**Exhibit 13.03**

 
|   | ***ML  CHESAPEAKE FUTURESACCESS LLC***

***(A  Delaware Limited Liability Company)*** |
|--------|---------------------------------------------------------------------------------------|
|   |                                                                                  |   |
|   |                                                                                  | *Financial Statements as of  and for the years ended*

*December 31, 2009 and 2008*

*and Report of Independent  Auditors*

(Under the Liquidation Basis of Accounting) |

 

 

 

----

 

ML CHESAPEAKEFUTURESACCESS LLC

(A DelawareLimited Liability Company)

(Under theLiquidation Basis of Accounting)

 

TABLE OF CONTENTS

 
| ** **                                                                                     | **Page** |
|------------------------------------------------------------------------------------------------|----------|
|                                                                                           |     |
| REPORT OF INDEPENDENT  AUDITORS                                                                | 1        |
|                                                                                           |     |
| FINANCIAL STATEMENTS:                                                                          |     |
|                                                                                           |     |
| Statements of Financial  Condition as of December 31, 2009 and 2008                            | 3        |
|                                                                                           |     |
| Statements of  Operations for the years ended December 31, 2009 and 2008                       | 4        |
|                                                                                           |     |
| Statements of Changes  in Members’ Capital for the years ended December 31, 2009 and 2008 | 5        |
|                                                                                           |     |
| Financial Data  Highlights for the years ended December 31, 2009 and 2008                      | 7        |
|                                                                                           |     |
| Notes  to Financial Statements                                                                 | 9        |

 

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**Report of Independent Auditors**

 

To the Members of

ML Chesapeake FuturesAccess LLC:

 

In our opinion, the accompanying statement of financial condition, andthe related statements of operations, changes in members’ capital, andfinancial data highlights present fairly, in all material respects, thefinancial position of ML Chesapeake FuturesAccess LLC (the “Fund”) atDecember 31, 2009, and the results of its operations, changes in itsmembers’ capital, and financial data highlights for the year then ended, inconformity with accounting principles generally accepted in the United Statesof America.  These financial statementsand the financial data highlights (hereafter referred to as the “financialstatements”) are the responsibility of the Fund’s management.  Our responsibility is to express an opinionon these financial statements based on our audit.  We conducted our audit of these financialstatements in accordance with auditing standards generally accepted in theUnited States of America.  Thosestandards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement.  An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements, assessing the accounting principles used andsignificant estimates made by the Fund’s management, and evaluating the overallfinancial statement presentation.  Webelieve that our audit provides a reasonable basis for our opinion. Thefinancial statements of the Fund as of December 31, 2008 and for the yearthen ended were audited by other auditors whose report dated March 30,2009 expressed an unqualified opinion on those statements.

 

As discussed in Note 1 tothe financial statements, the Fund was placed into liquidation on December 22,2009.  As a result, the Fund has changedits basis of accounting for the year from the going concern basis to theliquidation basis.

 

 

/s/PricewaterhouseCoopersLLP

 

 

March 25, 2010

 

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INDEPENDENT AUDITORS’ REPORT

 

To the Members of

ML Chesapeake FuturesAccess LLC:

 

We have audited the accompanying statement offinancial condition of ML Chesapeake FuturesAccess LLC (the “Fund”), as of December 31,2008, and the related statements of operations, changes in member’s capital,and the financial data highlights for the year ended December 31, 2008.These financial statements and financial data highlights are the responsibilityof the Fund’s management. Our responsibility is to express an opinion on thesefinancial statements and financial data highlights based on our audit.

 

We conducted our audit in accordance with auditingstandards generally accepted in the United States of America. Those standardsrequire that we plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements and financial data highlights are free ofmaterial misstatement. An audit includes consideration of internal control overfinancial reporting as a basis for designing audit procedures that areappropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Fund’s internal control over financialreporting. Accordingly, we express no such opinion. An audit also includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements, assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audit provides areasonable basis for our opinion.

 

In our opinion, the financial statements and financialdata highlights referred to above present fairly, in all material respects, thefinancial position of ML Chesapeake FuturesAccess LLC as of December 31,2008, and the results of its operations, changes in member’s capital and the financialdata highlights for the year ended December 31, 2008, in conformity withaccounting principles generally accepted in the United States of America.

 

 

 

March 30, 2009

 

 

2

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ML CHESAPEAKEFUTURESACCESS LLC

(A DelawareLimited Liability Company)

(Under theLiquidation Basis of Accounting)

 

STATEMENTS OFFINANCIAL CONDITION

AS OF DECEMBER 31,2009 and 2008

 
| ** **                                                                                          | ** ** | **2009**    | ** **  | **2008**    | ** ** |
|-----------------------------------------------------------------------------------------------------|------------|-------------|-------------|-------------|------------|
| **ASSETS:**                                                                                         |       |        |        |        |       |
| Equity in commodity futures trading accounts:                                                       |       |        |        |        |       |
| Cash (including restricted cash of $38,911,660 for  2009 and $11,325,562 for 2008)                  |       | $           | 155,944,059 |        | $          | 158,796,424 |   |
| Net unrealized profit on open contracts                                                             |       | 7,155,320   |        | 6,643,829   |       |
| Cash and cash equivalents                                                                           |       | 92,771      |        | 9,983       |       |
| Prepaid fees or prepaid expenses                                                                    |       | 34,028      |        | —      |       |
| Accrued interest receivable                                                                         |       | —      |        | 13,301      |       |
|                                                                                                |       |        |        |        |       |
| **TOTAL ASSETS**                                                                                    |       | $           | 163,226,178 |        | $          | 165,463,537 |   |
|                                                                                                |       |        |        |        |       |
| **LIABILITIES AND MEMBERS’ CAPITAL:**                                                          |       |        |        |        |       |
| LIABILITIES:                                                                                        |       |        |        |        |       |
| Brokerage commissions payable                                                                       |       | $           | 130,641     |        | $          | 20,986 |   |
| Commodity Trading Advisor fee payable                                                               |       | 329,528     |        | 2,838,059   |       |
| Redemptions payable                                                                                 |       | 10,404,733  |        | 3,407,148   |       |
| Other liabilities                                                                                   |       | 214,721     |        | 160,003     |       |
|                                                                                                |       |        |        |        |       |
| Total liabilities                                                                                   |       | 11,079,623  |        | 6,426,196   |       |
|                                                                                                |       |        |        |        |       |
| MEMBERS’ CAPITAL:                                                                              |       |        |        |        |       |
| Members’ Interest (128,945,881 and 134,254,090 Units  outstanding, unlimited Units authorized) |       | 152,146,555 |        | 159,037,341 |       |
| Total members’ capital                                                                         |       | 152,146,555 |        | 159,037,341 |       |
|                                                                                                |       |        |        |        |       |
| **TOTAL LIABILITIES AND MEMBERS’  CAPITAL**                                                    |       | $           | 163,226,178 |        | $          | 165,463,537 |   |

 

See notes to financialstatements.

