UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-K

x  Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended: December 31, 2010

or

o   Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission file number: 0-50269

ML SELECT FUTURES I  L.P.

(Exact name of registrant as specified in its charter)

c/o Merrill Lynch Alternative Investments LLC

Four World Financial Center, 10th Floor

250 Vesey Street

New York, New York 10080

(Address of principal executive offices)

(Zip Code)

212-449-3517

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Limited Partnership Units

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o  No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  Yes o  No x

Indicate by check mark if the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

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

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

The Units of the limited partnership interest of the registrant are not publicly traded. Accordingly, there is no aggregate market value for the registrant’s outstanding equity that is readily determinable.

As of February 28, 2011, limited partnership units with a Net Asset Value of $151,775,245 were outstanding and held by non-affiliates.

Documents Incorporated by Reference

The registrant’s 2010 Annual Report and Reports of Independent Registered Public Accounting Firms, the annual report to security holders for the fiscal year ended December 31, 2010, is incorporated by reference into Part II, Item 8, and Part IV hereof and filed as an Exhibit herewith. Copies of the annual report are available free of charge by contacting Alternative Investments Client Services at 1-866-MER-ALTS.

ML SELECT FUTURES I L. P.

ANNUAL REPORT FOR 2010 ON FORM 10-K

Table of Contents

PART I

Item 1:   Business

(a)           General Development of Business:

ML Select Futures I L.P.  (the “Partnership”) was organized under the Delaware Revised Uniform Limited Partnership Act on August 4, 1995 under the name ML Chesapeake L.P.  The Partnership began trading on April 16, 1996 and trades in the international futures and forward markets applying proprietary trading strategies under the direction of Sunrise Capital Partners, LLC (“Sunrise”).  The Partnership’s objective is to achieve, through speculative trading, substantial capital appreciation over time.

Merrill Lynch Alternative Investments LLC (“MLAI”) is the sponsor (“Sponsor”) and manager (“Manager”) of the Fund. 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 Fund’s commodity broker. Merrill Lynch is a wholly-owned subsidiary of Bank of America Corporation.

The proceeds of the Partnership’s units of limited partnership interest (the “Units”) were initially allocated to the Partnership’s initial trading advisor, Chesapeake Capital Corporation (“Chesapeake”).  On July 1, 1998, Sunrise replaced Chesapeake as the Partnership’s sole trading advisor (“Trading Advisor”).

The Partnership calculates the Net Asset Value per Unit as of the close of business on the last business day of each calendar month and such other dates as MLAI may determine in its discretion. The Partnership’s Net Asset Value will generally equal the value of the Partnership’s account under the management of its Trading Advisor as of such date, plus any other assets held by the Partnership, minus accrued brokerage commissions, administrative fees, profit shares, and other liabilities of the Partnership.  MLAI is authorized to make all net asset value determinations.

As of December 31, 2010, the capitalization of the Partnership was $150,455,350 and the Net Asset Value per Unit, originally $100 as of April 1, 1996, had risen to $287.91

The highest month-end Net Asset Value per Unit since Sunrise began trading the Partnership was $326.49 (November 30, 2009) and the lowest was $127.01 (July 31, 1998).

(b)           Financial Information about Segments:

The Partnership’s business constitutes only one segment for financial reporting purposes, i.e., a speculative “commodity pool”. The Partnership does not engage in sales of goods or services.

(c)           Narrative Description of Business:

Trading Advisor’s Trading Model

The Partnership trades in U.S. and the international futures and forward markets with the objective of achieving substantial capital appreciation.

The Partnership has entered into an advisory agreement with Sunrise whereby Sunrise trades the Partnership’s assets through a managed account using its Expanded Diversified Program (the “Program”).  In the Expanded Diversified Program, Sunrise applies its trend-following systems to a broadly-diversified portfolio of futures and forward markets on underlying interests, including, but not limited to, precious and industrial metals, grains, petroleum products, soft commodities, domestic and foreign interest rate futures, domestic and foreign stock indices, currencies and their cross rates, and minor currencies. One of the aims of the Partnership is to provide diversification to a limited portion of the risk segment of the Limited Partners’ portfolios into an investment field that has historically often demonstrated a low degree of performance correlation with traditional stock and bond holdings.

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Employees

The Partnership has no employees.

Sunrise and its Expanded Diversified Program

Sunrise currently offers five trading programs, one of which, the Expanded Diversified Trading Program, is used in managing the Partnership’s assets.  In the Expanded Diversified Trading Program, Sunrise applies its trend-following systems to a broadly-diversified portfolio of futures and forward markets, including, but not limited to, precious and industrial metals, grains, petroleum products, soft commodities, domestic and foreign interest rate futures, domestic and foreign stock indices (including S&P 500, DAX and Nikkei 225), currencies and their cross rates, and minor currency markets (collectively, “Commodity Interests”).  Sunrise may trade these Commodity Interests on any U.S. or non-U.S. exchange or over the counter.  Sunrise may also trade options for the Partnership in the future; in the event that it does, these options will be considered Commodity Interests.  As of December 31, 2010, Sunrise was managing approximately $703 million (excluding “notional” funds) in the futures and forward markets.

Sunrise’s Programs Are Technical and Trend-Following Systems

The mathematical models used by Sunrise’s programs are technical systems, generating trading signals on the basis of statistical research into past market prices.  Sunrise does not attempt to predict or forecast changes in price through fundamental economic analysis.  The trading methodologies employed by Sunrise are based on programs analyzing a large number of interrelated mathematical and statistical formulas and techniques, which are quantitative and proprietary in nature.

As a trend-following advisor, Sunrise’s objective is to participate in major price trends—sustained price movements either up or down.  Such price trends may be relatively infrequent.  Some trend-following advisors have anticipated that over half of their positions will be unprofitable.  Their strategy is based on making sufficiently large profits from the trends which they identify and follow to generate overall profits despite the more numerous but, hopefully, smaller losses incurred on the majority of their positions.

Long-Term, Trend-Following Methodology

Sunrise’s long-term, trend-following program attempts to detect a trend, or lack of a trend, with respect to a particular Commodity Interest by analyzing price movement and volatility over time.  This program consists of multiple, independent and parallel systems, each designed and tested to seek out and extract different market inefficiencies on different time horizons.  These systems will generate a signal to sell a “short” contract or purchase a “long” contract based upon their identification of a price trend in the particular Commodity Interest.  If the systems do not detect a price trend, a “neutral” trading signal will be generated.  While this neutral signal is designed to filter out high-risk “whipsaw” markets, it is successful on only a limited basis.  Successful speculative commodity trading employing trend-following techniques, such as Sunrise’s system, depends to a large degree upon not trading in non-directional markets.  Accordingly, to the extent that this “neutral” trading signal is not generated during a non-trending market, trading would likely be unprofitable.

Long-term, trend-following trading systems, such as those employed by Sunrise, will seldom effect market entry or exit at the most favorable price in the particular market trend.  Rather, this type of trading system seeks to close out losing positions quickly and to hold portions of profitable positions for as long as the trading system determines that the particular market trend continues to offer reasonable profit potential.  The number of losing transactions may exceed substantially the number of profitable transactions.  However, if Sunrise’s approach is successful, these losses should be more than offset by gains.  In using this trading methodology, it is anticipated that Sunrise will commit to margin between 5% and 30% of assets managed.  Margin requirements may from time to time exceed this range.

While Sunrise relies on mechanical technical trading systems in making investment decisions using the methodology described, the overall strategy does include the latitude to depart from this approach if market conditions are such that, in the opinion of Sunrise, execution of trades recommended by the mechanical systems would be difficult or unusually risky to an account.

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There may occur the rare instance in which Sunrise will override the trading system to decrease market exposure.  Any modification of trading instructions could adversely affect the profitability of an account.  Among the possible consequences of such a modification would be (1) the entrance of a trade at a price significantly worse than a system’s signal price, (2) the complete negation of a signal which subsequently would have produced a profitable trade or (3) the premature termination of an existing trade.  Sunrise is under no obligation to notify MLAI of this type of deviation from its mechanical systems, since it is an integral part of its overall trading method.

The Trading Advisor of the Partnership, may exercise discretion in connection with its technical trading program in order to enforce risk parameters, address extraordinary market events or as otherwise determined by the Trading Advisor. Although the Trading Advisor’s trading program is continually evolving, there were no fundamental or material charges to the trading program during the 2010 fiscal year.

A technical trading system consists of a series of fixed rules applied systematically.  However, the system still requires that Sunrise make certain subjective judgments.  For example, Sunrise must select the markets it will follow and Commodity Interests it will actively trade, along with the contract months in which it will maintain positions.  Sunrise must also subjectively determine when to liquidate positions in a contract month which is about to expire and initiate a position in a more distant contract month.

All trades which Sunrise initiates with the Partnership’s FCMs will be done without any prior consultation with an Investor and the trades will be in such amounts and at such prices as Sunrise, in its sole discretion, may determine.

Sunrise engages in ongoing research which may lead to significant modifications from time to time.  Sunrise will notify MLAI if modifications to its trading systems or portfolio structure are material.  Changes to commodity markets and/or Commodity Interests traded are not considered material and Investors will not generally receive notice of such changes.  However, Sunrise will provide MLAI with a complete list of those Commodity Interests which it may, or intends to, trade for the Partnership.

