10-Q 1 a2157677z10-q.txt 10-Q 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, 2005 -------------- 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 Managers LLC 222 Broadway 27th Floor New York, NY 10038-2510 ----------------------- (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 / / PART I - FINANCIAL INFORMATION Item 1. Financial Statements ML FUTURES INVESTMENTS L.P. (A DELAWARE LIMITED PARTNERSHIP) STATEMENTS OF FINANCIAL CONDITION

See notes to financial statements. 2 ML FUTURES INVESTMENTS L.P. (A DELAWARE LIMITED PARTNERSHIP) STATEMENTS OF OPERATIONS (unaudited)

Substantially all items of income and expense are derived from the investment in Global Horizons or MM LLC. (Note 2). 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, 2005 AND 2004 (unaudited)

See notes to financial statements. 4 ML FUTURES INVESTMENTS L.P. (A DELAWARE LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS (unaudited) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES In the opinion of management, the financial statements contain all adjustments necessary to present fairly the financial position of ML Futures Investments L.P. (the "Partnership") as of March 31, 2005, and the results of its operations for the three months ended March 31, 2005 and 2004. The operating results for the interim periods may not be indicative of the results for the full year. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Partnership's Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2004. 2. INVESTMENTS Effective December 31, 2004, ML Multi-Manager LLC ("MM LLC") redeemed all of the Partnership units and proceeds were invested on January 2, 2005 in Global Horizons I L.P. ("Global Horizons), formerly known as ML Global Horizons L. P. As of March 31, 2005 the Partnership had an investment in Global Horizons of $44,445,749 and the Partnership's percentage ownership share of Global Horizons was 16.97% . 5 Condensed statements of financial condition and statements of operations for Global Horizons and MM LLC are set forth as follows:

4. FAIR VALUE AND OFF-BALANCE SHEET RISK The Partnership invests indirectly in derivative instruments as a result of its investment in Global Horizons, but does not itself hold any derivative instrument positions. The nature of this Partnership has certain risks, which cannot be presented in the financial statements. The following summarizes some of those risks resulting from its investment in Global Horizons. MARKET RISK Derivative financial instruments involve varying degrees of off-balance sheet market risk. Changes in the level or volatility of interest rates, foreign currency exchange rates or the market values of the underlying financial instruments or commodities underlying such derivative instruments frequently results in changes in the Partnership's allocation of net unrealized profit on such derivative instruments as reflected in the Statements of Financial Condition of Global Horizons. The Partnership's exposure to market risk is influenced by a number of factors, including the relationships among the derivative instruments held by Global Horizons, as well as the volatility and liquidity of such markets in which such derivative instruments are traded. Merrill Lynch Investment Managers LLC ("MLIM LLC"), the General Partner, 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 by the General Partner for Global Horizons, calculating the Net Asset Value of the Advisors' respective Partnership accounts and Global Horizons' 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 MLIM LLC does not itself intervene in the markets 6 to hedge or diversify the Partnership's market exposure, MLIM LLC may urge Advisors to reallocate positions, or itself reallocate Partnership assets, through Global Horizons, 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, MLIM LLC's basic risk control procedures consist simply of the ongoing process of advisor monitoring and selection with the market risk controls being applied by the Advisors themselves. CREDIT RISK The risks associated with exchange-traded contracts are typically perceived to be less than those associated with over-the-counter (non-exchange-traded) transactions, because exchanges typically (but not universally) provide clearinghouse arrangements in which the collective credit (in some cases limited in amount, in some cases not) of the members of the exchange is pledged to support the financial integrity of the exchange. In over-the-counter transactions, on the other hand, traders must rely solely on the credit of their respective individual counterparties. Margins, which may be subject to loss in the event of a default, are generally required in exchange trading, and counterparties may require margin in the over-the-counter markets. The Partnership, through Global Horizons, has credit risk with respect to non-performance of its counterparties and brokers, but attempts to mitigate this risk by dealing almost exclusively with Merrill Lynch entities as clearing brokers. The Partnership, through Global Horizons, in its normal course of business, enters into various contracts, with Merrill Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S") acting as its commodity broker. Pursuant to the brokerage agreement with MLPF&S (which includes a netting arrangement), to the extent that such trading results in receivables from and payables to MLPF&S, these receivables and payables are offset and reported as a net receivable or payable in the financial statements of Global Horizons in the Equity in commodity futures trading accounts in the Statements of Financial Condition. Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations MONTH-END NET ASSET VALUE PER UNIT

