**UNITED STATES SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

** **

**FORM 10-Q**

** **

**(Mark One)**

** **
| **x** | **QUARTERLY REPORT PURSUANT TO   SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|-------|---------------------------------------------------------------------------------------------------------|

** **

**For the quarterly period ended March 31, 2011**

 

**OR**

** **
| **o** | **TRANSITION REPORT PURSUANT TO   SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|-------|----------------------------------------------------------------------------------------------------------|

** **

**For the transition period from                  to              **

** **

**Commission File Number 0-52505**

 

**ML SYSTEMATIC MOMENTUM FUTURESACCESS LLC**

(Exact Name of Registrant as

specified in its charter)

 

| **Delaware**                    | ** ** | **30-0408280**                    |
|---------------------------------|------------|-----------------------------------|
| (State or other jurisdiction of |       | (IRS Employer Identification No.) |
| incorporation or organization)  |       |                              |

 

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

**Four World Financial Center, 10****th**** 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)

 

Indicate by check mark whether 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 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):

 

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

 

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

 

As of March 31, 2011, 840,650,693 units of limited liability company interest were outstanding.

 

 

 

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**ML SYSTEMATIC MOMENTUM FUTURESACCESS LLC**

 

QUARTERLY REPORT FOR MARCH 31, 2011 ON FORM 10-Q

 

Table of Contents

 
| ** **   | ** **                                                                                   | **PAGE** |
|--------------|----------------------------------------------------------------------------------------------|----------|
| PART I  |                                                                                         |
|         |                                                                                         |     |
| Item   1.    | Financial   Statements                                                                       | 1        |
|         |                                                                                         |     |
| Item   2.    | Management’s   Discussion and Analysis of Financial Condition and Results of Operations | 14       |
|         |                                                                                         |     |
| Item   3.    | Quantitative   and Qualitative Disclosures About Market Risk                                 | 19       |
|         |                                                                                         |     |
| Item   4.    | Controls   and Procedures                                                                    | 28       |
|         |                                                                                         |     |
| PART II |                                                                                         |
|         |                                                                                         |     |
| Item   1.    | Legal   Proceedings                                                                          | 29       |
|         |                                                                                         |     |
| Item   1A.   | Risk   Factors                                                                               | 29       |
|         |                                                                                         |     |
| Item   2.    | Unregistered   Sales of Equity Securities and Use of Proceeds                                | 29       |
|         |                                                                                         |     |
| Item   3.    | Defaults   Upon Senior Securities                                                            | 30       |
|         |                                                                                         |     |
| Item   4.    | (Removed   and Reserved)                                                                     | 30       |
|         |                                                                                         |     |
| Item   5.    | Other   Information                                                                          | 30       |
|         |                                                                                         |     |
| Item   6.    | Exhibits                                                                                     | 30       |

 

----

 

PART I - FINANCIAL INFORMATION

 

Item 1.             Financial Statements

 

ML SYSTEMATIC MOMENTUM FUTURESACCESS LLC

(a Delaware Limited Liability Company)

 

STATEMENTS OF FINANCIAL CONDITION

(unaudited)

 
| ** **                                                                                                 | ** ** | **March 31,** | ** **    | **December 31,** | ** ** |
|------------------------------------------------------------------------------------------------------------|------------|--------------------|---------------|-----------------------|------------|
| ** **                                                                                                 | ** ** | **2011**           | ** **    | **2010**              | ** ** |
| **ASSETS:**                                                                                                |       |               |          |                  |       |
|                                                                                                       |       |               |          |                  |       |
| Cash and cash equivalents                                                                                  |       | $                  | 214,052       |                  | $          | 312,720 |   |
| Investment in Portfolio Funds (Cost $953,666,085   at 2011 and $917,232,393 at 2010)                       |       | 1,044,818,916      |          | 1,038,634,185         |       |
| Other assets                                                                                               |       | 120,000            |          | 120,000               |       |
| Receivable from Portfolio Fund                                                                             |       | 5,345,556          |          | —                |       |
| Accrued Interest Receivable                                                                                |       | 27                 |          | 48                    |       |
|                                                                                                       |       |               |          |                  |       |
| **TOTAL ASSETS**                                                                                           |       | $                  | 1,050,498,551 |                  | $          | 1,039,066,953 |   |
|                                                                                                       |       |               |          |                  |       |
| **LIABILITIES AND MEMBERS’ CAPITAL:**                                                                 |       |               |          |                  |       |
| LIABILITIES:                                                                                               |       |               |          |                  |       |
| Sponsor fee payable                                                                                        |       | $                  | 1,737,478     |                  | $          | 1,718,827 |   |
| Redemptions payable                                                                                        |       | 7,439,833          |          | 9,355,655             |       |
| Other liabilities                                                                                          |       | 449,396            |          | 580,585               |       |
|                                                                                                       |       |               |          |                  |       |
| Total liabilities                                                                                          |       | 9,626,707          |          | 11,655,067            |       |
|                                                                                                       |       |               |          |                  |       |
| MEMBERS’ CAPITAL:                                                                                     |       |               |          |                  |       |
| Members’ Interest (840,650,693 Units and   803,714,707 Units outstanding; unlimited Units authorized) |       | 1,040,871,844      |          | 1,027,411,886         |       |
| Total members’ capital                                                                                |       | 1,040,871,844      |          | 1,027,411,886         |       |
|                                                                                                       |       |               |          |                  |       |
| **TOTAL LIABILITIES AND MEMBERS’   CAPITAL**                                                          |       | $                  | 1,050,498,551 |                  | $          | 1,039,066,953 |   |
| ** **                                                                                                 | ** ** | ** **         | ** **    | ** **            | ** ** |
| **NET ASSET VALUE PER UNIT:**                                                                              |       |               |          |                  |       |
|                                                                                                       |       |               |          |                  |       |
| Class A                                                                                               |       | $                  | 1.2138        |                  | $          | 1.2523 |   |
| Class C                                                                                               |       | $                  | 1.2196        |                  | $          | 1.2615 |   |
| Class D                                                                                               |       | $                  | 1.4388        |                  | $          | 1.4789 |   |
| Class I                                                                                               |       | $                  | 1.2870        |                  | $          | 1.3265 |   |
| Class D1                                                                                              |       | $                  | 1.2841        |                  | $          | 1.3199 |   |

 

See notes to financial statements.

 

1

----

 

ML SYSTEMATIC MOMENTUM FUTURESACCESS LLC

(a Delaware Limited Liability Company)

 

STATEMENTS OF OPERATIONS

(unaudited)

 
| ** **                                   | ** ** | **For the three**  | ** **  | **For the three**  | ** ** |
|----------------------------------------------|------------|------------------------------|-------------|------------------------------|------------|
| ** **                                   | ** ** | **months ended**        | ** **  | **months ended**        | ** ** |
| ** **                                   | ** ** | **March 31, 2011** | ** **  | **March 31, 2010** | ** ** |
| **TRADING PROFIT (LOSS):**                   |       |                         |        |                         |       |
|                                         |       |                         |        |                         |       |
| Realized, net                                |       | $                            | 1,426,894   |                         | $          | 4,340,632 |   |
| Change in unrealized, net                    |       | (30,248,961                  | )           | 22,783,336                   |       |
|                                         |       |                         |        |                         |       |
| Total trading profit (loss)                  |       | (28,822,067                  | )           | 27,123,968                   |       |
|                                         |       |                         |        |                         |       |
| **INVESTMENT INCOME:**                       |       |                         |        |                         |       |
| Interest                                     |       | 84                           |        | 1,599                        |       |
|                                         |       |                         |        |                         |       |
| **EXPENSES:**                                |       |                         |        |                         |       |
| Sponsor fee                                  |       | 5,216,635                    |        | 4,395,205                    |       |
| Other                                        |       | 397,150                      |        | 272,487                      |       |
| Total expenses                               |       | 5,613,785                    |        | 4,667,692                    |       |
|                                         |       |                         |        |                         |       |
| **NET INVESTMENT INCOME (LOSS)**             |       | (5,613,701                   | )           | (4,666,093                   | )          |
|                                         |       |                         |        |                         |       |
| **NET INCOME (LOSS)**                        |       | $                            | (34,435,768 | )                            | $          | 22,457,875 |   |
|                                         |       |                         |        |                         |       |
| **NET INCOME (LOSS) PER UNIT:**              |       |                         | ** **  | ** **                   | ** ** |
| ** **                                   | ** ** | ** **                   | ** **  | ** **                   | ** ** |
| Weighted average number of Units outstanding |       |                         |        |                         |       |
| Class A                                 |       | 115,047,368                  |        | 109,864,257                  |       |
| Class C                                 |       | 566,323,165                  |        | 511,070,874                  |       |
| Class D                                 |       | 36,784,464                   |        | 31,546,416                   |       |
| Class I                                 |       | 78,591,516                   |        | 78,405,395                   |       |
| Class D1                                |       | 35,706,226                   |        | 39,777,603                   |       |
|                                         |       |                         |        |                         |       |
| Net income (loss) per weighted average Unit  |       |                         |        |                         |       |
| Class A                                 |       | $                            | (0.0388     | )                            | $          | 0.0300 |   |
| Class C                                 |       | $                            | (0.0423     | )                            | $          | 0.0274 |   |
| Class D                                 |       | $                            | (0.0438     | )                            | $          | 0.0399 |   |
| Class I                                 |       | $                            | (0.0398     | )                            | $          | 0.0328 |   |
| Class D1                                |       | $                            | (0.0351     | )                            | $          | 0.0336 |   |

 

See notes to financial statements.

