**UNITED STATES SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-Q**

 

**(Mark One)**

 

**x**** QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For thequarterly period ended June 30, 2008**

 

**OR**

 

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

 

**For the transition period from                      ****to                      **

 

**CommissionFile Number 0-28928**

 

**ML TREND-FOLLOWING FUTURES FUNDL.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/o Merrill Lynch AlternativeInvestments LLC**

**Two World FinancialCenter, 7****th****Floor**

**New York, New York 10281**

(Address of principalexecutive offices)

(Zip Code)

 

**212-236-1974**

(Registrant’s telephone number, including area code)

 

**Hopewell Corporate Campus,Building No. 2**

**1200 Merrill Lynch Drive-First floor, Pennington, New Jersey 08534**

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

 

Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days.

Yes x     No o

 

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

 

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

 

Indicateby check mark whether registrant is a shell company (as defined by Rule 12b-2of the Exchange Act).

Yes o  No x

 

Indicateby check mark whether the registrant has filed all documents and reportsrequired to be filed by Sections 12, 13 or 15(d) of the SecuritiesExchange Act of 1934 subsequent to the distribution of securities under a planconfirmed by a court.          Yes o  No o

 

Thelimited partnership units of the registrant are not publicly traded.Accordingly, there is no aggregate market value for registrant’s outstandingequity that is readily determinable.

 

 

 

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

 

QUARTERLY REPORT FOR JUNE 30, 2008 ON FORM 10-Q

 
| ** ** | ** **                                                                                  | **PAGE** |
|------------|---------------------------------------------------------------------------------------------|----------|
|       | PART I                                                                                 |     |
|       |                                                                                        |     |
| Item 1.    | Financial Statements                                                                        | 2        |
|       |                                                                                        |     |
| 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 4.    | Controls and  Procedures                                                                    | 21       |
|       |                                                                                        |     |
|       | PART II                                                                                |     |
|       |                                                                                        |     |
| Item 1.    | Legal Proceedings                                                                           | 22       |
|       |                                                                                        |     |
| Item 1A.   | Risk Factor                                                                                 | 22       |
|       |                                                                                        |     |
| Item 2.    | Unregistered  Sales of Securities and Use of Proceeds                                       | 24       |
|       |                                                                                        |     |
| Item 3.    | Defaults  Upon Senior Securities                                                            | 24       |
|       |                                                                                        |     |
| Item 4.    | Submission  of Matters to a Vote of Security Holders                                        | 24       |
|       |                                                                                        |     |
| Item 5.    | Other Information                                                                           | 24       |
|       |                                                                                        |     |
| Item 6.    | Exhibits                                                                                    | 25       |

 

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PART I - FINANCIALINFORMATION

 

Item 1.  Financial Statements

 

ML TREND-FOLLOWING FUTURES FUND L.P.(a Delaware Limited Partnership)

 

STATEMENTS OF FINANCIAL CONDITION

 
| ** **                                                                             | ** ** | **June 30,** | ** **  | **December 31,** | ** ** |
|----------------------------------------------------------------------------------------|------------|-------------------|-------------|-----------------------|------------|
| ** **                                                                             | ** ** | **2008**          | ** **  | **2007**              | ** ** |
| ** **                                                                             | ** ** | **(unaudited)**   | ** **  | ** **            | ** ** |
| ** **                                                                             |       |              |        |                  |       |
| **ASSETS:**                                                                            |       |              |        |                  |       |
| Cash                                                                                   |       | $                 | 727,926     |                  | $          | 225,042 |   |
| Investments in Portfolio Funds (cost  $300,577,611 for 2008 and $347,355,241 for 2007) |       | 383,197,980       |        | 369,982,077           |       |
| Due from Portfolio Funds                                                               |       | 8,408,505         |        | 17,014,386            |       |
| Other                                                                                  |       | 69,787            |        | 59,180                |       |
|                                                                                   |       |              |        |                  |       |
| **TOTAL  ASSETS**                                                                      |       | $                 | 392,404,198 |                  | $          | 387,280,685 |   |
| ** **                                                                             |       |              |        |                  |       |
| **LIABILITIES  AND PARTNERS’ CAPITAL**                                            |       |              |        |                  |       |
| **LIABILITIES:**                                                                       |       |              |        |                  |       |
| Wrap fee payable                                                                       |       | 1,305,546         |        | 1,290,255             |       |
| Redemptions payable                                                                    |       | 7,108,263         |        | 15,662,095            |       |
| Other                                                                                  |       | 744,993           |        | 209,053               |       |
|                                                                                   |       |              |        |                  |       |
| Total liabilities                                                                      |       | 9,158,802         |        | 17,161,403            |       |
|                                                                                   |       |              |        |                  |       |
| **PARTNERS’  CAPITAL:**                                                           |       |              |        |                  |       |
| General Partner (42,282 and 42,282 Units)                                              |       | 8,176,370         |        | 6,943,734             |       |
| Limited Partners (1,947,278 and 2,211,461  Units)                                      |       | 375,069,026       |        | 363,175,548           |       |
|                                                                                   |       |              |        |                  |       |
| Total partners’ capital                                                           |       | 383,245,396       |        | 370,119,282           |       |
|                                                                                   |       |              |        |                  |       |
| **TOTAL  LIABILITIES AND PARTNERS’ CAPITAL**                                      |       | $                 | 392,404,198 |                  | $          | 387,280,685 |   |
| ** **                                                                             |       |              |        |                  |       |
| **NET  ASSET VALUE PER UNIT**                                                          |       |              |        |                  |       |
| Based on 1,989,560 and 2,253,743 Units  outstanding and unlimited Units authorized     |       | $                 | 192.63      |                  | $          | 164.22 |   |

 

See notes to financial statements.

 

2

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ML TREND-FOLLOWING FUTURES FUND L.P.

(a Delaware Limited Partnership)

STATEMENTS OF OPERATIONS

(unaudited)

 
| ** **                                                                        | ** ** | **For the three** | ** ** | **For the three** | ** ** | **For the six** | ** ** | **For the six** | ** ** |
|-----------------------------------------------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|---------------------------|------------|---------------------------|------------|
| ** **                                                                        | ** ** | **months ended**       | ** ** | **months ended**       | ** ** | **months ended**     | ** ** | **months ended**     | ** ** |
| ** **                                                                        | ** ** | **June 30,**           | ** ** | **June 30,**           | ** ** | **June 30,**         | ** ** | **June 30,**         | ** ** |
| ** **                                                                        | ** ** | **2008**                    | ** ** | **2007**                    | ** ** | **2008**                  | ** ** | **2007**                  | ** ** |
| ** **                                                                        |       |                        |       |                        |       |                      |       |                      |       |
| **TRADING  PROFIT (LOSS):**                                                       |       |                        |       |                        |       |                      |       |                      |       |
| ** **                                                                        |       |                        |       |                        |       |                      |       |                      |       |
| Realized                                                                          |       | $                           | 4,247,342  |                        | $          | 9,679,789                 |       | 8,914,302                 |       | $ | (65,942,559 | ) |
| Change in unrealized                                                              |       | 24,952,396                  |       | 14,788,610                  |       | 59,993,533                |       | 3,189,185                 |       |
|                                                                              |       |                        |       |                        |       |                      |       |                      |       |
| Total trading profit (loss)                                                       |       | 29,199,738                  |       | 24,468,399                  |       | 68,907,835                |       | (62,753,374               | )          |
|                                                                              |       |                        |       |                        |       |                      |       |                      |       |
| **INVESTMENT  INCOME:**                                                           |       |                        |       |                        |       |                      |       |                      |       |
| ** **                                                                        |       |                        |       |                        |       |                      |       |                      |       |
| Interest                                                                          |       | 1,903                       |       | 4,674,750                   |       | 4,248                     |       | 13,900,096                |       |
|                                                                              |       |                        |       |                        |       |                      |       |                      |       |
| **EXPENSES:**                                                                     |       |                        |       |                        |       |                      |       |                      |       |
| ** **                                                                        |       |                        |       |                        |       |                      |       |                      |       |
| Wrap fee                                                                          |       | 3,816,647                   |       | 1,599,426                   |       | 7,731,891                 |       | 1,599,426                 |       |
| Brokerage commissions                                                             |       | —                      |       | 5,215,580                   |       | —                    |       | 15,400,942                |       |
| Administrative and filing fees                                                    |       | —                      |       | 268,431                     |       |                      |       | 773,773                   |       |
| Ongoing offering costs                                                            |       | —                      |       | —                      |       | —                    |       | 25,000                    |       |
| Other                                                                             |       | —                      |       | —                      |       | 343,750                   |       | —                    |       |
|                                                                              |       |                        |       |                        |       |                      |       |                      |       |
| Total expenses                                                                    |       | 3,816,647                   |       | 7,083,437                   |       | 8,075,641                 |       | 17,799,141                |       |
| ** **                                                                        |       |                        |       |                        |       |                      |       |                      |       |
| **NET  INVESTMENT INCOME (LOSS)**                                                 |       | (3,814,744                  | )          | (2,408,687                  | )          | (8,071,393                | )          | (3,899,045                | )          |
| ** **                                                                        |       |                        |       |                        |       |                      |       |                      |       |
| **INCOME (LOSS) BEFORE MINORITY INTEREST**                                        |       | 25,384,994                  |       | 22,059,712                  |       | 60,836,442                |       | (66,652,419               | )          |
| ** **                                                                        |       |                        |       |                        |       |                      |       |                      |       |
| Minority interest in (income) loss                                                |       | —                      |       | (3,330                      | )          | —                    |       | 18,048                    |       |
|                                                                              |       |                        |       |                        |       |                      |       |                      |       |
| **NET  INCOME (LOSS)**                                                            |       | $                           | 25,384,994 |                        | $          | 22,056,382                |       | 60,836,442                |       | $ | (66,634,371 | ) |
| ** **                                                                        |       |                        |       |                        |       |                      |       |                      |       |
| **NET  INCOME (LOSS) PER UNIT:**                                                  |       |                        |       |                        |       |                      |       |                      |       |
| Weighted average number of General Partner and Limited Partner Units  outstanding |       | 2,065,146                   |       | 3,276,519                   |       | 2,131,548                 |       | 3,779,536                 |       |
|                                                                              |       |                        |       |                        |       |                      |       |                      |       |
| Net income (loss) per weighted average                                            |       |                        |       |                        |       |                      |       |                      |       |
| General Partner and Limited Partner Unit                                          |       | $                           | 12.29      |                        | $          | 6.73                      |       | $                         | 28.54      |   | $ | (17.63 | ) |
|                                                                                   |            |                             |            |                             |            |                           |            |                           |            |  |  |  |  |

