<PAGE>
 
                                                                   EXHIBIT 13.01


          ML FUTURES INVESTMENTS II L.P.
          (A DELAWARE LIMITED PARTNERSHIP)

          Financial Statements for the years ended
          December 31, 1995, 1994 and 1993
          and Independent Auditors' Report
<PAGE>
 
To:  The Limited Partners of ML FUTURES INVESTMENTS II L.P.

ML Futures Investments II L.P. (the "Fund") ended its eighth fiscal year of
trading on December 31, 1995 with a Net Asset Value ("NAV") per Unit of $166.06,
representing an increase of 17.08% from the December 31, 1994 NAV per Unit of
$141.84. During the fiscal year, trading profits were generated in the interest
rate, currency, energy, stock index and agriculture sectors while losses were
incurred in the metals sector.

In 1995, price trends which prevailed in several key markets enabled the Fund's
Trading Advisors to trade profitably for the Fund.  Although trading in many of
the traditional commodity markets may have been lackluster, the currency and
financial markets offered exceptional trading opportunities. Soaring stock
prices and falling interest rates, coupled with significant currency moves,
resulted in profitable trading opportunities in these markets throughout the
year.

After months characterized by very difficult trading environments, solid price
trends across many markets began to emerge during the first quarter of 1995.  In
February, bond markets worldwide recovered some of the ground lost in the
previous year.  Specifically, U.S. Treasury prices improved, spurred by the
belief that growth in the U.S. economy was slowing enough for inflation to
stabilize. The Fund was also able to profit in the non-dollar markets, as German
and Japanese bonds rallied. In the currency markets, the Deutsche mark hit a
two-year high of DM/US$ 1.4613 on February 24.

In the second quarter, market volatility once again began to cast its shadow on
trading as many previously strong price trends began to weaken and even reverse
in some cases.  During April, the U.S. dollar hit new lows versus the Japanese
yen and Deutsche mark before sharply rebounding.  The U.S. dollar experienced
another sharp rally in May, due to intervention on the part of major central
banks, potential trade sanctions against Japan and congressional action to
reduce the federal budget. In June, strong indications that the U.S. economy was
slowing, coupled with a failure of the Bundesbank to lower the Lombard rate,
stalled a rally in the German bond market.

In July, Alan Greenspan's optimistic comments concerning the U.S. economy led to
a sudden correction in U.S. bond prices after several months of a strong
uptrend.  Throughout August and into September, the U.S. dollar rallied sharply
against the Japanese yen and the Deutsche mark.  The dollar's rally was
supported by coordinated intervention on the part of major central banks and
further bolstered on August 30 by the potential impact of the growing banking
crisis in Japan.

Despite continued price volatility during the final quarter of 1995, the Fund's
Trading Advisors were able to single out some trends in key markets.  U.S.
Treasury bond prices continued their strong move upward throughout November due
to weak economic data and optimism on Federal budget talks. By month-end, the
30-year Treasury bond rate was pushed to its lowest level in more than two
years. U.S. bond prices weakened during December as government budget talks
continued to stall. By month-end, however, prices strengthened somewhat as the
yield on the U.S. long bond fell below 6% for the first time in over two years.
<PAGE>
 
1995 proved to be a good year for the Fund.  As General Partner and Trading
Manager of the Fund, we believe that the Fund's strategy of focused
diversification positioned the Fund well to profit from a variety of trading
opportunities during the year.  We continue to work diligently with the Trading
Advisors to meet the Fund's objective of substantial capital appreciation over
the long-term and look forward to the new fiscal year and the trading
opportunities it may bring.

                                     Sincerely,
                                     John R. Frawley, Jr.
                                     President
                                     MERRILL LYNCH INVESTMENT PARTNERS INC.
                                     (General Partner)

FUTURES TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. PAST
PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
<PAGE>
 
ML FUTURES INVESTMENTS II L.P.
(A Delaware Limited Partnership)
 ------------------------------ 

 
TABLE OF CONTENTS
---------------------------------------------------- 
                                                Page
                                                ----
 
INDEPENDENT AUDITORS' REPORT                      1
 
FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 1995, 1994 and 1993:
 
 Statements of Financial Condition                2
 
 Statements of Operations                         3
 
 Statements of Changes in Partners' Capital       4
 
 Notes to Financial Statements                 5-10
<PAGE>
 
INDEPENDENT AUDITORS' REPORT
----------------------------



To the Partners of
  ML Futures Investments II L.P.

