** **

**UNITED STATES SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

** **

**FORM 10-Q**

** **

**(Mark One)**

 

| **ý**                                              | ** ** | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**  |
|---------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------|
| ** **                                              | ** ** | ** **                                                                                              |
| **For the quarterly period ended March 31,  2006** |
| **OR**                                                  |
| ** **                                              | ** ** | ** **                                                                                              |
| **o**                                                   | ** ** | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

 

**For the transition period from                to   **              

 

**Commission File Number 0-51087**

 

**MLAPPLETON 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 AlternativeInvestments LLC**

**Princeton Corporate Campus**

**800 Scudders Mill Road -  Section 2G**

**Plainsboro, New Jersey 08536**

(Address of principalexecutive offices)

(Zip Code)

 

**609-282-6996**

(Registrant’s telephonenumber, including area code)

 

Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15 (d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days. Yes ý  No o

 

Indicate by check mark ifthe registrant is a well-known seasoned issuer, as defined in Rule 405 ofthe Securities Act.

 

| Yes o |   | No ý |
|------------|--------|----------------|

 

Indicate by check mark ifthe registrant is not required to file reports pursuant to Section 13 or15(d) of the Act.

 

| Yes o |   | No ý |
|------------|--------|----------------|

 

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 ý |   | No o |
|-----------------|--------|-----------|

 

Indicate by check mark ifdisclosure of delinquent filers pursuant to Item 405 of Regulation S-K is notcontained herein, and will not be contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporated byreference in Part II of this Form 10-Q or any amendment to this Form 10-Q.ý

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

 

| Large accelerated filer o |   | Accelerated filer o |   | Non-accelerated  filer ý |
|--------------------------------|--------|---------------------|--------|-------------------------------|

 

Indicate by check mark ifthe registrant is a shell company (as defined by Rule 12b-2 of the Act).

 

| Yes o |   | No ý |
|------------|--------|----------------|

 

 

----

 

**ML APPLETON FUTURESACCESS LLC**

 

QUARTERLY REPORT FOR MARCH 31,2006 ON FORM 10-Q

 

Table of Contents

 
| PART I  |                                                                                        |
|--------------|---------------------------------------------------------------------------------------------|
|         |                                                                                        |   |
| Item 1.      | Financial  Statements                                                                       | 2 |
|         |                                                                                        |   |
| Item  2.     | Management’s  Discussion and Analysis of Financial Condition and Results of Operations | 9 |
|         |                                                                                        |   |
| Item  3.     | Quantitative  and Qualitative Disclosures About Market Risk                                 | 9 |
|         |                                                                                        |   |
| Item  4.     | Controls  and Procedures                                                                    | 10 |
|         |                                                                                        |   |
| PART II |                                                                                        |
|         |                                                                                        |   |
| Item 1.      | Legal  Proceedings                                                                          | 11 |
|         |                                                                                        |   |
| Item  2.     | Changes  in Securities and Use of Proceeds                                                  | 11 |
|         |                                                                                        |   |
| Item  3.     | Defaults  Upon Senior Securities                                                            | 11 |
|         |                                                                                        |   |
| Item  4.     | Submission  of Matters to a Vote of Security Holders                                        | 11 |
|         |                                                                                        |   |
| Item 5.      | Other  Information                                                                          | 11 |
|         |                                                                                        |   |
| Item  5a.    | Recent  Sales of Unregistered Securities: Uses of Proceeds From Registered Securities       | 12 |
|         |                                                                                        |   |
| Item  6      | Exhibits  and Reports on Form 8-K                                                      | 12 |

 

----

 

PART I - FINANCIAL INFORMATION

 

Item 1.  Financial Statements

 

ML APPLETONFUTURESACCESS LLC

(a Delaware Limited LiabilityCompany)

 

