**UNITED STATES SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-Q**

 

**(Mark One)**

 

**x****      QUARTERLY REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For the quarterly period ended June 30,2010**

 

**OR**

 

**o****         TRANSITION REPORTPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934**

 

**For the transition period from                to**

 

**Commission File Number 0-52505**

 

**MLSYSTEMATIC MOMENTUM FUTURESACCESS LLC**

(Exact Name of Registrant as

specified in its charter)

 

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

 

**c/o Merrill Lynch AlternativeInvestments LLC**

**Four World FinancialCenter, 10****th**** Floor**

**250 Vesey Street**

**New York, New York 10080**

(Address of principalexecutive offices)

(Zip Code)

 

**212-449-3517**

(Registrant’s telephonenumber, including area code)

 

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

 

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

 

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

 

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

 

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

 

As of June 30, 2010,780,725,823 units of limited liability company interest were outstanding.

 

 

 

----

 

**ML SYSTEMATIC MOMENTUMFUTURESACCESS LLC**

 

QUARTERLY REPORT FOR JUNE30, 2010 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 | 16       |
|         |                                                                                        |     |
| Item  3.     | Quantitative  and Qualitative Disclosures About Market Risk                                 | 21       |
|         |                                                                                        |     |
| Item  4.     | Controls  and Procedures                                                                    | 31       |
|         |                                                                                        |     |
| PART II |
|         |                                                                                        |     |
| Item  1.     | Legal  Proceedings                                                                          | 32       |
|         |                                                                                        |     |
| Item  1A.    | Risk  Factors                                                                               | 32       |
|         |                                                                                        |     |
| Item  2.     | Unregistered  Sales of Equity Securities and Use of Proceeds                                | 32       |
|         |                                                                                        |     |
| Item  3.     | Defaults  Upon Senior Securities                                                            | 33       |
|         |                                                                                        |     |
| Item  4.     | (Removed  and Reserved)                                                                     | 33       |
|         |                                                                                        |     |
| Item  5.     | Other  Information                                                                          | 33       |
|         |                                                                                        |     |
| Item  6.     | Exhibits                                                                                    | 33       |

 

----

 

PART I - FINANCIALINFORMATION

 

Item 1.    Financial Statements

 

ML SYSTEMATIC MOMENTUMFUTURESACCESS LLC

(a Delaware LimitedLiability Company)

 

STATEMENTS OF FINANCIALCONDITION

(unaudited)

 
| ** **                                                                                                | ** ** | **June 30,** | ** **  | **December 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------|------------|-------------------|-------------|-----------------------|------------|
| ** **                                                                                                | ** ** | **2010**          | ** **  | **2009**              | ** ** |
| **ASSETS:**                                                                                               |       |              |        |                  |       |
|                                                                                                      |       |              |        |                  |       |
| Cash and cash equivalents                                                                                 |       | $                 | 239,257     |                  | $          | 54,630,410 |   |
| Investment in Portfolio Funds (Cost $884,372,276  at 2010 and $757,978,343 at 2009)                       |       | 916,556,823       |        | 787,161,250           |       |
| Receivable from Portfolio Fund                                                                            |       | 4,525,886         |        | 36,355,806            |       |
| Other assets                                                                                              |       | 58,280            |        | 66,913                |       |
|                                                                                                      |       |              |        |                  |       |
| **TOTAL ASSETS**                                                                                          |       | $                 | 921,380,246 |                  | $          | 878,214,379 |   |
|                                                                                                      |       |              |        |                  |       |
| **LIABILITIES AND MEMBERS’ CAPITAL:**                                                                | ** ** | ** **        |        |                  |       |
| LIABILITIES:                                                                                              |       |              |        |                  |       |
| Sponsor fee payable                                                                                       |       | $                 | 1,530,361   |                  | $          | 1,442,757 |   |
| Redemptions payable                                                                                       |       | 7,607,142         |        | 8,071,178             |       |
| Other liabilities                                                                                         |       | 251,901           |        | 399,200               |       |
|                                                                                                      |       |              |        |                  |       |
| Total liabilities                                                                                         |       | 9,389,404         |        | 9,913,135             |       |
|                                                                                                      |       |              |        |                  |       |
| MEMBERS’ CAPITAL:                                                                                    | ** ** | ** **        |        |                  |       |
| Members’ Interest (780,725,823 Units and  742,615,122 Units outstanding; unlimited Units authorized) |       | 911,990,842       |        | 868,301,244           |       |
| Total members’ capital                                                                               |       | 911,990,842       |        | 868,301,244           |       |
|                                                                                                      |       |              |        |                  |       |
| **TOTAL LIABILITIES AND MEMBERS’  CAPITAL**                                                          |       | $                 | 921,380,246 |                  | $          | 878,214,379 |   |
| ** **                                                                                                | ** ** | ** **        | ** **  | ** **            | ** ** |
| **NET ASSET VALUE PER UNIT:**                                                                             | ** ** | ** **        |        |                  |       |
| ** **                                                                                                |       |              |        |                  |       |
| Class A                                                                                              |       | $                 | 1.1423      |                  | $          | 1.1397 |   |
| Class C                                                                                              |       | $                 | 1.1564      |                  | $          | 1.1596 |   |
| Class D                                                                                              |       | $                 | 1.3389      |                  | $          | 1.3259 |   |
| Class I                                                                                              |       | $                 | 1.2075      |                  | $          | 1.2024 |   |
| Class D1                                                                                             |       | $                 | 1.1949      |                  | $          | 1.1833 |   |
| Class DA                                                                                             |       | $                 | —      |                  | $          | — |   |

 

See notes to financial statements.

 

1

----

 

ML SYSTEMATIC MOMENTUMFUTURESACCESS LLC

(a Delaware LimitedLiability Company)

 

STATEMENTS OF OPERATIONS

(unaudited)

 
| ** **                                   | ** ** | **For the three** | ** **  | **For the three** | ** ** | **For the six**   | ** ** | **For the six**   | ** ** |
|----------------------------------------------|------------|-----------------------------|-------------|-----------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| ** **                                   | ** ** | **months ended**       | ** **  | **months ended**       | ** ** | **months ended**       | ** ** | **months ended**       | ** ** |
| ** **                                   | ** ** | **June 30, 2010** | ** **  | **June 30, 2009** | ** ** | **June 30, 2010** | ** ** | **June 30, 2009** | ** ** |
| **TRADING PROFIT (LOSS):**                   |       |                        |        |                        |       |                        |       |                        |       |
|                                         |       |                        |        |                        |       |                        |       |                        |       |
| Realized, net                                |       | $                           | 2,473,490   |                        | $          | 2,467,088                   |       | $                           | 6,814,122  |   | $ | 2,467,823 |   |
| Change in unrealized, net                    |       | (19,781,696                 | )           | (30,209,096                 | )          | 3,001,640                   |       | (56,073,962                 | )          |
|                                         |       |                        |        |                        |       |                        |       |                        |       |
| Total trading profit (loss)                  |       | (17,308,206                 | )           | (27,742,008                 | )          | 9,815,762                   |       | (53,606,139                 | )          |
|                                         |       |                        |        |                        |       |                        |       |                        |       |
| **INVESTMENT INCOME:**                       | ** ** | ** **                  | ** **  | ** **                  |       |                        |       |                        |       |
| Interest                                     |       | 146                         |        | 29,631                      |       | 1,745                       |       | 37,073                      |       |
|                                         |       |                        |        |                        |       |                        |       |                        |       |
| **EXPENSES:**                                | ** ** | ** **                  | ** **  | ** **                  |       |                        |       |                        |       |
| Sponsor fee                                  |       | 4,622,504                   |        | 3,551,089                   |       | 9,017,709                   |       | 6,814,212                   |       |
| Other                                        |       | 252,872                     |        | 98,649                      |       | 525,359                     |       | 276,337                     |       |
| Total expenses                               |       | 4,875,376                   |        | 3,649,738                   |       | 9,543,068                   |       | 7,090,549                   |       |
|                                         |       |                        |        |                        |       |                        |       |                        |       |
| **NET INVESTMENT INCOME (LOSS)**             |       | (4,875,230                  | )           | (3,620,107                  | )          | (9,541,323                  | )          | (7,053,476                  | )          |
|                                         |       |                        |        |                        |       |                        |       |                        |       |
| **NET INCOME (LOSS)**                        |       | $                           | (22,183,436 | )                           | $          | (31,362,115                 | )          | $                           | 274,439    |   | $ | (60,659,615 | ) |
|                                         |       |                        |        |                        |       |                        |       |                        |       |
| **NET INCOME (LOSS) PER UNIT:**              | ** ** | ** **                  | ** **  | ** **                  |       |                        | ** ** | ** **                  | ** ** |
| ** **                                   | ** ** | ** **                  | ** **  | ** **                  | ** ** | ** **                  | ** ** | ** **                  | ** ** |
| Weighted average number of Units outstanding |       |                        |        |                        |       |                        |       |                        |       |
| Class A                                 |       | 109,113,119                 |        | 63,876,988                  |       | 109,488,688                 |       | 57,210,267                  |       |
| Class C                                 |       | 528,530,190                 |        | 404,899,308                 |       | 519,800,532                 |       | 379,798,108                 |       |
| Class D                                 |       | 28,166,056                  |        | 25,297,946                  |       | 29,856,236                  |       | 28,952,960                  |       |
| Class I                                 |       | 80,316,715                  |        | 66,425,628                  |       | 79,361,055                  |       | 63,512,612                  |       |
| Class D1                                |       | 38,158,637                  |        | 35,748,383                  |       | 38,968,120                  |       | 34,101,840                  |       |
| Class DA*                               |       | —                      |        | 45,821,817                  |       | —                      |       | 48,189,767                  |       |
|                                         |       |                        |        |                        |       |                        |       |                        |       |
| Net income (loss) per weighted average Unit  |       |                        |        |                        |       |                        |       |                        |       |
| Class A                                 |       | $                           | (0.0261     | )                           | $          | (0.0464                     | )          | $                           | 0.0041     |   | $ | (0.0965 | ) |
| Class C                                 |       | $                           | (0.0296     | )                           | $          | (0.0515                     | )          | $                           | (0.0031    | ) | $ | (0.1052 | ) |
| Class D                                 |       | $                           | (0.0244     | )                           | $          | (0.0484                     | )          | $                           | 0.0192     |   | $ | (0.0939 | ) |
| Class I                                 |       | $                           | (0.0266     | )                           | $          | (0.0483                     | )          | $                           | 0.0055     |   | $ | (0.0974 | ) |
| Class D1                                |       | $                           | (0.0233     | )                           | $          | (0.0432                     | )          | $                           | 0.0115     |   | $ | (0.0870 | ) |
| Class DA*                               |       | $                           | —      |                        | $          | (0.0361                     | )          | $                           | —     |   | $ | (0.0709 | ) |

 

----

* Units issued on December 1, 2008 and liquidated as of September 30,2009.

 

See notes to financial statements.

