<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(x) Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended: December 31, 1996
or
( ) Transition Report Pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934
Commission file number: 0-28928
ML JWH STRATEGIC ALLOCATION FUND L.P.
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(Exact name of registrant as specified in its charter)
DELAWARE 13-3887922
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(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
C/O MERRILL LYNCH INVESTMENT PARTNERS INC.
MERRILL LYNCH WORLD HEADQUARTERS
WORLD FINANCIAL CENTER
SOUTH TOWER, 6TH FLOOR, NEW YORK, NY 10080-6106
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(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 236-4167
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Limited Partnership
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Units
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 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 information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Aggregate market value of the voting stock held by non-affiliates: the
registrant is a limited partnership and, accordingly, has no voting stock held
by non-affiliates or otherwise.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant's "1996 Annual Report and Independent Auditors' Report," the
annual report to security holders for the fiscal year ended December 31, 1996,
is incorporated by reference into Part II, Item 8, and Part IV hereof and filed
as an Exhibit herewith.
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ML JWH STRATEGIC ALLOCATION FUND L.P.
ANNUAL REPORT FOR 1996 ON FORM 10-K
Table of Contents
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PART I PAGE
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Item 1. Business........................................... 1
Item 2. Properties......................................... 10
Item 3. Legal Proceedings.................................. 10
Item 4. Submission of Matters to a Vote of Security
Holders............................................ 10
PART II
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Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters................................ 10
Item 6. Selected Financial Data............................ 11
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................ 13
Item 8. Financial Statements and Supplementary Data........ 16
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................ 16
PART III
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Item 10. Directors and Executive Officers of the Registrant. 17
Item 11. Executive Compensation............................. 18
Item 12. Security Ownership of Certain Beneficial Owners
and Management..................................... 19
Item 13. Certain Relationships and Related Transactions..... 19
PART IV
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Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K........................................ 20
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PART I
ITEM 1: BUSINESS
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(a) General Development of Business:
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ML JWH Strategic Allocation Fund L.P. (the "Partnership" or the
"Fund") was organized under the Delaware Revised Uniform Limited Partnership Act
on December 11, 1995 and began trading operations on July 15, 1996. The Fund
trades in the international futures and forward markets applying multiple
proprietary trading strategies under the direction of John W. Henry & Company,
Inc. ("JWH"). The primary objective of the Fund is achieving, through
speculative trading, substantial capital appreciation.
Merrill Lynch Investment Partners Inc. (the "General Partner" or
"MLIP") acts as the general partner of the Partnership. Merrill Lynch Futures
Inc. (the "Commodity Broker" or "MLF") is the Partnership's commodity broker.
Merrill Lynch Asset Management, L.P. ("MLAM") provides cash management services
to the Partnership. The General Partner is a wholly-owned subsidiary of Merrill
Lynch Group Inc., which in turn is a wholly-owned subsidiary of Merrill Lynch &
Co., Inc. The Commodity Broker is an indirect wholly-owned subsidiary of
Merrill Lynch & Co., Inc. (Merrill Lynch & Co., Inc. and its affiliates are
herein sometimes referred to as "Merrill Lynch").
The Fund offers its units of limited partnership interest
("Units") on a continuous basis throughout each month. Investors whose
subscriptions are accepted during a month are admitted to the Fund as Limited
Partners as of the beginning of the following month, acquiring Units at the Net
Asset Value per Unit as of the date of admission. Investors' customer securities
accounts are debited in the amount of their subscriptions on a single monthly
settlement date within approximately five business days of the issuance of their
Units.
The Fund began trading on July 15, 1996 with an initial
capitalization of $102,000,000. A total of an additional $64,774,217 was
invested in the Units through December 31, 1996, and Units with an aggregate Net
Asset Value of $3,241,918 were redeemed. As of December 31, 1996, the aggregate
Net Asset Value of the Fund was $172,844,448, and the Net Asset Value per Unit,
originally $100 as of July 15, 1996, had risen to $123.16. As of December 31,
1996, the Fund had 5,324 Limited Partners.
