** **

**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

 

**Washington,D.C.  20549**

 

**FORM 10-K**

 

**x**** Annual Report Pursuant toSection 13 or 15(d)**

**of the Securities Exchange Act of 1934**

 

**For thefiscal year ended: December 31, 2008**

 

**or**

 

**o****Transition Report Pursuant toSection 13 or**

**15(d) of the Securities Exchange Act of 1934**

 

**Commissionfile number: 0-28928**

 

**ML TREND-FOLLOWING FUTURESFUND L.P.**

(Exact name of registrant asspecified in its charter)

 

| **Delaware**                    | ** ** | **13-3887922**      |
|---------------------------------|------------|---------------------|
| (State or other jurisdiction of |       | (I.R.S. Employer    |
| incorporation or organization)  |       | Identification No.) |

 

**c/o Merrill Lynch Alternative Investments LLC**

**Two World Financial Center, 7****th Floor**

**New York,New York 10281**

(Address ofprincipal executive offices)

(Zip Code)

 

**212-236-2063**

(Registrant’s telephone number, including area code)

 

Securities registered pursuant toSection 12(b) of the Act: **None**

 

Securities registered pursuant toSection 12(g) of the Act:**Limited Partnership Units**

 

Indicate by check mark if the registrant is awell-known seasoned issuer, as defined in Rule 405 of the Securities Act.

 
|   | Yes o  No  x |
|--------|------------------------|

 

Indicate by check mark if the registrant isnot required to file reports pursuant to Section 13 or 15(d) of theAct.

 
|   | Yes o  No  x |
|--------|------------------------|

 

Indicate by check mark whether the registrant (1) has filed allreports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.

 
|   | Yes x  No  o |
|--------|------------------------|

 

Indicate by check mark if disclosure of delinquent filers pursuant toItem 405 of Regulation S-K is not contained herein, and will not be contained,to the best of registrant’s knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-K orany 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 check mark whether the registrantis a shell company (as defined by Rule 12b-2 of the Act).

 
|   | Yes o  No  x |
|--------|------------------------|

 

The Units of the limited liability company interest registrant are notpublicly traded. Accordingly, there is no aggregate market value for theregistrant’s outstanding equity that is readily determinable

 

As of January 31, 2009, limited partnership units with a Net AssetValue of $346,819,989 were held by non-affiliates.

 

**Documents Incorporated by Reference**

 

The registrant’s 2008 Annual Report and Report of  Independent Registered Public AccountingFirm, 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.  The annual reports are available free ofcharge by contacting Alternative Investments Client Services at 1-866-MER-ALTS.

 

 

 

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**MLTREND-FOLLOWING FUTURES FUND L.P.**

 

ANNUAL REPORT FOR 2008 ON FORM 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                        |       | 13       |
|        |       |                                                                                                               |       |     |
| Item 7A.    |       | Quantitative and Qualitative Disclosures about  Market Risks                                                       |       | 22       |
|        |       |                                                                                                               |       |     |
| Item 8.     |       | Financial Statements and Supplementary Data                                                                        |       | 27       |
|        |       |                                                                                                               |       |     |
| Item 9.     |       | Changes in and Disagreements with Accountants  on Accounting and Financial Disclosure                              |       | 27       |
|        |       |                                                                                                               |       |     |
| Item 9A(T). |       | Controls and Procedures                                                                                            |       | 27       |
|        |       |                                                                                                               |       |     |
| Item 9B.    | ** ** | Other Information                                                                                                  |       | 28       |
|        |       |                                                                                                               |       |     |
|        |       | PART III                                                                                                      |       |     |
|        |       |                                                                                                               |       |     |
| Item 10.    |       | Directors and Executive Officers and Corporate Governance                                                          |       | 29       |
|        |       |                                                                                                               |       |     |
| Item 11.    |       | Executive Compensation                                                                                             |       | 31       |
|        |       |                                                                                                               |       |     |
| Item 12.    |       | Security Ownership of Certain Beneficial  Owners and Management and Related Stockholder Matters                    |       | 31       |
|        |       |                                                                                                               |       |     |
| Item 13.    |       | Certain Relationships and Related  Transactions and Director Independence                                          |       | 31       |
|        |       |                                                                                                               |       |     |
| Item 14.    |       | Principal Accountant Fees and Services                                                                             |       | 32       |
|        |       |                                                                                                               |       |     |
|        |       | PART IV                                                                                                       |       |     |
|        |       |                                                                                                               |       |     |
| Item 15.    |       | Exhibits and Financial Statement Schedules                                                                         |       | 33       |

 

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**PART I**

 

**Item 1: Business**

 

(a)                                  GeneralDevelopment of Business:

 

ML Trend-Following Futures Fund L.P. (the “Partnership”), formerlyknown as ML JWH Strategic Allocation Fund L.P. was organized under the DelawareRevised Uniform Limited Partnership Act on December 11, 1995 and commencedtrading on July 15, 1996.  ThePartnership operates as a “fund of funds”, allocating and reallocating itscapital, under the discretion of Merrill Lynch Alternative Investments LLC(“MLAI”) the general partner of the Partnership, among four underlyingFuturesAccess Funds (each a “Portfolio Fund” and collectively the “PortfolioFunds”). MLAI  is an indirectwholly-owned subsidiary of Merrill Lynch & Co., Inc. (“MerrillLynch”).  Merrill Lynch, Pierce,Fenner & Smith Incorporated (“MLPF&S”), a wholly-owned subsidiaryof Merrill Lynch, is the Partnership’s commodity broker.

 

On April 20,2007, MLAI issued an announcement regarding a restructuring of thePartnership.  Effective June 1,2007, as part of the restructuring the following occurred:

 

·                  The Partnership changed its name to ML Trend-Following Futures FundL.P.

 

·                  The Partnership’s assets were reinvested in MLAI-sponsored PortfolioFunds: ML Aspect FuturesAccess LLC (“Aspect”), ML Chesapeake FuturesAccess LLC(“Chesapeake”), ML Transtrend DTP Enhanced FuturesAccess LLC (“Transtrend”) andML Winton FuturesAccess LLC (“Winton”). These Portfolio Funds employ a variety of systematic models with anemphasis on a style of investment commonly referred to as “diversified trendfollowing” and the Partnership no longer utilizes the services of John W. Henry &Company, Inc. (“JWH®”) as a commodity trading advisor.

 

·                  The Portfolio Funds are a group of commodity pools sponsored by MLAI,each of which places substantially all of its assets in a managed futures andforward trading account managed by a single commodity trading advisor.  Each of the Portfolio Funds implements adifferent trading strategy; and

 

·                  On May 7, 2007, the Partnership was deregistered under theSecurities Act of 1933, as amended, but retained its registration under theSecurities Act of 1934, as amended.

 

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“Merger Agreement”) with Bank of America Corporation (“Bank of America”).Pursuant to the Merger Agreement, on January 1, 2009, a wholly-ownedsubsidiary of Bank of America (“Merger Sub”) merged with and into MerrillLynch, with Merrill Lynch continuing as the surviving corporation and asubsidiary of Bank of America (the “Merger”).

 

The Partnership may offer its units oflimited partnership interest (“Units”), when available for sale, as of thebeginning of each month.  Investors whosesubscriptions are accepted during a month are admitted to the Partnership asLimited Partners as of the beginning of the following month, acquiring Units atthe Net Asset Value per Unit as of the date of admission.  Investors’ customer securities accounts aredebited in the amount of their subscriptions on a single monthly settlementdate within approximately five business days of the issuance of their Units.

 

As of December 31, 2008, the aggregateNet Asset Value of the Partnership was $351,874,508, and the Net Asset Valueper Unit, originally $100 as of July 15, 1996, had risen to $199.20.

 

Through December 31, 2008, the highestmonth-end Net Asset Value per Unit was $272.23 (May 31, 2003) and thelowest $98.89 (August 31, 1996).

 

(b)                                 FinancialInformation about Segments:

 

The Partnership’s and Portfolio Funds’business constitutes only one segment for financial reporting purposes, i.e*.,* a speculative “commodity pool.”  The Partnership and the Portfolio Funds donot engage in sales of goods or services.

 

1

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(c)                                  NarrativeDescription of Business:

 

***General***

 

The investmentobjective of the Partnership is to achieve superior risk-adjusted rates ofreturn through a “single strategy-type” fund of funds approach focusing on, butnot limited to, trend-following managed futures strategies. Under the directionof MLAI, the Partnership will seek to achieve this objective by allocating itscapital among a group of Portfolio Funds managed by the Partnership’s  trading advisors which, MLAI believes,collectively have the ability to achieve substantial capital appreciation withcontrolled performance volatility and draw downs.

 

Systematictrading generally assumes that a disciplined quantitative analysis ofhistorical and contemporaneous market information without discretionarydecision making can enable a trader to forecast price action in term of trendsor other market dynamics and to take positions designed to profit from it.These systems can incur substantial losses when the market significantlydeviates from its usual historical patterns, e.g.**whenweather-related catastrophes, international political disruptions, andunanticipated supply/demand imbalances unexpectedly dominate the market.Systematic trading systems share basic similarities, although the models whichthey apply to historical price data differ. Such similarities imply that there willbe certain market conditions which are likely to be adverse to all orsubstantially all of the Portfolio Funds in the Partnership’s portfolio.

 

Systematictrading strategies are speculative and involve substantial risk. By operatingthe Partnership as a “fund of funds” and investing in a number of differentPortfolio Funds, MLAI will attempt to mitigate the volatility and certain otherrisks of investing in a single Portfolio Fund. While diversifying amongdifferent trading advisors of the Partnership involves the risk of onemanager’s loss frequently offsetting another’s profits, this same offsettingeffect also typically reduces overall performance volatility, potentiallyproducing a risk/return profile for the Partnership that may be more consistentwith the portfolio objectives of certain investors than investing in a singlePortfolio Fund.

 

***Background***

 

ThePartnership has an extensive operating and performance history, but terminatedthe joint venturing agreement under which John W. Henry & Company, Inc.as a trading advisors was responsible for its performance to date providedadvisory services.  Currently MLAIallocates capital among the Portfolio Funds.

 

The pastperformance of the Partnership prior to June 1, 2007 or of the PortfolioFunds in which the Partnership will invest either individually or in anycombination is not indicative of the future results of the Partnership or anyof the Portfolio Funds. There can be no assurance that the Partnership or anyof the Portfolio Funds will achieve its objective or avoid substantial or totallosses. The MLAI trading principals who make allocations for the Partnershiphave only recently begun to operate pools and trade accounts.

 

***Employees***

 

The Fund hasno employees.

 

***Addition, Redemption and Reallocation of Capital for Commodity Pool orPartnership Accounts***

 

Investors purchase or redeem Units at NetAsset Value (“NAV”) on the close of business on the last business day of themonth.  In order to provide marketexposure commensurate with the Partnership’s equity on the date of thesetransactions, Partnership general practice is to adjust positions as near aspossible to the close of business on the last trading date of the month.  The intention is to provide for additions andredemptions at a NAV that will be the same for each of these transactions, andto eliminate possible variations in NAVs that could occur as a result ofinter-day price changes if, for example, additions were calculated on the firstday of the subsequent month.  Therefore,the Partnership may, at its sole discretion, adjust its investment of theassets associated with the addition or redemption as near as possible to theclose of business on the last business day of the month to reflect the amountthen available for trading.  Based on thePartnership’s determination of liquidity or other market conditions, thePartnership may decide to commence trading earlier in the day on, or before,the last business day of the month, or at its sole discretion, delayadjustments to trading for an account to a date or time after the close ofbusiness on the last day of the month. No

 

2

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assurance isgiven that the Partnership will be able to achieve the objectives describedabove in connection with the Partnership’s equity level changes.  The use of discretion by the Partnership inthe application of this procedure may affect performance positively ornegatively.

 

Custody of Assets.

Substantial portion of the Portfolio Funds’assets are currently held in customer accounts at MLPF&S.

 

Available Assets.

The Partnership and the Portfolio Funds earnincome, as described below, on its “Available Assets,” which can be generallydescribed as the cash actually held by the Partnership.  Available Assets are held primarily in U.S.dollars and are comprised of the Partnership’s and the Portfolio Funds’ cashbalances 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 and thePortfolio Funds’ account, on a daily basis and the Partnership’s and thePortfolio Funds’ cash balance in foreign currencies derived from its trading innon-U.S. dollar denominated futures and options contracts, which includes opentrade equity on those exchanges which settle gains and losses on open positionsin such contracts prior to closing out such positions. Available Assets do notinclude, and the Partnership and the Portfolio Funds do not earn interest on,the Partnership’s gains or losses on its open forward, commodity option andcertain foreign futures positions since such gains and losses are not collectedor paid until such positions are closed out.

 

The Partnership’s and the Portfolio Funds’Available Assets may be greater than, less than or equal to the Partnership’sand the Portfolio Funds’ Net Asset Value (on which the redemption value of theUnits is based) primarily because Net Asset Value reflects all gains and losseson open positions as well as accrued but unpaid expenses.

 

Interest Earned on the Partnership’s U.S.Dollar Available Assets.

The following description relates to thePartnership’s and the Portfolio Funds’ U.S. dollar Available Assets.

 

The Partnership’s and the Portfolio Funds’U.S. dollar Available Assets are held in cash in offset accounts or may beinvested in short-term U.S. Treasury bills purchased from dealers unaffiliatedwith Merrill Lynch.  Offset accounts arenon-interest bearing demand deposit accounts maintained with banks unaffiliatedwith Merrill Lynch.  An integral featureof the offset arrangements is that the participating banks specificallyacknowledge that the offset accounts are MLPF&S customer accounts, notsubject to any Merrill Lynch liability.

 

Merrill Lynch credits the Partnership and thePortfolio Funds, as of the end of each month, with interest at the effectiveprevailing 91-day Treasury bill rate on the average daily U.S. dollar AvailableAssets held in the offset accounts during such month.  The Partnership and the Portfolio Fundsreceive all interest paid on the short-term Treasury bills in which it invests.

 

The use of the offset account arrangementsfor the Partnership’s U.S. dollar Available Assets may be discontinued byMerrill Lynch whether or not Merrill Lynch otherwise continues to maintain itsoffset arrangements. The offset arrangements are dependent on the banks’continued willingness to make overnight credits available to Merrill Lynch,which, in turn, is dependent on the credit standing of Merrill Lynch.  If Merrill Lynch were to determine that theoffset arrangements had ceased to be practicable (either because Merrill Lynchcredit lines at participating banks were exhausted or for any other reason),Merrill Lynch would thereafter attempt to invest all of the Partnership’s U.S.dollar Available Assets to the maximum practicable extent in short-term U.S.Treasury bills.  All interest earned onthe U.S. dollar Available Assets so invested would be paid to the Partnership,but MLAI would expect the amount of such interest to be less than thatavailable 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 aremaintained make available to Merrill Lynch interest-free overnight credits,loans or overdrafts in the amount of the Partnership’s and the Portfolio Funds’U.S. dollar Available Assets held in the offset accounts, charging MerrillLynch a small fee for this service.  Theeconomic benefits derived by Merrill Lynch – net of the interest credits paidto the Partnership and the Portfolio Funds and the fee paid to the offset banks– from the offset accounts have not exceeded 0.75% per annum of thePartnership’s and the Portfolio Funds’ average daily U.S. dollar AvailableAssets held in the offset accounts. These revenues to Merrill Lynch are inaddition to the Brokerage Commissions and Administrative Fees paid by thePartnership to MLPF&S and MLAI, respectively.

