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, 1998
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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.
Merrill Lynch World Headquarters - South Tower, 6th Fl.
World Financial Center New York, New York 10080-6106
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(Address of principal executive offices)
(Zip Code)
212-236-9757
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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
--- ---
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,
1998 1997
----------------- -----------------
ASSETS
- ------
Accrued interest $42,117 $45,161
Equity in commodity futures trading accounts:
Cash and option premiums 9,645,272 9,749,760
Net unrealized profit on open contracts 179,889 550,739
Investments 14,382,490 14,266,512
Receivable from investments 173,412 299,255
Other receivable 81,166 51,715
----------------- -----------------
TOTAL 24,504,346 $24,963,142
================= =================
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
LIABILITIES:
Redemptions payable $278,652 $498,752
Brokerage commissions payable 73,323 76,811
Profit Shares payable - -
Administrative fees payable 2,074 2,174
----------------- -----------------
Total liabilities 354,049 577,737
----------------- -----------------
PARTNERS' CAPITAL:
General Partner (1787 and 1787 Units) 414,938 402,372
Limited Partners (102217 and 106509 Units) 23,735,359 23,983,033
----------------- -----------------
Total partners' capital 24,150,297 24,385,405
----------------- -----------------
TOTAL $24,504,346 $24,963,142
================= =================
NET ASSET VALUE PER UNIT
(Based on 104004 and 108296 Units outstanding) $232.21 $225.17
================= =================
See notes to financial statements.
2
ML FUTURES INVESTMENTS L.P.
---------------------------
(a Delaware limited partnership)
------------------------------
STATEMENTS OF INCOME
--------------------
For the three For the three
months ended months ended
March 31, March 31,
1998 1997
------------------ -----------------
REVENUES:
Trading profits (loss):
Realized $530,175 $506,511
Change in unrealized (370,850) 737,701
------------------ -----------------
Total trading results 159,325 1,244,212
------------------ -----------------
Interest income 128,173 137,457
Income from investments 697,815 707,117
------------------ -----------------
Total revenues 985,313 2,088,786
------------------ -----------------
EXPENSES:
Profit shares - 171,558
Brokerage commissions 223,271 220,070
Administrative fees 6,379 6,129
------------------ -----------------
Total expenses 229,650 397,757
------------------ -----------------
NET INCOME $755,663 $1,691,029
================== =================
NET INCOME PER UNIT:
Weighted average number of units
outstanding 106,612 121,831
================== =================
Weighted average net income
per Limited Partner
and General Partner Unit $7.09 $13.88
================== =================
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, 1998 and 1997
--------------------------------------------------
Units Limited Partners General Partner Total
---------------- ---------------- ----------------- ----------------
PARTNERS' CAPITAL,
December 31, 1996 122,597 $24,906,584 $368,402 $25,274,986
Net income - 1,666,295 24,734 1,691,029
Redemptions (2,864) (624,161) - (624,161)
---------------- ----------------- ----------------- ----------------
PARTNERS' CAPITAL,
March 31, 1997 119,733 $25,948,718 $393,136 $26,341,854
================ ================= ================= ================
PARTNERS' CAPITAL,
December 31, 1997 108,296 $23,983,033 $402,372 $24,385,405
Net income - 743,097 12,566 755,663
Redemptions (4,292) (990,771) - (990,771)
---------------- ----------------- ----------------- ----------------
PARTNERS' CAPITAL,
March 31, 1998 104,004 $23,735,359 $414,938 $24,150,297
================ ================= ================= ================
See notes to financial statements.
4
ML FUTURES INVESTMENTS L.P.
---------------------------
(A Delaware limited partnership)
------------------------------
NOTES TO FINANCIAL STATEMENTS
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" or the "Fund") as
of March 31, 1998 and the results of its operations for the three months ended
March 31, 1998 and 1997. 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 general accepted accounting
principles 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, 1997 (the
"Annual Report").
