**UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549**

**FORM 10-Q**

**(Mark One)**

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

**For the quarterly period endedSeptember 30, 2007**

**OR**

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

**For the transition period from                to                **

**Commission File Number 0-28928**

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

(Exact Name of Registrant as specified in its charter)

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

 

**c/o Merrill Lynch Alternative Investments LLCHopewell Building No. 21200 Merrill Lynch Drive - First FloorPennington, New Jersey 08534**(Address of principal executive offices)(Zip Code)

**609-274-5838**(Registrant’s telephone number, including area code)

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days.

Yes x  No o

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer,or a non-accelerated filer.  Seedefinition of “accelerated filer and large accelerated filer” in Rule 12b-2 ofthe Exchange Act. (Check one):

Large acceleratedfiler o   Acceleratedfiler o   Non-accelerated filer x

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

Yes o  No x

Indicate by check mark whether the registrant hasfiled all documents and reports required to be filed by Sections 12, 13 or15(d) of the Securities Exchange Act of 1934 subsequent to the distribution ofsecurities under a plan confirmed by a court. 

Yes o  No o

 

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

QUARTERLY REPORTFOR SEPTEMBER 30, 2007 ON FORM 10-Q

Table of Contents
| ** ** | ** ** | ** **                                                                                  | ** ** | **Page** |
|------------|------------|---------------------------------------------------------------------------------------------|------------|----------|
|            |       | PART I                                                                                      |       |     |
|       |       |                                                                                        |       |     |
| Item 1.    |       | Financial Statements                                                                        |       | 2        |
|       |       |                                                                                        |       |     |
| Item 2.    |       | Management’s  Discussion and Analysis of Financial Condition and Results of Operations |       | 8        |
|       |       |                                                                                        |       |     |
| Item 3.    |       | Quantitative  and Qualitative Disclosures About Market Risk                                 |       | 17       |
|       |       |                                                                                        |       |     |
| Item 4.    |       | Controls and  Procedures                                                                    |       | 20       |
|       |       |                                                                                        |       |     |
|       |       | PART  II                                                                                    |       |     |
|       |       |                                                                                        |       |     |
| Item 1.    |       | Legal Proceedings                                                                           |       | 21       |
|       |       |                                                                                        |       |     |
| Item 2.    |       | Unregistered  Sales of Securities and Use of Proceeds                                       |       | 21       |
|       |       |                                                                                        |       |     |
| Item 3.    |       | Defaults Upon  Senior Securities                                                            |       | 21       |
|       |       |                                                                                        |       |     |
| Item 4.    |       | Submission of  Matters to a Vote of Security Holders                                        |       | 21       |
|       |       |                                                                                        |       |     |
| Item 5.    |       | Other Information                                                                           |       | 21       |
|       |       |                                                                                        |       |     |
| Item  6.   |       | Exhibits                                                                                    |       | 21       |

 

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PART I - FINANCIAL INFORMATION

Item1.    Financial Statements

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

STATEMENTS OF FINANCIAL CONDITION
| ** **                                                                | ** ** | **September 30,** | ** **  | **December 31,** | ** ** |
|---------------------------------------------------------------------------|------------|------------------------|-------------|-----------------------|------------|
| ** **                                                                | ** ** | **2007**               | ** **  | **2006**              | ** ** |
| ** **                                                                | ** ** | **(unaudited)**        | ** **  | ** **            | ** ** |
|                                                                      |       |                   |        |                  |       |
| **ASSETS:**                                                               |       |                   |        |                  |       |
| Equity in commodity  futures trading accounts:                            |       |                   |        |                  |       |
| Cash (includes  restricted cash of $0 for 2007 and $313,038,069 for 2006) |       | $                      | 1,357       |                  | $          | 833,258,309 |   |
| Net unrealized  profit on open contracts                                  |       | —                 |        | 7,308,299             |       |
| Cash                                                                      |       | 10,954                 |        | —                |       |
| Investments in  Portfolio Funds (cost $412,295,056)                       |       | 407,313,458            |        | —                |       |
| Accrued interest                                                          |       | 59,180                 |        | 3,815,156             |       |
| Receivable from  Portfolio Funds                                          |       | 14,247,664             |        | —                |       |
| Subscriptions  receivable                                                 |       | 237,370                |        | 10,648                |       |
|                                                                      |       |                   |        |                  |       |
| **TOTAL  ASSETS**                                                         |       | $                      | 421,869,983 |                  | $          | 844,392,412 |   |
|                                                                      |       |                   |        |                  |       |
| **LIABILITIES, PARTNERS’ CAPITAL  AND MINORITY INTEREST**            |       |                   |        |                  |       |
| **LIABILITIES:**                                                          |       |                   |        |                  |       |
| Brokerage commissions  payable                                            |       | —                 |        | $                     | 4,045,866  |   |
| Wrap fee payable                                                          |       | 1,405,454              |        | 175,915               |       |
| Redemptions payable                                                       |       | 12,805,753             |        | 47,544,300            |       |
| Ongoing offering costs  payable                                           |       | —                 |        | 125,000               |       |
| Other                                                                     |       | 21,553                 |        | 20,834                |       |
|                                                                      |       |                   |        |                  |       |
| Total  liabilities                                                        |       | 14,232,760             |        | 51,911,915            |       |
|                                                                      |       |                   |        |                  |       |
| **PARTNERS’ CAPITAL:**                                               |       |                   |        |                  |       |
| General Partner (42,282  Units and 46,719 Units)                          |       | 6,505,985              |        | 8,204,766             |       |
| Limited Partners  (2,604,613 Units and 4,465,097 Units)                   |       | 401,131,238            |        | 784,098,296           |       |
|                                                                      |       |                   |        |                  |       |
| Total partners’  capital                                             |       | 407,637,223            |        | 792,303,062           |       |
|                                                                      |       |                   |        |                  |       |
| **MINORITY INTEREST**                                                     |       | —                 |        | 177,435               |       |
| ** **                                                                |       |                   |        |                  |       |
|                                                                      |       |                   |        |                  |       |
| **TOTAL  LIABILITIES, PARTNERS’ CAPITAL AND MINORITY INTEREST**      |       | $                      | 421,869,983 |                  | $          | 844,392,412 |   |
|                                                                      |       |                   |        |                  |       |
| **NET ASSET VALUE PER UNIT**                                              |       |                   |        |                  |       |
| (Based on 2,646,895 and 4,511,816 Units outstanding and authorized)       |       | $                      | 154.01      |                  | $          | 175.61 |   |

 

See notes to financialstatements.