 

2

----

 

ML SYSTEMATIC MOMENTUM FUTURESACCESS LLC

(a Delaware Limited Liability Company)

 

STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL

For the three months ended March 31, 2011 and 2010

(unaudited) (in Units)

 
| ** **                | ** ** | **Members’ Capital   December 31, 2009** | ** ** | **Subscriptions** | ** ** | **Redemptions** | ** ** | **Members’ Capital   March 31, 2010** | ** ** | **Members’ Capital   December 31, 2010** | ** ** | **Subscriptions** | ** ** | **Redemptions** | ** ** | **Members’ Capital   March 31, 2011** | ** ** |
|---------------------------|------------|--------------------------------------------------------------|------------|-------------------|------------|-----------------|------------|-----------------------------------------------------------|------------|--------------------------------------------------------------|------------|-------------------|------------|-----------------|------------|-----------------------------------------------------------|------------|
| Class A              |       | 101,281,370                                                  |       | 14,934,123        |       | (9,710,317      | )          | 106,505,176                                               |       | 109,942,197                                                  |       | 9,657,373         |       | (5,389,243      | )          | 114,210,327                                               |       |
| Class C              |       | 495,761,388                                                  |       | 35,327,219        |       | (20,012,209     | )          | 511,076,398                                               |       | 545,907,287                                                  |       | 39,438,758        |       | (12,350,980     | )          | 572,995,065                                               |       |
| Class D              |       | 29,983,145                                                   |       | 1,819,980         |       | (3,364,900      | )          | 28,438,225                                                |       | 34,000,711                                                   |       | 5,839,850         |       | (164,000        | )          | 39,676,561                                                |       |
| Class I              |       | 75,813,210                                                   |       | 6,177,421         |       | (2,820,717      | )          | 79,169,914                                                |       | 78,308,142                                                   |       | 2,318,371         |       | (2,117,914      | )          | 78,508,599                                                |       |
| Class D1             |       | 39,776,009                                                   |       | 809,264           |       | (2,132,707      | )          | 38,452,566                                                |       | 35,556,370                                                   |       | 546,379           |       | (842,608        | )          | 35,260,141                                                |       |
|                      |       |                                                         |       |              |       |            |       |                                                      |       |                                                         |       |              |       |            |       |                                                      |       |
| Total Members’ Units |       | 742,615,122                                                  |       | 59,068,007        |       | (38,040,850     | )          | 763,642,279                                               |       | 803,714,707                                                  |       | 57,800,731        |       | (20,864,745     | )          | 840,650,693                                               |       |

 

See notes to financial statements.

 

3

----

 

ML SYSTEMATIC MOMENTUM FUTURESACCESS LLC

(a Delaware Limited Liability Company)

 

STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL

For the three months ended March 31, 2011 and 2010

(unaudited)

 
| ** **                   | ** ** | **Members’ Capital   December 31, 2009** | ** **  | **Subscriptions** | ** ** | **Redemptions** | ** ** | **Net Income   (Loss)** | ** **  | **Members’ Capital   March 31, 2010** | ** ** | **Members’ Capital   December 31, 2010** | ** ** | **Subscriptions** | ** **  | **Redemptions** | ** ** | **Net Income (Loss)** | ** ** | **Members’ Capital   March 31, 2011** | ** ** |
|------------------------------|------------|--------------------------------------------------------------|-------------|-------------------|------------|-----------------|------------|------------------------------|-------------|-----------------------------------------------------------|------------|--------------------------------------------------------------|------------|-------------------|-------------|-----------------|------------|---------------------------------|------------|-----------------------------------------------------------|------------|
| Class A                 |       | $                                                            | 115,433,469 |              | $          | 16,789,483      |       | $                            | (11,061,914 | )                                                         | $          | 3,295,837                                                    |       | $                 | 124,456,875 |            | $          | 137,682,539                     |       | $                                                         | 12,069,132 |   | $ | (6,652,245 | ) | $ | (4,469,349 | ) | $ | 138,630,077 |   |
| Class C                 |       | 574,889,257                                                  |        | 40,138,124        |       | (22,900,947     | )          | 13,991,336                   |        | 606,117,770                                               |       | 688,642,500                                                  |       | 49,512,678        |        | (15,344,730     | )          | (23,972,406                     | )          | 698,838,042                                               |       |
| Class D                 |       | 39,754,376                                                   |        | 2,381,999         |       | (4,591,406      | )          | 1,260,100                    |        | 38,805,069                                                |       | 50,284,160                                                   |       | 8,649,996         |        | (235,963        | )          | (1,610,091                      | )          | 57,088,102                                                |       |
| Class I                 |       | 91,156,074                                                   |        | 7,271,461         |       | (3,303,652      | )          | 2,573,507                    |        | 97,697,390                                                |       | 103,872,241                                                  |       | 3,071,099         |        | (2,776,603      | )          | (3,129,257                      | )          | 101,037,480                                               |       |
| Class D1                |       | 47,068,068                                                   |        | 928,469           |       | (2,505,388      | )          | 1,337,095                    |        | 46,828,244                                                |       | 46,930,446                                                   |       | 711,112           |        | (1,108,750      | )          | (1,254,665                      | )          | 45,278,143                                                |       |
| ** **                   | ** ** | ** **                                                   | ** **  | ** **        | ** ** | ** **      | ** ** | ** **                   | ** **  | ** **                                                | ** ** | ** **                                                   | ** ** | ** **        | ** **  | ** **      | ** ** | ** **                      | ** ** | ** **                                                | ** ** |
| Total Members’ Interest |       | $                                                            | 868,301,244 |              | $          | 67,509,536      |       | $                            | (44,363,307 | )                                                         | $          | 22,457,875                                                   |       | $                 | 913,905,348 |            | $          | 1,027,411,886                   |       | $                                                         | 74,014,017 |   | $ | (26,118,291 | ) | $ | (34,435,768 | ) | $ | 1,040,871,844 |   |

 

See notes to financial statements.

 

4

----

 

ML SYSTEMATIC MOMENTUM FUTURESACCESS LLC

(a Delaware Limited Liability Company)

 

FINANCIAL DATA HIGHLIGHTS

FOR THE THREE MONTHS ENDED MARCH 31, 2011 (unaudited)

 

The following per Unit data and ratios have been derived from information provided in the financial statements.

 
| ** **                                                        | ** ** | **Class A** | ** ** | **Class C** | ** ** | **Class D** | ** ** | **Class I** | ** ** | **Class D1** | ** ** |
|-------------------------------------------------------------------|------------|------------------|------------|------------------|------------|------------------|------------|------------------|------------|-------------------|------------|
| **Per Unit Operating Performance:**                               |       |             |       |             |       |             |       |             |       |              |       |
|                                                              |       |             |       |             |       |             |       |             |       |              |       |   |   |   |   |   |
| Net asset value, beginning of period                              |       | $                | 1.2523     |             | $          | 1.2615           |       | $                | 1.4789     |              | $          | 1.3265 |   | $ | 1.3199 |   |
|                                                              |       |             |       |             |       |             |       |             |       |              |       |
| Net Realized and net change in unrealized trading   profit (loss) |       | (0.0334          | )          | (0.0336          | )          | (0.0395          | )          | (0.0354          | )          | (0.0353           | )          |
| Interest income                                                   |       | 0.0000           |       | 0.0000           |       | 0.0000           |       | 0.0000           |       | 0.0000            |       |
| Expenses                                                          |       | (0.0051          | )          | (0.0083          | )          | (0.0006          | )          | (0.0041          | )          | (0.0005           | )          |
|                                                              |       |             |       |             |       |             |       |             |       |              |       |
| Net asset value, end of period                                    |       | $                | 1.2138     |             | $          | 1.2196           |       | $                | 1.4388     |              | $          | 1.2870 |   | $ | 1.2841 |   |
|                                                              |       |             |       |             |       |             |       |             |       |              |       |
| **Total Return: (a)**                                             |       |             |       |             |       |             |       |             |       |              |       |
|                                                              |       |             |       |             |       |             |       |             |       |              |       |
| Total return                                                      |       | -3.07            | %          | -3.32            | %          | -2.71            | %          | -2.98            | %          | -2.71             | %          |
|                                                              |       |             |       |             |       |             |       |             |       |              |       |
| **Ratios to Average Members’   Capital:**                    |       |             |       |             |       |             |       |             |       |              |       |
|                                                              |       |             |       |             |       |             |       |             |       |              |       |
| Expenses                                                          |       | 0.41             | %          | 0.66             | %          | 0.04             | %          | 0.31             | %          | 0.04              | %          |
|                                                              |       |             |       |             |       |             |       |             |       |              |       |
| Net investment income (loss)                                      |       | -0.41            | %          | -0.66            | %          | -0.04            | %          | -0.31            | %          | -0.04             | %          |

 

----

(a) The total return calculations are based on compounded monthly returns and are calculated for each class taken as a whole. An individual members’ return may vary from these returns based on timing of capital transactions.

 

See notes to financial statements.

 

5

----

 

ML SYSTEMATIC MOMENTUM FUTURESACCESS LLC

(a Delaware Limited Liability Company)

 

FINANCIAL DATA HIGHLIGHTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010 (unaudited)

 

The following per Unit data and ratios have been derived from information provided in the financial statements.

 
| ** **                                                        | ** ** | **Class A** | ** ** | **Class C** | ** ** | **Class D** | ** ** | **Class I** | ** ** | **Class D1** | ** ** |
|-------------------------------------------------------------------|------------|------------------|------------|------------------|------------|------------------|------------|------------------|------------|-------------------|------------|
| **Per Unit Operating Performance:**                               |       |             |       |             |       |             |       |             |       |              |       |
|                                                              |       |             |       |             |       |             |       |             |       |              |       |   |   |   |   |   |
| Net asset value, beginning of period                              |       | $                | 1.1397     |             | $          | 1.1596           |       | $                | 1.3259     |              | $          | 1.2024 |   | $ | 1.1833 |   |
|                                                              |       |             |       |             |       |             |       |             |       |              |       |
| Net Realized and net change in unrealized trading   profit (loss) |       | 0.0334           |       | 0.0339           |       | 0.0390           |       | 0.0353           |       | 0.0348            |       |
| Interest income                                                   |       | 0.0000           |       | 0.0000           |       | 0.0000           |       | 0.0000           |       | 0.0000            |       |
| Expenses                                                          |       | (0.0045          | )          | (0.0075          | )          | (0.0004          | )          | (0.0037          | )          | (0.0003           | )          |
|                                                              |       |             |       |             |       |             |       |             |       |              |       |
| Net asset value, end of period                                    |       | $                | 1.1686     |             | $          | 1.1860           |       | $                | 1.3645     |              | $          | 1.2340 |   | $ | 1.2178 |   |
|                                                              |       |             |       |             |       |             |       |             |       |              |       |
| **Total Return: (a)**                                             |       |             |       |             |       |             |       |             |       |              |       |
|                                                              |       |             |       |             |       |             |       |             |       |              |       |
| Total return                                                      |       | 2.53             | %          | 2.27             | %          | 2.91             | %          | 2.63             | %          | 2.91              | %          |
|                                                              |       |             |       |             |       |             |       |             |       |              |       |
| **Ratios to Average Members’   Capital:**                    |       |             |       |             |       |             |       |             |       |              |       |
|                                                              |       |             |       |             |       |             |       |             |       |              |       |
| Expenses                                                          |       | 0.41             | %          | 0.66             | %          | 0.03             | %          | 0.31             | %          | 0.03              | %          |
|                                                              |       |             |       |             |       |             |       |             |       |              |       |
| Net investment income (loss)                                      |       | -0.41            | %          | -0.66            | %          | -0.03            | %          | -0.31            | %          | -0.03             | %          |

 

----

(a) The total return calculations are based on compounded monthly returns and are calculated for each class taken as a whole. An individual members’ return may vary from these returns based on timing of capital transactions.