 

2

----

 

ML SYSTEMATIC MOMENTUMFUTURESACCESS LLC

(a Delaware LimitedLiability Company)

 

STATEMENTS OF CHANGES INMEMBERS’ CAPITAL

For the six months ended June 30,2010 and 2009

(unaudited) (in Units)

 
| ** **                | ** ** | **Members’ Capital   December 31, 2008** | ** ** | **Subscriptions** | ** ** | **Redemptions** | ** ** | **Members’ Capital June  30, 2009** | ** ** | **Members’ Capital   December 31, 2009** | ** ** | **Subscriptions** | ** ** | **Redemptions** | ** ** | **Members’ Capital June  30, 2010** | ** ** |
|---------------------------|------------|-------------------------------------------------------------------|------------|-------------------|------------|-----------------|------------|---------------------------------------------------------|------------|-------------------------------------------------------------------|------------|-------------------|------------|-----------------|------------|---------------------------------------------------------|------------|
| Class A              |       | 43,411,942                                                        |       | 29,378,781        |       | (6,332,948      | )          | 66,457,775                                              |       | 101,281,370                                                       |       | 24,663,984        |       | (19,559,098     | )          | 106,386,256                                             |       |
| Class C              |       | 317,357,227                                                       |       | 133,881,500       |       | (35,581,512     | )          | 415,657,215                                             |       | 495,761,388                                                       |       | 70,702,737        |       | (37,618,430     | )          | 528,845,695                                             |       |
| Class D              |       | 34,878,314                                                        |       | —            |       | (15,638,873     | )          | 19,239,441                                              |       | 29,983,145                                                        |       | 2,778,905         |       | (4,539,900      | )          | 28,222,150                                              |       |
| Class I              |       | 53,200,108                                                        |       | 24,909,087        |       | (13,034,453     | )          | 65,074,742                                              |       | 75,813,210                                                        |       | 8,692,534         |       | (4,566,139      | )          | 79,939,605                                              |       |
| Class D1             |       | 31,040,046                                                        |       | 8,454,565         |       | (1,582,722      | )          | 37,911,889                                              |       | 39,776,009                                                        |       | 1,015,347         |       | (3,459,239      | )          | 37,332,117                                              |       |
| Class DA*            |       | 52,795,442                                                        |       | —            |       | (8,949,690      | )          | 43,845,752                                              |       | —                                                            |       | —            |       | —          |       | —                                                  |       |
|                      |       |                                                              |       |              |       |            |       |                                                    |       |                                                              |       |              |       |            |       |                                                    |       |
| Total Members’ Units |       | 532,683,079                                                       |       | 196,623,933       |       | (81,120,198     | )          | 648,186,814                                             |       | 742,615,122                                                       |       | 107,853,507       |       | (69,742,806     | )          | 780,725,823                                             |       |

 

----

* Units issued on December 1, 2008 and liquidated as of September 30,2009.

 

See notes to financial statements.

 

3

----

 

ML SYSTEMATIC MOMENTUMFUTURESACCESS LLC

(a Delaware LimitedLiability Company)

STATEMENTS OF CHANGES INMEMBERS’ CAPITAL

For the six months ended June 30,2010 and 2009

(unaudited)

 
| ** **                   | ** ** | **Members’ Capital   December 31, 2008** | ** **  | **Subscriptions** | ** ** | **Redemptions** | ** ** | **Net Income   (Loss)** | ** **   | **Members’ Capital June   30, 2009** | ** ** | **Members’ Capital   December 31, 2009** | ** ** | **Subscriptions** | ** **  | **Redemptions** | ** ** | **Net Income (Loss)** | ** ** | **Members’ Capital June  30, 2010** | ** **  |
|------------------------------|------------|-------------------------------------------------------------------|-------------|-------------------|------------|-----------------|------------|-----------------------------------|--------------|---------------------------------------------------------------|------------|-------------------------------------------------------------------|------------|-------------------|-------------|-----------------|------------|---------------------------------|------------|---------------------------------------------------------|-------------|
| Class A                 |       | $                                                                 | 54,529,667  |              | $          | 35,638,288      |       | $                                 | (7,549,705   | )                                                             | $          | (5,518,981                                                        | )          | $                 | 77,099,269  |            | $          | 115,433,469                     |       | $                                                       | 28,125,938  |   | $ | (22,482,233 | ) | $ | 444,392 |   | $ | 121,521,566 |   |
| Class C                 |       | 409,646,343                                                       |        | 167,504,515       |       | (44,147,220     | )          | (39,919,611                       | )            | 493,084,027                                                   |       | 574,889,257                                                       |       | 81,885,713        |        | (43,596,697     | )          | (1,627,498                      | )          | 611,550,775                                             |        |
| Class D                 |       | 50,152,681                                                        |        | —            |       | (21,718,952     | )          | (2,661,894                        | )            | 25,771,835                                                    |       | 39,754,376                                                        |       | 3,673,996         |        | (6,215,844      | )          | 573,020                         |       | 37,785,548                                              |        |
| Class I                 |       | 70,208,485                                                        |        | 31,981,356        |       | (16,526,680     | )          | (6,178,416                        | )            | 79,484,745                                                    |       | 91,156,074                                                        |       | 10,354,945        |        | (5,421,658      | )          | 435,436                         |       | 96,524,797                                              |        |
| Class D1                |       | 39,876,273                                                        |        | 10,437,901        |       | (2,025,884      | )          | (2,965,070                        | )            | 45,323,220                                                    |       | 47,068,068                                                        |       | 1,182,754         |        | (4,091,755      | )          | 449,089                         |       | 44,608,156                                              |        |
| Class DA*               |       | 54,284,639                                                        |        | —            |       | (8,919,221      | )          | (3,415,643                        | )            | 41,949,775                                                    |       | —                                                            |       | —            |        | —          |       | —                          |       | —                                                  |        |
| ** **                   | ** ** | ** **                                                        | ** **  | ** **        | ** ** | ** **      | ** ** | ** **                        | ** **   | ** **                                                    | ** ** | ** **                                                        | ** ** | ** **        | ** **  | ** **      | ** ** | ** **                      | ** ** | ** **                                              | ** **  |
| Total Members’ Interest |       | $                                                                 | 678,698,088 |              | $          | 245,562,060     |       | $                                 | (100,887,662 | )                                                             | $          | (60,659,615                                                       | )          | $                 | 762,712,871 |            | $          | 868,301,244                     |       | $                                                       | 125,223,346 |   | $ | (81,808,187 | ) | $ | 274,439 |   | $ | 911,990,842 |   |

 

----

* Units issued on December 1, 2008 and liquidated as of September 30,2009.

 

See notes to financial statements.

 

4

----

 

ML SYSTEMATIC MOMENTUM FUTURESACCESS LLC

(a Delaware Limited Liability Company)

 

FINANCIAL DATA HIGHLIGHTS

FOR THE THREE MONTHS ENDED JUNE 30, 2010 (unaudited)

 

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

 
| ** **                                                       | ** ** | **Class A** | ** ** | **Class C** | ** ** | **Class D** | ** ** | **Class I** | ** ** | **Class D1** | ** ** |
|------------------------------------------------------------------|------------|------------------|------------|------------------|------------|------------------|------------|------------------|------------|-------------------|------------|
| **Per Unit Operating Performance:**                              |       |             |       |             |       |             |       |             |       |              |       |
|                                                             |       |             |       |             |       |             |       |             |       |              |       |
| Net asset value, beginning of period                             |       | $                | 1.1686     |             | $          | 1.1860           |       | $                | 1.3645     |              | $          | 1.2340 |   | $ | 1.2178 |   |
|                                                             |       |             |       |             |       |             |       |             |       |              |       |
| Net Realized and net change in unrealized trading  profit (loss) |       | (0.0216          | )          | (0.0219          | )          | (0.0253          | )          | (0.0229          | )          | (0.0226           | )          |
| Interest income                                                  |       | 0.0000           |       | 0.0000           |       | 0.0000           |       | 0.0000           |       | 0.0000            |       |
| Expenses                                                         |       | (0.0047          | )          | (0.0077          | )          | (0.0003          | )          | (0.0036          | )          | (0.0003           | )          |
|                                                             |       |             |       |             |       |             |       |             |       |              |       |
| Net asset value, end of period                                   |       | $                | 1.1423     |             | $          | 1.1564           |       | $                | 1.3389     |              | $          | 1.2075 |   | $ | 1.1949 |   |
|                                                             |       |             |       |             |       |             |       |             |       |              |       |
| **Total Return: (a)**                                            |       |             |       |             |       |             |       |             |       |              |       |
|                                                             |       |             |       |             |       |             |       |             |       |              |       |
| Total return                                                     |       | -2.25            | %          | -2.49            | %          | -1.88            | %          | -2.15            | %          | -1.88             | %          |
|                                                             |       |             |       |             |       |             |       |             |       |              |       |
| **Ratios to Average Members’  Capital:**                    |       |             |       |             |       |             |       |             |       |              |       |
|                                                             |       |             |       |             |       |             |       |             |       |              |       |
| Expenses                                                         |       | 0.40             | %          | 0.65             | %          | 0.03             | %          | 0.30             | %          | 0.03              | %          |
|                                                             |       |             |       |             |       |             |       |             |       |              |       |
| Net investment income (loss)                                     |       | -0.40            | %          | -0.65            | %          | -0.03            | %          | -0.30            | %          | -0.03             | %          |

 

----

(a) Thetotal return calculations are based on compounded monthly returns and iscalculated for each class taken as a whole. An individual members’ return mayvary from these returns based on timing of capital transactions.

 

See notes to financial statements.

 

5

----

 

ML SYSTEMATIC MOMENTUM FUTURESACCESS LLC

(a Delaware LimitedLiability Company)

 

FINANCIAL DATA HIGHLIGHTS

FOR THE SIX MONTHS ENDED JUNE 30, 2010 (unaudited)

 

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

 
| ** **                                                       | ** ** | **Class A** | ** ** | **Class C** | ** ** | **Class D** | ** ** | **Class I** | ** ** | **Class D1** | ** ** |
|------------------------------------------------------------------|------------|------------------|------------|------------------|------------|------------------|------------|------------------|------------|-------------------|------------|
| **Per Unit Operating Performance:**                              |       |             |       |             |       |             |       |             |       |              |       |
|                                                             |       |             |       |             |       |             |       |             |       |              |       |
| Net asset value, beginning of period                             |       | $                | 1.1397     |             | $          | 1.1596           |       | $                | 1.3259     |              | $          | 1.2024 |   | $ | 1.1833 |   |
|                                                             |       |             |       |             |       |             |       |             |       |              |       |
| Net Realized and net change in unrealized trading  profit (loss) |       | 0.0118           |       | 0.0120           |       | 0.0137           |       | 0.0124           |       | 0.0123            |       |
| Interest income                                                  |       | 0.0000           |       | 0.0000           |       | 0.0000           |       | 0.0000           |       | 0.0000            |       |
| Expenses                                                         |       | (0.0092          | )          | (0.0152          | )          | (0.0007          | )          | (0.0073          | )          | (0.0007           | )          |
|                                                             |       |             |       |             |       |             |       |             |       |              |       |
| Net asset value, end of period                                   |       | $                | 1.1423     |             | $          | 1.1564           |       | $                | 1.3389     |              | $          | 1.2075 |   | $ | 1.1949 |   |
|                                                             |       |             |       |             |       |             |       |             |       |              |       |
| **Total Return: (a)**                                            |       |             |       |             |       |             |       |             |       |              |       |
|                                                             |       |             |       |             |       |             |       |             |       |              |       |
| Total return                                                     |       | 0.22             | %          | -0.28            | %          | 0.98             | %          | 0.42             | %          | 0.98              | %          |
|                                                             |       |             |       |             |       |             |       |             |       |              |       |
| **Ratios to Average Members’  Capital:**                    |       |             |       |             |       |             |       |             |       |              |       |
|                                                             |       |             |       |             |       |             |       |             |       |              |       |
| Expenses                                                         |       | 0.81             | %          | 1.31             | %          | 0.06             | %          | 0.61             | %          | 0.06              | %          |
|                                                             |       |             |       |             |       |             |       |             |       |              |       |
| Net investment income (loss)                                     |       | -0.81            | %          | -1.31            | %          | -0.06            | %          | -0.61            | %          | -0.06             | %          |

 

----

(a) Thetotal return calculations are based on compounded monthly returns and iscalculated for each class taken as a whole. An individual members’ return mayvary from these returns based on timing of capital transactions.

 

See notes to financial statements.

