<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
--------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission File Number 0-23240
ML GLOBAL HORIZONS L.P.
-----------------------
(Exact Name of Registrant as
specified in its charter)
Delaware 13-3716393
------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
c/o Merrill Lynch Investment Partners Inc.
(formerly ML Futures Investment Partners Inc.)
Merrill Lynch World Headquarters - South Tower, 6th Fl.
World Financial Center New York, New York 10080-6106
-----------------------------------------------------
(Address of principal executive offices)
(Zip Code)
212-236-4161
--------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No_____
-----
This document contains 13 pages.
There are no exhibits and no exhibit index filed with this document.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ML GLOBAL HORIZONS L.P.
-----------------------
(a Delaware limited partnership)
------------------------------
STATEMENTS OF FINANCIAL CONDITION
---------------------------------
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---------- ------------
<S> <C> <C>
ASSETS
- ------
Accrued interest (Note 2) $ 334,421 $ 357,496
Equity in commodity futures trading
accounts:
Cash and option premiums 84,391,381 85,254,980
Net unrealized gain on open contracts 4,871,064 5,630,789
----------- -----------
TOTAL $89,596,866 $91,243,265
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
LIABILITIES:
Redemptions payable $ 2,988,258 $ 674,724
Brokerage commissions payable (Note 540,776 551,853
2)
Profit shares payable 22,327 -
Organization and initial offering - 20,399
costs payable (Note 1)
Incentive override payable (Note 2) 573 855,796
----------- -----------
Total liabilities 3,551,934 2,102,772
----------- -----------
PARTNERS' CAPITAL:
General Partner (8,580 and 8,530 1,017,204 1,052,896
Units)
Limited Partners (723,700 and 86,438,435 91,708,172
737,413 Units)
Subscriptions receivable (11,812 and 29,116) (1,410,707) (3,620,575)
----------- -----------
Total partners' capital 86,044,932 89,140,493
----------- -----------
TOTAL $89,596,866 $91,243,265
=========== ===========
</TABLE>
NET ASSET VALUE PER UNIT (Note 4)
See notes to financial statements.
2
<PAGE>
ML GLOBAL HORIZONS L.P.
-----------------------
(a Delaware limited partnership)
------------------------------
STATEMENTS OF OPERATIONS
------------------------
<TABLE>
<CAPTION>
For the three For the three
Months ended Months ended
March 31, 1996 March 31, 1995
--------------- --------------
<S> <C> <C>
REVENUES:
Trading (loss) profit:
Realized $(2,339,711) $ 6,566,511
Change in unrealized (759,725) 3,040,156
--------------- ---------------
Total trading results (3,099,436) 9,606,667
--------------- ---------------
Interest income (Note 2) 997,932 847,330
--------------- ---------------
Total revenues (2,101,504) 10,453,997
--------------- ---------------
EXPENSES:
Profit shares 22,327 797,038
Brokerage commissions (Note 2) 1,656,642 1,257,250
Incentive override (Note 2) 573 754,740
--------------- ---------------
Total expenses 1,679,542 2,809,028
--------------- ---------------
NET (LOSS) INCOME $(3,781,046) $ 7,644,969
=============== ===============
NET (LOSS) INCOME PER UNIT:
Weighted average number of units
outstanding (Note 5) 750,186 629,933
=========== ===========
Weighted average net (loss) income per $(5.04) $12.14
unit =========== ===========
</TABLE>
See notes to financial statements.
3
<PAGE>
ML GLOBAL HORIZONS L.P.