While the principals of Sunrise have extensive experience in the development of systems and methods for trading in the futures, forward and, to a lesser extent, options markets, no “safe” trading system has ever been devised and that no one can guarantee profit or freedom from loss in Commodity Interest trading.

Sunrise employs the long-term, trend-following methodology described above in implementing the Expanded Diversified Program.  The Sunrise Expanded Diversified Program may follow numerous different markets.  These markets may include, but are not limited to, precious and industrial metals, grains, energy products, soft commodities, domestic and foreign interest rate futures, domestic and foreign stock indices, minor currencies, major currencies and their cross rates.

The Markets Traded by Sunrise for the Partnership

The Partnership trades on a variety of United States and non-United States futures exchanges. Applicable exchange rules differ significantly among different countries and exchanges. The Partnership’s entire off-exchange trading takes place substantially in the highly liquid, institutionally based currency forward markets.  The forward markets are generally unregulated, and in its forward trading the Partnership deposits margin with respect to its positions.  Spot and forward currency contracts currently are the only non-exchange traded instruments held by the Partnership. Forward currency contracts currently are the only non-exchange traded instruments held by the Partnership.

To date, approximately 30% to 40% of the Partnership’s trades by volume have been in forward currency contracts, but from time to time the percentage of the Partnership’s trading represented by forward currency trades may fall substantially outside this range.  Because the Partnership deposits margin in connection with its forward trading, the Partnership is subject to the risk of the insolvency of its counterparties, such as broker-dealers, futures commission merchants (“FCMs”), banks or other financial institutions, exchanges or clearinghouses.

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As in the case of its market sector allocations, the Partnership’s commitments to different types of markets — U.S. and non-U.S., regulated and unregulated — differ substantially from time to time as well as overtime.  The Partnership has no policy restricting its relative commitment to any of these different types of markets, although generally the bulk of the Partnership’s trading takes place on regulated exchanges.

The Partnership’s financial statements contain information relating to the types of market sectors in which the Partnership trades.  There can, however, be no assurance as to which market sectors the Partnership may trade or in which market sectors the Partnership’s trading may be concentrated at any one time or over time.

Use of Proceeds and Cash Management Income

Subscription Proceeds

The Partnership’s cash is used as security for and to pay the Partnership’s trading losses as well as its expenses and redemptions. The primary use of the proceeds of the sale of the Units is to permit Sunrise to trade on a speculative basis in a wide range of different futures and forwards markets on behalf of the Partnership.  While being used for this purpose, the Partnership’s assets are also generally available for cash management, as more fully described below under “Available Assets”.

Market Sectors

In the Expanded Diversified Program, Sunrise applies its trend-following systems to a broadly diversified portfolio of futures and forward markets.  Commodity interests currently included in the Expanded Diversified Program are: currencies (majors, minors, and crossrates), metals (gold, silver, copper, aluminum, nickel, and zinc), indices (S&P 500, DAX, and Nikkei 225), interest rates (T-bonds, T-Notes, Eurodollars, Euro-Bund, three-month Euro Futures, Euro BOBL, Japanese Government Bond, Euroyen, 90-day Australian Bank Accepted Bill (“Aussie Bill”) and three-month Canadian Bankers’ Acceptance Note), energy (crude oil and natural gas) and agriculturals (soybeans, soymeal, corn, wheat, coffee and sugar and cotton).

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CONDENSED SCHEDULES OF INVESTMENTS

The Fund’s investments, defined as Net unrealized profit (loss) on open contracts in the Statements of Financial Condition, as of December 31, 2010 and 2009 are as follows:

No individual contract’s unrealized gain or loss comprised greater than 5% of the Members’ Capital as of December 31, 2010 and 2009.

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Market Types

The Partnership trades on a variety of United States and foreign futures exchanges.  Substantially all of the Partnership’s off-exchange trading takes place in the highly liquid, institutionally based currency forward markets.

Many of the Partnership’s currency trades are executed in the spot and forward foreign exchange markets (the “FX Markets”) where there are no direct execution costs.  Instead, the participants, banks and dealers in the FX Markets take a “spread” between the prices at which they are prepared to buy and sell a particular currency and such spreads are built into the pricing of the spot or forward contracts with the Partnership.

As in the case of its market sector allocations, the Partnership’s commitments to different types of markets — U.S. and non-U.S. regulated and non-regulated differ substantially from time to time, as well as over time.  The Partnership has no policy restricting its relative commitment to any of these different types of markets.

Custody of Assets

Substantially all of the Partnership’s trading assets are currently held in Commodity Futures Trading Commission (“CFTC”) regulated customer accounts at MLPF&S.

Available Assets

The Partnership earns income, as described below, on its “Available Assets”, which can be generally described as the cash actually held by the Partnership.   Available Assets are held primarily in U.S. dollars and are comprised of the Partnership’s cash balances held in the offset accounts (as described below) — which include “open trade equity” (unrealized gain and loss on open positions) on United States futures contracts, which is paid into or out of the Partnership’s account on a daily basis; the Partnership’s cash balance in foreign currencies derived from its trading in non-U.S. dollar denominated futures and options contracts, which includes open trade equity on those exchanges which settle gains and losses on open positions in such contracts prior to closing out such positions.  Available Assets do not include and the Partnership does not earn interest income on the Partnership’s  unrealized gains or losses on its open forward, commodity option and certain foreign futures positions since such gains and losses are not collected or paid until such positions are closed out.

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

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

The Partnership’s U.S. dollar Available Assets are held in cash in offset accounts.

Offset accounts are non-interest bearing demand deposit accounts maintained with banks unaffiliated with Merrill Lynch.  An integral feature of the offset arrangements is that the participating banks specifically acknowledge that the offset accounts are MLPF&S customer accounts, not subject to any Merrill Lynch liability.

MLPF&S credits the Partnership, as of the end of each month, with interest at the effective daily 91-day Treasury bill rate on the average daily U.S. dollar Available Assets held in the offset accounts during such month.

The use of the offset account arrangements for the Partnership’s U.S. dollar Available Assets may be discontinued by Merrill Lynch at any time.  If Merrill Lynch were to terminate the offset arrangements, it would attempt to invest all of the Partnership’s U.S. dollar Available Assets to the maximum practicable extent in short-term Treasury bills.  All interest earned on the U.S. dollar Available Assets so invested would be paid to the Partnership but MLAI would expect the amount of such interest to be less than that available to the Partnership under the offset account

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arrangements.  The remaining U.S. dollar Available Assets of the Partnership would be kept in cash to meet variation margin payments and pay expenses, but would not earn interest for the Partnership.

The banks at which the offset accounts are maintained make available to Merrill Lynch interest-free overnight credits, loans or overdrafts in the amount of the Partnership’s U.S. dollar Available Assets held in the offset accounts, charging Merrill Lynch a small fee for this service.  The economic benefits derived by Merrill Lynch — net of the interest credits paid to the Partnership and the fee paid to the offset banks — from the offset accounts have not exceeded 0.75% per annum of the Partnership’s average daily U.S. dollar Available Assets held in the offset accounts.  These revenues to Merrill Lynch are in addition to the Brokerage Commissions and Administrative Fees paid by the Partnership to MLPF&S and MLAI, respectively.

Interest Paid by Merrill Lynch on the Partnership’s Non-U.S. Dollar Available Assets

Under the single currency margining system implemented for the Partnership, the Partnership does not deposit foreign currencies to margin trading in non-U.S. dollar denominated futures contracts and options, if any.  MLPF&S provides the necessary margin, permitting the Partnership to retain the monies which would otherwise be required for such margin as part of the Partnership’s U.S. dollar Available Assets.  The Partnership does not earn interest on foreign margin deposits provided by MLPF&S. The Partnership does, however, earn interest on its non-U.S. dollar Available Assets.  Specifically, the Partnership is credited by Merrill Lynch with interest at prevailing short-term local rates on assets and net gains on non-U.S. dollar denominated positions for such gains actually held in cash by the Partnership.  Merrill Lynch charges the Partnership Merrill Lynch’s cost of financing realized and unrealized losses on such positions.

The Partnership holds foreign currency gains and finances foreign currency losses on an interim basis until converted into U.S. dollars and either paid into or out of the Partnership’s U.S. dollar Available Assets.  Foreign currency gains or losses on open positions are not converted into U.S. dollars until the positions are closed.  Assets of the Partnership while held in foreign currencies are subject to exchange rate risk.

Charges

The following table summarizes the charges incurred by the Partnership during 2010, 2009 and 2008.

The foregoing table does not reflect the bid-ask spreads paid by the Partnership on its forward trading, or the benefits which may be derived by Merrill Lynch from the deposits of certain of the Partnership’s U.S. dollar assets maintained at MLPF&S.

Each Unit is subject to the same charges.  The Partnership’s average month-end Net Assets during 2010, 2009 and 2008 equaled $161,221,838, $196,776,157 and $224,567,351, respectively.

During 2010, 2009 and 2008 the Partnership earned $220,830, $326,337and $3,585,936 in interest income, or approximately 0.14%, 0.17% and 1.60% of the Partnership’s average month-end Net Assets.