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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 nine** | ** ** | **For the nine** | ** **  |
|------------------------------------------------------------------------------------|------------|-----------------------------|-------------|-----------------------------|------------|----------------------------|------------|----------------------------|-------------|
| ** **                                                                         | ** ** | **months ended**       | ** **  | **months ended**       | ** ** | **months ended**      | ** ** | **months ended**      | ** **  |
| ** **                                                                         | ** ** | **September 30,**      | ** **  | **September 30,**      | ** ** | **September 30,**     | ** ** | **September 30,**     | ** **  |
| ** **                                                                         | ** ** | **2007**                    | ** **  | **2006**                    | ** ** | **2007**                   | ** ** | **2006**                   | ** **  |
|                                                                               |       |                        |        |                        |       |                       |       |                       |        |
|                                                                               |       |                        |        |                        |       |                       |       |                       |        |
| **TRADING  PROFITS (LOSSES):**                                                     |       |                        |        |                        |       |                       |       |                       |        |
| ** **                                                                         |       |                        |        |                        |       |                       |       |                       |        |
|                                                                               |       |                        |        |                        |       |                       |       |                       |        |
| Realized                                                                           |       | $                           | (1,793,797  | )                           | $          | (59,557,532                | )          | $                          | (67,736,356 | ) | $ | (113,312,139 | ) |
| Change in unrealized                                                               |       | (15,479,082                 | )           | 69,080,414                  |       | (12,289,897                | )          | 39,271,248                 |        |
| ** **                                                                         |       |                        |        |                        |       |                       |       |                       |        |
| Total trading profits (losses)                                                     |       | (17,272,879                 | )           | 9,522,882                   |       | (80,026,253                | )          | (74,040,891                | )           |
|                                                                               |       |                        |        |                        |       |                       |       |                       |        |
| **INVESTMENT  INCOME:**                                                            |       |                        |        |                        |       |                       |       |                       |        |
|                                                                               |       |                        |        |                        |       |                       |       |                       |        |
| Interest                                                                           |       | 8,374                       |        | 13,472,272                  |       | 13,908,470                 |       | 39,964,208                 |        |
|                                                                               |       |                        |        |                        |       |                       |       |                       |        |
| **EXPENSES:**                                                                      |       |                        |        |                        |       |                       |       |                       |        |
|                                                                               |       |                        |        |                        |       |                       |       |                       |        |
| Brokerage commissions                                                              |       | —                      |        | 14,830,304                  |       | 15,400,942                 |       | 48,615,368                 |        |
| Wrap fee                                                                           |       | 4,246,211                   |        | 644,796                     |       | 6,515,243                  |       | 2,113,712                  |        |
| Ongoing offering costs                                                             |       | —                      |        | 375,000                     |       | 25,000                     |       | 1,075,000                  |        |
| Other                                                                              |       | —                      |        | 62,500                      |       | 104,167                    |       | 187,500                    |        |
|                                                                               |       |                        |        |                        |       |                       |       |                       |        |
| Total expenses                                                                     |       | 4,246,211                   |        | 15,912,600                  |       | 22,045,352                 |       | 51,991,580                 |        |
|                                                                               |       |                        |        |                        |       |                       |       |                       |        |
| **NET  INVESTMENT LOSS**                                                           |       | (4,237,837                  | )           | (2,440,328                  | )          | (8,136,882                 | )          | (12,027,372                | )           |
|                                                                               |       |                        |        |                        |       |                       |       |                       |        |
| ** **                                                                         |       |                        |        |                        |       |                       |       |                       |        |
| **INCOME (LOSS) BEFORE MINORITY INTEREST**                                         |       | (21,510,716                 | )           | 7,082,554                   |       | (88,163,135                | )          | (86,068,263                | )           |
| ** **                                                                         |       |                        |        |                        |       |                       |       |                       |        |
| Minority interest in (income) loss                                                 |       | —                      |        | (1,498                      | )          | 18,048                     |       | 14,832                     |        |
|                                                                               |       |                        |        |                        |       |                       |       |                       |        |
| **NET  INCOME (LOSS)**                                                             |       | $                           | (21,510,716 | )                           | $          | 7,081,056                  |       | $                          | (88,145,087 | ) | $ | (86,053,431 | ) |
|                                                                               |       |                        |        |                        |       |                       |       |                       |        |
| **NET  INCOME (LOSS) PER UNIT:**                                                   |       |                        |        |                        |       |                       |       |                       |        |
| Weighted average number of General Partner and  Limited Partners Units outstanding |       | 2,818,618                   |        | 5,518,762                   |       | 3,459,229                  |       | 5,785,513                  |        |
|                                                                               |       |                        |        |                        |       |                       |       |                       |        |
| Net income (loss) per weighted average General  Partner and Limited Partners Unit  |       | $                           | (7.63       | )                           | $          | 1.28                       |       | $                          | (25.48      | ) | $ | (14.87 | ) |

 

See notes tofinancial statements.

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

STATEMENTS OF CHANGES IN PARTNERS’ CAPITALFor the nine months ended September 30, 2007 and 2006(unaudited)
| ** **                                  | ** ** | **Units**  | ** ** | **General   Partner** | ** ** | **Limited   Partners** | ** ** | **Total**     | ** ** |
|---------------------------------------------|------------|------------|------------|----------------------------|------------|-----------------------------|------------|---------------|------------|
|                                        |       |       |       |                       |       |                        |       |          |       |
| PARTNERS’  CAPITAL, December 31, 2005  |       | 6,005,530  |       | $                          | 12,613,943 |                        | $          | 1,221,537,583 |       | $ | 1,234,151,526 |   |
|                                        |       |       |       |                       |       |                        |       |          |       |
| Subscriptions                               |       | 599,500    |       | 4,888                      |       | 116,440,991                 |       | 116,445,879   |       |
|                                        |       |       |       |                       |       |                        |       |          |       |
| Net loss                                    |       | —     |       | (915,640                   | )          | (85,137,791                 | )          | (86,053,431   | )          |
|                                        |       |       |       |                       |       |                        |       |          |       |
| Redemptions                                 |       | (1,340,264 | )          | (583,321                   | )          | (260,585,129                | )          | (261,168,450  | )          |
|                                        |       |       |       |                       |       |                        |       |          |       |
| PARTNERS’  CAPITAL, September 30, 2006 |       | 5,264,766  |       | $                          | 11,119,870 |                        | $          | 992,255,654   |       | $ | 1,003,375,524 |   |
|                                        |       |       |       |                       |       |                        |       |          |       |
|                                        |       |       |       |                       |       |                        |       |          |       |
| PARTNERS’  CAPITAL, December 31, 2006  |       | 4,511,816  |       | $                          | 8,204,766  |                        | $          | 784,098,296   |       | $ | 792,303,062 |   |
|                                        |       |       |       |                       |       |                        |       |          |       |
| Subscriptions                               |       | 224,956    |       | —                     |       | 36,090,161                  |       | 36,090,161    |       |
|                                        |       |       |       |                       |       |                        |       |          |       |
| Net loss                                    |       | —     |       | (1,011,673                 | )          | (87,133,414                 | )          | (88,145,087   | )          |
|                                        |       |       |       |                       |       |                        |       |          |       |
| Redemptions                                 |       | (2,089,877 | )          | (687,108                   | )          | (331,923,805                | )          | (332,610,913  | )          |
|                                        |       |       |       |                       |       |                        |       |          |       |
| PARTNERS’ CAPITAL,  September 30, 2007 |       | 2,646,895  |       | $                          | 6,505,985  |                        | $          | 401,131,238   |       | $ | 407,637,223 |   |

 

See notes tofinancial statements.

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

NOTES TO FINANCIALSTATEMENTS(unaudited)

1.     SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES

In the opinion ofmanagement, the financial statements contain all adjustments necessary topresent fairly the financial position of ML Trend-Following Futures Fund L.P.(the “Partnership”) as of September 30, 2007, and the results of its operationsfor the three month period ended September 30, 2007 and the consolidatedresults of its operations for the three month period ended September 30, 2006and nine month period ended September 30, 2007 and 2006. However, the operatingresults for the interim periods may not be indicative of the results for thefull year. These consolidated statements of operations contain the activitiesof both the Partnership and the joint venture in which the trading activitiesoccurred through May 31, 2007 at which time the joint venture was dissolved.Prior to June 1, 2007, the Partnership was known as ML JWH Strategic AllocationFund, L.P.

On April 20, 2007, MerrillLynch Alternative Investments LLC (“MLAI”), general partner of the Partnership,issued an announcement regarding a restructuring of the Partnership, effectiveJune 1, 2007.  As part of therestructuring the following occurred:

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

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

·      On May 7, 2007, the Partnership was deregistered under the SecuritiesAct of 1933, as amended, but retained its registration under the Securities Actof 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 in theamount of 4.0% of the Partnership’s average month-end Net Asset Value. Otherthan this 4.0% wrap fee, the only direct expense of the Partnership is theannual New Jersey filing fee, which is assessed on a per-partner basis with amaximum charge of $250,000 per year. 

Certaininformation and footnote disclosures normally included in annual financialstatements prepared in conformity with accounting principles generally acceptedin the United States of America (“US GAAP”) have been omitted. It is suggestedthat these financial statements be read in conjunction with the financial statementsand notes thereto included in the Partnership’s and the Portfolio Funds’ AnnualReports on Form 10-K filed with the Securities and Exchange Commission for theyear ended December 31, 2006 and Form 10 filed with Securities and ExchangeCommission. Certain prior period items have been reclassified to conform to thecurrent period presentation.

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

2.               INVESTMENTS IN PORTFOLIO FUNDS

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. 

At September 30, 2007, Investment in Portfolio Fundsat fair value are as follows:
|                                                                        | ** ** | **Fair Value** | ** **  | **Percentage of  Investment** | ** ** |
|------------------------------------------------------------------------|------------|---------------------|-------------|------------------------------------|------------|
| ML Winton  FuturesAccess LLC                                           |       | $                   | 101,837,957 |                               | 25.00      | % |
| ML Aspect  FuturesAccess LLC                                           |       | 101,837,958         |        | 25.00                              |       |
| ML Transtrend  DTP Enhanced FuturesAccess LLC                          |       | 101,818,822         |        | 25.00                              |       |
| ML Chesapeake  FuturesAccess LLC                                       |       | 101,818,721         |        | 25.00                              |       |
|                                                                   |       |                |        |                               |       |
| Total Investment in  Portfolio Funds at fair value (cost $412,295,056) |       | $                   | 407,313,458 |                               | 100.00     | % |

 

3.                MARKETAND CREDIT RISKS

The nature of thisPartnership has certain risks, which cannot be presented on the financialstatements. Additionally, the Partnership invests in other commodity funds withsimilar market risk as mentioned. The following summarizes some of those risks.