 

6

----

 

ML SYSTEMATIC MOMENTUMFUTURESACCESS LLC

(a Delaware Limited Liability Company)

 

FINANCIAL DATA HIGHLIGHTS

FOR THE THREE MONTHS ENDED JUNE 30, 2009 (unaudited)

 

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

 
| ** **                                               | ** ** | **Class A** | ** ** | **Class C** | ** ** | **Class D** | ** ** | **Class I** | ** ** | **Class D1** | ** ** | **Class DA *** | ** ** |
|----------------------------------------------------------|------------|------------------|------------|------------------|------------|------------------|------------|------------------|------------|-------------------|------------|---------------------|------------|
| **Per Unit Operating Performance:**                      |       |             |       |             |       |             |       |             |       |              |       |                |       |
|                                                     |       |             |       |             |       |             |       |             |       |              |       |                |       |
| Net asset value, beginning of period                     |       | $                | 1.2081     |             | $          | 1.2385           |       | $                | 1.3898     |              | $          | 1.2708              |       | $ | 1.2403 |   | $ | 0.9927 |   |
|                                                     |       |             |       |             |       |             |       |             |       |              |       |                |       |
| Realized and change in unrealized trading profit  (loss) |       | (0.0434          | )          | (0.0444          | )          | (0.0499          | )          | (0.0456          | )          | (0.0446           | )          | (0.0357             | )          |
| Brokerage commissions                                    |       | —           |       | —           |       | —           |       | —           |       | —            |       | —              |       |
| Interest income                                          |       | 0.0000           |       | 0.0000           |       | 0.0001           |       | 0.0000           |       | 0.0000            |       | 0.0000              |       |
| Expenses                                                 |       | (0.0046          | )          | (0.0078          | )          | (0.0005          | )          | (0.0038          | )          | (0.0002           | )          | (0.0002             | )          |
|                                                     |       |             |       |             |       |             |       |             |       |              |       |                |       |
| Net asset value, end of period                           |       | $                | 1.1601     |             | $          | 1.1863           |       | $                | 1.3395     |              | $          | 1.2214              |       | $ | 1.1955 |   | $ | 0.9568 |   |
|                                                     |       |             |       |             |       |             |       |             |       |              |       |                |       |
| **Total Return: (a)**                                    |       |             |       |             |       |             |       |             |       |              |       |                |       |
|                                                     |       |             |       |             |       |             |       |             |       |              |       |                |       |
| Total return before Performance fees                     |       | -3.98            | %          | -4.22            | %          | -3.62            | %          | -3.88            | %          | -3.62             | %          | -3.62               | %          |
| Performance fees                                         |       | 0.00             | %          | 0.00             | %          | 0.00             | %          | 0.00             | %          | 0.00              | %          | 0.00                | %          |
| Total return after Performance fees                      |       | -3.98            | %          | -4.22            | %          | -3.62            | %          | -3.88            | %          | -3.62             | %          | -3.62               | %          |
|                                                     |       |             |       |             |       |             |       |             |       |              |       |                |       |
| **Ratios to Average Members’  Capital:**            |       |             |       |             |       |             |       |             |       |              |       |                |       |
|                                                     |       |             |       |             |       |             |       |             |       |              |       |                |       |
| Expenses (excluding Performance fees)                    |       | 0.40             | %          | 0.65             | %          | 0.03             | %          | 0.30             | %          | 0.03              | %          | 0.03                | %          |
| Performance fees                                         |       | 0.00             | %          | 0.00             | %          | 0.00             | %          | 0.00             | %          | 0.00              | %          | 0.00                | %          |
| Expenses (including Performance fees)                    |       | 0.40             | %          | 0.65             | %          | 0.03             | %          | 0.30             | %          | 0.03              | %          | 0.03                | %          |
|                                                     |       |             |       |             |       |             |       |             |       |              |       |                |       |
| Net investment income (loss)                             |       | -0.40            | %          | -0.64            | %          | -0.02            | %          | -0.30            | %          | -0.02             | %          | -0.02               | %          |

 

----

*Unitsissued December 1, 2008

 

(a) The total return calculations are based on compounded monthlyreturns and is calculated for each class taken as a whole. An individualmembers’ return may vary from these returns based on timing of capitaltransactions.

 

See notes to financial statements.

 

7

----

 

ML SYSTEMATIC MOMENTUM FUTURESACCESS LLC

(a Delaware Limited Liability Company)

 

FINANCIAL DATA HIGHLIGHTS

FOR THE SIX MONTHS ENDED JUNE 30, 2009 (unaudited)

 

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

 
| ** **                                               | ** ** | **Class A** | ** ** | **Class C** | ** ** | **Class D** | ** ** | **Class I** | ** ** | **Class D1** | ** ** | **Class DA *** | ** ** |
|----------------------------------------------------------|------------|------------------|------------|------------------|------------|------------------|------------|------------------|------------|-------------------|------------|---------------------|------------|
| **Per Unit Operating Performance:**                      |       |             |       |             |       |             |       |             |       |              |       |                |       |
|                                                     |       |             |       |             |       |             |       |             |       |              |       |                |       |
| Net asset value, beginning of period                     |       | $                | 1.2561     |             | $          | 1.2908           |       | $                | 1.4379     |              | $          | 1.3197              |       | $ | 1.2847 |   | $ | 1.0282 |   |
|                                                     |       |             |       |             |       |             |       |             |       |              |       |                |       |
| Realized and change in unrealized trading profit  (loss) |       | (0.0864          | )          | (0.0886          | )          | (0.0976          | )          | (0.0909          | )          | (0.0887           | )          | (0.0710             | )          |
| Brokerage commissions                                    |       | —           |       | —           |       | —           |       | —           |       | —            |       | —              |       |
| Interest income                                          |       | 0.0001           |       | 0.0001           |       | 0.0001           |       | 0.0001           |       | 0.0001            |       | 0.0000              |       |
| Expenses                                                 |       | (0.0097          | )          | (0.0160          | )          | (0.0009          | )          | (0.0075          | )          | (0.0006           | )          | (0.0004             | )          |
|                                                     |       |             |       |             |       |             |       |             |       |              |       |                |       |
| Net asset value, end of period                           |       | $                | 1.1601     |             | $          | 1.1863           |       | $                | 1.3395     |              | $          | 1.2214              |       | $ | 1.1955 |   | $ | 0.9568 |   |
|                                                     |       |             |       |             |       |             |       |             |       |              |       |                |       |
| **Total Return: (a)**                                    |       |             |       |             |       |             |       |             |       |              |       |                |       |
|                                                     |       |             |       |             |       |             |       |             |       |              |       |                |       |
| Total return before Performance fees                     |       | -7.64            | %          | -8.11            | %          | -6.95            | %          | -7.46            | %          | -6.95             | %          | -6.95               | %          |
| Performance fees                                         |       | 0.00             | %          | 0.00             | %          | 0.00             | %          | 0.00             | %          | 0.00              | %          | 0.00                | %          |
| Total return after Performance fees                      |       | -7.64            | %          | -8.11            | %          | -6.95            | %          | -7.46            | %          | -6.95             | %          | -6.95               | %          |
|                                                     |       |             |       |             |       |             |       |             |       |              |       |                |       |
| **Ratios to Average Members’  Capital:**            |       |             |       |             |       |             |       |             |       |              |       |                |       |
|                                                     |       |             |       |             |       |             |       |             |       |              |       |                |       |
| Expenses (excluding Performance fees)                    |       | 0.80             | %          | 1.29             | %          | 0.05             | %          | 0.60             | %          | 0.05              | %          | 0.05                | %          |
| Performance fees                                         |       | 0.00             | %          | 0.00             | %          | 0.00             | %          | 0.00             | %          | 0.00              | %          | 0.00                | %          |
| Expenses (including Performance fees)                    |       | 0.80             | %          | 1.29             | %          | 0.05             | %          | 0.60             | %          | 0.05              | %          | 0.05                | %          |
|                                                     |       |             |       |             |       |             |       |             |       |              |       |                |       |
| Net investment income (loss)                             |       | -0.79            | %          | -1.29            | %          | -0.05            | %          | -0.59            | %          | -0.05             | %          | -0.05               | %          |

 

----

*Class DSand was previously known as Class D-SM.

 

**Class DT was previously known as Class D-TF.

 

(a) The total return calculations are based on compounded monthlyreturns and is calculated for each class taken as a whole. An individualmembers’ return may vary from these returns based on timing of capitaltransactions.

 

See notes to financial statements.

 

8

----

 

ML SYSTEMATIC MOMENTUMFUTURESACCESS LLC

(a Delaware LimitedLiability Company)

 

NOTES TO FINANCIAL STATEMENTS

(unaudited)

 

1.               SUMMARY OF SIGNIFICANTACCOUNTING POLICIES

 

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

 

MLAI is an indirect wholly-owned subsidiary of Merrill Lynch &Co., Inc. (“Merrill Lynch”). Merrill Lynch, Pierce, Fenner &Smith Incorporated (“MLPF&S”), a wholly-owned subsidiary of Merrill Lynch,is the commodity broker of the Portfolio Funds. On September 15, 2008, Merrill Lynch entered into an Agreement andPlan of Merger (as amended by Amendment No. 1 dated as of October 21,2008, the “Merger Agreement”) with Bank of America Corporation (“Bank ofAmerica”). Pursuant to the Merger Agreement, on January 1, 2009, awholly-owned subsidiary of Bank of America merged with and into Merrill Lynch,with Merrill Lynch continuing as the surviving corporation and a subsidiary ofBank of America.

 

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

 

The Fund offers four Classes of Units to retail investors: Class A,Class C, Class D and Class I. Each Class of Units wasoffered at $1.00 per Unit and subsequently is offered at Net Asset Value perUnit. The four Classes of Units are subject to different Sponsor fees. Class D1is used exclusively for investments made by Systematic Momentum FuturesAccessLTD. Class DA was used exclusively for investments made by SystematicMomentum FuturesAccess II LLC until its liquidation at September 30, 2009.Class D1 and DA are not charged Sponsor fees.

 

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

 

In the opinion of management, these interim financial statementscontain all adjustments, consisting only of normal recurring adjustments,necessary for a fair statement of the financial position of the Fund as of June 30,2010, and the results of its operations for the three and six months ended June 30,2010 and 2009. However, the operating results for the interim period may not beindicative of the results for the full year.

 

9

----

 

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.  These financial statementsshould be read in conjunction with the financial statements and notes theretoincluded in the Fund’s Annual Report on Form 10-K filed with theSecurities and Exchange Commission for the year ended December 31, 2009.

 

Estimates

 

The preparation of financialstatements in conformity with U.S. GAAP requires management to make estimatesand assumptions that may affect the reported amounts of assets and liabilitiesand disclosure of contingent assets and liabilities at the date of thefinancial statements as well as the reported amounts of revenues and expensesduring the reporting period.  Actualresults could differ from those estimates.

 

2.               INVESTMENTS INPORTFOLIO FUNDS

 

Theseven funds (each a “Portfolio Fund” and collectively “Portfolio Funds”) inwhich the Fund is invested as of June 30, 2010 are: ML Altis FuturesAccessLLC (“Altis”), ML Aspect FuturesAccess LLC (“Aspect”), ML Blue TrendFuturesAccess LLC (“Blue Trend”), ML John Locke FuturesAccess LLC (“John Locke”)ML Transtrend DTP Enhanced FuturesAccess LLC (“Transtrend”), ML Tudor TensorFuturesAccess LLC (“Tudor Tensor”) and ML Winton FuturesAccess LLC (“Winton”).MLAI, in its discretion, may change the Portfolio Funds at any time. MLAI, alsoat its discretion, may vary the percentage of the Fund’s total portfolioallocated to the different Portfolio Funds. There is no pre-established rangefor the minimum and maximum allocations that may be made to any individualPortfolio Fund.

 

Theinvestment transactions were accounted for on a trade date basis. Theinvestments in the Portfolio Funds were valued at fair value and are reflectedin the Statements of Financial Condition. In determining fair value, MLAIutilized the net asset value of the underlying Portfolio Funds whichapproximates fair value. The fair value was net of all fees relating to thePortfolio Funds, paid or accrued. Additionally, MLAI monitored the performanceof the Portfolio Funds. Such monitoring procedures included, but were not limitedto: monitoring market movements in Portfolio Funds’ investments, comparingperformance to industry benchmarks, and in-depth conference calls and sitevisits with the Portfolio Funds’ Managers.