 

Interest Paid by Merrill Lynch on thePartnership’s and the Portfolio Funds’ Non-U.S. Dollar Available Assets.

Under the single currency margining systemimplemented for the Partnership, the Partnership and the Portfolio Funds do 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 andthe Portfolio Funds to retain the monies which would otherwise be required forsuch margin as part of the Partnership’s and the Portfolio Funds’ U.S. 

 

3

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dollarAvailable Assets.  The Partnership andthe Portfolio Funds do not earn interest on foreign margin deposits provided byMLPF&S. The Partnership and the Portfolio Funds do, however, earn intereston their non-U.S. dollar Available Assets. Specifically, the Partnership and the Portfolio Funds are credited byMerrill Lynch with interest at prevailing short-term local rates on assets andnet gains on non-U.S. dollar denominated positions for such gains actually heldin cash by the Partnership and the Portfolio Funds.  Merrill Lynch charges the Partnership and thePortfolio Funds Merrill Lynch’s cost of financing realized and unrealizedlosses on such positions.

 

The Partnership and the Portfolio Funds holdforeign 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 and the Portfolio Funds’ U.S. dollar Available Assets.  Foreign currency gains or losses on openpositions are not converted into U.S. dollars until the positions areclosed.  Assets of the Partnership andthe Portfolio Funds while held in foreign currencies are subject to exchangerate risk.

 

###### ***Charges***

 

The following table summarizes the chargesincurred by the Fund 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 Commission           |       | $                  | —     |                                                   | 0.00       | %                  | $          | 15,400,942 |   | 3.05 | % | $ | 61,808,517 |   | 5.88 | % |
| Administrative and Filing Fees |       | 361,539            |       | 0.00                                                   | %          | 961,273            |       | 0.19 | % | 2,937,327 |   | 0.28 | % |
| Wrap Fee                       |       | 14,868,130         |       | 4.10                                                   | %          | 9,947,043          |       | 1.97 | % | — |   | 0.00 | % |
| Other Expenses                 |       | —             |       | 0.10                                                   | %          | 25,000             |       | 0.00 | % | 1,450,000 |   | 0.14 | % |
| Total                          |       | $                  | 15,229,669 |                                                   | 4.20       | %                  | $          | 26,334,258 |   | 5.21 | % | $ | 66,195,844 |   | 6.30 | % |

 

ThePartnership’s average month-end Net Assets during 2008, 2007 and 2006 equaled$362,197,519 $505,150,607 and $1,050,574,066 respectively.

 

During theyears ended December 31 2008, 2007 and 2006 the Partnership earned$10,654, $13,909,510 and $51,861,211 in interest income, respectively, orapproximately 0.0029%, 2.75% and 4.94%, respectively, of the Partnership’saverage month end Net Assets.

 

In addition to the above charges, thePartnership and JWH® prior to June 1, 2007, shared in the profits of the JointVenture based on equity provided that 20% of the Joint Venture’s quarterly NewTrading Profits are allocated to JWH®. For the years ended December 31, 2007 and 2006, JWH® did notreceive a profit share allocation.

 

4

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**Description of Current Charges**

 

The Partnership is subject to the followingcharges:

 
| **Recipient** | ** ** | **Nature of Payment**                         | ** ** | **Amount of Payment**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|---------------|------------|-----------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |       |                                          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| MLPF&S    |       | Brokerage commissions                         |       | A flat rate, monthly brokerage commissions of 0.479 of 1% of the  Joint Venture’s month-end assets (a 5.75% 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 JWH®’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. Effective June 1,  2007, no Brokerage commission is charged to investors at the Partnership  level, although Brokerage Commissions are charged to investors at the  Portfolio Funds’ level, and investors will be indirectly subject to their *pro rata* share of such fees based on the investment of the  Partnership in such underlying Portfolio Funds. MLAI estimates that the  round-turn equivalent commission rate charged to the Joint Venture by  MLPF&S for the period January 1, 2007 through May 31, 2007 and  for the year ended December 31, 2006 was $166 and $182, respectively  (not including, in calculating round-turn equivalents, forward contracts on a  futures-equivalent basis). |
|          |       |                                          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| MLPF&S    |       | Use of Partnership and Portfolio Funds assets |       | MLPF&S may derive certain economic benefit from the deposit of  certain of the Partnership’s and Portfolio Funds’ U.S. dollar Available  Assets in offset accounts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|          |       |                                          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| MLAI          |       | Administrative Fee                            |       | Prior to June 1, 2007, a flat rate monthly charge of 0.021 of 1%  (a 0.25% annual rate) of the Joint Venture’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) is  paid to MLAI, which pays all routine administrative expenses of the Joint  Venture, other than the Partnership’s ongoing offering costs and the actual  cost of the State of New Jersey annual filing fee. This filing fee is  assessed on a per partner basis with a maximum charge of $250,000 per year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |

 

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| MLIB; Other Counterparties      |   | Bid-ask spreads                 |   | Bid-ask spreads on forward and related trades.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|---------------------------------|--------|---------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                            |   |                            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| JWH® and Portfolio Funds   |   | Profit Share / Performance fees |   | Prior to June 1, 2007, 20% of any New Trading Profits (as the  Partnership owns substantially all of the Joint Venture, such special  allocation effectively is made out of Trading Profits which the Partnership  would otherwise have received).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                            |   |                            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                            |   |                            |   | As Profit Shares are calculated on the basis of quarter-end highs in  cumulative Trading Profit, substantial Profit Shares may (irrespective of the  fact that Units are purchased at different times and prices, and may have  materially different investment experiences during a year) be accrued during  a calendar year even though the joint venture has an overall loss for such  year.                                                                                                                                                                                                                                                                                                                                                                                                            |
|                            |   |                            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                            |   |                            |   | Performance fees paid by the Portfolio Funds are paid at the  following rates; Aspect — 15%; Chesapeake — 20%; Transtrend — 25% and Winton  — 15%, of any New Trading Profits as defined and earned by the respective  advisors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                            |   |                            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| JWH®                       |   | Consulting Fees                 |   | Prior to June 1, 2007, MLPF&S paid JWH® annual Consulting  Fees of 2% of the Partnership’s average month-end assets, after reduction for  a portion of the Brokerage Commissions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                            |   |                            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| MLPF&S; Other Third Parties |   | Extraordinary expenses          |   | Actual payments to third parties; none paid to third parties to date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                            |   |                            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| MLAI                            |   | Ongoing offering costs          |   | Actual costs incurred subject to limitation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                            |   |                            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| MLAI                            |   | Wrap Fees                       |   | Prior to  June 1, 2007, the Partnership’s brokerage commissions and administrative  fees constituted a single annual “wrap fee” not to exceed 6.5% of the  Partnership’s average month end Net Asset Value, which covered all of the  Partnership’s costs and expenses, other than bid ask spreads and certain  trading fees as well as an annual filing fee payable to the State of New  Jersey and offering costs. After June 1, 2007, the Partnership Pays  MLAI, wrap fee in the amount of 4.0% of the Partnership’s average month end  Net Asset Value. Other than this 4.0% wrap fee, the only direct expense of  the Partnership is the annual New Jersey filing fee, which is assessed on a  per partner basis with a maximum charge of $250,000 per year. |
|                            |   |                            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| Portfolio Funds                 |   | Management Fees                 |   | A flat monthly charge of the Portfolio Funds month-end assets (Aspect  and Winton: 1.5%, Chesapeake and Transtrend: 1%) per Annum.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

 

6

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***Regulation***

 

MLAI, the Partnership, the Portfolio Fundsand MLPF&S are each subject to regulation by the Commodity Futures TradingCommission (“CFTC”) and the National Futures Association (“NFA”).  Other than in respect of its periodicreporting requirements under the Securities Exchange Act of 1934, and the registrationof the Units for continuous public distribution under the Securities Act of1933, the Partnership itself is generally not subject to regulation by theSecurities and Exchange Commission (“SEC”). However, MLAI is registered as an “investment adviser” under theInvestment Advisers Act of 1940. MLPF&S is also regulated by the SEC and the Financial IndustryRegulatory Authority (“FINRA”).

 

(d)                                 FinancialInformation about Geographic Areas:

 

The Partnership and the Portfolio Funds donot engage in material operations in foreign countries, nor is a materialportion of the Partnership’s and the Portfolio Funds’ revenues derived fromcustomers in foreign countries.  ThePortfolio Funds, however, trade from the United States on a number of foreigncommodity exchanges.  The Partnership andthe Portfolio Funds’ do not engage in the sales of goods or services.

 

**Item 1A: RiskFactors**

 

**The LargeSize of the Portfolio Funds’ Trading Positions Increases the Risk of Sudden,Major Loses**

 

The PortfolioFuns take positions with face values which are as much as 15 times its totalcapital.

 

**PastPerformance Not Necessarily Indicative of Future Results**

 

Pastperformance is not necessarily indicative of future results.  The trading advisors’ past performance maynot be representative of how it may trade in the future for the Partnership.

 

**VolatileMarkets; Highly Leveraged Trading**

 

Futures andforward trading is highly leveraged, and market price levels are volatile andmaterially affected by unpredictable factors such as weather and governmentalintervention. The combination of leverage and volatility creates a high degreeof risk.

 

**Importanceof General Market Conditions**

 

Overall marketor economic conditions — which neither MLAI nor the Sunrise advisor can predictor control — have a material effect on the performance of any managed futuresstrategy.

 

**Possibilityof Additional Government or Market Regulation**

 

Marketdisruptions and the dramatic increase in the capital allocated to alternativeinvestment strategies during recent years have led to increased governmental aswell as self-regulatory scrutiny of the alternative investment funds industryin general.  In addition, certainlegislation proposing greater regulation of the industry periodically isconsidered by the U.S. Congress, as well as the governing bodies of foreignjurisdictions. It is impossible to predict what, if any, changes in theregulations applicable to the Partnership, its general partner (MLAI), themarkets in which they trade and invest or the counterparties with which they dobusiness may be instituted in the future. Any such regulation could have amaterial adverse impact on the profit potential of the Partnership, as well asrequire increased transparency as to the identity of the Partnership’s limitedpartners.

 

7

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**ForwardTrading**

*** ***

ThePartnership will trade in the forward markets in addition to trading in thefutures markets.  The forward markets areover-the-counter, non-exchange traded markets, and in trading in the forwardmarkets, the Portfolio Funds will be dependent on the credit standing of thecounterparties with which they trade, without the financial support of anyclearinghouse system.  In addition, theprices offered for the same forward contract may vary significantly amongdifferent forward market participants. Forward markets counterparties are under no obligation to enter intoforward transactions, including transactions through which the Portfolio Fundsare attempting to liquidate open positions.

 

***Increased Assets Under Management***

 

Thereappears to be a tendency for the rates of return achieved by managed futuresadvisors to decline as assets under management increase.  The trading advisors have not agreed to limitthe amount of additional equity which it may manage.

 

## **TradingAdvisor Risk**

 

ThePartnership is subject to the risk of the bad judgment, negligence ormisconduct of the trading advisors. There have been a number of instances in recent years in which privateinvestment funds have incurred substantial losses due to manager misconduct.

 

## **Changes in Trading Strategy**

 

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

 

## **Illiquid Markets**

 

Certainpositions held by the Partnership may become illiquid, preventing the tradingadvisors from acquiring positions otherwise indicated by its strategy or makingit impossible for the trading advisors to close out positions against which themarket is moving.

 

Certainfutures markets are subject to “daily price limits,” restricting the maximumamount by which the price of a particular contract can change during any giventrading day.  Once a contract’s price hasmoved “the limit,” it may be impossible or economically non-viable to executetrades in such contract.  From time totime, prices have moved “the limit” for a number of consecutive days, making itimpossible for traders against whose positions the market was moving to preventlarge losses.

 

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

 

Thetrading advisors may trade extensively on non-U.S. exchanges.  These exchanges are not regulated by anyUnited States governmental agency. The Partnership could incur substantiallosses trading on foreign exchanges to which they would not have been subjecthad their trading advisors limited their trading to U.S. markets.

 

Theprofits and losses derived from trading foreign futures and forwards willgenerally be denominated in foreign currencies; consequently, the Partnershipwill be subject to a certain degree of exchange-rate risk in trading suchcontracts.

 

## **The Partnership Could Lose Assets and HaveIts Trading Disrupted Due to the Bankruptcy of One of the Parties**

 

ThePartnership is subject to the risk of insolvency of a counterparty, anexchange, a clearinghouse or MLPF&S. The Partnership’s assets could be lostor impounded during lengthy bankruptcy proceedings.  Were a substantial portion of thePartnership’s capital tied up in a bankruptcy, MLAI might suspend or limittrading, perhaps causing the Partnership’s to miss significant profitopportunities. There are increased risks in dealing with unregulated 

 

8

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tradingcounterparties including the risk that assets may not benefit from theprotection afforded to “customer funds” deposited with regulated dealers andbrokers.

 

**Item 1B: UnresolvedStaff Comments**

 

Not applicable.

 

**Item 2: Properties**

 

ThePartnership does not use any physical properties in the conduct of itsbusiness.

 

The Partnership’s administrative office is theoffice of MLAI (Merrill Lynch Alternative Investments LLC, Two World FinancialCenter, 7th Floor, New York New York 10281).  MLAI performs administrative services for thePartnership from MLAI’s offices.

 

**Item 3: LegalProceedings**

 

None.

 

**Item 4: Submissionof Matters to a Vote of Security Holders**

 

None

 

**PART II**

 

**Item 5: Marketfor Registrant’s Common Equity, Related Stockholder Matters and IssuerPurchases of Equity Securities**

 

Item 5(a)

 

(a)                                  MarketInformation:

 

There is no established publictrading market for the Units, and none is likely to develop.  Limited Partners may redeem Units as of theend of each month at Net Asset Value, subject to certain early redemptioncharges.

 

(b)                                 Holders:

 

As of December 31,2008, there were 12,931 holders of Units, including MLAI.

 

(c)                                  Dividends:

 

MLAI has notmade, and does not contemplate making, any distributions on the Units.

 

(d)                                 SecuritiesAuthorized for Issuance Under Equity Compensation Plans:

 

Notapplicable.

 

PerformanceGraph:

 

Notapplicable.

 

9

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(e)                                  Recent Sales ofUnregistered Securities:

 

Issuance to accredited investors pursuant to Regulation D and Section 4(6) underthe Securities Act. The selling agent of the following Class of Units wasMLPF&S.

