<PAGE>
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, 1996
--------------
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 0-17543
ML FUTURES INVESTMENTS L.P.
---------------------------
(Exact Name of Registrant as
specified in its charter)
Delaware 13-3590615
- ------------------------------------ ----------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
c/o Merrill Lynch Investment Partners Inc.
(formerly ML Futures Investment Partners Inc.)
Merrill Lynch World Headquarters - South Tower, 6th Fl.
World Financial Center New York, New York 10080-6106
-----------------------------------------------------
(Address of principal executive offices)
(Zip Code)
212-236-4161
--------------------------------------------------------------
(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
----- -----
This document contains 12 pages.
There are no exhibits and no exhibit index filed with this document.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ML FUTURES INVESTMENTS L.P.
---------------------------
(a Delaware limited partnership)
------------------------------
STATEMENTS OF FINANCIAL CONDITION
---------------------------------
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
- ------
Accrued interest (Note 2) $ 102,208 $ 115,604
Equity in commodity futures trading
accounts:
Cash and option premiums 27,228,487 27,022,835
Net unrealized (loss) gain on open (320,791) 1,522,575
contracts
------------- -------------
TOTAL $27,009,904 $28,661,014
============= =============
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
LIABILITIES:
Redemptions payable $ 147,932 $ 626,446
Profit shares payable 60,937 -
Brokerage commissions payable (Note
2) 217,587 222,831
Administrative expense payable 5,627 -
------------- -------------
Total liabilities 432,083 849,277
------------- -------------
PARTNERS' CAPITAL:
General Partner (1,787 and 1,787
units) 339,338 347,972
Limited Partners (138,171 and
141,035 units) 26,238,483 27,463,765
------------- -------------
Total partners' capital 26,577,821 27,811,737
------------- -------------
TOTAL $27,009,904 $28,661,014
============= =============
NET ASSET VALUE PER UNIT
(Based on 139,958 and 142,822 Units
outstanding) $189.90 $194.73
=========== ===========
</TABLE>
See notes to financial statements.
2
<PAGE>
ML FUTURES INVESTMENTS L.P.
---------------------------
(a Delaware limited partnership)
------------------------------
STATEMENTS OF OPERATIONS
------------------------
<TABLE>
<CAPTION>
For the three For the three
Months ended Months ended
March 31, 1996 March 31, 1995
----------------- ----------------
<S> <C> <C>
REVENUES:
Trading profit (loss):
Realized $ 650,996 $1,430,054
Change in unrealized (890,207) 540,709
--------------- ---------------
Total trading results (239,211) 1,970,763
--------------- ---------------
Interest income (Note 2) 303,266 359,785
--------------- ---------------
Total revenues 64,055 2,330,548
--------------- ---------------
EXPENSES:
Profit shares 60,937 43,528
Brokerage commissions (Note 2) 665,538 733,584
Administrative expense 17,065 -
--------------- ---------------
Total expenses 743,540 777,112
--------------- ---------------
NET (LOSS) INCOME $(679,485) $1,553,436
=============== ===============
NET (LOSS) INCOME PER UNIT:
Weighted average number of units
outstanding (Note 4) 141,866 166,822
========= ==========
Weighted average (loss) net income per
unit $(4.79) $9.31
========= ==========
</TABLE>
See notes to financial statements.
3
<PAGE>
ML FUTURES INVESTMENTS L.P.
---------------------------
(a Delaware limited partnership)
------------------------------
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
------------------------------------------
<TABLE>
<CAPTION>
Limited General
Units Partners Partner Total
-------- ------------ --------- ------------
<S> <C> <C> <C> <C>
PARTNERS' CAPITAL,
DECEMBER 31, 1994 168,218 $28,947,888 $353,061 $29,300,949
Net loss - 1,534,239 19,197 1,553,436
Redemptions (6,876) (1,223,137) - (1,223,137)
---------- ------------ --------- ------------
PARTNERS' CAPITAL,
MARCH 31, 1995 161,342 $29,258,990 $372,258 $29,631,248
========== ============ ========= ============
PARTNERS' CAPITAL,
DECEMBER 31, 1995 142,822 $27,463,765 $347,972 $27,811,737
Net loss - (670,851) (8,634) (679,485)
Redemptions (2,864) (554,431) - (554,431)
---------- ------------ --------- ------------
PARTNERS' CAPITAL,
MARCH 31, 1996 139,958 $26,238,483 $339,338 $26,577,821
========== ============ ========= ============
See notes to financial statements.
