** **

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-K**

 
| **ý**                                        | ** ** | **Annual Report Pursuant to  Section 13 or 15(d) of the Securities Exchange Act of 1934**     |
|---------------------------------------------------|------------|-----------------------------------------------------------------------------------------------|
|                                              |       |                                                                                          |
| **For the fiscal year ended: December 31,  2005** |
| **or**                                            |
| **o**                                             | ** ** | **Transition Report Pursuant to  Section 13 or 15(d) of the Securities Exchange Act of 1934** |

 

**Commission file number: 0-23240**

 

**GLOBAL HORIZONS I L.P.**

(Exact name of registrant as specified in itscharter)

 

| **Delaware**                    | ** ** | **13-3716393**      |
|---------------------------------|------------|---------------------|
| (State or other jurisdiction of |       | (I.R.S. Employer    |
| incorporation or organization)  |       | Identification No.) |

 

**c/o Merrill Lynch Alternative Investments LLC**

**Princeton Corporate Campus**

**800 Scudders Mill Road – Section 2-G**

### ***Plainsboro, New Jersey 08536***

(Address of principal executive offices)

 

Registrant’s telephone number, including areacode:  **(609)282-6996**

 

Securities registered pursuant to Section 12(b) of the Act:  **None**

 

Securities registered pursuant to Section 12(g) of the Act:  **Limited Partnership Units**

 

Indicate by check mark whether registrant is a well-known seasonedissuer as defined by Rule 405 of the Securities Act.

 

Yes o    No ý

 

Indicate by check mark whether registrant is not required to filereports pursuant to Section 13 or 15(d) of the Act.

 

Yes o    No ý

 

Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.

 

Yes ý     No o

 

Indicate by check mark if disclosure of delinquent filers pursuant toItem 405 of Regulation S-K is not contained herein, and will not be contained,to the best of registrant’s knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K. ý

 

Indicate by check mark whetherthe registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Exchange Act. Check one:

 
| Large accelerated filer o |   | Accelerated  filer o |   | Non-accelerated  filer ý |
|---------------------------|--------|----------------------|--------|-------------------------------|

 

Indicate by check mark whether registrant is a shell company (asdefined by Rule 12b-2 of the Exchange Act).

 

Yes o    No ý

 

The limited partnership units of the registrant are not publiclytraded. Accordingly, there is no aggregate market value for the registrant’soutstanding equity that is readily determinable.

 

As of February 1, 2006, limited partnership units and non-unitizedpartners’ capital with an aggregate value of $274,964,251 were outstanding.

 

**Documents Incorporated by Reference**

 

The registrant’s 2005 Annual Report and Report of IndependentRegistered Public Accounting Firm, the annual report to security holders forthe fiscal year ended December 31, 2005, is incorporated by reference into PartII, Item 8 and Part IV hereof and filed as an Exhibit herewith. Copies of theannual report are available free of charge by contacting Merrill LynchAlternative Investments LLC client services at 1-877-465-8435.

 

 

----

 

**GLOBAL HORIZONS I L.P.**

 

ANNUAL REPORT FOR 2005 ON FORM 10-K

 

Table of Contents

 
| ** ** | ** **                                                                                       | **Page** |
|------------|--------------------------------------------------------------------------------------------------|----------|
| PART  I    |
|       |                                                                                             |     |
| Item  1.   | Business                                                                                         | 1        |
|       |                                                                                             |     |
| Item  1A.  | Risk  factors                                                                                    | 5        |
|       |                                                                                             |     |
| Item 2.    | Properties                                                                                       | 7        |
|       |                                                                                             |     |
| Item 3.    | Legal Proceedings                                                                                | 7        |
|       |                                                                                             |     |
| Item 4.    | Submission of Matters to a Vote of Security  Holders                                             | 7        |
|       |                                                                                             |     |
| PART  II   |
|       |                                                                                             |     |
| Item 5.    | Market for Registrant’s Common Equity,  Related Stockholder Matters and Issuer Purchases of |     |
|       | Equity Securities                                                                                | 8        |
|       |                                                                                             |     |
| Item  6.   | Selected  Financial Data                                                                         | 9        |
|       |                                                                                             |     |
| Item 7.    | Management’s Discussion and Analysis of  Financial Condition and Results of Operations      | 11       |
|       |                                                                                             |     |
| Item 7A.   | Quantitative and Qualitative Disclosures  about Market Risk                                      | 16       |
|       |                                                                                             |     |
| Item  8.   | Financial  Statements and Supplementary Data                                                     | 21       |
|       |                                                                                             |     |
| Item  9.   | Changes  in and Disagreements with Accountants on Accounting and Financial Disclosure            | 21       |
|       |                                                                                             |     |
| Item  9A.  | Controls  and Procedures                                                                         | 21       |
|       |                                                                                             |     |
| Item  9B.  | Other  Information                                                                               | 21       |
|       |                                                                                             |     |
| PART  III  |
|       |                                                                                             |     |
| Item  10.  | Directors  and Executive Officers of the Registrant                                              | 22       |
|       |                                                                                             |     |
| Item  11.  | Executive  Compensation                                                                          | 23       |
|       |                                                                                             |     |
| Item  12.  | Security  Ownership of Certain Beneficial Owners and Management and Related Stockholder  Matters | 23       |
|       |                                                                                             |     |
| Item  13.  | Certain  Relationships and Related Transactions                                                  | 24       |
|       |                                                                                             |     |
| Item  14.  | Principal  Accountant Fees and Services                                                          | 25       |
|       |                                                                                             |     |
| PART  IV   |
|       |                                                                                             |     |
| Item  15.  | Exhibits  and Financial Statement Schedules                                                      | 26       |

 

----

 

**PART I**

 

**Item 1:   Business**

 

(a)           GeneralDevelopment of Business:

 

Global Horizons I L.P. (the “Partnership”) was organized under theDelaware Revised Uniform Limited Partnership Act on May 11, 1993 and begantrading operations on January 4, 1994. The Partnership trades in theinternational futures and forward markets under the direction of multipleindependent professional advisors (the “Advisors”) applying proprietarystrategies. The Partnership’s objective is to achieve, through speculativetrading, substantial capital appreciation over time.

 

(b)           Amendments toCharter Documents/Name Change:

 

Effective January 15, 2005, ML Global Horizons L.P. was renamed GlobalHorizons I L.P. This change was implemented for strategic purposes only. Nochanges have occurred to the Partnership’s investment objective.

 

Merrill Lynch Alternative Investments, LLC (“MLAI”) is the generalpartner of the Partnership and is a wholly-owned subsidiary of Merrill LynchInvestment Managers, LP (“MLIM”) which, in turn, is an indirect wholly-ownedsubsidiary of Merrill Lynch & Co., Inc. (“Merrill Lynch”). Prior toDecember 1, 2005, Merrill Lynch Investment Managers LLC (“MLIM LLC”), also asubsidiary of MLIM, was the general partner of the Partnership. Merrill Lynch,Pierce, Fenner & Smith Incorporated (“MLPF&S”), a wholly-ownedsubsidiary of Merrill Lynch, is the Partnership’s commodity broker.

 

When the Partnership is offering its units of limited partnershipinterest (“Units”), it receives and processes subscriptions on a continuous basisthroughout each month. Investors whose subscriptions are accepted during amonth are admitted to the Partnership as Limited Partners as of the beginningof the immediately following month, acquiring Units at the Net Asset Value perUnit as of the date of admission. Investors’ customer securities accounts aredebited in the amount of their subscriptions on a single monthly settlementdate within approximately five business days of the issuance of the Units.

 

As of February 1, 2004, the Partnership privatelyoffered two new series of units of limited partnership interest, Series A andSeries I. The continuing units were renamed Series F. As of January 2, 2005,the Partnership created three “non-unitized” series of limited partnershipinterest. These series are invested in by other investment partnerships whereMLAI serves as the general partner.

 

As of December 31, 2005, the capitalization of the Partnership was$268,585,867, and the Net Asset Value per Series F (the initial Series ofUnits), originally $100 as of January 4, 1994, had risen to $221.81.

 

Through December 31, 2005, the highest month-end NetAsset Value of Series F Unit was $245.80 (February 29, 2004) and the lowest$97.36 (February 28, 1994).

 

(c)           FinancialInformation about Segments:

 

The Partnership’s business constitutes only one segment for financialreporting purposes, i.e*.,* aspeculative “commodity pool”. The Partnership does not engage in sales of goodsor services.

 

(d)           NarrativeDescription of Business:

 

***General***

 

The Partnership trades in the international futures, options on futuresand forward markets with the objective of achieving substantial capitalappreciation over time.

 

The Partnership’s assets are allocated and reallocated by MLAI to thetrading management of independent Advisors applying proprietary strategies innumerous markets.

 

MLAI may, from time to time, direct certain individual Advisors tomanage their Partnership accounts as if they were managing more equity than theactual capital allocated to them.

 

1

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One of the objectives of the Partnership is to provide diversificationfor a limited portion of the risk segment of the Limited Partners’ portfolios. Commoditypool performance has historically demonstrated a low degree of performancecorrelation with traditional stock and bond holdings. Since it began trading,the Partnership’s returns have been significantly non-correlated with theUnited States stock and bond markets.

 

***Use of Proceeds and Interest Income***

 

Subscription Proceeds.

 

MLAI pays from its own funds the selling commissions relating to thesale of the Units. Accordingly, 100% of the proceeds of Unit sales are receivedin cash by the Partnership and available for use in its speculative trading. Insuch trading, the Partnership’s assets are used as security for and to pay thePartnership’s trading losses, as well as any expenses and redemptions. Theprimary use of the proceeds of the sale of the Units is to permit the tradingadvisors (“Advisors”) to trade on a speculative basis in a wide range ofdifferent futures, forwards and options on futures markets on behalf of thePartnership. While being used for this purpose, the Partnership’s assets arealso generally available to earn interest, as more fully described below. Themost recent continuous offering of Units began for trading effective February1, 2004.

 

Market Sectors.

 

The Partnership trades in a diversified group of markets under thedirection of multiple independent Advisors. These Advisors can, and do, from timeto time, materially alter the allocation of their overall trading commitmentsamong different market sectors. There is essentially no restriction on thecommodity interests, which may be traded by any Advisor or the rapidity withwhich an Advisor may alter its market sector allocations.

 

Market Types.

 

The Partnership trades on a variety of United States and foreignfutures exchanges. Substantially all of the Partnership’s off-exchange tradingtakes place in the highly liquid, institutionally based currency forwardmarkets.

 

Many of the Partnership’s currency trades are executed in the spot andforward foreign exchange markets (the “FX Markets”) where there are no directexecution costs. Instead, the participants, banks and dealers, in the FXMarkets take a “spread” between the prices at which they are prepared to buyand sell a particular currency and such spreads are built into the pricing ofthe spot or forward contracts with the Partnership. In its exchange of futuresfor physical (“EFP”) trading, the Partnership acquires cash currency positionsthrough banks and dealers. The Partnership pays a spread when it exchangesthese positions for futures. This spread reflects, in part, the differentsettlement dates of the cash and the futures contracts, as well as prevailinginterest rates, but also includes a pricing spread in favor of the banks anddealers, which may include a Merrill Lynch entity.

 

As in the case of its market sector allocations, thePartnership’s commitments to different types of markets — U.S. and non-U.S.,regulated and nonregulated — differ substantially from time to time, as well asover time.

 

Custody of Assets.

 

All of the Partnership’s assets are currently held in customer accountsat MLPF&S.

 

Interest Paid by Merrill Lynch on the Partnership’sU.S. Dollar and Non-U.S. Dollar Assets

 

The Partnership’s U.S. dollar assets are maintained atMLPF&S. On assets held in U.S. dollars, Merrill Lynch credits thePartnership with interest at the prevailing 91-day U.S. Treasury bill rate. ThePartnership is credited with interest on any of its assets and net gainsactually held by Merrill Lynch in non-U.S. dollar currencies at a prevailinglocal rate received by Merrill Lynch. Merrill Lynch may derive certain economicbenefit, in excess of the interest which Merrill Lynch pays to the Partnership,from possession of such assets.

 

Merrill Lynch charges the Partnership Merrill Lynch’s cost of financingrealized and unrealized losses on the Partnership’s non-U.S. dollar denominatedpositions.

 

2

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***Charges***

 

The following table summarizes the charges incurred by the Partnershipduring 2005, 2004 and 2003.

 
| ** **          | ** ** | **2005**           | ** ** | **2004**                                               | ** ** | **2003**           | ** ** |
|---------------------|------------|--------------------|------------|--------------------------------------------------------|------------|--------------------|------------|
| **Charges**         | ** ** | **Dollar  Amount** | ** ** | **% of Average  Month-End  Net Assets** | ** ** | **Dollar  Amount** | ** ** | **% of Average  Month-End  Net Assets** | ** ** | **Dollar  Amount** | ** ** | **% of Average  Month-End  Net Assets** | ** ** |
| Brokerage           |       |               |       |                                                   |       |               |       |   |   |   |   |   |   |
| Commissions         |       | $                  | 17,973,653 |                                                   | 6.65       | %                  | $          | 5,725,678 |   | 6.89 | % | $ | 3,601,088 |   | 7.54 | % |
| Administrative Fees |       | 622,238            |       | 0.23                                                   | %          | 205,144            |       | 0.25 | % | 124,175 |   | 0.26 | % |
| Profit Shares       |       | 1,266,141          |       | 0.47                                                   | %          | 1,581,140          |       | 1.90 | % | 1,998,129 |   | 4.19 | % |
| Incentive Override  |       | —             |       | 0.00                                                   | %          | —             |       | 0.00 | % | 805,634 |   | 1.69 | % |
| Total               |       | $                  | 19,862,032 |                                                   | 7.35       | %                  | $          | 7,511,962 |   | 9.04 | % | $ | 6,529,026 |   | 13.68 | % |

 

The foregoing table does not reflect the bid-ask spreads paid by thePartnership on its forward trading, or the benefits which may be derived byMerrill Lynch from the deposit of certain of the Partnership’s U.S. dollaravailable assets maintained at MLPF&S.

 

The Partnership’s average month-end Net Assets during 2005, 2004 and2003 equaled $270,409,956, $83,065,122, and $47,738,381 respectively.

 

During 2005, 2004 and 2003,the Partnership earned $8,910,897, $1,297,826, and $496,656, respectively, ininterest income, or approximately 3.30%, 1.56% and 1.04%, respectively, of thePartnership’s average month-end Net Assets.

 

3

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**+Description of Current Charges**

 
| **Recipient**        | ** ** | **Nature of Payment** | ** ** | **Amount of Payment**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|----------------------|------------|---------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| MLPF&S           |       | Brokerage Commissions           |       | As of February 1, 2004, the flat monthly brokerage commission rate  for Series F was reduced to 0.583 of 1% (a 7.00% annual rate) from .0604 of  1% (a 7.25% annual rate). Series A and Series I incur brokerage commissions  of 7.00% and 4.00% per year, respectively. Brokerage commission for the  non-unitized series ranges from 7.25% to 8.75%.  During 2005, 2004 and 2003, the round-turn (each purchase and sale or sale  and purchase of a single futures contract) equivalent rate of the  Partnership’s flat-rate brokerage commissions was approximately $39, $90 and  $84, respectively. |
|                 |       |                            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| MLPF&S           |       | Use of Partnership assets       |       | Merrill Lynch may derive certain economic benefit from the deposit of  certain of the Partnership’s U.S. dollar assets in accounts maintained at MLPF&S.                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                 |       |                            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| MLAI                 |       | Administrative Fees             |       | A flat monthly administrative fee equal to 0.021 of 1% of the  Partnership’s month-end assets (0.25% annually). MLAI pays all of the  Partnership’s routine administrative costs.                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                 |       |                            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| Other Counterparties |       | Bid–ask spreads            |       | Bid–ask spreads on forward and related trades.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                 |       |                            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| MLIM LLC             |       | Annual Incentive Overrides      |       | Paid by the Partnership as a whole on an annual basis and by  reduction of the Net Asset Value of Units when redeemed. The Incentive  Override equals 10% of any Net New Gain (as defined). Units may generate Net  New Gain and be subject to paying an Incentive Override even though the Net  Asset Value per Unit has declined below the purchase price of such Units*.*As of January 1, 2004 the annual Incentive Override was  terminated.                                                                                                                                                             |

 
| Advisors           |   | Profit Shares          |   | All Advisors can receive quarterly or annual Profit Shares ranging  from 20% to 25% (depending on the Advisor) of any New Trading Profit achieved  by their Partnership account. Profit Shares are also paid upon redemption of  Units and upon the net reallocation of assets away from an Advisor. New  Trading Profit is calculated separately in respect of each Advisor,  irrespective of the overall performance of the Partnership. The Partnership  may pay substantial Profit Shares during periods when it is incurring  significant overall losses. |
|--------------------|--------|------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|               |   |                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| Advisors           |   | Consulting fees        |   | MLPF&S pays the Advisors annual Consulting Fees generally ranging  up to 2% of the Partnership’s average month-end assets allocated to them for  management, after reduction for a portion of the brokerage commissions  accrued with respect to such assets.                                                                                                                                                                                                                                                                                         |
|               |   |                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| MLPF&S; Others |   | Extraordinary expenses |   | Actual costs incurred; none paid to date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |

 

4

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***Regulation***

 

MLAI, the Advisors and MLPF&S are each subject to regulation by theCommodity Futures Trading Commission (the “CFTC”) and the National FuturesAssociation (“NFA”). Other than in respect of its periodic reportingrequirements under the Securities Exchange Act of 1934, and the registration ofthe Units for continuous public distribution under the Securities Act of 1933,the Partnership itself is generally not subject to regulation by the Securitiesand Exchange Commission. However, MLAI itself is registered as an “investmentadviser” under the Investment Advisers Act of 1940.

