                                                       |        |                                                       |        |
| TRADING PROFIT  (LOSS):                |       |                                                             |       |                                                       |       |                                                       |       |                                                       |        |                                                       |        |
| Realized                               |       | $                                                                | 81,364,923 |                                                       | $          | 13,343,726                                                 |       | $                                                          | 37,752,945  |                                                       | (24,222,659 | ) | $ | 52,256,615 |   |
| Change in  unrealized                  |       | (3,074,698                                                       | )          | (1,451,441                                                 | )          | (5,477,059                                                 | )          | 3,041,057                                                  |        | (14,070,731                                                | )           |
| Total trading  profit (loss)           |       | $                                                                | 78,290,225 |                                                       | 11,892,285 |                                                       | 32,275,886 |                                                       | (21,181,602 | )                                                          | 38,185,884  |   |
|                                   |       |                                                             |       |                                                       |       |                                                       |       |                                                       |        |                                                       |        |
| INVESTMENT  INCOME:                    |       |                                                             |       |                                                       |       |                                                       |       |                                                       |        |                                                       |        |
| Interest                               |       | 3,585,936                                                        |       | 13,248,150                                                 |       | 17,187,972                                                 |       | 15,719,664                                                 |        | 6,875,902                                                  |        |
|                                   |       |                                                             |       |                                                       |       |                                                       |       |                                                       |        |                                                       |        |
| EXPENSES:                              |       |                                                             |       |                                                       |       |                                                       |       |                                                       |        |                                                       |        |
| Brokerage  commissions                 |       | 13,184,374                                                       |       | 16,351,736                                                 |       | 19,872,678                                                 |       | 27,053,850                                                 |        | 26,151,018                                                 |        |
| Profit Shares                          |       | 15,939,202                                                       |       | 671,266                                                    |       | 49,055                                                     |       | -                                                          |        | 4,731,366                                                  |        |
| Administrative  and filing fees        |       | 600,956                                                          |       | 993,261                                                    |       | 1,153,304                                                  |       | 1,479,720                                                  |        | 1,641,858                                                  |        |
| Total expenses                         |       | 29,724,532                                                       |       | 18,016,263                                                 |       | 21,075,037                                                 |       | 28,533,570                                                 |        | 32,524,242                                                 |        |
|                                   |       |                                                             |       |                                                       |       |                                                       |       |                                                       |        |                                                       |        |
| NET INVESTMENT  LOSS                   |       | (26,138,596                                                      | )          | (4,768,113                                                 | )          | (3,887,065                                                 | )          | (12,813,906                                                | )           | (25,648,340                                                | )           |
|                                   |       |                                                             |       |                                                       |       |                                                       |       |                                                       |        |                                                       |        |
| **NET  INCOME (LOSS)**                 |       | $                                                                | 52,151,629 |                                                       | $          | 7,124,172                                                  |       | $                                                          | 28,388,821  |                                                       | $           | (33,995,508 | ) | $ | 12,537,544 |   |
|                                        |            |                                                                  |            |                                                            |            |                                                            |            |                                                            |             |                                                            |             |  |  |  |  |  |

 
| **Balance  Sheet Data**   | ** ** | **December  31,  2008** | ** **  | **December  31,  2007** | ** ** | **December  31,  2006** | ** ** | **December  31,  2005** | ** **  | **December  31,  2004** | ** ** |
|---------------------------|------------|-------------------------|-------------|-------------------------|------------|-------------------------|------------|-------------------------|-------------|-------------------------|------------|
|                      |       |                    |        |                    |       |                    |       |                    |        |                    |       |
| Partners'  Capital        |       | $                       | 215,554,694 |                    | $          | 225,754,363             |       | $                       | 326,172,570 |                    | $          | 396,829,138 |   | $ | 586,978,366 |   |
| Net Asset Value  per Unit |       | $                       | 314.15      |                    | $          | 250.55                  |       | $                       | 242.51      |                    | $          | 224.17 |   | $ | 234.41 |   |

 

11

----

 

The followingmonth-end net asset value per unit information has been derived from financialand accounting data of the Partnership.

 

MONTH-END NETASSET VALUE PER INITIAL UNIT

 
| ** ** | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** | **Apr.** | ** ** | **May** | ** ** | **June** | ** ** | **July** | ** ** | **Aug.** | ** ** | **Sept.** | ** ** | **Oct.** | ** ** | **Nov.** | ** ** | **Dec.** | ** ** |
|------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|---------|------------|----------|------------|----------|------------|----------|------------|-----------|------------|----------|------------|----------|------------|----------|------------|
| 2004       |       | $        | 226.76     |     | $          | 243.15   |       | $        | 248.26     |    | $          | 237.31   |       | $        | 234.35     |     | $          | 227.99    |       | $        | 223.83     |     | $          | 214.07   |       | $ | 215.06 |   | $ | 222.39 |   | $ | 232.33 |   | $ | 234.41 |   |
| 2005       |       | $        | 219.59     |     | $          | 218.75   |       | $        | 217.11     |    | $          | 213.97   |       | $        | 212.55     |     | $          | 211.75    |       | $        | 206.46     |     | $          | 206.27   |       | $ | 208.46 |   | $ | 210.63 |   | $ | 221.59 |   | $ | 224.17 |   |
| 2006       |       | $        | 225.13     |     | $          | 224.83   |       | $        | 232.20     |    | $          | 240.27   |       | $        | 241.84     |     | $          | 241.05    |       | $        | 230.50     |     | $          | 228.68   |       | $ | 227.51 |   | $ | 233.62 |   | $ | 238.87 |   | $ | 242.51 |   |
| 2007       |       | $        | 250.27     |     | $          | 243.24   |       | $        | 233.11     |    | $          | 248.30   |       | $        | 257.08     |     | $          | 261.40    |       | $        | 246.27     |     | $          | 209.49   |       | $ | 223.02 |   | $ | 243.54 |   | $ | 245.39 |   | $ | 250.55 |   |
| 2008       |       | $        | 263.68     |     | $          | 286.40   |       | $        | 281.89     |    | $          | 275.75   |       | $        | 283.56     |     | $          | 289.46    |       | $        | 277.25     |     | $          | 269.64   |       | $ | 273.58 |   | $ | 305.79 |   | $ | 312.97 |   | $ | 314.15 |   |

 

Pursuant to CFTC policy,monthly performance is presented from January 1, 2004, even though theUnits were outstanding prior to such date.

 

12

----

 

**ML SELECTFUTURES I L.P.**

**December 31,2008**

 

*Type ofPool:*  SingleAdvisor/Publicly-Offered/Non-“Principal Protected”(1)

*Inceptionof Trading:* April 1996

*AggregateSubscriptions:*   $592,639,650

*CurrentCapitalization: * $215,554,694

*WorstMonthly Drawdown(2): *(14.94)%(08/07)

*WorstPeak-to-Valley Drawdown(3): *(19.86)%  (07/07-08/07)

 

*Net AssetValue per Unit, December 31, 2008:*   $314.15

 

**Monthly Rates of Return (4)**

 
| **Month**                       | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|---------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
| January                         |       | 5.24     | %          | 3.20     | %          | 0.43     | %          | (6.32    | )%         | 0.95     | %          | 8.48     | %          |
| February                        |       | 8.62     |       | (2.81    | )          | (0.14    | )          | (0.38    | )          | 7.23     |       | 4.12     |       |
| March                           |       | (1.57    | )          | (4.16    | )          | 3.28     |       | (0.75    | )          | 2.10     |       | (6.18    | )          |
| April                           |       | (2.18    | )          | 6.52     |       | 3.48     |       | (1.45    | )          | (4.41    | )          | 0.31     |       |
| May                             |       | 2.83     |       | 3.54     |       | 0.65     |       | (0.67    | )          | (1.25    | )          | 4.48     |       |
| June                            |       | 2.08     |       | 1.68     |       | (0.33    | )          | (0.37    | )          | (2.71    | )          | (3.80    | )          |
| July                            |       | (4.22    | )          | (5.79    | )          | (4.38    | )          | (2.50    | )          | (1.82    | )          | (1.54    | )          |
| August                          |       | (2.74    | )          | (14.94   | )          | (0.79    | )          | (0.09    | )          | (4.36    | )          | (0.05    | )          |
| September                       |       | 1.46     |       | 6.46     |       | (0.51    | )          | 1.06     |       | 0.46     |       | (3.36    | )          |
| October                         |       | 11.77    |       | 9.20     |       | 2.69     |       | 1.04     |       | 3.41     |       | 5.54     |       |
| November                        |       | 2.35     |       | 0.76     |       | 2.25     |       | 5.20     |       | 4.47     |       | (1.21    | )          |
| December                        |       | 0.38     |       | 2.10     |       | 1.52     |       | 1.16     |       | 0.89     |       | 8.05     |       |
| Compound Annual  Rate of Return |       | 25.39    | %          | 3.31     | %          | 8.18     | %          | (4.37    | )%         | 4.35     | %          | 14.47    | %          |

 

----

(1) Certainfunds, including funds sponsored by MLAI, are structured so as to guarantee toinvestors that their investment will be worth no less than a specified amount(typically, the initial purchase price) as of a date certain after the date ofinvestment.  The CFTC refers to suchfunds as “principal protected”.  The Partnershiphas no such feature.

 

(2) WorstMonthly Drawdown represents the largest negative Monthly Rate of Returnexperienced since January 1, 2003 by the Partnership; a drawdown ismeasured on the basis of month-end Net Asset Value only, and does not reflectintra-month figures.

 

(3) WorstPeak-to-Valley Drawdown represents the greatest percentage decline since January 1,2003 from a month-end cumulative Monthly Rate of Return without such cumulativeMonthly Rate of Return being equaled or exceeded as of a subsequentmonth-end.  For example, if the MonthlyRate of Return was (1)% in each of January and February, 1% in March and(2)% in April, the Peak-to-Valley Drawdown would still be continuing at the endof April in the amount of approximately (3)%, whereas if the Monthly Rateof Return had been approximately 3% in March, the Peak-to-Valley Drawdown wouldhave ended as of the end of February at approximately the (2)% level.

