**UNITED STATES SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C.20549**

**FORM 10-Q**

| **(Mark One)**                                                                                                                  |
|---------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                            |
| **x****QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES      EXCHANGE  ACT OF 1934** |
| ** **                                                                                                                      |
| **For the quarterly period ended September 30,  2007**                                                                          |
| ** **                                                                                                                      |
| **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 0-51086**

# **ML CORNERSTONE FUTURESACCESS LLC**

(Exact Name of Registrant as specified in its charter)

| **Delaware**                     | ** ** | **20-1227929**                     |
|----------------------------------|------------|------------------------------------|
| (State or other  jurisdiction of |       | (IRS Employer  Identification No.) |
| incorporation or  organization)  |       |                               |

 

**c/o Merrill Lynch AlternativeInvestments LLC**

**Hopewell Building No. 2**

**1200 Merrill Lynch Drive - FirstFloor**

**Pennington,New Jersey 08534**

 (Address of principal executive offices)

(Zip Code)

**609-274-5838**

(Registrant’stelephone number, including area code)

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to filesuch reports), 
| and (2) has been subject  to such filing requirements for the past 90 days. |   | Yes x   No o |
|-----------------------------------------------------------------------------|--------|-------------------|

 

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

Large accelerated filer  o                           Accelerated filer  o                             Non-accelerated filer  x

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

 Indicate by check mark whether the registranthas filed all documents and reports required to be filed by Sections 12, 13 or15(d) of the Securities Exchange Act of 1934 subsequent to the distribution ofsecurities under a plan confirmed by a court. 
|  |   | Yes o   No o |
|--|--------|------------------------|

 

 

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**ML CORNERSTONE FUTURESACCESS LLC**

QUARTERLY REPORT FOR SEPTEMBER 30, 2007 ON FORM 10-Q

Table of Contents
|          | ** ** | ** **                                                                                  | ** ** | **Page** |
|----------|------------|---------------------------------------------------------------------------------------------|------------|----------|
|     |       | 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                                 |       | 14       |
| Item 4.  |       | Controls and  Procedures                                                                    |       | 16       |
|     |       |                                                                                        |       |     |
|     |       | PART II                                                                                     |       |     |
|     |       |                                                                                        |       |     |
| Item 1.  |       | Legal Proceedings                                                                           |       | 17       |
| Item 2.  |       | Unregistered  Sales of Equity Securities and use of Proceeds                                |       | 17       |
| Item 3.  |       | Defaults  Upon Senior Securities                                                            |       | 18       |
| Item 4.  |       | Submission  of Matters to a Vote of Security Holders                                        |       | 18       |
| Item 5.  |       | Other Information                                                                           |       | 18       |
| Item  6. |       | Exhibits                                                                                    |       | 18       |

 

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PART I - FINANCIAL INFORMATION

ML CORNERSTONEFUTURESACCESS LLC

(a Delaware Limited Liability Company)

STATEMENTS OF FINANCIAL CONDITION
| ** **                                                                        | ** ** | **September 30,** | ** **  | **December 31,** | ** ** |
|-----------------------------------------------------------------------------------|------------|------------------------|-------------|-----------------------|------------|
| ** **                                                                        | ** ** | **2007**               | ** **  | **2006**              | ** ** |
| ** **                                                                        | ** ** | **(unaudited)**        | ** **  | ** **            | ** ** |
| **ASSETS:**                                                                       | ** ** | ** **             | ** **  | ** **            | ** ** |
| Equity in commodity  futures trading accounts:                                    |       |                   |        |                  |       |
| Cash (including  restricted cash of $7,329,639 for 2007 and $28,072,260 for 2006) |       | $                      | 134,399,858 |                  | $          | 143,557,926 |   |
| Net unrealized  profit (loss) on open contracts                                   |       | (747,076               | )           | 2,046,680             |       |
| Cash                                                                              |       | 62,670                 |        | 78,401                |       |
| Accrued interest                                                                  |       | 569,455                |        | 595,529               |       |
|                                                                              |       |                   |        |                  |       |
| **TOTAL**                                                                         |       | $                      | 134,284,907 |                  | $          | 146,278,536 |   |
|                                                                              |       |                   |        |                  |       |
| **LIABILITIES AND MEMBERS’  CAPITAL:**                                       | ** ** | ** **             | ** **  | ** **            | ** ** |
| LIABILITIES:                                                                      |       |                   |        |                  |       |
| Brokerage  commissions payable                                                    |       | $                      | 19,989      |                  | $          | 105,040 |   |
| Management fee  payable                                                           |       | 223,478                |        | 243,160               |       |
| Sponsor’s fee  payable                                                       |       | 217,560                |        | 242,011               |       |
| Redemptions  payable                                                              |       | 13,869,379             |        | 4,516,504             |       |
| Initial offering  costs payable                                                   |       | 71,375                 |        | 80,425                |       |
| Other                                                                             |       | 171,376                |        | 277,879               |       |
|                                                                              |       |                   |        |                  |       |
| Total  liabilities                                                                |       | 14,573,157             |        | 5,465,019             |       |
|                                                                              |       |                   |        |                  |       |
| MEMBERS’ CAPITAL:                                                            |       |                   |        |                  |       |
|  Sponsor’s Capital (21,248 Units)                                       |       | 18,391                 |        | 20,656                |       |
|  Members’ Capital (138,078,279 Units and  144,378,189 Units)            |       | 119,693,359            |        | 140,792,861           |       |
|                                                                              |       |                   |        |                  |       |
| Total members’  capital                                                      |       | 119,711,750            |        | 140,813,517           |       |
|                                                                              |       |                   |        |                  |       |
| **TOTAL LIABILITIES AND MEMBERS’  CAPITAL**                                  |       | $                      | 134,284,907 |                  | $          | 146,278,536 |   |

 

**NETASSET VALUE PER UNIT (Note 2)**

(based on138,099,527 and 144,399,437 Units outstanding, unlimited Units authorized)

See notes tofinancial statements.

2

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ML CORNERSTONEFUTURESACCESS LLC 

(a Delaware Limited Liability Company)