 

(i) through (xii) — not applicable.

 

(xiii) The Partnership has no employees.

 

(d)           FinancialInformation about Geographic Areas

 

The Partnership does not engage in material operations in foreigncountries, nor is a material portion of the Partnership’s revenue derived fromcustomers in foreign countries. However, the Partnership trades, from theUnited States, on a number of foreign commodity exchanges. The Partnership doesnot engage in the sales of goods or services.

 

**Item 1A:        Risk factors**

 

**Past****Performance Not Necessarily Indicative of Future Results**

 

Past performance is not necessarily indicative offuture results. Neither the Advisors’ nor the Partnership’s past performancemay be representative of how they or it, respectively, may trade in the future.

 

**Volatile Markets; Highly Leveraged Trading**

 

Futures and forward trading is highly leveraged, andmarket price levels are volatile and materially affected by unpredictablefactors such as weather and governmental intervention. The combination ofleverage and volatility creates a high degree of risk.

 

**Substantial Charges**

 

The Partnership is subject to substantial charges.

 

The incentive compensation paid to the Advisors isbased on the individual performance of each Advisor, not the overallperformance of the Partnership. Historically, the Partnership has paidsubstantial incentive compensation to certain Advisors during periods when theperformance of the Partnership as a whole was breakeven or unprofitable.

 

**Importance****of General Market Conditions**

 

Overall market or economic conditions — which neitherMLAI (the “General Partner”) nor any Advisor can predict or control — have amaterial effect on performance. Furthermore, such overall conditions canadversely affect the performance of numerous Advisors at or about the sametime, despite their implementing different and independent strategies. Consequently,the multi-Advisor structure of the Partnership does not assure that itsperformance will not be adversely affected by future market or economicconditions.

 

**Combining Independent Trading Strategies**

 

Combining independent trading strategies involvessubstantial opportunity costs, as one Advisor’s profits are frequently offsetby another Advisor’s losses. Different Advisors often take opposite positionsfor the Partnership, eliminating the profit potential of the combinedpositions.

 

**Systematic****Strategies**

 

Most of the Partnership’s assets have been allocatedsince inception to Advisors which rely on technical, systematic strategies. Thewidespread use of technical trading systems frequently results in numerous 

 

5

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managers attempting to execute similar trades at orabout the same time, altering trading patterns and affecting market liquidity. Furthermore,the profit potential of trend-following systems may be diminished by thechanging character of the markets, which may make historical price data (onwhich technical programs are based) only marginally relevant to future marketpatterns.

 

**Discretionary****Strategies**

 

Certain of the Partnership’s Advisors arediscretionary rather than systematic traders. Discretionary trading managersmay be prone to emotionalism and a lack of discipline in their trading. Relyingon subjective trading judgment may produce less consistent results than thoseobtained by more systematic approaches.

 

**Increased****Assets Under Management**

 

There appears to be a tendency for the rates of returnachieved by managed futures advisors to decline as assets under managementincrease. None of the Advisors has agreed to limit the amount of additionalequity which it may manage, and most of them are at or near their all-time highin assets under management.

 

**No Assurance of Advisors’ Continued Services;Competition for Advisors**

 

There is no assurance that any Advisor will be willingor able to continue to provide advisory services to the Partnership. There issevere competition for the services of qualified Advisors, and the Partnershipmay not be able to retain satisfactory replacement or additional Advisors onacceptable terms. The General Partner must allocate Advisor availability amongits different partnerships, for which the General Partner has authority includingthe Partnership, and, accordingly, may not at all times select for thePartnership those Advisors which the General Partner would otherwise believe tobe in its best interests.

 

**Changes in Trading Strategy**

 

An Advisor may make certain changes in its tradingstrategies without the knowledge of the General Partner.

 

**Illiquid Markets**

 

Certain positions held by the Partnership may becomeilliquid, preventing an Advisor from acquiring positions otherwise indicated byits strategy or making it impossible for an Advisor to close out positionsagainst which the market is moving.

 

**Trading on Non-U.S. Exchanges**

 

The Advisors trade extensively on non-U.S. exchanges. Theseexchanges are not regulated by any United States governmental agency. ThePartnership could incur substantial losses trading on foreign exchanges towhich it would not have been subject had the Advisors limited their trading toU.S. markets.

 

The profits and losses derived from trading foreignfutures and options will generally be denominated in foreign currencies;consequently, the Partnership will be subject to a certain degree ofexchange-rate risk in trading such contracts.

 

**The Partnership Could Lose Assets and Have ItsTrading Disrupted Due to the Bankruptcy of Brokers**

 

The Partnership is subject to the risk of its clearingbroker, exchange or clearinghouse insolvency. Partnership assets could be lostor impounded during lengthy bankruptcy proceedings. Were a substantial portionof the Partnership’s capital tied up in a bankruptcy, the General Partner mightsuspend or limit trading, perhaps causing the Partnership to miss significantprofit opportunities. No Partnership managed by the General Partner has everlost any assets due to the bankruptcy or default of a broker, exchange orclearinghouse, but there can be no assurance that this will not happen in thefuture.

 

6

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**Item 2:   Properties**

 

The Partnership does not use any physical propertiesin the conduct of its business.

 

The Partnership’s administrative offices are the administrative officesof MLAI (Merrill Lynch Alternative Investments LLC, Princeton Corporate Campus,800 Scudders Mill Road - Section 2G, Plainsboro, New Jersey 08536). MLAIperforms administrative services for the Partnership from MLAI’s offices.

 

**Item 3:   Legal Proceedings**

 

Neither the Partnership nor MLAI has ever been the subject of anymaterial litigation. Merrill Lynch  isthe 100% indirect owner of MLAI, MLIM, MLPF&S and all other entitiesinvolved in the operation of  thePartnership. Merrill Lynch, as well as certain of its subsidiaries andaffiliates have been named as defendants in civil actions, arbitrationproceedings and claims arising out of their respective business activities. Althoughthe ultimate outcome of these actions cannot be predicted at this time and theresults of legal proceedings cannot be predicted with certainty, it is theopinion of management that the result of these matters will not be materiallyadverse to the business operations or financial condition of MLAI or thePartnership.

 

**Item 4:   Submission of Mattersto a Vote of Security Holders**

 

None.

 

7

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**PART II**

 

**Item 5:   Market for Registrant’sCommon Equity, Related Stockholder Matters and Issuer Purchases of EquitySecurities**

 

Item 5(a)

 

(a)               MarketInformation:

 

There is no established public trading market for theUnits or the non-unitized series, nor will one develop. Rather, LimitedPartners holding unitized series may purchase or redeem Units as of the end ofeach month at Net Asset Value, subject to certain early redemption charges whenapplicable.

 

(b)               Holders:

 

As of December 31, 2005, there were 2,591, 1,273 and 35 holders ofSeries A, F and I Units, respectively, including MLAI.

 

(c)               Dividends:

 

The Partnership has madeno distributions since trading commenced, nor does MLAI presently intend tomake any distributions in the future.

 

(d)               SecuritiesAuthorized for Issuance Under Equity Compensation Plans:

 

Not applicable.

 

Recent Sales of Unregistered Securities: Uses of Proceeds FromRegistered Securities:

 

Issuance to accredited investors pursuant to Regulation D and Section4(2) under the Securities Act. The selling agent of the following Class ofUnits was FAM Distributors.

 
| ** **        | ** ** | ** **       | ** ** | ** ** | ** ** | ** ** | ** ** | ** **        | ** ** | ** **       | ** ** | ** ** | ** ** | ** ** | ** ** |
|-------------------|------------|------------------|------------|------------|------------|------------|------------|-------------------|------------|------------------|------------|------------|------------|------------|------------|
| ** **        | ** ** | **Subscription** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **        | ** ** | **Subscription** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **SERIES A** | ** ** | **Amount**       | ** ** | **Units**  | ** ** | **NAV**    | ** ** | **SERIES I** | ** ** | **Amount**       | ** ** | **Units**  | ** ** | **NAV**    | ** ** |
| Jan-05            |       | 14,764,921       |       | 15,356,132 |       | 0.9615     |       | Jan-05            |       | 1,999,999        |       | 2,110,149  |       | 0.9478     |       |
| Feb-05            |       | 7,472,935        |       | 8,044,929  |       | 0.9289     |       | Feb-05            |       | —           |       | —     |       | 0.9178     |       |
| Mar-05            |       | 11,438,947       |       | 12,183,350 |       | 0.9389     |       | Mar-05            |       | 497,046          |       | 534,631    |       | 0.9297     |       |
| Apr-05            |       | 11,056,906       |       | 11,747,669 |       | 0.9412     |       | Apr-05            |       | —           |       | —     |       | 0.9338     |       |
| May-05            |       | 9,579,921        |       | 10,474,438 |       | 0.9146     |       | May-05            |       | 213,310          |       | 234,510    |       | 0.9096     |       |
| Jun-05            |       | 6,226,462        |       | 6,799,675  |       | 0.9157     |       | Jun-05            |       | 99,998           |       | 109,551    |       | 0.9128     |       |
| Jul-05            |       | 4,777,953        |       | 5,154,766  |       | 0.9269     |       | Jul-05            |       | —           |       | —     |       | 0.9258     |       |
| Aug-05            |       | 6,612,667        |       | 7,251,527  |       | 0.9119     |       | Aug-05            |       | 54,602           |       | 59,799     |       | 0.9131     |       |
| Sep-05            |       | 4,084,930        |       | 4,416,618  |       | 0.9249     |       | Sep-05            |       | 143,797          |       | 154,954    |       | 0.9280     |       |
| Oct-05            |       | 2,659,955        |       | 2,881,234  |       | 0.9232     |       | Oct-05            |       | 94,057           |       | 101,278    |       | 0.9287     |       |
| Nov-05            |       | 2,049,972        |       | 2,246,545  |       | 0.9125     |       | Nov-05            |       | 9,950            |       | 10,813     |       | 0.9202     |       |
| Dec-05            |       | 1,989,990        |       | 2,138,854  |       | 0.9304     |       | Dec-05            |       | 49,999           |       | 53,190     |       | 0.9400     |       |
| Jan-06            |       | 2,054,974        |       | 2,218,236  |       | 0.9264     |       | Jan-06            |       | 24,754           |       | 26,376     |       | 0.9385     |       |
| Feb-06            |       | 1,639,979        |       | 1,734,693  |       | 0.9454     |       | Feb-06            |       | 9,999            |       | 10,416     |       | 0.9600     |       |

 

Item 5(b)

 

Not applicable.

 

Item 5(c)

 

Not applicable.

 

8

----

 

**Item 6:   Selected Financial Data**

 

The following selected financial data has been derived from the auditedfinancial statements of the Partnership:

 
| ** **                          | ** ** | **For the Year** | ** ** | **For the Year** | ** ** | **For the Year** | ** ** | **For the Year** | ** ** | **For the Year** | ** ** |
|-------------------------------------|------------|----------------------------|------------|----------------------------|------------|----------------------------|------------|----------------------------|------------|----------------------------|------------|
| ** **                          | ** ** | **Ended**                  | ** ** | **Ended**                  | ** ** | **Ended**                  | ** ** | **Ended**                  | ** ** | **Ended**                  | ** ** |
| ** **                          | ** ** | **December 31,**      | ** ** | **December 31,**      | ** ** | **December 31,**      | ** ** | **December 31,**      | ** ** | **December 31,**      | ** ** |
| **Income Statement Data** | ** ** | **2005**                   | ** ** | **2004**                   | ** ** | **2003**                   | ** ** | **2002**                   | ** ** | **2001**                   | ** ** |
|                                |       |                       |       |                       |       |                       |       |                       |       |                       |       |
| Revenues:                           |       |                       |       |                       |       |                       |       |                       |       |                       |       |
|                                |       |                       |       |                       |       |                       |       |                       |       |                       |       |
| Trading profit (loss)               |       |                       |       |                       |       |                       |       |                       |       |                       |       |
| Realized                            |       | $                          | 680,616    |                       | $          | 8,179,826                  |       | $                          | 13,824,221 |                       | $          | 3,063,425 |   | $ | 9,573,592 |   |
| Change in Unrealized                |       | 1,837,104                  |       | (700,154                   | )          | (44,489                    | )          | 2,373,002                  |       | (3,522,456                 | )          |
| Settlement Proceeds                 |       | —                     |       | —                     |       | —                     |       | 1,346,689                  |       | —                     |       |
| Total trading revenues              |       | 2,517,720                  |       | 7,479,672                  |       | 13,779,732                 |       | 6,783,116                  |       | 6,051,136                  |       |
|                                |       |                       |       |                       |       |                       |       |                       |       |                       |       |
| Investment Income:                  |       |                       |       |                       |       |                       |       |                       |       |                       |       |
|                                |       |                       |       |                       |       |                       |       |                       |       |                       |       |
| Interest                            |       | 8,910,897                  |       | 1,297,826                  |       | 496,656                    |       | 801,151                    |       | 1,987,808                  |       |
|                                |       |                       |       |                       |       |                       |       |                       |       |                       |       |
| Expenses:                           |       |                       |       |                       |       |                       |       |                       |       |                       |       |
| Brokerage Commissions               |       | 17,973,653                 |       | 5,725,678                  |       | 3,601,088                  |       | 3,571,969                  |       | 4,136,863                  |       |
| Profit Shares                       |       | 1,266,141                  |       | 1,581,140                  |       | 1,998,129                  |       | 746,510                    |       | 1,511,234                  |       |
| Administrative Fees                 |       | 622,238                    |       | 205,144                    |       | 124,175                    |       | 123,171                    |       | 142,650                    |       |
| Incentive Override                  |       | —                     |       | —                     |       | 805,634                    |       | 68,966                     |       | 10,771                     |       |
| Total Expenses                      |       | 19,862,032                 |       | 7,511,962                  |       | 6,529,026                  |       | 4,510,616                  |       | 5,801,518                  |       |
|                                |       |                       |       |                       |       |                       |       |                       |       |                       |       |
| Net Investment loss                 |       | (10,951,135                | )          | (6,214,136                 | )          | (6,032,370                 | )          | (3,709,465                 | )          | (3,813,710                 | )          |
|                                |       |                       |       |                       |       |                       |       |                       |       |                       |       |
| Net Income (Loss)                   |       | $                          | (8,433,415 | )                          | $          | 1,265,536                  |       | $                          | 7,747,362  |                       | $          | 3,073,651 |   | $ | 2,237,426 |   |

 
| ** **                        | ** ** | **December 31,** | ** **  | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
|-----------------------------------|------------|-----------------------|-------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|
| **Balance Sheet Data**  | ** ** | **2005**              | ** **  | **2004**              | ** ** | **2003**              | ** ** | **2002**              | ** ** | **2001**              | ** ** |
|                              |       |                  |        |                  |       |                  |       |                  |       |                  |       |
| Partnership Net Asset Value       |       | $                     | 268,585,867 |                  | $          | 246,428,990           |       | $                     | 48,655,272 |                  | $          | 46,942,277 |   | $ | 51,773,460 |   |
| Net Asset Value per Series F Unit |       | $                     | 221.81      |                  | $          | 230.10                |       | $                     | 233.12     |                  | $          | 198.48 |   | $ | 185.92 |   |
| Net Asset Value per Series A Unit |       | $                     | 0.9264      |                  | $          | 0.9615                |       | n/a                   |       | n/a                   |       | n/a |   |
| Net Asset Value per Series I Unit |       | $                     | 0.9385      |                  | $          | 0.9478                |       | n/a                   |       | n/a                   |       | n/a |   |

 
| **MONTH-END NET ASSET VALUE PER SERIES F (ORIGINAL UNIT)** | ** ** |
|----------------------------------------------------------------------------------------------------|------------|
| ** **                                                                                         | ** ** | **Jan.** | ** ** | **Feb.** | ** ** | **Mar.** | ** ** | **Apr.** | ** ** | **May** | ** ** | **June** | ** ** | **July** | ** ** | **Aug.** | ** ** | **Sept.** | ** ** | **Oct.** | ** ** | **Nov.** | ** ** | **Dec.** | ** ** |
| 2001                                                                                               |       | $ | 180.39 |   | $ | 183.37 |   | $ | 190.51 |   | $ | 182.78 |   | $ | 181.49 |   | $ | 183.64 |   | $ | 181.61 |   | $ | 182.38 |   | $ | 189.22 |   | $ | 199.09 |   | $ | 184.90 |   | $ | 185.92 |   |
| 2002                                                                                               |       | $ | 179.13 |   | $ | 173.22 |   | $ | 172.71 |   | $ | 171.39 |   | $ | 176.93 |   | $ | 186.23 |   | $ | 189.41 |   | $ | 198.31 |   | $ | 203.27 |   | $ | 196.83 |   | $ | 190.21 |   | $ | 198.48 |   |
| 2003                                                                                               |       | $ | 209.82 |   | $ | 218.58 |   | $ | 208.20 |   | $ | 209.93 |   | $ | 220.27 |   | $ | 217.22 |   | $ | 213.38 |   | $ | 212.16 |   | $ | 213.21 |   | $ | 225.11 |   | $ | 224.93 |   | $ | 233.12 |   |
| 2004                                                                                               |       | $ | 238.09 |   | $ | 245.80 |   | $ | 244.21 |   | $ | 233.60 |   | $ | 230.71 |   | $ | 222.33 |   | $ | 220.06 |   | $ | 217.70 |   | $ | 217.77 |   | $ | 221.80 |   | $ | 229.90 |   | $ | 230.10 |   |
| 2005                                                                                               |       | $ | 222.30 |   | $ | 224.75 |   | $ | 225.37 |   | $ | 218.90 |   | $ | 219.29 |   | $ | 221.99 |   | $ | 218.32 |   | $ | 221.45 |   | $ | 221.00 |   | $ | 218.52 |   | $ | 222.81 |   | $ | 221.81 |   |

