ML SELECT FUTURES I 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 September 30, 2004

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 0-05269

ML SELECT FUTURES I LP
----------------------
(Exact Name of Registrant as
specified in its charter)

Delaware 13-3879393
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)

c/o Merrill Lynch Alternative Investments LLC
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 / /

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

ML SELECT FUTURES I LP
(A DELAWARE LIMITED PARTNERSHIP)

STATEMENTS OF FINANCIAL CONDITION

See notes to financial statements.

2

ML SELECT FUTURES I LP
(A DELAWARE LIMITED PARTNERSHIP)

STATEMENTS OF OPERATIONS
(unaudited)

See notes to financial statements.

3

ML SELECT FUTURES I LP
(A DELAWARE LIMITED PARTNERSHIP)

STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(unaudited)

See notes to financial statements.

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ML SELECT FUTURES I LP
(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 (consisting of only normal recurring adjustments) necessary to
present fairly the financial position of ML Select Futures I LP (the
"Partnership") as of September 30, 2004, and the results of its operations
for the three and nine months ended September 30, 2004 and 2003. 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 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, 2003.

2. FAIR VALUE AND OFF-BALANCE SHEET RISK

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

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 the 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. 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.

Merrill Lynch Alternative Investments LLC ("MLAI"), 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 Sunrise
Capital Partners, LLC ("Sunrise"), calculating the Net Asset Value of the
Partnership as of the close of business on each day and reviewing
outstanding positions for over-concentrations. While MLAI does not itself
intervene in the markets to hedge or diversify the Partnership's market
exposure, MLAI may urge Sunrise to reallocate positions in an attempt to
avoid over-concentrations. However, such interventions are unusual and
unless it appears that Sunrise has begun to deviate from past practice or
trading policies or to be trading erratically, MLAI's basic risk control
procedures consist simply of the ongoing process of advisor monitoring,
with the market risk controls being applied by Sunrise itself.

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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 also require
margin in the over-the-counter markets.

The credit risk associated with these instruments from counterparty
nonperformance is the net unrealized profit, if any, included in the
Statements of Financial Condition. The Partnership attempts to mitigate
this risk by dealing exclusively with Merrill Lynch entities as clearing
brokers.

The Partnership, 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 arrangement 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 and
included in Equity from commodity futures trading accounts in Net
Unrealized profit on open contracts on 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, 2004 TO SEPTEMBER 30, 2004

January 1, 2004 to March 31, 2004

The Partnership experienced gains for the quarter. All sectors were profitable.

The agriculture sector provided the greatest gains for the Partnership. Early in
the quarter, unusually tight grain inventory sent corn and bean prices to new
contract highs. In March, grains rallied to new highs supported by growing
global demand and a drastic reduction in grain inventories. Bean and corn prices
hit their highest levels since 1988 and 1996, respectively.

The metals sector also had significant gains for the quarter. Despite the
volatility in the market, copper and aluminum posted profits early in the
quarter, due to tight supplies. In February, copper hit an eight-year high. Base
metals, with the exception of nickel, continued to rise driven by strong demand,
U.S. dollar weakness and declining stocks. In March, both gold and silver
extended their gains as demand

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continued to rise. Silver was the best performing market overall, with the price
reaching a 17-year high of $8.30 an ounce.

The Partnership posted gains for the interest rate sector. The quarter began
with volatility. In February, interest rate futures moved higher and generated
profits. In March, the Partnership benefited from long interest rate futures.
Both domestic and foreign interest rate positions posted solid gains.

Although the energy sector began with losses in January, it was profitable
overall for the quarter. Crude oil contributed to losses for the month of
January, as price movements were sensitive to weather and inventory related
reports. Conversely, crude oil was the most profitable market in February,
supported by an unusually high level of weather-related demand and tight U.S.
inventories. In March, crude oil remained strong as May crude oil contracts
reached a new contract high of $37.80 per barrel, but during the second half of
the month prices dropped on expectations that the OPEC nations will have
difficulties reducing output in the face of such high prices.

The currency forward and futures trading also had gains for the quarter.
Currencies were the most profitable in January as the U.S. dollar moved up
against all major and minor currencies, with the announcement from the Federal
Reserve preparing the markets for a period of rising interest rates. In
February, exceptional volatility characterized the currency markets. The U.S.
dollar began to make an upside breakout and gained some ground. One of the
factors pushing the U.S. dollar higher included speculation that the U.S.
Federal Reserve would raise interest rates if the U.S. economy continues to
improve. In March, market exposure was at very low levels and volatility
indicators prevented trading in new positions in most major currencies against
the U.S. dollar.