 

During 2008, the Fund issued Units as setforth in the following chart:

 

CLASSD

 
| ** ** | ** ** | **Subscription** | ** ** | ** ** | ** ** |
|------------|------------|------------------|------------|------------|------------|
| ** ** | ** ** | **Amount**       | ** ** | **Units**  | ** ** | **NAV (1)** | ** ** |
| Jan-08     |       | $                | 35,636     |       | 217        |   | 164.22 |   |
| Feb-08     |       | 112,633          |       | 669        |       | 168.36 |   |
| Mar-08     |       | 275,922          |       | 1,496      |       | 184.45 |   |
| Apr-08     |       | 342,190          |       | 1,900      |       | 180.10 |   |
| May-08     |       | 610,081          |       | 3,428      |       | 177.98 |   |
| Jun-08     |       | 213,609          |       | 1,172      |       | 182.26 |   |
| Jul-08     |       | 1,298,326        |       | 6,740      |       | 192.63 |   |
| Aug-08     |       | 5,007,234        |       | 27,649     |       | 181.10 |   |
| Sep-08     |       | 3,390,137        |       | 19,469     |       | 174.13 |   |
| Oct-08     |       | 2,295,446        |       | 13,168     |       | 174.32 |   |
| Nov-08     |       | 2,717,905        |       | 14,636     |       | 185.70 |   |
| Dec-08     |       | 1,143,184        |       | 5,900      |       | 193.76 |   |
| Jan-09     |       | 1,288,226        |       | 6,467      |       | 199.20 |   |
| Feb-09     |       | 2,102,350        |       | 10,547     |       | 199.54 |   |
|            |            |                  |            |            |            |  |  |  |

 

Item 5(b)

 

Notapplicable.

 

Item 5(c)

 

Notapplicable.

 

10

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**Item 6: SelectedFinancial Data**

 
| ** **                                                          | ** ** | **For the Years Ended December 31,** | ** ** |
|---------------------------------------------------------------------|------------|---------------------------------------------------------------|------------|
| **Income Statement Data**                                 | ** ** | **2008**                                                      | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
| Revenues                                                            |       |                                                          |       |   |   |   |   |   |   |   |   |
|                                                                |       |                                                          |       |   |   |   |   |   |   |   |   |
| Trading Profit (Loss):                                              |       |                                                          |       |   |   |   |   |   |   |   |   |
| Realized                                                            |       | $                                                             | 20,765,365 |   | $ | (64,586,271 | ) | $ | (158,576,895 | ) | $ | (112,908,397 | ) | $ | 151,296,416 |   |
| Change in unrealized                                                |       | 65,888,978                                                    |       | 15,318,537 |   | 12,136,031 |   | (150,020,999 | ) | 91,466,219 |   |
|                                                                |       |                                                          |       |   |   |   |   |   |   |   |   |
| Total trading profit (loss)                                         |       | 86,654,343                                                    |       | (49,267,734 | ) | (146,440,864 | ) | (262,929,396 | ) | 242,762,635 |   |
|                                                                |       |                                                          |       |   |   |   |   |   |   |   |   |
| Investment Income:                                                  |       |                                                          |       |   |   |   |   |   |   |   |   |
| Interest                                                            |       | 10,654                                                        |       | 13,909,510 |   | 51,861,211 |   | 39,816,009 |   | 14,133,423 |   |
|                                                                |       |                                                          |       |   |   |   |   |   |   |   |   |
| Expenses:                                                           |       |                                                          |       |   |   |   |   |   |   |   |   |
| Brokerage commissions                                               |       | —                                                        |       | 15,400,942 |   | 61,808,517 |   | 73,622,017 |   | 57,501,150 |   |
| Administrative and filing fees                                      |       | —                                                        |       | 961,273 |   | 2,937,327 |   | 3,450,957 |   | 2,889,337 |   |
| Wrap fee                                                            |       | 14,868,130                                                    |       | 9,947,043 |   | — |   | — |   | — |   |
| Other expenses                                                      |       | 361,539                                                       |       | 25,000 |   | 1,450,000 |   | 475,000 |   | 348,101 |   |
|                                                                |       |                                                          |       |   |   |   |   |   |   |   |   |
| Total expenses                                                      |       | 15,229,669                                                    |       | 26,334,258 |   | 66,195,844 |   | 77,547,974 |   | 60,738,588 |   |
|                                                                |       |                                                          |       |   |   |   |   |   |   |   |   |
| Net Investment Loss                                                 |       | (15,219,015                                                   | )          | (12,424,748 | ) | (14,334,633 | ) | (37,731,965 | ) | (46,605,165 | ) |
|                                                                |       |                                                          |       |   |   |   |   |   |   |   |   |
| Income (loss) before Minority Interest and  Profit Share Allocation |       | 71,435,328                                                    |       | (61,692,482 | ) | (160,775,497 | ) | (300,661,361 | ) | 196,157,470 |   |
|                                                                |       |                                                          |       |   |   |   |   |   |   |   |   |
| Profit Share allocation                                             |       | —                                                        |       | — |   | — |   | (6,312 | ) | (39,051,490 | ) |
| Minority interest                                                   |       | —                                                        |       | 18,048 |   | 29,872 |   | 55,162 |   | (25,137 | ) |
|                                                                |       |                                                          |       |   |   |   |   |   |   |   |   |
| Net Income (Loss)                                                   |       | $                                                             | 71,435,328 |   | $ | (61,674,434 | ) | $ | (160,745,625 | ) | $ | (300,612,511 | ) | $ | 157,080,843 |   |

 
| **Balance Sheet Data** | ** ** | **December 31, 2008** | ** **  | **December 31, 2007** | ** ** | **December 31, 2006** | ** ** | **December 31, 2005** | ** **  | **December 31, 2004** | ** ** |
|----------------------------------|------------|---------------------------------|-------------|---------------------------------|------------|---------------------------------|------------|---------------------------------|-------------|---------------------------------|------------|
| Total Partners’ Capital     |       | $                               | 351,874,508 |                            | $          | 370,119,282                     |       | $                               | 792,303,062 |                            | $          | 1,234,151,526 |   | $ | 1,371,799,115 |   |
| Net Asset Value per Unit         |       | $                               | 199.20      |                            | $          | 164.22                          |       | $                               | 175.61      |                            | $          | 205.50 |   | $ | 260.33 |   |

 

The following selected month-end Net AssetValue per Unit information has been derived from the financial and accountingdata of the Partnership:

 

MONTH-END NET ASSET VALUEPER INITIAL UNIT

 
| ** ** | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** | **Apr.** | ** ** | **May** | ** ** | **June** | ** ** | **July** | ** ** | **Aug.** | ** ** | **Sept.** | ** ** | **Oct.** | ** ** | **Nov.** | ** ** | **Dec.** | ** ** |
|------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|---------|------------|----------|------------|----------|------------|----------|------------|-----------|------------|----------|------------|----------|------------|----------|------------|
| 2004       |       | $        | 244.57     |     | $          | 265.91   |       | $        | 251.68     |    | $          | 224.34   |       | $        | 210.08     |     | $          | 187.86    |       | $        | 183.46     |     | $          | 182.64   |       | $ | 201.36 |   | $ | 241.05 |   | $ | 268.07 |   | $ | 260.33 |   |
| 2005       |       | $        | 224.16     |     | $          | 213.19   |       | $        | 213.18     |    | $          | 190.18   |       | $        | 208.05     |     | $          | 212.63    |       | $        | 215.46     |     | $          | 214.97   |       | $ | 215.10 |   | $ | 214.98 |   | $ | 232.78 |   | $ | 205.50 |   |
| 2006       |       | $        | 198.52     |     | $          | 180.91   |       | $        | 191.14     |    | $          | 213.21   |       | $        | 212.48     |     | $          | 189.18    |       | $        | 176.75     |     | $          | 190.69   |       | $ | 190.58 |   | $ | 177.15 |   | $ | 188.07 |   | $ | 175.61 |   |
| 2007       |       | $        | 173.44     |     | $          | 164.76   |       | $        | 154.43     |    | $          | 157.93   |       | $        | 157.71     |     | $          | 161.03    |       | $        | 153.47     |     | $          | 143.03   |       | $ | 154.01 |   | $ | 164.69 |   | $ | 160.52 |   | $ | 164.22 |   |
| 2008       |       | $        | 168.36     |     | $          | 184.45   |       | $        | 180.10     |    | $          | 177.98   |       | $        | 182.26     |     | $          | 192.63    |       | $        | 181.10     |     | $          | 174.13   |       | $ | 174.32 |   | $ | 185.70 |   | $ | 193.76 |   | $ | 199.20 |   |

 

Pursuant to CFTC policy, monthly performance is presented from January 1,2003, even though the Units were outstanding prior to such date.

 

11

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**ML TRENDFOLLOWING FUTURES FUND L.P.**

**December 31,2008**

 

*Type ofPool:* Single-Advisor/Publicly-Offered/Not “PrincipalProtected”(1)

*Inceptionof Trading:* July 15, 1996

*AggregateSubscriptions:*  $2,033,730,098

*CurrentCapitalization:*  $351,874,508

*WorstMonthly Drawdown:(2) *  (13.89)% (January 2005)

*WorstPeak-to-Valley Drawdown:(3) *  (47.47)% (June 2003 — August 2007)

 

**MonthlyRates of Return****(4)**

 

| **Month**                      | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|--------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
| January                        |       | 2.52     | %          | (1.23    | )%         | (3.40    | )%         | (13.89   | )%         | 3.80     | %          |
| February                       |       | 9.55     |       | (5.01    | )          | (8.87    | )          | (4.89    | )          | 8.73     |       |
| March                          |       | (2.35    | )          | (6.27    | )          | 5.65     |       | 0.00     |       | (5.35    | )          |
| April                          |       | (1.18    | )          | 2.26     |       | 11.55    |       | (10.79   | )          | (10.86   | )          |
| May                            |       | 2.41     |       | (0.13    | )          | (0.34    | )          | 9.40     |       | (6.36    | )          |
| June                           |       | 5.69     |       | 2.10     |       | (10.97   | )          | 2.20     |       | (10.58   | )          |
| July                           |       | (5.99    | )          | (4.70    | )          | (6.57    | )          | 1.33     |       | (2.34    | )          |
| August                         |       | (3.85    | )          | (6.80    | )          | 7.89     |       | (0.23    | )          | (0.45    | )          |
| September                      |       | 0.11     |       | 7.68     |       | (0.06    | )          | 0.06     |       | 10.25    |       |
| October                        |       | 6.53     |       | 6.94     |       | (7.05    | )          | (0.05    | )          | 19.71    |       |
| November                       |       | 4.34     |       | (2.53    | )          | 6.16     |       | 8.28     |       | 11.21    |       |
| December                       |       | 2.81     |       | 2.31     |       | (6.63    | )          | (11.72   | )          | (2.89    | )          |
| Compound Annual Rate of Return |       | 21.30    | %          | (6.48    | )%         | (14.55   | )%         | (21.06   | )%         | 10.50    | %          |

 

----

(1) Certain funds, including fundssponsored by MLAI, are structured so as to guarantee to investors that theirinvestment will be worth no less than a specified amount (typically, the amountinitially invested) as of a date certain after the date of investment.  The CFTC refers to such funds as “principalprotected.”  The Partnership has no suchfeature.

 

(2) Worst Monthly Drawdown representsthe largest negative Monthly Rate of Return experienced by the Partnershipsince January 1, 2003; a drawdown is measured on the basis of month-endNet Asset Value only, and does not reflect intra-month figures.

 

(3) Worst Peak-to-Valley Drawdownrepresents the greatest percentage decline from a month-end cumulative MonthlyRate of Return without such cumulative Monthly Rate of Return being equaled orexceeded as of a subsequent month-end experienced by the Partnership since January 1,2003.  For example, if the Monthly Rateof 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) Monthly Rate of Return is the netperformance of the Partnership during the month of determination (includinginterest income and after all expenses accrued or paid) divided by the totalequity of the Partnership as of the beginning of such month, inclusive ofsubscription activity.

 

12

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**Item 7: Management’sDiscussion and Analysis of Financial Condition and Results of Operations**

 

**Results ofOperations**

 

Performance Summary

 

2008

 

The Partnership posted profits for the year.

 

The beginningof the first quarter was positive for the Partnership despite dramatic declinesin global stock indices, illustrating the Partnership’s low correlation withequities over a market cycle. All four Portfolio Funds had long positions infixed income and precious metals, both of which benefited from fears of a U.S.recession, as well as sharp U.S. Federal Reserve rate cuts totaling 1.25% forthe month and the continuing rally in grain markets. Losses came primarily fromenergy markets as oil prices weakened and natural gas rebounded. Profitscontinued to be posted to the Partnership in February. The bulk of returns wereearned in surging commodity markets as grains and softs rallied strongly due tolow inventories and positive forecasts of demand. Energy and metals climbed asthese sectors are perceived as an inflation hedge. The other profitable tradesincluded short currency positions against the U.S. dollar. The Partnershipposted losses at the end of the first quarter. Transtrend, the most diversifiedmanager in the vertical, was the top performer while Chesapeake was the bottomperformer. The Portfolio Funds were able to limit the damage in at the end ofthe first quarter by reducing leverage and scaling back positions in inverseproportion to rising volatility in the commodity markets.

 

ThePartnership posted losses at the beginning of the second quarter. Although mostPortfolio Funds made gains in April with their long energy positions, asoil and natural gas hit historic highs, these were offset by losses fromreversals in the financial futures markets. Most Portfolio Funds came into April withshort positions in the United States dollar, long positions on bonds and shortpositions in equities. However, markets experienced a relief rally in April asinvestors began to believe the credit crisis might be over. This caused theUnited States dollar to rebound, bonds to fall and equities to rise, resultingin losses for the Partnership. Profits were posted to the Partnership in May dueto the Portfolio Funds long energy positions with crude oil up from April andnatural gas was up continuing the trends from previous months. Profitscontinued to be posted to the Partnership at the end of the second quarter dueto the Portfolio Funds long positions in commodities and short positions inequities.

 

Losses wereposted to the Partnership at the beginning of the third quarter. The PortfolioFunds suffered their worst monthly performance of the year at the beginning ofthe third quarter, as bullish trends in commodities dramatically reversed.Losses continued to be posted to the Partnership due to the Portfolio Fundslong positions in most of the commodity markets. After having made most oftheir year to-date gains in commodities, the Portfolio Funds had their largestlosses in these markets in July. The Goldman Sachs Commodity Index fell for themonth and the energy sub-index was also down as the correction was particularlysevere in natural gas. Losses continued to be posted to the Partnership in August dueto two major trend themes. The first was the strengthening in the U.S. dollar,following a long period of declines against most major currencies due to thePortfolio Funds short positions in the U.S. dollar which caused them to losemoney. The second big theme was the continued decline in commodities, followingthe dramatic reversal from July. The Goldman Sachs Commodity Index was down fora second month in a row. Most of the Portfolio Funds within the verticalreduced their commodity exposure, however they were still long for most of themonth and were down accordingly. The end of the third quarter witnessed anextended weakness in the financial markets that was manifested in a sharpsell-off in global equities and commodities, including energies, grains, andindustrial metals. The Commodity Research Bureau Futures Index finished the endof the quarter down, bond yields fell moderately, while the U.S. dollarcontinued its upward move against other major currencies with the U.S. DollarIndex Future, finishing the month up. In light of September’s marketvolatility, the Portfolios Funds performance exhibited a fair amount ofvariance which was the function of the time frame of the underlying strategy.