 

9

----

 

**GLOBAL HORIZONS I L.P.**

**December 31, 2005**

 

*Type of Pool:*Selected-Advisor/Publicly-Offered/Non-”Principal Protected”(1)

*Inception of Trading:*January 4, 1994

*Aggregate Subscriptions:*   $558,024,944

*Current Capitalization: * $268,585,867

*Worst Monthly Drawdown(2): *(7.13)%  (11/01)

*Worst Peak-to-Valley Drawdown(3): *(13.93)%  (11/01-5/02)

 

----

 

*Net AssetValue per Series F (original unit), December 31, 2005:*   $221.81

 

| ** **                     | ** ** | **Monthly Rates of Return(4)** | ** ** |
|--------------------------------|------------|-----------------------------------------------|------------|
| **Month**                      | ** ** | **2005**                                      | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** |
| January                        |       | (3.39                                         | )%         | 2.13 | % | 5.71 | % | (3.65 | )% | 0.72 | % |
| February                       |       | 1.10                                          |       | 3.24 |   | 4.17 |   | (3.30 | ) | 1.65 |   |
| March                          |       | 0.28                                          |       | (0.65 | ) | (4.75 | ) | (0.30 | ) | 3.90 |   |
| April                          |       | (2.87                                         | )          | (4.34 | ) | 0.83 |   | (0.77 | ) | (4.06 | ) |
| May                            |       | 0.18                                          |       | (1.24 | ) | 4.92 |   | 3.24 |   | (0.71 | ) |
| June                           |       | 1.23                                          |       | (3.63 | ) | (1.38 | ) | 5.26 |   | 1.19 |   |
| July                           |       | (1.65                                         | )          | (1.02 | ) | (1.77 | ) | 1.71 |   | (1.11 | ) |
| August                         |       | 1.43                                          |       | (1.07 | ) | (0.57 | ) | 4.70 |   | 0.42 |   |
| September                      |       | (0.20                                         | )          | 0.04 |   | 0.49 |   | 2.50 |   | 3.75 |   |
| October                        |       | (1.12                                         | )          | 1.85 |   | 5.58 |   | (3.17 | ) | 5.22 |   |
| November                       |       | 1.96                                          |       | 3.65 |   | (0.08 | ) | (3.36 | ) | (7.13 | ) |
| December                       |       | (0.45                                         | )          | 0.09 |   | 3.64 |   | 4.35 |   | 0.55 |   |
| Compound Annual Rate of Return |       | (3.60                                         | )%         | (1.29 | )% | 17.45 | % | 6.75 | % | 3.81 | % |

 

(1) Pursuant to applicable CFTC regulations, a “Multi-Advisor”Partnership is defined as one that allocates no more than 25% of its tradingassets to any single manager. As the Partnership currently allocates more than25% of its trading assets to one or more Advisors, it is referred to as a “Selected-Advisor”Partnership. Certain partnerships, including partnerships sponsored by MLAI,are structured so as to guarantee to investors that their investment will beworth no less than a specified amount (typically, the initial purchase price)as of a date certain after the date of investment. The CFTC refers to suchPartnerships as “principal protected”. The Partnership has no such feature.

 

(2) Worst Monthly Drawdown represents the largest negative Monthly Rateof Return experienced since January 1, 2001 by the Partnership; a Drawdown ismeasured on the basis of month-end Net Asset Value only, and does not reflectintra-month figures.

 

(3) Worst Peak-to-Valley Drawdown represents the greatest percentagedecline since January 1, 2001 from a month-end cumulative Monthly Rate ofReturn without such cumulative Monthly Rate of Return being equaled or exceededas of a subsequent month-end. For example, if the Monthly Rate of Return was(1)% in each of January and February, 1% in March and (2)% in April, thePeak-to-Valley Drawdown would still be continuing at the end of April in theamount of approximately (3)%, whereas if the Monthly Rate of Return had beenapproximately 3% in March, the Peak-to-Valley Drawdown would have ended as ofthe end of February at approximately the (2)% level.

 

(4) Monthly Rate of Return is the net performance of the Partnershipduring the month of determination (including interest income and after allexpenses have been accrued or paid) divided by the total equity of thePartnership as of the beginning of such month.

 

10

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**Item 7:   Management’sDiscussion and Analysis of Financial Condition and Results of Operations**

 

***Operational Overview; Advisor Selections***

 

The Partnership’s results of operations depend on MLAI’s ability toselect Advisors and the Advisors’ ability to trade profitably. MLAI’s selectionprocedures, as well as the Advisors’ trading methods, are confidential, so thatsubstantially the only available information relevant to the Partnership’sresults of operations is its actual performance record to date. However,because of the speculative nature of its trading, the Partnership’s pastperformance is not necessarily indicative of its future results.

 

MLAI’s decision to terminate or reallocate assets among Advisors isbased on a combination of factors. Advisors are, in general, terminatedprimarily for unsatisfactory performance, but other factors — for example, achange in MLAI’s or an Advisor’s market outlook, apparent deviation fromannounced risk control policies, excessive turnover of positions, changes inprincipals, commitment of resources to other business activities, etc. — mayalso have a role in the termination or reallocation decision. The marketjudgment and experience of MLAI’s principals is an important factor in itsallocation decisions.

 

MLAI has no timetable orschedule for making Advisor changes or reallocations, and generally makes amedium- to long-term commitment to all Advisors selected. In particular, MLAIhas to date, made infrequent reallocations of trading assets and adjustments inthe Advisor combinations for the Partnership. However, there can be noassurance as to the frequency or number of Advisor changes that may take placein the future, or as to how long any of the current Advisors will continue tomanage assets for the Partnership.

 

***Results of Operations***

 

General.

 

MLAI believes that selected advisor futures funds should be regarded asmedium- to long-term (i.e*.*, three tofive year) investments, but it is difficult to identify trends in thePartnership’s operations and virtually impossible to make any predictionsregarding future results based on the results to date. An investment in thePartnership may be less successful over a longer than a shorter period.

 

Markets with sustained price trends tend to be more favorable tomanaged futures investments than whipsaw, choppy markets, but (i) this isnot always the case, (ii) it is impossible to predict when price trendswill occur and (iii) different Advisors are affected differently bytrending markets as well as by particular types of trends.

 

MLAI attempts to control credit risk in the Partnership’s futures,forward and options trading by clearing trading only through MLPF&S. MLPF&Sacts solely as a clearing broker or counterparty to the Partnership’s trades;it does not advise with respect to, or direct, any such trading.

 

MLAI attempts to control the market risk inherent in the Partnership’strading by MLAI’s selected advisor strategy and Advisor selections. MLAIreviews the positions acquired by the Advisors on a daily basis in an effort todetermine whether the overall positions of the Partnership may have become whatMLAI determines as being excessively concentrated in a limited number ofmarkets — in which case MLAI may, as of the next month-end or quarter-end,adjust the Partnership’s Advisor combination and/or allocations so as toattempt to reduce the risk of such over-concentration occurring in the future.

 

MLAI may consider making distributions to investors under certaincircumstances (for example, if substantial profits are recognized); however,MLAI has not done so to date and does not presently intend to do so.

 

11

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***Performance Summary***

 

*2005*

 
| ** **     | ** ** | **Total Trading** | ** ** |
|----------------|------------|------------------------|------------|
| ** **     | ** ** | **Profit (Loss)** | ** ** |
|           |       |                   |       |
| Metals         |       | $                      | 6,047,758  |   |
| Stock Indices  |       | 4,752,243              |       |
| Interest Rates |       | 1,606,865              |       |
| Energy         |       | 1,017,906              |       |
| Agriculture    |       | (554,215               | )          |
| Currencies     |       | (10,352,837            | )          |
|           |       | $                      | 2,517,720  |   |

 

Although the Partnership had a net loss for the year ended December 31,2005 the Partnership’s overall trading performance was profitable with tradingin metals and stock indices contributing the most profits.

 

Trading in the metals sector posted the most profits for the year. Longpositions in base and precious metals contributed to profits early in the yearbut detracted from performance in the second quarter. Long metal positions inthe third quarter, specifically copper, contributed to profits as global growthincreased speculation that demand and therefore, prices would increase. Metalscontinued their upward trend through the latter part of the year as demandremained strong for base and precious metals.

 

Trading in stock indices posted solid trading profits as well for theyear despite losses posted in the first half of the year. Losses occurred earlyin the year due to a trend reversal from long global equities to short globalequities. Trading in stock indices contributed positively to performance in thesecond half of the year with long positions in global equities contributing themost as global markets rallied. Trading in the Nikkei, DAX and European equitiesposted strong gains as they rallied at year end.

 

The interest rate sector posted gains for the year primarily due toprofits posted in the first half of the year despite this sector detractingfrom performance for the Partnership in the second half of the year. In thebeginning of the year the interest rate sector was the best performing sectoras the Partnership benefited from long U.S. dollar positions versus the Euroand long Euro and Japanese fixed incomes. Long positions in the ten-year Germanbund also contributed to gains. Mid-year a rally in bond prices attributed tolosses as did long positions in Japanese and European government bonds. Tradingin German bunds further detracted from performance. Gains were posted inOctober primarily due to short exposures to U.S. and European yield curves, asbond prices fell over concerns that the central banks would continue to raiserates; however these profits were not enough to outweigh losses postedthroughout the latter part of the fourth quarter. Interest rates detracted asthe U.S. yield curve inverted, resulting in a challenging environment fortrading managers. Additionally, the market perception that the Federal Reservewould end its interest rate increase sooner rather than later sparked a sell offof the U.S. dollar. Furthermore, many global long-term interest rates movedlower, causing negative returns for select short positions, particularly to theGerman bund and British gilt.

 

Trading in the energy sector also posted gains for the Partnership despitethe sector detracting from performance in the fourth quarter. Gains wereexperienced in the energy sector as the Partnership benefited from longpositions in crude oil and gas as these industries profited. During the secondquarter, crude oil and heating oil declined as crude oil fell in price, whichnegatively impacted trend followers. Trading in the energy sector posted thelargest gains in the third quarter. Long energy positions in the entire energycomplex, as well as a rally in the energy sector due to Hurricane Katrinaattributed to those gains. Natural gas retreated from its record high pricesset in September, negatively impacting trading managers. Natural gas continuedits decline throughout the fourth quarter detracting from performance.

 

Trading in the agricultural sector posted losses for the Partnershipfor the year, with the first and latter part of the year contributing toprofits and mid-year detracting from performance. During the first quarter,gains were experienced from long positions in cattle and hog markets. Gainswere posted due to coffee, which experienced a lack of 

 

12

----

 

supply and a growing demand. Gainsin exposure to hogs and soybeans were not enough to offset trading losses inother commodities. Long exposure to soymeal further attributed to losses. Shortexposure to corn and long exposure to London coffee detracted from performancein the third quarter. Agriculture posted small gains at the end of the year aslong sugar positions rallied due to an expectation of reduced supplies.

 

Trading in the currency sector posted the largest losses for thePartnership for the year, despite small gains posted in the second quarter. Lossesin the beginning of the year were due to a trend reversal from short U.S.dollar positions to long U.S. dollar positions. Long Japanese yen and Swissfranc positions also experienced losses. With the U.S. Federal Reserveexpressing concern about inflation, investors predicted that interest rates andthe U.S. dollar would rise. This caused losses as investors fled from emergingcurrencies. In the second quarter, long positions in the British pound and theAustralian dollar contributed to gains. Short positions to the British poundand Swiss franc enabled the Partnership to capitalize on trend reversals in themarket in the latter half of the second quarter. China’s revaluation of theyuan caused volatility across the currency markets. The U.S. dollar weakenedbased on higher oil prices and the potential Federal Reserve slowdown inSeptember. British pounds detracted from performance in the foreign sector. TheU.S. dollar rallied against most major currencies, primarily the yen, whichattributed to losses. Higher yielding carry trades reversed causing losses tobe posted as well. The year ended with currencies on the upswing. Short Euroand Swiss franc and long Mexican peso positions contributed to performance.

 

*2004*

 
| ** **     | ** ** | **Total Trading** | ** ** |
|----------------|------------|------------------------|------------|
| ** **     | ** ** | **Profit (Loss)** | ** ** |
|           |       |                   |       |
| Interest Rates |       | $                      | 2,472,856  |   |
| Energy         |       | 2,150,891              |       |
| Stock Indices  |       | 1,358,529              |       |
| Currencies     |       | 1,064,855              |       |
| Agriculture    |       | 537,117                |       |
| Metals         |       | (104,576               | )          |
|           |       | $                      | 7,479,672  |   |

 

The Partnership’s overall trading performance was profitable with gainsin the interest rate and energy sector contributing the most profits.

 

Trading in the interest rate sector was the most profitable for thePartnership. Small gains were posted in the first quarter generated fromvarious positions at the short end of the yield curve in Canada and Europe. Inthe second quarter, the rise of the interest rates contributed to the lossesposted. Bond prices rallied in the third quarter, which contributed to gains inthe sector. U.S. treasury markets reacted positively to employment datareleased during the fourth quarter causing gains to be posted.

 

The energy sector posted gains throughout the year. As temperaturesremained below normal for the northeastern and midwestern United States, andOPEC put limitations on output, profits rose in the energy sector. Crude oilcontributed mostly to the profits generated during the second quarter. Crudeoil continued its rally in the third quarter and continued that upward trend into the fourth quarter.

 

Stock index trading posted gains for the year despite small losses inthe second and third quarters. The main drivers to performance early in thefirst quarter were the Xetra DAX, the S&P 500 and the Taiwan Stock Indices.Slight losses posted in the second quarter were primarily due to worldwideconcerns about the imminent rate increases in the United States. During thethird quarter, major global equity markets recorded sharp declines with a lackof volatility, then saw a slight rally late in the quarter. Stock indicesproved profitable in the fourth quarter with European equities outperformingU.S. and Asian markets.

 

The currencies sector posted a net gain for the year. Gains were postedin the first quarter while currency trading was volatile as the U.S. dollarfell to four year lows against the Japanese yen. Losses were posted in thesecond quarter from positions in the Australian dollar, Swiss franc, Britishpound and other major markets. The sector posted a loss for the third quarterin a volatile trading market. The currency sector posted a strong gain for themonth of 

 

13

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October with downward pressureon the U. S. dollar resumed as higher oil prices and a close presidentialelection pushed the green back lower. The sector continued its upward trend inthe remaining fourth quarter.

