**UNITED STATESSECURITIES AND 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  June 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**                                                                                                                                                                                                    |

 

# **MLCORNERSTONE 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/oMerrill Lynch Alternative Investments LLC**

**PrincetonCorporate Campus**

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

**Plainsboro,New Jersey 08536**

(Address ofprincipal executive offices)

(Zip Code)

 

**609-282-6091**

(Registrant’s telephonenumber, including area code)

Indicate by check mark whether the registrant (1)has filed 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)has been subject to such filing requirements for the past 90 days.                                            Yes   x   No   o

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer andlarge accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Largeaccelerated filer o         Acceleratedfilero         Non-acceleratedfiler x

Indicate by checkmark whether registrant is a shell company (as defined by Rule 12b-2 of theExchange Act). 

Yes   o   No   x

Indicate by check mark whether the registrant has filed all documentsand reports required to be filed by Sections 12, 13 or 15(d) of the SecuritiesExchange Act of 1934 subsequent to the distribution of securities under a planconfirmed by a court.

Yes   o   No   o

 

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**ML CORNERSTONE FUTURESACCESS LLC**

QUARTERLY REPORT FOR JUNE 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 | 13 |
|              |       |   |   |
| Item 4.           |       | Controls and Procedures | 15 |
|              |       |   |   |
| PART  II          |       |
|              |       |   |   |
| Item 1.           |       | Legal Proceedings | 16 |
|              |       |   |   |
| Item 2.           |       | Unregistered  Sales of Equity Securities and use of Proceeds | 16 |
|              |       |   |   |
| Item 3.           |       | Defaults Upon  Senior Securities | 16 |
|              |       |   |   |
| Item 4.           |       | Submission  of Matters to a Vote of Security Holders | 17 |
|              |       |   |   |
| Item 5.           |       | Other Information | 17 |
|              |       |   |   |
| Item  6.          |       | Exhibits | 17 |
|                   |            |  |  |  |  |

 

----

PART I - FINANCIAL INFORMATION

ML CORNERSTONEFUTURESACCESS LLC

(a Delaware Limited Liability Company)

STATEMENTS OF FINANCIAL CONDITION
| ** **                                                                         | ** ** | **June 30,**     | ** **  | **December 31,** | ** ** |
|------------------------------------------------------------------------------------|------------|-----------------------|-------------|-----------------------|------------|
| ** **                                                                         | ** ** | **2007**              | ** **  | **2006**              | ** ** |
| ** **                                                                         | ** ** | **(unaudited) ** | ** **  | ** **            | ** ** |
|                                                                               |       |                  |        |                  |       |
| **ASSETS:**                                                                        | ** ** | ** **            | ** **  | ** **            | ** ** |
| Equity in commodity  futures trading accounts:                                     |       |                  |        |                  |       |
| Cash (including  restricted cash of $18,618,022 for 2007 and $28,072,260 for 2006) |       | $                     | 158,184,800 |                  | $          | 143,557,926 |   |
| Net unrealized  profit (loss) on open contracts                                    |       | (3,265,074            | )           | 2,046,680             |       |
| Cash                                                                               |       | 89,042                |        | 78,401                |       |
| Accrued interest                                                                   |       | 671,464               |        | 595,529               |       |
|                                                                               |       |                  |        |                  |       |
| **TOTAL**                                                                          |       | $                     | 155,680,232 |                  | $          | 146,278,536 |   |
|                                                                               |       |                  |        |                  |       |
| **LIABILITIES AND MEMBERS’  CAPITAL:**                                        | ** ** | ** **            | ** **  | ** **            | ** ** |
| LIABILITIES:                                                                       |       |                  |        |                  |       |
| Brokerage  commissions payable                                                     |       | $                     | 128,014     |                  | $          | 105,040 |   |
| Management fee  payable                                                            |       | 258,937               |        | 243,160               |       |
| Sponsor’s fee  payable                                                        |       | 254,182               |        | 242,011               |       |
| Redemptions  payable                                                               |       | 2,727,447             |        | 4,516,504             |       |
| Initial offering  costs payable                                                    |       | 74,377                |        | 80,425                |       |
| Other                                                                              |       | 189,953               |        | 277,879               |       |
|                                                                               |       |                  |        |                  |       |
| Total  liabilities                                                                 |       | 3,632,910             |        | 5,465,019             |       |
|                                                                               |       |                  |        |                  |       |
| MEMBERS’ CAPITAL:                                                             |       |                  |        |                  |       |
| Sponsor’s  Capital (21,248 and 21,248 Units issued and outstanding)           |       | 20,084                |        | 20,656                |       |
| Members’ Capital  (159,939,258 and 144,378,189 Units issued and outstanding)  |       | 152,027,238           |        | 140,792,861           |       |
|                                                                               |       |                  |        |                  |       |
| Total members’  capital                                                       |       | 152,047,322           |        | 140,813,517           |       |
|                                                                               |       |                  |        |                  |       |
| **TOTAL LIABILITIES AND MEMBERS’  CAPITAL**                                   |       | $                     | 155,680,232 |                  | $          | 146,278,536 |   |