 

3

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MLCHESAPEAKE FUTURESACCESS LLC

(A DelawareLimited Liability Company)

(Under theLiquidation Basis of Accounting)

 

STATEMENTS OFOPERATIONS

FOR THE YEARSENDED DECEMBER 31, 2009 AND 2008

 
| ** **                                   | ** ** | **2009**   | ** ** | **2008**   | ** ** |
|----------------------------------------------|------------|------------|------------|------------|------------|
| **TRADING PROFIT (LOSS):**                   | ** ** | ** ** | ** ** | ** ** | ** ** |
|                                         |       |       |       |       |       |
| Realized, net                                |       | $          | 2,742,940  |       | $          | 21,755,870 |   |
| Change in unrealized, net                    |       | 511,491    |       | 1,504,367  |       |
| Brokerage commissions                        |       | (283,240   | )          | (253,615   | )          |
|                                         |       |       |       |       |       |
| Total trading profit (loss)                  |       | 2,971,191  |       | 23,006,622 |       |
|                                         |       |       |       |       |       |
| **INVESTMENT INCOME (LOSS):**                |       |       |       |       |       |
| Interest                                     |       | (1,319     | )          | 2,209,146  |       |
|                                         |       |       |       |       |       |
| **EXPENSES:**                                |       |       |       |       |       |
| Management fee                               |       | 2,375,063  |       | 1,897,518  |       |
| Sponsor fee                                  |       | —     |       | 16,413     |       |
| Performance fee                              |       | 116,223    |       | 2,882,040  |       |
| Other                                        |       | 373,609    |       | 594,682    |       |
| Total expenses                               |       | 2,864,895  |       | 5,390,653  |       |
|                                         |       |       |       |       |       |
| **NET INVESTMENT INCOME (LOSS)**             |       | (2,866,214 | )          | (3,181,507 | )          |
|                                         |       |       |       |       |       |
| **NET INCOME (LOSS)**                        |       | $          | 104,977    |       | $          | 19,825,115 |   |
|                                         |       |       |       |       |       |
| **NET INCOME (LOSS) PER UNIT:**              |       |       |       |       |       |
|                                         |       |       |       |       |       |
| Weighted average number of Units outstanding |       |       |       |       |       |
| Class A                                      |       | —     |       | 82,672     |       |
| Class C                                      |       | —     |       | 625,692    |       |
| Class I                                      |       | —     |       | 25,432     |       |
| Class DS*                                    |       | 71,427,384 |       | 41,136,698 |       |
| Class DT**                                   |       | 66,387,389 |       | 80,900,526 |       |
|                                         |       |       |       |       |       |
| Net income (loss) per weighted average Unit  |       |       |       |       |       |
| Class A                                      |       | $          | —     |       | $          | (0.2561 | ) |
| Class C                                      |       | $          | —     |       | $          | (0.3565 | ) |
| Class I                                      |       | $          | —     |       | $          | (0.1958 | ) |
| Class DS*                                    |       | $          | 0.0077     |       | $          | 0.0871 |   |
| Class DT**                                   |       | $          | (0.0067    | )          | $          | 0.2038 |   |

 

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*Class DS was previouslyknown as Class D-SM.

**Class DT was previouslyknown as Class D-TF.

 

See notes to financialstatements.

 

4

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ML CHESAPEAKEFUTURESACCESS LLC

(A DelawareLimited Liability Company)

(Under theLiquidation Basis of Accounting)

 

STATEMENTS OFCHANGES IN MEMBERS’ CAPITAL

FOR THE YEARSENDED DECEMBER 31, 2009 AND 2008 (in Units)

 
| ** **                | ** ** | **Members’ Capital  December 31, 2007** | ** ** | **Subscriptions** | ** ** | **Redemptions** | ** ** | **Members’ Capital  December 31, 2008** | ** ** | **Subscriptions** | ** ** | **Redemptions** | ** ** | **Members’ Capital  December 31, 2009** | ** ** |
|---------------------------|------------|-------------------------------------------------------------|------------|-------------------|------------|-----------------|------------|-------------------------------------------------------------|------------|-------------------|------------|-----------------|------------|-------------------------------------------------------------|------------|
| Class  A                  |       | 29,496                                                      |       | 208,355           |       | (237,851        | )          | —                                                      |       | —            |       | —          |       | —                                                      |       |
| Class  C                  |       | 111,004                                                     |       | 2,114,691         |       | (2,225,695      | )          | —                                                      |       | —            |       | —          |       | —                                                      |       |
| Class  I                  |       | 10,000                                                      |       | 40,532            |       | (50,532         | )          | —                                                      |       | —            |       | —          |       | —                                                      |       |
| Class  DS*                |       | 18,218,323                                                  |       | 52,902,224        |       | (10,855,895     | )          | 60,264,652                                                  |       | 20,308,262        |       | (4,251,070      | )          | 76,321,844                                                  |       |
| Class  DT**               |       | 90,542,330                                                  |       | 10,953,954        |       | (27,506,846     | )          | 73,989,438                                                  |       | 493,737           |       | (21,859,138     | )          | 52,624,037                                                  |       |
|                      |       |                                                        |       |              |       |            |       |                                                        |       |              |       |            |       |                                                        |       |
| Total Members’ Units |       | 108,911,153                                                 |       | 66,219,756        |       | (40,876,819     | )          | 134,254,090                                                 |       | 20,801,999        |       | (26,110,208     | )          | 128,945,881                                                 |       |

 

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*Class DS waspreviously known as Class D-SM.

**Class DT waspreviously known as Class D-TF.

 

See notes tofinancial statements.

