<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, 2000
--------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to __________________
Commission File Number 33-22864
ML FUTURES INVESTMENTS L.P.
---------------------------
(Exact Name of Registrant as
specified in its charter)
Delaware 36-3590615
- ------------------------------- --------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
c/o Merrill Lynch Investment Partners Inc.
Princeton Corporate Campus
800 Scudders Mill Road - Section 2G
Plainsboro, New Jersey 08536
----------------------------
(Address of principal executive offices)
(Zip Code)
609-282-6996
---------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
<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,
2000 1999
(unaudited)
---------------- -----------------
<S> <C> <C>
ASSETS
Investments $ 15,712,059 $17,051,954
Receivable from investments 271,829 239,240
---------------- -----------------
TOTAL $ 15,983,888 $17,291,194
================ =================
LIABILITY AND PARTNERS' CAPITAL
Liability - Redemptions payable $ 271,829 $ 239,240
PARTNERS' CAPITAL:
General Partner (777 and 1,027 Units) 180,974 244,458
Limited Partners (66,676 and 70,606 Units) 15,531,085 16,807,496
---------------- -----------------
Total partners' capital 15,712,059 17,051,954
---------------- -----------------
TOTAL $ 15,983,888 $17,291,194
================ =================
NET ASSET VALUE PER UNIT
(Based on 67,453 and 71,633 Units outstanding) $ 232.93 $ 238.05
================ =================
</TABLE>
See notes to financial statements.
2
<PAGE>
ML FUTURES INVESTMENTS L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
For the three For the three
months ended months ended
March 31, March 31,
2000 1999
----------------- -----------------
<S> <C> <C>
Loss from investments $ (350,537) $ (111,985)
----------------- -----------------
NET LOSS $ (350,537) $ (111,985)
================= =================
NET LOSS PER UNIT:
Weighted average number of units
outstanding 70,024 86,155
================= =================
Weighted average net loss
per General Partner
and Limited Partner Unit $ (5.01) $ (1.30)
================= =================
</TABLE>
See notes to financial statements.
3
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ML FUTURES INVESTMENTS L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND MARCH 31, 1999
(unaudited)
<TABLE>
<CAPTION>
Units General Partner Limited Partners Total
---------------- ----------------- ----------------- ----------------
<S> <C> <C> <C> <C>
PARTNERS' CAPITAL,
December 31, 1998 87,302 $ 247,344 $ 20,779,919 $ 21,027,263
Net loss - (1,305) (110,680) (111,985)
Redemptions (3,661) - (876,106) (876,106)
---------------- ----------------- ----------------- ----------------
PARTNERS' CAPITAL,
March 31, 1999 83,641 $ 246,039 $ 19,793,133 $ 20,039,172
================ ================= ================= ================
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
================ ================= ================= ================
</TABLE>
See notes to financial statements.
4
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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" or the "Fund") as of March 31,
2000, and the results of its operations for the three months ended March 31,
2000 and March 31, 1999. 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 generally 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, 1999 (the "Annual Report").
2. INVESTMENTS
As of March 31, 2000 and December 31, 1999, the Partnership had an investment in
ML Multi Manager Fund, LLC ("MM LLC") of $15,712,059 and $17,051,954,
respectively.
