** **

**UNITEDSTATES SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-Q**

 

**(Mark One)**

 

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

 

**For the quarterly periodended June 30, 2008**

** **

**OR**

 

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

 

**For thetransition period from****                ****to                     **

 

**Commission File Number 0-52505**

 

**ML SYSTEMATIC MOMENTUM LLC**

(Exact Name of Registrant as

specified in its charter)

 

| **Delaware**                    | ** ** | **30-0408228**                    |
|---------------------------------|------------|-----------------------------------|
| (State or other jurisdiction of |       | (IRS Employer Identification No.) |
| incorporation or organization)  |       |                              |

 

**c/o Merrill Lynch AlternativeInvestments LLC**

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

**New York, New York 10281**

(Address of principalexecutive offices)(Zip Code)

 

**212-236-1974**

(Registrant’s telephonenumber, including area code)

 

**Hopewell Corporate Campus,Building No. 2 1200 Merrill Lynch Drive-First floor, Pennington, New Jersey 08534**

(Former name, former address and former fiscal year, if changed sincelast report)

 

Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days.

Yesx  No o

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, or a non-accelerated filer. See definition of “acceleratedfiler and large accelerated filer” in Rule 12b-2 of the Exchange Act.(Check one):

 
| Large  accelerated filer o |   | Accelerated filer o |   | Non-accelerated filer x |   | Smaller Reporting Company o |
|----------------------------|--------|---------------------|--------|-------------------------|--------|-----------------------------|

 

Indicate by check mark whether registrant is a shell company (asdefined by Rule 12b-2 of the Exchange Act).

Yes o  No x

 

Indicateby check mark whether the registrant has filed all documents and reportsrequired to be filed by Sections 12, 13 or 15(d) of the Securities ExchangeAct of 1934 subsequent to the distribution of securities under a plan confirmedby a court.

Yes o  No o

 

Thelimited partnership units of the registrant are not publicly traded.Accordingly, there is no aggregate market value for registrant’s outstandingequity that is readily determinable.

 

 

 

----

 

**ML SYSTEMATIC MOMENTUM LLC**

 

QUARTERLY REPORTFOR JUNE 30, 2008 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 |       | 11       |
|         |                                                                                        |       |     |
| Item 3.      | Quantitative  and Qualitative Disclosures About Market Risk                                 |       | 14       |
|         |                                                                                        |       |     |
| Item 4.      | Controls and  Procedures                                                                    |       | 21       |
|         |                                                                                        |       |     |
| PART II |
|         |                                                                                        |       |     |
| Item 1.      | Legal Proceedings                                                                           |       | 22       |
|         |                                                                                        |       |     |
| Item  1A.    | Risk Factors                                                                                |       | 22       |
|         |                                                                                        |       |     |
| Item 2.      | Unregistered  Sales of Equity Securities and Use of Proceeds                                |       | 24       |
|         |                                                                                        |       |     |
| Item 3.      | Defaults Upon  Senior Securities                                                            |       | 25       |
|         |                                                                                        |       |     |
| Item 4.      | Submission of  Matters to a Vote of Security Holders                                        |       | 25       |
|         |                                                                                        |       |     |
| Item 5.      | Other Information                                                                           |       | 25       |
|         |                                                                                        |       |     |
| Item 6.      | Exhibits                                                                                    |       | 25       |

 

----

 

PART I- FINANCIAL INFORMATION

 

Item 1.  Financial Statements

 

MLSYSTEMATIC MOMENTUM LLC

(aDelaware Limited Liability Company)

 

STATEMENTSOF FINANCIAL CONDITION

 
| ** **                                                                                          | ** ** | **June 30,**    | ** **  | **December 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------|------------|-----------------|-------------|-----------------------|------------|
| ** **                                                                                          | ** ** | **2008**        | ** **  | **2007**              | ** ** |
| ** **                                                                                          | ** ** | **(unaudited)** | ** **  | ** **            | ** ** |
| **ASSETS:**                                                                                         |       |            |        |                  |       |
| Cash                                                                                                |       | $               | 415,089     |                  | $          | 94,318 |   |
| Investments in Portfolio Funds (cost $311,962,473 for 2008 and  $106,513,819 for 2007)              |       | 368,147,727     |        | 121,063,894           |       |
| Deferred initial offering costs                                                                     |       | —          |        | 33,750                |       |
| Receivable from Portfolio Fund                                                                      |       | —          |        | 34,775                |       |
| **TOTAL ASSETS**                                                                                    |       | $               | 368,562,816 |                  | $          | 121,226,737 |   |
| ** **                                                                                          |       |            |        |                  |       |
| **LIABILITIES AND MEMBERS’ CAPITAL**                                                           |       |            |        |                  |       |
| LIABILITIES:                                                                                        |       |            |        |                  |       |
| Sponsor fee payable                                                                                 |       | $               | 553,110     |                  | $          | 177,810 |   |
| Redemptions payable                                                                                 |       | 877,601         |        | 505,214               |       |
| Other                                                                                               |       | 632,122         |        | 319,636               |       |
| Total liabilities                                                                                   |       | 2,062,833       |        | 1,002,660             |       |
|                                                                                                |       |            |        |                  |       |
| MEMBERS’ CAPITAL:                                                                              |       |            |        |                  |       |
| Members’ Interest (289,387,382 and 111,518,320 Units outstanding, unlimited  Units authorized) |       | 366,499,983     |        | 120,224,077           |       |
| Total members’ capital                                                                         |       | 366,499,983     |        | 120,224,077           |       |
|                                                                                                |       |            |        |                  |       |
| **TOTAL LIABILITIES AND MEMBERS’ CAPITAL**                                                     |       | $               | 368,562,816 |                  | $          | 121,226,737 |   |
|                                                                                                |       |            |        |                  |       |
| **NET  ASSET VALUE PER UNIT (NOTE 4)**                                                              |       |            |        |                  |       |

 

See notes to financial statements.

 

1

----

 

ML SYSTEMATIC MOMENTUM LLC

(a Delaware LimitedLiability Company)

 

STATEMENTSOF OPERATIONS

(unaudited)

 
| ** **                                   | ** ** | ** **                      | ** ** | ** **                  | ** ** | **For the period April 2,**                | ** ** |
|----------------------------------------------|------------|---------------------------------|------------|-----------------------------|------------|--------------------------------------------|------------|
| ** **                                   | ** ** | **For the three**     | ** ** | **For the six**   | ** ** | **2007 (commencement of**        | ** ** |
| ** **                                   | ** ** | **months ended June** | ** ** | **months ended**       | ** ** | **operations) to June 30,** | ** ** |
| ** **                                   | ** ** | **30, 2008**               | ** ** | **June 30, 2008** | ** ** | **2007**                                   | ** ** |
| **TRADING PROFIT (LOSS):**                   |       |                            |       |                        |       |                                       |       |
| ** **                                   |       |                            |       |                        |       |                                       |       |
| Realized                                     |       | $                               | —     |                        | $          | 59,031                                     |       | $ | 96,964 |   |
| Change in unrealized                         |       | 28,052,291                      |       | 41,635,179                  |       | 9,636,185                                  |       |
|                                         |       |                            |       |                        |       |                                       |       |
| Total trading profit (loss)                  |       | 28,052,291                      |       | 41,694,210                  |       | 9,733,149                                  |       |
|                                         |       |                            |       |                        |       |                                       |       |
| **INVESTMENT INCOME:**                       |       |                            |       |                        |       |                                       |       |
| Interest                                     |       | 75,127                          |       | 77,531                      |       | —                                     |       |
|                                         |       |                            |       |                        |       |                                       |       |
| **EXPENSES:**                                |       |                            |       |                        |       |                                       |       |
| Sponsor fee                                  |       | 1,382,240                       |       | 2,062,530                   |       | 775                                        |       |
| Other                                        |       | 162,346                         |       | 545,590                     |       | 100,367                                    |       |
|                                         |       |                            |       |                        |       |                                       |       |
| Total expenses                               |       | 1,544,586                       |       | 2,608,120                   |       | 101,142                                    |       |
|                                         |       |                            |       |                        |       |                                       |       |
| **NET INVESTMENT INCOME (LOSS)**             |       | (1,469,459                      | )          | (2,530,589                  | )          | (101,142                                   | )          |
| ** **                                   |       |                            |       |                        |       |                                       |       |
| **NET INCOME (LOSS)**                        |       | $                               | 26,582,832 |                        | $          | 39,163,621                                 |       | $ | 9,632,007 |   |
| ** **                                   |       |                            |       |                        |       |                                       |       |
| **NET INCOME (LOSS) PER UNIT:**              |       |                            |       |                        |       |                                       |       |
| ** **                                   |       |                            |       |                        |       |                                       |       |
| Weighted average number of Units outstanding |       |                            |       |                        |       |                                       |       |
| Class A**                               |       | 16,746,116                      |       | 11,724,200                  |       | —                                     |       |
| Class C*                                |       | 154,464,636                     |       | 117,093,678                 |       | 350,891                                    |       |
| Class D                                 |       | 24,517,703                      |       | 20,823,339                  |       | 80,000,000                                 |       |
| Class DI***                             |       | 14,008,975                      |       | 9,503,371                   |       | —                                     |       |
| Class I*                                |       | 41,200,934                      |       | 33,086,451                  |       | 11,186                                     |       |
|                                         |       |                            |       |                        |       |                                       |       |
| Net income (loss) per weighted average Unit  |       |                            |       |                        |       |                                       |       |
| Class A**                               |       | $                               | 0.1026     |                        | $          | 0.1929                                     |       | — |   |
| Class C*                                |       | $                               | 0.1025     |                        | $          | 0.1948                                     |       | $ | 0.0430 |   |
| Class D                                 |       | $                               | 0.1247     |                        | $          | 0.2366                                     |       | $ | 0.1202 |   |
| Class DI***                             |       | $                               | 0.1324     |                        | $          | 0.2484                                     |       | $ | — |   |
| Class I*                                |       | $                               | 0.0999     |                        | $          | 0.2056                                     |       | $ | 0.0442 |   |

 

----

* Units Issued on June 1, 2007.

