<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 September 30, 1999
------------------
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.
Princeton Corporate Campus
800 Scudders Mill Road - Section 2G
Plainsboro, New Jersey 08536
----------------------------
(Address of principal executive offices)
(Zip Code)
609-282-6996
-----------------------
(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>
September 30, December 31,
1999 1998
------------- ------------
<S> <C> <C>
ASSETS
- ------
Accrued interest $ 354,855 $ 407,106
Equity in commodity futures trading accounts:
Cash and option premiums 87,526,347 106,424,609
Net unrealized profit on open contracts 746,482 3,947,083
------------- ------------
TOTAL $ 88,627,684 $110,778,798
============= ============
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
LIABILITIES:
Profit Shares payable $ 450,282 $ 1,197,683
Brokerage commissions payable 535,459 669,289
Incentive override payable 5,555 153,883
Redemptions payable 1,475,763 4,299,253
Administrative fees payable 18,464 23,079
------------- ------------
Total liabilities 2,485,523 6,343,187
------------- ------------
PARTNERS' CAPITAL:
General Partners (8,298 and 8,298) 1,390,014 1,356,079
Limited Partners (505,949 and 630,758 Units) 84,752,147 103,079,532
------------- ------------
Total partners' capital 86,142,161 104,435,611
------------- ------------
TOTAL $ 88,627,684 $110,778,798
============= ============
NET ASSET VALUE PER UNIT
(Based on 514,247 and 639,056 Units outstanding) $ 167.51 $ 163.42
============= ============
</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 nine For the nine
months ended months ended months ended months ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
-------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES:
Trading profits (loss):
Realized $ (152,601) $ 3,448,134 $ 8,482,102 $ 10,239,067
Change in unrealized (175,697) 5,727,779 (3,199,762) (3,293,995)
-------------- -------------- ------------- -------------
Total trading results (328,298) 9,175,913 5,282,340 6,945,072
-------------- -------------- ------------- -------------
Interest income 1,119,855 1,446,873 3,374,614 4,827,507
-------------- -------------- ------------- -------------
Total revenues 791,557 10,622,786 8,656,954 11,772,579
-------------- -------------- ------------- -------------
EXPENSES:
Profit Shares (30,979) 1,645,930 748,011 2,812,848
Incentive override (109,386) 0 5,555 3,771
Brokerage commissions 1,665,704 2,085,156 5,284,406 6,922,375
Administrative fees 57,438 71,902 182,221 238,703
-------------- -------------- ------------- -------------
Total expenses 1,582,777 3,802,988 6,220,193 9,977,697
-------------- -------------- ------------- -------------
NET INCOME (Loss) $ (791,220) $ 6,814,798 $ 2,436,761 $ 1,794,882
============== ============== ============= =============
NET INCOME PER UNIT:
Weighted average number
of units outstanding 538,731 748,898 577,167 834,762
============== ============== ============= =============
Weighted average net
income (loss) per
Limited Partner
and General Partner Unit $ (1.47) $ 9.11 $ 4.22 $ 2.15
============== ============== ============= =============
</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 nine months ended September 30, 1999 and 1998
-----------------------------------------------------
<TABLE>
<CAPTION>
Limited General Subscriptions
Units Partners Partner Receivable Total
-------- ------------- ------------ ----------------- --------------
<S> <C> <C> <C> <C> <C>
PARTNERS' CAPITAL,
December 31, 1997 871,217 $ 134,446,411 $ 1,568,439 $ (1,970,485) $ 134,044,365
Subscriptions 56,473 6,798,138 8,766 1,970,485 8,777,389
Net income - 1,770,977 23,905 - 1,794,882
Redemptions (221,058) (33,149,610) (222,337) - (33,371,947)
-------- ------------- ------------ --------------- --------------
PARTNERS' CAPITAL,
September 30, 1998 706,632 $ 109,865,916 $ 1,378,773 $ - $ 111,244,689
======== ============= ============ =============== ==============
PARTNERS' CAPITAL,
December 31, 1998 639,056 $ 103,079,532 $ 1,356,079 $ - $ 104,435,611
Net income - 2,402,826 33,935 - 2,436,761
Redemptions (124,809) (20,730,211) - - (20,730,211)
-------- ------------- ------------ --------------- --------------
PARTNERS' CAPITAL,
September 30, 1999 514,247 $ 84,752,147 $ 1,390,014 $ - $ 86,142,161
======== ============= ============ =============== ==============
</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 September 30, 1999, and the results of its operations for the
three and nine month periods ended September 30, 1999 and 1998. 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, 1998 (the "Annual Report").
