** **

**UNITED STATES SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

** **

**FORM 10-Q**

** **

**(MarkOne)**

 

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

 

**For thequarterly period ended March 31, 2008**

 

**OR**

 

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

 

**For thetransition period from                to                  **

 

**CommissionFile Number 0-51087**

 

**ML APPLETON FUTURESACCESS LLC**

(Exact Name of Registrantas

specified in its charter)

 

| **Delaware**                    |   | **20-1227880**                    |
|---------------------------------|--------|-----------------------------------|
| (State or other jurisdiction of |   | (IRS Employer Identification No.) |
| incorporation or organization)  |   |                              |

 

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

**Hopewell Corporate Campus - Building No. 2**

**1200 Merrill Lynch Drive - First Floor**

**Pennington, New Jersey 08534**

(Address of principalexecutive offices)

(Zip Code)

 

**609-274-5838**

(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 is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company. See definitions of“large accelerated filer,” “accelerated filer,” and “smaller reporting company”in Rule 12b-2 of the Exchange Act. (Check one):

 

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

 

Indicate by check markwhether registrant is a shell company (as defined by Rule 12b-2 of theExchange Act).
|   |   |   | Yes  o | No  x |
|--------|--------|--------|------------------|-----------------|

 

Indicate by check markwhether the registrant has filed all documents and reports required to be filedby Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934subsequent to the distribution of securities under a plan confirmed by a court.
|   |   |   | Yes  o | No  o |
|--------|--------|--------|------------------|-----------------|

 

The limited partnershipunits of the registrant are not publicly traded. Accordingly, there is noaggregate market value for registrant’s outstanding equity that is readilydeterminable.

 

 

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**ML APPLETON FUTURESACCESS LLC**

 

QUARTERLY REPORT FOR MARCH 31,2008 ON FORM 10-Q

 

Table of Contents

 
|     | ** **                                                                                  | **PAGE** |
|----------|---------------------------------------------------------------------------------------------|----------|
|     | PART I                                                                                 |     |
|     |                                                                                        |     |
| Item 1.  | Financial  Statements                                                                       | 1        |
|     |                                                                                        |     |
| Item 2.  | Management’s  Discussion and Analysis of Financial Condition and Results of Operations | 10       |
|     |                                                                                        |     |
| Item 3.  | Quantitative  and Qualitative Disclosures About Market Risk                                 | 12       |
|     |                                                                                        |     |
| Item 4.  | Controls and  Procedures                                                                    | 15       |
|     |                                                                                        |     |
|     | PART II                                                                                |     |
|     |                                                                                        |     |
| Item 1.  | Legal Proceedings                                                                           | 17       |
|     |                                                                                        |     |
| Item 1A. | Risk Factors                                                                                | 17       |
|     |                                                                                        |     |
| Item 2.  | Unregistered  Sales of Equity Securities and Use of Proceeds                                | 19       |
|     |                                                                                        |     |
| Item 3.  | Defaults Upon Senior Securities                                                             | 19       |
|     |                                                                                        |     |
| Item 4.  | Submission of Matters to a Vote of  Security Holders                                        | 19       |
|     |                                                                                        |     |
| Item 5.  | Other Information                                                                           | 19       |
|     |                                                                                        |     |
| Item 6.  | Exhibits                                                                                    | 20       |

 

----

 

PART I -FINANCIAL INFORMATION

 

Item 1.    FinancialStatements

 

ML APPLETON FUTURESACCESS LLC

(a Delaware LimitedLiability Company)

 

STATEMENTS OF FINANCIALCONDITION

 
| ** **                                                        | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|-------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                                        | ** ** | **2008**           | ** ** | **2007**              | ** ** |
| ** **                                                        | ** ** | **(unaudited)**    | ** ** | ** **            | ** ** |
|                                                              |       |               |       |                  |       |
| **ASSETS:**                                                       |       |               |       |                  |       |
| Equity in  commodity futures trading accounts:                    |       |               |       |                  |       |
| Cash (including  restricted cash of $2,126,316 for 2008 and 2007) |       | $                  | 58,209,682 |                  | $          | 84,943,302 |   |
| Net unrealized  profit (loss) on open contracts                   |       | 7,729,698          |       | (3,228,854            | )          |
| Cash                                                              |       | 2,418,867          |       | 70,012                |       |
| Accrued interest                                                  |       | 133,270            |       | 298,217               |       |
|                                                              |       |               |       |                  |       |
| **TOTAL  ASSETS**                                                 |       | $                  | 68,491,517 |                  | $          | 82,082,677 |   |
|                                                              |       |               |       |                  |       |
| **LIABILITIES  AND MEMBERS’ CAPITAL:**                       |       |               |       |                  |       |
| LIABILITIES:                                                      |       |               |       |                  |       |
| Management fee  payable                                           |       | $                  | 113,280    |                  | $          | 136,166 |   |
| Sponsor fee  payable                                              |       | 247,043            |       | 268,034               |       |
| Redemptions  payable                                              |       | 42,648,929         |       | 4,465,562             |       |
| Initial offering  costs payable                                   |       | 10,107             |       | 11,855                |       |
| Other                                                             |       | 382,632            |       | 242,209               |       |
|                                                              |       |               |       |                  |       |
| Total  liabilities                                                |       | 43,401,991         |       | 5,123,826             |       |
|                                                              |       |               |       |                  |       |
| MEMBERS’  CAPITAL:                                           |       |               |       |                  |       |
| Sponsor’s  Interest (20,324 Units and 20,324 Units)          |       | 18,583             |       | 19,586                |       |
| Members’  Interest (27,436,465 Units and 79,694,808 Units)   |       | 25,070,943         |       | 76,939,265            |       |
|                                                              |       |               |       |                  |       |
| Total members’  capital                                      |       | 25,089,526         |       | 76,958,851            |       |
|                                                              |       |               |       |                  |       |
| **TOTAL  LIABILITIES AND MEMBERS’ CAPITAL**                  |       | $                  | 68,491,517 |                  | $          | 82,082,677 |   |

 

**NET ASSETVALUE PER UNIT (Note 2)**

(Based on 27,456,789 and79,715,132 Units outstanding, unlimited Units authorized)

 

See notes to financialstatements.