Total revenues and fees with respect to the Fund's investment are set forth as
follows:
<TABLE>
<CAPTION>
For the three months Total Brokerage Administrative Profit Loss from
ended March 31, 2000 Revenue Commissions Fees Shares Investments
-------------- ---------------- ----------------- ------------- --------------------
<S> <C> <C> <C> <C> <C>
MM LLC 26,660 365,017 10,429 1,751 (350,537)
-------------- ---------------- ----------------- ------------- --------------------
<CAPTION>
For the three months Total Brokerage Administrative Profit Loss from
ended March 31, 1999 Revenue Commissions Fees Shares Investments
-------------- ---------------- ----------------- ------------- --------------------
<S> <C> <C> <C> <C> <C>
MM LLC 391,836 455,369 13,011 35,441 (111,985)
-------------- ---------------- ----------------- ------------- --------------------
</TABLE>
5
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Condensed statements of financial condition and statements of operations for MM
LLC are set forth as follows:
<TABLE>
<CAPTION>
MM LLC MM LLC
--------------- ----------------
March 31, December 31,
2000 1999
(unaudited)
--------------- ----------------
<S> <C> <C>
Assets $ 92,056,725 $ 100,901,677
=============== ================
Liabilities $ 3,074,907 $ 2,906,392
Members' Capital 88,981,818 97,995,285
--------------- ----------------
Total $ 92,056,725 $ 100,901,677
=============== ================
<CAPTION>
For the three For the three
months ended months ended
March 31, 2000 March 31, 1999
(unaudited) (unaudited)
--------------- ----------------
<S> <C> <C>
Revenues $ 158,041 $ 2,230,887
Expenses 2,097,140 2,805,784
--------------- ----------------
Net Income $ (1,939,099) $ (574,897)
=============== ================
</TABLE>
<PAGE>
3. FAIR VALUE AND OFF-BALANCE SHEET RISK
As of June 1, 1998, the Partnership invested all of its assets in MM LLC.
Accordingly, the Partnership invested indirectly in derivative
instruments, but does not itself hold any derivative instrument positions.
As such, MLIP does not believe that the adoption of the provisions of
Statement of Financial Accounting Standards No. 133 had a significant
effect on the financial statements of the Partnership. Consequently, no
such positions subsequent to May 31, 1998 are reflected in these financial
statements.
MARKET RISK
Derivative instruments involve varying degrees of off-balance sheet market
risk. Changes in the level or volatility of interest rates, foreign
currency exchange rates or market values of the financial instruments or
commodities underlying such derivative instruments frequently result in
changes in the Partnership's net unrealized profit on such derivative
instruments as reflected in the Statements of Financial Condition or, with
respect to Partnership assets invested in MM LLC, the
6
<PAGE>
net unrealized profit (loss) as reflected in the respective Statements of
Financial Condition of 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 the Partnership, and MM LLC, as well as the
volatility and liquidity of the markets in which such derivative
instruments are traded.
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 the Partnership or MM LLC, and
include adjusting the percentage of the Partnership's, or MM LLC's total
assets allocated to trading, calculating the Net Asset Value of the
Advisors' respective Partnership accounts and 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 (although MLIP may
adjust the percentage of the Partnership's total assets allocated to
trading), MLIP 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-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.
One important aspect of MLIP's risk controls is its adjustments to the
leverage at which the Partnership trades. By controlling the percentage of
the Partnership's assets allocated to trading, MLIP can directly affect the
market exposure of the Partnership. Leverage control is the principal means
by which MLIP hopes to be able to ensure that Merrill Lynch is never
required to make any payments under its guarantee that the Net Asset Value
per Unit will equal no less than a specified minimum as of the Principal
Assurance 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 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 has credit risk in respect of its counterparties and
brokers, but attempts to control this risk by dealing almost exclusively
with Merrill Lynch entities as counterparties and clearing brokers.
The Partnership, through MM LLC, in its normal course of business, enters
into various contracts, with 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 future 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
<TABLE>
<CAPTION>
----------------------------------
Jan. Feb. Mar.
----------------------------------
<S> <C> <C> <C>
1999 $237.81 $240.67 $239.59
----------------------------------
2000 $238.86 $237.06 $232.93
----------------------------------
</TABLE>
Performance Summary
JANUARY 1, 1999 TO MARCH 31, 1999
Profits were produced from trading in crude oil, heating oil, and unleaded gas.
As the year opened, the global oil balance continued to show signs of being
lopsided with estimated year-end 1998 inventories at their highest levels
since 1984. During January, petroleum stocks rose by 21 million barrels
compared with a
7
<PAGE>
typical gain of 6 to 7 million barrels. Then, on March 23, OPEC ratified new
production cuts totaling 1.716 million barrels per day at its conference. These
new production cuts were scheduled to go into effect on April 1 and proved to be
harbingers of higher prices for crude.