 

See notes to financial statements.

 

6

----

 

ML SYSTEMATIC MOMENTUM FUTURESACCESS LLC

(a Delaware Limited Liability Company)

 

NOTES TO FINANCIAL STATEMENTS

(unaudited)

 

1.               SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

ML Systematic Momentum FuturesAccess LLC (the “Fund”), a Merrill Lynch FuturesAccess Program (the “Program”) fund, was organized under the Delaware Limited Liability Company Act on March 8, 2007 and commenced operations on April 2, 2007.  The Fund operates as a “fund of funds”, allocating and reallocating its capital, under the direction of Merrill Lynch Alternative Investments LLC (“MLAI” or the “Sponsor”), the Sponsor of the Fund, among seven underlying FuturesAccess Funds (each a “Portfolio Fund”, and collectively the “Portfolio Funds”). The Fund issues new units of limited liability company interest (“Units”) at Net Asset Value per Unit (see Item 2 for discussion of net asset value and net asset value per unit for subscriptions and redemptions purposes hereinafter referred to as Net Asset Value and Net Asset Value per Unit) as of the beginning of each calendar month.

 

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 commodity broker of the Portfolio Funds.  Merrill Lynch is a wholly-owned subsidiary of Bank of America Corporation.

 

The Program is a group of commodity pools sponsored by MLAI (each a “Program Fund” or collectively, “Program Funds”) each of which places substantially all of its assets in a managed futures and forward trading account managed by a single or multiple commodity trading advisors. Each Program Fund is generally similar to the Fund in terms of fees, Classes of Units and redemption rights. Each of the Program Funds implements a different trading strategy.

 

As of March 31, 2011 the Fund offers four Classes of Units to retail investors: Class A, Class C, Class D and Class I. Each Class of Units was offered at $1.00 per Unit and subsequently is offered at Net Asset Value per Unit. The four Classes of Units are subject to different Sponsor fees. Class D1 is used exclusively for investments made by Systematic Momentum FuturesAccess LTD. Class DA was used exclusively for investments made by Systematic Momentum FuturesAccess II LLC until its liquidation at September 30, 2009. Class D1 and DA are not charged Sponsor fees.

 

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

 

In the opinion of management, these interim financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the financial position of the Fund as of March 31, 2011, and the results of its operations for the three months ended March 31, 2011 and 2010. However, the operating results for the interim period may not be indicative of the results for the full year.

 

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted.  These financial statements should be read in conjunction with the financial statements and notes thereto included in the Fund’s Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2010.

 

7

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Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates and such differences could be material.

 

2.               INVESTMENTS IN PORTFOLIO FUNDS

 

The seven funds (each a “Portfolio Fund” and collectively “Portfolio Funds”) in which the Fund is invested as of March 31, 2011 are: ML Altis FuturesAccess LLC (“Altis”), ML Aspect FuturesAccess LLC (“Aspect”), ML BlueTrend FuturesAccess LLC (“BlueTrend”), ML John Locke FuturesAccess LLC (“John Locke”) ML Transtrend DTP Enhanced FuturesAccess LLC (“Transtrend”), ML Tudor Tensor FuturesAccess LLC (“Tudor Tensor”) and ML Winton FuturesAccess LLC (“Winton”). The Fund had invested in ML Chesapeake FuturesAccess LLC (“Chesapeake”) which liquidated January 31, 2010. MLAI, in its discretion, may change the Portfolio Funds at any time. MLAI, also at its discretion, may vary the percentage of the Fund’s total portfolio allocated to the different Portfolio Funds. There is no pre-established range for the minimum and maximum allocations that may be made to any individual Portfolio Fund.

 

The investment transactions were accounted for on a trade date basis. The investments in the Portfolio Funds were valued at fair value and are reflected in the Statements of Financial Condition. In determining fair value, MLAI utilized the net asset value of the underlying Portfolio Funds which approximates fair value. The fair value was net of all fees relating to the Portfolio Funds, paid or accrued. Additionally, MLAI monitored the performance of the Portfolio Funds. Such monitoring procedures included, but were not limited to: monitoring market movements in Portfolio Funds’ investments, comparing performance to industry benchmarks, and in-depth conference calls and site visits with the Portfolio Funds’ Managers.

 

The details of Investments in Portfolio Funds at and for the period ended March 31, 2011, are as follows:

 
| ** **     | ** ** | **Percentage of   Members’   Capital** | ** ** | **Fair Value** | ** **    | **Profit (Loss)** | ** ** | **Cost**    | ** ** | **Management   Fees** | ** **  | **Performance   Fees** | ** ** | **Redemptions Permitted** | ** ** |
|----------------|------------|--------------------------------------------------|------------|---------------------|---------------|------------------------|------------|-------------|------------|-----------------------|-------------|------------------------|------------|--------------------------------|------------|
| Tudor   Tensor |       | 12.38                                            | %          | $                   | 128,815,363   |                   | $          | (4,933,511  | )          | $                     | 128,538,890 |                   | $          | (670,366                       | )          | $ | — |   | monthly |   |
| Transtrend     |       | 17.87                                            | %          | 186,043,850         |          | (1,852,015             | )          | 174,623,253 |       | (935,099              | )           | —                 |       | monthly                        |       |
| Altis          |       | 12.21                                            | %          | 127,120,119         |          | (20,364,543            | )          | 117,721,741 |       | (642,454              | )           | —                 |       | monthly                        |       |
| Winton         |       | 17.92                                            | %          | 186,540,335         |          | 2,724,049              |       | 161,890,083 |       | (943,504              | )           | —                 |       | monthly                        |       |
| Aspect         |       | 9.96                                             | %          | 103,634,519         |          | 366,433                |       | 89,926,624  |       | (521,660              | )           | —                 |       | monthly                        |       |
| John   Locke   |       | 13.61                                            | %          | 141,686,564         |          | (9,671,998             | )          | 142,507,223 |       | (712,339              | )           | —                 |       | monthly                        |       |
| BlueTrend      |       | 16.43                                            | %          | 170,978,166         |          | 4,909,518              |       | 138,458,271 |       | (845,617              | )           | —                 |       | monthly                        |       |
|           |       |                                             |       |                |          |                   |       |        |       |                  |        |                   |       |                           |       |
|           |       | 100.38                                           | %          | $                   | 1,044,818,916 |                   | $          | (28,822,067 | )          | $                     | 953,666,085 |                   | $          | (5,271,039                     | )          | $ | — |   |   |   |

 

8

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The details of Investments in Portfolio Funds at and for the year ended December 31, 2010, are as follows:

 
| ** **   | ** ** | **Percentage of   Members’   Capital** | ** ** | **Fair Value** | ** **    | **Profit (Loss)** | ** ** | **Cost**    | ** ** | **Management   Fees** | ** **  | **Performance   Fees** | ** ** | **Redemptions Permitted** | ** ** |
|--------------|------------|--------------------------------------------------|------------|---------------------|---------------|------------------------|------------|-------------|------------|-----------------------|-------------|------------------------|------------|--------------------------------|------------|
| Chesapeake*  |       | 0.00                                             | %          | $                   | —        |                   | $          | (2,598,008  | )          | $                     | —      |                   | $          | (144,407                       | )          | $ | — |   | monthly |   |
| Transtrend   |       | 17.87                                            | %          | 183,615,388         |          | 29,487,583             |       | 170,118,192 |       | (3,404,718            | )           | —                 |       | monthly                        |       |
| Altis        |       | 13.05                                            | %          | 134,073,398         |          | 12,597,945             |       | 104,309,484 |       | (2,445,604            | )           | —                 |       | monthly                        |       |
| Winton       |       | 17.74                                            | %          | 182,231,744         |          | 20,913,669             |       | 159,384,935 |       | (3,399,640            | )           | —                 |       | monthly                        |       |
| Aspect       |       | 10.04                                            | %          | 103,142,819         |          | 14,049,609             |       | 89,607,738  |       | (1,888,760            | )           | —                 |       | monthly                        |       |
| John   Locke |       | 14.08                                            | %          | 144,651,209         |          | 10,500,284             |       | 135,795,468 |       | (2,627,905            | )           | —                 |       | monthly                        |       |
| BlueTrend    |       | 15.53                                            | %          | 159,597,862         |          | 18,370,900             |       | 131,991,494 |       | (2,703,505            | )           | —                 |       | monthly                        |       |
| Tudor        |       | 12.78                                            | %          | 131,321,765         |          | 5,257,749              |       | 126,025,082 |       | (2,391,031            | )           | —                 |       | monthly                        |       |
|         |       |                                             |       |                |          |                   |       |        |       |                  |        |                   |       |                           |       |
|         |       | 101.09                                           | %          | $                   | 1,038,634,185 |                   | $          | 108,579,731 |       | $                     | 917,232,393 |                   | $          | (19,005,570                    | )          | $ | — |   |   |   |

 

----

* Liquidated as of January 31, 2010.