Trading in stock indices posted gains for the quarter. January was the most
profitable month despite a volatile trading market.

April 1, 2004 to June 30, 2004

The Partnership experienced an overall loss for the second quarter. Energy was
the only profitable sector.

The energy sector was the only profitable sector for the Partnership. Early in
the quarter, crude oil was profitable due to strong demand combined with tight
supplies. In May, the price of oil reached record highs on fears of supply-side
disruptions in the Middle East. The quarter ended with negative returns,
particularly in long crude oil, as the market lost its direction.

The agricultural commodities sector posted losses for the Partnership even
though the beginning of the quarter generated profits on a short position in
cotton. Volatile conditions in May prevented the Partnership from initiating any
new positions and the market exposure was reduced to historically low levels.
Even though the quarter ended with negative results the trading model proved to
be effective in reducing the overall decline during the month by minimizing
exposure to non-directional and erratic markets.

Trading in stock indices posted losses for the Partnership. However, June ended
with foreign stock indices producing marginal profits for the Partnership but
not enough to recover losses earlier in the quarter.

The currency sector posted losses for the Partnership. In April, the largest
losses in the currency sector came from short U.S. dollar positions versus minor
currency positions. Choppy trading in May was due to non-directional price
movements in the market. The quarter ended with currency trading exposure close
to a historic low for the month with few trading opportunities in the markets.
However, profits were generated in Swiss franc and Japanese yen options
positions.

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The metals sector posted losses for the Partnership. News about a slowing
Chinese economy and possible decline in global demand for commodities put
down-ward pressure on commodity prices, especially metals.

The interest rate sector suffered the largest losses for the Partnership. In the
beginning of the quarter the market focused on growing expectation of higher
U.S. interest rates and began to prepare for the initial rate increase by the
U.S. Federal Reserve. Expectations of rising interest rates sent the prices of
long-term interest rate futures to their lowest levels in several months. In
May, the market was looking for a clear indication on the interest rate front,
which resulted in choppy trading. Jobless claims and manufacturing data proved
to be slightly worse than expected and thus had a much bigger impact on the
market than the U.S. Federal Reserve's expected rate hike. The quarter ended
with interest rate futures moving higher, which resulted in the liquidation of
short positions.

July 1, 2004 to September 30, 2004

Overall the Partnership experienced a loss for the quarter. The energy and
agricultural sectors posted gains while the metals, stock indices, interest
rate, and currency sectors posted losses.

The energy sector posted gains throughout the quarter. July was dominated by
crude oil, as oil prices reached new record highs. Higher prices were attributed
mostly to growing demand, especially from Asia. In August, crude oil futures hit
a 21-year high generating profits for long positions. The price dropped later in
the month, which reduced the month-end performance in crude oil to marginal
profits. In September, crude oil experienced the most dramatic price increase
since the mid 1970's, as a result of rapidly growing demand in the developing
world and ongoing geopolitical tensions. Hurricane disruptions also helped in
pushing the market prices upward.

The agricultural market posted a net gain for the quarter despite losses
mid-quarter. Short corn and cotton trades generated positive returns as corn
continued its downward trend and cotton prices weakened. The agriculture market
posted losses in August in a difficult trading environment but did not offset
the positive returns for July and September.

The metals sector posted a loss for the quarter despite small gains being posted
in the latter part of the quarter. Losses were posted in July, as trading
volumes were low. In August, losses continued during a difficult trading
environment with markets trading in extremely narrow ranges and the absence of
any directional movement. In September, gains were posted as trading in metals
was mixed. Zinc rallied against the Partnership's short positions reaching the
highest price since June, causing losses for the month. The trend in copper also
remained bullish and the price reached a six-month high.

Trading in stock indices posted losses for the Partnership due to thin trading
conditions and direction-less markets.

The interest rate sector also posted losses throughout the quarter. In the
latter part of the quarter, the U.S. Treasury markets showed high levels of
volatility. Despite the 25 basis point increase in short-term interest rates by
the U.S. Federal Reserve, the prices of 30-year Treasury Bonds and ten-year
Notes rose to new highs sending long-term U.S. Treasury yields down.