STATEMENTS OFFINANCIAL CONDITION

 
| ** **                                                                       | ** ** | **March 31,  2006** | ** ** | **December 31,  2005** | ** ** |
|----------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| ** **                                                                       | ** ** | **(unaudited)**          | ** ** | ** **                  | ** ** |
| **ASSETS:**                                                                      | ** ** | ** **               | ** ** | ** **                  | ** ** |
| Equity in commodity  futures trading accounts:                                   |       |                     |       |                        |       |
| Cash                                                                             |       | $                        | 30,994,620 |                        | $          | 21,237,799 |   |
| Net unrealized loss on  open contracts                                           |       | (3,112,287               | )          | (728,432                    | )          |
| Cash                                                                             |       | 2,294,911                |       | 29,573                      |       |
| Accrued interest                                                                 |       | 104,770                  |       | 62,139                      |       |
|                                                                             |       |                     |       |                        |       |
| **TOTAL ASSETS**                                                                 |       | $                        | 30,282,014 |                        | $          | 20,601,079 |   |
|                                                                             |       |                     |       |                        |       |
| **LIABILITIES AND MEMBERS’  CAPITAL:**                                      | ** ** | ** **               | ** ** | ** **                  | ** ** |
| LIABILITIES:                                                                     |       |                     |       |                        |       |
| Management fee payable                                                           |       | $                        | 50,397     |                        | $          | 33,026 |   |
| Sponsor’s fee payable                                                       |       | 54,440                   |       | 36,994                      |       |
| Peformance fee payable                                                           |       | —                   |       | 427,383                     |       |
| Redemptions payable                                                              |       | 357,796                  |       | 40,610                      |       |
| Initial offering costs  payable                                                  |       | 38,597                   |       | 41,409                      |       |
| Other payables                                                                   |       | 43,726                   |       | 69,011                      |       |
|                                                                             |       |                     |       |                        |       |
| Total liabilities                                                                |       | 544,956                  |       | 648,433                     |       |
|                                                                             |       |                     |       |                        |       |
| MEMBERS’ CAPITAL:                                                           |       |                     |       |                        |       |
| Sponsor’s Interest  (20,324 and 20,324 Units issued and outstanding)        |       | 18,936                   |       | 22,203                      |       |
| Members’ Interest  (31,980,224 and 18,307,945 Units issued and outstanding) |       | 29,718,122               |       | 19,930,443                  |       |
|                                                                             |       |                     |       |                        |       |
| Total members’ capital                                                      |       | 29,737,058               |       | 19,952,646                  |       |
|                                                                             |       |                     |       |                        |       |
| **TOTAL LIABILITIES AND MEMBERS’  CAPITAL**                                 |       | $                        | 30,282,014 |                        | $          | 20,601,079 |   |
|                                                                             |       |                     |       |                        |       |
| **NET ASSET VALUE PER UNIT (Note  2)**                                           | ** ** | ** **               | ** ** | ** **                  | ** ** |
|                                                                             |       |                     |       |                        |       |
| See notes to financial  statements.                                              |       |                     |       |                        |       |

 

2

----

 

ML APPLETON FUTURESACCESSLLC

(a Delaware LimitedLiability Company)

 

STATEMENT OF OPERATIONS

(unaudited)

 
| ** **                                    | ** ** | **For the three  months ended  March 31,  2006** | ** ** |
|-----------------------------------------------|------------|----------------------------------------------------------------------|------------|
| **TRADING LOSSES:**                           | ** ** | ** **                                                           | ** ** |
|                                          |       |                                                                 |       |
| Realized                                      |       | $                                                                    | (2,142,583 | ) |
| Change in unrealized                          |       | (2,383,856                                                           | )          |
|                                          |       |                                                                 |       |
| Total trading losses                          |       | (4,526,439                                                           | )          |
|                                          |       |                                                                 |       |
| **INVESTMENT INCOME:**                        | ** ** | ** **                                                           | ** ** |
| Interest                                      |       | 279,230                                                              |       |
|                                          |       |                                                                 |       |
| **EXPENSES:**                                 | ** ** | ** **                                                           | ** ** |
| Management fee                                |       | 132,425                                                              |       |
| Sponsor’s fee                            |       | 140,910                                                              |       |
| Other                                         |       | 33,666                                                               |       |
|                                          |       |                                                                 |       |
| Total expenses                                |       | 307,001                                                              |       |
|                                          |       |                                                                 |       |
| **NET INVESTMENT LOSS**                       |       | (27,771                                                              | )          |
|                                          |       |                                                                 |       |
| **NET LOSS**                                  |       | $                                                                    | (4,554,210 | ) |
|                                          |       |                                                                 |       |
| **NET LOSS PER UNIT:**                        | ** ** | ** **                                                           | ** ** |
|                                          |       |                                                                 |       |
| Weighted average number  of Units outstanding |       |                                                                 |       |
| Class A                                  |       | 2,762,898                                                            |       |
| Class C                                  |       | 19,704,253                                                           |       |
| Class D                                  |       | 1,346,164                                                            |       |
| Class I                                  |       | 2,441,663                                                            |       |
|                                          |       |                                                                 |       |
| Net loss per weighted  average Unit           |       |                                                                 |       |
| Class A                                  |       | $                                                                    | (0.1676    | ) |
| Class C                                  |       | $                                                                    | (0.1739    | ) |
| Class D                                  |       | $                                                                    | (0.1594    | ) |
| Class I                                  |       | $                                                                    | (0.1844    | ) |
|                                          |       |                                                                 |       |
| See notes to financial  statements.           |       |                                                                 |       |