** Units Issued on July 1, 2007.

*** Class DI waspreviously known as Class D-SD and issued on July 1, 2007. 

See notes to financialstatements.

 

2

----

 

ML SYSTEMATIC MOMENTUM LLC

(a Delaware Limited Liability Company)

 

STATEMENTS OF CHANGES INMEMBERS’ CAPITAL For the six months ended June 30, 2007 and for theperiod April 2, 2007 (commencement of operations) to June 30, 2007(unaudited)

 
| ** **                | ** ** | ** **                | ** ** | ** **        | ** ** | ** **      | ** ** | **Members’ Capital** | ** ** | **Members’ Capital**  | ** ** | ** **        | ** ** | ** **      | ** ** | **Members’ Capital** | ** ** |
|---------------------------|------------|---------------------------|------------|-------------------|------------|-----------------|------------|--------------------------------|------------|---------------------------------|------------|-------------------|------------|-----------------|------------|--------------------------------|------------|
| ** **                | ** ** | **Initial Offering** | ** ** | **Subscriptions** | ** ** | **Redemptions** | ** ** | **June 30, 2007**    | ** ** | **December 31, 2007** | ** ** | **Subscriptions** | ** ** | **Redemptions** | ** ** | **June 30, 2008**    | ** ** |
|                      |       |                      |       |              |       |            |       |                           |       |                            |       |              |       |            |       |                           |       |
| Class A**            |       | —                    |       | —            |       | —          |       | —                         |       | 5,078,646                       |       | 17,890,903        |       | (2,710,871      | )          | 20,258,678                     |       |
| Class C*             |       | —                    |       | 350,891           |       | —          |       | 350,891                        |       | 69,888,701                      |       | 133,450,969       |       | (24,047,852     | )          | 179,291,818                    |       |
| Class D              |       | 80,000,000                |       | —            |       | (9,094,198      | )          | 70,905,802                     |       | 16,803,705                      |       | 11,022,530        |       | (644,127        | )          | 27,182,108                     |       |
| Class DI***          |       | —                    |       | —            |       | —          |       | —                         |       | 4,990,154                       |       | 14,765,382        |       | —          |       | 19,755,536                     |       |
| Class I*             |       | —                    |       | 11,186            |       | —          |       | 11,186                         |       | 14,757,114                      |       | 29,721,479        |       | (1,579,351      | )          | 42,899,242                     |       |
|                      |       |                      |       |              |       |            |       |                           |       |                            |       |              |       |            |       |                           |       |
| Total Members’ Units |       | 80,000,000                |       | 362,077           |       | (9,094,198      | )          | 71,267,879                     |       | 111,518,320                     |       | 206,851,263       |       | (28,982,201     | )          | 289,387,382                    |       |

 

----

* UnitsIssued on June 1, 2007.

** Units Issued on July 1,2007.

*** Class DI waspreviously known as Class D-SD and issued on July 1, 2007.

 

See notes to financialstatements.

 

3

----

 

MLSYSTEMATIC MOMENTUM LLC

(aDelaware Limited Liability Company)

 

STATEMENTSOF CHANGES IN MEMBERS’ CAPITAL

Forthe six months ended June 30, 2008 and for the

periodApril 2, 2007 (commencement of operations) to June 30, 2007

(unaudited)

 
| ** **                    | ** ** | ** **                | ** ** | ** **        | ** ** | ** **      | ** ** | ** **                      | ** **  | **Members’ Capital** | ** ** | **Members’ Capital**  | ** ** | ** **        | ** ** | ** **      | ** ** | ** **                      | ** ** | **Members’ Capital** | ** **  |
|-------------------------------|------------|---------------------------|------------|-------------------|------------|-----------------|------------|---------------------------------|-------------|--------------------------------|------------|---------------------------------|------------|-------------------|------------|-----------------|------------|---------------------------------|------------|--------------------------------|-------------|
| ** **                    | ** ** | **Initial Offering** | ** ** | **Subscriptions** | ** ** | **Redemptions** | ** ** | **Net Income (loss)** | ** **  | **June 30, 2007**    | ** ** | **December 31, 2007** | ** ** | **Subscriptions** | ** ** | **Redemptions** | ** ** | **Net Income (loss)** | ** ** | **June 30, 2008**    | ** **  |
|                          |       |                      |       |              |       |            |       |                            |        |                           |       |                            |       |              |       |            |       |                            |       |                           |        |   |   |   |   |   |   |   |   |   |   |
| Class A**                |       | $                         | —     |              | $          | —          |       | $                               | —      |                           | $          | —                          |       | $                 | —     |            | $          | 5,217,419                       |       | $                              | 20,214,417  |   | $ | (3,053,721 | ) | $ | 2,261,936 |   | $ | 24,640,051 |   |
| Class C*                 |       | —                    |       | 350,891           |       | —          |       | 15,074                          |        | 365,965                        |       | 74,531,573                      |       | 154,755,299       |       | (26,883,355     | )          | 22,809,551                      |       | 225,213,068                    |        |
| Class D                  |       | 80,000,000                |       | —            |       | (10,190,958     | )          | 9,616,439                       |        | 79,425,481                     |       | 19,442,860                      |       | 14,023,255        |       | (848,637        | )          | 4,927,142                       |       | 37,544,620                     |        |
| Class DI***              |       | —                    |       | —            |       | —          |       | —                          |        | —                         |       | 5,165,016                       |       | 16,865,338        |       | —          |       | 2,361,020                       |       | 24,391,374                     |        |
| Class I*                 |       | —                    |       | 11,186            |       | —          |       | 494                             |        | 11,680                         |       | 15,867,209                      |       | 33,883,944        |       | (1,844,255      | )          | 6,803,972                       |       | 54,710,870                     |        |
|                          |       |                      |       |              |       |            |       |                            |        |                           |       |                            |       |              |       |            |       |                            |       |                           |        |
| Total Members’  Interest |       | $                         | 80,000,000 |              | $          | 362,077         |       | $                               | (10,190,958 | )                              | $          | 9,632,007                       |       | $                 | 79,803,126 |            | $          | 120,224,077                     |       | $                              | 239,742,253 |   | $ | (32,629,968 | ) | $ | 39,163,621 |   | $ | 366,499,983 |   |

 

----

* Units Issued on June 1,2007.

** Units Issued on July 1,2007.

*** Class DI waspreviously known as Class D-SD and issued on July 1, 2007.

 

Seenotes to financial statements.

 

4

----

 

ML SYSTEMATIC MOMENTUM LLC

(a Delaware Limited Liability Company)

 

NOTES TO FINANCIAL STATEMENTS

(unaudited)

 

1.                           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

ML Systematic Momentum FuturesAccess LLC (the “Fund”) was organizedunder the Delaware Limited Liability Company Act on March 8, 2007 andcommenced trading activities on April 2, 2007. The Fund issues new unitsof limited liability company interest (“Units”) at Net Asset Value per Unit asof the beginning of each calendar month.

 

Merrill Lynch Alternative Investments LLC (“MLAI”), an indirectwholly-owned subsidiary of Merrill Lynch & Co., Inc. (“MerrillLynch”), is the Sponsor (“Sponsor”) and Manager (“Manager”) of the Fund.

 

In the opinion of management, the financial statements contain alladjustments necessary to present fairly the financial position of the Fund asof June 30, 2008, and the results of its operations for the three and sixmonths ended June 30, 2008 and for the period April 2, 2007(commencement of operations) to June 30, 2007. However, the operatingresults for the interim period may not be indicative of the results for thefull year.

 

Certain information and footnote disclosures normally included inannual financial statements prepared in accordance with accounting principlesgenerally accepted in the United States of America (“U.S. GAAP”) have beenomitted. It is suggested that these financial statements be read in conjunctionwith the financial statements and notes thereto included in the Fund’s AnnualReport on Form 10-K filed with the Securities and Exchange Commission forthe period ended December 31, 2007.

 

The preparation of financial statements in conformity with U.S. GAAPrequires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities and disclosure of contingent assets andliabilities at the date of the financial statements and the reported amounts ofrevenues and expenses during the reporting period. Actual results could differfrom those estimates.

 

Certain prior year items have been reclassified to conform to thecurrent year presentation.

 

2.                           INVESTMENTS IN UNDERLYING FUNDS

 

The seven funds (“Portfolio Funds”) in which the Fund is invested as ofJune 30, 2008 are: ML Altis FuturesAccess LLC (“Altis”), ML AspectFuturesAccess LLC (“Aspect”), ML Chesapeake FuturesAccess LLC (“Chesapeake”),ML GSA FuturesAccess LLC (“GSA”), ML John Locke FuturesAccess LLC (“John Locke”)ML Transtrend DTP Enhanced FuturesAccess LLC (“Transtrend”) and ML WintonFuturesAccess LLC (“Winton”). MLAI, in its discretion may, change the PortfolioFunds at any time. MLAI, also at its discretion may vary the percentage of theFund’s total portfolio allocated to the different Portfolio Funds. There is nopre-established range for the minimum and maximum allocations that may be madeto any given Portfolio Fund.