 

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

(based on159,960,506 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 OF OPERATIONS

(unaudited)
| ** **                                   | ** ** | **For the three** | ** ** | **For the three** | ** ** | **For the six** | ** ** | **For the six** | ** ** |
|----------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|---------------------------|------------|---------------------------|------------|
| ** **                                   | ** ** | **months ended**       | ** ** | **months ended**       | ** ** | **months ended**     | ** ** | **months ended**     | ** ** |
| ** **                                   | ** ** | **June 30,**           | ** ** | **June 30,**           | ** ** | **June 30,**         | ** ** | **June 30,**         | ** ** |
| ** **                                   | ** ** | **2007**                    | ** ** | **2006**                    | ** ** | **2007**                  | ** ** | **2006**                  | ** ** |
| **TRADING  PROFIT (LOSS):**                  | ** ** | ** **                  | ** ** | ** **                  | ** ** | ** **                | ** ** | ** **                | ** ** |
|                                         |       |                        |       |                        |       |                      |       |                      |       |
| Realized                                     |       | $                           | 7,139,957  |                        | $          | 3,817,829                 |       | $                         | 1,155,402  |   | $ | 8,966,557 |   |
| Change in unrealized                         |       | (1,011,162                  | )          | (100,257                    | )          | (5,311,754                | )          | 375,672                   |       |
| Brokerage commissions                        |       | (166,777                    | )          | (118,261                    | )          | (386,785                  | )          | (204,014                  | )          |
| Total trading profit (loss)                  |       |                        |       |                        |       |                      |       |                      |       |
|                                         |       | 5,962,018                   |       | 3,599,311                   |       | (4,543,137                | )          | 9,138,215                 |       |
| **INVESTMENT  INCOME:**                      | ** ** | ** **                  | ** ** | ** **                  | ** ** | ** **                | ** ** | ** **                | ** ** |
| Interest                                     |       |                        |       |                        |       |                      |       |                      |       |
|                                         |       | 1,978,113                   |       | 1,086,277                   |       | 3,850,127                 |       | 1,806,477                 |       |
| **EXPENSES:**                                | ** ** | ** **                  | ** ** | ** **                  | ** ** | ** **                | ** ** | ** **                | ** ** |
| Management fee                               |       | 783,563                     |       | 481,532                     |       | 1,517,838                 |       | 833,103                   |       |
| Sponsor’s fee                           |       | 768,253                     |       | 512,621                     |       | 1,495,369                 |       | 884,939                   |       |
| Performance fee                              |       | —                      |       | 790,866                     |       | —                    |       | 1,961,042                 |       |
| Other                                        |       | 145,100                     |       | 241,939                     |       | 289,333                   |       | 291,685                   |       |
|                                         |       |                        |       |                        |       |                      |       |                      |       |
| Total expenses                               |       | 1,696,916                   |       | 2,026,958                   |       | 3,302,540                 |       | 3,970,769                 |       |
|                                         |       |                        |       |                        |       |                      |       |                      |       |
| **NET  INVESTMENT INCOME (LOSS)**            |       | 281,197                     |       | (940,681                    | )          | 547,587                   |       | (2,164,292                | )          |
|                                         |       |                        |       |                        |       |                      |       |                      |       |
| **NET INCOME  (LOSS)**                       |       | $                           | 6,243,215  |                        | $          | 2,658,630                 |       | $                         | (3,995,550 | ) | $ | 6,973,923 |   |
|                                         |       |                        |       |                        |       |                      |       |                      |       |
| **NET  INCOME (LOSS) PER UNIT:**             | ** ** | ** **                  | ** ** | ** **                  | ** ** | ** **                | ** ** | ** **                | ** ** |
|                                         |       |                        |       |                        |       |                      |       |                      |       |
| Weighted average number of Units outstanding |       |                        |       |                        |       |                      |       |                      |       |
| Class A                                      |       | 19,628,392                  |       | 13,252,787                  |       | 19,778,474                |       | 12,138,648                |       |
| Class C                                      |       | 109,587,453                 |       | 65,272,042                  |       | 107,465,613               |       | 57,511,221                |       |
| Class D                                      |       | 14,441,738                  |       | 2,133,110                   |       | 13,544,891                |       | 1,765,998                 |       |
| Class I                                      |       | 19,475,051                  |       | 9,429,816                   |       | 18,772,588                |       | 8,510,427                 |       |
|                                         |       |                        |       |                        |       |                      |       |                      |       |
| Net income (loss) per weighted average Units |       |                        |       |                        |       |                      |       |                      |       |
| Class A                                      |       | $                           | 0.0422     |                        | $          | 0.0339                    |       | $                         | (0.0230    | ) | $ | 0.0948 |   |
| Class C                                      |       | $                           | 0.0360     |                        | $          | 0.0285                    |       | $                         | (0.0276    | ) | $ | 0.0849 |   |
| Class D                                      |       | $                           | 0.0475     |                        | $          | 0.0128                    |       | $                         | (0.0144    | ) | $ | 0.0724 |   |
| Class I                                      |       | $                           | 0.0402     |                        | $          | 0.0344                    |       | $                         | (0.0200    | ) | $ | 0.0954 |   |