Market Risk

Derivative instrumentsinvolve varying degrees of market risk. Changes in the level or volatility of interest rates, foreign currencyexchange rates or the market values of the financial instruments or commoditiesunderlying such derivative instruments frequently result in changes in thePortfolio Funds’ Net unrealized profit (loss) on such derivative instruments asreflected in the Portfolio Funds’ Statements of Financial Condition.  The Portfolio Funds’ exposure to market riskis influenced by a number of factors, including the relationships among thederivative instruments held by the Portfolio Funds as well as the volatilityand liquidity of the markets in which the derivative instruments are traded.Investments in foreign markets may also entail legal and political risks.

Credit Risk

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

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

The Portfolio Funds, in their normalcourse of business, enter into various contracts, with Merrill Lynch PierceFenner & Smith Inc. (“MLPF&S”) acting as its 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 Portfolio Funds’ Statements ofFinancial Condition.

4.               RECENT ACCOUNTING PRONOUNCEMENT

During September 2006, the FASB issued Statement ofFinancial Accounting Standards No. 157, Fair Value Measurements (“FAS 157”). FAS 157 establishes a common definition for fair value under accountingprinciples generally accepted in the United States of America, establishes aframework for measuring fair value and expands disclosure requirements aboutsuch fair value measurements.  FAS 157 is effective for fiscal yearsbeginning after November 15, 2007.  The Partnership is currentlyevaluating the impact of adopting FAS 157 on its financial statements. 

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

MONTH-END NET ASSET VALUEPER UNIT
|      | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** | **Apr.** | ** ** | **May** | ** ** | **Jun.** | ** ** | **July** | ** ** | **August** | ** ** | **Sept.** | ** ** |
|------|------------|----------|------------|----------|------------|----------|------------|----------|------------|---------|------------|----------|------------|----------|------------|------------|------------|-----------|------------|
| 2006 |       | $        | 198.52     |     | $          | 180.91   |       | $        | 191.14     |    | $          | 213.21   |       | $        | 212.48     |       | $          | 189.18    |       | $ | 176.75 |   | $ | 190.69 |   | $ | 190.58 |   |
| 2007 |       | $        | 173.44     |     | $          | 164.76   |       | $        | 154.43     |    | $          | 157.93   |       | $        | 157.71     |       | $          | 161.03    |       | $ | 153.47 |   | $ | 143.03 |   | $ | 154.01 |   |

 

Performance Summary

January 1, 2007 toSeptember 30, 2007

January 1, 2007 to March 31, 2007

The Partnership posted anoverall loss for the first quarter.

The agriculturesector posted losses for the Partnership. Price instability hurt performance atthe beginning of the quarter as New York coffee fell from a ten month high. Therally in coffee had been fueled by speculation that drought would reduce Brazil’sharvest. The strong trend then suffered a reversal as coffee prices in New Yorksuffered their longest slump in thirteen months on speculation that favorableweather in Brazil might actually boost the harvest. Corn, which suffered asharp reversal by falling 7.2 % in the first two days of the year hurtingperformance, rebounded along with soybeans benefiting from speculation thatcold temperatures in the United States would boost demand for alternative fuelsmade from the nation’s two biggest crops. Corn regained its strength andreached a ten year high on January 17th, while soybeans reached an eighteenmonth high on January 18th.   Corn and soybeans continued posting gainsfor the Partnership through mid-quarter as soybeans reached their highest levelsince June 2004, as wet weather threatened to prevent Unites States farmersfrom planting enough crops to meet surging demand for crop-based fuels. ChicagoBoard of Trade limited wheat contract gains as it dropped in excess of 2percent after prices had reached $5.09, the highest since December 26, 2006, asinvestors bailed out of the commodity following the global plunge in equities.As a result 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 York coffee as its weakening trendaccelerated due to the fact that coffee fell to its lowest price since November2006 on signs that supply may be exceeding demand as stocks piled up inwarehouses monitored by the New York Coffee, Sugar & Cocoa Exchange.

The energy sector also posted losses for thePartnership. Geopolitical events and a record-breaking heat wave in theNortheastern United States caused volatility beginning of the quarter asnatural gas prices fell 6.9% after a government report showed asmaller-than-average decline in inventories of the fuel. Following a governmentreport indicating that the United States supplies of crude oil, gasoline,heating oil and diesel were above the five-year average for the period, crudeoil prices plunged and reached a nineteen month low of $49.90 a barrel.However, forecasts of colder weather throughout February reversed the weakeningtrend and sent energy prices upward. Despite the volatility within the sector,crude oil and London gas oil were able to offset a majority of the losses.  Natural gas reversed its strengthening trendmid-quarter and had its biggest loss in more than six weeks in New York.Larger-than-expected supplies and forecasts of more seasonal temperaturesacross the central United States contributed to the reversal. After reaching atwo-month high on February 5th for natural gas March delivery it dropped 7.7 %on February 12th, its biggest one-day percentage decline since December 26,2006. The drop in natural gas price March delivery was spurred by a governmentreport that U.S. gas supplies were 19 percent higher than the average for thepast five years. Crude oil’s reversal also hurt performance as it rose to$61.79 a barrel, its highest closing price this year on speculation that U.S.fuel inventories declined because refineries were down for repairs and also asa result of the increasing

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tension with Iran. The quarter ended as natural gasdropped to its lowest price in two months as forecasts for milder weathersignaled reduced consumption of the heating fuel.  However, when forecasters predicted a shiftin the weather pattern that would deliver colder-than-normal air to the easternUnited States, the sector experienced losses as natural gas suffered a trendreversal as prices rose to a one-month high. While gains were achieved in crude oil as it continued its weakeningtrend they were limited as crude oil spiked higher and traded near a six-monthhigh after Iran seized 15 British Naval personnel in the Persian Gulf on March23rd.

The stock indices posted losses for the Partnership.The beginning of the quarter was negative as losses in the NASDAQ E-mini offsetthe gains of the other components in the sector. Although U.S. stocks completedtheir longest stretch of monthly gains in more than a decade, intra-monthvolatility hurt the sectors overall performance. On January 13th, U.S. stocksrose the highest in more than three months. This was due to expectations thatprofits at technology companies, such as Apple Inc. and Microsoft Corp., wouldincrease as new products would prompt consumers and businesses to spend more.The NASDAQ had a 2.8 percent increase, a level not seen since February 2001.However, stocks fell towards the end of the first quarter after profit reportsfrom Intel Corp. and IBM caused concern that analysts’ forecasts for earningsat computer-related companies were too high. U.S. stocks had their biggesttumble since 2002 mid-quarter after a plunge in the Chinese equity marketcaused by concern that a government crackdown on investments with borrowedmoney will end a rally that drove benchmarks to records, sparked a global dropin equity prices and raised concerns that investors would unload equities aftera four-year bull market. On February 27th, Chinese stocks suffered their greatestloss in a decade, while the Dow Jones Stoxx 600 Index dropped 3% and the DowJones Industrial Average fell as much as 546 points intraday, the most sincethe first day of trading after September 11th, 2001. The Eurostoxx 50 was thesector’s worst performer while the Nikkei 225 offset some losses as the sector’sbest performer. The quarter ended as the global sell-off that began on February27th caused more than $2.4 trillion in share valueto be lost over five days.

The metals sector posted losses for the Partnership. Precious metal prices reacted tofluctuations in the U.S. dollar at the beginning of the quarter as reversal inthe U.S. dollar’s weakening trend reduced the appeal of gold as an alternativeinvestment. Gold weakened, falling 3.1% after the U.S. dollar rose to a six-week high as the United States announcedhigher-than-expected employment figures in December 2006 only to rise 3.9% asthe U.S. dollar once again weakened and speculation increased that the preciousmetal’s decline was excessive. The London Metal Exchange limited the coppersector’s losses as copper prices fell 10% and 35% since reaching a record highof 8,724 metric tons since May 2006. Copper prices declined amid expectationsthat a housing slowdown in the United States, the world’s second-largest userof the metal, would continue to reduce demand this year. Base metals sufferedstrong reversals mid-quarter as copper, which had been weakening prior toFebruary on reports of rising stockpiles signaled production was exceedingdemand and rallied on speculation that China, its largest user, wouldaccelerate its buying. Performance in gold and silver had limited losses asprices found further support as they climbed to nine-month highs as escalatingtension over Iran’s nuclear research program increased and investors searchedfor safe-haven investments. However, as the quarter ended the drop in price inthe equity markets sent precious metals lower, reversing their strengtheningtrend.  Although metals eventually beganto rally the quarter ended down 0.5 percent.