 

Trading in the agricultural commodities sector posted gains for theyear. The sector was profitable for the first quarter as grain marketscontinued to extend their long-term rally, with corn, soybeans, and soymealbeing pushed higher on strong demand from Asia and lower estimate of supplyfrom South America in March. A loss was posted in the sector for the secondquarter, despite small gains posted in early in the quarter. Soybean pricesfell sharply as ideal weather conditions persisted in the Midwest and exportsfailed to materialize. The sector posted slight gains in the third quarter asthe U.S. Department of Agriculture gave low crop estimates based on forecastsof an early freeze and slow crop development. Trading in agriculturalcommodities continued its downward trend in the fourth quarter as the USDAreported a crop well above market expectations, pushing grain prices lower. Cocoatrading was volatile as the political situation in the Ivory Coastdeteriorated.

 

The metals sector posted a loss for the year, despite it being the highperformer early in the year. In the first quarter, copper rose to its highestprice in more than six years and gold climbed to highs not seen since 1988. Strongdemand for copper and continued speculative interest pushed the market to aseven-year high. The second quarter was volatile with aluminum as the maincause for losses ending in May and industrial metals fell in June. The metalssector posted the largest losses for the third quarter. Gains from copper couldnot offset losses in nickel and aluminum. The sector posted gains in the fourthquarter as precious metals continued their upward trend.

 

***2003***

 
| ** **     | ** ** | **Total Trading** | ** ** |
|----------------|------------|------------------------|------------|
| ** **     | ** ** | **Profit (Loss)** | ** ** |
|           |       |                   |       |
| Interest Rates |       | $                      | 292,510    |   |
| Stock Indices  |       | 768,618                |       |
| Agriculture    |       | (591,507               | )          |
| Currencies     |       | 10,308,254             |       |
| Energy         |       | 756,661                |       |
| Metals         |       | 2,245,196              |       |
|           |       | $                      | 13,779,732 |   |

 

The Partnership’s overall trading performance was profitable with gainsin currency and metals sectors contributing the most profits.

 

Profits resulting from trading in the currency sector provided thePartnership with gains in the first, second and fourth quarter, whichoutweighed losses sustained during the third quarter. The weakening U.S. dollarwas continuing to decline as it has over the last year and the Partnership waswell positioned to capitalize on its U.S. dollar positions against othercurrencies. This trading strategy capitalized on the declining U.S. dollar andweathered the volatility of the currency market during the third quarter.

 

The metals sector was also profitable for the Partnership. Profits inthe industrial complex outweighed losses in the precious metal sector for July.Copper and other industrial metals rallied on technical buying and strongerdemand as economies showed stronger growth prospects. Gold appreciated by 2.50%and nickel appreciated by 8.02% in September. During the fourth quarter bothprecious and industrial metals were positive, but under more volatile marketconditions in December. Gold prices reached a six-year high and were one of themain drivers of performance for the sector later in the year.

 

Stock index trading was profitable for the Partnership. Stock indextrading was unprofitable for the first and second quarters with posted gainsfor the third and fourth quarters. The fourth quarter ended with small gains inHong Kong and Italy, and losses in other global indices.

 

The energy sector was profitable for the Partnership. Long positions inoil and natural gas were profitable in the beginning of the year. In February,the best performing month, natural gas prices rose nearly 40% in a single dayin connection with expected severely cold weather and supply shortages. Stronggains occurred in the month of August generated by trading unleaded gas andcrude oil. Wherein the fourth quarter the energy sector continued to bevolatile, as crude oil, initially rallied to above $32 a barrel, but thenplunged when OPEC output numbers actually increased during 

 

14

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November, while they wereexpected to decrease. Mild weather in the United States late in the year, led adownward trend in natural gas, which allowed short positions to be profitable.

 

The interest rate sector was slightly profitable for the Partnership.Interest rates were profitable for the first quarter with February havingsignificant gains offsetting losses in both January and March. U.S. andEuropean bonds rallied amid concerns of global economic slowdown benefiting thePartnership’s long exposures. The U.S. bond market suffered heavy losses inJuly after the U.S. government announced its intentions to borrow a recordamount to finance the huge deficit. By September, the global economic reboundwas the primary focus of the market. Bonds in Europe and in the United Statestraded sideways throughout the month of November with no clear trend. TheReserve Bank of Australia and the Bank of England were two major central banksto start raising interest rates. Japanese Government Bonds rose strongly asstocks sold off. Overall exposure within the sector was light at the end of theyear, since no clear trends have emerged.

 

Trading in the agricultural commodities sector was unprofitable for thePartnership. During the first quarter the Partnership held positions in sugar,livestock and the soybean complex. Livestock markets were off in February asRussia imposed an import limit to help its domestic production. Sugar was toblame for losses in March as prices reversed and hit a two-month low. Thesector posted gains in April, mainly from soybeans, which rallied due torevisions in crop estimates and weather overseas. Supply and demand drove thelivestock market to slightly higher volatility levels in June, creating lossesthat offset earlier gains in the quarter. Grains had a very big rally at theend of October, prompted by an increase of orders from Asia. This rally endedin the beginning of November with a severe retracement. Later in the month themarkets found good support as prices began to rally again in response to thesecular straightening of worldwide demand.

 

#### *Variables Affecting Performance*

#### * *

The principal variable, which determines the net performance of thePartnership, is gross profitability.

 

During all periods set forth under “Selected Financial Data,” theinterest rates in many countries were at unusually low levels. The low interestrates in the United States (although higher than in many other countries)negatively impacted revenues because interest income is typically a componentof the Partnership’s profitability. In addition, low interest rates are frequentlyassociated with reduced fixed income market volatility, and in static marketsthe Partnership’s profit potential generally tends to be diminished. On theother hand, during periods of higher interest rates, the relativeattractiveness of a high risk investment such as the Partnership may be reducedas compared to high yielding and much lower risk fixed income investments.

 

The Partnership’s Brokerage Commissions and Administrative Fees are aconstant percentage of the Partnership’s assets allocated to trading. The onlyPartnership costs (other than the insignificant currency trading costs) whichare not based on a percentage of the Partnership’s assets (allocated to tradingor total) are the Profit Shares payable to the Advisors on an Advisor-by-Advisorbasis and the Incentive Override (terminated in 2004). Gross profitability isin turn affected by the percentages of the Partnership’s assets allocated totrading. During periods when Profit Shares are a high percentage of net tradinggains, it is likely that there has been substantial performance non-correlationamong the Advisors (so that the total Profit Shares paid to those Advisorswhich have traded profitably are a high percentage, or perhaps even in excess,of the total profits recognized, as other Advisors have incurred offsettinglosses, reducing overall trading gains but not the Profit Shares paid to thesuccessful Advisors) — suggesting the likelihood of generally trendless,non-consensus markets.

 

Unlike many investmentfields, there is no meaningful distinction in the operation of the Partnershipbetween realized and unrealized profits. Most of the contracts traded by thePartnership are highly liquid and can be closed out at any time.

 

Except in unusual circumstances, factors (e.g. regulatory approvals,cost of goods sold, employee relations and the like) which often materiallyaffect an operating business have virtually no impact on the Partnership.

 

15

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***Liquidity; Capital Resources***

 

The Partnership borrows only to a limited extent and only on a strictlyshort-term basis in order to finance losses on non-U.S. dollar denominatedtrading positions pending the conversion of the Partnership’s U.S. dollardeposits. These borrowings are at a prevailing short-term rate in the relevantcurrency. They have been immaterial to the Partnership’s operation to date andare expected to continue to be so.

 

Substantially all of the Partnership’s assets are held in cash exceptfor the net unrealized profit on open positions. The Net Asset Value of thePartnership’s cash is not affected by inflation. However, changes in interestrates could cause periods of strong up or down price trends, during which thePartnership’s profit potential generally increases. Inflation in commodityprices could also generate price movements, which the strategies mightsuccessfully follow.

 

Except in very unusual circumstances, the Partnership should be able toclose out any or all of its open trading positions and liquidate any or all ofits securities holdings quickly and at market prices. This permits an Advisorto limit losses as well as reduce market exposure on short notice should itsstrategies indicate doing so. In addition, because there generally is a readilyavailable market value for the Partnership’s positions and assets, thePartnership’s monthly Net Asset Value calculations typically are precise, andinvestors need only wait ten business days to receive the full redemptionproceeds of their Units.

 

*Off-BalanceSheet Arrangements and Tabular Disclosure of Contractual Obligations*

 

The Partnership has no applicable disclosure under this Item 7regarding off-balance sheet arrangements and tabular disclosure of contractualobligations pursuant to Regulation S-K, Item 303(a)(4) and 303(a)(5),respectively as the Partnership does not have any off balance sheetarrangements that are likely to have a significant impact on its financialposition or contractual obligations long term in nature.

 

**Item 7A: Quantitative and Qualitative Disclosures about Market Risk**

 

***Introduction***

 

Past Performance NotNecessarily Indicative of Future Results

 

The Partnership is a speculative commodity pool. Unlike an operatingcompany, the risk of market sensitive instruments traded by it is integral, notincidental, to the Partnership’s main line of business.

 

Market movements result in frequent changes in the fair market value ofthe Partnership’s open positions and, consequently, in its earnings and cashflows. The Partnership’s market risk is influenced by a wide variety offactors, including the level and volatility of interest rates, exchange rates,equity price levels, the market value of financial instruments and contracts,the diversification effects among the Partnership’s open positions and theliquidity of the markets in which it trades.

 

The Partnership, under the direction of its Advisors, rapidly acquiresand liquidates both long and short positions in a wide range of differentmarkets. Consequently, it is not possible to predict how a possible futuremarket scenario will affect performance, and the Partnership’s past performanceis not necessarily indicative of its future results.

 

Value at Risk is a measure of the maximum amount which the Partnershipcould reasonably be expected to lose in a given market sector. However, theinherent uncertainty of the Partnership’s speculative trading and therecurrence in the markets traded by the Partnership of market movements farexceeding expectations could result in actual trading or non-trading losses farbeyond the indicated Value at Risk or the Partnership’s experience to date(i.e.*,* “risk of ruin”). In light of theforegoing, as well as the risks and uncertainties intrinsic to all futureprojections, the inclusion of the quantification in this section should not beconsidered to constitute any assurance or representations that the Partnership’slosses in any market sector will be limited to Value at Risk or by thePartnership’s attempt to manage market risk.

 

16

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### ***Quantifying thePartnership’s Trading Value at Risk***

### *** ***

*Quantitative Forward-Looking Statements*

 

The following quantitative disclosures regarding the Partnership’smarket risk exposures contain “forward-looking statements” within the meaningof the safe harbor from civil liability provided for such statements by thePrivate Securities Litigation Reform Act of 1995 (set forth in Section 27A ofthe Securities Act of 1933 and Section 21E of the Securities Exchange Act of1934). All quantitative disclosures in this section are deemed to beforward-looking statements for purposes of the safe harbor, except forstatements of historical fact.

 

The Partnership’s risk exposure in the various market sectors traded bythe Advisors is quantified below in terms of Value at Risk. Due to thePartnership’s mark-to-market accounting, any loss in the fair value of thePartnership’s open positions is directly reflected in the Partnership’searnings (realized or unrealized) and cash flows (at least in the case ofexchange-traded contracts in which profits and losses on open positions aresettled daily through variation margin).

 

Exchange maintenance margin requirements have been used by thePartnership as the measure of its Value at Risk. Maintenance margin requirementsare set by exchanges to equal or exceed the maximum loss in the fair value ofany given contract incurred in 95% - 99% of the one-day time periods includedin the historical sample (generally approximately one year) researched forpurposes of establishing margin levels. Maintenance margin levels areestablished by dealers and exchanges using historical price studies, as well asan assessment of current market volatility and economic fundamentals to providea probabilistic estimate of the maximum expected near-term one-day pricefluctuation.

 

In the case of market sensitive instruments which are notexchange-traded (almost exclusively currencies in the case of the Partnership),the margin requirements for the equivalent futures positions have been used asValue at Risk. In those rare cases in which a futures-equivalent margin is notavailable, dealers’ margins have been used.

 

The fair value of the Partnership’s futures and forward positions doesnot have any optionality component. However, certain of the Advisors tradecommodity options. The Value at Risk associated with options is reflected inthe following table as the margin requirement attributable to the instrumentunderlying each option.

 

100% positive correlation in the different positions held in eachmarket risk category has been assumed. Consequently, the margin requirementsapplicable to the open contracts have been aggregated to determine each tradingcategory’s aggregate Value at Risk. The diversification effects resulting fromthe fact that the Partnership’s positions are rarely, if ever, 100% positivelycorrelated have not been reflected.

 

17

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***The Partnership’s Trading Value at Risk inDifferent Market Sectors***

 

The following tableindicates the average, highest and lowest trading Value at Risk associated withthe Partnership’s open positions by market category for the fiscal years 2005and 2004. During the fiscal year 2005, the Partnership’s average capitalizationwas approximately $270,409,956. During the fiscal year 2004, the Partnership’saverage capitalization was approximately $90,532,707.

 
| ** **             | ** ** | **December 31, 2005** | ** ** |
|------------------------|------------|---------------------------------|------------|
| ** **             | ** ** | **Average**                     | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
| **Market Sector** | ** ** | **Value at Risk**     | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                   |       |                            |       |   |   |   |   |   |   |
| Agriculture            |       | $                               | 163,356    |   | 0.06 | % | $ | 453,699 |   | $ | 1,777 |   |
| Currencies             |       | 1,240,840                       |       | 0.46 | % | 6,832,670 |   | 43,503 |   |
| Energy                 |       | 292,892                         |       | 0.11 | % | 1,030,159 |   | 19,464 |   |
| Interest Rates         |       | 12,222,247                      |       | 4.52 | % | 20,179,223 |   | 3,383,516 |   |
| Metals                 |       | 684,801                         |       | 0.25 | % | 2,012,007 |   | 44,237 |   |
| Stock Indices          |       | 1,484,741                       |       | 0.55 | % | 5,251,655 |   | 279,032 |   |
| TOTAL                  |       | $                               | 16,088,877 |   | 5.95 | % | $ | 35,759,413 |   | $ | 3,771,529 |   |

 
| ** **             | ** ** | **December 31, 2004** | ** ** |
|------------------------|------------|---------------------------------|------------|
| ** **             | ** ** | **Average**                     | ** ** | **% of Average** | ** ** | **Highest Value** | ** ** | **Lowest Value** | ** ** |
| **Market Sector** | ** ** | **Value at Risk**     | ** ** | **Capitalization** | ** ** | **At Risk** | ** ** | **At Risk** | ** ** |
|                   |       |                            |       |   |   |   |   |   |   |
| Interest Rates         |       | $                               | 4,504,345  |   | 4.98 | % | $ | 9,299,897 |   | $ | 302,525 |   |
| Currencies             |       | 929,610                         |       | 1.03 | % | 2,796,995 |   | 168,478 |   |
| Stock Indices          |       | 304,520                         |       | 0.34 | % | 1,530,119 |   | 11,732 |   |
| Metals                 |       | 355,839                         |       | 0.39 | % | 2,015,386 |   | 6,539 |   |
| Agriculture            |       | 67,799                          |       | 0.07 | % | 308,248 |   | 12,190 |   |
| Energy                 |       | 112,545                         |       | 0.12 | % | 240,346 |   | 4,605 |   |
| TOTAL                  |       | $                               | 6,274,658  |   | 6.93 | % | $ | 16,190,991 |   | $ | 506,069 |   |

 

Average, highest and lowest Value at Risk amountsrelate to the month-end amounts for each month-end during the fiscal year.Average Capitalization is the average of the Partnership’s capitalization atthe end of each calendar quarter of fiscal years 2005 and 2004.

 

18

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### ***MaterialLimitations on Value at Risk as an Assessment of Market Risk***

### *** ***

The face value of the market sector instruments held by the Partnershipis typically many times the applicable maintenance margin requirement(maintenance margin requirements generally ranging between approximately 1% and10% of contract face value) as well as many times the capitalization of thePartnership. The magnitude of the Partnership’s open positions creates a “riskof ruin” not typically found in most other investment vehicles. Because of thesize of its positions, certain market conditions unusual, but historicallyrecurring from time to time could cause the Partnership to incur severe lossesover a short period of time. The foregoing Value at Risk table as well as thepast performance of the Partnership gives no indication of this “risk of ruin.”

 

***Non-Trading Risk***

 

#### *Foreign CurrencyBalances; Cash on Deposit with MLPF&S*

#### * *

The Partnership has non-trading market risk on its foreign cashbalances not needed for margin. However, these balances (as well as the marketrisk they represent) are generally immaterial. The Partnership controls thenon-trading exchange rate risk of its foreign currency balances by regularlyconverting its foreign currency balances back to U.S. dollars on a weeklybasis.

 

The Partnership also has non-trading market risk on the approximately90%-95% of its assets which are held in cash at MLPF&S. The value of thiscash is not interest rate sensitive, but there is cash flow risk in that ifinterest rates decline so will the cash flow generated on these monies. Thiscash flow risk is generally insignificant.