 

These investments are recorded at fair value. In accordance with Regulation S-X, the following is summarized financial information for each of the Portfolio Funds which require disclosure.

 
| ** ** | ** ** | **As of March 31, 2011** | ** **  |
|------------|------------|----------------------------------------------|-------------|
| ** ** | ** ** | **Total Assets**                        | ** **  | **Total Liabilities** | ** ** | **Total Capital** | ** ** |
| Altis      |       | $                                            | 127,397,873 |   | $ | 278,657 |   | $ | 127,119,216 |   |
| John Locke |       | 142,001,774                                  |        | 315,165 |   | 141,686,609 |   |
|       |       |                                         |        |   |   |   |   |
| Total      |       | $                                            | 269,399,647 |   | $ | 593,822 |   | $ | 268,805,825 |   |

 
| ** ** | ** ** | **As of December 31, 2010** | ** **  |
|------------|------------|-------------------------------------------------|-------------|
| ** ** | ** ** | **Total Assets**                           | ** **  | **Total Liabilities** | ** ** | **Total Capital** | ** ** |
| Transtrend |       | $                                               | 258,918,312 |   | $ | 2,958,512 |   | $ | 255,959,800 |   |
|       |       |                                            |        |   |   |   |   |
| Total      |       | $                                               | 258,918,312 |   | $ | 2,958,512 |   | $ | 255,959,800 |   |

 
| ** ** | ** ** | **For the three months ended March 31, 2011** | ** **  |
|------------|------------|----------------------------------------------------------------------------------|-------------|
| ** ** | ** ** | ** **                                                                       | ** **  | ** ** | ** ** | ** ** | ** ** | **Net** | ** ** |
| ** ** | ** ** | **Income (Loss)**                                                           | ** **  | **Commissions** | ** ** | **Other** | ** ** | **Income (Loss)** | ** ** |
| Altis      |       | $                                                                                | (19,472,228 | ) | $ | (206,141 | ) | $ | (686,173 | ) | $ | (20,364,542 | ) |
| John Locke |       | (8,609,364                                                                       | )           | (306,042 | ) | (756,592 | ) | (9,671,998 | ) |
|       |       |                                                                             |        |   |   |   |   |   |   |
| Total      |       | $                                                                                | (28,081,592 | ) | $ | (512,183 | ) | $ | (1,442,765 | ) | $ | (30,036,540 | ) |

 
| ** ** | ** ** | **For the three months ended March 31, 2010** | ** ** |
|------------|------------|----------------------------------------------------------------------------------|------------|
| ** ** | ** ** | ** **                                                                       | ** ** | ** ** | ** ** | ** ** | ** ** | **Net** | ** ** |
| ** ** | ** ** | **Income (Loss)**                                                           | ** ** | **Commissions** | ** ** | **Other** | ** ** | **Income (Loss)** | ** ** |
| Bluetrend  |       | $                                                                                | 13,126,264 |   | $ | (109,451 | ) | $ | (3,782,146 | ) | $ | 9,234,667 |   |
| Transtrend |       | 12,345,412                                                                       |       | (274,475 | ) | (905,268 | ) | 11,165,669 |   |
|       |       |                                                                             |       |   |   |   |   |   |   |
| Total      |       | $                                                                                | 25,471,676 |   | $ | (383,926 | ) | $ | (4,687,414 | ) | $ | 20,400,336 |   |

 

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3.                     FAIR VALUE OF INVESTMENTS

 

The Financial Accounting Standards Board (“FASB”) issued the Accounting Standards Codification (“ASC”) which provides authoritative guidance on fair value measurement. This guidance defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.

 

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

 

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

 

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

 

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

 

Level II — Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of generally accepted and understood models or other valuation methodologies. Investments which are generally included in this category are investments valued using market data.

 

Level III — Pricing inputs are unobservable and include situations where there is little, if any, market activity for the investment. Fair value for these investments is determined using valuation methodologies that consider a range of factors, including but not limited to the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance and financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant management judgment. Due to the inherent uncertainty of these estimates, these values may differ materially from the values that would have been used had a ready market for these investments existed.

 

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. MLAI’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.

 

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

 

10

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Investments in Portfolio Funds are valued using the net asset value reported by the Portfolio Funds as a practical expedient, which management believes approximates fair value. These net asset values are the prices used to execute trades with these Portfolio Funds.

 

Although there are monthly transactions in these Portfolio Funds, the Net Asset Value’s (“NAV”) are materially based on portfolios of Level I and Level II assets and liabilities for which the Fund has transparency.  As such, the Fund determined that its investments in these investment companies in this case, would be classified as Level II.  There were no transfers to or from Level I or II during the quarter and period ended March 31, 2011.

 

The following table summarizes the valuation of the Fund’s investment by the above fair value hierarchy levels as of March 31, 2011 and December 31, 2010:

 
| **Investment in ** | ** ** | ** ** | ** **    | ** **       | ** ** | ** **        | ** ** | ** **         | ** **    |
|------------------------------|------------|------------|---------------|------------------|------------|-------------------|------------|--------------------|---------------|
| **Portfolio Funds**     | ** ** | **Total**  | ** **    | **Level I** | ** ** | **Level II** | ** ** | **Level III** | ** **    |
|                         |       |       |          |             |       |              |       |               |          |
| March 31, 2011          |       | $          | 1,044,818,916 |             | $          | —            |       | $                  | 1,044,818,916 |   | $ | — |   |
| December 31, 2010       |       | $          | 1,038,634,185 |             | $          | —            |       | $                  | 1,038,634,185 |   | $ | — |   |

 

4.                           MARKET, CREDIT AND CONCENTRATION RISKS

 

The nature of this Fund has certain risks, which cannot be presented on the financial statements. The following summarizes some of those risks.

 

Market Risk

 

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

 

MLAI has procedures in place intended to control market risk exposure, although there can be no assurance that they will, in fact, succeed in doing so.  These procedures focus primarily on monitoring the trading of the Portfolio Funds, calculating the Net Asset Value of the Fund and the Portfolio Funds as of the close of business on each day and reviewing outstanding positions for over-concentrations.  While MLAI does not intervene in the markets to hedge or diversify the Portfolio Funds’ market exposure, MLAI may urge the respective trading advisors to reallocate positions in an attempt to avoid over-concentrations.  However, such interventions are expected to be unusual.  It is expected that MLAI’s basic risk control procedures will consist of the ongoing process of advisor monitoring, with the market risk controls being applied by respective trading advisors.

 

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Credit Risk

 

The risks associated with exchange-traded contracts are typically perceived to be less than those associated with over-the-counter (non-exchange-traded) transactions, because exchanges typically provide clearinghouse arrangements in which the collective credit (in some cases limited in amount, in some cases not) of the members of the exchange is pledged to support the financial integrity of the exchange.  In over-the-counter transactions, on the other hand, traders must rely solely on the credit of their respective individual counterparties. Margins, which may be subject to loss in the event of a default, are generally required in exchange trading, and counterparties may also require margin in the over-the-counter markets.

 

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

 

The Portfolio Funds, in their normal course of business, enter into various contracts, with MLPF&S acting as their commodity broker.  Pursuant to the brokerage arrangement with MLPF&S (which includes a netting arrangement), to the extent that such trading results in receivables from and payables to MLPF&S, these receivables and payables are offset and reported as a net receivable or payable and included in Equity in commodity futures trading accounts in the Statements of Financial Condition of the Portfolio Funds.

 

Concentration Risk

 

The Fund’s investments in the Portfolio Funds are subject to the market and credit risk of the Portfolio Funds. Because the majority of the Fund’s capital is invested in the Portfolio Funds, any changes in the market conditions that would adversely affect the Portfolio Funds could significantly impact the solvency of the Fund.

 

Indemnifications

 

In the normal course of business, the Fund has entered, or may in the future enter into agreements that obligate the Fund to indemnify third parties, including affiliates of the Fund, for breach of certain representations and warranties made by the Fund. No claims have actually been made with respect to such indemnities and any quantification would involve hypothetical claims that have not been made. Based on the Fund’s experience, MLAI expected the risk of loss to be remote and, therefore, no provision has been recorded.

 

12

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5.                           RELATED PARTY TRANSACTIONS

 

Starting in June of 2010, the Fund entered into a transfer agency and investor services agreement with Financial Data Services, Inc. (the “Transfer Agent”), a related party of Merrill Lynch through MLAI. The agreement calls for a fee to be paid based on the collective net assets of funds managed or sponsored by MLAI with a minimum annual fee of $2,700,000. The fee rate ranges from 0.016% to 0.02% based on aggregate net assets. The fee is payable monthly in arrears. MLAI allocates the Transfer Agent fees to each of the managed/sponsored funds on a monthly basis based on the Fund’s net assets. The Transfer Agent fee, which was determined at 0.02% of aggregate asset level, allocated to the Fund for the quarter ended March 31, 2011 amounted to $56,241, of which $35,462 was payable to the Transfer Agent as of March 31, 2011.

 

6.                           SUBSEQUENT EVENTS

 

Management has evaluated the impact of subsequent events on the Fund and has determined that there were no subsequent events that require adjustments to, or disclosure in, the financial statements.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

MONTH-END NET ASSET VALUE PER UNIT

 

MLAI believes that the Net Asset Value used to calculate subscription and redemption value and to    report performance to investors throughout the year is a useful performance measure for the investors of the Fund.   Therefore, the charts below referencing Net Asset Value and performance measurements are based on the Net Asset Value for financial reporting purposes.

 

The Fund calculates the Net Asset Value per unit of each class of units 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 Fund’s “Net Asset Value” as of any calculation date will generally equal the value of the Fund’s investments in the underlying funds as of such date, plus any other assets held by the Fund, minus accrued brokerage commissions, sponsor’s management and performance fees, and any operating costs and other liabilities of the Fund. MLAI is authorized to make all Net Asset Value determinations.

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS A

 
| ** ** | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** |
|------------|------------|----------|------------|----------|------------|----------|------------|
| 2010       |       | $        | 1.1036     |     | $          | 1.1154   |       | $ | 1.1686 |   |
| 2011       |       | $        | 1.2333     |     | $          | 1.2546   |       | $ | 1.2138 |   |

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS C

 
| ** ** | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** |
|------------|------------|----------|------------|----------|------------|----------|------------|
| 2010       |       | $        | 1.1220     |     | $          | 1.1329   |       | $ | 1.1860 |   |
| 2011       |       | $        | 1.2413     |     | $          | 1.2617   |       | $ | 1.2196 |   |

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS D

 
| ** ** | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** |
|------------|------------|----------|------------|----------|------------|----------|------------|
| 2010       |       | $        | 1.2855     |     | $          | 1.3008   |       | $ | 1.3645 |   |
| 2011       |       | $        | 1.4583     |     | $          | 1.4854   |       | $ | 1.4388 |   |

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS I

 
| ** ** | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** |
|------------|------------|----------|------------|----------|------------|----------|------------|
| 2010       |       | $        | 1.1647     |     | $          | 1.1774   |       | $ | 1.2340 |   |
| 2011       |       | $        | 1.3068     |     | $          | 1.3298   |       | $ | 1.2870 |   |

 

MONTH-END NET ASSET VALUE PER INITIAL UNIT CLASS D1

 
| ** ** | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** |
|------------|------------|----------|------------|----------|------------|----------|------------|
| 2010       |       | $        | 1.1473     |     | $          | 1.1609   |       | $ | 1.2178 |   |
| 2011       |       | $        | 1.3015     |     | $          | 1.3257   |       | $ | 1.2841 |   |

 

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Liquidity and Capital Resources

 

The Fund does not engage in the sale of goods or services.  The Fund’s assets are it’s (i) investment in Portfolio Funds and (ii) cash.    Because of the low margin deposits normally required in commodity futures trading relatively small price movements may result in substantial losses to the Fund.  While substantial losses could lead to a material decrease in liquidity, no such material losses occurred during the first quarter of 2011 and there was no impact on the Fund’s liquidity.