 

Profits wereposted to the Partnership at the beginning of the fourth quarter that containeda story of two months. The first half of the month was characterized by anacute panic in financial markets with global equities, commodities, and highyielding currencies dropping and dollar rising. The second half that startedwith the equity market rally on Monday October 13th was characterized bywild day to day volatility but kept most markets relatively range 

 

13

----

 

bound. Allfour Portfolio Funds generated positive returns in the first half of the monthand then succeeded to keep most of these gains. All Portfolio Funds benefitedfrom bearish moves in commodities and equities and strong U.S. dollar in thefirst half of the month. November was a stormy month in the financialmarkets however profits were posted to the Partnership. The Portfolio Fundsmade money in November as most stayed away from volatile equity marketsand instead benefited from long positions in global bonds as bonds rallied andshort positions in commodities as commodities continued to decline. On average,fixed income was the best contributor to the performance, followed bycommodities, and then currencies as a distant third place. The year ended withprofits being posted to the Partnership. The largest gains were made in fixedincome as the Portfolio Funds profited from long positions across the curve asyields continued to fall dramatically. Short positions in commodities,particularly energy, and long positions in the Euro and short positions in theBritish pound positions also proved profitable and equity returns were flat.

 

General

 

The following summary outlines the operations of the Partnership duringJanuary 1, 2007 to June 30, 2007.

 

Performance Summary

 

ML JWH Strategic Allocation Fund L.P. SectorCommentary for the period January – June 2007

 

The Partnership posted an overall loss for the first quarter.

 

The agriculture sector posted losses for the Partnership. Priceinstability hurt performance at the beginning of the quarter as New York coffeefell from a ten month high. The rally in coffee had been fueled by speculationthat drought would reduce Brazil’s harvest. The strong trend then suffered areversal as coffee prices in New York suffered their longest slump in thirteenmonths on speculation that favorable weather in Brazil might actually boost theharvest. Corn, which suffered a sharp reversal by falling 7.2 % in the firsttwo days of the year hurting performance, rebounded along with soybeansbenefiting from speculation that cold temperatures in the United States wouldboost demand for alternative fuels made from the nation’s two biggest crops.Corn regained its strength and reached a ten year high on January 17, 2007while soybeans reached an eighteen month high on January 18, 2007.   Corn and soybeans continued posting gainsfor the Partnership through mid-quarter as soybeans reached their highest levelsince June 2004, as wet weather threatened to prevent Unites Statesfarmers from planting enough crops to meet surging demand for crop-based fuels.Chicago Board of Trade limited wheat contract gains as it dropped in excess of2 percent after prices had reached $5.09, the highest since December 26,2006, as investors bailed out of the commodity following the global plunge inequities. As a result of the plunge in global equity prices investors bailed outof commodities as the quarter ended and took profits in corn and soybeans,which had just reached multi-year highs. Slight gains were produced in New York coffee as its weakening trendaccelerated due to the fact that coffee fell to its lowest price since November 2006on signs that supply may be exceeding demand as stocks piled up in warehousesmonitored by the New York Coffee, Sugar & Cocoa Exchange.

 

The energysector also posted losses for the Partnership. Geopolitical events and arecord-breaking heat wave in the Northeastern United States caused volatilitybeginning of the quarter as natural gas prices fell 6.9% after a governmentreport showed a smaller-than-average decline in inventories of the fuel.Following a government report indicating that the United States supplies ofcrude oil, gasoline, heating oil and diesel were above the five-year averagefor the period, crude oil prices plunged and reached a nineteen month low of$49.90 a barrel. However, forecasts of colder weather throughout February 2007reversed the weakening trend and sent energy prices upward. Despite thevolatility within the sector, crude oil and London gas oil were able to offseta majority of the losses.  Natural gasreversed its strengthening trend mid-quarter and had its biggest loss in morethan six weeks in New York. Larger-than-expected supplies and forecasts of moreseasonal temperatures across the central United States contributed to thereversal. After reaching a two-month high on February 5, 2007 for naturalgas March 2007 delivery it dropped 7.7 % on February 12, 2007, itsbiggest one-day percentage decline since December 26, 2006. The drop innatural gas price March 2007 delivery was spurred by a government reportthat U.S. gas supplies were 19 percent higher than the average for the pastfive years. Crude oil’s reversal also hurt performance as it rose to $61.79 abarrel, its highest closing price this year on speculation that U.S. fuelinventories declined because refineries were down for repairs and also as aresult of the increasing tension with Iran. The quarter ended as natural gasdropped to its lowest price in two months as forecasts for milder weathersignaled reduced consumption of the heating fuel.  However, when forecasters predicted a shiftin the weather pattern that would deliver colder-than-normal air to the easternUnited States, the sector experienced losses as natural gas suffered a trendreversal as prices rose to a one-month high. While gains were achieved in crude oil as it continued its weakening trendthey were limited as crude oil spiked higher and traded near a six-month highafter Iran 

 

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seized 15British Naval personnel in the Persian Gulf on March 23, 2007.

 

The stockindices posted losses for the Partnership. The beginning of the quarter wasnegative as losses in the NASDAQ E-mini offset the gains of the othercomponents in the sector. Although U.S. stocks completed their longest stretchof monthly gains in more than a decade, intra-month volatility hurt the sectorsoverall performance. On January 13, 2007, U.S. stocks rose the highest inmore than three months. This was due to expectations that profits at technologycompanies, such as Apple Inc. and Microsoft Corp., would increase as new productswould prompt consumers and businesses to spend more. The NASDAQ had a 2.8percent increase, a level not seen since February 2001. However, stocksfell towards the end of the first quarter after profit reports from Intel Corp.and IBM caused concern that analysts’ forecasts for earnings atcomputer-related companies were too high. U.S. stocks had their biggest tumblesince 2002 mid-quarter after a plunge in the Chinese equity market caused byconcern that a government crackdown on investments with borrowed money will enda rally that drove benchmarks to records, sparked a global drop in equityprices and raised concerns that investors would unload equities after afour-year bull market. On February 27, 2007, Chinese stocks suffered theirgreatest loss in a decade, while the Dow Jones Stoxx 600 Index dropped 3% andthe Dow Jones Industrial Average fell as much as 546 points intraday, the mostsince the first day of trading after September 11th, 2001. The Eurostoxx50 was the sector’s worst performer while the Nikkei 225 offset some losses asthe sector’s best performer. The quarter ended as the global sell-off thatbegan on February 27, 2007 caused more than $2.4 trillion in share valueto be lost over five days.

 

The metalssector posted losses for the Partnership. Precious metal prices reacted tofluctuations in the U.S. dollar at the beginning of the quarter as reversal inthe U.S. dollar’s weakening trend reduced the appeal of gold as an alternativeinvestment. Gold weakened, falling 3.1% after the U.S. dollar rose to a six-week high as the United Statesannounced higher-than-expected employment figures in December 2006 only torise 3.9% as the U.S. dollar once again weakened and speculation increased thatthe precious metal’s decline was excessive. The London Metal Exchange limitedthe copper sector’s losses as copper prices fell 10% and 35% since reaching arecord high of 8,724 metric tons since May 2006. Copper prices declinedamid expectations that a housing slowdown in the United States, the world’ssecond-largest user of the metal, would continue to reduce demand this year.Base metals suffered strong reversals mid-quarter as copper, which had beenweakening prior to February 2007 on reports of rising stockpiles signaledproduction was exceeding demand and rallied on speculation that China, itslargest user, would accelerate its buying. Performance in gold and silver hadlimited losses as prices found further support as they climbed to nine-monthhighs as escalating tension over Iran’s nuclear research program increased andinvestors searched for safe-haven investments. However, as the quarter endedthe drop in price in the equity markets sent precious metals lower, reversingtheir strengthening trend.  Althoughmetals eventually began to rally the quarter ended down 0.5 percent.

 

The interestrate sector posted losses for the Partnership. The quarter began with strongerthan expected growth and fears of increasing inflation led European ten-yearbond yields to reach six-month highs and the U.K. two-year gilt yields to movetoward five-year highs. U.K. long gilts slumped, which sent yields soaringafter the Bank of England policy makers unexpectedly raised interest rates by aquarter point. Volatility in the ten-year Japanese Government bonds limited thesector’s performance after Kyodo News reported that the Bank of Japan wasunlikely to raise interest rates at its meeting on January 18, 2007, andthe Bank of Japan followed through with no change in rates. The global bondmarkets reversed their weakening trend mid-quarter as the sell-off in theglobal equity markets fueled demand for government debt.  The Japanese Government Benchmark ten-yearbonds added to the Partnership’s negative performance as speculation grew thatthe Bank of Japan, which doubled interest rates, from .25 to .50, at its February 21,2007 meeting would pause before raising borrowing costs any further. Thisprompted a move higher in the market and the rally was further supported afterthe Nikkei 225 stock average posted its biggest decline since June 2006.  Fixed-income markets, which had ralliedmid-quarter continued to strengthen as uncertainty increased that the drop inequities and the rising defaults among the riskiest mortgages would slowconsumer spending and the global economy. European government bonds postedtheir biggest back-to-back weekly decline in three months as European CentralBank President Jean-Claude Trichet reassured investors and stated that growthwas “broader and sustained” and left “no time for complacency.”  The quarter ended as the U.S. ten-yearTreasury note surrendered the remainder of the gains it had amassed after theequity sell-off that began on February 27, 2007 which had driven the yieldto as low as 4.44%.

 

The currencysector posted losses for the Partnership. The quarter began with marketsanticipating the economic data releases and central bank policy announcementsin the hopes of gaining insight into the health of the world’s largesteconomies. On January 3, 2007, the U.S. dollar rose to its highest levelin six months against the Euro on the news that the Institute for SupplyManagement Manufacturing Index came in at a higher than expected 51.4,signaling an expansion of the U.S. economy. The Japanese yen declined to 122.19per U.S. dollar, the lowest in more than four 

 

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years, due tospeculation that there would be increased government pressure on policy makersnot to raise borrowing costs. The U.S. dollar had its largest fall mid-quarteragainst the Japanese yen in more than two months after U.S. Treasury SecretaryHenry Paulson said he would be watching the Japanese currency “very carefully”.The Japanese yen rallied against the U.S. dollar to its highest level in morethan 19 months amid a correction in U.S. stocks as the investors avoidedemerging market assets, triggering an unwinding of trades betting on a declinein the Japanese currency. The Japanese yen continued to advance against theU.S. dollar and gained against all 16 of the most-active currencies during thefirst week of March, as global stocks extended a slump. The British pound, thesector’s worst performer fell to its lowest level against the Japanese yen inmore than four months, as in one month the British pound sterling/Japanese yenimplied volatility soared to a record high of 11.75 due to concerns of risingrisk. The quarter ended with slight gains produced by the Brazilian Real as thecurrency’s strengthening trend remained intact and reached a six-year high onspeculation that the U.S. dollar flows from both financial investments and atrade surplus would remain strong.

 

April 1, 2007 to June 30, 2007

 

The Partnership posted a gain for the two months ended May 31,2007.

 

The interest rate sector was the most profitable sector for the period.The sector was negative for April 2007 as uncertainty grew over theinterest rate policy of the central banks of the world’s two largest economies.Both U.S. Treasuries and Japanese Government 10-year Bonds (JGBs), the sector’sworst performer, were trend-less in April 2007 as the markets’ interestrate expectations shifted with each economic release about the current healthof the U.S. and Japanese economies. While uncertainty surrounded the state ofthese two economies, the strength of the German and British economies wasclear. The German Benchmark ten-year bund led performance as stronger growthand increased fears of inflation sent yields to their highest level since August 2005.The sell-off in European fixed income limited losses within the sector asyields touched multi-year highs.  Thesector had strong performance for May 2007 as global interest ratessustained their steady rise as economic growth continued in Europe and as theU.S. housing market began to stabilize. The German Benchmark ten-year bund ledperformance as consumer confidence in the euro region economy climbed to asix-year high. U.S. Treasuries also bolstered performance as the benchmarkten-year bond yield increased 26 basis points since April 30, 2007, itsbiggest monthly increase since March 2006.

 

The currencysector was also profitable for the period. In April, the Euro reached anall-time high against both the U.S. dollar and the Japanese yen, while theBritish pound reached a 25-year high against the U.S. dollar.  The U.S. dollar weakened as investorsspeculated that the U.S. Federal Reserve Board would cut borrowing costs tostrengthen the U.S. economy; at the same time, expectations grew that theEuropean Central Bank and the Bank of England would raise rates to tameinflation as their economies strengthened. The U.S. dollar rebounded in May 2007 from an all time low againstthe Euro and rose one percent against the British pound. The U.S. dollarreversed as signs of economic strength reduced the likelihood of a cut ininterest rates by the Federal Reserve. The U.S. dollar’s biggest monthlyadvance against the Euro in more than a year caused the Partnership to exitpositions. A majority of the sector’s losses were offset by the U.S. dollar’sstrengthening trend against the Japanese yen.

 

The stockindices sector was profitable for the period. Stronger-than-expected first quarter earnings, an increase inmergers and acquisitions, economic growth in Europe, and benign inflation inthe U.S. drove global equity prices higher. Equity markets reached new highsduring the period due to continued economic growth in Europe and indicationsfrom the U.S. Federal Reserve Board that growth in the world’s largest economywould accelerate. The entire sector was positive as about $1.1 trillion ofannounced Merger and Acquisition deals so far this year pushed the S&P 500past its peak in the year 2000. The NASDAQ ended the period at 2604.52, itshighest level since February 2001.

 

Theagricultural commodities sector posted losses for the period. The sector’sperformance at the beginning of the period was slightly positive as gains inN.Y. cotton and coffee were partially offset by losses in CBOT wheat.  Freezing temperatures at the beginning of theperiod caused damage to the wheat crop. Wheat, which had been trending lowerprior to the cold weather, suffered a reversal due to the resulting globalsupply concerns. The sector suffered its worst losses when coffee futures inN.Y. climbed to their highest level in weeks on concern that Brazil’s crop, theworld’s largest, will decline due to frost damage, tightening supplies.

 

The metalssector also posted losses for the period. Performance was positive for April asLME copper strengthened, trading as high as $8,100 per ton on April 17,2007, the highest it has been in more than seven months. Supply disruptions anddemand from China, the world’s largest user, drove prices higher during themonth. Gold also 

 

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added toperformance as the precious metal reached an 11 month high when demand for ahedge against the weakness in the U.S. dollar increased.  The sector’s performance was negative in May 2007,as a reversal in precious metals hurt performance as the Partnership exitedpositions. Gold fell to a two-month low in May 2007 and was down 2.5percent for the month, as a gain in the value of the U.S. dollar reduced demandfor the precious metal as an alternative investment. Silver (which has widerindustrial applications than gold) dropped 0.7 percent in May 2007.Despite the drop, gold has gained 4.5 percent for the year, while silver hasrisen 4.1 percent.

