<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 June 30, 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)
212-236-5662
--------------------------------------------------------
(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>
June 30, December 31,
1998 1997
---------- --------------
<S> <C> <C>
ASSETS
- ------
Accrued interest $538,145 $ 572,654
Equity in commodity futures trading accounts:
Cash and option premiums 128,349,654 127,759,932
Net unrealized profit on open contracts (356,534) 8,665,240
------------- -------------
TOTAL $128,531,265 $136,997,826
============= =============
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
LIABILITIES:
Profit Shares payable $ 1,051,926 $ 1,196,823
Brokerage commissions payable 714,631 825,958
Incentive override payable 3,771 289,162
Redemptions payable 11,827,736 612,978
Administrative fees payable 24,697 28,540
------------- -------------
Total liabilities 13,622,761 2,953,461
------------- -------------
PARTNERS' CAPITAL:
General Partners (8658 and 10194 Units) 1,282,523 1,568,439
Limited Partners (767063 and 873830 Units) 113,625,981 134,446,411
Subscriptions Receivable (0 and 12807 Units) - (1,970,485)
------------- -------------
Total partners' capital 114,908,504 134,044,365
------------- -------------
TOTAL $128,531,265 $136,997,826
============= =============
NET ASSET VALUE PER UNIT
(Based on 775721 and 871217 Units outstanding) $148.13 $153.86
============= =============
</TABLE>
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 For the six For the six
months ended months ended months ended months ended
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
------------------- --------------------- --------------- --------------
<S> <C> <C> <C> <C>
REVENUES:
Trading profits (loss):
Realized $ (2,856,624) $ (2,075,330) $ 6,790,933 $ 3,866,816
Change in unrealized (4,232,290) (2,109,057) (9,021,774) (27,858)
------------------- --------------------- --------------- --------------
Total trading results (7,088,914) (4,184,387) (2,230,841) 3,838,958
------------------- --------------------- --------------- --------------
Interest income 1,643,341 1,163,729 3,380,634 2,246,191
------------------- --------------------- --------------- --------------
Total revenues (5,445,573) (3,020,658) 1,149,793 6,085,149
------------------- --------------------- --------------- --------------
EXPENSES:
Profit Shares (17,589) (350,438) 1,166,918 771,619
Incentive override (103,119) (520,461) 3,771 8,296
Brokerage commissions 2,313,093 1,708,822 4,837,219 3,262,867
Administrative fees 79,762 58,925 166,801 112,513
------------------- --------------------- --------------- --------------
Total expenses 2,272,147 896,848 6,174,709 4,155,295
------------------- --------------------- --------------- --------------
NET (LOSS) INCOME $ (7,717,720) $ (3,917,506) $(5,024,916) $ 1,929,854
=================== ===================== =============== ==============
NET (LOSS) INCOME PER UNIT:
Weighted average number of
units outstanding 870,950 630,884 877,695 608,141
=================== ===================== =============== ==============
Weighted average net (loss)
income per Limited Partner
and General Partner Unit $ (8.86) $ (6.21) $ (5.73) $ 3.17
=================== ===================== =============== ==============
</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 six months ended June 30, 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 - 1,898,361 31,493 - 1,929,854
Subscriptions 142,963 20,943,417 177,070 21,120,487
Subscriptions Receivable (36,391) (5,329,826)# (5,329,826)
Redemptions (24,081) (3,575,458) - - (3,575,458)
-------- ------------ ---------- ------------- ------------
PARTNERS' CAPITAL,
June 30, 1997 671,316 $102,155,441 $1,492,983 $ (5,329,826) $ 98,318,598
======== ============ ========== ============= ============
PARTNERS' CAPITAL,
December 31, 1997 871,217 $134,446,411 $1,568,439 $ (1,970,485) $134,044,365
Subscriptions 56,473 6,812,805 (5,900) 1,970,485 8,777,390
Net loss - (4,967,237) (57,679) - (5,024,916)
Redemptions (151,969) (22,665,998) (222,337) - (22,888,335)
-------- ------------ ---------- ------------- ------------
PARTNERS' CAPITAL,
June 30, 1998 775,721 $113,625,981 $1,282,523 $ - $114,908,504
======== ============ ========== ============= ============
</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
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 June 30, 1998 and the results of its operations for the six
months ended June 30, 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:
<TABLE>
<CAPTION>
For the three For the three For the six For the six
months ended months ended months ended months ended
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