-----------------------
(a Delaware limited partnership)
------------------------------
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
-----------------------------------------
For the three months ended March 31, 1996 and 1995
--------------------------------------------------
<TABLE>
<CAPTION>
Limited General
Units Partners Partners Receivable Total
----- -------- -------- ---------- -----
<S> <C> <C> <C> <C> <C>
PARTNERS' CAPITAL,
DECEMBER 31, 1994 644,519 $66,183,679 $ 669,580 - $66,853,259
Subscriptions 32,037 3,732,631 - - 3,732,631
Redemptions (74,159) (8,214,693) - - (8,214,693)
Net income - 7,564,143 80,826 - 7,644,969
--------- ----------- ---------- ----------- -----------
PARTNERS' CAPITAL,
MARCH 31, 1995 602,397 $69,265,760 $ 750,406 - $70,016,166
========= =========== ========== =========== ===========
PARTNERS' CAPITAL,
DECEMBER 31, 1995 716,827 $91,708,172 $1,052,896 $(3,620,575) $89,140,493
Subscriptions 68,925 4,847,918 6,296 3,620,575 8,474,789
Subscriptions receivable (11,812) - - (1,410,707) (1,410,707)
Net loss - (3,739,058) (41,988) - (3,781,046)
Redemptions (53,472) (6,378,597) - - (6,378,597)
--------- ----------- ---------- ----------- -----------
PARTNERS' CAPITAL,
MARCH 31, 1996 720,468 $86,438,435 $1,017,204 $(1,410,707) $86,044,932
========= =========== ========== =========== ===========
</TABLE>
See notes to financial statements.
4
<PAGE>
ML GLOBAL HORIZONS L.P.
(A Delaware Limited Partnership)
------------------------------
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ML Global Horizons L.P. (the "Partnership" or the "Fund) was organized as an
open-end fund under the Delaware Revised Uniform Limited Partnership Act on
May 11, 1993 and commenced trading activities on January 4, 1994. The
Partnership engages in the speculative trading of futures, options and forward
contracts on a wide range of commodities. The Partnership issues new units of
limited partnership interest ("Units") at the Net Asset Value as of the
beginning of each month. 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 partners' 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.
The financial information included herein has been prepared by management
without audit by independent certified public accountants who do not express
an opinion thereon. The statement of financial condition as of December 31,
1995 has been derived from but does not include all the disclosures contained
in the audited financial statements for the year ended December 31, 1995. The
information furnished includes all adjustments which are, in the opinion of
management, necessary for a fair statement of results for the interim period.
The results of operations as presented, however, should not be considered
indicative of the results to be expected for the entire year.
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.
Organization and Initial Offering Costs, Operating Costs and Selling
--------------------------------------------------------------------
Commissions
-----------
MLIP advanced all organization and initial offering costs relating to the
Partnership. The Partnership reimbursed MLIP for such costs over a two-year
period in 24 equal monthly installments. For financial reporting purposes,
the Partnership deducted the total organization and initial offering costs of
$447,000 from Partners capital at inception. For all other purposes,
including determining the Net Asset Value per Unit for redemption purposes,
the Partnership deducted organization and initial offering cost reimbursements
only as actually paid.
MLIP pays for all routine operating costs (including legal, accounting,
printing, postage and similar administrative expenses) of the Partnership,
including the costs of the ongoing offering of the Units. MLIP receives a
portion of the brokerage commissions paid to MLF by the Partnership as
reimbursement for the foregoing expenses.
No selling commissions are paid by Limited Partners.
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 March 31, 1996.
Redemptions
-----------
A Limited Partner may require the Partnership to redeem some or all of their
Units at Net Asset Value as of the close of business on the last business day
of any month upon ten calendar days notice. Units redeemed on or prior to the
end of the twelfth full month after subscription proceeds are invested in the
Partnership are assessed an early redemption charge of 3% of their Net Asset
Value as of the date of redemption. If an investor acquires Units at more
than one time, such Units are treated on a "first-in, first-out" basis for
purposes of determining whether redemption charges are applicable.
Dissolution of the Partnership
------------------------------
The Partnership will terminate on December 31, 2023 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
prevailing short-term government interest rate in the country in question. 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
0.625 of 1% (a 7.5% 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 accrued fees or charges. MLIP estimates that the round-turn equivalent
commission rate charged to the Partnership during the quarters ended March 31,
1996 and 1995 was approximately $67 and approximately $12.50 to $14.50,
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 the
brokerage commissions.