</TABLE>
4
<PAGE>
ML FUTURES INVESTMENTS L.P.
(formerly The Tudor Prime Advisors Fund L.P.)
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ML Futures Investments L.P. (formerly The Tudor Prime Advisors Partnership
L.P.) (the "Partnership" or the "Fund") was organized under the Delaware
Revised Uniform Limited Partnership Act on November 14, 1988 and commenced
trading activities on March 1, 1989. The Partnership engages in the
speculative trading of futures, options and forward contracts on a wide range
of commodities. Merrill Lynch Investment Partners Inc. (formerly ML Futures
Investment Partners Inc.) ("MLIP" or the "General Partner"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc. ("Merrill Lynch"), which in turn is a
wholly-owned subsidiary of Merrill Lynch & Co., Inc., is the general partner
of the Partnership, and Merrill Lynch Futures Inc. ("MLF"), also an affiliate
of Merrill Lynch, is its commodity broker. MLIP has agreed to maintain a
general partner's interest of at least 1% of the total capital in the
Partnership. MLIP and each Limited Partner share in the profits and losses of
the Partnership in proportion to their respective interests in it.
The financial information included herein has been prepared by management
without audit by independent certified public accountants who do not express
an opinion thereon. The statement of financial condition as of December 31,
1995, has been derived from but does not include all the disclosures contained
in the audited financial statements for the year ended December 31, 1995. The
information furnished includes all adjustments which are, in the opinion of
management, necessary for a fair statement of results for the interim period.
The results of operations as presented, however, should not be considered
indicative of the results to be expected for the entire year.
MLIP selects independent advisors (the "Advisors" or the "Trading Advisors")
to manage the Partnership's assets, and allocates and reallocates the
Partnership's assets among existing, replacement and additional Advisors.
Estimates
---------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Revenue Recognition
-------------------
Commodity futures, options, and forward contract transactions are recorded on
the trade date and open contracts are reflected in the financial statements at
their fair value on the last business day of the reporting period. The
difference between the original contract amount and fair value is reflected in
income as an unrealized gain or loss. Fair value is based on quoted market
prices. All commodity futures, options and forward contracts are reflected at
fair value in the financial statements.
Operating Expenses
------------------
MLIP pays for all routine operating costs (including legal, accounting,
printing, postage and similar administrative expenses) of the Partnership.
Income Taxes
------------
No provision for income taxes has been made in these financial statements as
each partner is individually responsible for reporting income or loss based on
their respective share of the Partnership's income and expenses as reported
for income tax purposes.
Distributions
-------------
The Unitholders are entitled to receive, equally per Unit, any distributions
which may be made by the Partnership. No such distributions have been made as
of March 31, 1996.
5
<PAGE>
Redemptions
-----------
A Limited Partner may require the Partnership to redeem some or all of their
Units at the Net Asset Value as of the close of business on the last business
day of any month upon ten calendar days' notice.
Dissolution of the Partnership
------------------------------
The Partnership will terminate on December 31, 2008 or at an earlier date if
certain conditions occur, as well as under certain other circumstances, as set
forth in the Limited Partnership Agreement.
2. RELATED PARTY TRANSACTIONS
All of the Partnership's assets are deposited with MLF. As a means of
approximating the interest rate which would be earned by the Partnership had
100% of its Net Assets on deposit with MLF been invested in 91-day Treasury
bills, MLF pays the Partnership interest on its account equity on deposit with
MLF at a rate of 0.5 of 1% per annum below the prevailing 91-day Treasury bill
rate. In the case of its trading in certain foreign futures contracts, the
Partnership deposits margin in foreign currency denominated instruments or
cash and earns interest generally at a rate of 0.5 of 1% per annum below the
prevailing short-term government interest rate in the country in question. Any
additional economic benefit derived from possession of the Partnership's
assets accrues to MLF or its affiliates.
