<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, 1997
--------------
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.
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 10 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
---------------------------------
March 31, December 31,
1997 1996
------------ ------------
ASSETS
- ------
Accrued interest $ 46,144 $ 60,983
Equity in commodity futures trading
accounts:
Cash and option premiums 10,510,753 17,891,525
Net unrealized profit on open 901,403 163,702
contracts
Investments 15,379,133 7,519,322
Receivable from investments 7,464 50,934
------------ ------------
TOTAL $26,844,897 $25,686,466
============ ============
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
LIABILITIES:
Redemptions payable $ 245,520 $ 170,082
Profit shares payable 171,558 92,397
Brokerage commissions payable 83,576 145,228
Administrative fees payable 2,389 3,773
------------ ------------
Total liabilities 503,043 411,480
------------ ------------
PARTNERS' CAPITAL:
General Partner (1,787 and 1,787
units) 393,136 368,402
Limited Partners (117,946 and
120,810 units) 25,948,718 24,906,584
------------ ------------
Total partners' capital 26,341,854 25,274,986
------------ ------------
TOTAL $26,844,897 $25,686,466
============ ============
NET ASSET VALUE PER UNIT
(Based on 119,733 and 122,597 Units
outstanding) $ 220.00 $ 206.16
======== ========
See notes to financial statements.
2
<PAGE>
ML FUTURES INVESTMENTS L.P.
---------------------------
(a Delaware limited partnership)
-------------------------------
STATEMENTS OF OPERATIONS
------------------------
For the three For the three
months ended months ended
March 31, March 31,
1997 1996
------------- -------------
REVENUES:
Trading Profits (Loss):
Realized $ 506,511 $ 650,996
Change in unrealized 737,701 (890,207)
------------- -------------
Total trading results 1,244,212 (239,211)
------------- -------------
Interest income 137,457 303,266
Income from investments 707,117 -
------------- -------------
Total revenues 2,088,786 64,055
------------- -------------
EXPENSES:
Profit shares 171,558 60,937
Brokerage commissions 220,070 665,538
Administrative fees 6,129 17,065
------------- -------------
Total expenses 397,757 743,540
------------- -------------
NET INCOME (LOSS) $ 1,691,029 $ (679,485)
============= =============
NET INCOME (LOSS) PER UNIT:
Weighted average number of units
outstanding 121,831 141,866
======= =======
Weighted average net income (loss)
per General Partner and
Limited Partner Unit $ 13.88 $ (4.79)
======= =======
See notes to financial statements.
3
<PAGE>
ML FUTURES INVESTMENTS L.P.
---------------------------
(a Delaware limited partnership)
--------------------------------
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
------------------------------------------
For the three months ended March 31, 1997 and 1996
--------------------------------------------------
<TABLE>
<CAPTION>
Limited General
Units Partners Partner Total
----- -------- ------- -----
<S> <C> <C> <C> <C>
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
=========== ============= ============ =============
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
=========== ============= ============ =============
</TABLE>
See notes to financial statements.
4
<PAGE>
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 The ML Futures Investments L.P. (the "Partnership" or
the "Fund") as of March 31, 1997 and the results of its operations for the
three months ended March 31, 1997 and 1996. 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, 1996
(the "Annual Report").
2. INVESTMENT
At March 31, 1997 the Partnership had an investment in ML Chesapeake
Diversified L.L.C. ("Chesapeake LLC") and effective January 1, 1997, the
Partnership has an additional investment in SJO Prospect Diversified
Portfolio L.L.C. ("SJO LLC")
Total revenues and fees with respect to such investments are set forth as
follows:
<TABLE>
<CAPTION>
Total Brokerage Administrative Profit Income from
Revenue Commissions Fees Shares Investments
---------------- ---------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C>
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
================ ================ ================ ================ =================
</TABLE>
3. FAIR VALUE AND OFF-BALANCE SHEET RISK
The Partnership's revenues by reporting category for the three months ended
March 31, 1997 and March 31, 1996 were as follows:
1997 1996
---------------- ---------------
Interest rate and Stock Indices $ 238,165 $ (598,341)
Commodities 368,821 (199,481)
Currencies 268,194 115,850
Energy (14,900) 380,523
Metals 383,932 62,238
---------------- ---------------
$ 1,244,212 $ (239,211)
================= ===============
5
<PAGE>
The contract/notional values of the Partnership's open derivative instrument
positions as of March 31, 1997 and December 31, 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
-------------------------------------------- --------------------------------------------
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 $ -- $ 105,784,889 $ 23,233,479 $ 4,981,659
Commodities 4,031,182 145,940 435,505 167,947
Currencies 6,454,492 9,673,691 4,329,546 8,191,986
Energy - - - -
Metals 7,010,910 1,175,579 1,788,579 3,100,766
------------------ ------------------ ------------------ ------------------
$ 17,496,584 $ 116,780,099 $ 29,787,109 $ 16,442,358
================== ================== ================== ==================
</TABLE>
Substantially all of the Partnership's derivative instruments outstanding as
of March 31, 1997 expire within one year.
