**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C.20549**

** **

**FORM 10-Q**

** **

**(Mark One)**

 

**x****     ****QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934**

 

**For thequarterly period ended September 30, 2009**

 

**OR**

 

**o****        ****TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934**

 

**For thetransition period from                to          **

 

**CommissionFile Number 0-28928**

 

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

(Exact Name of Registrant asspecified in its charter)

 

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

 

**c/oMerrill Lynch Alternative Investments LLC**

**Four World Financial Center, 6****th Floor**

**250 Vesey Street**

**New York, New York 10080**

(Address of principal executive offices)

(Zip Code)

 

**212-449-3517**

(Registrant’s telephone number, including area code)

 

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

**New York, New York 10281**

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

 

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

 

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

 

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer,a non-accelerated filer, or a smaller reporting company.  See the definitions of “large acceleratedfiler,” “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) |   |                      |

 

Indicateby check mark whether the registrant is a shell company (as defined by Rule 12b-2of the Exchange Act).    Yes o No x

 

Asof September 30, 2009, 1,562,630 units of membership were outstanding.

 

 

 

----

 

**ML TREND-FOLLOWING FUTURES FUND L.P.**

 

QUARTERLY REPORT FOR SEPTEMBER 30, 2009 ON FORM 10-Q

 
| ** **   | ** **                                                                                  | **PAGE** |
|--------------|---------------------------------------------------------------------------------------------|----------|
| PART I  |                                                                                        |
|         |                                                                                        |     |
| Item 1.      | Financial Statements                                                                        | 1        |
|         |                                                                                        |     |
| Item 2.      | Management’s Discussion  and Analysis of Financial Condition and Results of Operations | 10       |
|         |                                                                                        |     |
| Item 3.      | Quantitative and  Qualitative Disclosures About Market Risk                                 | 15       |
|         |                                                                                        |     |
| Item 4T.     | Controls and Procedures                                                                     | 23       |
|         |                                                                                        |     |
| PART II |                                                                                        |
|         |                                                                                        |     |
| Item 1.      | Legal Proceedings                                                                           | 23       |
|         |                                                                                        |     |
| Item 1A.     | Risk Factor                                                                                 | 23       |
|         |                                                                                        |     |
| Item 2.      | Unregistered Sales of  Securities and Use of Proceeds                                       | 23       |
|         |                                                                                        |     |
| Item 3.      | Defaults Upon Senior  Securities                                                            | 23       |
|         |                                                                                        |     |
| Item 4.      | Submission of Matters  to a Vote of Security Holders                                        | 23       |
|         |                                                                                        |     |
| Item 5.      | Other Information                                                                           | 24       |
|         |                                                                                        |     |
| Item 6.      | Exhibits                                                                                    | 24       |

 

----

 

PART I - FINANCIALINFORMATION

 

Item 1.    Financial Statements

 

ML TREND-FOLLOWING FUTURES FUND L.P.

(a Delaware LimitedPartnership)

 

STATEMENTS OF FINANCIALCONDITION

(unaudited)

 
| ** **                                                                             | ** ** | **September 30,  2009** | ** **  | **December 31,  2008** | ** ** |
|----------------------------------------------------------------------------------------|------------|------------------------------|-------------|-----------------------------|------------|
|                                                                                   |       |                         |        |                        |       |
| **ASSETS:**                                                                            |       |                         |        |                        |       |
| Cash                                                                                   |       | $                            | 240,808     |                        | $          | 251,804 |   |
| Investments in Portfolio Funds (cost $226,135,635  for 2009 and $264,645,269 for 2008) |       | 282,743,696                  |        | 353,161,083                 |       |
| Due from Portfolio Funds                                                               |       | —                       |        | 11,064,145                  |       |
| Accrued interest                                                                       |       | 92                           |        | —                      |       |
| Due to Managers                                                                        |       | 5,823,795                    |        | —                      |       |
| **TOTAL ASSETS**                                                                       |       | $                            | 288,808,391 |                        | $          | 364,477,032 |   |
|                                                                                   |       |                         |        |                        |       |
| **LIABILITIES AND PARTNERS’ CAPITAL LIABILITIES:**                                |       |                         |        |                        |       |
| Wrap fee payable                                                                       |       | $                            | 950,496     |                        | $          | 1,213,435 |   |
| Redemptions payable                                                                    |       | 4,240,822                    |        | 11,138,285                  |       |
| Other                                                                                  |       | 86,698                       |        | 250,804                     |       |
|                                                                                   |       |                         |        |                        |       |
| Total liabilities                                                                      |       | 5,278,016                    |        | 12,602,524                  |       |
|                                                                                   |       |                         |        |                        |       |
| **PARTNERS’ CAPITAL:**                                                            |       |                         |        |                        |       |
| General Partner (41,734 Units and 41,734 Units)                                        |       | 7,558,395                    |        | 8,313,413                   |       |
| Limited Partners (1,520,896 Units and 1,724,666  Units)                                |       | 275,971,980                  |        | 343,561,095                 |       |
|                                                                                   |       |                         |        |                        |       |
| Total partners’ capital                                                           |       | 283,530,375                  |        | 351,874,508                 |       |
|                                                                                   |       |                         |        |                        |       |
| **TOTAL LIABILITIES AND PARTNERS’  CAPITAL:**                                     |       | $                            | 288,808,391 |                        | $          | 364,477,032 |   |
|                                                                                   |       |                         |        |                        |       |
| **NET ASSET VALUE PER UNIT**                                                           |       |                         |        |                        |       |
| (Based on 1,562,630 and 1,766,400 Units outstanding;  unlimited Units authorized)      |       | $                            | 181.4443    |                        | $          | 199.2044 |   |

 

See notes tofinancial statements.

 

1

----

 

ML TREND-FOLLOWING FUTURES FUND L.P.

(a Delaware LimitedPartnership)

STATEMENTS OF OPERATIONS

(unaudited)

 
| ** **                                                                        | ** ** | **For the three** | ** ** | **For the three** | ** **  | **For the nine** | ** ** | **For the nine** | ** ** |
|-----------------------------------------------------------------------------------|------------|-----------------------------|------------|-----------------------------|-------------|----------------------------|------------|----------------------------|------------|
| ** **                                                                        | ** ** | **months ended**       | ** ** | **months ended**       | ** **  | **months ended**      | ** ** | **months ended**      | ** ** |
| ** **                                                                        | ** ** | **September 30,**      | ** ** | **September 30,**      | ** **  | **September 30,**     | ** ** | **September 30,**     | ** ** |
| ** **                                                                        | ** ** | **2009**                    | ** ** | **2008**                    | ** **  | **2009**                   | ** ** | **2008**                   | ** ** |
| ** **                                                                        |       |                        |       |                        |        |                       |       |                       |       |
| **TRADING PROFIT (LOSS):**                                              |       |                        |       |                        |        |                       |       |                       |       |
| Realized                                                                          |       | $                           | (435,177   | )                           | $           | 5,018,558                  |       | 11,247,309                 |       | $ | 13,932,860 |   |
| Change in unrealized, net                                                         |       | 7,094,312                   |       | (37,963,154                 | )           | (31,907,753                | )          | 22,030,379                 |       |
| Total trading profit (loss)                                                       |       | 6,659,135                   |       | (32,944,596                 | )           | (20,660,444                | )          | 35,963,239                 |       |
|                                                                              |       |                        |       |                        |        |                       |       |                       |       |
| **INVESTMENT INCOME:**                                                            |       |                        |       |                        |        |                       |       |                       |       |
| Interest                                                                          |       | 405                         |       | 4,535                       |        | 4,146                      |       | 8,783                      |       |
|                                                                              |       |                        |       |                        |        |                       |       |                       |       |
| **EXPENSES:**                                                                     |       |                        |       |                        |        |                       |       |                       |       |
| Wrap fee                                                                          |       | 2,888,630                   |       | 3,505,091                   |        | 9,418,811                  |       | 11,236,981                 |       |
| Other Expenses                                                                    |       | (41,250                     | )          | —                      |        | (20,720                    | )          | 343,751                    |       |
| Total expenses                                                                    |       | 2,847,380                   |       | 3,505,091                   |        | 9,398,091                  |       | 11,580,732                 |       |
| ** **                                                                        |       |                        |       |                        |        |                       |       |                       |       |
| **NET INVESTMENT (INCOME) LOSS**                                                  |       | (2,846,975                  | )          | (3,500,556                  | )           | (9,393,945                 | )          | (11,571,949                | )          |
| ** **                                                                        |       |                        |       |                        |        |                       |       |                       |       |
| **NET PROFIT (LOSS)**                                                             |       | 3,812,160                   |       | $                           | (36,445,152 | )                          | $          | (30,054,389                | )          | $ | 24,391,290 |   |
|                                                                              |       |                        |       |                        |        |                       |       |                       |       |
| **NET PROFIT (LOSS) PER UNIT:**                                                   |       |                        |       |                        |        |                       |       |                       |       |
| Weighted average number of General Partner and  Limited Partner Units outstanding |       | 1,611,705                   |       | 1,978,863                   |        | $                          | 1,672,830  |                       | 2,080,653  |   |
|                                                                              |       |                        |       |                        |        |                       |       |                       |       |
| Net (loss) per weighted average General Partner and  Limited Partner Unit         |       | $                           | 2.37       |                        | $           | (18.42                     | )          | $                          | (17.97     | ) | $ | 11.72 |   |

 

See notes tofinancial statements.

