UNITED STATES SECURITIES 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 March 31, 2001 ---------------- OR ( ) 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 33-22864 ML FUTURES INVESTMENTS L.P. --------------------------- (Exact Name of Registrant as specified in its charter) Delaware 36-3590615 - ----------------------------------- ---------------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) c/o Merrill Lynch Investment Partners Inc. Princeton Corporate Campus 800 Scudders Mill Road - Section 2G Plainsboro, New Jersey 08536 ---------------------------- (Address of principal executive offices) (Zip Code) 609-282-6996 ------------------------------------------------- (Registrant's telephone number, 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 the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter 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 ----- ----- PART I - FINANCIAL INFORMATION Item 1. Financial Statements ML FUTURES INVESTMENTS L.P. (A DELAWARE LIMITED PARTNERSHIP) STATEMENTS OF FINANCIAL CONDITION March 31, December 31, 2001 2000 (unaudited) ----------- ----------- ASSETS Investment in MM LLC $14,450,031 $14,260,889 Receivable from investment in MM LLC 58,047 250,414 ----------- ----------- TOTAL $14,508,078 $14,511,303 =========== =========== LIABILITY AND PARTNERS' CAPITAL Redemptions payable $ 58,047 $ 250,414 ----------- ----------- Total liabilities 58,047 250,414 ----------- ----------- PARTNERS' CAPITAL: General Partner (613 and 613 Units) 161,737 154,104 Limited Partners (54,154 and 56,108 Units) 14,288,294 14,106,785 ----------- ----------- Total partners' capital 14,450,031 14,260,889 ----------- ----------- TOTAL $14,508,078 $14,511,303 =========== =========== NET ASSET VALUE PER UNIT (Based on 54,767 and 56,721 Units outstanding) $ 263.85 $ 251.42 =========== =========== See notes to financial statements. 2 ML FUTURES INVESTMENTS L.P. (A DELAWARE LIMITED PARTNERSHIP) STATEMENTS OF OPERATIONS (unaudited) For the three For the three months ended months ended March 31, March 31, 2001 2000 -------------- -------------- Income (loss) from investments $ 681,787 $ (350,537) -------------- -------------- NET INCOME (LOSS) $ 681,787 $ (350,537) ============== ============== NET INCOME (LOSS) PER UNIT: Weighted average number of General Partner and Limited Partner Units outstanding 55,820 70,024 ============== ============== Net income (loss) per weighted average General Partner and Limited Partner Unit $ 12.21 $ (5.01) ============== ============== See notes to financial statements. 3 ML FUTURES INVESTMENTS L.P. (A DELAWARE LIMITED PARTNERSHIP) STATEMENTS OF CHANGES IN PARTNERS' CAPITAL FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND MARCH 31, 2000 (unaudited) Units General Partner Limited Partners Total ------------- --------------- ---------------- --------------- PARTNERS' CAPITAL, December 31, 1999 71,633 $ 244,458 $ 16,807,496 $ 17,051,954 Net loss -- (4,219) (346,318) (350,537) Redemptions (4,180) (59,265) (930,093) (989,358) ------------- --------------- ---------------- --------------- PARTNERS' CAPITAL, March 31, 2000 67,453 $ 180,974 $ 15,531,085 $ 15,712,059 ============= =============== ================ =============== PARTNERS' CAPITAL, December 31, 2000 56,721 $ 154,104 $ 14,106,785 $ 14,260,889 Net income -- 7,633 674,154 681,787 Redemptions (1,954) -- (492,645) (492,645) ------------- --------------- ---------------- --------------- PARTNERS' CAPITAL, March 31, 2001 54,767 $ 161,737 $ 14,288,294 $ 14,450,031 ============= =============== ================ =============== See notes to financial statements. 4 ML FUTURES INVESTMENTS L.P. (A DELAWARE LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS (unaudited) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES These financial statements have been prepared without audit. In the opinion of management, the financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position of ML Futures Investments L.P. (the "Partnership") as of March 31, 2001, and the results of its operations for the three months ended March 31, 2001 and 2000. However, the operating results for the interim periods may not be indicative of the results expected for the full year. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Partnership's Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2000 (the "Annual Report"). 2. INVESTMENTS As of March 31, 2001 and December 31, 2000, the Partnership had an investment in MM LLC of $14,450,031 and $14,260,889, respectively. Total revenues and fees with respect to the Partnership's investment are set forth as follows: For the three months Total Brokerage Administrative Profit Income ended March 31, 2001 (unaudited) Revenue Commissions Fees Shares from Investment ------------------ ---------------- ----------------- ------------- -------------------- MM LLC $ 1,228,383 288,177 8,234 250,185 $ 681,787 ================== ================ ================= ============= ==================== For the three months Total Brokerage Administrative Profit Loss ended March 31, 2000 (unaudited) Revenue Commissions Fees Shares from Investment ------------------ ---------------- ----------------- ------------- -------------------- MM LLC $ 26,660 365,017 10,429 1,751 $ (350,537) ================== ================ ================= ============= ==================== 5 Condensed statements of financial condition and statements of operations for MM LLC are set forth as follows: MM LLC MM LLC -------------------- -------------------- March 31, December 31, 2001 2000 (unaudited) -------------------- -------------------- Assets $ 248,273,121 $ 252,995,756 ==================== ==================== Liabilities $ 6,207,268 $ 5,383,789 Members' Capital 242,065,853 247,611,967 -------------------- -------------------- Total $ 248,273,121 $ 252,995,756 ==================== ==================== For the three months For the three months ended March 31, 2001 ended March 31, 2000 (unaudited) (unaudited) -------------------- -------------------- Revenues $ 17,007,938 $ 158,041 Expenses 6,927,429 2,097,140 -------------------- -------------------- Net Income (Loss) $ 10,080,509 $ (1,939,099) ==================== ==================== 3. FAIR VALUE AND OFF-BALANCE SHEET RISK The Partnership invests all of its assets in ML Multi Manager Portfolio LLC ("MM LLC"). Accordingly, the Partnership is invested indirectly in derivative instruments, but does not itself hold any derivative instrument positions. The application of the provisions of Statement of Financial Accounting Standards No. 133 as amended by SFAS No. 137, and further amended by SFAS No. 138, did not have a significant effect on the financial statements of the Partnership. MARKET RISK Derivative financial instruments involve varying degrees of off-balance sheet market risk. Changes in the level or volatility of interest rates, foreign currency exchange rates or the market values of the underlying financial instruments or commodities underlying such derivative instruments frequently result in changes in the Partnership's net unrealized profit on such derivative instruments with respect to Partnership assets invested in MM LLC, as reflected in the Statements of Financial Condition of the MM LLC. The Partnership's exposure to market risk is influenced by a number of factors, including the relationships among the derivative instruments held by MM LLC, as well as the volatility and liquidity of such markets in which such derivative instruments are traded. 6 The General Partner, Merrill Lynch Investment Partners Inc. ("MLIP"), has procedures in place intended to control market risk exposure, although there can be no assurance that they will, in fact, succeed in doing so. These procedures focus primarily on monitoring the trading of the Advisors selected from time to time for MM LLC, and include calculating the Net Asset Value of the Advisors' respective MM LLC accounts as of the close of business on each day and reviewing outstanding positions for over-concentrations both on an Advisor-by-Advisor and on an overall Partnership basis. While MLIP does not itself intervene in the markets to hedge or diversify the Partnership's market exposure, through MM LLC, MLIP may urge Advisors to reallocate positions, or itself reallocate Partnership assets among Advisors through MM LLC (although typically only as of the end of a month) in an attempt to avoid over-concentration. However, such interventions are unusual. Except in cases in which it appears that an Advisor has begun to deviate from past practice and trading policies or to be trading erratically, MLIP's basic risk control procedures consist simply of the ongoing process of advisor monitoring and selection, with the market risk controls being applied by the Advisors themselves. CREDIT RISK The risks associated with exchange-traded contracts are typically perceived to be less than those associated with over-the-counter (non-exchange-traded) transactions, because exchanges typically (but not universally) provide clearinghouse arrangements in which the collective credit (in some cases limited in amount, in some cases not) of the members of the exchange is pledged to support the financial integrity of the exchange. In over-the-counter transactions, on the other hand, traders must rely solely on the credit of their respective individual counterparties. Margins, which may be subject to loss in the event of a default, are generally required in exchange trading, and counterparties may require margin in the over-the-counter markets. The Partnership, through MM LLC, has credit risk in respect of its counterparties and brokers, but attempts to mitigate this risk by dealing almost exclusively with Merrill Lynch entities as clearing brokers. The Partnership, through MM LLC, in its normal course of business, enters into various contracts, with Merrill Lynch Futures ("MLF") acting as its commodity broker. Pursuant to the brokerage agreement with MLF (which includes a netting arrangement), to the extent that such trading results in receivables from and payables to MLF, these receivables and payables are offset and reported as a net receivable or payable in the financial statements of MM LLC in the Equity in commodity futures trading accounts in the Statements of Financial Condition. Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS MONTH-END NET ASSET VALUE PER UNIT ------------------------------------ Jan. Feb. Mar. ------------------------------------ 2000 $238.86 $237.06 $232.93 ------------------------------------ 2001 $249.58 $251.97 $263.85 ------------------------------------ Performance Summary All of the Partnership's assets are invested in MM LLC. The Partnership recognizes trading profits or losses as an investor in MM LLC. The following commentary describes the trading results of MM LLC. January 1, 2001 to March 31, 2001 Trading in the interest rate sector was highly profitable for the Partnership during the quarter. Long positions in the Euro resulted in gains in January. The impact of the weakening U.S. economy and the Federal Reserve's move to cut interest rates was felt throughout the interest rate futures market. Euro futures contracts rose dramatically since December 2000. Euro-yen and Euro-bund cross futures trading produced gains for the sector. 