The interest rate sector posted losses for thePartnership. The quarter began with stronger than expected growth and fears ofincreasing inflation led European ten-year bond yields to reach six-month highsand the U.K. two-year gilt yields to move toward five-year highs. U.K. longgilts slumped, which sent yields soaring after the Bank of England policymakers unexpectedly raised interest rates by a quarter point. Volatility in theten-year Japanese Government bonds limited the sector’s performance after KyodoNews reported that the Bank of Japan was unlikely to raise interest rates atits meeting on January 18th, and the Bank of Japan followed through with nochange in rates. The global bond markets reversed their weakening trendmid-quarter as the sell-off in the global equity markets fueled demand forgovernment debt.  The Japanese GovernmentBenchmark ten-year bonds added to the Fund’s negative performance asspeculation grew that the Bank of Japan, which doubled interest rates, from .25to .50, at its February 21st meeting would pause before raising borrowing costsany further. This prompted a move higher in the

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market and the rally was further supported after theNikkei 225 stock average posted its biggest decline since June 2006.  Fixed-income markets, which had ralliedmid-quarter continued to strengthen as uncertainty increased that the drop inequities and the rising defaults among the riskiest mortgages would slowconsumer spending and the global economy. European government bonds postedtheir biggest back-to-back weekly decline in three months as European CentralBank President Jean-Claude Trichet reassured investors and stated that growthwas “broader and sustained” and left “no time for complacency.”  The quarter ended as the U.S. ten-yearTreasury note surrendered the remainder of the gains it had amassed after theequity sell-off that began on February 27th which had driven the yield to as low as 4.44%.

The currency sector posted losses for the Partnership. The quarter began with marketsanticipating the economic data releases and central bank policy announcementsin the hopes of gaining insight into the health of the world’s largesteconomies. On January 3rd, the U.S. dollar rose to its highest level in sixmonths against the Euro on the news that the Institute for Supply ManagementManufacturing Index came in at a higher than expected 51.4, signaling anexpansion of the U.S. economy. The Japanese yen declined to 122.19 per U.S.dollar, the lowest in more than four years, due to speculation that there wouldbe increased government pressure on policy makers not to raise borrowing costs.The U.S. dollar had its largest fall mid-quarter against the Japanese yen inmore than two months after U.S. Treasury Secretary Henry Paulson said he wouldbe watching the Japanese currency “very carefully”. The Japanese yen ralliedagainst the U.S. dollar to its highest level in more than 19 months amid acorrection in U.S. stocks as the investors avoided emerging market assets,triggering an unwinding of trades betting on a decline in the Japanese currency.The Japanese yen continued to advance against the U.S. dollar and gainedagainst all 16 of the most-active currencies during the first week of March, asglobal stocks extended a slump. The British pound, the sector’s worst performerfell to its lowest level against the Japanese yen in more than four months, asin one month the British pound sterling/Japanese yen implied volatility soaredto a record high of 11.75 due to concerns of rising risk. The quarter endedwith 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 a gain for the two months ended May 31, 2007.

The interest rate sector was the most profitable sector for the period.The sector was negative for April as uncertainty grew over the interest ratepolicy of the central banks of the world’s two largest economies. Both U.S.Treasuries and Japanese Government 10-year Bonds (JGBs), the sector’s worstperformer, were trend-less in April as the markets’ interest rate expectationsshifted with each economic release about the current health of the U.S. and Japaneseeconomies. While uncertainty surrounded the state of these two economies, thestrength of the German and British economies was clear. The German Benchmarkten-year bund led performance as stronger growth and increased fears ofinflation sent yields to their highest level since August 2005. The sell-off inEuropean fixed income limited losses within the sector as yields touchedmulti-year highs.  The sector had strongperformance for May as global interest rates sustained their steady rise aseconomic growth continued in Europe and as the U.S. housing market began tostabilize. The German Benchmark ten-year bund led performance as consumerconfidence in the euro region economy climbed to a six-year high. U.S.Treasuries also bolstered performance as the benchmark ten-year bond yieldincreased 26 basis points since April 30th, its biggest monthly increase sinceMarch 2006.

The currency sector was alsoprofitable for the period. In April, the Euro reached an all-time high againstboth the U.S. dollar and the Japanese yen, while the British pound reached a25-year high against the U.S. dollar. The U.S. dollar weakened as investors speculated that the U.S. FederalReserve Board would cut borrowing costs to strengthen the U.S. economy; at thesame time, expectations grew that the European Central Bank and the Bank ofEngland would raise rates to tame inflation as their economiesstrengthened.  The U.S. dollar reboundedin May from an all time low against the Euro and rose one

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percent against the Britishpound. The U.S. dollar reversed as signs of economic strength reduced thelikelihood 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.

The stock indices sector wasprofitable 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.

The agricultural commoditiessector posted losses for the period. The sector’s performance at the beginningof the period was slightly positive as gains in N.Y. cotton and coffee werepartially offset by losses in CBOT wheat. Freezing temperatures at the beginning of the period caused damage tothe wheat crop. Wheat, which had been trending lower prior to the cold weather,suffered a reversal due to the resulting global supply concerns. The sectorsuffered its worst losses when coffee futures in N.Y. climbed to their highestlevel in weeks on concern that Brazil’s crop, the world’s largest, will declinedue to frost damage, tightening supplies.

The metals sector alsoposted losses for the period. Performance was positive for April as LME copperstrengthened, trading as high as $8,100 per ton on April 17th, the highest ithas been in more than seven months. Supply disruptions and demand from China,the world’s largest user, drove prices higher during the month. Gold also addedto performance as the precious metal reached an 11 month high when demand for ahedge against the weakness in the U.S. dollar increased.  The sector’s performance was negative in May,as a reversal in precious metals hurt performance as the Partnership exitedpositions. Gold fell to a two-month low in May and was down 2.5 percent for themonth, as a gain in the value of the U.S. dollar reduced demand for theprecious metal as an alternative investment. Silver (which has wider industrialapplications than gold) dropped 0.7 percent in May. Despite the drop, gold hasgained 4.5 percent for the year, while silver has risen 4.1 percent.

The energy sector was the least profitable for the month as weather andgeopolitical events once again were the driving force behind price movements.Natural gas, the sector’s worst performer, fluctuated throughout the period asweather drove demand. Crude oil also hurt performance as prices fell to $61.34a barrel on April 19th before reversing to $66.70 a barrel on April 27th. Thisreversal occurred when Saudi Arabian authorities announced the arrest of morethan 170 suspected terrorists, who were reportedly plotting to attack thecountry’s oil facilities. U.S. oil futures traded between $60 and $67 duringthe period as ample domestic stockpiles tempered the impact of supply shutdownsin Alaska and Nigeria.

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

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

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July 1, 2007 to September 30, 2007

The quarter began with extreme market reversals. Practically allmarkets which were trending upward retraced as investors ran for the exit in anattempt to reduce risk. Credit worries and a softening housing market finallycaught up to the equity markets and led to a big rally in global bonds. TheJapanese yen, which has been persistently weak for years, suddenly ralliedagainst all of its higher yielding counterparts. As a result of the reversals,losses were posted to the Partnership.

Longterm market trends continued to unwind mid-quarter as the long positions in theforeign exchange carry trades, long international equities, long energy andlong metals due to a spike in risk aversion on August 16th caused significant losses ineach of these trades posting losses for the Partnership.

Thequarter ended with a very strong performance after a turbulent summer. Strongtrends re-emerged in commodities in particular, as wheat gained 21%, and crudeoil rose 11% due to supply factors. In addition, precious metals rallied, withgold up by 10% and silver up by 13% due to the U.S. dollar weakening whichcaused demand for precious metals as a store of value. The U.S Federal Reserve’s50 basis points mid-month rate cut also helped to invigorate investor riskappetite, helping foreign exchange carry trades and boosting global equitymarkets.