 

2

----

 

ML TREND-FOLLOWING FUTURES FUND L.P.

(a Delaware LimitedPartnership)

 

STATEMENTS OF CHANGES INPARTNERS’ CAPITAL

For the nine months endedSeptember 30, 2009 and 2008

(unaudited)

 
| ** **                                       | ** ** | **Units** | ** ** | **General  Partner** | ** ** | **Limited  Partners** | ** ** | **Total**   | ** ** |
|--------------------------------------------------|------------|-----------|------------|----------------------|------------|-----------------------|------------|-------------|------------|
| PARTNERS’ CAPITAL, December 31, 2007   |       | 2,253,743 |       | 6,943,734            |       | 363,175,548           |       | 370,119,282 |       |
|                                             |       |      |       |                 |       |                  |       |        |       |
| Subscriptions                                    |       | 62,740    |       | —               |       | 11,285,768            |       | 11,285,768  |       |
|                                             |       |      |       |                 |       |                  |       |        |       |
| Net Profit (Loss)                                |       | —    |       | 441,698              |       | 23,949,592            |       | 24,391,290  |       |
|                                             |       |      |       |                 |       |                  |       |        |       |
| Redemptions                                      |       | (399,548  | )          | —               |       | (71,640,882           | )          | (71,640,882 | )          |
|                                             |       |      |       |                 |       |                  |       |        |       |
| PARTNERS’  CAPITAL, September 30, 2008 |       | 1,916,935 |       | $                    | 7,385,432  |                  | $          | 326,770,026 |       | $ | 334,155,458 |   |
|                                             |       |      |       |                 |       |                  |       |        |       |
| PARTNERS’  CAPITAL, December 31, 2008  |       | 1,766,400 |       | $                    | 8,313,413  |                  | $          | 343,561,095 |       | $ | 351,874,508 |   |
|                                             |       |      |       |                 |       |                  |       |        |       |
| Subscriptions                                    |       | 71,781    |       | —               |       | 13,546,928            |       | 13,546,928  |       |
|                                             |       |      |       |                 |       |                  |       |        |       |
| Net Profit (Loss)                                |       | —    |       | (755,018             | )          | (29,299,371           | )          | (30,054,389 | )          |
|                                             |       |      |       |                 |       |                  |       |        |       |
| Redemptions                                      |       | (275,551  | )          | —               |       | (51,836,672           | )          | (51,836,672 | )          |
|                                             |       |      |       |                 |       |                  |       |        |       |
| PARTNERS’ CAPITAL, September 30, 2009  |       | 1,562,630 |       | $                    | 7,558,395  |                  | $          | 275,971,980 |       | $ | 283,530,375 |   |

 

See notes tofinancial statements.

 

3

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ML TREND-FOLLOWINGFUTURES FUND L.P.

(A DelawareLimited Partnership)

 

FINANCIAL DATAHIGHLIGHTS

FOR THE THREE ANDNINE MONTHS ENDED SEPTEMBER 30, 2009

 

The following perUnit data and ratios have been derived from information provided in thefinancial statements.

 
| ** **                                               | ** ** | **Three months ended** | ** ** | **Nine months ended**  | ** ** |
|----------------------------------------------------------|------------|----------------------------------|------------|----------------------------------|------------|
| **Per Unit Operating Performance:**       | ** ** | **September 30, 2009** | ** ** | **September 30, 2009** | ** ** |
| Net asset value, beginning of year                       |       | $                                | 178.99     |                             | $          | 199.20 |   |
|                                                     |       |                             |       |                             |       |
| Realized and unrealized change in trading profit  (loss) |       | 4.22                             |       | (12.15                           | )          |
| Interest income                                          |       | 0                                |       | 0                                |       |
| Expenses                                                 |       | (1.77                            | )          | (5.61                            | )          |
|                                                     |       |                             |       |                             |       |
| Net asset value, end of period                           |       | $                                | 181.44     |                             | $          | 181.44 |   |
|                                                     |       |                             |       |                             |       |
| **Total Return:**                                        |       |                             |       |                             |       |
|                                                     |       |                             |       |                             |       |
| Total return                                             |       | 1.37                             | %          | -8.92                            | %          |
|                                                     |       |                             |       |                             |       |
| **Ratios to Average Net Assets:**                        |       |                             |       |                             |       |
|                                                     |       |                             |       |                             |       |
| Expenses                                                 |       | 5.22                             | %          | 2.98                             | %          |
|                                                     |       |                             |       |                             |       |
| Net investment profit (loss)                             |       | -2.46                            | %          | -9.14                            | %          |

 

See notes tofinancial statements.

 

4

----

 

ML TREND-FOLLOWINGFUTURES FUND L.P.

(a Delaware Limited Partnership)

 

NOTES TO FINANCIALSTATEMENTS

(unaudited)

 

1.               SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES

 

ML TrendFollowing Futures Fund L.P. (the “Partnership”), formerly knownas 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 underlying FuturesAccessFunds (each a “Portfolio Fund” and collectively the “Portfolio Funds”) (SeeNote 2).

 

In the opinion ofmanagement, these interim financial statements contain all adjustments,consisting only of normal recurring adjustments, necessary for a fair statementof the financial position of the Partnership as of September 30, 2009 andthe results of its operations for the three and nine months ended September 30,2009 and 2008. However, the operating results for the interim periods may notbe indicative of the results for the full year.

 

OnApril 20, 2007, MLAI issued an announcement regarding a restructuring ofthe Partnership, effective June 1, 2007. As part of the restructuring the following occurred:

 

·                  ThePartnership changed its name to ML Trend-Following Futures Fund L.P.

 

·                  ThePartnership’s assets were reinvested in MLAI-sponsored Portfolio Funds: MLAspect FuturesAccess LLC (“Aspect”), ML Chesapeake FuturesAccess LLC (“Chesapeake”),ML Transtrend DTP Enhanced FuturesAccess LLC (“Transtrend”) and ML WintonFuturesAccess LLC (“Winton”). These Portfolio Funds employ a variety ofsystematic models with an emphasis on a style of investment commonly referredto as “diversified trend following” and the Partnership no longer utilizes theservices of John W. Henry & Company, Inc. as the commoditytrading advisor.

 

·                  OnMay 7, 2007, the Partnership was deregistered under the Securities Act of1933, as amended, but retained its registration under the Securities Act of1934, as amended (the “Act”).

 

·                  Priorto June 1, 2007, the Partnership’s brokerage commissions and administrativefees constituted a single annual “wrap fee” in an amount of 6.0% of thePartnership’s average month-end Net Asset Value, which covered all of thePartnership’s costs and expenses, other than bid-ask spreads and certaintrading fees as well as an annual filing fee payable to the State of New Jerseyand offering costs. After June 1, 2007, the Partnership pays a wrap fee inthe 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 isthe annual New Jersey filing fee, which is assessed on a per-partner basis witha maximum charge of $250,000 per year.

 

5

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MLAI,the sponsor (“Sponsor”) and general partner of the Partnership, is an indirectwholly-owned subsidiary of Merrill Lynch & Co., Inc. (“MerrillLynch”).  Merrill Lynch, Pierce, Fenner &Smith Incorporated (“MLPF&S”), a wholly-owned subsidiary of Merrill Lynch,is the Partnership’s commodity broker. As used herein, the capitalized term “MLAI”also refers to the general partner at times when its name was MLIM AlternativeStrategies LLC, as applicable. On September 15, 2008, Merrill Lynchentered into an Agreement and Plan of Merger (as amended by Amendment No. 1dated as of October 21, 2008, the “Merger Agreement”) with Bank of AmericaCorporation (“Bank of America”). Pursuant to the Merger Agreement, on January 1,2009, a wholly-owned subsidiary of Bank of America merged with and into MerrillLynch, with Merrill Lynch continuing as the surviving corporation and asubsidiary of Bank of America.

 

Certain information andfootnote disclosures normally included in annual financial statements preparedin conformity with accounting principles generally accepted in the UnitedStates of America (“U.S. GAAP”) have been omitted. These financial statementsshould be read in conjunction with the financial statements and notes theretoincluded in the Partnership’s and three (Winton, Aspect, Transtrend) of thePortfolio Funds’ Annual Reports on Form 10-K filed with the Securities andExchange Commission for the year ended December 31, 2008. For the otherPortfolio Fund, Chesapeake, the selected financial information has beenprovided below. Certain prior period items have been reclassified to conform tothe current period presentation.

 

In July 2009, theFinancial Accounting Standards Board (“FASB”) issued Accounting StandardsCodification (“ASC”) 105, *Generally AcceptedAccounting Principles,*(ASC 105), which approved the FASB AccountingStandards Codification (the “Codification”) as the single source ofauthoritative nongovernmental GAAP. The Codification is effective for interimor annual periods ending after September 15, 2009. All existing accountingstandards have been superseded and all other accounting literature not includedin the Codification will be considered nonauthoritative. ASC 105 was notintended to change the accounting literature and did not impact the Partnership’sfinancial condition or results of operations. All accounting references within this report are in accordance with thenew Codification.

 

The preparation offinancial statements in conformity with U.S. GAAP requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date ofthe financial statements and the reported amounts of revenues and expensesduring the reporting period.  Actualresults could differ from those estimates.