---------------- --------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Interest rate $ (1,533,100) $(2,682,584) $ 1,933,153 $ (2,778,803)
Stock indices 51,571 (155,083) 142,113 819,216
Commodities (338,539) 191,393 646,660 4,494,529
Currencies (2,021,459) (1,430,241) (2,367,117) 649,187
Energy 802,358 (957,070) 2,562,057 (1,971,805)
Metals (4,049,745) 849,198 (5,147,707) 2,626,634
---------------- --------------- ------------------ -----------------
$ (7,088,914) $(4,184,387) $ (2,230,841) $ 3,838,958
================ =============== ================== =================
</TABLE>
The contract/notional values of the Partnership's open derivative instrument
positions as of June 30, 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 $ 254,180,154 $ 99,969,301 $ 361,262,091 $ 216,261,891
Stock indices 10,549,850 - 3,671,625 9,837,452
Commodities 44,725,546 40,772,741 32,721,460 39,980,310
Currencies 67,151,249 94,192,041 71,377,618 290,360,085
Energy 2,066,172 7,802,748 - 12,218,655
Metals 38,855,063 36,492,541 28,496,076 51,889,407
------------------- ------------------- ------------------ -------------------
$ 417,528,034 $ 279,229,372 $ 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 June 30, 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 $ 327,589,761 $ 188,505,215 $ 435,918,287 $ 484,549,200
Non-Exchange
traded 89,938,273 90,724,157 61,610,583 135,998,600
------------------- ------------------- ------------------ -------------------
$ 417,528,034 $ 279,229,372 $ 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 six months ended June 30, 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 $ 430,178,061 $ 150,980,539 $ 355,706,292 $ 163,790,120
Stock indices 15,622,781 5,249,111 16,261,720 10,889,808
Commodities 37,380,075 64,836,692 35,250,135 19,213,817
Currencies 154,592,081 216,029,326 93,524,652 185,718,360
Energy 3,525,540 11,082,194 5,554,722 5,244,100
Metals 42,639,863 42,917,704 30,160,151 39,147,176
------------------- ------------------- ------------------ ------------------
$ 683,938,401 $ 491,095,566 $ 536,457,672 $ 424,003,381
=================== =================== ================== ==================
</TABLE>
The gross unrealized profit and the net unrealized profit/(loss) on the
Partnership's open derivative instrument positions as of June 30, 1998 and
December 31, 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
----------------------------------- ------------------------------------
Gross Net Gross Net
Unrealized Unrealized Unrealized Unrealized
Profit Profit (Loss) Profit Profit
--------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Exchange
traded $ 3,615,019 $ 536,036 $ 10,018,862 $ 7,627,618
Non-Exchange
traded 3,148,854 (892,420) 2,824,800 1,037,622
--------------- --------------- ---------------- ---------------
$ 6,763,873 $ (356,534) $ 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
<TABLE>
<CAPTION>
Jan. Feb. Mar. Apr. May. Jun.
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1997 $146.53 $151.84 $152.92 $149.41 $146.53 $146.46
- -------------------------------------------------------------------------
1998 $154.11 $155.99 $156.90 $148.38 $148.82 $148.13
- -------------------------------------------------------------------------
</TABLE>
Performance Summary
January 1, 1997 to June 30, 1997
In the 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 the 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.
April 1, 1997 to June 30, 1997
In the currency markets, the dollar underwent a significant correction in
the Spring against the Japanese yen due to the G7 finance ministers'
determination that a further dollar advance would be counter-productive to their
current goals. Currency trading was unprofitable for the quarter.
Global interest rate trading proved unprofitable for the quarter. Losses
incurred in April were due to U.S. bond prices having moved in a directionless
pattern, as investors remained concerned over inflation and its impact on
further increases in interest rates by the U.S. Federal Reserve.
Energy trading saw losses throughout the quarter. In June crude oil
trended downward during the beginning of the month, before a sudden price
reversal occurred amid speculation that Iraq exports could be delayed until
August. Price movement of heating oil and unleaded gas proved to be trendless.
Agricultural commodity trading was profitable in April and May; overall the
second quarter was unprofitable. May's profits were due to coffee prices
surging beyond three dollars a pound for the first time in twenty years, on the
possibility of frost in Brazil and reports of poor crops in smaller countries.
January 1, 1998 to June 30, 1998
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.
7
<PAGE>
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.