 

The energy sector was the least profitable for the month as weather andgeopolitical events once again were the driving force behind price movements.Natural gas, the sector’s worst performer, fluctuated throughout the period asweather drove demand. Crude oil also hurt performance as prices fell to $61.34a barrel on April 19, 2007 before reversing to $66.70 a barrel on April 27,2007. This reversal occurred when Saudi Arabian authorities announced thearrest of more than 170 suspected terrorists, who were reportedly plotting toattack the country’s oil facilities. U.S. oil futures traded between $60 and$67 during the period as ample domestic stockpiles tempered the impact ofsupply shutdowns in Alaska and Nigeria.

 

Effective June 1, 2007, the Partnership became multi-manager fundof funds with equal weighting to the FuturesAccess managed accounts of Aspect,Chesapeake, Transtrend, and Winton. The Partnership returned an estimated +2.1%for the month of June 2007.

 

During the month of June 2007 the most profitable trading acrossall managers came from the fixed income and currency sectors.  Bonds sold off on strong data and inflationconcerns and the managers’ trend following models were successful navigatingthe higher interest rate environment.  Incurrencies gains were achieved as higher yielding currencies (AUD, NZD, GBP,CAD) continued to appreciate at the expense of the “funding” currencies ofJapan and Switzerland.  Equity marketsended the month lower although only small losses in this sector were realizedas risk management systems reduced exposure to this sector.  Commodities were mixed on the month withgains generally coming from long positions in grains, agriculturals and shortpositions in natural gas.  Metals tradingproduced net negative returns.

 

TrendFollowing Futures Fund L.P. Performance Summary June — December 2007

 

The followingperformance summaries are summaries of the Portfolio Funds’ performance for theperiod.

 

The third quarter began with extreme market reversals. Practically allmarkets which were trending upward retraced as investors ran for the exit in anattempt to reduce risk. Credit worries and a softening housing market finallycaught up to the equity markets and led to a big rally in global bonds. TheJapanese yen, which has been persistently weak for years, suddenly ralliedagainst all of its higher yielding counterparts. As a result of the reversals,losses were posted to the Partnership. Long term market trends continued tounwind mid-quarter as the long positions in the foreign exchange carry trades,long international equities, long energy and long metals due to a spike in riskaversion on August 16, 2007 caused significant losses in each of thesetrades posting losses for the Partnership. The third quarter ended with a verystrong performance after a turbulent summer. Strong trends re-emerged incommodities in particular, as wheat gained 21%, and crude oil rose 11% due tosupply factors. In addition, precious metals rallied, with gold up by 10% andsilver up by 13% due to the U.S. dollar weakening which caused demand forprecious metals as a store of value. The U.S Federal Reserve’s 50 basis pointsmid-month rate cut also helped to invigorate investor risk appetite, helpingforeign exchange carry trades and boosting global equity markets.

 

The fourth quarter began with positive results for the Partnership.Trends were strongest in currencies and commodities. October 2007 saw acontinuation of U.S. dollar weakness due to housing and credit concerns, aswell as the U.S. Federal Reserve interest rate cuts. Commodity based currenciessuch as the Canadian dollar and the Australian dollar surged, while lowyielding currencies such as the Japanese yen weakened. In commodities, supplyworries pushed crude oil up 17% past $95.00 a barrel, while gold also surged asthe U.S. dollar weakness caused investors to flock to precious metals as astore of value. Stocks were also broadly positive, with the Hang Seng Indexleading the major markets, gaining over 15% on reports that the Hong Kongmarket would open to mainland Chinese investors. Most Partnership managers hada moderately negative month in November 2007, which saw a swing backtowards global risk aversion.

 

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Trends were particularly strong in commodities, with rallies in grains,oil and gold, as well as continued declines in base metals. Financial futureswere more difficult to trade due to choppy conditions at the end of the year.

 

2006

 
| ** **                       | ** ** | **Total Trading  Profit (Loss)** | ** **   |
|----------------------------------|------------|--------------------------------------------|--------------|
| Metals                           |       | $                                          | 41,738,896   |   |
| Interest Rates and Stock Indices |       | (6,837,362                                 | )            |
| Agricultural Commodities         |       | (11,014,707                                | )            |
| Energy                           |       | (23,966,341                                | )            |
| Currencies                       |       | (146,361,350                               | )            |
|                             |       | $                                          | (146,440,864 | ) |

 

The Partnership’s performance was an overall loss in 2006 with metalsand stock indices posting gains and agriculture, interest rates, energy andcurrencies posting losses.

 

The metals sector was the most profitable for the Partnership. At thebeginning of the year, gold surged to a 25 year high and silver climbed to itshighest level since March 1984. This trend continued through the secondquarter with silver climbing 51%. Factors contributing to the rise in silverinclude the escalating dispute with Iran combined with a falling U. S. dollarwhich helped to push the precious metal higher as investors look for asafe-haven given the global geopolitical uncertainty. Both base and preciousmetals began to retreat from highs set in the middle of the quarter. Gold fellto a three month low after reaching a 26-year high in May 2006. The sharpsell-off was caused by the combination of a stronger U.S. dollar, as investorsbought dollars as an alternative to gold, and speculation that the FederalReserve could hike interest rates as much as 50 basis points. Silver’s rallywas due to increased demand throughout the world and expectations of continuedeconomic expansion of developing nations. Base and precious metals suffered ascommodities as an asset class had their biggest quarterly decline in at least50 years. During the third quarter, gold and silver prices continued to fall aslower energy prices and a stronger U.S. dollar eroded the appeal of theprecious metals as an alternative to U.S. stocks and bonds. Although weaknessin precious metals hurt performance, the Partnership was able to profit fromfalling base metal prices. New York copper futures fell 10 percent in December 2006as inventories of the metal used in wires and pipes grew, a sign of weakeningdemand. London Metals Exchange copper for March 2006 delivery touched$6,250 a metric ton, the lowest since April 20, 2006. Nevertheless,copper’s gain for the year in London was 44 percent and 41 percent in New York.

 

Stock indices also posted profits for the Partnership. European stockindices had their best January 2006 rally in eight years as energy stocksalong with miners and steelmakers gained on expectations earnings would benefitfrom higher commodity prices. The middle of the first quarter was volatile forthe stock indices sector as the Asian stock indices posted their first monthlydecline since October 2005,however the decline reversed  at the end of the quarter as Asian stocksapproached a 16-year high partly due to surging demand for metals and oil.  The interest rate rise, along with Chinaasking the nation’s banks to restrict lending to prevent the economy fromoverheating, sent shares of mining companies and commodity producers lower onspeculation that increased borrowing costs could curb demand for raw materialsin China’s economy. Global equity markets began to fall mid year after the U.S.Federal Reserve met and an additional rate hike was still a possibility in June 2006.The losses continued through the end of the second quarter due to mountingspeculation that actions of the U.S. Federal Reserve would hurt economic growthand 16 central banks raised interest rates to contain inflation. However, as itbecame evident that the U.S. Federal Reserve was actually closer to ending itsrate hiking cycle world equity markets rallied. The third quarter began with asubstantial portion of world equity markets trend-less as investors continuedto speculate over the U.S. Federal Reserve’s next move. Global equities reversedthe recent losing trend and rallied partly due to decreased concerns aboutinflation. U.S. Federal Reserve policy makers signaled that the economy mayhave cooled enough to preclude further interest rate increases for theremainder of the year. European stocks rallied at the end of the quarter to afive-year high. The fourth quarter began with the All Ordinary index rising toa record. Also advancing were the U.S. benchmark indices, as earlier optimismthat United States households would sustain economic growth pushed the Dowindustrials to a record high during October 2006 and sent the S&P 500to its highest level since November 2000. Three United States benchmarkshad their biggest monthly gain since November 2005, with the Dow gaining3.4 percent, the S&P 500 climbing 3.2 percent, and the NASDAQ advancing 4.8percent. The year ended as Japanese stocks completed their longest yearlywinning streak since 1989.  The 

 

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Japanese yen reached an all-time low of 156.73 against the Euro helpingto advance Japanese equities (a weaker Japanese yen boosts the value ofeuro-denominated sales when converted back into local currency).

 

The agriculture sector posted losses for the Partnership. The yearbegan with record highs as a result of the surging cost of crude oil whichincreased the demand for ethanol, a sugar cane by-product. Brazil, the biggestproducer and exporter of sugar,has been converting  more of its sugar cane crop to ethanol inconnection with record gasoline prices. New York coffee rose to seven monthhighs as worldwide demand outpaced supply. New York coffee and New York sugarhindered returns in the middle of the first quarter while trading in ChicagoBoard of Traders (“CBOT”) wheat limited losses. The first quarter ended withsugar prices in London rising to their highest levels since 1989 on speculationthat a jump in the cost of oil will force Brazil to direct more of its outputtowards producing ethanol. Mid-year, cotton fell to its lowest close since December 2,2005. The gains in cotton were not enough, however, to offset the losses in therest of the sector as choppy price action dominated the sector’s performance.Sugar, whose demand has increased on its ability to be made into ethanol, fellas energy prices dropped mid-year. Weather conditions had severe affects onvarious crops in the U.S. and around the world. CBOT wheat fell to a five-weeklow in the middle of June, after warm dry weather in the central U.S. helpedfarmers speed up the harvest. At the beginning of the third quarter, New Yorkand London sugar under performed on speculation that global demand will slow.Corn and soybeans also hurt performance as price volatility caused byfluctuating weather conditions in the U.S. Midwest threatened crop yields. Alsocontributing to corn price volatility was a report issued by the U.S.Department of Agriculture that indicated approximately 59% of the corn crop wasin good condition, which was the lowest percentage of the year. Losses in wheatthird quarter were offset by gains in sugar. World sugar production in 2006 washigher than previously forecasted easing a third straight annual shortfall asfavorable weather in India helped the harvest. The third quarter ended withsugar prices plunging on speculation that demand would fall as lower energycosts discouraged the use of sugar as an alternative fuel source eroding thevalue of ethanol. At the beginning of the fourth quarter, corn, the biggestU.S. crop, reached a two year high. Wheat prices fell 13 percent since reaching$5.57, a ten year high, on October 17, 2006. Wheat prices fell onspeculation that U.S. farmers may increase the acreage planted with the grainthis year.  The sector’s worst performerwas London sugar. Sugar fell as supplies are set to grow 3.9 percent fasterthan expected demand in 2007 which may leave unsold stockpiles at approximately49 percent of global consumption by the end of September 2007, the highestpercentage in ten years. Toward the end of 2006, corn and soybean futures inChicago rose on signs that export demand for the two biggest U.S. cropsremained strong even after price rallies. Farmers in Brazil, growers of Robustaand  Arabica beans traded in New York,held back supplies because drought conditions may reduce the 2007 crop. 2006ended with soybean prices falling on prospects that rains may have improvedSouth American crops.  Despite the fall,soybeans rose to a 17-month high on December 29, 2006 in Chicago onspeculation that rising corn prices will cut plantings of the oilseed.  Corn is more appealing than soybeans for U.S.farmers because of record demand for ethanol, a fuel being added to gasoline tomeet federal mandates for renewable energy.

 

The interest rate sector posted losses for the Partnership. The yearbegan with fixed income markets in the U.S., Europe and Japan selling off overfears of their respective central banks raising interest rates. The sectorbenefited from Japanese Government bonds, which was a price decline. Eurodollarposted gains which were offset by losses in U.S. 30 year bonds, German bundsand bobl. During the first quarter, the U.S. Federal Reserve and the EuropeanCentral Bank raised their respective interest rates 25 basis points. A catalystfor the sell-off was growing speculation in the markets that both central bankswould be forced to continue to raise rates after confidence reports released inboth Europe (IFO) and the U.S. (consumer confidence) on March 28, 2006were stronger than expected.  Mid-yearEuropean, Japanese and U.S. fixed income markets sold off which significantlyadded to the Partnership’s performance. The Japanese ten year bond (“JGB’s”)added to the sector’s performance as it fell for a fifth month, the longestsince 1990, on concerns that the Bank of Japan will raise interest rates thisyear. Yields on U.S. ten year Treasuries rose for a fifth straight monthmid-year, the longest stretch since 1999. During the third quarter, the U.S. benchmark ten year along with the U.S.ten year Treasury bond were the worst performers in the sector as the slowingU.S. economy spurred speculation that the U.S. Federal Reserve will stopraising interest rates. The Bank of Japan raised the rate between lenders 25basis points on July 14, 2006 ending a five-year policy of keepingborrowing costs near zero percent. Japanese government bonds, German bunds, and the U.S. benchmark ten yearTreasury bond rallied. Investors drove yields lower as a smaller than expectedincrease in consumer prices, as well as a sharp drop in industrial production,caused speculation that the Bank of Japan would keep interest rates at theircurrent level for the remainder of the year. U.S. bonds were supported by theU.S. Federal Reserve’s decision to benchmark

 

U.S. interest rate at 5.25 percent, ending a record two-year run of 17straight rate increases. The U.S. ten year yield touched a seven month low of4.53 percent on September 25, 2006, down from 5.14 percent on June 30,2006 as expectations that the U.S. Federal Reserve would raise interest ratesfurther gave way to the view that it may 

 

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lower them in the near future. During the beginning of the fourth quarter, U.S., European, and Japanesedebt markets suffered reversals over speculation surrounding potential globalinterest rate moves. Japanese ten year bonds and German ten year governmentbonds (“Bunds”) were the worst performing components in the sector onexpectations that the European Central Bank (“ECB”) and Bank of Japan (“BOJ”)would have to keep raising interest rates to help contain inflation.  Later in the fourth quarter, U.S. Treasuriesrose, pushing the benchmark ten-year note yields to 4.46 percent, the lowestsince January. U.S. Treasuries gained after the NAPM-Chicago business barometerdeclined to 49.9 from 53.5 in October 2006, (a reading below 50 signals acontraction). The U.S. Federal Reserve’s last series of interest rate cuts in2001 began five months after the business barometer dropped below 50. The yearended as German and U.S. government bonds fell, experiencing reversing trendswhile JGB’s oscillated due to market speculation on whether the BOJ would raiseinterest rates. On December 8, 2006, JGB’s posted their biggest weeklydecline in four months as investors increased their positions based on thebelief that the BOJ would raise rates at its December 2006 meeting. Germangovernment bonds fell on speculation the ECB will keep lifting rates into nextyear. Benchmark U.S. two-year notes had their longest losing run in more than15 years in December 2006, driving yields to their highest in more thanfour years. U.S. Treasuries also fell, enduring their first December 2006loss in five years.

