**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**FORM 10-Q**

 

**(MarkOne)**

 

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

 

**For the quarterly period ended March 31, 2010**

** **

**OR**

** **

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

** **

**For the transition period from               to              **

** **

**Commission File Number 0-28928**

 

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

(Exact Name of Registrantasspecified in its charter)

 

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

 

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

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

**250 Vesey Street**

**New York, New York 10080**

(Address of principalexecutive offices)(Zip Code)

 

**212-449-3517**(Registrant’stelephone number, including area code)

 

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

**New York, New York 10281**

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

 

Indicate by check mark whether the registrant (1) has filed allreports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.  Yes x  No o

 

Indicate by check mark whether the registrant has submittedelectronically and posted on its corporate website if any, every Interactive DataFile required to be submitted and posted pursuant to Rule 405 ofRegulation S-T (§232.405 of this chapter) during the preceding 12 months (orfor such shorter period that the registrant was required to submit and postsuch files).  Yes o  No o

 

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

 

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

 

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

 

As of March 31, 2010,1,358,724 units of limited partnership interest membership were outstanding.

 

 

** **

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

 

QUARTERLYREPORT FOR MARCH 31, 2010 ON FORM 10-Q

 
| ** **   | ** **                                                                                  | ** ** | **PAGE** |
|--------------|---------------------------------------------------------------------------------------------|------------|----------|
|         |                                                                                        |       |     |
| PART I  |                                                                                        |       |
|         |                                                                                        |       |     |
| Item 1.      | Financial Statements                                                                        |       | 1        |
|         |                                                                                        |       |     |
| Item 2.      | Management’s Discussion and Analysis of  Financial Condition and Results of Operations |       | 12       |
|         |                                                                                        |       |     |
| Item 3.      | Quantitative  and Qualitative Disclosures About Market Risk                                 |       | 15       |
|         |                                                                                        |       |     |
| Item 4T.     | Controls and  Procedures                                                                    |       | 23       |
|         |                                                                                        |       |     |
| PART II |                                                                                        |       |
|         |                                                                                        |       |     |
| Item 1.      | Legal Proceedings                                                                           |       | 23       |
|         |                                                                                        |       |     |
| Item 1A.     | Risk Factor                                                                                 |       | 23       |
|         |                                                                                        |       |     |
| Item 2.      | Unregistered  Sales of Securities and Use of Proceeds                                       |       | 23       |
|         |                                                                                        |       |     |
| Item 3.      | Defaults Upon  Senior Securities                                                            |       | 24       |
|         |                                                                                        |       |     |
| Item 4.      | (Removed and Reserved)                                                                      |       | 24       |
|         |                                                                                        |       |     |
| Item 5.      | Other Information                                                                           |       | 24       |
|         |                                                                                        |       |     |
| Item 6.      | Exhibits                                                                                    |       | 24       |

 

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PART I -FINANCIAL INFORMATION

 

Item 1.    FinancialStatements

 

ML TREND-FOLLOWING FUTURES FUND L.P.

(a Delaware LimitedPartnership)

 

STATEMENTS OF FINANCIALCONDITION

(unaudited)

 
| ** **                                                                             | ** ** | **March 31,** | ** **  | **December 31,** | ** ** |
|----------------------------------------------------------------------------------------|------------|--------------------|-------------|-----------------------|------------|
| ** **                                                                             | ** ** | **2010**           | ** **  | **2009**              | ** ** |
|                                                                                   |       |               |        |                  |       |
| **ASSETS:**                                                                            |       |               |        |                  |       |
| Cash and cash equivalents                                                              |       | $                  | 234,812     |                  | $          | 236,960 |   |
| Investments in Portfolio Funds (cost $199,311,541  for 2010 and $205,798,913 for 2009) |       | 249,365,408        |        | 252,194,542           |       |
| Due from Portfolio Funds                                                               |       | 6,969,521          |        | 11,698,600            |       |
| Accrued interest receivable                                                            |       | 39                 |        | 80                    |       |
| **TOTAL ASSETS**                                                                       |       | $                  | 256,569,780 |                  | $          | 264,130,182 |   |
|                                                                                   |       |               |        |                  |       |
| **LIABILITIES AND PARTNERS’ CAPITAL**                                             |       |               |        |                  |       |
| **LIABILITIES:**                                                                       |       |               |        |                  |       |
| Wrap fee payable                                                                       |       | $                  | 854,937     |                  | $          | 868,235 |   |
| Redemptions payable                                                                    |       | 6,275,713          |        | 11,251,332            |       |
| Other liabilities                                                                      |       | 88,458             |        | 86,698                |       |
|                                                                                   |       |               |        |                  |       |
| Total liabilities                                                                      |       | 7,219,108          |        | 12,206,265            |       |
|                                                                                   |       |               |        |                  |       |
| **PARTNERS’ CAPITAL:**                                                            |       |               |        |                  |       |
| General Partner (41,734 Units and 41,734 Units)                                        |       | 8,313,413          |        | 8,313,413             |       |
| Limited Partners (1,316,990 Units and 1,390,359  Units)                                |       | 241,037,259        |        | 243,610,504           |       |
|                                                                                   |       |               |        |                  |       |
| Total partners’ capital                                                           |       | 249,350,672        |        | 251,923,917           |       |
|                                                                                   |       |               |        |                  |       |
| **TOTAL LIABILITIES AND PARTNERS’  CAPITAL:**                                     |       | $                  | 256,569,780 |                  | $          | 264,130,182 |   |
|                                                                                   |       |               |        |                  |       |
| **NET ASSET VALUE PER UNIT**                                                           |       |               |        |                  |       |
| (Based on 1,358,724 and 1,432,093 Units outstanding;  unlimited Units authorized)      |       | $                  | 183.5183    |                  | $          | 175.9131 |   |

 

See notes to  financial statements.

 

1

----

 

ML TREND-FOLLOWING FUTURES FUND L.P.

(a Delaware LimitedPartnership)

STATEMENTS OF OPERATIONS

(unaudited)

 
| ** **                                                                        | ** ** | **For the three**  | ** ** | **For the three**  | ** ** |
|-----------------------------------------------------------------------------------|------------|--------------------|------------|--------------------|------------|
| ** **                                                                        | ** ** | **months ended**   | ** ** | **months ended**   | ** ** |
| ** **                                                                        | ** ** | **March 31,** | ** ** | **March 31,** | ** ** |
| ** **                                                                        | ** ** | **2010**           | ** ** | **2009**           | ** ** |
| **TRADING PROFIT (LOSS):**                                                        |       |               |       |               |       |
|                                                                              |       |               |       |               |       |
| Realized, net                                                                     |       | 9,246,023          |       | $                  | 7,916,653  |   |
| Change in unrealized, net                                                         |       | 3,658,238          |       | (13,885,456        | )          |
| Total trading profit (loss)                                                       |       | 12,904,261         |       | (5,968,803         | )          |
|                                                                              |       |               |       |               |       |
| **INVESTMENT INCOME:**                                                            | ** ** | ** **         |       |               |       |
| Interest                                                                          |       | 226                |       | 2,388              |       |
|                                                                              |       |               |       |               |       |
| **EXPENSES:**                                                                     | ** ** | ** **         |       |               |       |
| Wrap fee                                                                          |       | 2,487,465          |       | 3,449,197          |       |
| Administrative and filing fees                                                    |       | 13,710             |       | —             |       |
| Other Expenses                                                                    |       | —             |       | 62,500             |       |
| Total expenses                                                                    |       | 2,501,175          |       | 3,511,697          |       |
| ** **                                                                        |       |               |       |               |       |
| **NET INVESTMENT (INCOME) LOSS**                                                  |       | (2,500,949         | )          | (3,509,309         | )          |
| ** **                                                                        |       |               |       |               |       |
| **NET PROFIT (LOSS)**                                                             |       | $                  | 10,403,312 |               | $          | (9,478,111 | ) |
|                                                                              |       |               |       |               |       |
| **NET PROFIT (LOSS) PER UNIT:**                                                   |       |               |       |               |       |
| Weighted average number of General Partner and  Limited Partner Units outstanding |       | $                  | 1,413,283  |               | 1,741,129  |   |
|                                                                              |       |               |       |               |       |
| Net (loss) per weighted average General Partner and  Limited Partner Unit         |       | $                  | 7.36       |               | $          | (5.44 | ) |

 

See notes to  financial statements.