 

See notes to financial statements.

3

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ML CORNERSTONEFUTURESACCESS LLC

(a Delaware Limited Liability Company)

STATEMENTS OFCHANGES IN MEMBERS’ CAPITAL

For the six monthsended June 30, 2006 and 2007

(unaudited)
| ** **                  | ** ** | **Members’ Capital  December 31,2005 ** | ** ** | **Subscriptions** | ** ** | **Redemptions** | ** ** | **Members’ Capital  June30,2006** | ** ** | **Members’ Capital  December 31,2006** | ** ** | **Subscriptions** | ** ** | **Redemptions** | ** ** | **Members’ Capital  June30, 2007** | ** ** |
|-----------------------------|------------|-------------------------------------------------------------|------------|-------------------|------------|-----------------|------------|---------------------------------------------|------------|-------------------------------------------------------|------------|-------------------|------------|-----------------|------------|---------------------------------------------------|------------|
| ** **                  | ** ** | ** **                                                  | ** ** | ** **        | ** ** | ** **      | ** ** | ** **                                  | ** ** | ** **                                            | ** ** | ** **        | ** ** | ** **      | ** ** | ** **                                        | ** ** |
| Class A                     |       | 10,021,657                                                  |       | 5,171,712         |       | (704,991        | )          | 14,488,378                                  |       | 18,539,535                                            |       | 2,798,787         |       | (2,918,993      | )          | 18,419,329                                        |       |
| Class C                     |       | 43,063,748                                                  |       | 30,460,936        |       | (2,275,380      | )          | 71,249,304                                  |       | 99,282,281                                            |       | 22,955,420        |       | (14,160,087     | )          | 108,077,614                                       |       |
| Class D                     |       | 1,398,885                                                   |       | 1,668,011         |       | —          |       | 3,066,896                                   |       | 10,145,705                                            |       | 5,036,338         |       | (787,623        | )          | 14,394,420                                        |       |
| Class I                     |       | 7,295,006                                                   |       | 2,946,036         |       | (126,903        | )          | 10,114,139                                  |       | 16,410,668                                            |       | 4,025,546         |       | (1,388,319      | )          | 19,047,895                                        |       |
|                        |       |                                                        |       |              |       |            |       |                                        |       |                                                  |       |              |       |            |       |                                              |       |
| Total Members’  Units  |       | 61,779,296                                                  |       | 40,246,695        |       | (3,107,274      | )          | 98,918,717                                  |       | 144,378,189                                           |       | 34,816,091        |       | (19,255,022     | )          | 159,939,258                                       |       |
|                        |       |                                                        |       |              |       |            |       |                                        |       |                                                  |       |              |       |            |       |                                              |       |
| 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 Sponsors’  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 six monthsended June 30, 2006 and 2007