2. FAIR VALUE AND OFF-BALANCE SHEET RISK
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (the "Statement"), effective for fiscal
years beginning after June 15, 2000, however, the Fund has adopted the
Statement effective January 1, 1999. This Statement supercedes SFAS No. 119
("Disclosure about Derivative Financial Instruments and Fair Value of
Financial Instruments") and SFAS No. 105 ("Disclosure of information about
Financial Instruments with Off-Balance Sheet Risk and Financial Instruments
with Concentrations of Credit Risk") whereby disclosure of average
aggregate fair values and contract/notional values, respectively, of
derivative financial instruments is no longer required for an entity such
as the Partnership which carries its assets at fair value. Such Statement
sets forth a much broader definition of a derivative instrument. The
General Partner does not believe that the application of the provisions of
such statement has a significant effect on the financial statements.
SFAS No. 133 defines a derivative as a financial instrument or other
contract that has all three of the following characteristics (1) one or
more underlyings, notional amounts or payment provisions (2) requires no
initial net investment or a smaller initial net investment than would be
required relative to changes in market factors (3) terms require or permit
net settlement. Generally, derivatives include a future, forward, swap or
option contract, or other financial instrument with similar characteristics
such as caps, floors and collars.
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 net unrealized profit (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 derivative instruments
held by the Partnership as well as the volatility and liquidity of the
markets in which such derivative instruments are traded.
The General Partner has procedures in place intended to control market risk
exposure, 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 by 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-concentrations 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.
5
<PAGE>
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 require margin in the over-the-counter markets.
The credit risk associated with these instruments from counterparty
nonperformance is the net unrealized profit included on the Statements of
Financial Condition.
The Partnership has credit risk in respect of its counterparties and brokers,
but attempts to control this risk by dealing almost exclusively with Merrill
Lynch entities as counterparties and brokers.
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. Jul. Aug. Sep.
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998 $154.11 $155.99 $156.90 $148.38 $148.82 $148.13 $146.66 $154.13 $157.43
- ---------------------------------------------------------------------------------------
1999 $162.48 $163.98 $164.50 $167.59 $166.73 $169.02 $169.11 $168.78 $167.51
- ---------------------------------------------------------------------------------------
</TABLE>
Performance Summary
January 1, 1998 to September 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.
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.
July 1, 1998 to September 30, 1998
Fund performance in July was essentially flat. In August and continuing into
September, financial markets in general were characterized by a flight to
quality that resulted from uncertainty over Russia's solvency, continued
weakness in Asia, and concerns that recessionary conditions would spread to the
United States and Europe. These factors, combined with generally less liquid
market conditions, led to a
7
<PAGE>
marked widening in bond credit spreads and a broad sell-off in world-wide equity
markets. Managed futures funds exhibited strong non-correlation to world markets
in August and again in September, generating significant profits on the long
side of interest rates and the short side of the commodity markets.
Interest rate trading was particularly profitable during the quarter in
positions in Eurodollars, German and Japanese bonds, and U.S. Treasury notes and
bonds. The growth rate of the world bond market declined to its lowest level
since 1987 at 7.7%, down 4.0% from the last peak in 1993. Global investors
poured funds into such instruments as U.S. Treasury issues and German Bunds,
staging a major flight to quality. As a result, there was a significant widening
of credit spreads on a global basis. Global fund managers also increased their
already-overweight exposure to U.S. Treasuries to a record high. The impact of
these events was that in September, the yield on the Japanese 5-year bond fell
to .67%, an all-time low, German 10-year Bunds fell to 3.89%, representing
almost a 100-year low, and the 30-year bond in the U.S. dropped to its lowest
level on record.