 

2

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ML TREND-FOLLOWING FUTURES FUND L.P.

(a Delaware LimitedPartnership)

 

STATEMENTS OF CHANGES INPARTNERS’ CAPITAL

For the three monthsended March 31, 2010 and 2009

(unaudited)

 
| ** **                                      | ** ** | **Units** | ** ** | **General********Partner** | ** ** | **Limited********Partners** | ** ** | **Total**   | ** ** |
|-------------------------------------------------|------------|-----------|------------|----------------------------|------------|-----------------------------|------------|-------------|------------|
|                                            |       |      |       |                       |       |                        |       |        |       |
| PARTNERS’  CAPITAL, December 31, 2008 |       | 1,766,400 |       | $                          | 8,313,413  |                        | $          | 343,561,095 |       | $ | 351,874,508 |   |
|                                            |       |      |       |                       |       |                        |       |        |       |
| Subscriptions                                   |       | 15,988    |       | —                     |       | 3,185,216                   |       | 3,185,216   |       |
|                                            |       |      |       |                       |       |                        |       |        |       |
| Net Profit (Loss)                               |       | —    |       | (237,240                   | )          | (9,240,871                  | )          | (9,478,111  | )          |
|                                            |       |      |       |                       |       |                        |       |        |       |
| Redemptions                                     |       | (114,092  | )          | —                     |       | (22,509,757                 | )          | (22,509,757 | )          |
|                                            |       |      |       |                       |       |                        |       |        |       |
| PARTNERS’  CAPITAL, March 31, 2009    |       | 1,668,296 |       | $                          | 8,076,173  |                        | $          | 314,995,682 |       | $ | 323,071,856 |   |
|                                            |       |      |       |                       |       |                        |       |        |       |
| PARTNERS’  CAPITAL, December 31, 2009 |       | 1,432,093 |       | $                          | 8,313,413  |                        | $          | 243,610,504 |       | $ | 251,923,917 |   |
|                                            |       |      |       |                       |       |                        |       |        |       |
| Subscriptions                                   |       | 9,827     |       | —                     |       | 1,705,335                   |       | 1,705,335   |       |
|                                            |       |      |       |                       |       |                        |       |        |       |
| Net Profit (Loss)                               |       | —    |       | —                     |       | 10,403,312                  |       | 10,403,312  |       |
|                                            |       |      |       |                       |       |                        |       |        |       |
| Redemptions                                     |       | (83,196   | )          | —                     |       | (14,681,892                 | )          | (14,681,892 | )          |
|                                            |       |      |       |                       |       |                        |       |        |       |
| PARTNERS’  CAPITAL, March 31, 2010    |       | 1,358,724 |       | $                          | 8,313,413  |                        | $          | 241,037,259 |       | $ | 249,350,672 |   |

 

See notes to  financial statements.

 

3

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ML TREND-FOLLOWINGFUTURES FUND L.P.

(A Delaware LimitedPartnership)

 

FINANCIAL DATAHIGHLIGHTS

FOR THE THREEMONTHS ENDED MARCH 31, 2010 (unaudited)

 

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

 
| ** **                                                       | ** ** | **Three months ended**  | ** ** | **Three months ended**  | ** ** |
|------------------------------------------------------------------|------------|-------------------------|------------|-------------------------|------------|
| ** **                                                       | ** ** | **March 31, 2010** | ** ** | **March 31, 2009** | ** ** |
| **Per Unit Operating Performance:**                              |       |                    |       |                    |       |
| ** **                                                       |       |                    |       |                    |       |
| Net asset value, beginning of period                             |       | $                       | 175.91     |                    | $          | 199.20 |   |
|                                                             |       |                    |       |                    |       |
| Net Realized and net unrealized change in trading  profit (loss) |       | 9.38                    |       | (3.54                   | )          |
| Expenses (1)                                                     |       | (1.77                   | )          | (2.02                   | )          |
|                                                             |       |                    |       |                    |       |
| Net asset value, end of period                                   |       | $                       | 183.52     |                    | $          | 193.65 |   |
|                                                             |       |                    |       |                    |       |
| **Total Return: (3)**                                            |       |                    |       |                    |       |
|                                                             |       |                    |       |                    |       |
| Total return                                                     |       | 4.32                    | %          | -2.79                   | %          |
|                                                             |       |                    |       |                    |       |
| **Ratios to Average Net Assets: (1),(2)**                        |       |                    |       |                    |       |
|                                                             |       |                    |       |                    |       |
| Expenses                                                         |       | 1.02                    | %          | 1.02                    | %          |
|                                                             |       |                    |       |                    |       |
| Net investment profit (loss)                                     |       | 4.49                    | %          | -2.79                   | %          |

 

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(1) Includes theimpact of brokerage commission expense.

(2) The ratios donot reflect the proportionate share of income and expense of the PortfolioFunds.

(3) The total returncalculations are based on compounded monthly returns and is calculated for eachclass taken as a whole.

 

An individual partners’return may vary from these returns based on timing of capital transactions. 

 

See notes to financialstatements.

 

4

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ML TREND-FOLLOWING FUTURES FUND L.P.

(a Delaware Limited Partnership)

 

NOTES TO FINANCIALSTATEMENTS

(unaudited)

 

1.               SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

MLTrend-Following Futures Fund L.P. (the “Partnership”), formerly known as ML JWHStrategic Allocation Fund L.P. was organized under the Delaware Revised UniformLimited Partnership Act on December 11, 1995 and commenced trading on July 15,1996.  The Partnership operates as a “fundof funds”, allocating and reallocating its capital, under the discretion ofMerrill Lynch Alternative Investments LLC (“MLAI”) the general partner of thePartnership, among four underlying FuturesAccess Funds (each a “Portfolio Fund”and collectively the “Portfolio Funds”). MLAI is an indirect wholly-owned subsidiary of Merrill Lynch &Co., Inc. (“Merrill Lynch”)**. **Merrill Lynch, Pierce, Fenner &Smith Incorporated****(“MLPF&S”),a wholly-owned subsidiary of Merrill Lynch, is the Partnership’s commoditybroker.****The Portfolio Funds are a group ofcommodity pools sponsored by MLAI, each of which places substantially all ofits assets in a managed futures and forward trading account managed by a singlecommodity trading advisor.  Each of thePortfolio Funds implements a different trading strategy.

 

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

 

·                  The Partnership changed its name to MLTrend-Following Futures Fund L.P.

 

·                  The Partnership’sassets were reinvested in MLAI-sponsored Portfolio Funds: ML AspectFuturesAccess LLC (“Aspect”), ML Chesapeake FuturesAccess LLC (“Chesapeake”),ML Transtrend DTP Enhanced FuturesAccess LLC (“Transtrend”) and ML WintonFuturesAccess LLC (“Winton”). Chesapeake was liquidated on January 31,2010 and was replaced with ML BlueTrend FuturesAccess LLC (“BlueTrend”). ThesePortfolio Funds employ a variety of systematic models with an emphasis on astyle of investment commonly referred to as “diversified trend following” andthe Partnership no longer utilizes the services of John W. Henry &Company, Inc. as the commodity trading advisor.

 

·                  On May 7,2007, the Partnership was deregistered under the Securities Act of 1933, asamended, but retained its registration under the Securities Act of 1934, asamended (the “Act”).