(unaudited)

 
| ** **                    | ** ** | **Members’ Capital  December 31,2005** | ** ** | **Subscriptions** | ** ** | **Redemptions** | ** ** | **Net Income** | ** ** | **Members’ Capital  June 30,2006** | ** ** | **Members’ Capital  December 31,2006** | ** ** | **Subscriptions** | ** **  | **Redemptions** | ** ** | **Net Income  (Loss)** | ** ** | **Members’ Capital  June 30,2007** | ** ** |
|-------------------------------|------------|-------------------------------------------------------|------------|-------------------|------------|-----------------|------------|---------------------|------------|---------------------------------------------------|------------|-------------------------------------------------------|------------|-------------------|-------------|-----------------|------------|-----------------------------|------------|---------------------------------------------------|------------|
|                          |       |                                                  |       |              |       |            |       |                |       |                                              |       |                                                  |       |              |        |            |       |                        |       |                                              |       |
| Class A                       |       | $                                                     | 9,635,030  |              | $          | 5,303,826       |       | $                   | (723,952   | )                                                 | $          | 1,149,716                                             |       | $                 | 15,364,620  |            | $          | 18,197,781                  |       | $                                                 | 2,695,100  |   | $ | (2,812,962 | ) | $ | (455,067 | ) | $ | 17,624,852 |   |
| Class C                       |       | 41,024,353                                            |       | 30,787,003        |       | (2,290,913      | )          | 4,882,757           |       | 74,403,200                                        |       | 95,452,360                                            |       | 21,435,407        |        | (13,125,983     | )          | (2,969,094                  | )          | 100,792,690                                       |       |
| Class D                       |       | 1,466,886                                             |       | 1,949,999         |       | —          |       | 127,824             |       | 3,544,709                                         |       | 10,910,363                                            |       | 5,310,380         |        | (821,176        | )          | (195,234                    | )          | 15,204,333                                        |       |
| Class I                       |       | 7,048,458                                             |       | 3,068,933         |       | (132,745        | )          | 811,617             |       | 10,796,263                                        |       | 16,232,357                                            |       | 3,886,252         |        | (1,337,663      | )          | (375,583                    | )          | 18,405,363                                        |       |
|                          |       |                                                  |       |              |       |            |       |                |       |                                              |       |                                                  |       |              |        |            |       |                        |       |                                              |       |
| Total Members’ Interests |       | $                                                     | 59,174,727 |              | $          | 41,109,761      |       | $                   | (3,147,610 | )                                                 | $          | 6,971,914                                             |       | $                 | 104,108,792 |            | $          | 140,792,861                 |       | $                                                 | 33,327,139 |   | $ | (18,097,784 | ) | $ | (3,994,978 | ) | $ | 152,027,238 |   |
|                          |       |                                                  |       |              |       |            |       |                |       |                                              |       |                                                  |       |              |        |            |       |                        |       |                                              |       |
| Class A                       |       | $                                                     | 10,221     |              | $          | —          |       | $                   | —     |                                              | $          | 1,044                                                 |       | $                 | 11,265      |            | $          | 10,424                      |       | $                                                 | —     |   | $ | — |   | $ | (265 | ) | $ | 10,159 |   |
| Class C                       |       | 10,152                                                |       | —            |       | —          |       | 965                 |       | 11,117                                            |       | 10,232                                                |       | —            |        | —          |       | (307                        | )          | 9,925                                             |       |
| Class D                       |       | —                                                |       | —            |       | —          |       | —              |       | —                                            |       | —                                                |       | —            |        | —          |       | —                      |       | —                                            |       |
| Class I                       |       | —                                                |       | —            |       | —          |       | —              |       | —                                            |       | —                                                |       | —            |        | —          |       | —                      |       | —                                            |       |
|                          |       |                                                  |       |              |       |            |       |                |       |                                              |       |                                                  |       |              |        |            |       |                        |       |                                              |       |
| Total Sponsor’s Interest |       | $                                                     | 20,373     |              | $          | —          |       | $                   | —     |                                              | $          | 2,009                                                 |       | $                 | 22,382      |            | $          | 20,656                      |       | $                                                 | —     |   | $ | — |   | $ | (572 | ) | $ | 20,084 |   |
|                          |       |                                                  |       |              |       |            |       |                |       |                                              |       |                                                  |       |              |        |            |       |                        |       |                                              |       |
| Total Members’ Capital   |       | $                                                     | 59,195,100 |              | $          | 41,109,761      |       | $                   | (3,147,610 | )                                                 | $          | 6,973,923                                             |       | $                 | 104,131,174 |            | $          | 140,813,517                 |       | $                                                 | 33,327,139 |   | $ | (18,097,784 | ) | $ | (3,995,550 | ) | $ | 152,047,322 |   |

 

See notes to financial statements.

