**UNITED STATES**

**SECURITIES ANDEXCHANGE COMMISSION**

** **

**Washington, D.C.  20549**

 

**FORM 10-K**

 

**ý****Annual Report Pursuant toSection 13 or 15(d)**

**of theSecurities Exchange Act of 1934**

** **

**For the fiscal year ended: December 31,2005**

** **

**or**

** **

**o****Transition Report Pursuant toSection 13**

**or15(d) of the Securities Exchange Act of 1934**

 

**Commission file number: 33-22864**

 

**MLFUTURES INVESTMENTS L.P.**

(Exact name of registrant as specified in itscharter)

 
| **Delaware**                    | ** ** | **36-3590615**      |
|---------------------------------|------------|---------------------|
| (State or other jurisdiction of |       | (I.R.S. Employer    |
| incorporation or organization)  |       | Identification No.) |

 

**c/o Merrill Lynch Alternative Investments LLC**

**Princeton Corporate Campus**

**800 Scudders Mill Road – Section 2-G**

### **Plainsboro,New Jersey 08536**

(Address of principal executive offices)

 

Registrant’s telephone number, including areacode:  **(609)282-6996**

 

Securities registered pursuant to Section 12(b) of the Act: **None**

 

Securities registered pursuant to Section 12(g) of the Act:**Limited Partnership Units**

 

Indicate by check mark if the registrant is a well-known seasonedissuer as defined by Rule 405 of the Securities Act

Yes   o    No   ý

 

Indicate by check mark if the registrant is not required to filereports pursuant to Section 13 or 15(d) of the Act.

Yes   o    No   ý

 

Indicate by check mark if the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.

Yes   ý    No   o

 

Indicate by check mark if disclosure of delinquentfilers pursuant to Item 405 of Regulation S-K is not contained herein, and willnot be contained, to the best of registrant’s knowledge, in definitive proxy orinformation statements incorporated by reference in Part III of this Form 10-Kor any amendment to this Form 10-K

Yes   ý    No   o

 

Indicate by check mark whether the registrant is a large acceleratedfiler, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer andlarge accelerated filer” in Rule 12b-2 of the Exchange Act.  Check one:

 
| Large accelerated filer o | Accelerated filer o | Non-accelerated filer  ý |
|---------------------------|---------------------|------------------------------------|

 

Indicate by check mark whether registrant is a shell company (asdefined by Rule 12b-2 of the Act).

Yes   o    No   ý

 

The limited partnership units of the registrant are not publiclytraded. Accordingly, there is no aggregate market value for the registrant’soutstanding equity that is readily determinable.

 

As of February 1, 2006, limited partnership units with anaggregate value of $40,136,188 were outstanding and held by non-affiliates.

 

**Documents Incorporated by Reference**

 

The registrant’s 2005 Annual Report and Report of IndependentRegistered Public Accounting Firm, the annual report to security holders forthe fiscal year ended December 31, 2005, is incorporated by reference intoPart II, Item  and Part IVhereof and filed as an Exhibit herewith. Copies of the annual report are available free of charge by contactingMerrill Lynch Alternative Investments Client Services at 1-877-465-8435.

 

 

----

 

**ML FUTURES INVESTMENTS L.P.**

 

ANNUAL REPORT FOR 2005 ON FORM 10-K

 

Table of Contents

 
| PART I   |                                                                                                               |
|---------------|--------------------------------------------------------------------------------------------------------------------|
|          |                                                                                                               |   |
| Item 1.       | Business                                                                                                           | 1 |
|          |                                                                                                               |   |
| Item 1A.      | Risk Factors                                                                                                       | 5 |
|          |                                                                                                               |   |
| Item 2.       | Properties                                                                                                         | 7 |
|          |                                                                                                               |   |
| Item 3.       | Legal Proceedings                                                                                                  | 7 |
|          |                                                                                                               |   |
| Item 4.       | Submission of Matters to a Vote of Security  Holders                                                               | 7 |
|          |                                                                                                               |   |
| PART II  |                                                                                                               |
|          |                                                                                                               |   |
| Item 5.       | Market for Registrant’s Common Equity,  Related Stockholder Matters and Issuer Purchases of Equity Securities | 8 |
|          |                                                                                                               |   |
| Item 6.       | Selected Financial Data                                                                                            | 8 |
|          |                                                                                                               |   |
| Item 7.       | Management’s Discussion and Analysis of  Financial Condition and Results of Operations                        | 11 |
|          |                                                                                                               |   |
| Item 7A.      | Quantitative and Qualitative Disclosures  about Market Risk                                                        | 16 |
|          |                                                                                                               |   |
| Item 8.       | Financial Statements and Supplementary Data                                                                        | 19 |
|          |                                                                                                               |   |
| Item 9.       | Changes in and Disagreements with  Accountants on Accounting and Financial Disclosure                              | 19 |
|          |                                                                                                               |   |
| Item 9A.      | Controls and Procedures                                                                                            | 19 |
|          |                                                                                                               |   |
| Item 9B.      | Other Information                                                                                                  | 19 |
|          |                                                                                                               |   |
| PART III |                                                                                                               |
|          |                                                                                                               |   |
| Item 10.      | Directors and Executive Officers of the  Registrant                                                                | 20 |
|          |                                                                                                               |   |
| Item 11.      | Executive Compensation                                                                                             | 21 |
|          |                                                                                                               |   |
| Item 12.      | Security Ownership of Certain Beneficial  Owners and Management and Related Stockholder Matters                    | 22 |
|          |                                                                                                               |   |
| Item 13.      | Certain Relationships and Related Transactions                                                                     | 22 |
|          |                                                                                                               |   |
| Item 14.      | Principal Accountant Fees and Services                                                                             | 23 |
|          |                                                                                                               |   |
| PART IV  |                                                                                                               |
|          |                                                                                                               |   |
| Item 15.      | Exhibits and Financial Statement Schedules                                                                         | 24 |

 

----

 

## **PART I**

## ** **

**Item 1:****   Business**

 

(a)           General Developmentof Business:

 

ML Futures Investments L.P. (the “Partnership”) was organized under theDelaware Revised Uniform Limited Partnership Act on November 14, 1988 andbegan trading operations on March 1, 1989. The Partnership made a single offering of its units of limitedpartnership interest (“Units”).  Unitsmay be redeemed as of the end of each calendar month.  The Partnership engages currently, through aninvestment in a limited liability company (see below) in the speculative tradingof a portfolio of futures, options on futures and forwards contracts on a widerange of commodities. The Partnership’s objective is achieving, throughspeculative trading, substantial capital appreciation, over time.

 

Merrill Lynch Alternative Investments LLC (“MLAI”) is the generalpartner of the Partnership and is a wholly-owned subsidiary of Merrill LynchInvestment Managers LP (“MLIM”) which, in turn, is an indirect wholly-ownedsubsidiary of Merrill Lynch & Co., Inc. (“Merrill Lynch”). Priorto December 1, 2005, the general partner of the Partnership was MerrillLynch Investment Managers LLC (“MLIM LLC”). Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”),a wholly-owned subsidiary of Merrill Lynch, is the Partnership’s commoditybroker.

 

Effective after the close of business on December 31, 2002, thePartnership combined its net assets with five other similar MLIM sponsored (“Multi-AdvisorFunds”) to form a combined ML Futures Investments L.P. in a tax-free reorganization.All of the Partnership’s investors received new units of the combinedPartnership with an initial Net Asset Value per Unit of $1.00 in exchange foreach of their original Units. The aggregate Net Asset Value of each investor’snew Units is equal to the aggregate Net Asset Value of their originalUnits.  Conversion of the shares had noadverse economic effect on investors in any of the Multi-Advisor Funds. Thecombined Partnership continued to invest through ML Multi-Manager Portfolio LLC(“MM LLC”) through December 31, 2004 and the combination of theMulti-Advisor Funds did not change the operations of MM LLC.  The combined Partnership’s percentage ofownership of MM LLC was 32.32% immediately after the combination.

 

Unless otherwise noted, financial information provided in this reportfor 2003 and 2004 is for the combined Partnership.

 

Prior to October 1, 1996, the Partnership placed assets with thecommodity trading advisors (the “Advisors”) by opening individual managedaccounts with them.  For the period from October 1,1996 to May 31, 1998, the Partnership placed assets with certain of theAdvisors through investing in private funds (“Trading LLCs”) sponsored by MLAIthrough which the trading accounts of different MLAI-sponsored funds managed bythe same Advisor pursuant to the same strategy were consolidated. The onlymembers of the Trading LLCs were commodity pools sponsored by MLAI. Placingassets with an Advisor through investing in a Trading LLC rather than a managedaccount had no economic effect on the Partnership, except to the extent thatthe Partnership benefited from the Advisor not having to allocate trades amonga number of different accounts (rather than acquiring a single position for theTrading LLC as a whole).  As of June 1,1998, MLAI consolidated the trading accounts of nine of its multi-advisor funds(the “Multi-Advisor Funds”), including the Partnership.  The consolidation was achieved by havingthese Multi-Advisor Funds invest in a single Delaware limited liabilitycompany, MM LLC, which opened a single account with each Advisor selected.  MM LLC had been managed by MLIM LLC and MMLLC had no investors other than the Multi-Advisor Funds and served solely asthe vehicle through which the assets of such Multi-Advisor Funds were combinedin order to be managed through single rather than multiple accounts.  The placement of assets into MM LLC did notchange the operations or fee structure of the Partnership.

 

Effective after the close of business on December 31, 2004, MM LLCliquidated and the Partnership invested in Global Horizons I L.P., formerly MLGlobal Horizons LP (“Global Horizons”). Global Horizons is a MLAI-managed limited partnership that has aninvestment strategy similar to MM LLC.

 

Through December 31, 2002, prior to combination, the highestmonth-end Net Asset Value per Unit was $267.42 (October 31, 2001) and thelowest was $99.88 (March 31, 1989).

 

----

 

Through December 31, 2005, after the combination, the highestmonth-end Net Asset Value per Unit was $1.1324 (February 28, 2004) and thelowest was $1.000 (December 31, 2002).

 

(b)           FinancialInformation about Segments:

 

The Partnership’s business constitutes only one segment for financialreporting purposes, *i.e.,* aspeculative commodity pool. The Partnership does not engage in sales of goodsor services.

 

(c)           NarrativeDescription of Business:

 

***General***

 

The Partnership traded, through its investment in Global Horizons, infutures, options on futures, and forwards contract in the major sectors of theworld economy with the objective of achieving substantial capital appreciationover time. For the periods presented prior to the close of business on December 31,2004, the Partnership traded its investments through MM LLC.

 

MLAI is the Partnership’s trading manager, with responsibility forselecting Advisors to manage Global Horizon’s assets, allocating andreallocating Global Horizon’s assets among different Advisors.

 

Considered as a whole, the Partnership, through its investment inGlobal Horizons (and former investment in MM LLC), trades in a diversifiedrange of international markets.  CertainAdvisors considered individually, concentrate primarily on trading in a limitedportfolio of markets.  The composition ofthe “sectors” included in the Partnership’s portfolio varies substantially overtime.

 

MLAI may, from time to time, direct certain individual Advisors tomanage their Partnership accounts as if they were managing more equity than theactual capital allocated to them.