We have audited the accompanying statements of financial condition of ML Futures
Investments II L.P. (a Delaware limited partnership; the "Partnership") as of
December 31, 1995 and 1994, and the related statements of operation and of
changes in partners' capital for each of the three years in the period ended
December 31, 1995.  These financial statements are the responsibility of the
Partnership's management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, these financial statements present fairly, in all material
respects, the financial position of ML Futures Investments II L.P. (a Delaware
limited partnership) as of December 31, 1995 and 1994, and the results of its
operations for each of the three years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.



DELOITTE & TOUCHE LLP

January 26, 1996
New York, New York


                                      -1-
<PAGE>
 
ML FUTURES INVESTMENTS II L.P.
(A Delaware Limited Partnership)
 ------------------------------ 

STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1995 AND 1994
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                    1995          1994
                                                                ------------  -----------
ASSETS                                                       
------                                                       
<S>                                                             <C>           <C> 
Accrued interest (Note 2)                                       $    65,021   $    70,399
Equity in commodity futures trading accounts:                
    Cash and option premiums                                     14,612,463    14,932,872
    Net unrealized gain on open contracts                         2,029,049     2,149,465
                                                                -----------   ----------- 
                                                             
                TOTAL                                           $16,706,533   $17,152,736
                                                                ===========   =========== 
                                                             
LIABILITIES AND PARTNERS' CAPITAL                            
---------------------------------                            
                                                             
LIABILITIES:                                                 
    Redemptions payable                                         $   351,715   $   150,634
    Brokerage commissions payable (Note 2)                          139,221       142,935
    Profit shares payable                                            80,159        90,438
                                                                -----------   ----------- 
                                                             
            Total liabilities                                       571,095       384,007
                                                                -----------   ----------- 
                                                             
PARTNERS' CAPITAL:                                           
    General Partner (1,229 and 1,629 Units)                         204,068       231,044
    Limited Partners (95,936 and 116,590 Units)                  15,931,370    16,537,685
                                                                -----------   ----------- 
                                                             
            Total partners' capital                              16,135,438    16,768,729
                                                                -----------   ----------- 
                                                             
                TOTAL                                           $16,706,533   $17,152,736
                                                                ===========   =========== 
NET ASSET VALUE PER UNIT                                            
(Based on 97,165 and 118,219  outstanding)                          $166.06       $141.84
                                                                ===========   =========== 
</TABLE> 
 
See notes to financial statements.

                                      -2-
<PAGE>
 
ML FUTURES INVESTMENTS II L.P.
(A Delaware Limited Partnership)
 ------------------------------

STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
--------------------------------------------------------------------------------

<TABLE> 
<CAPTION> 
                                                           1995          1994          1993
                                                        ----------   -----------   -----------
<S>                                                     <C>          <C>           <C> 
REVENUES:
    Trading profits (loss):
       Realized                                         $3,732,452   $ 1,431,115   $ 5,305,174
 Change in unrealized                                     (120,416)     (270,445)      729,583
                                                        ----------   -----------   ----------- 

        Total trading results                            3,612,036     1,160,670     6,034,757
 
    Interest income (Note 2)                               806,886       614,734       451,294
                                                        ----------   -----------   ----------- 
 
        Total revenues                                   4,418,922     1,775,404     6,486,051
                                                        ----------   -----------   ----------- 
 
EXPENSES:
    Profit shares                                          293,724       380,332       654,698
    Brokerage commissions (Note 2)                       1,622,255     1,764,298     2,148,038
                                                        ----------   -----------   ----------- 
 
        Total expenses                                   1,915,979     2,144,630     2,802,736
                                                        ----------   -----------   ----------- 
 
NET INCOME (LOSS)                                       $2,502,943   $  (369,226)  $ 3,683,315
                                                        ==========   ===========   =========== 
NET INCOME (LOSS) PER UNIT:
     Weighted average number of Units
      outstanding (Note 4)                                 107,979       127,755       155,275
                                                        ==========   ===========   =========== 
     Weighted average net income (loss)                     
     per Unit                                               $23.18        $(2.89)       $23.72
                                                        ==========   ===========   =========== 
</TABLE> 
 
See notes to financial statements.