The Partnership paid brokerage commissions to MLF at a flat monthly rate of 1%
(a 12% annual rate) of the Partnership's month-end Net Assets. This monthly
rate was reduced to .83 of 1% (a 10% annual rate) as of April 1, 1993.
Effective January 1, 1996, the brokerage commission the Partnership pays to
the Commodity Broker was reduced to .8125% (a 9.75% annual rate), and the
Partnership began to pay an administrative fee to the General Partner of
.020833% (a .25% annual rate). Month-end assets are not reduced for purposes
of calculating brokerage commissions by any accrued but unpaid brokerage
commissions or any new profit share. MLIP estimates that the round-turn
equivalent commission rate charged to the Partnership during the quarters
ended March 31, 1996 and 1995 approximately $82 and $119, respectively (not
including, in calculating round-turn equivalents, forward contracts on a
futures-equivalent basis).
MLF pays the Advisors annual Consulting Fees ranging from 1.75% to 4% of the
Partnership's average month-end assets allocated to them for management, after
reduction for a portion of the brokerage commissions.
The Partnership trades forward contracts through a Foreign Exchange Desk (the
"F/X Desk") established by MLIP, that contacts at least two counterparties
along with Merrill Lynch International Bank ("MLIB"), for all of the
Partnership's currency trades. All counterparties other than MLIB are
unaffiliated with any Merrill Lynch entity. The F/X Desk charges a service
fee equal (at current exchange rates) to approximately $5.00 to $12.50 on each
purchase or sale of a futures contract-equivalent face amount of a foreign
currency. No service fees are charged on any trades awarded to MLIB (which
receives a "bid-ask" spread on such trades). MLIB is awarded trades only if
its price (which includes no service fee) is equal to or better than the best
price (including the service fee) offered by any of the other counterparties
contacted.
The F/X Desk trades on the basis of credit lines provided by a Merrill Lynch
entity. The Partnership is not required to margin or otherwise guarantee its
F/X Desk trading.
Certain of the Partnership's currency trades are executed in the form of
"exchange of futures for physical" ("EFP") transactions involving MLIB and
MLF. In these transactions, a spot or forward (collectively referred to as
"cash") currency position is acquired and exchanged for an equivalent futures
position on the Chicago Mercantile Exchange's International Monetary Market.
In its EFP trading, the Partnership acquires cash currency positions through
the F/X Desk in the same manner and on the same terms as in the case of the
Partnership's other F/X Desk trading. When the Partnership exchanges these
positions for futures, there is a "differential" between the prices of these
two positions. This "differential" reflects, in part, the different
settlement dates of the cash and the futures contracts as well as prevailing
interest rates, but also includes a pricing spread in favor of MLIB or another
Merrill Lynch entity.
The Partnership's F/X Desk service fee and EFP differential costs have, to
date, totaled no more than 0.25 of 1% per annum of the Partnership's average
month-end Net Assets.
3. AGREEMENTS
The Partnership and the Advisors have each entered into Advisory Agreements.
These Advisory Agreements generally terminate one year after they are entered
into, subject to certain renewal rights exercisable by the Partnership. The
Advisors determine the commodity futures and forward
6
<PAGE>
contract trades to be made on behalf of their respective Partnership accounts,
subject to certain Partnership trading policies and to certain rights reserved
for MLIP.
Profit shares, generally ranging from 15% to 25% of any New Trading Profit, as
defined, recognized by each Advisor considered individually irrespective of
the overall performance of the Partnership, as of the end of each calendar
quarter are paid by the Partnership to each Advisor. Profit shares are also
paid out in respect of Units redeemed as of the end of interim months during a
calendar quarter to the extent of the applicable percentage of any New Trading
Profit attributable to such Units.
4. WEIGHTED AVERAGE UNITS
The weighted average number of Units outstanding was computed for purposes of
disclosing net income per weighted average Unit. The weighted average number
of Units outstanding at March 31, 1996 and 1995 equals the Units outstanding
as of such date, adjusted proportionately for Units redeemed based on the
respective length of time each was outstanding during the preceding period.