 

5

----

 

AtJune 30, 2008, Investments in Portfolio Funds at fair value are asfollows:

 
| ** **                                                               | ** ** | ** **          | ** **  | **Percentage of Members’** | ** ** |
|--------------------------------------------------------------------------|------------|---------------------|-------------|-------------------------------------------|------------|
| ** **                                                               | ** ** | **Fair Value** | ** **  | **Capital**                               | ** ** |
| Altis                                                                    |       | $                   | 59,649,436  |                                      | 16.28      | % |
| Transtrend                                                               |       | 53,755,890          |        | 14.67                                     | %          |
| Aspect                                                                   |       | 56,145,731          |        | 15.32                                     | %          |
| Chesapeake                                                               |       | 57,152,984          |        | 15.58                                     | %          |
| Winton                                                                   |       | 55,035,764          |        | 15.02                                     | %          |
| John Locke                                                               |       | 43,285,272          |        | 11.81                                     | %          |
| GSA                                                                      |       | 43,122,650          |        | 11.77                                     | %          |
|                                                                     |       |                |        |                                      |       |
| Total Investments in Portfolio Funds at  Fair Value  (Cost $311,962,473) |       | $                   | 368,147,727 |                                      | 100.45     | % |

 

AtDecember 31, 2007, Investments in Portfolio Funds at fair value are asfollows:

 
| ** **                                                              | ** ** | ** **     | ** **  | **Percentage of Members’** | ** ** |
|-------------------------------------------------------------------------|------------|----------------|-------------|-------------------------------------------|------------|
| ** **                                                              | ** ** | **Fair Value** | ** **  | **Capital**                               | ** ** |
| Altis                                                                   |       | $              | 18,378,819  |                                      | 15.18      | % |
| Transtrend                                                              |       | 17,927,148     |        | 14.81                                     | %          |
| Aspect                                                                  |       | 18,235,954     |        | 15.06                                     | %          |
| Chesapeake                                                              |       | 18,829,228     |        | 15.55                                     | %          |
| Winton                                                                  |       | 17,829,738     |        | 14.73                                     | %          |
| John Locke                                                              |       | 14,914,443     |        | 12.32                                     | %          |
| GSA                                                                     |       | 14,948,564     |        | 12.35                                     | %          |
|                                                                    |       |           |        |                                      |       |
| Total Investments in Portfolio Funds at  Fair Value (Cost $106,513,819) |       | $              | 121,063,894 |                                      | 100.00     | % |

 

6

----

 

3.                           FAIR VALUE OF INVESTMENTS

 

In September 2006, the Financial Accounting Standards Board (“FASB”)issued Statement of Financial Accounting Standards No. 157, Fair ValueMeasurement (“FAS 157”). FAS 157 defines fair value, establishes a frameworkfor measuring fair value and expands disclosures about fair value measurements.The Fund adopted FAS 157 as of January 1, 2008. The adoption of FAS 157did not have a material impact on the Fund’s financial statements.

 

Fair value of an investment is the amount that would be received tosell the investment in an orderly transaction between market participants atthe measurement date (i.e. the exit price).

 

FAS 157 established a hierarchal disclosure framework which prioritizesand ranks the level of market price observability used in measuring investmentsat fair value. Market price observability is impacted by a number of factors,including the type of investment and the characteristics specific to theinvestment. Investments with readily available active quoted prices or forwhich fair value can be measured from actively quoted prices generally willhave a higher degree of market price observability and a lesser degree ofjudgment used in measuring fair value.

 

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

 

Level I – Quoted prices are available in active markets for identicalinvestments as of the reporting date. The type of investments included in LevelI are publicly traded investments.

 

Level II – Pricing inputs are other than quoted prices in activemarkets, which are either directly or indirectly observable as of the reportingdate, and fair value is determined through the use of models or other valuationmethodologies. Investments which are generally included in this category areinvestments valued using market data.

 

Level III – Pricing inputs are unobservable including the Fund’s ownassumptions in determining the fair value of investments.

 

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

 

The following table summarizes the valuation of the Fund’s investmentby the above FAS 157 fair value hierarchy levels as of June 30, 2008:

 
| ** **                    | ** ** | **Total** | ** **  | **Level I** | ** ** | **Level II** | ** ** | **Level III** | ** ** |
|-------------------------------|------------|-----------|-------------|------------------|------------|-------------------|------------|--------------------|------------|
| Investment in Portfolio Funds |       | $         | 368,147,727 |             | N/A        |              | $          | 368,147,727        |       | N/A |   |
|                               |            |           |             |                  |            |                   |            |                    |            |  |  |

 

The valuation of the Portfolio Funds’ investments by FAS 157 fair valuehierarchy levels as of June 30, 2008 are Level I and Level II.

 

7

----

 

4.                           NET ASSET VALUE PER UNIT

 

For financial reporting purposes, in conformity with U.S. GAAP, theFund amortizes over a twelve- month period the initial offering costs forpurposes of determining Net Asset Value. Such costs initially were paid byMLAI. For all other purposes, including computing Net Asset Value for purposesof member subscription and redemption activity, such costs are amortized over60 months. Consequently, the Net Asset Value and Net Asset Value per Unit ofthe different Classes for financial reporting purposes and for all otherpurposes at June 30, 2008 and December 31, 2007 are as follows:

 

June 30, 2008

 
| ** **    | ** ** | **Net Asset Value** | ** **  | ** **                   | ** ** | **Net Asset Value per Unit** | ** ** |
|---------------|------------|-------------------------------|-------------|------------------------------|------------|--------------------------------------------------|------------|
| ** **    | ** ** | **All Other**            | ** **  | ** **                   | ** ** | ** **                                       | ** ** | **All Other** | ** ** | **Financial** | ** ** |
| ** **    | ** ** | **Purposes**                  | ** **  | **Financial Reporting** | ** ** | **Number of Units**                    | ** ** | **Purposes** | ** ** | **Reporting** | ** ** |
| Class A  |       | $                             | 24,643,126  |                         | $          | 24,640,051                                       |       | 20,258,678 |   | $ | 1.2164 |   | $ | 1.2163 |   |
| Class C  |       | 225,254,154                   |        | 225,213,068                  |       | 179,291,818                                      |       | 1.2564 |   | 1.2561 |   |
| Class D  |       | 37,609,992                    |        | 37,544,620                   |       | 27,182,108                                       |       | 1.3836 |   | 1.3812 |   |
| Class DI |       | 24,394,602                    |        | 24,391,374                   |       | 19,755,536                                       |       | 1.2348 |   | 1.2347 |   |
| Class I  |       | 54,721,652                    |        | 54,710,870                   |       | 42,899,242                                       |       | 1.2756 |   | 1.2753 |   |
|          |       | $                             | 366,623,526 |                         | $          | 366,499,983                                      |       | 289,387,382 |   |   |   |   |   |
|               |            |                               |             |                              |            |                                                  |            |  |  |  |  |  |  |  |  |

 

December 31, 2007

 
| ** **    | ** ** | **Net Asset Value** | ** **  | ** **                   | ** ** | **Net Asset Value per Unit** | ** ** |
|---------------|------------|-------------------------------|-------------|------------------------------|------------|--------------------------------------------------|------------|
| ** **    | ** ** | **All Other**            | ** **  | ** **                   | ** ** | ** **                                       | ** ** | **All Other** | ** ** | **Financial** | ** ** |
| ** **    | ** ** | **Purposes**                  | ** **  | **Financial Reporting** | ** ** | **Number of Units**                    | ** ** | **Purposes** | ** ** | **Reporting** | ** ** |
| Class A  |       | $                             | 5,219,799   |                         | $          | 5,217,419                                        |       | 5,078,646 |   | $ | 1.0278 |   | $ | 1.0273 |   |
| Class C  |       | 74,560,703                    |        | 74,531,573                   |       | 69,888,701                                       |       | 1.0668 |   | 1.0664 |   |
| Class D  |       | 19,497,806                    |        | 19,442,860                   |       | 16,803,705                                       |       | 1.1603 |   | 1.1571 |   |
| Class DI |       | 5,167,584                     |        | 5,165,016                    |       | 4,990,154                                        |       | 1.0356 |   | 1.0350 |   |
| Class I  |       | 15,872,806                    |        | 15,867,209                   |       | 14,757,114                                       |       | 1.0756 |   | 1.0752 |   |
|          |       | $                             | 120,318,698 |                         | $          | 120,224,077                                      |       | 111,518,320 |   |   |   |   |   |
|               |            |                               |             |                              |            |                                                  |            |  |  |  |  |  |  |  |  |

 

8

----

 

5.                           MARKET, CREDIT AND CONCENTRATION RISKS

 

The nature of this Fund has certain risks, which cannot be presented onthe financial statements. Additionally, the Fund invests in other commodityfunds with similar market risk as mentioned. The following summarizes some ofthose risks.