The Partnership paid to MLIP an Incentive Override equal to 10% of the Net New
Gain, as defined, as of December 31, 1995, and will do so as of each
subsequent December 31 in respect of any Net New Gain then outstanding. Such
payments are also made to MLIP from the redemption value of Units redeemed as
of the end of interim months during a year, to the extent of any Net New Gain
attributable to such Units when redeemed.
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.
The F/X Desk trades using 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
6
<PAGE>
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.
The methods by which profit shares and the Incentive Override are calculated
may result in certain disproportionate allocations of such fees and possible
equity dilution among Partners purchasing Units at different times.
4. NET ASSET VALUE PER UNIT
For financial reporting purposes, the Partnership deducted the total
organization and initial offering costs payable to MLIP at inception, for
purposes of determining Net Asset Value. For all other purposes (including
computing Net Asset Value for redemptions), the Partnership deducted the
organization and initial offering costs reimbursement only as actually paid.
Consequently, as of March 31, 1996 and December 31, 1995, the Net Asset Value
per Unit was $119.43 and $124.35 for financial reporting purposes and $119.43
and $124.35 for all other purposes, respectively.
5. 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 March 31, 1996 and 1995 equals the Units outstanding
as of such date, adjusted proportionately for Units sold and redeemed based on
the respective length of time each was outstanding during the preceding
period.
6. 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 for the quarter ended March 31,
1996 were as follows:
<TABLE>
<CAPTION>
1996
----
<S> <C>
Interest rate $ 402,982
Stock indices (492,339)
Commodities (1,622,793)
Currencies 493,781
Energy (286,979)
Metals (1,594,088)
-------------
$(3,099,436)
=============
</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
7
<PAGE>
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 does 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 Income. The
contract/notional values of the Partnership's open derivative instrument
positions as of March 31, 1996 and December 31, 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
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 $ 56,586,261 $530,034,553 $366,794,659 $115,962,614
Stock indices 24,748,135 2,485,518 5,256,825 -
Commodities 47,128,420 11,872,432 43,376,228 13,773,026
Currencies 54,723,264 134,365,841 31,823,922 113,887,626
Energy 13,889,983 - 28,209,814 -
Metals 16,335,273 16,026,253 7,101,823 23,355,741
-------------- ------------ ------------ ------------
$213,411,336 $694,784,597 $482,563,271 $266,979,007
============== ============ ============ ============
</TABLE>
Substantially all of the Partnership's derivative instruments outstanding as
of March 31, 1996 expire within one year.
The contract/notional value of the Partnership's exchange-traded and non-
exchange-traded derivative instrument positions as of March 31, 1996 and
December 31, 1995 was as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
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>
Exchange
traded $188,929,297 $631,055,964 $451,632,138 $210,729,655
Non-Exchanged
traded 24,482,039 63,728,633 30,931,133 56,249,352
------------ ------------ ------------ ------------
$213,411,336 $694,784,597 $482,563,271 $266,979,007
============ ============ ============ ============
</TABLE>
8
<PAGE>
The average fair value of the Partnership's derivative instrument positions
which were open as of the end of each calendar month during the quarter ended
March 31, 1996 and the year ended December 31, 1995 was as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
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 $215,095,166 $527,339,394 $392,684,358 $ 52,525,025
Stock indices 24,617,244 2,485,518 11,263,970 4,597,664
Commodities 41,648,675 12,581,247 23,210,531 11,584,575
Currencies 74,998,855 142,030,573 96,987,577 95,012,878
Energy 8,703,721 992,948 8,271,275 6,430,540
Metals 32,140,895 13,634,353 12,245,216 31,011,275
------------ ------------ ------------ ------------
$397,204,556 $699,064,033 $544,662,927 $201,161,957
============ ============ ============ ============
</TABLE>
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 March 31, 1996 and December 31, 1995, $68,865,678 and $71,297,472 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 on the Partnership's
open derivative instrument positions as of March 31, 1996 and December 31,
1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
Gross Net Gross Net
Unrealized Unrealized Unrealized Unrealized
Gain Gain (Loss) Gain Gain (Loss)
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Exchange
traded $5,759,155 $4,767,846 $7,029,085 $5,952,033
Non-Exchanged
traded 406,623 103,218 338,067 (321,244)
---------- ---------- ---------- ----------
$6,165,778 $4,871,064 $7,367,152 $5,630,789
========== ========== ========== ==========
</TABLE>
The Partnership controls credit risk by dealing almost exclusively with
Merrill Lynch entities as brokers and counterparties.