STATEMENTS OFOPERATIONS

(unaudited)
| ** **                                   | ** ** | **For the three** | ** **  | **For the three** | ** ** | **For the nine** | ** ** | **For the nine** | ** **  |
|----------------------------------------------|------------|-----------------------------|-------------|-----------------------------|------------|----------------------------|------------|----------------------------|-------------|
| ** **                                   | ** ** | **months ended**       | ** **  | **months ended**       | ** ** | **months ended**      | ** ** | **months ended**      | ** **  |
| ** **                                   | ** ** | **September 30,**      | ** **  | **September 30,**      | ** ** | **September 30,**     | ** ** | **September 30,**     | ** **  |
| ** **                                   | ** ** | **2007**                    | ** **  | **2006**                    | ** ** | **2007**                   | ** ** | **2006**                   | ** **  |
| **TRADING  PROFIT (LOSS):**                  | ** ** | ** **                  | ** **  | ** **                  | ** ** | ** **                 | ** ** | ** **                 | ** **  |
|                                         |       |                        |        |                        |       |                       |       |                       |        |
| Realized                                     |       | $                           | (15,698,581 | )                           | $          | (5,029,841                 | )          | $                          | (14,543,179 | ) | $ | 3,936,716 |   |
| Change in unrealized                         |       | 2,517,998                   |        | (4,853,613                  | )          | (2,793,756                 | )          | (4,477,941                 | )           |
| Brokerage commissions                        |       | (67,069                     | )           | (172,005                    | )          | (453,854                   | )          | (376,019                   | )           |
|                                         |       |                        |        |                        |       |                       |       |                       |        |
| Total trading loss                           |       | (13,247,652                 | )           | (10,055,459                 | )          | (17,790,789                | )          | (917,244                   | )           |
| ** **                                   | ** ** | ** **                  | ** **  | ** **                  | ** ** | ** **                 | ** ** | ** **                 | ** **  |
| **INVESTMENT  INCOME:**                      | ** ** | ** **                  | ** **  | ** **                  | ** ** | ** **                 | ** ** | ** **                 | ** **  |
| Interest                                     |       | 1,850,747                   |        | 1,526,612                   |       | 5,700,874                  |       | 3,333,089                  |        |
|                                         |       |                        |        |                        |       |                       |       |                       |        |
| **EXPENSES:**                                | ** ** | ** **                  | ** **  | ** **                  | ** ** | ** **                 | ** ** | ** **                 | ** **  |
| Management fee                               |       | 709,695                     |        | 582,923                     |       | 2,227,533                  |       | 1,416,026                  |        |
| Sponsor’s fee                           |       | 694,809                     |        | 617,320                     |       | 2,190,178                  |       | 1,502,259                  |        |
| Performance fee                              |       | —                      |        | (1,961,042                  | )          | —                     |       | —                     |        |
| Other                                        |       | 143,535                     |        | 286,486                     |       | 432,868                    |       | 578,171                    |        |
|                                         |       |                        |        |                        |       |                       |       |                       |        |
| Total expenses                               |       | 1,548,039                   |        | (474,313                    | )          | 4,850,579                  |       | 3,496,456                  |        |
|                                         |       |                        |        |                        |       |                       |       |                       |        |
| **NET  INVESTMENT INCOME (LOSS)**            |       | 302,708                     |        | 2,000,925                   |       | 850,295                    |       | (163,367                   | )           |
|                                         |       |                        |        |                        |       |                       |       |                       |        |
| **NET  LOSS**                                |       | $                           | (12,944,944 | )                           | $          | (8,054,534                 | )          | $                          | (16,940,494 | ) | $ | (1,080,611 | ) |
|                                         |       |                        |        |                        |       |                       |       |                       |        |
| **NET  INCOME (LOSS) PER UNIT:**             | ** ** | ** **                  | ** **  | ** **                  | ** ** | ** **                 | ** ** | ** **                 | ** **  |
| ** **                                   | ** ** | ** **                  | ** **  | ** **                  | ** ** | ** **                 | ** ** | ** **                 | ** **  |
| Weighted average number of Units outstanding |       |                        |        |                        |       |                       |       |                       |        |
| Class A                                      |       | 18,368,422                  |        | 16,387,477                  |       | 19,308,456                 |       | 13,554,924                 |        |
| Class C                                      |       | 107,559,583                 |        | 83,151,532                  |       | 107,496,937                |       | 66,057,991                 |        |
| Class D                                      |       | 14,366,951                  |        | 4,175,416                   |       | 13,818,911                 |       | 2,569,137                  |        |
| Class I                                      |       | 19,348,513                  |        | 12,227,038                  |       | 18,964,563                 |       | 9,749,297                  |        |
|                                         |       |                        |        |                        |       |                       |       |                       |        |
| Net income (loss) per weighted average Units |       |                        |        |                        |       |                       |       |                       |        |
| Class A                                      |       | $                           | (0.0806     | )                           | $          | (0.0683                    | )          | $                          | (0.1002     | ) | $ | 0.0024 |   |
| Class C                                      |       | $                           | (0.0809     | )                           | $          | (0.0697                    | )          | $                          | (0.1086     | ) | $ | (0.0139 | ) |
| Class D                                      |       | $                           | (0.0845     | )                           | $          | (0.0718                    | )          | $                          | (0.1019     | ) | $ | (0.0670 | ) |
| Class I                                      |       | $                           | (0.0802     | )                           | $          | (0.0684                    | )          | $                          | (0.1016     | ) | $ | (0.0026 | ) |

 

See notes tofinancial statements.

3

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ML CORNERSTONEFUTURESACCESS LLC

(a Delaware Limited Liability Company)

STATEMENTS OFCHANGES IN MEMBERS’ CAPITAL

For the ninemonths ended September 30, 2006 and 2007

(unaudited)
| ** **                 | ** ** | **Members’ Capital  December 31, 2005** | ** ** | **Subscriptions** | ** ** | **Redemptions** | ** ** | **Members’ Capital  September 30, 2006** | ** ** | **Members’ Capital  December 31, 2006** | ** ** | **Subscriptions** | ** ** | **Redemptions** | ** ** | **Members’ Capital  September 30, 2007** | ** ** |
|----------------------------|------------|-------------------------------------------------------------|------------|-------------------|------------|-----------------|------------|--------------------------------------------------------------|------------|-------------------------------------------------------------|------------|-------------------|------------|-----------------|------------|--------------------------------------------------------------|------------|
|                       |       |                                                        |       |              |       |            |       |                                                         |       |                                                        |       |              |       |            |       |                                                         |       |
| Class A                    |       | 10,021,657                                                  |       | 8,053,588         |       | (1,000,523      | )          | 17,074,722                                                   |       | 18,539,535                                                  |       | 3,212,572         |       | (5,142,637      | )          | 16,609,470                                                   |       |
| Class C                    |       | 43,063,748                                                  |       | 48,535,257        |       | (3,498,170      | )          | 88,100,835                                                   |       | 99,282,281                                                  |       | 27,803,074        |       | (30,703,097     | )          | 96,382,258                                                   |       |
| Class D                    |       | 1,398,885                                                   |       | 3,081,310         |       | —          |       | 4,480,195                                                    |       | 10,145,705                                                  |       | 5,128,801         |       | (7,119,767      | )          | 8,154,739                                                    |       |
| Class I                    |       | 7,295,006                                                   |       | 5,497,202         |       | (172,978        | )          | 12,619,230                                                   |       | 16,410,668                                                  |       | 5,077,253         |       | (4,556,109      | )          | 16,931,812                                                   |       |
|                       |       |                                                        |       |              |       |            |       |                                                         |       |                                                        |       |              |       |            |       |                                                         |       |
| Total Members’  Units |       | 61,779,296                                                  |       | 65,167,357        |       | (4,671,671      | )          | 122,274,982                                                  |       | 144,378,189                                                 |       | 41,221,700        |       | (47,521,610     | )          | 138,078,279                                                  |       |
|                       |       |                                                        |       |              |       |            |       |                                                         |       |                                                        |       |              |       |            |       |                                                         |       |
| Class A                    |       | 10,611                                                      |       | —            |       | —          |       | 10,611                                                       |       | 10,611                                                      |       | —            |       | —          |       | 10,611                                                       |       |
| Class C                    |       | 10,637                                                      |       | —            |       | —          |       | 10,637                                                       |       | 10,637                                                      |       | —            |       | —          |       | 10,637                                                       |       |
| Class D                    |       | —                                                      |       | —            |       | —          |       | —                                                       |       | —                                                      |       | —            |       | —          |       | —                                                       |       |
| Class I                    |       | —                                                      |       | —            |       | —          |       | —                                                       |       | —                                                      |       | —            |       | —          |       | —                                                       |       |
|                       |       |                                                        |       |              |       |            |       |                                                         |       |                                                        |       |              |       |            |       |                                                         |       |
| Total Sponsor’s Units |       | 21,248                                                      |       | —            |       | —          |       | 21,248                                                       |       | 21,248                                                      |       | —            |       | —          |       | 21,248                                                       |       |

 

See notes tofinancial statements.