 

·                  Prior to June 1,2007, the Partnership’s brokerage commissions and administrative feesconstituted a single annual “wrap fee” in an amount of 6.0% of the Partnership’saverage month-end Net Asset Value, which covered all of the Partnership’s costsand expenses, other than bid-ask spreads and certain trading fees as well as anannual filing fee payable to the State of New Jersey and offering costs. After June 1,2007, the Partnership pays a wrap fee in the amount of 4.0% of the Partnership’saverage month-end Net Asset Value. Other than this 4.0% wrap fee, the onlydirect expense of the Partnership is the annual New Jersey filing fee, which isassessed on a per-partner basis with a maximum charge of $250,000 per year.

 

MLAI,the sponsor (“Sponsor”) and general partner of the Partnership, is an indirectwholly-owned subsidiary of Merrill Lynch & Co., Inc. (“MerrillLynch”).  Merrill Lynch, Pierce, Fenner &Smith Incorporated (“MLPF&S”), a wholly-owned subsidiary of Merrill Lynch,is the Partnership’s commodity broker. As used herein, the capitalized term “MLAI”also refers to the general partner at times when its name was MLIM 

 

5

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AlternativeStrategies LLC, as applicable. On September 15, 2008, Merrill Lynch (orthe “Company”) entered into an Agreement and Plan of Merger (as amended byAmendment No. 1 dated as of October 21, 2008, the “Merger Agreement”)with Bank of America Corporation (“Bank of America”). Pursuant to the MergerAgreement, on January 1, 2009, a wholly-owned subsidiary of Bank ofAmerica merged with and into Merrill Lynch, with Merrill Lynch continuing asthe surviving corporation and a subsidiary of Bank of America.

 

In the opinion of management, these interim financialstatements contain all adjustments, consisting only of normal recurringadjustments, necessary for a fair statement of the financial position of the Partnership as of March 31, 2010 andthe results of its operations for the three months ended March 31, 2010and  2009. However, the operating resultsfor the interim periods may not be indicative of the results for the full year.

 

Certain information andfootnote disclosures normally included in annual financial statements preparedin conformity with accounting principles generally accepted in the UnitedStates of America (“U.S. GAAP”) have been omitted. These financial statementsshould be read in conjunction with the financial statements and notes theretoincluded in the Partnership’s Annual Report on Form 10-K filed with theSecurities and Exchange Commission for the year ended December 31, 2009.

 

Interestsin the Fund are not insured or otherwise protected by the Federal DepositInsurance Corporation or any other government authority.  Interests are not deposits or otherobligations of, and are not guaranteed by, Bank of America or any of its affiliatesor by any bank.  Interests are subject toinvestment risks, including the possible loss of the full amount invested.

 

Estimates

 

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

 

2.     INVESTMENTS IN PORTFOLIO FUNDS

 

Thefour Portfolio Funds in which the Partnership is invested in as of March 31,2010 are; Winton, Aspect, Transtrend and Bluetrend. MLAI may, in its discretion, change Portfolio Funds atany time. MLAI may vary the percentage of the Partnership’s total portfolioallocated to the different Portfolio Funds at MLAI’s discretion. There is nopre-established range for the minimum and maximum allocations that may be madeto any given Portfolio Funds.

 

The investment transactions were accounted for on a trade date basis.The investments in the Portfolio Funds were valued at fair value and arereflected in the Statements of Financial Condition. In determining fair value,MLAI utilized the net asset value of the underlying Portfolio Funds whichapproximates fair value. The fair value was net of all fees relating to thePortfolio Funds, paid or accrued. Additionally, MLAI monitored the performanceof the Portfolio Funds. Such monitoring procedures included, but were notlimited to: monitoring market movements in Portfolio Funds’ investments,comparing performance to industry benchmarks, and in-depth conference calls andsite visits with the Portfolio Funds’ Managers.

 

6

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The Investment in Portfolio Funds at March 31,2010 and December 31, 2009 are as follows:

 

**March 31,2010**

 
| ** **                                         | ** ** | **Fair  Value** | ** **  | **Percentage  of  Partners’ Capital** | ** ** | **Profit  (Loss)** | ** ** | **Cost @  3/31/10** | ** **  | **Management  Fee** | ** ** | **Performance  Fee** | ** ** | **Redemptions  Permitted** | ** ** |
|----------------------------------------------------|------------|-----------------|-------------|--------------------------------------------|------------|--------------------|------------|---------------------|-------------|---------------------|------------|----------------------|------------|----------------------------|------------|
| ML Winton  FuturesAccess LLC                       |       | $               | 62,341,352  |                                       | 25.00      | %                  | 2,594,081  |                | 46,448,354  |                | (232,554   | )                    | —     |                       | Monthly    |   |
| ML Aspect  FuturesAccess LLC                       |       | 62,341,352      |        | 25.00                                      | %          | 2,217,416          |       | 50,469,876          |        | (232,082            | )          | —               |       | Monthly                    |       |
| ML Transtrend DTP  Enhanced FuturesAccess LLC      |       | 62,341,352      |        | 25.00                                      | %          | 4,228,514          |       | 45,514,152          |        | (156,334            | )          | —               |       | Monthly                    |       |
| ML Chesapeake  FuturesAccess LLC*                  |       | —          |        | 0.00                                       | %          | (1,787,343         | )          | —              |        | (51,094             | )          | —               |       | Monthly                    |       |
| ML Bluetrend  FuturesAccess LLC                    |       | 62,341,352      |        | 25.00                                      | %          | 5,651,593          |       | 56,879,159          |        | (106,551            | )          | —               |       | Monthly                    |       |
|                                               |       |            |        |                                       |       |               |       |                |        |                |       |                 |       |                       |       |
| Total Investment  in Portfolio Funds at fair value |       | $               | 249,365,408 |                                       | 100.00     | %                  | 12,904,261 |                | 199,311,541 |                |       |                 |       |                       |       |   |

 

**December 31,2009**

 
| ** **                                         | ** ** | **Fair  Value** | ** **  | **Percentage  of  Partners’ Capital** | ** ** | **Profit  (Loss)** | ** ** | **Cost @  12/31/09** | ** ** | **Management  Fee** | ** **  | **Performance  Fee** | ** ** | **Redemptions  Permitted** | ** ** |
|----------------------------------------------------|------------|-----------------|-------------|--------------------------------------------|------------|--------------------|------------|----------------------|------------|---------------------|-------------|----------------------|------------|----------------------------|------------|
| ML Winton  FuturesAccess LLC                       |       | $               | 63,048,635  |                                       | 25.02      | %                  | $          | (5,336,877           | )          | $                   | 49,017,143  |                 | $          | (1,141,376                 | )          | $ | (58 | ) | Monthly |   |
| ML Aspect  FuturesAccess LLC                       |       | 63,048,636      |        | 25.02                                      |       | (9,013,890         | )          | 52,913,668           |       | (1,136,895          | )           | (4,019               | )          | Monthly                    |       |
| ML Transtrend DTP  Enhanced FuturesAccess LLC      |       | 63,048,635      |        | 25.02                                      |       | (11,662,966        | )          | 49,054,433           |       | (755,300            | )           | (127                 | )          | Monthly                    |       |
| ML Chesapeake  FuturesAccess LLC*                  |       | 63,048,636      |        | 25.02                                      |       | (443,571           | )          | 54,813,669           |       | (764,642            | )           | (49,803              | )          | Monthly                    |       |
|                                               |       |            |        |                                       |       |               |       |                 |       |                |        |                 |       |                       |       |
| Total Investment  in Portfolio Funds at fair value |       | $               | 252,194,542 |                                       | 100.08     | %                  | $          | (26,457,304          | )          | $                   | 205,798,913 |                 |       |                       |       |   |   |   |
|                                                    |            |                 |             |                                            |            |                    |            |                      |            |                     |             |                      |            |                            |            |  |  |  |  |  |

 

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* Liquidated as of January 31, 2010.

 

These investments are recorded at fair value. Inaccordance with Regulation S-X, the following is summarized financialinformation for each of the Portfolio Funds which requires disclosure.