April 1, 1998 to June 30, 1998
As swings in the U.S. dollar and developments in Japan affected bond
markets, the Fund=s interest rate trading during the quarter resulted in losses,
particularly in Eurodollar deposits and U.S. Treasury bonds. Early in the
quarter, Treasury trading was range-bound, as concern that the economy might be
overheating was balanced by the potential impact of the Asian recession.
Additionally, Australian bonds and bills saw a dramatic drop in prices in early
June, as dollar-bloc currencies remained under pressure versus the U.S. dollar
due to the Japanese/Asian crisis.
Metals trading also resulted in losses, while energy trading was
profitable. The depressed gold market weakened further following news of a
European Central Bank consensus that ten to fifteen percent of reserves should
be made up of gold bullion which was at the low end of expectations. Despite
production cuts initiated by OPEC at the end of March, world oil supplies
remained excessive and oil prices stood at relatively low levels throughout the
quarter.
Results in currency trading were unprofitable, despite strong gains
realized from Japanese yen positions, which weakened during June to an eight-
year low versus the U.S. dollar. Trading results in stock index markets were
profitable as the Asia-Pacific region=s equity markets weakened across the
board. In particular, Hong Kong=s Hang Seng index trended downward during most
of the quarter and traded at a three-year low.
Agricultural commodity trading produced losses. Although the U.S. soybean
crop got off to a good start which contributed to higher yield expectations and
a more burdensome supply outlook, soybean prices traded in a volatile pattern
for the second half of the quarter. Sugar futures maintained mostly a
downtrend, as no major buyers emerged to support the market. Similarly, coffee
prices trended downward, as good weather conditions in Central America and
Mexico increased the prospects of more output from these countries.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable
8
<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
Effective May 11, 1998, Jo Ann Di Dario became a Vice President,
Treasurer and Chief Financial Officer of Merrill Lynch Investment Partners Inc.
(AMLIP@). Ms. Di Dario was born in 1946. Before joining MLIP, she was self-
employed for one year. From February 1996 to May 1997, she worked as a
consultant for Global Asset Management, an international mutual fund organizer
and operator headquartered in London, where she offered advice on restructuring
the back office operations. From May 1992 to January 1996, Ms. Di Dario served
as Vice President of Meridian Bank Corporation, a regional bank holding company.
She was responsible for managing the treasury operations of the bank holding
company and its wholly-owned subsidiary, Meridian Investment Company Inc. Ms. Di
Dario managed the domestic treasury operation of First Fidelity Bank, a regional
bank, from September 1991 to May 1992. From 1985 until December 1990, Ms. Di
Dario was Vice President, Secretary and Controller of Caxton Corporation, a
commodity pool operator and commodity trading advisor. Her background includes
seven years of public accounting experience. She graduated with high honors from
Stockton State College with a Bachelor of Science Degree in Accounting.
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 six months of
fiscal 1998.
9
<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: August 11, 1998 By /s/ JOHN R. FRAWLEY, JR.
------------------------
John R. Frawley, Jr.
Chairman, Chief Executive Officer,
President and Director
Date: August 11, 1998 By /s/ JO ANN DI DARIO
-------------------
Jo Ann Di Dario
Vice President, Chief Financial Officer
and Treasurer
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> BD
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> JUN-30-1998 JUN-30-1997
<CASH> 0 0
<RECEIVABLES> 128,531,265 136,997,826
<SECURITIES-RESALE> 0 0
<SECURITIES-BORROWED> 0 0
<INSTRUMENTS-OWNED> 0 0
<PP&E> 0 0
<TOTAL-ASSETS> 128,531,265 136,997,826
<SHORT-TERM> 0 0
<PAYABLES> 13,622,761 2,953,461
<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> 114,908,504 134,044,365
<TOTAL-LIABILITY-AND-EQUITY> 128,531,265 136,997,826
<TRADING-REVENUE> (2,230,841) 3,838,958
<INTEREST-DIVIDENDS> 3,380,634 2,246,191
<COMMISSIONS> 6,174,709 4,155,295
<INVESTMENT-BANKING-REVENUES> 0 0
<FEE-REVENUE> 0 0
<INTEREST-EXPENSE> 0 0
<COMPENSATION> 0 0
<INCOME-PRETAX> (5,024,916) 1,929,854
<INCOME-PRE-EXTRAORDINARY> (5,024,916) 1,929,854
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (5,024,916) 1,929,854
<EPS-PRIMARY> (5.73) 3.17
<EPS-DILUTED> (5.73) 3.17
</TABLE>