5. FAIR VALUE AND OFF-BALANCE SHEET RISK
The Partnership trades futures, options and forward contracts in interest
rates, stock indices, commodities, currencies, energy and metals The
Partnership's revenues by reporting category for the quarter ended March 31,
1996 was as follows:
<TABLE>
<CAPTION>
1996
----------
<S> <C>
Interest rate and Stock indices $(598,341)
Commodities (199,481)
Currencies 115,850
Energy 380,523
Metals 62,238
-----------
$(239,211)
===========
</TABLE>
Market Risk
-----------
Derivative instruments involve varying degrees of off-balance sheet market
risk, and changes in the level or volatility of interest rates, foreign
currency exchange rates or the market values of the financial instruments or
commodities underlying such derivative instruments frequently result in
changes in the Partnership's unrealized gain or loss on such derivative
instruments as reflected in the Statements of Financial Condition. The
Partnership's exposure to market risk is influenced by a number of factors,
including the relationships among the derivative instruments held by the
Partnership as well as the volatility and liquidity of the markets in which
the derivative instruments are traded.
The General Partner has procedures in place intended to control market risk,
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 the Partnership, calculating the Net
Asset Value of the Advisors' respective Partnership accounts as of the close
of business on each day and reviewing outstanding positions for over-
concentration C both on an Advisor-by-Advisor and on an overall Partnership
basis. While the General Partner does not itself intervene in the markets to
hedge or diversify the Partnership's market exposure, the General Partner may
urge Advisors to reallocate positions, or itself reallocate Partnership assets
among Advisors (although typically only as of the end of a month) in an
attempt to avoid over-concentrations. However, such interventions are
unusual. Except in cases in which it appears that an Advisor has begun to
deviate from past practice or trading policies or to be trading erratically,
the General Partner'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.
Fair Value
----------
The derivative instruments used in the Partnership's trading activities are
marked to market daily with the resulting unrealized gains or losses recorded
in the Statements of Financial Condition and the related profit or loss
reflected in trading revenues in the Statements of Income. The
contract/notional values of the Partnership's open derivative instrument
positions as of March 31, 1996 and December 31, 1995 were as follows:
7
<PAGE>
<TABLE>
<CAPTION>
1996 1995
--------------------------------------------------------------------------------------
Commitment to Commitment to Commitment to Commitment to
Purchase (Futures, Sell (Futures, Purchase (Futures, Sell (Futures,
Options & Forwards) Options & Forwards) Options & Forwards) Options & Forwards)
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Interest rate
and Stock
indices $40,243,961 $100,263,720 $233,892,908 $62,165,959
Commodities 8,106,973 803,033 8,944,541 1,780,506
Currencies 16,963,547 17,910,456 22,533,449 23,426,238
Energy 3,442,234 - 4,790,522 -
Metals 14,791,049 3,195,136 8,506,013 3,974,356
----------- ------------ ------------ -----------
$83,547,764 $122,172,345 $278,667,433 $91,347,059
=========== ============ ============ ===========
</TABLE>
Substantially all of the Partnership's derivative instruments outstanding as
of March 31, 1996 expire within one year.