 

3

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ML APPLETON FUTURESACCESSLLC

(a Delaware LimitedLiability Company)

 

STATEMENT OF CHANGES INMEMBERS’ CAPITAL

For the three monthsended March 31, 2006 

(unaudited)

 
| ** **                 | ** ** | **Members’ Capital  December 31, 2005** | ** ** | **Subscriptions** | ** ** | **Redemptions** | ** ** | **Net Loss** | ** ** | **Members’ Capital  March 31, 2006** | ** ** |
|----------------------------|------------|-------------------------------------------------------------|------------|-------------------|------------|-----------------|------------|-------------------|------------|----------------------------------------------------------|------------|
| ** **                 | ** ** | ** **                                                  | ** ** | ** **        | ** ** | ** **      | ** ** | ** **        | ** ** | ** **                                               | ** ** |
| Class A               |       | 2,015,034                                                   |       | 1,195,537         |       | (29,250)        |       | —            |       | 3,181,321                                                |       |
| Class C               |       | 14,289,916                                                  |       | 10,830,300        |       | (591,766)       |       | —            |       | 24,528,450                                               |       |
| Class D               |       | 375,509                                                     |       | 970,655           |       | —          |       | —            |       | 1,346,164                                                |       |
| Class I               |       | 1,627,486                                                   |       | 1,346,504         |       | (49,701         | )          | —            |       | 2,924,289                                                |       |
|                       |       |                                                        |       |              |       |            |       |              |       |                                                     |       |
| Total Members’ Units  |       | 18,307,945                                                  |       | 14,342,996        |       | (670,717        | )          | —            |       | 31,980,224                                               |       |
|                       |       |                                                        |       |              |       |            |       |              |       |                                                     |       |
| Class A               |       | 10,158                                                      |       | —            |       | —          |       | —            |       | 10,158                                                   |       |
| Class C               |       | 10,166                                                      |       | —            |       | —          |       | —            |       | 10,166                                                   |       |
| Class D               |       | —                                                      |       | —            |       | —          |       | —            |       | —                                                   |       |
| Class I               |       | —                                                      |       | —            |       | —          |       | —            |       | —                                                   |       |
|                       |       |                                                        |       |              |       |            |       |              |       |                                                     |       |
| Total Sponsor’s Units |       | 20,324                                                      |       | —            |       | —          |       | —            |       | 20,324                                                   |       |

 

Seenotes to financial statements.

 

4

----

 

ML APPLETON FUTURESACCESSLLC

(a Delaware LimitedLiability Company)

 

STATEMENT OF CHANGES INMEMBERS’ CAPITAL

For the three monthsended March 31, 2006 

(unaudited)