 

(4) MonthlyRate of Return is the net performance of the Partnership during the month ofdetermination (including interest income and after all expenses have beenaccrued or paid) divided by the total equity of the Partnership as of thebeginning of such month*.*

 

13

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| **Item 7:** | **Management’s  Discussion and Analysis of Financial Condition and Results of Operations** |
|-------------|-------------------------------------------------------------------------------------------------|

 

***Resultsof Operations***

 

General

 

Sunrise has beenthe Partnership’s sole Advisor since July 1, 1998.  Sunrise is a trend-following trader, whoseprogram does not attempt to predict price movements.  Sunrise has generally not relied on usingfundamental economic supply or demand analyses nor macroeconomic assessments ofthe relative strengths of different national economies or economic sectors.  Instead, its program applies proprietarymodels to analyze past market data, and from this data attempts to determinewhether market prices are trending.  As atechnical trader, Sunrise bases its strategies on the theory that market pricesreflect the collective judgment of numerous market participants and are,accordingly, an efficient indication of market movements.  However, there are frequent periods duringwhich fundamental factors external to the market dominate prices.

 

If Sunrise’smodels identify a trend, it signals positions, which follow the trend.  When these models identify the trend ashaving ended or reversed, these positions are either closed out orreversed.  Due to their trend-followingcharacter, Sunrise’s program does not predict either the commencement or theend of a price movement.  Rather, itsobjective is to identify a trend early enough to profit from it and detect itsend or reversal in time to close out the Partnership’s positions whileretaining most of the profits made from following the trend.

 

There are so manyinfluences on the markets that the same general type of economic event may leadto a price trend in some cases but not in others.  The analysis is further complicated by thefact that the programs are designed to recognize only certain types of trendsand to apply only certain criteria of when a trend has begun.  Consequently, even though significant pricetrends may occur, if these trends are not comprised of the type of intra-periodprice movements, which its program is designed to identify, Sunrise may missthe trend altogether.

 

***PerformanceSummary***

 

This performancesummary is an outline description of how the Partnership performed in the past,not necessarily any indication of how it will perform in the future.  In addition, the general causes to which certainprice movements are attributed may or may not in fact have caused suchmovements, but simply occurred at or about the same time.

 

Sunrise isunlikely to be profitable in markets in which such trends do not occur.  Static or erratic prices are likely to resultin losses.  Similarly, unexpected events(for example, a political upheaval, natural disaster or governmentalintervention) can lead to major short-term losses, as well as gains.

 

While there can beno assurance that Sunrise will be profitable under any given market condition,markets in which substantial and sustained price movements occur typicallyoffer the best profit potential for the Partnership.

 

2008

 
| ** **                | ** ** | **Total Trading  Profit (Loss)** | ** ** |
|---------------------------|------------|--------------------------------------------|------------|
| Energy                    |       | $                                          | 23,786,024 |   |
| Currencies                |       | 18,753,664                                 |       |
| Agricultural  Commodities |       | 610,889                                    |       |
| Interest Rates            |       | 10,363,798                                 |       |
| Stock Indices             |       | 19,323,290                                 |       |
| Metals                    |       | 5,452,560                                  |       |
|                      |       | $                                          | 78,290,225 |   |

 

14

----

 

The Partnershipposted profits for the year in all sectors which include the energy, stockindices, currency, interest rates, metals and agriculture sectors.

 

The energy sector posted profits for the Partnership.Oil prices eased back from the record high hit on January 3, 2008 of morethan $100 per barrel and posted moderate losses for the Partnership. Profitswere posted to the Partnership in the middle of the quarter continuing to theend of the first quarter as crude oil reached an unprecedented $110 abarrel.  Profits were posted to the Partnershipat the beginning of the second quarter as prices continued to move higher asworries about supply disruptions sent crude oil futures to a record of $120 abarrel. Profits continued to be posted to the Partnership in the middle of thequarter due to the long energy positions led by crude oil futures, whichreached record levels above $135 a barrel as prices advanced to new historicalhighs. The second quarter ended with profits being posted to the Partnership ascrude oil continued to make record highs, closing the month at $140 a barrel.  Losses were posted to the Partnership at thebeginning of the third quarter as oil prices reached a record high of $147.90 abarrel on July 11, 2008 and then declined more than $25 on prospects oflower demand. Losses continued to be posted to the Partnership from the middleof the third quarter to the end of the quarter due to volatility in the market.Profits were posted to the Partnership throughout the fourth quarter. Tradingin energies produced significant returns for the Partnership despite October beingamong the most volatile months in market history. As the world’s economicoutlook continued to deteriorate, the energy markets moved lower and postedprofits to the Partnership in November. Short positions in energies were amongthe most profitable for the Partnership at the end of the year. Oil pricesended the year significantly lower than the July record high price due toconcerns about weak global demand.

 

The stock indices sector posted profits for thePartnership. Trading in stocks was profitable for the Partnership as globalstocks experienced a steep decline and finished lower for the month of January.Profits continued to be posted to the Partnership during the middle of thefirst quarter. The first quarter ended with profits being generated due to thePartnership’s short positions in the Japanese Nikkei and Topix. Trading inglobal equities was unprofitable for the Partnership with positions in bothdomestic and foreign equity markets contributing to the negative performance aslosses were posted to the Partnership through the second quarter. Profits wereposted to the Partnership at the beginning of the third quarter in lieu of thestock market declines during the first half of July. The Program was able toquickly take profits on its short positions before the prices reversed andmoved higher during the second half of July. Losses were posted to thePartnership during the middle of the quarter due to market volatility. Profitswere posted to the Partnership at the end of the third quarter due to the riskexposure controls maintaining low levels of exposure in the market.  Profits were posted to the Partnership at thebeginning of the fourth quarter. The Partnership was able to benefit fromtrading opportunities that emerged during the period of global financial criseswith relatively low risk. Losses were posted to the Partnership from the middleof the quarter to the end of the fourth quarter as global markets remain veryvolatile.

 

The currency sector posted profits for thePartnership. The U.S. dollar weakened against the Euro and experienced volatileperformance against other major currencies at the beginning of the firstquarter. Profits were posted for the Partnership due to gains in the Britishpound positions versus the Swiss franc and the Euro. The currency sector alsogenerated solid profits for the Partnership as the U.S. dollar continued tofall in the middle of the quarter as the U.S. dollar marked new lifetime lowsagainst the Euro and a series of multiyear lows against other currencies,ranging form the Swiss franc to the Australian dollar. The U.S. dollar’sweakness stemmed from a number of factors, including soft U.S. economic dataand prospects for more interest rate cuts. Profits continued to be posted tothe Partnership as the U.S. dollar continued its decline in March, setting newlows against the Euro and the Swiss franc, and reaching its weakest levelagainst the Japanese yen since 1995. As the U.S. economic outlook continued todeteriorate and the interest rate differential widened at the expense of theU.S. dollar, its position as a low yielding currency remained the main factorbehind its declining value. Losses were posted to the Partnership at thebeginning of the second quarter due to the U. S. dollar initially dropping toanother record low against the Euro, only to rebound later in the month of April causingthe Partnership to liquidate some of its short U.S. dollar positions. Tradingin currencies produced small losses in the middle of the quarter for thePartnership as the environment turned more favorable for the U.S. dollar as theprice action was mostly range bound when compared to the high volatility ofprevious months. The U.S. dollar’s link to oil prices was one of the factorsthat kept it in a relatively tight price range against other major currencies.Negative economic news was prevalent throughout the month of June, startingwith an employment report in the United Sates that showed the largest month tomonth 

 

15

----

 

increase in the jobless rate since February 1986.The Partnership posted profits as the second quarter ended due to profits froma stronger Swiss franc and the U.S. dollar losing value. Losses were posted tothe Partnership at the beginning of the third quarter as the U. S. dollar movedup against the Partnership’s short positions. The U.S. dollar continued to gainagainst other major currencies especially the British pound. Although thePartnership’s long U.S. dollar positions against the British pound, theJapanese yen, and the New Zealand dollar generated profits, they were notenough to offset the losses sustained from the Partnership’s short U.S. dollartrades against the Euro, the Swiss Franc and the Australian dollar postinglosses to the Partnership in the middle of the quarter. Losses were posted tothe Partnership at the end of the third quarter as market volatility reachedrecord levels. Profits were posted to the Partnership at the beginning throughthe middle of the fourth quarter. Trading conditions in currencies wereexceptionally thin and the markets were therefore prone to volatile moves. TheU.S. dollar turned weaker at the end of the year which contributed to lossesbeing posted for the Partnership.

 

The interest rate sector posted profits to thePartnership. Unprecedented actions by the U.S. Federal Reserve appeared to bedriving the markets in January. Concerns about the housing and credit marketsas well as deteriorating economic fundamentals prompted the U.S. FederalReserve to cut interest rates. The decline in U.S. interest rates was the majorsource of profits being posted to the Partnership at the beginning of thequarter. Both domestic and foreign interest rate markets moved in favor of thePartnership’s positions posting profits for the Partnership in the middle ofthe quarter.  Losses were posted to thePartnership at the end of the quarter as the markets switched direction andmoved against the Partnership’s long positions. Losses were posted to thePartnership at the beginning of the second quarter. The key highlight among thenumerous economic reports and developments was the U.S. Federal Open MarketCommittee’s rate decision to leave interest rates on hold. In reaction to newsthat the U.S. Federal Reserve might leave interest rates on hold for some time,a number of key markets experienced volatile price actions and reversals.Profits were posted to the Partnership in the middle of the quarter due to theProgram’s positions were either liquidated (majority of domestic interest ratefutures) or switched direction (short-term foreign interest rates.).  Profits continued to be posted at the end ofthe second quarter.  Losses were postedto the Partnership at the beginning of the third quarter as trading wasnegative for this sector. Futures prices in the foreign interest rate sectorended higher in the middle of the quarter, producing moderate losses for thePartnership. Market volatility reached record levels reflecting anxiety overthe intensifying credit crisis in the U.S. financial market. Prospects forslower economic growth, tighter credit conditions and lower demand put pressureon both the financial and commodity markets. After the United States House ofRepresentatives voted down a financial rescue package the markets respondednegatively and tumbled, causing losses to be posted to the Partnership at theend of the third quarter. Profits were posted to the Partnership at thebeginning of the fourth quarter. The interest rate market rallied in November asinvestors moved from falling stocks to government debt. Yields on the 2, 5, 10and 30 U.S. bonds touched historic lows during the month. Growing demand forgovernment securities in general was based on expectations that central bankswould cut interest rates further. The year ended with the interest rate sectorposting profits for the Partnership due to the U.S. Federal Reserve’s zerointerest policy.