 

Market Risk

 

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

 

Credit Risk

 

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

 

The credit risk associated with these instruments from counterpartynonperformance is the Net unrealized profit, if any, included in the Statementsof Financial Condition of the Portfolio Funds. The Portfolio Funds attempt tomitigate this risk by dealing exclusively with Merrill Lynch entities asclearing brokers.

 

The Portfolio Funds, in their normal course of business, enter intovarious contracts, with Merrill Lynch Pierce, Fenner & Smith Inc., (“MLPF&S”)acting as their commodity broker. Pursuant to the brokerage arrangement withMLPF&S (which includes a netting arrangement), to the extent that suchtrading results in receivables from and payables to MLPF&S, thesereceivables and payables are offset and reported as a net receivable or payableand included in Equity in commodity futures trading accounts in the Statementsof Financial Condition of the Portfolio Funds.

 

Concentration Risk

 

The Fund’s investments in the Portfolio Funds are subject to the marketand credit risk of the Portfolio Funds. Because the majority of the Fund’scapital is invested in the Portfolio Funds, any changes in the marketconditions that would adversely affect the Portfolio Funds could significantlyimpact the solvency of the Fund.

 

9

----

 

6.                           RECENT ACCOUNTING PRONOUNCEMENTS

 

In March 2008, the FASB released Statement of Financial AccountingStandards No. 161, Disclosures about Derivative Instruments and HedgingActivities – an amendment to FASB Statement No. 133 (“FAS 161”). FAS 161requires qualitative disclosures about objectives and strategies for usingderivatives, quantitative disclosures about fair value amounts of and gains andlosses on derivative instruments, and disclosures about credit-risk relatedcontingent features in derivative agreements. The application of FAS 161 isrequired for fiscal years beginning after November 15, 2008 and interimperiods within those fiscal years. Currently, the Fund is evaluating theimplications of FAS 161 on its financial statements.

 

In May 2008, the FASB issued Statement of Financial AccountingStandards No. 162, “*The Hierarchy of**Generally Accepted Accounting Principles*”(“FAS 162”). FAS 162 identifies the sources of accounting**principles and the framework forselecting the accounting principles used in preparing financial statements ofnongovernmental entities that are presented in conformity with U.S. GAAP.Currently, U.S. GAAP hierarchy is provided in the American Institute ofCertified Public Accountants U.S. Auditing Standards (“AU”) Section 411, “*The Meaning of Present Fairly in Conformity With GenerallyAccepted**Accounting Principles*”(“AU Section 411”). FAS 162 is effective 60 days following the SEC’sapproval**of the Public CompanyAccounting Oversight Board’s amendments to AU Section 411. The Fund doesnot expect the adoption of FAS 162 to have an impact on its financialstatements.

 

10

----

 

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

 

MONTH-END NET ASSET VALUEPER UNIT(NON U.S. GAAP)

 

MLAIbelieves that the Net Asset Value used to calculate subscription and redemptionvalue and to report performance to investors throughout the year is the mostvaluable to the Members of the Fund. Therefore, the charts below referencingNet Asset Value and performance measurements are based on the Net Asset Valuefor all other purposes, as discussed in Note 4 to the financial statements.

 

Class A

 

| ** ** | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** | **Apr.** | ** ** | **May** | ** ** | **Jun.** | ** ** |
|------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|---------|------------|----------|------------|
| 2007       |       | N/A      |       | N/A      |       | N/A      |       | N/A      |       | N/A     |       | N/A      |       |
| 2008       |       | $        | 1.0416     |     | $          | 1.1508   |       | $        | 1.1243     |    | $          | 1.1183   |       | $ | 1.1597 |   | $ | 1.2164 |   |
|            |            |          |            |          |            |          |            |          |            |         |            |          |            |  |  |  |  |  |  |

 

Class C

 

| ** ** | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** | **Apr.** | ** ** | **May** | ** ** | **Jun.** | ** ** |
|------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|---------|------------|----------|------------|
| 2007       |       | N/A      |       | N/A      |       | N/A      |       | N/A      |       | N/A     |       | $        | 1.0432     |   |
| 2008       |       | $        | 1.0803     |     | $          | 1.1926   |       | $        | 1.1642     |    | $          | 1.1570   |       | $ | 1.1988 |   | $ | 1.2564 |   |
|            |            |          |            |          |            |          |            |          |            |         |            |          |            |  |  |  |  |  |  |

 

Class D

 

| ** ** | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** | **Apr.** | ** ** | **May** | ** ** | **Jun.** | ** ** |
|------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|---------|------------|----------|------------|
| 2007       |       | N/A      |       | N/A      |       | N/A      |       | $        | 1.0339     |    | $          | 1.0719   |       | $ | 1.1206 |   |
| 2008       |       | $        | 1.1774     |     | $          | 1.3025   |       | $        | 1.2741     |    | $          | 1.2689   |       | $ | 1.3175 |   | $ | 1.3836 |   |
|            |            |          |            |          |            |          |            |          |            |         |            |          |            |  |  |  |  |  |  |

 

Class I

 

| ** ** | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** | **Apr.** | ** ** | **May** | ** ** | **Jun.** | ** ** |
|------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|---------|------------|----------|------------|
| 2007       |       | N/A      |       | N/A      |       | N/A      |       | N/A      |       | N/A     |       | $        | 1.0444     |   |
| 2008       |       | $        | 1.0905     |     | $          | 1.2052   |       | $        | 1.1779     |    | $          | 1.1719   |       | $ | 1.2157 |   | $ | 1.2756 |   |
|            |            |          |            |          |            |          |            |          |            |         |            |          |            |  |  |  |  |  |  |

 

Class DI

 

| ** ** | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** | **Apr.** | ** ** | **May** | ** ** | **Jun.** | ** ** |
|------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|---------|------------|----------|------------|
| 2007       |       | N/A      |       | N/A      |       | N/A      |       | N/A      |       | N/A     |       | N/A      |       |
| 2008       |       | $        | 1.0508     |     | $          | 1.1624   |       | $        | 1.1371     |    | $          | 1.1324   |       | $ | 1.1758 |   | $ | 1.2348 |   |
|            |            |          |            |          |            |          |            |          |            |         |            |          |            |  |  |  |  |  |  |

 

11

----

 

Performance Summary

 

January 1, 2008 to June 30,2008

 

January 1, 2008 to March 31,2008

 

TheFund is a fund of funds investing in seven separate Portfolio Funds which aredomiciled at Merrill Lynch FuturesAccess Program. The Fund posted gains for thequarter.

 

January wasa positive month for the Fund, despite dramatic declines in global stockindices, illustrating the fund’s low correlation with equities over a marketcycle. Managers had long positions in fixed income and precious metals, both ofwhich benefited from fears of a US recession, as well as sharp Fed rate cutstotaling 1.25% for the month. The continuing rally in grain markets was anothersource of profit for managers. Losses came primarily from energy markets as oilprices weakened and natural gas rebounded. Aspect was the top performer withinthe Fund, gaining 4.7%, while Altis was the main underperformer, declining-4.6% for the month. Going into February, commodities and fixed income are thetwo largest risk allocations for most managers. CTAs continue to be long inmost fixed income markets, while in commodities, they generally have longpositions in grains, softs and precious metals, and shorts in livestock. Energyexposure has been cut back significantly after January’s losses. In equities,there is a small short bias for most managers, while in FX there is a short USDtilt against most currencies except the GBP.

 

February wasa very strong month for the Fund and the Fund continue to remain up for theyear 2008. As a point of comparison, the Newedge CTA Index (formerly CalyonFinancial Barclay Index) returned 4.6% for the month and is up 6.3% for theyear. The bulk of returns were earned in surging commodity markets. Grains andsofts rallied strongly due to low inventories and positive forecasts of demand.Energy and metals climbed as these sectors are perceived as an inflation hedge.The other profitable trades included short currency positions against the USD.The top performer within the vertical in February was Altis, which gained24.3%. Altis is a medium to short term manager, with higher than averagecommodity exposure and higher than average leverage. The bottom performer wasGSA, which gained 2.1%. GSA is a short term manager with a blend of trendfollowing and econometric models, the latter type faring less well during themonth. Going into March, most managers have increased their risk-taking toabove-average levels. The largest allocation remains in commodities, wheremanagers are long in most markets. In interest rates, most managers are biasedlong, whereas in currencies most are tilted against the USD. Equities have avery low risk allocation.

 

TheFund was unprofitable for March. GSA, a short term manager was the topperformer in the vertical in March, gaining 1.5%, while Altis was the bottomperformer losing -6.8%. For the 1st Quarter as a whole, John Locke was the topperformer in the vertical, up 12.0%, while GSA had the smallest gains, rising4.2%. The strong trends in commodity markets in February made a sharpreversal in March, hurting most funds in the vertical. After gaining 11.7% inFebruary, the CRB Commodity Index fell -6.3% March. The grains and preciousmetals sectors recorded particularly large reversals. The Fund was able toparticipate more in the upward move in February (when it gained 10.4%)than in the March reversal (when it lost -2.4%), thereby preserving itsgains for the quarter. Managers were able to limit the damage in March byreducing leverage. Most managers scaled back positions in inverse proportion torising volatility in commodity markets. By the end of March overallleverage for most managers was about 40% lower than at the start of the month.Losses for the vertical during the month were also mitigated by the positiveperformance of short term managers such as GSA and John Locke, who exploitedopportunities outside of commodities.

