-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ITmQgy8QEcowGZ1oPmukB8GjNNvSL9iAJVEw68Xv5D3TheZmrjFc8di6GSQjvAlw dwkJqR9bheDh8Y7P+uyYhw== 0000912057-01-528096.txt : 20010814 0000912057-01-528096.hdr.sgml : 20010814 ACCESSION NUMBER: 0000912057-01-528096 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ML GLOBAL HORIZONS LP CENTRAL INDEX KEY: 0000904918 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 133716393 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-23240 FILM NUMBER: 1706692 BUSINESS ADDRESS: STREET 1: MERRILL LYNCH WORLD HDQTS 6TH FLR S TWR STREET 2: C/O ML FUTURES INV PARTNERS INC CITY: NEW YORK STATE: NY ZIP: 10080-6106 BUSINESS PHONE: 2122364161 MAIL ADDRESS: STREET 1: C/O MERRILL LYNCH INVESTMENT PARTNERS IN STREET 2: WORLD FINANCIAL CENTER S TOWER 6TH FL CITY: NEW YORK STATE: NY ZIP: 10080-6106 10-Q 1 a2054160z10-q.txt 10-Q 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, 2001 ------------- 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 MLIM Alternative Strategies LLC (formerly 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___ PART I - FINANCIAL INFORMATION Item 1. Financial Statements ML GLOBAL HORIZONS L.P. (A DELAWARE LIMITED PARTNERSHIP) STATEMENTS OF FINANCIAL CONDITION
June 30, December 31, 2001 2000 (unaudited) ------------- ------------ ASSETS - ------ Equity in commodity futures trading accounts: Cash and option premiums $54,447,788 $57,347,041 Net unrealized profit on open contracts 1,629,237 5,045,369 Accrued interest 162,101 300,644 ----------- ----------- Total assets $56,239,126 $62,693,054 =========== =========== LIABILITIES AND PARTNERS' CAPITAL - --------------------------------- LIABILITIES: Brokerage commissions payable $ 339,486 $ 378,771 Profit Shares payable 401,309 716,037 Administrative fees payable 11,706 13,061 Redemptions payable 1,144,628 1,304,385 ----------- ----------- Total liabilities 1,897,129 2,412,254 ----------- ----------- PARTNERS' CAPITAL: General Partner (3,722 and 3,722 Units) 683,526 666,597 Limited Partners (292,186 and 332,856 Units) 53,658,471 59,614,203 ----------- ----------- Total partners' capital 54,341,997 60,280,800 ----------- ----------- TOTAL $56,239,126 $62,693,054 =========== =========== NET ASSET VALUE PER UNIT (Based on 295,908 and 336,578 Units outstanding) $ 183.64 $ 179.10 =========== ===========
See notes to financial statements. 2 ML GLOBAL HORIZONS L.P. (A DELAWARE LIMITED PARTNERSHIP) STATEMENTS OF OPERATIONS (unaudited)
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, 2001 2000 2001 2000 ------------- ------------- ------------ ------------ REVENUES: Trading profit (loss): Realized $ (130,736) $ (832,425) $ 7,058,775 $ (807,965) Change in unrealized (2,043,924) 231,792 (3,416,235) (138,321) ----------- ---------- ----------- ----------- Total trading results (2,174,660) (600,633) 3,642,540 (946,286) Interest income 525,461 984,016 1,248,841 2,071,550 ----------- ---------- ----------- ----------- Total revenues (1,649,199) 383,383 4,891,381 1,125,264 ----------- ---------- ----------- ----------- EXPENSES: Profit Shares (301,116) (21,775) 1,162,132 61,061 Brokerage commissions 1,017,337 1,220,749 2,133,957 2,625,921 Incentive override (243,425) -- 4,548 -- Administrative fees 35,081 42,095 73,585 90,549 ----------- ---------- ----------- ----------- Total expenses 507,877 1,241,069 3,374,222 2,777,531 ----------- ---------- ----------- ----------- NET INCOME (LOSS) $(2,157,076) $ (857,686) $ 1,517,159 $(1,652,267) =========== ========== =========== =========== NET INCOME (LOSS) PER UNIT: Weighted average number of General Partner and Limited Partner Units outstanding 306,968 408,007 317,012 433,760 =========== ========== =========== =========== Net income (loss) per weighted average General Partner and Limited Partner Unit $ (7.03) $ (2.10) $ 4.79 $ (3.81) =========== ========== =========== ===========
See notes to financial statements. 3 ML GLOBAL HORIZONS L.P. (A DELAWARE LIMITED PARTNERSHIP) STATEMENTS OF CHANGES IN PARTNERS' CAPITAL FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000 (unaudited)
General Limited Units Partner Partners Total ------- ---------- ------------ ------------ PARTNERS' CAPITAL, December 31, 1999 475,187 $1,481,537 $ 77,655,640 $ 79,137,177 Net loss -- (12,691) (1,639,576) (1,652,267) Redemptions (82,621) (657,306) (13,059,143) (13,716,449) ------- ---------- ------------ ------------ PARTNERS' CAPITAL, June 30, 2000 392,566 $ 811,540 $ 62,956,921 $ 63,768,461 ======= ========== ============ ============ PARTNERS' CAPITAL, December 31, 2000 336,578 $ 666,597 $ 59,614,203 $ 60,280,800 Net income -- 16,929 1,500,230 1,517,159 Redemptions (40,670) -- (7,455,962) (7,455,962) ------- ---------- ------------ ------------ PARTNERS' CAPITAL, June 30, 2001 295,908 $ 683,526 $ 53,658,471 $ 54,341,997 ======= ========== ============ ============