 

At June 30, 2010,details of Investments in Portfolio Funds are as follows:

 
| ** **    | ** ** | **Percentage of   Members’  Capital** | ** ** | **Fair Value** | ** **  | **Profit (Loss)** | ** ** | **Cost**    | ** ** | **Management  Fees** | ** **  | **Performance  Fees** | ** ** | **Redemptions Permitted** | ** ** |
|---------------|------------|------------------------------------------------------|------------|---------------------|-------------|------------------------|------------|-------------|------------|----------------------|-------------|-----------------------|------------|--------------------------------|------------|
| Tudor  Tensor |       | 13.04                                                | %          | $                   | 118,940,534 |                   | $          | (4,388,157  | )          | $                    | 123,326,189 |                  | $          | (1,132,764                     | )          | $ | — |   | monthly |   |
| Chesapeake*   |       | 0.00                                                 | %          | —              |        | (2,598,008             | )          | —      |       | (144,407             | )           | —                |       | monthly                        |       |
| Transtrend    |       | 18.21                                                | %          | 166,086,743         |        | 5,261,888              |       | 171,663,060 |       | (1,649,131           | )           | —                |       | monthly                        |       |
| Altis         |       | 12.67                                                | %          | 115,593,338         |        | (5,590,676             | )          | 100,886,569 |       | (1,175,361           | )           | —                |       | monthly                        |       |
| Winton        |       | 18.23                                                | %          | 166,263,564         |        | 11,078,009             |       | 153,059,422 |       | (1,658,841           | )           | —                |       | monthly                        |       |
| Aspect        |       | 10.13                                                | %          | 92,370,017          |        | 3,027,247              |       | 88,936,555  |       | (916,357             | )           | —                |       | monthly                        |       |
| John  Locke   |       | 14.18                                                | %          | 129,319,998         |        | (967,507               | )          | 131,939,340 |       | (1,274,210           | )           | —                |       | monthly                        |       |
| BlueTrend     |       | 14.03                                                | %          | 127,982,629         |        | 3,992,966              |       | 114,561,141 |       | (1,198,668           | )           | —                |       | monthly                        |       |
|          |       |                                                 |       |                |        |                   |       |        |       |                 |        |                  |       |                           |       |
|          |       | 100.49                                               | %          | $                   | 916,556,823 |                   | $          | 9,815,762   |       | $                    | 884,372,276 |                  | $          | (9,149,739                     | )          | $ | — |   |   |   |

 

----

* Liquidated as of January 31, 2010.

 

10

----

 

At December 31, 2009,details of Investments in Portfolio Funds are as follows:

 
| ** **   | ** ** | **Percentage  of   Members’   Capital** | ** ** | **Fair  Value** | ** **  | **Profit  (Loss)** | ** ** | **Cost**    | ** ** | **Management  Fees** | ** **  | **Performance  Fees** | ** ** | **Redemptions  Permitted** | ** ** |
|--------------|------------|----------------------------------------------|------------|-----------------|-------------|--------------------|------------|-------------|------------|---------------------------|-------------|----------------------------|------------|----------------------------|------------|
| Chesapeake** |       | 10.26                                        | %          | $               | 89,097,919  |               | $          | 548,547     |       | $                         | 85,817,248  |                       | $          | (1,610,421                 | )          | $ | (66,420 | ) | monthly |   |
| Transtrend   |       | 17.53                                        | %          | 152,211,381     |        | (25,830,157        | )          | 159,370,194 |       | (2,728,503                | )           | (174                       | )          | monthly                    |       |
| Altis        |       | 13.28                                        | %          | 115,332,711     |        | (8,896,043         | )          | 95,037,963  |       | (2,077,161                | )           | —                     |       | monthly                    |       |
| Winton       |       | 18.27                                        | %          | 158,630,744     |        | (8,375,671         | )          | 155,014,029 |       | (2,753,086                | )           | (76                        | )          | monthly                    |       |
| Aspect       |       | 9.92                                         | %          | 86,166,474      |        | (8,874,084         | )          | 85,326,225  |       | (1,594,961                | )           | (4,182                     | )          | monthly                    |       |
| John  Locke  |       | 14.37                                        | %          | 124,737,088     |        | (9,350,844         | )          | 126,419,973 |       | (2,692,888                | )           | —                     |       | monthly                    |       |
| BlueTrend    |       | 7.02                                         | %          | 60,984,933      |        | 2,608,281          |       | 50,992,711  |       | (1,136,431                | )           | (575,116                   | )          | monthly                    |       |
| GSA*         |       | 0.00                                         | %          | —          |        | (3,681,929         | )          | —      |       | (690,487                  | )           | —                     |       | monthly                    |       |
|         |       |                                         |       |            |        |               |       |        |       |                      |        |                       |       |                       |       |
|         |       | 90.65                                        | %          | $               | 787,161,250 |               | $          | (61,851,900 | )          | $                         | 757,978,343 |                       | $          | (15,283,938                | )          | $ | (645,968 | ) |   |   |

 

----

* Liquidated as of May 2009

** Liquidated as of January 31, 2010.

 

These investments arerecorded at fair value. In accordance with Regulation S-X, the following issummarized financial information for each of the Portfolio Funds which requiredisclosure.

 
| ** ** | ** ** | **As of June 30, 2010** | ** **  |                  |       |
|------------|------------|------------------------------|-------------|-----------------------|------------|
| ** ** | ** ** | **Total Assets**             | ** **  | **Total Liabilities** | ** ** | **Total Capital** | ** ** |   |   |
| Winton     |       | $                            | 812,417,812 |                  | $          | 18,893,855 |   | $ | 793,523,957 |   |   |   |
|       |       |                         |        |                  |       |   |   |   |   |
| Total      |       | $                            | 812,417,812 |                  | $          | 18,893,855 |   | $ | 793,523,957 |   |   |   |

 
| ** ** | ** ** | **As of December 31, 2009** | ** **  |                  |       |
|------------|------------|----------------------------------|-------------|-----------------------|------------|
| ** ** | ** ** | **Total Assets**                 | ** **  | **Total Liabilities** | ** ** | **Total Capital** | ** ** |   |   |
| Transtrend |       | $                                | 238,072,475 |                  | $          | 2,171,789 |   | $ | 235,900,686 |   |   |   |
|       |       |                             |        |                  |       |   |   |   |   |
|       |       | $                                | 238,072,475 |                  | $          | 2,171,789 |   | $ | 235,900,686 |   |   |   |

 
| ** ** | ** ** | **For the six months ended June 30, 2010** | ** ** |
|------------|------------|-------------------------------------------------|------------|
| ** ** | ** ** | ** **                                      | ** ** | ** ** | ** ** | **Net** | ** ** |
| ** ** | ** ** | **Income (Loss)**                               | ** ** | **Commissions** | ** ** | **Other** | ** ** | **Income (Loss)** | ** ** |
| Winton     |       | $                                               | 12,946,298 |   | $ | (106,941 | ) | $ | (1,761,348 | ) | $ | 11,078,009 |   |
|       |       |                                            |       |   |   |   |   |   |   |
| Total      |       | $                                               | 12,946,298 |   | $ | (106,941 | ) | $ | (1,761,348 | ) | $ | 11,078,009 |   |

 
| ** ** | ** ** | **For the six months ended June 30, 2009** | ** **  |
|------------|------------|-------------------------------------------------|-------------|
| ** ** | ** ** | ** **                                      | ** **  | ** ** | ** ** | **Net** | ** ** |
| ** ** | ** ** | **Income (Loss)**                               | ** **  | **Commissions** | ** ** | **Other** | ** ** | **Income (Loss)** | ** ** |
| Aspect     |       | $                                               | (11,004,342 | ) | $ | (100,142 | ) | $ | (832,063 | ) | $ | (11,936,547 | ) |
|       |       |                                            |        |   |   |   |   |   |   |
| Total      |       | $                                               | (11,004,342 | ) | $ | (100,142 | ) | $ | (832,063 | ) | $ | (11,936,547 | ) |

 

11

----

 

3.                     FAIR VALUE OF INVESTMENTS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

12

----

 

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

 

Although there are monthly transactions in thesePortfolio Funds, the Net Asset Value’s (“NAV”) are materially based onportfolios of Level I and Level II assets and liabilities for which the Fundhas transparency.  As such, the Funddetermined that its investments in these investment companies in this case,would be classified as Level II.

 

Thefollowing table summarizes the valuation of the Fund’s investment by the abovefair value hierarchy levels as of June 30, 2010 and December 31, 2009:

 
| **Investment  in**     | ** ** | ** ** | ** **  | ** **  | ** ** | ** **   | ** ** | ** **    | ** **  |
|------------------------|------------|------------|-------------|-------------|------------|--------------|------------|---------------|-------------|
| **Portfolio  Funds**   | ** ** | **Total**  | ** **  | **Level I** | ** ** | **Level II** | ** ** | **Level III** | ** **  |
|                   |       |       |        |        |       |         |       |          |        |
| June 30, 2010     |       | $          | 916,556,823 |        | $          | —       |       | $             | 916,556,823 |   | $ | — |   |
| December 31, 2009 |       | $          | 787,161,250 |        | $          | —       |       | $             | 787,161,250 |   | $ | — |   |

 

There were no significant transfers to or from Level I or II during thequarter and period ended June 30, 2010.

 

4.                           MARKET, CREDITAND CONCENTRATION RISKS

 

The nature of this Fund hascertain risks, which cannot be presented on the financial statements. Thefollowing summarizes some of those risks.

 

Market Risk

 

Derivative instrumentsinvolve varying degrees of market risk. Changes in the level or volatility of interest rates, foreign currencyexchange rates or the market values of the financial instruments or commoditiesunderlying such derivative instruments frequently result in changes in Netunrealized profit (loss) on such derivative instruments as reflected in theStatements of Financial Condition of the Portfolio Funds.  The Fund’s exposure to market risk isinfluenced 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.

 

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

 

13

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Credit Risk

 

 The risks associated withexchange-traded contracts are typically perceived to be less than thoseassociated with over-the-counter (non-exchange-traded) transactions, becauseexchanges typically provide clearinghouse arrangements in which the collectivecredit (in some cases limited in amount, in some cases not) of the members ofthe exchange is pledged to support the financial integrity of theexchange.  In over-the-countertransactions, on the other hand, traders must rely solely on the credit oftheir respective individual counterparties. Margins, which may be subject 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 on open contracts, if any, includedin the Statements of Financial Condition of the Portfolio Funds. The PortfolioFunds attempt to mitigate this risk by dealing exclusively with Merrill Lynchentities as clearing brokers.

 

The Portfolio Funds, in their normal course of business, enter intovarious contracts, with 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.

 

Indemnifications

 

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

 

5.                           RECENTACCOUNTING PRONOUNCEMENTS

 

In January 2010, the FASB issued an update to the fair valuemeasurements disclosure. Pursuant to this update, additional disclosures in thefinancial statements relating to transfers in and out of Levels 1 and 2 fairvalue measurements and separate disclosure of purchases, sales, issuances, andsettlements in Level 3 rollforward, will be required. In addition, this updateprovides clarifications on i) the level of aggregation of classes of assets andliabilities disclosed in the fair value measurement disclosures and ii)disclosures relating to the inputs and valuation techniques for Level 2 andLevel 3 fair value measurements. The new disclosures and clarifications ofexisting disclosures are effective for annual reporting periods beginning afterDecember 15, 2009, except for the disclosures about purchases, sales,issuances, and settlements in the Level 3 roll forward which are effective forfiscal years beginning after December 15, 2010. This 

 

14

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update further enhances the fair value disclosures and the Sponsor hasdetermined that the adoption of this update on January 1, 2010, did nothave a material impact to the Fund’s financial statements.