 

12

----

 

April 1, 2008 to June 30,2008

 

TheFund is a fund of funds investing in seven separate Portfolio Funds which aredomiciled at Merrill Lynch FuturesAccess Program. The Fund posted gains for thequarter.

 

ThePortfolio Funds made gains in their long energy positions at the beginning ofthe quarter, as oil and natural gas hit historic highs which were offset bylosses from reversals in financial futures markets. Most of the Portfolio Fundscame into April with short positions in the U.S. dollar, long positions inbonds and short positions in equities. However, markets experienced a reliefrally in April as investors began to believe the end of the credit crisismight be over. This caused the U.S. dollar to rebound, bonds to fall andequities to rise, thus hurting the Portfolio Funds performance. The PortfolioFunds with more energy exposure did better in the month, as well as thePortfolio Funds who had short positions in the financial futures were able tounwind their positions quickly.

 

May wasa month where energies jumped to record levels. Crude oil was up 13% andnatural gas was up 6.6%, continuing trends from previous months. The primarydrivers of performance for the Fund was in the commodities and energy sectors.Altis, which has the largest commodity bias among the seven Portfolio Funds inthe vertical, was up 12.8%. Roughly two thirds of Altis gains came from its energypositions. Other Portfolio Funds also benefited from energy exposure, thoughnone to the extent of Altis. Non-commodity markets were mixed as most of theFunds managed to be flat to positive in the financial markets overall. SeveralPortfolio Funds did well in fixed income but then lost money in the equityindices.

 

TheFund gained 4.80% in June and is up 17.77 % year to date. In comparison,the Newedge CTA index gained 2.0% for the month, and is up 8.3% for the year.The Portfolio Funds made money through long positions in commodities and shortequities positions. Longer term Portfolio Funds tended to have higher commodityand equity exposure than their shorter term peers. Short term managersmeanwhile were caught out by choppiness in currencies and rates. Altis was thetop performer in the vertical with a gain of 13.5%, benefiting from its highercommodity exposure and higher leverage than other managers. Meanwhile, GSA, ashort term manager, fell -1.6% as some of its relative value trades underperformed.

 

April 1, 2007 to June 30,2007

 

April 1, 2007 to June 30,2007

 

Thebeginning of the quarter through mid-quarter profits were up. However, as thequarter ended there was a resurgence in market volatility as bonds sold offheavily in the first half of the month on growing optimism for global growthand then rallied in the second half on renewed concerns in the sub-primelending market. Similarly, equity markets experienced wide swings and ended themonth lower partly on concerns about the potential for contagion on the back ofBear Stearns’ troubled credit focused hedge funds.

 

Althoughthe core long term trend followers performed well throughout the month of June,the out-performance in the portfolio came from the short term models of Winton,Aspect, Alphasimplex, Chesapeake, Transtrend, John Locke, Altis and GSA. Someof these managers captured reversals in equity markets and were able to profitboth long and short over the course of the month. Natural gas shorts alsogenerated positive results. In currencies, most managers were successfulcapturing strength in the Australian dollar, Canadian dollar, and the Britishpound as well as continuing to underweight the persistently weak Japanese yen.

 

13

----

 

Also please read the performance summary of some of the underlying inwhich the Fund invests into. The Form 10-Q of the following PortfolioFunds have also been filed: Aspect, Chesapeake, Transtrend and Winton.

 

Item3. Quantitative and Qualitative Disclosures About Market Risk

 

Quantitative Forward-LookingStatements

 

Thefollowing quantitative disclosures regarding the Fund’s market risk exposurescontain “forward- looking statement” within the meaning of the safe harbor fromcivil liability provided for such statements by the Private SecuritiesLitigation Reform Act of 1995 (set forth in Section 27A of the SecuritiesAct of 1933 and Section 21E of the Securities Exchange Act of 1934). Allquantitative disclosures in this section are deemed to be forward-looking statementsfor purposes of the safe harbor, except for statements of historical fact.

 

Due to the Fund’s fund offunds structure, the following statements are related to the Portfolio Funds.

 

Maintenancemargin requirements have been used by the Portfolio Funds as the measure oftheir Value at Risk. Maintenance margin requirements are set by exchanges toequal or exceed the maximum loss in the fair value of any given contractincurred in 95%-99% of the one-day time periods included in the historicalsample (generally approximately one year) researched for purposes ofestablishing margin levels. The maintenance margin levels are established bydealers and exchanges using historical price studies as well as an assessmentof current market volatility (including the implied volatility of the optionson a given futures contract) and economic fundamentals to provide aprobabilistic estimate of the maximum expected near-term one-day pricefluctuation.

 

Inthe case of market sensitive instruments which are not exchange-traded (almostexclusively currencies in the case of the Portfolio Funds), the marginrequirements for the equivalent futures positions have been used as Value atRisk. In those rare cases in which a futures-equivalent margin is notavailable, dealers’ margins have been used.

 

100%positive correlation in the different positions held in each market riskcategory has been assumed. Consequently, the margin requirements applicable tothe open contracts have been aggregated to determine each trading category’saggregate Value at Risk. The diversification effects resulting from the factthat the Portfolio Funds’ positions are rarely, if ever, 100% positivelycorrelated have not been reflected. Since the Fund is invested in the PortfolioFunds, the Value at Risk chart for the underlying funds have been provided.

 

14

----

 

The Portfolio Funds’ TradingValue at Risk in Different Market Sectors

 

The following tables indicate the average, highest, and lowest tradingValue at Risk associated with the Portfolio Funds’ open positions by marketcategory for the six months ended June 30, 2008 and the three months endedJune 30, 2007.

 

**AltisClass DS (1)**

 
| ** **               | ** ** | **June 30, 2008** | ** ** |
|--------------------------|------------|-----------------------------|------------|
| ** **               | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
| **Market Sector**   | ** ** | **Value at Risk** | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                     |       |                        |       |   |   |   |   |   |   |   |   |   |
| Agricultural Commodities |       | $                           | 423,566    |   | 1.26 | % | $ | 1,154,418 |   | $ | 54,072 |   |
| Energy                   |       | 802,873                     |       | 2.39 | % | 1,866,010 |   | 103,942 |   |
| Interest Rates           |       | 4,738,727                   |       | 14.08 | % | 9,327,165 |   | 954,658 |   |
| Metals                   |       | 346,093                     |       | 1.03 | % | 1,102,077 |   | 77,059 |   |
| Stock Indices            |       | 382,688                     |       | 1.14 | % | 794,787 |   | 37,656 |   |
| Currencies               |       | 341,353                     |       | 1.01 | % | 611,553 |   | 49,042 |   |
|                     |       |                        |       |   |   |   |   |   |   |
| TOTAL                    |       | $                           | 7,035,300  |   | 20.91 | % | $ | 14,856,010 |   | $ | 1,276,429 |   |

 

----

(1) Theaverage capitalization for Class DS is $33,645,905.

 

**TranstrendClass DS (2)**

 
| ** **               | ** ** | **June 30, 2008** | ** ** |
|--------------------------|------------|-----------------------------|------------|
| ** **               | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
| **Market Sector**   | ** ** | **Value at Risk** | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                     |       |                        |       |   |   |   |   |   |   |   |   |   |
| Agricultural Commodities |       | $                           | 161,862    |   | 0.51 | % | $ | 471,935 |   | $ | 7,447 |   |
| Energy                   |       | 343,416                     |       | 1.07 | % | 696,655 |   | 4,861 |   |
| Interest Rates           |       | 2,024,252                   |       | 6.32 | % | 2,630,297 |   | 867,240 |   |
| Metals                   |       | 127,244                     |       | 0.40 | % | 297,346 |   | 26,192 |   |
| Stock Indices            |       | 247,634                     |       | 0.77 | % | 453,499 |   | 73,411 |   |
| Currencies               |       | 830,454                     |       | 2.59 | % | 1,527,078 |   | 96,195 |   |
|                     |       |                        |       |   |   |   |   |   |   |
| TOTAL                    |       | $                           | 3,734,862  |   | 11.66 | % | $ | 6,076,810 |   | $ | 1,075,346 |   |

 

----

(2) The averagecapitalization for Class DS is $32,029,728.

 

15

----

 

**Aspect Class DS(3)**

 
| ** **               | ** ** | **June 30, 2008** | ** ** |
|--------------------------|------------|-----------------------------|------------|
| ** **               | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
| **Market Sector**   | ** ** | **Value at Risk** | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                     |       |                        |       |   |   |   |   |   |   |   |   |   |
| Agricultural Commodities |       | $                           | 175,821    |   | 0.54 | % | $ | 580,906 |   | $ | 52,949 |   |
| Energy                   |       | 289,528                     |       | 0.90 | % | 802,109 |   | 144,033 |   |
| Interest Rates           |       | 3,172,195                   |       | 9.82 | % | 5,320,117 |   | 1,468,558 |   |
| Metals                   |       | 104,298                     |       | 0.32 | % | 368,370 |   | 25,171 |   |
| Stock Indices            |       | 261,611                     |       | 0.81 | % | 687,348 |   | 92,080 |   |
| Currencies               |       | 607,552                     |       | 1.88 | % | 1,626,071 |   | 231,932 |   |
|                     |       |                        |       |   |   |   |   |   |   |
| TOTAL                    |       | $                           | 4,611,005  |   | 14.27 | % | $ | 9,384,921 |   | $ | 2,014,723 |   |

 

----

(3) Theaverage capitalization forClass DSis $32,300,023.