 

1

----

 

ML APPLETON FUTURESACCESS LLC

(a Delaware Limited Liability Company)

 

STATEMENTS OF OPERATIONS

(unaudited)

 
| ** **                                    | ** ** | **For the three** | ** **  | **For the three** | ** ** |
|-----------------------------------------------|------------|-----------------------------|-------------|-----------------------------|------------|
| ** **                                    | ** ** | **months ended**       | ** **  | **months ended**       | ** ** |
| ** **                                    | ** ** | **March 31,**          | ** **  | **March 31,**          | ** ** |
| ** **                                    | ** ** | **2008**                    | ** **  | **2007**                    | ** ** |
| **TRADING  LOSS:**                            |       |                        |        |                        |       |
|                                          |       |                        |        |                        |       |
| Realized                                      |       | $                           | (15,284,711 | )                           | $          | 5,193,324 |   |
| Change in  unrealized                         |       | 10,958,552                  |        | (17,493,313                 | )          |
|                                          |       |                        |        |                        |       |
| Total trading  loss                           |       | (4,326,159                  | )           | (12,299,989                 | )          |
|                                          |       |                        |        |                        |       |
| **INVESTMENT  INCOME:**                       |       |                        |        |                        |       |
| Interest                                      |       | 550,836                     |        | 1,125,214                   |       |
|                                          |       |                        |        |                        |       |
| **EXPENSES:**                                 |       |                        |        |                        |       |
| Management fee                                |       | 337,237                     |        | 423,106                     |       |
| Sponsor fee                                   |       | 328,887                     |        | 389,208                     |       |
| Other                                         |       | 175,996                     |        | 144,131                     |       |
|                                          |       |                        |        |                        |       |
| Total expenses                                |       | 842,120                     |        | 956,445                     |       |
|                                          |       |                        |        |                        |       |
| **NET  INVESTMENT INCOME (LOSS)**             |       | (291,284                    | )           | 168,769                     |       |
|                                          |       |                        |        |                        |       |
| **NET  LOSS**                                 |       | $                           | (4,617,443  | )                           | $          | (12,131,220 | ) |
|                                          |       |                        |        |                        |       |
| **NET  LOSS PER UNIT:**                       |       |                        |        |                        |       |
|                                          |       |                        |        |                        |       |
| Weighted average  number of Units outstanding |       |                        |        |                        |       |
| Class A                                  |       | 7,744,320                   |        | 7,418,744                   |       |
| Class C                                  |       | 54,856,490                  |        | 52,827,355                  |       |
| Class D                                  |       | 10,271,909                  |        | 14,125,547                  |       |
| Class I                                  |       | 5,174,659                   |        | 6,065,230                   |       |
|                                          |       |                        |        |                        |       |
| Net loss per  weighted average Unit           |       |                        |        |                        |       |
| Class A                                  |       | $                           | (0.0579     | )                           | $          | (0.1555 | ) |
| Class C                                  |       | $                           | (0.0589     | )                           | $          | (0.1502 | ) |
| Class D                                  |       | $                           | (0.0524     | )                           | $          | (0.1504 | ) |
| Class I                                  |       | $                           | (0.0766     | )                           | $          | (0.1515 | ) |

 

See notes tofinancial statements.

 

2

----

 

ML APPLETON FUTURESACCESS LLC

(a Delaware LimitedLiability Company)

 

STATEMENTS OF CHANGES INMEMBERS’ CAPITAL

For the three monthsended March 31, 2008 and 2007

(unaudited)

 
| ** **                  | ** ** | **Members’ Capital**  | ** ** | ** **        | ** ** | ** **      | ** ** | **Members’ Capital** | ** ** | **Members’ Capital**  | ** ** | ** **        | ** ** | ** **      | ** ** | **Members’ Capital** | ** ** |
|-----------------------------|------------|---------------------------------|------------|-------------------|------------|-----------------|------------|--------------------------------|------------|---------------------------------|------------|-------------------|------------|-----------------|------------|--------------------------------|------------|
| ** **                  | ** ** | **December 31, 2006** | ** ** | **Subscriptions** | ** ** | **Redemptions** | ** ** | **March 31, 2007**   | ** ** | **December 31, 2007** | ** ** | **Subscriptions** | ** ** | **Redemptions** | ** ** | **March 31, 2008**   | ** ** |
|                        |       |                            |       |              |       |            |       |                           |       |                            |       |              |       |            |       |                           |       |
| Class A                |       | 6,711,299                       |       | 1,272,991         |       | (299,997        | )          | 7,684,293                      |       | 7,827,084                       |       | 240,978           |       | (4,614,089      | )          | 3,453,973                      |       |
| Class C                |       | 51,147,894                      |       | 4,329,067         |       | (2,339,765      | )          | 53,137,196                     |       | 55,779,185                      |       | 1,396,487         |       | (37,126,665     | )          | 20,049,007                     |       |
| Class D                |       | 14,081,577                      |       | 131,911           |       | (2,400,000      | )          | 11,813,488                     |       | 10,397,079                      |       | —            |       | (7,116,651      | )          | 3,280,428                      |       |
| Class I                |       | 5,958,439                       |       | 357,444           |       | (37,042         | )          | 6,278,841                      |       | 5,691,460                       |       | 48,763            |       | (5,087,166      | )          | 653,057                        |       |
|                        |       |                            |       |              |       |            |       |                           |       |                            |       |              |       |            |       |                           |       |
| Total Members’  Units  |       | 77,899,209                      |       | 6,091,413         |       | (5,076,804      | )          | 78,913,818                     |       | 79,694,808                      |       | 1,686,228         |       | (53,944,571     | )          | 27,436,465                     |       |
|                        |       |                            |       |              |       |            |       |                           |       |                            |       |              |       |            |       |                           |       |
| Class A                |       | 10,158                          |       | —            |       | —          |       | 10,158                         |       | 10,158                          |       | —            |       | —          |       | 10,158                         |       |
| Class C                |       | 10,166                          |       | —            |       | —          |       | 10,166                         |       | 10,166                          |       | —            |       | —          |       | 10,166                         |       |
| Class D                |       | —                          |       | —            |       | —          |       | —                         |       | —                          |       | —            |       | —          |       | —                         |       |
| Class I                |       | —                          |       | —            |       | —          |       | —                         |       | —                          |       | —            |       | —          |       | —                         |       |
|                        |       |                            |       |              |       |            |       |                           |       |                            |       |              |       |            |       |                           |       |
| Total Sponsor’s  Units |       | 20,324                          |       | —            |       | —          |       | 20,324                         |       | 20,324                          |       | —            |       | —          |       | 20,324                         |       |

 

See notes to financialstatements.