 

6.                           SUBSEQUENTEVENTS

 

Managementhas evaluated the impact of subsequent events on the Fund and has determinedthat there were no subsequent events that require adjustments to, or disclosurein, the financial statements.

 

15

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

 

MONTH-END NET ASSET VALUEPER UNIT 

 

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

 

 

TheFund calculates the Net Asset Value per unit of each class of units as of theclose of business on the last business day of each calendar month and suchother dates as MLAI may determine in its discretion. The Fund’s “Net AssetValue” as of any calculation date will generally equal the value of the Fund’sinvestments in the underlying funds as of such date, plus any other assets heldby the Fund, minus accrued brokerage commissions, sponsor’s, management andperformance fees, organizational expense amortization and any operating costsand other liabilities of the Fund.

 

MONTH-END NET ASSET VALUE PER INITIAL UNITCLASS A

 
| ** ** | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** | **Apr.** | ** ** | **May** | ** ** | **Jun.** | ** ** |
|------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|---------|------------|----------|------------|
| 2009       |       | $        | 1.2473     |     | $          | 1.2484   |       | $        | 1.2081     |    | $          | 1.1729   |       | $ | 1.1861 |   | $ | 1.1601 |   |
| 2010       |       | $        | 1.1036     |     | $          | 1.1154   |       | $        | 1.1686     |    | $          | 1.1825   |       | $ | 1.1447 |   | $ | 1.1423 |   |

 

MONTH-END NET ASSET VALUE PER INITIAL UNITCLASS C

 
| ** ** | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** | **Apr.** | ** ** | **May** | ** ** | **Jun.** | ** ** |
|------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|---------|------------|----------|------------|
| 2009       |       | $        | 1.2807     |     | $          | 1.2808   |       | $        | 1.2385     |    | $          | 1.2014   |       | $ | 1.2139 |   | $ | 1.1863 |   |
| 2010       |       | $        | 1.1220     |     | $          | 1.1329   |       | $        | 1.1860     |    | $          | 1.1991   |       | $ | 1.1598 |   | $ | 1.1564 |   |

 

MONTH-END NET ASSET VALUEPER INITIAL UNIT CLASS D

 
| ** ** | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** | **Apr.** | ** ** | **May** | ** ** | **Jun.** | ** ** |
|------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|---------|------------|----------|------------|
| 2009       |       | $        | 1.4312     |     | $          | 1.4343   |       | $        | 1.3898     |    | $          | 1.3509   |       | $ | 1.3679 |   | $ | 1.3395 |   |
| 2010       |       | $        | 1.2855     |     | $          | 1.3008   |       | $        | 1.3645     |    | $          | 1.3825   |       | $ | 1.3400 |   | $ | 1.3389 |   |

 

MONTH-END NET ASSET VALUEPER INITIAL UNIT CLASS I

 
| ** ** | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** | **Apr.** | ** ** | **May** | ** ** | **Jun.** | ** ** |
|------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|---------|------------|----------|------------|
| 2009       |       | $        | 1.3110     |     | $          | 1.3126   |       | $        | 1.2708     |    | $          | 1.2341   |       | $ | 1.2484 |   | $ | 1.2214 |   |
| 2010       |       | $        | 1.1647     |     | $          | 1.1774   |       | $        | 1.2340     |    | $          | 1.2492   |       | $ | 1.2096 |   | $ | 1.2075 |   |

 

MONTH-END NET ASSET VALUEPER INITIAL UNIT CLASS D1

 
| ** ** | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** | **Apr.** | ** ** | **May** | ** ** | **Jun.** | ** ** |
|------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|---------|------------|----------|------------|
| 2009       |       | $        | 1.2773     |     | $          | 1.2800   |       | $        | 1.2403     |    | $          | 1.2057   |       | $ | 1.2208 |   | $ | 1.1955 |   |
| 2010       |       | $        | 1.1473     |     | $          | 1.1609   |       | $        | 1.2178     |    | $          | 1.2339   |       | $ | 1.1959 |   | $ | 1.1949 |   |

 

MONTH-END NET ASSET VALUEPER INITIAL UNIT CLASS DA*

 
| ** ** | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** | **Apr.** | ** ** | **May** | ** ** | **Jun.** | ** ** |
|------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|---------|------------|----------|------------|
| 2009       |       | $        | 1.0222     |     | $          | 1.0244   |       | $        | 0.9927     |    | $          | 0.9649   |       | $ | 0.9770 |   | $ | 0.9568 |   |
|            |            |          |            |          |            |          |            |          |            |         |            |          |            |  |  |  |  |  |  |

 

----

* Class DA was liquidated at September 30, 2009.

 

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Liquidity and Capital Resources

 

The Fund does not engage in the sale of goods orservices.  The Fund’s assets are it’s (i) investmentin Portfolio Funds and (ii) cash.   Because of the low margin deposits normally required in commodityfutures trading relatively small price movements may result in substantiallosses to the Fund.  While substantiallosses could lead to a material decrease in liquidity, no such material lossesoccurred during the first quarter of 2010 and there was no impact on the Fund’sliquidity.

 

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

 

Forthe three months ended June 30, 2010, Fund capital increased 5.03% from$868,301,244 to$911,990,842.  This increase wasattributable to the net gain from operations of $274,439, coupled with theredemption of 69,742,806 Redeemable Units resulting in an outflow of$81,808,187.  The cash outflow was offsetwith cash inflow of $125,223,346 due to subscription of 107,853,507 units.  Future redemptions could impact the amount offunds available for investment in commodity contract positions in subsequentmonths.

 

Critical Accounting Policies

 

Statement of Cash Flows

 

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

 

Investments

 

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

 

Cash Equivalents

 

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

 

Interest Rates and Income

 

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

 

Fair Value Measurements

 

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

 

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Income Taxes

 

No provision for income taxes has been made in the accompanying financialstatements as each Member is individually responsible for reporting income orloss based on such Member’s share of the Fund’s income and expenses as reportedfor income tax purposes.

 

The Fund follows the ASC’s guidance onaccounting for uncertainty in income taxes. This guidance provides how uncertain tax positions should be recognized,measured, presented and disclosed in the financial statements.  This guidance also requires the evaluation oftax positions taken or expected to be taken in the course of preparing the Fund’sfinancial statements to determine whether the tax positions are “more-likely-than-not”to be sustained by the applicable tax authority.  Tax positions with respect to tax at the Fundlevel not deemed to meet the “more-likely-than-not” threshold would be recordedas a tax benefit or expense in the current year.  MLAI has analyzed the Fund’s tax positionsand has concluded that no provision for income tax is required in the Fund’sfinancial statements. The following are the major tax jurisdictions for theFund and the earliest tax year subject to examination: United States — 2007.

 

Results of Operations

 

January 1, 2010 to March 31, 2010

 

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

 

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

 

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

 

Allof the Portfolio Funds had positive performance in March resulting inprofits being posted to the Fund. Equity indices drove performance for mostPortfolio Funds’ trading advisors. Positioning was firmly on the long side dueto the strength of the current up trends in global equity indices. Commoditieswere also profitable across the board due to long positions in oil and metalsand short positions in natural gas and grains. Positioning was spot on in mostof these sub sectors. Oil and metals generally rose and natural gas and grainsdeclined in March. Currencies also posted profits to the Fund. The Euro and

 

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Britishpound ended the month down, benefiting short positions in these currencies. Onthe other hand the Canadian and Australian dollars rose, resulting in profitsdue to their long positions in these currencies. Fixed income was the onlylosing asset class. Short term interest rate contracts generally stayed flat,but yields on longer term government bonds rose during the month, causing somelosses to long positions in those instruments. Overall, the yield moves werenot very large, so losses were contained.

 

April 1,2010 to June 30, 2010

 

The Fund experienced a nettrading loss for the second quarter of 2010 of $17,308,206.

 

Most Portfolio Funds hadpositive performance in April resulting in profits being posted to theFund.  The trading advisors who aremedium and long term trend followers: Altis, Aspect, BlueTrend Transtrend andWinton performed well. In fixed income, falling overall G7 (Canada, France,Germany, Italy, Japan, United Kingdom and United States) yields meant thatlong positions were profitable. In currencies, a balanced posture with shortEuropean currencies against long positions in commodity and emerging marketscurrencies posted profits to the Fund. In commodities, some sectors lost moneywhich was offset by gains in the energies and metals sectors. While U.S. equityindices ended the month up, European and Asian markets generally ended themonth lower. All trading advisors were long in global equity indices withprofits or losses dependent upon their relative size in various geographies.

 

The Portfolio Funds hadoverall losses in May resulting in losses posted to the Fund.  Medium and long term trend followers did notperform well as they were seriously affected by reversals in multiple markets.The trading advisors with shorter time horizons were better able to navigatethese reversals and adjust their portfolios quickly. Equities, oil, natural gasand industrial metals all saw reversals with some markets moving more than 10%in the opposite direction of the trend. By the end of May, most tradingadvisors were very light in equities (but still long) and slightly shortpositions in energies. Other losing commodity positions were curtailed, theremaining long exposure generally being in precious metals. Currenciesperformance varied as some trading advisors posted profits and some lost moneyin the asset class. Performance depended on the relative size of short Europeancurrency positions vs. long positions in commodities and emerging marketscurrency positions.  The trading advisorswith larger short positions in European currencies managed to make money in theasset class. Fixed income yields came down during the month of May asinvestors sought safety in government securities. The trading advisors longpositioning benefited from these moves however, the gains were not enough tooffset losses in other portfolio areas.

 

In June the PortfolioFunds posted losses to the Fund as performance was quite mixed among tradingadvisors. Equities and many commodity sectors had suffered significantreversals with the trading advisors being caught on the wrong side of trades.As a result, they had moved to cut risk in those asset classes. Coming intoJune, the trading advisors still had on some long equity exposure. They werealso long precious metals, short grains and neutral in the energy sector. Butin general, position sizes tended to be small. When equities continued to movedownward during June and commodities continued to experience some movesthat were adverse to positioning, losses were suffered but these losses werequite contained. In June, currencies were generally the worst performing assetclass for the trading advisors. Having significant short European currencyexposure was bad for performance as two major currencies, the British pound andSwiss franc rallied. There were some gains from short euro positions, but thesewere not enough to counter losses felt from reversals in the British pound andSwiss franc. Fixed income was a solid winning asset class for the tradingadvisors. Long positions across the yield curve generated positive returns asyields came down as a result of stronger risk adverse sentiment, especially inthe second half of June. Fixed income also happened to be a portfolio areawhere risk was relatively greater than in other asset classes, so gains herewere able to counter losses or mixed performance in all other

 

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sectors. Altis’ performancewas weakest among the trading advisors in Systematic Momentum. Its losses inequity indices and currencies were greater than its peers. However, Winton’slower level of risk taking in reversing asset classes as well as more sizablelong precious metals positions relative to other trading advisors resulted init being the best performer in June.

 

January 1, 2009 to March 31, 2009

 

The Fund experienced a net trading loss in the first quarter of 2009 of$25,864,131.

 

Performanceof the Portfolio Funds was mixed in January which reflected the choppymarkets and diversification of the Portfolio Funds approach to trading. Wintonwas the best performer, while Altis and GSA performed the worst. The PortfolioFunds profited from falling equities, with long-term managers capturing more ofthe move. The Portfolio Funds also profited from a continuous down-trend incommodities. Largest losses were suffered in fixed income positions as the U.S.Treasury yields rallied and other global bonds shadowed the move.

 

Timehorizon focus did not seem to be a driver of returns in the middle of thequarter, while asset allocation played a more significant role. The PortfolioFunds had small net short exposures to equity markets and thus registered gainsin this asset class. In addition, most of the Portfolio Funds that had longpositions in the U.S. dollar against various currencies posted profits. Some ofthe Portfolio Funds that had long positions in the Japanese yen vs. the U.S.dollar posted losses due to the Japanese yen ending the month downsignificantly relative to the U.S. dollar. Fixed income markets experiencedvolatile swings during the month as most of the Portfolio Funds ended withsmall losses in this sector.