The contract/notional values of the Partnership's exchange-traded and non-
exchange-traded open derivative instrument positions as of March 31, 1997 and
December 31, 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
-------------------------------------------- --------------------------------------------
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 $ 4,564,058 $ 106,497,229 $ 23,668,984 $ 7,277,636
Non-Exchange
traded 12,932,526 10,282,870 6,118,125 9,164,722
------------------ ------------------ ------------------ ------------------
$ 17,496,584 $ 116,780,099 $ 29,787,109 $ 16,442,358
================== ================== ================== ==================
</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 three months
ended March 31, 1997 and the year ended December 31, 1996 was as follows:
<TABLE>
<CAPTION>
1997 1996
-------------------------------------------- --------------------------------------------
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 $ 18,704,604 $ 49,410,155 $ 122,569,950 $ 56,764,487
Commodities 2,943,736 275,967 5,564,897 1,483,611
Currencies 12,494,681 16,207,011 28,363,350 29,061,432
Energy 852,600 841,680 2,652,894 41,980
Metals 6,152,538 1,312,218 10,444,937 6,273,290
------------------ ------------------ ------------------ ------------------
$ 41,148,159 $ 68,047,031 $ 169,596,028 $ 93,624,800
================== ================== ================== ==================
</TABLE>
As of March 31, 1997 and December 31, 1996, $7,353,261 and $13,229,366 of the
Partnership's assets, respectively, were held in segregated accounts at MLF in
accordance with Commodity Futures Trading Commission regulations.
6
<PAGE>
The gross unrealized profit and the net unrealized profit on the Partnership's
open derivative instrument positions as of March 31, 1997, and December 31,
1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
Gross Net Gross Net
Unrealized Unrealized Unrealized Unrealized
Profit Profit (Loss) Profit Profit (Loss)
---------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Exchange
traded $ 682,314 $ 586,275 $ 157,089 $ 154,714
Non-Exchange
traded 467,240 315,128 119,573 8,988
============= =============== ============== ================
$ 1,149,554 $ 901,403 $ 276,662 $ 163,702
============= =============== ============== ================
</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 Merrill Lynch Investment Partners Inc., ("MLIP")'s ability to select
Advisors and determine the appropriate percentage of 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, 1997, the Partnership's assets were allocated as
follows:
TRADING ADVISOR MARKETS TRADED % ALLOCATION
- --------------- -------------- ------------
Chesapeake Capital Corporation Diversified Program 29.47
Sjo, Inc. Diversified Program 28.38
Hyman Beck & Company, Inc. Diversified Program 18.74
Willowbridge Associate Inc. Diversified Program 17.37
Coral Rock Investments, Inc. Leverage Program 6.04
------
100.00
MLIP expects to continue to change both allocations and Advisor
selections from time to time without advance notice to existing investors.
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.
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.
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.
7
<PAGE>
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 three months 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 fees 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 loss of
$679,485 or 2.47% of average month-end Net Assets, which resulted in a 12.12%
decrease in the Net Asset Value per Unit since December 31, 1995.
During the first three months of 1997, the Fund's average month-end Net
Assets equalled $26,023,693 and the Fund recognized gross trading gains of
$1,244,212 or 4.78% of such average month-end Net Assets. Brokerage commissions
of $220,070 or .85%, Administrative fees of $6,129 or .02% and Profit Shares of
$171,558 or .66% of average month-end Net Assets were paid. Interest income of
$137,457 or .53% and earnings from investments of $707,117 or 2.72% of average
month-end Net Assets resulted in net Income of $1,691,029 or 6.50% of average
month-end Net Assets which resulted in a 6.71% increase in the overall Net Asset
Value per Units since December 31, 1996.
During the first three months of 1997 and 1996, the Fund experienced 4
profitable months and 2 unprofitable months.
MONTH-END NET ASSET VALUE PER UNIT
Jan. Feb. Mar.
------- ------- -------
1996 $252.05 $224.51 $189.90
1997 $211.33 $219.04 $220.00
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.
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.
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.)
8
<PAGE>
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 three months of
fiscal 1997.
9
<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, 1997 By /s/JOHN R. FRAWLEY, JR.
-----------------------
John R. Frawley, Jr.
President, Chief Executive Officer
and Director
Date: May 13, 1997 By /s/MICHAEL A. KARMELIN
----------------------
Michael A. Karmelin
Chief Financial Officer,
and Director
10
<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>
<CIK> 0000835666
<NAME> ML FUTURES INVESTMENTS LP
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> MAR-31-1997 MAR-31-1996
<CASH> 0 0
<RECEIVABLES> 26,844,897 27,009,904
<SECURITIES-RESALE> 0 0
<SECURITIES-BORROWED> 0 0
<INSTRUMENTS-OWNED> 0 0
<PP&E> 0 0
<TOTAL-ASSETS> 26,844,897 27,009,904
<SHORT-TERM> 0 0
<PAYABLES> 503,043 432,083
<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> 26,341,854 26,577,821
<TOTAL-LIABILITY-AND-EQUITY> 26,844,897 27,009,904
<TRADING-REVENUE> 1,244,212 (239,211)
<INTEREST-DIVIDENDS> 137,457 303,266
<COMMISSIONS> 397,757 743,540
<INVESTMENT-BANKING-REVENUES> 707,117 0
<FEE-REVENUE> 0 0
<INTEREST-EXPENSE> 0 0
<COMPENSATION> 0 0
<INCOME-PRETAX> 1,691,029 (679,485)
<INCOME-PRE-EXTRAORDINARY> 1,691,029 (679,485)
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,691,029 (679,485)
<EPS-PRIMARY> 13.88 (4.79)
<EPS-DILUTED> 13.88 (4.79)
</TABLE>