 

The Fund’s capital consists of the capital contributions of the members as increased or decreased by gains or losses on trading, expenses, interest income, redemptions of Redeemable Units and distributions of profits, if any.

 

For the three months ended March 31, 2011. Fund capital increased 1.31% from $1,027,411,886 to $1,040,871,844.  This increase was attributable to the net loss from operations of $34,435,768, coupled with the redemption of 20,864,745 Redeemable Units resulting in an outflow of $26,118,291.  The cash outflow was offset with cash inflow of $74,014,017 due to subscription of 57,800,731 units.  Future redemptions could impact the amount of funds available for investment in commodity contract positions in subsequent months.

 

Critical Accounting Policies

 

Statement of Cash Flows

 

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

 

Investments

 

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

 

Cash and Cash Equivalents

 

The Fund considers all highly liquid investments, with a maturity of three months or less when acquired, to be cash equivalents. Cash equivalents were recorded at amortized cost, as provided by the investment manager of the cash equivalent, which approximated fair value (Level II see Note 3).  Cash was held at a nationally recognized financial institution.

 

Interest Rates and Income

 

The Fund currently earns interest based on the prevailing Fed Funds rate plus a spread for short cash positions and minus a spread for long cash positions. The current short term interest rates have remained extremely low when compared with historical rates and thus has contributed negligible amounts to overall Fund performance.

 

Fair Value Measurements

 

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

 

15

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Income Taxes

 

No provision for income taxes has been made in the accompanying financial statements as each Member is individually responsible for reporting income or loss based on such Member’s share of the Fund’s income and expenses as reported for income tax purposes.

 

The Fund follows the ASC’s guidance on accounting 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 of tax positions taken or expected to be taken in the course of preparing the Fund’s financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority.  Tax positions with respect to tax at the Fund level not deemed to meet the “more-likely-than-not” threshold would be recorded as a tax benefit or expense in the current year.  MLAI has analyzed the Fund’s tax positions and has concluded that no provision for income tax is required in the Fund’s financial statements. The following are the major tax jurisdictions for the Fund and the earliest tax year subject to examination: United States — 2007.

 

Results of Operations

 

January 1, 2011 to March 31, 2011

 

The Fund experienced a net trading loss for the first quarter of March 31, 2011 of $28,822,067.

 

The Portfolio Funds posted losses to the Fund at the beginning of the quarter. Going into January the trading advisors had mostly long positions in all four major asset classes (commodities, stock indices, currency, fixed income). Commodities continued to represent the largest risk allocation and the trading advisors had long positions in energies (except natural gas), metals, grains, crops and livestock. The Stock indices was the next biggest risk allocation as the trading advisors had long positions in most geographies with the exception of some short positions in the European Stock Market indices. The trading advisors had long positions in commodity and emerging market currencies against short positions in European currencies (Euro, British pound, Swiss franc). In fixed income, exposure was more on the long side at the short end of the curve and more short at the long end of the curve resulting in losses. The energy, equity and agricultural markets continued to move higher resulting from positive economic and earnings news as well as the uncertainty around the unrest in North Africa. Most of the Portfolio Funds benefited from the rise in these sectors due to long positions in those markets while currencies, precious metals and fixed income had pullbacks and volatility. In the Foreign Currency Exchange, commodity and emerging market currencies suffered a reversal while the previously weak European currencies rose due to optimism with respect to debt problems and growth. These moves went directly against the trading advisors positioning and currencies were the worst performing asset class for most of the Portfolio Funds. After months of rising prices in gold and silver resulting in profits posted to the Fund, this sector reversed in January as gold and silver reversed, resulting in losses. Exposures in fixed income had been coming down since September 2010 when yields first began to reverse, but remaining long positions still suffered from the moves in January. Tudor Tensor was the best performing trading advisor in January followed by BlueTrend. These two trading advisors were the only ones to have positive returns for the month. Tudor’s shorter term strategies did well in the mixed environment in January. BlueTrend did well as a result of having much higher risk allocations to the sectors that did not see reversals (namely energies and equity indices). At the other end of the range, Altis’ performance was the worst. Almost all of the Altis’s losses came from the currency sector. None of the Portfolio Funds made a profit in the Foreign Currency Exchange during January, however, Altis had an especially large allocation to the asset 

 

16

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class going into January and the reversals in commodity, emerging market and European currencies resulted in losses.

 

The Portfolio Funds posted profits to the Fund in the middle of the quarter. Commodities continued to represent the largest risk allocation in February as the trading advisors had long positions in energies (except natural gas), metals, grains, crops and livestock. Equity indices were the next biggest risk allocation as the trading advisors had long positions in most geographies with the exception of some short positions in European indices. The trading advisors had long positions in all foreign currencies against the U.S. dollar, including European, commodity and emerging market currencies. In fixed income, exposure was more on the long side at the short end of the curve and more balanced at the long end of the curve. The Portfolio Funds as a whole were betting on the risk trade to continue to do well. This trade, characterized by long positions in commodities and equities coupled with a short position in the U.S. dollar had generally done well since late last summer, except for pullbacks in select markets during November and January. The Portfolio Funds were positioned for this trade to continue to do well in February. Market price action in February proved to be quite beneficial to general positioning for the Portfolio Funds. The major market moves were in the sectors of energies, precious metals, foreign currencies and equity indices. In each of these sectors, markets continued to go up, benefiting long positions held by the trading advisors. The moves in energies were primarily linked to unrest in Libya. Geopolitical uncertainty also contributed to precious metals gaining value as well appreciation in the currencies of commodity producing countries. In addition, the U.S. dollar generally lost value against European and emerging market currencies and global equity indices did not seem to be too impacted by problems in North Africa and the Middle East as they generally continued to rise due to positive economic numbers and general optimism. The areas where the Portfolio Funds lost money included fixed income and certain agricultural markets. February saw reversals in select grains and softs markets, which resulted in small losses. In addition, fixed income proved to be difficult as yields were volatile and there were no clear trends. However, losses in these sectors were minimal given low risk allocations which did not detract from performance. BlueTrend was the best performing trading advisor among the Portfolio Funds.  BlueTrend’s positioning favored the energy and equity sectors where trends were among the strongest during January. BlueTrend historically has had a greater risk allocation to these sectors. When those sectors trend strongly, BlueTrend is likely to outperform. Altis was the weakest trading advisor among the Portfolio Funds in terms of performance. Altis lost 6% in February. The losses were due to short precious metals positions coming into the month as well as short positions in the currency sector. Altis’ had adopted a slightly different positioning at the start of the month, which in turn proved unprofitable.

 

The Portfolio Funds posted losses to the Fund at the end of the quarter. Going into March the Portfolio Funds had long positions in commodities, equity indices and the Foreign Currency Exchange against the U.S. dollar. The Portfolio Funds were positioned for risk assets to continue to appreciate. In fixed income, the vertical was positioned net long at the short end but net short at the long end of the curve. In addition, there were some short positions in natural gas. This positioning did well initially during March. Continuing troubles in Libya and the Middle East in general put pressure on energy prices, and oil and related markets rose. The Portfolio Funds posted profits to the Fund the in the first week of March. During the second week of March, some reversals began to hit in base metals and agricultural markets, causing losses to long positions held by the trading advisors. Then came the large earthquake in Japan, with a tsunami and risks of a nuclear meltdown following. This shock roiled equity markets, with Japanese markets reacting most violently and global markets following suit shortly thereafter. Long positions in global equity indices took a big hit with the trading advisors attempting to reduce risk in the asset class quickly given the losses and the spike in volatility. At the end of March, the markets started to come back however, losses were recouped partially given the exposure reductions immediately after Japan’s natural disasters. Overall, most of the trading advisors were profitable in the energy sector, but they suffered large losses in equity indices. The reversals in agriculturals and base metals also resulted in 

 

17

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losses to a lesser extent given that these are smaller sectors with lower risk allocations. The trading advisors in the Foreign Currency Exchange as the U.S. dollar continued to slide against the majority of currencies were flat to slightly down in fixed income where a lack of strong trends still hindered performance. The trading advisors with shorter term systems were whipsawed during the month of March, reducing exposures or taking short positions just as markets were rebounding from the intra month lows. Medium and longer term trading advisors kept more risk on and benefited to a greater extent from the bounce back seen in markets towards the end of the month. Similarly, the trading advisors with larger risk allocations to the energy sector did better, while those who allocated more to equity indices, agriculturals and base metals suffered from the reversals seen in those sectors.

 

Winton was the best performing trading advisors among the Portfolio Funds, losing only 3%. Winton targets a lower 10% annualized volatility resulting in lower exposures and risk. During difficult months with reversals and increased volatility, Winton’s losses are typically smaller compared to the other Portfolio Funds. Its long term nature also helped it stay in positions and catch month end bounces better. Altis was the worst performer trading advisor among the Portfolio Funds in March. Altis targets higher volatility than the other Portfolio Funds (22-25% annually). It thus has larger exposures. Altis also has a greater risk allocation to the commodity sector (50% of total risk over the long term), suffering more from reversals in the asset class. Finally, the fund had short exposure to the energy sector coming into March and energies rose across the board. These three factors combined resulted in a difficult month for the manager. Altis is now in a -14.3% drawdown that began in January.

 

January 1, 2010 to March 31, 2010

 

The Fund experienced a net trading profit for the first quarter of 2010 of $27,123,968.

 

The Portfolio Funds’ long positions in equities, commodities and short positions in the U.S. dollar resulted in profits posted to the Fund at the beginning of January.  Markets then reversed and losses were posted in each of these asset classes and all gains accumulated through the middle of the month were given back in these various markets.  Fixed income was one asset class where existing positioning were profitable. Long positions in short term interest rate contracts posted gains however, these gains were not enough to offset losses in the three other major asset classes resulting in losses being posted to the Fund at the end of January.