 

Atthe start of March, most of the Portfolio Funds had long positions in the fixedincome markets and kept this position throughout the month of March andbenefited from falling yields. John Locke was the exception. As a shorter termmanager, its positioning was influenced significantly by intra-month choppinessin fixed income markets, causing large losses.

 

Allother sectors had posted losses in March as a result of significantreversals in many markets. During March, equity markets rallied following somepositive corporate news in the first week. When the U.S. Federal Reserveannounced the start of quantitative easing mid-month, the U.S. dollar beganlosing value against most major currencies and the commodity markets which arenegatively correlated with the U.S. dollar and risk aversion moved up. Giventhat most managers in the vertical are medium to long term trend followers,they were not in a position to cut exposures very fast and were negativelyaffected by these reversals.

 

April 1,2009 to June 30, 2009

 

The Fund experienced a net trading loss in the second quarter of 2009of $ 27,742,008.

 

The market environment thatcaused a loss for the Fund in March continued through April as well.The Portfolio Funds continued to be positioned against market moves andexperienced losses in most of the sectors they traded. In March, being longfixed income helped to offset losses in equity indices, currencies andcommodities. In April, the losses in equity indices, currencies and commoditieswere more muted as many Portfolio Funds had trimmed risk in those sectors;however, having long positions in fixed income proved to be a problem as globalbond yields rose significantly, hurting those long positions. Overall, fixedincome was the worst performing sector for the Portfolio Funds, followed bycurrencies. The Portfolio Funds approach to trading was mixed exposure incommodities, making money in some markets and losing money in others. Inequities, positioning was more on the short side, but with extremely smallexposures; losses thus were muted.

 

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May wasa continuation of March and April in terms of market direction andmoves. Equities and commodities were up, and bonds and the U.S. dollar wasdown. These new trends gave many Portfolio Fund managers a reason to adjusttheir portfolios to match the new environment resulting in profits being postedto the Fund. Short and medium term Portfolio Funds were more in sync withmarkets given that they adjust faster to new trends, while longer termPortfolio Funds have held on to their pre-March positioning somewhat longerand were not able to avoid losses. So the main difference in May relativeto March and April was that many Portfolio Funds were now correctlypositioned to take advantage of current trends. Short to medium term managers(John Locke, GSA, BlueTrend, Altis, Transtrend) had better performance thanlonger term managers (Winton, Chesapeake, Aspect). The shorter term managershave adjusted better to the current market environment where equities andcommodities are doing well and the U.S. dollar and bonds performed poorly. Riskby asset class continues to be biased towards fixed income which has a roughly50% risk allocation, down from more than 80% in April. Fixed income was theasset class with the fewest reversals recently and thus risk had moved there asequities, commodities and currencies experienced changes in trend during March.But now, the risk allocated to other asset classes is creeping up: commoditiesare about a third of the total and the remainder is split between currenciesand equities.

 

March,April and May had been characterized by market moves most commonlyseen during periods where investors are risk seeking. There were up moves inequities and commodities and down moves in bonds and the U.S. dollar. ThePortfolio Fund managers were just beginning to adjust their portfolios to matchthese new market directions. After suffering losses during March and April (asthey were not positioned for the new trends that began in early March), mostmanagers had begun turning around their portfolios to be more in line withwhere markets were going and many were able to post gains in May. That came toa stop in June as several events took place. First, short term interestrates suffered a sharp reversal during the first week of the month and the U.S.dollar had a similar reversal, gaining against most currencies. Then,mid-month, the up trends in equities and commodities reversed, as sentimentbecame risk averse again. As a result of these moves, most asset classes endedthe month with negative attribution. The worst were short term rates andcommodities. The quarter ended with losses being posted to the Fund. The worstwere short term rates and commodities. Medium term managers had the worstperformance as they not only suffered from the rates and U.S. dollar moves, butalso the reversals in equities and commodities. John Locke, the manager withthe shortest time horizon was able to avoid big losses. Winton and Chesapeake,the longest term managers, had relatively smaller losses because the equity andcommodity reversals were actually good for them since they were still holdingon to their pre-March positions in those asset classes.

 

The Fund has no applicable off-balance sheet arrangements or tabulardisclosure of contractual obligations of the type described in Items 303(a)(4) and303(a)(5) of Regulation S-K.

 

Item3. Quantitative and Qualitative Disclosures About Market Risk

 

Introduction

 

The Portfolio Funds are a speculative commodity pools. The marketsensitive instruments held by the Portfolio Funds are acquired for speculativetrading purposes and all or substantially all of the Fund’s assets are subjectto the risk of trading loss.  Unlike anoperating company, the risk of market sensitive instruments is integral, notincidental, to the Fund’s main line of business.

 

Market movements result in frequent changes in the fair market value ofthe Portfolio Fund’s open positions and, consequently, in its earnings and cashflow. The Portfolio Fund’s market risk is influenced

 

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by a wide variety of factors, including the level and volatility ofinterest rates, exchange rates, equity price levels, the market value offinancial instruments and contracts, the diversification effects among thePortfolio Fund’s open positions and the liquidity of the markets in which ittrades.

 

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

 

Value at Risk is a measure of the maximum amount which the PortfolioFunds could reasonably be expected to lose in a given market sector. However,the inherent uncertainty of the Portfolio Funds’ speculative trading and therecurrence in the markets traded by the Portfolio Funds of market movements farexceeding expectations could result in actual trading or non-trading losses farbeyond the indicated Value at Risk or the experience to date (i.e., “risk ofruin”). In light of the foregoing, as well as the risks and uncertaintiesintrinsic to all future projections, the quantifications included in thissection should not be considered to constitute any assurance or representationthat the Portfolio Funds’ losses in any market sector will be limited to Valueat Risk or by each Portfolio Funds’ attempts to manage its market risk.

 

QuantitativeForward Looking Statements

 

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

 

The Portfolio Fund’s risk exposure in the various market sectors tradedby the advisors is quantified below in terms of Value at Risk.  Due to the Portfolio Fund’s fair valueaccounting, any loss in the fair value of the Portfolio Fund’s open positionsis directly reflected in the Portfolio Fund’s earnings (realized or unrealized)and cash flow (at least in the case of exchange-traded contracts in whichprofits and losses on open positions are settled daily through variationmargin).

 

Maintenance margin requirements of the Portfolio Funds have been usedas the measure of its Value at Risk. Maintenance margin requirements are set by exchanges to equal or exceedthe maximum loss in the fair value of any given contract incurred in 95%-99% ofthe one-day time periods included in the historical sample (generallyapproximately one year) researched for purposes of establishing marginlevels.  The maintenance margin levelsare established by dealers and exchanges using historical price studies as wellas an assessment of current market volatility (including the implied volatilityof the options on a given futures contract) and economic fundamentals toprovide a probabilistic estimate of the maximum expected near-term one-dayprice fluctuation.

 

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

 

100% positive correlation in the different positions held in eachmarket risk category has been assumed. Consequently, the margin requirements applicable to the open contractshave been aggregated to determine each trading category’s aggregate Value atRisk.  The diversification effectsresulting from the fact that the Fund’s positions are rarely, if ever, 100%positively correlated have not been reflected.

 

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The Portfolio Funds’ Trading Value at Risk inDifferent Market Sectors

 

Thefollowing tables indicate the average, highest, and lowest trading Value atRisk associated with the Portfolio Funds’ open positions by market category forthe six months ended June 30, 2010 and June 30, 2009.

 
| ** **                  | ** ** | **June 30, 2010** | ** ** |
|-----------------------------|------------|------------------------|------------|
| **Altis Class DS (1)** | ** ** | **Average**            | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
| **Market Sector**           | ** ** | **Value at Risk**      | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                        |       |                   |       |   |   |   |   |   |   |
| Agricultural Commodities    |       | $                      | 1,392,780  |   | 1.19 | % | $ | 1,783,484 |   | $ | 876,412 |   |
| Energy                      |       | 3,340,435              |       | 2.85 | % | 3,789,264 |   | 2,611,116 |   |
| Interest Rates              |       | 3,386,308              |       | 2.89 | % | 4,218,894 |   | 2,214,446 |   |
| Metals                      |       | 697,303                |       | 0.60 | % | 1,387,439 |   | 137,142 |   |
| Stock Indices               |       | 2,211,263              |       | 1.89 | % | 4,058,641 |   | 706,111 |   |
| Currencies                  |       | 1,371,199              |       | 1.17 | % | 2,748,651 |   | 253,502 |   |
|                        |       |                   |       |   |   |   |   |   |   |
| TOTAL                       |       | $                      | 12,399,288 |   | 10.59 | % | $ | 17,986,373 |   | $ | 6,798,729 |   |

 

----

(1) Average capitalization of Altis Class DS is $117,053,446.

 
| ** **                  | ** ** | **June 30, 2009** | ** ** |
|-----------------------------|------------|------------------------|------------|
| **Altis Class DS (1)** | ** ** | **Average**            | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
| **Market Sector**           | ** ** | **Value at Risk**      | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                        |       |                   |       |   |   |   |   |   |   |
| Agricultural Commodities    |       | $                      | 146,929    |   | 0.15 | % | $ | 253,440 |   | $ | 68,285 |   |
| Energy                      |       | 146,804                |       | 0.15 | % | 239,415 |   | 27,763 |   |
| Interest Rates              |       | 9,499,575              |       | 9.83 | % | 11,279,824 |   | 7,331,246 |   |
| Metals                      |       | 138,920                |       | 0.14 | % | 356,543 |   | 79,345 |   |
| Stock Indices               |       | 94,328                 |       | 0.10 | % | 168,359 |   | 32,824 |   |
| Currencies                  |       | 181,933                |       | 0.19 | % | 438,433 |   | 31,310 |   |
|                        |       |                   |       |   |   |   |   |   |   |
| TOTAL                       |       | $                      | 10,208,489 |   | 10.56 | % | $ | 12,736,014 |   | $ | 7,570,773 |   |

 

----

(1) Average capitalization of Altis Class DS is $96,673,301.

 

23

----

** **
| ** **                       | ** ** | **June 30, 2010** | ** ** |
|----------------------------------|------------|------------------------|------------|
| **Transtrend Class DS (2)** | ** ** | **Average**            | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
| **Market Sector**                | ** ** | **Value at Risk**      | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                             |       |                   |       |   |   |   |   |   |   |
| Agricultural Commodities         |       | $                      | 1,496,538  |   | 0.93 | % | $ | 2,473,864 |   | $ | 804,213 |   |
| Energy                           |       | 5,645,154              |       | 3.50 | % | 8,950,750 |   | 2,756,066 |   |
| Interest Rates                   |       | 2,395,035              |       | 1.49 | % | 5,119,845 |   | 637,629 |   |
| Metals                           |       | 949,165                |       | 0.59 | % | 2,041,802 |   | 247,558 |   |
| Stock Indices                    |       | 1,992,952              |       | 1.24 | % | 3,124,674 |   | 987,179 |   |
| Currencies                       |       | 4,937,480              |       | 3.06 | % | 8,345,255 |   | 2,712,908 |   |
|                             |       |                   |       |   |   |   |   |   |   |
| TOTAL                            |       | $                      | 17,416,324 |   | 10.81 | % | $ | 30,056,190 |   | $ | 8,145,553 |   |

 

----

(2) Average capitalization of Transtrend Class DS is$161,230,335.

 
| ** **                       | ** ** | **June 30, 2009** | ** ** |
|----------------------------------|------------|------------------------|------------|
| **Transtrend Class DS (2)** | ** ** | **Average**            | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
| **Market Sector**                | ** ** | **Value at Risk**      | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                             |       |                   |       |   |   |   |   |   |   |
| Agricultural Commodities         |       | $                      | 352,393    |   | 0.29 | % | $ | 2,114,356 |   | $ | 105,724 |   |
| Energy                           |       | 455,347                |       | 0.37 | % | 2,732,080 |   | 88,013 |   |
| Interest Rates                   |       | 9,190,193              |       | 7.57 | % | 55,141,161 |   | 5,801,929 |   |
| Metals                           |       | 23,459                 |       | 0.02 | % | 140,755 |   | 2,650 |   |
| Stock Indices                    |       | 415,863                |       | 0.34 | % | 2,495,177 |   | 32,594 |   |
| Currencies                       |       | 418,726                |       | 0.34 | % | 2,512,354 |   | 58,825 |   |
|                             |       |                   |       |   |   |   |   |   |   |
| TOTAL                            |       | $                      | 10,855,981 |   | 108.94 | % | $ | 65,135,883 |   | $ | 6,089,735 |   |

 

----

(2) Average capitalization of TranstrendClass DS is $121,474,367.

