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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2005
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
GLOBAL HORIZONS I 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 Managers LLC
222 Broadway
27th Floor
New York, NY 10038-2510
------------------------
(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
GLOBAL HORIZONS I L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENTS OF FINANCIAL CONDITION
MARCH 31,
2005 DECEMBER 31,
(UNAUDITED) 2004
-------------- --------------
ASSETS
Equity in commodity futures trading accounts:
Cash $ 275,062,704 $ 148,295,862
Net unrealized profit on open contracts 1,557,396 3,149,341
Accrued interest and other assets 595,912 238,759
-------------- --------------
TOTAL $ 277,216,012 $ 151,683,962
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Profit Shares payable $ 701,513 $ 1,107,931
Brokerage commissions payable 912,004 862,605
Redemptions payable 13,320,569 331,608
Administrative fees payable 33,330 31,446
-------------- --------------
Total liabilities 14,967,416 2,333,590
-------------- --------------
PARTNERS' CAPITAL:
General Partner (1,189,937 and 756,618 Units) 2,187,918 1,215,470
Limited Partners -- Unitized (145,534,109 and
108,712,438 Units) 179,193,005 148,134,902
Limited Partners -- Non-unitized 80,867,673
-------------- --------------
Total partners' capital 262,248,596 149,350,372
-------------- --------------
TOTAL $ 277,216,012 $ 151,683,962
============== ==============
NET ASSET VALUE PER UNIT (Note 2)
See notes to financial statements.
2
GLOBAL HORIZONS I L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
(unaudited)
FOR THE THREE FOR THE THREE
MONTHS ENDED MONTHS ENDED
MARCH 31, MARCH 31,
2005 2004
-------------- --------------
TRADING REVENUE (LOSS):
Trading profit (loss):
Realized $ 129,619 $ 5,790,050
Change in unrealized (1,595,514) (2,025,033)
-------------- --------------
Total trading revenue (loss) (1,465,895) 3,765,017
-------------- --------------
INVESTMENT INCOME
Interest 1,629,661 116,136
-------------- --------------
EXPENSES:
Brokerage commissions 3,998,022 892,987
Profit Shares 698,959 675,305
Administrative fees 137,539 31,534
-------------- --------------
Total expenses 4,834,520 1,599,826
-------------- --------------
NET INVESTMENT LOSS (3,204,859) (1,483,690)
-------------- --------------
NET INCOME (LOSS) $ (4,670,754) $ 2,281,327
============== ==============
NET INCOME (LOSS) PER UNIT:
Weighted average number of General Partner
and Limited Partner Units outstanding 135,991,602 1,278,787
============== ==============
Net income (loss) per weighted average
General Partner and Limited Partner Unit $ (0.0245) $ 1.7840
============== ==============
See notes to financial statements.
3
GLOBAL HORIZONS I L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
(unaudited)
LIMITED PARTNERS
GENERAL ------------------------------
UNITS PARTNER UNITIZED NON-UNITIZED TOTAL
-------------- -------------- -------------- ------------ --------------
PARTNERS' CAPITAL,
December 31, 2003 208,714 $ 496,775 $ 48,158,497 $ -- $ 48,655,272
Additions 3,152,305 - 3,244,280 -- 3,244,280
Net income - 23,639 2,257,688 -- 2,281,327
Redemptions (4,259) - (1,039,765) -- (1,039,765)
-------------- -------------- -------------- ------------ --------------
PARTNERS' CAPITAL,
March 31, 2004 3,356,760 $ 520,414 $ 52,620,700 $ -- $ 53,141,114
============== ============== ============== ============ ==============
PARTNERS' CAPITAL,
December 31, 2004 109,469,056 $ 1,215,470 $ 148,134,902 $ -- $ 149,350,372
Additions 38,229,191 1,122,147 35,769,954 96,754,733 133,646,834
Net loss - (39,602) (3,298,009) (1,333,143) (4,670,754)
Redemptions (974,201) (110,097) (1,413,842) (14,553,917) (16,077,856)
-------------- -------------- -------------- ------------ --------------
PARTNERS' CAPITAL,
March 31, 2005 146,724,046 $ 2,187,918 $ 179,193,005 $ 80,867,673 $ 262,248,596
============== ============== ============== ============ ==============
See notes to financial statements.
4
GLOBAL HORIZONS I L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
(unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
In the opinion of management, the financial statements contain all adjustments
necessary to present fairly the financial position of Global Horizons I L.P.
(the "Partnership") as of March 31, 2005, and the results of its operations for
the three months ended March 31, 2005 and 2004. 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 accordance 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,
2004.