 

5

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ML CHESAPEAKEFUTURESACCESS LLC

(A DelawareLimited Liability Company)

(Under theLiquidation Basis of Accounting)

 

STATEMENTS OFCHANGES IN MEMBERS’ CAPITAL

FOR THE YEARSENDED DECEMBER 31, 2009 AND 2008

 
| ** **                   | ** ** | **Members’ Capital  December 31, 2007** | ** **  | **Subscriptions** | ** ** | **Redemptions** | ** ** | **Net Income  (Loss)** | ** **  | **Members’ Capital  December 31, 2008** | ** ** | **Subscriptions** | ** ** | **Redemptions** | ** **  | **Net Income  (Loss)** | ** ** | **Members’ Capital  December 31, 2009** | ** ** |
|------------------------------|------------|-------------------------------------------------------------|-------------|-------------------|------------|-----------------|------------|-----------------------------|-------------|-------------------------------------------------------------|------------|-------------------|------------|-----------------|-------------|-----------------------------|------------|-------------------------------------------------------------|------------|
| Class  A                     |       | $                                                           | 35,885.00   |              | $          | 283,510         |       | $                           | (298,224    | )                                                           | $          | (21,171           | )          | $               | —      |                        | $          | —                                                      |       | $ | — |   | $ | — |   | $ | — |   |
| Class  C                     |       | 102,301                                                     |        | 2,160,942         |       | (2,040,155      | )          | (223,088                    | )           | —                                                      |       | —            |       | —          |        | —                      |       | —                                                      |       |
| Class  I                     |       | 9,282                                                       |        | 43,381            |       | (47,685         | )          | (4,978                      | )           | —                                                      |       | —            |       | —          |        | —                      |       | —                                                      |       |
| Class  DS*                   |       | 18,829,228                                                  |        | 60,094,056        |       | (11,729,795     | )          | 3,584,166                   |        | 70,777,655                                                  |       | 22,679,638        |       | (4,907,923      | )           | 548,548                     |       | 89,097,918                                                  |       |
| Class  DT**                  |       | 92,480,677                                                  |        | 11,786,571        |       | (32,497,748     | )          | 16,490,186                  |        | 88,259,686                                                  |       | 564,045           |       | (25,331,523     | )           | (443,571                    | )          | 63,048,637                                                  |       |
| ** **                   | ** ** | ** **                                                  | ** **  | ** **        | ** ** | ** **      | ** ** | ** **                  | ** **  | ** **                                                  | ** ** | ** **        | ** ** | ** **      | ** **  | ** **                  | ** ** | ** **                                                  | ** ** |
| Total Members’ Interest |       | $                                                           | 111,457,373 |              | $          | 74,368,460      |       | $                           | (46,613,607 | )                                                           | $          | 19,825,115        |       | $               | 159,037,341 |                        | $          | 23,243,683                                                  |       | $ | (30,239,446 | ) | $ | 104,977 |   | $ | 152,146,555 |   |

 

----

*Class DS waspreviously known as Class D-SM.

**Class DT waspreviously known as Class D-TF.

 

See notes tofinancial statements.

 

6

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ML CHESAPEAKEFUTURESACCESS LLC

(A DelawareLimited Liability Company)

(Under theLiquidation Basis of Accounting)

 

FINANCIAL DATAHIGHLIGHTS

FOR THE YEAR ENDEDDECEMBER 31, 2009

 

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

 
| ** **                                                | ** ** | **Class DS** | ** ** | **Class DT** | ** ** |
|-----------------------------------------------------------|------------|-------------------|------------|-------------------|------------|
|                                                      |       |              |       |              |       |
| **Per Unit Operating Performance:**                       |       |              |       |              |       |
| ** **                                                |       |              |       |              |       |
| Net  asset value, beginning of year                       |       | $                 | 1.1744     |              | $          | 1.1929 |   |
|                                                      |       |              |       |              |       |
| Net  realized and net change in unrealized trading profit |       | 0.0211            |       | 0.0220            |       |
| Brokerage  commissions                                    |       | (0.0020           | )          | (0.0021           | )          |
| Expenses                                                  |       | (0.0261           | )          | (0.0147           | )          |
|                                                      |       |              |       |              |       |
| Net  asset value, end of year                             |       | $                 | 1.1674     |              | $          | 1.1981 |   |
|                                                      |       |              |       |              |       |
|                                                      |       |              |       |              |       |
| **Total Return: (a)**                                     |       |              |       |              |       |
|                                                      |       |              |       |              |       |
| Total  return before Performance fees                     |       | -0.53             | %          | 0.47              | %          |
| Performance  fees                                         |       | -0.08             | %          | -0.07             | %          |
| Total  return after Performance fees                      |       | -0.61             | %          | 0.40              | %          |
|                                                      |       |              |       |              |       |
| **Ratios to Average Members' Capital:**                   |       |              |       |              |       |
|                                                      |       |              |       |              |       |
| Expenses  (excluding Performance fees)                    |       | 2.24              | %          | 1.24              | %          |
| Performance  fees                                         |       | 0.08              | %          | 0.07              | %          |
| Expenses  (including Performance fees)                    |       | 2.32              | %          | 1.31              | %          |
|                                                      |       |              |       |              |       |
| Net  investment income (loss)                             |       | -2.32             | %          | -1.31             | %          |

 

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(a) The total return calculations are based on compounded monthlyreturns and is calculated for each class taken as a whole.

 

An individual members' return may vary from these returns based ontiming of capital transactions.

 

See notes to financial statements.

 

 

7

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ML CHESAPEAKEFUTURESACCESS LLC

(A DelawareLimited Liability Company)

(Under theLiquidation Basis of Accounting)

 

FINANCIAL DATAHIGHLIGHTS

FOR THE YEAR ENDEDDECEMBER 31, 2008

 

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

 
| ** **                                                | ** ** | **Class A** | ** ** | **Class C** | ** ** | **Class I** | ** ** | **Class DS** | ** ** | **Class DT** | ** ** |
|-----------------------------------------------------------|------------|------------------|------------|------------------|------------|------------------|------------|-------------------|------------|-------------------|------------|
|                                                      |       |             |       |             |       |             |       |              |       |              |       |
| **Per Unit Operating Performance:**                       |       |             |       |             |       |             |       |              |       |              |       |
|                                                      |       |             |       |             |       |             |       |              |       |              |       |
| Net  asset value, beginning of year                       |       | $                | 1.2166     |             | $          | 0.9216           |       | $                 | 0.9282     |              | $          | 1.0335 |   | $ | 1.0214 |   |
|                                                      |       |             |       |             |       |             |       |              |       |              |       |
| Net  realized and net change in unrealized trading profit |       | 0.0685           |       | 0.0542           |       | 0.0531           |       | 0.1891            |       | 0.1870            |       |
| Brokerage  commissions                                    |       | (0.0023          | )          | (0.0017          | )          | (0.0018          | )          | (0.0021           | )          | (0.0021           | )          |
| Interest  income                                          |       | 0.0218           |       | 0.0165           |       | 0.0167           |       | 0.0189            |       | 0.0189            |       |
| Expenses                                                  |       | (0.0761          | )          | (0.0746          | )          | (0.0527          | )          | (0.0650           | )          | (0.0323           | )          |
|                                                      |       |             |       |             |       |             |       |              |       |              |       |
| Net  asset value, before liquidation                      |       | 1.2285           |       | 0.9160           |       | 0.9435           |       | 1.1744            |       | 1.1929            |       |
| Less  liquidating distribution                            |       | (1.2285          | )          | (0.9160          | )          | 0.9435           |       | —            |       | —            |       |
|                                                      |       |             |       |             |       |             |       |              |       |              |       |
| Net  asset value, end of year                             |       | $                | —     |             | $          | —           |       | $                 | —     |              | $          | 1.1744 |   | $ | 1.1929 |   |
|                                                      |       |             |       |             |       |             |       |              |       |              |       |
|                                                      |       |             |       |             |       |             |       |              |       |              |       |
| **Total Return: (a)**                                     |       |             |       |             |       |             |       |              |       |              |       |
|                                                      |       |             |       |             |       |             |       |              |       |              |       |
| Total  return before Performance fees                     |       | 2.95             | %          | 2.16             | %          | 3.43             | %          | 16.61             | %          | 17.72             | %          |
| Performance  fees                                         |       | -3.14            | %          | -3.86            | %          | -2.81            | %          | -3.93             | %          | -2.24             | %          |
| Total  return after Performance fees                      |       | 0.98             | %          | -0.61            | %          | 1.65             | %          | 13.62             | %          | 16.79             | %          |
|                                                      |       |             |       |             |       |             |       |              |       |              |       |
| **Ratios to Average Members' Capital:**                   |       |             |       |             |       |             |       |              |       |              |       |
|                                                      |       |             |       |             |       |             |       |              |       |              |       |
| Expenses  (excluding Performance fees)                    |       | 3.75             | %          | 4.76             | %          | 3.36             | %          | 2.44              | %          | 1.42              | %          |
| Performance  fees                                         |       | 2.54             | %          | 3.31             | %          | 2.26             | %          | 3.28              | %          | 1.51              | %          |
| Expenses  (including Performance fees)                    |       | 6.29             | %          | 8.07             | %          | 5.62             | %          | 5.72              | %          | 2.93              | %          |
|                                                      |       |             |       |             |       |             |       |              |       |              |       |
| Net  investment income (loss)                             |       | -4.82            | %          | -6.76            | %          | -4.10            | %          | -4.05             | %          | -1.26             | %          |