 
| ** **                     | ** ** | **Members’ Capital  December 31, 2005** | ** ** | **Subscriptions** | ** ** | **Redemptions** | ** ** | **Net Loss** | ** ** | **Members’ Capital  March 31, 2006** | ** ** |
|--------------------------------|------------|-------------------------------------------------------------|------------|-------------------|------------|-----------------|------------|-------------------|------------|----------------------------------------------------------|------------|
| ** **                     | ** ** | ** **                                                  | ** ** | ** **        | ** ** | ** **      | ** ** | ** **        | ** ** | ** **                                               | ** ** |
| Class A                   |       | $                                                           | 2,205,634  |              | $          | 1,263,929       |       | $                 | (32,251    | )                                                        | $          | (461,561 | ) | $ | 2,975,751 |   |
| Class C                   |       | 15,516,532                                                  |       | 11,197,546        |       | (585,933        | )          | (3,424,731        | )          | 22,703,414                                               |       |
| Class D                   |       | 418,886                                                     |       | 1,084,999         |       | —          |       | (214,518          | )          | 1,289,367                                                |       |
| Class I                   |       | 1,789,391                                                   |       | 1,457,120         |       | (46,788         | )          | (450,133          | )          | 2,749,590                                                |       |
|                           |       |                                                        |       |              |       |            |       |              |       |                                                     |       |
| Total Members’  Interests |       | $                                                           | 19,930,443 |              | $          | 15,003,594      |       | $                 | (664,972   | )                                                        | $          | (4,550,943 | ) | $ | 29,718,122 |   |
|                           |       |                                                        |       |              |       |            |       |              |       |                                                     |       |
| Class A                   |       | $                                                           | 11,142     |              | $          | —          |       | $                 | —     |                                                     | $          | (1,627 | ) | $ | 9,515 |   |
| Class C                   |       | 11,061                                                      |       | —            |       | —          |       | (1,640            | )          | 9,421                                                    |       |
| Class D                   |       | —                                                      |       | —            |       | —          |       | —            |       | —                                                   |       |
| Class I                   |       | —                                                      |       | —            |       | —          |       | —            |       | —                                                   |       |
|                           |       |                                                        |       |              |       |            |       |              |       |                                                     |       |
| Total Sponsor’s  Interest |       | $                                                           | 22,203     |              | $          | —          |       | $                 | —     |                                                     | $          | (3,267 | ) | $ | 18,936 |   |
| Total Members’ Capital    |       | $                                                           | 19,952,646 |              | $          | 15,003,594      |       | $                 | (664,972   | )                                                        | $          | (4,554,210 | ) | $ | 29,737,058 |   |

 

Seenotes to financial statements.

 

5

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ML APPLETON FUTURESACCESSLLC 

(a Delaware LimitedLiability Company)

 

NOTES TO FINANCIALSTATEMENTS

(unaudited)

 

1.             SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES

 

In the opinion of management, the financial statementscontain all adjustments necessary to present fairly the financial position of MLAppleton FuturesAccess LLC (the “Fund”) as of March 31, 2006, and theresults of its operations for the three months ended March 31, 2006. However,the operating results for the interim period may not be indicative of theresults for the full year. The Fund commenced operations on April 1, 2005.Therefore comparative results for the interim period ending March 31, 2005are not applicable.

 

Certain information and footnote disclosures normallyincluded in annual financial statements prepared in accordance with accountingprinciples generally accepted in the United States of America (“US GAAP”) havebeen omitted. It is suggested that these financial statements be read inconjunction with the financial statements and notes thereto included in theFund’s Annual Report on Form 10-K filed with the Securities and ExchangeCommission for the period ended December 31, 2005.

 

The preparation of financial statements in conformitywith US GAAP requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities and disclosure of contingentassets and liabilities at the date of the financial statements and the reportedamounts of revenues and expenses during the reporting period. Actual resultscould differ from those estimates.

 

2.             NETASSET VALUE PER UNIT

 

For financial reporting purposes, in conformity withUS GAAP, the Fund deducted the total initial offering costs at inception fromMembers’ Capital for purposes of determining Net Asset Value. For all otherpurposes, including computing Net Asset Value for purposes of membersubscription and redemption activity, such costs are amortized over 60 months.Consequently, the Net Asset Value and Net Asset Value per Unit of the differentClasses for financial reporting purposes and for all other purposes are asfollows:

 

At March 31, 2006 the Net Asset Values of thedifferent series of Units are as follows:

 
| ** **   | ** ** | **Net Asset Value** | ** ** | ** **               | ** ** | **Net Asset Value per Unit** | ** ** |
|--------------|------------|-------------------------------|------------|--------------------------|------------|--------------------------------------------------|------------|
| ** **   | ** ** | **All Other  Purposes**  | ** ** | **Financial  Reporting** | ** ** | **Number of  Shares**                       | ** ** | **All Other  Purposes** | ** ** | **Financial  Reporting** | ** ** |
| Class A |       | $                             | 2,989,570  |                     | $          | 2,985,266                                        |       | 3,191,479 |   | $ | 0.9367 |   | $ | 0.9354 |   |
| Class C |       | 22,742,955                    |       | 22,712,835               |       | 24,538,616                                       |       | $ | 0.9268 |   | $ | 0.9256 |   |
| Class D |       | 1,290,088                     |       | 1,289,367                |       | 1,346,164                                        |       | $ | 0.9583 |   | $ | 0.9578 |   |
| Class I |       | 2,753,042                     |       | 2,749,590                |       | 2,924,289                                        |       | $ | 0.9414 |   | $ | 0.9403 |   |
|         |       | $                             | 29,775,655 |                     | $          | 29,737,058                                       |       | 32,000,548 |   |   |   |   |   |

 

6

----

 

At December 31, 2005 the Net Asset Values of thedifferent series of Units were:

 
| ** **   | ** ** | **Net Asset Value** | ** ** | ** **               | ** ** | **Net Asset Value per Unit** | ** ** |
|--------------|------------|-------------------------------|------------|--------------------------|------------|--------------------------------------------------|------------|
| ** **   | ** ** | **All Other  Purposes**  | ** ** | **Financial  Reporting** | ** ** | **Number of  Shares**                       | ** ** | **All Other  Purposes** | ** ** | **Financial  Reporting** | ** ** |
| Class A |       | $                             | 2,221,377  |                     | $          | 2,216,776                                        |       | 2,025,192 |   | $ | 1.0969 |   | $ | 1.0946 |   |
| Class C |       | $                             | 15,559,817 |                     | $          | 15,527,592                                       |       | 14,300,082 |   | $ | 1.0881 |   | $ | 1.0858 |   |
| Class D |       | $                             | 419,756    |                     | $          | 418,887                                          |       | 375,509 |   | $ | 1.1178 |   | $ | 1.1155 |   |
| Class I |       | $                             | 1,793,105  |                     | $          | 1,789,391                                        |       | 1,627,486 |   | $ | 1.1018 |   | $ | 1.0995 |   |
|         |       | $                             | 19,994,055 |                     | $          | 19,952,646                                       |       | 18,328,269 |   |   |   |   |   |

 

3.             FAIRVALUE AND OFF-BALANCE SHEET RISK

 

The nature of this Fund has certain risks, which cannotall be presented on the financial statements. The following summarizes some ofthose risks.

 

### Market Risk

 

Derivativeinstruments involve varying degrees of off-balance sheet market risk. Changesin the level or volatility of interest rates, foreign currency exchange ratesor the market values of the financial instruments or commodities underlyingsuch derivative instruments frequently result in changes in the Fund’s netunrealized profit (loss) on such derivative instruments as reflected in theStatements of Financial Condition. The Fund’s exposure to market risk isinfluenced by a number of factors, including the relationships among thederivative instruments held by the Fund as well as the volatility and liquidityof the markets in which the derivative instruments are traded.

 

The Sponsor of the Fund, Merrill Lynch AlternativeInvestments (“MLAI”), has procedures in place intended to control market riskexposure, although there can be no assurance that they will, in fact, succeedin doing so. These procedures focus primarily on monitoring the trading of AppletonCapital Management (“Appleton”), the trading advisor, calculating the Net AssetValue of the Fund as of the close of business on each day and reviewingoutstanding positions for over-concentrations. While MLAI does not itselfintervene 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 interventions are expected to be unusual. Itis expected that MLAI’s basic risk control procedures will consist of theongoing process of advisor monitoring, with the market risk controls beingapplied by Appleton itself.

 

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 the membersof the exchange is pledged to support the financial 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 besubject to loss in the event of a default, are generally required in exchangetrading, and counterparties may also require margin in theover-the-counter markets.

 

7

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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 & Co. Inc. (“Merrill Lynch”) entities as clearing brokers.

 

The Fund, in itsnormal course of business, enters into various contracts, with Merrill LynchPierce Fenner & Smith Inc. (“MLPF&S”) acting as its commoditybroker. Pursuant to the brokerage arrangement with MLPF&S (which includes anetting arrangement), to the extent that such trading results in receivablesfrom and payables to MLPF&S, these receivables and payables are offset andreported as a net receivable or payable and included in equity from commodityfutures trading accounts in the Statements of Financial Condition.