 

One of the objectives of the Partnership is to provide diversificationfor a limited portion of the risk segment of the Limited Partners’portfolios.  Commodity pool performancehas historically demonstrated a low degree of performance correlation withtraditional stock and bond holdings. Since it began trading, the Partnership’s returns have, in fact,frequently been non-correlated with the United States stock and bond markets.

 

Use of Proceeds and Interest Income

 

Market Sectors.

The Partnership, through its investment in Global Horizons (and itsformer investment in MM LLC), trades in a diversified group of markets underthe direction of multiple independent Advisors. These Advisors from time to time materially alter the allocation oftheir overall trading commitments among different market sectors. Except in thecase of certain trading programs which are purposefully limited in the marketswhich they trade, there is essentially no restriction on the commodityinterests which may be traded by any Advisor or the rapidity with which anAdvisor may alter its market sector allocations.

 

Market Types.

The Partnership trades, through its investment in Global Horizons (andformer investment in MM LLC), on a variety of United States and foreign futuresexchanges.  Substantially all of thePartnership’s non-exchange trading takes place in the highly liquid,institutionally based currency forward markets.

 

Many of the Partnership’s currency trades areexecuted in the spot and forward foreign exchange markets (the “FX Markets”)where there are no direct execution costs. Instead, the participants, banks and dealers in the FX Markets take a “spread”between the prices at which they are prepared to buy and sell particularcurrencies and such spreads are built into the pricing of the spot or forwardcontracts with the Partnership.  In itsexchange of futures for physical (“EFP”) trading, the Partnership acquires cashcurrency positions through banks and dealers, including Merrill Lynch.  The Partnership pays a spread when itexchanges these positions for futures. This spread reflects, in part, the different settlement dates of thecash and the futures contracts, as well as prevailing interest rates, but alsoincludes a pricing spread in favor of the banks and dealers, which may includea Merrill Lynch entity.

 

2

----

 

As in the case of its market sector allocations, the Partnership’scommitments to different types of markets — U.S. and non-U.S., regulated andnon-regulated — differ substantially from time to time as well as over time.

 

Custody of Assets.

 

The majority of the Partnership’s assets are currently held in customeraccounts at MLPF&S.

 

Interest paid by Merrill Lynch on thePartnership’s U.S. Dollar and Non U.S. Dollar Assets 

 

All of the Partnership’s U.S. dollar assets invested in Global Horizonswere maintained at MLPF&S.  On assetsheld in U.S. dollars, Merrill Lynch credited Global Horizons with interest atthe prevailing 91-day U.S. Treasury bill rate. Global Horizons was creditedwith interest on any of its assets and net gains actually held by Merrill Lynchin non-U.S. dollar currencies at a prevailing local rate received by MerrillLynch.  Merrill Lynch may derive certaineconomic benefit, in excess of the interest, which Merrill Lynch paid to GlobalHorizons, from possession of such assets.

 

Merrill Lynch charged the Partnership, through Global Horizons, MerrillLynch’s cost of financing realized and unrealized losses on Global Horizons’non-U.S. dollar-denominated positions**.**

 

Prior to the close of business on December 31, 2004, thePartnership invested through MM LLC. MLPF&S’s and Merrill Lynch’sarrangements with MM LLC were similar to arrangements with Global Horizons asoutlined in the preceding two paragraphs.

 

Charges

 

The following table summarizes the charges incurred by the Partnershipduring 2005, 2004 and 2003 allocated from Global Horizons (and prior to January 1,2005 from MM LLC).

 
| ** **          | ** ** | **2005**   | ** ** | **2004**                   | ** ** | **2003**   | ** ** |
|---------------------|------------|------------|------------|----------------------------|------------|------------|------------|
| ** **          | ** ** | ** ** | ** ** | **% of Average** | ** ** | ** ** | ** ** | **% of Average** | ** ** | ** ** | ** ** | **% of Average** | ** ** |
| ** **          | ** ** | **Dollar** | ** ** | **Month-End**              | ** ** | **Dollar** | ** ** | **Month-End** | ** ** | **Dollar** | ** ** | **Month-End** | ** ** |
| **Charges**         | ** ** | **Amount** | ** ** | **Net Assets**        | ** ** | **Amount** | ** ** | **Net Assets** | ** ** | **Amount** | ** ** | **Net Assets** | ** ** |
| Brokerage           |       |       |       |                       |       |       |       |   |   |   |   |   |   |
| Commissions         |       | $          | 3,456,917  |                       | 8.15       | %          | $          | 4,079,427 |   | 8.26 | % | $ | 4,601,819 |   | 8.36 | % |
| Administrative  Fee |       | 101,674    |       | 0.24                       | %          | 119,983    |       | 0.24 | % | 135,348 |   | 0.25 | % |
| Profit  Shares      |       | 177,296    |       | 0.42                       | %          | 741,906    |       | 1.50 | % | 1,524,986 |   | 2.77 | % |
| Total               |       | $          | 3,735,887  |                       | 8.81       | %          | $          | 4,941,316 |   | 10.00 | % | $ | 6,262,153 |   | 11.38 | % |

 

ThePartnership’s average month-end Net Assets, during 2005, 2004 and 2003 equaled$42,417,248, $49,423,972, and $55,028,914, respectively.

 

During 2005, the Partnership earned primarily through its investment inGlobal Horizons $1,320,101 in interest income, or approximately 3.11% of thePartnership’s average month-end Net Assets. During 2004 and 2003, the Partnershipearned directly or primarily through its investment in MM LLC $595,606 and$588,108 in interest income, or approximately 1.21% and 1.07% of thePartnership’s average month-end Net Assets.

 

3

----

 

**Description of Current Charges**

 
| **Recipient**        | ** ** | **Nature of Payment** | ** ** | **Amount of Payment**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|----------------------|------------|---------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |       |                            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| MLPF&S           |       | Brokerage Commissions           |       | A flat-rate monthly commission of 0.7083 of 1% (an 8.50% annual  rate), reduced from 8.75% prior to January 1, 2003, of the Partnership’s  month-end assets allocated* *to trading*.* Through the close of business on December 31, 2004,  100% of the Partnership’s assets were allocated to trading in MM LLC.  Thereafter, 100% of the Partnership’s assets were allocated to trading in  Global Horizons.  During 2005, 2004 and 2003, the Partnership paid round-turn commissions  through its investment in Global Horizons and formerly MM LLC. The estimated  aggregate round-turn commission rate of Global Horizons for the year ended  December 31, 2005 is $39. The estimated aggregate round-turn commission  rate of MM LLC for the years ended December 31, 2004 and 2003 are $45  and $53 respectively. |
|                 |       |                            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| MLPF&S           |       | Use of Partnership assets       |       | Merrill Lynch may derive certain economic benefit from the deposit of  certain of the Partnership’s U.S. dollar assets in offset accounts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                 |       |                            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| MLIM LLC             |       | Administrative Fees             |       | The Partnership pays MLAI a monthly administrative fee equal to 0.021  of 1% (a 0.25% annual rate) of the Partnership’s month-end assets allocated.  MLAI pays all of the Partnership’s routine administrative costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                 |       |                            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Other Counterparties |       | Bid–ask spreads            |       | Bid-ask spreads on forward and related trades.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                 |       |                            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Advisors             |       | Profit Shares                   |       | All Advisors can receive quarterly or annual Profit Shares ranging  from 20% to 25% (depending on the Advisor) of any New Trading Profit achieved  by their Partnership account. Profit Shares are also paid upon redemption of  Units and upon the net reallocation of assets away from an Advisor. New  Trading Profit is calculated separately in respect of each Advisor,  irrespective of the overall performance of the Partnership. The Partnership  may pay substantial Profit Shares during periods when it is incurring  significant overall losses.                                                                                                                                                                                                                                                                                                  |
|                 |       |                            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Advisors             |       | Consulting Fees                 |       | MLPF&S pays the Advisors annual Consulting Fees up to 2.5% of the  Partnership’s average month-end assets allocated to them for management,  after reduction for a portion of the brokerage commissions accrued with  respect to such assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                 |       |                            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| MLPF&S; Others   |       | Extraordinary expenses          |       | Actual costs incurred; none paid to date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |

 

4

----

 

Regulation

 

MLAI, the Advisors and MLPF&S are each subject to regulation by theCommodity Futures Trading Commission, (the “CFTC”) and the National FuturesAssociation (“NFA”).  Other than inrespect of its periodic reporting requirements under the Securities ExchangeAct of 1934, the Partnership itself is generally not subject to regulation bythe Securities and Exchange Commission (the “SEC”).  However, MLAI itself is registered as an “investmentadviser” under the Investment Advisers Act of 1940.  MLPF&S is also regulated by the SEC andthe National Association of Securities Dealers.

 

(i) through (xii) — not applicable.

 

(xiii)  The Partnership has noemployees.

 

(d)           FinancialInformation about Foreign and Domestic Operations and Export Sales:

 

The Partnership does not engage in material operations in foreigncountries, nor is a material portion of the Partnership’s revenue derived fromcustomers in foreign countries.  However,the Partnership traded through its investment Global Horizons (and formerlythrough MM LLC), on a number of foreign commodity exchanges.  The Partnership does not engage in the salesof goods or services.

 

**Item1A:  Risk Factors**

 

**PastPerformance Not Necessarily Indicative of Future Results**

 

Past performance is not necessarilyindicative of future results.  Neitherthe Advisors’ nor the Partnership’s past performance may be representative ofhow they or it, respectively, may trade in the future.

 

**VolatileMarkets; Highly Leveraged Trading**

 

Futures and forward trading is highlyleveraged, and market price levels are volatile and materially affected byunpredictable factors such as weather and governmental intervention.  The combination of leverage and volatilitycreates a high degree of risk.

 

**SubstantialCharges**

 

The Partnership is subject to substantialcharges.

 

The incentive compensation paid to theAdvisors is based on the individual performance of each Advisor, not theoverall performance of the Partnership. Historically, the Partnership has paid substantial incentivecompensation to certain Advisors during periods when the performance of thePartnership as a whole was breakeven or unprofitable.

 

**Importance of General Market Conditions**

 

Overall market or economic conditions — whichneither MLAI (the “General Partner”) nor any Advisor can predict or control —have a material effect on performance. Furthermore, such overall conditions can adversely affect theperformance of numerous Advisors at or about the same time, despite theirimplementing different and independent strategies.  Consequently, the multi-Advisor structure ofthe Partnership does not assure that its performance will not be adverselyaffected by future market or economic conditions.

 

**Combining Independent Trading Strategies**

 

Combining independent trading strategiesinvolves substantial opportunity costs, as one Advisor’s profits are frequentlyoffset by another Advisor’s losses. Different Advisors often take opposite positions for the Partnership,eliminating the profit potential of the combined positions.

 

**Systematic Strategies**

 

Most of the Partnership’s assets have beenallocated since inception to Advisors which rely on technical, systematicstrategies.  The widespread use of technicaltrading systems frequently results in numerous 

 

5

----

 

managers attempting to executesimilar trades at or about the same time, altering trading patterns andaffecting market liquidity.  Furthermore,the profit potential of trend-following systems may be diminished by thechanging character of the markets, which may make historical price data (onwhich technical programs are based) only marginally relevant to future marketpatterns.