 

----

(a) The total return calculations are based oncompounded monthly returns and is calculated for each class taken as a whole.

 

An individualmembers' return may vary from these returns based on timing of capitaltransactions.

 

See notes to financialstatements.

 

8

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ML CHESAPEAKEFUTURESACCESS LLC

(A DelawareLimited Liability Company)

(Under theLiquidation Basis of Accounting)

 

NOTES TO FINANCIALSTATEMENTS

 

1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Organization

 

MLChesapeake FuturesAccess LLC (the “Fund”), a Merrill Lynch FuturesAccessProgram (the “Program”) fund, was organized under the Delaware LimitedLiability Company Act on March 8, 2007 and commenced trading activities onApril 2, 2007. The Fund engages in the speculative trading of futures,options on futures and forward contracts on a wide range of commodities.Chesapeake Capital Corporation (“Chesapeake”) is the trading advisor of theFund.

 

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

 

TheProgram is a group of commodity pools sponsored by MLAI (each pool is a “ProgramFund” or collectively, “Program Funds”) each of which places substantially allof its assets in a managed futures or forward trading account managed by asingle or multiple commodity trading advisors. Each Program Fund is generallysimilar in terms of fees, Classes of Units and redemption rights.  Each of the Program Funds implements adifferent trading strategy.

 

TheFund offers five Classes of Units:  Class A,Class C, Class DS, Class DT and Class I.  Each Class of Units except Class DToffered at $1.0850, was offered at $1.00 per Unit during the initial offeringperiod and subsequently is offered at Net Asset Value per Unit (see Note6).  The five Classes of Units aresubject to different Sponsor fees.

 

On December 22,2009, the Sponsor resolved to redeem all its investment in the Fund, cease theFund’s operations and liquidate and distribute the Fund’s remaining Members’Capital to its Members.  Due to theSponsor’s decision to liquidate the Fund, the Fund changed its basis ofaccounting, as of December 22, 2009 from the going concern to theliquidation basis of accounting which requires that all assets and liabilitiesbe reported at net realizable value or expected payment and that all costsassociated with the liquidation of the Fund be accrued for and included on theStatement of Operations as of the date of liqudation.

 

Interests in the Fund are not insured or otherwise protected by theFederal Deposit Insurance Corporation or any other government authority.  Interests are not deposits or otherobligations of, and are not guaranteed by, Bank of America Corporation or anyof its affiliates or by any bank. Interests are subject to investment risks, including the possible lossof the full amount invested.

 

9

----

 

Estimates

 

The preparation offinancial statements is in conformity with GAAP on a liquidation basis.  Liquidation basis financial statementsrequire management to make estimates and assumptions that may have effected thereported amounts of assets and liabilities and disclosure of contingent assetsand liabilities at the date of the financial statements, as well as thereported amounts of revenues and expenses during the reporting period.  Actual results could have differed from thoseestimates. Certain prior year items have beenreclassified to conform to the current year presentation.

 

Statement of Cash Flows

 

The Fund is not required to provide a Statement of Cash Flows.

 

RevenueRecognition

 

Commodity futures,options on futures and forward contract transactions are recorded on tradedate. Open contracts are reflected in Net unrealized profit (loss) on opencontracts in the Statements of Financial Condition as the difference betweenthe original contract value and the market value (for those commodity interestsfor which market quotations are readily available) or at fair value.  The change in unrealized profit (loss) onopen contracts from one period to the next is reflected in Change in unrealizedunder Trading profit (loss) in the Statements of Operations.

 

Trading profit(loss) is reduced for brokerage commissions costs.

 

ForeignCurrency Transactions

 

TheFund’s functional currency is the U.S. dollar; however, it transacts businessin U.S. dollars and in currencies other than the U.S. dollar.  Assets and liabilities denominated incurrencies other than the U.S. dollar are translated into U.S. dollars at therates in effect at the date of the Statements of Financial Condition.  Income and expense items denominated incurrencies other than the U.S. dollar are translated into U.S. dollars at therates in effect during the year.  Profitsand losses resulting from the translation to U.S. dollars are included in TradingProfit(Loss) in the Statements of Operations.

 

Cash and Cash Equivalents

 

The Fund considered all highly liquid investments, with a maturity ofthree months or less when acquired, to be cash equivalents. Cash equivalents were recorded at amortized cost whichapproximated fair value (Level II see note 3) Cash was held at anationally recognized financial institution.

 

Cashat Broker / Equity in Commodity Futures Trading Accounts

 

Aportion of the assets maintained at MLPF&S is restricted cash required tomeet maintenance margin requirements.

 

OperatingExpenses and Offering Costs

 

The Fund pays for allroutine operating costs (including ongoing offering costs, administration,custody, transfer, exchange and redemption processing, legal, regulatoryfiling, tax, audit, escrow, accounting and printing fees and expenses) incurredby the Fund.  The Fund also pays anyextraordinary expenses.