 

8

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

 

MONTH-END NET ASSET VALUEPER UNIT (1)

(NON US GAAP)

 

Class A

| ** ** | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** |
|------------|------------|----------|------------|----------|------------|----------|------------|
| 2006       |       | $        | 1.1026     |     | $          | 1.0013   |       | $ | 0.9367 |   |
|            |            |          |            |          |            |          |            |  |  |  |

 

Class C

| ** ** | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** |
|------------|------------|----------|------------|----------|------------|----------|------------|
| 2006       |       | $        | 1.0929     |     | $          | 0.9915   |       | $ | 0.9268 |   |
|            |            |          |            |          |            |          |            |  |  |  |

 

Class D

| ** ** | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** |
|------------|------------|----------|------------|----------|------------|----------|------------|
| 2006       |       | $        | 1.1251     |     | $          | 1.0231   |       | $ | 0.9583 |   |
|            |            |          |            |          |            |          |            |  |  |  |

 

Class I

| ** ** | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** |
|------------|------------|----------|------------|----------|------------|----------|------------|
| 2006       |       | $        | 1.1079     |     | $          | 1.0060   |       | $ | 0.9414 |   |
|            |            |          |            |          |            |          |            |  |  |  |

 

----

(1) Represents NetAsset Value per unit for all other purposes as discussed in Note 2 to theFinancial Statements.

 

Performance Summary

 

January 1, 2006 to March 31, 2006

 

The Fund posted a net loss trading in financials andcurrencies due to difficult trading conditions for all currency marketparticipants as the market reversed some long established trends and themes.

 

The main difficulties continue to stem from the lackof direction in the Japanese yen. There appears to be two opposite forcespulling on the U.S. dollar and the Japanese yen. However, the significantinterest rate differential and the outlook for further rates hikes from theU.S. Federal Reserve would appear to support the U.S. dollar. Against this,there appears to be a reluctance to hold U.S. currency against the backdrop ofincreasing deficits and the war in Iraq. As a result, the trading continued tobe trapped in the 116.00 to 119.00 range. Losses for the Fund continued throughthe end of the quarter due to the unwinding of the carry trades across theboard.

 

The traditional practice of holding a high yieldingcurrency at the expense of a low-yield one is commonplace in the foreignexchange markets. The rationale is that in the absence of any movement in thespot price, the currency manager will benefit from the interest ratedifferential therein. Reflecting on the movement in the first quarter, or lackthereof, in the major currency markets, Japanese yen, Euro, British pound andCanadian dollar showed that the price action in that time period was a trend-follower’snightmare, with either little or no direction accompanied by patchy levels ofvolatility.

 

Item 3. Quantitative and Qualitative Disclosures AboutMarket Risk

 

Not applicable

 

9

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Item 4. Controls and Procedures

 

MLAI, the Sponsor of ML Appleton FuturesAccess LLC(the “Fund”), with the participation of the Sponsor’s Chief Executive Officerand the Chief Financial Officer, has evaluated the effectiveness of the designand operation of its disclosure controls and procedures with respect to the Fundas of the end of the period of this quarterly report, and, based on thisevaluation, has concluded that these disclosure controls and procedures areeffective. Additionally, there were no significant changes in the Fund’sinternal controls or in other factors that could significantly affect thesecontrols subsequent to the date of this evaluation, including any correctiveactions with regard to significant deficiencies and material weaknesses.

 

10

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PART II - OTHER INFORMATION

 

Item 1.    LegalProceedings

 

Neither the Fund nor MLAIhas ever been the subject of any material litigation. Merrill Lynch is the 100%indirect owner of MLAI, Merrill Lynch International Bank (“MLIB”), MLPF&Sand all other Merrill Lynch entities involved in the operation of the Fund. MerrillLynch as well as certain of its subsidiaries and affiliates have been named asdefendants in civil actions, arbitration proceedings and claims arising out oftheir respective business activities. Although the ultimate outcome of theseactions cannot be predicted at this time and the results of legal proceedingscannot be predicted with certainty, it is the opinion of management that theresult of these matters will not be materially adverse to the businessoperations or the financial condition of MLAI or the Fund.

 

Item 2.    Changesin Securities and Use of Proceeds

 

(a)   None.

(b)   None.

(c)   None.

(d)   None.

 

Item 3.    DefaultsUpon Senior Securities

 

None.