 

7

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| ** ** | ** ** | **As of  March 31, 2010** | ** **    |
|------------|------------|--------------------------------|---------------|
| ** ** | ** ** | **Total Assets**          | ** **    | **Total Liabilities** | ** ** | **Total Capital** | ** ** |
| Winton     |       | $                              | 798,187,296   |   | $ | 12,437,104 |   | $ | 785,750,192 |   |
| Aspect     |       | 273,904,038                    |          | 2,602,477 |   | 271,301,561 |   |
| Transtrend |       | 266,062,137                    |          | 14,549,068 |   | 251,513,069 |   |
| Bluetrend  |       | 250,350,337                    |          | 8,589,953 |   | 241,760,384 |   |
|       |       |                           |          |   |   |   |   |
| Total      |       | $                              | 1,588,503,808 |   | $ | 38,178,602 |   | $ | 1,550,325,206 |   |

 
| ** **  | ** ** | **As of December 31, 2009** | ** **    |
|-------------|------------|----------------------------------|---------------|
| ** **  | ** ** | **Total Assets**                 | ** **    | **Total Liabilities** | ** ** | **Total Capital** | ** ** |
| Winton      |       | $                                | 766,300,520   |   | $ | 16,264,053 |   | $ | 750,036,467 |   |
| Aspect      |       | 271,191,373                      |          | 5,562,211 |   | 265,629,162 |   |
| Transtrend  |       | 238,072,475                      |          | 2,171,789 |   | 235,900,686 |   |
| Chesapeake* |       | 163,226,178                      |          | 11,079,623 |   | 152,146,555 |   |
|        |       |                             |          |   |   |   |   |
|        |       | $                                | 1,438,790,546 |   | $ | 35,077,676 |   | $ | 1,403,712,870 |   |

 
| ** **  | ** ** | **For the three months ended March 31,2010**                          | ** ** |
|-------------|------------|----------------------------------------------------------------------------|------------|
| ** **  | ** ** | **Income (Loss)**                                                          | ** ** | **Commissions** | ** ** | **Other** | ** ** | **Net  Income (Loss)** | ** ** |
| Winton      |       | $                                                                          | 2,864,052  |   | $ | (17,083 | ) | $ | (252,888 | ) | $ | 2,594,081 |   |
| Aspect      |       | 2,515,578                                                                  |       | (30,500 | ) | (267,662 | ) | 2,217,416 |   |
| Transtrend  |       | 4,523,722                                                                  |       | (104,654 | ) | (190,554 | ) | 4,228,514 |   |
| Chesapeake* |       | (1,716,301                                                                 | )          | (5,817 | ) | (65,225 | ) | (1,787,343 | ) |
| Bluetrend   |       | 7,398,688                                                                  |       | (49,752 | ) | (1,697,343 | ) | 5,651,593 |   |
|        |       |                                                                       |       |   |   |   |   |   |   |
| Total       |       | $                                                                          | 15,585,739 |   | $ | (207,806 | ) | $ | (2,473,672 | ) | $ | 12,904,261 |   |
|        |       |                                                                       |       |   |   |   |   |   |   |
| ** **  | ** ** | **For the three months ended March 31,2009** | ** ** |
| ** **  | ** ** | ** **                                                                 | ** ** | ** ** | ** ** | ** ** | ** ** | **Net** | ** ** |
| ** **  | ** ** | **Income (Loss)**                                                     | ** ** | **Commissions** | ** ** | **Other** | ** ** | **Income (Loss)** | ** ** |
| Winton      |       | $                                                                          | (660,917   | ) | $ | (18,963 | ) | $ | (355,887 | ) | $ | (1,035,767 | ) |
| Aspect      |       | (1,145,409                                                                 | )          | (26,024 | ) | (362,568 | ) | (1,534,001 | ) |
| Transtrend  |       | (2,008,489                                                                 | )          | (74,392 | ) | (265,398 | ) | (2,348,279 | ) |
| Chesapeake* |       | (765,267                                                                   | )          | (12,653 | ) | (265,131 | ) | (1,043,051 | ) |
|        |       |                                                                       |       |   |   |   |   |   |   |
| Total       |       | $                                                                          | (4,580,082 | ) | $ | (132,032 | ) | $ | (1,248,984 | ) | $ | (5,961,098 | ) |

 

3.    FAIR VALUE OF INVESTMENTS

 

TheFinancial Accounting Standards Board (“FASB”) issued the Accounting StandardsCodification (“ASC”) which provides authoritative guidance on fair valuemeasurement. This guidance defines fair value, establishes a framework formeasuring fair value and expands disclosures about fair value measurements.

 

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

 

Thefair value measurement guidance established a hierarchal disclosure frameworkwhich prioritizes and ranks the level of market price observability used inmeasuring investments at fair value. Market price observability is impacted bya number of factors, including the type of investment and the characteristicsspecific to the investment. Investments with readily available active quotedprices or for which fair value can be measured from actively quoted pricesgenerally will have a higher degree of market price observability and a lesserdegree of judgment used in measuring fair value.

 

Investmentsmeasured and reported at fair value are classified and disclosed in one of thefollowing categories:

 

8

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LevelI — Quoted prices are available in active markets for identical investments asof the reporting date. The type of investments included in Level I are publiclytraded investments. As required by the fair market value measurement guidance,the Fund does not adjust the quoted price for these investments even insituations where the Fund holds a large position and a sale could reasonablyimpact the quoted price.

 

LevelII — Pricing inputs are other than quoted prices in active markets, which areeither directly or indirectly observable as of the reporting date, and fairvalue is determined through the use of generally accepted and understood modelsor other valuation methodologies. Investments which are generally included inthis category are investments valued using market data.

 

LevelIII — Pricing inputs are unobservable and include situations where there islittle, if any, market activity for the investment. Fair value for theseinvestments is determined using valuation methodologies that consider a rangeof factors, including but not limited to the nature of the investment, localmarket conditions, trading values on public exchanges for comparablesecurities, current and projected operating performance and financingtransactions subsequent to the acquisition of the investment. The inputs intothe determination of fair value require significant management judgment. Due tothe inherent uncertainty of these estimates, these values may differ materiallyfrom the values that would have been used had a ready market for theseinvestments existed.

 

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

 

Following is a description of the valuationmethodologies used for investments, as well as the general classification ofsuch investments pursuant to the valuation hierarchy.

 

Investments in Portfolio Funds are valued using thenet asset value reported by the investment company, which management believesapproximates fair value. These net asset values are the prices used to executetrades with these Portfolio Funds.

 

Although there are monthly transactions inthese Portfolio Funds interests, the Net Asset Value’s (“NAV”) are materiallybased on portfolios of Level I and Level II assets and liabilities for whichthe Fund has transparency.  As such, thePartnership determined that its investments in these portfolio funds in thiscase, would be classified as Level II.

 

The following tablesummarizes the valuation of the Partnership’s investments by the above fairvalue hierarchy levels as of March 31, 2010 and December 31, 2009:

 
| **Investment in**       | ** ** | ** ** | ** **  | ** **  | ** ** | ** **   | ** ** | ** **    | ** **  |
|-------------------------|------------|------------|-------------|-------------|------------|--------------|------------|---------------|-------------|
| **Portfolio Funds**     | ** ** | **Total**  | ** **  | **Level I** | ** ** | **Level II** | ** ** | **Level III** | ** **  |
|                    |       |       |        |        |       |         |       |          |        |
| March 31,  2010    |       | $          | 249,365,408 |        | $          | —       |       | $             | 249,365,408 |   | $ | — |   |
| December 31,  2009 |       | $          | 252,194,542 |        | $          | —       |       | $             | 252,194,542 |   | $ | — |   |

 

There were no significanttransfers to or from Level I or II during the quarter ended March 31,2010.