 

10

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Income Taxes

 

No provision forincome taxes has been made in the accompanying financial statements as eachMember is individually responsible for reporting income or loss based on suchMember’s share of the Fund’s income and expenses as reported for income taxpurposes.

 

The Fund follows the ASC guidance onaccounting for uncertainty in income taxes. This guidance provides how uncertain tax positions should be recognized,measured, presented and disclosed in the financial statements.  This guidance also requires the evaluation oftax positions taken or expected to be taken in the course of preparing the Fund’sfinancial statements to determine whether the tax positions are “more-likely-than-not”to be sustained by the applicable tax authority.  Tax positions with respect to tax at the Fundlevel not deemed to meet the “more-likely-than-not” threshold would be recordedas a tax benefit or expense in the current year.  MLAI has analyzed the Fund’s tax positionsand has concluded that no provision for income tax is required in the Fund’sfinancial statements.  The following arethe major tax jurisdictions for the Fund and the earliest tax year subject toexamination: United States – 2006.

 

Distributions

 

The Members areentitled to receive, equally per Unit, any distributions which may be made bythe Fund.  No such distributions havebeen declared for the year ended December 31, 2009 and 2008.

 

Subscriptions

 

Units are offered as ofthe close of business at the end of each month. Units are purchased as of the first business day of any month at NetAsset Value (see Note 6), but the subscription request must be submitted atleast three calendar days before the end of the preceding month.  Subscriptions submitted less than three daysbefore the end of a month will be applied to Units subscriptions as of thebeginning of the second month after receipt, unless revoked by MLAI.  Due to the liquidation of the Fund, no futuresubscriptions are being accepted and redemption of all remaining investors willoccur on or prior to January 31, 2010.

 

11

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Redemptions andExchanges

 

A Member may redeem or exchange some or all of suchMember’s Units at Net Asset Value (see Note 6) as of the close of business, onthe last business day of any month, upon ten calendar days’ notice (“noticeperiod”).

 

Aninvestor in the Fund can exchange these Units for Units of the same Class inother Program Funds as of the beginning of each calendar month upon at leastten days prior notice.  The minimumexchange amount is $10,000.

 

Redemptionrequests are accepted within the notice period. The Fund does not accept any redemption requests after the noticeperiod.  All redemption requests receivedafter the notice period will be processed for the following month.

 

Dissolution of theFund

 

TheFund may terminate if certain circumstances occur as set forth in the privateplacement memorandum, which include but are not limited to the following:

 

(a)       Bankruptcy,dissolution, withdrawal or other termination of the trading advisor of thisFund.

(b)       Anyevent which would make unlawful the continued existence of this Fund.

(c)       Determinationby MLAI to liquidate or withdraw from the Fund.

 

The adoption of the liquidation of the Fund was basedon item (c) above.

 

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2.               CONDENSED SCHEDULE OF INVESTMENTS

 

The Fund’s investments, defined as Net unrealizedprofit on open contracts in the Statements of Financial Condition, as of December 31,2009 and 2008 are as follows:

 

2009

 
| ** **                  | ** ** | **Long Positions** | ** ** | **Short Positions** | ** ** | **Net Unrealized**        | ** ** | ** **         | ** ** | ** **             | ** ** |
|-----------------------------|------------|-------------------------|------------|--------------------------|------------|--------------------------------|------------|--------------------|------------|------------------------|------------|
| **Commodity Industry** | ** ** | **Number of**      | ** ** | **Unrealized**           | ** ** | **Percent of**            | ** ** | **Number of** | ** ** | **Unrealized**         | ** ** | **Percent of** | ** ** | **Profit (Loss)** | ** ** | **Percent of** | ** ** | ** ** | ** ** |
| **Sector**                  | ** ** | **Contracts**           | ** ** | **Profit (Loss)**   | ** ** | **Members’ Capital** | ** ** | **Contracts**      | ** ** | **Profit (Loss)** | ** ** | **Members’ Capital** | ** ** | **on Open Positions** | ** ** | **Members’ Capital** | ** ** | **Maturity Dates** | ** ** |
|                        |       |                    |       |                     |       |                           |       |               |       |                   |       |   |   |   |   |   |   |   |   |
| Agriculture                 |       | 2,163                   |       | $                        | 5,776,816  |                           | 3.80       | %                  | (1,660     | )                      | $          | 281,540 |   | 0.19 | % | $ | 6,058,356 |   | 3.99 | % | February 10 - March 10 |   |
| Currencies                  |       | 859                     |       | (1,372,445               | )          | -0.90                          | %          | (489               | )          | (124,945               | )          | -0.08 | % | (1,497,390 | ) | -0.98 | % | March 10 |   |
| Energy                      |       | 489                     |       | 2,560,204                |       | 1.68                           | %          | —             |       | —                 |       | 0.00 | % | 2,560,204 |   | 1.68 | % | March 10 |   |
| Interest rates              |       | 938                     |       | (1,621,856               | )          | -1.06                          | %          | (678               | )          | (96,778                | )          | -0.06 | % | (1,718,634 | ) | -1.12 | % | March 10 - December 10 |   |
| Metals                      |       | 864                     |       | 1,039,390                |       | 0.68                           | %          | (49                | )          | (309,831               | )          | -0.20 | % | 729,559 |   | 0.48 | % | February 10 |   |
| Stock indices               |       | 22,062                  |       | 1,023,225                |       | 0.67                           | %          | —             |       | —                 |       | 0.00 | % | 1,023,225 |   | 0.67 | % | March 10 |   |
|                        |       |                    |       |                     |       |                           |       |               |       |                   |       |   |   |   |   |   |   |   |   |
| Total                       |       |                    |       | $                        | 7,405,334  |                           | 4.87       | %                  |       |                   | $          | (250,014 | ) | -0.15 | % | $ | 7,155,320 |   | 4.72 | % |   |   |

 