4

----

ML CORNERSTONEFUTURESACCESS LLC

(a Delaware Limited Liability Company)

STATEMENTS OFCHANGES IN MEMBERS’ CAPITAL

For the ninemonths ended September 30, 2007 and 2006

(unaudited)
| ** **                     | ** ** | **Members’ Capital  December 31, 2005** | ** ** | **Subscriptions** | ** ** | **Redemptions** | ** ** | **Net Income  (Loss)** | ** ** | **Members’ Capital  September 30,  2006** | ** ** | **Members’ Capital  December 31, 2006** | ** ** | **Subscriptions** | ** **  | **Redemptions** | ** ** | **Net Income  (Loss)** | ** ** | **Members’ Capital  September 30, 2007** | ** ** |
|--------------------------------|------------|-------------------------------------------------------------|------------|-------------------|------------|-----------------|------------|-----------------------------|------------|----------------------------------------------------------|------------|-------------------------------------------------------------|------------|-------------------|-------------|-----------------|------------|-----------------------------|------------|--------------------------------------------------------------|------------|
|                           |       |                                                        |       |              |       |            |       |                        |       |                                                     |       |                                                        |       |              |        |            |       |                        |       |                                                         |       |
| Class A                        |       | $                                                           | 9,635,030  |              | $          | 8,301,893       |       | $                           | (1,024,333 | )                                                        | $          | 31,963                                                      |       | $                 | 16,944,553  |            | $          | 18,197,781                  |       | $                                                            | 3,087,089  |   | $ | (4,783,199 | ) | $ | (1,933,854 | ) | $ | 14,567,817 |   |
| Class C                        |       | 41,024,353                                                  |       | 49,259,570        |       | (3,518,775      | )          | (916,179                    | )          | 85,848,969                                               |       | 95,452,360                                                  |       | 25,808,357        |        | (27,404,422     | )          | (11,668,755                 | )          | 82,187,540                                                   |       |
| Class D                        |       | 1,466,886                                                   |       | 3,557,100         |       | —          |       | (172,053                    | )          | 4,851,933                                                |       | 10,910,363                                                  |       | 5,403,379         |        | (6,979,121      | )          | (1,408,696                  | )          | 7,925,925                                                    |       |
| Class I                        |       | 7,048,458                                                   |       | 5,760,841         |       | (179,071        | )          | (24,880                     | )          | 12,605,348                                               |       | 16,232,357                                                  |       | 4,878,251         |        | (4,171,607      | )          | (1,926,924                  | )          | 15,012,077                                                   |       |
|                           |       |                                                        |       |              |       |            |       |                        |       |                                                     |       |                                                        |       |              |        |            |       |                        |       |                                                         |       |
| Total Members’  Interests |       | $                                                           | 59,174,727 |              | $          | 66,879,404      |       | $                           | (4,722,179 | )                                                        | $          | (1,081,149                                                  | )          | $                 | 120,250,803 |            | $          | 140,792,861                 |       | $                                                            | 39,177,076 |   | $ | (43,338,349 | ) | $ | (16,938,229 | ) | $ | 119,693,359 |   |
|                           |       |                                                        |       |              |       |            |       |                        |       |                                                     |       |                                                        |       |              |        |            |       |                        |       |                                                         |       |
| Class A                        |       | $                                                           | 10,221     |              | $          | —          |       | $                           | —     |                                                     | $          | 318                                                         |       | $                 | 10,539      |            | $          | 10,424                      |       | $                                                            | —     |   | $ | — |   | $ | (1,109 | ) | $ | 9,315 |   |
| Class C                        |       | 10,152                                                      |       | —            |       | —          |       | 220                         |       | 10,372                                                   |       | 10,232                                                      |       | —            |        | —          |       | (1,156                      | )          | 9,076                                                        |       |
| Class D                        |       | —                                                      |       | —            |       | —          |       | —                      |       | —                                                   |       | —                                                      |       | —            |        | —          |       | —                      |       | —                                                       |       |
| Class I                        |       | —                                                      |       | —            |       | —          |       | —                      |       | —                                                   |       | —                                                      |       | —            |        | —          |       | —                      |       | —                                                       |       |
|                           |       |                                                        |       |              |       |            |       |                        |       |                                                     |       |                                                        |       |              |        |            |       |                        |       |                                                         |       |
| Total Sponsor’s  Interest |       | $                                                           | 20,373     |              | $          | —          |       | $                           | —     |                                                     | $          | 538                                                         |       | $                 | 20,911      |            | $          | 20,656                      |       | $                                                            | —     |   | $ | — |   | $ | (2,265 | ) | $ | 18,391 |   |
| Total Members’ Capital    |       | $                                                           | 59,195,100 |              | $          | 66,879,404      |       | $                           | (4,722,179 | )                                                        | $          | (1,080,611                                                  | )          | $                 | 120,271,714 |            | $          | 140,813,517                 |       | $                                                            | 39,177,076 |   | $ | (43,338,349 | ) | $ | (16,940,494 | ) | $ | 119,711,750 |   |

 

See notes tofinancial statements.

5

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ML CORNERSTONEFUTURESACCESS LLC 

(a Delaware Limited Liability Company)

NOTES TO FINANCIALSTATEMENTS

(unaudited)

1.     SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES

In the opinion ofmanagement, the financial statements contain all adjustments necessary topresent fairly the financial position of ML Cornerstone FuturesAccess LLC (the “Fund”)as of September 30, 2007, and the results of its operations for the three andnine months ended September 30, 2007 and 2006, respectively.  However, the operating results for theinterim periods may not be indicative of the results for the full year.

Certaininformation and footnote disclosures normally included in annual financialstatements prepared in accordance with accounting principles generally acceptedin the United States of America (“US GAAP”) have been omitted.  It is suggested that these financialstatements be read in conjunction with the financial statements and notesthereto included in the Fund’s Annual Report on Form 10-K filed with theSecurities and Exchange Commission for the year ended December 31, 2006.

The preparation offinancial statements in conformity with US GAAP requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date ofthe financial statements and the reported amounts of revenues and expensesduring the reporting period.  Actualresults could differ from those estimates.