Through December 31, 1996, the net gain in the Net Asset Value per
Unit was 23.16%. The highest month-end Net Asset Value per Unit was $123.16
(December 31, 1996) and the lowest $98.89 (August 31, 1996).
(b) Financial Information about Industry Segments:
---------------------------------------------
The Partnership's business constitutes only one segment for
financial reporting purposes, i.e., a speculative "commodity pool."
(c) Narrative Description of Business:
---------------------------------
GENERAL
The Partnership applies a multi-strategy, not a multi-manager,
approach. Furthermore, MLIP has allocated to JWH full discretionary authority
over the selection of which JWH Trading Programs to use for the Partnership and
the leverage to be applied in doing so.
The Fund trades in the international futures, options on futures
and forward markets, with the objectives of achieving substantial capital
appreciation.
One of the objectives of the Fund is to provide diversification to
a limited portion of the risk segment of the Limited Partners' portfolios into
an investment field that has historically often demonstrated a low degree of
performance correlation with traditional stock and bond holdings. Since it began
trading, the Fund's returns have, in fact, frequently been significantly non-
correlated (not, however, negatively correlated) with the United States stock
and bond markets.
1
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Multiple JWH Programs. JWH selects, on an ongoing basis, various
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different combinations of JWH Programs to be used by the Fund, allocating and
reallocating its assets among these strategies in response to existing and
anticipated market conditions as well as to the performance of the individual
Programs and of the Fund as a whole.
The Partnership has available to it, in the discretion of JWH, most of
the currently active JWH Programs, and will have access to such new Programs as
JWH may develop from time to time and determine to be both suitable for and
available to the Fund.
JWH classifies its Programs as Diversified, Financial, or Foreign
Exchange. The dates in parentheses below indicate the month when client trading
began for the Program in question.
JWH STRATEGIC ALLOCATION PROGRAM
AVAILABLE JWH TRADING PROGRAMS
DECEMBER 31, 1996
DIVERSIFIED FINANCIAL
- ----------- ---------
Global Diversified Portfolio (6/88) Financial and Metals Portfolio (10/84)
Original Investment Program (10/82) Global Financial Portfolio (6/94)
International Currency and Bond
Portfolio (1/93)
FOREIGN EXCHANGE
- ---------------- The World Financial Perspective (4/87)
Dollar Program (6/94) Worldwide Bond Program (10/94)
G-7 Currency Portfolio (2/91) Yen Financial Portfolio (1/92)
International Foreign Exchange
Program (8/86)
Considered collectively, these JWH Trading Programs trade in a wide
range of international currencies, financial instruments, commodities, metals
and stock indices, although these Programs place substantial emphasis on the
currency and interest-rate sectors.
Leverage Adjustments. An integral feature of the JWH Strategic
--------------------
Allocation Program is JWH's ongoing monitoring and adjustment of the overall
leverage at which the Fund trades. Factors which may affect the decision to
adjust leverage include: ongoing research; portfolio volatility; recent market
volatility; perceived risk exposure; and subjective evaluation of general market
conditions. During certain periods, the Fund's market commitments may exceed
(by as much as approximately 50%), and during other periods be reduced below
(also by as much as approximately 50%), the Fund's actual Net Assets. Leverage
adjustments, if successful, can augment both profit potential and risk control.
THE JOINT VENTURE STRUCTURE OF THE FUND'S TRADING
The trading management relationship between the Fund and JWH has been
structured in the form of a Joint Venture Agreement. The Joint Venture
Agreement terminates September 30, 1997, subject to up to two one-year renewals,
on the same terms, at the option of the MLIP. JWH has the right to terminate
the Joint Venture Agreement for certain reasons, including JWH determining to
cease managing client accounts pursuant to the JWH Strategic Allocation Program.
