**Exhibit 13.01**

 

***SYSTEMATIC MOMENTUM II LLC***

***(A Delaware Limited LiabilityCompany)***

 

Financial Statements forthe years ended December 31, 2008 and 2007 and for the Period December 1,2006 (Commencement of Operations)

to December 31,2006 and

Report of Independent Registered Public AccountingFirm

 

 

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SYSTEMATICMOMENTUM II LLC

(A DELAWARELIMITED PARTNERSHIP)

 

TABLEOF CONTENTS
| ** **                                                                                                                                                                                            | **Page** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|
|                                                                                                                                                                                                  |     |
| REPORT OF INDEPENDENT  REGISTERED PUBLIC ACCOUNTING FIRM                                                                                                                                              | 1        |
|                                                                                                                                                                                                  |     |
| FINANCIAL  STATEMENTS:                                                                                                                                                                                |     |
|                                                                                                                                                                                                  |     |
| Statements of Financial  Condition as of December 31, 2008 and 2007                                                                                                                              | 2        |
|                                                                                                                                                                                                  |     |
| Statements of  Operations for the years ended December 31, 2008 and 2007 and for the  period December 1, 2006 (Commencement of Operations) to December 31,  2006                       | 3        |
|                                                                                                                                                                                                  |     |
| Statements of Changes  in Members’ Capital for the years ended December 31, 2008 and 2007 and  for the period December 1, 2006 (Commencement of Operations) to December 31,  2006 | 4        |
|                                                                                                                                                                                                  |     |
| Financial Data  Highlights for the years ended December 31, 2008 and 2007 and for the  period December 1, 2006 (Commencement of Operations) to  December 31, 2006                      | 5        |
|                                                                                                                                                                                                  |     |
| Notes to Financial  Statements                                                                                                                                                                        | 8        |

 

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|        |                       |             |
|--------|----------------------------|------------------|
|   |                       |
|   |                       |
|   | Deloitte & Touche LLP  |
|   | Two World Financial Center |
|   | New York, NY 10281-1414    |
|   | USA                        |
|   |                       |
|   | Tel: +1 212 436 2000       |
|   |                       | www.deloitte.com |

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTINGFIRM

 

To the Members of

Systematic Momentum II LLC:

 

We have audited the accompanying statements offinancial condition of Systematic Momentum II LLC (formerly known as APM GlobalCommodity FuturesAccess LLC) (the “Fund”), as of December 31, 2008 and2007, and the related statements of operations, changes in members’ capital,and the financial data highlights for the years ended December 31, 2008and 2007 and for the period December 1, 2006 (commencement of operations)to December 31, 2006. These financial statements and financial datahighlights are the responsibility of the Fund’s management. Our responsibilityis to express an opinion on these financial statements and financial datahighlights based on our audits.

 

We conducted our audits in accordance with thestandards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements and financial data highlightsare free of material misstatement. The Fund is not required to have, nor werewe engaged to perform, an audit of its internal control over financialreporting. Our audits included consideration of internal control over financialreporting as a basis for designing audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Fund’s internal control over financial reporting.Accordingly, we express no such opinion. An audit also includes examining, on atest basis, evidence supporting the amounts and disclosures in the financialstatements, assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financial statementpresentation. We believe that our audits provide a reasonable basis for ouropinion.

 

In our opinion, the financial statements and financialdata highlights referred to above present fairly, in all material respects, thefinancial position of Systematic Momentum II LLC as of December 31, 2008and 2007, the results of its operations, changes in members’ capital and thefinancial data highlights for the years ended December 31, 2008 and 2007and for the period December 1, 2006 (commencement of operations) to December 31,2006, in conformity with accounting principles generally accepted in the UnitedStates of America.

 

 

 

 

March 30, 2009

 

 

A member firm of 

**DeloitteTouche Tohmatsu**

 

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SYSTEMATICMOMENTUM II LLC

(A DELAWARELIMITED PARTNERSHIP)

 

STATEMENTSOF FINANCIAL CONDITION

DECEMBER31, 2008 AND 2007

 
| ** **                                                                                               | ** ** | **2008**   | ** ** | **2007**   | ** ** |
|----------------------------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|
| **ASSETS:**                                                                                              |       |       |       |       |       |
| Equity in  commodity futures trading accounts:                                                           |       |       |       |       |       |
| Cash (including  restricted cash of $6,068,085 for 2007)                                                 |       | $          | —     |       | $          | 57,821,014 |   |
| Options at  market (premium paid of $4,367,164 for 2007)                                                 |       | —     |       | 6,520,243  |       |
| Net unrealized  profit on open contracts                                                                 |       | —     |       | 589,384    |       |
| Investments in  Systematic Momentum (cost $52,795,442)                                                   |       | 54,284,473 |       | —     |       |
| Due from  Systematic Momentum                                                                            |       | 3,752,667  |       | —     |       |
| Cash                                                                                                     |       | 117,899    |       | 13,740     |       |
| Accrued interest                                                                                         |       | 2,092      |       | 191,067    |       |
|                                                                                                     |       |       |       |       |       |
| **TOTAL  ASSETS**                                                                                        |       | $          | 58,157,131 |       | $          | 65,135,448 |   |
|                                                                                                     |       |       |       |       |       |
| **LIABILITIES  AND MEMBERS’ CAPITAL:**                                                              |       |       |       |       |       |
| LIABILITIES:                                                                                             |       |       |       |       |       |
| Brokerage  commissions payable                                                                           |       | $          | —     |       | $          | 16,935 |   |
| Management fee  payable                                                                                  |       | —     |       | 80,070     |       |
| Sponsor fee  payable                                                                                     |       | 96,219     |       | 70,822     |       |
| Redemptions  payable                                                                                     |       | 3,583,417  |       | 142,377    |       |
| Perfomance fee  payable                                                                                  |       | —     |       | 936,548    |       |
| Initial offering  costs payable                                                                          |       | 27,156     |       | 27,965     |       |
| Other                                                                                                    |       | 120,219    |       | 291,685    |       |
|                                                                                                     |       |       |       |       |       |
| Total  liabilities                                                                                       |       | 3,827,011  |       | 1,566,402  |       |
|                                                                                                     |       |       |       |       |       |
| MEMBERS’ CAPITAL:                                                                                   |       |       |       |       |       |
| Members’  Interest (46,011,832 Units and 56,168,576 Units outstanding, unlimited Units  authorized) |       | 54,330,120 |       | 63,569,046 |       |
| Total members’  capital                                                                             |       | 54,330,120 |       | 63,569,046 |       |
|                                                                                                     |       |       |       |       |       |
| **TOTAL  LIABILITIES AND MEMBERS’ CAPITAL**                                                         |       | $          | 58,157,131 |       | $          | 65,135,448 |   |
| ** **                                                                                               | ** ** | ** ** | ** ** | ** ** | ** ** |
| **NET  ASSET VALUE PER UNIT (SEE NOTE 7)**                                                               |       |       |       |       |       |

 

See notes tofinancial statements.