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Description of Current Charges

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Regulation

The CFTC has delegated to the National Futures Association responsibility for the registration of “commodity trading advisors,” “commodity pool operators,” “futures commission merchants,” “introducing brokers” and their respective associated persons, and “floor brokers” and “floor traders.”  The Commodity Exchange Act requires commodity pool operators such as MLAI, commodity trading advisors such as the Trading Advisor and commodity brokers or futures commission merchants (“FCMs”) such as MLPF&S to be registered and to comply with various reporting and record keeping requirements.  CFTC regulations also require FCMs to maintain a minimum level of net capital.  In addition, the CFTC and certain commodities exchanges have established limits referred to as “speculative position limits” on the maximum net long or net short speculative positions that any person may hold or control in any particular futures or options contracts traded on U.S. commodities exchanges.  All accounts owned or managed by the Trading Advisor will be combined for position limit purposes.  The Trading Advisor could be required to liquidate positions in order to comply with such limits.  Any such liquidation could result in substantial costs to the Partnership.  In addition, many futures exchanges impose limits beyond which the price of a futures contract may not trade during the course of a trading day, and there is a potential for a futures contract to reach its daily price limit for several days in a row, making it impossible for the Trading Advisor to liquidate a position and thereby experiencing dramatic losses. Currency forward contracts currently are not subject to regulation by any U.S. government agency.

Other than in respect of the registration requirements pertaining to the Partnership’s securities under Section 12(g) of the Securities Exchange Act of 1934, the Partnership is generally not subject to regulation by the Securities and Exchange Commission (the “SEC”).  However, MLAI itself is registered as an “investment adviser” under the Investment Advisers Act of 1940.  MLPF&S is also regulated by the SEC and the Financial Industry Regulatory Authority (the “FINRA”).

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(d)                                 Financial Information about Geographic Areas

The Partnership does not engage in material operations in foreign countries, nor is a material portion of the Partnership’s revenue derived from customers in foreign countries.

The Partnership trades on a number of foreign commodity exchanges.  The Partnership does not engage in the sales of goods or services.

Item 1A: Risk Factors

The Large Size of the Partnership’s Trading Positions Increases the Risk of Sudden, Major Losses

The Partnership takes positions with values up to approximately 15 times its total equity.  Consequently, even small price movements can cause major losses.

Past Performance Not Necessarily Indicative of Future Results

Sunrise’s past performance may not be representative of how it may trade in the future for the Partnership.

Volatile Markets; Highly Leveraged Trading

Futures and forward trading is highly leveraged, and market price levels are volatile and materially affected by unpredictable factors such as weather and governmental intervention. The combination of leverage and volatility creates a high degree of risk.

Importance of General Market Conditions

Overall market or economic conditions which neither MLAI nor Sunrise can predict or control have a material effect on the performance of any managed futures strategy.

Possibility of Additional Government or Market Regulation

Market disruptions and the dramatic increase in the capital allocated to alternative investment strategies during recent years have led to increased governmental as well as self-regulatory scrutiny of the alternative investment funds industry in general.  In addition, certain legislation proposing greater regulation of the industry periodically is considered by the U.S. Congress, as well as the governing bodies of foreign jurisdictions.  It is impossible to predict what, if any, changes in the regulations applicable to the Partnership, its general partner (MLAI), the markets in which they trade and invest or the counterparties with which they do business may be instituted in the future.  Any such regulation could have a material adverse impact on the profit potential of the Partnership, as well as require increased transparency as to the identity of the Partnership’s limited partners.

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Forward Trading

The Partnership will trade in forward markets, in addition to trading in futures markets.  None of the CFTC, the NFA, futures exchanges or banking authorities currently regulates forward markets, and accordingly such markets are not subject to the breadth of regulation applicable to the futures markets.  The forward markets are over-the-counter, non-exchange traded markets, and in trading in these markets, the Partnership will be dependent on the credit standing of the counterparties with which they trade, without the financial support of any clearinghouse system, as well as on the continued operation of the counterparties.  This results in the risk that a counterparty may not settle a transaction with the Partnership in accordance with its terms, because the counterparty is either unwilling or unable to do so, for example, because of a credit or liquidity problem affecting the counterparty, potentially resulting in significant loss.  In addition, the prices offered for the same forward contract may vary significantly among different forward market participants.  Forward markets counterparties are under no obligation to enter into forward transactions with the Partnership, including transactions through which the Partnership is attempting to liquidate open positions.

Effects of Speculative Position Limits

The CFTC and the U.S. commodities exchanges have established limits referred to as “speculative position limits” on the maximum net long or net short speculative positions that any person may hold or control in any particular futures or options contracts traded on U.S. commodities exchanges.  For example, the CFTC currently imposes speculative position limits on a number of agricultural commodities (e.g., corn, oats, wheat, soybeans and cotton). All commodity accounts controlled by the Trading Advisor and its principals and their affiliates are combined for speculative position limit purposes.  The Trading Advisor could be required to liquidate positions held for the Partnership, or may not be able to fully implement trading instructions generated by its trading models, in order to comply with such limits.  Any such liquidation or limited implementation could result in substantial costs to the Partnership.

Regulatory Change Could Restrict the Partnership’s Operations

The Partnership implements speculative, highly leveraged strategies.  From time to time there is governmental scrutiny of these types of strategies and political pressure to regulate their activities.  The CFTC and the exchanges are authorized to take extraordinary actions in the event of a market emergency, including, for example, the retroactive implementation of speculative position limits or higher margin requirements, the establishment of daily price limits and the suspension of trading. The regulation of futures, forward and option transactions in the United States is a rapidly changing area of law and is subject to modification by government and judicial action.  In addition, several U.S. legislators and the CFTC have expressed the concern that speculative futures traders, and commodity funds in particular, may be responsible for unwarranted and dramatic swings in the prices of commodities.  Non-U.S. governments have from time to time blamed the declines of their currencies on speculative currency trading and imposed restrictions on speculative trading in certain markets.

Regulatory changes could adversely affect the Partnership by restricting its markets, limiting its trading and/or increasing the taxes to which investors are subject.  Adverse regulatory initiatives could develop suddenly and without notice.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Reform Act”) was enacted in July 2010.  The Reform Act includes provisions that comprehensively regulate the over-the-counter derivatives markets for the first time.  The Reform Act requires that a substantial portion of over-the-counter derivatives be executed in regulated markets and submitted for clearing to regulated clearinghouses.  Those over-the-counter derivatives may include over-the-counter foreign exchange forewords and swaps which are traded by the Partnership, although the U.S. Treasury has the discretion to exclude foreign exchange forwards and swaps from certain of the new regulatory requirements.  If these forewords and swaps are not so excluded, the Reform Act may require them to be cleared and may subject the Partnership, the Trading Advisor, the Sponsor and/or the Partnership’s counterparties to additional regulatory requirements including minimum initial and variation margin requirements, minimum capital requirements, registration with the SEC and/or the CFTC, new business conduct standards, disclosure requirements, reporting and recordkeeping requirements, transparency requirements, position limits, limitations on conflicts of interest and other regulatory burdens. 

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Some or all of these requirements may apply even if forwards and swaps are excluded by the U.S. Treasury.  These new regulatory burdens would further increase the dealers’ costs, which costs are expected to be passed through to other market participants such as the Partnership in the form of higher fees and less favorable dealer marks.  They may also render certain strategies in which the Trading Advisor might otherwise engage impossible, or so costly that they will no longer be economical, to implement.

Additionally, the Reform Act, under what is commonly referred to as the “Volcker Rule,” may restrict banking entities or their affiliates, such as MLAI and certain other financial entities, from (i) purchasing units or other ownership interests in, or sponsoring, hedge funds or private equity funds (such as the Partnership), with the exception of maintaining a de minimis investment, subject to certain other conditions and/or exceptions, (ii) engaging in proprietary trading and (iii) certain transactions involving conflicts of interest.  The regulations and interpretations with respect to the Reform Act have yet to be issued, and the full import of the Reform Act is not yet clear.  Once such regulations are issued and become effective, MLAI may take certain actions that it determines, in its sole discretion, to be necessary or advisable to comply with the Reform Act.  Such changes may include, but are not limited to, the complete or partial redemption or transfer of any Units held by MLAI and/or the compulsory redemption of U.S. persons from the Partnership.  These actions could have a material adverse effect on the Partnership and investors.

Increased Assets Under Management

There appears to be a tendency for the rates of return achieved by managed futures advisors to decline as assets under management increase.  Sunrise has not agreed to limit the amount of additional equity which it may manage.

Trading Advisor Risk

The Partnership is subject to the risk of the bad judgment, negligence or misconduct of its Advisor. There have been a number of instances in recent years in which private investment funds have incurred substantial losses due to Trading Advisor misconduct.

Changes in Trading Strategy

Sunrise may make material changes in its trading strategies without the knowledge or seeking the approval of MLAI.

Illiquid Markets

Certain positions held by the Partnership may become illiquid, preventing Sunrise from acquiring positions otherwise indicated by its strategy or making it impossible for the Trading Advisor to close out positions against which the market is moving.