 

5

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ML CORNERSTONEFUTURESACCESS LLC 

(a Delaware Limited Liability Company)

NOTES TO FINANCIALSTATEMENTS

(unaudited)

1.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

In the opinion ofmanagement, the financial statements contain all adjustments necessary to presentfairly the financial position of ML Cornerstone FuturesAccess LLC (the “Fund”)as of June 30, 2007, and the results of its operations for the three and sixmonths ended June 30, 2007 and 2006, respectively.  However, the operating results for the interimperiods may not be indicative of the results for the full year.

Certain information and footnote disclosures normallyincluded in annual financial statements prepared in accordance with accountingprinciples generally accepted in the United States of America (“US GAAP”) havebeen omitted.  It is suggested that thesefinancial statements be read in conjunction with the financial statements andnotes thereto 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 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 contingent assetsand liabilities at the date of the financial statements and the reportedamounts of revenues and expenses during the reporting period.  Actual results could differ from thoseestimates.

2.               NET ASSET VALUE PERUNIT

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 June 30, 2007 the NetAsset Values of the different 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    |       | $                                  | 17,647,863  |                           | $          | 17,635,011                                       |       | 18,429,940 |   | $ | 0.9576 |   | $ | 0.9569 |   |
| Class C    |       | 100,853,882                        |        | 100,802,615                    |       | 108,088,251                                      |       | 0.9331 |   | 0.9326 |   |
| Class D    |       | 15,205,409                         |        | 15,204,333                     |       | 14,394,420                                       |       | 1.0563 |   | 1.0563 |   |
| Class I    |       | 18,414,545                         |        | 18,405,363                     |       | 19,047,895                                       |       | 0.9667 |   | 0.9663 |   |
|       |       | $                                  | 152,121,699 |                           | $          | 152,047,322                                      |       | 159,960,506 |   |   |   |   |   |
|            |            |                                    |             |                                |            |                                                  |            |  |  |  |  |  |  |  |  |

 

6

----

At December 31, 2006 theNet Asset Values of the different 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    |       | $                                  | 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 the Fund, Merrill Lynch AlternativeInvestments LLC (“MLAI”), has procedures in place intended to control marketrisk exposure, although there can be no assurance that they will, in fact,succeed in doing so.  These proceduresfocus primarily on monitoring the trading of Cornerstone Trading Company, Inc.(“Cornerstone”), the trading advisor, calculating the Net Asset Value of theFund as of the close of business on each day and reviewing outstandingpositions for over-concentrations.  WhileMLAI does not itself intervene in the markets to hedge or diversify the Fund’smarket exposure, MLAI may urge Cornerstone to reallocate positions in anattempt to avoid over-concentrations. However, such interventions are expected to be unusual.  It is expected that MLAI’s basic risk controlprocedures will consist of the ongoing process of advisor monitoring, with themarket risk controls being applied 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, in some cases not) of themembers of the exchange is pledged to support the financial integrity of theexchange.  In over-the-countertransactions, on the other hand, traders must rely solely on the credit oftheir respective individual counterparties. Margins, which may be subject to loss in the 

7

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event of adefault, are generally required in exchange trading, and counterparties mayalso require margin in the over-the-counter markets.

The credit riskassociated with these instruments from counterparty nonperformance is the netunrealized profit, if any, included in the Statements of Financial Condition.The Fund attempts to mitigate this risk by dealing exclusively with MerrillLynch & Co., Inc. (“Merrill Lynch”) entities as clearing brokers.

The Fund, in its normal course of business, entersinto various contracts with Merrill Lynch Pierce Fenner & Smith Inc. (“MLPF&S”)acting as its commodity broker.  Pursuantto the brokerage arrangement with MLPF&S (which includes a nettingarrangement), to the extent that such trading results in receivables from andpayables to MLPF&S, these receivables and payables are offset and reportedas a net receivable or payable and included in equity from commodity futurestrading accounts in the Statement of Financial Condition.