 

The energy sector posted losses for the Partnership. At the beginningof the year volatility within the energy sector increased as oil and naturalgas were being used as “geopolitical weapons” by Iran, Russia, Venezuela andmilitants in Bolivia. Natural gas fell 17 percent around the beginning of theyear as mild weather in several of  thelargest U.S. consuming regions cut demand which limited the need for utilitiesto pull from reserves . The market continued to be apprehensive in connectionwith geopolitical conflicts in the middle East and Nigeria. Mid-year concernsthat the U.N. Security Council will impose sanctions that could lead Iran, thefourth-largest oil producer, to cut shipments drove crude oil for June 2006delivery to a new high of $75.35 a barrel. Increased geopolitical uncertaintydrove all petroleum based products higher. While the sector benefited fromincreased instability in the world, mild weather in the U.S. hinderedperformance as natural gas has fallen 20 percent and approached a nine monthlow as demand slowed. Crude oil spiked on July 14, 2006 to a record high onconcern that the fighting in Lebanon might spread to other parts of the MiddleEast, which is the source of approximately a third of the world’s oil. Crudeoil plunged 25 percent in October 2006, since reaching a record high on July 14,2006. Energy prices continued their downward trend as warm weather in thenorthern U.S. reduced fuel demand. Also contributing to the downward pricemovement were signs that OPEC would not cut production as much as previouslypledged.  Crude oil fell to a 17-monthlow. The year ended with the population centers of the Midwest and Northeast,where demand for gas is highest, experiencing weather as much as 25 percentwarmer than normal.  Forecasters said anEl Nino weather pattern, which typically brings above-average winter temperature,is affecting much of the U.S. crude oil for February 2007 delivery touched$59.99, the lowest since November 27, 2006, while heating oil for January 2007delivery touched $1.5995, the lowest since October 31, 2006.

 

The currencies sector posted the greatest losses for the Partnership.At the beginning of the year foreign exchange sector suffered losses as theU.S. dollar posted its biggest monthly decline against the euro since November 2004.This was significantly due to the market’s anticipation of the U.S. FederalReserve’s removal of “measured pace” from its statement after its meeting on January 31,2006. The euro also benefited as the market waited for whether the EuropeanCentral Bank’s meeting on February 2, 2006 would raise borrowing costs asEurope’s economy strengthened.  Duringthe second quarter, stronger than expected core Consumer Price (“CPI”) coupledwith statements from U.S. Federal Reserve Chairman Bernanke calling recentincreases in inflation measures an “unwelcome development”, led investors tospeculate that the U.S. Federal Reserve might raise rates 50 basis pointsrather than the previously expected 25. The increased rate speculation helpedthe U.S. dollar reach an eight-week high of 1,2479 against the euro. On June 29,2006, the U.S. Federal Reserve raised rates 25 basis points and suggested itmay be nearing the end of its 2-year cycle of rate increases as the statementannouncing their decision indicated that slowing economic growth “should helpto limit inflation pressures”. As a result, the U.S. dollar reversed once againand weakened during the last two days of the month.  During the third quarter, fighting broke outbetween Israel and Hezbollah causing a sharp reversal in the weakening U.S.dollar trend. The U.S. dollar rallied as fighting in the Middle East escalatedsending the currency higher against the Japanese yen and euro. Unfortunately,most of the gains disappeared as investors focused on interest rates after U.S.Federal Reserve Chairman Bernanke stated that “moderation” in the economy wasunder way. On October 13, 2006 the dollar rose to its highest levelagainst the Japanese yen this year and the strongest level versus the eurosince July 2006, after a government report showed U.S. retail salesexcluding gasoline increased in September 2006. On October 31, 2006,however, the U.S. dollar had given up most of its gains from earlier in themonth and dropped to its lowest level in five weeks against the euro andJapanese yen after a survey of purchasing managers showed business declined anda report revealed U.S consumer confidence unexpectedly fell for the month.  The data provided evidence of a slowdown inthe world’s largest economy, increasing speculation that the U.S. FederalReserve may cut borrowing costs early in 2007 reducing the appeal ofdollar-denominated assets. Near the end of the year the U.S. dollar tumbled toa 20-month low 

 

20

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against the euro and approached a three-month low versus the Japaneseyen. The year ended as higher European interest rates helped the euro reach arecord high against the Japanese yen on December 29, 2006 and caused theJapanese yen to fall to its lowest level since 1998 versus the British pound.

 

**VariablesAffecting Performance**

 

The principal variables that determine the net performance of thePartnership and the Portfolio Funds are gross profitability from thePartnership’s and the Portfolio Funds’ trading activities and 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 revenues becauseinterest 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.

 

The Partnership’s Brokerage Commissions and Administrative Fees are aconstant percentage of the Partnership costs (other than the insignificantcurrency trading costs which are not based on a percentage of the Partnership’sassets allocated to trading or total) and the Profit Shares payable to theAdvisor based on the new Trading Profits generated by the Partnership excludinginterest and after reduction for a portion of the Brokerage Commissions.

 

Unlike many investment funds, there is no meaningful distinction in theoperation of the Partnership between realized and unrealized profits.  Most of the contracts traded by thePartnership and the Portfolio Funds are highly liquid and can be closed out atany time.

 

Except inunusual circumstances, factors—regulatory approvals, cost of goods sold, employeerelations and the like—which often materially affect an operating business haveno material impact on the Partnership.

 

**Liquidity;Capital Resources**

 

The Partnership and the Portfolio Fundsborrow 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 and the Portfolio Funds’ U.S.dollar deposits.  These borrowings are ata prevailing short-term rate in the relevant currency.

 

Inflation byitself does not affect profitability, but it can cause price movements that doso.

 

The Partnership’s and the Portfolio Funds’assets and open positions are generally highly liquid.

 

The Partnership and the Portfolio Fundschanges its positions and market focus frequently.  Consequently, the fact that the Partnershipand the Portfolio Funds realized gains or incurred losses in certain markets(gold, stock indices, currencies, etc.) in the past is not necessarilyindicative of whether the Partnership and the Portfolio Funds will do so in thefuture.

 

(The Partnership has no off-balance sheet arrangements or tabulardisclosure of contractual obligations of the type described in Items 3.03(a)(4) and3.03(a)(5) of Regulation S-K.)

 

21

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**Item 7A: Quantitativeand Qualitative Disclosures about Market Risk**

 

Introduction

 

The Portfolio Funds are a speculativecommodity pools.  The market sensitiveinstruments held  by   the Portfolio Funds’ are acquired forspeculative trading purposes and all or substantially all of the PortfolioFunds’ assets are subject to the risk of trading loss.  Unlike an operating company, the risk ofmarket sensitive instruments is integral, not incidental, to the Portfolio Funds’main line of business.

 

Market movements result in frequent changes in the fair market value ofthe Portfolio Funds’ open positions and, consequently, in its earnings and cashflow.  The Portfolio Funds’ market riskis influenced by a wide variety of factors, including the level and volatilityof interest rates, exchange rates, equity price levels, the market value offinancial instruments and contracts, the diversification effects among thePortfolio Funds’ open positions and the liquidity of the markets in which ittrades.

 

The Portfolio Funds’ under the direction oftheir respective advisors,rapidly acquire and liquidate both long and shortpositions in a wide range of different markets. Consequently, it is not possible to predict how a possible future marketscenario will affect performance, and the Partnership’s and the PortfolioFunds’ past performance is not necessarily indicative of its future results.

 

Value at Risk is a measure of the maximumamount which the Partnership and the Portfolio Funds could reasonably beexpected to lose in a given market sector. However, the inherent uncertainty of the Partnership’s  and the Portfolio Funds’ speculative tradingand the recurrence in the markets traded by the Partnership and the PortfolioFunds of market movements far exceeding expectations could result in actualtrading or non-trading losses far beyond the indicated Value at Risk or thePartnership’s and the Portfolio Funds’ experience to date (i.e., “risk ofruin”).  In light of the foregoing as wellas the risks and uncertainties intrinsic to all future projections, theinclusion of the quantification in this section should not be considered toconstitute any assurance or representation that the Partnership’s and thePortfolio Funds’ losses in any market sector will be limited to Value at Riskor by the Partnership’s and the Portfolio Funds’ attempts to manage its marketrisk.

 

Quantifying the Partnership’s Trading Value at Risk

 

Quantitative Forward-Looking Statements

 

The following quantitative disclosuresregarding the Partnership’s market risk exposures contain “forward-lookingstatements” within the meaning of the safe harbor form civil liability providedfor such statements by the Private Securities Litigation Reform Act of 1995(set forth in Section 27A of the Securities Act of 1933 and Section 21Eof the Securities Exchange Act of 1934). All quantitative disclosures in this section are deemed to beforward-looking statements for purposes of the safe harbor, except forstatements of historical fact.

 

The Partnership’s risk exposure in thevarious market sectors traded by the Portfolio Funds are quantified below interms of Value at Risk.  Due to thePortfolio Funds’ mark-to-market accounting, any loss in the fair value of thePortfolio Funds’ open positions is directly reflected in the Portfolio Funds’earnings (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 maintenance margin requirements havebeen used by the Portfolio Funds as the measure of their Value at Risk.  Maintenance margin requirements are set byexchanges to equal or exceed the maximum loss in the fair value of any givencontract incurred in 95% to 99% of the one-day time periods included in thehistorical sample (approximately one year, generally) researched for purposesof establishing margin levels.  Themaintenance margin levels are established by dealers and exchanges usinghistorical price studies as well as an assessment of current market volatility(including the implied volatility of the options on a given futures contract)and economic fundamentals to provide a probabilistic estimate of the maximumexpected near-term one-day price fluctuation.

 

In the case of market sensitive instrumentswhich are not exchange-traded (almost exclusively currencies in the case of thePortfolio Funds), the margin requirements for the equivalent futures positionshave been used as Value at Risk.  Inthose rare cases in which a futures-equivalent margin is not available,dealers’ margins have been used.

 

100% positive correlation in the differentpositions held in each market risk category has been assumed.  Consequently, the margin requirementsapplicable to the open contracts have been aggregated to determine each tradingcategory’s aggregate Value at Risk.  Thediversification effects (which would reduce the Value at Risk estimates)resulting from the fact that the Portfolio Funds’ positions are rarely, if ever,100% positively correlated have not been reflected.

 

22

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

 

The following table indicates the average,highest, and lowest trading Value at Risk associated with   the Partnership’s open positions by marketcategory for the fiscal year 2008, with the period June 1, 2007 through December 31,2007and five months ended May 31, 2007. The Partnership’s averagecapitalization was approximately $617,644,302. During the fiscal year 2008, thePartnership’s average capitalization was approximately $362,197,519.

 

**Aspect Class DT (3)**** **

 

**December 31,2008**

 
| ** **               | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
|--------------------------|------------|-----------------------------|------------|----------------------------|------------|------------------------|------------|-----------------------|------------|
| **Market Sector**   | ** ** | **Value at Risk** | ** ** | **Capitalization**         | ** ** | **At Risk**       | ** ** | **At Risk**      | ** ** |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| Agricultural Commodities |       | $                           | 185,196    |                       | 0.20       | %                      | $          | 889,832               |       | $ | 40,581 |   |
| Energy                   |       | 291,253                     |       | 0.32                       | %          | 1,228,672              |       | 43,388                |       |
| Interest Rates           |       | 5,380,977                   |       | 5.93                       | %          | 11,532,098             |       | 2,249,539             |       |
| Metals                   |       | 125,019                     |       | 0.14                       | %          | 564,269                |       | 38,558                |       |
| Stock Indices            |       | 356,658                     |       | 0.39                       | %          | 1,448,188              |       | 15,889                |       |
| Currencies               |       | 646,950                     |       | 0.71                       | %          | 2,490,817              |       | 27,035                |       |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| TOTAL                    |       | $                           | 6,986,053  |                       | 7.69       | %                      | $          | 18,153,876            |       | $ | 2,414,990 |   |

 

----

(3) Average Capitalizationof Aspect Class DT is $90,732,270.

 

**AspectClass DT (3)**** **

 

**December 31, 2007**

 
| ** **               | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
|--------------------------|------------|-----------------------------|------------|----------------------------|------------|------------------------|------------|-----------------------|------------|
| **Market Sector**   | ** ** | **Value at Risk** | ** ** | **Capitalization**         | ** ** | **At Risk**       | ** ** | **At Risk**      | ** ** |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| Agricultural Commodities |       | $                           | 228,135    |                       | 0.31       | %                      | $          | 942,487               |       | $ | 15,036 |   |
| Energy                   |       | 419,548                     |       | 0.58                       | %          | 1,968,051              |       | 4,557                 |       |
| Interest Rates           |       | 6,448,517                   |       | 8.85                       | %          | 12,118,929             |       | 3,834,811             |       |
| Metals                   |       | 187,289                     |       | 0.26                       | %          | 927,015                |       | 6,689                 |       |
| Stock Indices            |       | 350,534                     |       | 0.48                       | %          | 683,060                |       | 32,951                |       |
| Currencies               |       | 660,464                     |       | 0.91                       | %          | 2,457,903              |       | 24,105                |       |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| TOTAL                    |       | $                           | 8,294,487  |                       | 11.39      | %                      | $          | 19,097,445            |       | $ | 3,918,149 |   |

 

----

(3) Average Capitalization of Aspect Class DT is $72,858,525.

 

**Chesapeake Class DT (4)**** **

 

**December 31,2008**

 
| ** **               | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
|--------------------------|------------|-----------------------------|------------|----------------------------|------------|------------------------|------------|-----------------------|------------|
| **Market Sector**   | ** ** | **Value at Risk** | ** ** | **Capitalization**         | ** ** | **At Risk**       | ** ** | **At Risk**      | ** ** |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| Agricultural Commodities |       | $                           | 529,522    |                       | 0.59       | %                      | $          | 1,383,301             |       | $ | 46,666 |   |
| Energy                   |       | 407,296                     |       | 0.45                       | %          | 1,037,186              |       | —                |       |
| Interest Rates           |       | 4,733,982                   |       | 5.26                       | %          | 6,598,772              |       | 2,370,577             |       |
| Metals                   |       | 221,449                     |       | 0.25                       | %          | 578,699                |       | 20,974                |       |
| Stock Indices            |       | —                      |       | 0.00                       | %          | —                 |       | —                |       |
| Stock Futures            |       | 96,842                      |       | 0.11                       | %          | 242,893                |       | —                |       |
| Currencies               |       | 702,668                     |       | 0.78                       | %          | 1,987,043              |       | 10,057                |       |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| TOTAL                    |       | $                           | 6,691,759  |                       | 7.44       | %                      | $          | 11,827,894            |       | $ | 2,448,274 |   |

 

----

(4) Average capitalizationof Chesapeake Class DT is $89,997,090.

 

**ChesapeakeClass DT (4)**** **

 

**December 31, 2007**

 
| ** **               | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
|--------------------------|------------|-----------------------------|------------|----------------------------|------------|------------------------|------------|-----------------------|------------|
| **Market Sector**   | ** ** | **Value at Risk** | ** ** | **Capitalization**         | ** ** | **At Risk**       | ** ** | **At Risk**      | ** ** |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| Agricultural Commodities |       | $                           | 430,468    |                       | 0.61       | %                      | $          | 695,518               |       | $ | 27,294 |   |
| Energy                   |       | 292,057                     |       | 0.42                       | %          | 617,653                |       | 2,390                 |       |
| Interest Rates           |       | 9,754,785                   |       | 13.93                      | %          | 18,855,135             |       | 1,705,678             |       |
| Metals                   |       | 154,313                     |       | 0.22                       | %          | 410,521                |       | 43,095                |       |
| Stock Indices            |       | 367,354                     |       | 0.52                       | %          | 969,993                |       | —                |       |
| Stock Futures            |       | 293,848                     |       | 0.42                       | %          | 529,148                |       | 51,051                |       |
| Currencies               |       | 811,503                     |       | 1.16                       | %          | 1,431,721              |       | 58,523                |       |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| TOTAL                    |       | $                           | 12,104,328 |                       | 17.28      | %                      | $          | 23,509,689            |       | $ | 1,888,031 |   |

 

----

(4) Average capitalization of Chesapeake Class DT is$70,017,725.