See notes to financial statements. 4 ML GLOBAL HORIZONS L.P. (A DELAWARE LIMITED PARTNERSHIP) -------------------------------- NOTES TO FINANCIAL STATEMENTS (unaudited) 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") as of June 30, 2001, and the results of its operations for the three and six months ended June 30, 2001 and 2000. 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 conformity with accounting principles generally accepted in the United States of America 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, 2000 (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, as amended by SFAS No. 137. SFAS No. 133 is further amended by SFAS No. 138, which clarifies issues surrounding interest risk, foreign currency denominated items, normal purchases and sales and net hedging. 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 application of the provisions of SFAS No. 133, as amended by SFAS No. 137 and SFAS No. 138, did not have 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 futures, forwards, swaps or option contracts, or other financial instruments 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 the derivative instruments held by the Partnership as well as the volatility and liquidity in the markets in which such derivative instruments are traded. The General Partner, MLIM Alternative Strategies LLC ("MLIM AS LLC") (formerly Merrill Lynch Investment Partners, Inc.) 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, calculating the Net Asset Value of the Partnership as of the close of business on each day and reviewing outstanding positions for over-concentrations. While MLIM AS LLC does not itself intervene 5 in the markets to hedge or diversify the Partnership's market exposure, MLIM AS LLC may urge Advisors to reallocate positions 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, MLIM AS LLC's basic risk control procedures consist simply of the ongoing process of advisor monitoring, with the market risk controls being applied by the Advisors themselves. 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, if any, included on the Statements of Financial Condition. The Partnership attempts to mitigate this risk by dealing exclusively with Merrill Lynch entities as clearing brokers. The Partnership, in its normal course of business, enters into various contracts, with Merrill Lynch Futues ("MLF") acting as its commodity broker. Pursuant to the brokerage arrangement with MLF (which includes a netting arrangement), to the extent that such trading results in receivables from and payables to MLF, these receivables and payables are offset and reported as a net receivable or payable and are included in the Statement of Financial Condition under Equity from commodity futures trading accounts. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations MONTH-END NET ASSET VALUE PER UNIT
- ------------------------------------------------------------- Jan. Feb. Mar. Apr. May Jun. - ------------------------------------------------------------- 2000 $168.83 $168.54 $164.59 $162.97 $166.07 $162.44 - ------------------------------------------------------------- 2001 $180.39 $183.37 $190.51 $182.78 $181.49 $183.64 - -------------------------------------------------------------
Performance Summary JANUARY 1, 2001 TO JUNE 30, 2001 - -------------------------------- January 1, 2001 to March 31, 2001 Trading in the interest rates market was profitable for the Partnership. Long positions in the Euro dollar resulted in gains. Euro dollar futures contracts rose dramatically as the U.S. economy weakened and the Federal Reserve cut interest rates. Japanese ten-year bond and Euro-bund cross futures trading was also profitable. Currency trading was profitable as gains from short Japanese yen positions offset losses from the Euro and Australian dollar. The Euro fell from a high near 96 cents back to the 90-cent level, resulting in losses for the Partnership's long positions. Stock index trading was profitable as gains were realized from the Partnership's short positions in the S&P 500, Nikkei 225 and DAX German Stock Indices. Trading in agricultural commodities was profitable during the quarter. The sector continued to face weak grain and oilseed prices. Excellent growing weather in the U.S., Argentina and Brazil, concerns about U.S. export potential and inventories at historically high levels have kept these markets on the defensive. Short cotton positions were profitable as the market sank to a 15-year low on poor demand and a possible planting increase. 