                                      -3-
<PAGE>
 
ML FUTURES INVESTMENTS II L.P.
(A Delaware Limited Partnership)
 ------------------------------

STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
--------------------------------------------------------------------------------
 
<TABLE> 
<CAPTION> 
                                                      Limited       General
                                            Units     Partners      Partner       Total
                                          -------   -----------   -----------   -----------
<S>                                       <C>       <C>           <C>           <C>  
PARTNERS' CAPITAL,                        
DECEMBER 31, 1992                         179,342   $21,340,267   $   391,251   $21,731,518
                                         
Redemptions                               (42,463)   (5,517,941)     (212,992)   (5,730,933)
Net income                                     --     3,627,336        55,979     3,683,315
                                          -------   -----------   -----------   -----------
PARTNERS' CAPITAL,                        
DECEMBER 31, 1993                         136,879    19,449,662       234,238    19,683,900
                                         
Redemptions                               (18,660)   (2,545,945)           --    (2,545,945)
Net loss                                       --      (366,032)       (3,194)     (369,226)
                                          -------   -----------   -----------   -----------
                                         
PARTNERS' CAPITAL,                        
DECEMBER 31, 1994                         118,219    16,537,685       231,044    16,768,729
                                         
Redemptions                               (21,054)   (3,075,946)      (60,288)   (3,136,234)
Net income                                     --     2,469,631        33,312     2,502,943
                                          -------   -----------   -----------   -----------
PARTNERS' CAPITAL,                         
DECEMBER 31, 1995                          97,165   $15,931,370   $   204,068   $16,135,438
                                          =======   ===========   ===========   ===========
</TABLE> 
 
See notes to financial statements.

                                      -4-
<PAGE>
 
ML FUTURES INVESTMENTS II L.P.
(A Delaware Limited Partnership)
 ------------------------------ 

NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
--------------------------------------------------------------------------------

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ML Futures Investments II L.P. (the "Partnership") was organized under the
Delaware Revised Uniform Limited Partnership Act on January 20, 1987 and
completed its initial Public offering of units of limited partnership interest
("Initial Units") on April 28, 1988.  The Partnership commenced trading
activities on May 2, 1988.  The Partnership engages in the speculative trading
of futures, options and forward contracts on a wide range of commodities.
Merrill Lynch Investment Partners Inc. (formerly ML Futures Investment Partners
Inc.) ("MLIP" or the "General Partner"), a wholly-owned subsidiary of Merrill
Lynch Group, Inc. ("Merrill Lynch"), which in turn is a wholly-owned subsidiary
of Merrill Lynch & Co., Inc., is the general partner of the Partnership, and
Merrill Lynch Futures Inc. ("MLF"), also an affiliate of Merrill Lynch, is its
commodity broker. MLIP has agreed to maintain a general partner's interest of at
least 1% of the total capital in the Partnership.  MLIP and each Limited Partner
share in the profits and losses of the Partnership in proportion to their
respective interests in it.

MLIP selects independent advisors (the "Advisors" or the "Trading Advisors") to
manage the Partnership's assets, and allocates and reallocates the Partnership's
assets among existing, replacement and additional Advisors.

Estimates
---------

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Revenue Recognition
-------------------

Commodity futures, options, and forward contract transactions are recorded on
the trade date and open contracts are reflected in the financial statements at
their fair value on the last business day of the reporting period.  The
difference between the original contract amount and fair value is reflected in
income as an unrealized gain or loss.  Fair value is based on quoted market
prices.  All commodity futures, options and forward contracts are reflected at
fair value in the financial statements.

Operating Expenses
------------------

MLIP pays all routine operating expenses (including legal, accounting, printing,
postage and similar administrative expenses) of the Partnership.  MLIP receives
a portion of the brokerage commissions paid to MLF by the Partnership as
reimbursement for the foregoing expenses.


                                      -5-
<PAGE>
 
Income Taxes
------------

No provision for income taxes has been made in the accompanying financial
statements as each partner is individually responsible for reporting income or
loss based on their respective share of the Partnership's income and expenses as
reported for income tax purposes.

