<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, 1998
----------------
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.
Merrill Lynch World Headquarters - South Tower, 6th Fl.
World Financial Center New York, New York 10080-6106
----------------------------------------------------
(Address of principal executive offices)
(Zip Code)
212-236-9757
----------------------------------------------------
(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
--- ---
<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,
1998 1997
----------------- -----------------
<S> <C> <C>
ASSETS
- ------
Accrued interest $593,355 $572,654
Other receivable 280 -
Equity in commodity futures trading accounts:
Cash and option premiums 136,684,284 127,759,932
Net unrealized profit on open contracts 3,875,756 8,665,240
----------------- -----------------
TOTAL $141,153,675 $136,997,826
================= =================
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
LIABILITIES:
Profit shares payable $1,186,989 $1,196,823
Brokerage commissions payable 851,162 825,958
Incentive override payable 106,890 289,162
Redemptions payable 3,770,307 612,978
Administrative fees payable 29,405 28,540
----------------- -----------------
Total liabilities 5,944,753 2,953,461
----------------- -----------------
PARTNERS' CAPITAL:
General Partners (10252 and 10194 Units) 1,608,583 1,568,439
Limited Partners (851477 and 873830 Units) 133,600,339 134,446,411
Subscriptions Receivable (0 and 12807 Units) - (1,970,485)
----------------- -----------------
Total partners' capital 135,208,922 134,044,365
----------------- -----------------
TOTAL $141,153,675 $136,997,826
================= =================
NET ASSET VALUE PER UNIT
(Based on 861729 and 871217 Units outstanding) $156.90 $153.86
================= =================
</TABLE>
See notes to financial statements.
2
<PAGE>
ML GLOBAL HORIZONS L.P.
-----------------------
(a Delaware limited partnership)
------------------------------
STATEMENTS OF INCOME
--------------------
<TABLE>
<CAPTION>
For the three For the three
months ended months ended
March 31, March 31,
1998 1997
------------------- ---------------------
<S> <C> <C>
REVENUES:
Trading profits (loss):
Realized $ 9,647,557 $5,942,145
Change in unrealized (4,789,484) 2,081,199
------------------- ---------------------
Total trading results 4,858,073 8,023,344
------------------- ---------------------
Interest income 1,737,293 1,082,462
------------------- ---------------------
Total revenues 6,595,366 9,105,806
------------------- ---------------------
EXPENSES:
Profit shares 1,184,507 1,122,057
Incentive override 106,890 528,757
Brokerage commissions 2,524,126 1,554,045
Administrative fees 87,039 53,588
------------------- ---------------------
Total expenses 3,902,562 3,258,447
------------------- ---------------------
NET INCOME $ 2,692,804 $5,847,359
=================== =====================
NET INCOME PER UNIT:
Weighted average number of
units outstanding 884,437 585,398
=================== =====================
Weighted average net income
per Limited Partner
and General Partner Unit $3.04 $9.99
=================== =====================
</TABLE>
See notes to financial statements.
3
<PAGE>
ML GLOBAL HORIZONS L.P.
(a Delaware limited partnership)
------------------------------
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
------------------------------------------
For the three months ended March 31, 1998 and 1997
--------------------------------------------------
<TABLE>
<CAPTION>
Limited General Subscriptions
Units Partners Partner Receivable Total
---------------- ----------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
PARTNERS' CAPITAL,
December 31, 1996 588,825 $82,889,121 $1,284,420 $ - $84,173,541
Net income - 5,757,772 89,587 - 5,847,359
Redemptions (9,759) (1,468,761) - - (1,468,761)
---------------- ----------------- ---------------- ----------------- -----------------
PARTNERS' CAPITAL,
March 31, 1997 579,066 $87,178,132 $1,374,007 $ - $88,552,139
================ ================= ================ ================= =================
PARTNERS' CAPITAL,
December 31, 1997 871,217 $134,446,411 $1,568,439 $ (1,970,485) $134,044,365
Subscriptions 36,741 3,702,015 8,938 1,970,485 5,681,438
Net income - 2,661,598 31,206 - 2,692,804
Redemptions (46,229) (7,209,685) - - (7,209,685)
---------------- ----------------- ---------------- ----------------- -----------------
PARTNERS' CAPITAL,
March 31, 1998 861,729 $133,600,339 $1,608,583 $ - $135,208,922
================ ================= ================ ================= =================
See notes to financial statements.
</TABLE>
4
<PAGE>
ML GLOBAL HORIZONS L.P.