 

2.               INVESTMENTS IN PORTFOLIO FUNDS

 

ThePartnership’s assets are invested in Winton, Aspect, Transtrend and Chesapeake.

 

MLAI may, in itsdiscretion, change Portfolio Funds at any time. MLAI may vary the percentage ofthe Partnership’s total portfolio allocated to the different Portfolio Funds atMLAI’s discretion. There is no pre-established range for the minimum andmaximum allocations that may be made to any given Portfolio Funds.   The investment in portfolio funds at September 30,2009 and December 31, 2008 are as follows:

 
| ** ** | ** ** | **% of Partnership’s Capital @9/30/09** | ** ** | **% of Partnership’s  Capital @12/31/08** | ** ** | **Fair Value @  9/30/09** | ** **  | **Fair Value @  12/31/08** | ** ** | **Cost @ 9/30/09** | ** ** | **Cost @ 12/31/08** | ** **  |
|------------|------------|----------------------------------------------|------------|------------------------------------------------|------------|---------------------------|-------------|----------------------------|------------|--------------------|------------|---------------------|-------------|
|       |       |                                         |       |                                           |       |                      |        |                       |       |               |       |                |        |
| Winton     |       | 25.05                                        | %          | 25.09                                          | %          | $                         | 71,034,018  |                       | $          | 88,290,271         |       | 55,486,643          |        | 64,048,216 |   |
| Aspect     |       | 25.05                                        | %          | 25.09                                          | %          | 71,034,018                |        | 88,290,270                 |       | 58,383,202         |       | 65,018,330          |        |
| Transtrend |       | 24.56                                        | %          | 25.09                                          | %          | 69,641,642                |        | 88,290,271                 |       | 48,985,499         |       | 57,629,808          |        |
| Chesapeake |       | 25.05                                        | %          | 25.09                                          | %          | 71,034,018                |        | 88,290,271                 |       | 63,280,290         |       | 77,948,915          |        |
|       |       |                                         |       |                                           |       |                      |        |                       |       |               |       |                |        |
| Total      |       |                                         |       |                                           |       | $                         | 282,743,696 |                       | $          | 353,161,083        |       | $                   | 226,135,634 |   | $ | 264,645,269 |   |
|            |            |                                              |            |                                                |            |                           |             |                            |            |                    |            |                     |             |  |  |  |  |

 

6

----

 

These investments arerecorded at fair value which is consistent with equity method accounting, inaccordance with fund of fund accounting guidance and in accordance withRegulation S-X; the following is summarized financial information for each ofthe Portfolio Funds which requires disclosure.

 
| ** ** | ** ** | **As of September 30,2009** | ** **    |                  |       |
|------------|------------|----------------------------------|---------------|-----------------------|------------|
| ** ** | ** ** | **Total Assets**                 | ** **    | **Total Liabilities** | ** ** | **Total Capital** | ** ** |   |   |
| Winton     |       | $                                | 774,945,019   |                  | $          | 12,691,401 |   | $ | 762,253,623 |   |   |   |
| Aspect     |       | 283,597,508                      |          | 4,237,129             |       | 279,360,379 |   |   |   |
| Transtrend |       | 241,061,174                      |          | 1,129,060             |       | 239,932,114 |   |   |   |
| Chesapeake |       | 160,071,865                      |          | 2,528,336             |       | 157,543,529 |   |   |   |
|       |       |                             |          |                  |       |   |   |   |   |
| Total      |       | $                                | 1,459,675,566 |                  | $          | 20,585,926 |   | $ | 1,439,089,645 |   |   |   |

 
| ** ** | ** ** | **As of December 31, 2008** | ** **    |                  |       |
|------------|------------|----------------------------------|---------------|-----------------------|------------|
| ** ** | ** ** | **Total Assets**                 | ** **    | **Total Liabilities** | ** ** | **Total Capital** | ** ** |   |   |
| Winton     |       | $                                | 864,513,961   |                  | $          | 60,525,401 |   | $ | 803,988,560 |   |   |   |
| Aspect     |       | 346,419,209                      |          | 25,985,403            |       | 320,433,806 |   |   |   |
| Transtrend |       | 234,472,658                      |          | 17,137,534            |       | 217,335,124 |   |   |   |
| Chesapeake |       | 165,463,537                      |          | 6,426,196             |       | 159,037,341 |   |   |   |
|       |       |                             |          |                  |       |   |   |   |   |
|       |       | $                                | 1,610,869,365 |                  | $          | 110,074,534 |   | $ | 1,500,794,831 |   |   |   |

 
| ** ** | ** ** | **For the nine months ended September 30,2009** | ** **        |
|------------|------------|------------------------------------------------------|-------------------|
| ** ** | ** ** | **Income (Loss)**                                    | ** **        | **Commissions** | ** ** | **Other** | ** ** | **Net  Income (Loss)** | ** ** |
| Winton     |       | $                                                    | (4,635,330        | ) | $ | (59,361 | ) | $ | (990,453 | ) | $ | (5,685,144 | ) |
| Aspect     |       | (6,617,789                                           | )                 | (165,954 | ) | (1,021,490 | ) | (7,805,233 | ) |
| Transtrend |       | (4,469,046                                           | )                 | (274,672 | ) | (732,857 | ) | (5,476,575 | ) |
| Chesapeake |       | 2,587,821                                            |              | (78,323 | ) | (803,507 | ) | 1,705,991 |   |
|       |       |                                                 |              |   |   |   |   |   |   |
| Total      |       | $                                                    |  (13,134,344 | ) | $ | (578,310 | ) | $ | (3,548,307 | ) | $ | (17,260,961 | ) |

 
| ** ** | ** ** | **For the nine months ended  September 30, 2008** | ** ** |
|------------|------------|--------------------------------------------------------|------------|
| ** ** | ** ** | **Income (Loss)**                                      | ** ** | **Commissions** | ** ** | **Other** | ** ** | **Net  Income (Loss)** | ** ** |
| Winton     |       | $                                                      | 12,895,811 |   | $ | (118,881 | ) | $ | (1,215,218 | ) | $ | 11,561,712 |   |
| Aspect     |       | 12,319,718                                             |       | (218,739 | ) | (1,272,565 | ) | 10,828,414 |   |
| Transtrend |       | 18,866,585                                             |       | (311,816 | ) | (869,708 | ) | 17,685,061 |   |
| Chesapeake |       | 2,982,461                                              |       | (157,004 | ) | (847,343 | ) | 1,978,114 |   |
|       |       |                                                   |       |   |   |   |   |   |   |
| Total      |       | $                                                      | 47,064,575 |   | $ | (806,440 | ) | $ | (4,204,834 | ) | $ | 42,053,301 |   |

 

3.               FAIR VALUE OF INVESTMENTS

 

In September 2006,FASB issued authoritative guidance on fair value measurement. This guidancedefines fair value, establishes a framework for measuring fair value andexpands disclosures about fair value measurements. The Partnership adopted thisguidance as of January 1, 2008. The adoption of this guidance did not havea material impact on the Partnership’s financial statements.

 

Fair value of an investment is the amount that wouldbe received to sell the investment in an orderly transaction between marketparticipants at measurement date (i.e. the exit price). Purchase and sale ofinvestments is recorded on a trade date basis. Realized gains and losses oninvestments is recognized when the investments are sold. Any change in netunrealized gain or loss from the preceding period is reported on the Statementof Operations.

 

The fair valuemeasurement guidance established a hierarchal disclosure framework whichprioritizes and ranks the level of market price observability used in measuringinvestments at fair value. Market price observability is impacted by a numberof factors, including the type of investment and the characteristics specificto the investment. Investments with readily available active quoted prices orfor which fair value can be measured from actively quoted prices generally willhave a higher degree of market price observability and a lesser degree ofjudgment used in measuring fair value.

 

7

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Investments measured andreported at fair value are classified and disclosed in one of the followingcategories:

 

Level I — Quoted pricesare available in active markets for identical investments as of the reportingdate. The type of investments included in Level I are publicly tradedinvestments. As required, the Fund does not adjust the quoted price for theseinvestments even in situations where the Fund holds a large position and a salecould reasonably impact the quoted price.

 

Level II — Pricing inputsare other than quoted prices in active markets, which are either directly orindirectly observable as of the reporting date, and fair value is determinedthrough the use of generally accepted and understood models or other valuationmethodologies. Investments which are generally included in this category areinvestments valued using market data.

 

Level III — Pricinginputs are unobservable and include situations where there is little, if any,market activity for the investment. Fair value for these investments isdetermined using valuation methodologies that consider a range of factors,including but not limited to the nature of the investment, local marketconditions, trading values on public exchanges for comparable securities,current and projected operating performance and financing transactionssubsequent to the acquisition of the investment. The inputs into thedetermination of fair value require significant management judgment. Due to theinherent uncertainty of these estimates, these values may differ materiallyfrom the values that would have been used had a ready market for theseinvestments existed.

 

In certain cases,the inputs used to measure fair value may fall into different levels of thefair value hierarchy. In such cases, an investment’s level within the fairvalue hierarchy is based on the lowest level of input that is significant to thefair value measurement. The Sponsor’s assessment of the significance of aparticular input to the fair value measurement in its entirety requiresjudgment, and considers factors specific to the investment.

 

Following is a description of the valuation methodologiesused for investments, as well as the general classification of such investmentspursuant to the valuation hierarchy.