The contract/notional value of the Partnership's exchange-traded and non-
exchange-traded derivative instrument positions as of March 31, 1996 and
December 31, 1995 was as follows:
<TABLE>
<CAPTION>
1996 1995
--------------------------------------------------------------------------------------
Commitment to Commitment to Commitment to Commitment to
Purchase (Futures, Sell (Futures, Purchase (Futures, Sell (Futures,
Options & Forwards) Options & Forwards) Options & Forwards) Options & Forwards)
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Exchange
traded $74,654,664 $114,868,062 $253,233,552 $67,844,388
Non-Exchanged
traded 8,893,100 7,304,283 25,433,881 23,502,671
----------- ------------ ------------ -----------
$83,547,764 $122,172,345 $278,667,433 $91,347,059
=========== ============ ============ ===========
</TABLE>
The average fair value of the Partnership's derivative instrument positions
which were open as of the end of each calendar month during the quarter ended
March 31, 1996 and the year ended December 31, 1995 was as follows:
<TABLE>
<CAPTION>
1996 1995
--------------------------------------------------------------------------------------
Commitment to Commitment to Commitment to Commitment to
Purchase (Futures, Sell (Futures, Purchase (Futures, Sell (Futures,
Options & Forwards) Options & Forwards) Options & Forwards) Options & Forwards)
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Interest rate
and Stock
indices $ 92,532,307 $141,827,374 $180,800,308 $20,386,155
Commodities 6,418,693 1,101,902 7,173,549 1,204,905
Currencies 25,551,034 30,006,945 34,970,478 31,883,215
Energy 2,538,292 41,980 1,605,552 528,913
Metals 13,251,644 3,419,796 8,842,427 $ 5,677,989
------------ ------------ ------------ -----------
$140,291,970 $176,397,997 $233,392,314 $59,681,177
============ ============ ============ ===========
</TABLE>
A portion of the amounts indicated as off-balance sheet risk reflects
offsetting commitments to purchase and sell the same derivative instrument on
the same date in the future. These commitments are economically offsetting
but are not, as a technical matter, offset in the forward market until the
settlement date.
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
8
<PAGE>
subject to loss in the event of a default, are generally required in exchange
trading, and counterparties may also require margin in the over-the-counter
markets.
The fair value amounts in the above tables represent the extent of the
Partnership's market exposure in the particular class of derivative instrument
listed, but not the credit risk associated with counterparty nonperformance.
The credit risk associated with these instruments from counterparty
nonperformance is the net unrealized gain, if any, included in the Statements
of Financial Condition. The Partnership also has credit risk because the sole
counterparty or broker with respect to most of the Partnership's assets is
MLF.
As of March 31, 1996 and December 31, 1995, $22,489,893 and $18,809,783 of the
Partnership's assets, respectively, were held in segregated accounts at MLF in
accordance with Commodity Futures Trading Commission regulations.
The gross unrealized gain and the net unrealized gain on the Partnership's
open derivative instrument positions as of March 31, 1996 and December 31,
1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
----------------------- -----------------------
Gross Net Gross Net
Unrealized Unrealized Unrealized Unrealized
Gain Gain (Loss) Gain Gain (Loss)
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Exchange
traded $745,376 $ 434,293 $1,852,088 $1,527,947
Non-Exchanged
traded 190,016 (755,084) 160,590 (5,372)
-------- ---------- ---------- -----------
$935,392 $(320,791) $2,012,678 $1,522,575
======== ========== ========== ===========
</TABLE>
The Partnership controls credit risk by dealing almost exclusively with
Merrill Lynch entities as brokers and counterparties.
Item 2: Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
- -------------
Operational Overview: Advisor Selections
- ----------------------------------------
Due to the nature of the Fund's business, its results of operations
depend on MLIP's ability to select Advisors and determine the appropriate
percentage of each series' assets to allocate to them for trading, as well as
the Advisors' ability to recognize and capitalize on trends and other profit
opportunities in different sectors of the world commodity markets. MLIP's
Advisor selection procedure and leveraging analysis, as well as the Advisors'
trading methods, are confidential, so that substantially the only information
that can be furnished regarding the Fund's results of operations is contained in
the performance record of its trading. Unlike operating businesses, general
economic or seasonal conditions do not directly affect the profit potential of
the Fund, and its past performance is not necessarily indicative of future
results. Because of the speculative nature of its trading, operational or
economic trends have little relevance to the Fund's results. MLIP believes,
however, that there are certain market conditions, for example, markets with
strong price trends, in which the Fund has a better likelihood of being
profitable than in others.
As of April 1, 1996, the Partnership's assets were allocated as
follows:
<TABLE>
<CAPTION>
TRADING ADVISOR MARKETS TRADED % ALLOCATION
- -------------------------------- ------------------- ------------
<S> <C> <C>
Chesapeake Capital Corporation Diversified Program 29.23
Sjo, Inc. Diversified Program 27.33
West Course Capital, Inc. Diversified Program 21.23
Hyman Back & Company, Inc. Diversified 15.64
Coral Rock Leverage Program 6.57
------
100.00
</TABLE>
MLIP expects to continue to change both allocations and Advisor
selections from time to time without advance notice to existing investors.