Certain futures markets are subject to “daily price limits,” restricting the maximum amount by which the price of a particular contract can change during any given trading day.  Once a contract’s price has moved “the limit,” it may be impossible or economically non-viable to execute trades in such contract.  From time to time, prices have moved “the limit” for a number of consecutive days, making it impossible for traders against whose positions the market was moving to prevent large losses.

Trading on Non-U.S. Exchanges

Sunrise may trade extensively on non-U.S. exchanges.  These exchanges are not regulated by any United States governmental agency.  The Partnership could incur substantial losses trading on foreign exchanges to which it would not have been subject had its Trading Advisor limited its trading to U.S. markets.

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The profits and losses derived from trading foreign futures and forwards will generally be denominated in foreign currencies; consequently, the Partnership will be subject to a certain degree of exchange-rate risk in trading such contracts.

Risk of Loss Due to the Bankruptcy or Failure of Counterparties, Brokers and Exchanges

The Partnership is subject to the risk of the insolvency of its counterparties (such as broker-dealers, futures commission merchants, exchanges, clearinghouses, banks or other financial institutions, including MLPF&S).  Consequently, losses to the Partnership could develop and substantially affect performance if insolvency of any of these counterparties occurs.  The Partnership’s assets could be lost or impounded during a counterparty’s bankruptcy or insolvency proceedings and a substantial portion or all of the Partnership’s assets may become unavailable to it either permanently or for a matter of years.  Were any such bankruptcy or insolvency to occur or were the threat of such bankruptcy or insolvency here to occur, MLAI might decide to liquidate the Partnership or suspend, limit or otherwise alter trading, perhaps causing the Partnership to miss significant profit opportunities. In connection with offshore futures and over-the-counter forward trading, there are increased risks in dealing with offshore brokers and unregulated trading counterparties, including the risk that assets may not benefit from the protection afforded to “customer funds” deposited with regulated brokers and dealers.

Item 1B: Unresolved Staff Comments

None.

Item 2:          Properties

The Partnership does not use any physical properties in the conduct of its business.

The Partnership’s offices are the administrative offices of MLAI (Merrill Lynch Alternative Investments LLC, Four World Financial Center, 10th Floor, 250 Vesey Street, New York, New York 10080). MLAI performs administrative services for the Partnership from MLAI’s offices.

Item 3:          Legal Proceedings

None.

Item 4:          (Removed and Reserved

PART II

Item 5:          Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Item 5(a)

(a)                                  Market Information:

There is no established public trading market for the Units, and none is likely to develop.  Limited Partners may redeem Units on ten days written notice to MLAI as of the last day of each month at their Net Asset Value, subject to certain early redemption charges.

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(b)                                 Holders:

As of December 31, 2010, there were 1,653 holders of Units, including MLAI, none of whom owed 5% or more of the Partnership’s Units.

(c)                                  Dividends:

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

(d)                                 Securities Authorized for Issuance Under Equity Compensation Plans:

Not applicable.

(e)                                  Recent Sales of Unregistered Securities:

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

During 2010, the Partnership issued Units as set forth in the following chart.

Item 5(b)

Not applicable.

Item 5(c)

Not applicable.

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Item 6:          Selected Financial Data

The following selected financial data has been derived from the audited financial statements of the Partnership.

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MLAI believes that the Net Asset Value used to calculate subscription and redemption value and report performance to investors throughout the year is useful information for the Limited Partner’s of the Partnership.

MONTH-END NET ASSET VALUE PER INITIAL UNIT

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ML SELECT FUTURES I L.P.

December 31, 2010

Type of Pool:  Single Advisor/Publicly-Offered/Non-”Principal Protected”(1)

Inception of Trading: April 1996

Aggregate Subscriptions:    $559,617,658

Current Capitalization:   $150,455,350

Worst Monthly Drawdown(2):  (14.94)% (August 31, 2007)

Worst Peak-to-Valley Drawdown(3):  (22.43)%  (December 2009 — January 2010)

Net Asset Value per Unit, December 31, 2010:   $287.91

Monthly Rates of Return (4) 

(1) Certain funds are structured so as to guarantee to investors that their investment will be worth no less than a specified amount (typically, the initial purchase price) as of a date certain after the date of investment.  The CFTC refers to such funds as “principal protected”. The Partnership has no such feature.

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

(3) Worst Peak-to-Valley Drawdown represents the greatest percentage decline since January 1, 2003 from a month-end cumulative Monthly Rate of Return without such cumulative Monthly Rate of Return being equaled or exceeded as of a subsequent month-end.  For example, if the Monthly Rate of Return was (1)% in each of January and February, 1% in March and (2)% in April, the Peak-to-Valley Drawdown would still be continuing at the end of April in the amount of approximately (3)%, whereas if the Monthly Rate of Return had been approximately 3% in March, the Peak-to-Valley Drawdown would have ended as of the end of February at approximately the (2)% level.

(4) Monthly Rate of Return is the net performance of the Partnership during the month of determination (including interest income and after all expenses have been accrued or paid) divided by the total equity of the Partnership as of the beginning of such month.

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Item 7:                                       Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

General

Sunrise has been the Partnership’s sole Trading Advisor since July 1, 1998.  Sunrise is a trend-following trader, whose program does not attempt to predict price movements.  Sunrise’s long-term Program attempts to detect a trend, or lack of a trend, with respect to a particular Commodity Interest by analyzing price movements and volatility over time.  However, there are frequent periods during which fundamental factors external to the market dominate prices.

There are so many influences on the markets that the same general type of economic event may lead to a price trend in some cases but not in others.  The analysis is further complicated in that the Program might recognize only certain types of trends and to apply only certain criteria of when a trend has begun.  Consequently, even though significant price trends may occur, if these trends are not comprised of the type of intra-period price movements, which its program is designed to identify, Sunrise may miss the trend altogether.

Performance Summary

This performance summary is an outline description of how the Partnership performed in the past, not necessarily any indication of how it will perform in the future.  In addition, the general causes to which certain price movements are attributed may or may not have caused such movements, but simply occurred at or about the same time.

Sunrise is unlikely to be profitable in markets in which such trends do not occur.  Static or erratic prices are likely to result in losses.  Similarly, unexpected events (for example, a political upheaval, natural disaster or governmental intervention) can lead to major short-term losses, as well as gains.

While there can be no assurance that Sunrise will be profitable under any given market condition, markets in which substantial and sustained price movements occur typically offer the best profit potential for the Partnership.

The Partnership experienced a net trading loss before brokerage commissions and related fees for the year ended December 31, 2010 of $11,145,770.  Profits were primarily attributable to the Partnership trading in the agriculture, currency and interest rate sectors posted profits while the metals, stock indices and energy sectors posted losses.

The agriculture sector posted profits to the Partnership. Profits were posted to the Partnership at the beginning of the first quarter due to sugar prices rallying to a 29 year high. The market’s upward momentum was supported by favorable fundamental factors as key producing countries produced smaller than expected yields. Losses were posted to the Partnership in the middle of the first quarter. Cotton generated positive returns while sugar generated the largest loss. Sugar prices reversed direction in early February and by the end of the month the trading program had

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liquidated all of its long sugar positions. Profits were posted to the Partnership at the end of the first quarter due to short wheat positions as prices weakened on what appeared to be favorable weather and supply conditions. Losses were posted to the Partnership at the beginning of the second quarter. Cotton futures were up at their highest level in more than 2 years which was offset by sugar prices dropping to their lowest level in nearly a year on supply worries. Profits were posted to the Partnership in the middle of the second quarter due to the trading program’s short positions in wheat and sugar. Losses were posted to the Partnership at the end of the second quarter with the exception of coffee. Coffee futures reached important technical levels and soared to a 12-year high, then retreated somewhat towards the end of the June. Reports of tight supplies from key producing countries appeared to be the main factor behind the spike in prices. Losses were posted to the Partnership at the beginning of the third quarter. During the month of July, the Partnership’s trading program identified several new trend signals that led to profits, such as long positions in coffee and soymeal. However, gains from these trades were not enough to offset losses. Profits were posted to the Partnership in the middle of the third quarter due to the Partnership’s trading program benefiting from rising prices in wheat, soymeal and cotton. Despite weakening economic conditions, agricultural commodities remained relatively strong. Unfavorable weather conditions and export disruptions appeared to be the main drivers behind this trend. Coffee futures also moved higher in August, reaching a 13-year high in mid-month. However, this move was followed by a one day drop of nearly 10% before the market slowly resumed its upward trend with coffee positions finishing the month with small losses. In September, cotton was the best performing market for the month as prices moved above the $1 per pound level for the first time in 15 years. Among the key factors that supported commodity prices in September seemed to be weather-related supply shortages and improving demand resulting in profits being posted to the Partnership at the end of the third quarter. Profits were posted to the Partnership at the beginning of the fourth quarter. Weather related shortages in supply appeared to be the main factor for rising prices in combination with growing demand that led to explosive market behavior of which cotton was the most notable example. After multiple sessions of limit up price moves cotton futures set an all-time record in October. Prices initially shot to new highs in November, only to reverse just as quickly resulting in losses posted to the Partnership in the middle of the fourth quarter. Profits were posted to the Partnership at the end of the fourth quarter. Markets rallied on strong demand and weather related crop problems. Coffee was the largest contributor to performance in this sector as prices surged to 13 year highs.