 

9

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4.    MARKET, CREDIT ANDCONCENTRATION RISKS

 

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

 

Market Risk

 

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

 

MLAI has procedures in place intended to controlmarket risk exposure, although there can be no assurance that they will, infact, succeed in doing so.  Theseprocedures focus primarily on monitoring the trading of the Portfolio Funds,calculating the Net Asset Value of the Fund and the Portfolio Funds as of theclose of business on each day and reviewing outstanding positions forover-concentrations.  While MLAI does notintervene in the markets to hedge or diversify the Portfolio Funds’ marketexposure, MLAI may urge the respective trading advisors to reallocate positionsin an attempt to avoid over-concentrations. However, such interventions are expected to be unusual.  It is expected that MLAI’s basic risk controlprocedures will consist of the ongoing process of advisor monitoring, with themarket risk controls being applied by respective trading advisors.

 

Credit Risk

 

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

 

The credit riskassociated with these instruments from counterparty nonperformance is the netunrealized profit on open contracts, if any, included in the Portfolio Funds’ Statements of Financial Condition. The Portfolio Funds attempt to mitigate this risk by dealingexclusively with Merrill Lynch entities as clearing brokers.

 

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

 

10

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Concentration Risk

 

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

 

Indemnifications

 

Inthe normal course of business, the Fund has entered, or may in the future enterinto agreements, that obligate the Fund to indemnify third parties, includingaffiliates of the Fund, for breach of certain representations and warrantiesmade by the Fund. No claims have actually been made with respect to suchindemnities and any quantification would involve hypothetical claims that havenot been made. Based on the Fund’s experience, MLAI expected the risk of lossto be remote and, therefore, no provision has been recorded.

 

5.    RECENT ACCOUNTING PRONOUNCEMENTS

 

In January 2010, the FASB issued an update to the fair valuemeasurements disclosure. Pursuant to this update, additional disclosures in thefinancial statements relating to transfers in and out of Levels 1 and 2 fairvalue measurements and separate disclosure of purchases, sales, issuances, andsettlements in Level 3 rollforward, will be required. In addition, this updateprovides clarifications on i) the level of aggregation of classes of assets andliabilities disclosed in the fair value measurement disclosures and ii)disclosures relating to the inputs and valuation techniques for Level 2 andLevel 3 fair value measurements. The new disclosures and clarifications ofexisting disclosures are effective for annual reporting periods beginning afterDecember 15, 2009, except for the disclosures about purchases, sales,issuances, and settlements in the Level 3 roll forward which are effective forfiscal years beginning after December 15, 2010. This update furtherenhances the fair value disclosures and the Sponsor has determined that theadoption of this update on January 1, 2010, did not have a material impactto the Partnership’s financial statements.

 

6.    SUBSEQUENT EVENTS

 

BlueCrestrecently notified MLAI that it would close the underlying trading strategy ofBlueTrend to new investments due to capacity constraints on the strategy.  BlueCrest is taking this action in order tohelp protect the future performance of the BlueTrend trading strategy fromover-investment.  Based on BlueCrest’sdecision, MLAI closed BlueTrend to new investments as of April 1, 2010,

 

11

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Item 2:  Management’sDiscussion and Analysis of Financial Condition and Results of Operations

 

The Partnershipcalculates the Net Asset Value per unit of each class of units as of the closeof business on the last business day of each calendar month and such otherdates as MLAI may determine in its discretion. The Partnership’s “Net Asset Value” as of any calculation date willgenerally equal the value of the Partnership’s investments in the underlyingfunds as of such date, plus any other assets held by the Partnership, minusaccrued brokerage commissions, sponsor’s, management and performance fees,organizational expense amortization and any operating costs and otherliabilities of the Partnership.  MLAI isauthorized to make all net asset value determinations.

 

MONTH-ENDNET ASSET VALUE PER INITIAL UNIT

 
| ** ** | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** |
|------------|------------|----------|------------|----------|------------|----------|------------|
| 2009       |       | $        | 199.54     |     | $          | 199.02   |       | $ | 193.65 |   |
| 2010       |       | $        | 169.62     |     | $          | 173.32   |       | $ | 183.52 |   |

 

Liquidity and Capital Resources

 

The Partnership does not engage in the sale of goodsor services.  The Partnership’s assetsare its (i) investment in Funds and (ii) Cash.  Because of the low margin deposits normallyrequired in commodity futures trading relatively small price movements mayresult in substantial losses to the Partnership.  While substantial losses could lead to amaterial decrease in liquidity, no such material losses occurred during thefirst quarter of 2010          .

 

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

 

For the three months ended March 31, 2010,Partnership capital decreased 1.02% from $251,923,917 to $249,350,672.  This decrease was attributable to the netgain from operations of $10,403,312, coupled with the redemption of 83,196Redeemable Units resulting in an outflow of $14,681,892.  The cash outflow was offset with cash inflowof $1,705,334due to subscription of 9,827 units.  Future redemptions could impact the amount offunds available for investment in commodity contract positions in subsequentmonths.

 

Critical Accounting Policies

 

Statement of Cash Flows

 

The Partnership is not required to provide aStatement of Cash Flows.

 

Fair value is defined as the price that would bereceived to sell an asset or paid to transfer a liability in an orderlytransaction between market participants at the measurement date.  For more information on our treatment of fairvalue see Note 3, Fair Value of Investments.

 

Investments in other investment companies are valuedusing the net asset value reported by the investment company. If appropriate,adjustments to the reported net asset value may be made based on variousfactors, including, but not limited to, the attributes of the interest held,including the rights and obligations, and any restrictions or illiquidity.

 

12

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

 

Cashand Cash Equivalents

 

The Fund considers all highly liquid investments, with a maturity ofthree months or less when acquired, to be cash equivalents. Cash equivalentswere recorded at amortized cost which approximated fair value (Level II seeNote 3).  Cash was held at a nationally recognized financial institution.

 

Interest Rates and Income

 

The Partnershipcurrently earns interest based on the prevailing Fed Funds rate plus a spreadfor short cash positions and minus a spread for long cash positions. Thecurrent short term interest rates have remained extremely low when comparedwith historical rates and thus has contributed negligible amounts to overallPartnership performance.

 

Income Taxes

 

No provision for incometaxes has been made in the accompanying financial statements as each Partner isindividually responsible for reporting income or loss based on such Partner’srespective share of the Partnership’s income and expenses as reported forincome tax purposes.

 

The Partnership follows the ASC guidance issued foraccounting for uncertainty in income taxes. This guidance provides how uncertain tax positions should be recognized,measured, presented and disclosed in the financial statements.  This guidance also requires the evaluation oftax positions taken or expected to be taken in the course of preparing thePartnership’s financial statements to determine whether the tax positions are “more-likely-than-not”to be sustained by the applicable tax authority.  Tax positions with respect to tax at thepartnership level not deemed to meet the “more-likely-than-not” threshold wouldbe recorded as a tax benefit or expense in the current year.  The General Partner has analyzed thePartnership’s tax positions and has concluded that no provision for income taxis required in the Partnership’s financial statements. The following are themajor tax jurisdictions for the Partnership and the earliest tax year subjectto examination: United States — 2007.

 

Resultsof Operations

 

January 1,2010 to March 31, 2010

 

ThePartnership experienced a net trading profit of $12,904,261for the firstquarter of 2010.

 

ThePortfolio Funds’ long positions in equities, commodities and short positions inthe U.S. dollar resulted in profits posted to the Partnership at the beginningof January.  Markets then reversed andlosses were posted in each of these asset classes and all gains accumulatedthrough the middle of the month were given back in these various markets.  Fixed income was one asset class whereexisting positioning were profitable. Long positions in short term interestrate contracts posted gains however, these gains were not enough to offsetlosses in the three other major asset classes resulting in losses being postedto the Partnership at the end of January.

 

ThePortfolio Funds had positive performance in February resulting in profitsbeing posted to the Partnership. Long positions in fixed income droveperformance. Yields generally moved lower over the course of the month and thePortfolio Funds benefited from having long exposure to both bonds and shortterm interest rate contracts. The managers benefited from short positions inEuropean currency exposure due to the Euro and British pound losing valueagainst the U.S. dollar. In other asset classes, some choppiness and a lack of 

 

13

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significanttrends meant that equity indices and commodities did not have much of an impacton the month’s returns.