Results of Operations - General
- -------------------------------
MLIP believes that multi-Advisor futures funds should be regarded as
medium- to long-term investments but, unlike an operating business, it is
difficult to identify "trends" in the Fund's operations and virtually impossible
to make any predictions regarding future results based on results to date.
9
<PAGE>
Markets in which sustained price trends occur with some frequency tend
to be more favorable to managed futures investments than "whipsaw," "choppy"
markets, but (i) this is not always the case, (ii) it is impossible to predict
when trending markets will occur and (iii) different Advisors are affected
differently by trends in general as well as by particular types of trends.
The Fund controls credit risk in its trading in the derivatives markets
by trading only through Merrill Lynch entities which MLIP believes to be
creditworthy. The Fund attempts to control the market risk inherent in its
derivatives trading by utilizing a multi-advisor, multi-strategy structure.
This structure purposefully attempts to diversify the Fund's Advisor group among
different strategy types and market sectors in an effort to reduce risk
(although the Fund's portfolio currently emphasizes technical and trend-
following approaches).
Performance Summary
- -------------------
During the first quarter of 1995, the Fund's average month-end Net
Assets equalled $28,603,119 and the Fund recognized gross trading gains of
$1,970,763 or 6.89% of such average month-end Net Assets. Brokerage commissions
of $733,584 or 2.56% and Profit Shares of $43,528 or .15% of average month-end
Net Assets were paid. Interest income of $359,785 or 1.26% of average month-end
Net Assets resulted in net income of $1,553,437 or 5.43% of average month-end
Net Assets, which resulted in a 5.44% increase in the Net Asset Value per Unit
since December 31, 1994.
During the first quarter of 1996, the Fund's average month-end Net
Assets equalled $27,529,130, and the Fund recognized gross trading losses of
$239,211 or (.087)% of such average month-end Net Assets. Brokerage commissions
of $665,538 or 2.42%, Administrative expenses of $17,065 or .06% and Profit
Shares of $60,937 or .22% of average month-end Net Assets were paid. interest
income of $303,266 or 1.10% of average month-end Net Assets resulted in net
losses of $(679,485) or 2.47% of average month-end Net Assets which resulted in
a 4.83% decrease in the overall Net Asset Value per Units since December 31,
1995.
During the first quarter of 1996 and 1995, the Fund experienced 3
profitable months and 3 unprofitable months.
<TABLE>
<CAPTION>
MONTH-END NET ASSET VALUE PER UNIT
Jan. Feb. Mar.
---------------------------
<S> <C> <C> <C>
1995 $168.83 $170.34 $183.65
------- ------- -------
1996 $199.47 $192.27 $189.90
------- ------- -------
</TABLE>
Importance of Market Factors
- ----------------------------
Comparisons between the Fund's performance in a given period in one
fiscal year to the same period in a prior year are unlikely to be meaningful,
given the uncertainty of price movements in the markets traded by the Fund. In
general, MLIP expects that the Fund is most likely to trade successfully in
markets which exhibit strong and sustained price trends. The current Advisor
group emphasizes technical and trend-following methods. Consequently, one would
expect that in trendless, "choppy" markets the Fund would likely be
unprofitable, while in markets in which major price movements occur, the Fund
would have its best profit potential (although there could be no assurance that
the Fund would, in fact, trade profitably). However, trend-followers not
infrequently will miss major price movements, and market corrections can result
in rapid and material losses (sometimes as much as 5% in a single day).
Although MLIP monitors market conditions and Advisor performance on an ongoing
basis in overseeing the Fund's trading, MLIP does not attempt to "market
forecast" or to "match" trading styles with predicted market conditions.
Rather, MLIP concentrates on quantitative and qualitative analysis of
prospective Advisors, as well as on statistical studies of the historical
performance parameters of different Advisor combinations in selecting Advisors
and allocating and reallocating Fund assets among them.
Because managed futures advisors' strategies are proprietary and
confidential and market movements unpredictable, selecting advisors to implement
speculative trading strategies involves considerable uncertainty. Furthermore,
the concentration of the Fund's current Advisor portfolio, both in terms of the
number of managers retained and the common emphasis of their strategies on
technical and trend-following methods, increases the risk that unexpectedly bad
performance, turbulent market conditions or a combination of the two will result
in significant losses.