 

***Qualitative Disclosures Regarding PrimaryTrading Risk Exposures***

 

The following qualitative disclosures regarding the Partnership’smarket risk exposures except for (i) those disclosures that are statements of historicalfact and (ii) the descriptions of how the Partnership manages its primarymarket risk exposure  constituteforward-looking statements within the meaning of Section 27A of the SecuritiesAct and Section 21E of the Securities Exchange Act. The Partnership’s primarymarket risk exposures as well as the strategies used by MLAI and the Advisorsfor managing such exposures are subject to numerous uncertainties,contingencies and risks, any one of which could cause the actual results of thePartnership’s risk controls to differ materially from the objectives of suchstrategies. Government interventions, defaults and expropriations, illiquidmarkets, the emergence of dominant fundamental factors, political upheavals,changes in historical price relationships, an influx of new marketparticipants, increased regulation and many other factors could result inmaterial losses as well as in material changes to the risk exposures and therisk management strategies of the Partnership. There can be no assurance thatthe Partnership’s current market exposure and/or risk management strategieswill not change materially or that any such strategies will be effective ineither the short- or long-term. Investors must be prepared to lose all orsubstantially all of their investment in the Partnership.

 

The following were the primary trading risk exposures of thePartnership as of December 31, 2005, by market sector.

 

**Interest Rates**.

 

Interest rate risk is the principal market exposure of the Partnership.Interest rate movements directly affect the price of derivative sovereign bondpositions held by the Partnership and indirectly the value of its stock indexand currency positions. Interest rate movements in one country as well asrelative interest rate movements between countries materially impact thePartnership’s profitability. The Partnership’s primary interest rate exposureis to interest rate fluctuations in the United States and the other G-7countries. However, the Partnership also takes positions in the government debtof smaller nations e.g.*,* New Zealandand Australia. MLAI anticipates that G-7 interest rates will remain the primarymarket exposure of the Partnership for the foreseeable future.

 

**Currencies**.

 

The Partnership trades in a large number of currencies. However, thePartnership’s major exposures have typically been in the U.S. dollar/Japaneseyen, U.S. dollar/Euro and U.S. dollar/British pound positions. MLAI does notanticipate that the risk profile of the Partnership’s currency sector willchange significantly in the future. The currency trading Value at Risk figureincludes foreign margin amounts converted into U.S. dollars with an incrementaladjustment to reflect the exchange rate risk of maintaining Value at Risk in afunctional currency other than U.S. dollars.

 

19

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**Stock Indices**.

 

The Partnership’s primary equity exposure is to G-7 equity index pricemovements. As of December 31, 2005 the Partnership’s primary exposures were inthe stock indices from Southeast Asian countries. The Partnership is primarilyexposed to the risk of adverse price trends or static markets in the majorU.S., European and Asian indices.

 

**Metals**.

 

The Partnership’s primary metals market exposure is tofluctuations in the price of gold and silver. Although certain of the Advisorstrade base metals such as aluminum, nickel, copper and tin, the principalmarket exposures of the Partnership have consistently been in the preciousmetals. MLAI anticipates that gold will remain the primary metal marketexposure for the Partnership.

 

**Agricultural Commodities**.

 

The Partnership’s primary agricultural commoditiesexposure is to agricultural price movements which are often directly affectedby severe or unexpected weather conditions. Soybeans, grains, livestock andsugar accounted for the substantial bulk of the Partnership’s commodityexposure as of December 31, 2005. In the past, the Partnership has had materialmarket exposure to orange juice and cotton and may do so again in the future. However,MLAI anticipates that the Advisors will maintain an emphasis on soybeans,grains and sugar, in which the Partnership has historically taken its largestpositions.

 

**Energy**.

 

The Partnership’s primary energy market exposure is tonatural gas and oil price movements, often resulting from politicaldevelopments in the Middle East. Oil prices can be volatile and substantialprofits and losses have been and are expected to continue to be experienced inthis market.

 

***Qualitative Disclosures Regarding Non-TradingRisk Exposure***

 

The following were the non-trading risk exposures ofthe Partnership as of December 31, 2005.

 

**Foreign Currency Balances.**

 

The Partnership’s primary foreign currency balancesare in Japanese yen, British pounds and Euro. The Partnership has minimalexchange rate exposure on these balances.

 

**U.S. Dollar Balances.**

 

The Partnership holds its U.S. dollars in cash atMLPF&S. The Partnership has immaterial cash flow and interest-rate risk onits cash on deposit with MLPF&S in that declining interest rates wouldcause the income from such cash to decline.

 

### ***QualitativeDisclosures Regarding Means of Managing Risk Exposure***

### *** ***

*Trading Risk*

 

MLAI has procedures in place intended to controlmarket risk exposure, although there can be no assurance that they will, infact, succeed in doing so. These procedures focus primarily on monitoring thetrading of the Advisors selected from time to time for the Partnership, andreviewing outstanding positions for over-concentrations both on anAdvisor-by-Advisor and on an overall Partnership basis. While MLAI does notitself intervene in the markets to hedge or diversify the Partnership’s marketexposure, MLAI may urge Advisors to reallocate positions, or itself reallocatePartnership assets among Advisors (although typically only as of the end of amonth), in an attempt to avoid over-concentrations. However, such interventionsare unusual.

 

At the Advisor level, each Advisor applies its ownrisk management policies to its trading. These policies generally limit the totalexposure that may be taken per “risk unit” of assets under management. Inaddition, many Advisors follow diversification guidelines (often formulated interms of the maximum margin, which they will commit to positions in any onecontract or group of related contracts), as well as imposing “stop-loss” pointsat which open positions must be closed out. Occasionally, Advisors will limitthe market exposure of their Partnership account through acquiring put or calloptions which “collar” the risk of open positions. However, because of thetypically high degree of liquidity in the markets traded by the Partnership andthe expense of acquiring options, most Advisors rely simply on stop-losspolicies, requiring the liquidation of positions once losses of a certainmagnitude have been incurred.

 

20

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Certain Advisors treat their risk control policies asstrict rules; others only as general guidelines for controlling risk.

 

*Non-Trading Risk*

 

The Partnership controls the non-trading exchange raterisk of its foreign currency balances by regularly converting these balancesback into U.S. dollars on a weekly basis.

 

The Partnership has cash flow interest rate risk onits cash on deposit with MLPF&S in that declining interest rates wouldcause the income from such cash to decline. However, a certain amount of cashor cash equivalents must be held by the Partnership in order to facilitatemargin payments and pay expenses and redemptions. MLAI does not take any stepsto limit the cash flow risk on its cash held on deposit at MLPF&S.

 

**Item 8:   Financial Statements and SupplementaryData**

 

Selected Quarterly Financial Data

ML Global Horizons L.P.

 

Net Income by Quarter

Eight Quarters through December 31, 2005

 
| ** **                 | ** ** | **Fourth**  | ** ** | **Third**   | ** ** | **Second**  | ** ** | **First**   | ** ** | **Fourth**  | ** ** | **Third**   | ** ** | **Second**  | ** ** | **First**   | ** ** |
|----------------------------|------------|-------------|------------|-------------|------------|-------------|------------|-------------|------------|-------------|------------|-------------|------------|-------------|------------|-------------|------------|
| ** **                 | ** ** | **Quarter** | ** ** | **Quarter** | ** ** | **Quarter** | ** ** | **Quarter** | ** ** | **Quarter** | ** ** | **Quarter** | ** ** | **Quarter** | ** ** | **Quarter** | ** ** |
| ** **                 | ** ** | **2005**    | ** ** | **2005**    | ** ** | **2005**    | ** ** | **2005**    | ** ** | **2004**    | ** ** | **2004**    | ** ** | **2004**    | ** ** | **2004**    | ** ** |
| Total Income (Loss)        |       | $           | 6,015,390  |        | $          | 3,831,311   |       | $           | 1,418,150  |        | $          | 163,766     |       | $           | 10,640,033 |        | $          | (306,947 | ) | $ | (5,436,741 | ) | $ | 3,881,153 |   |
| Total Expenses             |       | 5,062,809   |       | 4,903,366   |       | 5,061,337   |       | 4,834,520   |       | 3,483,624   |       | 1,565,539   |       | 862,973     |       | 1,599,826   |       |
| Net Income (Loss)          |       | $           | 952,581    |        | $          | (1,072,055  | )          | $           | (3,643,187 | )           | $          | (4,670,754  | )          | $           | 7,156,409  |        | $          | (1,872,486 | ) | $ | (6,299,714 | ) | $ | 2,281,327 |   |
|                       |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |        |       |
| Net Income (Loss) per Unit |       | $           | 0.0045     |        | $          | (0.0040     | )          | $           | (0.0160    | )           | $          | (0.0245     | )          | $           | 0.0754     |        | $          | (0.0340 | ) | $ | (0.3088 | ) | $ | 1.7840 |   |

 

Calculation of net income(loss) per weighted average general partner and limited partner unit excludesnet income (loss) allocated to non-unitized interests for the four quarters in2005.

 

The financial statements required by this Item areincluded in Exhibit 13.01.

 

The supplementary financial information (“informationabout oil and gas producing activities”) specified by Item 302 of RegulationS-K is not applicable.

 

**Item 9:   Changes in and Disagreements withAccountants on Accounting and Financial Disclosure**

 

There were no changes in or disagreements with theindependent registered public accounting firm on accounting or financialdisclosure.

 

**Item 9A: Controlsand Procedures**

 

Merrill Lynch AlternativeInvestments LLC, the General Partner of Global Horizons I L.P., with theparticipation of the General Partner’s Chief Operating Officer and the ChiefFinancial Officer, has evaluated the effectiveness of the design and operationof its disclosure controls and procedures with respect to the Partnershipwithin 90 days of the filing date of this annual report, and, based on theirevaluation, have concluded that these disclosure controls and procedures areeffective. Additionally, there were no significant changes in the Partnership’sinternal controls or in other factors that could significantly affect thesecontrols subsequent to the date of their evaluation, including any correctiveactions with regard to significant deficiencies and material weaknesses.

 

**Item 9B: OtherInformation**

 

Not Applicable.

 

21

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**PART III**

 

**Item 10: Directorsand Executive Officers of the Registrant**

 

10(a) and 10(b)      Identificationof Directors and Executive Officers:

 

As a limited partnership, the Partnership itself hasno officers or directors and is managed by MLAI. Trading decisions are made bythe Advisors on behalf of the Partnership. MLAI promotes the Partnership and isits controlling person.

 

The managers and executive officers of MLAI and theirrespective business backgrounds are as follows.
|                    |   |                                                  |
|-------------------------|--------|-------------------------------------------------------|
| **Robert M. Alderman**  |   | Chief Executive Officer, President and Manager        |
|                    |   |                                                  |
| **Steven B. Olgin**     |   | Vice President, Chief Operating Officer and Manager   |
|                    |   |                                                  |
| **Michael L. Pungello** |   | Vice President, Chief Financial Officer and Treasurer |
|                    |   |                                                  |
| **Jeffrey F. Chandor**  |   | Manager                                               |

 

Mr. Alderman was born in 1960. Mr. Robert M. Alderman is ChiefExecutive Officer, President and Manager of MLAI. Mr. Alderman is a ManagingDirector of Merrill Lynch Global Private Client and global head of Retail Salesand Business Management for Alternative Investments. Prior to re-joiningMerrill Lynch and the International Private Client Group in 1999, he was apartner in the Nashville, Tennessee based firm of J.C. Bradford & Co. wherehe was the Director of Marketing, and a National Sales Manager for PrudentialInvestments. Mr. Alderman first joined Merrill Lynch in 1987 where he workeduntil 1997. During his tenure at Merrill Lynch, Mr. Alderman has held positionsin Financial Planning, Asset Management and High Net Worth Services. Hereceived his Master’s of Business Administration from the Carroll School ofManagement Boston College and a Bachelor of Arts from Clark University.

 

Steven B. Olgin was born in 1960. Mr. Olgin is Vice President, ChiefOperating Officer and a Manager of MLAI. He joined MLAI in July 1994 and becamea Vice President in July 1995. From 1986 until July 1994, Mr. Olgin was anassociate of the law firm of Sidley & Austin. In 1982, Mr. Olgin graduatedfrom The American University with a Bachelor of Science in BusinessAdministration and a Bachelor of Arts in Economics. In 1986, he received hisJuris Doctor from the John Marshall Law School. Mr. Olgin is a member of theManaged Funds Association’s Government Relations Committee and has served as anarbitrator for the National Futures Association. Mr. Olgin is a member of theIllinois Bar.

 

Michael L. Pungello was born in 1957. Mr. Pungello is a Vice President,Chief Financial Officer and Treasurer of MLAI. He was First Vice President andSenior Director of Finance for Merrill Lynch’s Operations, Services andTechnology Group from January 1998 to March 1999. Prior to that, Mr. Pungellospent over 18 years with Deloitte & Touche LLP, and was a partner in theirfinancial services practice from June 1990 to December 1997. He graduated fromFordham University in 1979 with a Bachelor of Science in Accounting andreceived his Master’s of Business Administration in Finance from New YorkUniversity in 1987.

 

Jeffrey F. Chandor was born in 1942. Mr. Chandor isthe Global Sales Director of the General Partner. Mr. Chandor became a Managerof the General Partner on April 1, 2003. He was a Senior Vice President,Director of Sales, Marketing and Research and a Director of Merrill LynchInvestment Partners, Inc., a predecessor to the General Partner. He joinedMerrill Lynch, Pierce, Fenner & Smith Incorporated in 1971 and has servedas the Product Manager of International Institutional Equities, EquityDerivatives and Mortgage-Backed Securities as well as Managing Director ofInternational Sales in the United States, and Managing Director of Sales in Europe.Mr. Chandor holds a Bachelor of Arts degree from Trinity College, Hartford,Connecticut.

 

As of December 31, 2005, MLAI’s general partner interest in thePartnership was valued at $2,297,491.

 

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MLAI acts as the sponsor, general partner or manager to ten publicfutures funds whose units of limited partner or member interests are registeredunder the Securities Exchange Act of 1934: ML Futures Investments L.P., MLPrincipal Protection L.P., ML JWH Strategic Allocation L.P., ML Select FuturesI L.P., John W. Henry & Co./Millburn L.P., ML Appleton FuturesAccess LLC,ML Aspect FuturesAccess LLC, ML Cornerstone FuturesAccess LLC, ML WintonFuturesAccess LLC, and the Partnership. Because MLAI serves as the sponsor,general partner or manager of each of these funds, the officers and managers ofMLAI effectively manage them as officers and directors of such funds.

 

(c)            Identificationof Certain Significant Employees:

 

None.

 

(d)           FamilyRelationships:

 

None.

 

(e)            BusinessExperience:

 

See Items 10 (a) and 10(b) above.

 

(f)            Involvement inCertain Legal Proceedings:

 

None.

 

(g)           Promoters andControl Persons:

 

Not applicable.

 

(h)           AuditCommittee Financial Expert:

 

Not applicable. (Neither the Partnership nor MLAI has an auditcommittee.)

 

Section 16(a) Beneficial Ownership ReportingCompliance:

 

Not applicable.

 

Code of Ethics:

 

The Partnership has adopted a code of ethics, as of the end of theperiod covered by this report, which applies to the Partnership’s principalexecutive officer and principal financial officer or persons performing similarfunctions. A copy of the code of ethics is available upon request by calling1-800-637-3863.

 

**Item 11: ExecutiveCompensation**

 

The managers and officers of MLAI are remunerated byMLAI in their respective positions. The Partnership does not itself have anyofficers, managers or employees. The Partnership pays Brokerage Commissions toan affiliate of MLAI and Administrative Fees to MLAI. MLAI or its affiliatesmay also receive certain economic benefits from the possession of thePartnership’s U.S. dollar assets in offset accounts, as described in Item 1(c)above. The managers and officers receive no “other compensation” from thePartnership, and the managers receive no compensation for serving as managersof MLAI. There are no compensation plans or arrangements relating to a changein control of either the Partnership or MLAI.

 

**Item12:  Security Ownership of CertainBeneficial Owners and Management and Related Stockholders Matters**

 

(a)            SecurityOwnership of Certain Beneficial Owners:

 

Not applicable (The Units are non-voting limited partnership interests.The Partnership is managed   by MLAI, itsgeneral partner).

 

23

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As of December 31, 2005, MLAI owned 2,012,396 Units (unit-equivalentgeneral partnership interests), which was approximately 1.13 % of the totalUnits outstanding.

 

(b)           Changes inControl:

 

None.

 

**Item13:  Certain Relationships and RelatedTransactions**

 

(a)           Transactionsbetween Merrill Lynch and the Partnership

 

All of the service providers to the Partnership, otherthan the Advisors, are affiliates of Merrill Lynch. Merrill Lynch negotiatedwith the Advisors over the level of its advisory fees and Profit Shares. However,none of the fees paid by the Partnership to any Merrill Lynch party werenegotiated, and they are higher than would have been obtained in arm’s-lengthbargaining.