Distributions
-------------

The Unitholders are entitled to receive, equally per Unit, any distributions
which may be made by the Partnership.  No such distributions have been made as
of December 31, 1995.

Redemptions
-----------

A Limited Partner may require the Partnership to redeem some or all their
Limited Partner's Units at  Net Asset Value as of the close of business on the
last business day of any month upon ten calendar days' notice.

Dissolution of the Partnership
------------------------------

The Partnership will terminate on December 31, 2007 or at an earlier date if
certain conditions occur, as well as under certain other circumstances, as set
forth in the Limited Partnership Agreement.

2.  RELATED PARTY TRANSACTIONS

All of the Partnership's assets are deposited with MLF.  As a means of
approximating the interest rate which would be earned by the Partnership had
100% of its Net Assets on deposit with MLF been invested in 91-day Treasury
bills, MLF pays the Partnership interest on its account equity on deposit with
MLF at a rate of 0.5 of 1% per annum below the prevailing 91-day Treasury bill
rate.  In the case of its trading in certain foreign futures contracts, the
Partnership deposits margin in foreign currency denominated instruments or cash
and earns interest generally at a rate of 0.5 of 1% per annum below the London
Clearing Broker Rate.  Any additional economic benefit derived from possession
of the Partnership's assets accrues to MLF or its affiliates.

The Partnership pays brokerage commissions to MLF at a flat monthly rate of 0.83
of 1% (a 10% annual rate) of the Partnership's month-end assets.  Month-end
assets are not reduced for purposes of calculating brokerage commissions by any
accrued but unpaid brokerage commissions, Profit shares or other fees or
charges.  MLIP estimates that the round-turn equivalent commission rate charged
to the Partnership during the years ended December 31, 1995, 1994 and 1993, was
approximately $90, $24 and $28, respectively (not including, in calculating
round-turn equivalents, forward contracts on a futures-equivalent basis).

MLF pays the Advisors annual Consulting Fees ranging from 2% to 4% of the
Partnership's average month-end assets, after reduction for a portion of
brokerage commissions.

The Partnership trades forward contracts through a Foreign Exchange Desk (the
"F/X Desk") established by MLIP, that contacts at least two counterparties along
with Merrill Lynch International Bank ("MLIB"),  for all of the Partnership's
currency trades.  All counterparties other than MLIB are unaffiliated with any
Merrill Lynch entity.  The F/X Desk charges a service fee equal (at current
exchange rates) to approximately $5.00 to $12.50 on each purchase or sale of a
futures contract-equivalent face amount of a foreign currency.  No service fees
are charged on any trades awarded to MLIB (which receives a "bid-ask" spread on
such trades). MLIB is awarded trades only if its price (which includes no
service fee) is equal to or better than the best price (including the service
fee) offered by any of the other counterparties contacted.


                                      -6-
<PAGE>
 
The F/X Desk trades on the basis of credit lines provided by a Merrill Lynch
entity.  The Partnership is not required to margin or otherwise guarantee its
F/X Desk trading.

Certain of the Partnership's currency trades are executed in the form of
"exchange of futures for physical" ("EFP") transactions involving MLIB and MLF.
In these transactions, a spot or forward (collectively referred to as "cash")
currency position is acquired and exchanged for an equivalent futures position
on the Chicago Mercantile Exchange's International Monetary Market.  In its EFP
trading, the Partnership acquires cash currency positions through the F/X Desk
in the same manner and on the same terms as in the case of the Partnership's
other F/X Desk trading.  When the Partnership exchanges these positions for
futures, there is a "differential" between the prices of these two positions.
This "differential" reflects, in part, the different settlement dates of the
cash and the futures contracts as well as prevailing interest rates, but also
includes a pricing spread in favor of MLIB or another Merrill Lynch entity.

The Partnership's F/X Desk service fee and EFP differential costs have, to date,
totaled no more than 0.25 of 1% per annum of the Partnership's average month-end
Net Assets.

3.  AGREEMENTS

The Partnership and the Advisors have each entered into Advisory Agreements.
These Advisory Agreements generally terminate one year after they are entered
into, subject to certain renewal rights exercisable by the Partnership.  The
Advisors determine the commodity futures and forward contract trades to be made
on behalf of their respective Partnership accounts, subject to certain
Partnership trading policies and to certain rights reserved by MLIP.