The interest rate sector posted profits to the Partnership. Profits were posted to the Partnership at the beginning through the middle of the first quarter. Changing perceptions about the global interest rate adjustments seemed to keep the prices within a range during the February. However, the markets representing the shorter end of the yield curve finished the month higher, outside their recent trading range as yields decreased. Losses were posted to the Partnership at the end of the first quarter due to volatility in global markets. Interest rate markets, both domestic and foreign, produced profits for the Partnership at the beginning through the middle of the second quarter.  In the environment of anxiety about global fiscal issues the interest rate market strengthened, sending yields lower. A consistent theme of strong demand for U.S. government debt continued in June. Signs of a slowdown in the global economic recovery and more worrisome financial news out of Europe were among the macro factors that supported the interest rate market. Some important yield levels were broken domestically: the 2-year U.S. Treasury Note fell to a record low, the 10-year U.S. Treasury Note yield dropped below 3%. These yields benefited the trading program’s long positions. The second quarter ended with profits being posted to the Partnership. Profits were posted to the Partnership at the beginning of the third quarter due to the exposure in the interest rate sector was very low. Profits continued to be posted to the Partnership in the middle of the third quarter as the general trend in interest rates seemed to be driven by expectations of more monetary easing by the Federal Reserve. Economic data provided further evidence of a slowing economic expansion resulting in yields to decline and prices to move in favor of the Partnership’s trading program’s long positions. Long positions in U.S. bonds outperformed the positions in foreign interest rates. In September, the Partnership’s trading program’s risk exposure was spread across different market sectors, with relatively higher allocations to currencies and commodities. The Partnership’s trading program profited from directional price movements in both of these sectors while limiting the negative impact of the losses posted to the Partnership at the end of the third quarter from the interest rate sector on the overall Partnership performance. Losses were posted to the Partnership at the beginning of the fourth quarter. Trading in interest rates was uneventful. Performance was either flat (domestic rates) or slightly negative (foreign rates). Overall, there appeared to be some nervousness in the financial markets in anticipation of another round of monetary stimulus by the U.S. Federal Reserve. Losses were posted to the Partnership in the middle of the fourth quarter. Positions in interest rate futures were unprofitable as yields rose and the trading program’s remaining long trades were liquidated. Trading in interest rates generated losses for the Partnership at the end of the fourth quarter.  Treasury prices initially fell and then recovered during the second half of the month.

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The currency sector posted profits to the Partnership. Losses were posted to the Partnership at the beginning of the first quarter as the currency sector experienced price reversals. The U.S. dollar declined against the euro and other currencies, dropping most sharply against commodity linked currencies, such as the Australian dollar and the New Zealand dollar. Later in January the U.S. dollar reversed direction and turned higher against short positions. Profits were posted to the Partnership in the middle of the first quarter due to newly established short positions in major currency cross rates, such as the euro and the British pound against the Japanese yen. Losses were posted to the Partnership at the end of the first quarter as the Japanese yen moved lower across the board versus most of the major currencies. Losses were posted to the Partnership at the beginning of the second quarter as currencies produced mixed results. The U.S. dollar versus the Singapore dollar was the best performing market in the currency sector. The euro came under pressure and moved in favor of the trading program’s short positions and suffered losses from the reversal in the British pound and the Swiss franc. As a result, all cross rate positions involving the two currencies were liquidated.  The euro weakened against every major currency dropping to a 4 year low against the U.S. dollar and to its lowest level against the Japanese yen since 2001. The euro and the Swiss franc were the best performing markets in the currency sector. These gains offset losses from minor currency trading resulting in profits being posted to the Partnership in the middle of the second quarter. The U.S. dollar weakened against other major currencies. The euro versus the British pound cross rate was the best performing market in sector. The Swiss franc generated the biggest loss, moving up against the U.S. dollar. Other currency markets were confined to tighter ranges, leading to marginal results. The second quarter ended with losses posted to the Partnership. Losses were posted to the Partnership at the beginning of the third quarter as the euro rebounded significantly from its early June lows which negatively impacted the trading program’s short euro positions against the U.S. dollar and the British pound. Profits continued to be posted to the Partnership in the middle of the third quarter as the Japanese yen and the euro were the best performing markets. The Japanese yen strengthened against other major currencies, except the Swiss franc. The Japanese yen reached its highest level since 1995 versus the U.S. dollar, which benefited the Partnership’s trading program’s long positions. Other profitable trades included long positions in the Japanese yen against the British pound and the euro. Profits were posted to the Partnership at the end of the third quarter due to the short U.S. dollar positions against minor currencies, such as the Australian dollar, South African rand and Singapore dollar. Trading in the Swiss franc and the Japanese yen were also profitable. The prospects of another round of monetary stimulus from the Federal Reserve appeared to be negative for the U.S. dollar as it weakened versus most major and minor currencies. Trading in the euro currency generated losses, especially in the euro versus the British pound. The euro currency moved higher against the remaining short positions, which led to their gradual liquidation. Profits were posted to the Partnership at the beginning of the fourth quarter. The U.S. dollar continued to fall against a broad range of currencies. The Japanese yen was the best performer against the U.S. dollar while other major currencies, such as the British pound and the euro currency became range bound during the second half of the month. The higher yielding minor currencies gained ground against the U.S. dollar and made a positive contribution to performance. Losses were posted to the Partnership in the middle of the fourth quarter. The U.S. dollar reversed direction and rose against most major and minor currencies, generating losses for the Partnership. The unfolding debt crisis in the euro zone combined with the events in Korea is perceived to have adversely impacted the currency sector. Profits were posted to the Partnership at the end of the fourth quarter. The Swiss franc was the strongest performer as it appreciated significantly against other European currencies and the U.S. dollar. It appeared to benefit from the euro zone fiscal problems as well as Switzerland’s strong economy. The Swiss franc versus the British pound was the most profitable trade in the currency sector.

The metals sector posted losses to the Partnership. Losses were posted to the Partnership at the beginning of the first quarter. The markets had a strong start to the year and the price dynamic then changed dramatically toward the middle of the month. The price correction was large enough to trigger partial liquidation of long positions. Losses continued to be posted in the middle of the first quarter as the commodity markets initially extended their downturn into February causing the trading program to close out more of its long positions. Profits were posted to the Partnership at the end of the first quarter. Nickel was the best performer of the base metal sector, maintaining strong price momentum throughout the month of March. Losses were posted to the Partnership at the beginning of the second quarter as negative returns were generated in base metals due to adverse price movements in aluminum and copper. Losses continued to be posted in the middle of the second quarter due to elevated volatility levels. The second quarter ended with profits posted to the Partnership due to the trading program’s long gold positions. Gold futures reached a new all-time high in June as global economic anxiety continued to support a rally in precious metals. Losses were posted to the Partnership at the beginning of the third quarter through the middle of the quarter. In July after reaching a record high in

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June, gold futures also experienced a large price correction which triggered liquidation of the Partnership’s trading program’s long positions. Profits were posted to the Partnership at the end of the third quarter as gold continued its record run. Trading in silver was also profitable as prices rose to 30-year highs. Overall, the still-pessimistic assessment of the economy along with rising inflation expectations seemed to push investors into the relative safety of precious metals at the end of the third quarter. Profits were posted to the Partnership at the beginning of the fourth quarter due to long positions in gold and silver. Both metals finished the month higher despite a sizeable price correction in mid-October when the markets encountered an interim resistance level. Profits were posted to the Partnership in the middle of the fourth quarter. Prices initially shot to new highs in November, only to reverse just as quickly. Despite the large price correction, gold and silver remained the best performing markets for the month. Profits were posted to the Partnership at the end of the fourth quarter.

Stock indices posted losses to the Partnership. Losses were posted to the Partnership at the beginning of the first quarter as the markets found it difficult to follow a clear direction in January. The stock markets initially extended their downturn into February posting losses to the Partnership in the middle of the first quarter. Profits were posted to the Partnership at the end of the first quarter. Stock markets recovered from a steep February price correction and resumed their upward trends. As a result, the trading program increased its long exposure in both domestic and foreign stock index futures. Profits were posted to the Partnership at the beginning of the second quarter. Trading in domestic stock indices was profitable as equities reached 18-month highs in April. New long trades were initiated in March and early April when the trading model signaled a resumption of upward trends. Unfortunately, during the violent price action of May 6th trends reversed simultaneously across multiple markets and triggered stop loss signals resulting in losses posted to the Partnership in the middle of the second quarter. The second quarter ended with losses posted to the Partnership. Equities continued their downward slide in June as concerns regarding European financial stability and global growth plagued markets. Profits were posted to the Partnership at the beginning of the third quarter as the market environment was characterized by non-directional price volatility, which was consistent with fluctuations in global economic sentiment. Losses were posted to the Partnership in the middle of the third quarter. Profits posted to the Partnership from short positions in Nikkei and Topix which was not enough to offset losses from long positions in DAX. Overall, markets appeared to be cautious about the long-term economic recovery. It was evident in daily price swings and lack of sustained trends in many market sectors. Losses were posted to the Partnership at the end of the third quarter due to global market volatility. Profits were posted to the Partnership at the beginning of the fourth quarter. Profits from long positions in domestic and European stock index futures were partially offset by losses from short trades in Japanese stock indices. Losses were posted to the Partnership in the middle of the fourth quarter. Negative influence of global volatility brought back a sense of “risk aversion” and led to quick correction of existing market trends across different market sectors, including commodities and global equity markets. The fourth quarter ended with profits posted to the Partnership as equity markets gained momentum in December. The equity markets seemed to benefit from good corporate news and rising confidence in a U.S. economic recovery.