 

The metals sector posted profits to the Partnership.Gold prices rallied at the beginning of the year setting a record of $936.30 anounce which was not enough to offset the losses posted to the Partnership earlyin the first quarter. The metals sector rallied in the middle of the quarterposting profits for the Partnership. Commodity prices rose to unprecedentedlevels during the month of March with crude oil reaching $110 a barrel andgold reaching $1,000 per ounce for the first time. There was an aggressivesell-off in the commodity complex later in March, which erased gains that wereachieved earlier in the month. Gold and crude oil experienced their biggestone-day price correction in years. As a result, the Partnership’s exposure inthe commodity sector was reduced considerably. Losses were posted to thePartnership at the beginning of the second quarter through the middle due to avolatile market. The second quarter ended with profits posted to thePartnership due to the long positions in copper and aluminum. Trading in metalswas unprofitable for the Partnership as demand slowed around the world, pricesfor base metals fell which contributed to the losses posted to the Partnershipthroughout the third quarter.  Trading inmetals produced profits being posted to the Partnership at the beginning of thefourth quarter due to the Partnership participating in many pronounced pricetrends. Losses were posted to the Partnership in the middle of the quarter dueto the volatility in the global markets. The year ended with profits posted tothe Partnership despite the most difficult trading conditions and unprecedentedvolatility that defined the markets for most of the year.

 

16

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The agriculture sector posted profits to thePartnership. Profits were posted to the Partnership at the beginning throughthe middle of the first quarter due to a powerful rally in grains.  The end of the first quarter generated lossesfor the Partnership due to increased volatility and trend reversals.  Profits were posted to the Partnership at thebeginning through the middle of the second quarter. However, heavy flooding inthe Midwest section of the United States contributed to losses being posted tothe Partnership at the end of the second quarter as the price of grains weredriven up. Soybean meal traded near all time high however, these gains wereoffset by losses in cotton and sugar. The Partnership exited their shortpositions in these markets as prices bounced upward. Losses were posted to thePartnership at the beginning of the third quarter due to the volatility in themarket. Profits were posted to the Partnership from the middle through the endof the third quarter as cotton was the best performing market as prices movedin favor of the Partnership’s short positions. Profits were posted to thePartnership at the beginning through the middle part of the fourth quarter inlieu of market volatility. Losses were posted to the Partnership as the yearended due to extreme volatility in the markets.

 

2007

 
| ** **                | ** ** | **Total Trading  Profit (Loss)** | ** ** |
|---------------------------|------------|--------------------------------------------|------------|
| Energy                    |       | $                                          | 12,315,951 |   |
| Currencies                |       | 7,513,761                                  |       |
| Agricultural  Commodities |       | 3,750,546                                  |       |
| Interest Rates            |       | 2,846,258                                  |       |
| Stock Indices             |       | (7,861,021                                 | )          |
| Metals                    |       | (6,673,210                                 | )          |
|                      |       | $                                          | 11,892,285 |   |

 

The Partnership postedoverall gains for the year with the energy, currency, agriculture, and interestrate sectors posted profits while the stock indices and metal sectors sustainedlosses.

 

The energy sectorposted profits for the Partnership. The year began with profits posted to thePartnership due to the United States crude futures falling to a twenty monthlow. Declining energy prices reached profit target levels resulting in apartial liquidation of the Partnership’s short energy positions. Risinginventories and warm weather were the primary drivers of the downward move.Despite initial weakness, the oil complex moved upward beginning mid-quarterand remained volatile with crude oil reaching a two-month high when the pricerose above $60.00 a barrel. This move contributed heavily to the sector lossessuffered by the Partnership’s short energy positions. Crude oil initiallyweakened and then rallied due to uncertainty over the hostage situation betweenthe United Kingdom and Iran. Due to the volatility of the markets trading wasdifficult and relatively flat throughout the second quarter. The third quarterwas profitable for the Partnership due to oil prices moving to record highs.The cut in interest rates, rising energy demands and forecasts for continueddeclines in U.S. inventories were among the major factors behind the rally. Theyear ended as prices continued to move higher. Crude oil approached $100.00 perbarrel after the United States crude inventories fell more than expected. Newsof the assassination of the former Pakistani Prime Minister also contributed tothe rise.

 

The currency sectorposted profits for the Partnership. There were gains at the beginning of theyear due to long positions in the British pound against the Swiss franc, theEuro and the Japanese yen. The British pound continued to strengthen againstmost major currencies due to rising United Kingdom interest rates reaching atwo year high against the Euro and an eight year high against the Japanese yen.Profits continued to be posted through the second quarter as the U. S. dollardropped to an all time low against the Euro and hit multiyear lows againstother major and minor currencies. Sentiment towards the U.S. dollar remainednegative in reaction to the disappointing United States economic data.Therefore, long positions in the Euro, British pound, Australian dollar, andNew Zealand dollar generated solid gains against the U.S. dollar. Volatilityand uncertainty returned to the currency market at the beginning of the thirdquarter as declines in global equity markets prompted position liquidation inthe currency 

 

17

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sector. Sunrise ExpandedDiversified Program (“SEDP”) short positions in the Japanese yen sufferedlosses when the currency moved higher against its major counterparts. Lossescontinued to be posted to the Partnership during the mid third quarter inreaction to developments in the global financial system as the Japanese yenrallied while the British pound, Euro, Australian dollar and the New Zealanddollar weakened sharply as investors reduced their exposure to high yieldingcarry trades. As a result, SEDP liquidated a large portion of its shortJapanese yen crosses and a large portion of its long positions in minorcurrencies. The U.S. dollar hit a series of new record lows against the Euroafter the Federal Reserve cut its short-term lending rate by half point on September 18,2007. The interest rate adjustment was a result of developments in thefinancial markets. It was negative for the U.S. dollar, with an outlook forless favorable interest rate differentials. Higher yielding currencies, likethe Euro, Australian dollar, and the New Zealand dollar, showed gains after theFederal Reserves announcement. The trend of the lower U.S dollar and strongercommodity prices enabled SEDP to post profits for the Partnership at the end ofthe third quarter. The year ended with the British pound trading very close toall-time lows versus the Euro, which made SEDP’s short positions in the Britishpound versus the Euro the most profitable for the currency sector.

 

The agriculture sectorposted profits for the Partnership. Trading in sugar was profitable at thebeginning of the year as prices continued to decline. Soybeans and soybean mealfutures rallied due to new contract highs on the possibility of planting andweather problems. However, the first quarter ended with losses posted to thePartnership due to weakened commodities prices causing the Partnership to exitmost of SEDP’s long positions. Soybeans, wheat and cotton soared at thebeginning of the second quarter due to the acreage and stock reports as well asweather forecasts. However, this could not offset the losses incurred midthrough the end of the second quarter as price action in agriculturalcommodities remained very choppy. Wheat generated profits for the Partnershipthird quarter as the market climbed to an all-time high due to globalproduction problems, a pre-existing tight inventory, and technicalstrength.  Grains continued to rally atthe end of the third quarter mainly due to demand from the growing economies ofAsia and Latin America posting profits for the Partnership. Profits continuedto be posted for the Partnership as the year ended in response to a growingglobal demand.

 

The interest rate sectorposted profits for the Partnership. Performance in the interest rate marketswere mixed at the beginning of the year due to yields rising in most majormarkets, except Japan with moderate profits being generated in Europeaninterest rates futures. Losses were also incurred at the end of the firstquarter as investors fled to safer alternatives and drove the market higher,against the Partnership’s short positions. Performance in the interest ratemarkets were mixed at the beginning of the second quarter due to domesticinterest rate futures posting losses as the United States Federal Reserve wasstill on hold since last summer regarding interest rate adjustments. A numberof equity markets reached new historic highs during the second quarter. Inreaction to continued global expansion and strong economic growth, the EuropeanCentral Bank raised interest rates to curb inflationary pressures resulting inthe price of European debt instruments to move down, in favor of the SEDP’sshort positions. The trends of rising stocks and interest rates switchedsharply at the beginning of the third quarter forcing SEDP out of someprofitable positions. The interest rate market rallied as investors moved intothe traditional safety of government bonds, which generated losses for SEDP.Trading in interest rate futures also produced losses mid-quarter as investorsmoved from stocks to less risky government securities and pushed prices higheragainst the against SEDP’s short positions. These short positions were quicklyliquidated and long positions were initiated for some shorter-term systems. Thethird quarter ended with interest rate sector posting profits to thePartnership as prices moved higher in favor of SEDP’s long positions. Theinterest rate sector faced a volatile market producing losses in December.Treasury prices moved lower during the first half of December 2007 andfinished the year higher, ultimately supported by economic data.

 

The metals sector postedlosses for the Partnership. Due to the volatility of the markets trading wasdifficult at the beginning of the year. There were no positions in the metalmarkets due to a lack of trends and/or unacceptable volatility which continuedthrough the second quarter. Base and precious metals posted losses as pricesdeclined across the board. Weakness in metals was a reflection of risinginventories which triggered heavy position liquidation resulting in lossesbeing posted to the Partnership.  Profitswere posted to the Partnership at the beginning of the third quarter in spiteof the volatile markets and a difficult trading environment. Global growthremained strong as demand for commodities that are priced in dollars grew asgold prices moved higher posting solid profits. Gold extended its upward trendand traded above $800.00 an ounce in at the beginning of the fourth quarter.The upward trend in gold continued at the end of the year as strong demandhelped drive prices higher. Industrial metals moved in favor of SEDP’s shortpositions which generated profits for the Partnership as the year ended.