 

3

----

 

ML APPLETON FUTURESACCESS LLC

(a Delaware LimitedLiability Company)

 

STATEMENTS OF CHANGES INMEMBERS’ CAPITAL

For the three monthsended March 31, 2008 and 2007

(unaudited)

 
| ** **                     | ** ** | **Members’ Capital  December 31, 2006** | ** ** | **Subscriptions** | ** ** | **Redemptions** | ** ** | **Net Loss** | ** ** | **Members’ Capital  March 31, 2007** | ** ** | **Members’ Capital  December 31, 2007** | ** ** | **Subscriptions** | ** ** | **Redemptions** | ** ** | **Net Loss** | ** ** | **Members’ Capital  March 31, 2008** | ** ** |
|--------------------------------|------------|-------------------------------------------------------------|------------|-------------------|------------|-----------------|------------|-------------------|------------|----------------------------------------------------------|------------|-------------------------------------------------------------|------------|-------------------|------------|-----------------|------------|-------------------|------------|----------------------------------------------------------|------------|
|                           |       |                                                        |       |              |       |            |       |              |       |                                                     |       |                                                        |       |              |       |            |       |              |       |                                                     |       |
| Class A                   |       | $                                                           | 7,453,230  |              | $          | 1,399,115       |       | $                 | (309,118   | )                                                        | $          | (1,151,791                                                  | )          | $                 | 7,391,436  |            | $          | 7,648,575         |       | $                                                        | 227,997    |   | $ | (4,222,853 | ) | $ | (448,136 | ) | $ | 3,205,583 |   |
| Class C                   |       | 55,775,159                                                  |       | 4,647,921         |       | (2,419,907      | )          | (7,932,669        | )          | 50,070,504                                               |       | 52,983,661                                                  |       | 1,251,334         |       | (32,961,784     | )          | (3,233,476        | )          | 18,039,735                                               |       |
| Class D                   |       | 16,184,797                                                  |       | 145,999           |       | (2,398,800      | )          | (2,125,042        | )          | 11,806,954                                               |       | 10,675,926                                                  |       | —            |       | (6,925,631      | )          | (538,361          | )          | 3,211,934                                                |       |
| Class I                   |       | 6,670,600                                                   |       | 385,759           |       | (41,760         | )          | (918,700          | )          | 6,095,899                                                |       | 5,631,103                                                   |       | 42,999            |       | (4,663,944      | )          | (396,467          | )          | 613,691                                                  |       |
|                           |       |                                                        |       |              |       |            |       |              |       |                                                     |       |                                                        |       |              |       |            |       |              |       |                                                     |       |
| Total Members’  Interests |       | $                                                           | 86,083,786 |              | $          | 6,578,794       |       | $                 | (5,169,585 | )                                                        | $          | (12,128,202                                                 | )          | $                 | 75,364,793 |            | $          | 76,939,265        |       | $                                                        | 1,522,330  |   | $ | (48,774,212 | ) | $ | (4,616,440 | ) | $ | 25,070,943 |   |
|                           |       |                                                        |       |              |       |            |       |              |       |                                                     |       |                                                        |       |              |       |            |       |              |       |                                                     |       |
| Class A                   |       | $                                                           | 11,285     |              | $          | —          |       | $                 | —     |                                                     | $          | (1,511                                                      | )          | $                 | 9,774      |            | $          | 9,928             |       | $                                                        | —     |   | $ | — |   | $ | (497 | ) | $ | 9,431 |   |
| Class C                   |       | 11,089                                                      |       | —            |       | —          |       | (1,507            | )          | 9,582                                                    |       | 9,658                                                       |       | —            |       | —          |       | (506              | )          | 9,152                                                    |       |
| Class D                   |       | —                                                      |       | —            |       | —          |       | —            |       | —                                                   |       | —                                                      |       | —            |       | —          |       | —            |       | —                                                   |       |
| Class I                   |       | —                                                      |       | —            |       | —          |       | —            |       | —                                                   |       | —                                                      |       | —            |       | —          |       | —            |       | —                                                   |       |
|                           |       |                                                        |       |              |       |            |       |              |       |                                                     |       |                                                        |       |              |       |            |       |              |       |                                                     |       |
| Total Sponsor’s  Interest |       | $                                                           | 22,374     |              | $          | —          |       | $                 | —     |                                                     | $          | (3,018                                                      | )          | $                 | 19,356     |            | $          | 19,586            |       | $                                                        | —     |   | $ | — |   | $ | (1,003 | ) | $ | 18,583 |   |
|                           |       |                                                        |       |              |       |            |       |              |       |                                                     |       |                                                        |       |              |       |            |       |              |       |                                                     |       |
| Total Members’  Capital   |       | $                                                           | 86,106,160 |              | $          | 6,578,794       |       | $                 | (5,169,585 | )                                                        | $          | (12,131,220                                                 | )          | $                 | 75,384,149 |            | $          | 76,958,851        |       | $                                                        | 1,522,330  |   | $ | (48,774,212 | ) | $ | (4,617,443 | ) | $ | 25,089,526 |   |

 

See notes to financialstatements.

 

4

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ML APPLETON FUTURESACCESSLLC

(a Delaware LimitedLiability Company)

 

NOTES TO FINANCIAL STATEMENTS

(unaudited)

 

1.              SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES

 

ML Appleton FuturesAccessLLC (the “Fund”) was organized under the Delaware Limited Liability Company Acton May 17, 2004 and commenced trading activities on April 1, 2005.The Fund issues new units of limited liability company interest (“Units”) atNet Asset Value per Unit as of the beginning of each calendar month. The Fundengages in the speculative trading of currency forward contracts. ACMP Limitedtrading as Appleton Capital Management LLC (“Appleton”) is the trading advisorof the Fund.

 

Merrill Lynch AlternativeInvestments LLC (“MLAI”), is the sponsor and manager of the Fund. MLAI is anindirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. (“MerrillLynch”). Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”),a wholly-owned subsidiary of Merrill Lynch, is the Fund’s commodity broker.

 

In February 2008, MLAI announced to the Membersits intent to liquidate the Fund as of June 30, 2008. Effective March 1, 2008,subscriptions/exchanges in will no longer be accepted; however,redemptions/exchanges out are allowed through June 2008 at which time theremaining Members will redeem their capital upon the liquidation of the Fund.MLAI has agreed to waive payment for any remaining unreimbursed costs relatedto the initial offering of the Units.

 

In the opinion of management, the financial statementscontain all adjustments necessary to present fairly the financial position ofthe Fund as of March 31, 2008, and the results of its operations for thethree months ended March 31, 2008 and 2007.  However, the operating results for theinterim period may not be indicative of the results for the full year.

 

Certain information and footnote disclosures normallyincluded in annual financial statements prepared in accordance with accountingprinciples generally accepted in the United States of America (“U.S. GAAP”)have been omitted.  It is suggested thatthese financial statements be read in conjunction with the financial statementsand notes thereto included in the Fund’s Annual Report on Form 10-K filedwith the Securities and Exchange Commission for the year ended December 31,2007.

 

The preparation of financial statements in conformitywith U.S. GAAP requires management to make estimates and assumptions thataffect the reported amounts of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of the financial statements andthe reported amounts of revenues and expenses during the reporting period.  Actual results could differ from thoseestimates.