January 1, 2006 toJune 30, 2006

January 1, 2006 to March31, 2006

The Partnership’s performance was an overall loss for the first quarterwith metals, stock indices, interest rates, and agriculture posting gains whileenergy and currencies posted losses.

The metals sector was the most profitable for thePartnership. The quarter began with gold surging to a 25 year high and silverclimbing to its highest level since March 1984. This occurred because ofconcerns that the U.S. dollar may weaken because of higher oil prices,increasing the metal’s appeal as a hedge against further declines in the U.S.currency. London copper prices rose to a near record as production for theworld’s mines are failing to keep pace with increased demand from countrieslike China, the world’s largest user of the metal. Gold, silver and coppercontinued the upward trend throughout the quarter.

The stock indices were profitable for thePartnership. European stock indices had their best January rally in eight yearsas energy stocks along with miners and steelmakers gained on expectationsearnings would benefit from higher commodity prices. Leading the sector’sperformance was the Nikkei (Osaka), which despite increased volatility causedby geopolitical events, approached a decade high. The middle of the quarter wasvolatile for the stock indices sector as Asian stocks posted their firstmonthly decline since October 2005. The decline was short lived as Asian stocksapproached a 16-year high on surging demand for metals and oil at the end ofthe quarter. The Nikkei 225 climbed above 17,000 for the first time in morethan five years. The All Ordinaries rose 8% this quarter, while the NasdaqComposite Index rose to a five year high.

Theinterest rate sector was profitable for the Partnership, however, the beginningof the quarter was not profitable due the fact the fixed income markets in theU.S., Europe and Japan sold off over fears of their respective central banksraising interest rates. Performance in various markets counterbalanced eachother in the middle of the quarter.  Thesector benefited from Japanese Government bonds, which was in a price decline.Eurodollar posted gains, which were offset by losses in U.S. 30 year bonds,German bunds and bobl. The quarter ended with both the Federal Reserve and theEuropean Central Bank raising their respective interest rates 25 basis points.The true catalyst for the sell-off was growing speculation in the markets thatboth central banks would be forced to continue to raise rates after consumerconfidence reports released in both Europe and the U.S. on March 28th were much stronger thanexpected. The largest gains in this sector were achieved in the German bund andthe Japanese Government bond while

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the largest loss occurred in the Australianthree-year bond as traders increased speculation that the Federal Reserve Bankof Australia may have to raise interest rates to keep pace with the U.S.Federal Reserve.

The agricultural sector was profitable for thePartnership.  The quarter began withrecord highs as a result of the surging cost of crude oil which increased thedemand for ethanol, a sugar cane by-product. Brazil, the biggest producer andexporter of sugar, is converting more of its cane crop to ethanol to cope withrecord gasoline prices. New York (“N.Y.”) coffee rose to seven month highs asworldwide demand outpaced supply. N.Y. coffee and N.Y. sugar hindered returnsin the middle of the quarter while trading in CBOT (Chicago Board of Trade)wheat limited losses. CBOT wheat rose to a 20 month high on speculation thatunusually hot, dry weather from Texas to Nebraska reduced U.S. production. Thequarter ended with sugar prices in London rising to their highest levels since1989 on speculation that a jump in the cost of oil will force Brazil to directmore of its output towards producing ethanol. Wheat was weaker as rains revivedwinter wheat crops in the U.S. great plains after four months of dry weather.Corn posted a loss for this sector as prices in Chicago rose the most in eightmonths after U.S. farmers told the government they plan to slash this year’splantings to the lowest levels since 2001.

The energy sector was not profitable for thePartnership. Volatility within the energy sector increased as oil and naturalgas are now being used as “geopolitical weapons” by Iran, Russia, Venezuela andmilitants in Bolivia. Crude oil is up 41 percent from a year ago and 11 percentsince the beginning of the first quarter. However, the gains were not enough tooffset the losses incurred in natural gas, which for the first time in almostsix months dropped below $8 in New York. Natural gas fell 17 percent since thebeginning of the quarter as mild weather in the largest U.S. consuming regionscut demand which limited the need for utilities to pull from reserves. Themarket continued to be apprehensive over the unrest in Iran, Iraq, Nigeria andSaudi Arabia. Limiting losses in the sector was natural gas, as prices fell totheir lowest level in almost nine months as U.S. stockpiles for the week endedFebruary 17, 2006 were almost 700 billion cubic feet above the five yearaverage. The quarter ended with crude oil rising to a two month high and gasolinesurged as U.S. fuel supplies declined. Prices fell after Iran stated it wouldnot use crude oil as leverage in a dispute with western countries over itsnuclear program.

The currencies sector wasthe least profitable for the Partnership. The foreign exchange sector sufferedlosses as the U.S. dollar posted its biggest monthly decline against the Eurosince November 2004. This was due to the market’s anticipation of the FederalReserve’s removal of “measured pace” from its statement after its meeting on January31st. The Euro also benefited as the market waited for the European CentralBank’s meeting on February 2, 2006 to raise borrowing costs as Europe’s economystrengthened. The U.S. dollar also suffered losses against the Swiss franc,Japanese yen and the Euro. Investors no longer expect interest ratedifferentials to benefit the U.S. dollar as the spread narrowed between theU.S. and both European and Japanese interest rates. The U.S. dollar roseagainst the Euro in the middle of the quarter as new Federal Reserve Chairman,Ben S. Bernanke, stated that inflation may quicken. His comments suggestfurther tightening by the Federal Reserve. The quarter ended as range-boundtrading continued to negatively affect the Partnership’s long term trendfollowing approach. Although some currencies had directional moves during themonth, they were accompanied by strong reversals.

April 1, 2006 to June 30,2006

The Partnershipposted an overall loss for the second quarter with metals, interest rates, andenergy posting gains while stock indices, agriculture and currencies postedlosses.

The metals sector postedgains for the Partnership. The quarter began with gold surging to a 25 yearhigh and silver climbing 51% percent this year. This occurred due to theescalating dispute with Iran combined with a falling U.S. dollar which helpedto push the precious metal higher as investors look for a safe-haven given theglobal geopolitical uncertainty. Silver rallied on speculation that investordemand will grow as Barclays Bank PLC began offering an exchange traded fundbacked by the metal.  Both base andprecious metals began to retreat from highs set in the middle of the quarter.Gold fell to a three

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month low afterreaching a 26-year high in May. The dramatic sell-off was caused by thecombination of a stronger dollar, as investors bought dollars as an alternativeto gold, and increased speculation that the U.S. Federal Reserve could hikeinterest rates as much as 50 basis points. However, during the last two days ofthe quarter, gold surged, after the U.S. Federal Reserve suggested it may takea break from raising rates, eroding the value of the U.S. dollar.

The interest ratesector also posted a gain for the Partnership. European, Japanese and U.S. fixed income markets were sold off thebeginning of the quarter which significantly added to the Partnership’sperformance. The largest gain in the sector was in the German benchmark 10-yearbund whose yield rose 22 basis points. This rise was due to speculation theEuropean Central Bank will raise its key interest rate three more times thisyear. The Japanese 10 year bond (JGB’s) also added to the sector’s performanceas it fell for a fifth month, the longest since 1990, on concerns that the Bankof Japan will raise interest rates this year. Yields on U.S. 10-year Treasuriesrose for a fifth straight month mid-quarter, the longest stretch since 1999.Interest rate speculation occurred at the end of the quarter in U.S. Treasurieswith the U.S. Treasury bonds slightly rebounding due to U.S. Federal Reservehinting a pause in increasing rates in the future.

The energy sectorposted profits for the Partnership primarily due to the increasing price ofcrude oil. Concerns that the U.N. Security Council will impose sanctions thatcould lead Iran, the fourth-largest oil producer, to cut shipments drove crudeoil for June delivery to a new high of $75.35 a barrel. Increased geopoliticaluncertainty drove all petroleum based products higher as Brent crude oil forJune settlement also reached a new high of $74.79 a barrel on April 21st. While the sector benefitedfrom increased instability in the world, mild weather in the U.S. hinderedperformance as natural gas fell 20 percent and approached a nine month low asdemand slowed. Brent crude oil for July settlement touched a record high of$74.97 a barrel the middle of the quarter, the highest since the contract begantrading in 1988, as attacks in Nigeria and doubts that Iran will embrace a newU.S. backed effort to rein in the country’s nuclear program kept crude relatedproducts from suffering the severe intra month reversals that plagued themajority of the other sectors. Weakness in the markets caused by fears of aslowing world economy was replaced by strength at the end of the quarter due torenewed tensions in the Middle East and speculation that gasoline consumptionwould jump during the 4th of July holiday weekend. Crude oil futures forAugust delivery touched $74.10 on the NYMEX, after falling to a low of $68.75during the month. Natural gas posted gains as prices fell in New York as hotweather eased in the northern U.S. trimming demand for the fuel from powerplants, which is used to meet air cooling needs.