 

23

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**Transtrend Class DT (2)**** **

 

**December 31,2008**

 
| ** **               | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
|--------------------------|------------|-----------------------------|------------|----------------------------|------------|------------------------|------------|-----------------------|------------|
| **Market Sector**   | ** ** | **Value at Risk** | ** ** | **Capitalization**         | ** ** | **At Risk**       | ** ** | **At Risk**      | ** ** |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| Agricultural Commodities |       | $                           | 182,461    |                       | 0.20       | %                      | $          | 582,659               |       | $ | 9,194 |   |
| Energy                   |       | 285,767                     |       | 0.31                       | %          | 860,102                |       | 6,002                 |       |
| Interest Rates           |       | 3,320,343                   |       | 3.66                       | %          | 4,725,600              |       | 1,070,708             |       |
| Metals                   |       | 135,642                     |       | 0.15                       | %          | 367,108                |       | 5,320                 |       |
| Stock Indices            |       | 269,176                     |       | 0.30                       | %          | 559,898                |       | 74,117                |       |
| Currencies               |       | 663,147                     |       | 0.73                       | %          | 1,885,356              |       | 22,246                |       |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| TOTAL                    |       | $                           | 4,856,536  |                       | 5.35       | %                      | $          | 8,980,723             |       | $ | 1,187,587 |   |

 

----

(2) Average capitalizationof Transtrend Class DT is $90,739,888. 

 

**TranstrendClass DT (2) **

 

**December 31, 2007**

 
| ** **               | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
|--------------------------|------------|-----------------------------|------------|----------------------------|------------|------------------------|------------|-----------------------|------------|
| **Market Sector**   | ** ** | **Value at Risk** | ** ** | **Capitalization**         | ** ** | **At Risk**       | ** ** | **At Risk**      | ** ** |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| Agricultural Commodities |       | $                           | 692,994    |                       | 0.98       | %                      | $          | 1,968,726             |       | $ | 2,084 |   |
| Energy                   |       | 1,177,540                   |       | 1.66                       | %          | 4,825,604              |       | 5,223                 |       |
| Interest Rates           |       | 5,176,012                   |       | 7.32                       | %          | 12,735,683             |       | 1,585,621             |       |
| Metals                   |       | 551,895                     |       | 0.78                       | %          | 1,347,754              |       | 5,395                 |       |
| Stock Indices            |       | 1,492,304                   |       | 2.11                       | %          | 3,404,913              |       | 76,559                |       |
| Currencies               |       | 1,891,323                   |       | 2.67                       | %          | 6,594,136              |       | 83,757                |       |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| TOTAL                    |       | $                           | 10,982,068 |                       | 15.52      | %                      | $          | 30,876,816            |       | $ | 1,758,639 |   |

 

----

(2) Average capitalization of Transtrend Class DT is$70,734,292 

 

**Winton Class DT (5) **

 

**December 31,2008**

 
| ** **               | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
|--------------------------|------------|-----------------------------|------------|----------------------------|------------|------------------------|------------|-----------------------|------------|
| **Market Sector**   | ** ** | **Value at Risk** | ** ** | **Capitalization**         | ** ** | **At Risk**       | ** ** | **At Risk**      | ** ** |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| Agricultural Commodities |       | $                           | 170,852    |                       | 0.19       | %                      | $          | 413,358               |       | $ | 14,904 |   |
| Energy                   |       | 179,406                     |       | 0.20                       | %          | 473,722                |       | 20,147                |       |
| Interest Rates           |       | 2,951,536                   |       | 3.25                       | %          | 4,369,215              |       | 1,938,209             |       |
| Metals                   |       | 113,219                     |       | 0.12                       | %          | 272,303                |       | 1,798                 |       |
| Stock Indices            |       | 283,997                     |       | 0.31                       | %          | 1,162,635              |       | 10,490                |       |
| Currencies               |       | 503,530                     |       | 0.55                       | %          | 1,134,007              |       | 38,278                |       |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| TOTAL                    |       | $                           | 4,202,540  |                       | 4.62       | %                      | $          | 7,825,240             |       | $ | 2,023,826 |   |

 

----

(5) Average capitalizationof Winton Class DT is $90,903,740.

 

**WintonClass DT (5) **

 

**December 31, 2007**

 
| ** **               | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
|--------------------------|------------|-----------------------------|------------|----------------------------|------------|------------------------|------------|-----------------------|------------|
| **Market Sector**   | ** ** | **Value at Risk** | ** ** | **Capitalization**         | ** ** | **At Risk**       | ** ** | **At Risk**      | ** ** |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| Agricultural Commodities |       | $                           | 113,820    |                       | 0.15       | %                      | $          | 276,888               |       | $ | 5,171 |   |
| Energy                   |       | 75,132                      |       | 0.10                       | %          | 205,716                |       | 8,725                 |       |
| Interest Rates           |       | 5,235,693                   |       | 7.05                       | %          | 8,986,186              |       | 3,028,832             |       |
| Metals                   |       | 89,019                      |       | 0.12                       | %          | 177,232                |       | 34,624                |       |
| Stock Indices            |       | 370,567                     |       | 0.50                       | %          | 653,724                |       | 86,576                |       |
| Currencies               |       | 524,533                     |       | 0.71                       | %          | 1,070,750              |       | 44,655                |       |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| TOTAL                    |       | $                           | 6,408,764  |                       | 8.63       | %                      | $          | 11,370,496            |       | $ | 3,208,583 |   |

 

----

(5) Average capitalization of Winton Class DT is $74,275,739.

 

Material Limitations on Value at Risk as an Assessment of Market Risk

 

24

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**May 31, 2007**

 
| ** **             | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
|------------------------|------------|-----------------------------|------------|----------------------------|------------|------------------------|------------|-----------------------|------------|
| **Market Sector** | ** ** | **Value at Risk** | ** ** | **Capitalization**         | ** ** | **At Risk**       | ** ** | **At Risk**      | ** ** |
|                   |       |                        |       |                       |       |                   |       |                  |       |
| Agriculture            |       | $                           | 846,301    |                       | 0.14       | %                      | $          | 2,805,345             |       | $ |  — |   |
| Currencies             |       | 9,769,334                   |       | 1.64                       | %          | 17,688,603             |       | 14,804                |       |
| Energy                 |       | 1,595,481                   |       | 0.27                       | %          | 2,699,064              |       | —                |       |
| Interest Rates         |       | 27,474,079                  |       | 4.61                       | %          | 73,672,809             |       | —                |       |
| Metals                 |       | 2,203,184                   |       | 0.37                       | %          | 6,999,047              |       | —                |       |
| Stock Indices          |       | 2,444,700                   |       | 0.41                       | %          | 5,459,142              |       | —                |       |
|                   |       |                        |       |                       |       |                   |       |                  |       |
| TOTAL                  |       | $                           | 44,333,079 |                       | 7.44       | %                      | $          | 109,324,010           |       | $ | 14,804 |   |

 

The face value of the market sectorinstruments held by the Partnership and the Portfolio Funds are typically manytimes the applicable maintenance margin requirement (maintenance marginrequirements generally ranging between approximately 1% and 10% of contractface value) as well as many times the capitalization of the Partnership and thePortfolio Funds.  The magnitude of thePartnership’s and the Portfolio Funds’ open positions creates a “risk of ruin”not typically found in most other investment vehicles.  Because of the size of their positions,certain market conditions — unusual, but historically recurring from time totime — could cause the Partnership and the Portfolio Funds to incur severelosses over a short period of time.  Evencomparatively minor losses could cause MLAI to further deleverage or terminatethe Partnership’s and the Portfolio Funds’ trading.  The foregoing Value at Risk table — as wellas the past performance of the Partnership and the Portfolio Funds — give noindication of this “risk of ruin.”

 

Non-Trading Risk

 

Foreign Currency Balances; Cash on Deposit with MLPF&S

 

The Portfolio Funds have non-trading marketrisk on its foreign cash balances not needed for margin. These balances (aswell as the market risk they represent) are generally immaterial.

 

The Portfolio Funds also have non-tradingmarket risk on the approximately 90-95% of its assets which are held in cash atMLPF&S.  The value of this cash isnot interest rate sensitive, but there is cash flow risk in that if interestrates decline so will the cash flow generated on these monies.  This cash flow risk is immaterial.

 

**Qualitative Disclosures Regarding PrimaryTrading Risk Exposures**

 

The following qualitative disclosuresregarding the Partnership’s market risk exposures through the Portfolio Fundsafter the change in structure— except for (i) those disclosures that arestatements of historical fact and (ii) the descriptions of how thePartnership 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’s primary market riskexposures as well as the strategies used and to be used by MLAI and the tradingadvisors of the Portfolio Funds for managing such exposures are subject tonumerous uncertainties, contingencies and risks, any one of which could causethe actual results of the risk controls for the Partnership and for the tradingconducted through  Portfolio Funds todiffer materially from the objectives of such strategies.  Government interventions, defaults andexpropriations, illiquid markets, the emergence of dominant fundamentalfactors, political upheavals, changes in historical price relationships, 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 be no assurance that thePartnership’s risk management strategies will not change materially or that anysuch strategies will be effective in either the short- or long-term.  Investors must be prepared to lose all orsubstantially all of the value of their investment in the Partnership.

 

**Qualitative Disclosures Regarding Means ofManaging Risk Exposure**

 

Trading Risk

 

MLAI has procedures in place intended to control market risk, althoughthere can be no assurance that they will, in fact, succeed in doing so.  While MLAI does not intervene in the marketsto hedge or diversify the Partnership’s market exposure; MLAI may urge thePortfolio Funds to reallocate positions in an attempt to avoidover-concentrations.  However, suchinterventions are unusual.  Except incases in which it appears that the Portfolio Funds has begun to deviate frompast practice and trading policies or to be trading erratically, MLAI basicrisk control procedures consist simply of the ongoing process of monitoring thePortfolio Funds with the market risk controls being

 

25

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applied by the Portfolio Funds.

 

**Risk Management**

 

Portfolio Funds attempt to control risk in all aspects of theinvestment process — from confirmation of a trend to determining the optimalexposure in a given market, and to money management issues such as the startupor upgrade of investor accounts. Portfolio Funds double check the accuracy of market data, and will nottrade a market without multiple price sources for analytical input.  In constructing a portfolio, Portfolio Fundsseek to control overall risk as well as the risk of any one position, andPortfolio Funds trade only markets that have been identified as having positiveperformance characteristics.  Tradingdiscipline requires plans for the exit of a market as well as for entry.  Portfolio Funds factor the point of exit intothe decision to enter (stop loss).  Thesize of Portfolio Fund’s positions in a particular market is not a matter ofhow large a return can be generated but of how much risk it is willing to takerelative to that expected return.

 

To attempt to reduce the risk of volatility while maintaining thepotential for excellent performance, proprietary research is conducted on anongoing basis to refine the Portfolio Funds investment strategies.  Research may suggest substitution ofalternative investment methodologies with respect to particular contracts; thismay occur, for example, when the testing of a new methodology has indicatedthat its use might have resulted in different historical performance.  In addition, risk management research andanalysis may suggest modifications regarding the relative weighting amongvarious contracts, the addition or deletion of particular contracts for aprogram, or a change in position size in relation to account equity.  The weighting of capital committed to variousmarkets in the investment programs is dynamic, and Portfolio Funds may vary theweighting at its discretion as market conditions, liquidity, position limitconsiderations and other factors warrant.

 

Portfolio Funds may determine that risks arise when markets areilliquid or erratic, which may occur cyclically during holiday seasons, or onthe basis of irregularly occurring market events.  In such cases, Portfolio Funds at its solediscretion may override computer-generated signals and may at times usediscretion in the application of its quantitative models, which may affectperformance positively or negatively.

 

Adjustments in position size in relation to account equity have beenand continue to be an integral part of Portfolio Fund’s investmentstrategy.  At its discretion, PortfolioFunds may adjust the size of a position in relation to equity in certainmarkets or entire programs.  Suchadjustments may be made at certain times for some programs but not forothers.  Factors which may affect thedecision to adjust the size of a position in relation to account equity includeongoing research, program volatility, assessments of current market volatilityand risk exposure, subjective judgment, and evaluation of these and othergeneral market conditions.

 

Non-TradingRisk

 

The Partnership and the Portfolio Funds control the non-tradingexchange rate risk by regularly converting foreign currency balances back intoU.S. dollars at least once per week and more frequently if a particular foreigncurrency balance becomes unusually high.

 

The Partnership and the Portfolio Funds have cash flow interest raterisk on its cash on deposit with MLPF&S in that declining interest rates wouldcause the income from such cash to decline. However, a certain amount of cash or cash equivalents must be held bythe Partnership in order to facilitate margin payments and pay expenses andredemptions.  MLAI does not take anysteps to limit the cash flow risk on the cash held on deposit at MLPF&S.

 

26

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**Item 8:   Financial Statements and SupplementaryData**

 

Net Income by Quarter

Eight Quarters through December 31, 2008

 
| ** **                                       | ** ** | **Fourth**  | ** ** | **Third**   | ** ** | **Second**  | ** ** | **First**   | ** ** | **Fourth**  | ** ** | **Third**   | ** ** | **Second**  | ** ** | **First**   | ** ** |
|--------------------------------------------------|------------|-------------|------------|-------------|------------|-------------|------------|-------------|------------|-------------|------------|-------------|------------|-------------|------------|-------------|------------|
| ** **                                       | ** ** | **Quarter** | ** ** | **Quarter** | ** ** | **Quarter** | ** ** | **Quarter** | ** ** | **Quarter** | ** ** | **Quarter** | ** ** | **Quarter** | ** ** | **Quarter** | ** ** |
| ** **                                       | ** ** | **2008**    | ** ** | **2008**    | ** ** | **2008**    | ** ** | **2008**    | ** ** | **2007**    | ** ** | **2007**    | ** ** | **2007**    | ** ** | **2007**    | ** ** |
| Total Income  (Loss)                             |       | $           | 50,692,975 |        | $          | (32,940,061 | )          | $           | 29,201,641 |        | $          | 39,710,442  |       | $           | 30,759,559 |        | $          | (17,264,505 | ) | $ | 29,143,149 |   | $ | (77,996,427 | ) |
| Total Expenses                                   |       | 3,648,937   |       | 3,505,091   |       | 3,816,647   |       | 4,258,994   |       | (4,288,906  | )          | 4,246,211   |       | 7,086,767   |       | 10,694,326  |       |
| Net Income (Loss)                                |       | $           | 47,044,038 |        | $          | (36,445,152 | )          | $           | 25,384,994 |        | $          | 35,451,448  |       | $           | 26,470,653 |        | $          | (21,510,716 | ) | $ | 22,056,382 |   | $ | (88,690,753 | ) |
|                                             |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |
| Net Income (Loss)  per weighted average Unit (a) |       | $           | 25.0566    |        | $          | (18.4172    | )          | $           | 12.2921    |        | $          | 16.1293     |       | $           | 10.56      |        | $          | (7.63 | ) | $ | 6.73 |   | $ | (20.71 | ) |

 

----

(a) The Net Income (Loss) per weightedaverage Unit is based on the weighted average of the total Units for eachquarter.