The Fund profited from its currency trading during the quarter with significant
gains from short Japanese yen and Canadian dollar positions. In the currency
markets, Japan's problems spread to other sectors of the global economy, causing
commodities prices to decline as demand from the Asian economies weakened, in
turn putting pressure on Canada's commodity-sensitive currency.
Energy trading also resulted in gains for the quarter. Short heating oil
positions proved profitable for the Fund as the market for heating oil prices
dropped to its lowest level in more than a decade (the previous low was in
1986). Crude oil and unleaded gas positions also generated strong profits for
the Fund.
As U.S. equity markets declined in July and August, the Fund profited from short
positions in the S&P 500(R), most notably during August, when the index dropped
14.5%. Volatility in September made for a difficult trading environment, and the
Fund incurred losses in the stock index sector during September, ultimately
resulting in losses overall for the quarter in these markets.
The agricultural sector generated losses overall for the quarter. Although as
commodity markets collapsed in August, profits were generated on the short side,
in September, the Fund was caught on the long side of the soybean complex
resulting in losses as the U.S. soybean crop increased relative to the USDA's
production estimate as a result of timely rains, which contributed to lower
prices.
In the metals markets, gold prices attempted to move higher against a backdrop
of volatility in major equity markets, increasing concerns about emerging
markets, economic chaos in Russia, weakness in the U.S. dollar, and increasing
worries about global economic conditions. However, gold was unable to extend
rallies and build any significant upside momentum resulting in a trendless
environment and resulting losses in gold positions for the Fund.
January 1, 1999 to September 30, 1999
- -------------------------------------
January 1, 1999 to March 31, 1999
Agricultural trading was profitable overall, as gains in coffee and live cattle
offset losses in corn and live hogs positions. Hog prices plummeted due to a
glut of hogs in the market. At the beginning of the quarter, the corn market
continued to struggle despite a stretch of solid export business. The market's
negative sentiment was deepened by ongoing favorable weather in South America
which continued through February, even though there was a sharp reduction in
Argentina's planted area. Lack of enthusiasm for new crop and less than
spectacular demand continued to depress the corn market throughout the quarter.
The Fund also profited from trading in crude oil, heating oil, and unleaded gas.
As the year opened, the global oil balance continued to show signs of being
lopsided with estimated year-end 1998 inventories at their highest levels since
1984. During January, petroleum stocks rose by 21 million barrels compared with
a typical gain of 6 to 7 million barrels. Then, on March 23, OPEC ratified new
production cuts totaling 1.716 million barrels per day at its conference. These
new production cuts were scheduled to go into effect on April 1 and proved to be
harbingers of higher prices for crude.
Interest rate trading proved profitable for the Fund as well, as gains in
Japanese government bonds and 10-year U.S. Treasury notes offset losses in
German 10-year bonds. Early in January, the yield on the Japanese government 10-
year bond increased to 1.8%, sharply above the record low of 0.695% it reached
on October 7, 1998. This was triggered by the Japanese Trust Fund Bureau's
decision to absorb a smaller share of future issues, leaving the burden of
financing future budget deficits to the private sector.
Stock index trading was unprofitable, as losses were sustained in Hang Seng and
CAC40 positions. Also of note, the Dow Jones Industrial Average closed above the
10,000 mark for the first time ever at the end of March, setting a record for
the index.
The Fund also suffered losses in currency trading during the quarter, as losses
in Japanese yen overpowered gains in German marks. In January, the yen had
advanced by nearly 35% against the dollar
8
<PAGE>
since early in August, and the Bank of Japan lowered rates to keep the economy
sufficiently liquid so as to allow fiscal spending to restore some growth to the
economy and to drive down the surging yen.