6 Metals trading was moderately profitable. Short silver trading profited as prices declined in a generally weak market. March proved to be a volatile trading month for gold, but in the end short positions realized gains as another attempted gold rally failed. Trading in the energy sector was the only unprofitable strategy during the quarter. Natural gas prices pulled back in January after rallying the past few months. With low inventories and stagnant production priced into the market, warmer than normal weather became the dominant variable adversely affecting prices. April 1, 2001 to June 30, 2001 Profits were realized in agricultural commodities even though trading in general displayed a lackluster tone with few inflationary implications. Although demand for commodities has not been favorable, short cotton and corn positions and long soymeal and wheat positions were profitable. Trading in the energy markets was profitable. Short natural gas positions accounted for most of the gains as prices declined over 60 percent form last year's peak. The sector as a whole faced downside pressure from the slowing global economy, inventory surplus and OPEC's decision to leave production levels unchanged. The metals sector performed poorly. Weakness in the Euro, a decline in the Australian dollar to all time lows and producer and central bank selling sent gold prices lower. Silver trading was volatile, as China's silver exports were high due to poor domestic demand. Demand restraints and a lack of momentum weighed heavily on the sector. Trading in the stock market indices was unprofitable as losses were sustained in the DAX German Stock Index, Nikkei 225 and S&P 500 positions. Currency trading was unprofitable on losses from Euro and Japanese yen positions. The further weakening of the Euro and yen displayed how the world economy is not immune to the economic slowdown of the U.S. The markets remained concerned with the risk of a hard landing for the Japanese economy. Trading in the interest rate markets was significantly unprofitable on losses from U.S. Treasury Bond, Euro Bond and three-month Euribor futures positions. JANUARY 1, 2000 TO JUNE 30, 2000 - -------------------------------- January 1, 2000 to March 31, 2000 Energy trading was profitable for the quarter due to long crude oil and unleaded gas positions. Despite the possibility of OPEC increasing oil production by 5%, crude oil prices continued to rise as such a hike would still leave oil inventories at levels much below normal during the balance of the year. Prices began to decline in mid-March as Iran backed down from its position on the point of "no increase" and again later in the month as OPEC announced a production increase of 1.716 million barrels per day offsetting some gains from the previous two months. Metals trading alternated from profitable to unprofitable, however, the sector ended the quarter on the upside. Prices rose during the period in base metals as concerns over higher interest rates and the decline in stock prices globally created defensive tones in the market. High aluminum inventories caused prices to decline on the London Metals Exchange. Late in the quarter, copper prices rose over rumors of increased demand from China, having an adverse effect on the short positions held. The agriculture commodity sector produced profits for the quarter due to gains in feeder cattle, coffee and cocoa which outpaced losses in short corn positions due to dry conditions in Argentina, which led to high corn prices. In currency trading, the Euro declined against the dollar as officials from the Group of Seven met and failed to express concern about the low levels of the European currency. Some other contributing factors to the decline of the Euro include the slow pace of microeconomic reform in Europe, plans for a European withholding tax and the scale of direct investment flows outside of Europe. In Asia, the yen has been strong resulting in losses for the Partnership's short positions. During the quarter, profitable positions in the MIB 30 (Milan) and Hang Seng Indices were outweighed by losses in CAC 40 Euro futures and the FTSE Financial Times Stock Index. Long MIB Index futures positions were profitable as private consumption and improved labor flexibility are supporting growth in Italy. Volatile market conditions led to unprofitable positions in the S&P 500 and the FTSE - Financial Times Index. Short Eurodollar trading was profitable as the currency continued to decline in January. The European Union ministers blamed the currency's slide in January on rapid U.S. growth and fears that the Federal Reserve will increase U.S. interest rates. These profits were far outweighed by losses in the Japanese 10-year bond, U.S. 10-year Treasury note positions and long U.S. Treasury positions as the yield curve fluctuated widely during the quarter. April 1, 2000 to June 30, 2000 Long natural gas positions proved to be profitable throughout the quarter, however crude oil faced whipsaw market conditions. Prices on crude oil declined early in the quarter in the wake of OPEC's March decision to increase production; however, prices later rose as the International Energy Agency reported the