 

2

----

 

SYSTEMATICMOMENTUM II LLC

(A DELAWARELIMITED PARTNERSHIP)

 

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 AND FORTHE PERIOD

DECEMBER 1, 2006 (COMMENCEMENT OF OPERATIONS) TODECEMBER 31, 2006

 
| ** **                                    | ** ** | **2008**   | ** ** | **2007**   | ** ** | **2006**   | ** ** |
|-----------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| **TRADING  PROFIT (LOSS):**                   |       |       |       |       |       |       |       |
|                                          |       |       |       |       |       |       |       |
| Realized                                      |       | $          | 4,207,691  |       | $          | 4,791,852  |       | $ | (238,314 | ) |
| Change in unrealized                          |       | (1,253,632 | )          | 2,721,629  |       | 20,834     |       |
| Brokerage  commissions                        |       | (294,966   | )          | (82,693    | )          | (3,465     | )          |
|                                          |       |       |       |       |       |       |       |
| Total trading  profit (loss)                  |       | 2,659,093  |       | 7,430,788  |       | (220,945   | )          |
|                                          |       |       |       |       |       |       |       |
| **INVESTMENT  INCOME:**                       |       |       |       |       |       |       |       |
| Interest                                      |       | 1,445,818  |       | 1,459,136  |       | 45,356     |       |
|                                          |       |       |       |       |       |       |       |
| **EXPENSES:**                                 |       |       |       |       |       |       |       |
| Management fee                                |       | 1,330,727  |       | 543,610    |       | 13,694     |       |
| Sponsor fee                                   |       | 1,536,052  |       | 465,974    |       | —     |       |
| Performance fee                               |       | 5,864      |       | 936,548    |       | —     |       |
| Other                                         |       | 269,144    |       | 426,215    |       | 23,284     |       |
| Total expenses                                |       | 3,141,787  |       | 2,372,347  |       | 36,978     |       |
|                                          |       |       |       |       |       |       |       |
| **NET  INVESTMENT INCOME (LOSS)**             |       | (1,695,969 | )          | (913,211   | )          | 8,378      |       |
|                                          |       |       |       |       |       |       |       |
| **NET  INCOME (LOSS)**                        |       | $          | 963,124    |       | $          | 6,517,577  |       | $ | (212,567 | ) |
|                                          |       |       |       |       |       |       |       |
| Weighted average  number of Units outstanding |       |       |       |       |       |       |       |
| Class A*                                 |       | 7,824,807  |       | 3,900,017  |       | —     |       |
| Class C                                  |       | 39,730,521 |       | 13,552,158 |       | —     |       |
| Class D                                  |       | 14,075,689 |       | 12,898,046 |       | 11,150,000 |       |
| Class I                                  |       | 14,052,241 |       | 4,433,866  |       | —     |       |
|                                          |       |       |       |       |       |       |       |
| Net income  (loss) per weighted average Unit  |       |       |       |       |       |       |       |
| Class A*                                 |       | $          | (0.0006    | )          | $          | 0.1533     |       | $ | — |   |
| Class C                                  |       | $          | (0.0188    | )          | $          | 0.2127     |       | $ | — |   |
| Class D                                  |       | $          | 0.1074     |       | $          | 0.1607     |       | $ | (0.0191 | ) |
| Class I                                  |       | $          | 0.0143     |       | $          | 0.2174     |       | $ | — |   |

 

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* Units issued onFebruary 1, 2007.

 

See notes tofinancial statements.

 

3

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SYSTEMATICMOMENTUM II LLC

(A DELAWARELIMITED PARTNERSHIP)

 

STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 AND FORTHE PERIOD

DECEMBER 1, 2006 (COMMENCEMENT OF OPERATIONS) TODECEMBER 31, 2006

 
| ** **                 | ** ** | **Initial Offering** | ** ** | **Subscriptions** | ** ** | **Redemptions** | ** ** | **Members’ Capital  December 31, 2006** | ** ** | **Subscriptions** | ** ** | **Redemptions** | ** ** | **Members’ Capital  December 31, 2007** | ** ** | **Subscriptions** | ** ** | **Redemptions** | ** ** | **Members’ Capital  December 31, 2008** | ** ** |
|----------------------------|------------|---------------------------|------------|-------------------|------------|-----------------|------------|-------------------------------------------------------------|------------|-------------------|------------|-----------------|------------|-------------------------------------------------------------|------------|-------------------|------------|-----------------|------------|-------------------------------------------------------------|------------|
| Class A*              |       | —                    |       | —            |       | —          |       | —                                                      |       | 4,470,511         |       | (222,719        | )          | 4,247,792                                                   |       | 7,469,935         |       | (5,216,126      | )          | 6,501,601                                                   |       |
| Class C               |       | —                    |       | —            |       | —          |       | —                                                      |       | 26,151,093        |       | (2,689,173      | )          | 23,461,920                                                  |       | 27,952,891        |       | (19,612,074     | )          | 31,802,737                                                  |       |
| Class D               |       | 11,150,000                |       | —            |       | (4,534,800      | )          | 6,615,200                                                   |       | 24,658,509        |       | (11,598,523     | )          | 19,675,186                                                  |       | 7,283,952         |       | (25,212,614     | )          | 1,746,524                                                   |       |
| Class I               |       | —                    |       | —            |       | —          |       | —                                                      |       | 8,875,453         |       | (91,775         | )          | 8,783,678                                                   |       | 9,979,725         |       | (12,802,433     | )          | 5,960,970                                                   |       |
|                       |       |                      |       |              |       |            |       |                                                        |       |              |       |            |       |                                                        |       |              |       |            |       |                                                        |       |
| Total Members’  Units |       | 11,150,000                |       | —            |       | (4,534,800      | )          | 6,615,200                                                   |       | 64,155,566        |       | (14,602,190     | )          | 56,168,576                                                  |       | 52,686,503        |       | (62,843,247     | )          | 46,011,832                                                  |       |