Agricultural trading was also profitable overall, as gains in live hogs and live
cattle offset losses in corn positions. Hog prices plummeted due to a glut of
hogs in the market. At the beginning of the quarter, the corn market continued
to struggle despite a stretch of solid export business. The market's negative
sentiment was deepened by ongoing favorable weather in South America which
continued through February, even though there was a sharp reduction in
Argentina's planted area. Lack of enthusiasm for new crop and less than
spectacular demand continued to depress the corn market throughout the quarter.
Interest rate trading proved profitable as well, as losses in Japanese
10-year government bonds were offset by gains in 10-year U.S. Treasury notes
and German 10-year bonds. Early in January, the yield on the Japanese
government 10-year bond increased to 1.8%, sharply above the record low of
0.695% it reached on October 7, 1998. This was triggered by the Japanese
Trust Fund Bureau's decision to absorb a smaller share of future issues,
leaving the burden of financing future budget deficits to the private sector.
Losses in aluminum overshadowed slight gains in copper during the first quarter.
In January, burdensome warehouse stocks and questionable demand prospects
weighed on base metals as aluminum fell to a 5-year low and copper fell to
nearly an 11-year low. Major surpluses in both metals were expected, keeping
prices down, and there was no supply side response to weak demand and lower
prices. However, the end of March showed copper and aluminum leading a surge in
base metals as prices recovered from multi-year lows.
Losses were suffered in currency trading during the quarter, as losses in
Japanese yen overpowered gains in Swiss francs. On a trade-weighted basis,
the Swiss franc ended the quarter at close to a seven-month low, mostly as a
result of the stronger U.S. dollar. In January, the yen had advanced by
nearly 35% against the dollar since early in August, and the Bank of Japan
lowered rates to keep the economy sufficiently liquid so as to allow fiscal
spending to restore some growth to the economy and to drive down the surging
yen.
Stock index trading was also unprofitable, as losses were sustained in Hang Seng
and CAC40 positions. Also of note, the Dow Jones Industrial Average closed above
the 10,000 mark for the first time ever at the end of March, setting a record
for the index.
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, however 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable
8
<PAGE>
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
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 2000.
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 15, 2000 By /s/ JOHN R. FRAWLEY, JR.
------------------------
John R. Frawley, Jr.
Chairman, Chief Executive Officer,
President and Director
Date: May 15, 2000 By /s/ MICHAEL L. PUNGELLO
-----------------------
Michael L. Pungello
Vice President, Chief Financial Officer
and Treasurer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> BD
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-2000 DEC-31-1999
<PERIOD-START> JAN-01-2000 JAN-01-1999
<PERIOD-END> MAR-31-2000 MAR-31-1999
<CASH> 0 0
<RECEIVABLES> 15,983,888 20,380,336
<SECURITIES-RESALE> 0 0
<SECURITIES-BORROWED> 0 0
<INSTRUMENTS-OWNED> 0 0
<PP&E> 0 0
<TOTAL-ASSETS> 15,983,888 20,380,336
<SHORT-TERM> 0 0
<PAYABLES> 271,829 341,164
<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> 15,712,059 20,039,172
<TOTAL-LIABILITY-AND-EQUITY> 15,983,888 20,380,336
<TRADING-REVENUE> (350,537) (111,985)
<INTEREST-DIVIDENDS> 0 0
<COMMISSIONS> 0 0
<INVESTMENT-BANKING-REVENUES> 0 0
<FEE-REVENUE> 0 0
<INTEREST-EXPENSE> 0 0
<COMPENSATION> 0 0
<INCOME-PRETAX> (350,537) (111,985)
<INCOME-PRE-EXTRAORDINARY> (350,537) (111,985)
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (350,537) (111,985)
<EPS-BASIC> (5.01) (1.30)
<EPS-DILUTED> (5.01) (1.30)
</TABLE>