 

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Stock indices posted lossesfor the Partnership. Equity markets performed well at beginning of the year dueto soft inflation and solid economic growth creating a positive environment forequities as long trades in both domestic and foreign stock indices recordedprofits. However, mid-quarter generated losses due to most major stock indiceshad been at their long-term high and the Partnership had to liquidate a smallportion of its long position on profit targets and continued to decline to theend of the first quarter. The beginning of the second quarter trading wasprofitable in the global stock market indices as favorable reports on economicgrowth abroad and corporate profits helped drive stock markets into recordterritory. The market experienced sharp up and down moves as the second quarterended producing losses for the Partnership that were offset by gains fromforeign stock index futures. The steepest losses were recorded at the beginningof the third quarter in global stock indices as stock prices fell sharply justdays after setting record highs. Various pieces of unfavorable economic newssent the stock market down: concerns about the state of the U.S. credit andhousing markets, corporate borrowing and mixed corporate results. Lossescontinued to be posted to the Partnership through the end of the third quarterdue to dramatic price reversals as well as major position adjustments in thefinancial sector around the world. Developments in the credit markets andworries about the financial system negatively impacted the stock market and thePartnership recorded losses as the market suffered a major price correction asthe year ended.

 

*2006*

 
| ** **                | ** ** | **Total Trading  Profit (Loss)** | ** ** |
|---------------------------|------------|--------------------------------------------|------------|
| Energy                    |       | $                                          | 470,071    |   |
| Currencies                |       | 5,369,824                                  |       |
| Agricultural  Commodities |       | (1,879,496                                 | )          |
| Interest Rates            |       | 6,848,350                                  |       |
| Stock Indices             |       | 8,321,295                                  |       |
| Metals                    |       | 13,145,842                                 |       |
|                      |       | $                                          | 32,275,886 |   |

 

The Partnership’sperformance was an overall gain in 2006 with metals, stock indices, interestrates, currencies and energy posting gains while agriculture posted losses.

 

The metals sectorproduced gains for the Partnership. The year began with both precious and basemetals continuing to be supported by strong supply-demand fundamentals.Concerns about the mining industry’s ability to meet growing demand, coupledwith inflation and geopolitical concerns continued to drive prices higher.Gold, which is considered an indicator of inflation, rose to a 25-year high.Silver, which followed other precious and industrial metals, was trading athistorically high levels, hitting a 22-year high. Growing demand for industrialmetals in Asian economies seemed to be the main source of price support for theentire metals sector.  During the secondquarter, the metals complex rallied to historically high levels, supported by astrong demand and tight global supplies. The rally attracted more speculativecommodity interest, which further intensified the buying momentum. Trading wasdifficult throughout the third quarter due to the volatility of the markets.The year ended with the metals sector maintaining the profits it gainedthroughout the year.

 

The stock indices sectorproduced gains for the Partnership. Stock indices were profitable through thewhole first quarter. During the second quarter, prices fell in May 2006reflecting fears that inflation and rising interest rates might hurt corporateprofits. Late in the quarter, prices moved higher after the U.S. FederalReserve’s quarter-point rate hike. The stock market reacted to the statementthat accompanied the U.S. Federal Reserve’s decision as the Federal Reservetoned down its warning about further rate increases. During the third quarter,the DAX, Germany’s benchmark stock index, was near a three-year high and theNikkei 225 Stock Index reached a new four-year high. The year ended with severalEuropean and Japanese, as well as some domestic stock markets rising to newrecord highs.

 

The interest rates sectorproduced gains for the Partnership. The year started with year strong economicgrowth in the U.S. and abroad prompting central banks to raise interestrates.  The purpose of the economictightening policy is to control the inflationary trend that tends to accompanyeconomic growth. Mid-year global bond prices declined 

 

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in anticipation offurther interest rate increases. Strong economic data and growing inflationworries pushed yields to multi-year highs. Uncertainty about the U.S. FederalReserve’s position on interest rate increases contributed towards keeping themarkets volatile and choppy. A quarter-point interest rate hike at the end of June broughtthe short-term interest rates to 5.25 %. During the third quarter, the U.S.Federal Reserve decided not to increase interest rates for the first time intwo years. The year ended with inflation fears decreasing and short terminterest rates remaining unchanged for the third consecutive month with themarket remained range bound.

 

The currency sectorproduced gains for the Partnership. The beginning of year was characterized bychoppy, non-directional patterns making it difficult to identify trends. TheU.S. dollar weakened against other major currencies. Mid-year the U.S. dollarcame under pressure from several fronts and moved lower against other majorcurrencies. Comments from the group of seven industrialized nations thataddressed global imbalances and called for more currency flexibility caused theU.S. dollar to fall.  The U.S. dollarweakened further when the U.S. Federal Reserve signaled it might pause in itsinterest tightening cycle. The British pound outperformed the other majorcurrencies and became the largest contributor to the Partnership’s positiveperformance.  The U.S. dollar advancedagainst most major and minor currencies, due largely to speculation overinterest rates.  Another factor in theU.S. dollar’s rise was weakness in its counterparts, especially the Japaneseyen, the New Zealand dollar and the African rand. At the beginning of the thirdquarter, there were no gains due to concerns about lower growth and higher inflation.The U.S. currency reversed direction in reaction to soft economic data anddeclined against most major currencies. The British pound was under pressure atthe end of the quarter in reaction to unfavorable economic reports. At thebeginning of the fourth quarter, the U.S. dollar moved in relatively narrowranges; it rose against other major currencies in early October 2006 onlyto reverse course and weaken in the second half of the month. Mid quarter, theBritish pound took center stage, rising to a 14-year high versus the U.S.dollar and generated significant profits for the Partnership’s long positions.The year ended with the U.S dollar higher against most major currencies.

 

The energy sectorproduced gains for the Partnership. At the beginning of the year, the energysector posted a small profit for the Partnership. Mid-year crude oil pricesmoved up and reached an exchange-record level of $75.35 per barrel as concernsabout tight summer gasoline supplies and tensions over Iran’s nuclear program remainedhigh. During the third quarter, crude oil prices topped at $79 a barrel as aresult of the current conflict in the Middle East and concern that conflictmight spread to other countries, including the threat to oil exports from thePersian Gulf. Crude oil prices fell below $60 a barrel at the end of thequarter down 21% from its high at the beginning of the quarter. The factorsbehind the dramatic price decline included growing inventories and a slowdownin global economic growth. The year ended as energy prices weakened in reactionto unseasonably warm weather in the Northeastern U.S. and rising inventories ofgasoline and other products. Falling oil prices triggered several profit-takingsignals for the Partnership.

 

The agriculture sectorproduced losses for the Partnership. The beginning of the year saw sugar as themain single market contributor to positive returns reaching the highest pricelevel since 1995. Mid-year favorable weather forecasts for the Midwest putpressure on grain futures and caused the Partnership to liquidate long corn andwheat positions. The third quarter ended with the sector posting losses due toincreased volatility. The year ended with corn prices rising to new highs onexpectations of strong ethanol demand and wheat prices moving higher due toreports of tight supplies.

 

VariablesAffecting Performance

 

The principal variables that determine the net performance of thePartnership are gross profitability from the Partnership’s trading activitiesand interest income.

 

During all periods set forth above “Selected Financial Data”, theinterest rates in many countries were at unusually low levels.  The low interest rates in the United States(although higher than in many other countries) negatively impacted revenuesbecause interest income is typically a major component of the Partnership’sprofitability.  In addition, low interestrates are frequently associated with reduced fixed income market volatility,and in static markets the Partnership’s profit potential generally tends to bediminished.  On the other hand, duringperiods of higher interest rates, the relative attractiveness of a high riskinvestment such as the Partnership may be reduced as compared to high yieldingand much lower risk fixed-income investments.

 

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The Partnership’sBrokerage Commissions and Administrative Fees are a constant percentage of thePartnership costs (other than the insignificant currency trading costs whichare not based on a percentage of the Partnership’s assets allocated to tradingor total) are the Profit Shares payable to the Advisor based on the new TradingProfits generated by the Partnership excluding interest and after reduction fora portion of the Brokerage Commissions.

 

Unlike many investment fields, there is no meaningful distinction inthe operation of the Partnership between realized and unrealized profits.  Most of the contracts traded by thePartnership are highly liquid and can be closed out at any time.

 

Except in unusual circumstances, factors—regulatory approvals, cost ofgoods sold, employee relations and the like—which often materially affect anoperating business have no material impact on the Partnership.

 

***Liquidity;Capital Resources***

 

The Partnershipborrows only to a limited extent and only on a strictly short-term basis inorder to finance losses on non-U.S. dollar denominated trading positionspending the conversion of the Partnership’s U.S. dollar deposits. Theseborrowings are at a prevailing short-term rate in the relevant currency.

 

Substantially allof the Partnership’s assets are held in cash. The Net Asset Value of thePartnership’s cash is not affected by inflation. However, changes in interestrates could cause periods of strong up or down price trends, during which thePartnership’s profit potential generally increases. Inflation in commodityprices could also generate price movements, which the strategies mightsuccessfully follow.

 

Becausesubstantially all of the Partnership’s assets are held in cash, the Partnershipshould be able to close out any or all of its open trading positions andliquidate any or all of its securities holdings quickly and at market prices,except in very unusual circumstances. This permits the Partnership to limitlosses as well as reduce market exposure on short notice should its strategiesindicate doing so. In addition, because there is a readily available marketvalue for the Partnership’s positions and assets, the Partnership’s monthly NetAsset Value calculations are precise, and investors need only wait ten businessdays to receive the full redemption proceeds of their Units.

 

(The Partnership has no applicable off-balance sheet arrangements andtabular disclosure or contractual obligations of the type described in Items3.03(a)(4) and 3.03(a)(5) of Regulation S-K)

 

**Item 7A:****Quantitative and Qualitative Disclosures AboutMarket Risk**

 

Introduction

 

The Partnership is aspeculative commodity pool. The market sensitive instruments held by it areacquired for speculative trading purposes and all or substantially all of thePartnership’s assets are subject to the risk of trading loss.  Unlike an operating company, the risk ofmarket sensitive instruments is integral, not incidental, to the Partnership’smain line of business.