 
|                         |       |                      |       |              |       |            |       |                        |       |                                                        |       |              |       |            |       |                |       |                                                        |       |              |        |            |       |                            |       |                                                        |       |   |   |       |   |   |        |   |   |    |   |   |       |   |
|------------------------------|------------|---------------------------|------------|-------------------|------------|-----------------|------------|-----------------------------|------------|-------------------------------------------------------------|------------|-------------------|------------|-----------------|------------|---------------------|------------|-------------------------------------------------------------|------------|-------------------|-------------|-----------------|------------|---------------------------------|------------|-------------------------------------------------------------|------------|--------|--------|------------|--------|--------|-------------|--------|--------|---------|--------|--------|------------|--------|
| ** **                   | ** ** | **Initial Offering** | ** ** | **Subscriptions** | ** ** | **Redemptions** | ** ** | **Net Income  (Loss)** | ** ** | **Members’ Capital  December 31, 2006** | ** ** | **Subscriptions** | ** ** | **Redemptions** | ** ** | **Net Income** | ** ** | **Members’ Capital  December 31, 2007** | ** ** | **Subscriptions** | ** **  | **Redemptions** | ** ** | **Net Income (Loss)** | ** ** | **Members’ Capital  December 31, 2008** | ** ** |
| Class A*                |       | $                         | —     |              | $          | —          |       | $                           | —     |                                                        | $          | —            |       | $               | —     |                | $          | 4,484,410                                                   |       | $                 | (233,025    | )               | $          | 597,999                         |       | $                                                           | 4,849,384  |   | $      | 9,135,410  |   | $      | (6,186,041  | )      | $      | (4,839  | )      | $      | 7,793,914  |   |
| Class C                 |       | —                    |       | —            |       | —          |       | —                      |       | —                                                      |       | 26,424,408        |       | (2,847,647      | )          | 2,882,803           |       | 26,459,564                                                  |       | 34,186,917        |        | (22,662,445     | )          | (745,302                        | )          | 37,238,734                                                  |       |
| Class D                 |       | 11,150,000                |       | —            |       | (4,449,999      | )          | (212,567                    | )          | 6,487,434                                                   |       | 25,153,084        |       | (11,476,308     | )          | 2,072,896           |       | 22,237,106                                                  |       | 9,034,994         |        | (30,671,375     | )          | 1,512,063                       |       | 2,112,788                                                   |       |
| Class I                 |       | —                    |       | —            |       | —          |       | —                      |       | —                                                      |       | 9,156,130         |       | (97,017         | )          | 963,879             |       | 10,022,992                                                  |       | 12,178,742        |        | (15,218,252     | )          | 201,202                         |       | 7,184,684                                                   |       |
|                         |       |                      |       |              |       |            |       |                        |       |                                                        |       |              |       |            |       |                |       |                                                        |       |              |        |            |       |                            |       |                                                        |       |
| Total Members’  Capital |       | $                         | 11,150,000 |              | $          | —          |       | $                           | (4,449,999 | )                                                           | $          | (212,567          | )          | $               | 6,487,434  |                | $          | 65,218,032                                                  |       | $                 | (14,653,997 | )               | $          | 6,517,577                       |       | $                                                           | 63,569,046 |   | $      | 64,536,063 |   | $      | (74,738,113 | )      | $      | 963,124 |   | $      | 54,330,120 |   |

 

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* Units issued on February 1,2007.

 

See notes tofinancial statements.

 

4

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SYSTEMATICMOMENTUM II LLC

(A DELAWARELIMITED PARTNERSHIP)

 

FINANCIALDATA HIGHLIGHTS

FORTHE YEAR ENDED DECEMBER 31, 2008

 

The following per Unitdata and ratios have been derived from information provided in the financialstatements.

 
| ** **                                        | ** ** | **Class A** | ** ** | **Class C** | ** ** | **Class D** | ** ** | **Class I** | ** ** |
|---------------------------------------------------|------------|------------------|------------|------------------|------------|------------------|------------|------------------|------------|
| **Per  Unit Operating Performance:**              |       |             |       |             |       |             |       |             |       |
|                                              |       |             |       |             |       |             |       |             |       |
| Net asset value,  beginning of period             |       | $                | 1.1416     |             | $          | 1.1278           |       | $                | 1.1302     |   | $ | 1.1411 |   |
|                                              |       |             |       |             |       |             |       |             |       |
| Realized and  unrealized change in trading profit |       | 0.0890           |       | 0.0877           |       | 0.0779           |       | 0.0881           |       |
| Brokerage  commissions                            |       | (0.0038          | )          | (0.0037          | )          | (0.0038          | )          | (0.0038          | )          |
| Interest income                                   |       | 0.0192           |       | 0.0189           |       | 0.0192           |       | 0.0192           |       |
| Expenses                                          |       | (0.0472          | )          | (0.0598          | )          | (0.0138          | )          | (0.0393          | )          |
|                                              |       |             |       |             |       |             |       |             |       |
| Net asset value,  end of period                   |       | $                | 1.1988     |             | $          | 1.1709           |       | $                | 1.2097     |   | $ | 1.2053 |   |
|                                              |       |             |       |             |       |             |       |             |       |
| **Total  Return:**                                |       |             |       |             |       |             |       |             |       |
|                                              |       |             |       |             |       |             |       |             |       |
| Total return  before Performance fees             |       | 5.52             | %          | 4.45             | %          | 7.11             | %          | 5.92             | %          |
| Performance fees                                  |       | -0.86            | %          | -0.97            | %          | 0.29             | %          | -0.65            | %          |
| Total return  after Performance fees              |       | 4.98             | %          | 3.82             | %          | 7.81             | %          | 5.62             | %          |
|                                              |       |             |       |             |       |             |       |             |       |
| **Ratios  to Average Members’ Capital:**     |       |             |       |             |       |             |       |             |       |
|                                              |       |             |       |             |       |             |       |             |       |
| Expenses  (excluding Performance fees)            |       | 3.15             | %          | 4.15             | %          | 1.64             | %          | 2.74             | %          |
| Performance fees                                  |       | 0.69             | %          | 0.79             | %          | -0.47            | %          | 0.46             | %          |
| Expenses  (including Performance fees)            |       | 3.84             | %          | 4.94             | %          | 1.17             | %          | 3.20             | %          |
|                                              |       |             |       |             |       |             |       |             |       |
| Net investment  income (loss)                     |       | -2.29            | %          | -3.39            | %          | 0.38             | %          | -1.66            | %          |

 

See notes to financialstatements.