2.     NET ASSET 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 other purposes, including computingNet Asset Value for purposes of member subscription and redemption activity,such costs are amortized over 60 months. Consequently, the Net Asset Value andNet Asset Value per Unit of the different Classes for financial reportingpurposes and for all other purposes are as follows:

At September 30, 2007 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  Units**                        | ** ** | **All Other  Purposes** | ** ** | **Financial  Reporting** | ** ** |
| Class A    |       | $                             | 14,589,635  |                     | $          | 14,577,132                                       |       | 16,620,081 |   | $ | 0.8778 |   | $ | 0.8771 |   |
| Class C    |       | 82,245,901                    |        | 82,196,616               |       | 96,392,895                                       |       | $ | 0.8532 |   | $ | 0.8527 |   |
| Class D    |       | 7,926,700                     |        | 7,925,925                |       | 8,154,739                                        |       | $ | 0.9720 |   | $ | 0.9719 |   |
| Class I    |       | 15,020,889                    |        | 15,012,077               |       | 16,931,812                                       |       | $ | 0.8871 |   | $ | 0.8866 |   |
|       |       | $                             | 119,783,125 |                     | $          | 119,711,750                                      |       | 138,099,527 |   |   |   |   |   |

 

6

----

At December 31, 2006the Net Asset Values of the different series of Units are as follows:
|            | ** ** | **Net Asset Value**             | ** **  | ** **               | ** ** | **Net Asset Value per Unit** | ** ** |
|------------|------------|-------------------------------------------|-------------|--------------------------|------------|--------------------------------------------------|------------|
| ** ** | ** ** | **All Other  Purposes  (unaudited)** | ** **  | **Financial  Reporting** | ** ** | **Number of  Units**                        | ** ** | **All Other  Purposes  (unaudited)** | ** ** | **Financial  Reporting** | ** ** |
| Class A    |       | $                                         | 18,221,804  |                     | $          | 18,208,205                                       |       | 18,550,146 |   | $ | 0.9823 |   | $ | 0.9816 |   |
| Class C    |       | 95,517,833                                |        | 95,462,592               |       | 99,292,918                                       |       | 0.9620 |   | 0.9614 |   |
| Class D    |       | 10,912,052                                |        | 10,910,363               |       | 10,145,705                                       |       | 1.0755 |   | 1.0754 |   |
| Class I    |       | 16,242,254                                |        | 16,232,357               |       | 16,410,668                                       |       | 0.9897 |   | 0.9891 |   |
|       |       | $                                         | 140,893,943 |                     | $          | 140,813,517                                      |       | 144,399,437 |   |   |   |   |   |
|            |            |                                           |             |                          |            |                                                  |            |  |  |  |  |  |  |  |  |

 

3.       MARKET AND CREDIT RISK

The nature of this Fundhas certain risks, which cannot all be presented on the financialstatements.  The following summarizessome of those risks.

### Market Risk

Derivative instrumentsinvolve varying degrees of market risk. Changes in the level or volatility of interest rates, foreign currencyexchange rates or the market values of the financial instruments or commoditiesunderlying such derivative instruments frequently result in changes in the Fund’snet unrealized profit (loss) on such derivative instruments as reflected in theStatements of Financial Condition.  TheFund’s exposure to market risk is influenced by a number of factors, includingthe relationships among the derivative instruments held by the Fund as well asthe volatility and liquidity of the markets in which the derivative instrumentsare traded. Investment in foreign market may also entail legal and politicalrisks.

The Sponsor of theFund, Merrill Lynch Alternative Investments LLC (“MLAI”), has procedures inplace intended to control market risk exposure, although there can be noassurance that they will, in fact, succeed in doing so.  These procedures focus primarily onmonitoring the trading of Cornerstone Trading Company, Inc. (“Cornerstone”),the trading advisor, calculating the Net Asset Value of the Fund as of theclose of business on each day and reviewing outstanding positions forover-concentrations.  While MLAI does notitself intervene in the markets to hedge or diversify the Fund’s marketexposure, MLAI may urge Cornerstone to reallocate positions in an attempt toavoid over-concentrations.  However, suchinterventions are expected to be unusual. It is expected that MLAI’s basic risk control procedures will consist ofthe ongoing process of advisor monitoring, with the market risk controls beingapplied by Cornerstone 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, 

7

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in some cases not)of the members of the exchange is pledged to support the financial integrity ofthe exchange.  In over-the-countertransactions, on the other hand, traders must rely solely on the credit oftheir respective individual counterparties. Margins, which may be subject to loss in the event of a default, aregenerally required in exchange trading, and counterparties may also requiremargin 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 & Co., Inc. (“Merrill Lynch”) entities as clearing brokers.

The Fund, in its normalcourse of business, enters into various contracts with Merrill Lynch PierceFenner & Smith Inc. (“MLPF&S”) acting as its commodity broker.  Pursuant to the brokerage arrangement withMLPF&S (which includes a netting arrangement), to the extent that such tradingresults in receivables from and payables to MLPF&S, these receivables andpayables are offset and reported as a net receivable or payable and included inequity from commodity futures trading accounts in the Statements of FinancialCondition.

4.       RECENTACCOUNTING PRONOUNCEMENT

In September 2006,the FASB issued Statement of Financial Accounting Standards No. 157, Fair ValueMeasurements (“FAS 157”).  FAS 157 establishes a common definitionfor fair value under accounting principles generally accepted in the UnitedStates of America, establishes a framework for measuring fair value and expandsdisclosure requirements about such fair value measurements.  FAS 157 iseffective for fiscal years beginning after November 15, 2007.  The Fund iscurrently evaluating the impact of adopting FAS 157 on its financialstatements.

8

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

MONTH-END NET ASSET VALUE PER UNIT

(NON US GAAP)

MLAI believes that the Net Asset Value used to calculate subscriptionand redemption value and to report performance to investors throughout the yearis the most valuable to the Members 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.** | ** ** | **Apr** | ** ** | **May** | ** ** | **Jun** | ** ** | **July** | ** ** | **Aug** | ** ** | **Sep** | ** ** |
|------|------------|----------|------------|----------|------------|----------|------------|---------|------------|---------|------------|---------|------------|----------|------------|---------|------------|---------|------------|
| 2006 |       | $        | 0.9693     |     | $          | 0.9888   |       | $       | 1.0245     |    | $          | 1.0621  |       | $        | 1.0737     |    | $          | 1.0616  |       | $ | 1.0338 |   | $ | 1.0110 |   | $ | 0.9932 |   |
| 2007 |       | $        | 0.9856     |     | $          | 0.9306   |       | $       | 0.9181     |    | $          | 0.9475  |       | $        | 0.9860     |    | $          | 0.9576  |       | $ | 0.9106 |   | $ | 0.8894 |   | $ | 0.8778 |   |

 