 

**Discretionary Strategies**

 

Certain of the Partnership’s Advisors arediscretionary rather than systematic traders. Discretionary trading managers may be prone to emotionalism and a lackof discipline in their trading.  Relyingon subjective trading judgment may produce less consistent results than thoseobtained by more systematic approaches.

 

**Increased Assets Under Management**

 

There appears to be a tendency for the ratesof return achieved by managed futures advisors to decline as assets undermanagement increase.  None of theAdvisors has agreed to limit the amount of additional equity which it maymanage, and most of them are at or near their all-time high in assets undermanagement.

 

**No Assurance of Advisors’ Continued Services;Competition for Advisors**

 

There is no assurance that any Advisor willbe willing or able to continue to provide advisory services to thePartnership.  There is severe competitionfor the services of qualified Advisors, and the Partnership may not be able toretain satisfactory replacement or additional Advisors on acceptableterms.  The General Partner must allocateAdvisor availability among its different partnerships for which the GeneralPartner has authority, including the Partnership, and, accordingly, may not atall times select for the Partnership those Advisors which the General Partnerwould otherwise believe to be in its best interests.

 

**Changes in Trading Strategy**

 

An Advisor may make certain changes in itstrading strategies without the knowledge of the General Partner.

 

**Illiquid Markets**

 

Certain positions held by the Partnership maybecome illiquid, preventing an Advisor from acquiring positions otherwiseindicated by its strategy or making it impossible for an Advisor to close outpositions against which the market is moving.

 

**Trading on Non-U.S. Exchanges**

 

The Advisors trade extensively on non-U.S.exchanges.  These exchanges are notregulated by any United States governmental agency.  The Partnership could incur substantiallosses trading on foreign exchanges to which it would not have been subject hadthe Advisors limited their trading to U.S. markets.

 

The profits and losses derived from tradingforeign futures and options will generally be denominated in foreigncurrencies; consequently, the Partnership will be subject to a certain degreeof exchange-rate risk in trading such contracts.

 

**The Partnership Could Lose Assets and HaveIts Trading Disrupted Due to the Bankruptcy of Brokers**

 

The Partnership is subject to the risk of itsclearing broker, exchange or clearinghouse insolvency.  Partnership assets could be lost or impoundedduring lengthy bankruptcy proceedings. Were a substantial portion of the Partnership’s capital tied up in abankruptcy, the General Partner might suspend or limit trading, perhaps causingthe Partnership to miss significant profit opportunities.  No Partnership managed by the General Partnerhas ever lost any assets due to the bankruptcy or default of a broker, exchangeor clearinghouse, but there can be no assurance that this will not happen inthe future.

 

6

----

 

**Item 2:****   Properties**

 

The Partnership does not use any physicalproperties in the conduct of its business.

 

The Partnership’s offices are the offices of MLAI (Merrill LynchAlternative Investments LLC, Princeton Corporate Campus, 800 Scudders Mill Road- Section 2G, Plainsboro, New Jersey 08536).  MLAI performs administrative services for thePartnership from MLAI’s offices.

 

**Item 3:****   LegalProceedings**

 

Neither the Partnership MLIM LLC nor MLAI have ever been the subject ofany material litigation.  Merrill Lynchis the 100% indirect owner of MLAI, MLIM, MLPF&S and all other MerrillLynch entities involved in the operation of the Partnership.  Merrill Lynch as well as certain of itssubsidiaries and affiliates have been named as defendants in civil actions,arbitration proceedings and claims arising out of their respective businessactivities.  Although the ultimateoutcome of these actions cannot be predicted at this time and the results oflegal proceedings cannot be predicted with certainty, it is the opinion ofmanagement that the result of these matters will not be materially adverse tothe business operations or financial condition of MLAI or the Partnership.

 

**Item 4:****   Submission of Matters to aVote of Security Holders**

 

None

 

7

----

 

**PART II**

 

**Item 5:****   Market for Registrant’sCommon Equity, Related Stockholder Matters and Issuer Purchases Of EquitySecurities**

 

Item 5(a)

 

(a)           Market Information:

 

There is no established public trading market for the Units, nor is itanticipated that one will develop. Limited Partners may redeem Units as of the end of each month at NetAsset Value.

 

(b)           Holders:

 

As of December 31, 2005, there were 1,960 holders of Units, includingMLAI.

 

(c)           Dividends:

 

The Partnership has made no distributions, nor does MLAI presentlyintend to make any distributions in the future.

 

(d)                                 SecuritiesAuthorized for Issuance Under Equity Compensation Plan:

 

Not applicable.

 

Recent Sales of Unregistered Securities; Usesof Proceeds From Registered Securities:

 

Not applicable.

 

Item 5(b)

 

Not applicable.

 

Item 5(c)

 

Not applicable.

 

**Item 6:****   Selected Financial Data**

 

The following selected financial data has been derived from the auditedfinancial statements of the Partnership:

 
| ** **                  | ** ** | **For the Year**      | ** ** | **For the Year**      | ** ** | **For the Year**      | ** ** | **For the Year**      | ** ** | **For the Year**      | ** ** |
|-----------------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                  | ** ** | **Ended**             | ** ** | **Ended**             | ** ** | **Ended**             | ** ** | **Ended**             | ** ** | **Ended**             | ** ** |
| ** **                  | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
| **Statement of Operations** | ** ** | **2005**              | ** ** | **2004**              | ** ** | **2003**              | ** ** | **2002**              | ** ** | **2001**              | ** ** |
|                        |       |                  |       |                  |       |                  |       |                  |       |                  |       |   |   |   |   |   |
| Net  Investment Loss        |       | $                     | (2,415,786 | )                     | $          | (4,345,716            | )          | $                     | (5,674,045 | )                     | $          | (1,143,729 | ) | $ | (1,004,037 | ) |
| Net Income  (Loss)          |       | $                     | (2,271,036 | )                     | $          | (355,684              | )          | $                     | 4,689,691  |                  | $          | 477,493 |   | $ | 131,917 |   |

 
| ** **                   | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
|------------------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|
| **Balance Sheet Data**       | ** ** | **2005**              | ** ** | **2004**              | ** ** | **2003**              | ** ** | **2002**              | ** ** | **2001**              | ** ** |
|                         |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Partnership  Net Asset Value |       | $                     | 39,887,435 |                  | $          | 46,876,541            |       | $                     | 53,823,502 |                  | $          | 56,057,893 |   | $ | 12,802,184 |   |
| Net Asset  Value per Unit    |       | $                     | 1.0286     |                  | $          | 1.0814                |       | $                     | 1.0881     |                  | $          | 1.0000 |   | $ | 253.70 |   |

 

The variations in income statement line items are primarily due toinvesting in Global Horizons and formerly MM LLC.

 

8

----

 

MONTH-ENDNET ASSET VALUE PER UNIT

 
| ** ** | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** | **Apr.** | ** ** | **May** | ** ** | **June** | ** ** | **July** | ** ** | **Aug.** | ** ** | **Sept.** | ** ** | **Oct.** | ** ** | **Nov.** | ** ** | **Dec.** | ** ** |
|------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|---------|------------|----------|------------|----------|------------|----------|------------|-----------|------------|----------|------------|----------|------------|----------|------------|
| 2001       |       | $        | 249.58     |     | $          | 251.97   |       | $        | 263.85     |    | $          | 256.16   |       | $        | 253.51     |     | $          | 253.68    |       | $        | 253.09     |     | $          | 254.51   |       | $ | 256.69 |   | $ | 267.24 |   | $ | 254.23 |   | $ | 253.70 |   |
| 2002       |       | $        | 246.27     |     | $          | 239.70   |       | $        | 243.32     |    | $          | 239.74   |       | $        | 242.38     |     | $          | 250.38    |       | $        | 254.47     |     | $          | 261.38   |       | $ | 264.94 |   | $ | 259.14 |   | $ | 258.11 |   | $ | 1.0000 |   |
| 2003       |       | $        | 1.0317     |     | $          | 1.0629   |       | $        | 1.0162     |    | $          | 1.0217   |       | $        | 1.0734     |     | $          | 1.0555    |       | $        | 1.0397     |     | $          | 1.0345   |       | $ | 1.0382 |   | $ | 1.0619 |   | $ | 1.0600 |   | $ | 1.0881 |   |
| 2004       |       | $        | 1.0929     |     | $          | 1.1324   |       | $        | 1.1301     |    | $          | 1.0899   |       | $        | 1.0748     |     | $          | 1.0406    |       | $        | 1.0365     |     | $          | 1.0284   |       | $ | 1.0266 |   | $ | 1.0499 |   | $ | 1.0809 |   | $ | 1.0814 |   |
| 2005       |       | $        | 1.0435     |     | $          | 1.0538   |       | $        | 1.0557     |    | $          | 1.0242   |       | $        | 1.0249     |     | $          | 1.0363    |       | $        | 1.0179     |     | $          | 1.0315   |       | $ | 1.0283 |   | $ | 1.0155 |   | $ | 1.0343 |   | $ | 1.0286 |   |

 

Pursuant to CFTC policy, monthly performance is presented only from January 1,2001 even though Units were outstanding prior to such date.

 

After the close of business on December 31,2002, the Partnership combined its assets with five other similar Multi AdvisorFunds to form the Combined Partnership. All of the affected investors received new units of the combinedPartnership with an initial Net Asset Value per Unit of $1.00 in exchange foreach of their original units.  Theaggregate Net Asset Value of investor’s new units is equal to the aggregate NetAsset Value of their original Units.  Theratio of the Unit exchange by entity is listed below.

 
| ML Futures Investments L.P.                       |   | 264.694900 |   |
|---------------------------------------------------|--------|------------|--------|
| ML Futures Investments II L.P.                    |   | 205.193438 |   |
| The S.E.C.T.O.R. Strategy Fund L.P.               |   | 207.382494 |   |
| The Sector Strategy Fund II L.P.                  |   | 172.917074 |   |
| The Sector Strategy Fund II L.P. Sector III Units |   | 182.523103 |   |
| The Sector Strategy Fund V L.P.                   |   | 147.310123 |   |
| The Sector  Strategy Fund VI L.P.                 |   | 134.331163 |   |

 

9

----

 

**ML FUTURES INVESTMENTS L.P.**

**December 31, 2005**

 

***Type of Pool:*Selected-Advisor/Publicly-Offered/”Principal Protected”(1)**

***Inception of Trading:*March **1, 1989

***Aggregate Subscriptions:* **$130,705,893

***Current Capitalization:***$39,887,435

***Worst Monthly Drawdown****(2)**:***(4.87)**% **(11/01)

***Worst Peak-to-Valley Drawdown****(3)**:** *(10.32)% (3/04-10/05)

 

***Net Asset Value per Unit, December 31,2005:*  $1.0286**

 