 

5

----

 

SYSTEMATICMOMENTUM II LLC

(A DELAWARELIMITED PARTNERSHIP)

 

FINANCIALDATA HIGHLIGHTS

FORTHE YEAR ENDED DECEMBER 31, 2007

 

The following per Unitdata and ratios have been derived from information provided in the financialstatements.

 
| ** **                                        | ** ** | **Class A*** | ** ** | **Class C** | ** ** | **Class D** | ** ** | **Class I** | ** ** |
|---------------------------------------------------|------------|-------------------|------------|------------------|------------|------------------|------------|------------------|------------|
| **Per  Unit Operating Performance:**              |       |              |       |             |       |             |       |             |       |
|                                              |       |              |       |             |       |             |       |             |       |
| Net asset value,  beginning of period             |       | $                 | 1.0000     |             | $          | 1.0000           |       | $                | 0.9807     |   | $ | 1.0000 |   |
|                                              |       |              |       |             |       |             |       |             |       |
| Realized and  unrealized change in trading profit |       | 0.1639            |       | 0.1644           |       | 0.1643           |       | 0.1661           |       |
| Brokerage  commissions                            |       | (0.0020           | )          | (0.0021          | )          | (0.0021          | )          | (0.0021          | )          |
| Interest income                                   |       | 0.0388            |       | 0.0423           |       | 0.0420           |       | 0.0425           |       |
| Expenses                                          |       | (0.0591           | )          | (0.0768          | )          | (0.0547          | )          | (0.0654          | )          |
|                                              |       |              |       |             |       |             |       |             |       |
| Net asset value,  end of period                   |       | $                 | 1.1416     |             | $          | 1.1278           |       | $                | 1.1302     |   | $ | 1.1411 |   |
|                                              |       |              |       |             |       |             |       |             |       |
| **Total  Return:**                                |       |              |       |             |       |             |       |             |       |
|                                              |       |              |       |             |       |             |       |             |       |
| Total return  before Performance fees             |       | 15.87             | %(b)       | 14.65            | %          | 17.53            | %          | 16.26            | %          |
| Performance fees                                  |       | -1.62             | %(b)       | -1.78            | %          | -2.13            | %          | -2.02            | %          |
| Total return  after Performance fees              |       | 14.13             | %(b)       | 12.78            | %          | 15.24            | %          | 14.11            | %          |
|                                              |       |              |       |             |       |             |       |             |       |
| **Ratios  to Average Members’ Capital:**     |       |              |       |             |       |             |       |             |       |
|                                              |       |              |       |             |       |             |       |             |       |
| Expenses  (excluding Performance fees)            |       | 4.43              | %(a)       | 5.09             | %          | 3.26             | %          | 3.62             | %          |
| Performance fees                                  |       | 1.95              | %(a)       | 2.78             | %          | 2.74             | %          | 3.12             | %          |
| Expenses  (including Performance fees)            |       | 6.38              | %          | 7.87             | %          | 6.00             | %          | 6.74             | %          |
|                                              |       |              |       |             |       |             |       |             |       |
| Net investment  income (loss)                     |       | -2.23             | %(a)       | -3.77            | %          | -1.46            | %          | -2.72            | %          |

 

----

* Units wereissued on February 1, 2007.

(a) Theratios have been annualized.

(b) Notannualized.

 

See notes tofinancial statements.

 

6

----

 

SYSTEMATIC MOMENTUM IILLC

(A DELAWARELIMITED PARTNERSHIP)

 

FINANCIALDATA HIGHLIGHTS

FOR THE PERIOD DECEMBER 1, 2006 (COMMENCEMENT OFOPERATIONS) TO DECEMBER 31, 2006

 

The following per Unitdata and ratios have been derived from information provided in the financialstatements.

 
| ** **                                        | ** ** | **Class D** | ** ** |
|---------------------------------------------------|------------|------------------|------------|
| **Per  Unit Operating Performance:**              |       |             |       |
|                                              |       |             |       |
| Net asset value,  beginning of period             |       | $                | 1.0000     |   |
|                                              |       |             |       |
| Realized and  unrealized change in trading profit |       | (0.0198          | )          |
| Brokerage  commissions                            |       | (0.0003          | )          |
| Interest income                                   |       | 0.0041           |       |
| Expenses                                          |       | (0.0033          | )          |
|                                              |       |             |       |
| Net asset value,  end of period                   |       | $                | 0.9807     |   |
|                                              |       |             |       |
| **Total  Return:**                                |       |             |       |
|                                              |       |             |       |
| Total return                                      |       | -1.91            | %(b)       |
|                                              |       |             |       |
| **Ratios  to Average Members’ Capital (a):** |       |             |       |
|                                              |       |             |       |
| Expenses                                          |       | 5.50             | %          |
|                                              |       |             |       |
| Net investment  income (loss)                     |       | 1.14             | %          |

 

----

(a) Theratios have been annualized.

(b) Notannualized.

 

See notes tofinancial statements.

 

7

----

 

SYSTEMATICMOMENTUM II LLC

(a DelawareLimited Partnership)

 

NOTESTO FINANCIAL STATEMENTS

 

1.               SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES

 

Organization

 

SystematicMomentum II LLC (the “Fund”) formerly known as ML APM Global CommodityFuturesAccess LLC, a Merrill Lynch FuturesAccess Program (the “Program”) fund,was organized under the Delaware Limited Liability Company Act on May 17,2004 and commenced trading activities on December 1, 2006.

 

On October 22, 2008, MLAI issued an announcement regarding arestructuring of the Fund. Effective December 1, 2008 as part of therestructuring the following occurred:

 

·                  The Fund changed its name toSYSTEMATIC MOMENTUM II LLC

 

·                  The name change amendmentwas filed with the Secretary of States of Delaware, New Jersey and New York on December 1,2008.

 

·                  The Fund’s assets were reinvested in ML SystematicMomentum FuturesAccess LLC (“Systematic Momentum”).  Systematic Momentum invests into thefollowing Funds: ML Altis FuturesAccess LLC (“Altis”), ML Aspect FuturesAccessLLC (“Aspect”), ML BlueTrend FuturesAccess LLC (“BlueTrend”), ML ChesapeakeFuturesAccess LLC (“Chesapeake”), ML GSA FuturesAccess LLC (“GSA”), ML JohnLocke FuturesAccess LLC (“John Locke”), ML Transtrend DTP EnhancedFuturesAccess LLC (“Transtrend”) and ML Winton FuturesAccess LLC (“Winton”)and, (each a “Portfolio Fund”, collectively “Portfolio Funds”).  The Portfolio Funds employ a variety ofsystematic models and the Fund no longer utilizes the services of Absolute PlusManagement, LLC (“APM”) as a commodity trading advisor. Prior to therestructure, the Fund engaged in the speculative trading of futures, options onfutures and forward contracts on a wide range of commodities.

 

·                  The Portfolio Funds are agroup of commodity pools sponsored by MLAI, each of which places substantiallyall of its assets in a managed futures and forward trading account managed by asingle or multiple commodity trading advisors. Each of the Portfolio Funds implements a different trading strategy.