2008

 
| ** **                  | ** ** | **Long Positions** | ** ** | **Short Positions** | ** ** | **Net Unrealized**        | ** ** | ** **         | ** ** | ** **             | ** ** |
|-----------------------------|------------|-------------------------|------------|--------------------------|------------|--------------------------------|------------|--------------------|------------|------------------------|------------|
| **Commodity Industry** | ** ** | **Number of**      | ** ** | **Unrealized**           | ** ** | **Percent of**            | ** ** | **Number of** | ** ** | **Unrealized**         | ** ** | **Percent of** | ** ** | **Profit (Loss)** | ** ** | **Percent of** | ** ** | ** ** | ** ** |
| **Sector**                  | ** ** | **Contracts**           | ** ** | **Profit (Loss)**   | ** ** | **Members’ Capital** | ** ** | **Contracts**      | ** ** | **Profit (Loss)** | ** ** | **Members’ Capital** | ** ** | **on Open Positions** | ** ** | **Members’ Capital** | ** ** | **Maturity Dates** | ** ** |
|                        |       |                    |       |                     |       |                           |       |               |       |                   |       |   |   |   |   |   |   |   |   |
| Agriculture                 |       | 172                     |       | $                        | 405,059    |                           | 0.25       | %                  | (981       | )                      | $          | 335,272 |   | 0.22 | % | $ | 740,331 |   | 0.47 | % | February 09 - March 09 |   |
| Currencies                  |       | 378                     |       | 1,216,706                |       | 0.77                           | %          | (455               | )          | (920,050               | )          | -0.58 | % | 296,656 |   | 0.19 | % | March 09 |   |
| Interest rates              |       | 1,594                   |       | 4,676,373                |       | 2.94                           | %          | (24                | )          | (311,813               | )          | -0.20 | % | 4,364,560 |   | 2.74 | % | March 09 - December 09 |   |
| Metals                      |       | 1                       |       | (9,981                   | )          | -0.01                          | %          | (127               | )          | 1,252,263              |       | 0.79 | % | 1,242,282 |   | 0.78 | % | February 09 |   |
|                        |       |                    |       |                     |       |                           |       |               |       |                   |       |   |   |   |   |   |   |   |   |
| Total                       |       |                    |       | $                        | 6,288,157  |                           | 3.95       | %                  |       |                   | $          | 355,672 |   | 0.23 | % | $ | 6,643,829 |   | 4.18 | % |   |   |

 

No individual contract’s unrealized profit or losscomprised greater than 5% of the Members’ Capital as of December 31, 2009and 2008.

 

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3.                     FAIR VALUE OF INVESTMENTS

 

The FASB’s ASC’s provide authoritative guidance onfair value measurement. This guidance defines fair value, establishes aframework for measuring fair value and expands disclosures about fair valuemeasurements.

 

Fair value of aninvestment is the amount that would be received to sell the investment in anorderly transaction between market participants at the measurement date (i.e.the exit price). All investments (includingderivative financial instruments and derivative commodity instruments) are heldfor trading purposes.  The investmentsare recorded on trade date and open contracts are recorded at fair value(described below) at the measurement date. Investments denominated in foreigncurrencies are translated into U.S. dollars at the exchange rates prevailing atthe measurement date.  Gains or lossesare realized when contracts are liquidated. Unrealized gains or losses on open contracts are included in Equity incommodity futures trading account.  Anychange in net unrealized gain or loss from the preceding year is reported inthe Statements of Operations.

 

The fair value measurement guidance established ahierarchal disclosure framework which prioritizes and ranks the level of marketprice observability used in measuring investments at fair value. Market priceobservability is impacted by a number of factors, including the type ofinvestment and the characteristics specific to the investment. Investments withreadily available active quoted prices or for which fair value can be measuredfrom actively quoted prices generally will have a higher degree of market priceobservability and a lesser degree of judgment used in measuring fair value.

 

Investments measured and reported at fair value areclassified and disclosed in one of the following categories:

 

Level I — Quoted prices are available in activemarkets for identical investments as of the reporting date. The type ofinvestments included in Level I are publicly traded investments. As required bythe fair market value measurement guidance, the Fund does not adjust the quotedprice for these investments even in situations where the Fund holds a largeposition and a sale could reasonably impact the quoted price.

 

Level II — Pricing inputs are other than quoted pricesin active markets, which are either directly or indirectly observable as of thereporting date, and fair value is determined through the use of generallyaccepted and understood models or other valuation methodologies. Investmentswhich are generally included in this category are investments valued usingmarket data.

 

Level III — Pricing inputs are unobservable andinclude situations where there is little, if any, market activity for theinvestment. Fair value for these investments is determined using valuation methodologiesthat consider a range of factors, including but not limited to the nature ofthe investment, local market conditions, trading values on public exchanges forcomparable securities, current and projected operating performance andfinancing transactions subsequent to the acquisition of the investment. Theinputs into the determination of fair value require significant managementjudgment. Due to the inherent uncertainty of these estimates, these values maydiffer materially from the values that would have been used had a ready marketfor these investments existed.

 

In certain cases, theinputs used to measure fair value may fall into different levels of the fairvalue hierarchy. In such cases, an investment’s level within the fair valuehierarchy is based on the lowest level of input that is significant to the FairValue Measurement. MLAI’s assessment of the significance of a particular inputto the Fair Value Measurement in its entirety requires judgment, and considersfactors specific to the investment.

 

Following is a description of the valuation methodologies used forinvestments, as well as the general classification of such investments pursuantto the valuation hierarchy.

 

Exchange traded investments are fair valued by the Fund by using thereported closing price on the primary exchange where it trades suchinvestments.  These closing prices areobserved through the clearing broker and 

 

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third party pricing services. For non-exchange traded investments,quoted values and other data provided by nationally recognized independentpricing sources are used as inputs into its process for determining fairvalues.

 

The independent pricing sources obtain market quotations and actualtransaction prices for securities that have quoted prices in active markets.Each source has its own proprietary method for determining the fair value ofsecurities that are not actively traded. In general, these methods involve theuse of “matrix pricing” in which the independent pricing source uses observablemarket inputs including, but not limited to, investment yields, credit risksand spreads, benchmarking of like securities, broker-dealer quotes, reportedtrades and sector groupings to determine a reasonable fair market value.

 

The Fund has determined that Level I securities would include all ofits futures and options contracts where it believes that quoted prices areavailable in an active market.

 

Where the Fund believes that quoted market prices are not available orthat the market is not active, fair values are estimated by using quoted pricesof securities with similar characteristics, pricing models or matrix pricingand these are generally classified as Level II securities. The Fund determinedthat Level II securities would include its forward contracts.

 

The Fund’s net unrealized profit (loss) on openforward and futures contracts as of December 31, 2009 and 2008 are asfollows:

 
| **December 31, 2009** | ** ** | **Unrealized Long Positions** | ** ** | **Unrealized Short Positions** | ** ** | **Total** | ** ** |
|---------------------------------|------------|-----------------------------------------|------------|------------------------------------------|------------|-----------|------------|
| Futures                         |       | $                                       | 7,405,334  |                                     | $          | (250,014  | )          | $ | 7,155,320 |   |
| Forwards                        |       | —                                  |       | —                                   |       | —    |       |
| Total                           |       | $                                       | 7,405,334  |                                     | $          | (250,014  | )          | $ | 7,155,320 |   |

 
| **December 31, 2008** | ** ** | **Unrealized Long Positions** | ** ** | **Unrealized Short Positions** | ** ** | **Total** | ** ** |
|---------------------------------|------------|-----------------------------------------|------------|------------------------------------------|------------|-----------|------------|
| Futures                         |       | $                                       | 6,288,157  |                                     | $          | 355,672   |       | $ | 6,643,829 |   |
| Forwards                        |       |                                    |       |                                     |       | —    |       |
| Total                           |       | $                                       | 6,288,157  |                                     | $          | 355,672   |       | $ | 6,643,829 |   |

 

The Fund’s volume oftrading forward and futures as of the end of this year is representative of theactivity throughout the year.