 

Five of the seven Portfolio Funds had positive performance in February resulting in profits being posted to the Fund. These were the medium and long term trend followers: Altis, Aspect, BlueTrend, Transtrend and Winton. Long positions in fixed income drove performance. Yields generally moved lower over the course of the month and the trading advisors benefited from having long exposure to both bonds and short term interest rate contracts. The Portfolio Funds’ benefited from short positions in European currency exposure due to the Euro and British pound losing value against the U.S. dollar. In other asset classes, some choppiness and a lack of significant trends meant that equity indices and commodities did not have much of an impact on the month’s returns. These two trading advisors, John Locke and Tudor Tensor, had negative performance in the month of February. These two trading advisors utilize trend following as an important allocation and made money in similar areas as other trend followers. However, John Locke and Tudor Tensor also allocate capital to shorter term strategies. One of these strategies, pattern recognition, suffered large losses in several markets that showed significant choppiness in February which was not enough to offset the profits posted to the Fund.

 

All of the Portfolio Funds had positive performance in March resulting in profits being posted to the Fund. Equity indices drove performance for most Portfolio Funds’ trading advisors. Positioning was firmly on the long side due to the strength of the current up trends in global equity indices. Commodities were also profitable across the board due to long positions in oil and metals and short positions in natural 

 

18

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gas and grains. Positioning was spot on in most of these sub sectors. Oil and metals generally rose and natural gas and grains declined in March. Currencies also posted profits to the Fund. The Euro and British pound ended the month down, benefiting short positions in these currencies. On the other hand the Canadian and Australian dollars rose, resulting in profits due to their long positions in these currencies. Fixed income was the only losing asset class. Short term interest rate contracts generally stayed flat, but yields on longer term government bonds rose during the month, causing some losses to long positions in those instruments. Overall, the yield moves were not very large, so losses were contained.

 

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

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

Introduction

 

The Portfolio Funds are a speculative commodity pools. The market sensitive instruments held by the Portfolio Funds are acquired for speculative trading purposes and all or substantially all of the Fund’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 Fund’s main line of business.

 

Market movements result in frequent changes in the fair market value of the Portfolio Fund’s open positions and, consequently, in its earnings and cash flow. The Portfolio Fund’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 Portfolio Fund’s open positions and the liquidity of the markets in which it trades.

 

The Portfolio Funds, under the direction of their respective advisors, rapidly acquire and liquidate both long and short positions in currency markets.  Consequently, it is not possible to predict how a particular future market scenario will affect performance, and the past performance is not necessarily indicative of its future results.

 

Value at Risk is a measure of the maximum amount which the Portfolio Funds could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Portfolio Funds’ speculative trading and the recurrence in the markets traded by the Portfolio Funds of market movements far exceeding expectations could result in actual trading or non-trading losses far beyond the indicated Value at Risk or the 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 Portfolio Funds’ losses in any market sector will be limited to Value at Risk or by each Portfolio Funds’ attempts to manage its market risk.

 

Quantifying the Fund’s Trading Value At Risk

 

Quantitative Forward Looking Statements

 

The following quantitative disclosures regarding the Fund’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.

 

19

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The Portfolio Fund’s risk exposure in the various market sectors traded by the advisors is quantified below in terms of Value at Risk.  Due to the Portfolio Fund’s fair value accounting, any loss in the fair value of the Portfolio Fund’s open positions is directly reflected in the Portfolio Fund’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).

 

Exchange maintenance margin requirements of the Portfolio Funds have been used 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 Portfolio Funds), 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 Fund’s positions are rarely, if ever, 100% positively correlated have not been reflected.

 

20

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The Portfolio Funds’ Trading Value at Risk in Different Market Sectors

 

The following tables indicate the average, highest, and lowest trading Value at Risk associated with the Portfolio Funds’ open positions by market category for the three months ended March 31, 2011 and 2010.

 

**Altis Class DS (1)**

 

**March 31, 2011**

 
| ** **               | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
|--------------------------|------------|-----------------------------|------------|----------------------------|------------|------------------------|------------|-----------------------|------------|
| **Market Sector**   | ** ** | **Value at Risk** | ** ** | **Capitalization**         | ** ** | **At Risk**       | ** ** | **At Risk**      | ** ** |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| Agricultural Commodities |       | $                           | 30,317     |                       | 0.02       | %                      | $          | 31,713                |       | $ | 27,998 |   |
| Energy                   |       | 2,285,152                   |       | 1.76                       | %          | 2,390,417              |       | 2,110,398             |       |
| Interest Rates           |       | 918,768                     |       | 0.71                       | %          | 961,090                |       | 848,506               |       |
| Metals                   |       | 4,563,228                   |       | 3.52                       | %          | 4,773,430              |       | 4,214,260             |       |
| Stock Indices            |       | 2,468,363                   |       | 1.90                       | %          | 2,582,067              |       | 2,279,598             |       |
| Currencies               |       | 6,914,190                   |       | 5.33                       | %          | 7,232,688              |       | 6,385,434             |       |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| TOTAL                    |       | $                           | 17,180,018 |                       | 13.24      | %                      | $          | 17,971,405            |       | $ | 15,866,194 |   |

 

----

(1) Average capitalization of Altis Class DS is $129,725,325.

 

**Altis Class DS (1)**

 

**March 31, 2010**

 
| ** **               | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
|--------------------------|------------|-----------------------------|------------|----------------------------|------------|------------------------|------------|-----------------------|------------|
| **Market Sector**   | ** ** | **Value at Risk** | ** ** | **Capitalization**         | ** ** | **At Risk**       | ** ** | **At Risk**      | ** ** |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| Agricultural Commodities |       | $                           | 1,648,512  |                       | 1.42       | %                      | $          | 1,783,484             |       | $ | 1,465,924 |   |
| Energy                   |       | 3,293,230                   |       | 2.84                       | %          | 3,562,863              |       | 2,928,475             |       |
| Interest Rates           |       | 3,899,614                   |       | 3.37                       | %          | 4,218,894              |       | 3,467,695             |       |
| Metals                   |       | 154,223                     |       | 0.13                       | %          | 166,850                |       | 137,142               |       |
| Stock Indices            |       | 794,061                     |       | 0.69                       | %          | 859,075                |       | 706,111               |       |
| Currencies               |       | 285,077                     |       | 0.25                       | %          | 308,417                |       | 253,502               |       |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| TOTAL                    |       | $                           | 10,074,717 |                       | 8.70       | %                      | $          | 10,899,583            |       | $ | 8,958,849 |   |

 

----

(1) Average capitalization of Altis Class DS is $115,884,948.

 

21

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**Transtrend Class DS (2)**

 

**March 31, 2011**

 
| ** **               | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
|--------------------------|------------|-----------------------------|------------|----------------------------|------------|------------------------|------------|-----------------------|------------|
| **Market Sector**   | ** ** | **Value at Risk** | ** ** | **Capitalization**         | ** ** | **At Risk**       | ** ** | **At Risk**      | ** ** |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| Agricultural Commodities |       | $                           | 1,755,543  |                       | 0.95       | %                      | $          | 2,072,133             |       | $ | 1,437,784 |   |
| Energy                   |       | 925,998                     |       | 0.50                       | %          | 1,092,990              |       | 758,389               |       |
| Interest Rates           |       | 283,024                     |       | 0.15                       | %          | 334,064                |       | 231,796               |       |
| Metals                   |       | 2,904,094                   |       | 1.57                       | %          | 3,427,810              |       | 2,378,443             |       |
| Stock Indices            |       | 5,210,120                   |       | 2.81                       | %          | 6,149,698              |       | 4,267,070             |       |
| Currencies               |       | 6,893,794                   |       | 3.72                       | %          | 8,137,000              |       | 5,645,992             |       |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| TOTAL                    |       | $                           | 17,972,573 |                       | 9.70       | %                      | $          | 21,213,695            |       | $ | 14,719,474 |   |

 

----

(2) Average capitalization of Transtrend Class DS is $185,428,866.

 

**Transtrend Class DS (2)**

 

**March 31, 2010**

 
| ** **               | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
|--------------------------|------------|-----------------------------|------------|----------------------------|------------|------------------------|------------|-----------------------|------------|
| **Market Sector**   | ** ** | **Value at Risk** | ** ** | **Capitalization**         | ** ** | **At Risk**       | ** ** | **At Risk**      | ** ** |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| Agricultural Commodities |       | $                           | 1,545,336  |                       | 0.98       | %                      | $          | 2,163,359             |       | $ | 979,787 |   |
| Energy                   |       | 6,316,357                   |       | 4.00                       | %          | 8,842,445              |       | 4,004,751             |       |
| Interest Rates           |       | 3,612,968                   |       | 2.29                       | %          | 5,057,895              |       | 2,290,725             |       |
| Metals                   |       | 1,440,857                   |       | 0.91                       | %          | 2,017,096              |       | 913,544               |       |
| Stock Indices            |       | 2,205,017                   |       | 1.39                       | %          | 3,086,865              |       | 1,398,044             |       |
| Currencies               |       | 4,993,884                   |       | 3.16                       | %          | 6,991,078              |       | 3,166,265             |       |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| TOTAL                    |       | $                           | 20,114,419 |                       | 12.73      | %                      | $          | 28,158,738            |       | $ | 12,753,116 |   |

 

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(2) Average capitalization of Transtrend Class DS is $158,105,697.

 

22

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**Aspect Class DS (3)**

 

**March 31, 2011**

 
| ** **               | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
|--------------------------|------------|-----------------------------|------------|----------------------------|------------|------------------------|------------|-----------------------|------------|
| **Market Sector**   | ** ** | **Value at Risk** | ** ** | **Capitalization**         | ** ** | **At Risk**       | ** ** | **At Risk**      | ** ** |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| Agricultural Commodities |       | $                           | 9,602      |                       | 0.01       | %                      | $          | 10,072                |       | $ | 9,271 |   |
| Energy                   |       | 3,090,304                   |       | 2.99                       | %          | 3,241,592              |       | 2,983,876             |       |
| Interest Rates           |       | 27,832                      |       | 0.03                       | %          | 29,195                 |       | 26,874                |       |
| Metals                   |       | 294,068                     |       | 0.28                       | %          | 308,464                |       | 283,941               |       |
| Stock Indices            |       | 1,349,211                   |       | 1.30                       | %          | 1,415,263              |       | 1,302,745             |       |
| Currencies               |       | 1,713,117                   |       | 1.66                       | %          | 1,796,984              |       | 1,654,119             |       |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| TOTAL                    |       | $                           | 6,484,134  |                       | 6.27       | %                      | $          | 6,801,570             |       | $ | 6,260,826 |   |

 

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(3) Average Capitalization of Aspect Class DS is $103,460,336.