 

MerrillLynch Alternative Investments LLC (“MLAI”) is the Sponsor of the Fund. MLAI isan indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc.(“Merrill Lynch”). Merrill Lynch, Pierce, Fenner & Smith Incorporated(“MLPF&S”), a wholly-owned subsidiary of Merrill Lynch, is the Fund’scommodity broker.

 

Effective January 1,2009, Merrill Lynch & Co., Inc. became a wholly-owned subsidiaryof Bank of America Corporation pursuant to a merger agreement.

 

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.

 

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Estimates

 

The preparation of financial statements in conformity with accountingprinciples generally accepted in the United States of America (“U.S. GAAP”)requires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities and disclosure of contingent assets andliabilities at the date of the financial statements and the reported amounts ofrevenues and expenses during the reporting period.  Actual results could differ from thoseestimates.

 

Revenue Recognition

 

Prior to December 1, 2008 commodity futures, options on futuresand forward contract transactions were recorded on the trade date.  Open futures and forward contracts were reflected in Net unrealized profit onopen contracts in the Statements of Financial Condition as the differencebetween the original contract value and the market value (for those commodityinterests for which market quotations are readily available) or at fairvalue.  Option contracts were valued atmarket (last sale price) as of the last business day of the reporting periodand shown in the Statements of Financial Condition.  The change in unrealized profit (loss) onopen contracts and options from one period to the next is reflected in Changein unrealized under Trading profit (loss) in the Statements of Operations.

 

As of December 1, 2008the Fund invests in Systematic Momentum and the resulting change between costand market value is reflected in the Statements of Operations as Change inunrealized under Trading profit (loss). In addition, when the Fund redeems orpartially redeems its interest in the Systematic Momentum, it records realizednet profit (loss) for such interests in the Statements of Operations asRealized under Trading profit (loss).

 

Foreign Currency Transactions

 

The Fund’s functionalcurrency is the U.S. dollar, however, the Fund and Systematic Momentum maytransact business in U.S. dollars and in currencies other than the U.S.dollar.  Assets and liabilitiesdenominated in currencies other than the U.S. dollar are translated into U.S.dollars at the rates in effect at the date of the Statements of FinancialCondition of the Fund and Systematic Momentum. Income and expense items denominated in currencies other than the U.S.dollar are translated into U.S. dollars at the rates in effect during theperiod.  Gains and losses resulting fromthe translation to U.S. dollars are reported in Realized in the Statements ofOperations of the Fund and Systematic Momentum.

 

Cash at Broker

 

Aportion of the assets maintained at MLPF&S is restricted cash required tomeet maintenance margin requirements. Included in cash deposits with the brokerat December 31, 2007 were restricted cash for margin requirements of$6,068,085. As of December 31, 2008, no cash was held at the broker.

 

Operating Expenses, Offering Costs and Selling Commissions

 

The Fund pays forall routine operating costs (including offering costs, administration, custody,transfer, exchange and redemption process, legal, regulatory filing, tax,audit, escrow, accounting and printing fees and expenses) incurred by the Fund.  The Fund also pays any extraordinaryexpenses.

 

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MLAIpaid all the expenses incurred in connection with the initial offering of theUnits. The Fund is reimbursing MLAI for these costs.  The fund amortizes the initial offering costover 60 months.  For financial reportingpurposes in conformity with U.S. GAAP, the Fund amortizes the total initialoffering costs of $42,000 over a twelve-month period (the Fund revised itsestimate of initial offering costs from $60,000 to $42,000 during the yearended December 31, 2007).  For allother purposes, including determining the Net Asset Value per Unit forsubscription and redemption purposes, the Fund amortizes offering costs over a60 month period (see Note 7).

 

Class A Units are subject to a sales commission paid to MerrillLynch ranging from 1.0% to 2.5%.  Class Dand Class I Units are subject to sales commissions up to 0.5%.  The rate assessed to a given subscription isbased upon the subscription amount. Commissions are directly deducted from subscription amounts prior toshare issuance.  Class C Units arenot subject to any sales commissions.

 

Income Taxes

 

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

 

Distributions

 

The Members areentitled to receive, equally per Unit, any distributions which may be made by theFund.  No such distributions have beendeclared for the years ended December 31, 2008 and 2007 and for the periodended December 31, 2006.

 

Subscriptions

 

Prior to December 1, 2008 Units were offered as of the close ofbusiness at the end of each month.  Unitswere purchased as of the first business day of any month at Net Asset Value forall other purposes (see Note 6), but the subscription request had to besubmitted at least three calendar days before the end of the precedingmonth.  Subscriptions that were submittedless than three days before the end of the month would have been applied toUnits subscriptions as of the beginning of the second month after receipt,unless revoked by MLAI.

 

As of December 1, 2008 this Fund is no longeroffered.

 

Redemptions and Exchanges

 

A Member may redeem or exchange some or all of such Member’s Units atNet Asset Value for all other purposes (see Note 7) as of the close ofbusiness, on the last business day of any month, upon ten calendar days’ notice(“notice period”).

 

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

 

Redemptionand exchange requests are accepted within the notice period.  The Fund does not accept any redemptionrequests after the notice period.  Allredemption requests received after the notice period will be processed for thefollowing month.

 

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Dissolution of the Fund

 

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

 

(a)                             Bankruptcy, dissolution, withdrawal or othertermination of the trading advisors of this Fund.

(b)                            Any event which would make unlawful thecontinued existence of this Fund.

(c)                             Determination by MLAI to liquidate orwithdraw from the Fund.

 

Indemnifications

 

In the normalcourse of business, the Fund enters into contracts and agreements that containa variety of representations and warranties and which provide generalindemnifications. The Fund’s maximum exposure under these arrangements isunknown, as this would involve future claims that may be made against the Fundthat have not yet occurred.  The Fundexpects the risk of any future obligation under these indemnifications to beremote.

 

2.               INVESTMENT IN SYSTEMATIC MOMENTUM

 

The Fund investssubstantially all of its assets in Systematic Momentum. The investment transactionsare accounted for on a trade date basis. Investment in Systematic Momentum isvalued at fair value and reflected on the Statements of Financial Condition. Indetermining fair value, MLAI utilizes the net asset valuation of SystematicMomentum. The fair value of Systematic Momentum is net of all fees relating toSystematic Momentum, paid or accrued. Additionally, MLAI monitors theperformance of the Portfolio Funds. Such monitoring procedures include, but arenot limited to: monitoring market movements in Portfolio Funds’ investments,comparing performance to industry benchmarks, and in-depth conference calls andsite visits with Portfolio Funds managers.