 

The Partnership pays indirectly Merrill Lynch throughMLPF&S and MLAI substantial Brokerage Commissions and Administrative Fees,respectively, as well as bid-ask spreads on forward currency trades. ThePartnership also pays MLPF&S interest on short-term loans extended byMLPF&S to cover losses on foreign currency positions.

 

Within the Merrill Lynch organization, MLAI is thedirect beneficiary of the revenues received by different Merrill Lynch entitiesfrom the Partnership. MLAI controls the management of the Partnership andserves as its promoter. Although  MLAIhas not sold any assets, directly or indirectly, to the Partnership, MLAI hasmade substantial profits from the Partnership due to the foregoing revenues.

 

No loans have been, are or will be outstanding betweenMLAI or any of its principals and the Partnership.

 

MLAI paid substantial selling commissions and trailingcommissions to MLPF&S for distributing the Units. MLAI is ultimately paidback for these expenditures from the revenues it receives from the Partnership.

 

(b)           Certain BusinessRelationships:

 

MLPF&S, an affiliate of MLAI, acts as the principal commoditybroker for the Partnership.

 

In 2005, the Partnership expensed: (i) Brokerage Commissions of $17,973,653, which included $2,853,358 inconsulting fees earned by the Advisors (non-unitized Series pay consulting feesseparately from the unitized Series); and (ii) Administrative Fees of $622,238to MLAI. In addition, MLAI and its affiliates may have derived certain economicbenefits from possession of the Partnership’s assets, as well as from foreignexchange and EFP trading.

 

See Item 1(c), “Narrative Description of Business — Charges” and “—Description of Current Charges” for a discussion of other business dealingsbetween MLAI affiliates and the Partnership.

 

The fact that MLAI receives incentive compensation from the Partnership(which is an unusual fee arrangement for MLAI) could cause MLAI to manage thePartnership in a more speculative and “risky” fashion than MLAI otherwisewould.

 

(c)           Indebtedness ofManagement:

 

The Partnership is prohibited from making any loans, to management orotherwise.

 

(d)           Transactions withPromoters:

 

Not applicable.

 

24

----

 

**Item 14: PrincipalAccountant Fees and Services**

 

(a)           Audit Fees

 

Aggregate fees forprofessional services rendered by Deloitte & Touche LLP in connectionwith  the audit of the Partnership’sfinancial statements as of and for the year ended December 31, 2005 were$75,000.

 

Aggregate fees forthese services for the year ended December 31, 2004 were $52,350.

 

(b)           Audit-Related Fees

 

There were no otheraudit-related fees for the years ended December 31, 2005 or 2004 related to thePartnership.

 

(c)           Tax Fees

 

Aggregate fees for professional services rendered byDeloitte Tax LLP in connection with the tax compliance, advice and preparationof the Partnerships tax returns for the year ended December 31, 2005 were$182,000.

 

Aggregate fees for these services for the year endedDecember 31, 2004 were $80,000.

 

(d)           All Other Fees

 

No fees were paid toDeloitte and Touche LLP, Deloitte Tax LLP or any Member Firms of DeloitteTouche Tohmatsu, and their respective affiliates during the years endedDecember 31, 2005 or 2004 for any other professional services in relation tothe Partnership.

 

25

----

 

**PART IV**

 

**Item 15: Exhibitsand Financial Statement Schedules**

 
| ** ** | ** ** | ** **                                                          | ** ** | **Page** |
|------------|------------|---------------------------------------------------------------------|------------|----------|
|       | 1.         | Financial Statements (found in Exhibit 13.01):                      |       |     |
|       |       |                                                                |       |     |
|       |       | Report of Independent Registered Public  Accounting Firm            |       | 1        |
|       |       |                                                                |       |     |
|       |       | Statements of Financial Condition as of  December 31, 2005 and 2004 |       | 2        |
|       |       |                                                                |       |     |
|       |       | For the years ended December 31, 2005, 2004 and 2003:               |       |     |
|       |       |                                                                |       |     |
|       |       | Statements of Operations                                            |       | 3        |
|       |       |                                                                |       |     |
|       |       | Statements of Changes in Partners’ Capital                     |       | 4        |
|       |       |                                                                |       |     |
|       |       | Financial Data Highlights for the year  ended December 31, 2005     |       | 5        |
|       |       |                                                                |       |     |
|       |       | Notes to Financial Statements                                       |       | 6-14     |

 

2.             FinancialStatement Schedules:

 

Financial statement schedules not included in this Form 10-K have beenomitted for the reason that they are not required or are not applicable or thatequivalent information has been included in the financial statements or notesthereto.

 

3.             Exhibits:

 

The following exhibits are incorporated by reference or are filedherewith to this Annual Report on Form 10-K:

 
| **Designation**    | ** ** | **Description**                                                                                                                                                                                                                                                               |
|--------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|               |       |                                                                                                                                                                                                                                                                          |
| 1.01               |       | Selling Agreement among the Partnership, MLAI, MLPF&S, the  Selling Agent and the Advisors.                                                                                                                                                                               |
|               |       |                                                                                                                                                                                                                                                                          |
| Exhibit 1.01:      |       | Is incorporated herein by reference from Exhibit 1.01 contained in  Amendment No. 1 to the Registration Statement (File No. 33-62998) filed on  September 10, 1993, on Form S-1 under the Securities Act of 1933 (the  “Registrant’s Registration Statement”). |
|               |       |                                                                                                                                                                                                                                                                          |
| 3.01(i)            |       | Amended and Restated Certificate of Limited Partnership of the Registrant,  dated August 25, 1994.                                                                                                                                                                            |
|               |       |                                                                                                                                                                                                                                                                          |
| Exhibit 3.01(i):   |       | Is incorporated herein by reference from Exhibit 3.01(i) contained in  the Registrant’s Registration Statement.                                                                                                                                                          |
|               |       |                                                                                                                                                                                                                                                                          |
| 3.01(ii)           |       | Amended and Restated Limited Partnership Agreement of the  Partnership.                                                                                                                                                                                                       |
|               |       |                                                                                                                                                                                                                                                                          |
| Exhibit 3.01(ii):  |       | Is incorporated herein by reference from Exhibit 3.01(ii) contained  in the Registrant’s Registration Statement (as Exhibit A).                                                                                                                                          |
|               |       |                                                                                                                                                                                                                                                                          |
| 3.01(iii)          |       | Amended and Restated Certificate of Limited Partnership of the  Partnership, dated July 27, 1995.                                                                                                                                                                             |
|               |       |                                                                                                                                                                                                                                                                          |
| Exhibit 3.01(iii): |       | Is incorporated by reference from Exhibit 3.02(iii) contained in the  Registrant’s report on Form 10-Q for the Quarter Ended June 30, 1995.                                                                                                                              |

 

26

----

 
| 3.01(iv)          |   | Amended and Restated Certificate of Limited Partnership of the  Partnership, dated January 13, 2005.                                                                                                                                  |
|-------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|              |   |                                                                                                                                                                                                                                  |
| Exhibit 3.01(iv): |   | Is incorporated herein by reference from Exhibit 3.01(iv) contained  in the Registrant’s report Form 10-K for the year ended December 31, 2004.                                                                                  |
|              |   |                                                                                                                                                                                                                                  |
| 10.01(d)          |   | Form of Advisory Agreement between the Partnership, MLIM LLC,  MLPF&S and prospective trading advisors.                                                                                                                           |
|              |   |                                                                                                                                                                                                                                  |
| Exhibit 10.01(d): |   | Is incorporated by reference from Exhibit 10.01(d) contained in the  Registrant’s report on Form 10-Q for the Quarter Ended June 30, 1995.                                                                                       |
|              |   |                                                                                                                                                                                                                                  |
| 10.02             |   | Form of Consulting Agreement between each Advisor, the Partnership  and MLPF&S.                                                                                                                                                   |
|              |   |                                                                                                                                                                                                                                  |
| Exhibit 10.02:    |   | Is incorporated herein by reference from Exhibit 10.02 contained in  the Registrant’s Registration Statement.                                                                                                                    |
|              |   |                                                                                                                                                                                                                                  |
| 10.03             |   | Form of Customer Agreement between the Partnership and MLPF&S.                                                                                                                                                                    |
|              |   |                                                                                                                                                                                                                                  |
| Exhibit 10.03:    |   | Is incorporated herein by reference from Exhibit 10.03 contained in  the Registrant’s Registration Statement.                                                                                                                    |
|              |   |                                                                                                                                                                                                                                  |
| 10.05             |   | Form of Subscription Agreement and Power of Attorney.                                                                                                                                                                                 |
|              |   |                                                                                                                                                                                                                                  |
| Exhibit 10.05:    |   | Is incorporated herein by reference from Exhibit 10.05 contained in  the Registrant’s Registration Statement (as Exhibit D).                                                                                                     |
|              |   |                                                                                                                                                                                                                                  |
| 10.06             |   | Foreign Exchange Desk Service Agreement, dated July 1, 1993 among  Merrill Lynch International Bank, MLIM LLC, MLPF&S and the Partnership.                                                                                        |
|              |   |                                                                                                                                                                                                                                  |
| Exhibit 10.06:    |   | Is incorporated herein by reference from Exhibit 10.06 contained in  Amendment No. 1 to the Registration Statement.                                                                                                                   |
|              |   |                                                                                                                                                                                                                                  |
| 10.07             |   | Form of Advisory and Consulting Agreement Amendment among MLIM LLC,  each Advisor, the Partnership and MLPF&S.                                                                                                                    |
|              |   |                                                                                                                                                                                                                                  |
| Exhibit 10.07:    |   | Is incorporated herein by reference from Exhibit 10.07 contained in  the Registrant’s report on Form 10-K for the year ended December 31, 1996.                                                                                  |
|              |   |                                                                                                                                                                                                                                  |
| 13.01             |   | 2005 Annual Report and Report of Independent Registered Public  Accounting Firm.                                                                                                                                                      |
|              |   |                                                                                                                                                                                                                                  |
| Exhibit 13.01:    |   | Is filed herewith.                                                                                                                                                                                                                    |
|              |   |                                                                                                                                                                                                                                  |
| 28.01             |   | Prospectus of the Partnership dated December 6, 1995.                                                                                                                                                                                 |
|              |   |                                                                                                                                                                                                                                  |
| Exhibit 28.01:    |   | Is incorporated by reference as filed with the Securities and  Exchange Commission pursuant to Rule 424 under the Securities Act of 1933,  Registration Statement (File No. 33-88994) on Form S-1, effective  December 6, 1995). |
|              |   |                                                                                                                                                                                                                                  |
| 31.01 and         |   |                                                                                                                                                                                                                                  |
| 31.02             |   | Rule 13a-14(a)/15d-14(a) Certifications                                                                                                                                                                                               |
|              |   |                                                                                                                                                                                                                                  |
| Exhibit 31.01     |   |                                                                                                                                                                                                                                  |
| and 31.02:        |   | Are filed herewith.                                                                                                                                                                                                                   |
|              |   |                                                                                                                                                                                                                                  |
| 32.01 and         |   |                                                                                                                                                                                                                                  |
| 32.02             |   | Section 1350 Certifications                                                                                                                                                                                                           |
|              |   |                                                                                                                                                                                                                                  |
| Exhibit 32.01     |   |                                                                                                                                                                                                                                  |
| and 32.02:        |   | Are filed herewith.                                                                                                                                                                                                                   |

 

27

----

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the SecuritiesExchange Act of 1934, the Registrant has duly caused this report to be signedon its behalf by the undersigned, thereunto duly authorized.

 
|   | **GLOBAL HORIZONS I L.P.**                        |
|--------|---------------------------------------------------|
|   |                                              |
|   | By: **MERRILL LYNCH ALTERNATIVE INVESTMENTS LLC** |
|   | General  Partner                                  |
|   |                                              |
|   | By:                                               | /s/Robert M. Alderman |   |
|   | Robert M. Alderman                                |
|   | Chief Executive Officer, President and Manager    |
|   | (Principal Executive Officer)                     |

 

Pursuant to the requirements of Section 13 or 15(d) of the SecuritiesExchange Act of 1934, this report has been signed on March 31, 2006 by thefollowing persons on behalf of the Registrant and in the capacities indicated.

 
| **Signature**          | ** ** | **Title**                                    | ** **                                            | **Date** |
|------------------------|------------|----------------------------------------------|-------------------------------------------------------|----------|
|                   |       |                                         |                                                  |     |
| /s/Robert M. Alderman  |       |                                         | Chief Executive Officer, President and Manager        |     | March 31, 2006 |
| Robert M. Alderman     |       | (Principal Executive Officer)                |                                                  |     |
|                   |       |                                         |                                                  |     |
| /s/Steven B. Olgin     |       |                                         | Vice President, Chief Operating Officer and Manager   |     | March 31, 2006 |
| Steven B. Olgin        |       |                                         |                                                  |     |
|                   |       |                                         |                                                  |     |
| /s/Michael L. Pungello |       |                                         | Vice President, Chief Financial Officer and Treasurer |     | March 31, 2006 |
| Michael L. Pungello    |       | (Principal Financial and Accounting Officer) |                                                  |     |
|                   |       |                                         |                                                  |     |
| /s/Jeffrey F. Chandor  |       |                                         | Manager                                               |     | March 31, 2006 |
| Jeffrey F. Chandor     |       |                                         |                                                  |     |
|                        |            |                                              |                                                       |          |  |  |  |  |

 

 

(Being the principal executive officer, the principal financial andaccounting officer and a majority of the managers of Merrill Lynch InvestmentManagers LLC)

 

**MERRILL LYNCH ALTERNATIVE INVESTMENTS LLC**
| General Partner of Registrant |   | March 31, 2006 |
|-------------------------------|--------|----------------|

 

 
| By:                                            | /s/Robert M. Alderman |   |
|------------------------------------------------|-----------------------|--------|
| Robert M. Alderman                             |
| Chief Executive Officer, President and Manager |
| (Principal Executive Officer)                  |

 

28

----

 

**ML GLOBAL HORIZONS I L.P.**

 

2005 FORM 10-K

 

INDEX TO EXHIBITS

 

Exhibit

 

Exhibit 13.01          2005 AnnualReport and Report of Independent Registered Public Accounting Firm

 

29

----

 

GLOBAL HORIZONS I L.P.

(A Delaware Limited Partnership)

 

TABLE OF CONTENTS

 
| ** **                                                                                            | **Page** |
|-------------------------------------------------------------------------------------------------------|----------|
|                                                                                                  |     |
| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING  FIRM                                              | 1        |
|                                                                                                  |     |
| FINANCIAL STATEMENTS:                                                                                 |     |
|                                                                                                  |     |
| Statements of Financial  Condition as of December 31, 2005 and 2004                                   | 2        |
|                                                                                                  |     |
| Statements of Operations for the years  ended December 31, 2005, 2004 and 2003                        | 3        |
|                                                                                                  |     |
| Statements of Changes in  Partners’ Capital for the years ended December 31, 2005, 2004 and 2003 | 4        |
|                                                                                                  |     |
| Financial Data Highlights  for the year ended December 31, 2005                                       | 5        |
|                                                                                                  |     |
| Notes to Financial  Statements                                                                        | 6-14     |

 

----

 

REPORT OF INDEPENDENT REGISTEREDPUBLIC ACCOUNTING FIRM

 

To the Partners of

  Global Horizons I L.P.:

 

We have audited the accompanying statements of financial condition ofGlobal Horizons I L.P. (the “Partnership”) as of December 31, 2005 and 2004,and the related statements of operations and changes in partners’ capital foreach of the three years in the period ended December 31, 2005 and the financialdata highlights for the year ended December 31, 2005. These financialstatements and financial data highlights are the responsibility of thePartnership’s management. Our responsibility is to express an opinion on thesefinancial statements and financial data highlights based on our audits.

 

We conducted our audits in accordance with the standards of the PublicCompany Accounting Oversight Board (United States). Those standards requirethat we plan and perform the audits to obtain reasonable assurance aboutwhether the financial statements and financial data highlights are free ofmaterial misstatement. The Partnership is not required to have nor were weengaged to perform, an audit of its internal control over financial reporting.Our audits included consideration of internal control over financial reportingas a basis for designing audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Partnership’s internal control over financial reporting. Accordingly,we express no such opinion. An audit also includes examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements,assessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation.We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, such financial statements and financial data highlightspresent fairly, in all material respects, the financial position of GlobalHorizons I L.P. as of December 31, 2005 and 2004, and the results of its operations,changes in its partners’ capital and financial data highlights for each of theperiods presented in conformity with accounting principles generally acceptedin the United States of America.

 

 
| /s/ Deloitte & Touche LLP |   |
|-------------------------------|--------|

New York, New York

March 30, 2006

 

----

 

GLOBAL HORIZONS I L.P.