(A Delaware Limited Partnership)
--------------------------------
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements have been prepared without audit. In the
opinion of management, the financial statements contain all adjustments
(consisting of only normal recurring adjustments) necessary to present
fairly the financial position of ML Global Horizons L.P. (the
"Partnership" or the "Fund") as of March 31, 1998 and the results of its
operations for the three months ended March 31, 1998 and 1997. However,
the operating results for the interim periods may not be indicative of the
results expected for the full year.
Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. It is suggested that these
financial statements be read in conjunction with the financial statements
and notes thereto included in the Partnership's Annual Report on Form 10-K
filed with the Securities and Exchange Commission for the year ended
December 31, 1997 (the "Annual Report").
2. FAIR VALUE AND OFF-BALANCE SHEET RISK
The Partnership's total trading results by reporting category for the
respective periods were as follows:
For the three For the three
months ended months ended
March 31, March 31,
1998 1997
------------------- -----------------
Interest rate $3,466,253 $(96,219)
Stock indices 90,542 974,299
Commodities 985,199 4,303,136
Currencies (345,658) 2,079,428
Energy 1,759,699 (1,014,735)
Metals (1,097,962) 1,777,435
------------------- -----------------
$4,858,073 $8,023,344
=================== =================
The contract/notional values of the Partnership's open derivative
instrument positions as of March 31, 1998 and December 31, 1997 were as
follows:
<TABLE>
<CAPTION>
1998 1997
-------------------------------------------- -------------------------------------------
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 $495,041,205 $305,161,512 $361,262,091 $216,261,891
Stock indices 25,048,642 - 3,671,625 9,837,452
Commodities 42,978,960 73,438,082 32,721,460 39,980,310
Currencies 162,707,384 168,808,351 71,377,618 290,360,085
Energy 4,678,340 4,312,398 - 12,218,655
Metals 31,495,325 35,259,238 28,496,076 51,889,407
------------------- ------------------- ------------------ -------------------
$761,949,856 $586,979,581 $497,528,870 $620,547,800
=================== =================== ================== ===================
</TABLE>
5
<PAGE>
The contract/notional values of the Partnership's exchange-traded and
non-exchange-traded open derivative instrument positions as of March 31, 1998
and December 31, 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
------------------------------------------- ------------------------------------------
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 $699,807,956 $483,573,735 $435,918,287 $484,549,200
Non-Exchange
traded 62,141,900 103,405,846 61,610,583 135,998,600
----------------- ----------------- ---------------- -----------------
$761,949,856 $586,979,581 $497,528,870 $620,547,800
================= ================= ================ =================
</TABLE>
The average fair values, based on contract/notional values, of the Partnership's
derivative instrument positions which were open as of the end of each calendar
month during the three months ended March 31, 1998 and the year ended December
31, 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
------------------------------------------- ------------------------------------------
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 $536,359,969 $148,042,585 $355,706,292 $163,790,120
Stock indices 16,147,173 4,405,220 16,261,720 10,889,808
Commodities 34,700,402 64,798,228 35,250,135 19,213,817
Currencies 133,157,371 258,468,064 93,524,652 185,718,360
Energy 2,851,780 11,699,290 5,554,722 5,244,100
Metals 38,416,572 44,923,926 30,160,151 39,147,176
----------------- ----------------- ----------------- -----------------
$761,633,267 $532,337,313 $536,457,672 $424,003,381
================= ================= ================= =================
</TABLE>
The gross unrealized profit and the net unrealized profit on the Partnership's
open derivative instrument positions as of March 31, 1998 and December 31, 1997
were as follows:
<TABLE>
<CAPTION>
1998 1997
---------------------------------- -----------------------------------
Gross Net Gross Net
Unrealized Unrealized Unrealized Unrealized
Profit Profit Profit Profit
-------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
Exchange
traded $6,895,409 $3,064,630 $10,018,862 $7,627,618
Non-Exchange
traded 1,735,526 811,126 2,824,800 1,037,622
-------------- -------------- --------------- --------------
$8,630,935 $3,875,756 $12,843,662 $8,665,240
============== ============== =============== ==============
</TABLE>
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
MONTH-END NET ASSET VALUE PER UNIT
----------------------------------
Jan. Feb. Mar.
----------------------------------
1997 $146.53 $151.84 $152.92
----------------------------------
1998 $154.11 $155.99 $156.90
----------------------------------
Performance Summary
January 1, 1997 to March 31, 1997
In currency markets, the U.S. dollar rallied and started 1997 on
a strong note, rising to a four-year high versus the Japanese yen and
two-and-a-half year highs versus the Deutsche mark and the Swiss franc. January
and February were profitable trading months for currencies.