 

5

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2.              NETASSET VALUE PER UNIT

 

For financial reporting purposes, in conformity withU.S. GAAP, the Fund deducted the total initial offering costs payable to MLAIat inception from Members’ Capital for purposes of determining Net AssetValue.  For all other purposes, includingcomputing Net Asset Value for purposes of member subscription and redemptionactivity, such costs are amortized over 60 months. Consequently, the Net AssetValue and Net Asset Value per Unit of the different Classes for financialreporting purposes and for all other purposes at March 31, 2008 and December 31,2007 are as follows:

 

March 31, 2008

 
| ** **   | ** ** | **Net Asset Value** | ** ** | ** **               | ** ** | **Net Asset Value per Unit** | ** ** |
|--------------|------------|-------------------------------|------------|--------------------------|------------|--------------------------------------------------|------------|
| ** **   | ** ** | **All Other  Purposes**  | ** ** | **Financial  Reporting** | ** ** | **Number of  Units**                        | ** ** | **All Other  Purposes** | ** ** | **Financial  Reporting** | ** ** |
| Class A |       | $                             | 3,216,337  |                     | $          | 3,215,014                                        |       | 3,464,131 |   | $ | 0.9285 |   | $ | 0.9281 |   |
| Class C |       | 18,056,780                    |       | 18,048,887               |       | 20,059,173                                       |       | 0.9002 |   | 0.8998 |   |
| Class D |       | 3,211,934                     |       | 3,211,934                |       | 3,280,428                                        |       | 0.9791 |   | 0.9791 |   |
| Class I |       | 614,582                       |       | 613,691                  |       | 653,057                                          |       | 0.9411 |   | 0.9397 |   |
|         |       | $                             | 25,099,633 |                     | $          | 25,089,526                                       |       | 27,456,789 |   |   |   |   |   |
|              |            |                               |            |                          |            |                                                  |            |  |  |  |  |  |  |  |  |

 

At December 31, 2007

 
| ** **   | ** ** | **Net Asset Value** | ** ** | ** **               | ** ** | **Net Asset Value per Unit** | ** ** |
|--------------|------------|-------------------------------|------------|--------------------------|------------|--------------------------------------------------|------------|
| ** **   | ** ** | **All Other  Purposes**  | ** ** | **Financial  Reporting** | ** ** | **Number of  Units**                        | ** ** | **All Other  Purposes** | ** ** | **Financial  Reporting** | ** ** |
| Class A |       | $                             | 7,660,030  |                     | $          | 7,658,503                                        |       | 7,837,242 |   | $ | 0.9774 |   | $ | 0.9772 |   |
| Class C |       | 53,002,616                    |       | 52,993,319               |       | 55,789,351                                       |       | 0.9500 |   | 0.9499 |   |
| Class D |       | 10,675,926                    |       | 10,675,926               |       | 10,397,079                                       |       | 1.0268 |   | 1.0268 |   |
| Class I |       | 5,632,134                     |       | 5,631,103                |       | 5,691,460                                        |       | 0.9896 |   | 0.9894 |   |
|         |       | $                             | 76,970,706 |                     | $          | 76,958,851                                       |       | 79,715,132 |   |   |   |   |   |
|              |            |                               |            |                          |            |                                                  |            |  |  |  |  |  |  |  |  |

 

3.              MARKET AND CREDIT RISKS

 

The nature of this Fund has certain risks, which cannot be presented onthe financial statements.  The followingsummarizes some of those risks.

 

6

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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 Fund’s Net unrealized profit (loss) on suchderivative instruments as reflected in the Statements of FinancialCondition.  The Fund’s exposure to marketrisk is influenced by a number of factors, including the relationships amongthe derivative instruments held by the Fund as well as the volatility andliquidity of the markets in which the derivative instruments are traded.Investments in foreign markets may also entail legal and political risks.

 

MLAI hasprocedures in place intended to control market risk exposure, although therecan be no assurance that they will, in fact, succeed in doing so.  These procedures focus primarily onmonitoring the trading of Appleton, calculating the Net Asset Value of the Fundas of 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 Fund’s market exposure, MLAImay urge Appleton to reallocate positions in an attempt to avoidover-concentrations.  However, such interventionsare expected to be unusual.  It isexpected that MLAI’s basic risk control procedures will consist of the ongoingprocess of advisor monitoring, with the market risk controls being applied byAppleton.

 

Credit Risk

 

The risksassociated with exchange-traded contracts are typically perceived to be lessthan those associated with over-the-counter (non-exchange-traded) transactions,because exchanges typically provide clearinghouse arrangements in which thecollective credit (in some cases limited in amount, in some cases not) of themembers of the exchange is pledged to support the financial integrity of theexchange.  In over-the-countertransactions, on the other hand, traders must rely solely on the credit oftheir respective individual counterparties. Margins, which may be subject 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 riskassociated with these instruments from counterparty nonperformance is the Netunrealized profit, if any, included in the Statements of Financial Condition.The Fund attempts to mitigate this risk by dealing exclusively with MerrillLynch entities as clearing brokers.

 

The Fund, in its normalcourse of business, enters into various contracts, with MLPF&S acting asits commodity broker.  Pursuant to thebrokerage arrangement with MLPF&S (which includes a netting arrangement),to the extent that such trading results in receivables from and payables to MLPF&S,these receivables and payables are offset and reported as a net receivable orpayable and included in Equity in commodity futures trading accounts on theStatements of Financial Condition.

 

7

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4.        RECENT ACCOUNTING PRONOUNCEMENTS

 

In September 2006,the Financial Accounting Standards Board (“FASB”) issued Statement of FinancialAccounting Standards No. 157, Fair Value Measurement (“FAS 157”). FAS 157defines fair value, establishes a framework for measuring fair value andexpands disclosures about fair value measurements. The Fund adopted FAS 157 asof January 1, 2008. The adoption of FAS 157 did not have a material impacton 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 hierarchal 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.

 

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 models or other valuation methodologies.Investments which are generally included in this category are investmentsvalued 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 price at which the investment wasacquired, the nature of the investment, local market conditions, trading valueson public exchanges for comparable securities, current and projected operatingperformance and financing transactions subsequent to the acquisition of theinvestment. The inputs into the determination of fair value require significantmanagement judgment. Due to the inherent uncertainty of these estimates, thesevalues may differ materially from the values that would have been used had aready market for these investments existed. Investments that are included inthis category generally are privately held debt and equity securities.