2. INVESTMENTS
As of March 31, 1998 and December 31, 1997 the Partnership had investments in
the ML Chesapeake Diversified L.L.C. ("Chesapeake LLC") and the ML Sjo
Prospect L.L.C. ("SJO LLC") as follows:
1998 1997
---------------- ----------------
Chesapeake LLC $ 7,410,045 $ 7,176,214
SJO LLC 6,972,445 7,090,298
---------------- ----------------
Total $ 14,382,490 $ 14,266,512
================ ================
Total revenues and fees with respect to such investments is set forth as
follows:
For the three months Total Brokerage Administrative Profit Income from
ended March 31, 1998 Revenue Commissions Fees Shares Investments
--------------- ---------------- ------------------ ------------ --------------------
Chesapeake LLC $824,380 $162,505 $4,643 $131,693 $525,539
SJO LLC 358,502 159,662 4,562 22,002 172,276
--------------- ---------------- ------------------ ------------ --------------------
Total $1,182,882 $322,167 $9,205 $153,695 $697,815
=============== ================ ================== ============ ====================
For the three months Total Brokerage Administrative Profit Income from
ended March 31, 1997 Revenue Commissions Fees Shares Investments
--------------- ---------------- ------------------ ------------ --------------------
Chesapeake LLC $722,288 $181,200 $4,993 $108,893 $427,202
SJO LLC 500,222 173,372 4,774 42,161 279,915
--------------- ---------------- ------------------ ------------ --------------------
Total $1,222,510 $354,572 $9,767 $151,054 $707,117
=============== ================ ================== ============ ====================
5
Condensed statements of financial condition as of March 31, 1998 and
December 31, 1997 and statements of income for the three months ended March
31, 1998 and 1997 are set forth as follows:
1998 1997
------------------------------------- -------------------------------------
Chesapeake SJO Chesapeake SJO
LLC LLC LLC LLC
------------------ ------------------ ------------------ ------------------
Assets $17,505,551 $19,174,586 $17,195,182 $21,240,207
================== ================== ================== ==================
Liabilities $764,584 $568,783 $704,681 $2,058,617
Members' Capital 16,740,967 18,605,803 16,490,501 19,181,590
------------------ ------------------ ------------------ ------------------
Total $17,505,551 $19,174,586 $17,195,182 $21,240,207
================== ================== ================== ==================
Revenues $1,890,020 $972,284 $1,979,886 $1,409,347
Expenses 685,055 503,557 800,919 619,328
------------------ ------------------ ------------------ ------------------
Net Income $1,204,965 $468,727 $1,178,967 $790,019
================== ================== ================== ==================
3. FAIR VALUE AND OFF-BALANCE SHEET RISK
The Partnership's total trading results by reporting category for the
respective periods were as follows:
For the three For the three
months ended months ended
March 31, March 31,
1998 1997
-------------------- --------------------
Interest rate &
Stock indices $343,382 $238,165
Commodities (33,072) 368,821
Currencies (198,284) 268,194
Energy 2,150 (14,900)
Metals 45,149 383,932
-------------------- --------------------
$159,325 $1,244,212
==================== ====================
6
The contract/notional values of the Partnership's open derivative instrument
positions as of March 31, 1998 and December 31, 1997 were as follows:
1998 1997
------------------------------------------- -------------------------------------------
Commitment to Commitment to Commitment to Commitment to
Purchase (Futures, Sell (Futures, Purchase (Futures, Sell (Futures,
Options & Forwards) Options & Forwards) Options & Forwards) Options & Forwards)
------------------- ------------------- ------------------- -------------------
Interest rate &
Stock Indices $30,200,732 $14,107,765 $44,385,611 $11,883,229
Commodities 274,750 392,787 - 570,095
Currencies 13,110,360 16,168,908 2,030,107 14,234,764
Metals 2,502,233 987,354 1,353,394 1,703,304
----------------- ------------------ ------------------ ------------------
$46,088,075 $31,656,814 $47,769,112 $28,391,392
================= ================== ================== ==================
The contract/notional values of the Partnership's exchange-traded and
non-exchange-traded open derivative instrument positions as of March 31, 1998
and December 31, 1997 were as follows:
1998 1997
------------------------------------------- -------------------------------------------
Commitment to Commitment to Commitment to Commitment to
Purchase (Futures, Sell (Futures, Purchase (Futures, Sell (Futures,
Options & Forwards) Options & Forwards) Options & Forwards) Options & Forwards)
------------------- ------------------- ------------------- -------------------
Exchange
traded $43,350,792 $26,994,245 $45,970,412 $24,361,153
Non-Exchange
traded 2,737,283 4,662,569 1,798,700 4,030,239
----------------- ------------------ ----------------- ------------------
$46,088,075 $31,656,814 $47,769,112 $28,391,392
================= ================== ================= ==================
The average fair values, based on contract/notional values, of the Partnership's
derivative instrument positions which were open as of the end of each calendar
month during the three months ended March 31, 1998 and the year ended December
31, 1997 were as follows:
1998 1997
------------------------------------------- ----------------------------------------------
Commitment to Commitment to Commitment to Commitment to
Purchase (Futures, Sell (Futures, Purchase (Futures, Sell (Futures,
Options & Forwards) Options & Forwards) Options & Forwards) Options & Forwards)
------------------- ------------------- ------------------- -------------------
Interest rate &
Stock Indices $39,312,343 $10,309,961 $23,451,890 $30,553,601
Commodities 274,750 718,962 1,662,055 398,620
Currencies 10,309,383 13,017,447 9,044,965 14,258,465
Energy - - 866,145 841,680
Metals 1,963,162 1,009,282 5,754,718 2,949,551
----------------- ------------------ ------------------ -------------------
$51,859,638 $25,055,652 $40,779,773 $49,001,917
================= ================== ================== ===================
7
The gross unrealized profit and the net unrealized profit (loss) on the
Partnership's open derivative instrument positions as of March 31, 1998 and
December 31, 1997 were as follows:
1998 1997
----------------------------------- -----------------------------------
Gross Net Gross Net
Unrealized Unrealized Unrealized Unrealized
Profit Profit (Loss) Profit Profit
-------------- -------------- -------------- --------------
Exchange
traded $295,074 $184,186 $552,949 $481,945
Non-Exchange
traded 23,593 (4,297) 101,308 68,794
-------------- -------------- -------------- --------------
$318,667 $179,889 $654,257 $550,739
============== ============== ============== ==============
Item 2: Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
MONTH-END NET ASSET VALUE PER UNIT
----------------------------------
Jan. Feb. Mar.
----------------------------------
1997 $211.33 $219.04 $220.00
----------------------------------
1998 $229.37 $231.94 $232.21
----------------------------------
Performance Summary
January 1, 1997 to March 31, 1997
In currency markets, the U.S. dollar rallied and started 1997 on a
strong note, rising to a four-year high versus the Japanese yen and two-and-a-
half year highs versus the Deutsche mark and the Swiss franc. January and
February proved profitable for currencies; however, losses were incurred in
March.
Global interest rate markets began the year on a volatile note, as
investors evaluated economic data for signs of inflation. Profits resulted from
interest rate trading in February and March.
In energy markets, a slump in crude oil prices was characteristic of
its lackluster performance from the beginning of the year. Early in 1997,
volatility returned in the energy markets, reflecting the impact of a winter
significantly warmer than normal. January and March saw losses in energy;
however, February proved profitable.
Agricultural commodity trading proved profitable throughout the
quarter. Soybean prices reached their highest level in over eight years, on
continued demand and fears that inventories could fall to critically low levels
before the next harvest.
January 1, 1998 to March 31, 1998
The Fund's positions in the global interest rate markets were
profitable during the quarter. In Europe, an extended bond market rally
continued despite an environment of robust growth in the United States, Canada
and the United Kingdom, as well as a strong pick-up in growth in continental
Europe.
Gold prices drifted sideways and lower as Asian demand continued to
slow and demand in the Middle East was affected by low oil prices. Initially
buoyed on concerns about a U.S.-led military strike against Iraq, crude oil fell
to a nine year low, as the globally warm winter, the return of Iraq as a
producer and the Asian economic crisis added to OPEC's supply glut problems.
Trading results in stock index markets were mixed, but profitable,
despite a strong first-quarter performance by the U.S. equity market as several
consecutive weekly gains were recorded with most market averages setting new
highs. Results in currency trading were also mixed, but unprofitable. In
particular, the Swiss franc weakened versus the U.S. dollar.
Agricultural commodity markets provided profitable trading results
overall. Live cattle and hog prices trended downward throughout the quarter.
Cotton prices moved mostly upward during the quarter, but prices dropped off
sharply at the end of March.
8
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable
9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no pending proceedings to which the Partnership or the
General Partner 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
Mr. Michael A. Karmelin, Chief Financial Officer, Vice President and
Treasurer of Merrill Lynch Investment Partners Inc. ("MLIP"), has announced
that he will resign from MLIP effective April 15, 1998 to pursue other
business opportunities. MLIP expects to announce his successor in the near
future.
The Fund will consolidate its trading accounts with those of certain
other MLIP sponsored multi-advisor funds effective June 1, 1998.
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 1998.
10
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 11, 1998 By /s/ JOHN R. FRAWLEY, JR.
-----------------------
John R. Frawley, Jr.
Chairman, Chief Executive Officer, President
and Director
Date: May 11, 1998 By /s/ SERGIO M. PAVONE
--------------------
Sergio M. Pavone
Vice President and Controller
(Chief Accounting Officer)