Losses in aluminum and gold overshadowed gains in copper during the first
quarter. In January, burdensome warehouse stocks and questionable demand
prospects weighed on base metals as aluminum fell to a 5-year low and copper
fell to nearly an 11-year low. Major surpluses in both metals were expected,
keeping prices down, and there was no supply side response to weak demand and
lower prices. However, the end of March showed copper and aluminum leading a
surge in base metals as prices recovered from multi-year lows. In precious
metals, gold failed to sustain a rally, and gold's role as a flight to safety
vehicle has clearly been greatly diminished as has its role as a monetary asset.
April 1, 1999 to June 30, 1999
The Fund profited in interest rate trading from short positions in Euro dollars,
Japanese 10-year bonds and U.S. 10-year Treasury notes as the flight to quality
in the bond market reversed during the first half of 1999 and concerns about
higher interest rates continued to rattle the financial markets.
Stock index trading also resulted in gains overall for the quarter, as positions
in the S&P 500, CAC 40 Euro Futures outweighed losses in the Toronto Stock Index
as equity markets rallied worldwide in April and June.
Trading in the agricultural markets resulted in gains for the Fund as positions
in cocoa, coffee and soyoil all generated profits. Agricultural commodities were
weak almost across the board as they were saddled with supply/demand imbalances.
However, the coffee market soared as several cold fronts effected areas of the
coffee region.
The energy sector was profitable as positions in crude oil and gasoil offset
unprofitable short positions in natural gas trading. The focus of attention in
the natural gas markets since the end of winter was the sharply lower than year-
ago storage injection activity. Crude oil prices rallied much higher and faster
than expected following last quarter's ratification of an OPEC/non-OPEC
agreement to cut production by over 2 million barrels per day. Natural gas
prices also rallied sharply over the quarter, reflecting, in part, growing
concerns about a decline in US natural gas production.
Currency trading also resulted in gains for the Fund. Gains in Euro trading were
offset by losses sustained in the British pound and short positions in the
Australian dollar. The Australian dollar has been feeling the pinch of commodity
price weakness for the past few years but has rallied back since its low in
August of 1998.
In the metals sector, gains from short gold positions were overshadowed by
losses in copper and nickel trading. Throughout the first half of 1999, gold
prices were in a state of gradual erosion and in early June, hit their lowest
levels in over 20 years. Gold continued to show a lack of response to political
and military events such as Kosovo and also lost much of its role as a monetary
asset and flight to safety vehicle. The economic scenario for Asia, Brazil,
emerging market nations and Europe helped keep copper and other base metals on
the defensive as demand receded with virtually no supply side response.
July 1, 1999 to September 30, 1999
The Fund profited in the energy sector with long positions in light crude oil
resulting in strong gains. The Fund was also profitable in gasoil and unleaded
gas positions. Crude oil prices received a jolt owing to a report in August
indicating Russia's plan to cut 70% its fuel oil and gasoil exports for August
and completely eliminate gasoil exports in order to satisfy domestic needs.
Trading in the metals markets was also profitable as positions in nickel
outweighed losses in short gold and silver positions. A major statement from the
President of the European Central Bank sent gold prices sharply higher in late
September. A key part of the statement was the fact that the banks have agreed
not to expand their gold lending. This initiated the first bullish bias in
years. Silver trading was virtually trendless throughout much of the quarter yet
did experience gains during the gold rally, although not as dramatic.
The Fund suffered losses in stock index positions as trading throughout the
quarter was volatile. Though the S&P 500 finished the third quarter by breaking
the post-October 1998 highs, the Fund suffered losses in stock index trading due
to significant volatility globally. For the quarter, losses were sustained in
the S&P 500, the Hang Seng Stock Index, and the Nikkei 225 Index, resulting in
losses for the sector overall.
Currency trading resulted in losses for the quarter as profitable positions in
the Japanese yen were offset by losses in Euro currency trading and the British
pound. Long yen positions resulted in strong gains as the Bank of Japan refused
to ease monetary policy and investors added to their yen exposure, which reached
a two-year high during the quarter. The most positive sign in Japan was that,
for the second
9
<PAGE>
quarter in a row, domestic consumption exceeded that of the year ago quarter.