 

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

 

8

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The following table summarizes the valuation of theFund’s investments by the above FAS 157 fair value hierarchy levels as of March 31,2008:

 
| ** **                                     | ** ** | **Total** | ** ** | **Level I** | ** ** | **Level II** | ** ** | **Level III** | ** ** |
|------------------------------------------------|------------|-----------|------------|------------------|------------|-------------------|------------|--------------------|------------|
| Net unrealized  profit (loss) on open contract |       | $         | 7,729,698  |             | N/A        |              | $          | 7,729,698          |       | N/A |   |
|                                                |            |           |            |                  |            |                   |            |                    |            |  |  |

 

In March 2008,FASB released Statement of Financial Accounting Standards No. 161,Disclosures about Derivative Instruments and Hedging Activities – an amendmentto FASB Statement No. 133 (“FAS 161”). FAS 161 requires qualitativedisclosures about objectives and strategies for using derivatives, quantitativedisclosures about fair value amounts of and gains and losses on derivativeinstruments, and disclosures about credit-risk related contingent features inderivative agreements. The application of FAS 161 is required for fiscal yearsbeginning after November 15, 2008 and interim periods within those fiscalyears. Currently, the Fund is evaluating the implications of FAS 161 on itsfinancial statements.

 

9

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

 

MONTH-END NET ASSET VALUEPER UNIT

(NON U.S. GAAP)

 

MLAI believes that the NetAsset Value used to calculate subscription and redemption value and to reportperformance to investors throughout the year is the most valuable to theMembers of the Fund.  Therefore, the charts below referencing NetAsset Value and performance measurements are based on the Net Asset Value forall other purposes, as discussed in Note 2 to the financial statements.

 

Class A

 

| ** ** | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** |
|------------|------------|----------|------------|----------|------------|----------|------------|
| 2007       |       | $        | 1.1381     |     | $          | 1.0669   |       | $ | 0.9622 |   |
| 2008       |       | $        | 0.8706     |     | $          | 0.8227   |       | $ | 0.9285 |   |

 

Class C

 

| ** ** | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** |
|------------|------------|----------|------------|----------|------------|----------|------------|
| 2007       |       | $        | 1.1165     |     | $          | 1.0460   |       | $ | 0.9426 |   |
| 2008       |       | $        | 0.8456     |     | $          | 0.7984   |       | $ | 0.9002 |   |

 

Class D

 

| ** ** | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** |
|------------|------------|----------|------------|----------|------------|----------|------------|
| 2007       |       | $        | 1.1789     |     | $          | 1.1068   |       | $ | 0.9994 |   |
| 2008       |       | $        | 0.9158     |     | $          | 0.8665   |       | $ | 0.9791 |   |

 

Class I

 

| ** ** | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** |
|------------|------------|----------|------------|----------|------------|----------|------------|
| 2007       |       | $        | 1.1476     |     | $          | 1.0764   |       | $ | 0.9711 |   |
| 2008       |       | $        | 0.8818     |     | $          | 0.8335   |       | $ | 0.9411 |   |

 

PerformanceSummary

 

January 1,2008 to March 31, 2008

 

The Fund posted overalllosses trading in financials and currencies due to the difficult tradingconditions for all currency markets.

 

The beginning of thefirst quarter was extremely difficult for the Fund with volatility andlongstanding trends coming to an abrupt halt in the currency markets causinglosses to be posted to the Fund. The dominant trades were long positions in theEuro versus the Japanese yen and the U.S. dollar versus the Japanese yen.Although the last day of 2007 had seen a sizeable drop in open equity, therewas still sufficient trend strength for the Fund to remain in both.  Therefore, the further strengthening of theJapanese yen in the first few days of 2008 caused the first losses to beincurred to the Fund. Falling from 111.50 down to 109.00 the U.S. dollar versusthe Japanese yen exposure was exited for a loss, while the majority of the Euroversus the Japanese yen position was retained. As the Euro started climbingback up to historical highs the Euro versus the Japanese yen was holding itsown and had a considerable interest rate differential therefore, there werefurther losses posted to the Fund. As the Euro versus the Canadian dollarpeaked at 1.5150, the subsequent fall back to 1.4700 was the third source of lossesfor the Fund, 

 

10

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while the remaining Euroversus the Japanese yen exposure also fared poorly. Despite the negativeinterest rate differential, the Fund started to take long positions in theJapanese yen, against both the U.S. dollar and the Canadian dollar. With theU.S. dollar against the Japanese yen declining 105.50 and the Canadian dollarversus the Japanese yen reaching as low as 102.50, there was enough trendstrength in both to merit inclusion in the optimized portfolio but not enoughto offset losses.

 

TheFund continued its long position in the Euro throughout the middle of thequarter with profits made in the Euro versus the U.S. dollar positions. From108.50 in the U.S. dollar and 161.50 in the Euro, theJapanese yen promptly appreciated sharply forwhat seems like the hundredth time in the last three years to 104.50 and 156.00respectively therefore, significant losses were posted to the Fund. Despite thefact gains were made in the Euro versus the U.S. dollar the Fund had shortpositions in the U.S. dollar for the entire month of February therefore,losses could not offset the gains. The long positions in the Euro versus theCanadian dollar posted losses for the Fund due to the move upwards from 1.3300to 1.5100 that had initiated prior to the end of 2007. Unfortunately, theshort-lived fall in the Euro from 1.4850 to 1.4550 was enough to cause thatposition to be exited for a loss and instead the short position in the U.S.dollar was taken in the guise of short positions in the U.S. dollar versus theCanadian dollar. The stance was in place just in time to see the Canadiandollar weaken from 0.9985 to 1.0300 therefore, the position was exited for aloss being posted to the Fund. Long positions were taken again in the Euroversus the Canadian dollar up to 1.4975 only to close mid-quarter to 1.4800posting losses for the Fund.

 

Atthe beginning of March the U.S. dollar versus the Japanese yen started at103.15 and looked at one point as if it was heading for 90.00, the Japanese yenactually stalled and finished the quarter  to 100.00 for an unspectacular gain. The Euro versus the U.S. dollarpositions were  profitable for the Fundhowever profits were attributed to the Fund’s short positions in the Canadiandollar against the single currency. The Canadian currency has had a strong runsince 2003 for the most part, but the worries about the health of the U.S.economy seem to be spilling north of the border. This fact, coupled with asharp fall in commodity prices in the middle of March seemed to have setin place a certain weakness in the currency. As the U.S. dollar versus theCanadian dollar and the Euro versus the U.S. dollar were both rising, the Fundtook significant long positions in the Euro versus the Canadian dollar trade.The long positions in the Euro versus the Canadian dollar started at 1.4950 thebeginning of March before climbing all the way to 1.6225 posting profitsto the Fund. The Fund also posted profits due to the  climb in the Euro from 1.5175 to 1.5775. Thequarter ended with profits being posted to the Fund.

 

January 1,2007 to March 31, 2007

 

The Fund posted a netloss trading in financials and currencies due to difficult trading conditionsfor all currency market participants as some longstanding positions were exitedas the favorable conditions of the last quarter of 2006 experienced a very softlanding.

 

The beginning of thequarter proved to be uneventful from a performance point of view. The middle ofthe quarter was extremely difficult for the Fund with volatility andlongstanding trends coming to an abrupt halt, not just in currency markets butin global macro markets generally. The difficulties in the currency marketsexperienced mid-quarter continued into the end of the quarter with the majorforeign exchange market being subject to some harsh reversals and some choppyvolatility.

