ML FUTURES INVESTMENTS LP - 10-Q Quarterly Report

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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 June 30, 2002
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OR

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from to
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Commission File Number 33-22864

ML FUTURES INVESTMENTS L.P.
---------------------------
(Exact Name of Registrant as
specified in its charter)

DELAWARE 36-3590615
- ----------------------------------- ----------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)

c/o MLIM Alternative Strategies LLC
Princeton Corporate Campus
800 Scudders Mill Road - Section 2G
Plainsboro, New Jersey 08536
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(Address of principal executive offices)
(Zip Code)

609-282-6996
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(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements

ML FUTURES INVESTMENTS L.P.
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(a Delaware Limited Partnership)
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STATEMENTS OF FINANCIAL CONDITION
---------------------------------

See notes to financial statements.

2

ML FUTURES INVESTMENTS L.P.
---------------------------
(a Delaware Limited Partnership)
--------------------------------

STATEMENTS OF OPERATIONS
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(unaudited)

See notes to financial statements.

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ML FUTURES INVESTMENTS L.P.
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(a Delaware Limited Partnership)
--------------------------------

STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
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For the six months ended June 30, 2002 and 2001
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(unaudited)

See notes to financial statements.

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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") as of June 30, 2002, and the
results of its operations for the three and six months ended June 30, 2002 and
2001. However, 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 conformity 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,
2001.

2. INVESTMENTS

As of June 30, 2002 and December 31, 2001, the Partnership had an investment in
ML Multi-Manager Portfolio ("MM LLC") of $11,904,743 and $12,802,184,
respectively. As of June 30, 2002, and December 31, 2001, the Partnership's
percentage ownership share of MM LLC was 6.48% and 6.35%, respectively.

Total revenues and fees with respect to the Partnership's investment are set
forth as follows:

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Condensed statements of financial condition and statements of operations for MM
LLC are set forth as follows:

3. FAIR VALUE AND OFF-BALANCE SHEET RISK

The nature of this Partnership has certain risks, which can not be presented in
the financial statements. The following summarizes some of those risks.

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
resulted in changes in the Partnership's net unrealized profit (loss) on such
derivative instruments as reflected in the Statements of Financial Condition or,
with respect to Partnership assets invested in MM LLC, the net unrealized profit
as reflected in the Statements of Financial Condition of the 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 such markets
in which such derivative instruments are traded.

MLIM Alternative Strategies LLC ("MLIM AS LLC") 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 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 MLIM AS
LLC does not itself intervene in the markets to hedge or diversify the
Partnership's market exposure, MLIM AS LLC may urge Advisors to reallocate
positions, or itself

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reallocate Partnership assets, through MM LLC, 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 AS 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 MM LLC, has credit risk in respect of its
counterparties and brokers, but attempts to mitigate this risk by dealing
exclusively with Merrill Lynch entities as clearing brokers.

The Partnership, through MM LLC, 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 MM LLC 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

Performance Summary

All of the Partnership's assets are 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.

JANUARY 1, 2002 to JUNE 30, 2002
- --------------------------------
January 1, 2002 to March 31, 2002

The energy sector was the only profitable trading strategy for the quarter.
Natural gas short positions were profitable as the positions benefited from the
mild weather in the United States. The sector experienced large declines in
February due to increased concerns of the health of world economies. This lead
to price instability. Gains were realized in March in the physical commodity
markets, as fears of increased conflicts in the Middle East could potentially
result in a shortage of oil supplies.

Trading in stock indices resulted in losses for the quarter. Long equity
exposures suffered losses in choppy market conditions as profit forecasts fell
short and concern over the Enron accounting situation deepened. Uncertainty in
the global marketplace prevailed, making for extremely difficult trading

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conditions. Long positions appreciated in March, notably in Japan, Germany and
France, but not enough to offset earlier losses.

Conflicting economic reports was the cause for losses in the interest rate
sector. These reports prompted the Advisors to flip exposures from long
positions to short positions in most major international bond markets during the
quarter. European fixed income exposures posted losses under particularly
direction-less markets. Global bond prices declined on growing optimism for a
stronger economic outlook for the remainder of 2002.