Profit shares, generally ranging from 15% to 25% of any New Trading Profit, as
defined, recognized by each Advisor, considered individually irrespective of the
overall performance of the Partnership, as of the end of each calendar quarter
are paid by the Partnership to each Advisor.  Profit shares are also paid out in
respect of Units redeemed as of the end of interim months during a calendar
quarter to the extent of the applicable percentage of any New Trading Profit
attributable to such Units.

4.  WEIGHTED AVERAGE UNITS

The weighted average number of Units outstanding was computed for purposes of
disclosing net income per weighted average Unit.  The weighted average number of
Units outstanding at December 31, 1995, 1994 and 1993 equals the Units
outstanding as of such date, adjusted proportionately for Units redeemed based
on the respective length of time each was outstanding during the preceding
period.


                                      -7-
<PAGE>
 
5.  FAIR VALUE AND OFF-BALANCE SHEET RISK

The Partnership trades futures, options and forward contracts in interest rates,
stock indices, commodities, currencies, energy and metals.  The Partnership's
revenues by reporting category were as follows:

<TABLE>
<CAPTION>
                                                           1995
                                                  Total Trading Results
                                                  ---------------------
<S>                                               <C> 
Interest Rate                                          
  and Stock Indices                                    $ 3,053,438
Commodities                                                164,606
Currencies                                               1,104,325
Energy                                                     476,395
Metals                                                  (1,186,728)
                                                       ----------- 
                                                       $ 3,612,036
                                                       =========== 
</TABLE>

Market Risk
-----------

Derivative instruments involve varying degrees of off-balance sheet market risk,
and changes in the level or volatility of interest rates, foreign currency
exchange rates or the market values of the financial instruments or commodities
underlying such derivative instruments frequently result in changes in the
Partnership's unrealized gain or loss on such derivative instruments as
reflected in the Statements of Financial Condition. The Partnership's exposure
to market risk is influenced by a number of factors, including the relationships
among the derivative instruments held by the Partnership as well as the
volatility and liquidity of the markets in which the derivative instruments are
traded.

The General Partner has procedures in place intended to control market risk,
although there can be no assurance that they will, in fact, succeed in doing so.
These procedures focus primarily on monitoring  the trading of the Advisors
selected from time to time for the Partnership, calculating the Net Asset Value
of the Advisors' respective Partnership accounts as of the close of business on
each day and reviewing outstanding positions for over-concentration -- both on
an Advisor-by-Advisor and on an overall Partnership basis.  While the General
Partner will not itself intervene in the markets to hedge or diversify the
Partnership's market exposure, the General Partner may urge Advisors to
reallocate positions, or itself reallocate Partnership assets among Advisors
(although typically only as of the end of a month) in an attempt to avoid over-
concentrations. However, such interventions are unusual.  Except in cases in
which it appears that an Advisor has begun to deviate from past practice or
trading policies or to be trading erratically, the General Partner's basic risk
control procedures consist simply of the ongoing process of Advisor monitoring
and selection, with the market risk controls being applied by the Advisors
themselves.

Fair Value
----------

The derivative instruments used in the Partnership's trading activities are
marked to market daily with the resulting unrealized gains or losses recorded in
the Statements of Financial Condition and the related profit or loss reflected
in trading revenues in the Statements of Operations.  The contract/notional
values of open contracts as of December 31, 1995 and 1994 were as follows:


                                      -8-
<PAGE>
 
<TABLE>
<CAPTION>
                                       December 31, 1995                          December 31, 1994
                           ----------------------------------------  ----------------------------------------
                              Commitment to        Commitment to        Commitment to        Commitment to
                           Purchase (Futures,     Sell (Futures,     Purchase (Futures,     Sell (Futures,
                           Options & Forwards)  Options & Forwards)  Options & Forwards)  Options & Forwards)
                          --------------------  -------------------  -------------------  -------------------
<S>                       <C>                   <C>                  <C>                  <C>
Interest Rate                 
and Stock Indices             $129,489,560          $31,263,822          $36,656,901          $52,422,164
Commodities                      7,069,814              488,365            7,799,867              808,654
Currencies                       4,837,858            7,541,184           18,918,896           24,870,676
Energy                           3,753,322            1,008,952            5,984,265            1,763,110
Metals                           9,115,049            1,405,316            9,865,956            2,923,934
                              ------------          -----------          -----------          ----------- 
                              $154,265,603          $41,707,639          $79,225,885          $82,788,538
                              ============          ===========          ===========          ===========
</TABLE>

Substantially all of the Partnership's derivative instruments outstanding as of
December 31, 1995 expire within one year.