(A Delaware Limited Partnership)

 

STATEMENTS OF FINANCIALCONDITION

DECEMBER 31, 2005 AND 2004

 
| ** **                                                          | ** ** | **2005**    | ** **  | **2004**    | ** ** |
|---------------------------------------------------------------------|------------|-------------|-------------|-------------|------------|
| **ASSETS:**                                                         |       |        |        |        |       |
| Equity in commodity futures trading accounts:                       |       |        |        |        |       |
| Cash                                                                |       | $           | 274,496,535 |        | $          | 148,295,862 |   |
| Net unrealized profit on open contracts                             |       | 4,986,310   |        | 3,149,341   |       |
| Accrued interest and other assets                                   |       | 992,410     |        | 238,759     |       |
|                                                                |       |        |        |        |       |
| **TOTAL ASSETS**                                                    |       | $           | 280,475,255 |        | $          | 151,683,962 |   |
|                                                                |       |        |        |        |       |
| **LIABILITIES AND PARTNERS’ CAPITAL**                          |       |        |        |        |       |
| **LIABILITIES:**                                                    |       |        |        |        |       |
|                                                                |       |        |        |        |       |
| Administrative fees payable                                         |       | $           | 56,411      |        | $          | 1,107,931 |   |
| Brokerage commissions payable                                       |       | 1,624,549   |        | 862,605     |       |
| Redemptions payable                                                 |       | 9,945,759   |        | 331,608     |       |
| Profit Shares payable                                               |       | 117,551     |        | 31,446      |       |
| Due to affiliate                                                    |       | 145,118     |        | —      |       |
|                                                                |       |        |        |        |       |
| Total liabilities                                                   |       | 11,889,388  |        | 2,333,590   |       |
|                                                                |       |        |        |        |       |
| **PARTNERS’ CAPITAL:**                                         |       |        |        |        |       |
|                                                                |       |        |        |        |       |
| General Partner (2,012,396 Units and 756,618 Units)                 |       | 2,297,491   |        | 1,215,470   |       |
| Limited Partners-Unitized (175,502,197 Units and 108,712,438 Units) |       | 201,750,316 |        | 148,134,902 |       |
| Limited Partners-Non-unitized                                       |       | 64,538,060  |        | —      |       |
|                                                                |       |        |        |        |       |
| Total partners’ capital                                        |       | 268,585,867 |        | 149,350,372 |       |
|                                                                |       |        |        |        |       |
| **TOTAL LIABILITIES AND PARTNERS’ CAPITAL**                    |       | $           | 280,475,255 |        | $          | 151,683,962 |   |

 

**NET ASSET VALUE PER UNIT (Note 6)**

 

See notes to financial statements.

 

2

----

 

GLOBAL HORIZONS I L.P.

(A Delaware Limited Partnership)

 

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

 
| ** **                    | ** ** | **2005**    | ** ** | **2004**   | ** ** | **2003**   | ** ** |
|-------------------------------|------------|-------------|------------|------------|------------|------------|------------|
| **TRADING PROFITS (LOSSES):** |       |        |       |       |       |       |       |
| Realized                      |       | $           | 680,616    |       | $          | 8,179,826  |       | $ | 13,824,221 |   |
| Change in unrealized          |       | 1,837,104   |       | (700,154   | )          | (44,489    | )          |
|                          |       |        |       |       |       |       |       |
| Total trading profits         |       | 2,517,720   |       | 7,479,672  |       | 13,779,732 |       |
|                          |       |        |       |       |       |       |       |
| **INVESTMENT INCOME:**        |       |        |       |       |       |       |       |
| Interest income               |       | 8,910,897   |       | 1,297,826  |       | 496,656    |       |
|                          |       |        |       |       |       |       |       |
| **EXPENSES:**                 |       |        |       |       |       |       |       |
| Brokerage commissions         |       | 17,973,653  |       | 5,725,678  |       | 3,601,088  |       |
| Profit Shares                 |       | 1,266,141   |       | 1,581,140  |       | 1,998,129  |       |
| Administrative fees           |       | 622,238     |       | 205,144    |       | 124,175    |       |
| Incentive Override            |       | —      |       | —     |       | 805,634    |       |
|                          |       |        |       |       |       |       |       |
| Total expenses                |       | 19,862,032  |       | 7,511,962  |       | 6,529,026  |       |
|                          |       |        |       |       |       |       |       |
| **NET INVESTMENT LOSS**       |       | (10,951,135 | )          | (6,214,136 | )          | (6,032,370 | )          |
|                          |       |        |       |       |       |       |       |
| **NET INCOME(LOSS)**          |       | $           | (8,433,415 | )          | $          | 1,265,536  |       | $ | 7,747,362 |   |

 

**NET INCOME (LOSS) PER UNIT:**

 
| Weighted average number of General Partner and Limited Partner Units  outstanding |   |        |    |       |   |    |   |
|-----------------------------------------------------------------------------------|--------|-------------|---------|------------|--------|---------|--------|
| Series A                                                                          |   | 158,164,103 |    | 41,739,953 |   | n/a     |   |
| Series F                                                                          |   | 186,537     |    | 199,814    |   | 222,625 |   |
| Series I                                                                          |   | 8,007,483   |    | 970,488    |   | n/a     |   |
|                                                                              |   |        |    |       |   |    |   |
| Net income (loss) per weighted average General                                    |   |        |    |       |   |    |   |
| Partner and Limited Partner Unit*                                                 |   |        |    |       |   |    |   |
| Series A                                                                          |   | $           | (0.0268 | )          | $      | 0.0413  |   | n/a |   |
| Series F                                                                          |   | $           | (8.65   | )          | $      | (3.12   | )      | $ | 34.80 |   |
| Series I                                                                          |   | $           | (0.0061 | )          | $      | 0.1689  |   | n/a |   |
|                                                                                   |        |             |         |            |        |         |        |  |  |  |

 

----

*Calculation of netincome (loss) per weighted average general partner and limited partner unitexcludes net loss allocated to non-unitized interests for the year endedDecember 31, 2005.

 

See notes to financial statements.

 

3

----

 

GLOBAL HORIZONS I L.P.

(A Delaware Limited Partnership)

 

STATEMENTS OF CHANGES INPARTNERS’ CAPITAL

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

 
| ** **                                 | ** ** | **Units**        | ** ** | **General  Partner** | ** ** | **Limited Partners** | ** ** | **Total**   | ** ** |
|--------------------------------------------|------------|------------------|------------|----------------------|------------|----------------------|------------|-------------|------------|
| **Unitized**                               | ** ** | **Non-unitized** |
|                                       |       |             |       |                 |       |                 |       |        |       |   |   |
| PARTNERS’ CAPITAL,  DECEMBER 31, 2002 |       | 236,509          |       | $                    | 499,969    |                 | $          | 46,442,308  |       | $ | — |   | $ | 46,942,277 |   |
|                                       |       |             |       |                 |       |                 |       |        |       |   |   |
| Net income                                 |       | —           |       | 87,257               |       | 7,660,105            |       | —      |       | 7,747,362 |   |
|                                       |       |             |       |                 |       |                 |       |        |       |   |   |
| Redemptions                                |       | (27,795          | )          | (90,451              | )          | (5,943,916           | )          | —      |       | (6,034,367 | ) |
|                                       |       |             |       |                 |       |                 |       |        |       |   |   |
| PARTNERS’ CAPITAL,  DECEMBER 31, 2003 |       | 208,714          |       | 496,775              |       | 48,158,497           |       | —      |       | 48,655,272 |   |
|                                       |       |             |       |                 |       |                 |       |        |       |   |   |
| Additions                                  |       | 109,835,116      |       | 698,374              |       | 102,941,546          |       | —      |       | 103,639,920 |   |
|                                       |       |             |       |                 |       |                 |       |        |       |   |   |
| Net income                                 |       | —           |       | 20,321               |       | 1,245,215            |       | —      |       | 1,265,536 |   |
|                                       |       |             |       |                 |       |                 |       |        |       |   |   |
| Redemptions                                |       | (574,774         | )          | —               |       | (4,210,356           | )          | —      |       | (4,210,356 | ) |
|                                       |       |             |       |                 |       |                 |       |        |       |   |   |
| PARTNERS’ CAPITAL,  DECEMBER 31, 2004 |       | 109,469,056      |       | 1,215,470            |       | 148,134,902          |       | —      |       | 149,350,372 |   |
|                                       |       |             |       |                 |       |                 |       |        |       |   |   |
| Additions                                  |       | 92,064,612       |       | 1,153,893            |       | 84,724,425           |       | 97,084,491  |       | 182,962,809 |   |
|                                       |       |             |       |                 |       |                 |       |        |       |   |   |
| Net loss                                   |       | —           |       | (30,294              | )          | (5,865,971           | )          | (2,537,150  | )          | (8,433,415 | ) |
|                                       |       |             |       |                 |       |                 |       |        |       |   |   |
| Redemptions                                |       | (24,019,075      | )          | (41,578              | )          | (25,243,040          | )          | (30,009,281 | )          | (55,293,899 | ) |
|                                       |       |             |       |                 |       |                 |       |        |       |   |   |
| PARTNERS’ CAPITAL,  DECEMBER 31, 2005 |       | 177,514,593      |       | $                    | 2,297,491  |                 | $          | 201,750,316 |       | $ | 64,538,060 |   | $ | 268,585,867 |   |

 

See notes to financial statements.

 

4

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GLOBAL HORIZONS I L.P.

(A Delaware Limited Partnership)

 

FINANCIAL DATAHIGHLIGHTS

FOR THE YEAR ENDED DECEMBER 31, 2005

 

The following per Unit data and ratios have been derived frominformation provided in the financial statements.

 
| **Per  Unit Operating Performance:** | ** ** | **Series A** | ** ** | **Series F** | ** ** | **Series I** | ** ** | **Non-unitized** | ** ** |
|--------------------------------------|------------|--------------|------------|--------------|------------|--------------|------------|------------------|------------|
|                                 |       |         |       |         |       |         |       |             |       |
| Net asset value,  beginning of year  |       | $            | 0.9615     |         | $          | 230.10       |       | $                | 0.9478     |   | n/a |   |
|                                 |       |         |       |         |       |         |       |             |       |
| Realized trading profit              |       | 0.0002       |       | 0.06         |       | 0.0005       |       | n/a              |       |
| Change in unrealized                 |       | 0.0051       |       | 1.20         |       | 0.0052       |       | n/a              |       |
| Interest income                      |       | 0.0289       |       | 6.94         |       | 0.0290       |       | n/a              |       |
| Expenses                             |       | (0.0693      | )          | (16.49       | )          | (0.0440      | )          | n/a              |       |
|                                 |       |         |       |         |       |         |       |             |       |
| Net asset value, end of  year        |       | $            | 0.9264     |         | $          | 221.81       |       | $                | 0.9385     |   | n/a |   |
|                                 |       |         |       |         |       |         |       |             |       |
| **Total Return:**                    |       |         |       |         |       |         |       |             |       |
|                                 |       |         |       |         |       |         |       |             |       |
| Total return before  Profit Shares   |       | -3.12        | %          | -3.12        | %          | -0.31        | %          | -2.47            | %          |
| Profit Shares                        |       | -0.55        | %          | -0.50        | %          | -0.68        | %          | -0.31            | %          |
| Total return                         |       | -3.65        | %          | -3.60        | %          | -0.98        | %          | -2.77            | %          |
|                                 |       |         |       |         |       |         |       |             |       |
| **Ratios to Average Net Assets:**    |       |         |       |         |       |         |       |             |       |
|                                 |       |         |       |         |       |         |       |             |       |
| Expenses (before Profit  Shares)     |       | 7.22         | %          | 6.95         | %          | 4.18         | %          | 6.46             | %          |
| Profit Shares                        |       | 0.51         | %          | 0.51         | %          | 0.67         | %          | 0.34             | %          |
| Expenses                             |       | 7.73         | %          | 7.46         | %          | 4.85         | %          | 6.80             | %          |
|                                 |       |         |       |         |       |         |       |             |       |
| Net investment loss                  |       | -4.40        | %          | -4.33        | %          | -1.60        | %          | -3.48            | %          |

 

See notes to financial statements.

 

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GLOBAL HORIZONS I L.P.

(A Delaware Limited Partnership)

 

NOTES TO FINANCIALSTATEMENTS

 

1.                                       SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES

 

Organization

 

Global Horizons I L.P.(the “Partnership”), formerly ML Global Horizons, LP,  was organized as an open-end fund under theDelaware Revised Uniform Limited Partnership Act on May 11, 1993 and commencedtrading activities on January 4, 1994. The Partnership engages in thespeculative trading of futures, options on futures and forward contracts on awide range of commodities. The Partnership issues units of limited partnershipinterest (“Units”) at Net Asset Value as of the beginning of each month. EffectiveDecember 1, 2005 Merrill Lynch Alternative Investments LLC (“MLAI”) became thegeneral partner of the Partnership. Prior to December 1, 2005, Merrill LynchInvestment Managers LLC (“MLIM LLC”) was the general partner of the Partnership.MLAI is a wholly-owned subsidiary of Merrill Lynch Investment Managers LP (“MLIM”),which in turn, is an indirect wholly-owned subsidiary of Merrill Lynch &Co. Inc. (“Merrill Lynch”). Trading authority is delegated to independenttrading advisors (the “Advisors”) by MLIM. Merrill Lynch, Pierce, Fenner &Smith Incorporated (“MLPF&S”), a wholly-owned subsidiary of Merrill Lynch,is the Partnership’s commodity broker. MLAI has agreed to maintain a generalpartner’s interest of at least 1% of the total capital of the unitized seriesin the Partnership. MLAI and each Limited Partner share in the profits andlosses of the Partnership in proportion to their respective interests in thePartnership.

 

Estimates

 

The preparation of financial statements in conformity with accountingprinciples generally accepted in the United States of America requiresmanagement to make estimates and assumptions that affect the reported amountsof assets and liabilities and disclosure of contingent assets and liabilitiesat the date of the financial statements as well as the reported amounts ofrevenues and expenses during the reporting period. Actual results could differfrom those estimates.

 

Revenue Recognition

 

Commodity futures, options on futures and forward contract transactionsare recorded on trade date and open contracts are reflected in Net unrealizedprofit on open contracts in the Statements of Financial Condition as thedifference between the original contract value and the market value (for thosecommodity interests for which market quotations are readily available). Thechange in unrealized profit on open contracts from one period to the next isreflected in Change in unrealized in the Statements of Operations.

 

Foreign Currency Transactions

 

The Partnership’s functional currency is the U.S. dollar; however, ittransacts business in currencies other than the U.S. dollar. Assets andliabilities denominated in currencies other than the U.S. dollar are translatedinto U.S. dollars at the rates in effect at the dates of the Statements ofFinancial Condition. Income and expense items denominated in currencies otherthan the U.S. dollar are translated into U.S. dollars at the rates in effectduring the period. Gains and losses resulting from the translation to U.S.dollars are reported in Realized in the Statements of Operations.

 

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Cash at Broker

 

A portion of the assets maintained at MLPF&S is restricted to meetmaintenance margin requirements. Typically, margin requirements range from 1%to 10% of the face value of the derivatives traded.

 

Operating Expenses, Ongoing Offering Costs and Selling Commissions 

 

MLAI pays for all routine operating costs (including legal, accounting,printing, postage and similar administrative expenses) of the Partnership,including the costs, if any, of the ongoing offering of the Units. MLAIreceives an administrative fee as well as a portion of the brokeragecommissions paid to MLPF&S by the Partnership.

 

No selling commissions have been or are paid directly by LimitedPartners. All selling commissions are paid by MLAI.

 

Income Taxes

 

No provision for income taxes has been made in these financialstatements as each Partner is individually responsible for reporting income orloss based on such Partner’s respective share of the Partnership’s income andexpenses as reported for income tax purposes.

 

Distributions

 

The Limited Partners are entitled to receive, equally per Unit, anydistributions which may be made by the Partnership. No such distributions havebeen declared for the years ended December 31, 2005, 2004 or 2003.

 

Subscriptions

 

Units are offered as of the close of business at the end of each month.Units are purchased as of the first business day of any month at Net AssetValue, but the subscription request must be submitted at least ten calendardays before the end of the preceding month. Subscriptions submitted less thanten days before the end of a month will be applied to Unit subscriptions as ofthe beginning of the second month after receipt, unless revoked by MLAI.

 

Redemptions

 

A Limited Partner may redeem some or all of such Partner’s Units at NetAsset Value as of the close of business on the last business day of any calendarmonth upon ten calendar days’ notice. Units redeemed on or prior to the end ofthe twelfth full month after purchase are assessed an early redemption chargeof 3% of their Net Asset Value as of the date of redemption.

