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
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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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
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(Address of principal executive offices)
(Zip Code)
609-282-6996
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(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
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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.
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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)
================== ================ ================= ============= ====================
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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