 

At December 31, 2008,Investments in Portfolio Funds at fair value are as follows:

 
| ** ** | ** ** | **Percentage of  Member’s Capital** | ** ** | **Fair Value** | ** ** | **Profit (Loss)** | ** ** | **Management  Fees** | ** ** | **Performance  Fees** | ** ** |
|------------|------------|----------------------------------------------------|------------|---------------------|------------|------------------------|------------|----------------------|------------|-----------------------|------------|
|       |       |                                               |       |                |       |                   |       |                 |       |                  |       |
| Chesapeake |       | 10.09                                              | %          | 5,480,117           |       | 286,625                |       | (75,680              | )          | (92,468               | )          |
| Transtrend |       | 15.93                                              | %          | 8,653,456           |       | 1,315,312              |       | (98,532              | )          | (541,504              | )          |
| Altis      |       | 13.32                                              | %          | 7,238,009           |       | 2,373,651              |       | (91,333              | )          | (579,470              | )          |
| Winton     |       | 15.82                                              | %          | 8,595,311           |       | 828,774                |       | (95,201              | )          | (191,718              | )          |
| Aspect     |       | 10.10                                              | %          | 5,489,181           |       | 843,664                |       | (76,930              | )          | (198,262              | )          |
| John Locke |       | 14.90                                              | %          | 8,092,870           |       | 825,864                |       | (84,958              | )          | (194,637              | )          |
| BlueTrend  |       | 6.98                                               | %          | 3,792,994           |       | 635,750                |       | (23,249              | )          | (209,479              | )          |
| GSA        |       | 12.78                                              | %          | 6,942,535           |       | (621,980               | )          | (75,262              | )          | (0                    | )          |
|       |       |                                               |       |                |       |                   |       |                 |       |                  |       |
|       |       | 99.92                                              | %          | $                   | 54,284,473 |                   | $          | 6,487,660            |       | $                     | (621,145   | ) | $ | (2,007,538 | ) |
|            |            |                                                    |            |                     |            |                        |            |                      |            |                       |            |  |  |  |  |

 

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At December 31,2007, the fund invested in the following postitions:

 
| ** **                          | ** ** | **Long Positions**       | ** ** | **Short Positions** | ** ** | **Net Unrealized**                    | ** ** | ** **                    | ** ** | ** **             | ** ** |
|-------------------------------------|------------|-------------------------------|------------|--------------------------|------------|--------------------------------------------|------------|-------------------------------|------------|------------------------|------------|
| **Commodity Industry  Sector** | ** ** | **Number of  Contracts** | ** ** | **Unrealized  Profit**   | ** ** | **Percent of  Members’ Capital** | ** ** | **Number of  Contracts** | ** ** | **Unrealized  Profit** | ** ** | **Percent of  Members’ Capital** | ** ** | **Profit  on Open Positions** | ** ** | **Percent of  Members’ Capital** | ** ** | **Maturity Dates** | ** ** |
|                                |       |                          |       |                     |       |                                       |       |                          |       |                   |       |   |   |   |   |   |   |   |   |
| Futures Contracts                   |       |                          |       |                     |       |                                       |       |                          |       |                   |       |   |   |   |   |   |   |   |   |
|                                |       |                          |       |                     |       |                                       |       |                          |       |                   |       |   |   |   |   |   |   |   |   |
| Interest rates                      |       | 1,804                         |       | $                        | 463,505    |                                       | 0.73       | %                             | (448       | )                      | $          | 125,879 |   | 0.20 | % | $ | 589,384 |   | 0.93 | % | March 2008 |   |
|                                |       |                          |       |                     |       |                                       |       |                          |       |                   |       |   |   |   |   |   |   |   |   |
| Sector Total                        |       |                          |       | $                        | 463,505    |                                       | 0.73       | %                             |       |                   | $          | 125,879 |   | 0.20 | % | $ | 589,384 |   | 0.93 | % |   |   |
|                                |       |                          |       |                     |       |                                       |       |                          |       |                   |       |   |   |   |   |   |   |   |   |
| Options                             |       |                          |       |                     |       |                                       |       |                          |       |                   |       |   |   |   |   |   |   |   |   |
|                                |       |                          |       | **Cost**                 |       |                                       |       |                          |       | **Market**             |       |   |   |   |   |   |   |   |   |
| Agriculture                         |       | 967                           |       | $                        | 1,550,162  |                                       | 2.44       | %                             | 967        |                   | $          | 2,425,546 |   | 3.82 | % | $ | 875,384 |   | 1.38 | % | May 2008 - June 2008 |   |
| Energy                              |       | 215                           |       | 1,222,845                |       | 1.92                                       | %          | 215                           |       | 2,280,460              |       | 3.59 | % | 1,057,615 |   | 1.67 | % | May 2008 |   |
| Metals                              |       | 338                           |       | 1,594,157                |       | 2.51                                       | %          | 338                           |       | 1,814,237              |       | 2.85 | % | 220,080 |   | 0.34 | % | May 2008 - June 2008 |   |
|                                |       |                          |       |                     |       |                                       |       |                          |       |                   |       |   |   |   |   |   |   |   |   |
| Options Total                       |       |                          |       | $                        | 4,367,164  |                                       | 6.87       | %                             |       |                   | $          | 6,520,243 |   | 10.26 | % | $ | 2,153,079 |   | 3.39 | % |   |   |

 

3.     INVESTMENT IN PORTFOLIO FUNDS ANDCONDENSED SCHEDULE OF INVESTMENTS

 

The Fund invests in Systematic Momentum which investsin the Porfolio Funds mentioned in Note 1. MLAI the sponsor of the fund may inits discretion change the Portfolio Funds at any time.  MLAI also at its discretion may vary thepercentage of the Fund’s total portfolio allocated to the different PortfolioFunds.  There is no pre-established rangefor the minimum and maximum allocations that may be made to any given PortfolioFund.

 

4.     FAIR VALUE OF INVESTMENTS

 

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

 

Fairvalue of an investment is the amount that would be received to sell theinvestment in an orderly transaction between market participants at themeasurement date (i.e. the exit price).

 

FAS157 established a hierarchical disclosure framework which prioritizes and ranksthe level of market price observability used in measuring investments at fairvalue. Market price observability is impacted by a number of factors, includingthe type of investment and the characteristics specific to the investment.Investments with readily available active quoted prices or for which fair valuecan be measured from actively quoted prices generally will have a higher degreeof market price observability and a lesser degree of judgment used in measuringfair 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 FAS 157, the Fund does not adjust the quotedprice for these investments even in situations where the Fund holds a largeposition and a sale could reasonably impact the quoted price.

 

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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. Investments that are included in this category generallyare privately held debt and equity securities.

 

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.