 

Market movements resultin frequent changes in the fair market value of the Partnership’s openpositions and, consequently, in its earnings and cash flow. The Partnership’smarket risk is influenced by a wide variety of factors, including the level andvolatility of interest rates, exchange rates, equity price levels, the marketvalue of financial instruments and contracts, the diversification effects amongthe Partnership’s open positions and the liquidity of the markets in which ittrades.

 

The Partnership, under thedirection of Sunrise, rapidly acquires and liquidates both long and shortpositions in a wide range of different markets. Consequently, it is not possible to predict how a particular futuremarket scenario will affect performance, and the Partnership’s past performanceis not necessarily indicative of its future results.

 

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Value at Risk is ameasure of the maximum amount which the Partnership could reasonably beexpected to lose in a given market sector. However, the inherent uncertainty ofthe Partnership’s speculative trading and the recurrence in the markets tradedby the Partnership of market movements far exceeding expectations could resultin actual trading or non-trading losses far beyond the indicated Value at Riskor the Partnership’s experience to date (i.e., “risk of ruin”). In light of theforegoing, as well as the risks and uncertainties intrinsic to all futureprojections, the quantifications included in this section should not beconsidered to constitute any assurance or representation that the Partnership’slosses in any market sector will be limited to Value at Risk or by thePartnership’s attempts to manage its market risk.

 

Quantifying ThePartnership’s Trading Value At Risk

 

QuantitativeForward-Looking Statements

 

The followingquantitative disclosures regarding the Partnership’s market risk exposures contain“forward-looking statement” within the meaning of the safe harbor form civilliability provided for such statements by the Private Securities LitigationReform Act of 1995 (set forth in Section 27Aof the Securities Act of 1933and Section 21E of the Securities Exchange Act of 1934).  All quantitative disclosures in this sectionare deemed to be forward-looking statements for purposes of the safe harbor,except for statements of historical fact.

 

The Partnership’s riskexposure in the various market sectors traded by the Advisor is quantifiedbelow in terms of Value at Risk.  Due tothe Partnership’s mark-to-market accounting, any loss in the fair value of thePartnership’s open positions is directly reflected in the Partnership’searnings (realized or unrealized) and cash flow (at least in the case ofexchange-traded contracts in which profits and losses on open positions aresettled daily through variation margin).

 

Exchange maintenancemargin requirements have been used by the Partnership as the measure of itsValue at Risk.  Maintenance marginrequirements are set by exchanges to equal or exceed the maximum loss in thefair value of any given contract incurred in 95%-99% of the one-day timeperiods included in the historical sample (generally approximately one year)researched for purposes of establishing margin levels.  The maintenance margin levels are establishedby dealers and exchanges using historical price studies as well as anassessment of current market volatility (including the implied volatility ofthe options on a given futures contract) and economic fundamentals to provide aprobabilistic estimate of the maximum expected near-term one-day pricefluctuation.

 

In the case ofmarket sensitive instruments which are not exchange-traded (almost exclusivelycurrencies in the case of the Partnership), the margin requirements for theequivalent futures positions have been used as Value at Risk.  In those rare cases in which afutures-equivalent margin is not available, dealers’ margins have been used.

 

100% positivecorrelation in the different positions held in each market risk category hasbeen assumed.  Consequently, the marginrequirements applicable to the open contracts have been aggregated to determineeach trading category’s aggregate Value at Risk.  The diversification effects resulting fromthe fact that the Partnership’s positions are rarely, if ever, 100% positivelycorrelated have not been reflected.

 

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***ThePartnership’s Trading Value at Risk in Different Market Sectors***

 

The following tableindicates the average, highest and lowest trading Value at Risk associated withthe Partnership’s open positions by market category for the fiscal years 2008,2007 and 2006. During the fiscal year 2008, the Partnership’s averagecapitalization was $224,567,351. During the fiscal year 2007, the Partnership’saverage capitalization was $288,689,351. During the fiscal year 2006, thePartnership’s average capitalization was $354,244,209.

 

**December31, 2008**

 
| **Market Sector**    | ** ** | **Average  Value at Risk** | ** ** | **% of Average  Capitalization** | ** ** | **Highest Value  At Risk** | ** ** | **Lowest Value  At Risk** | ** ** |
|---------------------------|------------|--------------------------------------|------------|--------------------------------------------|------------|--------------------------------------|------------|-------------------------------------|------------|
|                      |       |                                 |       |                                       |       |                                 |       |                                |       |
| Currencies                |       | $                                    | 1,720,373  |                                       | 0.77       | %                                    | $          | 7,650,023                           |       | $ | 77,773 |   |
| Metals                    |       | 507,761                              |       | 0.23                                       | %          | 3,195,563                            |       | 30,914                              |       |
| Stock Indices             |       | 1,056,921                            |       | 0.47                                       | %          | 4,437,960                            |       | —                              |       |
| Interest Rates            |       | 10,969,318                           |       | 4.88                                       | %          | 21,989,395                           |       | 2,371,171                           |       |
| Energy                    |       | 510,246                              |       | 0.23                                       | %          | 2,290,531                            |       | —                              |       |
| Agricultural  Commodities |       | 476,983                              |       | 0.21                                       | %          | 3,602,638                            |       | 23,638                              |       |
|                      |       |                                 |       |                                       |       |                                 |       |                                |       |
| TOTAL                     |       | $                                    | 15,241,602 |                                       | 6.79       | %                                    | $          | 43,166,110                          |       | $ | 2,503,496 |   |

 

**December 31, 2007**

 
| **Market  Sector**        | ** ** | **Average  Value at Risk** | ** ** | **% of  Average  Capitalization** | ** ** | **Highest  Value  At Risk** | ** ** | **Lowest  Value  At Risk** | ** ** |
|---------------------------|------------|----------------------------|------------|-----------------------------------|------------|-----------------------------|------------|----------------------------|------------|
|                      |       |                       |       |                              |       |                        |       |                       |       |
| Currencies                |       | $                          | 6,528,563  |                              | 2.26       | %                           | $          | 78,342,752                 |       | $ | 1,273,153 |   |
| Metals                    |       | 965,803                    |       | 0.33                              | %          | 11,589,631                  |       | -                          |       |
| Stock Indices             |       | 3,084,338                  |       | 1.07                              | %          | 37,012,055                  |       | 520,573                    |       |
| Interest Rates            |       | 22,335,459                 |       | 7.74                              | %          | 268,025,512                 |       | 3,455,553                  |       |
| Energy                    |       | 1,452,389                  |       | 0.50                              | %          | 17,428,673                  |       | —                     |       |
| Agricultural  Commodities |       | 720,811                    |       | 0.25                              | %          | 8,649,733                   |       | 27,165                     |       |
|                      |       |                       |       |                              |       |                        |       |                       |       |
| TOTAL                     |       | $                          | 35,087,363 |                              | 12.15      | %                           | $          | 421,048,357                |       | $ | 5,276,444 |   |

 

**December31, 2006**

 
| **Market  Sector**        | ** ** | **Average  Value at Risk** | ** ** | **% of  Average  Capitalization** | ** ** | **Highest  Value  At Risk** | ** ** | **Lowest  Value  At Risk** | ** ** |
|---------------------------|------------|----------------------------|------------|-----------------------------------|------------|-----------------------------|------------|----------------------------|------------|
|                      |       |                       |       |                              |       |                        |       |                       |       |
| Currencies                |       | $                          | 1,887,758  |                              | 0.53       | %                           | $          | 6,222,410                  |       | $ | 197,905 |   |
| Metals                    |       | 183,195                    |       | 0.05                              | %          | 458,773                     |       | —                     |       |
| Stock Indices             |       | 1,534,109                  |       | 0.43                              | %          | 5,526,258                   |       | —                     |       |
| Interest Rates            |       | 26,922,172                 |       | 7.60                              | %          | 33,894,080                  |       | 13,349,857                 |       |
| Energy                    |       | 589,740                    |       | 0.17                              | %          | 2,618,734                   |       | —                     |       |
| Agricultural  Commodities |       | 218,024                    |       | 0.06                              | %          | 1,475,549                   |       | —                     |       |
|                      |       |                       |       |                              |       |                        |       |                       |       |
| TOTAL                     |       | $                          | 31,334,998 |                              | 8.85       | %                           | $          | 50,195,804                 |       | $ | 13,547,762 |   |

 

23

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Material Limitations onValue at Risk as an Assessment of Market Risk

 

The face value ofthe market sector instruments held by the Partnership is typically many timesthe applicable maintenance margin requirement (maintenance margin requirementsgenerally ranging between approximately 1% and 10% of contract face value) aswell as many times the capitalization of the Partnership.  The magnitude of the Partnership’s openpositions creates a “risk of ruin” not typically found in most other investmentvehicles.  Because of the size of itspositions, certain market conditions — unusual, but historically recurring fromtime to time — could cause the Partnership to incur severe losses over a shortperiod of time.   The foregoing Value atRisk table — as well as the past performance of the Partnership — gives noindication of this “risk of ruin.”

 

**Non-Trading Risk**

 

Foreign Currency Balances; Cash on Deposit with MLPF&S

 

The Partnershiphas non-trading market risk on its foreign cash balances not needed for margin.However, these balances (as well as the market risk they represent) areimmaterial.

 

The Partnershipalso has non-trading market risk on the approximately 90%-95% of its assetswhich are held in cash at MLPF&S. The value of this cash is not interestrate sensitive, but there is cash flow risk in that if interest rates declineso will the cash flow generated on these monies. This cash flow risk isimmaterial.