 

Dissolution of thePartnership

 

The Partnership will terminate on December 31, 2023 or at an earlierdate if certain conditions occur, as well as under certain other circumstancesas set forth in the Limited Partnership Agreement.

 

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Indemnifications

 

In the normal course of business, the Partnership enters into contractsand agreements that contain a variety of representations and warranties andwhich provide general indemnifications. The Partnership’s maximum exposureunder these arrangements is unknown, as this would involve future claims thatmay be made against the Partnership that have not yet occurred. The Partnershipexpects the risk of any future obligation under these indemnifications to beremote.

 

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2.             CONDENSED SCHEDULESOF INVESTMENTS

 

The Partnership’s investments, defined as Netunrealized profit on open contracts on the Statements of Financial Condition,as of December 31, 2005, and 2004, are as follows:

 
| **2005**                       | ** ** | ** **               | ** ** | **Long  Positions**           | ** ** | ** **                  | ** ** | ** **               | ** ** | **Short  Positions**          | ** ** | ** **                  | ** ** | **Net  Unrealized**                  | ** ** | ** **                  | ** ** | ** **               | ** ** |
|--------------------------------|------------|--------------------------|------------|-------------------------------|------------|-----------------------------|------------|--------------------------|------------|-------------------------------|------------|-----------------------------|------------|--------------------------------------|------------|-----------------------------|------------|--------------------------|------------|
| **Commodity  Industry Sector** | ** ** | **Number  of Contracts** | ** ** | **Unrealized  Profit (Loss)** | ** ** | **Percent  of  Net Assets** | ** ** | **Number  of Contracts** | ** ** | **Unrealized  Profit (Loss)** | ** ** | **Percent  of  Net Assets** | ** ** | **Profit  (Loss)  on Open Positons** | ** ** | **Percent  of  Net Assets** | ** ** | **Maturity  Dates**      |       |
|                           |       |                     |       |                          |       |                        |       |                     |       |                          |       |                        |       |                                 |       |                        |       |                     |       |
| Agriculture                    |       | 1,762                    |       | $                             | 2,241,726  |                        | 0.83       | %                        | (1,675     | )                             | $          | (946,375                    | )          | -0.35                                | %          | $                           | 1,295,351  |                     | 0.48       | % | January 06 - December 07 |   |
| Currencies                     |       | 1,693,056                |       | (834,923                      | )          | -0.31                       | %          | (3,494,929               | )          | 1,560,017                     |       | 0.58                        | %          | 725,094                              |       | 0.27                        | %          | January 06 - December 06 |       |
| Energy                         |       | 58                       |       | (40,250                       | )          | -0.01                       | %          | (142                     | )          | (209,978                      | )          | -0.08                       | %          | (250,228                             | )          | -0.09                       | %          | January 06 - March 06    |       |
| Interest rates                 |       | 4,464                    |       | 760,732                       |       | 0.28                        | %          | (7,621                   | )          | (869,250                      | )          | -0.32                       | %          | (108,518                             | )          | -0.04                       | %          | January 06 - December 07 |       |
| Metals                         |       | 1,315                    |       | 4,529,763                     |       | 1.69                        | %          | (358                     | )          | (1,407,519                    | )          | -0.51                       | %          | 3,122,244                            |       | 1.18                        | %          | January 06 - April 06    |       |
| Stock indices                  |       | 1,339                    |       | 209,188                       |       | 0.08                        | %          | (239                     | )          | (6,821                        | )          | 0.00                        | %          | 202,367                              |       | 0.08                        | %          | January 06 - March 06    |       |
|                           |       |                     |       |                          |       |                        |       |                     |       |                          |       |                        |       |                                 |       |                        |       |                     |       |
| Total                          |       |                     |       | $                             | 6,866,236  |                        | 2.56       | %                        |       |                          | $          | (1,879,926                  | )          | -0.68                                | %          | $                           | 4,986,310  |                     | 1.88       | % |   |   |

 
| **2004**                       | ** ** | ** **               | ** ** | **Long  Positions**           | ** ** | ** **                  | ** ** | ** **               | ** ** | **Short  Positions**          | ** ** | ** **                  | ** ** | **Net  Unrealized**                  | ** ** | ** **                  | ** ** | ** **             | ** ** |
|--------------------------------|------------|--------------------------|------------|-------------------------------|------------|-----------------------------|------------|--------------------------|------------|-------------------------------|------------|-----------------------------|------------|--------------------------------------|------------|-----------------------------|------------|------------------------|------------|
| **Commodity  Industry Sector** | ** ** | **Number  of Contracts** | ** ** | **Unrealized  Profit (Loss)** | ** ** | **Percent  of  Net Assets** | ** ** | **Number  of Contracts** | ** ** | **Unrealized  Profit (Loss)** | ** ** | **Percent  of  Net Assets** | ** ** | **Profit  (Loss)  on Open Positons** | ** ** | **Percent  of  Net Assets** | ** ** | **Maturity  Dates**    | ** ** |
|                           |       |                     |       |                          |       |                        |       |                     |       |                          |       |                        |       |                                 |       |                        |       |                   |       |
| Agriculture                    |       | 543                      |       | $                             | 444,685    |                        | 0.30       | %                        | (914       | )                             | $          | (220,473                    | )          | -0.15                                | %          | $                           | 224,212    |                   | 0.15       | % | January 05 - December 06 |   |
| Currencies                     |       | 6,483,273                |       | 3,673,444                     |       | 2.46                        | %          | (8,601,780               | )          | (2,712,818                    | )          | -1.82                       | %          | 960,626                              |       | 0.64                        | %          | January 05 - March 05  |       |
| Energy                         |       | 26                       |       | (119,651                      | )          | -0.08                       | %          | (175                     | )          | 170,020                       |       | 0.11                        | %          | 50,369                               |       | 0.03                        | %          | January 05 - April 05  |       |
| Interest rates                 |       | 3,809                    |       | 222,329                       |       | 0.15                        | %          | (4,491                   | )          | 640,930                       |       | 0.43                        | %          | 863,259                              |       | 0.58                        | %          | March 05 - December 06 |       |
| Metals                         |       | 1,113                    |       | 1,227,276                     |       | 0.82                        | %          | (715                     | )          | (978,357                      | )          | -0.65                       | %          | 248,919                              |       | 0.17                        | %          | January 05 - March 05  |       |
| Stock indices                  |       | 955                      |       | 830,596                       |       | 0.56                        | %          | (6                       | )          | (28,640                       | )          | -0.02                       | %          | 801,956                              |       | 0.54                        | %          | January 05 - March 05  |       |
|                           |       |                     |       |                          |       |                        |       |                     |       |                          |       |                        |       |                                 |       |                        |       |                   |       |
| Total                          |       |                     |       | $                             | 6,278,679  |                        | 4.21       | %                        |       |                          | $          | (3,129,338                  | )          | -2.10                                | %          | $                           | 3,149,341  |                   | 2.11       | % |   |   |

 

No individual contract’s unrealized gain or loss comprised greater than5% of the Partner’s capital as of December 31, 2005 or 2004.

 

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3.                    RELATEDPARTY TRANSACTIONS

 

**The Partnership’s U.S. dollarassets are maintained at MLPF&S. On assets held in U.S. dollars, MerrillLynch credits the Partnership with interest at the prevailing 91-day U.S.Treasury bill rate. The Partnership is credited with interest on any of its netgains actually held by MLPF&S in non-U.S. dollar currencies at a prevailinglocal rate received by Merrill Lynch. Merrill Lynch may derive certain economicbenefit, in excess of the interest which Merrill Lynch pays to the Partnership,from possession of such assets.**

 

Merrill Lynch charges the Partnership Merrill Lynch’s cost of financingrealized and unrealized losses on the Partnership’s non-U.S. dollar denominatedpositions. Such amounts are netted against interest income due to theinsignificance of such amounts.

 

As of February 1, 2004, the Partnership was made available for newinvestment. Series A and F units pay brokerage commissions to MLPF&S at aflat monthly rate of .583 of 1% (a 7.00% annual rate) of the Series’ month-endtrading assets. Series I pays brokerage commissions to MLPF&S at a flatmonthly rate of .333 of 1% (a 4.00% annual rate) of the Series’ month-endtrading assets. The Partnership pays MLAI a monthly administrative fee of .021of 1% (a 0.25% annual rate) of the Partnership’s month-end trading assets. Month-endtrading assets are not reduced, for purposes of calculating brokeragecommissions and administrative fees, by any accrued brokerage commissions, administrativefees, Profit Shares or other fees or charges. Prior to February 1, 2004 thebrokerage commissions on Series F was a monthly rate of .604 of 1% (a 7.25%annual rate). Brokerage commissions for the non-unitized series range from .604of 1% (a 7.25% annual rate) to .729 of 1% (a 8.75% annual rate).

 

MLAI estimates that the round-turn equivalent commission rate chargedto the Partnership by MLPF&S during the years ended December 31, 2005, 2004and 2003 was approximately $39, $90 and $84, respectively (not including, incalculating round-turn equivalents, forward contracts on a futures-equivalentbasis).

 

MLPF&S pays the Advisors annual consulting fees ranging up to 2.00%of the Partnership’s average month-end assets allocated to them for management,after reduction for a portion of the brokerage commissions accrued with respectto such assets.

 

Prior to January 1, 2004, the Partnership paid to MLIM LLC an IncentiveOverride equal to 10% of the Net New Gain, as defined. Such payments were alsomade to MLIM LLC from the redemption value of Units redeemed as of the end ofinterim months during a year, to the extent of any Net New Gain attributable tosuch Units when redeemed. For the year ended December 31, 2003, an IncentiveOverride of $805,634 was paid to MLIM LLC.

 

Due to affiliate on the Statement of Financial Condition relates tocash assets held in accounts relating to a previously liquidated fund.  This amount will be paid to MLAI upon thelegal liquidation of the affiliated fund.

#  

# 4.                    ADVISORY AGREEMENTS

 

The Partnership and the Advisors have each entered into AdvisoryAgreements. These Advisory Agreements generally renew one year after they areentered into, subject to certain renewal rights exercisable by the Partnership.The Advisors determine the commodity futures, options on futures and forwardcontract trades to be made on behalf of their respective Partnership accounts,subject to certain trading policies and to certain rights reserved by MLAI.

 

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Profit Shares, generally ranging from 20% to 25% of any New TradingProfit, as defined, recognized by each Advisor considered individually,irrespective of the overall performance of the Partnership, as of either theend of each calendar quarter or year and upon the net reallocation of assetsaway from an Advisor, are paid by the Partnership to each Advisor. ProfitShares are also paid out in respect of Units redeemed as of the end of interimmonths, to the extent of the applicable percentage of any New Trading Profitattributable to such Units.

 

5.                    WEIGHTEDAVERAGE UNITS

 

The weighted average number of Units outstanding iscomputed for purposes of disclosing net income (loss) per weighted average Unit.The weighted average number of Units outstanding for the years ended December31, 2005, 2004 and 2003 equals the Units outstanding as of such date, adjustedproportionately for Units sold and redeemed based on the respective length oftime each was outstanding during the year.

 

6.                    UNITIZEDAND NON-UNITIZED SERIES

 

At December 31, 2005 and 2004, the Net Asset Values of the differentunitized series and the partners holding the non-unitized series of thePartnership are as follows:

 

December 31, 2005

 
| **Unitized Series** | ** ** | **Net Asset  Value** | ** **  | **Number of  Units** | ** **  | **Net Asset  Value per  Unit** | ** ** |
|---------------------|------------|----------------------|-------------|----------------------|-------------|--------------------------------|------------|
|                |       |                 |        |                 |        |                           |       |
| Series A            |       | $                    | 156,419,239 |                 | 168,843,481 |                           | $          | 0.9264 |   |
| Series F            |       | 39,658,470           |        | 178,795              |        | $                              | 221.81     |   |
| Series I            |       | 7,970,098            |        | 8,492,317            |        | $                              | 0.9385     |   |
|                |       | $                    | 204,047,807 |                 | 177,514,593 |                           |       |   |

 

Non-unitized Series

 
| ML Futures  Investments L.P.      |   | $          | 39,887,435  |   |
|-----------------------------------|--------|------------|-------------|--------|
| ML Principal Protection L.P.      |   | 10,232,424 |        |
| ML Principal Protection Plus Ltd. |   | 14,418,201 |        |
|                              |   | $          | 64,538,060  |   |
|                              |   |       |        |
| Total partners’ capital      |   | $          | 268,585,867 |   |

 

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December 31, 2004

 
| ** **                   | ** ** | **Net Asset  Value** | ** **  | **Number of  Units** | ** **  | **NetAsset  Value per  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     |   |
| Total partners’ capital |       | $                    | 149,350,372 |                 | 109,469,056 |                          |       |   |

 

Effective January 1, 2005, three funds (the “Feeder Funds”) in which MLAIis general partner or sponsor invested their net assets in a non-unitizedseries of the Partnership. The Feeder Funds are all closed to new investmentand are segregated from other subscriptions as the non-unitized series. At thepoint of contribution, the total investment by the Feeder Funds was$97,084,491.

 

7.                    COPPERSETTLEMENT

 

The Partnership, as a member of a class ofplaintiffs, received a settlement payment in February 2005 relating to certaincopper trades made by a number of investors, including the Partnership, duringa period in the mid-1990s. Members of the class were those who purchased orsold Comex copper futures or options contracts between June 24, 1993 and June15, 1996. The amount of the settlement for the Partnership was $27,888, whichis included in Realized under Trading profits (losses) on the Statement ofOperations of the Partnership for the year ended December 31, 2005.

 

8.                    FAIRVALUE AND OFF-BALANCE SHEET RISK

 

The nature of this Partnership has certain risks,which cannot all be presented on the financial statements. The followingsummarizes some of those risks.

 

Market Risk

 

Derivative instruments involve varying degrees of off-balance sheetmarket risk. Changes in the level or volatility of interest rates, foreigncurrency exchange rates or the market values of the financial instruments orcommodities underlying open contracts frequently result in changes in thePartnership’s net unrealized profit on such derivative instruments as reflectedin the Statements of Financial Condition. The Partnership’s exposure to marketrisk is influenced by a number of factors, including the relationships amongthe derivative instruments held by the Partnership as well as the volatilityand liquidity of the markets in which the derivative instruments are traded.

 

MLAI 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 Values of the Partnership as of the close of businesson each day and reviewing outstanding positions for over-concentrations. While MLAIdoes not itself intervene in the markets to hedge or diversify the Partnership’smarket exposure, MLAI may urge the Advisors to reallocate positions in anattempt to avoid over-concentrations. However, such interventions are unusualand unless it appears that the Advisors have begun to deviate from pastpractice or trading policies or to be trading erratically, MLAI’s basic riskcontrol procedures consist simply of the ongoing process of advisor monitoring,with the market risk controls being applied by the Advisors themselves.

 

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Credit Risk

 

The risks associated with exchange-traded contracts are typicallyperceived to be less than those associated with over-the-counter(non-exchange-traded) transactions, because exchanges typically (but notuniversally) provide clearinghouse arrangements in which the collective credit(in some cases limited in amount, in some cases not) of the members of theexchange is pledged to support the financial integrity of the exchange. Inover-the-counter transactions, on the other hand, traders must rely solely onthe credit of their respective individual counterparties. Margins, which may besubject to loss in the event of a default, are generally required in exchangetrading, and counterparties may also require margin in the over-the-countermarkets.

 

The credit risk associated with these instruments from counterpartynonperformance is the net unrealized profit on open contracts, included in theStatements of Financial Condition. The Partnership attempts to mitigate thisrisk by dealing exclusively with Merrill Lynch entities as clearing brokers.

 

The Partnership, in its normal course of business, enters into variouscontracts with MLPF&S acting as its commodity broker. Pursuant to thebrokerage agreement with MLPF&S (which includes a netting arrangement), tothe extent that such trading results in receivables from and payables toMLPF&S, these receivables and payables are offset and reported as a netreceivable or payable and included in Net unrealized profit on open contractson the Statements of Financial Condition.

 

9.                    SUBSEQUENTEVENT

 

On February 15, 2006, Merrill Lynch and BlackRock, Inc (“BlackRock”)announced that they have reached an agreement to merge the asset managementbusiness of MLIM and BlackRock to create a new independent asset managementcompany. The transaction has been approved by the boards of directors of bothMerrill Lynch and BlackRock and is expected to close in the third quarter of2006. As a result of the transaction, the combined company will become thegeneral partner or sponsor of the Partnership.

 

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*   *   *  *   *   *   *    *  *   *   *  *   *

 

To the best of the knowledge and belief of theundersigned, the information contained in thisreport is accurate and complete.

 

Michael PungelloChief Financial OfficerMerrill Lynch Alternative Investments LLCGeneral Partner ofML Global Horizons L.P.

 

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