The stock indicesattributed to the loss posted for the Partnership. The Partnership’sperformance was hindered by increased geopolitical instability in the globalstock markets, as well as a volatile interest rate environment. Asian stocksdropped from a 16-year high at the beginning of the quarter after Chinaunexpectedly raised its key lending rate. The rate rise, along with Chinaasking the nation’s banks to restrict lending to prevent the economy fromoverheating, sent shares of mining companies and commodity producers lower onspeculation that increased borrowing costs could curb demand for raw materialsin the world’s fastest growing major economy. Global equity markets began tofall mid-quarter after the U.S. Federal Reserve met and it became apparent anadditional rate hike was still a possibility in June. The losses continued throughthe end of the quarter due to mounting speculation that actions of the U.S.Federal Reserve would hurt economic growth and 16 central banks raised interestrates to contain inflation. However, as it became evident that the U.S. FederalReserve was actually closer to ending its rate hiking cycle, world equitymarkets rallied. Despite the quarter end rally, the NASDAQ composite slid 7.2percent, its biggest drop since the first quarter of 2005.

The currencies sector was not profitable for the Partnership. In thebeginning of the quarter, the currency sector started strong with the largestgain in the British pound which posted its first back-to-back monthly gainmid-quarter against the U.S. dollar since the end of 2004.  An improving economic outlook increasedspeculation that the Bank of England may lift borrowing costs this year.However, losses were incurred at the end of the quarter by a strengthening ofthe U.S. dollar relative to most major currencies which adversely affected thePartnership. Stronger than expected June core Consumer Price (CPI) coupled withstatements from U.S. Federal Reserve Chairman Bernanke calling recent increasesin

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inflation measures an “unwelcomedevelopment”, led investors to speculate that the U.S. Federal Reserve might raiserates 50 basis points rather than the previously expected 25. The increasedrate speculation helped the dollar reach an eight-week high of 1.2479 againstthe Euro. On June 29th,the U.S. Federal Reserve raised rates 25 basis points and suggested it may benearing the end of its two-year cycle of rate increases as the statementannouncing their decision indicated that slowing economic growth “should helpto limit inflation pressures”. As a result, the U.S. dollar reversed once againand weakened during the last two days of the month. The U.S. dollar ended thequarter 5.3 percent lower against the Euro and 2.8 percent versus the Japaneseyen, which was the greatest percentage decrease since the last quarter of 2004.

The agricultural sectorwas the least profitable for the Partnership. At the beginning of the quartercotton fell to its lowest close since December 2, 2005. Prices were down 3.7percent from a year ago after farmers harvested a record 23.72 million baleslast year, up 2 percent from 2004. The gains were not enough however to offsetthe losses in the rest of the sector as choppy price action dominated thesector’s performance. The largest loss occurred in N.Y. coffee as growers inLatin America and Africa took advantage of a recent rally to sell beans. Sugar,whose demand has increased on its ability to be made into ethanol, fell asenergy prices dropped mid-quarter. Sugar prices fell to nearly a three monthlow in London on speculation that the European Union will increase exportsbefore the world trade organization reforms take effect in July. Weatherconditions had severe affects on various crops in the U.S. and around the worldat the end of the quarter. CBOT (Chicago Board of Trade) wheat fell to afive-week low in the middle of June, after warm dry weather in the central U.S.helped farmers speed up the harvest. About 21 percent of the winter wheat crophad been collected as of June 11th, almost double the five-year average of11 percent. Corn and soybeans also hindered performance as prices in Chicagofell as Midwest rains helped revive crops after six weeks of hot, dry weather.

July 1, 2006 to September30, 2006

The Partnership posted anoverall gain for the third quarter with interest rates and energy posting gainswhile stock indices, agriculture, metals and currencies posted losses.

The interest ratesector was the most profitable for the Partnership.  However, the quarter began with losses. Thebenchmark ten-year Japanese Government bond along with the U.S. ten-yearTreasury bond were the worst performers in the sector as the slowing U.S.economy spurred speculation that the Federal Reserve will stop raising interestrates. The Bank of Japan raised the rate between lenders 25 basis points onJuly 14th ending a five-year policy of keeping borrowingcosts near zero percent. Japanese government bonds, German bunds, and the U.S.benchmark ten-year Treasury bond rallied mid-quarter. Investors drove yieldslower as a smaller than expected increase in consumer prices, as well as asharp drop in industrial production, caused speculation that the Bank of Japanwould keep interest rates at their current level for the remainder of the year.German bunds added to the sector’s gains as yields hit their lowest levelssince March. The rally was due to European Central Bank (“ECB”) President JeanClaude Trichet signaling that the ECB may be ready to raise interest ratesagain at its meeting October 5th.  The sector had additional gains as U.S.Treasuries rose, extending their second straight monthly advance. Bonds weresupported by the Federal Reserve’s decision to benchmark U.S. interest rate at5.25%, ending a record two-year run of 17 straight rate increases. Quarterended as U.S. Treasuries had their biggest quarterly gains in four years andEuropean ten-year bonds posted their first quarterly gain since June 2005. TheU.S. ten-year yield touched a seven month low of 4.53 percent on September 25th, down from 5.14 percent onJune 30th as expectations that the Federal Reserve wouldraise interest rates further gave way to the view that it may lower them in thenear future.  Speculation increased thatthe cumulative effects of 17 U.S. Federal Reserve’s rate increases since June2004 would likely slow the economy and curb inflation.

The energy sector alsoposted gains for the Partnership. Geopolitical events and a record-breakingheat wave in the midwest and northeastern U.S. caused volatility throughout theentire energy sector. Natural gas rallied to its biggest gain for the year,posting gains of over 44% between July 18th and July 31st. The largest loss occurred in London gasoil as oil prices rose on the back of the rally in natural gas. Crude oil

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spiked on July 14th to a record $78.40 a barrel on concern thatthe fighting in Lebanon would spread to other parts of the Middle East, whichis the source of about a third of the world’s oil. Mid-quarter natural gasclosed at a six week low due to mild weather across the central and easternUnited States reduced demand for the fuel. The quarter ended as natural gas andcrude oil prices tumbled as mild weather in the U.S. Midwest cut demand andallowed inventories to climb toward an all time high. Natural gas futures forOctober delivery dropped to a four year low of $4.05 amid concerns that storagewill fill up and leave buyers with few places to store the fuel.

The stock indiceswere not profitable for the Partnership. The quarter began with the majority ofworld equity markets trendless as investors continued to speculate over theU.S. Federal Reserve’s next move. Global equities reversed the recent losingtrend and rallied on decreased fears of inflation mid-quarter. U.S. FederalReserve policy makers signaled that the economy may have cooled enough topreclude further interest rate increases for the remainder of the year.European stocks rallied at quarter’s end to a five-year high. Fears that slowereconomic growth in the U.S. and in Japan kept the Nikkei lower for the majorityof the month, however those fears subsided and the Nikkei rallied on signs ofeconomic growth in Japan. A pause in U.S. interest rate increases also easedconcerns of higher borrowing costs that could curb demand in Europe’s largestexport market.

The agriculturesector posted losses for the Partnership. At the beginning of the quarter, sugarunderperformed on speculation that global demand will slow. Sugar prices haveclimbed 52% over the past year on the theory that record oil prices would spurBrazil, the world’s largest sugar producer, to divert more of its harvest tomaking ethanol. Corn and soybeans also hurt performance as price volatilitycaused by fluctuating weather conditions in the U.S. Midwest threatened cropyields. A report issued by the U.S. Department of Agriculture that indicatedabout 59% of the corn crop was in good condition, which was the lowestpercentage of the year, contributed to corn price volatility. Losses in wheatmid-quarter were offset by gains in sugar. World sugar production this yearwill be higher than previously forecasted easing a third straight annual shortfallas favorable weather in India helped the harvest. Quarter ended with sugarprices plunging on speculation that demand would fall as lower energy costsdiscouraged the use of ethanol as an alternative fuel source eroding the valueof sugar. Cotton prices also fell as speculation that an attempted coup inThailand, the fifth-largest buyer of the fiber, would reduce imports from theUnited States.