Class C
|      | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** | **Apr** | ** ** | **May** | ** ** | **Jun** | ** ** | **July** | ** ** | **Aug** | ** ** | **Sep** | ** ** |
|------|------------|----------|------------|----------|------------|----------|------------|---------|------------|---------|------------|---------|------------|----------|------------|---------|------------|---------|------------|
| 2006 |       | $        | 0.9597     |     | $          | 0.9781   |       | $       | 1.0125     |    | $          | 1.0484  |       | $        | 1.0574     |    | $          | 1.0452  |       | $ | 1.0168 |   | $ | 0.9935 |   | $ | 0.9751 |   |
| 2007 |       | $        | 0.9644     |     | $          | 0.9098   |       | $       | 0.8969     |    | $          | 0.9248  |       | $        | 0.9616     |    | $          | 0.9331  |       | $ | 0.8866 |   | $ | 0.8652 |   | $ | 0.8532 |   |

 

Class D
|      | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** | **Apr** | ** ** | **May** | ** ** | **Jun** | ** ** | **July** | ** ** | **Aug** | ** ** | **Sep** | ** ** |
|------|------------|----------|------------|----------|------------|----------|------------|---------|------------|---------|------------|---------|------------|----------|------------|---------|------------|---------|------------|
| 2006 |       | $        | 1.0585     |     | $          | 1.0812   |       | $       | 1.1222     |    | $          | 1.1632  |       | $        | 1.1780     |    | $          | 1.1566  |       | $ | 1.1265 |   | $ | 1.1014 |   | $ | 1.0834 |   |
| 2007 |       | $        | 1.0805     |     | $          | 1.0215   |       | $       | 1.0090     |    | $          | 1.0426  |       | $        | 1.0864     |    | $          | 1.0563  |       | $ | 1.0058 |   | $ | 0.9836 |   | $ | 0.9720 |   |

 

Class I
|      | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** | **Apr** | ** ** | **May** | ** ** | **Jun** | ** ** | **July** | ** ** | **Aug** | ** ** | **Sep** | ** ** |
|------|------------|----------|------------|----------|------------|----------|------------|---------|------------|---------|------------|---------|------------|----------|------------|---------|------------|---------|------------|
| 2006 |       | $        | 0.9745     |     | $          | 0.9944   |       | $       | 1.0310     |    | $          | 1.0683  |       | $        | 1.0798     |    | $          | 1.0686  |       | $ | 1.0399 |   | $ | 1.0173 |   | $ | 0.9997 |   |
| 2007 |       | $        | 0.9934     |     | $          | 0.9383   |       | $       | 0.9260     |    | 0.9560     |    | $          | 0.9952   |       | $       | 0.9667     |    | $          | 0.9196 |   | $ | 0.8985 |   | $ | 0.8871 |   |
|      |            |          |            |          |            |          |            |         |            |         |            |         |            |          |            |         |            |         |            |  |  |  |  |  |  |  |  |  |

 

**Performance Summary**

January 1, 2007 to September 30, 2007

January 1, 2007 toMarch 31, 2007

The Fund posted anoverall loss for the quarter with agriculture and stock indices posting gainswhile metals, energy, currencies and interest rates posted losses.

The agriculturalsector was the most profitable for the Fund. The agricultural market was softwhich attributed to the difficult trading environment. Gains were posted at thebeginning of the quarter only to reverse with losses mid-quarter due to thewarm winter the U.S. had been experiencing ended abruptly with longer termforecasts indicating temperatures well below normal which caused the Fund toreverse its position and went from short to long. However, as the quarter endedthe Fund reversed its positions in grains as the United States Department ofAgriculture released its prospective plantings report for the 

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2007 plantingseason. Farmers intend to plant 90.5 million acres of corn compared to anexpectation of about 88 million acres. The market reaction was to send cornlimit down with rest of the grains.

The stock indicessector posted the second highest profits for the Fund. The markets were choppyand exposures changed continuously. Losses were posted mid-quarter but theywere offset by gains at the beginning and the end of the quarter.

The metals sectorposted losses for the Fund. Profits were generated from mid-quarter through theend of the quarter only, as long positions were held in all the metals.

The energy sectorposted losses for the Fund. Losses were posted for the Fund throughout thequarter due to the fact the energy sector had mixed positions.

The currencysector posted losses for the Fund. The quarter began with losses being postedto the Fund continuing through mid-quarter as short positions held in the U.S.dollar, Eurodollar and German bund. The quarter ended with a short positionbeing added in the U.S. dollar (vs. the Norwegian krone and the Japanese yen)however, could not offset losses.

The interest ratesector was the least profitable for the Fund. Interest rate related positionsposted losses at the beginning of the quarter due to the Fund’s positioning forworld rates to increase however, they decreased. Interest rates decreasedmid-quarter in both the U.S. and Japan, on a perceived decrease in rate hikeprospects. The quarter ended with short term interest rate positions remainingsubstantially unchanged.

April 1, 2007 to June 30, 2007

The Fund postedprofits for the quarter with interest rates, stock indices, and the metalsectors posting gains while energy, agriculture and currency sector postinglosses.

The interest rate sectorposted the highest profits for the Fund. The beginning of the quarter profits were posted to the Fund as theportfolio did not adjust their trading strategy and continued to be marketneutral only to unwind their short positions in the German bunds and JapaneseGovernment Bonds. In the mid quarter the Fund posted profits due to theinternational market and the fixed income markets. In particular, the shortpositions in the U.S. dollar and Eurodollar did very well, as did the shortpositions in German bunds.   Governmentbond trading did well at quarter’s end relative to its modest risk allocation.

The stock indicessector posted the second highest profits for the Fund. Profits were posted tothe Fund throughout the quarter.  Longpositions in the United States, Canadian and United Kingdom stock markets wereprofitable as those markets all posted gains mid-quarter. The quarter endedwith small profits being posted to the Fund.

The metals sectoralso posted profits for the Fund. Profits were posted to the Fund at thebeginning of the quarter due to long positions in base metals, all of whichappreciated sharply. A number of factors including supply disruptions androbust Chinese growth drove metal prices higher with copper approaching its May2006 peak. However, losses were posted to the Fund mid-quarter through quarter’send as the Fund traded long in metals.

The energy sectorposted losses for the Fund. Profits were posted to the Fund at the beginning ofthe quarter due to long positions in natural gas and unleaded gasoline. Crudeoil was the worst performer mid-quarter due to its recent range bound natureand switching of trend signals resulting in a series of poorly timed tradesposting losses for the Fund.  Losses wereposted to the Fund at quarter’s end due to long positions in natural gas andthe natural gas prices dropped 15% despite unchanged or stronger prices in thepetroleum complex.

10

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The agriculturalsector posted losses for the Fund. The agricultural market was soft whichattributed to the difficult trading environment. Gains were posted to the Fundat the beginning of the quarter only to be offset with losses in commoditiesmid-quarter. Losses were small but widespread with thirteen of the sixteenpositions losing money. The best performing contract at quarter’s end was corn,but it could not pull the agricultural sector into positive territory.

The currencysector posted losses for the Fund. The quarter began with profits being postedto the Fund due to the strength in both the euro and the British sterlingcurrencies. Offsetting these gains mid-quarter were losses in long positions inthe Norwegian krone and the Japanese yen. International value had a difficultquarters end with the short rate asset allocation model, the model with thebiggest weight, posting the worst performance This model has been hurt over thelast several months by unexpected Bank of England rate hikes in response topersistently high core inflation in the United Kingdom.