 

**Chesapeake Class DS(4)**

 
| ** **               | ** ** | **June 30, 2008** | ** ** |
|--------------------------|------------|-----------------------------|------------|
| ** **               | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
| **Market Sector**   | ** ** | **Value at Risk** | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                     |       |                        |       |   |   |   |   |   |   |   |   |   |
| Agricultural Commodities |       | $                           | 566,286    |   | 1.73 | % | $ | 927,000 |   | $ | 211,931 |   |
| Energy                   |       | 423,450                     |       | 1.30 | % | 695,056 |   | 330,398 |   |
| Interest Rates           |       | 3,168,097                   |       | 9.69 | % | 4,422,074 |   | 1,588,609 |   |
| Metals                   |       | 209,258                     |       | 0.64 | % | 387,807 |   | 110,814 |   |
| Stock Indices            |       | —                      |       | 0.00 | % | — |   | — |   |
| Stock Futures            |       | 103,195                     |       | 0.32 | % | 162,771 |   | 53,725 |   |
| Currencies               |       | 752,040                     |       | 2.30 | % | 1,331,589 |   | 443,742 |   |
|                     |       |                        |       |   |   |   |   |   |   |
| TOTAL                    |       | $                           | 5,222,326  |   | 15.98 | % | $ | 7,926,297 |   | $ | 2,739,219 |   |

 

----

(4) Theaverage capitalization forClassDS is $32,682,873.

 

**Winton Class DS(5)**

 
| ** **               | ** ** | **June 30, 2008** | ** ** |
|--------------------------|------------|-----------------------------|------------|
| ** **               | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
| **Market Sector**   | ** ** | **Value at Risk** | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                     |       |                        |       |   |   |   |   |   |   |   |   |   |
| Agricultural Commodities |       | $                           | 152,135    |   | 0.47 | % | $ | 271,751 |   | $ | 62,935 |   |
| Energy                   |       | 145,154                     |       | 0.45 | % | 234,753 |   | 69,763 |   |
| Interest Rates           |       | 1,786,781                   |       | 5.56 | % | 2,075,834 |   | 1,274,223 |   |
| Metals                   |       | 103,116                     |       | 0.32 | % | 167,232 |   | 55,308 |   |
| Stock Indices            |       | 120,173                     |       | 0.37 | % | 304,998 |   | 6,896 |   |
| Currencies               |       | 460,225                     |       | 1.43 | % | 657,583 |   | 268,024 |   |
|                     |       |                        |       |   |   |   |   |   |   |
| TOTAL                    |       | $                           | 2,767,584  |   | 8.60 | % | $ | 3,712,151 |   | $ | 1,737,149 |   |

 

----

(5) The averagecapitalization for Class DS is $32,115,632.

 

16

----

 

**John Locke Class DS(6)**

 
| ** **               | ** ** | **June 30, 2008** | ** ** |
|--------------------------|------------|-----------------------------|------------|
| ** **               | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
| **Market Sector**   | ** ** | **Value at Risk** | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                     |       |                        |       |   |   |   |   |   |   |   |   |   |
| Agricultural Commodities |       | $                           | 66,600     |   | 0.25 | % | $ | 192,589 |   | $ | 3,386 |   |
| Energy                   |       | 137,223                     |       | 0.52 | % | 368,725 |   | 9,148 |   |
| Interest Rates           |       | 2,052,800                   |       | 7.73 | % | 3,306,172 |   | 769,897 |   |
| Metals                   |       | 83,091                      |       | 0.31 | % | 221,857 |   | 24,169 |   |
| Stock Indices            |       | 83,029                      |       | 0.31 | % | 261,571 |   | 9,144 |   |
| Currencies               |       | 339,097                     |       | 1.28 | % | 588,857 |   | 90,074 |   |
|                     |       |                        |       |   |   |   |   |   |   |
| TOTAL                    |       | $                           | 2,761,840  |   | 10.40 | % | $ | 4,939,771 |   | $ | 905,818 |   |

 

----

(6) Theaverage capitalization forClass DSis $26,541,375.

 

**GSA Class DS(7)**

 
| ** **               | ** ** | **June 30, 2008** | ** ** |
|--------------------------|------------|-----------------------------|------------|
| ** **               | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
| **Market Sector**   | ** ** | **Value at Risk** | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                     |       |                        |       |   |   |   |   |   |   |   |   |   |
| Agricultural Commodities |       | $                           | 15,324     |   | 0.06 | % | $ | 55,392 |   | $ | 2,042 |   |
| Energy                   |       | 36,768                      |       | 0.14 | % | 110,509 |   | 73 |   |
| Interest Rates           |       | 3,730,540                   |       | 14.15 | % | 6,162,630 |   | 1,861,503 |   |
| Metals                   |       | 16,738                      |       | 0.06 | % | 35,846 |   | 1,862 |   |
| Stock Indices            |       | 248,904                     |       | 0.94 | % | 751,919 |   | 32,488 |   |
| Currencies               |       | 208,873                     |       | 0.79 | % | 634,400 |   | 14,452 |   |
|                     |       |                        |       |   |   |   |   |   |   |
| TOTAL                    |       | $                           | 4,257,147  |   | 16.14 | % | $ | 7,750,696 |   | $ | 1,912,420 |   |

 

----

(7) The averagecapitalization for Class DS is $26,372,070.

 

**Altis**

 
| ** **               | ** ** | **June 30, 2007** | ** ** |
|--------------------------|------------|-----------------------------|------------|
| ** **               | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
| **Market Sector**   | ** ** | **Value at Risk** | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                     |       |                        |       |   |   |   |   |   |   |   |   |   |
| Agricultural Commodities |       | $                           | 38,399     |   | 0.30 | % | $ | 78,148 |   | $ | — |   |
| Energy                   |       | 29,761                      |       | 0.23 | % | 62,289 |   | — |   |
| Interest Rates           |       | 2,082,957                   |       | 16.23 | % | 2,136,654 |   | 2,020,724 |   |
| Metals                   |       | 18,105                      |       | 0.14 | % | 27,374 |   | — |   |
| Stock Indices            |       | 98,914                      |       | 0.77 | % | 132,611 |   | 74,464 |   |
| Currencies               |       | 106,821                     |       | 0.83 | % | 126,138 |   | 90,387 |   |
|                     |       |                        |       |   |   |   |   |   |   |
| TOTAL                    |       | $                           | 2,374,957  |   | 18.50 | % | $ | 2,563,214 |   | $ | 2,185,575 |   |

 

17

----

 

**Transtrend**

 
| ** **               | ** ** | **June 30, 2007** | ** ** |
|--------------------------|------------|-----------------------------|------------|
| ** **               | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
| **Market Sector**   | ** ** | **Value at Risk** | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                     |       |                        |       |   |   |   |   |   |   |   |   |   |
| Agricultural Commodities |       | $                           | 1,718      |   | 0.00 | % | $ | 3,049 |   | $ | 97 |   |
| Energy                   |       | 903                         |       | 0.00 | % | 1,934 |   | 75 |   |
| Interest Rates           |       | 121,987                     |       | 0.29 | % | 188,007 |   | 22,818 |   |
| Metals                   |       | 215                         |       | 0.00 | % | 569 |   | — |   |
| Stock Indices            |       | 17,625                      |       | 0.04 | % | 28,794 |   | 1,749 |   |
| Currencies               |       | 63                          |       | 0.00 | % | 176 |   | 4 |   |
|                     |       |                        |       |   |   |   |   |   |   |
| TOTAL                    |       | $                           | 142,511    |   | 0.33 | % | $ | 222,529 |   | $ | 24,743 |   |

 

**Aspect**

 
| ** **               | ** ** | **June 30, 2007** | ** ** |
|--------------------------|------------|-----------------------------|------------|
| ** **               | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
| **Market Sector**   | ** ** | **Value at Risk** | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                     |       |                        |       |   |   |   |   |   |   |   |   |   |
| Agricultural Commodities |       | $                           | 7,290      |   | 0.10 | % | $ | 12,636 |   | $ | 2,255 |   |
| Energy                   |       | 4,462                       |       | 0.06 | % | 9,788 |   | 1,030 |   |
| Interest Rates           |       | 1,127,037                   |       | 15.67 | % | 1,873,247 |   | 624,366 |   |
| Metals                   |       | 17,038                      |       | 0.24 | % | 20,984 |   | 14,523 |   |
| Stock Indices            |       | 54,978                      |       | 0.76 | % | 73,794 |   | 36,543 |   |
| Currencies               |       | 36,430                      |       | 0.50 | % | 44,997 |   | 21,720 |   |
|                     |       |                        |       |   |   |   |   |   |   |
| TOTAL                    |       | $                           | 1,247,235  |   | 17.33 | % | $ | 2,035,446 |   | $ | 700,437 |   |

 

