Back to GetFilings.com
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, 2002
-------------
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
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,
2002 2001
(unaudited)
------------- -------------
ASSETS
Equity in commodity futures trading accounts:
Cash and option premiums $ 47,531,337 $ 51,806,183
Net unrealized profit on open contracts 2,575,450 1,523,577
Accrued interest 67,962 79,104
------------- -------------
Total assets $ 50,174,749 $ 53,408,864
============= =============
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Brokerage commissions payable $ 303,139 $ 322,724
Profit Shares payable 295,033 595,428
Administrative fees payable 10,453 11,128
Redemptions payable 494,254 706,124
------------- -------------
Total liabilities 1,102,879 1,635,404
------------- -------------
PARTNERS' CAPITAL:
General Partner (3,025 and 3,025 Units) 563,358 562,414
Limited Partners (260,470 and 275,443 Units) 48,508,512 51,211,046
------------- -------------
Total partners' capital 49,071,870 51,773,460
------------- -------------
TOTAL $ 50,174,749 $ 53,408,864
============= =============
NET ASSET VALUE PER UNIT
(Based on 263,495 and 278,468 Units outstanding) $ 186.23 $ 185.92
============= =============
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,
2002 2001 2002 2001
------------- ------------- ------------- -------------
REVENUES:
Trading profit (loss):
Realized $ 3,493,854 $ (130,736) $ 581,565 $ 7,058,775
Change in unrealized 1,108,643 (2,043,924) 1,054,149 (3,416,235)
------------- ------------- ------------- -------------
Total trading results 4,602,497 (2,174,660) 1,635,714 3,642,540
Interest income 204,852 525,461 414,707 1,248,841
------------- ------------- ------------- -------------
Total revenues 4,807,349 (1,649,199) 2,050,421 4,891,381
------------- ------------- ------------- -------------
EXPENSES:
Profit Shares 295,033 (301,116) 295,033 1,162,132
Brokerage commissions 874,630 1,017,337 1,759,470 2,133,957
Incentive override -- (243,425) -- 4,548
Administrative fees 30,159 35,081 60,671 73,585
------------- ------------- ------------- -------------
Total expenses 1,199,822 507,877 2,115,174 3,374,222
------------- ------------- ------------- -------------
NET INCOME (LOSS) $ 3,607,527 $ (2,157,076) $ (64,753) $ 1,517,159
============= ============= ============= =============
NET INCOME (LOSS) PER UNIT:
Weighted average number of General Partner
and Limited Partner Units outstanding 268,642 306,968 272,910 317,012
============= ============= ============= =============
Net income (loss) per weighted average
General Partner and Limited Partner Unit $ 13.43 $ (7.03) $ (0.24) $ 4.79
============= ============= ============= =============
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, 2002 and 2001
-----------------------------------------------
(unaudited)
General Limited
Units Partner Partners Total
------------- ------------- ------------- -------------
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
============= ============= ============= =============
PARTNERS' CAPITAL,
December 31, 2001 278,468 $ 562,414 $ 51,211,046 $ 51,773,460
Net income (loss) - 944 (65,697) (64,753)
Redemptions (14,973) - (2,636,837) (2,636,837)
------------- ------------- ------------- -------------
PARTNERS' CAPITAL,
June 30, 2002 263,495 $ 563,358 $ 48,508,512 $ 49,071,870
============= ============= ============= =============
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, 2002, and the
results of its operations for the three and six months ended June 30, 2002 and
2001. However, the operating results for the interim periods may not be
indicative of the results 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,
2001.
2. FAIR VALUE AND OFF-BALANCE SHEET RISK
The nature of this Partnership has certain risks, which cannot be presented on
the financial statements. The following summarizes some of those risks.
Market Risk
- -----------
Derivative instruments involve varying degrees of off-balance sheet market risk.
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 of the markets in which the derivative instruments are
traded.
The General Partner, MLIM Alternative Strategies LLC ("MLIM AS LLC"), 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 in the markets to hedge or diversify the Partnership's
market exposure, MLIM AS LLC may urge the Advisors to reallocate positions in an
attempt to avoid over-concentrations. However, such interventions are unusual.
Except in cases in which it appears that the Advisors have 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 also require margin in the over-the-counter markets.
5
The credit risk associated with these instruments from counterparty
nonperformance is the net unrealized profit, if any, included in 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 Pierce Fenner & Smith Inc. ("MLPF&S") acting as
its commodity broker. Pursuant to the brokerage agreement with MLPF&S (which
includes a netting arrangement), to the extent that such trading results in
receivables from and payables to MLPF&S, these receivables and payables are
offset and reported as a net receivable or payable and included in the
Statements of Financial Condition under Equity in 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.