July 1, 2007 to September 30, 2007

The Fund posted anoverall loss for the third quarter due to the volatility of the commoditymarkets.

The metals sectorposted profits to the Fund at the beginning of the quarter due to longpositions in copper and zinc. The most important metals markets sufferedreversals mid-quarter particularly in the long positions in aluminum. However,the quarter ended with profits being posted to the Fund because of the longpositions taken in the metals markets.

The energy sectorposted losses to the Fund throughout the quarter. Energies were negative withall of the losses accounted for by the long positions in natural gas.

The currencysector posted losses to the Fund. The market moves generated by concerns overthe financial side of the U.S. housing market adversely affected internationalvalue, which was down about 4.6% at the beginning of the quarter as losses wereincurred in short positions in the U.S. dollar and the Euro. Losses continuedto be posted to the Fund mid-quarter, only to be reversed at the end of thequarter.

Stock indicessector posted losses to the Fund. Losses at the beginning and mid-quarter wereincurred due to long positions in the Fund’s equity index strategy. Equityindices were down globally causing losses to be incurred in the Japanese,British, and German markets. However, gains were posted to the Fund at the endof the quarter due to the Fund’s equity index strategy continuing its longpositions in the world equity indices.

The agriculturesector posted losses to the Fund. The agriculture market was soft whichattributed to the difficult trading environment resulting in the sector postinglosses for the Fund.

The interest ratesector posted losses to the Fund. Profits were incurred mid-quarter only due tothe net long positions in the short term interest rate. However, the quarterended with losses in which a number of small losses in short rates contributedto an overall modest loss coupled with increases in the market’s volatility.

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January 1, 2006 to September 30, 2006

January 1, 2006 to March 31, 2006

The Fund posted anoverall gain for the quarter with interest rates, energy, and metal sectorsposting gains while agricultural and currencies sectors posted losses.

 The interest rate sector was the mostprofitable for the Fund.  Although theFund was generally net short, the best performer in Short Rate Asset Allocationwas a long position in the Canadian market. In addition, the Fund was modestlyprofitable in a short position in Eurodollar futures. These positions continuedto be profitable through mid-quarter as the market priced in roughly one moreU.S. Federal Reserve tightening than had been anticipated in January. Our othermajor short term interest rate position, short Euribor (Euro denominated threemonth interest rate) futures, was modestly profitable as well as the consensusshifted to expect still stronger economic growth in Europe. Interest rates wentup at the end of the quarter and the strategy was short fixed income. Inparticular, the Fund was short and did well in German bunds, Euribor andEurodollars.

The energy sectorposted the second highest profit for the Fund. The best performer for the Fund was a short position in natural gas. Acontinued mild winter in the U.S. has contributed to lower prices. Excellent performancemid-quarter was mainly due to the energy markets, most of which were short. Inparticular, natural gas futures dropped around 30%. However, by the end of thequarter, the energy sector short positions adversely affected the Fund.

 The metals sector posted profits for the Fund.Profits were generated in the metals sector even through a volatile climate.The quarter ended with the bullish speculative environment fueling long termtrends.

The agriculturalsector posted losses for the Fund. The agricultural market was soft whichattributed to the difficult trading environment resulting in the Fund postinglosses for this sector.

The currencysector was the least profitable for the Fund. Currency Asset Allocationcontinued to struggle the beginning of the quarter losing money in shortpositions in the Australian dollar. The Fund has closed out all currencypositions and will probably not re-enter until the U.S. dollar shifts tonegative momentum.

April 1, 2006 to June 30, 2006

The Fund posted anoverall gain for the quarter with interest rate, metals, currency and energysectors posting gains while the agricultural sector posted a loss.

The interest ratesector was the most profitable for the Fund. The Bond Asset Allocation posted profits for the Fund due to shortpositions in German bunds. German bunds decreased in price as the EuropeanCentral Bank continued to ruminate about the possibility of inflation ratesabove levels the bank is comfortable with. However, long-term bonds were theworst performer mid-quarter with most of the losses coming from a shortposition in the German bund. The likelihood of an extended interest rateadvantage for the U.S. dollar was one factor behind its rally at the end of thequarter. The quarter ended with modest contributions with returns short in theU.S. and Euro-zone interest rates.

The metals sector postedthe second highest profit for the Fund. Base metals produced around 0.8% returnon NAV at the beginning of the quarter despite having only roughly a 2% riskallocation.  The best

12

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performingposition for the Fund was to have a long position in both aluminum and copperwith copper posting they were near their peaks.

Base metal marketscontributed a great deal of volatility as long-standing in the copper marketwas down 15% at the end of the quarter. However, by the end of the quarter theeffect on the returns was small.

The currencysector posted profits for the Fund. The Currency Asset Allocation portfolio, inU.S. dollar terms, was long British pounds and Japanese yen and shortAustralian dollars, with a net U.S. dollar short. This position was profitableas the U.S. dollar declined against the major currencies. The strategy withlong positions in the British pound produced most of the gain mid-quarteroffsetting losses in the Australian dollar. International value had difficultyin the currency markets quarters-end in the long Japanese yen/short U.S. dollarposition that reversed May’s gains. The quarter ended with the currency marketsexpecting the end of the U.S. Federal Reserve’s current tightening cycle to befurther away than previously thought.

The energy sectorposted profits for the Fund. The energy sector posted profits for the Fundduring a very volatile period on the Iran/U.S./Europe “Nuclear Standoff”.  The end of the quarter, once again, forcedthe sector into a period of increased volatility, as both military andterrorist activities in the key energy production areas led to rising energyprices.

The agriculturalsector posted losses for the Fund. The agricultural market was soft whichattributed to the difficult trading environment resulting in the Fund postinglosses for this sector.

July 1, 2006 toSeptember 30, 2006

The Fund posted anoverall loss for the quarter with energy and metals posting gains whileagriculture, currencies and interest rates posted losses.

The energy sectorwas the most profitable for the Fund. The quarter began with profits due tolong positions in natural gas and the heat wave in the U.S. drove energy demandfor cooling usage. Gains were made mid-quarter from short positions in theenergy markets which continued through quarter’s end. The quarter ended withnear term supplies being ample for all the energies and thus putting downwardpressure on the markets. In addition, the natural gas market was priced for amajor weather event.

The metals sectorposted profits for the Fund. Zinc was added to the metal portfolio mid-quarterwhile holding constant the U.S. dollar exposure in the base metal sector withlong positions in all the metals (copper, aluminum, and zinc). Profitscontinued to be posted through the end of the quarter.

The agriculturalsector posted losses for the Fund. The agricultural market was soft whichattributed to the difficult trading environment resulting in the Fund postinglosses for this sector.

The currencysector posted losses for the Fund. Long positions in the Japanese yen causedlosses due to the strong U.S. dollar beginning of the quarter. Losses wereposted at quarter’s end due to the short U.S. dollar positions on expectationsthat the U.S. dollar would depreciate versus the Japanese yen and the Britishpound. The shift in momentum in the currency market caused the Fund to closeout positions at quarter’s end.