The Fund contributes substantially all of its capital to the joint venture, and
the joint venture is the entity which actually trades in the futures and forward
markets, allocating its profits and losses between JWH and the Fund (the Fund
being allocated substantially all such profits and losses except in respect of
any Profit Shares allocated to JWH). All expenses (other than organizational
and initial offering cost reimbursements and ongoing offering costs) and trading
activities described herein as being incurred or engaged in by, and services
described herein as being provided to, the Fund are, in fact, incurred or
engaged in by, or provided to, the joint venture. The Fund trading through a
joint venture with JWH, rather than directly in its own account while retaining
JWH as an advisor, has no effect on investors (other than causing the Profit
Share to constitute a reduction of the capital gain allocated to the Fund as
opposed to an incentive fee deductible by the Fund as an ordinary and necessary
business expense). For convenience of reference, the term "Fund" is used in
this Report to refer to the Fund, the joint venture or both, as the context may
require.
2
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USE OF PROCEEDS AND CASH MANAGEMENT INCOME
Subscription Proceeds. MLIP pays from its own funds the selling
---------------------
commissions relating to the sale of the Units. Accordingly, 100% of the
proceeds of Unit sales are received in cash by the Partnership and available for
use in its speculative trading. In such trading, the Partnership's assets are
not used to purchase or acquire any physical commodity but rather held as
security for and to pay the Partnership's trading losses as well as any expenses
and redemptions. The primary use of the proceeds of the sale of the Units is to
permit JWH to trade on a speculative basis in a wide range of different futures,
forwards and options on futures markets on behalf of the Partnership. While
being used for this purpose, the Partnership's assets are also generally
available for cash management, as more fully described below under "-- Available
Assets."
Market Sectors. The Partnership trades in a diversified group of
--------------
markets under the direction of JWH. JWH can, and does, from time to time
materially alter the allocation of its overall trading commitments among
different market sectors. Except in the case of certain trading programs which
are purposefully limited in the markets which they trade, there is essentially
no restriction on the commodity interests which may be traded by JWH or the
rapidity with which JWH may alter its market sector allocations.
The Fund's financial statements contain information relating to the
market sectors traded by the Fund. There can, however, be no assurance as to
which markets may be included in the Fund's portfolio or as to in which market
sectors the Fund's trading may be concentrated at any one time or over time.
Market Types. The Partnership trades on a variety of United States
------------
and foreign futures exchanges. Applicable exchange rules differ significantly
among different countries and exchanges. Substantially all of the Fund's off-
exchange trading takes places in the highly liquid, institutionally based
currency forward markets. The forward markets are generally unregulated, and in
its forward trading the Fund does not deposit margin with respect to its
positions. The Partnership's forward currency trading is executed exclusively
through the Foreign Exchange Service Desk (the "F/X Desk") operated by MLIP and
certain of its affiliates, with MLF as the back-to-back intermediary to the
ultimate counterparties, which include Merrill Lynch International Bank ("MLIB")
with which JWH trades on behalf of the Fund.
As in the case of its market sector allocations, the Fund's
commitments to different types of markets -- U.S. and non-U.S., regulated and
unregulated -- differ substantially from time to time as well as over time. The
Fund has no policy restricting its relative commitment to any of these different
types of markets, although generally the bulk of the Fund's trading takes place
on regulated exchanges.
The Fund's financial statements contain information relating to the
types of markets traded by the Fund. There can, however, be no assurance as to
in which markets the Fund may trade or the Fund's trading may be concentrated at
any one time or over time.
Custody of Assets. All of the Fund's assets -- other than the assets
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managed by MLAM and held in a custodial account as described below under "--The
Fund's U.S. Dollar Available Assets Managed by MLAM" -- are currently held in
customer accounts at Merrill Lynch.