 

See notes to financial statements.

 

3

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ML TREND-FOLLOWING FUTURESFUND L.P.

(aDelaware Limited Partnership)

 

STATEMENTS OF CHANGES INPARTNERS’ CAPITAL

For the six months endedJune 30, 2008 and 2007

(unaudited)

 
| ** **                                     | ** ** | ** ** | ** ** | **General** | ** ** | **Limited**  | ** ** | ** **   | ** ** |
|------------------------------------------------|------------|------------|------------|-------------|------------|--------------|------------|--------------|------------|
| ** **                                     | ** ** | **Units**  | ** ** | **Partner** | ** ** | **Partners** | ** ** | **Total**    | ** ** |
|                                           |       |       |       |        |       |         |       |         |       |
| PARTNERS’ CAPITAL, December 31, 2006 |       | 4,511,816  |       | $           | 8,204,766  |         | $          | 784,098,296  |       | $ | 792,303,062 |   |
| Subscriptions                                  |       | 224,956    |       | —      |       | 36,090,162   |       | 36,090,162   |       |
| Net income (loss)                              |       | —     |       | (704,866    | )          | (65,929,505  | )          | (66,634,371  | )          |
| Redemptions                                    |       | (1,839,658 | )          | (687,107    | )          | (294,538,653 | )          | (295,225,760 | )          |
|                                           |       |       |       |        |       |         |       |         |       |
| PARTNERS’ CAPITAL, June 30, 2007     |       | 2,897,114  |       | $           | 6,812,793  |         | $          | 459,720,300  |       | $ | 466,533,093 |   |
| PARTNERS’ CAPITAL, December 31, 2007 |       | 2,253,743  |       | $           | 6,943,734  |         | $          | 363,175,548  |       | $ | 370,119,282 |   |
| Subscriptions                                  |       | 8,882      |       | —      |       | 1,590,071    |       | 1,590,071    |       |
| Net income (loss)                              |       | —     |       | 1,232,636   |       | 59,603,806   |       | 60,836,442   |       |
| Redemptions                                    |       | (273,065   | )          | —      |       | (49,300,399  | )          | (49,300,399  | )          |
| PARTNERS’ CAPITAL,June 30, 2008      |       | 1,989,560  |       | $           | 8,176,370  |         | $          | 375,069,026  |       | $ | 383,245,396 |   |

 

See notes to financial statements.

 

4

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ML TREND-FOLLOWING FUTURESFUND L.P.

(a Delaware Limited Partnership)

 

NOTES TO FINANCIALSTATEMENTS

(unaudited)

 

1.              SUMMARY OF SIGNIFICANT 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. The Partnership operates as a “fund of funds”,allocating and reallocating its capital, under the discretion of Merrill LynchAlternative Investments LLC (“MLAI”), the general partner of the Partnership,among four underlying FuturesAccess Funds (each a “Portfolio Fund” andcollectively the “Portfolio Funds”) (See Note 2).

 

In the opinion of management, the financial statements contain alladjustments necessary to present fairly the financial position of thePartnership as of June 30, 2008 and the results of its operations for thethree and six months ended June 30, 2008 and 2007. However, the operatingresults for the interim periods may not be indicative of the results for thefull year.

 

On April 20, 2007, MLAI issued an announcement regarding arestructuring of the Partnership, effective June 1, 2007. As part of therestructuring the following occurred:

 

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

 

·           The Partnership’s assets were reinvested in MLAI-sponsored PortfolioFunds: ML Aspect FuturesAccess LLC (“Aspect”), ML Chesapeake FuturesAccess LLC(“Chesapeake”), ML Transtrend DTP Enhanced FuturesAccess LLC (“Transtrend”) andML Winton FuturesAccess LLC (“Winton”). These Portfolio Funds employ a varietyof systematic models with an emphasis on a style of investment commonlyreferred to as “diversified trend following” and the Partnership no longerutilizes the services of John W. Henry & Company, Inc. as thecommodity trading advisor.

 

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

 

·           Prior to June 1, 2007, the Partnership’s brokerage commissions andadministrative fees constituted a single annual “wrap fee” in an amount of 6.0%of the Partnership’s average month-end Net Asset Value, which covered all ofthe Partnership’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.

 

Certain information and footnote disclosures normally included inannual financial statements prepared in conformity with accounting principlesgenerally accepted in the United States of America (“U.S. GAAP”) have beenomitted. It is suggested that these financial statements be read in conjunctionwith the financial statements and notes thereto included in the Partnership’sand the Portfolio Funds’ Annual Reports on Form 10-K filed with theSecurities and Exchange Commission for the year ended December 31, 2007.Certain prior period items have been reclassified to conform to the currentperiod presentation.

 

5

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The preparation of financial statements in conformity with U.S. GAAPrequires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities and disclosure of contingent assets andliabilities at the date of the financial statements and the reported amounts ofrevenues and expenses during the reporting period. Actual results could differfrom those estimates.

 

2.              INVESTMENTS IN PORTFOLIO FUNDS

 

MLAI may, in its discretion, change Portfolio Funds at any time. MLAImay vary the percentage of the Partnership’s total portfolio allocated to thedifferent Portfolio Funds at MLAI’s discretion. There is no pre-establishedrange for the minimum and maximum allocations that may be made to any givenPortfolio Funds.