 

The following table summarizes the valuation of the Fund’s investmentsby the above FAS 157 fair value hierarchy levels as of December 31, 2008:

 
| ** **                         | ** ** | **Total** | ** ** | **Level I** | ** ** | **Level II** | ** ** | **Level III** | ** ** |
|------------------------------------|------------|-----------|------------|------------------|------------|-------------------|------------|--------------------|------------|
| Investment in  Systematic Momentum |       | $         | 54,284,473 |             | N/A        |              | $          | 54,284,473         |       | N/A |   |
|                                    |            |           |            |                  |            |                   |            |                    |            |  |  |

 

5.     RELATED PARTYTRANSACTIONS

 

The Portfolio Funds’ U.S. dollar assets are maintained at MLPF&S.On assets held in U.S. dollars, Merrill Lynch credits the Portfolio Funds withinterest at the most favorable rate payable by MLPF&S to accounts ofMerrill Lynch affiliates but not less than 75% of such prevailing rate.  The Portfolio Funds are credited withinterest on any of their assets and net gains actually held by MLPF&Snon-U.S. dollar currencies at a prevailing local rate received by MerrillLynch.  Merrill Lynch may derive certain economicbenefit, in excess of the interest which Merrill Lynch pays to the PortfolioFunds, from possession of such assets.

 

Merrill Lynch charges the Portfolio Funds at prevailing local interestrates for financing realized and unrealized losses on each Portfolio Fund’snon-U.S. dollar-denominated positions. Such amounts are netted against interest income due to theinsignificance of such amounts.

 

The Fund charges Sponsor fees on the month-end net assets after allother charges at annual rates equal to 1.50% for Class A, 2.50% for Class C,1.10% on Class I.  Class D isnot charged a Sponsor fee.   Sponsor feesare paid to MLAI.

 

As of December 1, 2008 no brokerage commission is charged tomembers at the Fund level, although brokerage commissions are charged tomembers at the Portfolio Funds’ level, and investors will be indirectly subjectto their *pro rata* share of such fees based on theindirect investment of the Fund in such underlying Portfolio Funds. Brokeragecommissions will be paid on the completion or liquidation of a trade and arereferred to as “round-turn” commissions, which cover both the initial purchase(or sale) and the subsequent offsetting sale (or purchase) of a commodityfutures contract.  A portion of thebrokerage fees is paid to Portfolio Funds’ executing brokers, which may includeMLPF&S, as the commission or 

 

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their execution services. The “round-turn” commissions paid will notexceed $15 per round-turn, except in the case of certain foreign contracts onwhich the rates may be as high as $100 per round-turn due to the large size ofthe contracts traded.  In general, it isestimated that aggregate brokerage commission charges will not exceed 3% andshould equal approximately 0.50% per annum of each of the Portfolio Fund’s averagemonth-end assets.

 

Prior to December 1, 2008, the Fund paid brokerage commissions onactual cost per round turn. The average round-turn commission rate charged tothe Fund for the eleven month period ended November 30, 2008 was $7.96.The average round-turn commission rate charged to the Fund for the year ended December 31,2007 and for the period ended December 31, 2006 were approximately $7.63and $10.47 respectively (not including, in calculating round-turn, forwardcontracts on a futures-equivalent basis).

 

Priorto December 1, 2008, the Fund paid APM annual management fees of 1.50% ofthe Fund’s average month-end assets allocated to them after reduction for thebrokerage commissions accrued with respect to such assets.  MLAI receives 25% of the 1.50% management feefor sponsoring and providing ongoing administration and operational support tothe Fund.

 

6.     ADVISORYAGREEMENTS

 

EachPortfolio Fund implements a systematic-based managed future strategy under thedirection of its trading advisor which is listed below:

 

 
| **Advisor**                       | ** ** | **Next Renewal Date  of Advisory Agreement** | ** ** |
|-----------------------------------|------------|------------------------------------------------------------------|------------|
| Altis Partners (Jersey) Limited   |       | December 31, 2016                                           |       |
| Aspect Capital Management         |       | December 31, 2011                                           |       |
| Chesapeake Capital Corporation    |       | December 31, 2016                                           |       |
| Transtrend B.V.                   |       | December 31, 2009                                           |       |
| Winton Capital Corporation        |       | December 31, 2014                                           |       |
| John Locke Investments SA         |       | December 31, 2016                                           |       |
| GSA Capital Partner, LLP          |       | June 30, 2012                                               |       |
| BlueCrest Capital Management L.P. |       | December 31, 2010                                           |       |

 

 

The advisory agreements shall be automatically renewed for successivethree-year periods, on the same terms, unless terminated by either thePortfolio Fund or the respective advisor upon 90 days’ notice to the otherparty.  The advisors determine thecommodity futures, options on futures and forward contract trades to be made onbehalf of their respective Portfolio Fund accounts, subject to certain tradingpolicies and to certain rights reserved by MLAI.

 

The Portfolio Funds pay their respective trading advisors annualmanagement fees of 2.00% of their average month-end assets after reduction forthe brokerage commissions accrued with respect to such assets. For Altis,Chesapeake and Transtrend, MLAI receives 50% of the 2.00% management fees. ForAspect, Winton, John Locke, GSA and BlueTrend, MLAI receives 25% of the 2.00%management fees.

 

Performance charged by the Portfolio Funds are calculated at 20% forall Portfolio Funds except Bluetrend and Transtrend which is calculated at 25%of any New Trading Profit, as defined, and earned by the respective advisors.  Performance fees are also paid out in respectof Units redeemed as of the end of interim month, to the extent of theapplicable percentage of any New Trading Profit attributable to such Units. ForAspect, Winton, GSA and John Locke, MLAI received 25% of the 20% performancefees.

 

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Prior to December 1, 2008, the Fund hadcontracted APM as the Fund’s Trading Advisor. As of December 1, 2008, APMis no longer the Fund’s Trading Advisor.

 

Performancefees under the APM advisory agreement were paid by the Fund and calculated as15% of any New Trading Profit, as defined, and earned by APM as of either theend of each calendar year or upon the net reallocation of assets away from APM.  MLAI received 25% of the 15% performancefees.  Performance fees were also paidout in respect of Units redeemed as of the end of interim months, to the extentof the applicable percentage of any New Trading Profit attributable to suchUnits. All fees due to APM under the advisory agreement were paid in full as ofDecember 31, 2008.