4.               RECENTACCOUNTING PRONOUNCEMENTS

In June 2006, the Financial Accounting Standards Board(“FASB”) issued Interpretation No.48 (“FIN 48”), Accounting for Uncertainty inIncome Taxes – an interpretation of FASB Statement No.109. In May 2007, FASBamended this guidance by issuing FASB Staff Position No. FIN 48-1, Definitionof settlement in FASB Interpretation No. 48. FIN 48, as amended, prescribes the minimum recognition threshold a taxposition must meet in connection with accounting for uncertainties in incometax positions taken or expected to be taken by an entity before being measuredand recognized in the financial statements. Adoption of FIN 48, as amended, isrequired for fiscal years beginning after December 15, 2006. The Fund hasevaluated its tax positions and has determined that the implementation of thispronouncement does not have a material impact to the financial statements.

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 United Statesof 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 NETASSET 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** | ** ** |
|------|------------|----------|------------|----------|------------|----------|------------|---------|------------|---------|------------|---------|------------|
| 2006 |       | $        | 0.9693     |     | $          | 0.9888   |       | $       | 1.0245     |    | $          | 1.0621  |       | $ | 1.0737 |   | $ | 1.0616 |   |
| 2007 |       | $        | 0.9856     |     | $          | 0.9306   |       | $       | 0.9181     |    | $          | 0.9475  |       | $ | 0.9860 |   | $ | 0.9576 |   |

 

Class C
|      | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** | **Apr** | ** ** | **May** | ** ** | **Jun** | ** ** |
|------|------------|----------|------------|----------|------------|----------|------------|---------|------------|---------|------------|---------|------------|
| 2006 |       | $        | 0.9597     |     | $          | 0.9781   |       | $       | 1.0125     |    | $          | 1.0484  |       | $ | 1.0574 |   | $ | 1.0452 |   |
| 2007 |       | $        | 0.9644     |     | $          | 0.9098   |       | $       | 0.8969     |    | $          | 0.9248  |       | $ | 0.9616 |   | $ | 0.9331 |   |

 

Class D
|      | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** | **Apr** | ** ** | **May** | ** ** | **Jun** | ** ** |
|------|------------|----------|------------|----------|------------|----------|------------|---------|------------|---------|------------|---------|------------|
| 2006 |       | $        | 1.0585     |     | $          | 1.0812   |       | $       | 1.1222     |    | $          | 1.1632  |       | $ | 1.1780 |   | $ | 1.1566 |   |
| 2007 |       | $        | 1.0805     |     | $          | 1.0215   |       | $       | 1.0090     |    | $          | 1.0426  |       | $ | 1.0864 |   | $ | 1.0563 |   |

 

Class I
|      | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** | **Apr** | ** ** | **May** | ** ** | **Jun** | ** ** |
|------|------------|----------|------------|----------|------------|----------|------------|---------|------------|---------|------------|---------|------------|
| 2006 |       | $        | 0.9745     |     | $          | 0.9944   |       | $       | 1.0310     |    | $          | 1.0683  |       | $ | 1.0798 |   | $ | 1.0686 |   |
| 2007 |       | $        | 0.9934     |     | $          | 0.9383   |       | $       | 0.9260     |    | 0.9560     |    | $          | 0.9952 |   | $ | 0.9667 |   |
|      |            |          |            |          |            |          |            |         |            |         |            |         |            |  |  |  |  |  |  |

 

**Performance Summary**

January 1, 2007 to June 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 

9

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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 ratesector posted 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 agricultural sectorposted losses for the Fund. The agricultural market was soft which attributedto the difficult trading environment. Gains were posted to the Fund at thebeginning 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.

January 1, 2006 to June 30, 2006

January 1, 2006 to March 30, 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 ratesector was the most profitable for the Fund. Although the Fund was generally net short, the best performer in ShortRate Asset Allocation was a long position in the Canadian market. In addition,the Fund was modestly profitable in a short position in Eurodollar futures.These positions continued to be profitable through mid-quarter as the marketpriced in roughly one more U.S. Federal Reserve tightening than had beenanticipated in January. Our other major short term interest rate position,short Euribor (Euro denominated three month interest rate) futures, wasmodestly profitable as well as the consensus shifted to expect still strongereconomic growth in Europe. Interest rates went up at the end of the quarter andthe strategy was short fixed income. In particular, the Fund was short and didwell in German bunds, Euribor and Eurodollars.

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. Excellentperformance mid-quarter was mainly due to the energy markets, most of whichwere short. In particular, natural gas futures dropped around 30%. However, bythe end of the quarter, the energy sector short positions adversely affectedthe Fund.

The metals sectorposted profits for the Fund. Profits were generated in the metals sector eventhrough a volatile climate. The quarter ended with the bullish speculativeenvironment fueling long term trends.