The metals sectorposted losses for the Partnership. Volatility in the gold market increased as fighting escalated in theMiddle East causing the sector to post losses at the beginning of the quarter.The precious metal has gained 90 percent in the past year. Silver’s rally isdue to increased demand throughout the world and expectations of continued ofeconomic expansion in the developing nations. Base and precious metals sufferedas commodities as an asset class had their biggest quarterly decline in atleast 50 years. Gold and silver prices continued to fall as lower energy pricesand a stronger U.S. dollar eroded the appeal of the precious metals as analternative to U.S. stocks and bonds. The Commodity Research Bureau index endedthe third quarter down 12%, its largest decline in at least 50 years.

The currencysector was the least profitable for the Partnership.  Fighting broke out between Israel andHezbollah causing a sharp reversal in the weakening U.S. dollar trend. The U.S.dollar rallied beginning of the quarter as fighting in the Middle Eastescalated sending the currency higher against the Japanese yen and Euro.

Unfortunately, most ofthe gains disappeared as investors focused on interest rates after the U.S.Federal Reserve Chairman Bernanke stated that “moderation” in the economy wasunder way. Mid-quarter the Japanese yen fell against the U.S. dollar and theEuro on increased speculation that the Bank of Japan would keep interest ratesat their current levels causing the sector to post profits for the Partnership.However, the quarter ended as volatility increased due to speculationsurrounding the health of the U.S. economy and uncertainty of global inflation.The U.S. dollar fluctuated as differing economic data kept the marketplaceguessing what the U.S. Federal Reserve’s next move might be.

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Item 3.   Quantitativeand Qualitative Disclosures About Market Risk

Introduction

The Partnership was a speculative commodity pool through May 31, 2007.Effective June 1, 2007 the Partnership invests in Portfolio Funds that arecommodity pools.  The market sensitiveinstruments held by the Portfolio Funds are acquired for speculative tradingpurposes and all or substantially all of the Portfolio Funds’ assets aresubject to the risk of trading loss. Unlike an operating company, the risk of market sensitive instruments isintegral, not incidental, to the Partnership’s main line of business.

Market movements result in frequent changes in the fair market value ofthe Portfolio Funds’ open positions and, consequently, in their earnings andcash flow.  The Portfolio Funds’ marketrisk is influenced by a wide variety of factors, including the level andvolatility of interest rates, exchange rates, equity price levels, the marketvalue of financial instruments and contracts, the diversification effects amongthe Portfolio Funds’ open positions and the liquidity of the markets in whichit trades.

The Partnership, under the direction of JWH® through May 31, 2007 rapidly acquires andliquidates both long and short positions in a wide range of differentmarkets.  Consequently, it is notpossible to predict how a possible future market scenario will affectperformance, and the Partnership’s past performance is not necessarilyindicative of its future results.

Value at Risk is ameasure of the maximum amount which the Portfolio Funds could reasonably be expected to lose in a givenmarket sector.  However, the inherentuncertainty of the Portfolio Funds’speculative trading and the recurrence in the markets traded by the Portfolio Funds of market movementsfar exceeding expectations could result in actual trading or non-trading lossesfar beyond the indicated Value at Risk or the Portfolio Funds’ experience to date (i.e., “risk of ruin”).  In light of the foregoing as well as therisks and uncertainties intrinsic to all future projections, the inclusion ofthe quantification in this section should not be considered to constitute anyassurance or representation that the PortfolioFunds’ losses in any market sector will be limited to Value at Risk orby the Portfolio Funds’ attemptsto manage its market risk.

Quantifying thePartnership’s Trading Value at Risk

QuantitativeForward-Looking Statements

The following quantitative disclosures regarding the Partnership’smarket risk exposures contain “forward-looking statements” within the meaningof the safe harbor from civil liability provided for such statements by thePrivate Securities Litigation Reform Act of 1995 (set forth in Section 27A ofthe Securities Act of 1933 and Section 21E of the Securities Exchange Act of1934).  All quantitative disclosures inthis section are deemed to be forward-looking statements for purposes of thesafe harbor, except for statements of historical fact.

Due to the Partnership’s Fund of Funds structure,the following statements are related to the Portfolio Funds.

Exchangemaintenance margin requirements have been used by the Portfolio Funds as themeasure of its Value at Risk. Maintenance margin requirements are set by exchanges to equal or exceedthe maximum loss in the fair value of any given contract incurred in 95% to 99%of the one-day time periods included in the historical sample (approximatelyone year, generally) researched for purposes of establishing marginlevels.  The maintenance margin levelsare established by dealers and exchanges using historical price studies as wellas an assessment of current market volatility (including the implied volatilityof the options on a given futures contract) and economic fundamentals toprovide a probabilistic estimate of the maximum expected near-term one-day pricefluctuation.

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

100% positive correlation in the different positionsheld in each market risk category has been assumed.  Consequently, the margin requirements applicableto the open contracts have been aggregated to determine each trading category’saggregate Value at Risk.  Thediversification effects (which would reduce the Value at Risk estimates)resulting from the fact that the Portfolio Funds’ positions are rarely, ifever, 100% positively correlated have not been reflected.

**The Partnership’sTrading Value at Risk in Different Market Sectors**

The following table indicates the average, highest,and lowest trading Value at Risk associated with the Partnership’s openpositions by market category for the third quarter 2007.  During the third quarter 2007, thePartnership’s average capitalization was approximately $540,463,089. During thethird quarter 2006, the Partnership’s average capitalization was approximately$1,106,504,757.

The Partnership’s investments in the Portfolio Fundsare in class D-TF. The Value at Risk calculation for the Portfolio Funds isallocated to this class based upon the class proportion to total capital of thePortfolio Funds.

**Winton CLASS D-TFSeptember 30, 2007**
| **Market Sector** | ** ** | **Average  Value at Risk** | ** ** | **% of Average  Capitalization** | ** ** | **Highest Value  At Risk** | ** ** | **Lowest Value  At Risk** | ** ** |
|------------------------|------------|--------------------------------------|------------|--------------------------------------------|------------|--------------------------------------|------------|-------------------------------------|------------|
|                   |       |                                 |       |                                       |       |                                 |       |                                |       |
| Agriculture            |       | $                                    | 147,824    |                                       | 0.16       | %                                    | $          | 211,846                             |       | $ | 65,298 |   |
| Currencies             |       | 725,410                              |       | 0.77                                       | %          | 990,261                              |       | 299,332                             |       |
| Energy                 |       | 143,876                              |       | 0.15                                       | %          | 230,579                              |       | 9,780                               |       |
| Interest Rates         |       | 5,327,066                            |       | 5.69                                       | %          | 6,697,896                            |       | 4,522,247                           |       |
| Metals                 |       | 79,633                               |       | 0.08                                       | %          | 147,103                              |       | 38,809                              |       |
| Stock Indices          |       | 261,979                              |       | 0.28                                       | %          | 421,679                              |       | 97,040                              |       |
|                   |       |                                 |       |                                       |       |                                 |       |                                |       |
| TOTAL                  |       | $                                    | 6,685,788  |                                       | 7.13       | %                                    | $          | 8,699,364                           |       | $ | 5,032,506 |   |

 

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**Aspect CLASS D-TFSeptember 30, 2007**
| **Market Sector** | ** ** | **Average  Value at Risk** | ** ** | **% of Average  Capitalization** | ** ** | **Highest Value  At Risk** | ** ** | **Lowest Value  At Risk** | ** ** |
|------------------------|------------|--------------------------------------|------------|--------------------------------------------|------------|--------------------------------------|------------|-------------------------------------|------------|
|                   |       |                                 |       |                                       |       |                                 |       |                                |       |
| Agricultural           |       | $                                    | 225,172    |                                       | 0.24       | %                                    | $          | 653,832                             |       | $ | 40,278 |   |
| Currencies             |       | 918,447                              |       | 0.98                                       | %          | 2,630,865                            |       | 293,997                             |       |
| Energy                 |       | 423,506                              |       | 0.45                                       | %          | 1,389,902                            |       | 4,864                               |       |
| Interest Rates         |       | 8,432,377                            |       | 8.97                                       | %          | 12,935,262                           |       | 4,356,269                           |       |
| Metals                 |       | 404,741                              |       | 0.43                                       | %          | 989,459                              |       | 100,288                             |       |
| Stock Indices          |       | 412,901                              |       | 0.44                                       | %          | 729,071                              |       | 35,170                              |       |
|                   |       |                                 |       |                                       |       |                                 |       |                                |       |
| TOTAL                  |       | $                                    | 10,817,144 |                                       | 11.51      | %                                    | $          | 19,328,391                          |       | $ | 4,830,866 |   |