 

The following tablesummarizes the valuation of the Fund’s investment by the above fair valuehierarchy levels as of December 31, 2009 and 2008.

 
| **Net unrealized  profit (loss)  on open contracts** | ** ** | **Total** | ** ** | **Level I** | ** ** | **Level II** | ** ** | **Level III** | ** ** |
|--------------------------------------------------------------------------|------------|-----------|------------|------------------|------------|-------------------|------------|--------------------|------------|
|                                                                     |       |      |       |             |       |              |       |               |       |
| December 31, 2009                                                   |       | $         | 7,155,320  |             | $          | 4,425,581         |       | $                  | 2,729,739  |   | $ | — |   |
| December 31, 2008                                                   |       | $         | 6,643,829  |             | $          | 6,643,829         |       | $                  | —     |   | $ | — |   |

 

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Effective January 1, 2009, the Fund adopted the FASB’s guidance ondisclosures about derivative instruments and hedging activities which requiresqualitative disclosures about objectives and strategies for using derivatives,quantitative disclosures about fair value amounts of and gains and losses onderivative instruments, and disclosures about credit-risk-related contingentfeatures in derivative agreements. This guidance only expands the disclosurerequirements for derivative instruments and related hedging activities and hasno impact on Statements of Financial Condition or Statements of Operations orStatements of Changes in Members’ Capital.

 

The Fund engages in the speculative trading of futures, options onfutures and forward contracts on a wide range of commodities. Such contractsmeet the definition of a derivative as noted in the guidance for derivatives and hedging. The fairvalue amounts of and the gains and losses on derivative instruments isdisclosed in the Statements of Financial Condition and Statements ofOperations, respectively. There are no credit related contingent featuresembedded in these derivative contracts.

 

The followingtable indicates the trading gains and losses, by commodity industry sector, onderivative instruments for the year ended December 31, 2009:

 
| **Commodity Industry** | ** ** | **Gain (loss)**  | ** ** |
|-----------------------------|------------|-----------------------|------------|
| **Sector**                  | ** ** | **from trading** | ** ** |
|                        |       |                  |       |
| Agriculture                 |       | $                     | 8,801,519  |   |
| Currencies                  |       | (7,505,048            | )          |
| Energy                      |       | (997,292              | )          |
| Interest rates              |       | (5,788,269            | )          |
| Metals                      |       | 5,961,389             |       |
| Stock indices               |       | 2,782,132             |       |
|                        |       |                  |       |
| Total                       |       | $                     | 3,254,431  |   |

 

The Fund is subject to therisk of insolvency of a counterparty, an exchange, a clearinghouse orMLPF&S.  Fund assets could be lost orimpounded during lengthy bankruptcy proceedings.  Were a substantial portion of the Fund’scapital tied up in a bankruptcy or other similar types of proceedings, MLAImight suspend or limit trading, perhaps causing the Fund to miss significantprofit opportunities.  There areincreased risks in dealing with unregulated trading counterparties includingthe risk that assets may not benefit from the protection afforded to “customerfunds” deposited with regulated dealers and brokers.

 

4.                    RELATED PARTY TRANSACTIONS

 

The Fund’s U.S. dollarassets are maintained at MLPF&S. On assets held in U.S. dollars, MerrillLynch credits the Fund with interest at the most favorable rate payable byMLPF&S to accounts of Merrill Lynch affiliates but not less than 75% ofsuch prevailing rate.  The Fund iscredited with interest on any of its assets and net gains actually held byMLPF&S non-U.S. dollar currencies at a prevailing local rate received byMerrill Lynch.  Merrill Lynch may derivecertain economic benefit, in excess of the interest which Merrill Lynch pays tothe Fund, from possession of such assets.

 

Merrill Lynchcharges the Fund at prevailing local interest rates for financing realized andunrealized losses on the Fund’s non-U.S. dollar-denominated positions. Suchamounts are netted against interest income due to the insignificance of suchamounts.

 

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The Fund charges Sponsorfees on the month-end net assets after all other charges at annual rates equalto 1.50% for Class A, 2.50% for Class C, and 1.10% on Class I.  Class DS and DT are not charged aSponsor Fee.   Sponsor fees are paid toMLAI.

 

The Fund pays brokeragecommissions on actual cost per round-turn. The average round-turn commissionrate charged to the Fund for the years ended December 31, 2009 and 2008was approximately $10.06 and $7.67, respectively (not including, in calculatinground-turn, forward contracts on a futures-equivalent basis).

 

Brokerage Commissions, Interest and Sponsor fees asseen on the Statements of Operations are all received from or paid to relatedparties.

 

The Fund holds cash at an unaffiliated bank which invests such cash ina money market fund which is managed by BlackRock, a related party to MLAI. The Cash and cash equivalents as seen on the Statements of FinancialCondition is the amount held by the related party.

 

5.                    ADVISORY AGREEMENT

 

The Fund and Chesapeake have entered into an AdvisoryAgreement. This agreement shall continue in effect until December 31,2016.  Thereafter, this agreement shall beautomatically renewed for successive three-year periods, on the same terms,unless terminated at any time by either Chesapeake or the Fund upon 90 days’written notice to the other party. Chesapeake determines the commodity futures, options on futures andforward contract trades to be made on behalf of their respective Fund accounts,subject to certain trading policies and to certain rights reserved by MLAI.

 

The Fund charges annual management fees on the Fund’saverage month-end net assets allocated to them after reduction for thebrokerage commissions accrued with respect to such assets and are payable toChesapeake on a monthly basis. Management Fees are 2.0% for all classes exceptfor Class DT which charges a 1.0% Fee. Chesapeake pays MLAI 50% of the management fees on all classes except Class DT,in return for sponsoring and providing ongoing administration and operationalsupport to the Fund.

 

Performance fees are charged by the Fund on any NewTrading Profit, as defined in the private placement memorandum, and are payableto Chesapeake as of either the end of each calendar year or upon any interimperiod for which there are net redemption of Units, to the extent of theapplicable percentage of any New Trading Profit attributable to such Units. TheFund charges a 20% performance fee for all classes.