Effective December 31, 2004, ML Multi-Manager LLC redeemed all members capital
and such amounts were invested in the Partnership as of January 2, 2005 as
non-unitized limited partners capital.
As of January 15, 2005, the Partnership changed its name from ML Global Horizons
L.P. to Global Horizons I L.P. No changes have occurred to the Partnership's
investment objective or to the Partnership's structure.
5
2. NET ASSET VALUE PER UNIT
At March 31, 2005 and December 31, 2004, the Net Asset Values of the different
series of Units were:
March 31, 2005
(unaudited)
NET ASSET
NUMBER OF VALUE PER
NET ASSET VALUE UNITS UNIT
--------------- -------------- ----------
Series A $ 130,602,470 138,765,512 $ 0.9412
Series F 42,891,456 190,312 225.37
Series I 7,253,781 7,768,222 0.9338
--------------- --------------
180,747,707 146,724,046
--------------- --------------
NON-UNITIZED SERIES
ML Futures Investments L.P. 44,445,749 - -
ML Principal Protection L.P. 12,083,012 - -
ML Principal Protection Plus Ltd. 24,972,128 - -
--------------- --------------
81,500,889 -
--------------- --------------
$ 262,248,596 146,724,046
=============== ==============
December 31, 2004
NET ASSET
NUMBER OF VALUE PER
NET ASSET VALUE UNITS UNIT
--------------- -------------- ----------
Series A $ 100,146,503 104,152,884 $ 0.9615
Series F 44,347,994 192,730 230.10
Series I 4,855,875 5,123,442 0.9478
--------------- --------------
$ 149,350,372 109,469,056
=============== ==============
3. 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.
6
Merrill Lynch Investment Managers LLC ("MLIM LLC"), 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, 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 LLC does not
itself intervene in the markets to hedge or diversify the Partnership's market
exposure, MLIM 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 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.
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.
7
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
MONTH-END NET ASSET VALUE PER SERIES F UNIT
JAN FEB MAR
--------- --------- ---------
2004 $ 238.09 $ 245.80 $ 244.21
2005 $ 222.30 $ 224.75 $ 225.37
Performance Summary
January 1, 2005 to March 31, 2005
The Partnership posted a loss for the first quarter. Losses in the currency and
global equity sectors outweighed gains experienced in the agricultural sector.
The interest rate sector was the best performing sector for the Partnership. The
Partnership benefited from long U.S. dollar positions versus the Euro and long
Euro and Japanese fixed incomes. Systematic, long-term trend followers also
posted gains in the interest rate sector.
The energy sector was the second highest performing sector for the Partnership.
Gains were experienced in the energy sector as the Partnership benefited from
long positions in crude oil and gas as these industries profited. Gains were
also posted in long crude oil and heating oil positions.
The agricultural sector also performed well for the quarter. Gains were
experienced from long positions in cattle and hog markets. Short grain positions
and long soybean positions detracted from performance mid-quarter. However, the
quarter ended with gains posted due to coffee, which experienced a lack of
supply and a growing demand.
The metals sector posted a gain for the quarter. The Partnership benefited from
long positions in base and precious metals, such as gold, copper and zinc.
The stock indices sector posted a loss for the quarter. Losses occurred in the
beginning of the quarter due to a trend reversal from long global equities to
short global equities. Profits were made through long positions on the FTSE
index and Asian equities. Stock indices contributed negatively to performance as
the equity markets declined at the end of the quarter.
The currency sector posted the greatest loss for the Partnership. Losses at the
beginning of the quarter were due to a trend reversal from short U.S. dollar
positions to long U.S. dollar positions. Long Japanese yen and Swiss franc
positions also experienced losses. With the U.S. Federal Reserve expressing
concern about inflation, investors predicted that interest rates and the U.S.
dollar would rise. This caused losses as investors fled from emerging
currencies. Long Australian dollar and Mexican peso positions also contributed
to negative performance.
January 1, 2004 to March 31, 2004
The Partnership experienced gains in all sectors, with most of the gains in the
metals sector.
The metals sector was profitable throughout the quarter. In January, the
Partnership profited from its long exposure. Copper rose to its highest price in
more than six years and gold climbed to highs not seen since
8
1988. In February, both precious and industrial metals generated positive
returns from the long side. Base metals, with the exception of nickel, continued
their upward trend as the sector reacted to strong demand, shrinking supply and
U.S. dollar weakness. Strong demand for copper and continued speculative
interest pushed the market to a seven-year high. In March, industrial metals
generated minor losses. Precious metals contributed profits.