 

**Chesapeake ClassD-TFSeptember 30, 2007**
| **Market Sector** | ** ** | **Average  Value at Risk** | ** ** | **% of Average  Capitalization** | ** ** | **Highest Value  At Risk** | ** ** | **Lowest Value  At Risk** | ** ** |
|------------------------|------------|--------------------------------------|------------|--------------------------------------------|------------|--------------------------------------|------------|-------------------------------------|------------|
|                   |       |                                 |       |                                       |       |                                 |       |                                |       |
| Agricultural           |       | $                                    | 537,374    |                                       | 0.63       | %                                    | $          | 738,370                             |       | $ | 333,293 |   |
| Energy                 |       | 245,320                              |       | 0.29                                       | %          | 548,358                              |       | 29,405                              |       |
| Interest Rates         |       | 788,443                              |       | 0.93                                       | %          | 1,081,995                            |       | 59,256                              |       |
| Metals                 |       | 14,959,032                           |       | 17.65                                      | %          | 20,016,844                           |       | 1,810,769                           |       |
| Stock Futures          |       | 260,396                              |       | 0.31                                       | %          | 435,814                              |       | 63,430                              |       |
| Stock Indices          |       | 402,927                              |       | 0.48                                       | %          | 561,749                              |       | 213,118                             |       |
| Currencies             |       | 667,479                              |       | 0.79                                       | %          | 1,029,757                            |       | 165,084                             |       |
|                   |       |                                 |       |                                       |       |                                 |       |                                |       |
| TOTAL                  |       | $                                    | 17,860,971 |                                       | 21.08      | %                                    | $          | 24,412,887                          |       | $ | 2,674,355 |   |

 

**Transtrend CLASSD-TFSeptember 30, 2007**
| **Market Sector** | ** ** | **Average  Value at Risk** | ** ** | **% of Average  Capitalization** | ** ** | **Highest Value  At Risk** | ** ** | **Lowest Value  At Risk** | ** ** |
|------------------------|------------|--------------------------------------|------------|--------------------------------------------|------------|--------------------------------------|------------|-------------------------------------|------------|
|                   |       |                                 |       |                                       |       |                                 |       |                                |       |
| Agricultural           |       | $                                    | 304,254    |                                       | 0.35       | %                                    | $          | 993,862                             |       | $ | 2,619 |   |
| Energy                 |       | 3,032,800                            |       | 3.50                                       | %          | 4,050,216                            |       | 955,895                             |       |
| Interest Rates         |       | 1,315,053                            |       | 1.52                                       | %          | 13,609,078                           |       | 50,710                              |       |
| Metals                 |       | 5,677,488                            |       | 6.56                                       | %          | 1,131,194                            |       | 1,706,516                           |       |
| Currencies             |       | 818,842                              |       | 0.95                                       | %          | 5,634,924                            |       | —                              |       |
| Stock Indices          |       | 1,867,674                            |       | 2.16                                       | %          | 4,278,844                            |       | 53,230                              |       |
|                   |       |                                 |       |                                       |       |                                 |       |                                |       |
| TOTAL                  |       | $                                    | 13,016,111 |                                       | 15.04      | %                                    | $          | 29,698,118                          |       | $ | 2,768,970 |   |

 

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**September 31, 2006**
| **Market Sector** | ** ** | **Average Value  at Risk** | ** **  | **% of Average  Capitalization** | ** ** | **Highest Value  At Risk** | ** ** | **Lowest Value  At Risk** | ** ** |
|------------------------|------------|---------------------------------|-------------|--------------------------------------------|------------|--------------------------------------|------------|-------------------------------------|------------|
|                   |       |                            |        |                                       |       |                                 |       |                                |       |
| Interest Rates         |       | $                               | 107,257,752 |                                       | 9.69       | %                                    | $          | 143,544,330                         |       | $ | 43,863,637 |   |
| Currencies             |       | 28,742,732                      |        | 2.60                                       | %          | 93,297,083                           |       | 6,095,675                           |       |
| Stock Indices          |       | 4,679,211                       |        | 0.42                                       | %          | 13,268,291                           |       | 1,859,211                           |       |
| Metals                 |       | 3,035,075                       |        | 0.27                                       | %          | 9,249,917                            |       | 742,261                             |       |
| Agricultural           |       | 1,404,072                       |        | 0.13                                       | %          | 3,181,996                            |       | 191,779                             |       |
| Energy                 |       | 2,303,860                       |        | 0.21                                       | %          | 5,803,259                            |       | 630,938                             |       |
|                   |       |                            |        |                                       |       |                                 |       |                                |       |
| TOTAL                  |       | $                               | 147,417,702 |                                       | 13.32      | %                                    | $          | 268,344,876                         |       | $ | 53,383,501 |   |

 

Material Limitations onValue at Risk as an Assessment of Market Risk

The face value of the marketsector instruments held by the Portfolio Funds are typically many times theapplicable maintenance margin requirement (maintenance margin requirementsgenerally ranging between approximately 1% and 10% of contract face value) aswell as many times the capitalization of the Portfolio Funds.  The magnitude of the Portfolio Funds openpositions creates a “risk of ruin” not typically found in most other investmentvehicles.  Because of the size of itspositions, certain market conditions — unusual, but historically recurring fromtime to time — could cause the Portfolio Funds to incur severe losses over ashort period of time.   The foregoingValue at Risk table — as well as the past performance of the Portfolio Funds —gives no indication of this “risk of ruin.”

Item 4. Controls and Procedures

Merrill Lynch AlternativeInvestments LLC (MLAI), the General Partner of ML Trend-Following Fund L.P.,with the participation of the General Partner’s Chief Executive Officer and theChief Financial Officer, has evaluated the effectiveness of the design andoperation of its disclosure controls and procedures with respect to thePartnership as of the end of the period of this quarterly report, and, based onthis evaluation, has concluded that these disclosure controls and proceduresare effective.  Additionally, there wereno significant changes in the Partnership’s internal controls or in otherfactors that could significantly affect these controls subsequent to the dateof this evaluation, including any corrective actions with regard to significantdeficiencies and material weaknesses.

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PART II - OTHER INFORMATION

Item 1.             Legal Proceedings

On July 31, 2007, the CFTC issued an order againstMLAI and an advisory affiliate, to which MLAI and the affiliate consented,containing findings, which MLAI and the affiliate neither admitted nor denied,that MLAI and the affiliate filed with the NFA a number of annual reports forcommodity pools for which they acted as commodity pool operators after thedeadline established by the CFTC’s regulations, in violation of CFTC Regulation4.22(c). MLAI and the affiliate were ordered to cease and desist from violatingRegulation 4.22(c) and to pay a civil penalty in the amount of $500,000.

Item 2.            Unregistered Sales of Securities and Use ofProceeds

(a) None.

(b) None.

(c) None.

Item 3.            Defaults Upon Senior Securities

None.

Item 4.            Submission of Matters to a Vote of SecurityHolders

None.

Item 5.            Other Information

SeeNote 1 in the Notes to Financial Statements

Item 6.            Exhibits

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

31.01 and

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

Exhibit 31.01

and 31.02               Are filed herewith.

32.01 and

32.02                       Section1350 Certifications

Exhibit 32.01

and 32.02               Are filed herewith.

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**SIGNATURES**

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized.
|                                | ML TREND-FOLLOWING FUTURES FUND L.P. |
|--------------------------------|--------------------------------------|
|                           |                                 |
|                           | By: MERRILL LYNCH  ALTERNATIVE       |   |
|                           | INVESTMENTS  LLC                |   |
|                           | (General Partner)                    |   |
|                           |                                 |
|                           |                                 |
| Date: November 14, 2007        | By                                   | /s/ ROBERT D. OLLWERTHER |   |
|                           |                                 | Robert D. Ollwerther |
|                           |                                 | Chief Executive Officer and President |
|                           |                                 | (Principal Executive Officer) |
|                           |                                 |
|                           |                                 |
| Date:   November 14, 2007 | By                                   | /s/ BARBRA E. KOCSIS |   |
|                           |                                 | Barbra E. Kocsis |
|                           |                                 | Chief Financial Officer |
|                           |                                 | (Principal  Financial and Accounting Officer) |
|                                |                                      |  |  |  |  |  |

 

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