 

6.                    NET ASSET VALUE PER UNIT

 

The Net Asset Value per Unit as of December 31,2009 and 2008 are:

 
| December 31,2009                            |
|--------------------------------------------------|
| ** **                                       | ** ** |
| **Net Asset Value per Unit (Liquidation Basis)** | ** ** |
| Class DS                                    |   | $ | 1.1674 |   |
| Class DT                                    |   | 1.1981 |   |
|                                                  |  |  |  |  |

 
| December 31,2008        |
|------------------------------|
| ** **                   |   |
| **Net Asset Value per Unit** |   |
| Class DS                |   | 1.1744 |   |
| Class DT                |   | 1.1929 |   |

 

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7.                    WEIGHTED AVERAGE UNITS

 

The weighted averagenumber of Units outstanding for each Class is computed for purposes ofcalculating net income per weighted average Unit.  The weighted average number of Unitsoutstanding for each Class for the years ended December 31, 2009 and2008 equals the Units outstanding as of such date, adjusted proportionately forUnits sold or redeemed based on the respective length of time each wasoutstanding during the year.

 

8.                    RECENT ACCOUNTING PRONOUNCEMENTS

 

In July 2009, the Financial Accounting StandardsBoard (“FASB”) issued Accounting Standards Codification (“ASC”) 105, *Generally Accepted Accounting Principles,*(ASC 105), whichapproved the FASB Accounting Standards Codification (the “Codification”) as thesingle source of authoritative nongovernmental GAAP. The Codification iseffective for interim or annual periods ending after September 15, 2009.All existing accounting standards have been superseded and all other accountingliterature not included in the Codification are considered nonauthoritative.ASC 105 was not intended to change the accounting literature and did not impactthe Fund’s financial condition or results of operations.  All accounting references within this reportare in accordance with the new Codification.

 

In April 2009, theFASB issued guidance on determining**fair**value**when**the**volume**and**level**of activity for the asset or liabilityhave significantly decreased and identifying transactions that are not orderly.This guidance**providesadditional guidance for estimating fair value in accordance with FASB guidanceon fair value measurements,when the volume and level of activity for the asset or liability havesignificantly decreased. This guidance also identifies circumstances thatindicate a transaction is not orderly. The guidance emphasizes that even ifthere has been a significant decrease in the volume and level of activity forthe asset or liability and regardless of the valuation technique(s) used,the objective of a fair value measurement remains the same. Fair value is theprice that would be received to sell an asset or paid to transfer a liabilityin an orderly transaction (that is, not a forced liquidation or distressedsale) between market participants at the measurement date under current marketconditions. The guidance also contains enhanced disclosure requirements wherebyfair value disclosures as well as certain disaggregated information will bedisclosed. The adoption of this guidance had no impact on the financialstatements.

 

InSeptember 2009, the FASB issued *Accounting StandardsUpdate No. 2009-12, Investmentsin Certain Entities That Calculate Net Asset Value per Share (or ItsEquivalent) (the “ASU 2009-12”),*which is effective for interim or annual financial periods endingafter December 15, 2009.  The adoption of this guidance had noimpact on the financial statements.

 

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

 

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9.                    MARKET AND CREDIT RISK

 

The nature of this Fundhas certain risks, which cannot all be presented on the financialstatements.  The following summarizessome of those risks.

 

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### MarketRisk

###  

Derivative instrumentsinvolve varying degrees of market risk. Changes in the level or volatility of interest rates, foreign currencyexchange rates or the market values of the financial instruments or commoditiesunderlying such derivative instruments frequently result in changes in the Fund’snet unrealized profit (loss) on open contracts on such derivative instrumentsas reflected in the Statements of Financial Condition.  The Fund’s exposure to market risk isinfluenced by a number of factors, including the relationships among thederivative instruments held by the Fund as well as the volatility and liquidityof the markets in which the derivative instruments are traded.  Investments in foreign markets may alsoentail legal and political risks.

 

MLAI hasprocedures in place intended to control market risk exposure, although therecan be no assurance that they will, in fact, succeed in doing so.  These procedures focus primarily onmonitoring the trading of Chesapeake, calculating the Net Asset Value of theFund as of the close of business on each day and reviewing outstandingpositions for over-concentrations.  WhileMLAI does not intervene in the markets to hedge or diversify the Fund’s marketexposure, MLAI may urge Chesapeake to reallocate positions in an attempt toavoid over-concentrations.  However, suchinterventions are expected to be unusual. It is expected that MLAI’s basic risk control procedures will consist ofthe ongoing process of advisor monitoring, with the market risk controls beingapplied by Chesapeake.

 

Credit Risk

 

The risksassociated with exchange-traded contracts are typically perceived to be lessthan those associated with over-the-counter (non-exchange-traded) transactions,because exchanges typically provide clearinghouse arrangements in which thecollective credit (in some cases limited in amount, in some cases not) of themembers of the exchange is pledged to support the financial integrity of theexchange.  In over-the-countertransactions, on the other hand, traders must rely solely on the credit oftheir respective individual counterparties. Margins, which may be subject to loss in the event of a default, aregenerally required in exchange trading, and counterparties may also requiremargin in the over-the-counter markets.

 

The credit riskassociated with these instruments from counterparty nonperformance is the Netunrealized profit on open contracts, if any, included in the Statements ofFinancial Condition. The Fund attempts to mitigate this risk by dealingexclusively with Merrill Lynch entities as clearing brokers.

 

The Fund, in itsnormal course of business, enters into various contracts, with MLPF&Sacting as its commodity broker.  Pursuantto the brokerage arrangement with MLPF&S (which includes a nettingarrangement), to the extent that such trading results in receivables from andpayables to MLPF&S, these receivables and payables are offset and reportedas a net receivable or payable and included in Equity in commodity futurestrading accounts in the Statements of Financial Condition.

 

Indemnifications

 

In the normal course of business, the Fund hasentered, or may in the future enter into agreements that obligate` the Fund toindemnify third parties, including affiliates of the Fund, for breach ofcertain representations and warranties made by the Fund. No claims haveactually been made with respect to such indemnities and any quantificationwould involve hypothetical claims that have not been made. Based on the Fund’sexperience, MLAI expected the risk of loss to be remote and, therefore, noprovision has been recorded.

 

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10.              SUBSEQUENT EVENTS

 

On December 22, 2009,the Sponsor resolved to redeem all its investment in the Fund, cease the Fund’soperations and liquidate and distribute the Fund’s remaining Members’ Capitalto its Members as of January 31, 2010.

 

Management has evaluated the impact of subsequentevents on the Fund through March 23, 2010, the date the financialstatements were available to be issued, and has determined that there were noother subsequent events that require adjustments to, or disclosure in, thefinancial statements.

 

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*     *    *     *     *    *     *     *    *     *      *

 

To the best of the knowledge and belief of the

undersigned, the information contained in this

report is accurate and complete.

 
|   |                                           |   |
|--------|-------------------------------------------|--------|
|   | Barbra E. Kocsis                          |   |
|   | Chief Financial Officer                   |   |
|   | Merrill Lynch Alternative Investments LLC |   |
|   | Sponsor of                                |   |
|   | ML Chesapeake  FuturesAccess LLC          |   |

 

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