Losses were sustained in Euro currency trading as it continued to trade in the
same choppy pattern that has been evident for the past few quarters.
Interest rate trading was unprofitable for the third quarter as losses were
sustained in Euro bund, Japanese government bond and long gilt positions. Long
positions in Eurodollar trading were unprofitable given the speculations of the
probability of a tightening bias by the US Federal Reserve. Eurodollar contracts
gave up much of the gains that they enjoyed following the Federal Open Market
Committee's adoption of a neutral bias.
The Fund also was unprofitable in the agricultural markets as gains in soymeal
positions were outweighed by losses sustained in the coffee and soybean markets.
Agricultural trading began the quarter with an increase in prices as there was a
sharp decline in crop ratings due to wet conditions in the Eastern Belt during
July. This in conjunction with forecasters' outlooks for additional declines in
the weeks ahead helped jump-start the first major weather scare of the season.
As a result, long positions in soymeal proved profitable as there was a sharp
upturn in soy prices. Additionally, long coffee positions were unprofitable as
the coffee market plunged to 5-year lows during the quarter when cold
temperatures in Brazil skirted the major coffee belt and failed to harm trees.
YEAR 2000 COMPLIANCE
As the Year 2000 approaches, Merrill Lynch has undertaken initiatives to address
the Year 2000 problem (the "Y2K problem"), as more fully described in the 1998
Annual Report. The failure of Merrill Lynch's technology systems relating to a
Y2K problem would likely have a material adverse effect on the company's
business, results of operations, and financial condition. This effect could
include disruption of normal business transactions, such as the settlement,
execution, processing, and recording of trades in securities, commodities,
currencies, and other assets. The Y2K problem could also increase Merrill
Lynch's exposure to risk and legal liability and its need for liquidity.
The renovation phase of Merrill Lynch's Year 2000 system efforts, as described
in the 1998 Annual Report, was 100% completed as of June 30, 1999, and
production testing was 100% completed as of that date. In March and April 1999,
Merrill Lynch successfully participated in U.S. industrywide testing sponsored
by the Securities Industry Association. These tests involved an expanded number
of firms, transactions, and conditions compared with those previously conducted.
Merrill Lynch has participated in and continues to participate in numerous
industry tests throughout the world.
Merrill Lynch's business units have developed and tested contingency plans. The
plans identify critical processes, potential Y2K problems, and personnel,
processes, and available resources needed to maintain operations. However, the
failure of exchanges, clearing organizations, vendors, service providers,
clients and counterparties, regulators, or others to resolve their own
processing issues in a timely manner could have a material adverse effect on
Merrill Lynch's business, results of operations, and financial condition.
In light of the interdependency of the parties in or serving the financial
markets, there can be no assurance that all Y2K problems will be identified and
remedied on a timely basis or that all remediation and contingency planning will
be successful. Public uncertainty regarding successful remediation of the Y2K
problem may cause a reduction in activity in the financial markets. This could
result in reduced liquidity as well as increased volatility. Disruption or
suspension of activity in the world's financial markets is also possible. In
some non-U.S. markets in which Merrill Lynch does business, the level of
awareness and remediation efforts relating to the Y2K problem are thought to be
less advanced than in the U.S. Management is unable at this point to ascertain
whether all significant third parties will successfully address the Y2K problem.
Merrill Lynch will continue to monitor third parties' Year 2000 readiness to
determine if additional or alternative measures are necessary. Contingency plans
have been established for all business units. Merrill Lynch's year-end balance
sheet levels will depend on Y2K risks and many other factors, including business
opportunities and customer demand.