 

**Aspect Class DS (3)**

 

**March 31, 2010**

 
| ** **               | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
|--------------------------|------------|-----------------------------|------------|----------------------------|------------|------------------------|------------|-----------------------|------------|
| **Market Sector**   | ** ** | **Value at Risk** | ** ** | **Capitalization**         | ** ** | **At Risk**       | ** ** | **At Risk**      | ** ** |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| Agricultural Commodities |       | $                           | 611,487    |                       | 0.69       | %                      | $          | 687,648               |       | $ | 497,383 |   |
| Energy                   |       | 1,225,904                   |       | 1.38                       | %          | 1,378,592              |       | 997,150               |       |
| Interest Rates           |       | 3,342,184                   |       | 3.77                       | %          | 3,758,457              |       | 2,718,532             |       |
| Metals                   |       | 1,015,024                   |       | 1.15                       | %          | 1,141,446              |       | 825,620               |       |
| Stock Indices            |       | 1,260,332                   |       | 1.42                       | %          | 1,417,307              |       | 1,025,154             |       |
| Currencies               |       | 164,004                     |       | 0.19                       | %          | 184,430                |       | 133,400               |       |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| TOTAL                    |       | $                           | 7,618,935  |                       | 8.60       | %                      | $          | 8,567,880             |       | $ | 6,197,239 |   |

 

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(3) Average Capitalization of Aspect Class DS is $88,559,906.

 

23

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**Winton Class DS (4)**

 

**March 31, 2011**

 
| ** **               | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
|--------------------------|------------|-----------------------------|------------|----------------------------|------------|------------------------|------------|-----------------------|------------|
| **Market Sector**   | ** ** | **Value at Risk** | ** ** | **Capitalization**         | ** ** | **At Risk**       | ** ** | **At Risk**      | ** ** |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| Agricultural Commodities |       | $                           | 826,454    |                       | 0.45       | %                      | $          | 902,551               |       | $ | 765,139 |   |
| Energy                   |       | 1,338,902                   |       | 0.72                       | %          | 1,462,182              |       | 1,239,567             |       |
| Interest Rates           |       | 818,399                     |       | 0.44                       | %          | 893,754                |       | 757,681               |       |
| Metals                   |       | 448,533                     |       | 0.24                       | %          | 489,832                |       | 415,256               |       |
| Stock Indices            |       | 2,923,301                   |       | 1.58                       | %          | 3,192,467              |       | 2,706,419             |       |
| Currencies               |       | 2,822,298                   |       | 1.53                       | %          | 3,082,164              |       | 2,612,909             |       |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| TOTAL                    |       | $                           | 9,177,887  |                       | 4.96       | %                      | $          | 10,022,950            |       | $ | 8,496,971 |   |

 

----

(4) Average capitalization of Winton Class DS is $185,059,977.

 

**Winton Class DS (4)**

 

**March 31, 2010**

 
| ** **               | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
|--------------------------|------------|-----------------------------|------------|----------------------------|------------|------------------------|------------|-----------------------|------------|
| **Market Sector**   | ** ** | **Value at Risk** | ** ** | **Capitalization**         | ** ** | **At Risk**       | ** ** | **At Risk**      | ** ** |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| Agricultural Commodities |       | $                           | 1,351,482  |                       | 0.84       | %                      | $          | 1,567,956             |       | $ | 1,162,046 |   |
| Energy                   |       | 884,608                     |       | 0.55                       | %          | 1,026,300              |       | 760,613               |       |
| Interest Rates           |       | 2,504,481                   |       | 1.56                       | %          | 2,905,637              |       | 2,153,429             |       |
| Metals                   |       | 2,487,213                   |       | 1.55                       | %          | 2,885,603              |       | 2,138,582             |       |
| Stock Indices            |       | 2,477,033                   |       | 1.54                       | %          | 2,873,793              |       | 2,129,829             |       |
| Currencies               |       | 1,638,238                   |       | 1.02                       | %          | 1,900,644              |       | 1,408,607             |       |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| TOTAL                    |       | $                           | 11,343,055 |                       | 7.06       | %                      | $          | 13,159,933            |       | $ | 9,753,106 |   |

 

----

(4) Average capitalization of Winton Class DS is $160,674,996

 

24

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**John Locke Class DS (5)**

 

**March 31, 2011**

 
| ** **               | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
|--------------------------|------------|-----------------------------|------------|----------------------------|------------|------------------------|------------|-----------------------|------------|
| **Market Sector**   | ** ** | **Value at Risk** | ** ** | **Capitalization**         | ** ** | **At Risk**       | ** ** | **At Risk**      | ** ** |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| Agricultural Commodities |       | $                           | 790,910    |                       | 0.55       | %                      | $          | 845,273               |       | $ | 732,787 |   |
| Energy                   |       | 4,802,860                   |       | 3.36                       | %          | 5,132,980              |       | 4,449,902             |       |
| Interest Rates           |       | 2,175,907                   |       | 1.52                       | %          | 2,325,466              |       | 2,016,002             |       |
| Metals                   |       | 1,562,611                   |       | 1.09                       | %          | 1,670,016              |       | 1,447,777             |       |
| Stock Indices            |       | 1,260,769                   |       | 0.88                       | %          | 1,347,426              |       | 1,168,116             |       |
| Currencies               |       | 2,675,309                   |       | 1.87                       | %          | 2,859,194              |       | 2,478,703             |       |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| TOTAL                    |       | $                           | 13,268,366 |                       | 9.27       | %                      | $          | 14,180,355            |       | $ | 12,293,287 |   |

 

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(5) Average capitalization of John Locke Class DS is $142,834,499.

 

**John Locke Class DS (5)**

 

**March 31, 2010**

 
| ** **               | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
|--------------------------|------------|-----------------------------|------------|----------------------------|------------|------------------------|------------|-----------------------|------------|
| **Market Sector**   | ** ** | **Value at Risk** | ** ** | **Capitalization**         | ** ** | **At Risk**       | ** ** | **At Risk**      | ** ** |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| Agricultural Commodities |       | $                           | 301,229    |                       | 0.24       | %                      | $          | 319,492               |       | $ | 291,928 |   |
| Energy                   |       | 286,429                     |       | 0.23                       | %          | 303,794                |       | 277,585               |       |
| Interest Rates           |       | 250,762                     |       | 0.20                       | %          | 265,965                |       | 243,019               |       |
| Metals                   |       | 244,363                     |       | 0.20                       | %          | 259,178                |       | 236,818               |       |
| Stock Indices            |       | 241,826                     |       | 0.20                       | %          | 256,487                |       | 234,359               |       |
| Currencies               |       | 57,512                      |       | 0.05                       | %          | 60,999                 |       | 55,737                |       |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| TOTAL                    |       | $                           | 1,382,121  |                       | 1.12       | %                      | $          | 1,465,915             |       | $ | 1,339,446 |   |

 

----

(5) Average capitalization of John Locke Class DS is $123,356,365.

 

25

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**BlueTrend Class DS (6)**

 

**March 31, 2011**

 
| ** **               | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
|--------------------------|------------|-----------------------------|------------|----------------------------|------------|------------------------|------------|-----------------------|------------|
| **Market Sector**   | ** ** | **Value at Risk** | ** ** | **Capitalization**         | ** ** | **At Risk**       | ** ** | **At Risk**      | ** ** |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| Agricultural Commodities |       | $                           | 44,481     |                       | 0.03       | %                      | $          | 47,822                |       | $ | 39,805 |   |
| Energy                   |       | 5,805,401                   |       | 3.51                       | %          | 6,241,442              |       | 5,195,218             |       |
| Interest Rates           |       | 446,333                     |       | 0.27                       | %          | 479,857                |       | 399,420               |       |
| Metals                   |       | 26,349                      |       | 0.02                       | %          | 28,328                 |       | 23,579                |       |
| Stock Indices            |       | 7,737,659                   |       | 4.68                       | %          | 8,318,832              |       | 6,924,385             |       |
| Currencies               |       | 1,817,756                   |       | 1.10                       | %          | 1,954,287              |       | 1,626,699             |       |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| TOTAL                    |       | $                           | 15,877,979 |                       | 9.61       | %                      | $          | 17,070,568            |       | $ | 14,209,106 |   |

 

----

(6) Average capitalization of BlueTrend Class DS is $165,443,902.

 

**BlueTrend Class DS (6)**

 

**March 31, 2010**

 
| ** **               | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
|--------------------------|------------|-----------------------------|------------|----------------------------|------------|------------------------|------------|-----------------------|------------|
| **Market Sector**   | ** ** | **Value at Risk** | ** ** | **Capitalization**         | ** ** | **At Risk**       | ** ** | **At Risk**      | ** ** |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| Agricultural Commodities |       | $                           | 578,138    |                       | 0.61       | %                      | $          | 798,299               |       | $ | 276,899 |   |
| Energy                   |       | 4,951,589                   |       | 5.26                       | %          | 6,837,201              |       | 2,371,559             |       |
| Interest Rates           |       | 4,110,188                   |       | 4.36                       | %          | 5,675,386              |       | 1,968,571             |       |
| Metals                   |       | 489,640                     |       | 0.52                       | %          | 676,100                |       | 234,513               |       |
| Stock Indices            |       | 2,491,791                   |       | 2.64                       | %          | 3,440,688              |       | 1,193,441             |       |
| Currencies               |       | 167,103                     |       | 0.18                       | %          | 230,737                |       | 80,034                |       |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| TOTAL                    |       | $                           | 12,788,449 |                       | 13.57      | %                      | $          | 17,658,411            |       | $ | 6,125,017 |   |

 

----

(6) Average capitalization of BlueTrend Class DS is $94,225,778.

 

26

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**Tudor Tensor Class DS (7)**

 

**March 31, 2011**

 
| ** **               | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
|--------------------------|------------|-----------------------------|------------|----------------------------|------------|------------------------|------------|-----------------------|------------|
| **Market Sector**   | ** ** | **Value at Risk** | ** ** | **Capitalization**         | ** ** | **At Risk**       | ** ** | **At Risk**      | ** ** |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| Agricultural Commodities |       | $                           | 1,672,377  |                       | 1.26       | %                      | $          | 2,111,920             |       | $ | 1,367,186 |   |
| Energy                   |       | 1,455,737                   |       | 1.10                       | %          | 1,838,342              |       | 1,190,081             |       |
| Interest Rates           |       | 1,627,901                   |       | 1.23                       | %          | 2,055,755              |       | 1,330,827             |       |
| Metals                   |       | 1,565,845                   |       | 1.18                       | %          | 1,977,389              |       | 1,280,095             |       |
| Stock Indices            |       | 482,635                     |       | 0.36                       | %          | 609,484                |       | 394,559               |       |
| Currencies               |       | 5,063,509                   |       | 3.83                       | %          | 6,394,328              |       | 4,139,473             |       |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| TOTAL                    |       | $                           | 11,868,004 |                       | 8.96       | %                      | $          | 14,987,218            |       | $ | 9,702,221 |   |

 

----

(7) Average capitalization of Tudor Tensor Class DS is $132,277,472.