 

Investments in other investment companies are valuedusing the net asset value reported by the investment company, which managementbelieves approximates fair value. These net asset values are the prices used toexecute trades with these investment companies. If appropriate, adjustments to the reported net asset value may be madebased on various factors, including, but not limited to, the attributes of theinterest held, including the rights and obligations, and any restrictions orilliquidity.

 

Although there are monthly transactions in theseinvestment company interests, the Net Asset Value’s (“NAV”) are materiallybased on portfolios of Level I and Level II assets and liabilities for whichthe Fund has transparency.  As such, thePartnership determined that its investments in these investment companies inthis case, would be classified as Level II.

 

The followingtable summarizes the valuation of the Partnership’s investments by the abovefair value hierarchy levels as of September 30, 2009 and December 31,2008:

 
| ** **                      | ** ** | **Total**  | ** **  | **Level I** | ** ** | **Level II** | ** ** | **Level III** | ** ** |
|---------------------------------|------------|------------|-------------|-------------|------------|--------------|------------|---------------|------------|
| ** **                      | ** ** | ** ** | ** **  | ** **  | ** ** | ** **   | ** ** | ** **    | ** ** |
| Investments in Portfolio  Funds |       |       |        |        |       |         |       |          |       |
| September 30, 2009         |       | $          | 282,743,696 |        | N/A        |         | $          | 282,743,696   |       | N/A |   |
| December 31, 2009          |       | $          | 353,161,083 |        | N/A        |         | $          | 353,161,083   |       | N/A |   |

 

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As of January 1, 2009, the Partnership adopted the guidance ondisclosures about derivative instruments and hedging activities which requiresqualitative disclosures about objectives and strategies for using derivatives,quantitative disclosures about fair value amounts of and gains and losses onderivative instruments, and disclosures about credit-risk-related contingentfeatures in derivative agreements. This guidance only expands the disclosurerequirements for derivative instruments and related hedging activities and hasno impact on Statements of Financial Condition or Statements of Operations andPartners’ Capital. As the Partnership invests only in other Portfolio Funds, itdoes not have any direct investments in derivative investments.

 

4.               MARKET, CREDIT AND CONCENTRATION RISKS

 

Thenature of this Partnership has certain risks, which cannot be presented on thefinancial statements. Additionally, the Partnership invests in the PortfolioFunds which have similar market risk as mentioned below. The followingsummarizes some of those risks.

 

Market Risk

 

Derivativeinstruments involve varying degrees of market risk.  Changes in the level or volatility ofinterest rates, foreign currency exchange rates or the market values of thefinancial instruments or commodities underlying such derivative instrumentsfrequently result in changes in the Portfolio Funds’ Net unrealized profit(loss) on such derivative instruments as reflected in the Portfolio Funds’Statements of Financial Condition.  ThePortfolio Funds’ exposure to market risk is influenced by a number of factors,including the relationships among the derivative instruments held by thePortfolio Funds as well as the volatility and liquidity of the markets in whichthe derivative instruments are traded. Investments in foreign markets may alsoentail legal and political risks.

 

Credit Risk

 

The risksassociated with exchange-traded contracts are typically perceived to be lessthan those associated with over-the-counter (non-exchange-traded) transactions,because exchanges typically (but not universally) provide clearinghousearrangements in which the collective credit (in some cases limited in amount,in some cases not) of the members of the exchange is pledged to support thefinancial integrity of the exchange.  Inover-the-counter transactions, on the other hand, traders must rely solely onthe credit of their respective individual counterparties.  Margins, which may be subject to loss in theevent of a default, are generally required in exchange trading, andcounterparties may also require margin in the over-the-counter markets.

 

The credit riskassociated with these instruments from counterparty nonperformance is the Netunrealized profit, if any, included in the Portfolio Funds’ Statements ofFinancial Condition. The PortfolioFunds attempt to mitigate this risk by dealing exclusively with MerrillLynch entities as clearing brokers.

 

The Portfolio Funds, in their normalcourse of business, enter into various contracts, with Merrill Lynch PierceFenner & Smith Inc. (“MLPF&S”) acting as their commoditybroker.  Pursuant to the brokeragearrangement with MLPF&S (which includes a netting arrangement), to theextent that such trading results in receivables from and payables toMLPF&S, these receivables and payables are offset and reported as a netreceivable or payable and included in Net unrealized profit (loss) on opencontracts on the Portfolio Funds’Statements of Financial Condition.

 

9

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Concentration Risk

 

The Partnership’sinvestments in the Portfolio Funds are subject to the market and credit risk ofthe Portfolio Funds. Because the majority of the Partnership’s capital isinvested in the Portfolio Funds, any changes in the market conditions thatwould adversely affect the Portfolio Funds could significantly impact thesolvency of the Partnership.

 

5.           RECENT ACCOUNTING PRONOUNCEMENTS

 

In April 2009, the FASB issued guidance on determining**fair value when**thevolume**and level of**activity for the asset or liability**have**significantly**decreased**and**identifying**transactions**that**are**not**orderly*.*This provides additional guidancefor estimating fair value in accordance with FASB guidance on fair value measurements, when thevolume and level of activity for the asset or liability have significantlydecreased. This also identifies circumstances that indicate a transaction isnot orderly. The guidance emphasizes that even if there has been a significantdecrease in the volume and level of activity for the asset or liability andregardless of the valuation technique(s) used, the objective of a fairvalue measurement remains the same. Fair value is the price that would bereceived to sell an asset or paid to transfer a liability in an orderly transaction(that is, not a forced liquidation or distressed sale) between marketparticipants at the measurement date under current market conditions. Theguidance also contains enhanced disclosure requirements whereby fair valuedisclosures as well as certain disaggregated information will be disclosed. Theadoption of this guidance has no impact on the financial statements.

 

In September 2009, theFASB issued Accounting Standards Update No. 2009-12, *Investments in Certain Entities That Calculate NetAsset Value per Share (or Its Equivalent)*(the “ASU 2009-12”)*,*which is effective for interim or annualfinancial periods ending after December 15, 2009. At this time, theSponsor is evaluating the implications of this statement.  However, theadoption is not expected to have material impact on the Fund’s financialstatements.

 

6.               SUBSEQUENT EVENTS

 

The Partnership hasperformed an evaluation of subsequent events through November 12, 2009,which is the date the financial statements were issued, and determined that thereare no subsequent events require an adjustment of or disclosure in thefinancial statements.

 

Item 2:  Management’s Discussion and Analysis ofFinancial Condition and Results of Operations

 

**MONTH-ENDNET ASSET VALUE PER INITIAL UNIT**

 
| ** ** | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** | **April** | ** ** | **May** | ** ** | **June** | ** ** | **July** | ** ** | **August** | ** ** | **September** | ** ** |
|------------|------------|----------|------------|----------|------------|----------|------------|-----------|------------|---------|------------|----------|------------|----------|------------|------------|------------|---------------|------------|
| 2008       |       | $        | 168.36     |     | $          | 184.45   |       | $         | 180.10     |    | $          | 177.98   |       | $        | 182.26     |       | $          | 192.63        |       | $ | 181.10 |   | $ | 174.13 |   | $ | 174.32 |   |
| 2009       |       | $        | 199.54     |     | $          | 199.02   |       | $         | 193.65     |    | $          | 188.68   |       | $        | 185.32     |       | $          | 178.99        |       | $ | 175.44 |   | $ | 179.11 |   | $ | 181.44 |   |

 

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Liquidity and Capital Resources

 

The Partnership does not engage in the sale of goodsor services.  The Partnership’s assetsare its (i) investment in Funds and (ii) Cash.  Because of the low margin deposits normallyrequired in commodity futures trading relatively small price movements mayresult in substantial losses to the Partnership.  While substantial losses could lead to amaterial decrease in liquidity, no such material losses occurred during thethird quarter of 2009.

 

The Partnership’s capital consists of the capitalcontributions of the partners as increased or decreased by gains or losses ontrading, expenses, interest income, redemptions of Redeemable Units anddistributions of profits, if any.

 

For the nine months ended September 30, 2009,Partnership capital decreased 19.42% from $351,874,508 to $283,530,375.  This decrease was attributable to the netloss from operations of $30,054,389, coupled with the redemption of 275,551Redeemable Units resulting in an outflow of $51,836,672.  The cash outflow was offset with cash inflowof $ 13,546,928due to subscription of 71,781 units.   Future redemptions could impact the amount of funds available forinvestment in commodity contract positions in subsequent months.

 

Critical Accounting Policies

 

Use of Estimates

 

The preparation of financial statements andaccompanying notes in conformity with U.S. generally accepted accountingprinciples (“GAAP”‘) requires management to make estimates and assumptions thataffect the reported amounts of assets and liabilities, income and expenses, andrelated disclosures of contingent assets and liabilities in the financialstatements and accompanying notes.  As aresult, actual results could differ from these estimates.

 

Statement of Cash Flows

 

The Partnership has elected not to provide aStatement of Cash Flows as permitted by the ASC guidance for Statement of CashFlows specifically relating to the exemption of certain enterprises and theclassification of cash flows from certain securities acquired for resale.

 

The Partnership adopted Fair**Value**Measurements as of January 1, 2008 which defines fairvalue as the price that would be received to sell an asset or paid to transfera liability in an orderly transaction between market participants at themeasurement date.  The Partnership didnot apply the deferral allowed for nonfinancial assets and nonfinancialliabilities measured at fair value on a nonrecurring basis. For moreinformation on our treatment of fair value see Note 3, Fair Value ofInvestments.