need for additional OPEC oil to prevent a shortage in inventory. In June, long positions of light crude oil resulted in profits despite OPEC's 7 agreement to raise the production ceiling effective July 1. Prices sustained their levels because the market was looking for a larger production hike. Currency trading for the quarter was profitable as gains from Euro futures outweighed losses from positions in Japanese yen. Currencies suffered when the Japanese yen appreciated against the dollar due to speculation that the Japanese government was considering a stimulus package after the G8 summit in late July. The yen was firmer in June due to capital data spending which indicated strong first-quarter growth and signals that an end is near to Japan's 16-month old zero interest rate policy. Agriculture trading was unprofitable for the quarter as losses in soybean positions were greater than gains in short corn and long sugar positions. Long soybean positions were unprofitable as weather and soil conditions appear favorable for an abundance of supply. Weather conditions exerted pressure on the market in anticipation of a large yield during harvest and corn prices were down for most of the month. A report from Brazil stated that due to unfavorable weather conditions that prevailed last year, there will be a significant drop in the 2000/01 sugar production which contributed to the rise in sugar prices for the month. In metals trading, short aluminum positions were profitable early in the quarter but were outweighed by losses in the Partnership's gold positions. An Indonesian refinery indicated that it will return to operation this year, adding supply to the market. Gold prices ended higher for the month in reaction to the Federal Reserve leaving interest rates unchanged and a report that the South African Reserve Bank received a $500 million gold denominated loan. While other central banks are decreasing reserves, this positive message to the bullion market pushed up prices creating losses in short positions. Stock index trading was unprofitable as losses were sustained in Nikkei 225 and S&P 500 positions early in the quarter. Signs of rising inflation fueled fears that the Federal Reserve will continue to raise interest rates aggressively to slow the robust economy. However, Nikkei 225 trading showed gains at the end of the quarter as well as did the All Ordinaries and DAX indices. Interest rate positions were unprofitable throughout the quarter. Losses were incurred from U.S. Treasury bond and Euro dollar trading. U.S. bond yields fell during the month as investors shifted to Treasuries due to increased volatility in the NASDAQ and other equity markets. After the Federal Reserve raised interest rates 50 basis points, U.S. interest rates rallied due to a combination of lower stock prices and a perception that the Federal Reserve will be able to slow the economy. Since the most recent Fed funds and discount rate increase, the long bond has increased over 4 points or a decline of over 25 basis points in yield. U.S. bonds were unprofitable when bonds rallied during the June both after a higher than expected unemployment report and on a lack of interest rate action by the Federal Reserve. 8 PART II - OTHER INFORMATION Item 1. Legal Proceedings There are no pending proceedings to which the Partnership or MLIM AS LLC 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 31, 2001, Merrill Lynch Investment Partners Inc. ("MLIP"), a Delaware corporation and General Partner of the Partnership, converted to a Delaware limited liability company. In connection with the conversion, MLIP's name was changed to MLIM Alternative Strategies LLC ("MLIM AS LLC"). This step was taken in connection with the ongoing reorganization of the various alternative investment groups under the Merrill Lynch Investment Managers umbrella. The change will have no impact on the Partnership's investors. All of the officers of MLIP continue in their former roles with MLIM AS LLC, except that also effective May 31, 2001, Ronald S. Rosenberg, formerly Chief Executive Officer of MLIP, became President of MLIM AS LLC and Fabio P. Savoldelli, formerly President of MLIP, became Chairman and Chief Executive Officer of MLIM AS LLC. In addition, each of the four directors of MLIP now serve on the board of managers of MLIM AS LLC. 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 2001. 9 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: MLIM ALTERNATIVE STRATEGIES LLC (formerly Merrill Lynch Investment Partners, Inc.) (General Partner) Date: August 13, 2001 By /s/ FABIO SAVOLDELLI -------------------- Fabio Savoldelli Chairman, Chief Executive Officer and Manager Date: August 13, 2001 By /s/ MICHAEL L. PUNGELLO ----------------------- Michael L. Pungello Vice President, Chief Financial Officer and Treasurer 10 -----END PRIVACY-ENHANCED MESSAGE-----