Global interest rate markets began the year on a volatile note, as
investors evaluated economic data for signs of inflation. Interest rate trading
was profitable in January and March.
In energy markets, a slump in crude oil prices was characteristic
of its lackluster performance from the beginning of the year. Early in 1997,
volatility returned in the energy markets, reflecting the impact of a winter
significantly warmer than normal. Losses occurred in January and March for
energy trading; February trading was, however, profitable.
Agricultural commodity trading proved profitable in February and
March. Soybean prices reached their highest level in over eight years, on
continued demand and fears that inventories could fall to critically low levels
before the next harvest.
January 1, 1998 to March 31, 1998
The Fund's most profitable positions during the quarter were in
the global interest rate markets, particularly in European bonds where an
extended bond market rally continued despite an environment of robust growth in
the United States, Canada and the United Kingdom, as well as a strong pick-up in
growth in continental Europe. Specifically, strong gains were recorded in French
and German bonds.
For the quarter, positions in gold resulted in losses, while
positions in crude oil resulted in gains. Gold prices drifted sideways and lower
as Asian demand continued to slow and demand in the Middle East was affected by
low oil prices. Initially buoyed on concerns about a U.S.-led military strike
against Iraq, crude oil fell to a nine year low, as the globally warm winter,
the return of Iraq as a producer and the Asian economic crisis added to OPEC's
supply glut problems.
Trading results in stock index markets were mixed, but marginally
profitable, despite a strong first-quarter performance by the U.S. equity market
as several consecutive weekly gains were recorded with most market averages
setting new highs. Results in currency trading were also mixed, but marginally
unprofitable. Gains were realized in positions on the Swiss franc, which
weakened versus the U.S. dollar, while trading losses resulted from positions in
the Japanese yen and the Australian dollar.
Agricultural commodity markets provided profitable trading results
overall. Live cattle and hog prices trended downward throughout the quarter
resulting in strong gains. Cotton prices moved mostly upward during the quarter,
but prices dropped off sharply at the end of March causing losses.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable
7
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no pending proceedings to which the Partnership or the
General Partner is a party.
Item 2. Changes in Securities and Use of Proceeds
(a) None.
(b) None.
(c) None.
(d) None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
Mr. Michael A. Karmelin, Chief Financial Officer, Vice President
and Treasurer of Merrill Lynch Investment Partners Inc. ("MLIP"), has announced
that he will resign from MLIP effective April 15, 1998 to pursue other business
opportunities. MLIP expects to announce his successor in the near future.
Please be advised that the General Partner has decided to close
the Fund to new investors.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
There are no exhibits required to be filed as part of this report.
(b) Reports on Form 8-K
-------------------
There were no reports on Form 8-K filed during the first three
months of fiscal 1998.
8
<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 11, 1998 By /s/ JOHN R. FRAWLEY, JR.
------------------------
John R. Frawley, Jr.
Chairman, Chief Executive Officer,
President and Director
Date: May 11, 1998 By /s/ SERGIO M. PAVONE
--------------------
Sergio M. Pavone
Vice President and Controller
(Chief Accounting Officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> BD
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> MAR-31-1998 MAR-31-1997
<CASH> 0 0
<RECEIVABLES> 141,153,675 91,136,710
<SECURITIES-RESALE> 0 0
<SECURITIES-BORROWED> 0 0
<INSTRUMENTS-OWNED> 0 0
<PP&E> 0 0
<TOTAL-ASSETS> 141,153,675 91,136,710
<SHORT-TERM> 0 0
<PAYABLES> 5,944,753 2,584,571
<REPOS-SOLD> 0 0
<SECURITIES-LOANED> 0 0
<INSTRUMENTS-SOLD> 0 0
<LONG-TERM> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 135,208,922 88,552,139
<TOTAL-LIABILITY-AND-EQUITY> 141,153,675 91,136,710
<TRADING-REVENUE> 4,858,073 8,023,344
<INTEREST-DIVIDENDS> 1,737,293 1,082,462
<COMMISSIONS> 3,902,562 3,258,447
<INVESTMENT-BANKING-REVENUES> 0 0
<FEE-REVENUE> 0 0
<INTEREST-EXPENSE> 0 0
<COMPENSATION> 0 0
<INCOME-PRETAX> 2,692,804 5,847,359
<INCOME-PRE-EXTRAORDINARY> 2,692,804 5,847,359
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,692,804 5,847,359
<EPS-PRIMARY> 3.04 9.99
<EPS-DILUTED> 3.04 9.99
</TABLE>