 

ThePortfolio Funds had positive performance in March resulting in profitsbeing posted to the Partnership. Equity indices drove performance for mostPortfolio Funds’ trading advisors. Positioning was firmly on the long side dueto the strength of the current up trends in global equity indices. Commoditieswere also profitable across the board due to long positions in oil and metalsand short positions in natural gas and grains. Positioning was spot on in mostof these sub sectors. Oil and metals generally rose and natural gas and grainsdeclined in March. Currencies also posted profits to the Partnership. The Euroand British pound ended the month down, benefiting short positions in thesecurrencies. On the other hand the Canadian and Australian dollars rose,resulting in profits due to their long positions in these currencies. Fixedincome was the only losing asset class. Short term interest rate contractsgenerally stayed flat, but yields on longer term government bonds rose duringthe month, causing some losses to long positions in those instruments. Overall,the yield moves were not very large, so losses were contained.

 

January 1,2009 to March 31, 2009

 

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

 

Theperformances of the Portfolio Funds were mixed at the beginning of the quarterwhich reflected the choppy markets and diversification of the Portfolio Fund’sapproach to trading. The Partnership profited from falling equities, withlong-term Portfolio Funds managers capturing more of the move. The Partnershipalso profited from a continuous down-trend in commodities. Largest losses weresuffered in fixed income positions as U.S. Treasury yields rallied and otherglobal bonds shadowed the move.

 

Timehorizon focus did not seem to be a driver of returns, while asset allocationplayed a more significant role in the middle of the quarter. Most of thePortfolio Funds had small net short exposures to equity markets posting profitsfor the Partnership. In addition, the Portfolio Funds that had long positionsin the U.S. dollar against various currencies also posted profits for thePartnership. The Portfolio Funds that had long positions in the Japanese yenvs. the U.S. dollar was detrimental as the Japanese yen ended the month downsignificantly relative to the U.S. dollar. Fixed income markets experiencedvolatile swings in February and most of the Portfolio Funds ended withlosses being posted for the Partnership.

 

ThePartnership posted losses at the end of the quarter. At the start of March, thePortfolio Funds were positioned long in the fixed income markets. MostPortfolio Funds kept this positioning throughout the month and benefited fromfalling yields resulting in profits posted for the Partnership. This was theonly sector contributing to profits for the Partnership. All other sectors hadnegative attribution for the month as a result of significant reversals in manymarkets. During March, equity markets rallied, following some positivecorporate news in the first week. When the U.S. Federal Reserve announced thestart of quantitative easing midmonth, the U.S. dollar began losing valueagainst most major currencies along with commodity markets which are negativelycorrelated with the U.S. dollar and risk aversion, moved up. The PortfolioFunds are medium to long term trend followers and were not in a position to cutexposures very fast and were negatively affected by these reversals.

 

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

 

14

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Item 3.  Quantitative and Qualitative Disclosures About Market Risk

 

Introduction

 

ThePortfolio Funds are a speculative commodity 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.

 

Marketmovements result in frequent changes in the fair market value of the PortfolioFunds’ open positions and, consequently, in their earnings and cash flow.  The Portfolio Funds’ market risk isinfluenced by a wide variety of factors, including the level and volatility ofinterest rates, exchange rates, equity price levels, the market value offinancial instruments and contracts, the diversification effects among thePortfolio Funds’ open positions and the liquidity of the markets in which theytrade.

 

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

 

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

 

Quantifying thePartnership’s Trading Value at Risk

 

Quantitative Forward-Looking Statements

 

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

 

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

 

Exchange maintenance margin requirements have been used by thePortfolio Funds as the measure of their Value at Risk.  Maintenance margin requirements are set byexchanges to equal or exceed the maximum loss in the fair value of any givencontract incurred in 95% to 99% of the one-day time periods included in thehistorical sample (approximately one year, generally) researched for purposesof establishing margin levels.  Themaintenance margin levels are established by dealers and exchanges usinghistorical price studies as well as an assessment of current market volatility(including the implied volatility of the options on a given futures contract)and economic fundamentals to provide a probabilistic estimate of the maximumexpected near-term one-day price fluctuation.

 

15

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

 

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

 

The following information with respect to Value At Risk (VAR) is setforth in respect of the Portfolio Funds separately, rather than for thePartnership on a stand-alone basis.

 

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

 

The following table indicates the average, highest, and lowest tradingValue at Risk which is the sum of the individual Portfolio Funds’ tables. TheValue at Risk table is also associated with the Partnership’s open positions bymarket category for the three months ended March 31, 2010 and 2009.

 

16

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| ** **                                                           | ** ** | **March 31, 2010**         | ** ** |
|----------------------------------------------------------------------|------------|--------------------------------------|------------|
| **Aspect Class D****T ****(3)****Market Sector** | ** ** | **Average  Value at Risk** | ** ** | **% of Average  Capitalization** | ** ** | **Highest Value  At Risk** | ** ** | **Lowest Value  At Risk** | ** ** |
|                                                                 |       |                                 |       |   |   |   |   |   |   |
| Agricultural  Commodities                                            |       | $                                    | 412,873    |   | 0.67 | % | $ | 464,297 |   | $ | 335,831 |   |
| Energy                                                               |       | 827,725                              |       | 1.35 | % | 930,819 |   | 673,271 |   |
| Interest Rates                                                       |       | 2,256,627                            |       | 3.68 | % | 2,537,693 |   | 1,835,540 |   |
| Metals                                                               |       | 685,340                              |       | 1.12 | % | 770,699 |   | 557,455 |   |
| Stock Indices                                                        |       | 850,970                              |       | 1.39 | % | 956,960 |   | 692,179 |   |
| Currencies                                                           |       | 110,734                              |       | 0.18 | % | 124,527 |   | 90,071 |   |
|                                                                 |       |                                 |       |   |   |   |   |   |   |
| TOTAL                                                                |       | $                                    | 5,144,269  |   | 8.39 | % | $ | 5,784,995 |   | $ | 4,184,347 |   |

 

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(3) AverageCapitalization of Aspect Class DT is $61,389,455.

 
| ** **                                                       | ** ** | **March 31, 2009**         | ** ** |
|------------------------------------------------------------------|------------|--------------------------------------|------------|
| **Aspect Class DT ****(3)****Market Sector** | ** ** | **Average  Value at Risk** | ** ** | **% of Average  Capitalization** | ** ** | **Highest Value  At Risk** | ** ** | **Lowest Value  At Risk** | ** ** |
|                                                             |       |                                 |       |   |   |   |   |   |   |
| Agricultural  Commodities                                        |       | $                                    | 63,773     |   | 0.07 | % | $ | 191,320 |   | $ | 41,350 |   |
| Energy                                                           |       | 31,147                               |       | 0.04 | % | 93,440 |   | 21,533 |   |
| Interest Rates                                                   |       | 5,145,751                            |       | 6.03 | % | 15,437,252 |   | 4,070,454 |   |
| Metals                                                           |       | 41,746                               |       | 0.05 | % | 125,238 |   | 34,883 |   |
| Stock Indices                                                    |       | 42,661                               |       | 0.05 | % | 127,984 |   | 38,782 |   |
| Currencies                                                       |       | 153,197                              |       | 0.18 | % | 459,592 |   | 84,599 |   |
|                                                             |       |                                 |       |   |   |   |   |   |   |
| TOTAL                                                            |       | $                                    | 5,478,275  |   | 6.42 | % | $ | 16,434,826 |   | $ | 4,291,601 |   |

 

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(3) AverageCapitalization of Aspect Class DT is $85,295,625.