9
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operation
------------
Operational Overview; Advisor Selections
- ----------------------------------------
The Fund's success depends on MLIP's ability to select Advisors and the
Advisors' ability to recognize and capitalize on trends and other profit
opportunities in different sectors of the world economy. MLIP's Advisor
selection procedure and the Advisors' trading methods are confidential, so that
substantially the only information that can be furnished regarding the Fund's
results of operations is its performance record, as set forth above. Unlike
most operating businesses, general economic or seasonal conditions have no
direct effect on the profit potential of the Fund, while, at the same time, its
past performance is not necessarily indicative of future results. Because of
the speculative nature of its trading, operational or economic trends have
little relevance to the Fund's results. MLIP believes, however, that there are
certain market conditions -- for example, markets with strong price trends -- in
which the Fund has a better likelihood of being profitable than in others.
As of April 1, 1996, the Partnership's assets were allocated as
follows:
<TABLE>
<CAPTION>
TRADING ADVISOR MARKETS TRADED % ALLOCATION
- --------------- -------------- ------------
<S> <C> <C>
John W. Henry & Co., Inc. Financial Instruments (including
currencies) and Metals 40%
Chesapeake Capital Corporation Diversified Program 40%
ARA Portfolio Management Company Diversified Program 20%
---
100%
</TABLE>
MLIP reserves the right to change both allocations and Advisor
selections at any time without advance notice to existing investors. MLIP
expects, from time to time, to make allocations to Advisors other than those
currently retained by the Fund.
Results of Operations - General
- -------------------------------
MLIP believes that multi-Advisor futures funds should be regarded as
medium- to long-term investments but, unlike an operating business, it is
difficult to identify "trends" in the Fund's operations and virtually impossible
to make any predictions regarding future results based on results to date.
Markets in which sustained price trends occur with some frequency tend
to be more favorable to managed futures investments than "whipsaw," "choppy"
markets, but (i) this is not always the case, (ii) it is impossible to predict
when trending markets will occur and (iii) different Advisors are affected
differently by trends in general as well as by particular types of trends.
The Fund controls credit risk in its trading in the derivatives markets
by trading only through Merrill Lynch entities which MLIP believes to be
creditworthy. The Fund attempts to control the market risk inherent in its
derivatives trading by utilizing a multi-advisor, multi-strategy structure.
This structure purposefully attempts to diversify the Fund's Advisor group among
different strategy types and market sectors in an effort to reduce risk
(although the Fund's portfolio currently emphasizes technical and trend-
following approaches).
Performance Summary
- -------------------
During the first quarter of 1995, the Fund's average month-end Net
Assets equalled $65,099,137, and the Fund recognized gross trading gains of
$9,606,667 or 14.76% of average month-end Net Assets. Brokerage commissions of
$1,257,250 or 1.93% of average month-end Net Assets before fees, Profit Shares
of $797,038 or 1.22% of average month-end Net Assets and Incentive Overrides of
$754,740 or 1.16% of average month-end Net Assets were paid or accrued.
Interest income (at an average rate of approximately 4% per annum) of $847,330
or 1.30% of average month-end Net Assets, resulted in net income (without
reduction for organizational and initial offering cost reimbursement payments)
of $7,644,969 or 11.74% of average month-end Net Assets, and a 11.95% increase
in the Net Asset Value per Unit since December 31, 1994.