**Chesapeake**

 
| ** **               | ** ** | **June 30, 2007** | ** ** |
|--------------------------|------------|-----------------------------|------------|
| ** **               | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
| **Market Sector**   | ** ** | **Value at Risk** | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                     |       |                        |       |   |   |   |   |   |   |   |   |   |
| Agricultural Commodities |       | $                           | 21,449     |   | 0.51 | % | $ | 56,920 |   | $ | 3,339 |   |
| Energy                   |       | 1,699                       |       | 0.04 | % | 3,388 |   | 292 |   |
| Interest Rates           |       | 907,113                     |       | 21.39 | % | 2,279,959 |   | 208,651 |   |
| Metals                   |       | 20,360                      |       | 0.48 | % | 50,218 |   | 5,272 |   |
| Stock Indices            |       | 46,659                      |       | 1.10 | % | 118,657 |   | 10,067 |   |
| Stock Futures            |       | 26,280                      |       | 0.62 | % | 64,729 |   | 6,245 |   |
| Currencies               |       | 50,915                      |       | 1.20 | % | 124,267 |   | 13,084 |   |
|                     |       |                        |       |   |   |   |   |   |   |
| TOTAL                    |       | $                           | 1,074,475  |   | 25.34 | % | $ | 2,698,138 |   | $ | 246,950 |   |

 

18

----

 

**Winton**

 
| ** **               | ** ** | **June 30, 2007** | ** ** |
|--------------------------|------------|-----------------------------|------------|
| ** **               | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
| **Market Sector**   | ** ** | **Value at Risk** | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                     |       |                        |       |   |   |   |   |   |   |   |   |   |
| Agricultural Commodities |       | $                           | 7,161      |   | 0.67 | % | $ | 8,678 |   | $ | 5,191 |   |
| Energy                   |       | 2,607                       |       | 0.00 | % | 4,350 |   | 1,300 |   |
| Interest Rates           |       | 779,683                     |       | 0.20 | % | 890,137 |   | 701,258 |   |
| Metals                   |       | 8,304                       |       | 0.00 | % | 11,742 |   | 6,030 |   |
| Stock Indices            |       | 39,189                      |       | 0.01 | % | 53,729 |   | 30,397 |   |
| Currencies               |       | 42,984                      |       | 0.01 | % | 51,038 |   | 38,136 |   |
|                     |       |                        |       |   |   |   |   |   |   |
| TOTAL                    |       | $                           | 879,928    |   | 0.89 | % | $ | 1,019,674 |   | $ | 782,312 |   |

 

**John Locke**

 
| ** **               | ** ** | **June 30, 2007** | ** ** |
|--------------------------|------------|-----------------------------|------------|
| ** **               | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
| **Market Sector**   | ** ** | **Value at Risk** | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                     |       |                        |       |   |   |   |   |   |   |   |   |   |
| Agricultural Commodities |       | $                           | 33,342     |   | 0.40 | % | $ | 62,746 |   | $ | 2,421 |   |
| Energy                   |       | 37,972                      |       | 0.46 | % | 77,712 |   | 6,359 |   |
| Interest Rates           |       | 333,673                     |       | 4.02 | % | 409,916 |   | 279,802 |   |
| Metals                   |       | 29,775                      |       | 0.36 | % | 70,896 |   | 1,381 |   |
| Stock Indices            |       | 117,420                     |       | 1.41 | % | 290,112 |   | 22,984 |   |
| Currencies               |       | 129,635                     |       | 1.57 | % | 193,548 |   | 55,167 |   |
|                     |       |                        |       |   |   |   |   |   |   |
| TOTAL                    |       | $                           | 681,817    |   | 8.22 | % | $ | 1,104,930 |   | $ | 368,114 |   |

 

**GSA**

 
| ** **               | ** ** | **June 30, 2007** | ** ** |
|--------------------------|------------|-----------------------------|------------|
| ** **               | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
| **Market Sector**   | ** ** | **Value at Risk** | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                     |       |                        |       |   |   |   |   |   |   |   |   |   |
| Agricultural Commodities |       | $                           | 2,626      |   | 0.04 | % | $ | 3,707 |   | $ | 1,646 |   |
| Energy                   |       | 2,073                       |       | 0.03 | % | 4,998 |   | 153 |   |
| Interest Rates           |       | 1,517,030                   |       | 23.60 | % | 1,560,340 |   | 1,470,265 |   |
| Metals                   |       | 6,410                       |       | 0.10 | % | 10,233 |   | 4,253 |   |
| Stock Indices            |       | 70,264                      |       | 1.09 | % | 79,077 |   | 60,897 |   |
| Currencies               |       | 34,834                      |       | 0.54 | % | 51,028 |   | 2,614 |   |
|                     |       |                        |       |   |   |   |   |   |   |
| TOTAL                    |       | $                           | 1,633,237  |   | 25.40 | % | $ | 1,709,383 |   | $ | 1,539,828 |   |

 

19

----

 

**AlphaSimplex**

 
| ** **               | ** ** | **June 30, 2007** | ** ** |
|--------------------------|------------|-----------------------------|------------|
| ** **               | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
| **Market Sector**   | ** ** | **Value at Risk** | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                     |       |                        |       |   |   |   |   |   |   |   |   |   |
| Agricultural Commodities |       | $                           | —     |   | 0.00 | % | $ | — |   | $ | — |   |
| Energy                   |       | —                      |       | 0.00 | % | — |   | — |   |
| Interest Rates           |       | 321,527                     |       | 5.32 | % | 477,006 |   | 222,899 |   |
| Metals                   |       | —                      |       | 0.00 | % | — |   | — |   |
| Stock Indices            |       | 37,226                      |       | 0.62 | % | 51,031 |   | 30,245 |   |
| Currencies               |       | 28,817                      |       | 0.48 | % | 48,551 |   | 9,131 |   |
|                     |       |                        |       |   |   |   |   |   |   |
| TOTAL                    |       | $                           | 387,570    |   | 6.42 | % | $ | 576,588 |   | $ | 262,275 |   |

 

Material Limitations onValue at Risk as an Assessment of Market Risk

 

The face value of the market sector instruments held by the PortfolioFunds is typically many times the applicable maintenance margin requirement(maintenance margin requirements generally ranging between approximately 1% and10% of contract face value) as well as many times the capitalization of thePortfolio Funds. The magnitude of the Portfolio Funds’ open positions creates a“risk of ruin” not typically found in most other investment vehicles. Becauseof the size of its positions, certain market conditions — unusual, buthistorically recurring from time to time — could cause the Portfolio Funds toincur severe losses over a short period of time. The foregoing Value at Risktable — as well as the past performance of the Portfolio Funds — gives noindication of this “risk of ruin.”

 

**Non-TradingRisk**

 

Foreign Currency Balances;Cash on Deposit with MLPF&S

 

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

 

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

 

Qualitative DisclosuresRegarding Primary Trading Risk Exposures

 

The following qualitative disclosures regarding the Portfolio Funds’market risk exposures — except for (i) those disclosures that arestatements of historical fact and (ii) the descriptions of how thePortfolio Funds manage their primary market risk exposures — constituteforward-looking statements within the meaning of Section 27A of theSecurities Act and Section 21E of the Securities Exchange Act. ThePortfolio Funds’ primary market risk exposures as well as the strategies usedand to be used by Portfolio Funds’ managers for managing such exposures aresubject to numerous uncertainties, contingencies and risks, any one of whichcould cause the actual results of the Portfolio Funds’ risk controls to differmaterially from the objectives of such strategies. Government interventions,defaults and expropriations, illiquid markets, the emergence of dominantfundamental factors, political upheavals, changes in historical pricerelationships, an influx of new market participants, increased regulation andmany other factors could result in material losses as well as in materialchanges to the risk exposures and the risk management strategies of thePortfolio Funds. There can be no assurance that the Portfolio Funds’ currentmarket exposure and/or risk management strategies will not change materially orthat any such

 

20

----

 

strategieswill be effective in either the short- or long-term. Investors must be preparedto lose all or substantially all of the time value of their investment in theFund.

 

Item4. Controls and Procedures

 

MLAI,the Sponsor of ML Systematic Momentum LLC, with the participation of theSponsor’s Chief Executive Officer and the Chief Financial Officer, hasevaluated the effectiveness of the design and operation of its disclosurecontrols and procedures with respect to the Fund as of the end of the period ofthis quarterly report, and, based on this evaluation, has concluded that thesedisclosure controls and procedures are effective. Additionally, there were nosignificant changes in the Fund’s internal controls or in other factors thatcould significantly affect these controls subsequent to the date of thisevaluation, including any corrective actions with regard to significantdeficiencies and material weaknesses.

 

21

----

 

PART II - OTHER INFORMATION

 

Item 1.                                  LegalProceedings

 

None.

 

Item 1A.                           Risk Factors

 

Past Performance NotNecessarily Indicative of Future Results

 

Pastperformance is not necessarily indicative of future results. The tradingadvisor’s past performance may not be representative of how it may trade in thefuture for the Fund.

 

Volatile Markets; HighlyLeveraged Trading

 

Futuresand forward trading is highly leveraged, and market price levels are volatileand materially affected by unpredictable factors such as weather andgovernmental intervention. The combination of leverage and volatility creates ahigh degree of risk.

 

Importance of General MarketConditions

 

Overallmarket or economic conditions — which neither MLAI nor the trading advisor canpredict or control — have a material effect on the performance of any managedfutures strategy of the Portfolio Funds.

 

Forward Trading

 

ThePortfolio Funds will trade currencies in the forward markets in addition to inthe futures markets. The forward markets are over-the-counter, non-exchangemarkets, and in trading in these markets, the Portfolio Funds will be dependenton the credit standing of the counterparties with which they trade, without thefinancial support of any clearinghouse system. In addition, the prices offeredfor the same forward contract may vary significantly among different forwardmarket participants. Forward market counterparties are under no obligation toenter into forward transactions with a Fund, including transactions throughwhich the Portfolio Funds are attempting to liquidate open positions.