Agricultural commodities posted gains for the quarter. Small gains were posted
in January as the USDA cut its forecast for both soybean and corn supplies which
sent prices surging for each. In February, grains markets extended their
long-term rally, with corn and soybeans being pushed to seven and 15-year highs
on strong demand and low stockpiles. Grain markets continued to extend their
long-term rally, with corn, soybeans, and soymeal being pushed higher on strong
demand from Asia and lower estimate of supply from South America in March.
The currency sector posted net gains for the quarter despite losses in March.
Currency trading was volatile in January, but gains were experienced as the
Partnership benefited in the early part of the month from the U.S. dollar's
continued slide. These gains were cut short when European Central Bank officials
started to issue strong rhetoric designed to slow the appreciation of the Euro.
Gains were posted in February despite the volatility in the market. The U.S.
dollar was stagnate after the G-7 Finance Ministers meeting, but the Partnership
was able to extract positive returns from long Australian dollar and British
pound positions. Japanese yen and Swiss franc exposure detracted from
performance. In March, the currency sector posted a loss under difficult trading
conditions. All of the political events during the month and rumors of the Bank
of Japan's intervention policies created significant uncertainty in the markets.
The U.S. dollar strength turned around toward the end of the month and a large
drop at the end of the month's close saw the U.S. dollar fall to four year lows
against the Japanese yen.
The energy sector posted gains for the quarter. In January, the energy sector
was profitable, as temperatures remained below normal in the northeastern and
midwestern United States. OPEC output limitations and a weakening U.S. dollar
also contributed to January's rise in the energy prices. In February, crude oil
had a sharp rally early in the month and gradually sold off, as the markets
became complacent about the OPEC meeting. After the OPEC decision to cut
production by 1.5 million barrels per day on February 10, the market resumed its
upward trend. In March, the energy sector posted a small loss under extremely
volatile market conditions. The crude oil market had very choppy performance
during the month, as did the heating oil market.
Stock indices posted gains for the quarter as well. The main drivers to
performance early in the quarter were the Xetra DAX, the S&P 500 and the Taiwan
Stock Indices. In March, stock indices posted a loss. The Partnership's long
bias to various global equity indices was changed during March to hold more
short and neutral positions. Long Nikkei profits were overcome by losses in long
exposure to European equities, which later flipped to short positions by
month-end.
Gains were experienced in the interest rate sector despite losses in January and
March. Early in the quarter, profits were generated from various positions at
the short end of the yield curve in Canada and Europe, while losses were posted
at longer points in the curve in both the United States and Europe. In February,
gains were posted as the Partnership's interest rate exposure remains in the
lower end of its historical range. In March, long exposure to most of the major
global yield curves proved to generate positive results. German Bunds posted
gains, while short U.S. ten-year bonds hurt performance in the beginning of the
month.
9
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable
Item 4. Controls and Procedures
Merrill Lynch Investment Managers LLC, the General Partner of Global Horizons I
L.P., with the participation of the General Partner's Chief Executive Officer
and the Chief Financial Officer, has evaluated the effectiveness of the design
and operation of its disclosure controls and procedures with respect to the
Partnership within 90 days of the filing date of this quarterly report, and,
based on this evaluation, has concluded that these disclosure controls and
procedures are effective. Additionally, there were no significant changes in the
Partnership's internal controls or in other factors that could significantly
affect these controls subsequent to the date of this evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no pending proceedings to which the Partnership or MLIM LLC
is a party.
Item 2. Changes in Securities and Use of Proceeds
(a) None.
(b) None.
(c) As of February 1, 2004, the Partnership privately offered two
new classes of units of limited partnership interest, class A
and I. The continuing units were renamed class F. As of
February 1, 2004, brokerage commissions were reduced to 7.00%
per year. Class A and class I incur brokerage commissions of
7.00% and 4.00% per year, respectively.
(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 three
months of fiscal 2005.
11
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.
GLOBAL HORIZONS I L.P.
By: MERRILL LYNCH INVESTMENT
MANAGERS LLC
General Partner
Date: May 16, 2005 By /s/ FABIO P. SAVOLDELLI
-----------------------
Fabio P. Savoldelli
Managing Director and Chief Investment
Officer
-Alternative Strategies
Advisers Division
(Principal Executive Officer)
Date: May 16, 2005 By /s/ PATRICK HAYWARD
-------------------
Patrick Hayward
Chief Financial Officer
(Principal Financial and Accounting Officer)