 

17

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| ** **                                                           | ** ** | **March 31, 2010**         | ** ** |
|----------------------------------------------------------------------|------------|--------------------------------------|------------|
| **Transtrend Class DT ****(2)****Market Sector** | ** ** | **Average  Value at Risk** | ** ** | **% of Average  Capitalization** | ** ** | **Highest Value  At Risk** | ** ** | **Lowest Value  At Risk** | ** ** |
|                                                                 |       |                                 |       |   |   |   |   |   |   |
| Agricultural  Commodities                                            |       | $                                    | 571,205    |   | 0.93 | % | $ | 799,645 |   | $ | 362,160 |   |
| Energy                                                               |       | 2,334,724                            |       | 3.80 | % | 3,268,445 |   | 1,480,281 |   |
| Interest Rates                                                       |       | 1,335,466                            |       | 2.18 | % | 1,869,557 |   | 846,724 |   |
| Metals                                                               |       | 532,586                              |       | 0.87 | % | 745,582 |   | 337,675 |   |
| Stock Indices                                                        |       | 815,043                              |       | 1.33 | % | 1,141,002 |   | 516,761 |   |
| Currencies                                                           |       | 1,845,896                            |       | 3.01 | % | 2,584,122 |   | 1,170,351 |   |
|                                                                 |       |                                 |       |   |   |   |   |   |   |
| TOTAL                                                                |       | $                                    | 7,434,920  |   | 12.12 | % | $ | 10,408,353 |   | $ | 4,713,952 |   |

 

----

(2) Averagecapitalization of Transtrend Class DT is $61,360,267.

 
| ** **                                                           | ** ** | **March 31, 2009**         | ** ** |
|----------------------------------------------------------------------|------------|--------------------------------------|------------|
| **Transtrend Class DT ****(2)****Market Sector** | ** ** | **Average  Value at Risk** | ** ** | **% of Average  Capitalization** | ** ** | **Highest Value  At Risk** | ** ** | **Lowest Value  At Risk** | ** ** |
|                                                                 |       |                                 |       |   |   |   |   |   |   |
| Agricultural  Commodities                                            |       | $                                    | 340,668    |   | 0.40 | % | $ | 1,022,004 |   | $ | 115,800 |   |
| Energy                                                               |       | 295,540                              |       | 0.35 | % | 886,620 |   | 55,314 |   |
| Interest Rates                                                       |       | 4,955,523                            |       | 5.81 | % | 14,866,568 |   | 3,646,403 |   |
| Metals                                                               |       | 18,083                               |       | 0.02 | % | 54,248 |   | 3,497 |   |
| Stock Indices                                                        |       | 335,900                              |       | 0.39 | % | 1,007,700 |   | 20,485 |   |
| Currencies                                                           |       | 65,434                               |       | 0.08 | % | 196,303 |   | 36,971 |   |
|                                                                 |       |                                 |       |   |   |   |   |   |   |
| TOTAL                                                                |       | $                                    | 6,011,148  |   | 7.05 | % | $ | 18,033,443 |   | $ | 3,878,470 |   |

 

----

(2) Averagecapitalization of Transtrend Class DT is $85,295,625.

 

18

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| ** **                                                           | ** ** | **March 31, 2010**         | ** ** |
|----------------------------------------------------------------------|------------|--------------------------------------|------------|
| **Winton Class DT**** ****(5)****Market Sector** | ** ** | **Average  Value at Risk** | ** ** | **% of Average  Capitalization** | ** ** | **Highest Value  At Risk** | ** ** | **Lowest Value  At Risk** | ** ** |
|                                                                 |       |                                 |       |   |   |   |   |   |   |
| Agricultural  Commodities                                            |       | $                                    | 503,650    |   | 0.82 | % | $ | 584,322 |   | $ | 433,053 |   |
| Energy                                                               |       | 329,662                              |       | 0.54 | % | 382,466 |   | 283,454 |   |
| Interest Rates                                                       |       | 933,331                              |       | 1.52 | % | 1,082,828 |   | 802,507 |   |
| Metals                                                               |       | 926,896                              |       | 1.51 | % | 1,075,362 |   | 796,974 |   |
| Stock Indices                                                        |       | 923,103                              |       | 1.50 | % | 1,070,961 |   | 793,712 |   |
| Currencies                                                           |       | 610,513                              |       | 0.99 | % | 708,303 |   | 524,938 |   |
|                                                                 |       |                                 |       |   |   |   |   |   |   |
| TOTAL                                                                |       | $                                    | 4,227,155  |   | 6.88 | % | $ | 4,904,242 |   | $ | 3,634,638 |   |

 

----

(5) Averagecapitalization of Winton Class DT is $61,389,455.

 
| ** **                                                       | ** ** | **March 31, 2009**         | ** ** |
|------------------------------------------------------------------|------------|--------------------------------------|------------|
| **Winton Class DT ****(5)****Market Sector** | ** ** | **Average  Value at Risk** | ** ** | **% of Average  Capitalization** | ** ** | **Highest Value  At Risk** | ** ** | **Lowest Value  At Risk** | ** ** |
|                                                             |       |                                 |       |   |   |   |   |   |   |
| Agricultural  Commodities                                        |       | $                                    | 58,531     |   | 0.07 | % | $ | 175,597 |   | $ | 38,800 |   |
| Energy                                                           |       | 10,744                               |       | 0.01 | % | 32,236 |   | 3,659 |   |
| Interest Rates                                                   |       | 3,654,083                            |       | 4.28 | % | 10,962,240 |   | 3,219,496 |   |
| Metals                                                           |       | 10,942                               |       | 0.01 | % | 32,830 |   | 5,985 |   |
| Stock Indices                                                    |       | 30,295                               |       | 0.04 | % | 90,885 |   | 26,710 |   |
| Currencies                                                       |       | 123,037                              |       | 0.14 | % | 369,111 |   | 64,192 |   |
|                                                             |       |                                 |       |   |   |   |   |   |   |
| TOTAL                                                            |       | $                                    | 3,887,632  |   | 4.55 | % | $ | 11,662,899 |   | $ | 3,358,842 |   |

 

----

(5) Averagecapitalization of Winton Class DT is $85,294,625.

 

19

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| ** **                                                          | ** ** | **March 31, 2010**         | ** ** |
|---------------------------------------------------------------------|------------|--------------------------------------|------------|
| **Bluetrend Class DT ****(2)****Market Sector** | ** ** | **Average  Value at Risk** | ** ** | **% of Average  Capitalization** | ** ** | **Highest Value  At Risk** | ** ** | **Lowest Value  At Risk** | ** ** |
|                                                                |       |                                 |       |   |   |   |   |   |   |
| Agricultural  Commodities                                           |       | $                                    | 274,755    |   | 0.90 | % | $ | 379,384 |   | $ | 131,593 |   |
| Energy                                                              |       | 2,353,195                            |       | 7.67 | % | 3,249,313 |   | 1,127,061 |   |
| Interest Rates                                                      |       | 1,953,327                            |       | 6.37 | % | 2,697,172 |   | 935,544 |   |
| Metals                                                              |       | 232,697                              |       | 0.76 | % | 321,310 |   | 111,450 |   |
| Stock Futures                                                       |       | 1,184,199                            |       | 3.86 | % | 1,635,154 |   | 567,171 |   |
| Currencies                                                          |       | 79,414                               |       | 0.26 | % | 109,655 |   | 38,035 |   |
|                                                                |       |                                 |       |   |   |   |   |   |   |
| TOTAL                                                               |       | $                                    | 6,077,587  |   | 19.82 | % | $ | 8,391,988 |   | $ | 2,910,854 |   |

 

----

(2) Averagecapitalization of Bluetrend Class DT is $30,664,254.

 
| ** **                                                           | ** ** | **March 31, 2009**         | ** ** |
|----------------------------------------------------------------------|------------|--------------------------------------|------------|
| **Chesapeake Class DT ****(4)****Market Sector** | ** ** | **Average  Value at Risk** | ** ** | **% of Average  Capitalization** | ** ** | **Highest Value  At Risk** | ** ** | **Lowest Value  At Risk** | ** ** |
|                                                                 |       |                                 |       |   |   |   |   |   |   |
| Agricultural  Commodities                                            |       | $                                    | 168,742    |   | 0.20 | % | $ | 506,227 |   | $ | 120,812 |   |
| Interest Rates                                                       |       | 3,788,900                            |       | 4.44 | % | 11,366,701 |   | 3,491,307 |   |
| Metals                                                               |       | 39,501                               |       | 0.05 | % | 118,502 |   | 35,915 |   |
| Stock Futures                                                        |       | 531                                  |       | 0.00 | % | 1,594 |   | 298 |   |
| Currencies                                                           |       | 36,324                               |       | 0.04 | % | 108,971 |   | 21,840 |   |
|                                                                 |       |                                 |       |   |   |   |   |   |   |
| TOTAL                                                                |       | $                                    | 4,033,998  |   | 4.73 | % | $ | 12,101,995 |   | $ | 3,670,172 |   |

 

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(4) Averagecapitalization of Chesapeake Class DT is $85,294,625.