 

Increased Assets UnderManagement

 

Thereappears to be a tendency for the rates of return achieved by managed futuresadvisors to decline as assets under management increase. The trading advisor hasnot agreed to limit the amount of additional equity which it may manage.

 

Trading Advisor Risk

 

ThePortfolio Funds are subject to the risk of the bad judgment, negligence ormisconduct of its trading advisor. There have been a number of instances in recentyears in which private investment funds have incurred substantial losses due tomanager misconduct.

 

22

----

 

Changes in Trading Strategy

 

Thetrading advisor may make material changes in their trading strategies withoutthe knowledge of MLAI.

 

Illiquid Markets

 

Certainpositions held by the Portfolio Funds may become illiquid, preventing thePortfolio Funds’ trading advisor from acquiring positions otherwise indicatedby its strategy or making it impossible for the trading advisor to close outpositions against which the market is moving.

 

Certainfutures markets are subject to “daily price limits,” restricting the maximumamount by which the price of a particular contract can change during any giventrading day. Once a contract’s price has moved “the limit,” it may beimpossible or economically non-viable to execute trades in such contract. Fromtime to time, prices have moved “the limit” for a number of consecutive days,making it impossible for traders against whose positions the market was movingto prevent large losses.

 

Trading on Non-U.S.Exchanges

 

Thetrading advisor may trade extensively on non-U.S. exchanges. These exchangesare not regulated by any United States governmental agency. The Portfolio Fundscould incur substantial losses trading on foreign exchanges to which it wouldnot have been subject had its trading advisor limited its trading to U.S.markets.

 

Theprofits and losses derived from trading foreign futures and options willgenerally be denominated in foreign currencies; consequently, the PortfolioFunds will be subject to a certain degree of exchange-rate risk in trading suchcontracts.

 

ThePortfolio Funds Could Lose Assets and Have Its Trading Disrupted Due to theBankruptcy of One of the Parties

 

ThePortfolio Funds are subject to the risk of insolvency of a counterparty, anexchange, a clearinghouse or MLPF&S. Portfolio Funds’ assets could be lostor impounded during lengthy bankruptcy proceedings. Were a substantial portionof the Portfolio Funds’ capital tied up in a bankruptcy, MLAI might suspend orlimit trading, perhaps causing the Portfolio Funds to miss significant profitopportunities. There are increased risks in dealing with unregulated tradingcounterparties including the risk that assets may not benefit from theprotection afforded to “customer funds” deposited with regulated dealers andbrokers.

 

23

----

 

Item 2.                                             UnregisteredSales of Equity Securities and Use of Proceeds

 

(a) Issuance to accredited investors pursuant to RegulationD and Section 4(6) under the Securities Act. The selling agent of the followingClass of Units was MLPF&S.

 

CLASS A

 
| ** ** | ** ** | **Subscription** | ** ** | ** ** | ** ** |
|------------|------------|------------------|------------|------------|------------|
| ** ** | ** ** | **Amount**       | ** ** | **Units**  | ** ** | **NAV (1)** |   |
| Jan-08     |       |             | $          | 490,879    |       | 477,602 |   | $ | 1.0278 |   |
| Feb-08     |       |             | 765,834    |       | 735,248    |   | 1.0416 |   |
| Mar-08     |       |             | 2,265,597  |       | 1,968,714  |   | 1.1508 |   |
| Apr-08     |       |             | 9,401,839  |       | 8,361,650  |   | 1.1243 |   |
| May-08     |       |             | 1,921,834  |       | 1,718,532  |   | 1.1183 |   |
| Jun-08     |       |             | 5,368,433  |       | 4,629,157  |   | 1.1597 |   |
| Jul-08     |       |             | 7,312,229  |       | 6,011,369  |   | 1.2164 |   |
|            |            |                  |            |            |            |  |  |  |  |  |

 

CLASS C

 
| ** ** | ** ** | **Subscription** | ** ** | ** ** | ** ** |
|------------|------------|------------------|------------|------------|------------|
| ** ** | ** ** | **Amount**       | ** ** | **Units**  | ** ** | **NAV (1)** | ** ** |
| Jan-08     |       |             | $          | 9,676,279  |       | 9,070,378 |   | $ | 1.0668 |   |
| Feb-08     |       |             | 10,615,351 |       | 9,826,299  |   | 1.0803 |   |
| Mar-08     |       |             | 13,574,098 |       | 11,381,937 |   | 1.1926 |   |
| Apr-08     |       |             | 59,470,138 |       | 51,082,407 |   | 1.1642 |   |
| May-08     |       |             | 28,399,000 |       | 24,545,376 |   | 1.1570 |   |
| Jun-08     |       |             | 33,020,433 |       | 27,544,572 |   | 1.1988 |   |
| Jul-08     |       |             | 24,702,976 |       | 19,661,713 |   | 1.2564 |   |
|            |            |                  |            |            |            |  |  |  |  |  |

 

CLASS DI

 
| ** ** | ** ** | **Subscription** | ** ** | ** ** | ** ** |
|------------|------------|------------------|------------|------------|------------|
| ** ** | ** ** | **Amount**       | ** ** | **Units**  | ** ** | **NAV ****(1)** | ** ** |
| Jan-08     |       |             | —     |       | —     |   | $ | 1.0356 |   |
| Feb-08     |       |             | 11,999     |       | 11,419     |   | 1.0508 |   |
| Mar-08     |       |             | —     |       | —     |   | 1.1624 |   |
| Apr-08     |       |             | 899,999    |       | 791,487    |   | 1.1371 |   |
| May-08     |       |             | 12,100,000 |       | 10,685,270 |   | 1.1324 |   |
| Jun-08     |       |             | 3,853,340  |       | 3,277,206  |   | 1.1758 |   |
| Jul-08     |       |             | 5,005,971  |       | 4,054,074  |   | 1.2348 |   |
|            |            |                  |            |            |            |  |  |  |  |

 

CLASS D

 
| ** ** | ** ** | **Subscription** | ** ** | ** ** | ** ** |
|------------|------------|------------------|------------|------------|------------|
| ** ** | ** ** | **Amount**       | ** ** | **Units**  | ** ** | **NAV****(1)** | ** ** |
| Jan-08     |       |             | —     |       | —     |   | $ | 1.1603 |   |
| Feb-08     |       |             | —     |       | —     |   | 1.1774 |   |
| Mar-08     |       |             | 1,270,999  |       | 975,814    |   | 1.3025 |   |
| Apr-08     |       |             | 974,999    |       | 765,246    |   | 1.2741 |   |
| May-08     |       |             | 11,777,257 |       | 9,281,470  |   | 1.2689 |   |
| Jun-08     |       |             | —     |       | —     |   | 1.3175 |   |
| Jul-08     |       |             | —     |       | —     |   | 1.3836 |   |
|            |            |                  |            |            |            |  |  |  |  |

 

CLASS I

 
| ** ** | ** ** | **Subscription** | ** ** | ** ** | ** ** |
|------------|------------|------------------|------------|------------|------------|
| ** ** | ** ** | **Amount**       | ** ** | **Units**  | ** ** | **NAV ****(1)** | ** ** |
| Jan-08     |       |             | $          | 175,293    |       | 162,972 |   | $ | 1.0756 |   |
| Feb-08     |       |             | 15,517,918 |       | 14,230,094 |   | 1.0905 |   |
| Mar-08     |       |             | 2,540,369  |       | 2,107,841  |   | 1.2052 |   |
| Apr-08     |       |             | 12,073,337 |       | 10,249,883 |   | 1.1779 |   |
| May-08     |       |             | 921,474    |       | 786,308    |   | 1.1719 |   |
| Jun-08     |       |             | 2,655,553  |       | 2,184,381  |   | 1.2157 |   |
| Jul-08     |       |             | 3,975,738  |       | 3,116,759  |   | 1.2756 |   |
|            |            |                  |            |            |            |  |  |  |  |  |

 

----

(1) Net Asset Valuefor all other purposes

 

(b)   None.

(c)   None.

 

24

----

 

Item 3.                                   Defaults UponSenior Securities

 

None.

 

Item 4.                                   Submission ofMatters to a Vote of Security Holders

 

None.

 

Item 5.                                   OtherInformation

 

None.

 

Item 6.                                   Exhibits

 

The following exhibits are incorporated by reference or are filed herewithto 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 filedherewith.

 

32.01 and

32.02                                             Section 1350Certifications

 

Exhibit 32.01

and 32.02                      Are filedherewith.

 

25

----

 

**SIGNATURES**

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 

 
|                       | ML SYSTEMATIC MOMENTUM LLC     |
|----------------------------|--------------------------------|
|                       |                           |
|                       |                           |
|                       | By: MERRILL LYNCH  ALTERNATIVE |
|                       | INVESTMENTS LLC                |
|                       | (Manager)                      |
|                       |                           |
|                       |                           |
| Date: August 13, 2008 | By                             | /s/ PAUL MORTON |
|                       |                           | Paul Morton |
|                       |                           | Chief Executive Officer  and President |
|                       |                           | (Principal Executive  Officer) |
|                       |                           |
|                       |                           |
| Date: August 13, 2008 | By                             | /s/  BARBRA E. KOCSIS |
|                       |                           | Barbra  E. Kocsis |
|                       |                           | Chief  Financial Officer |
|                       |                           | (Principal Financial and Accounting  Officer) |

 

26

----