The interest ratesector was the least profitable for the Fund. Interest rate related positionsposted losses at the beginning of the quarter due to the Fund’s positioning forworld rates to increase however, they decreased. Interest rates decreasedmid-quarter in both the U.S. and Japan, on a perceived decrease in rate hike prospects.The quarter ended with short term interest rate positions remainingsubstantially unchanged. Highest gains for the Fund. As the metal pricesincreased, the mid-quarter strategy to cut positions to keep a constant dollarexposure worked out well due to the fact this was done when prices

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Item 3.   Quantitative and Qualitative DisclosuresAbout Market Risk

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 movements result infrequent changes in the fair market value of the Fund’s open positions and,consequently, in its earnings and cash flow. The Fund’s market risk isinfluenced by a wide variety of factors, including the level and volatility ofinterest rates, exchange rates, equity price levels, the market value offinancial instruments and contracts, the diversification effects among the Fund’sopen positions and the liquidity of the markets in which it trades.

The Fund, under thedirection of Cornerstone, rapidly acquires and liquidates both long and shortpositions in a wide range of different markets. Consequently, it is not possible to predict how a particular futuremarket scenario will affect performance, and the Fund’s past performance is notnecessarily indicative of its future results.

Value at Risk is a measureof the maximum amount which the Fund could reasonably be expected to lose in agiven 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.

Quantifying The Fund’s Trading Value At Risk

Quantitative Forward-LookingStatements

The following quantitativedisclosures 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 27A of the Securities Act of 1933 and Section 21E of theSecurities Exchange Act of 1934).  Allquantitative disclosures in this section are deemed to be forward-lookingstatements for purposes of the safe harbor, except for statements of historicalfact.

The Fund’s risk exposure inthe various market sectors traded by Cornerstone is quantified below in termsof Value at Risk.  Due to the Fund’smark-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).

Exchange 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

14

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included in the historical sample (generallyapproximately one year) researched for purposes of establishing marginlevels.  The maintenance margin levelsare established by dealers and exchanges using historical price studies as wellas an assessment of current market volatility (including the implied volatilityof the options on a given futures contract) and economic fundamentals toprovide a probabilistic estimate of the maximum expected near-term one-dayprice fluctuation.

In the case of market sensitive instruments which are notexchange-traded (almost exclusively currencies in the case of the Fund), themargin requirements for the equivalent futures positions have been used asValue at Risk.  In those rare cases inwhich a futures-equivalent margin is not available, dealers’ margins have beenused.

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 effects resultingfrom the fact that the Fund’s positions are rarely, if ever, 100% positivelycorrelated have not been reflected.

***The Fund’s Trading Value at Risk in DifferentMarket Sectors***

The following table indicates theaverage, highest and lowest trading Value at Risk associated with the Fund’sopen positions by market category for the fiscal period. For the nine monthsended September 30, 2007 and 2006, the Fund’s average month-end Net Asset Valuefor all other purposes was $142,965,784 and $90,128,050, respectively.

September 30, 2007
| ** **             | ** ** | ** **                  | ** ** |
|------------------------|------------|-----------------------------|------------|
| ** **             | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
| **Market Sector** | ** ** | **Value at Risk** | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                   |       |                        |       |   |   |   |   |   |   |
| Agriculture            |       | $                           | 271,419    |   | 0.19 | % | $ | 1,378,409 |   | $ | 87,299 |   |
| Currencies             |       | 336,749                     |       | 0.23 | % | 1,302,255 |   | 20,691 |   |
| Energy                 |       | 116,730                     |       | 0.08 | % | 509,756 |   | 2,566 |   |
| Interest Rates         |       | 11,855,764                  |       | 8.21 | % | 15,887,910 |   | 5,564,691 |   |
| Metals                 |       | 251,869                     |       | 0.17 | % | 1,463,107 |   | 43,172 |   |
| Stock Indices          |       | 659,776                     |       | 0.46 | % | 3,658,220 |   | 152,473 |   |
|                   |       |                        |       |   |   |   |   |   |   |
| TOTAL                  |       | $                           | 13,492,307 |   | 9.34 | % | $ | 24,199,657 |   | $ | 5,870,892 |   |

 

September 30, 2006

 
| ** **             | ** ** | ** **                  | ** ** |
|------------------------|------------|-----------------------------|------------|
| ** **             | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
| **Market Sector** | ** ** | **Value at Risk** | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                   |       |                        |       |   |   |   |   |   |   |
| Agriculture            |       | $                           | 35,802     |   | 0.04 | % | 212,331 |   | $ | 385 |   |
| Currencies             |       | 476,899                     |       | 0.53 | % | 2,720,834 |   | 6,037 |   |
| Energy                 |       | 35,690                      |       | 0.04 | % | 202,632 |   | 111 |   |
| Interest Rates         |       | 6,487,170                   |       | 7.20 | % | 10,971,127 |   | 2,268,317 |   |
| Metals                 |       | 37,876                      |       | 0.04 | % | 174,363 |   | 78 |   |
|                   |       |                        |       |   |   |   |   |   |   |
| TOTAL                  |       | $                           | 7,073,437  |   | 7.85 | % | $ | 14,281,287 |   | $ | 2,274,928 |   |
|                        |            |                             |            |  |  |  |  |  |  |  |  |  |

 

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MaterialLimitations on Value at Risk as an Assessment of Market Risk

The face value of the market sector instruments held by the Fund istypically many times the applicable maintenance margin requirement (maintenancemargin requirements generally ranging between approximately 1% and 10% ofcontract face value) as well 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**

Foreign Currency Balances; Cash on Deposit with MLPF&S

The Fund has non-trading market risk on its foreign cash balances notneeded for margin. However, these balances (as well as the market risk theyrepresent) are immaterial.

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

Item 4. Controls and Procedures

MLAI, the Sponsorof ML Cornerstone FuturesAccess LLC, with the participation of the Sponsor’sChief Executive Officer and the Chief Financial Officer, has evaluated theeffectiveness of the design and operation of its disclosure controls andprocedures with respect to the Fund as of the end of the period of thisquarterly report, and, based on this evaluation, has concluded that thesedisclosure controls and procedures are effective.  Additionally, there were no significantchanges in the Fund’s internal controls or in other factors that couldsignificantly affect these controls subsequent to the date of this evaluation,including any corrective actions with regard to significant deficiencies andmaterial weaknesses.

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PART II - OTHERINFORMATION

Item 1.            LegalProceedings

On July 31, 2007, the CFTCissued an order against MLAI and an advisory affiliate, to which MLAI and theaffiliate consented, containing findings, which MLAI and the affiliate neitheradmitted nor denied, that MLAI and the affiliate filed with the NFA a number ofannual reports for commodity pools for which they acted as commodity pooloperators after the deadline established by the CFTC’s regulations, inviolation of CFTC Regulation 4.22(c). MLAI and the affiliate were ordered tocease and desist from violating Regulation 4.22(c) and to pay a civil penaltyin the amount of $500,000.