 

June 30, 2008

 
| ** **                                                             | ** ** | ** **          | ** **  | **Percentage of**          | ** ** |
|------------------------------------------------------------------------|------------|---------------------|-------------|---------------------------------|------------|
| ** **                                                             | ** ** | **Fair Value** | ** **  | **Partners’ Capital** | ** ** |
| ML  Chesapeake FuturesAccess LLC                                       |       | 96,089,334          |        | 25.07                           | %          |
| ML Transtrend DTP Enhanced FuturesAccess  LLC                          |       | 94,862,848          |        | 24.75                           | %          |
| ML Aspect FuturesAccess LLC                                            |       | 96,122,900          |        | 25.08                           | %          |
| ML Winton FuturesAccess LLC                                            |       | 96,122,898          |        | 25.08                           | %          |
|                                                                   |       |                |        |                            |       |
| Total Investment in Portfolio Funds at fair  value (cost $300,577,611) |       | $                   | 383,197,980 |                            | 99.98      | % |
|                                                                        |            |                     |             |                                 |            |  |

 

December 31,2007

 
| ** **                                                             | ** ** | ** **          | ** **  | **Percentage of**          | ** ** |
|------------------------------------------------------------------------|------------|---------------------|-------------|---------------------------------|------------|
| ** **                                                             | ** ** | **Fair Value** | ** **  | **Partners’ Capital** | ** ** |
| ML Winton FuturesAccess LLC                                            |       | 92,508,127          |        | 24.99                           | %          |
| ML Aspect FuturesAccess LLC                                            |       | 92,508,126          |        | 24.99                           | %          |
| ML Transtrend DTP Enhanced FuturesAccess  LLC                          |       | 92,485,147          |        | 24.99                           | %          |
| ML Chesapeake FuturesAccess LLC                                        |       | 92,480,677          |        | 24.99                           | %          |
|                                                                   |       |                |        |                            |       |
| Total Investment in Portfolio Funds at fair  value (cost $347,355,241) |       | $                   | 369,982,077 |                            | 99.96      | % |
|                                                                        |            |                     |             |                                 |            |  |

 

3.              FAIR VALUE OF INVESTMENTS

 

In September 2006, the Financial Accounting Standards Board (“FASB”)issued Statement of Financial Accounting Standards No. 157, Fair ValueMeasurement (“FAS 157”). FAS 157 defines fair value, establishes a frameworkfor measuring fair value and expands disclosures about fair value measurements.The Partnership adopted FAS 157 as of January 1, 2008. The adoption of FAS157 did not have a material impact on the Partnership’s financial statements.

 

Fair value of an investment is the amount that would be received tosell the investment in an orderly transaction between market participants atthe measurement date (i.e. the exit price).

 

FAS 157 established a hierarchal disclosure framework which prioritizesand ranks the level of market price observability used in measuring investmentsat fair value. Market price observability is impacted by a number of factors,including the type of investment and the characteristics specific to theinvestment. Investments with readily available active quoted prices or forwhich 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.

 

6

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Investments measured and reported at fair value are classified anddisclosed in one of the following categories:

 

Level I – Quoted prices are available in active markets for identicalinvestments as of the reporting date. The type of investments included in LevelI are publicly traded investments.

 

Level II – Pricing inputs are other than quoted prices in activemarkets, which are either directly or indirectly observable as of the reportingdate, and fair value is determined through the use of models or other valuationmethodologies. Investments which are generally included in this category areinvestments valued using market data.

 

Level III – Pricing inputs are unobservable including the Partnership’sown assumptions in determining the fair value of investments.

 

In certain cases, the inputs used to measure fair value may fall intodifferent levels of the fair value hierarchy. In such cases, an investment’slevel within the fair value hierarchy is based on the lowest level of inputthat is significant to the fair value measurement. The Sponsor’s assessment ofthe significance of a particular input to the fair value measurement in itsentirety requires judgment, and considers factors specific to the investment.

 

The following table summarizes the valuation of the Partnership’sinvestments by the above FAS 157 fair value hierarchy levels as of June 30,2008:

 
| ** **                     | ** ** | **Total** | ** **  | **Level I** | ** ** | **Level II** | ** ** | **Level III** | ** ** |
|--------------------------------|------------|-----------|-------------|------------------|------------|-------------------|------------|--------------------|------------|
| Investments in Portfolio Funds |       | $         | 383,197,980 |             | N/A        |              | $          | 383,197,980        |       | N/A |   |
|                                |            |           |             |                  |            |                   |            |                    |            |  |  |

 

The valuation of the Portfolio Funds’ investments by FAS 157 fair valuehierarchy levels as of June 30, 2008 are Level I and Level II.

 

7

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4.              MARKET, CREDIT AND CONCENTRATION RISKS

 

The nature of thisPartnership has certain risks, which cannot be presented on the financialstatements. Additionally, the Partnership invests in the Portfolio Funds whichhave similar market risk as mentioned. The following summarizes some of thoserisks.

 

Market Risk

 

Derivative instruments involve varying degrees of market risk. Changesin the level or volatility of interest rates, foreign currency exchange ratesor the market values of the financial instruments or commodities underlyingsuch derivative instruments frequently result in changes in the Portfolio Funds’Net unrealized profit (loss) on such derivative instruments as reflected in thePortfolio Funds’ Statements of Financial Condition. The Portfolio Funds’exposure to market risk is influenced by a number of factors, including therelationships among the derivative instruments held by the Portfolio Funds aswell as the volatility and liquidity of the markets in which the derivativeinstruments are traded. Investments in foreign markets may also entail legaland political risks.

 

Credit Risk

 

The risks associated with exchange-traded contracts are typicallyperceived to be less than those associated with over-the-counter(non-exchange-traded) transactions, because exchanges typically (but notuniversally) provide clearinghouse arrangements in which the collective credit(in some cases limited in amount, in some cases not) of the members of theexchange is pledged to support the financial 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 besubject to loss in the event of a default, are generally required in exchangetrading, and counterparties may also require margin in the over-the-countermarkets.

 

The credit risk associated with these instruments from counterpartynonperformance is the Net unrealized profit, if any, included in the PortfolioFunds’ Statements of Financial Condition. The Portfolio Funds attempt tomitigate this risk by dealing exclusively with Merrill Lynch entities asclearing brokers.

 

The Portfolio Funds, in their normal course of business, enter intovarious contracts, with Merrill Lynch Pierce Fenner & Smith Inc. (“MLPF&S”)acting as their commodity broker. Pursuant to the brokerage arrangement withMLPF&S (which includes a netting arrangement), to the extent that suchtrading results in receivables from and payables to MLPF&S, thesereceivables and payables are offset and reported as a net receivable or payableand included in Net unrealized profit (loss) on open contracts on the PortfolioFunds’ Statements of Financial Condition.

 

Concentration Risk

 

The Partnership’s investments in the Portfolio Funds are subject to themarket and credit risk of the Portfolio Funds. Because the majority of thePartnership’s capital is invested in the Portfolio Funds, any changes in themarket conditions that would adversely affect the Portfolio Funds couldsignificantly impact the solvency of the Partnership.

 

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5.              RECENT ACCOUNTING PRONOUNCEMENTS

 

In March 2008, the FASBreleased Statement of Financial Accounting Standards No. 161, Disclosuresabout Derivative Instruments and Hedging Activities – an amendment to FASBStatement No. 133 (“FAS 161”). FAS 161 requires qualitative disclosuresabout objectives and strategies for using derivatives, quantitative disclosuresabout fair value amounts of and gains and losses on derivative instruments, anddisclosures about credit-risk related contingent features in derivativeagreements. The application of FAS 161 is required for fiscal years beginningafter November 15, 2008 and interim periods within those fiscal years.Currently, the Partnership is evaluating the implications of FAS 161 on itsfinancial statements.

 

In May 2008, the FASB issued Statement of Financial AccountingStandards No. 162, “*The**Hierarchy of Generally Accepted Accounting Principles*”(“FAS 162”). FAS 162 identifies the**sourcesof accounting principles and the framework for selecting the accountingprinciples used in preparing financial statements of nongovernmental entitiesthat are presented in conformity with U.S. GAAP. Currently, U.S. GAAP hierarchyis provided in the American Institute of Certified Public Accountants U.S.Auditing Standards (“AU”) Section 411, “*TheMeaning of Present Fairly in**ConformityWith Generally Accepted Accounting Principles*” (“AU Section 411”).FAS 162 is**effective 60 daysfollowing the SEC’s approval of the Public Company Accounting Oversight Board’samendments to AU Section 411. The Partnership does not expect the adoptionof FAS 162 to have an impact on its financial statements.

 

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Item2:  Management’s Discussion and Analysisof Financial Condition and Results of Operations

 

MONTH-END NET ASSET VALUE PER UNIT

 
| ** ** | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** | **Apr.** | ** ** | **May** | ** ** | **Jun.** | ** ** |
|------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|---------|------------|----------|------------|
| 2007       |       | $        | 173.44     |     | $          | 164.76   |       | $        | 154.43     |    | $          | 157.93   |       | $ | 157.71 |   | $ | 161.03 |   |
| 2008       |       | $        | 168.36     |     | $          | 184.45   |       | $        | 180.10     |    | $          | 177.98   |       | $ | 182.26 |   | $ | 192.63 |   |

 

Performance Summary

 

January 1, 2008 to June 30,2008

 

January 1, 2008 to March 31,2008

 

The Partnership posted gainsfor the first quarter.