**Monthly Rates of Return(4)**

** **

| **Month**                      | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** |
|--------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
| January                        |       | (3.51    | )%         | 0.44     | %          | 3.17     | %          | (2.93    | )%         | (0.73    | )%         |
| February                       |       | 0.99     |       | 3.61     |       | 3.03     |       | (2.67    | )          | 0.96     |       |
| March                          |       | 0.19     |       | (0.20    | )          | (4.40    | )          | 1.51     |       | 4.71     |       |
| April                          |       | (2.99    | )          | (3.56    | )          | 0.55     |       | (1.47    | )          | (2.91    | )          |
| May                            |       | 0.07     |       | (1.38    | )          | 5.06     |       | 1.10     |       | (1.03    | )          |
| June                           |       | 1.11     |       | (3.19    | )          | (1.67    | )          | 3.30     |       | 0.07     |       |
| July                           |       | (1.77    | )          | (0.39    | )          | (1.50    | )          | 1.63     |       | (0.23    | )          |
| August                         |       | 1.33     |       | (0.78    | )          | (0.50    | )          | 2.72     |       | 0.56     |       |
| September                      |       | (0.31    | )          | (0.18    | )          | 0.36     |       | 1.36     |       | 0.85     |       |
| October                        |       | (1.24    | )          | 2.27     |       | 2.28     |       | (2.19    | )          | 4.11     |       |
| November                       |       | 1.85     |       | 2.96     |       | (0.18    | )          | (0.39    | )          | (4.87    | )          |
| December                       |       | (0.55    | )          | 0.04     |       | 2.65     |       | 2.55     |       | (0.21    | )          |
|                           |       |     |       |     |       |     |       |     |       |     |       |
| Compound Annual Rate of Return |       | (4.88    | )%         | (0.61    | )%         | 8.81     | %          | 4.33     | %          | 0.91     | %          |

 

----

(1) Pursuant to applicable CFTC regulations, a “Multi-Advisor”fund is defined as one that allocates no more than 25% of its trading assets toany single manager.  As the Partnershipmay allocate more than 25% of its trading assets to one or more Advisors, it isreferred to as a “Selected-Advisor” fund. Certain funds, including funds sponsored by MLAI, are structured so asto guarantee to investors that their investment will be worth no less than aspecified amount (typically, the initial purchase price) as of a date certainafter the date of investment.  The CFTCrefers to such funds as “Principal Protected”. The Partnership has no such feature.

 

(2) Worst Monthly Drawdown represents the largest negative MonthlyRate of Return experienced since January 1, 2001 by the Partnership; aDrawdown is measured on the basis of month-end Net Asset Value only, and doesnot reflect intra-month figures.

 

(3) Worst Peak-to-Valley Drawdown represents the greatestpercentage decline since January 1, 2001 from a month-end cumulativeMonthly Rate of Return without such cumulative Monthly Rate of Return beingequaled or exceeded as of a subsequent month-end.  For example, if the Monthly Rate of Returnwas (1)% in each of January and February, 1% in March and (2)% inApril, the Peak-to-Valley Drawdown would still be continuing at the end of April inthe amount of approximately (3)%, whereas if the Monthly Rate of Return had beenapproximately 3% in March, the Peak-to-Valley Drawdown would have ended as ofthe end of February at approximately the (2)% level.

 

(4) Monthly Rate of Return is the net performance of thePartnership during the month of determination (including interest income andafter all expenses have been accrued or paid) divided by the total equity ofthe Partnership as of the beginning of such month.

 

10

----

 

**Item 7:****   Management’s Discussion andAnalysis of Financial Condition and Results of Operations**

 

Operational Overview; Advisor Selections

 

The Partnership’s results of operations depend on MLAI’s ability toselect Advisors and the Advisors’ ability to trade profitably.  MLAI’s selection procedures, as well as theAdvisors’ trading methods, are confidential, so that substantially the onlyavailable information relevant to the Partnership’s results of operations isits actual performance record to date. However, because of the speculative nature of its trading, the Partnership’spast performance is not necessarily indicative of its future results.

 

MLAI’s decision to terminate or reallocate assets among Advisors isbased on a combination of factors. Advisors are, in general, terminatedprimarily for unsatisfactory performance, but other factors — for example, achange in MLAI’s or an Advisor’s market outlook, apparent deviation fromannounced risk control policies, excessive turnover of positions, changes inprincipals, commitment of resources to other business activities, etc. — mayalso have a role in the termination or reallocation decision.  The market judgment and experience of MLAI’sprincipals is an important factor in its allocation decisions.

 

MLAI has no timetable or schedule for making Advisor changes orreallocations, and generally makes a medium- to long-term commitment to allAdvisors selected.  In particular, MLAIhas to date, made infrequent reallocations of trading assets and adjustments inthe Advisor combinations for the Partnership. However, there can be no assurance as to the frequency or number ofAdvisor changes that may take place in the future, or as to how long any of thecurrent Advisors will continue to manage assets for the Partnership.

 

General

 

A number of the Advisors are trend following traders, whose programs donot attempt to predict price movements. No fundamental economic supply or demand analyses are used by theseAdvisors, and no macroeconomic assessments of the relative strengths ofdifferent national economies or economic sectors are evaluated.  Instead, the programs apply proprietarycomputer models to analyze past market data, and from this data alone attemptto determine whether market prices are trending.  These traders base their strategies on thetheory that market prices reflect the collective judgment of numerous differenttraders and are, accordingly, the best and most efficient indication of marketmovements. However, there are frequent periods during which fundamental factorsexternal to the market dominant prices.

 

If a trend-following Advisor’s models identify a trend, they signalpositions which follow it.  When thesemodels identify the trend as having ended or reversed, these positions areeither closed out or reversed.  Due totheir trend-following character, these Advisors’ programs do not predict eitherthe commencement or the end of a price movement. Rather, their objective is toidentify a trend early enough to profit from it and detect its end or reversalin time to close out the Partnership’s positions while retaining most of theprofits made from following the trend.

 

In analyzing the performance of trend-following programs, economicconditions, political events, weather factors, etc., are not directly relevantbecause only market data has any input into trading results.  Furthermore, there is no direct connectionbetween particular market conditions and price trends.  There are so many influences on the marketsthat the same general type of economic event may lead to a price trend in somecases but not in others.  The analysis isfurther complicated by the fact that the programs are designed to recognizeonly certain types of trends and to apply only certain criteria of when a trendhas begun.  Consequently, even thoughsignificant price trends may occur, if these trends are not comprised of thetype of intra-period price movements, which the programs are, designed toidentify, a trend-following Advisor may miss the trend altogether.

 

In the case of the Advisors, which implement strategies who rely moreon discretion and market judgment, it is not possible to predict, from theirperformance during past market cycles, how they will respond to future marketevents.

 

Performance Summary

 

This performance summary is an outline description of how thePartnership performed in the past, 

 

11

----

 

not necessarily any indicationof how it will perform in the future.  Inaddition, the general causes to which certain price movements are attributedmay or may not in fact have caused such movements, but simply occurred at orabout the same time.

 

The Advisors, as a group, are unlikely to be profitable in markets inwhich such trends do not occur.  Staticor erratic prices are likely to result in losses.  Similarly, unexpected events (for example, apolitical upheaval, natural disaster or governmental intervention) can lead tomajor short-term losses as well as gains.

 

While there can be no assurance that any Advisor will be profitable,under any given market condition, markets in which substantial and sustainedprice movements occur typically offer the best profit potential for thePartnership.

 

***2005***

 

Though an overall loss was realized for the year, the Partnership’soverall trading performance was profitable, with trading in metals and stockindices.

 

Trading in the metals sector posted the most profits for the year.  Long positions in base and precious metalscontributed to profits early in the year but detracted from performance in thesecond quarter.  Long metal positions inthe third quarter, specifically copper, contributed to profits as global growthincreased speculation that demand and therefore, prices would increase.  Metals continued their upward trend throughthe latter part of the year as demand remained strong for base and preciousmetals.

 

Trading in stock indices posted solid trading profits as well for theyear despite losses posted in the first half of the year.  Losses occurred early in the year due to atrend reversal from long global equities to short global equities.  Trading in stock indices contributedpositively to performance in the second half of the year with long positions inglobal equities contributing the most as global markets rallied.  Trading in the Nikkei, DAX and Europeanequities posted strong gains as they rallied at year end.

 

The interest rate sector posted gains for the year primarily due toprofits posted in the first half of the year despite this sector detractingfrom performance for the Partnership in the second half of the year.  In the beginning of the year the interestrate sector was the best performing sector as the Partnership benefited fromlong U.S. dollar positions versus the Euro and long Euro and Japanese fixedincomes.  Long positions in the ten-yearGerman bund also contributed to gains. Mid-year a rally in bond pricesattributed to losses as did long positions in Japanese and European governmentbonds.  Trading in German bunds furtherdetracted from performance.   Gains wereposted in October primarily due to short exposures to U.S. and Europeanyield curves, as bond prices fell over concerns that the central banks wouldcontinue to raise rates; however these profits were not enough to outweighlosses posted throughout the latter part of the fourth quarter.  Interest rates detracted as the U.S. yieldcurve inverted, resulting in a challenging environment for trading managers.Additionally, the market perception that the Federal Reserve would end itsinterest rate increase sooner rather than later sparked a sell off of the U.S.dollar.  Furthermore, many globallong-term interest rates moved lower, causing negative returns for select shortpositions, particularly to the German bund and British gilt.

 

Trading in the energy sector also posted gains for the Partnershipdespite the sector detracting from performance in the fourth quarter. Gainswere experienced in the energy sector as the Partnership benefited from longpositions in crude oil and gas as these industries profited.  During the second quarter, crude oil andheating oil declined as crude oil fell in price, which negatively impactedtrend followers.  Trading in the energysector posted the largest gains in the third quarter.  Long energy positions in the entire energycomplex, as well as a rally in the energy sector due to Hurricane Katrinaattributed to those gains.  Natural gasretreated from its record high prices set in September, negatively impactingtrading managers. Natural gas continued its decline throughout the fourthquarter detracting from performance.

 

Trading in the agricultural sector posted slight losses for thePartnership for the year, with the first and latter part of the yearcontributing to profits and mid-year detracting from performance.  During the first quarter, gains were experiencedfrom long positions in cattle and hog markets. Gains were posted due to coffee, which experienced a lack of supply anda growing demand.   Gains in exposure tohogs and soybeans were not enough to offset trading losses in othercommodities.  Long exposure to soymealfurther attributed to losses.  Shortexposure to 

 

12

----

 

corn and long exposure toLondon coffee detracted from performance in the third quarter.  Agriculture posted small gains at the end ofthe year as long sugar positions rallied due to an expectation of reducedsupplies.

 

Trading in the currency sector posted the largest losses for thePartnership for the year, despite small gains posted in the secondquarter.  Losses in the beginning of theyear were due to a trend reversal from short U.S. dollar positions to long U.S.dollar positions.  Long Japanese yen andSwiss 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 fromemerging currencies.  In the secondquarter, long positions in the British pound and the Australian dollarcontributed to gains.  Short positions tothe British pound and Swiss franc enabled the Partnership to capitalize ontrend reversals in the market in the latter half of the second quarter.  China’s revaluation of the yuan causedvolatility across the currency markets. The U.S. dollar weakened based on higher oil prices and the potentialFederal Reserve slowdown in September. British pounds detracted from performance in the foreign sector.  The U.S. dollar rallied against most majorcurrencies, primarily the yen, which attributed to losses.  Higher yielding carry trades reversed causinglosses to be posted as well.  The yearended with currencies on the upswing. Short Euro and Swiss franc and long Mexican peso positions contributedto performance.