 

Investments in otherinvestment companies are valued using the net asset value reported by theinvestment company. If appropriate, adjustments to the reported net asset valuemay be made based on various factors, including, but not limited to, theattributes of the interest held, including the rights and obligations, and anyrestrictions or illiquidity.

 

Where the Partnership believes that quoted marketprices are not available or that the market is not active, fair values are estimatedby using quoted prices of securities with similar characteristics, pricingmodels or matrix pricing, observable net asset values and these are generallyclassified as Level II securities the Partnership determined that itsinvestments in other investment funds would be classified as Level II.

 

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Income Taxes

 

Income taxes have not been provided as each partneris individually liable for the taxes, if any, on their share of the Partnership’sincome and expenses and Partners’ Capital.

 

In 2007, the Partnership adopted the guidance issuedfor accounting for uncertainty in income taxes. This guidance provides how uncertain tax positions should be recognized,measured, presented and disclosed in the financial statements.  This guidance also requires the evaluation oftax positions taken or expected to be taken in the course of preparing thePartnership’s financial statements to determine whether the tax positions are “more-likely-than-not”to be sustained by the applicable tax authority.  Tax positions with respect to tax at thepartnership level not deemed to meet the “more-likely-than-not” threshold wouldbe recorded as a tax benefit or expense in the current year.  The General Partner has concluded that thisguidance had no impact on the operations of the Partnership for the periodended September 30, 2009 and that no provision for income tax is requiredin the Partnership’s financial statements.

 

Resultsof Operations

 

January 1,2009 to March 31, 2009

 

During the first quarterof 2009, the Partnership’s Net Asset Value per Redeemable Unit decreased 2.67%from $199.20 to $193.89 as compared to an increase of 9.67% in the same periodof 2008.  The Partnership experienced anet trading loss in the first quarter of 2009 of $5,968,803.

 

The performances of thePortfolio Funds were mixed at the beginning of the quarter which reflected thechoppy markets and diversification of the Portfolio Fund’s approach to trading.The Partnership profited from falling equities, with long-term Portfolio Fundsmanagers capturing more of the move. The Partnership also profited from acontinuous down-trend in commodities. Largest losses were suffered in fixedincome positions as U.S. Treasury yields rallied and other global bondsshadowed the move.

 

Time horizon focus did notseem to be a driver of returns, while asset allocation played a moresignificant role in the middle of the quarter. Most of the Portfolio Funds hadsmall net short exposures to equity markets posting profits for thePartnership. In addition, the Portfolio Funds that had long positions in theU.S. dollar against various currencies also posted profits for the Partnership.The Portfolio Funds that had long positions in the Japanese yen vs. the U.S.dollar was detrimental as the Japanese yen ended the month down significantlyrelative to the U.S. dollar. Fixed income markets experienced volatile swingsin February and most of the Portfolio Funds ended with losses being postedfor the Partnership.

 

The Partnership postedlosses at the end of the quarter. At the start of March, the Portfolio Fundswere positioned long in the fixed income markets. Most Portfolio Funds keptthis positioning throughout the month and benefited from falling yieldsresulting in profits posted for the Partnership. This was the only sectorcontributing to profits for the Partnership. All other sectors had negativeattribution for the month as a result of significant reversals in many markets.During March, equity markets rallied, following some positive corporate news inthe first week. When the U.S. Federal Reserve announced the start ofquantitative easing midmonth, the U.S. dollar began losing value against mostmajor currencies along with commodity markets which are negatively correlated withthe U.S. dollar and risk aversion, moved up. The Portfolio Funds are medium tolong term trend followers and were not in a position to cut exposures very fastand were negatively affected by these reversals.

 

April 1, 2009to June 30, 2009

 

During the second quarterof 2009, the Partnership’s Net Asset Value per Redeemable Unit decreased 7.68%from $193.89 to $178.99 as compared to an increase of 6.95% in the same periodof 2008.  The Partnership experienced anet trading loss in the second quarter of 2009 of $21,350,776.

 

Theperformances of the Portfolio Funds were down at the beginning of the quarterwhich resulted in losses being posted to the Partnership. The marketenvironment that caused losses for the Partnership in March persistedthrough April as well. The Portfolio Fund Managers continued to bepositioned against 

 

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marketmoves and experienced losses in most of the sectors they traded in. In March 2009having long positions in fixed income helped to offset losses in equityindices, currencies and commodities. In April, the losses in equity indices,currencies and commodities were more muted as many managers had trimmed risk inthose sectors; however, having long positions in fixed income proved to be aproblem as global bond yields rose significantly, hurting those long positions. Overall, fixedincome was the worst performing sector for the Partnership, followed bycurrencies. Most managers had mixed exposure in commodities, making money insome markets and losing money in others. In equities, positioning was more onthe short side, but with extremely small exposures; losses thus were muted.

 

ThePartnership posted losses in April as many big trends reversed as thePortfolio Fund Managers were not correctly positioned in the markets movements.The reversing trends continued in May and only one of the Portfolio FundManagers turned around its portfolio to be in line with them. Winton andChesapeake have long time horizons and need more conviction about new trendsbefore reversing positioning. Aspect and Transtrend are more medium term, butonly Transtrend was able to adjust its portfolio enough to take advantage ofnew trends. As a result, losses were posted to the Partnership in the middle ofthe quarter. Overall, equity positioning was flat therefore, attribution fromequities was likely zero. Commodity positioning was mostly short positions andthat hurt the Partnership as commodities moved up during May. Long positions inthe U.S. dollar and long positions in bond bias also detracted fromperformance.

 

ThePortfolio Funds had a negative month resulting in losses being posted to thePartnership at the end of the quarter. April and May had beencharacterized by market moves most commonly seen during periods where investorsare risk seeking. There were up moves in equities and commodities and downmoves in bonds and the U.S. dollar. June continued to be a challengingmonth as several events took place. First, short term interest rates suffered asharp reversal during the first week of June and the U.S. dollar had asimilar reversal, gaining against most currencies. Then, mid-month, the uptrends in equities and commodities reversed, as sentiment became risk averseagain. As a result of these moves, most asset classes ended the month withnegative attribution. The worst were short term interest rates and commodities.Medium term managers had the worst performance as they not only suffered fromthe interest rates and U.S. dollar moves, but also the reversals in equitiesand commodities. Winton and

 

Chesapeake,the longest term managers, had relatively smaller losses because the equity andcommodity reversals were actually good for them since they were still holdingon to their pre-March positions in those asset classes.

 

July 1, 2009to September 30, 2009

 

During the third quarterof 2009, the Partnership’s Net Asset Value per Redeemable Unit increased 1.37%from $178.99 to $181.45 as compared to a decrease of 9.51% in the same periodof 2008. The Partnership experienced a net trading profit of $6,659,135 beforebrokerage commissions and related fees in the third quarter of 2009.

 

Losses were posted to theFund in July which was characterized by two types of moves in mostmarkets. At the beginning of the month, equities, commodities and bond yieldswere moving lower while the United States dollar gained ground against othermajor currencies. In mid-July, sentiment reversed and equities and commoditiesresumed their up trends from prior month and the United States dollar lostvalue against other major currencies. The moves in the second part of the monthwere larger in magnitude, therefore, the Portfolio Funds who shifted towards ‘riskseeking’ trades faster performed better. Transtrend was an underperformer resultingin losses in the synthetic markets it trades in.

 

Losses were posted to theFund in August attributable to a continuation of trends from the secondhalf of July. Equities and fixed income ended the month up. Similarly, mostcommodities finished up (except oil, natural gas and grains) and currencyperformance was mixed. Coming into August, Systematic Momentum had small longpositions in all geographies in equity indices. In commodities, the PortfolioFunds had more long positions than short positions: long positions in crudeoil, softs and metals with 

 

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short positions in naturalgas, grains and livestock. In currencies, the Portfolio Funds held shortpositions in the United States dollar and in fixed income, it was long acrossthe yield curve. In general, the equity and fixed income positioning postedprofits for the Portfolio Funds throughout the month of August. Similarly, thePortfolio Funds were spot on in their Commodity positioning except in crudeoil. Currencies were mixed and losses in some markets canceled out profits inothers. Sugar, metals and equity positions were the best performers.

 

In September, the Portfolio Funds made most of their profitsin equity indices and currencies as trends from late summer continued. Shortpositions in the United States dollar performed the best as the United Statesdollar continued to slide against other major currencies. Long equity index andlong fixed income positions also continued to be profitable for the PortfolioFunds as there were neither reversals nor choppiness in those asset classes astrends from late summer continued. Commodities detracted from performance dueto choppiness in crude oil and huge adverse moves in natural gas. Transtrendwas the only Portfolio Fund showing a loss for the month due to its shortpositions in natural gas.

 

January 1,2008 to March 31, 2008

 

The Partnershipexperienced a net trading gain in the first quarter of 2008 of $39,708,097.

 

January was a positivemonth for the Partnership, despite dramatic declines in global stock indices,illustrating the Partnership’s low correlation with equities over a marketcycle. The Portfolio Funds’ Managers had long positions in fixed income andprecious metals, both of which benefited from fears of a U.S. recession, aswell as sharp U.S. Federal Reserve rate cuts totaling 1.25% for the month. Thecontinuing rally in grain markets was another source of profit for thePortfolio Funds. Losses came primarily from energy markets as oil pricesweakened and natural gas rebounded.