 

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 1.7%, while Chesapeakewas the bottom performer, losing -6.9%. For the 1st 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.

 

10

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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.

 

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.

 

Performance Summary

 

January 1, 2007 to June 30,2007

 

January 1, 2007 to March 31,2007

 

The Partnership posted anoverall loss for the first quarter.

 

Theagriculture sector posted losses for the Partnership. Price instability hurtperformance at the beginning of the quarter as New York coffee fell from a tenmonth high. The rally in coffee had been fueled by speculation that droughtwould reduce Brazil’s harvest. The strong trend then suffered a reversal ascoffee prices in New York suffered their longest slump in thirteen months onspeculation that favorable weather in Brazil might actually boost the harvest.Corn, which suffered a sharp reversal by falling 7.2 % in the first two days ofthe year hurting performance, rebounded along with soybeans benefiting fromspeculation that cold temperatures in the United States would boost demand foralternative fuels made from the nation’s two biggest crops. Corn regained itsstrength and reached a ten year high on January 17th, while soybeans reached an eighteen month high on January 18th. Corn and soybeans continued posting gains for the Partnership throughmid-quarter as soybeans reached their highest level since June 2004, aswet weather threatened to prevent Unites States farmers from planting enoughcrops to meet surging demand for crop-based fuels. Chicago Board of Tradelimited wheat contract gains as it dropped in excess of 2 percent after priceshad reached $5.09, the highest since December 26, 2006, as investorsbailed out of the commodity following the global plunge in equities. As aresult of the plunge in global equity prices investors bailed out ofcommodities as the quarter ended and took profits in corn and soybeans, whichhad just reached multi-year highs. Slight gains were produced in New Yorkcoffee as its weakening trend accelerated due to the fact that coffee fell toits lowest price since November 2006 on signs that supply may be exceedingdemand as stocks piled up in warehouses monitored by the New York Coffee, Sugar &Cocoa Exchange.

 

11

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Theenergy sector also posted losses for the Partnership. Geopolitical events and arecord-breaking heat wave in the Northeastern United States caused volatilitybeginning of the quarter as natural gas prices fell 6.9% after a governmentreport showed a smaller-than-average decline in inventories of the fuel. Followinga government report indicating that the United States supplies of crude oil,gasoline, heating oil and diesel were above the five-year average for theperiod, crude oil prices plunged and reached a nineteen month low of $49.90 abarrel. However, forecasts of colder weather throughout February reversedthe weakening trend and sent energy prices upward. Despite the volatilitywithin the sector, crude oil and London gas oil were able to offset a majorityof the losses. Natural gas reversed its strengthening trend mid-quarter and hadits biggest loss in more than six weeks in New York. Larger- than-expectedsupplies and forecasts of more seasonal temperatures across the central UnitedStates contributed to the reversal. After reaching a two-month high on February 5thfor natural gas March delivery it dropped 7.7 % on February 12th, itsbiggest one-day percentage decline since December 26, 2006. The drop innatural gas price March delivery was spurred by a government report thatU.S. gas supplies were 19 percent higher than the average for the past fiveyears. Crude oil’s reversal also hurt performance as it rose to $61.79 abarrel, its highest closing price this year on speculation that U.S. fuelinventories declined because refineries were down for repairs and also as aresult of the increasing tension with Iran. The quarter ended as natural gasdropped to its lowest price in two months as forecasts for milder weathersignaled reduced consumption of the heating fuel. However, when forecasterspredicted a shift in the weather pattern that would deliver colder-than-normalair to the eastern United States, the sector experienced losses as natural gassuffered a trend reversal as prices rose to a one-month high. While gains wereachieved in crude oil as it continued its weakening trend they were limited ascrude oil spiked higher and traded near a six-month high after Iran seized 15British Naval personnel in the Persian Gulf on March 23rd.

 

Thestock indices posted losses for the Partnership. The beginning of the quarter wasnegative as losses in the NASDAQ E-mini offset the gains of the othercomponents in the sector. Although U.S. stocks completed their longest stretchof monthly gains in more than a decade, intra-month volatility hurt the sectorsoverall performance. On January 13th, U.S. stocks rose the highest in morethan three months. This was due to expectations that profits at technologycompanies, such as Apple Inc. and Microsoft Corp., would increase as newproducts would prompt consumers and businesses to spend more. The NASDAQ had a2.8 percent increase, a level not seen since February 2001. However,stocks fell towards the end of the first quarter after profit reports fromIntel Corp. and IBM caused concern that analysts’ forecasts for earnings atcomputer-related companies were too high. U.S. stocks had their biggest tumblesince 2002 mid-quarter after a plunge in the Chinese equity market caused byconcern that a government crackdown on investments with borrowed money will enda rally that drove benchmarks to records, sparked a global drop in equityprices and raised concerns that investors would unload equities after afour-year bull market. On February 27th, Chinese stocks suffered their greatest loss in a decade, while theDow Jones Stoxx 600 Index dropped 3% and the Dow Jones Industrial Average fellas much as 546 points intraday, the most since the first day of trading after September 11th,2001. The Eurostoxx 50 was the sector’s worst performer while the Nikkei 225offset some losses as the sector’s best performer. The quarter ended as theglobal sell-off that began on February 27th caused more than $2.4 trillion in share value to be lost over fivedays.

 

Themetals sector posted losses for the Partnership. Precious metal prices reactedto fluctuations in the U.S. dollar at the beginning of the quarter as reversalin the U.S. dollar’s weakening trend reduced the appeal of gold as analternative investment. Gold weakened, falling 3.1% after the U.S. dollar roseto a six-week high as the United States announced higher-than-expectedemployment figures in December 2006 only to rise 3.9% as the U.S. dollaronce again weakened and speculation increased that the precious metal’s declinewas excessive. The London Metal Exchange limited the copper sector’s losses ascopper prices fell 10% and 35% since reaching a record high of 8,724 metrictons since May 2006. Copper prices declined amid expectations that ahousing slowdown in the United States, the world’s second-largest user of themetal, would continue to reduce demand this year. Base metals suffered strongreversals mid- quarter as copper, which had been weakening prior to February onreports of rising stockpiles signaled production was exceeding demand andrallied on speculation that China, its largest 

 

12

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user,would accelerate its buying. Performance in gold and silver had limited lossesas prices found further support as they climbed to nine-month highs asescalating tension over Iran’s nuclear research program increased and investorssearched for safe-haven investments. However, as the quarter ended the drop inprice in the equity markets sent precious metals lower, reversing theirstrengthening trend. Although metals eventually began to rally the quarterended down 0.5 percent.

 

Theinterest rate sector posted losses for the Partnership. The quarter began withstronger than expected growth and fears of increasing inflation led Europeanten-year bond yields to reach six-month highs and the U.K. two-year gilt yieldsto move toward five-year highs. U.K. long gilts slumped, which sent yieldssoaring after the Bank of England policy makers unexpectedly raised interestrates by a quarter point. Volatility in the ten-year Japanese Government bondslimited the sector’s performance after Kyodo News reported that the Bank ofJapan was unlikely to raise interest rates at its meeting on January 18th,and the Bank of Japan followed through with no change in rates. The global bondmarkets reversed their weakening trend mid-quarter as the sell-off in theglobal equity markets fueled demand for government debt. The JapaneseGovernment Benchmark ten-year bonds added to the Partnership’s negativeperformance as speculation grew that the Bank of Japan, which doubled interestrates, from .25 to .50, at its February 21st meeting would pause beforeraising borrowing costs any further. This prompted a move higher in the marketand the rally was further supported after the Nikkei 225 stock average postedits biggest decline since June 2006. Fixed-income markets, which hadrallied mid-quarter continued to strengthen as uncertainty increased that thedrop in equities and the rising defaults among the riskiest mortgages wouldslow consumer spending and the global economy. European government bonds postedtheir biggest back-to-back weekly decline in three months as European CentralBank President Jean- Claude Trichet reassured investors and stated that growthwas “broader and sustained” and left “no time for complacency.” The quarterended as the U.S. ten-year Treasury note surrendered the remainder of the gainsit had amassed after the equity sell-off that began on February 27th which had driven the yield to as low as 4.44%.