The currency sector posted the largest losses for the quarter. The sector
experienced extensive intra-month price fluctuations in July. Short U.S. dollar
positions established at the beginning of the month were exited later when the
U.S. currency reversed direction. The largest losses were posted in August. With
questions over soft employment numbers, terror alerts, uncertainty about the
U.S. election and high oil prices, the U.S. dollar initially weakened, then
gained momentum against major European currencies later in the month. Currency
cross rates produced the largest losses within this sector. In September, most
markets continued their non-directional movements thus keeping the U.S. dollar
range-bound against other major currencies.

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JANUARY 1, 2003 TO SEPTEMBER 30, 2003

January 1, 2003 to March 31, 2003

Overall the Partnership experienced gains for the quarter. All sectors were
profitable except the metals sector.

The energy sector provided the greatest gains for the Partnership. As
Iraq-related events brought the possibility of war closer, petroleum products
moved to new highs. Crude oil was the best performing market in this category.
The natural gas market also strengthened during the month. Cold weather
conditions in the northeastern U.S. helped push prices to target levels causing
a portion of the Partnership's position to be liquidated to protect profits from
a downturn. As the trend reversed sharply in March, long positions in both
markets were gradually liquidated.

The currency forward and futures trading had significant gains for the quarter.
The Partnership started the year with short U.S. dollar positions versus other
major currencies. The Partnership capitalized on the persistent rise in the
value of these currencies against the U.S. dollar. Profits were also posted in
long European currencies against the Japanese yen in January. Trading in
currencies gave back profits in February and March. Short U.S. dollar positions
were maintained and exposure in the currency sector was below average. The
prolonged anxiety about the war was reflected in choppy and narrow price ranges
in most major currencies.

Interest rate future trading was profitable for the Partnership. The continued
rise in interest rate futures prices created a favorable trading environment in
January and February. Price reversals as well as choppiness and volatility in
March caused some losses and subsequently the Partnership's exposure was reduced
in the market.

Trading in stock indices posted gains for the quarter. January and February were
relatively flat. Foreign stock indices were the only positive sector. Short
positions in DAX and Nikkei produced small profits.

Agricultural commodities trading resulted in gains for the Partnership. Sugar
prices, like commodities in general, continued their upward trend. During
January, this trend accelerated thus producing significant profits. Soybeans
also contributed to profits with prices moving sharply upward.

The metals sector was the only unprofitable strategy for the quarter. Gold's
rise to a six-year high in January had a positive influence on the month. The
demand for gold rose because investors usually turn their attention to this
traditional "safe haven" market during uncertain times. Supply-side
considerations caused nickel prices to increase sharply as well. This uptrend
was reversed in February and March as market actions were driven by the course
of the war with Iraq. The risks and potential impact on the global economy
produced increased volatility, as headlines about the war became the main focus.

April 1, 2003 to June 30, 2003

Gains were realized in the currency, interest rates and energy sectors. Losses
were posted in the metals, agricultural commodities and stock index sectors.
Overall, the Partnership was profitable.

Trading in the currency sector provided the greatest gains for the Partnership.
Currencies produced the largest profits in May, as the U.S. dollar remained on
the defensive throughout most of the quarter. The underlying factors driving the
U.S. dollar lower were low U.S. interest rates, the increasing U.S. deficit and
the Federal Reserve's use of the U.S. dollar as a tool to stabilize the U.S.
economy. The U.S. dollar's downtrend was also supported by technical indicators,
which further accelerated the pace of the U.S. dollar's decline. The biggest
beneficiary of the U.S. dollar's slide was the Euro, which hit four-year highs

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against the U.S. dollar, the Japanese yen and the British pound. The largest
profits were posted in short U.S. dollar positions against the Euro and the
Swiss franc, as well as in long Euro positions against the Japanese yen. The
strong downward trend in the U.S. dollar that dominated the market for 18 months
came to a halt in June, reversing nearly half of the gains incurred in April and
May, causing some short U.S. dollar positions to be liquidated.

The interest rate sector was also profitable in April and May as market prices
continued to rally to falling U.S. interest rates. The yields declined to
45-year lows, generating profits for all interest rate positions. In June, the
interest rate markets reversed direction when the Federal Reserve announced the
decision to lower interest rates by 25 basis points was less than anticipated.
The market expressed their disappointment with the Federal Reserve's action by
selling debt futures. This, coupled with the flight to equities, caused long
positions to suffer during the month but stayed solidly profitable overall for
the quarter.