 

***2004***

 

During 2004 all of the Partnership’s assets were invested in MMLLC.  The Partnership received tradingprofits as an investor in MM LLC.  Thefollowing commentary of 2004 describes the trading results for MM LLC duringthe year.

 

The Partnership’s overall trading performance was successful withtrading in the interest rate sector proving to be the most profitable.

 

The interest rate sector was the most profitable for the Partnership,despite choppy trading conditions early in the year.  Long exposure early in the year to most ofthe major global yield curves proved to generate positive results thoughoverall exposure was light compared to historical exposure. Bond markets werefairly range bound during the second quarter however, yields on the U.S.ten-year note reached their highest levels since July 2002. U.S. Treasurymarkets reacted to the employment data during the third quarter with a strongsell-off, which caused the sector to reduce the long exposure to change to anet short bias. The Federal Reserve raised key interest rates by 25 basispoints on September 21st and softer economic data eventually pushedlonger-term maturities higher by the end of the quarter. The U.S. fixed incomemarkets, particularly the front end, reversed their sell-off, which started inNovember, but rallied during the first week of December, only to reverse that trendduring the last two weeks of the year.

 

The energy sector had the second highest gains for thisPartnership.  The upward trend in crudeoil prices and related products continued in their secular bull market trend,in a very volatile fashion. Colder than expected winter months in the Northeastand Midwest U.S., instability with Russian suppliers, fears of worldwide terrorism, and active hurricane season inthe U.S., all contributed to keeping prices high throughout the year. The endof the year did see a pull back from the all time highs in energy prices, dueto both fundamental and technical factors, such as increased stockpiles andspeculators trading the market.

 

Trading in agricultural commodities posted gains for the Partnership.In the beginning of the year, the USDA cut its forecast of the crop supply forboth soybeans and corn, which sent prices surging. This long term rallycontinued through the second quarter on strong demand from Asia and lowerestimates of supply from South America. Demand from China and diminishingsupplies had kept prices high for quite some time. Small gains were posted inJune, with cotton prices dropping allowing short exposures to generate profits.Corn also posted a significant decline during the month, which caused the portfolioto adjust positions from long to short. The USDA gave a low crop estimate as there were forecasts of an earlyfreeze following a cool summer and slow crop development all surprising themarket and posting losses as the short positions were covered. Cocoa had avolatile move in November as the political situation in the Ivory Coastdeteriorated. The year ended with fundamental factors continuing to drivecoffee prices higher, reaching over $1 per pound, a level not seen since July 2000.

 

The metals sector was not profitable for thePartnership. Despite gains in the first quarter and third quarter, the year wasnot profitable. The second quarter generated significant losses in bothindustrial and precious 

 

13

----

 

metals. The U.S. dollarstrengthening and the fear of higher interest rates, which would curb growth,caused base and precious metals to sell-off. Industrial metals, particularlycopper, added to performance in the third quarter while exposure to preciousmetals contributed a small gain. Copper rallied primarily based on increasingdemand from China and tight supply conditions. The year ended with the metalssector posting a loss, as gains in long industrials were outweighed by lossesin long precious metal exposure. Gold experienced its first decline in sixmonths.

 

Stock indices posted a loss for thePartnership. The market was choppy throughout the year making tradingdifficult. The Partnership was able to realize some gains in the beginning of theyear on long exposure to global equities from momentum based and fundamentalmodels performing well. However, stock indices posted a loss that exceeded thegains from earlier in the first quarter. In April, the Japanese Nikkeiexperienced a sudden deterioration, which sent that market plungingapproximately 5% in one day. Losses in the U.S. outweighed moderate gains insome of the international markets late in the third quarter. However, stockindices posted a strong gain at the end of the year, as markets continued theupward trend on positive economic data, a decline in energy prices andincreased overall confidence. Gains were made across the U.S., Asia and Europe.

 

The currency sector was the least profitable for the Partnership. Thecurrency markets continued its long trend of a weakening U.S. dollar. However,trading was very choppy and gains generated in the beginning of the firstquarter were lost. Early U.S. dollar strength reversed towards the end of thefirst quarter and at the quarter’s close the U.S. dollar fell to a four yearlow against the Japanese yen. The U.S. dollar rebounded at the beginning of thesecond quarter only to weaken at the end of the quarter. The currency marketsremained range bound versus the U.S. dollar throughout the third quarter. Theyear ended with the U.S. dollar continuing to decline against various othercurrencies.

 

***2003***

 

During 2003 all of the Partnership’s assetswere invested in MM LLC.  The Partnershipreceived trading profits as an investor in MM LLC.  The following commentary of 2003 describesthe trading results for MM LLC during the year.

 

The Partnership’s overall trading performancewas successful with trading in the currency sector proving to be the mostprofitable.  The Partnership experiencedgains in all sectors.

 

The currency sector had the most significantgains for the year.  The weakening U.S.dollar continued to decline as it has for over a year and the Partnership waswell positioned to capitalize on its U.S. dollar positions against othercurrencies.  The largest gains versus theU.S. dollar during January and February were with the Australiandollar and Canadian dollar.  In March, onhopes that the war with Iraq would be short, the U.S. dollar strengthened andreturned some of the profits earned early in the year. . The U.S. dollardepreciated against most major currencies throughout most of the secondquarter.  The currency markets judged thedevelopments in the Middle East as negative for the U.S. economy and trade, andthe U.S. dollar sold off against most major currencies.  The U.S. dollar continued to weakensignificantly during the month of May when Treasury Secretary Snowindicated he was comfortable with current declines and that a cheaper U.S.dollar would increase exports. The U.S. dollar strengthened against most majorcurrencies late June, reversing some earlier profits.  During the middle of the third quarter, theU.S. dollar appreciated relative to the European currencies. In the fourthquarter the U.S. dollar declined against other major currencies, as concernsover the widening trade deficits persisted. Gains in trading the Australiandollar and Euro outweighed smaller losses in other markets during the fourthquarter.

 

Trading in stock indices posted a gain forthe year.  The market was choppythroughout the year making trading difficult. The Partnership was able to realize some gains in January on shortpositions as most indices recorded three-month lows. At the beginning of thethird quarter, the equities were fairly quiet with strong gains being generatedin trading global stock indices, primarily the Nikkei 225. During the middle ofthe third quarter, the losses in the S&P 500 and Dow Jones futuresoutweighed gains in other markets. However, the Japanese Nikkei was the strongestperformer as it gained over 8% on strong economic numbers. In December, aprofit was posted as long exposure to global equities from momentum basedmodels performed well as equities closed the year out with positiveperformance.  The main drives to performancein this sector were the DAX and the S&P500.

 

The metals sector was also profitable for theyear.  Gold drove profits in January asit continued its run up.  The generalperception of risks in the financial markets and the geopolitical situationunfolding was a main 

 

14

----

 

driver for the gold market inJanuary.  Gold generated losses in March throughJune as gold’s appeal as a safe investment diminished.  At the closing of the third quarter, both theindustrial and metal complex sectors benefited from increases in valuation. In November goldrallied and prices reached a six-year high and was one of the main drivers ofperformance for the sector. The year ended with strong physical demand fromAsia accelerating the up trend in base metals, particularly, nickel and copper,which benefited our long exposure to these markets.

 

Interest rate futures were profitable for theyear.  Significant gains in February andMay as well as in July due to the massive sell-off in bonds, offsetlosses throughout the remainder of the year. U.S. and European bonds rallied until the beginning of the thirdquarter, when the U.S. bond market suffered losses after the U.S. governmentannounced its intentions to borrow a record amount to finance the hugedeficit.  European bonds were weaker, butgenerally outperformed U.S. bonds during such period  Despite a record $60 billion refundingprogram in the U.S., bonds managed a timid recovery after making new lows.Trading conditions remain choppy in this sector and overall exposure continuesto remain low, since no clear trends have emerged at the end of the year.

 

Energy was a profitable sector for the year.In February, the best performing month, natural gas prices rose nearly 40% in asingle day in connection with expected severely cold weather and supplyshortages.  This helped the Partnershipretain profits as prices declined in crude oil and natural gas in March. Themarkets in April and May were dominated by the developments in theMiddle East, especially OPEC’s reaction to the developments in Iraq.  Production was not being resumed as initiallyestimated even though the destruction of the oilfields was smaller thanexpected.  Natural gas was very volatileduring June.  During the middle of thethird quarter, crude oil and most of the other energy markets were almostunchanged with high volatility throughout this period. The volatility wasmainly due to the uncertainty in supply and estimates of demand that wereprojected to increase. This was partly offset by expectations of the possibleresumption of oil production by Iraq. Strong gains were generated tradingunleaded gas and crude oil, only to be reversed in September. The year endedwith losses posted in the fourth quarter primarily due to milder weather in theU.S., which lead to a downward trend in natural gas.  Prices were volatile after the arrest ofSaddam Hussein and by a potential increase of OPEC quotas.

 

Trading in agricultural commodities postedsmall gains for the year. Livestock markets were off in February as Russiaimposed an import limit to help its domestic production.  Sugar was to blame for losses in March asprices reversed and hit a two-month low. Gains in April, mainly from soybeans,which rallied due to revisions in crop estimates and weather overseas, wereovershadowed by losses in May and June due to changes in cropestimates and a volatile livestock market. In the beginning of the thirdquarter, short exposure in corn generated strong profits as the U.S. governmentforecasted a record crop for this year. Supply and demand continued to drivethe cattle market as prices rose sharply in the beginning of the thirdquarter.  Weather drove prices up due tovery little rain in the Midwest, where a substantial portion of the U.S. cropsgrow.  By the end of the third quarter,supply concerns drove the corn and soybean markets due to the fact the USDAreported a better than expected yield on corn and lower yields on soybeans.  The fourth quarter began with  posted gains as grain export data was verybullish for most grain markets and soybeans. Later in the fourth quarter, thediscovery of the first case of mad cow disease contributed to the posting oflosses.

 

#### Variables AffectingPerformance

 

The principal variables, which determine the net performance of thePartnership, are gross profitability and interest income.

 

During all periods set forth under “Selected Financial Data,” theinterest rates in many countries were at unusually low levels.  The low interest rates in the United States(although higher than in many other countries) negatively impacted revenuesbecause interest income is typically a major component of the Partnership’sprofitability.  In addition, low interestrates are frequently associated with reduced fixed income market volatility,and in static markets the Partnership’s profit potential generally tends to bediminished.  On the other hand, duringperiods of higher interest rates, the relative attractiveness of a high riskinvestment such as the Partnership may be reduced as compared to high yieldingand much lower risk fixed-income investments.