 

Thecurrency sector posted losses for the Partnership. The quarter began withmarkets anticipating the economic data releases and central bank policyannouncements in the hopes of gaining insight into the health of the world’slargest economies. On January 3rd, the U.S. dollar rose to its highestlevel in six months against the Euro on the news that the Institute for SupplyManagement Manufacturing Index came in at a higher than expected 51.4,signaling an expansion of the U.S. economy. The Japanese yen declined to 122.19per U.S. dollar, the lowest in more than four years, due to speculation thatthere would be increased government pressure on policy makers not to raiseborrowing costs. The U.S. dollar had its largest fall mid-quarter against theJapanese yen in more than two months after U.S. Treasury Secretary Henry Paulsonsaid he would be watching the Japanese currency “very carefully”. The Japaneseyen rallied against the U.S. dollar to its highest level in more than 19 monthsamid a correction in U.S. stocks as the investors avoided emerging marketassets, triggering an unwinding of trades betting on a decline in the Japanesecurrency. The Japanese yen continued to advance against the U.S. dollar andgained against all 16 of the most-active currencies during the first week ofMarch, as global stocks extended a slump. The British pound, the sector’s worstperformer fell to its lowest level against the Japanese yen in more than fourmonths, as in one month the British pound sterling/Japanese yen impliedvolatility soared to a record high of 11.75 due to concerns of rising risk. Thequarter ended with slight gains produced by the Brazilian Real as the currency’sstrengthening trend remained intact and reached a six-year high on speculationthat the U.S. dollar flows from both financial investments and a trade surpluswould remain strong.

 

April 1, 2007 to June 30,2007

 

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

 

Theinterest rate sector was the most profitable sector for the period. The sectorwas negative for April as uncertainty grew over the interest rate policyof the central banks of the world’s two largest economies. Both U.S. Treasuriesand Japanese Government 10-year Bonds (JGBs), the sector’s worst performer,were trend-less in April as the markets’ interest rate expectationsshifted with each economic release about the current health of the U.S. andJapanese economies. While uncertainty surrounded the state of 

 

13

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thesetwo economies, the strength of the German and British economies was clear. TheGerman Benchmark ten-year bund led performance as stronger growth and increasedfears of inflation sent yields to their highest level since August 2005.The sell-off in European fixed income limited losses within the sector asyields touched multi-year highs. The sector had strong performance for May asglobal interest rates sustained their steady rise as economic growth continuedin Europe and as the U.S. housing market began to stabilize. The GermanBenchmark ten-year bund led performance as consumer confidence in the euroregion economy climbed to a six-year high. U.S. Treasuries also bolsteredperformance as the benchmark ten-year bond yield increased 26 basis pointssince April 30th, its biggest monthly increase since March 2006.

 

Thecurrency sector was also profitable for the period. In April, the Euro reachedan all-time high against both the U.S. dollar and the Japanese yen, while theBritish pound reached a 25-year high against the U.S. dollar. The U.S. dollarweakened as investors speculated that the U.S. Federal Reserve Board would cutborrowing costs to strengthen the U.S. economy; at the same time, expectationsgrew that the European Central Bank and the Bank of England would raise ratesto tame inflation as their economies strengthened. The U.S. dollar rebounded inMay from an all time low against the Euro and rose one percent against theBritish pound. The U.S. dollar reversed as signs of economic strength reducedthe likelihood of a cut in interest rates by the Federal Reserve. The U.S. dollar’sbiggest monthly advance against the Euro in more than a year caused thePartnership to exit positions. A majority of the sector’s losses were offset bythe U.S. dollar’s strengthening trend against the Japanese yen.

 

Thestock indices sector was profitable for the period. Stronger-than-expectedfirst quarter earnings, an increase in mergers and acquisitions, economicgrowth in Europe, and benign inflation in the U.S. drove global equity priceshigher. Equity markets reached new highs during the period due to continuedeconomic growth in Europe and indications from the U.S. Federal Reserve Boardthat growth in the world’s largest economy would accelerate. The entire sectorwas positive as about $1.1 trillion of announced Merger and Acquisition dealsso far this year pushed the S&P 500 past its peak in the year 2000. TheNASDAQ ended the period at 2604.52, its highest level since February 2001.

 

Theagricultural commodities sector posted losses for the period. The sector’sperformance at the beginning of the period was slightly positive as gains inN.Y. cotton and coffee were partially offset by losses in CBOT wheat. Freezingtemperatures at the beginning of the period caused damage to the wheat crop.Wheat, which had been trending lower prior to the cold weather, suffered areversal due to the resulting global supply concerns. The sector suffered itsworst losses when coffee futures in N.Y. climbed to their highest level inweeks on concern that Brazil’s crop, the world’s largest, will decline due tofrost damage, tightening supplies.

 

Themetals sector also posted losses for the period. Performance was positive for April asLME copper strengthened, trading as high as $8,100 per ton on April 17th,the highest it has been in more than seven months. Supply disruptions anddemand from China, the world’s largest user, drove prices higher during themonth. Gold also added to performance as the precious metal reached an 11 monthhigh when demand for a hedge against the weakness in the U.S. dollar increased.The sector’s performance was negative in May, as a reversal in precious metalshurt performance as the Partnership exited positions. Gold fell to a two-monthlow in May and was down 2.5 percent for the month, as a gain in the valueof the U.S. dollar reduced demand for the precious metal as an alternativeinvestment. Silver (which has wider industrial applications than gold) dropped0.7 percent in May. Despite the drop, gold has gained 4.5 percent for the year,while silver has risen 4.1 percent.

 

Theenergy sector was the least profitable for the month as weather andgeopolitical events once again were the driving force behind price movements.Natural gas, the sector’s worst performer, fluctuated throughout the period asweather drove demand. Crude oil also hurt performance as prices fell to $61.34a barrel on April 19th before reversing to $66.70 a barrel on April 27th.This reversal occurred when Saudi Arabian authorities announced the arrest ofmore than 170 suspected terrorists, who were reportedly plotting to attack thecountry’s oil facilities. U.S. oil futures traded between $60 and $67 

 

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duringthe period as ample domestic stockpiles tempered the impact of supply shutdownsin Alaska and Nigeria.

 

EffectiveJune 1, 2007, the Partnership became a multi-manager fund of funds withequal weighting to the FuturesAccess managed accounts of Aspect, Chesapeake,Transtrend and Winton. The Partnership returned an estimated +2.1% for themonth of June.

 

Duringthe month of June the most profitable trading across all managers camefrom the fixed income and currency sectors. Bonds sold off on strong data andinflation concerns and the managers’ trend following models were successfulnavigating the higher interest rate environment. In currencies gains wereachieved as higher yielding currencies (AUD, NZD, GBP, CAD) continued toappreciate at the expense of the “funding” currencies of Japan and Switzerland.Equity markets ended the month lower although only small losses in this sectorwere realized as risk management systems reduced exposure to this sector.Commodities were mixed on the month with gains generally coming from longpositions in grains and agriculturals and short positions in natural gas.Metals trading produced net negative returns.

 

Item3.   Quantitative and QualitativeDisclosures About Market Risk

 

Introduction

 

ThePartnership was a speculative commodity pool through May 31, 2007.Effective June 1, 2007 the Partnership invests in Portfolio Funds that arecommodity pools. The market sensitive instruments held by the Portfolio Fundsare acquired for speculative trading purposes and all or substantially all ofthe Portfolio Funds’ assets are subject to the risk of trading loss. Unlike anoperating company, the risk of market sensitive instruments is integral, notincidental, to the Partnership’s main 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. ThePortfolio Funds’ market risk is influenced by a wide variety of factors,including the level and volatility of interest rates, exchange rates, equityprice levels, the market value of financial instruments and contracts, thediversification effects among the Portfolio Funds’ open positions and theliquidity of the markets in which it trades.

 

Valueat Risk is a measure of the maximum amount which the Portfolio Funds couldreasonably be expected to lose in a given market sector. However, the inherentuncertainty of the Portfolio Funds’ speculative trading and the recurrence inthe markets traded by the Portfolio Funds of market movements far exceedingexpectations could result in actual trading or non-trading losses far beyondthe indicated Value at Risk or the Portfolio Funds’ experience to date (i.e., “riskof ruin”). In light of the foregoing as well as the risks and uncertaintiesintrinsic to all future projections, the inclusion of the quantification inthis section should not be considered to constitute any assurance orrepresentation that the Portfolio Funds’ losses in any market sector will belimited to Value at Risk or by the Portfolio Funds’ attempts to manage itsmarket risk.