The energy sector posted losses to the Partnership. Losses were posted to the Partnership at the beginning of the first quarter as oil prices rose to a 15 month high in early January and then retreated sharply. Losses were posted to the Partnership in the middle of the first quarter due to the commodity markets continuing their downturn resulting in the trading program closing out of their long exposure in energies. Profits were posted to the Partnership at the end of the first quarter as the trading program capitalized on declining prices in natural gas and newly initiated short positions. Profits were posted to the Partnership at the beginning of the second quarter. The trading program increased its long exposure in the energy sector early in April as prices moved to new highs for the year. The market subsequently came back under downward pressure only to recover in the second half of the month. Since the oil-futures curve sloped significantly upward, the trading program benefited from its long positions in the more distant contract month. Losses were posted to the Partnership in the middle through the end of the second quarter. Prices turned higher against the trading program’s short position in early June. The intramonth price action was very choppy. It triggered a position reversal in natural gas, only to turn again and trade lower at the end of June. Profits were posted to the Partnership in the middle of the third quarter with losses posted to the Partnership at the beginning and the end of the third quarter due to the global market volatility. Profits were posted to the Partnership as the trading program’s strategy performed well in October by maintaining higher commodity exposure only to reverse in the middle of the fourth quarter due to volatility in global markets. Energy prices were up in December driven partly by unusually cold weather as well as more positive macroeconomic news. The trading program increased the long exposure in energies at the beginning of the month which led to profits at the end of the fourth quarter.

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The Partnership experienced a net trading profit before brokerage commissions and related fees for the year ended December 31, 2009 of $16,061,392.  Profits were primarily attributable to the Partnership’s trading in metals, stock indices, energy, agriculture and losses to currencies and interest rates.

The metals sector posted profits for the Partnership. Losses were posted to the Partnership at the beginning of the first quarter as most markets in the metals sectors had negative returns. The Program initiated a long position in gold in the middle of the first quarter as demand was rising and the price reached $1,000 per ounce. The market was not able to sustain that level and ended the month lower which caused losses for the Partnership. Losses continued to be posted to the Partnership at the end of the first quarter as markets in general lacked clear direction in an environment of uncertainty over the global economic outlook. The Program took advantage of new developing trends in metals and initiated new long positions in the metals sector resulting in profits being posted to the Partnership throughout the second quarter. Profits continued to be posted to the Partnership at the beginning through the middle of the third quarter due to base metals of  aluminum and  in copper which more than doubled in price for the year in August. However, the metals sector moved lower at the end of September resulting in losses being posted to the Partnership. Profits were posted to the Partnership at the beginning through the middle of the fourth quarter as gold was the best performing market as prices rose to record levels. In reaction to the sharp increase in the U.S. dollar, commodity prices initially fell across the board at the beginning of December. Losses were recorded in precious metals while base metals posted profits which were not enough to offset the losses to the Partnership as the year ended.

The stock indices posted profits for the Partnership. Losses were posted to the Partnership at the beginning of the first quarter as markets remained volatile and generally failed to show any meaningful price direction. Profits were posted to the Partnership and trading in equity futures was profitable, as the bear market began to accelerate and stock fell to their lowest level since 1997 in February. The governments plan to rescue the banking system sent stock markets to their highest levels not seen in more than a month. As a result, the majority of the Partnership’s short positions were liquidated with losses being posted for the Partnership as the first quarter ended. Losses were posted to the Partnership at the beginning of the second quarter in reaction to the United States Federal Reserve’s assessment that the United States economy began to show a slower rate of decline, while the equity markets grew stronger and triggered a liquidation of the program’s remaining short positions. Equity prices were somewhat volatile in the middle of the quarter due to continued uncertainty over the global economy. Long positions resulted in profits being posted to the Partnership with foreign equities more profitable than domestic equities. Profits continued to be posted to the Partnership at the end of the second quarter as equity prices moved higher as the market focuses on positive economic reports, improved consumer confidence and other signs of stabilization. The stock indices posted profits for the Partnership throughout the third quarter.  Equity markets reached new highs in July as all positions in equity were profitable with the largest gains coming from Eurostox and NASDAQ. Profits continued to be posted to the Partnership in August and September due to the United States and European equity markets as they moved to new highs for the year. Most global equity markets initially extended their gains from previous months and reached their highest point of the year in mid October and finished the month lower, thus producing losses for the Partnership. While most major United States and European equity markets ended the month of November higher resulting in profits for the Partnership, Japanese stock index futures incurred small losses. The Program’s long positions in equities resulted in profits being posted to the Partnership as the year ended.

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The energy sector posted profits for the Partnership. Losses were posted to the Partnership at the beginning of the first quarter as markets remain volatile and fail to show price direction. Short positions in crude oil futures generated losses in the middle of the first quarter due to oil prices rising after the U.S. data showed declining inventories. The first quarter ended with losses being posted to the Partnership as trading was difficult in a volatile market. Profits were posted to the Partnership at the beginning through the middle of the second quarter as crude oil rose to a six month high on expectations of higher demand in a recovering economy. The quarter ended with profits being posted to the Partnership due to long positions in the energy sector as oil prices made new highs for the year as the outlook for global demand continued to show signs of strengthening. The energy sector posted losses for the Partnership throughout the third quarter.  Oil prices were volatile with oil finishing the month of August below the $70 level. Speculations about the extent and speed of a global economic recovery dominated the markets in September, resulting in a difficult trading environment.  Profits were posted to the Partnership at the beginning through the middle of the fourth quarter. Crude oil finished higher despite a major pullback in prices at the end of October. Performance from the energy sector was slightly profitable as the markets failed to make new highs in November and moved in a wide price range. Losses were posted to the Partnership in energies as the year ended in reaction to the sharp increase in the U.S. dollar.

The agriculture sector posted profits for the Partnership. Losses were posted for the Partnership throughout the first quarter due to the volatility in global markets. Profits were posted to the Partnership at the beginning through the middle of the second quarter as the Program initiated new long positions due the developing trends in the agriculture commodities. Losses were posted to the Partnership at the end of the second quarter due to reversals in the Program’s long agricultural positions (wheat, corn and soy meal) which contributed negatively to returns. Long positions were systematically reduced during the month of June. Profits were posted to the Partnership at the beginning through the middle of the third quarter as sugar prices rose in July on expectations for a smaller harvest and prices rallied to new highs in August. The wheat market continued its downturn in August, which led to solid profits for the Program’s short positions. The third quarter ended with losses posted to the Partnership as speculations about the extent and speed of a global economic recovery dominated the markets in September, resulting in a difficult trading environment for a technical model. Losses were posted to the Partnership at the beginning of the fourth quarter. The potential for a smaller harvest in grains appeared to push prices higher against the Program’s short positions. Sugar was the worst performing market in October. The Program’s long trades were liquidated after a sharp reversal in price. Trading systems generated solid profits across all programs in November. The Program was able to capitalize on several recurring trends, including rising commodity prices. In reaction to the sharp increase in the U.S. dollar, commodity prices initially fell almost across the board. Some of them stabilized during the second half of December and resumed the direction of their original trend. The year ended with profits posted to the Partnership.

The currency sector posted losses for the Partnership. The markets were thinner than in normal economic conditions at the beginning of the first quarter and there were no strong technical signals for a new price trend. The U.S. dollar benefited from its status as the world’s reserve currency and managed to strengthen against other European currencies. The Partnership’s exposure in the currency sector was light resulting in slightly negative returns. Losses continued to be posted to the Partnership in the middle of the first quarter as the currency sector was hurt by a major reversal in Japanese yen. The Japanese yen rose about 30% between August 2008 and the start of February 2009, then switched direction against the U.S. dollar and other major currencies. Trading in currencies at the end of the first quarter generated losses being posted for the Partnership. The U.S. dollar weakened against a wide range of currencies as worries about inflation intensified and the U.S. dollar’s status as the world’s reserve currency gained increased coverage. Currencies posted losses to the Partnership at the beginning of the second quarter as the U.S. dollar initially strengthened then moved lower against other currencies. Profits were posted to the Partnership in the middle of the second quarter due to an uptrend in the Australian dollar, New Zealand dollar and the South African rand and the U.S. dollar weakened against other major and minor currencies due to rising concerns about the country’s credit ratings. Profits in the currency markets were led by the strength of the British pound against other currencies especially the U.S. dollar plus minor currency positions resulting in profits being posted to the Partnership at the end of the second quarter. Profits were posted to the Partnership at the beginning of the third quarter as the U.S. dollar remained weak and the Program’s short U.S. dollar trades generated profits for the Partnership. All major currency markets traded in a range bound fashion in August resulting in losses being posted to the Partnership. Gains in minor currencies such as the Australian dollar and the New Zealand dollar were not large enough to offset losses in major currencies. The U.S. dollar declined to a twelve month low versus the Euro and an eight month low versus the Japanese yen, which prompted readjustments in the Program’s major currency positions. Commodity-linked

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currencies such as the New Zealand dollar and the Australian dollar benefited from expectations of revived economic growth and rose to their strongest level in more than a year resulting in profits being posted to the Partnership at the end of the third quarter. The U.S. dollar fell to a fourteen month low against the Euro and then bounced back strongly. The currency sector produced profits for the Partnership in October resulting from the short U.S. dollar positions against minor currencies, such as the Australian dollar and the Singapore dollar. The U.S. dollar resumed its fall against most major and minor currencies and hit new lows for the year in November as profits were posted to the Partnership resulting from the Program’s short U.S. dollar positions. The U.S. dollar experienced a relatively large correction, compared to moves in other markets. It rallied against other major and minor currencies, reaching the highest level against the Japanese yen the Euro since September. The year ended with losses being posted to the Partnership.