 

There appears to be twoopposite forces pulling on the U.S. dollar and the Japanese yen. However, thesignificant interest rate differential and the outlook for further rates hikesfrom the U.S. Federal Reserve would appear to support the U.S. dollar. Againstthis, there appears to be a reluctance to hold U.S. currency against thebackdrop of increasing deficits and the war in Iraq.

 

11

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The traditional practiceof holding a high yielding currency at the expense of a low-yield iscommonplace in the foreign exchange markets. The rationale is that in theabsence of any movement in the spot price, the currency manager will benefitfrom the interest rate differential therein. Getting back to the specifics ofMarch, it was a frustrating month in the sense that a currency manager withmore primitive risk management systems may have been rewarded in the case of aposition like the Euro/Japanese Yen. Having started the month at a level of156.25, the cross continued to fall precipitously in the first four days of themonth. Ultimately, the market found support marginally below 151.00.Considering that the peak had been 159.50 in the latter stages of the priormonth, the total reversal in excess of 5% was considerable, particularly whenannualized volatility was being priced at between 6% and 7%. The modelcontinued to react as it had done in the final days of February, by cuttingpositions due both to the increased volatility and also the perceived change inoverall direction of the market. The potential for frustration, and thejustification for the comment in the opening line of this paragraph, stems fromthe fact that the next four weeks saw the market gradually climb all the wayback to 157.25 by the end of March. Thus, a complete ignorance of volatilitywould have seen the portfolio hold onto the position and make gains ultimately,albeit with extreme levels of profit and loss in the interim. Clearly, thisapproach is not in keeping with the Appleton risk management credo. Portfoliovolatility must be kept constant at all times. Therefore as the position inquestion continued to fall through successive levels, the proprietaryassessment of volatility crept up, with the consequence that positions neededto be reduced in size in order to remain within parameters.

 

Item3.   Quantitative and QualitativeDisclosures About Market Risk

 

Introduction

 

The Fund is a speculativecommodity pool. The market sensitive instruments held by it are acquired forspeculative trading purposes and all or substantially all of the Fund’s assetsare subject to the risk of trading loss. Unlike an operating company, the risk of market sensitive instruments isintegral, not incidental, to the Fund’s main line of business.

 

Market movementsresult in frequent changes in the fair market value of the Fund’s openpositions and, consequently, in its earnings and cash flow. The Fund’s marketrisk is influenced by a wide variety of factors, including the level andvolatility of interest rates, exchange rates, equity price levels, the marketvalue of financial instruments and contracts, the diversification effects amongthe Fund’s open positions and the liquidity of the markets in which it trades.

 

The Fund, underthe direction of Appleton, rapidly acquires and liquidates both long and shortpositions in currency markets. Consequently, it is not possible to predict how a particular future marketscenario will affect performance, and the Fund’s past performance is notnecessarily indicative of its future results.

 

Value at Risk is ameasure of the maximum amount which the Fund could reasonably be expected tolose in a given market sector. However, the inherent uncertainty of the Fund’sspeculative trading and the recurrence in the markets traded by the Fund ofmarket movements far exceeding expectations could result in actual trading ornon-trading losses far beyond the indicated Value at Risk or the Fund’sexperience to date (i.e., “risk of ruin”). In light of the foregoing, as wellas the risks and uncertainties intrinsic to all future projections, thequantifications included in this section should not be considered to constituteany assurance or representation that the Fund’s losses in any market sectorwill be limited to Value at Risk or by the Fund’s attempts to manage its marketrisk.

 

12

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Quantifying The Fund’sTrading Value At Risk

 

QuantitativeForward-Looking Statements

 

The followingquantitative disclosures regarding the Fund’s market risk exposures contain “forward-lookingstatement” within the meaning of the safe harbor from civil liability providedfor such statements by the Private Securities Litigation Reform Act of 1995(set forth in Section 27Aof the Securities Act of 1933 and Section 21Eof the Securities Exchange Act of 1934). All quantitative disclosures in this section are deemed to beforward-looking statements for purposes of the safe harbor, except forstatements of historical fact.

 

The Fund’s riskexposure in the various market sectors traded by Appleton is quantified belowin terms of Value at Risk.  Due to theFund’s mark-to-market accounting, any loss in the fair value of the Fund’s openpositions is directly reflected in the 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 marginrequirements have been used by the Fund as the measure of its Value atRisk.  Maintenance margin requirementsare set by exchanges to equal or exceed the maximum loss in the fair value ofany given contract incurred in 95%-99% of the one-day time periods included inthe historical sample (generally approximately one year) researched forpurposes of establishing margin levels. The maintenance margin levels are established by dealers and exchangesusing historical price studies as well as an assessment of current marketvolatility (including the implied volatility of the options on a given futurescontract) and economic fundamentals to provide a probabilistic estimate of themaximum expected near-term one-day price fluctuation.

 

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.

 

***TheFund’s Trading Value at Risk in Different Market Sectors***

 

Thefollowing table indicates the average, highest and lowest trading Value at Riskassociated with the Fund’s open positions by market category for the fiscalperiod. For the three months ended March 31, 2008 and 2007, the Fund’saverage month-end Net Asset Value for all other purposes was approximately$57,468,201 and $83,502,684, respectively.

 

13

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March 31, 2008

 
| ** **             | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
|------------------------|------------|-----------------------------|------------|----------------------------|------------|------------------------|------------|-----------------------|------------|
| **Market Sector** | ** ** | **Value at Risk** | ** ** | **Capitalization**         | ** ** | **At Risk**       | ** ** | **At Risk**      | ** ** |
|                   |       |                        |       |                       |       |                   |       |                  |       |
| Currencies             |       | $                           | 2,126,316  |                       | 3.70       | %                      | $          | 2,126,316             |       | $ | 2,126,316 |   |
|                   |       |                        |       |                       |       |                   |       |                  |       |
| TOTAL                  |       | $                           | 2,126,316  |                       | 3.70       | %                      | $          | 2,126,316             |       | $ | 2,126,316 |   |

 

March 31,2007

 
| ** **             | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
|------------------------|------------|-----------------------------|------------|----------------------------|------------|------------------------|------------|-----------------------|------------|
| **Market Sector** | ** ** | **Value at Risk** | ** ** | **Capitalization**         | ** ** | **At Risk**       | ** ** | **At Risk**      | ** ** |
|                   |       |                        |       |                       |       |                   |       |                  |       |
| Currencies             |       | $                           | 2,126,316  |                       | 2.55       | %                      | $          | 2,126,316             |       | $ | 2,126,316 |   |
|                   |       |                        |       |                       |       |                   |       |                  |       |
| TOTAL                  |       | $                           | 2,126,316  |                       | 2.55       | %                      | $          | 2,126,316             |       | $ | 2,126,316 |   |

 

Material Limitations on Value at Riskas an Assessment of Market Risk

 

The facevalue of the market sector instruments held by the Fund is typically many timesthe applicable maintenance margin requirement (maintenance margin requirementsgenerally ranging between approximately 1% and 10% of contract face value) aswell as many times the capitalization of the Fund.  The magnitude of the Fund’s open positionscreates a “risk of ruin” not typically found in most other investmentvehicles.  Because of the size of itspositions, certain market conditions — unusual, but historically recurring fromtime to time — could cause the Fund to incur severe losses over a short periodof time.   The foregoing Value at Risktable — as well as the past performance of the Fund — gives no indication ofthis “risk of ruin.”