 

Quantifying the Partnership’sTrading Value at Risk

 

Quantitative Forward-LookingStatements

 

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 in this section are deemed to beforward-looking statements for purposes of the safe harbor, except forstatements of historical fact.

 

Dueto the Partnership’s fund of funds structure, the following statements arerelated to the Portfolio Funds.

 

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Exchangemaintenance margin requirements have been used by the Portfolio Funds as themeasure 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 maintenance margin levels are established bydealers and exchanges using historical price studies as well as an assessmentof current market volatility (including the implied volatility of the optionson a given futures contract) and economic fundamentals to provide aprobabilistic estimate of the maximum expected near-term one-day pricefluctuation.

 

Inthe case of market sensitive instruments which are not exchange-traded (almostexclusively currencies in the case of the Portfolio Funds), the marginrequirements for the equivalent futures positions have been used as Value atRisk. In those rare cases in which a futures-equivalent margin is notavailable, dealers’ margins have been used.

 

100%positive correlation in the different positions held in each market riskcategory has been assumed. Consequently, the margin requirements applicable tothe open contracts have been aggregated to determine each trading category’saggregate Value at Risk. The diversification effects (which would reduce theValue at Risk estimates) resulting from the fact that the Portfolio Funds’positions are rarely, if ever, 100% positively correlated have not beenreflected.

 

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

 

Thefollowing table indicates the average, highest, and lowest trading Value atRisk associated with the Partnership’s open positions by market category forthe six months ended June 30, 2008 and 2007.

 

**Winton CLASS DT****(1)**

**June 30, 2008**

 
| ** **             | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
|------------------------|------------|-----------------------------|------------|----------------------------|------------|------------------------|------------|-----------------------|------------|
| **Market Sector** | ** ** | **Value at Risk** | ** ** | **Capitalization**         | ** ** | **At Risk**       | ** ** | **At Risk**      | ** ** |
|                   |       |                        |       |                       |       |                   |       |                  |       |   |   |   |
| Agriculture            |       | $                           | 265,923    |                       | 0.28       | %                      | $          | 475,003               |       | $ | 110,006 |   |
| Currencies             |       | 804,445                     |       | 0.85                       | %          | 1,149,414              |       | 468,489               |       |
| Energy                 |       | 253,720                     |       | 0.27                       | %          | 410,334                |       | 121,942               |       |
| Interest Rates         |       | 3,123,180                   |       | 3.32                       | %          | 3,628,426              |       | 2,227,262             |       |
| Metals                 |       | 180,240                     |       | 0.19                       | %          | 292,311                |       | 96,675                |       |
| Stock Indices          |       | 210,055                     |       | 0.22                       | %          | 533,117                |       | 12,054                |       |
|                   |       |                        |       |                       |       |                   |       |                  |       |
| TOTAL                  |       | $                           | 4,837,563  |                       | 5.13       | %                      | $          | 6,488,605             |       | $ | 3,036,428 |   |

 

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(1) Average capitalization of Winton Class DT is $94,116,066

 

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** **

**Chesapeake Class DT****(2)**

**June 30, 2008**

 
| ** **             | ** ** | **Average**                 | ** **      | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
|------------------------|------------|-----------------------------|-----------------|----------------------------|------------|------------------------|------------|-----------------------|------------|
| **Market Sector** | ** ** | **Value at Risk** | ** **      | **Capitalization**         | ** ** | **At Risk**       | ** ** | **At Risk**      | ** ** |
| ** **             | ** ** | ** **                  | ** **      | ** **                 | ** ** | ** **             | ** ** | ** **            | ** ** |
| Agricultural           |       | $                           | 952,325         |                       | 1.02       | %                      | $          | 1,558,938             |       | $ | 356,404 |   |
| Energy                 |       | 712,117                     |            | 0.76                       | %          | 1,168,877              |       | 555,631               |       |
| Interest Rates         |       | 5,327,798                   |            | 5.69                       | %          | 7,436,615              |       | 2,671,568             |       |
| Metals                 |       | 351,909                     |            | 0.38                       | %          | 652,176                |       | 186,356               |       |
| Stock Futures          |       | 173,543                     |            | 0.19                       | %          | 273,733                |       | 90,350                |       |
| Currencies             |       | 1,264,708                   |            | 1.35                       | %          | 2,239,337              |       | 746,242               |       |
|                   |       |                        |            |                       |       |                   |       |                  |       |
| TOTAL                  |       | $                           |  8,782,400 |                       | 9.39       | %                      | $          |  13,329,676      |       | $ |  4,606,551 |   |

 

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(2) Average capitalization of Chesapeake Class DT is $93,694,981

 

**Transtrend CLASS DT****(3)**

**June 30, 2008**

 
| ** **             | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
|------------------------|------------|-----------------------------|------------|----------------------------|------------|------------------------|------------|-----------------------|------------|
| **Market Sector** | ** ** | **Value at Risk** | ** ** | **Capitalization**         | ** ** | **At Risk**       | ** ** | **At Risk**      | ** ** |
| ** **             | ** ** | ** **                  | ** ** | ** **                 | ** ** | ** **             | ** ** | ** **            | ** ** |
| Agricultural           |       | $                           | 285,549    |                       | 0.30       | %                      | $          | 832,566               |       | $ | 13,137 |   |
| Energy                 |       | 605,838                     |       | 0.65                       | %          | 1,229,006              |       | 8,576                 |       |
| Interest Rates         |       | 3,571,090                   |       | 3.81                       | %          | 4,640,247              |       | 1,529,943             |       |
| Metals                 |       | 224,477                     |       | 0.24                       | %          | 524,564                |       | 46,206                |       |
| Currencies             |       | 1,465,049                   |       | 1.56                       | %          | 2,694,000              |       | 169,702               |       |
| Stock Indices          |       | 436,864                     |       | 0.47                       | %          | 800,042                |       | 129,509               |       |
|                   |       |                        |       |                       |       |                   |       |                  |       |
| TOTAL                  |       | $                           | 6,588,867  |                       | 7.03       | %                      | $          | 10,720,425            |       | $ | 1,897,073 |   |

 

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(3) Average capitalizationof Transtrend Class DT is $93,811,769

 

**Aspect CLASS DT (4)**

**June 30, 2008**

 
| ** **         | ** ** | **Average**        | ** ** | **% of  Average**  |       | **Highest  Value** |       | **Lowest  Value** |       |
|--------------------|------------|--------------------|------------|--------------------|------------|--------------------|------------|-------------------|------------|
| **Market  Sector** | ** ** | **Value at  Risk** | ** ** | **Capitalization** | ** ** | **At Risk**        | ** ** | **At Risk**       | ** ** |
| ** **         | ** ** | ** **         | ** ** | ** **         | ** ** | ** **         | ** ** | ** **        | ** ** |
| Agricultural       |       | $                  | 301,041    |               | 0.32       | %                  | $          | 994,627           |       | $ | 90,659 |   |
| Currencies         |       | 1,040,251          |       | 1.11               | %          | 2,784,160          |       | 397,113           |       |
| Energy             |       | 495,730            |       | 0.53               | %          | 1,373,373          |       | 246,613           |       |
| Interest Rates     |       | 5,431,436          |       | 5.78               | %          | 9,109,110          |       | 2,514,468         |       |
| Metals             |       | 178,580            |       | 0.19               | %          | 630,723            |       | 43,099            |       |
| Stock Indices      |       | 447,930            |       | 0.48               | %          | 1,176,878          |       | 157,659           |       |
|               |       |               |       |               |       |               |       |              |       |
| TOTAL              |       | $                  | 7,894,968  |               | 8.41       | %                  | $          | 16,068,871        |       | $ | 3,449,611 |   |

 

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(4) Average capitalizationof Aspect Class DT is $93,896,553

 