 

February was a verystrong month for the Partnership and it continues to be up year to date in2008. As a point of comparison, the Newedge CTA Index returned 4.6% for themonth and was up 6.3% for the year. The bulk of returns were earned in surgingcommodity markets. Grains and softs rallied strongly due to low inventories andpositive forecasts of demand. Energy and metals climbed as these sectors areperceived as an inflation hedge. The other profitable trades included shortcurrency positions against the U.S. dollar. The top performer within thevertical in February was Chesapeake, a long-term trend-follower, whichgained 16.7%. The bottom performer was Transtrend, which gained 5.4%.

 

The Partnership finished March down-2.35%. In comparison, the Newedge CTA Index was down marginally -0.1% inMarch, and is up 6.3% year to date. Transtrend, the most diversified manager inthe vertical, was the top performer in March, gaining 0.6%, while Chesapeakewas the bottom performer, losing -6.6%. For the first quarter as a whole,Chesapeake was the top performer in the vertical, up 11.2%, while Transtrendhad the smallest gains, rising 5.7%. The strong trends in commodity markets in February madea sharp reversal in March, hurting most funds in the vertical. After gaining11.7% in February, the CRB Commodity Index fell -6.3% March. The grains andprecious metals sectors recorded particularly large reversals. The Partnershipwas able to participate more in the upward move in February (when itgained 9.6%) than in the March reversal (when it lost -2.0%), therebypreserving its gains for the quarter. The Portfolio Funds’ Managers were ableto limit the damage in March by reducing leverage and scaling backpositions in inverse proportion to rising volatility in commodity markets.

 

April 1, 2008 to June 30,2008

 

The Partnership declined by-1.18% in April. In comparison, the Newedge Commodity Trader Advisor Index wasdown -2.1% for the month, and is up 4.1% for the year. Although most PortfolioFunds made gains in April with their long energy positions, as oil andnatural gas hit historic highs, these were offset by losses from reversals inthe 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 end of the credit crisis might be over. Thiscaused the United States dollar to rebound, bonds to fall and equities to rise,resulting in losses.

 

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May was a strong monthfor the Partnership and continues to be up year to date. The best performingPortfolio Fund in the vertical was Aspect, which gained 3.0% for the month. Theworst performer was Winton, which gained only 1.4% for the month. All fourPortfolio Funds in the Partnership made gains in their long energy positionswith crude oil up 13% from April and natural gas was up 6.6%, continuingthe trends from previous months.

 

The Partnership returned anestimated 5.69% in June. The Portfolio Funds posted profits in June throughlong positions in commodities and short positions in equities. Chesapeake wasthe best performing Portfolio Fund in the Partnership vertical gaining 7.9%with the longest time horizon and currently the largest exposure to commoditytrades. Meanwhile, Transtrend was the bottom performer in the group, but stillgained 2.3% for the month. Transtrend is the most diversified Portfolio Fundacross markets, trading over 200 standalone markets and 100 synthetic markets.As a result, Transtrend had less risk allocated to those markets which had thestrongest performance.

 

July 1, 2008 to September 30,2008

 

All four managers’ in theTrend-Following Futures Fund suffered their worst monthly performance of theyear at the beginning of the quarter, as bullish trends in commoditiesdramatically reversed. The managers came into the month of July with longpositions in most of the commodity markets. After having made most of theiryear to-date gains in commodities, the managers had their largest losses inthese markets in July. The Goldman Sachs Commodity Index fell for the month andthe energy sub-index was also down as the correction was particularly severe innatural gas.

 

All four managers continuedto have a difficult second month of poor performance. There were two majortrend themes that caused them to lose money. The first was the strengthening inthe U.S. dollar, following a long period of declines against most majorcurrencies due to the portfolios’ short positions in the U.S. dollar whichcaused them to lose money. The second big theme was the continued decline incommodities, following the dramatic reversal from July. The Goldman SachsCommodity Index was down for a second month in a row. Most managers within thevertical reduced their commodity exposure however, they were still long formost of the month and their portfolios were down accordingly.

 

September witnessed anextended weakness in financial markets that was manifested in a sharp sell-offin global equities and commodities, including energies, grains, and industrialmetals. The Commodity Research Bureau Futures Index finished the end of thequarter down, bond yields fell moderately, while the U.S. dollar continued itsupward move against other major currencies with the U.S. Dollar Index Future,finishing the month up. In light of September’s market volatility, thePortfolio’s Managers’ performance exhibited a fair amount of variance which wasthe function of the time frame of the underlying strategy.

 

The Partnershiphas no applicable off-balance sheet arrangements and tabular disclosure orcontractual obligations of the type described in Items 303(a)(4) and303(a)(5) of Regulation S-K.

 

Item3.   Quantitative and QualitativeDisclosures About Market Risk

 

Introduction

 

Themarket sensitive instruments 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 Partnership’smain line of business.

 

Marketmovements result in frequent changes in the fair market value of the PortfolioFunds’ open positions and, consequently, in their earnings and cash flow.  The Portfolio Funds’ market risk isinfluenced by a wide variety of factors, including the level and volatility ofinterest 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 theytrade.

 

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Value at Risk is ameasure of the maximum amount which the Portfolio Funds could reasonably be expected to lose ina given market sector.  However, theinherent uncertainty of the Portfolio Funds’ speculative trading and the recurrence in the marketstraded by the Portfolio Funds of market movements far exceeding expectations couldresult in actual trading or non-trading losses far beyond the indicated Valueat Risk or the Portfolio Funds’ experience to date (i.e., “risk of ruin”).  In light of the foregoing as well as therisks and uncertainties intrinsic to all future projections, the inclusion ofthe quantification in this section should not be considered to constitute anyassurance or representation that the Portfolio Funds’ losses in any market sector will belimited to Value at Risk or by the Portfolio Funds’ attempts to manage their market risks.

 

Quantifying thePartnership’s Trading Value at Risk

 

Quantitative Forward-Looking Statements

 

Thefollowing quantitative disclosures regarding the Partnership’s market riskexposures contain “forward-looking statements” within the meaning of the safeharbor from civil liability provided for such statements by the PrivateSecurities Litigation Reform Act of 1995 (set forth in Section 27A of theSecurities Act of 1933 and Section 21E of the Securities Exchange Act of1934).  All quantitative disclosures inthis section are deemed to be forward-looking statements for purposes of thesafe harbor, except for statements of historical fact.

 

Due to the Partnership’s fund of funds structure, the followingstatements are related to the Portfolio Funds.

 

Exchange maintenance margin requirements have been used by thePortfolio 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.  The maintenancemargin levels are established by dealers and exchanges using historical pricestudies as well as an assessment of current market volatility (including theimplied volatility of the options on a given futures contract) and economicfundamentals to provide a probabilistic estimate of the maximum expectednear-term one-day price fluctuation.

 

In the case of market sensitive instruments which are notexchange-traded (almost exclusively currencies in the case of the PortfolioFunds), the margin requirements for the equivalent futures positions have beenused as Value at Risk.  In those rarecases in which a futures-equivalent margin is not available, dealers’ marginshave been used.

 

100% positive correlation in the different positions held in each marketrisk category has been assumed. Consequently, the margin requirements applicable to the open contractshave been aggregated to determine each trading category’s aggregate Value atRisk.  The diversification effects (whichwould reduce the Value at Risk estimates) resulting from the fact that thePortfolio Funds’ positions are rarely, if ever, 100% positively correlated havenot been reflected.

 

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# ** **

# **The Partnership’s Trading Value at Risk in Different MarketSectors**

# ** **

The following table indicates the average, highest, and lowest tradingValue at Risk which is the sum of the individual Portfolio Funds’ tables. TheValue at Risk table is also associated with the Partnership’s open positions bymarket category for the nine months ended September 30, 2009 and 2008.

 

**AspectClass DT (3)**

 
| ** **               | ** ** | **September 30,  2009** | ** ** |
|--------------------------|------------|------------------------------|------------|
| ** **               | ** ** | **Average**                  | ** ** | **% of  Average** | ** ** | **Highest  Value** | ** ** | **Lowest  Value** | ** ** |
| **Market  Sector**       | ** ** | **Value at  Risk**           | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                     |       |                         |       |   |   |   |   |   |   |
| Agricultural Commodities |       | $                            | 39,870     |   | 0.05 | % | $ | 76,160 |   | $ | 1,985 |   |
| Energy                   |       | 50,403                       |       | 0.06 | % | 122,417 |   | 6,782 |   |
| Interest Rates           |       | 6,576,164                    |       | 8.44 | % | 12,174,872 |   | 3,840,187 |   |
| Metals                   |       | 66,891                       |       | 0.09 | % | 175,052 |   | 2,955 |   |
| Stock Indices            |       | 100,873                      |       | 0.13 | % | 311,150 |   | 4,830 |   |
| Currencies               |       | 262,170                      |       | 0.34 | % | 530,110 |   | 79,813 |   |
|                     |       |                         |       |   |   |   |   |   |   |
| TOTAL                    |       | $                            | 7,096,371  |   | 9.11 | % | $ | 13,389,761 |   | $ | 3,936,552 |   |

 

----

(3) AverageCapitalization of Aspect Class DT is $77,891,408.