 

**Non-Trading Risk**

 

ForeignCurrency Balances; Cash on Deposit with MLPF&S

 

TheFund has non-trading market risk on its foreign cash balances not needed formargin. However, these balances (as well as the market risk they represent) areimmaterial.

 

TheFund also has non-trading market risk on the approximately 90%-95% of itsassets which are held in cash at MLPF&S. The value of this cash is notinterest rate sensitive, but there is cash flow risk in that if interest ratesdecline so will the cash flow generated on these monies. This cash flow risk isimmaterial.

 

Qualitative Disclosures Regarding Primary Trading Risk Exposures

 

Thefollowing qualitative disclosures regarding the Fund’s market risk exposures — exceptfor (i) those disclosures that are statements of historical fact and (ii) thedescriptions of how the Fund manages its primary market risk exposures — constituteforward-looking statements within the meaning of Section 27A 

 

14

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ofthe Securities Act and Section 21E of the Securities Exchange Act. TheFund’s primary market risk exposures as well as the strategies used and to beused by MLAI and Appleton for managing such exposures are subject to numerousuncertainties, contingencies and risks, any one of which could cause the actualresults of the Fund’s risk controls to differ materially from the objectives ofsuch strategies. Government interventions, defaults and expropriations,illiquid markets, the emergence of dominant fundamental factors, politicalupheavals, 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 Fund. There can be no assurance that the Fund’scurrent market exposure and/or risk management strategies will not changematerially or that any such strategies will be effective in either the short-or long-term. Investors must be prepared to lose all or substantially all ofthe time value of their investment in the Fund.

 

Item 4. Controls and Procedures

 

MLAI’sChief Executive Officer and the Chief Financial Officer, on behalf of the Fund,have evaluated the effectiveness of the design and operation of the disclosurecontrols and procedures with respect to the Fund as of and for the quarterwhich ended March 31, 2008, and, based on this evaluation, have concludedthat these disclosure controls and procedures are effective. Additionally,there were no significant changes in the Fund’s internal controls overfinancial reporting which materially affect such internal controls.

 

*Changes in Internal Controls over Financial Reporting*

 

Nochange in internal controls over financial reporting (as defined in Rule 13a-15(f) underthe Exchange Act ) occurred during the quarter which ended March 31, 2008that has materially affected, or is reasonable likely to materially affect, theFund’s internal controls, over financial reporting.

 

*Management’s Report on Internal Control over FinancialReporting:*

 

TheFund’s management is responsible for establishing and maintaining adequateinternal controls over financial reporting.  The Fund’s internal controlsover financial reporting is a process designed under the supervision of MLAI’sChief Executive Officer and the Chief Financial Officer, on behalf of the Fundand is effected by management, other personnel and service providers to providereasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance withU.S. GAAP include policies and procedures that:

 

·  Pertainto the maintenance of records that in reasonable detail accurately and fairlyreflect the transactions and dispositions of the assets of the Fund.

 

·  Providereasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with U.S. GAAP and that receipts and expenditures of the Fund are being made only in accordance withauthorizations of management of the Fund and Board of Managers of MLAI LLC.

 

·  Providereasonable assurance regarding prevention or timely detection of unauthorizedacquisitions, use or disposition of the Fund’s assets that could have amaterial effect on the financial statements of the Fund.

 

15

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Becauseof its inherent limitations, internal controls over financial reporting canonly provide reasonable assurance with respect to financial statementpreparation and presentation.  Projections of any evaluation ofeffectiveness to future periods are subject to the risks that controls maybecome inadequate because of changes in condition, or that the degree ofcompliance with the policies or procedures may deteriorate.

 

TheFund’s management assessed the effectiveness of the Funds internal controlsover financial reporting as March 31, 2008.  In making thisassessment, management used the criteria set forth by the Committee ofSponsoring Organizations of the Treadway Commission (COSO) in “InternalControl-Integrated Framework”.

 

Basedon its assessment the Fund’s management concluded that at March 31, 2008the Fund’s internal controls over financial reporting were effective.

 

16

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PART II - OTHERINFORMATION

 

Item 1.            LegalProceedings

 

None.

 

Item 1A.   Risk Factors

 

## Past Performance Not Necessarily Indicative of Future Results

 

Past performance is not necessarily indicativeof future results.  The trading advisor’spast performance may not be representative of how it may trade in the futurefor the Fund.

 

## Volatile Markets; Highly Leveraged Trading

 

Futures and forward trading is highly leveraged,and market price levels are volatile and materially affected by unpredictablefactors such as weather and governmental intervention.  The combination of leverage and volatilitycreates a high degree of risk.

 

## Importance of General Market Conditions

 

Overall market or economic conditions — whichneither MLAI nor the trading advisor can predict or control — have a materialeffect on the performance of any managed futures strategy.

 

## Forward Trading

 

The Fund will trade currencies in the forwardmarkets in addition to in the futures markets. The forward markets are over-the-counter, non-exchange markets, and intrading in these markets, the Fund will be dependent on the credit standing ofthe counterparties with which they trade, without the financial support of anyclearinghouse system.  In addition, the pricesoffered for the same forward contract may vary significantly among differentforward market participants.  Forwardmarket counterparties are under no obligation to enter into forwardtransactions with a Fund, including transactions through which the Fund isattempting to liquidate open positions.

 

## Increased Assets Under Management

 

There appears to be a tendency for the rates ofreturn achieved by managed futures advisors to decline as assets undermanagement increase.  The trading advisorhas not agreed to limit the amount of additional equity which it may manage.

 

## Trading Advisor Risk

 

The Fund is subject to the risk of the badjudgment, negligence or misconduct of its trading advisor.  There have been a number of instances inrecent years in which private investment funds have incurred substantial lossesdue to manager misconduct.

 

17

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## Changes in Trading Strategy

 

The trading advisor may make materialchanges in its trading strategies without the knowledge of MLAI.