Trading in the metals sector was down for the quarter. Short positions in base
metals were unsuccessful early on as base metals prices soared on the hope that
an economic recovery in the United States would boost demand. Precious metal
prices declined as the U. S. economy continued to show signs of stabilizing and
inflation concerns waned. Long gold positioning generated gains as prices rose
above $300 for the first time in two years.

Currency trading resulted in losses for the Partnership. In January, gains were
generated in short Japanese yen positions as the Japanese yen continued to
depreciate against the U. S. dollar due to continued deterioration of economic
fundamentals in Japan. In February, all of the futures traded currencies
appreciated against the U.S. dollar, except the Canadian dollar. March was a
relatively volatile month for G-7 currencies. The U.S. dollar fell from 133 to
127.50 Japanese Yen during the first week, and then almost completely reversed
the move by month-end, causing losses.

Agricultural trading was the least successful strategy. During January and
February, coffee prices were in a downward trend. This trend sharply reversed in
March as reduced exports from Mexico and Central America trimmed inventories of
exchange-approved soybeans in U.S. warehouses. As prices rose, the Partnership's
short positions sustained losses.

April 1, 2002 to June 30, 2002

Profits resulting from trading in the currency sector provided the Partnership
with the majority of its gains in the second quarter. The decline in the U.S.
dollar continued through June unabated fueled by the decline in the U.S. equity
markets.

The interest rate sector was profitable for the Partnership despite its slow
start. Yields on major debt-instruments continued to decline. U.S. fixed income
markets have rallied sharply due to the flight-to-safety effect as well as the
conviction that the U.S. Federal Reserve will raise rates later rather than
sooner.

The agricultural commodities sector posted small gains for the quarter. Strong
gains were posted in livestock and grains in April as prices trended downward.
Soybean by-products positions also contributed to the profits in this sector.
The continued weakness in the U.S. dollar and low stockpiles in grains and
soybeans should aid in sustaining a price rally in the summer months.

The metals sector sustained slight losses for the quarter. In June, the uptrend
in gold and silver reversed and losses were sustained on long position
eliminating profits earned earlier in the quarter.

Energy futures experienced whipsaw markets and trading brought in losses for the
Partnership. The market was volatile during the quarter due to continued turmoil
in the Middle East.

Losses were experienced in the stock indices sector. The quarter began with the
stall of the appreciation in the U.S. and European equity markets in April due
to weak recovery expectations. The continued erosion of confidence in the
quarter about corporate earnings and the timing of recovery caused both the U.S.
and European markets to fall back.

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JANUARY 1, 2001 to JUNE 30, 2001
- --------------------------------
January 1, 2001 to March 31, 2001

Trading in the interest rate sector was highly profitable for the Partnership
during the quarter. Long positions in the Euro resulted in gains in January. The
impact of the weakening U.S. economy and the Federal Reserve's move to cut
interest rates was felt throughout the interest rate futures market, as Euro
futures contracts rose dramatically since December 2000. Euro-yen and Euro-bund
cross futures trading produced gains for the sector.

Agricultural trading was profitable despite losses sustained early in the
quarter. During January, the agricultural sector faced weak grain and oilseed
prices. Excellent growing weather in the U.S., Argentina and Brazil, concerns
about U.S. export potential and inventories at historically high levels, kept
the markets on the defensive. Contract lows in cotton produced gains for short
positions. The cotton market sank to a 15-year low as a result of short supply
and increased demand. Potential increased planting, paired with a drop in
demand, forced prices lower.

Currency trading resulted in gains for the Partnership. Losses were realized
during January and February on long Euro and Swiss franc trading. After rallying
from a low of 82--83 cents to 96 cents, the Euro fell back to the 90 cent level,
despite strong fundamentals. This resulted in losses for the Partnership's long
positions. The sector rebounded strongly in March on substantial gains from
short Japanese yen positions.