 

24

----

 
| ** **                   | ** ** | **June 30, 2010** | ** ** |
|------------------------------|------------|------------------------|------------|
| **Aspect Class DS (3)** | ** ** | **Average**            | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
| **Market Sector**            | ** ** | **Value at Risk**      | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                         |       |                   |       |   |   |   |   |   |   |
| Agricultural Commodities     |       | $                      | 558,355    |   | 0.62 | % | $ | 706,854 |   | $ | 425,911 |   |
| Energy                       |       | 864,930                |       | 0.96 | % | 1,417,096 |   | 409,832 |   |
| Interest Rates               |       | 2,744,681              |       | 3.04 | % | 3,863,430 |   | 1,791,986 |   |
| Metals                       |       | 927,537                |       | 1.03 | % | 1,173,327 |   | 708,216 |   |
| Stock Indices                |       | 1,018,999              |       | 1.13 | % | 1,456,893 |   | 647,807 |   |
| Currencies                   |       | 1,068,684              |       | 1.18 | % | 2,393,963 |   | 137,126 |   |
|                         |       |                   |       |   |   |   |   |   |   |
| TOTAL                        |       | $                      | 7,183,186  |   | 7.96 | % | $ | 11,011,563 |   | $ | 4,120,878 |   |

 

----

(3) Average Capitalization of AspectClass DS is $90,359,783.

 
| ** **                   | ** ** | **June 30, 2009** | ** ** |
|------------------------------|------------|------------------------|------------|
| **Aspect Class DS (3)** | ** ** | **Average**            | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
| **Market Sector**            | ** ** | **Value at Risk**      | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                         |       |                   |       |   |   |   |   |   |   |
| Agricultural Commodities     |       | $                      | 54,823     |   | 0.07 | % | $ | 328,939 |   | $ | 2,153 |   |
| Energy                       |       | 53,883                 |       | 0.07 | % | 323,301 |   | 11,627 |   |
| Interest Rates               |       | 7,427,723              |       | 10.13 | % | 44,566,340 |   | 4,164,883 |   |
| Metals                       |       | 38,798                 |       | 0.05 | % | 232,788 |   | 3,205 |   |
| Stock Indices                |       | 38,407                 |       | 0.05 | % | 230,441 |   | 5,239 |   |
| Currencies                   |       | 200,645                |       | 0.27 | % | 1,203,872 |   | 86,561 |   |
|                         |       |                   |       |   |   |   |   |   |   |
| TOTAL                        |       | $                      | 7,814,279  |   | 10.64 | % | $ | 46,885,681 |   | $ | 4,273,668 |   |

 

----

(3) Average Capitalization of Aspect Class DS is $73,327,333.

 

25

----

 
| ** **                   | ** ** | **June 30, 2010** | ** ** |
|------------------------------|------------|------------------------|------------|
| **Winton Class DS (4)** | ** ** | **Average**            | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
| **Market Sector**            | ** ** | **Value at Risk**      | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                         |       |                   |       |   |   |   |   |   |   |
| Agricultural Commodities     |       | $                      | 1,075,965  |   | 0.66 | % | $ | 1,543,128 |   | $ | 633,454 |   |
| Energy                       |       | 717,282                |       | 0.44 | % | 1,010,049 |   | 434,684 |   |
| Interest Rates               |       | 2,821,051              |       | 1.72 | % | 3,738,628 |   | 2,119,330 |   |
| Metals                       |       | 2,614,628              |       | 1.60 | % | 3,272,840 |   | 2,104,718 |   |
| Stock Indices                |       | 2,001,242              |       | 1.22 | % | 2,828,287 |   | 1,205,999 |   |
| Currencies                   |       | 1,955,879              |       | 1.20 | % | 2,705,722 |   | 1,386,302 |   |
|                         |       |                   |       |   |   |   |   |   |   |
| TOTAL                        |       | $                      | 11,186,047 |   | 6.84 | % | $ | 15,098,654 |   | $ | 7,884,487 |   |

 

----

(4) Average capitalization of Winton Class DS is$163,582,445.

 
| ** **                   | ** ** | **June 30, 2009** | ** ** |
|------------------------------|------------|------------------------|------------|
| **Winton Class DS (4)** | ** ** | **Average**            | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
| **Market Sector**            | ** ** | **Value at Risk**      | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                         |       |                   |       |   |   |   |   |   |   |
| Agricultural Commodities     |       | $                      | 70,782     |   | 0.06 | % | $ | 424,694 |   | $ | 1,940 |   |
| Energy                       |       | 30,614                 |       | 0.03 | % | 183,686 |   | 6,644 |   |
| Interest Rates               |       | 6,174,140              |       | 5.14 | % | 37,044,839 |   | 5,658,429 |   |
| Metals                       |       | 24,377                 |       | 0.02 | % | 146,262 |   | 10,868 |   |
| Stock Indices                |       | 116,171                |       | 0.10 | % | 697,026 |   | 48,501 |   |
| Currencies                   |       | 289,285                |       | 0.24 | % | 1,735,709 |   | 116,563 |   |
|                         |       |                   |       |   |   |   |   |   |   |
| TOTAL                        |       | $                      | 6,705,369  |   | 5.59 | % | $ | 40,232,216 |   | $ | 5,842,945 |   |

 

----

(4) Average capitalization of Winton Class DS is $120,077,571

 

26

----

 
| ** **                       | ** ** | **June 30, 2010** | ** ** |
|----------------------------------|------------|------------------------|------------|
| **John Locke Class DS (5)** | ** ** | **Average**            | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
| **Market Sector**                | ** ** | **Value at Risk**      | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                             |       |                   |       |   |   |   |   |   |   |
| Agricultural Commodities         |       | $                      | 2,040,190  |   | 1.62 | % | $ | 2,512,938 |   | $ | 1,337,070 |   |
| Energy                           |       | 1,646,726              |       | 1.31 | % | 2,389,469 |   | 813,118 |   |
| Interest Rates                   |       | 2,489,594              |       | 1.98 | % | 4,054,236 |   | 1,911,449 |   |
| Metals                           |       | 1,871,110              |       | 1.48 | % | 2,454,250 |   | 1,422,337 |   |
| Stock Indices                    |       | 1,110,621              |       | 0.88 | % | 2,017,379 |   | 249,413 |   |
| Currencies                       |       | 879,009                |       | 0.70 | % | 1,760,469 |   | 438,391 |   |
|                             |       |                   |       |   |   |   |   |   |   |
| TOTAL                            |       | $                      | 10,037,250 |   | 7.97 | % | $ | 15,188,741 |   | $ | 6,171,778 |   |

 

----

(5) Average capitalization of John Locke Class DS is$126,017,439.

 
| ** **                       | ** ** | **June 30, 2009** | ** ** |
|----------------------------------|------------|------------------------|------------|
| **John Locke Class DS (5)** | ** ** | **Average**            | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
| **Market Sector**                | ** ** | **Value at Risk**      | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                             |       |                   |       |   |   |   |   |   |   |
| Agricultural Commodities         |       | $                      | 385,759    |   | 0.34 | % | $ | 968,849 |   | $ | 60,755 |   |
| Energy                           |       | 548,008                |       | 0.48 | % | 1,812,797 |   | 99,913 |   |
| Interest Rates                   |       | 57,595,731             |       | 50.17 | % | 305,915,780 |   | 1,922,404 |   |
| Metals                           |       | 673,966                |       | 0.59 | % | 3,324,914 |   | 30,523 |   |
| Stock Indices                    |       | 520,901                |       | 0.45 | % | 1,976,182 |   | 34,401 |   |
| Currencies                       |       | 3,407,926              |       | 2.97 | % | 13,102,677 |   | 500,808 |   |
|                             |       |                   |       |   |   |   |   |   |   |
| TOTAL                            |       | $                      | 63,132,291 |   | 55.00 | % | $ | 327,101,199 |   | $ | 2,648,804 |   |

 

----

(5) Average capitalization of John Locke Class DS is$114,791,832.

 

27

----

** **
| ** **                      | ** ** | **June 30, 2010** | ** ** |
|---------------------------------|------------|------------------------|------------|
| **BlueTrend Class DS (6)** | ** ** | **Average**            | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
| **Market Sector**               | ** ** | **Value at Risk**      | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                            |       |                   |       |   |   |   |   |   |   |
| Agricultural Commodities        |       | $                      | 435,091    |   | 0.40 | % | $ | 791,652 |   | $ | 200,843 |   |
| Energy                          |       | 2,734,461              |       | 2.50 | % | 6,780,272 |   | 377,902 |   |
| Interest Rates                  |       | 3,499,530              |       | 3.20 | % | 5,628,131 |   | 1,952,180 |   |
| Metals                          |       | 510,299                |       | 0.47 | % | 753,493 |   | 232,560 |   |
| Stock Indices                   |       | 2,834,817              |       | 2.59 | % | 4,504,596 |   | 1,183,504 |   |
| Currencies                      |       | 2,106,775              |       | 1.93 | % | 5,700,597 |   | 79,367 |   |
|                            |       |                   |       |   |   |   |   |   |   |
| TOTAL                           |       | $                      | 12,120,973 |   | 11.09 | % | $ | 24,158,741 |   | $ | 4,026,356 |   |

 

----

(6) Average capitalization of BlueTrendClass DS is $109,361,795.

 
| ** **                      | ** ** | **June 30, 2009** | ** ** |
|---------------------------------|------------|------------------------|------------|
| **BlueTrend Class DS (6)** | ** ** | **Average**            | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
| **Market Sector**               | ** ** | **Value at Risk**      | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                            |       |                   |       |   |   |   |   |   |   |
| Agricultural Commodities        |       | $                      | 11,618     |   | 0.02 | % | $ | 69,707 |   | $ | 2,789 |   |
| Energy                          |       | 16,048                 |       | 0.03 | % | 96,287 |   | 4,902 |   |
| Interest Rates                  |       | 3,500,233              |       | 6.75 | % | 21,001,399 |   | 3,028,582 |   |
| Metals                          |       | 10,457                 |       | 0.02 | % | 62,739 |   | 4,048 |   |
| Stock Indices                   |       | 38,659                 |       | 0.07 | % | 231,956 |   | 9,804 |   |
| Currencies                      |       | 17,918                 |       | 0.03 | % | 107,507 |   | 2,177 |   |
|                            |       |                   |       |   |   |   |   |   |   |
| TOTAL                           |       | $                      | 3,594,933  |   | 6.92 | % | $ | 21,569,595 |   | $ | 3,052,302 |   |

 

----

(6) Average capitalization of BlueTrendClass DS is $51,873,248

 