 

The financial statements required by this Item are included in Exhibit 13.01.

 

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

 

**Item 9:   Changes in and Disagreements withAccountants on Accounting and Financial Disclosure**

 

There were no changes in or disagreementswith the independent registered public accounting firm on accounting andfinancial disclosure.

 

**Item 9A(T):****Controls and Procedures**

 

MLAI’sChief Executive Officer and the Chief Financial Officer, on behalf of thePartnership, has evaluated the effectiveness of the design and operation of itsdisclosure controls and procedures with respect to the Partnership’s as of andfor the year which ended December 31, 2008, and, based on its evaluation,has concluded that these disclosure controls and procedures are effective.Additionally, there were no significant changes in the Partnership’s internalcontrols over financial reporting which materially affect such internalcontrol.

 

*Changes inInternal Control over Financial Reporting*

 

Nochange in internal control over financial reporting (as defined in Rule 13a-15(f) underthe Exchange Act ) occurred during the year ended December 31, 2008 thathas materially affected, or is reasonable likely to materially affect, thePartnership’s internal control, over financial reporting.

 

*Management’sReport on Internal Control over Financial Reporting:*

 

ThePartnership’s management is responsible for establishing and maintainingadequate internal control over financial reporting.  The Partnership’sinternal control over financial reporting is a process designed under thesupervision of MLAI’s Chief Executive Officer and the Chief Financial Officer,on behalf of the Partnership and is effected by management, other personnel andservice providers to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles andincluded those policy and procedures that:

 

·              Pertainto the maintenance of records that in reasonable detail accurately and fairlyreflect the transactions and dispositions of the assets of the Partnership.

 

27

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·              Providereasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally acceptedaccounting principles, and that  receipts and expenditures of thePartnership are being made only in accordance with authorizations of managementand directors of the Partnership; and

 

·              Providereasonable assurance regarding prevention or timely detection of unauthorizedacquisitions, use or disposition of the Partnership’s assets that could have amaterial effect on the financial statements.

 

Becauseof its inherent limitations, internal control over financial reporting can onlyprovide only reasonable assurance with respect to financial statementpreparation and presentation.  Projections of any evaluation ofeffectiveness to future periods are subject to the risks that controls maybecome inadequate because of changes in condition, or that the degree ofcompliance with the policies or procedures may deteriorate.

 

ThePartnership’s management assessed the effectiveness of the Partnerships’internal control over financial reporting as December 31, 2008.  Inmaking this assessment, management used the criteria set forth by the Committeeof Sponsoring Organizations of the Treadway Commission (COSO) in “InternalControl-Integrated Framework”.

 

Basedon its assessment the Partnership’s management concluded that at December 31,2008, the Fund’s internal control over financial report was effective.

 

This annual report does not include anattestation report of the Fund’s registered public accounting firm regardinginternal control over financial reporting. Management’s report was not subjectto attestation by the Fund’s registered public accounting firm pursuant totemporary rules of the Securities and Exchange Commission that permit theFund to provide only management’s report for this annual report.

 

**Item 9B:  Other Information**

 
|   | Not applicable. |
|--------|-----------------|

 

28

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**PART III**

 

**Item 10: Directors,Executive Officers  and CorporateGovernance**

 

10(a) and 10(b)      Identification of Directors and Executive Officers:

 

As a Limited partnership, the Partnership has no officers or directorsand is managed by MLAI. Trading decisions are made by Portfolio Funds’ tradingadvisors on behalf of the Partnership.

 

The managers and executive officers of MLAIand their respective business backgrounds are as follows:

 
| **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 Chief Executive Officer of MLAI, President andManager of MLAI. He also serves as the Chief Operating Officer for the GlobalInvestment and Insurance Solutions (GIIS) group for Merrill Lynch.  As Chief Operating Office of GIIS, Mr. Mortonleads the market investments business within the group, which includessecondary equity, debt, listed options, futures and FX for Merrill Lynch’sGlobal Wealth Management division.  Priorto serving as Chief Operating Officer of GIIS, Mr. Morton worked in theequity and debt trading management of Merrill Lynch. Prior to joining MerrillLynch in 1996, Mr. Morton worked in the equity derivatives at PaineWebber.  From 1988-1993, Mr. Mortonserved as an officer in the US Army for five years.  Mr. Morton holds a BS (AerospaceEngineering) from the United States Military Academy at West Point (1988) and aMBA (Finance) from the Wharton School at the University of Pennsylvania (1995).

 

Barbra E. Kocsis******is the Chief FinancialOfficer of MLAI. She is also a Director within the Merrill Lynch Global PrivateClient Global Infrastructure Solutions group. Prior to that, she was the FundController of MLAI. Before coming to MLAI, Ms Kocsis held various accountingand 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.

 

Thomas W. Lee**is VicePresident and Manager of MLAI. He is also Managing Director in Merrill Lynch’sMarket Investments and Origination Group, responsible for Global PrivateClient’s equity and debt new issue businesses, and is a Vice President andManager of the MLAI and his registration 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.

 

Justin C. Ferri is Vice President and Manager of MLAI. He is alsoManaging Director within the MLPF&S Structured and Alternative Solutions(SAS) group and is a Vice President of IQ Investment Advisors LLC.  Prior to his role in SAS, Mr. Ferri wasa Director in the MLPF&S Global Private Client Market Investments &Origination group, and before that, he served as a Vice President and Head ofGlobal Private Client Rampart Equity Derivatives group.  Prior to joining Merrill Lynch in 2002, Mr. Ferriwas a Vice President within the Quantitative Development group of MPowerAdvisors LLC from 1999 to 2002. He graduated with a Bachelor of Arts Degreefrom Loyola College in Baltimore, Maryland.

 

29

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As of December 31, 2008, the principals of MLAIhad no investment in the Partnership, and MLAI’s general partner interest inthe Partnership was valued at $8,313,413

 

MLAI acts as the sponsor, general partner or manager to seven publicfutures funds whose units of limited partner or member interests are registeredunder the Securities Exchange Act of 1934: ML Aspect FuturesAccess LLC, MLSelect Futures I L.P., ML Systematic Momentum FuturesAccess LLC, SystematicMomentum II LLC, ML Transtrend DTP Enhanced FuturesAccess LLC, MLTrend-Following Futures Fund L.P, and ML Winton FuturesAccess LLC. Because MLAIserves as the sole sponsor, general partner or manager of each of these funds,the officers and managers of MLAI effectively manage them as officers anddirectors of such funds.

 
| (c)    | Identification of Certain Significant Employees: |
|--------|--------------------------------------------------|
|   |                                             |
|   | None.                                            |
|   |                                             |
| (d)    | Family Relationships:                            |
|   |                                             |
|   | None.                                            |
|   |                                             |
| (e)    | Business Experience:                             |
|   |                                             |
|   | See Item 10(a) and (b) above.          |
|   |                                             |
| (f)    | Involvement in Certain Legal Proceedings:        |
|   |                                             |
|   | None.                                            |
|   |                                             |
| (g)    | Promoters and Control Persons:                   |
|   |                                             |
|   | Not applicable.                                  |
|   |                                             |
|   | Code of Ethics:                                  |

 

MLAI andMerrill Lynch have 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.

 

Nominating Committee:

 

Not applicable.  (Neither the Partnership nor MLAI has anominating committee.)

 

Audit Committee: Audit Committee Financial Expert:

Notapplicable. (Neither the Partnership nor MLAI has an audit committee.) There are no listed shares of the Partnership orMLAI.

 

30

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**Item 11: Executive Compensation**

 

The managers and officers of MLAI are remunerated byMLAI in their respective positions.  ThePartnership does not   have any officers,managers or employees.  The Partnershippays Brokerage Commissions to an affiliate of MLAI and Administrative Fees toMLAI.  MLAI or its affiliates may alsoreceive certain economic benefits from holding certain of the Partnership’sU.S. dollar Available Assets in offset accounts, as described in Item 1(c) above.The managers and officers receive no “other compensation” from the Partnership,and the managers receive no 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: Security Ownership of CertainBeneficial Owners and Management and Related Stockholder Matters**

 

(a)                                  SecurityOwnership of Certain Beneficial Owners:

 

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

 

(b)                                 SecurityOwnership of Management:

 

As of December 31,2008, MLAI owned 41,734 Unit-equivalent general partnership interests, whichwas 2.36% of the total Units outstanding.

 

(c)                                  Changesin Control:

 

None.

 

(d)                                 SecuritiesAuthorized for Issuance Under Equity Compensation Plans:

 

Not applicable.

 

**Item 13: Certain Relationships and RelatedTransactions and Director Independence**

 

(a)                                  Transactionsbetween Merrill Lynch and the Partnership

 

Some of theservice providers to the Partnership are affiliates of Merrill Lynch. However,none of the fees paid by the Partnership to such Merrill Lynch affiliates werenegotiated and such fees charged to the Fund might be higher than would havebeen obtained in arms-length negotiations”.

 

The Partnership pays indirectly Merrill Lynch through MLPF&S andMLAI substantial Brokerage Commissions and Administrative Fees, respectively,as well as bid-ask spreads on forward currency trades.  The Partnership also pays MLPF&S intereston short-term loans extended by MLPF&S to cover losses on foreign currencypositions.

 

Within the MerrillLynch organization, MLAI is the direct beneficiary of the revenues received bydifferent Merrill Lynch entities from the Partnership.  MLAI controls the management of the Partnershipand serves as its promoter. Although MLAI has not sold any assets, directly orindirectly, to the Partnership, MLAI makes substantial profits from thePartnership due to the foregoing revenues.

 

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

 

MLAI payssubstantial selling commissions and trailing commissions to MLPF&S fordistributing the Units.  MLAI isultimately paid back for these expenditures from the revenues it receives fromthe Partnership.

 

(b)                                 CertainBusiness Relationships:

 

MLPF&S, an affiliate of MLAI, acts as theprincipal commodity broker for the Partnership.

 

31

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See Item 1(c), “Narrative Description of Business — Charges”and “— Description of Current Charges” for a discussion of other businessdealings between MLAI affiliates and the Partnership.

 

(c)                                  Indebtednessof Management:

 

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

 

(d)                                 Transactionswith Promoters:

 

Not applicable.

 

**Item 14: Principal Accountant Fees and Services**

 

(a)                                  AuditFees

 

Aggregate fees billed forprofessional services rendered by Deloitte & Touche LLP in connectionwith the audit of the Partnership’s financial statements as of and for theyears ended December 31, 2008 and 2007 were $85,000 for both years.

 

(b)                                 Audit-RelatedFees

 

There were noother audit-related fees billed for the years ended December 31, 2008 and2007 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 $106,000 forboth years.

 

(d)                                 AllOther Fees

 

No fees were paidto Deloitte and Touche LLP or Deloitte Tax LLP or any member firm of DeloitteTouche Tohmatsu and their respective affiliates during the years ended December 31, 2008, 2007 and 2006 for anyother professional services in relation to the Partnership.

 

Neither the Partnershipnor MLAI has an audit committee to pre-approve principal accountant fees andservices. In lieu of an audit committee, the managers and the principalfinancial officer pre-approve all billings prior to the commencement ofservices.

 

32

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**PART IV**

 

**Item 15: Exhibits and Financial StatementSchedules**

 
| ** **                                                                                                  | **Page** |
|-------------------------------------------------------------------------------------------------------------|----------|
| 1. Financial Statements:                                                                               |     |
|                                                                                                        |     |
| REPORT  OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                                                    | 1        |
|                                                                                                        |     |
| FINANCIAL STATEMENTS:                                                                                       |     |
|                                                                                                        |     |
| Statements  of Financial Condition as of December 31, 2008 and 2007                                    | 2        |
|                                                                                                        |     |
| Statements  of Operations for the years ended December 31, 2008, 2007 and 2006                         | 3        |
|                                                                                                        |     |
| Statements  of Changes in Partners’ Capital for the years ended December 31, 2008,  2007 and 2006 | 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 reason thatthey are not required or are not applicable or that equivalent information hasbeen 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(i)                   |       | Certificate of  Amendment of ML JWH Allocation Fund L.P.                                                                                                                                                                                                   |
|                      |       |                                                                                                                                                                                                                                                       |
| Exhibit 3.01(i):     |       | Is incorporated  herein by reference from Exhibit 3.01 contained in the Registrant’s  Registration Statement.                                                                                                                                    |
|                      |       |                                                                                                                                                                                                                                                       |
| 3.01(ii):                 |       | Form of  Limited Liability Compnay Operating Agreement.                                                                                                                                                                                               |
|                      |       |                                                                                                                                                                                                                                                       |
| Exhibit 3.01(ii):    |       | Is incorporated  herein by reference from Exhibit 10.08 contained in the Registrant’s  Form 10-K, for the fiscal year ended December 31, 1997 filed  March 30,1998.                                                               |
|                      |       |                                                                                                                                                                                                                                                       |
| 13.01                     |       | 2008 Annual  Report and Report of Independent Registered Public Accounting Firm.                                                                                                                                                                           |
| Exhibit 13.01:       |       | Is filed  herewith.                                                                                                                                                                                                                                        |
|                      |       |                                                                                                                                                                                                                                                       |
| 28.01                     |       | Prospectus of  the Partnership dated March 31, 2007.                                                                                                                                                                                                  |
|                      |       |                                                                                                                                                                                                                                                       |
| Exhibit 28.01:       |       | Is incorporated  herein by reference as filed with the Securities and Exchange Commission  pursuant to Rule 424 under the Securities Act of 1933, Registration  Statement (File No. 333-80509) on Form S-1, effective  March 31, 2003. |
|                      |       |                                                                                                                                                                                                                                                       |
| 31.01 and 31.02           |       | Rule 13a-14(a)/15d-14(a) Certifications.                                                                                                                                                                                                         |
|                      |       |                                                                                                                                                                                                                                                       |
| Exhibits 31.01  and 31.02 |       | Are filed  herewith.                                                                                                                                                                                                                                       |

 

33

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| 32.01 and 32.02           |   | Section 1350  Certifications. |
|---------------------------|--------|------------------------------------|
|                      |   |                               |
| Exhibits 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 TREND-FOLLOWING FUTURES FUNDL.P.**

 

By:  **MERRILL LYNCH ALTERNATIVEINVESTMENTS LLC, 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 Manger                      |       | March 31,  2009 |
| Justin C. Ferri      |       |                                            |       |                 |

 

 

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

 

35

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**ML TREND-FOLLOWING FUTURES FUNDL.P.**

 

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  13.02     |       | Rule 13a-14(a)/15d-14(a) Certifications                                |
|                          |       |                                                                             |
| Exhibit 32.01  and 32.02 |       | Sections 1350  Certifications                                                    |

 

36

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