Available Assets. The Fund earns income, as described below, on its
----------------
"Available Assets," which can be generally described as the cash actually held
by the Fund or invested in short-term Treasury bills. Available Assets are held
primarily in U.S. dollars or in U.S. dollar denominated securities issued by the
United States Government or certain of its agencies ("Government Securities"),
and to a lesser extent in foreign currencies, and are comprised of the
following: (a) the Fund's cash balances managed by MLAM or held in the offset
accounts (as described below) -- which include "open trade equity" (unrealized
gain and loss on open positions) on United States futures contracts, which is
paid into or out of the Fund's account on a daily basis; (b) short-term Treasury
bills purchased by the Fund; and (c) the Fund's cash balance in foreign
currencies derived from its trading in non-U.S. dollar denominated futures and
options contracts, which includes open trade equity on those exchanges which
settle gains and losses on open positions in such contracts prior to closing out
such positions. Available Assets do not include, and the Fund does not earn
interest on, the Fund's gains or losses on its open forward, commodity option
and certain foreign futures positions since such gains and losses are not
collected or paid until such positions are closed out.
3
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The Partnership's Available Assets may be greater than, less than or
equal to the Fund's Net Asset Value (on which the redemption value of the Units
is based) primarily because Net Asset Value reflects all gains and losses on
open positions as well as accrued but unpaid expenses.
The interest income arrangements for the Partnership's U.S. dollar
Available Assets differ from those applicable to its non-U.S. dollar Available
Assets. Interest income, once accrued by the Fund, is subject to the risk of
trading losses.
The Fund's U.S. Dollar Available Assets Managed by MLAM.
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Approximately 80% of the Fund's U.S. dollar Available Assets are managed
directly by MLAM, pursuant to guidelines established by MLIP for which MLAM
assumes no responsibility, in the Government Securities markets. MLIP's
objective in retaining MLAM to provide cash management services to the Fund is
to enhance the return earned on the Fund's U.S. dollar Available Assets managed
by MLAM to slightly above the 91-day Treasury bill rate, while maintaining
minimal (but by no means eliminating) market risk in the Fund's cash management
operations.
The Government Securities acquired by MLAM on behalf of the Fund are
maintained in a custodial account at a Merrill Lynch affiliate and are
specifically traceable to the Fund. All income earned on such Government
Securities inures to the benefit of the Fund.
MLF pays all fees due to MLAM in respect of its management of a
portion of the Fund's U.S. dollar Available Assets, at no additional cost to the
Fund.
MLAM does business as Merrill Lynch Asset Management. MLAM is a
limited partnership. ML&Co. is its limited partner, and Princeton Services,
Inc., a wholly-owned subsidiary of ML&Co., is the general partner. As of
December 31, 1996, MLAM and its affiliates, collectively, had a total of
approximately $234.1 billion in investment company and other portfolio assets
under management, including accounts of certain affiliates of MLAM.
Interest Earned on the Fund's U.S. Dollar Available Assets Not Managed
----------------------------------------------------------------------
by MLAM. The following description relates to the approximately 20% of the
- -------
Fund's U.S. dollar Available Assets not managed by MLAM.
The Fund's U.S. dollar Available Assets not managed by MLAM are held
in cash in offset accounts and in short-term Treasury bills purchased from
dealers unaffiliated with Merrill Lynch. Offset accounts are non-interest
bearing demand deposit accounts maintained with banks unaffiliated with Merrill
Lynch. An integral feature of the offset arrangements is that the participating
banks specifically acknowledge that the offset accounts are MLF customer
accounts, not subject to any Merrill Lynch liability.
MLF credits the Partnership, as of the end of each month, with
interest at the effective daily 91-day Treasury bill rate on the average daily
U.S. dollar Available Assets held in the offset accounts during such month. The
Fund receives all the interest paid on the short-term Treasury bills in which it
invests.