The interest rate sector posted losses for the Partnership. Interest rate futures were subjected to price reversals at the beginning of the first quarter as yields on government securities moved higher causing this sector to produce small losses. Profits were posted to the Partnership in the middle of the first quarter as the Program was able to identify trading opportunities in the long-term price trends. The first quarter ended with losses being posted to the Partnership as global markets lacked any clear direction in an environment of uncertainty over the global economic outlook. Losses were posted to the Partnership at the beginning of the second quarter due to the swine flu outbreak generating concerns which resulted in higher volatility levels across all market levels. It created a new challenge for the markets with its negative implications on the global economy. Treasury prices fell and yields rose on concerns about increasing supplies of government debt resulting in profits being posted to the Partnership in the middle of the second quarter. A significant drop in the U.S. treasury prices early in June triggered a decrease in overall exposure to interest rate products. An improved U.S. employment report sent the yield on two year U.S. Treasury notes surging to the highest level since November 2008 before retreating towards the end of the June resulting in losses being posted to the Partnership. Losses were posted to the Partnership at the beginning of the third quarter as the price action was missing significant directional movement and was not beneficial to the Program’s positions. Profits were posted to the Partnership in the middle to the end of the third quarter as the Program maintained a very low exposure in this sector. At the beginning of the fourth quarter losses were posted to the Partnership as performance was flat as the program’s exposure was very low. Profits were posted to the Partnership in November due the Program’s long positions profiting from an increase in prices. Apparent growing demand for the safety of United States Government bonds led to a further decline in the U.S. yields.

The Partnership experienced a net trading profit before brokerage commissions and related fees for the year ended December 31, 2008 of $78,290,225.  Profits were primarily attributable to the Partnership’s trading in energy, stock indices, currencies, interest rates, metals and agriculture.

The energy sector posted profits for the Partnership. Oil prices eased back from the record high hit on January 3, 2008 of more than $100 per barrel and posted moderate losses for the Partnership. Profits were posted to the Partnership in the middle of the quarter continuing to the end of the first quarter as crude oil reached an unprecedented $110 a barrel.  Profits were posted to the Partnership at the beginning of the second quarter as prices continued to move higher as worries about supply disruptions sent crude oil futures to a record of $120 a barrel. Profits continued to be posted to the Partnership in the middle of the quarter due to the long energy positions led by crude oil futures, which reached record levels above $135 a barrel as prices advanced to new historical highs. The second quarter ended with profits being posted to the Partnership as crude oil continued to make record highs, closing the month at $140 a barrel. 

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Losses were posted to the Partnership at the beginning of the third quarter as oil prices reached a record high of $147.90 a barrel on July 11, 2008 and then declined more than $25 on prospects of lower demand. Losses continued to be posted to the Partnership from the middle of the third quarter to the end of the quarter due to volatility in the market. Profits were posted to the Partnership throughout the fourth quarter. Trading in energies produced significant returns for the Partnership despite October being among the most volatile months in market history. As the world’s economic outlook continued to deteriorate, the energy markets moved lower and posted profits to the Partnership in November. Short positions in energies were among the most profitable for the Partnership at the end of the year. Oil prices ended the year significantly lower than the July record high price due to concerns about weak global demand.

The stock indices sector posted profits for the Partnership. Trading in stocks was profitable for the Partnership as global stocks experienced a steep decline and finished lower for the month of January. Profits continued to be posted to the Partnership during the middle of the first quarter. The first quarter ended with profits being generated due to the Partnership’s short positions in the Japanese Nikkei and Topix. Trading in global equities was unprofitable for the Partnership with positions in both domestic and foreign equity markets contributing to the negative performance as losses were posted to the Partnership through the second quarter. Profits were posted to the Partnership at the beginning of the third quarter in lieu of the stock market declines during the first half of July. The Program was able to quickly take profits on its short positions before the prices reversed and moved higher during the second half of July. Losses were posted to the Partnership during the middle of the quarter due to market volatility. Profits were posted to the Partnership at the end of the third quarter due to the risk exposure controls maintaining low levels of exposure in the market.  Profits were posted to the Partnership at the beginning of the fourth quarter. The Partnership was able to benefit from trading opportunities that emerged during the period of global financial crises with relatively low risk. Losses were posted to the Partnership from the middle of the quarter to the end of the fourth quarter as global markets remain very volatile.

The currency sector posted profits for the Partnership. The U.S. dollar weakened against the Euro and experienced volatile performance against other major currencies at the beginning of the first quarter. Profits were posted for the Partnership due to gains in the British pound positions versus the Swiss franc and the Euro. The currency sector also generated solid profits for the Partnership as the U.S. dollar continued to fall in the middle of the quarter as the U.S. dollar marked new lifetime lows against the Euro and a series of multiyear lows against other currencies, ranging form the Swiss franc to the Australian dollar. The U.S. dollar’s weakness stemmed from a number of factors, including soft U.S. economic data and prospects for more interest rate cuts. Profits continued to be posted to the Partnership as the U.S. dollar continued its decline in March, setting new lows against the Euro and the Swiss franc, and reaching its weakest level against the Japanese yen since 1995. As the U.S. economic outlook continued to deteriorate and the interest rate differential widened at the expense of the U.S. dollar, its position as a low yielding currency remained the main factor behind its declining value. Losses were posted to the Partnership at the beginning of the second quarter due to the U. S. dollar initially dropping to another record low against the Euro, only to rebound later in the month of April causing the Partnership to liquidate some of its short U.S. dollar positions. Trading in currencies produced small losses in the middle of the quarter for the Partnership as the environment turned more favorable for the U.S. dollar as the price action was mostly range bound when compared to the high volatility of previous months. The U.S. dollar’s link to oil prices was one of the factors that kept it in a relatively tight price range against other major currencies. Negative economic news was prevalent throughout the month of June, starting with an employment report in the United Sates that showed the largest month to month increase in the jobless rate since February 1986. The Partnership posted profits as the second quarter ended due to profits from a stronger Swiss franc and the U.S. dollar losing value. Losses were posted to the Partnership at the beginning of the third quarter as the U. S. dollar moved up against the Partnership’s short positions. The U.S. dollar continued to gain against other major currencies especially the British pound. Although the Partnership’s long U.S. dollar positions against the British pound, the Japanese yen, and the New Zealand dollar generated profits, they were not enough to offset the losses sustained from the Partnership’s short U.S. dollar trades against the Euro, the Swiss Franc and the Australian dollar posting losses to the Partnership in the middle of the quarter. Losses were posted to the Partnership at the end of the third quarter as market volatility reached record levels. Profits were posted to the Partnership at the beginning through the middle of the fourth quarter. Trading conditions in currencies were exceptionally thin and the markets were therefore prone to volatile moves. The U.S. dollar turned weaker at the end of the year which contributed to losses being posted for the Partnership.

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The interest rate sector posted profits to the Partnership. Unprecedented actions by the U.S. Federal Reserve appeared to be driving the markets in January. Concerns about the housing and credit markets as well as deteriorating economic fundamentals prompted the U.S. Federal Reserve to cut interest rates. The decline in U.S. interest rates was the major source of profits being posted to the Partnership at the beginning of the quarter. Both domestic and foreign interest rate markets moved in favor of the Partnership’s positions posting profits for the Partnership in the middle of the quarter.  Losses were posted to the Partnership at the end of the quarter as the markets switched direction and moved against the Partnership’s long positions. Losses were posted to the Partnership at the beginning of the second quarter. The key highlight among the numerous economic reports and developments was the U.S. Federal Open Market Committee’s rate decision to leave interest rates on hold. In reaction to news that the U.S. Federal Reserve might leave interest rates on hold for some time, a number of key markets experienced volatile price actions and reversals. Profits were posted to the Partnership in the middle of the quarter due to the Program’s positions were either liquidated (majority of domestic interest rate futures) or switched direction (short-term foreign interest rates.).  Profits continued to be posted at the end of the second quarter.  Losses were posted to the Partnership at the beginning of the third quarter as trading was negative for this sector. Futures prices in the foreign interest rate sector ended higher in the middle of the quarter, producing moderate losses for the Partnership. Market volatility reached record levels reflecting anxiety over the intensifying credit crisis in the U.S. financial market. Prospects for slower economic growth, tighter credit conditions and lower demand put pressure on both the financial and commodity markets. After the United States House of Representatives voted down a financial rescue package the markets responded negatively and tumbled, causing losses to be posted to the Partnership at the end of the third quarter. Profits were posted to the Partnership at the beginning of the fourth quarter. The interest rate market rallied in November as investors moved from falling stocks to government debt. Yields on the 2, 5, 10 and 30 U.S. bonds touched historic lows during the month. Growing demand for government securities in general was based on expectations that central banks would cut interest rates further. The year ended with the interest rate sector posting profits for the Partnership due to the U.S. Federal Reserve’s zero interest policy.