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.

11

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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 rate sectorwas 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 performing positionfor the Fund was to have a long position in both aluminum and copper withcopper posting the highest gains for the Fund. As the metal prices increased,the mid-quarter strategy to cut positions to keep a constant dollar exposureworked out well due to the fact this was done when prices were near theirpeaks. Base metal markets contributed a great deal of volatility aslong-standing in the copper market was down 15% at the end of the quarter.However, by the end of the quarter the effect on the returns was small.

The currency sectorposted profits for the Fund. The Currency Asset Allocation portfolio, in U.S.dollar terms, was long British pounds and Japanese yen and short Australiandollars, with a net U.S. dollar short. This position was profitable as the U.S.dollar declined against the major currencies. The strategy with long positionsin the British pound produced most of the gain mid-quarter offsetting losses inthe Australian dollar. International value had difficulty in the currencymarkets quarters-end in the long Japanese yen/short U.S. dollar position thatreversed May’s gains. The quarter ended with the currency markets expecting theend of the U.S. Federal Reserve’s current tightening cycle to be further awaythan previously thought.

The energy sector postedprofits for the Fund. The energy sector posted profits for the Fund during avery 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 agricultural sectorposted losses for the Fund. The agricultural market was soft which attributedto the difficult trading environment resulting in the Fund posting losses forthis sector.

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Item 3.   Quantitative and Qualitative DisclosuresAbout Market Risk

The Fund is a speculative commodity pool. The market sensitiveinstruments held by it are acquired for speculative trading purposes and all orsubstantially all of the Fund’s assets are subject to the risk of tradingloss.  Unlike an operating company, therisk of market sensitive instruments is integral, not incidental, to the Fund’smain line of business.

Market movements result in frequent changesin the fair market value of the Fund’s open positions and, consequently, in itsearnings and cash flow. The Fund’s market risk is influenced by a wide varietyof factors, including the level and volatility of interest rates, exchangerates, equity price levels, the market value of financial instruments andcontracts, the diversification effects among the Fund’s open positions and theliquidity of the markets in which it trades.

The Fund, under the direction of Cornerstone,rapidly acquires and liquidates both long and short positions in a wide rangeof different markets.  Consequently, itis not possible to predict how a particular future market scenario will affectperformance, and the Fund’s past performance is not necessarily indicative ofits future results.

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

Quantifying The Fund’s Trading Value At Risk

Quantitative Forward-Looking Statements

The following quantitative disclosuresregarding the Fund’s market risk exposures contain “forward-looking statement”within the meaning of the safe harbor from civil liability provided for suchstatements by the Private Securities Litigation Reform Act of 1995 (set forthin Section 27A of the Securities Act of 1933 and Section 21E of the SecuritiesExchange Act of 1934).  All quantitativedisclosures in this section are deemed to be forward-looking statements forpurposes of the safe harbor, except for statements of historical fact.

The Fund’s risk exposure in the variousmarket sectors traded by Cornerstone is quantified below in terms of Value atRisk.  Due to the Fund’s mark-to-marketaccounting, any loss in the fair value of the Fund’s open positions is directlyreflected in the Fund’s earnings (realized or unrealized) and cash flow (atleast in the case of exchange-traded contracts in which profits and losses onopen positions are settled daily through variation margin).

Exchange maintenance margin requirements havebeen used by the Fund as the measure of its Value at Risk.  Maintenance margin requirements are set byexchanges to equal or exceed the maximum loss in the fair value of any givencontract incurred in 95%-99% of the one-day time periods included in the historicalsample (generally approximately one year) researched for purposes ofestablishing margin levels.  Themaintenance margin levels are established by dealers and exchanges 

13

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using historical price studies as well as an assessment of currentmarket volatility (including the implied volatility of the options on a givenfutures contract) and economic fundamentals to provide a probabilistic estimateof the maximum expected near-term one-day price 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***

Thefollowing table indicates the average, highest and lowest trading Value at Riskassociated with the Fund’s open positions by market category for the fiscalperiod. For the six months ended June 30, 2007 and June 30, 2006, the Fund’saverage month-end Net Asset Value for all other purposes was $147,212,268 and$66,635,051, respectively.