The use of the offset account arrangements for the Partnership's U.S.
dollar Available Assets not managed by MLAM may be discontinued by Merrill Lynch
whether or not Merrill Lynch otherwise continues to maintain its offset
arrangements. The offset arrangements are dependent on the banks' continued
willingness to make overnight credits available to Merrill Lynch, which, in
turn, is dependent on the credit standing of ML&Co. If Merrill Lynch were to
determine that the offset arrangements had ceased to be practicable (either
because ML&Co. credit lines at participating banks were exhausted or for any
other reason), Merrill Lynch would thereafter attempt to invest all of the
Fund's U.S. dollar Available Assets not managed by MLAM to the maximum
practicable extent in short-term United States Treasury bills. All interest
earned on the U.S. dollar Available Assets so invested would be paid to the
Fund, but MLIP would expect the amount of such interest to be less than that
available to the Fund under the offset account arrangements. The remaining U.S.
dollar Available Assets of the Fund not managed by MLAM would be kept in cash to
meet variation margin payments and pay expenses, but would not earn interest for
the Fund.
The banks at which the offset accounts are maintained make available
to Merrill Lynch interest-free overnight credits, loans or overdrafts in the
amount of the Fund's U.S. dollar Available Assets held in the offset accounts,
4
<PAGE>
charging Merrill Lynch a small fee for this service. The economic benefits
derived by Merrill Lynch -- net of the interest credits paid to the Fund and the
fee paid to the offset banks -- from the offset accounts have not exceeded 3/4
of 1% per annum of the Fund's average daily U.S. dollar Available Assets not
managed by MLAM and held in the offset accounts. These revenues to Merrill Lynch
are in addition to the Brokerage Commissions and Administrative Fees paid by the
Fund to MLF and MLIP, respectively.
Interest Paid by Merrill Lynch on the Fund's Non-U.S. Dollar Available
----------------------------------------------------------------------
Assets. Under the single currency margining system implemented for the
- -------
Partnership, the Partnership itself does not deposit foreign currencies to
margin trading in non-U.S. dollar denominated futures contracts and options. MLF
provides the necessary margin, permitting the Fund to retain the monies which
would otherwise be required for such margin as part of the Partnership 's U.S.
dollar Available Assets. Consequently, the Partnership does not earn interest
on foreign margin deposits. The Partnership does, however, earn interest on its
non-U.S. dollar Available Assets. Specifically, the Fund is credited by Merrill
Lynch with interest at the local short-term rate on realized and unrealized
gains on non-U.S. dollar denominated positions for such gains actually held in
cash by the Fund (MLAM does not manage any of the Fund's non-U.S. dollar
Available Assets.). Merrill Lynch charges the Fund Merrill Lynch's cost of
financing realized and unrealized losses on such positions.
In order to avoid the expense of daily currency conversions, the
Partnership holds foreign currency gains and finances foreign currency losses on
an interim basis until converted into U.S. dollars and either paid into or out
of the Partnership's U.S. dollar Available Assets. Foreign currency gains or
losses on open positions are not converted into U.S. dollars until the positions
are closed. Assets of the Partnership while held in foreign currencies are
subject to exchange rate risk.
Forward Transactions. Spot and forward currency contracts are the
---------------------
only non-exchange traded instruments held by the Fund.
To date, approximately 20% to 30% of the Fund's trades by volume have
been in forward currency contracts, but from time to time the percentage of the
Fund's trading represented by forward currency trades may fall substantially
outside this range. In using the F/X Desk, the Fund trades through MLF.
Because the Fund need not deposit any margin with MLF in respect of the Fund's
forward trading, the Fund's additional risk in trading in such unregulated
markets should be limited to a possible loss of unrealized profits on open
forward positions which a counterparty accessed through MLF would not, in the
event of its bankruptcy, be able to pay to MLF for the account of the Fund (MLF
not itself being obligated to pay such unrealized profits to the Fund unless MLF
is paid by MLF's counterparty).
Having the Fund (and the other MLF clients using the F/X Desk) trade
through the F/X Desk on the basis of MLF's credit lines permits the F/X Desk to
access a wide range of counterparties without the need of such counterparties
evaluating the individual credit of the Fund (or any other MLF client).