 

**Aspect Class DT (3)**

 
| ** **               | ** ** | **September 30,  2008** | ** ** |
|--------------------------|------------|------------------------------|------------|
| ** **               | ** ** | **Average**                  | ** ** | **% of  Average** | ** ** | **Highest  Value** | ** ** | **Lowest  Value** | ** ** |
| **Market Sector**        | ** ** | **Value at  Risk**           | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                     |       |                         |       |   |   |   |   |   |   |
| Agricultural Commodities |       | $                            | 241,393    |   | 0.26 | % | $ | 947,471 |   | $ | 43,210 |   |
| Energy                   |       | 395,254                      |       | 0.43 | % | 1,308,260 |   | 64,661 |   |
| Interest Rates           |       | 5,857,216                    |       | 6.40 | % | 12,279,096 |   | 2,395,254 |   |
| Metals                   |       | 159,522                      |       | 0.17 | % | 600,820 |   | 41,055 |   |
| Stock Indices            |       | 500,335                      |       | 0.55 | % | 1,541,995 |   | 109,611 |   |
| Currencies               |       | 902,600                      |       | 0.99 | % | 2,652,160 |   | 118,809 |   |
|                     |       |                         |       |   |   |   |   |   |   |
| TOTAL                    |       | $                            | 8,056,320  |   | 8.80 | % | $ | 19,329,802 |   | $ | 2,772,600 |   |

 

----

(3) Averagecapitalization of Aspect Class DT is $93,896,553

 

17

----

 

**ChesapeakeClass DT (4)**

 
| ** **               | ** ** | **September 30,  2009** | ** ** |
|--------------------------|------------|------------------------------|------------|
| ** **               | ** ** | **Average**                  | ** ** | **% of  Average** | ** ** | **Highest  Value** | ** ** | **Lowest  Value** | ** ** |
| **Market Sector**        | ** ** | **Value at Risk**            | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                     |       |                         |       |   |   |   |   |   |   |
| Agricultural Commodities |       | $                            | 293,815    |   | 0.38 | % | $ | 1,094,739 |   | $ | 63,584 |   |
| Energy                   |       | 592                          |       | 0.00 | % | 2,675 |   | — |   |
| Interest Rates           |       | 3,378,371                    |       | 4.32 | % | 5,206,278 |   | 2,805,646 |   |
| Metals                   |       | 310,447                      |       | 0.40 | % | 1,518,073 |   | 28,105 |   |
| Stock Indices            |       | 5,373                        |       | 0.01 | % | 46,912 |   | — |   |
| Stock Futures            |       | 121,849                      |       | 0.16 | % | 939,315 |   | — |   |
| Currencies               |       | 156,666                      |       | 0.20 | % | 821,250 |   | 18,950 |   |
|                     |       |                         |       |   |   |   |   |   |   |
| TOTAL                    |       | $                            | 4,267,113  |   | 5.47 | % | $ | 9,629,242 |   | $ | 2,916,285 |   |

 

----

(4) Averagecapitalization of Chesapeake Class DT is $78,191,176.

 

**ChesapeakeClass DT (4) **

 
| ** **               | ** ** | **September 30,  2008** | ** ** |
|--------------------------|------------|------------------------------|------------|
| ** **               | ** ** | **Average**                  | ** ** | **% of  Average** | ** ** | **Highest  Value** | ** ** | **Lowest  Value** | ** ** |
| **Market  Sector**       | ** ** | **Value at  Risk**           | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                     |       |                         |       |   |   |   |   |   |   |
| Agricultural Commodities |       | $                            | 722,109    |   | 0.80 | % | $ | 1,553,661 |   | $ | 52,413 |   |
| Energy                   |       | 609,942                      |       | 0.67 | % | 1,164,921 |   | 148,521 |   |
| Interest Rates           |       | 5,547,827                    |       | 6.12 | % | 7,411,443 |   | 2,662,525 |   |
| Metals                   |       | 311,679                      |       | 0.34 | % | 649,969 |   | 23,557 |   |
| Stock Indices            |       | —                       |       | — |   | — |   | — |   |
| Stock Futures            |       | 145,025                      |       | 0.16 | % | 272,806 |   | 25,587 |   |
| Currencies               |       | 1,030,812                    |       | 1.14 | % | 2,237,366 |   | 50,515 |   |
|                     |       |                         |       |   |   |   |   |   |   |
| TOTAL                    |       | $                            | 8,367,394  |   | 9.23 | % | $ | 13,290,166 |   | $ | 2,963,118 |   |

 

----

(4) Averagecapitalization of Chesapeake Class DT is $90,610,908

 

18

----

** **

**TranstrendClass DT (2) **

 
| ** **               | ** ** | **September 30,  2009** | ** ** |
|--------------------------|------------|------------------------------|------------|
| ** **               | ** ** | **Average**                  | ** ** | **% of  Average** | ** ** | **Highest  Value** | ** ** | **Lowest  Value** | ** ** |
| **Market  Sector**       | ** ** | **Value at  Risk**           | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                     |       |                         |       |   |   |   |   |   |   |
| Agricultural Commodities |       | $                            | 155,567    |   | 0.20 | % | $ | 562,008 |   | $ | 51,300 |   |
| Energy                   |       | 168,859                      |       | 0.22 | % | 380,514 |   | 18,625 |   |
| Interest Rates           |       | 5,061,779                    |       | 6.48 | % | 6,904,671 |   | 2,815,246 |   |
| Metals                   |       | 42,640                       |       | 0.05 | % | 116,540 |   | 1,286 |   |
| Stock Indices            |       | 261,033                      |       | 0.33 | % | 536,538 |   | 15,815 |   |
| Currencies               |       | 163,891                      |       | 0.21 | % | 458,800 |   | 28,543 |   |
|                     |       |                         |       |   |   |   |   |   |   |
| TOTAL                    |       | $                            | 5,853,769  |   | 7.49 | % | $ | 8,959,071 |   | $ | 2,930,815 |   |

 

----

(2) Averagecapitalization of Transtrend Class DT is $78,108,343.

 

**Transtrend Class DT (2) **

 
| ** **               | ** ** | **September 30,  2008** | ** ** |
|--------------------------|------------|------------------------------|------------|
| ** **               | ** ** | **Average**                  | ** ** | **% of  Average** | ** ** | **Highest  Value** | ** ** | **Lowest  Value** | ** ** |
| **Market Sector**        | ** ** | **Value at Risk**            | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                     |       |                         |       |   |   |   |   |   |   |
| Agricultural Commodities |       | $                            | 215,269    |   | 0.24 | % | $ | 674,101 |   | $ | 10,637 |   |
| Energy                   |       | 350,408                      |       | 0.38 | % | 995,085 |   | 6,944 |   |
| Interest Rates           |       | 3,552,176                    |       | 3.88 | % | 5,308,263 |   | 1,238,743 |   |
| Metals                   |       | 166,558                      |       | 0.18 | % | 424,722 |   | 6,155 |   |
| Stock Indices            |       | 326,431                      |       | 0.36 | % | 647,767 |   | 36,582 |   |
| Currencies               |       | 970,445                      |       | 1.06 | % | 2,181,241 |   | 34,569 |   |
|                     |       |                         |       |   |   |   |   |   |   |
| TOTAL                    |       | $                            | 5,581,287  |   | 6.10 | % | $ | 10,231,179 |   | $ | 1,333,630 |   |

 

----

(2) Averagecapitalization of Transtrend Class DT is $91,576,546

 

19

----

 

**Winton Class DT (5) **

 
| ** **               | ** ** | **September 30,  2009** | ** ** |
|--------------------------|------------|------------------------------|------------|
| ** **               | ** ** | **Average**                  | ** ** | **% of  Average** | ** ** | **Highest  Value** | ** ** | **Lowest  Value** | ** ** |
| **Market Sector**        | ** ** | **Value at Risk**            | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                     |       |                         |       |   |   |   |   |   |   |
| Agricultural Commodities |       | $                            | 30,448     |   | 0.04 | % | $ | 65,918 |   | $ | 972 |   |
| Energy                   |       | 16,331                       |       | 0.02 | % | 31,411 |   | 3,328 |   |
| Interest Rates           |       | 3,246,606                    |       | 4.15 | % | 3,918,487 |   | 2,833,971 |   |
| Metals                   |       | 30,025                       |       | 0.04 | % | 100,968 |   | 5,443 |   |
| Stock Indices            |       | 69,240                       |       | 0.09 | % | 164,195 |   | 24,291 |   |
| Currencies               |       | 218,561                      |       | 0.28 | % | 430,518 |   | 58,380 |   |
|                     |       |                         |       |   |   |   |   |   |   |
| TOTAL                    |       | $                            | 3,611,211  |   | 4.62 | % | $ | 4,711,497 |   | $ | 2,926,385 |   |

 

----

(5) Averagecapitalization of Winton Class DT is $78,176,177.