28

----

 
| ** **                         | ** ** | **June 30, 2010** | ** ** |
|------------------------------------|------------|------------------------|------------|
| **Tudor Tensor Class DS (7)** | ** ** | **Average**            | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
| **Market Sector**                  | ** ** | **Value at Risk**      | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                               |       |                   |       |   |   |   |   |   |   |
| Agricultural Commodities           |       | $                      | 335,058    |   | 0.30 | % | $ | 481,456 |   | $ | 174,880 |   |
| Energy                             |       | 1,311,289              |       | 1.16 | % | 1,646,337 |   | 847,693 |   |
| Interest Rates                     |       | 1,480,199              |       | 1.31 | % | 2,030,443 |   | 1,085,170 |   |
| Metals                             |       | 403,294                |       | 0.36 | % | 498,579 |   | 266,466 |   |
| Stock Indices                      |       | 3,232,177              |       | 2.86 | % | 4,511,655 |   | 1,778,124 |   |
| Currencies                         |       | 817,635                |       | 0.72 | % | 1,800,419 |   | 293,075 |   |
|                               |       |                   |       |   |   |   |   |   |   |
| TOTAL                              |       | $                      | 7,579,652  |   | 6.71 | % | $ | 10,968,889 |   | $ | 4,445,408 |   |

 

----

(7) Average capitalization of TudorTensor Class DS is $113,031,408.

 
| ** **                       | ** ** | **June 30, 2009** | ** ** |
|----------------------------------|------------|------------------------|------------|
| **Chesapeake Class DS (4)** | ** ** | **Average**            | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
| **Market Sector**                | ** ** | **Value at Risk**      | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                             |       |                   |       |   |   |   |   |   |   |
| Agricultural Commodities         |       | $                      | 155,604    |   | 0.21 | % | $ | 933,625 |   | 72,559 |   |
| Energy                           |       | 94                     |       | 0.00 | % | 563 |   | — |   |
| Interest Rates                   |       | 3,649,742              |       | 4.93 | % | 21,898,450 |   | 3,297,032 |   |
| Metals                           |       | 49,899                 |       | 0.07 | % | 299,393 |   | 32,072 |   |
| Stock Indices                    |       | —                 |       | 0.00 | % | — |   | — |   |
| Stock Futures                    |       | 263                    |       | 0.00 | % | 1,579 |   | — |   |
| Currencies                       |       | 59,914                 |       | 0.08 | % | 359,483 |   | 21,625 |   |
|                             |       |                   |       |   |   |   |   |   |   |
| TOTAL                            |       | $                      | 3,915,516  |   | 5.29 | % | $ | 23,493,093 |   | $ | 3,423,288 |   |
|                                  |            |                        |            |  |  |  |  |  |  |  |  |  |

 

----

(4) Average capitalization of ChesapeakeClass DS is $74,001,528.

 

* Liquidated as of January 31, 2010.

 

29

----

 
| ** **                | ** ** | **June 30, 2009** | ** ** |
|---------------------------|------------|------------------------|------------|
| **GSA Class DS (7)** | ** ** | **Average**            | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
| **Market Sector**         | ** ** | **Value at Risk**      | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                      |       |                   |       |   |   |   |   |   |   |
| Agricultural Commodities  |       | $                      | 290,575    |   | 0.43 | % | $ | 815,648 |   | $ | — |   |
| Energy                    |       | 354,628                |       | 0.52 | % | 1,174,250 |   | — |   |
| Interest Rates            |       | 2,301,652              |       | 3.41 | % | 5,370,356 |   | — |   |
| Metals                    |       | 229,626                |       | 0.34 | % | 1,145,669 |   | — |   |
| Stock Indices             |       | 1,254,491              |       | 1.86 | % | 4,304,255 |   | — |   |
| Currencies                |       | 448,269                |       | 0.66 | % | 1,553,411 |   | — |   |
|                      |       |                   |       |   |   |   |   |   |   |
| TOTAL                     |       | $                      | 4,879,241  |   | 7.22 | % | $ | 14,363,589 |   | $ | — |   |

 

----

(7) Average capitalization of GSAClass DS is $67,550,833.

 

* Liquidated as of May 2009

 

Material Limitations on Value at Risk as an Assessmentof Market Risk

 

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

 

30

----

 

Non-TradingRisk

 

Foreign Currency Balances;Cash on Deposit with MLPF&S

 

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

 

The Portfolio Funds alsohave non-trading market risk on the approximately 90%-95% of its assets whichare held in cash at MLPF&S. The value of this cash is not interest ratesensitive, but there is cash flow risk in that if interest rates decline sowill the cash flow generated on these monies.

 

Qualitative Disclosures Regarding Primary Trading Risk Exposures

 

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

 

Item 4. Controls and Procedures

 

MLAI,the Manager of ML Systematic Momentum FuturesAccess LLC, with the participationof the Manager’s Chief Executive Officer and the Chief Financial Officer, hasevaluated the effectiveness of the design and operation of its disclosurecontrols and procedures (as defined in Rule 13(a) -15(e) underthe Securities Exchange Act of 1934) with respect to the Fund as of the end ofthe period covered by this  quarterlyreport, and, based on this evaluation, has concluded that these disclosurecontrols and procedures are effective. No change in internal control over financial reporting (as defined in Rule 13a-15(f) underthe Securities Exchange Act of 1934) occurred during the quarter ended June 30,2010 that has materially affected, or is reasonably likely to materiallyaffect, the Fund’s internal control over financial reporting.

 

31

----

 

PART II - OTHER INFORMATION

 

Item 1.                                     LegalProceedings

 

None.

 

Item 1A.                           Risk Factors

 

There are no materialchanges from risk factors as previously disclosed in the Annual Report on Form 10-Kfor the year ended December 31, 2009, filed with the Securities andExchange Commission on March 31, 2010.

 

Item 2.                                     Unregistered Sales of EquitySecurities and Use of Proceeds

 

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

 

CLASS A

 
| ** ** | ** ** | **Subscription** | ** ** | ** ** | ** ** |
|------------|------------|------------------|------------|------------|------------|
| ** ** | ** ** | **Amount**       | ** ** | **Units**  | ** ** | **NAV (1)** | ** ** |
| Jan-10     |       | $                | 8,495,734  |       | 7,454,360  |   | $ | 1.1397 |   |
| Feb-10     |       | 4,599,449        |       | 4,167,678  |       | 1.1036 |   |
| Mar-10     |       | 3,694,299        |       | 3,312,085  |       | 1.1154 |   |
| Apr-10     |       | 3,799,299        |       | 3,251,154  |       | 1.1686 |   |
| May-10     |       | 3,784,640        |       | 3,200,541  |       | 1.1825 |   |
| Jun-10     |       | 3,752,517        |       | 3,278,166  |       | 1.1447 |   |
| Jul-10     |       | 2,040,660        |       | 1,786,448  |       | 1.1423 |   |
|            |            |                  |            |            |            |  |  |  |  |

 

CLASS C

 
| ** ** | ** ** | **Subscription** | ** ** | ** ** | ** ** |
|------------|------------|------------------|------------|------------|------------|
| ** ** | ** ** | **Amount**       | ** ** | **Units**  | ** ** | **NAV (1)** | ** ** |
| Jan-10     |       | $                | 10,791,109 |       | 9,305,889  |   | $ | 1.1596 |   |
| Feb-10     |       | 13,643,857       |       | 12,160,300 |       | 1.1220 |   |
| Mar-10     |       | 15,703,161       |       | 13,861,030 |       | 1.1329 |   |
| Apr-10     |       | 17,633,870       |       | 14,868,356 |       | 1.1860 |   |
| May-10     |       | 10,053,868       |       | 8,384,512  |       | 1.1991 |   |
| Jun-10     |       | 14,059,848       |       | 12,122,650 |       | 1.1598 |   |
| Jul-10     |       | 9,782,235        |       | 8,459,214  |       | 1.1564 |   |
|            |            |                  |            |            |            |  |  |  |  |

 

CLASS D

 
| ** ** | ** ** | **Subscription** | ** ** | ** ** | ** ** |
|------------|------------|------------------|------------|------------|------------|
| ** ** | ** ** | **Amount**       | ** ** | **Units**  | ** ** | **NAV (1)** | ** ** |
| Jan-10     |       | $                | 1,391,999  |       | 1,049,852  |   | $ | 1.3259 |   |
| Feb-10     |       | 990,000          |       | 770,128    |       | 1.2855 |   |
| Mar-10     |       | —           |       | —     |       | 1.3008 |   |
| Apr-10     |       | 391,999          |       | 287,284    |       | 1.3645 |   |
| May-10     |       | —           |       | —     |       | 1.3825 |   |
| Jun-10     |       | 899,998          |       | 671,641    |       | 1.3400 |   |
| Jul-10     |       | 499,999          |       | 373,440    |       | 1.3389 |   |
|            |            |                  |            |            |            |  |  |  |  |

 

CLASS I

 
| ** ** | ** ** | **Subscription** | ** ** | ** ** | ** ** |
|------------|------------|------------------|------------|------------|------------|
| ** ** | ** ** | **Amount**       | ** ** | **Units**  | ** ** | **NAV (1)** | ** ** |
| Jan-10     |       | $                | 1,914,992  |       | 1,592,641  |   | $ | 1.2024 |   |
| Feb-10     |       | 3,819,726        |       | 3,279,579  |       | 1.1647 |   |
| Mar-10     |       | 1,536,743        |       | 1,305,201  |       | 1.1774 |   |
| Apr-10     |       | 1,209,894        |       | 980,465    |       | 1.2340 |   |
| May-10     |       | 545,111          |       | 436,368    |       | 1.2492 |   |
| Jun-10     |       | 1,328,479        |       | 1,098,280  |       | 1.2096 |   |
| Jul-10     |       | 639,948          |       | 529,978    |       | 1.2075 |   |
|            |            |                  |            |            |            |  |  |  |  |

 

CLASS D1

 
| ** ** | ** ** | **Subscription** | ** ** | ** ** | ** ** |
|------------|------------|------------------|------------|------------|------------|
| ** ** | ** ** | **Amount**       | ** ** | **Units**  | ** ** | **NAV (1)** | ** ** |
| Jan-10     |       | $                | —     |       | —     |   | $ | 1.1833 |   |
| Feb-10     |       | 928,469          |       | 809,264    |       | 1.1473 |   |
| Mar-10     |       | —           |       | —     |       | 1.1609 |   |
| Apr-10     |       | —           |       | —     |       | 1.2178 |   |
| May-10     |       | 254,285          |       | 206,083    |       | 1.2339 |   |
| Jun-10     |       | —           |       | —     |       | 1.1959 |   |
| Jul-10     |       | —           |       | —     |       | 1.1949 |   |
|            |            |                  |            |            |            |  |  |  |  |

 

----

(1) Beginning of the month Net AssetValue

 

(b)  None.

(c)  None.

 

32

----

 

Item 3.                                     Defaults UponSenior Securities

 

None.

 

Item 4.                                   (Removed andReserved)

 

Item 5.                                   OtherInformation

 

None.

 

Item 6.                                   Exhibits

 

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

 

31.01 and

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

 

Exhibit 31.01

and 31.02:      Are filedherewith.

 

32.01 and

32.02               Section 1350Certifications

 

Exhibit 32.01

and 32.02       Arefiled herewith.

 

33

----

 

**SIGNATURES**

 

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

 

 
|                        | ML  SYSTEMATIC MOMENTUM FUTURESACCESS LLC |
|-----------------------------|-------------------------------------------|
|                        |                                      |
|                        |                                      |
|                        |                                      | By: | MERRILL  LYNCH ALTERNATIVE INVESTMENTS LLC |
|                        |                                      |   | (Manager) |
|                        |                                      |   |   |
|                        |                                      |   |   |
| Date: August 13, 2010  |                                      | By: | /s/ JUSTIN C. FERRI |
|                        |                                      |   | Justin  C. Ferri |
|                        |                                      |   | Chief  Executive Officer and President |
|                        |                                      |   | (Principal  Executive Officer) |
|                        |                                      |   |   |
|                        |                                      |   |   |
| Date:  August 13, 2010 |                                      |   |   |
|                        |                                      | By: | /s/  BARBRA E. KOCSIS |
|                        |                                      |   | Barbra  E. Kocsis |
|                        |                                      |   | Chief  Financial Officer |
|                        |                                      |   | (Principal  Financial and Accounting Officer) |

 

34

----