Item 2.  Unregistered sales ofEquity Securities and use of Proceeds

(a)  Issuance to accredited investors pursuant toRegulation D and Section 4(6) under the securities Act.    The selling agent of the following Class ofUnits was MLPF&S.

 

CLASS A

 
| ** ** | ** ** | **Subscription** | ** ** | ** ** | ** ** | ** ** | ** ** |
|------------|------------|------------------|------------|------------|------------|------------|------------|
| ** ** | ** ** | **Amount**       | ** ** | **Units**  | ** ** | **NAV(1)** | ** ** |
| Jan-07     |       | $                | 998,367    |       | 1,016,357  |       | $          | 0.9823 |   |
| Feb-07     |       | 460,191          |       | 466,915    |       | 0.9856     |       |
| Mar-07     |       | 475,792          |       | 511,274    |       | 0.9306     |       |
| Apr-07     |       | 210,832          |       | 229,639    |       | 0.9181     |       |
| May-07     |       | 409,520          |       | 432,211    |       | 0.9475     |       |
| Jun-07     |       | 140,398          |       | 142,391    |       | 0.9860     |       |
| Jul-07     |       | 326,666          |       | 341,130    |       | 0.9576     |       |
| Aug-07     |       | 30,225           |       | 33,192     |       | 0.9106     |       |
| Sep-07     |       | 35,098           |       | 39,463     |       | 0.8894     |       |
| Oct-07     |       | 78,973           |       | 89,967     |       | 0.8778     |       |
|            |            |                  |            |            |            |            |            |  |  |

 

CLASS C

 
| ** ** | ** ** | **Subscription** | ** ** | ** ** | ** ** | ** ** | ** ** |
|------------|------------|------------------|------------|------------|------------|------------|------------|
| ** ** | ** ** | **Amount**       | ** ** | **Units**  | ** ** | **NAV(1)** | ** ** |
| Jan-07     |       | $                | 3,484,982  |       | 3,622,642  |       | $          | 0.9620 |   |
| Feb-07     |       | 3,841,647        |       | 3,983,458  |       | 0.9644     |       |
| Mar-07     |       | 3,542,114        |       | 3,893,289  |       | 0.9098     |       |
| Apr-07     |       | 4,277,951        |       | 4,769,708  |       | 0.8969     |       |
| May-07     |       | 3,539,740        |       | 3,827,574  |       | 0.9248     |       |
| Jun-07     |       | 2,748,973        |       | 2,858,749  |       | 0.9616     |       |
| Jul-07     |       | 2,035,964        |       | 2,181,936  |       | 0.9331     |       |
| Aug-07     |       | 1,267,990        |       | 1,430,170  |       | 0.8866     |       |
| Sep-07     |       | 1,068,996        |       | 1,235,548  |       | 0.8625     |       |
| Oct-07     |       | 154,995          |       | 181,663    |       | 0.8532     |       |
|            |            |                  |            |            |            |            |            |  |  |

 

CLASS D

 
| ** ** | ** ** | **Subscription** | ** ** | ** ** | ** ** | ** ** | ** ** |
|------------|------------|------------------|------------|------------|------------|------------|------------|
| ** ** | ** ** | **Amount**       | ** ** | **Units**  | ** ** | **NAV(1)** | ** ** |
| Jan-07     |       | $                | 1,577,999  |       | 1,467,224  |       | $          | 1.0755 |   |
| Feb-07     |       | 1,637,997        |       | 1,515,962  |       | 1.0805     |       |
| Mar-07     |       | 75,000           |       | 73,421     |       | 1.0215     |       |
| Apr-07     |       | 1,360,000        |       | 1,347,869  |       | 1.0090     |       |
| May-07     |       | 644,384          |       | 618,055    |       | 1.0426     |       |
| Jun-07     |       | 15,000           |       | 13,807     |       | 1.0864     |       |
| Jul-07     |       | —           |       | —     |       | 1.0563     |       |
| Aug-07     |       | 92,999           |       | 92,463     |       | 1.0058     |       |
| Sep-07     |       | —           |       | —     |       | 0.9836     |       |
| Oct-07     |       | —           |       | —     |       | 0.9720     |       |
|            |            |                  |            |            |            |            |            |  |  |

 

CLASS I

 
| ** ** | ** ** | **Subscription** | ** ** | ** ** | ** ** | ** ** | ** ** |
|------------|------------|------------------|------------|------------|------------|------------|------------|
| ** ** | ** ** | **Amount**       | ** ** | **Units**  | ** ** | **NAV(1)** | ** ** |
| Jan-07     |       | $                | 1,084,949  |       | 1,096,240  |       | $          | 0.9897 |   |
| Feb-07     |       | 576,998          |       | 580,832    |       | 0.9934     |       |
| Mar-07     |       | 783,808          |       | 835,349    |       | 0.9383     |       |
| Apr-07     |       | 186,748          |       | 201,672    |       | 0.9260     |       |
| May-07     |       | 1,253,749        |       | 1,311,453  |       | 0.9560     |       |
| Jun-07     |       | —           |       | —     |       | 0.9952     |       |
| Jul-07     |       | 509,999          |       | 527,567    |       | 0.9667     |       |
| Aug-07     |       | 482,000          |       | 524,140    |       | 0.9196     |       |
| Sep-07     |       | —           |       | —     |       | 0.8985     |       |
| Oct-07     |       | —           |       | —     |       | 0.8871     |       |
|            |            |                  |            |            |            |            |            |  |  |

 

----

(1) Net Asset Value for all other purposes

17

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(b)                 None.

(c)                  None.

Item 3.            Defaults Upon SeniorSecurities

None.

Item 4.            Submission of Mattersto a Vote of Security Holders

None.

Item 5.            Other Information

None.

 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               Rule13a-14(a)/15d-14(a) Certifications

Exhibit 31.01

and 31.02:      Arefiled herewith.

32.01 and

32.02               Section1350 Certifications

Exhibit 32.01

and 32.02       Arefiled herewith.

18

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**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized.
|                         |   | ML CORNERSTONE  FUTURESACCESS LLC     |
|-------------------------|--------|---------------------------------------|
|                    |
|                    |   |                                  |
|                    |   | By:                                   | MERRILL LYNCH ALTERNATIVE |   |
|                    |   |                                  | INVESTMENTS LLC |
|                    |   |                                  | (General Partner) |
|                    |   |                                  |
|                    |   |                                  |
| Date: November 14, 2007 |   | By                                    | /s/ ROBERT D. OLLWERTHER |   |
|                    |   | Robert D. Ollwerther                  |
|                    |   | Chief Executive Officer and President |
|                    |   | (Principal Executive Officer)         |
|                    |   |                                  |
| Date: November 14, 2007 |   |                                  |
|                    |   | By                                    | /s/ BARBRA E. KOCSIS |   |
|                    |   |                                  | Barbra E. Kocsis |
|                    |   |                                  | Chief Financial Officer |
|                    |   |                                  | (Principal Financial and Accounting Officer) |
|                         |        |                                       |  |  |  |  |  |  |  |  |  |

 

19

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