As of September 24, 1999, the total estimated expenditures of existing and
incremental resources for the Year 2000 compliance initiative are approximately
$520 million. This estimate includes $104 million of occupancy, communications,
and other related overhead expenditures, as Merrill Lynch is applying a fully
costed pricing methodology for this project. Of the total estimated
expenditures, approximately $40 million, related to continued testing,
contingency planning, and risk management. There can be no assurance that the
costs associated with such efforts will not exceed those currently anticipated
by Merrill Lynch, or that the possible failure of such efforts will not have a
material adverse effect on Merrill Lynch's business, results of operations, or
financial condition.
10
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The following table indicates the trading Value at Risk associated with the
Fund's open positions by market category as of September 30, 1999 and December
31, 1998, and the average of the three and nine month periods ending September
30, 1999. As of September 30, 1999 and December 31, 1998, the Fund's total
capitalization was approximately $86 million and $104 million, all of which was
allocated to trading.
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
--------------------------------- --------------------------------
% OF TOTAL % OF TOTAL
MARKET SECTOR VALUE AT RISK CAPITALIZATION VALUE AT RISK CAPITALIZATION
- ------------- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Interest Rates $ 1,165,766 1.35% $ 1,485,947 1.42%
Currencies 1,150,848 1.34% 3,022,541 2.90
Stock Indices 423,646 0.49% 1,788,496 1.71
Metals 805,346 0.93% 620,947 0.60
Commodities 535,936 0.62% 492,438 0.47
Energy 901,100 1.05% 578,300 0.55
------------- -------------- ------------- --------------
$ 4,982,642 5.78% $ 7,988,669 7.65%
============= ============== ============= ==============
</TABLE>
<TABLE>
<CAPTION>
Average month-end Average month-end
For the Period For the Period
July 1999 through September 1999 January 1999 through September 1999
--------------------------------- -----------------------------------
% OF TOTAL % OF TOTAL
MARKET SECTOR VALUE AT RISK CAPITALIZATION VALUE AT RISK CAPITALIZATION
- ------------- ------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Interest Rates $ 1,610,260 1.82% $ 3,867,737 4.12%
Currencies 1,053,065 1.19% 1,419,244 1.51%
Stock Indices 590,610 0.66% 1,611,548 1.72%
Metals 690,205 0.78% 500,085 0.53%
Commodities 521,054 0.59% 590,894 0.63%
Energy 911,583 1.03% 746,184 0.80%
------------- -------------- ------------- --------------
$ 5,376,777 6.07% $ 8,735,692 9.31%
============= ============== ============= ==============
</TABLE>
11
<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
None.
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 nine
months of fiscal 1999.
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: November 12, 1999 By /s/ JOHN R. FRAWLEY, JR.
------------------------
John R. Frawley, Jr.
Chairman, Chief Executive Officer,
President and Director
Date: November 12, 1999 By /s/ MICHAEL L. PUNGELLO
-----------------------
Michael L. Pungello
Vice President, Chief Financial Officer
and Treasurer
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> BD
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> SEP-30-1999 SEP-30-1998
<CASH> 0 0
<RECEIVABLES> 88,627,684 110,778,798
<SECURITIES-RESALE> 0 0
<SECURITIES-BORROWED> 0 0
<INSTRUMENTS-OWNED> 0 0
<PP&E> 0 0
<TOTAL-ASSETS> 88,627,684 110,778,798
<SHORT-TERM> 0 0
<PAYABLES> 2,485,523 6,343,187
<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> 86,142,161 104,435,611
<TOTAL-LIABILITY-AND-EQUITY> 88,627,684 110,778,798
<TRADING-REVENUE> 5,282,340 6,945,072
<INTEREST-DIVIDENDS> 3,374,614 4,827,507
<COMMISSIONS> 6,220,193 9,977,697
<INVESTMENT-BANKING-REVENUES> 0 0
<FEE-REVENUE> 0 0
<INTEREST-EXPENSE> 0 0
<COMPENSATION> 0 0
<INCOME-PRETAX> 2,436,761 1,794,882
<INCOME-PRE-EXTRAORDINARY> 2,436,761 1,794,882
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,436,761 1,794,882
<EPS-BASIC> 4.22 2.15
<EPS-DILUTED> 4.22 2.15
</TABLE>