 

**Tudor Tensor Class DS (7)**

 

**March 31, 2010**

 
| ** **               | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
|--------------------------|------------|-----------------------------|------------|----------------------------|------------|------------------------|------------|-----------------------|------------|
| **Market Sector**   | ** ** | **Value at Risk** | ** ** | **Capitalization**         | ** ** | **At Risk**       | ** ** | **At Risk**      | ** ** |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| Agricultural Commodities |       | $                           | 231,909    |                       | 0.22       | %                      | $          | 327,215               |       | $ | 174,880 |   |
| Energy                   |       | 1,124,129                   |       | 1.06                       | %          | 1,586,104              |       | 847,693               |       |
| Interest Rates           |       | 1,439,048                   |       | 1.36                       | %          | 2,030,443              |       | 1,085,170             |       |
| Metals                   |       | 353,361                     |       | 0.33                       | %          | 498,579                |       | 266,466               |       |
| Stock Indices            |       | 2,357,976                   |       | 2.23                       | %          | 3,327,019              |       | 1,778,124             |       |
| Currencies               |       | 1,276,021                   |       | 1.21                       | %          | 1,800,419              |       | 962,233               |       |
|                     |       |                        |       |                       |       |                   |       |                  |       |
| TOTAL                    |       | $                           | 6,782,444  |                       | 6.41       | %                      | $          | 9,569,779             |       | $ | 5,114,566 |   |

 

----

(7) Average capitalization of Tudor Tensor Class DS is $105,723,082.

 

27

----

 

Material Limitations on Value at Risk as an Assessment of Market Risk

 

The face value of the market sector instruments held by the Portfolio Funds is typically many times the applicable maintenance margin requirement (maintenance margin requirements generally ranging between approximately 1% and 10% of contract face value) as well as many times the capitalization of the Portfolio Funds.  The magnitude of the Portfolio Funds’ open positions creates a “risk of ruin” not typically found in most other investment vehicles.  Because of the size of its positions, certain market conditions — unusual, but historically recurring from time to time — could cause the Portfolio Funds to incur severe losses over a short period of time.   The foregoing Value at Risk table — as well as the past performance of the Portfolio Funds — gives no indication of this “risk of ruin.”

 

Non-Trading Risk

 

Foreign Currency Balances; Cash on Deposit with MLPF&S

 

The Portfolio Funds have non-trading market risk on its foreign cash balances not needed for margin. However, these balances (as well as the market risk they represent) are immaterial.

 

The Portfolio Funds also have non-trading market risk on the approximately 90%-95% of its assets which are held in cash at MLPF&S. The value of this cash is not interest rate sensitive, but there is cash flow risk in that if interest rates decline so will the cash flow generated on these monies.

 

Qualitative Disclosures Regarding Primary Trading Risk Exposures

 

The following qualitative disclosures regarding the Portfolio Funds’ market risk exposures — except for (i) those disclosures that are statements of historical fact and (ii) the descriptions of how the Portfolio Funds manage their primary market risk exposures — constitute forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. The Portfolio Funds’ primary market risk exposures as well as the strategies used and to be used by Portfolio Funds’ managers for managing such exposures are subject to numerous uncertainties, contingencies and risks, any one of which could cause the actual results of the Portfolio Funds’ risk controls to differ materially from the objectives of such strategies. Government interventions, defaults and expropriations, illiquid markets, the emergence of dominant fundamental factors, political upheavals, changes in historical price relationships, an influx of new market participants, increased regulation and many other factors could result in material losses as well as in material changes to the risk exposures and the risk management strategies of the Portfolio Funds. There can be no assurance that the Portfolio Funds’ current market exposure and/or risk management strategies will not change materially or that any such strategies will be effective in either the short- or long-term. Investors must be prepared to lose all or substantially all of the time value of their investment in the Fund.

 

Item 4. Controls and Procedures

 

MLAI, the Manager of ML Systematic Momentum FuturesAccess LLC, with the participation of the Manager’s Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13(a) -15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934) with respect to the Fund as of the end of the period covered by this  quarterly report, and, based on this evaluation, has concluded that these disclosure controls and procedures are effective.  No change in internal control over financial reporting (in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Securities Exchange Act of 1934) occurred during the quarter ended March 31, 2011 that has materially affected, or is reasonably likely to materially affect, the Fund’s internal control over financial reporting.

 

28

----

 

PART II - OTHER INFORMATION

 

Item 1.                                    Legal Proceedings

 

None.

 

Item 1A.                          Risk Factors

 

There are no material changes from risk factors as previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2010, filed with the Securities and Exchange Commission on March 15, 2011.

 

Item 2.                                    Unregistered Sales of Equity Securities and Use of Proceeds

 

(a) 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.

 

CLASS A

 
| ** ** | ** ** | **Subscription** | ** ** | ** ** | ** ** |
|------------|------------|------------------|------------|------------|------------|
| ** ** | ** ** | **Amount**       | ** ** | **Units**  | ** ** | **NAV (1)** | ** ** |
| Jan-11     |       | $                | 6,020,020  |       | 4,807,171  |   | $ | 1.2523 |   |
| Feb-11     |       | 2,081,630        |       | 1,687,854  |       | 1.2333 |   |
| Mar-11     |       | 3,967,482        |       | 3,162,348  |       | 1.2546 |   |
| Apr-11     |       | 5,490,727        |       | 4,523,585  |       | 1.2138 |   |
|            |            |                  |            |            |            |  |  |  |  |

 

CLASS C

 
| ** ** | ** ** | **Subscription** | ** ** | ** ** | ** ** |
|------------|------------|------------------|------------|------------|------------|
| ** ** | ** ** | **Amount**       | ** ** | **Units**  | ** ** | **NAV (1)** | ** ** |
| Jan-11     |       | $                | 14,214,345 |       | 11,267,812 |   | $ | 1.2615 |   |
| Feb-11     |       | 14,904,609       |       | 12,007,258 |       | 1.2413 |   |
| Mar-11     |       | 20,393,724       |       | 16,163,688 |       | 1.2617 |   |
| Apr-11     |       | 16,574,435       |       | 13,590,058 |       | 1.2196 |   |
|            |            |                  |            |            |            |  |  |  |  |

 

CLASS D

 
| ** ** | ** ** | **Subscription** | ** ** | ** ** | ** ** |
|------------|------------|------------------|------------|------------|------------|
| ** ** | ** ** | **Amount**       | ** ** | **Units**  | ** ** | **NAV (1)** | ** ** |
| Jan-11     |       | $                | 1,349,999  |       | 912,840    |   | $ | 1.4789 |   |
| Feb-11     |       | 999,999          |       | 685,729    |       | 1.4583 |   |
| Mar-11     |       | 6,299,998        |       | 4,241,281  |       | 1.4854 |   |
| Apr-11     |       | —           |       | —     |       | 1.4388 |   |
|            |            |                  |            |            |            |  |  |  |  |

 

CLASS I

 
| ** ** | ** ** | **Subscription** | ** ** | ** ** | ** ** |
|------------|------------|------------------|------------|------------|------------|
| ** ** | ** ** | **Amount**       | ** ** | **Units**  | ** ** | **NAV (1)** | ** ** |
| Jan-11     |       | $                | 664,870    |       | 501,221    |   | $ | 1.3265 |   |
| Feb-11     |       | 580,495          |       | 444,211    |       | 1.3068 |   |
| Mar-11     |       | 1,825,734        |       | 1,372,939  |       | 1.3298 |   |
| Apr-11     |       | 555,810          |       | 431,865    |       | 1.2870 |   |
|            |            |                  |            |            |            |  |  |  |  |

 

CLASS D1

 
| ** ** | ** ** | **Subscription** | ** ** | ** ** | ** ** |
|------------|------------|------------------|------------|------------|------------|
| ** ** | ** ** | **Amount**       | ** ** | **Units**  | ** ** | **NAV (1)** | ** ** |
| Jan-11     |       | $                | —     |       | —     |   | $ | 1.3199 |   |
| Feb-11     |       | 711,112          |       | 546,379    |       | 1.3015 |   |
| Mar-11     |       | —           |       | —     |       | 1.3257 |   |
| Apr-11     |       | —           |       | —     |       | 1.2841 |   |
|            |            |                  |            |            |            |  |  |  |  |

 

----

(1) Beginning of the month Net Asset Value

 

(b)         Not applicable.

(c)          Not applicable.

 

29

----

 

Item 3.                                    Defaults Upon Senior Securities

 

None.

 

Item 4.                                    (Removed and Reserved)

 

Item 5.                                    Other Information

 

None.

 

Item 6.                                    Exhibits

 

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

 

31.01 and

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

 

Exhibit 31.01

and 31.02:                  Are filed herewith.

 

32.01 and

32.02                                            Section 1350 Certifications

 

Exhibit 32.01

and 32.02                     Are filed herewith.

 

30

----

 

**SIGNATURES**

 

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

 

 

ML SYSTEMATIC MOMENTUM FUTURESACCESS LLC

 

 
|                      | By:    | MERRILL   LYNCH ALTERNATIVE                    |
|---------------------------|--------|------------------------------------------------|
|                      |   | INVESTMENTS   LLC                              |
|                      |   | (Manager)                                      |
|                      |   |
|                      |   |
| Date: May 13, 2011   | By:    | /s/ JUSTIN C. FERRI                            |
|                      |   | Justin   C. Ferri                              |
|                      |   | Chief   Executive Officer and President        |
|                      |   | (Principal   Executive Officer)                |
|                      |   |
|                      |   |
| Date:   May 13, 2011 | By:    | /s/   BARBRA E. KOCSIS                         |
|                      |   | Barbra   E. Kocsis                             |
|                      |   | Chief   Financial Officer                      |
|                      |   | (Principal   Financial and Accounting Officer) |

 

31

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