MLIP's Advisor Selections
- -------------------------
MLIP has no timetable or schedule for making Advisor changes or
reallocations, and generally intends to make a medium- to long-term commitment
to all Advisors selected. However, there can be no assurance as to the
frequency or number of the Advisor changes which may take place in the future,
or as to how long any of the current Advisors will continue to manage assets for
the Fund.
Liquidity
- ---------
Most of the Partnership's assets are held as cash which, in turn, is
used to margin its futures positions and earn interest income and is withdrawn,
as necessary, to pay redemptions and fees.
10
<PAGE>
The futures contracts in which the Partnership trades may become illiquid
under certain market conditions. Commodity exchanges limit fluctuations in
futures prices during a single day by regulations referred to as "daily limits."
During a single day no trades may be executed at prices beyond the daily limit.
Once the price of a futures contract for a particular commodity has increased or
decreased by an amount equal to the daily limit, positions in the commodity can
generally neither be taken nor liquidated unless traders are willing to effect
trades at or within the limit. Futures contracts have occasionally moved to the
daily limit for several consecutive days with little or no trading. Such market
conditions could prevent the Partnership from promptly liquidating its futures
(including its options) positions. There are no limitations on the daily price
moves in trading foreign currency forward contracts through banks, although
illiquidity may develop in the forward markets due to large spreads between
"bid" and "ask" prices quoted. (Forward contracts are the bank version of
currency futures contracts and are not traded on exchanges.)
Capital Resources
- -----------------
The Partnership does not have, nor does it expect to have, any capital
assets and has no material commitments for capital expenditures. The
Partnership uses its assets to supply the necessary margin or premiums for, and
to pay any losses incurred in connection with, its trading activity and to pay
redemptions and fees.
Inflation is not a significant factor in the Fund's profitability,
although inflationary cycles can give rise to the type of major price movements
which can have a materially favorable or adverse impact on the Fund's
performance.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
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 document.
(b) Reports on Form 8-K.
--------------------
There were no reports on Form 8-K filed during the first quarter of fiscal
1996.
11
<PAGE>
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 13, 1996 By /s/JOHN R. FRAWLEY, JR.
-----------------------
John R. Frawley, Jr.
President, Chief Executive Officer
and Director
Date: May 13, 1996 By /s/JAMES M. BERNARD
-------------------
James M. Bernard
Chief Financial Officer,
Treasurer and Senior Vice President
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> BD
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
STATEMENTS OF FINANCIAL CONDITION, CONSOLIDATED STATEMENTS OF OPERATIONS,
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> MAR-31-1996 MAR-31-1995
<CASH> 0 0
<RECEIVABLES> 27,009,904 30,707,936
<SECURITIES-RESALE> 0 0
<SECURITIES-BORROWED> 0 0
<INSTRUMENTS-OWNED> 0 0
<PP&E> 0 0
<TOTAL-ASSETS> 27,009,904 30,707,936
<SHORT-TERM> 0 0
<PAYABLES> 432,083 1,076,688
<REPOS-SOLD> 0 0
<SECURITIES-LOANED> 0 0
<INSTRUMENTS-SOLD> 0 0
<LONG-TERM> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 26,577,821 29,631,248
<TOTAL-LIABILITY-AND-EQUITY> 27,009,904 30,707,936
<TRADING-REVENUE> (239,211) 1,970,763
<INTEREST-DIVIDENDS> 303,266 359,785
<COMMISSIONS> 743,540 777,112
<INVESTMENT-BANKING-REVENUES> 0 0
<FEE-REVENUE> 0 0
<INTEREST-EXPENSE> 0 0
<COMPENSATION> 0 0
<INCOME-PRETAX> (679,485) 1,553,436
<INCOME-PRE-EXTRAORDINARY> (679,485) 1,553,436
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (679,485) 1,553,436
<EPS-PRIMARY> (4.79) 9.31
<EPS-DILUTED> (4.79) 9.31
</TABLE>