 

The Partnership’s Brokerage Commissions and Administrative Fees are aconstant percentage of the Partnership’s assets allocated to trading.  The only Partnership costs (other than theinsignificant currency trading costs) which are not based on a percentage ofthe Partnership’s assets (allocated to trading or total) are the Profit Sharespayable to the Advisors on an Advisor-by-Advisor basis.  Gross profitability is in turn affected bythe 

 

15

----

 

percentages of the Partnership’sassets allocated to trading.  Duringperiods when Profit Shares are a high percentage of net trading gains, it islikely that there has been substantial performance non-correlation among theAdvisors (so that the total Profit Shares paid to those Advisors which havetraded profitably are a high percentage, or perhaps even in excess, of thetotal profits recognized, as other Advisors have incurred offsetting losses,reducing overall trading gains but not the Profit Shares paid to the successfulAdvisors) — suggesting the likelihood of generally trendless, non-consensusmarkets.

 

Unlike many investment fields, there is no meaningful distinction inthe operation of the Partnership between realized and unrealized profits.  Most of the contracts traded by thePartnership are highly liquid and can be closed out at any time.

 

Except in unusual circumstances, factors (e.g. regulatory approvals,cost of goods sold, employee relations and the like) which often materiallyaffect an operating business have virtually no impact on the Partnership.

 

**Liquidity; Capital Resources**

 

The Partnership sells no securities other than the Units. ThePartnership borrows, through Global Horizons, only to a limited extent and onlyon a strictly short-term basis in order to finance losses on non-U.S. dollardenominated trading positions pending the conversion of the Partnership’s U.S.dollar deposits. These borrowings are at a prevailing short-term rate in therelevant currency. They have been immaterial to the Partnership’s operations todate and are expected to continue to be so.

 

Substantially all of the Partnership’s assets are held in cash, throughGlobal Horizons. The Net Asset Value of the Partnership’s cash is not affectedby inflation. However, changes in interest rates could cause periods of strongup or down price trends, during which the Partnership’s profit potentialgenerally increases. Inflation in commodity prices could also generate pricemovements which the strategies might successfully follow.

 

Except in very unusual circumstances, the Partnership should be able toclose out any or all of its open trading positions and liquidate any or all ofits securities holdings quickly and at market prices. This permits an Advisorto limit losses, as well as reduce market exposure on short notice should itsstrategies indicate doing so. In addition, because there generally is a readilyavailable market value for the Partnership’s positions and assets, thePartnership’s monthly Net Asset Value calculations typically are precise, andinvestors need only wait ten business days to receive the full redemptionproceeds of their Units.

 

(The Partnership has no off-balance sheet arrangements or contractualobligations of the type described in Items 303(a)(4) and 303(a)(5) ofRegulation S-K.)

 

**Item 7A: Quantitative and Qualitative Disclosures about Market Risk**

 

***Introduction***

Past Performance Not Necessarily Indicativeof Future Results

 

The Partnership’s trading activities occurredthrough its investment in Global Horizons I L.P.  (Prior the close of business on December 31,2004, the Partnership invested in MM LLC). The following commentary describes the Partnership’s investment inGlobal Horizons.

 

The Partnership is a speculative commodity pool.  Unlike an operating company, the risk ofmarket sensitive instruments traded by it is integral, not incidental, to thePartnership’s main line of business.

 

Market movements result in frequent changesin the fair market value of the Partnership’s open positions and, consequently,in its earnings and cash flows.  ThePartnership’s market risk is influenced by a wide variety of factors, includingthe level and volatility of interest rates, exchange rates, equity pricelevels, the market 

 

16

----

 

value of financial instrumentsand contracts, the diversification effects among the Partnership’s openpositions and the liquidity of the markets in which it trades.

 

The Partnership, under the direction of itsAdvisors, rapidly acquires and liquidates both long and short positions in awide range of different markets. Consequently, it is not possible to predict how a possible future marketscenario will affect performance, and the Partnership’s past performance is notnecessarily indicative of its future results.

 

Value at Risk is a measure of the maximumamount which the Partnership could reasonably be expected to lose in a givenmarket sector.  However, the inherentuncertainty of the Partnership’s speculative trading and the recurrence in themarkets traded by the Partnership of market movements far exceedingexpectations could result in actual trading or non-trading losses far beyondthe indicated Value at Risk or the Partnership’s experience to date (i.e.*,* “risk of ruin”).  Inlight of the foregoing, as well as the risks and uncertainties intrinsic to allfuture projections, the inclusion of the quantification in this section shouldnot be considered to constitute any assurance or representations that thePartnership’s losses in any market sector will be limited to Value at Risk orby the Partnership’s attempt to manage market risk.

 

### Quantifying the Partnership’s Trading Value at Risk

 

*QuantitativeForward-Looking Statements*

 

The following quantitative disclosuresregarding the Partnership’s market risk exposures contain “forward-lookingstatements” within the meaning of the safe harbor from civil liability providedfor such statements by the Private Securities Litigation Reform Act of 1995(set forth in Section 27A of the Securities Act of 1933 and Section 21Eof the Securities Exchange Act of 1934). All quantitative disclosures in this section are deemed to beforward-looking statements for purposes of the safe harbor, except forstatements of historical fact.

 

The Partnership’s risk exposure in thevarious market sectors traded by the Advisors is quantified below in terms ofValue at Risk.  Due to the Partnership’smark-to-market accounting, any loss in the fair value of the Partnership’s openpositions is directly reflected in the Partnership’s earnings (realized orunrealized) and cash flows (at least in the case of exchange-traded contractsin which profits and losses on open positions are settled daily throughvariation margin).

 

Exchange maintenance margin requirements havebeen used by the Partnership as the measure of its Value at Risk.  Maintenance margin requirements are set byexchanges to equal or exceed the maximum loss in the fair value of any givencontract incurred in 95% - 99% of the one-day time periods included in thehistorical sample (generally approximately one year) researched for purposes ofestablishing margin levels.  Maintenancemargin levels are established by dealers and exchanges using historical pricestudies, as well as an assessment of current market volatility and economicfundamentals to provide a probabilistic estimate of the maximum expectednear-term one-day price fluctuation.

 

In the case of market sensitive instrumentswhich are not exchange-traded (almost exclusively currencies in the case of thePartnership), the margin requirements for the equivalent futures positions havebeen used as Value at Risk. In those rare cases in which a futures-equivalentmargin is not available, dealers’ margins have been used.

 

The fair value of the Partnership’s futuresand forward positions does not have any optionality component. However, certainof the Advisors trade commodity options. The Value at Risk associated with options is reflected in the followingtable as the margin requirement attributable to the instrument underlying eachoption.

 

100% positive correlation in the differentpositions held in each market risk category has been assumed. Consequently, themargin requirements applicable to the open contracts have been aggregated todetermine each trading category’s aggregate Value at Risk.  The diversification effects resulting fromthe fact that the Partnership’s positions are rarely, if ever, 100% positivelycorrelated have not been reflected.

 

17

----

 

***The Partnership’s Trading Value at Risk inDifferent Market Sectors***

 

The following table indicates the average, highest and lowest tradingValue at Risk associated with Global Horizons’ and MM LLC’s open positions bymarket category for the fiscal years. During the fiscal year 2005, GlobalHorizons’ average capitalization was approximately $270,409,956.  During the fiscal year 2004, MM LLC’s averagecapitalization was approximately $105,726,423.

 
| ** **                | ** ** | **December 31, 2005** | ** ** |
|---------------------------|------------|-----------------------|------------|
| ** **                | ** ** | **Average**           | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
| **Market Sector**         | ** ** | **Value at Risk**     | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                      |       |                  |       |   |   |   |   |   |   |
| Interest  Rates           |       | $                     | 12,222,247 |   | 4.52 | % | $ | 20,179,223 |   | $ | 3,383,516 |   |
| Currencies                |       | 1,240,840             |       | 0.46 | % | 6,832,670 |   | 43,503 |   |
| Stock  Indices            |       | 1,484,741             |       | 0.55 | % | 5,251,655 |   | 279,032 |   |
| Metals                    |       | 684,801               |       | 0.25 | % | 2,012,007 |   | 44,237 |   |
| Agricultural  Commodities |       | 163,356               |       | 0.06 | % | 453,699 |   | 1,777 |   |
| Energy                    |       | 292,892               |       | 0.11 | % | 1,030,159 |   | 19,464 |   |
|                      |       |                  |       |   |   |   |   |   |   |
| TOTAL                     |       | $                     | 16,088,877 |   | 5.95 | % | $ | 35,759,413 |   | $ | 3,771,529 |   |

 
| ** **                | ** ** | **December 31, 2004** | ** ** |
|---------------------------|------------|-----------------------|------------|
| ** **                | ** ** | **Average**           | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
| **Market Sector**         | ** ** | **Value at Risk**     | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
| ** **                | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Interest  Rates           |       | $                     | 3,682,601  |   | 3.48 | % | $ | 5,506,045 |   | $ | 2,166,111 |   |
| Currencies                |       | 654,898               |       | 0.62 | % | 2,250,853 |   | 317,715 |   |
| Stock  Indices            |       | 187,384               |       | 0.18 | % | 551,042 |   | 20,045 |   |
| Metals                    |       | 73,245                |       | 0.07 | % | 157,020 |   | 16,983 |   |
| Agricultural  Commodities |       | 46,692                |       | 0.04 | % | 101,621 |   | 2,338 |   |
| Energy                    |       | 89,843                |       | 0.09 | % | 253,721 |   | 12,894 |   |
|                      |       |                  |       |   |   |   |   |   |   |
| TOTAL                     |       | $                     | 4,734,663  |   | 4.48 | % | $ | 8,820,302 |   | $ | 2,536,086 |   |

 

18

----

 

**Item 8:****   Financial Statements andSupplementary Data**

 

The financial statements required by this Itemare included in Exhibit 13.01.

 

SelectedQuarterly Financial Data

ML FuturesInvestments L.P.

 

Net Income byQuarter

Eight Quartersthrough December 31, 2005

 
| ** **                 | ** ** | **Fourth**  | ** ** | **Third**   | ** ** | **Second**  | ** ** | **First**   | ** ** | **Fourth**  | ** ** | **Third**   | ** ** | **Second**  | ** ** | **First**   | ** ** |
|----------------------------|------------|-------------|------------|-------------|------------|-------------|------------|-------------|------------|-------------|------------|-------------|------------|-------------|------------|-------------|------------|
| ** **                 | ** ** | **Quarter** | ** ** | **Quarter** | ** ** | **Quarter** | ** ** | **Quarter** | ** ** | **Quarter** | ** ** | **Quarter** | ** ** | **Quarter** | ** ** | **Quarter** | ** ** |
| ** **                 | ** ** | **2005**    | ** ** | **2005**    | ** ** | **2005**    | ** ** | **2005**    | ** ** | **2004**    | ** ** | **2004**    | ** ** | **2004**    | ** ** | **2004**    | ** ** |
| Total Income               |       | $           | 873,044    |        | $          | 550,439     |       | $           | 127,657    |        | $          | (86,289     | )          | $           | 3,846,228  |        | $          | 543,589 |   | $ | (3,645,761 | ) | $ | 3,841,576 |   |
| Total Expenses             |       | 866,219     |       | 880,240     |       | 959,212     |       | 1,030,216   |       | 1,424,598   |       | 1,175,267   |       | 553,916     |       | 1,787,535   |       |
| Net Income (Loss)          |       | $           | 6,825      |        | $          | (329,801    | )          | $           | (831,555   | )           | $          | (1,116,505  | )          | $           | 2,421,630  |        | $          | (631,678 | ) | $ | (4,199,678 | ) | $ | 2,054,041 |   |
|                       |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |
| Net Income (Loss) per Unit |       | $           | 0.0002     |        | $          | (0.0082     | )          | $           | (0.0202    | )           | $          | (0.0262     | )          | $           | 0.0550     |        | $          | (0.0139 | ) | $ | (0.0897 | ) | $ | 0.0421 |   |

 

The financial statements required by thisItem are included in Exhibit 13.01.