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**June 30, 2008**

 
| ** **             | ** ** | **Average**                 | ** ** | **% of Average**   | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
|------------------------|------------|-----------------------------|------------|--------------------|------------|------------------------|------------|-----------------------|------------|
| **Market Sector** | ** ** | **Value at Risk** | ** ** | **Capitalization** | ** ** | **At Risk**       | ** ** | **At Risk**      | ** ** |
| ** **             | ** ** | ** **                  | ** ** | ** **         | ** ** | ** **             | ** ** | ** **            | ** ** |
| Agriculture            |       | $                           | 1,804,838  |               | 0.48       | %                      | $          | 3,861,134             |       | $ | 570,206 |   |
| Currencies             |       | 4,574,452                   |       | 1.22               | %          | $                      | 8,866,911  |                  | $          | 1,781,546 |   |
| Energy                 |       | 2,067,405                   |       | 0.55               | %          | $                      | 4,181,590  |                  | $          | 932,762 |   |
| Interest Rates         |       | 17,453,504                  |       | 4.65               | %          | $                      | 24,814,398 |                  | $          | 8,943,241 |   |
| Metals                 |       | 935,207                     |       | 0.25               | %          | $                      | 2,099,774  |                  | $          | 372,335 |   |
| Stock Indices          |       | 1,268,392                   |       | 0.34               | %          | $                      | 2,783,770  |                  | $          | 389,572 |   |
|                   |       |                        |       |               |       |                   |       |                  |       |
| TOTAL                  |       | $                           | 28,103,798 |               | 7.49       | %                      | $          | 46,607,577            |       | $ | 12,989,662 |   |

 

**May 31, 2007**

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

 

**Winton CLASS D-TF***

**June 30, 2007**

 
| ** **             | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
|------------------------|------------|-----------------------------|------------|----------------------------|------------|------------------------|------------|-----------------------|------------|
| **Market Sector** | ** ** | **Value at Risk** | ** ** | **Capitalization**         | ** ** | **At Risk**       | ** ** | **At Risk**      | ** ** |
| ** **             | ** ** | ** **                  | ** ** | ** **                 | ** ** | ** **             | ** ** | ** **            | ** ** |
| Agriculture            |       | $                           | 77,526     |                       | 0.07       | %                      | $          | 77,526                |       | $ | 77,526 |   |
| Currencies             |       | 354,599                     |       | 0.30                       | %          | 354,599                |       | 354,599               |       |
| Energy                 |       | 11,611                      |       | 0.01                       | %          | 11,611                 |       | 11,611                |       |
| Interest Rates         |       | 7,952,220                   |       | 6.74                       | %          | 7,952,220              |       | 7,952,220             |       |
| Metals                 |       | 53,868                      |       | 0.05                       | %          | 53,868                 |       | 53,868                |       |
| Stock Indices          |       | 298,742                     |       | 0.25                       | %          | 298,742                |       | 298,742               |       |
| FX                     |       | 789                         |       | 0.00                       | %          | 789                    |       | 789                   |       |
|                   |       |                        |       |                       |       |                   |       |                  |       |
| TOTAL                  |       | $                           | 8,749,355  |                       | 7.42       | %                      | $          | 8,749,355             |       | $ | 8,749,355 |   |

 

----

* Class D-TF is nowknown as Class DT within each respective underlying fund.

 

18

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**Aspect CLASS D-TF***

**June 30, 2007**

 
| ** **             | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
|------------------------|------------|-----------------------------|------------|----------------------------|------------|------------------------|------------|-----------------------|------------|
| **Market Sector** | ** ** | **Value at Risk** | ** ** | **Capitalization**         | ** ** | **At Risk**       | ** ** | **At Risk**      | ** ** |
| ** **             | ** ** | ** **                  | ** ** | ** **                 | ** ** | ** **             | ** ** | ** **            | ** ** |
| Agricultural           |       | $                           | 95,335     |                       | 0.10       | %                      | $          | 95,335                |       | $ | 95,335 |   |
| Currencies             |       | 321,210                     |       | 0.35                       | %          | 321,210                |       | 321,210               |       |
| Energy                 |       | 73,844                      |       | 0.08                       | %          | 73,844                 |       | 73,844                |       |
| Interest Rates         |       | 14,132,577                  |       | 15.36                      | %          | 14,132,577             |       | 14,132,577            |       |
| Metals                 |       | 109,571                     |       | 0.12                       | %          | 109,571                |       | 109,571               |       |
| Stock Indices          |       | 556,733                     |       | 0.61                       | %          | 556,733                |       | 556,733               |       |
|                   |       |                        |       |                       |       |                   |       |                  |       |
| TOTAL                  |       | $                           | 15,289,270 |                       | 16.62      | %                      | $          | 15,289,270            |       | $ | 15,289,270 |   |

 

----

* Class D-TF is nowknown as Class DT within each respective underlying fund.

 

**Transtrend CLASS  D-TF***

**June  30, 2007**

 
| ** **             | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
|------------------------|------------|-----------------------------|------------|----------------------------|------------|------------------------|------------|-----------------------|------------|
| **Market Sector** | ** ** | **Value at Risk** | ** ** | **Capitalization**         | ** ** | **At Risk**       | ** ** | **At Risk**      | ** ** |
| ** **             | ** ** | ** **                  | ** ** | ** **                 | ** ** | ** **             | ** ** | ** **            | ** ** |
| Agricultural           |       | $                           | 159,910    |                       | 0.25       | %                      | $          | 159,910               |       | $ | 159,910 |   |
| Energy                 |       | 55,777                      |       | 0.09                       | %          | 55,777                 |       | 55,777                |       |
| Interest Rates         |       | 14,968,848                  |       | 23.25                      | %          | 14,968,848             |       | 14,968,848            |       |
| Metals                 |       | —                      |       | 0.00                       | %          | —                 |       | —                |       |
| Currencies             |       | 14,012                      |       | 0.02                       | %          | 14,012                 |       | 14,012                |       |
| Stock Indices          |       | 1,777,966                   |       | 2.76                       | %          | 1,777,966              |       | 1,777,966             |       |
|                   |       |                        |       |                       |       |                   |       |                  |       |
| TOTAL                  |       | $                           | 16,976,513 |                       | 26.37      | %                      | $          | 16,976,513            |       | $ | 16,976,513 |   |

 

----

*  Class  D-TF is now known as  Class  DT within each respectiveunderlying fund.

 

**Chesapeake  Class D-TF***

**June 30, 2007**

 
| ** **             | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
|------------------------|------------|-----------------------------|------------|----------------------------|------------|------------------------|------------|-----------------------|------------|
| **Market Sector** | ** ** | **Value at Risk** | ** ** | **Capitalization**         | ** ** | **At Risk**       | ** ** | **At Risk**      | ** ** |
| ** **             | ** ** | ** **                  | ** ** | ** **                 | ** ** | ** **             | ** ** | ** **            | ** ** |
| Agricultural           |       | $                           | 504,108    |                       | 0.79       | %                      | $          | 504,108               |       | $ | 504,108 |   |
| Energy                 |       | 30,008                      |       | 0.05                       | %          | 30,008                 |       | 30,008                |       |
| Interest Rates         |       | 20,192,293                  |       | 31.48                      | %          | 20,192,293             |       | 20,192,293            |       |
| Metals                 |       | 444,752                     |       | 0.69                       | %          | 444,752                |       | 444,752               |       |
| Stock Futures          |       | 573,270                     |       | 0.89                       | %          | 573,270                |       | 573,270               |       |
| Stock Indices          |       | 1,050,876                   |       | 1.64                       | %          | 1,050,876              |       | 1,050,876             |       |
| Currencies             |       | 1,100,541                   |       | 1.72                       | %          | 1,100,541              |       | 1,100,541             |       |
|                   |       |                        |       |                       |       |                   |       |                  |       |
| TOTAL                  |       | $                           | 23,895,848 |                       | 37.26      | %                      | $          | 23,895,848            |       | $ | 23,895,848 |   |

 

----

* Class D-TF is nowknown as Class DT within each respective underlying fund.

 

19

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Material Limitations onValue 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 Portfolio Funds open positions’ creates a “risk ofruin” not typically found in most other investment vehicles. Because of thesize of its positions, certain market conditions — unusual, but historicallyrecurring from time to time — could cause the Portfolio Funds to incur severelosses 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.”

 

Qualitative DisclosuresRegarding Primary Trading Risk Exposures

 

Thefollowing qualitative disclosures regarding the Partnership’s market riskexposures through the Portfolio Funds after the change in structure— except for(i) those disclosures that are statements of historical fact and (ii) thedescriptions of how the Partnership manages its primary market risk exposures —constitute forward-looking statements within the meaning of Section 27A ofthe Securities Act and Section 21E of 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 and expropriations, illiquid markets, the emergence of dominantfundamental factors, political upheavals, changes in historical pricerelationships, an influx of new market participants, increased regulation andmany other factors could result in material losses as well as in materialchanges to the risk exposures and the risk management strategies of thePartnership. There can be no assurance that the Partnership’s risk managementstrategies will not change materially or that any such strategies will beeffective in either the short- or long-term. Investors must be prepared to loseall or substantially all of the value of their investment in the Partnership.