7 Agricultural trading was profitable despite losses sustained early in the quarter. During January, the agricultural sector faced weak grain and oilseed prices. Excellent growing weather in the U.S., Argentina and Brazil, concerns about U.S. export potential and inventories at historically high levels kept the markets on the defensive. Contract lows in cotton produced gains for short positions. The cotton market sank to a 15 year low as a result of short supply and increased demand. Potential increased planting paired with a drop in demand forced prices lower. Currency trading resulted in gains for the Partnership. Losses were realized during January and February on long Euro and Swiss franc trading. After rallying from a low of 82--83 cents to 96 cents, the Euro corrected back to the 90 cent level, despite strong fundamentals. This resulted in losses for the Partnership's long positions. The sector rebounded strongly in March on substantial gains from short Japanese yen positions. Trading in the metals markets was successful. Losses from short silver positions were sustained in January as silver had minor technical run as it reached it's four month high. Short silver positions were profitable in February as silver prices reversed its earlier trend and declined as the market was generally weak and on gold's failure to rally weighed on the market. March was a volatile trading month as another attempted gold rally failed, resulting in gains in short positions. Stock index trading was moderately successful despite uncertainty in equity markets. Short S&P 500 and NASDAQ positions resulted in gains as global equity markets remain caught between negative news about earnings and the potential positive effects of further monetary easing. Energy trading was the only unprofitable sector during the quarter. Natural gas prices pulled back in January after rallying during the last few months, resulting in losses. Crude oil prices were driven lower by both a seasonal downturn in global oil usage and heavier than normal refinery maintenance work, reducing the demand. Short natural gas positions were unprofitable in March on concerns over supply availability. January 1, 2000 to March 31, 2000 Energy trading was profitable for the quarter due to long crude oil and unleaded gas positions. Despite the possibility of OPEC increasing oil production by 5%, crude oil prices continued to rise as such a hike would still leave oil inventories at levels much below normal during the balance of the year. Prices began to decline in mid-March as Iran backed down from its position on the point of "no increase" and again later in the month as OPEC announced a production increase of 1.716 million barrels per day offsetting some gains from the previous two months. Stock Index trading was profitable for the quarter. During the month of January, the Hang Seng Index found market conditions to be difficult. However stock index trading returned in February and March with gains in positions in CAC 40 Euro futures, DAX German Stock Index and long S&P 500 positions resulted in gains as investors focused more on value stocks near the end of the quarter. Metals trading alternated from profitable to unprofitable during the quarter. In January gains in aluminum positions outweighed losses in zinc and copper, however losses in aluminum and gold positions outweighed gains in nickel positions during February. In March, metals trading was slightly profitable as gains in silver positions outweighed losses in zinc and copper. Short Swiss franc and Euro positions launched the quarter with gains after officials from the Group of Seven met and failed to express concern about the low levels of the European currency, however the positions were unprofitable in February offsetting gains in Japanese yen positions. Short Euro positions then bounced back in March but were outweighed by losses in Japanese yen and British pound positions. Agriculture trading resulted in losses for the quarter. In January and February, gains in sugar positions were outweighed by losses in corn positions. In March, corn positions were profitable as prices rose, but were outweighed by unprofitable soyoil and sugar positions. Corn prices fluctuated as changes in weather forecasts occurred throughout the quarter. Short Eurodollar trading was profitable as the currency continued to decline in January. The European Union ministers blamed the currency's slide in January on rapid U.S. growth and fears that the Federal Reserve will increase U.S. interest rates. These profits were far outweighed by losses in the Japanese 10-year bond, U.S. 10-year Treasury note positions and long U.S. Treasury positions as the yield curve fluctuated widely during the quarter. 8 PART II - OTHER INFORMATION Item 1. Legal Proceedings There are no pending proceedings to which the Partnership or MLIP is a party. Item 2. Changes in Securities and Use of Proceeds (a) None. (b) None. (c) None. (d) None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K. (a) EXHIBITS. There are no exhibits required to be filed with this report. (b) REPORTS ON FORM 8-K. There were no reports on Form 8-K filed during the first three months of fiscal 2001. 9 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 the undersigned thereunto duly authorized. ML FUTURES INVESTMENTS L.P. By: MERRILL LYNCH INVESTMENT PARTNERS INC. (General Partner) Date: May 15, 2001 By /s/ RONALD S. ROSENBERG ----------------------- Ronald S. Rosenberg Chairman and Director Date: May 15, 2001 By /s/ MICHAEL L. PUNGELLO ----------------------- Michael L. Pungello Vice President, Chief Financial Officer and Treasurer 10