During the first quarter of 1996, the Fund's average month-end Net
Assets equalled $89,187,754, and the Fund recognized gross trading losses of
$3,099,436 or 3.48% of average month-end Net Assets. Brokerage commissions of
$1,656,642 or 1.86% of average month-end Net Assets before fees, Profit Shares
of $22,327 or .03% of average month-end Net Assets and Incentive Overrides of
$573 or .001% of average month-end Net Assets were paid. Interest income (at an
average rate of approximately 4% per annum) of $997,932 or 1.12% of average
month-end Net Assets, resulted in a loss (without reduction for organizational
and initial offering cost reimbursement payments) of $3,781,046 or 4.24% of
average month-end Net Assets, and a 3.96% decrease in the Net Asset Value per
Unit since December 31, 1995.
10
<PAGE>
During the first quarter of 1996 and 1995, the fund experienced 4
profitable months and 2 unprofitable months.
<TABLE>
<CAPTION>
MONTH-END NET ASSET VALUE PER UNIT
Jan. Feb. Mar.
---- ---- ----
<S> <C> <C> <C>
1995 $101.22 $106.76 $116.51
1996 $125.91 $117.82 $119.43
</TABLE>
Importance of Market Factors
- ----------------------------
Comparisons between the Fund's performance during a given period in one
fiscal year to the same period in a prior year are unlikely to be meaningful
given the uncertainty of the markets traded by the Fund. In general, MLIP
expects that the Fund is most likely to trade successfully in markets which
exhibit strong and sustained price trends. The current Advisor group is heavily
biased towards technical, systematic, trend-following methods. Consequently,
one would expect that in trendless, "choppy" markets the Fund would likely be
unprofitable, while in markets in which major price movements occur, the Fund
would have its best profit potential (although there could be no assurance that
the Fund would, in fact, trade profitably). However, trend-followers not
infrequently will miss major price movements, and market corrections can result
in rapid and material losses (sometimes as much as 5% or more in a single day)
for multi-advisor funds. Although MLIP monitors market conditions and Advisor
performance in overseeing the Fund's trading, MLIP does not attempt to "market
forecast" or to "match" trading styles with anticipated market conditions.
Rather, MLIP concentrates on quantitative and qualitative analysis of
prospective Advisors, as well as on statistical studies of the historical
performance parameters of different Advisor combinations, in selecting Advisors
and allocating and reallocating Fund assets among them.
Because managed futures advisors' strategies are proprietary and
confidential and market movements unpredictable, selecting advisors to implement
a speculative trading strategy involves considerable uncertainty. Furthermore,
the concentration of the Fund's current Advisor portfolio, both in terms of the
number of managers retained and the common emphasis of their strategies on
technical trend-following methods, increases the risk that significant losses
may be incurred in adverse markets.
MLIP's Advisor Selections and Asset Reallocations
- -------------------------------------------------
MLIP has no timetable or schedule for making Advisor changes or
reallocations, and generally intends to make a medium- to long-term commitment
to all Advisors selected. However, there can be no assurance as to the
frequency or number of the Advisor changes which may take place in the future,
or as to how long any of the current Advisors will continue (or be permitted by
MLIP to continue) managing assets for the Fund.
Performance in Major Price Movements
- ------------------------------------
MLIP believes that the profit potential of a managed futures product
such as the Fund can be increased in markets in which major price movements
occur. There have, however, been prolonged periods in the futures markets
without significant price movements during which "whipsaw" markets, in which
prices appear to be moving in one direction but then quickly reverse, prevail.
Such periods may recur with considerable frequency, and most futures traders
would expect it to be very difficult to achieve profitability in such markets.
There can be, in any event, no assurance that any Advisor will trade profitably
or that major market movements will occur.
Liquidity
- ---------
The Fund's assets are generally held as cash or cash equivalents which
are used to margin the Fund's futures positions and earn interest income and
withdrawn, as necessary, to pay redemptions and expenses.