 

**Winton Class DT (5) **

 
| ** **               | ** ** | **September 30,  2008** | ** ** |
|--------------------------|------------|------------------------------|------------|
| ** **               | ** ** | **Average**                  | ** ** | **% of  Average** | ** ** | **Highest  Value** | ** ** | **Lowest  Value** | ** ** |
| **Market  Sector**       | ** ** | **Value at  Risk**           | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                     |       |                         |       |   |   |   |   |   |   |
| Agricultural Commodities |       | $                            | 210,848    |   | 0.23 | % | $ | 415,239 |   | $ | 14,972 |   |
| Energy                   |       | 228,324                      |       | 0.25 | % | 475,878 |   | 50,875 |   |
| Interest Rates           |       | 2,835,664                    |       | 3.09 | % | 4,389,100 |   | 1,947,030 |   |
| Metals                   |       | 141,688                      |       | 0.15 | % | 273,542 |   | 1,806 |   |
| Stock Indices            |       | 362,852                      |       | 0.40 | % | 1,167,926 |   | 10,537 |   |
| Currencies               |       | 638,225                      |       | 0.70 | % | 1,139,168 |   | 131,611 |   |
|                     |       |                         |       |   |   |   |   |   |   |
| TOTAL                    |       | $                            | 4,417,601  |   | 4.82 | % | $ | 7,860,853 |   | $ | 2,156,831 |   |

 

----

(5) Averagecapitalization of Winton Class DT is $41,933,983

 

20

----

 

MaterialLimitations on Value at Risk as an Assessment of Market Risk

 

Theface value of the market sector instruments held by the Portfolio Funds aretypically many times the applicable maintenance margin requirement (maintenancemargin requirements generally ranging between approximately 1% and 10% ofcontract face value) as well as many times the capitalization of the PortfolioFunds.  The magnitude of the PortfolioFunds open positions’ creates a “risk of ruin” not typically found in mostother investment vehicles.  Because ofthe size of its positions, certain market conditions — unusual, buthistorically recurring from time to time — could cause the Portfolio Funds toincur severe losses over a short period of time.   The foregoing Value at Risk table — as wellas the past performance of the Portfolio Funds — gives no indication of this “riskof ruin.”

 

Non-Trading Risk

 

Foreign Currency Balances; Cash on Deposit with MLPF&S

 

The Portfolio Funds have non-trading market risk on its foreign cashbalances not needed for margin. These balances (as well as the market risk theyrepresent) are generally immaterial.

 

The Portfolio Funds also have non-trading market risk on theapproximately 90-95% of its assets which are held in cash at MLPF&S.  The value of this cash is not interest ratesensitive, but there is cash flow risk in that if interest rates decline sowill the cash flow generated on these monies. This cash flow risk is immaterial.

 

Qualitative Disclosures Regarding Primary Trading Risk Exposures

 

The following qualitative disclosures regarding thePartnership’s market risk exposures through the Portfolio Funds after thechange in structure— except for (i) those disclosures that are statementsof historical fact and (ii) the descriptions of how the Partnershipmanages its primary market risk exposures constitute forward-looking statementswithin the meaning of Section 27A of the Securities Act and Section 21Eof the Securities Exchange Act.  ThePartnership’s primary market risk exposures as well as the strategies used andto be used by MLAI and the trading advisors of the Portfolio Funds for managingsuch exposures are subject to numerous uncertainties, contingencies and risks,any one of which could cause the actual results of the risk controls for thePartnership and for the trading conducted through Portfolio Funds to differmaterially 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 of ManagingRisk Exposure

 

#### **Trading Risk**

#### ** **

MLAIhas procedures in place intended to control market risk, although there can beno 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 from pastpractice and trading policies or to be trading erratically, MLAI basic riskcontrol procedures consist simply of the ongoing process of monitoring thePortfolio Funds with the market risk controls being applied by the PortfolioFunds.

 

21

----

 

Risk Management

 

Portfolio Funds attempt to control risk inall aspects of the investment process — from confirmation of a trend todetermining the optimal exposure in a given market, and to money managementissues such as the startup or upgrade of investor accounts.  Portfolio Funds double check the accuracy ofmarket data, and will not trade a market without multiple price sources foranalytical input.  In constructing aportfolio, Portfolio Funds seek to control overall risk as well as the risk ofany one position, and Portfolio Funds trade only markets that have beenidentified as having positive performance characteristics.  Trading discipline requires plans for theexit of a market as well as for entry. Portfolio Funds factor the point of exit into the decision to enter(stop loss).  The size of Portfolio Fund’spositions in a particular market is not a matter of how large a return can begenerated but of how much risk it is willing to take relative to that expectedreturn.

 

Toattempt to reduce the risk of volatility while maintaining the potential forexcellent performance, proprietary research is conducted on an ongoing basis torefine 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.

 

PortfolioFunds may determine that risks arise when markets are illiquid or erratic,which may occur cyclically during holiday seasons, or on the basis ofirregularly occurring market events.  Insuch cases, Portfolio Funds at its sole discretion may overridecomputer-generated signals and may at times use discretion in the applicationof its quantitative models, which may affect performance positively ornegatively.

 

Adjustmentsin position size in relation to account equity have been and continue to be anintegral part of Portfolio Fund’s investment strategy.  At its discretion, Portfolio Funds may adjustthe size of a position in relation to equity in certain markets or entireprograms.  Such adjustments may be madeat certain times for some programs but not for others.  Factors which may affect the decision toadjust the size of a position in relation to account equity include ongoingresearch, program volatility, assessments of current market volatility and riskexposure, subjective judgment, and evaluation of these and other general marketconditions.

 

## ***Non-TradingRisk***

## *** ***

ThePartnership and the Portfolio Funds control the non-trading exchange rate riskby regularly converting foreign currency balances back into U.S. dollars atleast once per week and more frequently if a particular foreign currencybalance becomes unusually high.

 

ThePartnership and the Portfolio Funds have cash flow interest rate risk on itscash on deposit with MLPF&S in that declining interest rates would causethe 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.

 

22

----

 

Item4T. Control and Procedures

 

MLAI, the Sponsorof the Partnership with the participation of the Sponsor’s Chief ExecutiveOfficer and the Chief Financial Officer, has evaluated the effectiveness of thedesign and operation of its disclosure controls and procedures with respect tothe Partnership as of the end of the period of this quarterly report, and,based on this evaluation, has concluded that these disclosure controls andprocedures are effective.  Additionally,there were no changes in the Partnership’s internal controls or in otherfactors during the latest fiscal quarter that has materially affected, or isreasonably likely to materially affect, the funds’ internal control overfinancial reporting.

 

PART II - OTHER INFORMATION

 

Item 1.             LegalProceedings

 

None.

 

Item 1A:  RiskFactors

 

Thereare no material changes from risk factors as previously disclosed in the AnnualReport on Form 10-K for the year ended December 31, 2008, filed March 31,2009.

 

Item 2.                                                             Unregistered Sales of Securities and Useof Proceeds

 

(a)          Issuance to accredited investors pursuantto Regulation D and Section 4(6) under the Securities Act.  The selling agent of the following Class ofUnits was MLPF&S

 
| ** ** | ** ** | **Subscription** | ** ** | ** ** | ** ** |
|------------|------------|------------------|------------|------------|------------|
| ** ** | ** ** | **Amount**       | ** ** | **Units**  | ** ** | **NAV** | ** ** |
| Jan-09     |       | $                | 1,288,226  |       | $          | 6,467 |   | 199.20 |   |
| Feb-09     |       | 814,123          |       | 4,080      |       | 199.54 |   |
| Mar-09     |       | 1,082,868        |       | 5,441      |       | 199.02 |   |
| Apr-09     |       | 741,486          |       | 3,829      |       | 193.65 |   |
| May-09     |       | 5,878,325        |       | 31,155     |       | 188.68 |   |
| Jun-09     |       | 822,636          |       | 4,439      |       | 185.32 |   |
| Jul-09     |       | 2,004,330        |       | 11,198     |       | 178.99 |   |
| Aug-09     |       | 545,092          |       | 3,107      |       | 175.44 |   |
| Sep-09     |       | 369,842          |       | 2,065      |       | 179.11 |   |
| Oct-09     |       | 771,120          |       | 4,250      |       | 181.44 |   |
|            |            |                  |            |            |            |  |  |  |  |

 

(b) None.

(c) None.

 

Item 3.                               Defaults Upon Senior Securities

 

None.

 

Item 4.                               Submission of Matters to a Vote ofSecurity Holders

 

None.

 

23

----

 

Item 5.                               Other Information

 

None.

 

Item 6.                               Exhibits

 

The followingexhibits are incorporated by reference or are filed herewith to this QuarterlyReport on Form 10-Q:

31.01 and

31.02                                                                     Rule 13a-14(a)/15d-14(a) Certifications

 

Exhibit 31.01

and 31.02                                              Are filed herewith.

 

32.01 and

32.02                                                                     Section 1350 Certifications

 

Exhibit 32.01

and 32.02               Arefiled herewith.

 

24

----

** **

**SIGNATURES**

** **

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 

 
|                          | ML TREND-FOLLOWING  FUTURES FUND L.P. |
|-------------------------------|---------------------------------------|
|                          |                                  |
|                          | By:                                   | MERRILL LYNCH  ALTERNATIVE |
|                          |                                  | INVESTMENTS LLC |
|                          |                                  | (General Partner) |
|                          |                                  |
|                          |                                  |
| Date: November 12,  2009 | By                                    | /s/ JUSTIN C.  FERRI |
|                          |                                  | Justin  C. Ferri |
|                          |                                  | Chief Executive Officer  and President |
|                          |                                  | (Principal Executive  Officer) |
|                          |                                  |   |
|                          |                                  |   |
| Date: November 12,  2009 | By                                    | /s/ BARBRA E. KOCSIS |
|                          |                                  | Barbra E. Kocsis |
|                          |                                  | Chief Financial Officer |
|                          |                                  | (Principal Financial  and Accounting Officer) |

 

25

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