 

**Qualitative Disclosures Regarding Primary TradingRisk Exposures**

 

The following qualitative disclosures regarding thePartnership’s market risk exposures — except for (i) those disclosuresthat are statements of historical fact and (ii) the descriptions of howthe Partnership manages its primary market risk exposures — constituteforward-looking statements within the meaning of Section 27A of theSecurities Act and Section 21E of the Securities Exchange Act. The Partnership’sprimary market risk exposures as well as the strategies used and to be used byMLAI and Sunrise for managing such exposures are subject to numerousuncertainties, contingencies and risks, any one of which could cause the actualresults of the Partnership’s risk controls to differ materially from theobjectives of such strategies. Government interventions, defaults andexpropriations, illiquid markets, the emergence of dominant fundamentalfactors, political upheavals, changes in historical price relationships, and aninflux of new market participants, increased regulation and many other factorscould result in material losses as well as in material changes to the riskexposures and the risk management strategies of the Partnership. There can beno assurance that the Partnership’s current market exposure and/or riskmanagement strategies will not change materially or that any such strategieswill be effective in either the short- or long-term. Investors must be preparedto lose all or substantially all of the time value of their investment in thePartnership.

 

The following were the primary trading risk exposuresof the Partnership as of December 31, 2008, by market sector.

 

**Interest Rates**.

Interest rate risk is the principal market exposure ofthe Partnership.  Interest rate movementsdirectly affect the price of derivative sovereign bond positions held by thePartnership and indirectly the value of its stock index and currency positions.Interest rate movements in one country as well as relative interest ratemovements between countries materially impact the Partnership’s profitability.The Partnership’s primary interest rate exposure is to interest ratefluctuations in the United States and the other G-7 countries.  However, the Partnership also takes positionsin the government debt of smaller nations e.g., Australia. The Partnershipanticipates that G-7 interest rates will remain the primary market exposure ofthe Partnership for the foreseeable future.

 

**Currencies**.

The Partnership trades in a number of currencies.However, the Partnership’s major exposures have typically been in the U.S.dollar/Japanese yen, U.S. dollar/Euro, U.S dollar/Australian dollar and U.S.dollar/Swiss franc positions. The Partnership does not anticipate that the riskprofile of the Partnership’s currency sector will change significantly in thefuture. The currency trading Value at Risk figure includes foreign marginamounts converted into U.S. dollars with an incremental adjustment to reflectthe exchange rate risk of maintaining Value at Risk in a functional currencyother than U.S. dollars.

 

24

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**Stock Indices**.

The Partnership’s primary equity exposure is toS&P 500, Nikkei and German DAX equity index price movements. The Partnershipis primarily exposed to the risk of adverse price trends or static markets inthe major U.S., European and Asian indices.

 

**Metals**.

The Partnership’s metals market exposure is tofluctuations in both the price of precious and non-precious metals.

 

**Agricultural Commodities**

The Partnership’s primary agricultural commoditiesexposure is to agricultural price movements which are often directly affectedby severe or unexpected weather conditions. Soybeans, grains, cotton and sugaraccounted for the substantial bulk of the Partnership’s agriculturalcommodities exposure as of December 31, 2007. However, it is anticipatedthat Sunrise will maintain an emphasis on cotton, grains and sugar, in whichthe Partnership has historically taken its largest positions.

 

**Energy**.

The Partnership’s primary energy market exposure is tonatural gas and crude oil price movements, often resulting from politicaldevelopments in the Middle East. Oil prices can be volatile and substantialprofits and losses have been and are expected to continue to be experienced inthis market.

 

**Qualitative Disclosures RegardingNon-Trading Risk Exposure**

 

The following were theonly non-trading risk exposures of the Partnership as of December 31,2008.

 

**ForeignCurrency Balances.**

The Partnership’s primary foreign currency balancesare in Japanese yen, AUD, CHF and Euros.

 

**U.S. Dollar Cash Balance**.

ThePartnership holds U.S. dollars only in cash at MLPF&S. The Partnership hasimmaterial cash flow interest rate risk on its cash on deposit with MLPF&Sin that declining interest rates would cause the income from such cash todecline.

 

**Qualitative DisclosuresRegarding Means of Managing Risk Exposure**

** **

#### **Trading Risk**

#### ** **

MLAI has procedures in place intended to controlmarket risk, although there can be no assurance that they will, in fact,succeed in doing so. These procedures focus primarily on monitoring the tradingof the Advisor, calculating the Net Asset Value of the Partnership accountmanaged by the Advisor as of the close of business on each day and reviewingoutstanding positions for over-concentrations. While MLAI does not itselfintervene in the markets to hedge or diversify the Partnership’s marketexposure, MLAI may urge the Advisor to reallocate positions in an attempt toavoid over-concentrations.  However, suchinterventions are unusual. Sunrise applies its own risk management policies toits trading.

 

Sunrise Risk Management

 

Sunrise attempts to control risk through theutilization of proprietary risk management techniques, which are applied at allstages of the trading process. These techniques are designed to control allaspects of portfolio, market, and execution risk, with the stated goal ofmaintaining Sunrise’s historical rates of returns without increased volatility.

 

The basis for Sunrise’s risk management system is itsscientific approach and historical research. This process attempts to measurethe correlation and performance characteristics associated with variousweightings assigned to different markets and sectors. Sunrise allocates equityrisk to each market and market sector in an effort to minimize the possibilitythat any one market or sector has a disproportionate influence on theportfolio. Overall, portfolio exposure, drawdown and recovery periods arecarefully studied.

 

25

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Sunrise uses filters that attempt to avoid takingtrades with poor risk/reward characteristics. In addition, once a trade istaken, an array of exit strategies are employed that attempt to protect openprofits while exiting positions that fail to trend in the expected direction.Initial money stops are strictly followed and factors that would make itdifficult to execute trades, such as reduced liquidity or extreme marketdevelopments, are also incorporated in the trading decision and risk managementprocesses.

 

Other risk factors such as foreign currency risk whentrading in non-U.S. markets, custodian risk, and counterparty risk when tradingin the over-the counter markets are taken into account and play an importantpart of Sunrise’s overall risk management process. Sunrise uses onlycounterparties and brokers to execute trades that it and the market generallyperceive as creditworthy. The majority of trades are done with institutionswith which Sunrise has long-term relationships.

 

## Non-Trading Risk

##  

ThePartnership controls the non-trading exchange rate risk by regularly convertingforeign balances back into U.S. dollars at least once per week, and morefrequently if a particular foreign currency balance becomes unusually high.

 

ThePartnership has cash flow interest rate risk on its cash on deposit withMLPF&S in that declining interest rates would cause the income from suchcash to decline. However, a certain amount of cash or cash equivalents must beheld by the Partnership in order to facilitate margin payments and pay expensesand redemptions. MLAI does not take any steps to limit the cash flow risk onits cash held on deposit at MLPF&S.

 

**Item 8: FinancialStatements and Supplementary Data**

 

Net Income by Quarter

Eight Quarters through December 31, 2008

 
| ** **                                   | ** ** | **Fourth  Quarter  2008** | ** ** | **Third  Quarter  2008** | ** ** | **Second  Quarter  2008** | ** ** | **First  Quarter  2008** | ** ** | **Fourth  Quarter  2007** | ** ** | **Third  Quarter  2007** | ** ** | **Second  Quarter  2007** | ** ** | **First  Quarter  2007** | ** ** |
|----------------------------------------------|------------|---------------------------|------------|--------------------------|------------|---------------------------|------------|--------------------------|------------|---------------------------|------------|--------------------------|------------|---------------------------|------------|--------------------------|------------|
| Total Income  (Loss)                         |       | $                         | 42,882,026 |                     | $          | (13,099,118               | )          | $                        | 11,510,363 |                      | $          | 40,582,890               |       | $                         | 34,530,537 |                     | $          | (48,718,656 | ) | $ | 46,724,564 |   | $ | (7,396,010 | ) |
| Total Expenses                               |       | 12,549,373                |       | (483,240                 | )          | 5,460,868                 |       | 12,197,531               |       | 4,217,901                 |       | (1,394,041               | )          | 10,435,600                |       | 4,756,803                |       |
| Net Income (Loss)                            |       | $                         | 30,332,653 |                     | $          | (12,615,878               | )          | $                        | 6,049,495  |                      | $          | 28,385,359               |       | $                         | 30,312,636 |                     | $          | (47,324,615 | ) | $ | 36,288,964 |   | $ | (12,152,813 | ) |
| ** **                                   | ** ** | ** **                | ** ** | ** **               | ** ** | ** **                | ** ** | ** **               | ** ** | ** **                | ** ** | ** **               | ** ** | ** **                | ** ** | ** **               | ** ** |
| Weighted average  units                      |       | 725,016                   |       | 780,054                  |       | 829,950                   |       | 890,742                  |       | 1,045,515                 |       | 1,211,846                |       | 1,274,203                 |       | 1,327,037                |       |
|                                         |       |                      |       |                     |       |                      |       |                     |       |                      |       |                     |       |                      |       |                     |       |
| Net Income (Loss)  per weighted average Unit |       | $                         | 41.84      |                     | $          | (16.17                    | )          | $                        | 7.29       |                      | $          | 31.87                    |       | $                         | 28.99      |                     | $          | (39.05 | ) | $ | 28.48 |   | $ | (9.16 | ) |

 

The financialstatements required by this Item are included in Exhibit 13.01.

 

The supplementaryfinancial information (“information about oil and gas producing activities”)specified by Item 302(b) of Regulation S-K is not applicable.

 

**Item 9: Changesin and Disagreements with Accountants on Accounting and Financial Disclosure**

 

There were nochanges in or disagreements with the independent registered public accountingfirm on accounting and financial disclosure.

 

26

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**Item9A(T): Controls and Procedures**

 

MLAI’s Chief Executive Officer and the ChiefFinancial Officer, on behalf of the Partnership, has evaluated theeffectiveness of the design and operation of its disclosure controls andprocedures with respect to the Partnership as of and for the year which ended December 31,2008, and, based on its evaluation, has concluded that these disclosurecontrols and procedures are effective. Additionally, there were no significantchanges in the Partnership’s internal controls over financial reporting whichmaterially affect such internal control.

 

*Changes in Internal Control over Financial Reporting*

 

No change in internal control over financialreporting (as defined in Rule 13a-15(f) under the Exchange Act )occurred during the year ended December 31, 2008 that has materiallyaffected, or is reasonable likely to materially affect, the Fund’s internalcontrol, over financial reporting.