 

Liquidated as of January 31,2010.

 

20

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MaterialLimitations on Value at Risk as an Assessment of Market Risk

 

Theface value of the market sector instruments held by the Partnership and thePortfolio Funds are typically many times the applicable maintenance marginrequirement (maintenance margin requirements generally ranging betweenapproximately 1% and 10% of contract face value) as well as many times thecapitalization of the Partnership and the Portfolio Funds.  The magnitude of the Partnership’s and thePortfolio Funds’ open positions’ creates a “risk of ruin” not typically foundin most other investment vehicles. Because of the size of its positions, certain market conditions —unusual, but historically recurring from time to time — could cause thePartnership and the Portfolio Funds to incur severe losses over a short periodof time.   Even comparatively minorlosses could cause MLAI to further deleverage or terminate the Partnership’sand the Portfolio Funds’ trading. The foregoing Value at Risk table — as wellas the past performance of the Partnership and the Portfolio Funds — gives noindication of this “risk of ruin.”

 

Non-Trading Risk

 

Foreign Currency Balances; Cash on Deposit with MLPF&S

 

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

 

The Portfolio Funds also have non-trading market risk on theapproximately 90-95% of its assets which are held in cash at MLPF&S orBlackRock.  The value of this cash is notinterest rate sensitive, but there is cash flow risk in that if interest ratesdecline so will the cash flow generated on these monies.

 

Qualitative Disclosures Regarding Primary Trading Risk Exposures

 

The following qualitative disclosures regarding thePartnership’s market risk exposures through the Portfolio Funds after thechange in structure— except for (i) those disclosures that are statementsof historical fact and (ii) the descriptions of how the Partnershipmanages its primary market risk exposures constitute forward-looking statementswithin the meaning of Section 27A of the Securities Act and Section 21Eof the Securities Exchange Act.  ThePartnership’s primary market risk exposures as well as the strategies used andto be used by MLAI and the trading advisors of the Portfolio Funds for managingsuch exposures are subject to numerous uncertainties, contingencies and risks,any one of which could cause the actual results of the risk controls for thePartnership and for the trading conducted through Portfolio Funds to differmaterially from the objectives of such strategies.  Government interventions, defaults andexpropriations, illiquid markets, the emergence of dominant fundamentalfactors, political upheavals, changes in historical price relationships, aninflux of new market participants, increased regulation and many other factorscould result in material losses as well as in material changes to the riskexposures and the risk management strategies of the Partnership.  There can be no assurance that thePartnership’s risk management strategies will not change materially or that anysuch strategies will be effective in either the short- or long-term.  Investors must be prepared to lose all orsubstantially all of the value of their investment in the Partnership.

 

21

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Qualitative Disclosures Regarding Means of ManagingRisk Exposure

 

#### **Trading Risk**

 

MLAIhas procedures in place intended to control market risk, although there can beno assurance that they will, in fact, succeed in doing so.  While MLAI does not intervene in the marketsto hedge or diversify the Partnership’s market exposure; MLAI may urge thePortfolio Funds to reallocate positions in an attempt to avoidover-concentrations.  However, suchinterventions are unusual.  Except incases in which it appears that the Portfolio Funds has begun to deviate frompast practice and trading policies or to be trading erratically, MLAI basicrisk control procedures consist simply of the ongoing process of monitoring thePortfolio Funds with the market risk controls being applied by the PortfolioFunds.

 

Risk Management

 

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

 

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

 

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

 

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

 

## ***Non-TradingRisk***

 

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

 

22

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ThePartnership and the Portfolio Funds have cash flow interest rate risk on its cashon deposit with MLPF&S in that declining interest rates would cause theincome from such cash to decline. However, a certain amount of cash or cash equivalents must be held bythe Partnership in order to facilitate margin payments and pay expenses andredemptions.  MLAI does not take anysteps to limit the cash flow risk on the cash held on deposit at MLPF&S andin the BlackRock sponsored money market fund.

 

Item 4T. Controls and Procedures

 

MLAI, the general partnerof the Partnership with the participation of MLAI’s Chief Executive Officer andthe Chief 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.  No change in internalcontrol over financial reporting (as defined in Rule 13a-15(f) underthe Securities Exchange Act of 1934) occurred during the quarter ended March 31,2010 that has materially affected, or is reasonably likely to materiallyaffect, the Partnership’s internal control over financial reporting

 

PART II - OTHER INFORMATION

 

Item 1.  Legal Proceedings

 

None.

 

Item 1A:  Risk Factors

 

Thereare no material changes from risk factors as previously disclosed in the AnnualReport on

Form 10-Kfor the year ended December 31, 2009, filed with the Securities andExchange

Commissionon March 31, 2010.

 

Item 2.                    Unregistered Sales of Securities and Useof Proceeds

 

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

 
| ** ** | ** ** | **Subscription** | ** ** | ** ** | ** ** |
|------------|------------|------------------|------------|------------|------------|
| ** ** | ** ** | **Amount**       | ** ** | **Units**  | ** ** | **NAV** | ** ** |
| Jan-10     |       |             | $          | 432,387    |       | $ | 2,458 |   | 175.91 |   |
| Feb-10     |       |             | 194,727    |       | 1,148      |   | 169.62 |   |
| Mar-10     |       |             | 1,078,220  |       | 6,221      |   | 173.32 |   |
| Apr-10     |       |             | 177,277    |       | 966        |   | 183.52 |   |
|            |            |                  |            |            |            |  |  |  |  |  |

 

(b) None.

(c) None.

 

23

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Item 3.    Defaults Upon Senior Securities

 

None.

 

Item 4.    (Removed and Reserved)

 

Item 5.    OtherInformation

 

None.

 

Item 6.    Exhibits

 

The followingexhibits are filed herewith to this Quarterly Report on Form 10-Q:

31.01 and

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

 

Exhibit 31.01

and 31.02               Are filed herewith.

 

32.01 and

32.02                       Section 1350 Certifications

 

Exhibit 32.01

and 32.02               Are filed herewith.

 

24

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** **

**SIGNATURES**

 

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

 

 
|   | ML TREND-FOLLOWING  FUTURES FUND L.P. |
|--------|---------------------------------------|
|   |                                  |
|   | By:                                   | MERRILL LYNCH  ALTERNATIVE |
|   |                                  | INVESTMENTS LLC |
|   |                                  | (General Partner) |

 

 
| Date: May 14, 2010 | By:    | /s/ JUSTIN C.  FERRI                   |
|-------------------------|--------|----------------------------------------|
|                    |   | Justin  C. Ferri                       |
|                    |   | Chief Executive Officer  and President |
|                    |   | (Principal Executive  Officer)         |

 

 
| Date: May 14, 2010 | By:    | /s/ BARBRA E. KOCSIS                          |
|-------------------------|--------|-----------------------------------------------|
|                    |   | Barbra E. Kocsis                              |
|                    |   | Chief Financial Officer                       |
|                    |   | (Principal Financial  and Accounting Officer) |

 

25

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