Although Units may be redeemed at any month-end, no one who cannot afford
to commit funds to a comparatively illiquid investment should subscribe to the
Fund (redemption penalties apply through the end of the first twelve months
after a Unit is issued). MLIP believes that investors who are not prepared to
regard the Fund as a medium- to long-term investment should not purchase Units.
MLIP may consider making distributions to investors under certain
circumstances (for example, if substantial profits are recognized); however,
MLIP has not done so to date and does not presently intend to do so.
Capital Resources
- -----------------
Units are offered for sale as of the beginning, and may be redeemed as
of the end, of each month. Only whole Units are sold, and only whole Units may
be redeemed.
11
<PAGE>
The amount of capital raised for the Fund should not have a significant
impact on its operations, as the Fund has no significant capital expenditure or
working capital requirements other than for moneys to pay trading losses, fees
and charges. Within broad ranges of capitalization, the Advisors' trading
positions should increase or decrease in approximate proportion to the size of
the Fund account managed by each of them, respectively.
The Fund raises additional capital only through the sale of Units and
trading profits (if any). The Fund is prohibited from borrowing under the terms
of the Limited Partnership Agreement.
Due to the nature of the Fund's business, substantially all its assets
are represented by cash, United States government obligations and short-term
foreign sovereign debt obligations, while the Fund maintains its market exposure
through open futures and forward contract positions.
Inflation is not a significant factor in the Fund's profitability,
although inflationary cycles can give rise either to the type of major price
movements or to the "whipsaw markets" which can have a materially favorable or
adverse impact on the Fund's profitability.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
--------
There are no exhibits required to be filed as part of this document.
(b) Reports on Form 8-K
-------------------
There were no reports on Form 8-K filed during the first quarter of
fiscal 1996.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ML GLOBAL HORIZONS L.P.
By: MERRILL LYNCH INVESTMENT PARTNERS INC.
(General Partner)
Date: May 13, 1996 By /s/JOHN R. FRAWLEY, JR.
-----------------------
John R. Frawley, Jr.
President, Chief Executive Officer
and Director
Date: May 13, 1996 By /s/JAMES M. BERNARD
-------------------
James M. Bernard
Chief Financial Officer
Treasurer and Senior Vice President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> BD
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
STATEMENTS OF FINANCIAL CONDITION, CONSOLIDATED STATEMENTS OF OPERATIONS,
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> MAR-31-1996 MAR-31-1995
<CASH> 0 0
<RECEIVABLES> 89,596,866 77,162,232
<SECURITIES-RESALE> 0 0
<SECURITIES-BORROWED> 0 0
<INSTRUMENTS-OWNED> 0 0
<PP&E> 0 0
<TOTAL-ASSETS> 89,596,866 77,162,232
<SHORT-TERM> 0 0
<PAYABLES> 3,551,934 7,146,066
<REPOS-SOLD> 0 0
<SECURITIES-LOANED> 0 0
<INSTRUMENTS-SOLD> 0 0
<LONG-TERM> 0 0
<COMMON> 0 0
0 0
0 0
<OTHER-SE> 86,044,932 70,016,166
<TOTAL-LIABILITY-AND-EQUITY> 89,596,866 77,162,232
<TRADING-REVENUE> (3,099,436) 9,606,667
<INTEREST-DIVIDENDS> 997,932 847,330
<COMMISSIONS> 1,679,542 2,809,028
<INVESTMENT-BANKING-REVENUES> 0 0
<FEE-REVENUE> 0 0
<INTEREST-EXPENSE> 0 0
<COMPENSATION> 0 0
<INCOME-PRETAX> (3,781,046) 7,644,969
<INCOME-PRE-EXTRAORDINARY> (3,781,046) 7,644,969
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (3,781,046) 7,644,969
<EPS-PRIMARY> (5.04) 12.14
<EPS-DILUTED> (5.04) 12.14
</TABLE>