 

*Management’s Report on Internal Control over FinancialReporting:*

 

The Partnership’s management is responsible forestablishing and maintaining adequate internal control over financialreporting.  The Fund’s internal control over financial reporting is aprocess designed under the supervision of MLAI’s Chief Executive Officer andthe Chief Financial Officer, on behalf of the Partnership and is effected bymanagement, other personnel and service providers to provide reasonableassurance regarding the reliability of financial reporting and the preparationof financial statements for external purposes in accordance with generallyaccepted accounting principles and included those policy and procedures that:

 

·                                          Pertain to the maintenance of records that inreasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the Partnership.

 

·                                          Provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles, andthat  receipts and expenditures of the Partnership are being made only inaccordance with authorizations of management and directors of the Partnership;and

 

·                                          Provide reasonable assurance regardingprevention or timely detection of unauthorized acquisitions, use or dispositionof the Partnership’s assets that could have a material effect on the financialstatements.

 

Because of its inherent limitations, internal controlover financial reporting can  provideonly reasonable assurance with respect to financial statement preparation andpresentation.  Projections of any evaluation of effectiveness to futureperiods are subject to the risks that controls may become inadequate because ofchanges in condition, or that the degree of compliance with the policies orprocedures may deteriorate.

 

The Partnership’s management assessed theeffectiveness of the Partnership’s internal control over financial reporting asDecember 31, 2008.  In making this assessment, management used thecriteria set forth by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO) in “Internal Control-Integrated Framework”.

 

Based on its assessment the Partnership’s managementconcluded that at December 31, 2008, the Partnership’s internal controlover financial report was effective.

 

This annual reportdoes not include an attestation report of the Fund’s registered publicaccounting firm regarding internal control over financial reporting. Management’sreport was not subject to attestation by the Fund’s registered publicaccounting firm pursuant to temporary rules of the Securities and ExchangeCommission that permit the Fund to provide only management’s report for thisannual report.

 

27

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**Item9B:  Other Information**

 

  Not Applicable

 

**PART III**

 

**Item 10: Directors, Executive Officers andCorporate Governance**

 

 10(a) and10(b)     Identification of Directorsand Executive Officers:

 

As a limited partnership,the Partnership has no officers or directors and is managed by MLAI. Tradingdecisions are made by Sunrise on behalf of the Partnership.

 

The managers andexecutive officers of MLAI and their respective business backgrounds are asfollows:

 
| **Paul Morton**      | Chief Executive  Officer, President and Manager |
|----------------------|-------------------------------------------------|
|                 |                                            |
| **Barbra E. Kocsis** | Chief Financial Officer                         |
|                 |                                            |
| **Thomas W. Lee**    | Vice President and  Manager                     |
|                 |                                            |
| **Justin C. Ferri**  | Vice President and  Manager                     |

 

Paul Morton is the ChiefExecutive Officer, President, and Manager of MLAI. He also serves as the ChiefExecutive Officer for the Global Investment and Insurance Solutions (GIIS)group for Merrill Lynch.  As ChiefExecutive Officer of GIIS, Mr. Morton leads the market investmentsbusiness within the group, which includes secondary equity, debt, listedoptions, futures and FX for Merrill Lynch’s Global Wealth Managementdivision.  Prior to serving as ChiefExecutive Officer of GIIS, Mr. Morton worked in the equity and debttrading management of Merrill Lynch. Prior to joining Merrill Lynch in 1996, Mr. Mortonworked in the equity derivatives at Paine Webber.  From 1988-1993, Mr. Morton served as anofficer in the US Army for five years.  Mr. Mortonholds a BS (Aerospace Engineering) from the United States Military Academy atWest Point (1988) and a MBA (Finance) from the Wharton School at the Universityof Pennsylvania (1995).

 

Barbra E. Kocsis******is the Chief Financial Officerof MLAI. She is also a Director within the Merrill Lynch Global Private ClientGlobal Infrastructure Solutions group. Prior to that, she was the FundController of MLAI. Before coming to MLAI, Ms. Kocsis held variousaccounting and tax positions at Derivatives Portfolio Management LLC from May 1992until May 1999, at which time she held the position of accountingdirector. Prior to that, she was an associate at Coopers & Lybrand inboth the audit and tax practices. She graduated cum laude from Monmouth Collegein 1988 with a Bachelor of Science in Business Administration — Accounting.

 

ThomasW. Lee**is Vice President and Manager of MLAI.He is also a Managing Director in Merrill Lynch’s Market Investments andOrigination Group, responsible for Global Private Client’s equity and debt newissue businesses, and is a Vice President and Manager of MLAI, and hisregistration as a principal of MLAI is pending with NFA.  Prior to joining Merrill Lynch in 1998, Mr. Leewas a corporate securities attorney at the law firm of Brown &Wood.  Mr. Lee received his J.D.from Emory University School of Law and a B.S. from Cornell University.

 

JustinC. Ferri is Vice President and Manager of MLAI. He is also a Managing Directorwithin the 

 

28

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MLPF&SStructured and Alternative Solutions (SAS) group and is a Vice President of IQInvestment Advisors LLC.  Prior to hisrole in SAS, Mr. Ferri was a Director in the MLPF&S Global PrivateClient Market Investments & Origination group, and before that, heserved as a Vice President and Head of Global Private Client Rampart EquityDerivatives group.  Prior to joiningMerrill Lynch in 2002, Mr. Ferri was a Vice President within theQuantitative Development group of MPower Advisors LLC from 1999 to 2002. Hegraduated with a Bachelor of Arts Degree from Loyola College in Baltimore,Maryland.

 

As of December 31,2008, the principals of MLAI had no investment in the Partnership, and MLAI’sgeneral partner interest in the Partnership was valued at $4,367,587.

 

MLAIacts as the sponsor, general partner or manager to seven public futures fundswhose units of limited partner or member interests are registered under theSecurities Exchange Act of 1934: ML Aspect Futures Access LLC, ML SelectFutures I L.P., ML Systematic Momentum FuturesAccess LLC, Systematic MomentumII LLC, ML Transtrend DTP Enhanced FuturesAccess LLC, ML Trend-FollowingFutures Fund L.P, and ML Winton FuturesAccess LLC. Because MLAI serves as thesole sponsor, general partner or manager of each of these funds, the officersand managers of MLAI effectively manage them as officers and directors of suchfunds.

 

(c)                                  Identificationof Certain Significant Employees:

 

None.

 

(d)                                 FamilyRelationships:

 

None.

 

(e)                                  BusinessExperience:

 

See Item 10(a) and(b) above.

 

(f)                                    Involvementin Certain Legal Proceedings:

 

None.

 

(g)                                 Promotersand Control Persons:

 

Not applicable.

 

Section 16(a) BeneficialOwnership Reporting Compliance:

 

Not applicable.

 

Section 16(a) BeneficialOwnership Reporting Compliance:

 

Not applicable.

 

Code of Ethics:

 

MLAI and Merrill Lynchhave adopted a code of ethics which applies to the Partnership’s (MLAI’s)principal executive officer and principal financial officer or personsperforming similar functions on behalf of the Partnership.  A copy of the code of ethics is available toany person, without charge, upon request by calling 1-866-MER-ALTS.

 

29

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Nominating Committee:

 

Not applicable. (Neitherthe Partnership nor MLAI has nominating committee.)

 

Audit Committee: AuditCommittee Financial Expert:

 

Not applicable. (Neitherthe Partnership nor MLAI has an audit committee.  There are no listed shares of the Partnershipor MLAI.)

 

**Item 11: ExecutiveCompensation**

 

The managers andofficers of MLAI are remunerated by MLAI in their respective positions. ThePartnership does not have any officers, managers or employees.  The Partnership pays Brokerage Commissions toan affiliate of MLAI and Administrative Fees to MLAI.  MLAI or its affiliates may also receivecertain economic benefits from possession of the Partnership’s U.S. dollarassets.  The managers and officersreceive no “other compensation” from the Partnership, and the managers receiveno compensation for serving as managers of MLAI.  There are no compensation plans orarrangements relating to a change in control of either the Partnership or MLAI.

 

**Item 12: SecurityOwnership of Certain Beneficial Owners and Management and Related StockholderMatters**

 

(a)                                  SecurityOwnership of Certain Beneficial Owners:

 

Not applicable(The Units are non-voting limited partnership interests.  The Partnership is managed by MLAI, itsgeneral partner).

 

(b)                                 SecurityOwnership of Management:

 

As of December 31,2008, MLAI owned 13,916 Unit-equivalent general partnership interests, whichconstituted 2.03% of the total Units outstanding, the principals of MLAI didnot own any Units, and the Advisor did not own any Units.

 

(c)                                  Changesin Control:

 

None.

 

(d)                                 SecuritiesAuthorized for Issuance Under Equity Compensation Plans:

 

Not applicable.

 

**Item 13: CertainRelationships and Related Transactions and Director Independence**

 

(a)                                  Transactionsbetween Merrill Lynch and the Partnership

 

Some of theservice providers to the Fund are affiliates of Merrill Lynch. However, none ofthe fees paid by the Fund to such Merrill Lynch affiliates were negotiated andsuch fees charged to the Fund might be higher than would have been obtained inarms-length negotiations.

 

The Partnership pays MLPF&S substantial BrokerageCommissions and Administrative Fees as well as bid-ask spreads on forwardcurrency trades.  The Partnership alsopays MLPF&S interest on short-term loans extended by MLPF&S to coverlosses on foreign currency positions.

 

30

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Within the Merrill Lynch organization, MLAI is thebeneficiary of the revenues received by different Merrill Lynch entities fromthe Partnership.  MLAI controls themanagement of the Partnership and serves as its promoter.  Although MLAI has not sold any assets,directly or indirectly, to the Partnership, MLAI makes substantial profits fromthe Partnership due to the foregoing revenues.

 

No loans have been, are or will be outstanding betweenMLAI or any of its principals and the Partnership.

 

MLAI pays substantial selling commissions and trailingcommissions to MLPF&S for distributing the Units.  MLAI is ultimately paid back for theseexpenditures from the revenues it receives from the Partnership.