 

Item 4.    Submissionof Matters to a Vote of Security Holders

 

None.

 

Item 5.    OtherInformation

 

None.

 

11

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Item 5(a).                RecentSales of Unregistered Securities:  Usesof Proceeds From Registered Securities:

 

Issuance toaccredited investors pursuant to Regulation D and Section 4(6) underthe Securities Act. The selling agent of the following Class of Units wasMLPF&S.

 

CLASS A

 
| ** ** | ** ** | **Subscription  Amount** | ** ** | **Units** | ** ** | **NAV(1)** | ** ** |
|------------|------------|--------------------------|------------|-----------|------------|------------|------------|
| Jan-06     |       | 462,670                  |       | 421,798   |       | 1.0969     |       |
| Feb-06     |       | 288,589                  |       | 261,735   |       | 1.1026     |       |
| Mar-06     |       | 512,670                  |       | 512,004   |       | 1.0013     |       |
| Apr-06     |       | 593,761                  |       | 633,886   |       | 0.9367     |       |

 

CLASS C

 
| ** ** | ** ** | **Subscription  Amount** | ** ** | **Units** | ** ** | **NAV(1)** | ** ** |
|------------|------------|--------------------------|------------|-----------|------------|------------|------------|
| Jan-06     |       | 1,980,960                |       | 1,820,568 |       | 1.0881     |       |
| Feb-06     |       | 3,054,912                |       | 2,795,235 |       | 1.0929     |       |
| Mar-06     |       | 6,161,674                |       | 6,214,497 |       | 0.9915     |       |
| Apr-06     |       | 6,034,434                |       | 6,511,042 |       | 0.9268     |       |

 

CLASS D

 
| ** ** | ** ** | **Subscription  Amount** | ** ** | **Units** | ** ** | **NAV(1)** | ** ** |
|------------|------------|--------------------------|------------|-----------|------------|------------|------------|
| Jan-06     |       | 1,084,998                |       | 970,655   |       | 1.1178     |       |
| Feb-06     |       | —                   |       | —    |       | 1.1251     |       |
| Mar-06     |       | —                   |       | —    |       | 1.0231     |       |
| Apr-06     |       | 6,196,499                |       | 6,466,137 |       | 0.9583     |       |

 

CLASS I

 
| ** ** | ** ** | **Subscription  Amount** | ** ** | **Units** | ** ** | **NAV(1)** | ** ** |
|------------|------------|--------------------------|------------|-----------|------------|------------|------------|
| Jan-06     |       | 144,997                  |       | 131,600   |       | 1.1018     |       |
| Feb-06     |       | 977,753                  |       | 882,528   |       | 1.1079     |       |
| Mar-06     |       | 334,370                  |       | 332,376   |       | 1.0060     |       |
| Apr-06     |       | 1,502,885                |       | 1,596,436 |       | 0.9414     |       |

 

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(1) Net AssetValue for all other purposes

 

Item 6.                    Exhibitsand Reports on Form 8-K.

 

(a)           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:              Arefiled herewith.

 

32.01 and

32.02                       Section 1350Certifications

 

Exhibit 32.01

and 32.02               Arefiled herewith.

 

(b) Reports on Form 8-K.

 

There were no reports on Form 8-K filed duringthe three months of fiscal 2006.

 

12

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**SIGNATURES**

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized.

 

 
|                    | ML APPLETON FUTURESACCESS LLC |
|-------------------------|-------------------------------|
|                    |                          |
|                    |                          |
|                    | By: MERRILL LYNCH ALTERNATIVE |
|                    | INVESTMENTS LLC               |
|                    | (Sponsor)                     |
|                    |                          |
|                    |                          |
| Date: May 15, 2006 | By                            | /s/ ROBERT M. ALDERMAN |   |
|                    |                          | Robert M. Alderman |
|                    |                          | Chief Executive Officer, President and Manager |
|                    |                          | (Principal Executive Officer) |
|                    |                          |
|                    |                          |
| Date: May 15, 2006 |                          |
|                    | By                            | /s/ MICHAEL L. PUNGELLO |   |
|                    |                          | Michael L. Pungello |
|                    |                          | Vice President, Chief Financial Officer |
|                    |                          | and Treasurer |
|                    |                          | (Principal Financial and Accounting Officer) |

 

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