 

The supplementary financial information (“informationabout oil and gas producing activities”) specified by Item 302 of RegulationS-K is not applicable.

 

**Item 9:****   Changes in and Disagreementswith Accountants on Accounting and Financial Disclosure**

 

There were no changes in or disagreementswith the Independent Registered Public Accounting Firm on accounting orfinancial disclosure.

 

**Item 9A: Controls and Procedures**

 

Merrill Lynch Alternative Investments LLC,the General Partner of ML Futures Investments L.P., with the participation ofthe General Partner’s Chief Executive Officer and the Chief Financial Officer,has evaluated the effectiveness of the design and operation of its disclosurecontrols and procedures with respect to the Partnership as of the end of theperiod covered by this annual report, and, based on their evaluation, haveconcluded that these disclosure controls and procedures are effective.  Additionally, there were no significantchanges in the Partnership’s internal controls or in other factors that couldsignificantly affect these controls subsequent to the date of their evaluation,including any corrective actions with regard to significant deficiencies andmaterial weaknesses.

 

**Item 9B: OtherInformation**

 

Not applicable.

 

19

----

 

## **PART III**

 

**Item 10:  Directors andExecutive Officers of the Registrant**

 

(a,b)        Identification ofDirectors and Executive Officers:

 

As a limited partnership, the Partnership itself has no officers ordirectors and is managed by MLAI. Trading decisions are made by the Advisors on behalf of thePartnership.  MLAI promotes thePartnership and is its controlling person.

 

The managers and executive officers of MLAI and their respectivebusiness backgrounds are as follows.

 
| **Robert M. Alderman**  | Chief Executive Officer, President and Manager        |
|-------------------------|-------------------------------------------------------|
|                    |                                                  |
| **Steven B. Olgin**     | Vice President, Chief Operating Officer and Manager   |
|                    |                                                  |
| **Michael L. Pungello** | Vice President, Chief Financial Officer and Treasurer |
|                    |                                                  |
| **Jeffrey F. Chandor**  | Manager                                               |

 

Mr. Alderman was born in 1960. Mr. Robert M. Alderman is Chief Executive Officer, President andManager of MLAI. Mr. Alderman is a Managing Director of Merrill LynchGlobal Private Client and global head of Retail Sales and Business Managementfor Alternative Investments. Prior to re-joining Merrill Lynch and theInternational Private Client Group in 1999, he was a partner in the Nashville,Tennessee based firm of J.C. Bradford & Co. where he was the Directorof Marketing, and a National Sales Manager for Prudential Investments. Mr. Aldermanfirst joined Merrill Lynch in 1987 where he worked until 1997. During histenure at Merrill Lynch, Mr. Alderman has held positions in FinancialPlanning, Asset Management and High Net Worth Services. He received his Master’sof Business Administration from the Carroll School of Management Boston Collegeand a Bachelor of Arts from Clark University.

 

Steven B. Olgin was born in 1960. Mr. Olgin is Vice President,Chief Operating Officer and a Manager of MLAI. He joined MLAI in July 1994and became a Vice President in July 1995. From 1986 until July 1994, Mr. Olginwas an associate of the law firm of Sidley & Austin. In 1982, Mr. Olgingraduated from The American University with a Bachelor of Science in BusinessAdministration and a Bachelor of Arts in Economics. In 1986, he received hisJuris Doctor from the John Marshall Law School. Mr. Olgin is a member ofthe Managed Funds Association’s Government Relations Committee and has servedas an arbitrator for the National Futures Association. Mr. Olgin is amember of the Illinois Bar.

 

Michael L. Pungello was born in 1957. Mr. Pungello is a VicePresident, Chief Financial Officer and Treasurer of MLAI. He was First VicePresident and Senior Director of Finance for Merrill Lynch’s Operations,Services and Technology Group from January 1998 to March 1999. Priorto that, Mr. Pungello spent over 18 years with Deloitte & ToucheLLP, and was a partner in their financial services practice from June 1990to December 1997. He graduated from Fordham University in 1979 with aBachelor of Science in Accounting and received his Master’s of BusinessAdministration in Finance from New York University in 1987.

 

Jeffrey F.Chandor was born in 1942. Mr. Chandor is the Global Sales Director of theGeneral Partner. Mr. Chandor became a Manager of the General Partner on April 1,2003. He was a Senior Vice President, Director of Sales, Marketing and Researchand a Director of Merrill Lynch Investment Partners, Inc., a predecessorto the General Partner. He joined Merrill Lynch, Pierce, Fenner &Smith Incorporated in 1971 and has served as the Product Manager ofInternational Institutional Equities, Equity Derivatives and Mortgage-BackedSecurities as well as Managing Director of International Sales in the UnitedStates, and Managing Director of Sales in Europe. Mr. Chandor holds aBachelor of Arts degree from Trinity College, Hartford, Connecticut.

 

20

----

 

As of December 31, 2005, the principalsof MLAI had no investment in the Partnership, and MLAI’s general partnerinterest in the Partnership was valued at $454,109.

 

MLAI acts as sponsor, general partner or manager to ten public futuresfunds whose units of limited partnership or member interests are registeredunder the Securities Exchange Act of 1934: Global Horizons I L.P., ML PrincipalProtection L.P., ML JWH Strategic Allocation L.P., ML Select Futures I L.P., John W. Henry & Co./MillburnL.P., ML Appleton FuturesAccess LLC, ML Aspect FuturesAccess LLC, MLCornerstone FuturesAccess LLC, ML Winton FuturesAccess LLC, and thePartnership.  Because MLAI serves as thegeneral partner, sponsor or manager of each of these funds, the officers andmanagers of MLAI effectively manage them as officers and directors of suchfunds.

 

(c)           Identification ofCertain Significant Employees:

 

None.

 

(d)           Family Relationships:

 

None.

 

(e)           Business Experience:

 

See Item 10(a)(b) above.

 

(f)            Involvement inCertain Legal Proceedings:

 

None.

 

(g)           Promoters andControl Persons:

 

Not applicable.

 

(h)                                 Audit CommitteeFinancial Expert:

 

Not applicable.  (Neither thePartnership nor MLIM has an audit committee.)

 

Section 16(a) Beneficial OwnershipReporting Compliance:

 

Not applicable.

 

Code of Ethics:

 

The Partnership has adopted a code of ethics, as of the end of theperiod covered by this report, which applies to the Partnership’s (MLAI’s)principal executive officer and principal financial officer or personsperforming similar functions on behalf of the Partnership.  A copy of the code of ethics is available toany person, without charge, upon request by calling 1-877-465-8435.

 

**Item 11: Executive Compensation**

 

The managers and officers of MLAI are remunerated by MLAI. ThePartnership does not itself have any officers, directors or employees. ThePartnership pays Brokerage Commissions to an affiliate of MLAI andAdministrative Fees to MLAI.  MLAI or itsaffiliates may also receive certain economic benefits from holding thePartnership’s U.S. dollar assets. The managers and officers receive no othercompensation from the Partnership, and the directors receive no compensationfor serving as directors of MLAI. There are no compensation plans orarrangements relating to a change in control of either MLAI or the Partnership.

 

21

----

 

**Item 12: Security Ownership of Certain Beneficial Owners and Managementand Related Stockholder Matters**

 

(a)           Security Ownershipof Certain Beneficial Owners:

 

Not applicable (The Units are non-voting limited partnershipinterests.  The Partnership ismanaged   by MLAI, its general partner).

 

(b)           Security Ownershipof Management:

 

As of December 31, 2005, MLAI owned 441,484 Units (unit-equivalentgeneral partnership interests), which was 1.14% of the total Units outstanding.

 

(c)                                  Changes in Control:

 

None

 

(d)                                 Securities Authorizedfor Issuance Under Equity Compensation Plans:

 

None

 

**Item 13: Certain Relationships and Related Transactions**

 

(a)           Transactions betweenMerrill Lynch and the Partnership

 

All of the service providers to the Partnership, other than theAdvisors, are affiliates of Merrill Lynch. Merrill Lynch negotiated with theAdvisors over the level of their advisory fees and Profit Shares.  However, none of the fees paid by thePartnership to any Merrill Lynch party were negotiated, and they are higherthan would have been obtained in arms-length bargaining.

 

The Partnership indirectly pays Merrill Lynch through MLPF&S andMLAI substantial Brokerage Commissions and Administrative Fees, respectively,as well as bid-ask spreads on forward currency trades. The Partnership alsopays MLPF&S interest on short-term loans extended by MLPF&S to coverlosses on foreign currency positions.

 

Within the Merrill Lynch organization, MLAI is the direct beneficiaryof the revenues received by different Merrill Lynch entities from thePartnership. MLAI controls the management of the Partnership and serves as itspromoter. Although MLAI has not sold any assets, directly or indirectly, to thePartnership, MLAI makes substantial profits from the Partnership due to theforegoing revenues.

 

No loans have been, are or will be outstanding between MLAI or any ofits principals and the Partnership.

 

MLAI paid substantial selling commissions and trailing commissions toMLPF&S for distributing the Units. MLAI is ultimately paid back for these expenditures from the revenues itreceives from the Partnership.

 

(b)           Certain BusinessRelationships:

 

MLPF&S, an affiliate of MLAI acts as the principal commodity brokerfor the Partnership.

 

In 2005, Global Horizons expensed directly on behalf of thepartnership: (i) Brokerage Commissions of $3,456,917 to MLPF&S, whichincluded $595,575 in consulting fees earned by the Advisors; and (ii) AdministrativeFees of $101,674 to MLIM LLC and MLAI. In addition MLAI and its affiliates may have derived certain economicbenefit from possession of the Partnership’s assets, as  well as from foreign exchange and EFP trading.

 

See Item 1(c), “Narrative Description of Business — Charges” and “Descriptionof Current 

 

22

----

 

Charges” for a discussion ofother business dealings between MLAI affiliates and the Partnership.

 

(c)           Indebtedness ofManagement:

 

The Partnership is prohibited from making any loans to management orotherwise.

 

(d)           Transactions withPromoters:

 

Not applicable.

 

**Item 14: Principal Accountant Fees and Services**

 

(a)                                  AuditFees

 

Aggregate fees billed for professionalservices rendered by Deloitte & Touche LLP in connection with  the audit of the Partnership’s financialstatements as of and for the year ended December 31, 2005 were $21,500.

 

Aggregate fees billed for these services forthe year ended December 31, 2004 were $19,000.

 

(b)                                 Audit-RelatedFees  

 

There were no other audit-related fees billed for the years ended December 31,2005 or 2004 related to the Partnership.