 

7.     NET ASSET VALUE PER UNIT

 

Forfinancial reporting purposes, in conformity with U.S. GAAP, the Fund amortizesover a twelve-month period the total initial offering costs payable to MLAI forpurposes of determining Net Asset Value. For all other purposes, including computing Net Asset Value for purposesof member subscription and redemption activity, such costs are amortized over60 months.  Consequently, as of December 31,2008 and 2007, the Net Asset Value and Net Asset Value per Unit of thedifferent Classes for financial reporting purposes and for all other purposesare as follows:

 

December 31,2008

 
| ** **   | ** ** | **Net Asset Value**             | ** ** | **Net Asset Value per Unit** | ** ** |
|--------------|------------|-------------------------------------------|------------|--------------------------------------------------|------------|
| ** **   | ** ** | **All Other  Purposes  (unaudited)** | ** ** | **Financial  Reporting**                         | ** ** | **Number of  Units** | ** ** | **All Other  Purposes  (unaudited)** | ** ** | **Financial  Reporting** | ** ** |
| Class A |       | $                                         | 7,796,919  |                                             | $          | 7,793,914 |   | 6,501,601 |   | $ | 1.1992 |   | $ | 1.1988 |   |
| Class C |       | 37,243,881                                |       | 37,238,734                                       |       | 31,802,737 |   | 1.1711 |   | 1.1709 |   |
| Class D |       | 2,129,830                                 |       | 2,112,788                                        |       | 1,746,524 |   | 1.2195 |   | 1.2097 |   |
| Class I |       | 7,186,646                                 |       | 7,184,684                                        |       | 5,960,970 |   | 1.2056 |   | 1.2053 |   |
|         |       | $                                         | 54,357,276 |                                             | $          | 54,330,120 |   | 46,011,832 |   |   |   |   |   |
|              |            |                                           |            |                                                  |            |  |  |  |  |  |  |  |  |  |  |

 

December 31,2007

 
| ** **   | ** ** | **Net Asset Value**             | ** ** | **Net Asset Value per Unit** | ** ** |
|--------------|------------|-------------------------------------------|------------|--------------------------------------------------|------------|
| ** **   | ** ** | **All Other  Purposes  (unaudited)** | ** ** | **Financial  Reporting**                         | ** ** | **Number of  Units** | ** ** | **All Other  Purposes  (unaudited)** | ** ** | **Financial  Reporting** | ** ** |
| Class A |       | $                                         | 4,852,693  |                                             | $          | 4,849,384 |   | 4,247,792 |   | $ | 1.1424 |   | $ | 1.1416 |   |
| Class C |       | 26,466,199                                |       | 26,459,564                                       |       | 23,461,920 |   | 1.1280 |   | 1.1278 |   |
| Class D |       | 22,254,692                                |       | 22,237,106                                       |       | 19,675,186 |   | 1.1311 |   | 1.1302 |   |
| Class I |       | 10,025,466                                |       | 10,022,992                                       |       | 8,783,678 |   | 1.1414 |   | 1.1411 |   |
|         |       | $                                         | 63,599,050 |                                             | $          | 63,569,046 |   | 56,168,576 |   |   |   |   |   |
|              |            |                                           |            |                                                  |            |  |  |  |  |  |  |  |  |  |  |

 

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8.     WEIGHTEDAVERAGE UNITS

 

The weightedaverage number of Units outstanding was computed for purposes of disclosing netincome (loss) per weighted average Unit. The weighted average Units outstanding for the years ended December 31,2008 and 2007 and for the period ended December 31, 2006 equals the Unitsoutstanding as of such date, adjusted proportionately for Units sold andredeemed based on the respective length of time each was outstanding during theperiod.

 

9.     RECENT ACCOUNTING PRONOUNCEMENTS

 

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

 

InMay 2008, the FASB issued Statement of Financial Accounting Standards No. 162,“*The Hierarchy of Generally Accepted AccountingPrinciples*” (“FAS 162”). FAS 162 identifies the sources ofaccounting principles and the framework for selecting the accounting principlesused in preparing financial statements of nongovernmental entities that arepresented in conformity with U.S. GAAP. Currently, U.S. GAAP hierarchy isprovided in the American Institute of Certified Public Accountants U.S.Auditing Standards (“AU”) Section 411, “*The Meaningof Present Fairly in Conformity With Generally Accepted Accounting Principles*”.The Fund and Systematic Momentum do not expect the adoption of FAS 162 to havean impact on their respective financial statements.

 

10.   MARKETAND CREDIT RISKS

 

The nature of this Fund has certain risks, which cannot all be presentedon the financial statements.  Thefollowing summarizes some of those risks.

 

### Market Risk

###  

Derivative instruments involve varying degrees of market risk.  Changes in the level or volatility ofinterest rates, foreign currency exchange rates or the market values of thefinancial instruments or commodities underlying such derivative instrumentsfrequently result in changes in the Portfolio Funds’ net unrealized gains onopen contracts on such derivative instruments as reflected in the Statements ofFinancial Condition of the Portfolio Funds. The Fund’s exposure to market risk is influenced by a number of factors,including the relationships among the derivative instruments held by thePortfolio Funds as well as the volatility and liquidity of the markets in whichthe derivative instruments are traded. Investments in foreign markets may also entail legal and politicalrisks.

 

MLAI has procedures in place intended to controlmarket risk exposure, although there can be no assurance that they will, in fact,succeed in doing so.  These proceduresfocus primarily on monitoring the trading of the Portfolio Funds, calculatingthe Net Asset Value of the Fund, Systematic Momentum and the Portfolio Funds asof the close of business on each day and reviewing outstanding positions forover-concentrations.  While MLAI does notintervene in the markets to hedge or diversify the Portfolio Funds’ marketexposure, MLAI may urge the respective advisors to reallocate positions in anattempt to avoid over-concentrations.  However,such interventions 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 advisors.

 

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CreditRisk

 

The risks associated with exchange-traded contracts are typicallyperceived to be less than those associated with over-the-counter(non-exchange-traded) transactions, because exchanges typically provide clearinghousearrangements in which the collective credit (in some cases limited in amount,in some cases not) of the members of the exchange is pledged to support thefinancial integrity of the exchange.  Inover-the-counter transactions, on the other hand, traders must rely solely onthe credit of their respective individual counterparties.  Margins, which may be subject to loss in theevent 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 gains 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.

 

ThePortfolio Funds, in their normal course of business, enter into variouscontracts, 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.

 

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*     *     *    *     *     *    *     *     *    *     *

 

To the best of the knowledge and belief of the

undersigned, theinformation contained in this

report is accurateand complete.

 

 
|   | /s/ Barbra E. Kocsis |   |
|--------|----------------------|--------|
|   | Barbra E. Kocsis     |   |

Chief FinancialOfficer

Merrill LynchAlternative Investments LLC

Sponsor of

SYSTEMATIC MOMENTUM II LLC

 

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