 

(b)                                 CertainBusiness Relationships:

 

MLPF&S, anaffiliate of MLAI, acts as the principal commodity broker for the Partnership.

 

In 2008, thePartnership expensed:  (i) BrokerageCommissions of $13,184,374 to MLPF&S, which included $2,377,600 inconsulting fees earned by Sunrise; and (ii) Administrative Fees of$599,290 to MLAI. In addition, MLAI and its affiliates may have derived certaineconomic benefits from possession of a portion of the Partnership’s assets, as wellas from foreign exchange and EFP trading.

 

See Item 1(c), “NarrativeDescription of Business — Charges” and “— Description of Current Charges”for a discussion of other business dealings between MLAI affiliates and thePartnership.

 

(c)                                  Indebtednessof Management:

 

The Partnership isprohibited from making any loans, to management or otherwise.

 

(d)                                 Transactionswith Promoters:

 

Not applicable.

 

(e)                                  DirectorIndependence

 

No person whoserved as a manager of MLAI during 2008 would be considered an independent (basedon the definition of an independent director under the NASDAQ rules).

 

**Item 14: PrincipalAccountant Fees and Services**

 

(a)                                  AuditFees

 

Aggregate fees billed for professional services rendered by Deloitte &Touche LLP in connection with the audit of the Partnership’s financialstatements as of and for the years ended December 31, 2008 and 2007 were$48,000 for both years.

 

(b)                                 Audit-RelatedFees

 

There were noother audit-related fees billed for the years ended December 31, 2008 or2007 related to the Partnership.

 

(c)                                  TaxFees

 

Aggregate feesbilled for professional services rendered by Deloitte Tax LLP in connectionwith the tax compliance, advice and preparation of the Partnership’s taxreturns for the years ended December 31, 2008 and 2007 were $72,000 forboth years.

 

31

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(d)                                 AllOther Fees

 

No fees were paidto Deloitte & Touche LLP nor Deloitte Tax LLP during the years ended December 31,2008 or 2007 for any other professional services in relation to thePartnership.

 

Neither thePartnership nor MLAI has an audit committee to pre-approve principal accountantfees and services.  In lieu of an auditcommittee, the managers and the principal financial officer pre-approve allbillings prior to the commencement of services.

 

32

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#### **PART IV**

#### ** **

**Item 15: Exhibitsand Financial Statement Schedules**

 
| ** ** | ** **                                                                           | **Page:** |
|------------|--------------------------------------------------------------------------------------|-----------|
| 1.         | Financial  Statements (found in Exhibit 13.01):                                 |      |
|       |                                                                                 |      |
|       | Report of  Independent Registered Public Accounting Firm                             | 1         |
|       |                                                                                 |      |
|       | Statements of  Financial Condition as of December 31, 2008 and 2007             | 2         |
|       |                                                                                 |      |
|       | For the years  ended December 31, 2008, 2007 and 2006:                          |      |
|       | Statements of Operations                                                             | 3         |
|       | Statements of Changes in Partners’ Capital                                      | 4         |
|       |                                                                                 |      |
|       | Financial Data  Highlights for the years ended December 31, 2008, 2007 and 2006 | 5         |
|       |                                                                                 |      |
|       | Notes to  Financial Statements                                                       | 6         |

 

2.                                       FinancialStatement Schedules:

 

Financial statementschedules not included in this Form 10-K have been omitted for the reasonthat they are not required or are not applicable or that equivalent informationhas been included in the financial statements or notes thereto.

 

3.                                       Exhibits:

 

The following exhibitsare incorporated by reference or are filed herewith to this Annual Report on Form 10-K:

 
| **Designation**     | ** ** | **Description**                                                                                                                                                                                                                                                                                     |
|---------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                |       |                                                                                                                                                                                                                                                                                                |
| 3.01                |       | Amended and  Restated Certificate of Limited Partnership of the Registrant.                                                                                                                                                                                                                         |
|                |       |                                                                                                                                                                                                                                                                                                |
| Exhibit 3.01:  |       | Is incorporated  herein by reference from Exhibit 3.01 contained in Amendment No. 1  to the Registration Statement (File No. 000-50269) filed on  April 30, 2003, on Form 10 under the Securities Act of 1933 (the  “Registrant’s Registration Statement”). |
|                |       |                                                                                                                                                                                                                                                                                                |
| 3.02                |       | ML Select  Futures I L.P. Eleventh Amendment and Restated Limited Partnership Agreement.                                                                                                                                                                                                            |
|                |       |                                                                                                                                                                                                                                                                                                |
| Exhibit 3.02   |       | Is incorporated  by reference from Exhibit 3.02(a) contained in the Registration  Statement on Form 10 (File No. 000-50269) under the Securities  Exchange Act of 1934, filed on October 11, 2007.                                                                         |
|                |       |                                                                                                                                                                                                                                                                                                |
| 10.01               |       | Subscription  Agreement                                                                                                                                                                                                                                                                             |
|                |       |                                                                                                                                                                                                                                                                                                |
| Exhibit 10.01: |       | Is incorporated  by reference from Exhibit 10.01 contained in Amendment No. 2 to the  Registrant’s Registration Statement                                                                                                                                                            |
|                |       |                                                                                                                                                                                                                                                                                                |
| 10.03               |       | Customer  Agreement between ML Select Futures I L.P. and Merrill Lynch Futures Inc.                                                                                                                                                                                                                 |
|                |       |                                                                                                                                                                                                                                                                                                |
| Exhibit 10.03: |       | Is incorporated  hereby by reference from Exhibit 10.03 contained in the Registrant’s  Registration Statement.                                                                                                                                                                            |

 

33

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| 10.04                          |   | Consulting  Agreement between Merrill Lynch Futures Inc. and Sunrise Capital Partners,  LLC.                                                                                                                      |
|--------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                           |   |                                                                                                                                                                                                              |
| Exhibit 10.04:            |   | Is incorporated  hereby by reference from Exhibit 10.04 contained in the Registrant’s  Registration Statement.                                                                                          |
|                           |   |                                                                                                                                                                                                              |
| 10.05                          |   | Selling  Agreement among ML Select Futures I L.P. Merrill Lynch Investment Partners  Inc., Merrill Lynch Futures Inc., Merrill Lynch, Pierce, Fenner &  Smith Incorporated and Sunrise Capital Partners. |
|                           |   |                                                                                                                                                                                                              |
| Exhibit 10.05:            |   | Is incorporated  hereby by reference from Exhibit 10.05 contained in the Registrant’s  Registration Statement.                                                                                          |
|                           |   |                                                                                                                                                                                                              |
| 13.01                          |   | 2008 Annual  Report and Report of Independent Registered Public Accounting Firm.                                                                                                                                  |
|                           |   |                                                                                                                                                                                                              |
| Exhibit 13.01:            |   | Is filed  herewith.                                                                                                                                                                                               |
|                           |   |                                                                                                                                                                                                              |
| 31.01 and 31.02                |   | Rule 13a-14(a)/15d-14(a) Certifications                                                                                                                                                                 |
|                           |   |                                                                                                                                                                                                              |
| Exhibit 31.01 and  31.02: |   | Are filed herewith.                                                                                                                                                                                               |
|                           |   |                                                                                                                                                                                                              |
| 32.01 and 32.02                |   | Section 1350  Certifications                                                                                                                                                                                 |
|                           |   |                                                                                                                                                                                                              |
| Exhibit 32.01 and  32.02: |   | Are filed herewith.                                                                                                                                                                                               |

 

34

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**SIGNATURES**

 

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

 
| **ML  SELECT FUTURES I L.P.**                                 |           |
|---------------------------------------------------------------|----------------|
|                                                          |           |
| By: **MERRILL LYNCH ALTERNATIVE INVESTMENTS GENERAL PARTNER** |
|                                                          |           |
| By:                                                           | /s/Paul Morton |   |
| Paul Morton                                                   |           |
| Chief Executive  Officer, President and Manager               |           |
| (Principal  Executive Officer)                                |           |
|                                                               |                |  |

 

 

Pursuant to the requirements of Section 13 or 15(d) ofthe Securities Exchange Act of 1934, this report has been signed on March 31,2009 by the following persons on behalf of the Registrant and in the capacitiesindicated.

 
| **Signature**        | ** ** | **Title**                                       | ** ** | **Date**             |
|----------------------|------------|-------------------------------------------------|------------|----------------------|
|                 |       |                                            |       |                 |
| /s/ Paul Morton      |       | Chief Executive  Officer, President and Manager |       | March 31,  2009 |
| Paul Morton          |       |                                            |       |                 |
|                 |       |                                            |       |                 |
| /s/ Barbra E. Kocsis |       | Chief Financial  Officer                        |       | March 31,  2009 |
| Barbra E. Kocsis     |       | (Principal Financial and Accounting Officer)    |       |                 |
|                 |       |                                            |       |                 |
| /s/ Thomas W.  Lee   |       | Vice President  and Manager                     |       | March 31,  2009 |
| Thomas W. Lee        |       |                                            |       |                 |
|                 |       |                                            |       |                 |
| /s/Justin C.  Ferri  |       | Vice President  and Manager                     |       | March 31,  2009 |
| Justin C. Ferri      |       |                                            |       |                 |

 

 

(Being the principal executive officer, the principalfinancial and accounting officer and a majority of the managers of Merrill LynchAlternative Investments LLC)

 

35

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**ML SELECT FUTURES LIMITEDPARTNERSHIP**

 

2008 FORM 10-K

 

INDEX TO EXHIBITS

 

Exhibit

 
| Exhibit 13.01            |   | 2008 Annual  Report and Report of Independent Registered Public Accounting Firm |
|-------------------------------|--------|---------------------------------------------------------------------------------|
|                          |   |                                                                            |
| Exhibit 31.01  and 31.02 |   | Rule 13a -  14(a) / 15d - 14(a) Certifications                   |
|                          |   |                                                                            |
| Exhibit 32.01  and 32.02 |   | Sections 1350  Certifications                                                   |

 

36

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