----------------------------------------------------
2001 $180.39 $183.37 $190.51 $182.78 $181.49 $183.64
----------------------------------------------------
2002 $179.13 $173.22 $172.71 $171.39 $176.93 $186.23
----------------------------------------------------
Performance Summary
January 1, 2002 to June 30, 2002
- --------------------------------
January 1, 2002 to March 31, 2002
Trading in the energy markets was the only profitable strategy for the
Partnership in the quarter. Natural gas short positions benefited from mild
weather in the United States. Large gains were posted in March on fears of
increased conflict in the Middle East potentially causing a shortage of oil
supply.
Losses were sustained in the metals sector. Short positions in base metals and
long positions in precious metals suffered losses. Base metals prices soared on
the hope that an economic recovery in the United States would boost demand.
Precious metals declined as the U.S. economy showed signs of stabilizing and
inflation concerns waned.
Stock index trading was unprofitable. Long equity exposures resulted in losses
from choppy market conditions as profit forecasts fell short and concern over
the Enron accounting scandal continued to grow. Large price swings in the U.S.
equity markets created a whipsaw environment, causing the Advisors to flip
exposures numerous times, yielding an end result of negative performance. Global
equity markets appreciated in March, notably Japan, Germany and France,
generating losses on short positioning.
Losses were realized in the interest rate markets. Conflicting economic reports
prompted the Advisors to alternate exposures from long to short in most major
international bond markets. European fixed income exposures posted losses under
particularly direction-less markets. Global bond prices declined on growing
optimism for a stronger economic outlook for the remainder of 2002.
Trading in the agricultural commodities resulted in losses. Uncertainty in the
global marketplace prevailed, making for extremely difficult trading conditions.
Most of the losses for the sector were attributed to short coffee positions.
During January and February, coffee had been in a downward trend. This trend
sharply reversed in March as Mexico and Central America reduced exports, causing
lower inventories of exchange-approved beans in U.S. warehouses. Coffee futures
rallied from 46.71 cents per pound to 58.48 cents per pound.
Currency trading also sustained losses. With the exception of the Canadian
dollar, all of the futures traded currencies appreciated against the U.S.
dollar. The momentum in the U.S. dollar and Japanese yen trade reversed,
generating significant losses. Relative volatility continued for the G-7
currencies in March.
6
April 1, 2002 to June 30, 2002
Profits resulting from trading in the currency sector provided the Partnership
with the majority of its gains in the second quarter. The decline in the U.S.
dollar continued through June unabated fueled by the decline in the U.S. equity
markets.
The interest rate sector was profitable for the Partnership despite its slow
start. Yields on major debt-instruments continued to decline. U.S. fixed income
markets have rallied sharply due to the flight-to-safety effect as well as the
conviction that the U.S. Federal Reserve will raise rates later rather than
sooner.
The trading in stock indices found profits from its short positions. The
strength of U.S. economic data continued to surprise on the upside, pointing
toward a stronger recovery than expected, but the equity markets have remained
weak.
The agricultural commodities sector posted small gains for the quarter. Strong
gains were posted in livestock and grains in April as prices trended downward.
Some of the gains were lost in June as livestock prices began to rise. The
continued weakness in the U.S. dollar and low stockpiles in grains and soybeans
should aid in sustaining a price rally in the summer months.
The metals sector sustained slight losses for the quarter. In June, the uptrend
in gold and silver reversed and losses were sustained on long positions
eliminating profits earned earlier in the quarter.
Energy futures experienced whipsaw markets and trading brought in losses for the
Partnership. The market was volatile during the quarter due to continued turmoil
in the Middle East.
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 eurodollar resulted in gains. Eurodollar 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 German DAX 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.
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.
7
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 German DAX, 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 Japanese 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable
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
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 six months
of fiscal 2002.
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
(General Partner)
Date: August 15, 2002 By /s/ FABIO P. SAVOLDELLI
-----------------------
Fabio P. Savoldelli
Chairman, Chief Executive Officer and Manager
(Principal Executive Officer)
Date: August 15, 2002 By /s/ MICHAEL L. PUNGELLO
-----------------------
Michael L. Pungello
Vice President, Chief Financial Officer
and Treasurer
(Principal Financial and Accounting Officer)
10
EXHIBIT 99
Form of Certification Pursuant to Section 1350 of Chapter 63
of Title 18 of the United States Code
We, Fabio P. Savoldelli and Michael L. Pungello, the chief executive officer and
chief financial officer, respectively, of MLIM Alternative Strategies LLC,
general partner of ML Global Horizons L.P., certify that (i) the quarterly
report Form 10-Q fully complies with the requirements of Section 13(a) or 15(d)
of the Securities and Exchange Act of 1934 and (ii) the information contained in
the Form 10-Q fairly presents, in all material respects, the financial condition
and results of operations of ML Global Horizons L.P.
Date: August 15, 2002 By /s/ FABIO P. SAVOLDELLI
-----------------------
Fabio P. Savoldelli
Chairman, Chief Executive Officer and Manager
(Principal Executive Officer)
Date: August 15, 2002 By /s/ MICHAEL L. PUNGELLO
-----------------------
Michael L. Pungello
Vice President, Chief Financial Officer
and Treasurer
(Principal Financial and Accounting Officer)
11