The contract/notional value of the Partnership's open exchange-traded and non-
exchange-traded open derivative instrument positions as of December 31, 1995 was
as follows:

<TABLE>
<CAPTION>
                              Commitment to       Commitment to
                           Purchase (Futures,     Sell (Futures,
                          Options & Forwards)  Options & Forwards)
                          -------------------  -------------------
<S>                       <C>                  <C>
Exchange-Traded              $149,690,079          $39,752,029
Non-Exchange-Traded             4,575,524            1,955,610
                             ------------          ----------- 
                             $154,265,603          $41,707,639
                             ============          ===========
</TABLE>

The average fair value of the Partnership's derivative instrument positions
which were open as of the end of each calendar month during the year ended
December 31, 1995 was as follows:

<TABLE>
<CAPTION>
                           Commitment to       Commitment to
                        Purchase (Futures,     Sell (Futures,
                        Options & Forwards)  Options & Forwards)
                        -------------------  -------------------
<S>                     <C>                  <C>
Interest Rate and
  Stock Indices            $ 87,503,045          $ 9,790,296
Commodities                   6,850,876            1,132,188
Currencies                    9,693,546           11,307,390
Energy                        2,831,169              677,595
Metals                        7,755,902            2,700,777
                           ------------          ----------- 
                           $114,634,538          $25,608,246
                           ============          ===========
</TABLE>


                                      -9-
<PAGE>
 
A portion of the amounts indicated as off-balance sheet risk reflects offsetting
commitments to purchase and sell the same derivative instrument on the same date
in the future.  These commitments are economically offsetting but are not, as a
technical matter, offset in the forward market until the settlement date.

Credit Risk
-----------

The risks associated with exchange-traded contracts are typically perceived to
be less than those  associated with over-the-counter (non-exchange-traded)
transactions, because exchanges typically (but not universally) provide
clearinghouse arrangements in which the collective credit (in some cases limited
in amount, in some cases not) of the members of the exchange is pledged to
support the financial integrity of the exchange.  In over-the-counter
transactions, on the other hand, traders must rely solely on the credit of their
respective individual counterparties.  Margins, which may be subject to loss in
the event of a default, are generally required in exchange trading, and
counterparties may also require margin in the over-the-counter markets.

The fair value amounts in the above tables represent the extent of the
Partnership's market exposure in the particular class of derivative instrument
listed, but not the credit risk associated with counterparty nonperformance.
The credit risk associated with these instruments from counterparty
nonperformance is the net unrealized gain, if any, included in the Statements of
Financial Condition.  The Partnership also has credit risk because the sole
counterparty or broker with respect to most of the Partnership's assets is MLF.

As of December 31, 1995 and 1994, $13,723,065 and $5,434,990 of the
Partnership's assets, respectively, were held in segregated accounts at MLF in
accordance with Commodity Futures Trading Commission regulations.

The gross unrealized gain and the net unrealized gain (loss) on the
Partnership's open derivative instrument positions as December 31, 1995 were as
follows:

<TABLE>
<CAPTION>
                         Gross Unrealized  Net Unrealized
                               Gain          Gain (Loss)
                         ----------------  --------------
<S>                      <C>               <C>
Exchange-Traded              $1,523,390      $1,128,424
Non-Exchange-Traded              54,965         900,625
                             ----------      ----------
                             $1,578,355      $2,029,049
                             ==========      ==========
</TABLE>

The Partnership controls credit risk by dealing almost exclusively with Merrill
Lynch entities as brokers and counterparties.



                 To the best of the knowledge and belief of the
                 undersigned, the information contained in this
                        report is accurate and complete.



                                James M. Bernard
                            Chief Financial Officer
                         ML Futures Investments II L.P.
                     Merrill Lynch Investment Partners Inc.


                                     -10-