Performance Summary January 1, 2005 to March 31, 2005 All of the Partnership's assets are invested in Global Horizons. The Partnership recognizes trading profits or losses as an investor in Global Horizons. The following commentary describes the trading results of Global Horizons. The Partnership posted a loss for the first quarter. Losses in the currency and global equity sectors outweighed gains experienced in the agricultural sector. 7 The interest rate sector was the best performing sector for the Partnership. The Partnership benefited from long U.S. dollar positions versus the Euro and long Euro and Japanese fixed incomes. Systematic, long-term trend followers also posted gains in the interest rate sector. The energy sector was the second highest performing sector for the Partnership. Gains were experienced in the energy sector as the Partnership benefited from long positions in crude oil and gas as these industries profited. Gains were also posted in long crude oil and heating oil positions. The agricultural sector also performed well for the quarter. Gains were experienced from long positions in cattle and hog markets. Short grain positions and long soybean positions detracted from performance mid-quarter. However, the quarter ended with gains posted due to coffee, which experienced a lack of supply and a growing demand. The metals sector posted a gain for the quarter. The Partnership benefited from long positions in base and precious metals, such as gold, copper and zinc. The stock indices sector posted a loss for the quarter. Losses occurred in the beginning of the quarter due to a trend reversal from long global equities to short global equities. Profits were made through long positions on the FTSE index and Asian equities. Stock indices contributed negatively to performance as the equity markets declined at the end of the quarter. The currency sector posted the greatest loss for the Partnership. Losses at the beginning of the quarter were due to a trend reversal from short U.S. dollar positions to long U.S. dollar positions. Long Japanese yen and Swiss franc positions also experienced losses. With the U.S. Federal Reserve expressing concern about inflation, investors predicted that interest rates and the U.S. dollar would rise. This caused losses as investors fled from emerging currencies. Long Australian dollar and Mexican peso positions also contributed to negative performance. January 1, 2004 to March 31, 2004 All of the Partnership's assets were invested in MM LLC. The Partnership recognizes trading profits or losses as an investor in MM LLC. The following commentary describes the trading results of MM LLC MM LLC experienced gains in the interest rate, metals, agricultural commodities, energy, and currency sectors and losses in stock indices. Overall, for the quarter, MM LLC experienced gains. The interest sector posted the largest gains for the quarter despite choppy trading conditions early in the quarter. In January, profits were generated from various positions at the short end of the curve in Canada and Europe, while losses were posted at longer points in the curve in both the U.S. and Europe. In February, fixed income markets resumed their slow upward trend. In March, long exposure to most of the major global yield curves proved to generate positive results. The metals sector posted gains for the quarter as well. In January, both precious and industrial metals generated positive returns from the long side. Base metals continued to move higher with the exception of nickel. Copper rose to its highest price in more than six years due to supply disruptions and heavy demand from new home construction. In February, base metals continued their upward move as the sector experienced strong demand, shrinking supply and U.S. dollar weakness, helping to drive prices higher. Strong industrial demand for copper and continued speculative interest pushed the market to a seven year high. In March, industrial metals generated minor losses for MM LLC, while precious metals contributed significantly, particularly, gold and silver. 8 The agricultural commodities sector posted gains early in the quarter as the USDA cut its forecast of the crop supply for both soybeans and corn, which sent prices surging. In February, grain markets extended their long-term rally, with corn and soybeans being pushed to highs on strong demand and low stockpiles. Grain markets continued to extend their long-term rally in March, with corn, soybeans and soymeal being pushed higher on strong demand from Asia and lower estimates of supply from South America. The energy sector posted gains for the quarter. In crude oil and more broad energy markets, weather and OPEC were the dominant factors behind price moves during January. Weather was extremely cold in the Northeast and Midwest U.S., which caused a sharp rally in natural gas and heating oil. Crude oil had a sharp rally in early February and gradually sold-off as the markets became complacent about the OPEC meeting. The market continued this trend, as weather-related demand and tight U.S. inventories continued. In March, the energy sectors posted a small loss under extremely volatile market conditions. The crude oil market had very choppy performance during the month, as did the heating oil market. The currency sector posted slight gains for the quarter. The currency sector began the quarter with gains as it continued its long trend of a weakening U.S. dollar. However, trading was very choppy and gains generated in the early part of January were lost. In February and March, the trend continued as currency trading was very difficult due to the heightened volatility in the markets. Stock indices posted losses despite gains early in the quarter. Stock indices posted a profit for January, as long exposure to global equities from momentum based and fundamental models performed well. In February, long exposure to global equities produced positive performance. In March, stock indices posted a loss that exceeded the gains from earlier in the quarter. Long Nikkei profits were overcome by losses in long exposure to European equities, which later flipped to short positions by month-end. Item 3. Quantitative and Qualitative Disclosures About Market Risk Not applicable Item 4. Controls and Procedures Merrill Lynch Investment Managers LLC, the General Partner of ML Futures Investments L.P., with the participation of the General Partner's Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures with respect to the Partnership within 90 days of the filing date of this quarterly report, and, based on this evaluation, has concluded that these disclosure controls and procedures are effective. Additionally, there were no significant changes in the Partnership's internal controls or in other factors that could significantly affect these controls subsequent to the date of this evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. 9 PART II - OTHER INFORMATION Item 1. Legal Proceedings There are no pending proceedings to which the Partnership, Global Horizons, or MLIM LLC 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 2005. 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 MANAGERS LLC General Partner Date: May 16, 2005 By /s/ FABIO P. SAVOLDELLI ----------------------- Fabio P. Savoldelli Managing Director and Chief Investment Officer -Alternative Strategies Advisers Division (Principal Executive Officer) Date: May 16, 2005 By /s/ PATRICK HAYWARD ------------------- Patrick Hayward Chief Financial Officer (Principal Financial and Accounting Officer) 11

ML FUTURES INVESTMENTS LP 10-Q