 

20

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Item4. Control and Procedures

 

Evaluation of DisclosureControls and Procedures

 

MLAI’sChief Executive Officer and the Chief Financial Officer, on behalf of thePartnership, have evaluated the effectiveness of the design and operation ofthe disclosure controls and procedures with respect to the Partnership as ofand for the quarter which ended June 30, 2008, and, based on this evaluation,have concluded that these disclosure controls and procedures are effective.Additionally, there were no significant changes in the Partnership’s internalcontrols over financial reporting which materially affect such internalcontrols.

 

*Changes inInternal Controls over Financial Reporting*

 

Nochange in internal controls over financial reporting (as defined in Rule 13a-15(f) underthe Exchange Act ) occurred during the quarter which ended June 30, 2008that has materially affected, or is reasonable likely to materially affect, thePartnership’s internal controls, over financial reporting.

 

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

 

ThePartnership’s management is responsible for establishing and maintainingadequate internal controls over financial reporting. The Partnership’s internalcontrols over financial reporting is a process designed under the supervisionof MLAI’s Chief Executive Officer and the Chief Financial Officer, on behalf ofthe Partnership and is effected by management, other personnel and serviceproviders to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for externalpurposes in accordance with U.S. GAAP include policies and procedures that:

 

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

 

·      Provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financialstatements in accordance with U.S. GAAP and that receipts and expenditures ofthe Partnership are being made only in accordance with authorizations ofmanagement of the Partnership and Board of Managers of MLAI.

 

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

 

Becauseof its inherent limitations, internal controls over financial reporting canonly provide reasonable assurance with respect to financial statementpreparation and presentation. Projections of any evaluation of effectiveness tofuture periods are subject to the risks that controls may become inadequatebecause of changes in condition, or that the degree of compliance with thepolicies or procedures may deteriorate.

 

ThePartnership’s management assessed the effectiveness of the Partnership’sinternal controls over financial reporting as of June 30, 2008. In makingthis assessment, management used the criteria set forth by the Committee ofSponsoring Organizations of the Treadway Commission (COSO) in “InternalControl-Integrated Framework”. Based on its assessment the Partnership’smanagement concluded that at June 30, 2008 the Partnership’s internalcontrols over financial reporting was effective.

 

21

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PART II - OTHER INFORMATION

 

Item1.   Legal Proceedings

 

None.

 

Item1A:  Risk Factors

 

Past Performance NotNecessarily Indicative of Future Results

 

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

 

Volatile Markets; HighlyLeveraged Trading

 

Futuresand forward trading is highly leveraged, and market price levels are volatileand materially affected by unpredictable factors such as weather andgovernmental intervention. The combination of leverage and volatility creates ahigh degree of risk.

 

Importance of General MarketConditions

 

Overallmarket or economic conditions — which neither MLAI nor the trading advisors canpredict or control — have a material effect on the performance of any managedfutures strategy.

 

Forward Trading

 

ThePortfolio Funds will trade currencies in the forward markets in addition to inthe futures markets. The forward markets are over-the-counter, non-exchangemarkets, and in trading in these markets, the Portfolio Funds will be dependenton the credit standing of the counterparties with which they trade, without thefinancial support of any clearinghouse system. In addition, the prices offeredfor the same forward contract may vary significantly among different forwardmarket participants. Forward market counterparties are under no obligation toenter into forward transactions with the Portfolio Funds, includingtransactions through which the Portfolio Funds are attempting to liquidate openpositions.

 

Increased Assets UnderManagement

 

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

 

22

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Trading Advisors Risk

 

ThePortfolio Funds are subject to the risk of the bad judgment, negligence ormisconduct of their trading advisors. There have been a number of instances inrecent years in which private investment funds have incurred substantial lossesdue to manager misconduct.

 

Changes in Trading Strategy

 

The trading advisors maymake material changes in its trading strategies without the knowledge of MLAI.

 

Illiquid Markets

 

Certainpositions held by the Portfolio Funds may become illiquid, preventing thePortfolio Funds’ trading advisors from acquiring positions otherwise indicatedby their strategy or making it impossible for the trading advisors to close outpositions against which the market is moving.

 

Certainfutures markets are subject to “daily price limits,” restricting the maximumamount by which the price of a particular contract can change during any giventrading day. Once a contract’s price has moved “the limit,” it may beimpossible or economically non-viable to execute trades in such contract. Fromtime to time, prices have moved “the limit” for a number of consecutive days,making it impossible for traders against whose positions the market was movingto prevent large losses.

 

Trading on Non-U.S. Exchanges

 

Thetrading advisors may trade extensively on non-U.S. exchanges. These exchangesare not regulated by any United States governmental agency. The Portfolio Fundscould incur substantial losses trading on foreign exchanges to which it wouldnot have been subject had its trading advisors limited its trading to U.S.markets.

 

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

 

ThePortfolio Funds Could Lose Assets and Have Its Trading Disrupted Due to theBankruptcy of One of the Parties

 

ThePortfolio Funds are subject to the risk of insolvency of a counterparty, anexchange, a clearinghouse or MLPF&S. Portfolio Funds’ assets could be lostor impounded during lengthy bankruptcy proceedings. Were a substantial portionof the Portfolio Funds’ capital tied up in a bankruptcy, MLAI might suspend orlimit trading, perhaps causing the Portfolio Funds to miss significant profitopportunities. There are increased risks in dealing with unregulated tradingcounterparties including the risk that assets may not benefit from theprotection afforded to “customer funds” deposited with regulated dealers andbrokers.

 

23

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Item 2.           Unregistered Sales of Securities and Use ofProceeds

 

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

 

Duringthe first seven months of 2008 the fund issued Units as set forth in thefollowing chart:

 

CLASS D

 
| ** ** | ** ** | **Subscription** | ** ** | ** ** | ** ** |
|------------|------------|------------------|------------|------------|------------|
| ** ** | ** ** | **Amount**       | ** ** | **Units**  | ** ** | **NAV(1)** | ** ** |
| Jan-08     |       | 35,636           |       | 217        |       | 164.22 |   |
| Feb-08     |       | 112,633          |       | 669        |       | 168.36 |   |
| Mar-08     |       | 275,922          |       | 1,496      |       | 184.45 |   |
| Apr-08     |       | 342,190          |       | 1,900      |       | 180.10 |   |
| May-08     |       | 610,081          |       | 3,428      |       | 177.98 |   |
| Jun-08     |       | 213,609          |       | 1,172      |       | 182.26 |   |
| Jul-08     |       | 1,298,326        |       | 6,740      |       | 192.63 |   |

 

----

(1)          Beginning ofthe month Net Asset Value

 

(b) None.

(c) None.

 

Item 3.     DefaultsUpon Senior Securities

 

None.

 

Item 4.     Submissionof Matters to a Vote of Security Holders

 

None.

 

Item 5.     OtherInformation

 

SeeNote 1 in the Notes to Financial Statements

 

24

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Item 6.          Exhibits

 
| The  following exhibits are incorporated by reference or are filed herewith to  this Quarterly Report 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                                                                                            |   | Are filed  herewith. |

 

25

----

 

**SIGNATURES**

 

 

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

 

 
|                        | ML TREND-FOLLOWING FUTURES  FUND L.P. |
|-----------------------------|---------------------------------------|
|                        |                                  |   |
|                        |                                  | By: MERRILL LYNCH ALTERNATIVE |
|                        |                                  | INVESTMENTS LLC |
|                        |                                  | (General Partner) |
|                        |                                  |   |
|                        |                                  |   |
| Date: August 13, 2008  | By                                    | /s/ PAUL MORTON |
|                        |                                  | Paul Morton |
|                        |                                  | Chief Executive Officer  and President |
|                        |                                  | (Principal Executive  Officer) |
|                        |                                  |   |
|                        |                                  |   |
| Date:  August 13, 2008 | By                                    | /s/  BARBRA E. KOCSIS |
|                        |                                  | Barbra  E. Kocsis |
|                        |                                  | Chief  Financial Officer |
|                        |                                  | (Principal  Financial and Accounting Officer) |

 

26

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