The metals sector posted profits to the Partnership. Gold prices rallied at the beginning of the year setting a record of $936.30 an ounce which was not enough to offset the losses posted to the Partnership early in the first quarter. The metals sector rallied in the middle of the quarter posting profits for the Partnership. Commodity prices rose to unprecedented levels during the month of March with crude oil reaching $110 a barrel and gold reaching $1,000 per ounce for the first time. There was an aggressive sell-off in the commodity complex later in March, which erased gains that were achieved earlier in the month. Gold and crude oil experienced their biggest one-day price correction in years. As a result, the Partnership’s exposure in the commodity sector was reduced considerably. Losses were posted to the Partnership at the beginning of the second quarter through the middle due to a volatile market. The second quarter ended with profits posted to the Partnership due to the long positions in copper and aluminum. Trading in metals was unprofitable for the Partnership as demand slowed around the world, prices for base metals fell which contributed to the losses posted to the Partnership throughout the third quarter.  Trading in metals produced profits being posted to the Partnership at the beginning of the fourth quarter due to the Partnership participating in many pronounced price trends. Losses were posted to the Partnership in the middle of the quarter due to the volatility in the global markets. The year ended with profits posted to the Partnership despite the most difficult trading conditions and unprecedented volatility that defined the markets for most of the year.

The agriculture sector posted profits to the Partnership. Profits were posted to the Partnership at the beginning through the middle of the first quarter due to a powerful rally in grains.  The end of the first quarter generated losses for the Partnership due to increased volatility and trend reversals.  Profits were posted to the Partnership at the beginning through the middle of the second quarter. However, heavy flooding in the Midwest section of the United States contributed to losses being posted to the Partnership at the end of the second quarter as the price of grains were driven up. Soybean meal traded near all time high however, these gains were offset by losses in cotton and sugar. The Partnership exited their short positions in these markets as prices bounced upward. Losses were posted to the Partnership at the beginning of the third quarter due to the volatility in the market. Profits were posted to the Partnership from the middle through the end of the third quarter as cotton was the best performing market as prices moved in favor of the Partnership’s short positions. Profits were posted to the Partnership at the beginning through the middle part of the fourth quarter in lieu of market volatility. Losses were posted to the Partnership as the year ended due to extreme volatility in the markets.

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Variables Affecting Performance

The principal variables that determine the net performance of the Partnership are gross profitability from the Partnership’s trading activities and interest income.

The Partnership receives an interest based on the 90 day t-bill rate on their U.S. dollar deposits.  Other rates exist for the non U.S. dollar deposits, however, most of the Partnership’s cash is held in U.S. dollars.  The current short term interest rates have remained extremely low when compared with historical rates and thus has contributed negligible amounts to overall Partnership performance.

During all periods set forth above in “Selected Financial Data”, the interest rates in many countries were at unusually low levels. In addition, low interest rates are frequently associated with reduced fixed income market volatility, and in static markets the Partnership’s profit potential generally tends to be diminished.  On the other hand, during periods of higher interest rates, the relative attractiveness of a high risk investment such as the Partnership may be reduced as compared to high yielding and much lower risk fixed-income investments.

The Partnership’s Brokerage Commissions and Administrative Fees are a constant percentage of the Partnership costs, other than the insignificant currency trading costs which are not based on a percentage of the Partnership’s assets allocated to trading or total. The Profit Shares payable to the Trading Advisor are based on the New Trading Profits generated by the Partnership excluding interest and after reduction for a portion of the Brokerage Commissions.

Unlike many investment fields, there is no meaningful distinction in the operation of the Partnership between realized and unrealized profits.  Most of the contracts traded by the Partnership are highly liquid and can be closed out at any time.

Except in unusual circumstances, factors—regulatory approvals, cost of goods sold, employee relations and the like—which often materially affect an operating business, have no material impact on the Partnership.

Liquidity; Capital Resources

The Partnership borrows only to a limited extent and only on a strictly short-term basis in order to finance losses on non-U.S. dollar denominated trading positions pending the conversion of the Partnership’s U.S. dollar deposits. These borrowings are at a prevailing short-term rate in the relevant currency.

Substantially all of the Partnership’s assets are held in cash. The Net Asset Value of the Partnership’s cash is not affected by inflation. However, changes in interest rates could cause periods of strong up or down price trends, during which the Partnership’s profit potential generally increases. Inflation in commodity prices could also generate price movements, which the strategies might successfully follow.

Because substantially all of the Partnership’s assets are held in cash, the Partnership should be able to close out any or all of its open trading positions and liquidate any or all of its securities holdings quickly and at market prices, except in very unusual circumstances. This permits the Partnership to limit losses as well as reduce market exposure on short notice should its strategies indicate doing so. In addition, because there is a readily available market value for the Partnership’s positions and assets, the Partnership’s monthly Net Asset Value calculations are precise, and investors need only wait ten business days to receive the full redemption proceeds of their Units.

As a commodity pool, the Partnership maintains an extremely large percentage of its assets in cash, which it must have available to post initial and variation margin on futures contracts.  This cash is also used to fund redemptions.  While the Partnership has the ability to fund redemption proceeds from liquidating positions, as a practical matter positions are not liquidated to fund redemptions.  In the event that positions were liquidated to fund redemptions, MLAI, as the General Partner of the Partnership, has the ability to override decisions of the Trading Advisor to fund

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redemptions if necessary, but in practice the Trading Advisor would determine in its discretion which investments should be liquidated.

(The Partnership has no applicable off-balance sheet arrangements or tabular disclosure of contractual obligations of the type described in Items 3.03(a)(4) and 3.03(a)(5) of Regulation S-K)

Recent Accounting Developments

Recent Accounting developments are discussed in Exhibit 13.01

Item 7A: Quantitative and Qualitative Disclosures About Market Risk

Introduction

The Partnership is a speculative commodity pool. The market sensitive instruments held by it are acquired for speculative trading purposes and all or substantially all of the Partnership’s assets are subject to the risk of trading loss.  Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Partnership’s main line of business.

Market movements result in frequent changes in the fair market value of the Partnership’s open positions and, consequently, in its earnings and cash flow. The Partnership’s market risk is influenced by a wide variety of factors, including the level and volatility of interest rates, exchange rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Partnership’s open positions and the liquidity of the markets in which it trades.

The Partnership, under the direction of Sunrise, rapidly acquires and liquidates both long and short positions in a wide range of different markets.  Consequently, it is not possible to predict how a particular future market scenario will affect performance, and the Partnership’s past performance is not necessarily indicative of its future results.

Value at Risk is a measure of the maximum amount which the Partnership could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Partnership’s speculative trading and the recurrence in the markets traded by the Partnership of market movements far exceeding expectations could result in actual trading or non-trading losses far beyond the indicated Value at Risk or the Partnership’s experience to date (i.e., “risk of ruin”). In light of the foregoing, as well as the risks and uncertainties intrinsic to all future projections, the quantifications included in this section should not be considered to constitute any assurance or representation that the Partnership’s losses in any market sector will be limited to Value at Risk or by the Partnership’s attempts to manage its market risk.

Quantifying The Partnership’s Trading Value At Risk

Quantitative Forward-Looking Statements

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

The Partnership’s risk exposure in the various market sectors traded by the Advisor is quantified below in terms of Value at Risk.  Due to the Partnership’s fair value accounting, any loss in the fair value of the Partnership’s open positions is directly reflected in the Partnership’s earnings (realized or unrealized) and cash flow (at least in the case of exchange-traded contracts in which profits and losses on open positions are settled daily through variation margin).

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Exchange maintenance margin requirements have been used by the Partnership as the measure of its Value at Risk.  Maintenance margin requirements are set by exchanges to equal or exceed the maximum loss in the fair value of any given contract incurred in 95%-99% of the one-day time periods included in the historical sample (generally approximately one year) researched for purposes of establishing margin levels.  The maintenance margin levels are established by dealers and exchanges using historical 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 maximum expected near-term one-day price fluctuation.

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

100% positive correlation in the different positions held in each market risk category has been assumed.  Consequently, the margin requirements applicable to the open contracts have been aggregated to determine each trading category’s aggregate Value at Risk.  The diversification effects resulting from the fact that the Partnership’s positions are rarely, if ever, 100% positively correlated have not been reflected.

The Partnership’s Trading Value at Risk in Different Market Sectors

The following table indicates the average, highest and lowest trading Value at Risk associated with the Partnership’s open positions by market category for the fiscal years 2010, 2009 and 2008. During the fiscal year 2010 the Partnership’s average capitalization was $161,221,838. During the fiscal year 2009, the Partnership’s average capitalization was $196,776,157. During the fiscal year 2008, the Partnership’s average capitalization was $224,567,351.

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December 31, 2010