** **
| **June 30, 2007** |   |
|-------------------|--------|

 
|                        | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value**                                               | ** ** | **Lowest Value** | ** ** |
|------------------------|------------|-----------------------------|------------|----------------------------|------------|----------------------------------------------------------------------|------------|-----------------------|------------|
| **Market Sector** | ** ** | **Value at Risk** | ** ** | **Capitalization**         | ** ** | **At Risk**                                                     | ** ** | **At Risk**      | ** ** |
|                   |       |                        |       |                       |       |                                                                 |       |                  |       |
| Agriculture            |       | $                           | 348,018    |                       | 0.24       | %                                                                    | $          | 1,378,409             |       | $ | 103,364 |   |
| Currencies             |       | 487,391                     |       | 0.33                       | %          |         1,302,255                 |       | 28,853                |       |
| Energy                 |       | 131,277                     |       | 0.09                       | %          |            509,756 |       | 2,566                 |       |
| Interest Rates         |       | 12,820,489                  |       | 8.71                       | %          |       15,887,910                            |       | 6,811,618             |       |
| Metals                 |       | 339,986                     |       | 0.23                       | %          |         1,463,107                 |       | 61,269                |       |
| Stock Indices          |       | 862,028                     |       | 0.59                       | %          | 3,658,220                                                            |       | 152,473               |       |
|                   |       |                        |       |                       |       |                                                                 |       |                  |       |
| TOTAL                  |       | $                           | 14,989,189 |                       | 10.19      | %                                                                    | $          | 24,199,657            |       | $ | 7,160,143 |   |

 
| **June 30, 2006** |   |
|-------------------|--------|

 
|                        | ** ** | **Average**                 | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
|------------------------|------------|-----------------------------|------------|----------------------------|------------|------------------------|------------|-----------------------|------------|
| **Market Sector** | ** ** | **Value at Risk** | ** ** | **Capitalization**         | ** ** | **At Risk**       | ** ** | **At Risk**      | ** ** |
|                   |       |                        |       |                       |       |                   |       |                  |       |
| Agriculture            |       | $                           | 11,614     |                       | 0.02       | %                      | $          | 23,960                |       | $ | 385 |   |
| Currencies             |       | 253,578                     |       | 0.38                       | %          | 393,441                |       | 6,069                 |       |
| Energy                 |       | 7,922                       |       | 0.01                       | %          | 13,630                 |       | 111                   |       |
| Interest Rates         |       | 6,172,501                   |       | 9.26                       | %          | 7,506,383              |       | 4,243,191             |       |
| Metals                 |       | 12,200                      |       | 0.02                       | %          | 21,782                 |       | 78                    |       |
| Stock Indices          |       | —                      |       | 0.00                       | %          | —                 |       | —                |       |
|                   |       |                        |       |                       |       |                   |       |                  |       |
| TOTAL                  |       | $                           | 6,457,815  |                       | 9.69       | %                      | $          | 7,959,196             |       | $ | 4,249,834 |   |

 

14

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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.

15

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PART II - OTHERINFORMATION

Item1.            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 of EquitySecurities 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           |       |
|            |            |                  |            |            |            |                  |            |  |  |

 

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           |       |
|            |            |                  |            |            |            |                  |            |  |  |

 

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     |       | —           |       | —     |       | NAV              |       |
|            |            |                  |            |            |            |                  |            |  |  |

 

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     |       | —           |       | —     |       | NAV              |       |
| Jul-07     |       | 509,999          |       | 527,567    |       | 0.9667           |       |
|            |            |                  |            |            |            |                  |            |  |  |

 

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(1) Net AssetValue for all other purposes

(b)         None.

(c)          None.

Item 3.            DefaultsUpon Senior Securities

None.

16

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Item 4.            Submissionof Matters to a Vote of Security Holders

None.

Item 5.            OtherInformation

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

Exhibit 31.01

and 31.02:      Are filed herewith.

32.01 and

32.02               Section 1350 Certifications

Exhibit 32.01

and 32.02       Are filed herewith.

17

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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: August 14,  2007 |                              | By | /s/ ROBERT D.  OLLWERTHER |   |
|                   |                              |   | Robert D. Ollwerther |
|                   |                              |   | Chief Executive Officer and President |
|                   |                              |   | (Principal Executive Officer) |
|                   |                              |   |
| Date: August 14,  2007 |                              |   |
|                   |                              | By | /s/ BARBRA E. KOCSIS |   |
|                   |                              |   | Barbra E. Kocsis |
|                   |                              |   | Chief Financial Officer |
|                   |                              |   | (Principal Financial and Accounting Officer) |
|                        |                                   |  |  |  |  |

 

18

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