 

(c)                                  Tax Fees

 

Aggregate fees billed for professionalservices rendered by Deloitte Tax LLP in connection with the tax compliance,advice and preparation of the Partnerships tax returns for the year ended December 31,2005 were $68,000.

 

Aggregate fees billed for these services forthe year ended December 31, 2004 were $27,500.

 

(d)                                 All Other Fees

 

No fees were billed by Deloitte & Touche LLP or Deloitte TaxLLP or any member firms of Deloitte Touche Tohmatsu, and their respectiveaffiliates during the years ended December 31, 2005 or 2004 for any otherprofessional services in relation to the Partnership.

 

Neither the Partnership nor MLAI has an audit committee to pre-approveprincipal accountant fees and services. In lieu of an audit committee, the managers and the principal financialofficer pre-approve all billings prior to the commencement of the performanceof such services.

 

23

----

 

**PART IV**

 

**Item 15: Exhibits and Financial Statement Schedules**

 

1.             FinancialStatements:

 
| Report of Independent Registered Public Accounting Firm                  | 1      |
|--------------------------------------------------------------------------|--------|
|                                                                     |   |
| Statements of Financial Condition as of December 31, 2005 and  2004 | 2      |
|                                                                     |   |
| For the years ended December 31, 2005, 2004 and 2003                | 3      |
| Statements of Operations                                                 |   |
| Statements of Changes in Partners’ Capital                          | 4      |
|                                                                     |   |
| Financial Data Highlights for the year ended December 31, 2005      | 5      |
|                                                                     |   |
| Notes to Financial Statements                                            | 6-10   |

 

2.             FinancialStatement Schedules:

 

Financial statement schedules not included in this Form 10-K havebeen omitted for the reason that they are not required or are not applicable orthat equivalent information has been included in the financial statements ornotes thereto.

 

3.             Exhibits:

 

The following exhibits are incorporated by reference or are filedherewith to this Annual Report on Form 10-K:

 
| **Designation**        | ** ** | **Description**                                                                                                                                                                                                                                                                                                              |
|------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                   |       |                                                                                                                                                                                                                                                                                                                         |
| 2.01                   |       | Amended and Restated Agreement and Plan of Merger of certain Limited  Partnerships with and into ML Futures Investment L.P.                                                                                                                                                                                                  |
|                   |       |                                                                                                                                                                                                                                                                                                                         |
| Exhibit 2.01      |       | Is incorporated herein by reference from Exhibit 2.01 contained  in the Registrant’s report on Form 10-K for the year ended  December 31, 2003.                                                                                                                                                          |
|                   |       |                                                                                                                                                                                                                                                                                                                         |
| 3.01(i)                |       | Amended and Restated Certificate of Limited Partnership of the  Registrant, dated July 27, 1995.                                                                                                                                                                                                                        |
|                   |       |                                                                                                                                                                                                                                                                                                                         |
| Exhibit 3.01(i):  |       | Is incorporated herein by reference from  Exhibit 3.01(d) contained in the Registrant’s report on  Form 10-Q for the Quarter Ended June 30, 1995.                                                                                                                                                   |
|                   |       |                                                                                                                                                                                                                                                                                                                         |
| 3.01(ii)               |       | Limited Partnership Agreement of the Partnership.                                                                                                                                                                                                                                                                            |
|                   |       |                                                                                                                                                                                                                                                                                                                         |
| Exhibit 3.01(ii): |       | Is incorporated herein by reference from  Exhibit 3.01(a) contained in Amendment No. 1 (as  Exhibit A) to the Registration Statement (File No. 33-34432) filed  on May 25, 1990 on Form S-1 under the Securities Act of 1933 (the  “Registrant’s Registration Statement”). |
|                   |       |                                                                                                                                                                                                                                                                                                                         |
| 10.01(o)               |       | Form of Advisory Agreement between the Partnership, MLIM LLC,  MLPF&S and each Advisor.                                                                                                                                                                                                                             |
|                   |       |                                                                                                                                                                                                                                                                                                                         |
| Exhibit 10.01(o): |       | Is incorporated herein by reference from Exhibit 10.01(o)  contained in the Registrant’s report on Form 10-Q for the Quarter Ended  June 30, 1995.                                                                                                                                                       |

 

24

----

 
| 10.02(a)                 |   | Form of Consulting Agreement between each Advisor of the  Partnership and MLPF&S.                                                                                                          |
|--------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                     |   |                                                                                                                                                                                                |
| Exhibit 10.02(a):   |   | Is incorporated herein by reference from  Exhibit 10.02(a) contained in the Registrant’s Registration  Statement.                                                                    |
|                     |   |                                                                                                                                                                                                |
| 10.03(a)                 |   | Form of Customer Agreement between the Partnership and  MLPF&S.                                                                                                                            |
|                     |   |                                                                                                                                                                                                |
| Exhibit 10.03(a):   |   | Is incorporated herein by reference from  Exhibit 10.03(a) contained in the Registrant’s Registration  Statement.                                                                    |
|                     |   |                                                                                                                                                                                                |
| 10.06                    |   | Foreign Exchange Desk Service Agreement among Merrill Lynch  Investment Bank, MLIM LLC, MLPF&S and the Partnership.                                                                             |
|                     |   |                                                                                                                                                                                                |
| Exhibit 10.06:      |   | Is incorporated herein by reference from Exhibit 10.06 contained  in the Registrant’s report on Form 10-K for the year ended  December 31, 1996.                                |
|                     |   |                                                                                                                                                                                                |
| 10.07(a)                 |   | Form of Advisory and Consulting Agreement Amendment among MLAI,  each Advisor, the Partnership and MLPF&S.                                                                                 |
|                     |   |                                                                                                                                                                                                |
| Exhibit 10.07(a):   |   | Is incorporated herein by reference from  Exhibit 10.07(a) contained in the Registrant’s report on  Form 10-K for the year ended December 31, 1996.                        |
|                     |   |                                                                                                                                                                                                |
| 10.07(b)                 |   | Form of Amendment to the Customer Agreement among the  Partnership and MLPF&S.                                                                                                             |
|                     |   |                                                                                                                                                                                                |
| Exhibit 10.07(b):   |   | Is incorporated herein by reference from  Exhibit 10.07(b) contained in the Registrant’s report on  Form 10-K for the year ended December 31, 1996.                        |
|                     |   |                                                                                                                                                                                                |
| 13.01                    |   | 2005 Annual Report and Report of Independent Registered Public  Accounting Firm.                                                                                                                    |
|                     |   |                                                                                                                                                                                                |
| Exhibit 13.01:      |   | Is filed herewith.                                                                                                                                                                                  |
|                     |   |                                                                                                                                                                                                |
| 13.01                    |   | 2005 Annual Report and Independent Registered Public Accounting Firm  report for the following Trading Limited Liability Company sponsored by MLAI:                                                 |
|                     |   | Global Horizons I L.P.                                                                                                                                                                              |
|                     |   |                                                                                                                                                                                                |
| Exhibit 13.01(a):   |   | Is filed herewith.                                                                                                                                                                                  |
|                     |   |                                                                                                                                                                                                |
| 28.01                    |   | Prospectus of the Partnership dated June 1, 1990.                                                                                                                                              |
|                     |   |                                                                                                                                                                                                |
| Exhibit 28.01:      |   | Is incorporated by reference as filed with the Securities and  Exchange Commission pursuant to Rule 424 under the Securities Act of  1933 (File No. 33-34432) filed on June 7, 1990. |
|                     |   |                                                                                                                                                                                                |
| 31.01 and 31.02          |   | Rule 13a-14(a)/15d-14(a) Certifications.                                                                                                                                                  |
|                     |   |                                                                                                                                                                                                |
| Exhibits 31.01 and 31.02 |   | Are filed herewith.                                                                                                                                                                                 |
|                     |   |                                                                                                                                                                                                |
| 32.01 and 32.02          |   | Section 1350 Certifications.                                                                                                                                                                   |
|                     |   |                                                                                                                                                                                                |
| Exhibits 32.01 and 32.02 |   | Are filed herewith.                                                                                                                                                                                 |

 

25

----

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of theSecurities Exchange Act of 1934, the Registrant has duly caused this report tobe signed on its behalf by the undersigned, thereunto duly authorized.

 
| ** ** | **ML FUTURES INVESTMENTS L.P.**                   |
|------------|---------------------------------------------------|
|       |                                              |   |
|       | By: **MERRILL LYNCH ALTERNATIVE INVESTMENTS LLC** |
|       | General Partner                                   |   |
|       |                                              |
|       | By:                                               | /s/Robert M. Alderman |   |
|       | Robert M. Alderman                                |
|       | Chief Executive Officer, President and Manager    |
|       | (Principal Executive Officer)                     |   |
|       |                                              |   |
|            |                                                   |  |  |  |

 

Pursuant to the requirements of Section 13 or 15(d) of theSecurities Exchange Act of 1934, this report has been signed on March 31,2006 by the following persons on behalf of the Registrant and in the capacitiesindicated.

 
| **Signature**          | ** ** | **Title** | ** **                                            | **Date** |
|------------------------|------------|-----------|-------------------------------------------------------|----------|
|                   |       |      |                                                  |     |
| /s/Robert M. Alderman  |       |      | Chief Executive Officer, President and Manager        |     | March 31, 2006 |
| Robert M. Alderman     |       |      | (Principal Executive Officer)                         |     |   |
|                   |       |      |                                                  |     |   |
| /s/Steven B. Olgin     |       |      | Vice President, Chief Operating Officer and Manager   |     | March 31, 2006 |
| Steven B. Olgin        |       |      |                                                  |     |   |
|                   |       |      |                                                  |     |   |
| /s/Michael L. Pungello |       |      | Vice President, Chief Financial Officer and Treasurer |     | March 31, 2006 |
| Michael L. Pungello    |       |      | (Principal Financial and Accounting Officer)          |     |   |
|                   |       |      |                                                  |     |   |
| /s/Jeffrey F. Chandor  |       |      | Manager                                               |     | March 31, 2006 |
| Jeffrey F. Chandor     |       |      |                                                  |     |   |

 

 

(Being the principal executive officer, the principal financial andaccounting officer and a majority of the managers of Merrill Lynch AlternativeInvestments LLC)

 

**MERRILL LYNCH ALTERNATIVE INVESTMENTS LLC**
| General Partner of Registrant | March 31, 2006 |
|-------------------------------|---------------------|

 

 
| By: | /s/Robert M. Alderman |   |
|-----|-----------------------|--------|

Robert M. Alderman

Chief Executive Officer, President and Manager

(Principal Executive Officer)

 

26

----

 

**ML FUTURES INVESTMENTS L.P.**

 

2005 FORM 10-K

 

INDEX TO EXHIBITS

 

Exhibit

 
| Exhibit 13.01 2003 |   | 2005 Annual Report and Report of Independent Registered Public  Accounting Firm                                                                         |
|-------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|
|                    |   |                                                                                                                                                    |
| Exhibit 13.01(a)   |   | 2005 Annual Report and Report of Independent Registered Public  Accounting Firm for the following Trading Limited Liability Company sponsored  by MLAI: |
|                    |   | Global Horizons I L.P.                                                                                                                                  |

 

27

----