 

## Illiquid Markets

 

Certain positions held by the Fund may becomeilliquid, preventing the Fund’s trading advisor from acquiring positionsotherwise indicated by its strategy or making it impossible for the tradingadvisor to close out positions against which the market is moving.

 

Certain futures markets are subject to “dailyprice limits,” restricting the maximum amount by which the price of aparticular contract can change during any given trading day.  Once a contract’s price has moved “the limit,”it may be impossible or economically non-viable to execute trades in suchcontract.  From time to time, prices havemoved “the limit” for a number of consecutive days, making it impossible fortraders against whose positions the market was moving to prevent large losses.

 

## Trading on Non-U.S. Exchanges

 

The trading advisor may trade extensively onnon-U.S. exchanges.  These exchanges arenot regulated by any United States governmental agency.  The Fund could incur substantial lossestrading on foreign exchanges to which it would not have been subject had itstrading advisor limited its trading to U.S. markets.

 

The profits and losses derived from tradingforeign futures and options will generally be denominated in foreigncurrencies; consequently, the Fund will be subject to a certain degree ofexchange-rate risk in trading such contracts.

 

The Fund Could Lose Assets and Have Its TradingDisrupted Due to the Bankruptcy of One of the Parties

 

The Fund issubject to the risk of insolvency of a counterparty, an exchange, a clearinghouse orMLPF&S. Fund assets could be lost or impounded during lengthybankruptcy proceedings.  Were asubstantial portion of the Fund’s capital tied up in a bankruptcy, MLAI mightsuspend or limit trading, perhaps causing the Fund to miss significant profitopportunities. There are increasedrisks in dealing with unregulated trading counterparties including the riskthat assets may not benefit from the protection afforded to “customer funds”deposited with regulated dealers and brokers.

 

18

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Item 2.           UnregisteredSales of Equity Securities and Use of Proceeds

 

(a)          Issuance to accreditedinvestors pursuant to Regulation D and Section 4(6) under theSecurities Act.  The selling agent of thefollowing Class of Units was MLPF&S.

 

CLASS A

 
| ** ** | ** ** | **Subscription** | ** ** |
|------------|------------|------------------|------------|
| ** ** | ** ** | **Amount**       | ** ** | **Units** | ** ** | **NAV (1)** | ** ** |
| Jan-08     |       | $                | 166,573    |   | 170,425 |   | $ | 0.9774 |   |
| Feb-08     |       | 61,424           |       | 70,553 |   | 0.8706 |   |
| Mar-08     |       | —           |       | — |   | 0.8227 |   |
| Apr-08     |       | —           |       | — |   | 0.9285 |   |
|            |            |                  |            |  |  |  |  |  |  |

 

CLASS C

 
| ** ** | ** ** | **Subscription** | ** ** |
|------------|------------|------------------|------------|
| ** ** | ** ** | **Amount**       | ** ** | **Units** | ** ** | **NAV (1)** | ** ** |
| Jan-08     |       | $                | 640,648    |   | 674,295 |   | $ | 0.9501 |   |
| Feb-08     |       | 610,686          |       | 722,192 |   | 0.8456 |   |
| Mar-08     |       | —           |       | — |   | 0.7984 |   |
| Apr-08     |       | —           |       | — |   | 0.9002 |   |
|            |            |                  |            |  |  |  |  |  |  |

 

CLASS D

 
| ** ** | ** ** | **Subscription** | ** ** |
|------------|------------|------------------|------------|
| ** ** | ** ** | **Amount**       | ** ** | **Units** | ** ** | **NAV (1)** | ** ** |
| Jan-08     |       | $                | —     |   | — |   | $ | 1.0268 |   |
| Feb-08     |       | —           |       | — |   | 0.9158 |   |
| Mar-08     |       | —           |       | — |   | 0.8665 |   |
| Apr-08     |       | —           |       | — |   | 0.9791 |   |
|            |            |                  |            |  |  |  |  |  |  |

 

CLASS I

 
| ** ** | ** ** | **Subscription** | ** ** |
|------------|------------|------------------|------------|
| ** ** | ** ** | **Amount**       | ** ** | **Units** | ** ** | **NAV (1)** | ** ** |
| Jan-08     |       | $                | —     |   | — |   | $ | 0.9896 |   |
| Feb-08     |       | 42,999           |       | 48,763 |   | 0.8818 |   |
| Mar-08     |       | —           |       | — |   | 0.8335 |   |
| Apr-08     |       | —           |       | — |   | 0.9411 |   |
|            |            |                  |            |  |  |  |  |  |  |

 

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(1) Net Asset Valuefor all other purposes

 
|    | (b)  None.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    | (c)  None.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| Item 3. | Defaults  Upon Senior Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|    | None.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| Item 4. | Submission  of Matters to a Vote of Security Holders                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|    | None.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| Item 5. | Other  Information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|    | In February 2008, MLAI announced to the Members its intent to  liquidate the Fund as of June 30, 2008. Effective March 1, 2008, subscriptions/exchanges in are no longer  being accepted; however, redemptions/exchanges out are allowed through  June 2008 at which time the remaining Members will redeem their capital  upon the liquidation of the Fund. MLAI has agreed to waive payment for any  remaining unreimbursed costs related to the initial offering of the Units. |

 

19

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Item 6.            Exhibits

 

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

 
| 31.01 and 31.02               |   | Rule 13a-14(a)/15d-14(a) Certifications |
|-------------------------------|--------|---------------------------------------------------|
|                          |   |                                              |
| Exhibit 31.01  and 31.02 |   | Are filed  herewith.                              |
|                          |   |                                              |
| 32.01 and 32.02               |   | Section 1350  Certifications                 |
|                          |   |                                              |
| Exhibit 32.01  and 32.02 |   | Are filed  herewith.                              |

 

20

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**SIGNATURES**

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 

 
|                     | ML  APPLETON FUTURESACCESS LLC       |                                            |
|--------------------------|--------------------------------------|-------------------------------------------------|
|                     |  By:  MERRILL LYNCH ALTERNATIVE |                                            |
|                     | INVESTMENTS LLC                      |                                            |
|                     | (Manager)                            |                                            |
|                     |                                 |                                            |
|                     |                                 |                                            |
| Date:  May 14, 2008 |                                 | By                                              | /s/PAUL  MORTON |
|                     |                                 | Paul  Morton                                    |
|                     |                                 | Chief  Executive Officer, President and Manager |
|                     |                                 |  (Principal Executive Officer)             |
|                     |                                 |                                            |
|                     |                                 |                                            |
| Date:  May 14, 2008 |                                 |                                            |   |
|                     | By                                   | /s/  BARBRA E. KOCSIS                           |
|                     |                                 |  Barbra E. Kocsis                          |
|                     |                                 | Chief  Financial Officer                        |
|                     |                                 | (Principal Financial and Accounting Officer)    |
|                          |                                      |                                                 |  |  |  |

 

21

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