Trading in the metals markets was successful. Losses from short silver positions
were sustained in January as silver had a minor technical run as it reached its
four month high. Short silver positions were profitable in February as silver
prices reversed its earlier trend and declined as the market was generally weak
and on gold's failure to rally weighed on the market. March was a volatile
trading month as another attempted gold rally failed, resulting in gains in
short positions.

Stock index trading was moderately successful despite uncertainty in equity
markets. Short S&P 500 and NASDAQ positions resulted in gains as global equity
markets remain caught between negative news about earnings and the potential
positive effects of further monetary easing.

Energy trading was the only unprofitable sector during the quarter. Natural gas
prices pulled back in January after rallying during the last few months,
resulting in losses. Crude oil prices were driven lower by both a seasonal
downturn in global oil usage and heavier than normal refinery maintenance work,
reducing the demand. Short natural gas positions were unprofitable in March on
concerns over supply availability.

April 1, 2001 to June 30, 2001

Trading in agricultural commodities was profitable despite a sluggish start to
the quarter. The market for grains has been weak throughout the beginning of
2001. Excellent crops in Argentina and Brazil and a good start to the U.S.
growing season has resulted in weakness in the grain complex. Also, during the
quarter, profits from short corn and cotton positions outweighed losses from
soybeans.

Stock index trading was profitable for the Partnership as long NASDAQ 100
positions outweighed losses from German DAX trading. Trading in S&P contracts
was successful despite continued volatility.

Trading in the energy sector was down slightly. Despite profitable unleaded gas
trading, losses were posted on long light crude oil and heating oil positions.
Crude prices fell due to increased total inventories, stemming from the effects
of crude oil stores rising more than 42 million barrels over the last

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few months. The energy sector faded from downside pressure from a slowing global
economy, inventory surplus and OPEC's decision to leave production levels
unchanged.

Currency trading suffered losses, particularly in Euro and Japanese yen
positions. The further weakening of the Euro and Japanese yen displayed how the
global economy is not immune to the slowdown of the U.S. economy. Gains were
posted in the Canadian dollar at quarter end due to a healthy trade surplus and
a favorable short-term interest rate differential.

The metals sector performed poorly. Weakness in the Euro, a decline in the
Australian dollar to all time lows and producer and Central Bank selling sent
gold prices lower. Silver trading was volatile, as China's silver exports have
been high due to poor domestic demand, adversely affecting prices.

Trading in the interest rate markets was accounted for most of the Partnership's
trading losses for the quarter. Positions in Euro-bund futures, three-month
Euribor futures and U.S. ten-year notes were unprofitable.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

There are no pending proceedings to which the Partnership or MLIM
AS 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.
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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 six months
of fiscal 2002.

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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: MLIM ALTERNATIVE STRATEGIES LLC
(General Partner)

Date: August 15, 2002 By /s/ FABIO P. SAVOLDELLI
-----------------------
Fabio P. Savoldelli
Chairman, Chief Executive Officer and Manager
(Principal Executive Officer)

Date: August 15, 2002 By /s/ MICHAEL L. PUNGELLO
-----------------------
Michael L. Pungello
Vice President, Chief Financial Officer
and Treasurer
(Principal Financial and Accounting Officer)

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EXHIBIT 99

Form of Certification Pursuant to Section 1350 of Chapter 63
of Title 18 of the United States Code

We, Fabio P. Savoldelli and Michael L. Pungello, the chief executive officer and
chief financial officer, respectively, of MLIM Alternative Strategies LLC,
general partner of ML Futures Investments L.P., certify that (i) the quarterly
report Form 10-Q fully complies with the requirements of Section 13(a) or 15(d)
of the Securities and Exchange Act of 1934 and (ii) the information contained in
the Form 10-Q fairly presents, in all material respects, the financial condition
and results of operations of ML Futures Investments L.P.

Date: August 15, 2002 By /s/ FABIO P. SAVOLDELLI
-----------------------
Fabio P. Savoldelli
Chairman, Chief Executive Officer and Manager
(Principal Executive Officer)

Date: August 15, 2002 By /s/ MICHAEL L. PUNGELLO
-----------------------
Michael L. Pungello
Vice President, Chief Financial Officer
and Treasurer
(Principal Financial and Accounting Officer)

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