The energy sector incurred gains for the quarter, mostly in June. Volatility in
the first quarter caused exposure in this market to be reduced. Crude oil was
the best performer in June. Its price strengthened in response to declining
inventories.

The metals sector had losses for the quarter. Metal prices were stable and
produced marginal profits in May. Unfortunately, May's gains could not offset
unfavorable market conditions in June.

Trading in the agricultural commodities sector was unprofitable for the quarter.
Soybeans contributed to profits in April with prices moving sharply upward. The
direction of the markets shifted in May in reaction to weather and supply
reports. The worst performers in this sector were corn and cotton.

Trading in stock indices was the most unprofitable sector for the Partnership.
The largest losses came from short positions in stock index futures when equity
markets staged a postwar recovery.

July 1, 2003 to September 30, 2003

The Partnership was profitable in the agricultural commodities and metals
sectors and unprofitable in the stock index, energy, currencies and interest
rate sectors. Overall, the Partnership was unprofitable for the quarter.

Agricultural commodities trading generated the most profits for the Partnership
for the third quarter. This sector was profitable due to long positions in
soybeans, soybean meal and cotton. The soybean complex rallied on forecasts of
cold weather across the Midwest. Tight supplies were also seen as supportive
factors for the products.

Trading in the metals sector was also profitable for the quarter. Base metals
drove most of the profits. The markets took direction from economic data and
changing perceptions about the economy. Higher prices during the month triggered
buy signals to build on the Partnership's positions. Nickel was the best
performer in this sector as the price moved to new highs.

Trading in stock index futures was unprofitable for the Partnership. Stock
indices closed out July and August on the plus side but fell in September
following the G-7 meeting. The G-7 finance ministers and central bankers called
for more flexible exchange rates, which resulted in losses for the Partnership's
long positions.

The energy sector produced losses for the Partnership for the quarter. Gains in
July and August were offset by significant losses in September. Crude oil was
the most significant contributor to September's negative results as the trend of
falling prices reversed mid-month and moved against the Partnership's short
positions. These positions were initiated during the first half of the month
when the price of crude

10

oil fell from a high of $31.40 on September 2 to a four month low of $26.65 on
September 19. It was followed by a sharp upward move back to nearly the $30.00
level. The sudden price shift appeared to be triggered by OPEC's announcement
about their impending production cuts.

The currency sector was unprofitable in the third quarter. The sector was highly
volatile resulting in difficult trading conditions. The U.S. dollar appreciated
against most major currencies in July and August, resulting in losses for the
Partnership. The G-7 summit directed the market to the idea that a weak U.S.
dollar is important to global trade balance. Foreign currencies appreciated
against the U.S. dollar reversing some of the sector's previous losses.

The interest rate sector was the most unprofitable sector for the Partnership.
The U.S. bond market suffered heavy losses in July after the U.S. government
announced its intentions to borrow a record amount to finance the huge deficit.
The U.S. bond market managed a timid recovery in August after making new lows in
July. In September, the global economic rebound was the primary focus of the
market. The U.S. continued to produce mixed economic data, which led some
investors to question the strength of the recovery. The G-7 summit resulted in a
call for more flexible exchange rates around the world. This announcement
signaled to the world marketplace that a weaker U.S. dollar is important to
strengthen the global economy. Interest rates moved up slightly, as the central
banks worldwide continued to reiterate that low interest rates are necessary to
sustain an economic recovery.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable

Item 4. Controls and Procedures

Merrill Lynch Alternative Investments LLC, the General Partner of ML Select
Futures I LP, 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 their evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

There are no pending proceedings to which the Partnership or MLAI 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 as part of this document.

(b) Reports on Form 8-K.

There were no reports on Form 8-K filed during the nine months of
fiscal 2004.

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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 SELECT FUTURES I LP

By: MERRILL LYNCH ALTERNATIVE
INVESTMENTS LLC
(General Partner)

Date: November 15, 2004 By /s/ ROBERT M. ALDERMAN
----------------------
Robert M. Alderman
Chief Executive Officer, President
and Manager
(Principal Executive Officer)

Date: November 15, 2004 By /s/ MICHAEL L. PUNGELLO
-----------------------
Michael L. Pungello
Vice President, Chief Financial Officer
and Treasurer
(Principal Financial and Accounting
Officer)

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