5
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CHARGES
The Partnership traded for only 5 1/2 months in 1996. During that
period, the Brokerage Commissions, Administrative Fees, and other expenses were
generally consistent with the following estimates. During such 5 1/2 month
period, the Partnership's average month-end Net Assets were $132,779,232, and
the Partnership's Brokerage Commissions, Administrative Fees, and reimbursement
of organizational and initial offering costs totaled $4,873,368, $157,205 and
$149,621 respectively (or 3.67%, 0.12% and 0.11% of average month-end net
assets).
In addition to the above charges, the Partnership and JWH share in the
profits of the Joint Venture based on equity ownership after 15% of the Joint
Venture's quarterly New Trading Profits are allocated to JWH. During such 5 1/2
month period, JWH received Profit Shares of $4,683,010 (inclusive of interest).
<TABLE>
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BREAKEVEN TABLE
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COLUMN II
COLUMN I DOLLAR BREAKEVEN RETURN
PERCENTAGE BREAKEVEN FIRST TWELVE MONTHS OF
RETURN INVESTMENT
FIRST TWELVE MONTHS ($5,000 INITIAL
ROUTINE EXPENSES OF INVESTMENT INVESTMENT)
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Reimbursement of Organizational and 0.50% $ 25.00
Initial Offering Costs/(1)/
Ongoing Offering Costs/(2)/ 0.25% $ 12.50
Brokerage Commissions 7.75% $387.50
Administrative Fee 0.25% $ 12.50
Profit Share/(3)/ 1.00% $ 50.00
F/X Desk Service and Related Fees/(4)/ 0.10% $ 5.00
Redemption Charge/(5)/ 3.10% $155.00
Cash Management Income/ (6)/ 5.00% $250.00
RETURN ON $5,000 INITIAL 17.95% $897.50
INVESTMENT REQUIRED TO
BREAKEVEN
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NOTES TO BREAKEVEN TABLE
(1) Assumes a $100 million average capitalization for the Fund.
(2) Assumes the maximum percentage ongoing offering costs. MLIP will pay any
such costs to the extent that they exceed 0.25 of 1% of the Fund's average
month-end Net Assets in any year.
(3) The 1% Profit Share assumed during a breakeven year is intended to reflect
possible timing differences between quarterly Profit Shares and annual
performance.
(4) Estimated; paid on a per-transaction basis. Bid-ask spreads on forward
currency trades are difficult to estimate and are not included as an expense
in the Breakeven Table. The F/X Desk is the Foreign Exchange Service Desk
through which the Fund trades forward currency contracts.
(5) Redemption charges would equal 3.10% of the initial $5,000 investment
because these charges would equal 3% of the $5,155 Net Asset Value necessary
in order for the investor to receive net redemption proceeds of $5,000 after
subtracting the 3% redemption charge.
(6) Estimated. The total cash management return earned on the Fund's assets,
including the results of MLAM's cash management services, is assumed to
approximate the 91-day Treasury bill rate for purposes of this estimate; in
fact, however, MLAM's cash management may be unable to produce an enhanced
cash management return or avoid a loss of principal. Such estimate does
6
<PAGE>
not reflect the economic benefit which may be derived by Merrill Lynch from
the deposit of certain of the Fund's U.S. dollar Available Assets in offset
accounts. See Item (c), "Narrative Description of Business -- Use of
Proceeds and Cost Management Income -- Interest Earned on the Fund's U.S.
Dollars Available Asset Not Managed by MLAM," above.
DESCRIPTION OF CURRENT CHARGES
The Fund and the Fund/JWH joint venture are subject to the following
charges and priority profit allocation (Profit Share):
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RECIPIENT NATURE OF PAYMENT AMOUNT OF PAYMENT
- --------- ----------------- -----------------
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MLIP Organizational and MLIP advanced these costs, $1,000,000 of which are being reimbursed to MLIP
initial offering costs by the Fund in 24 equal monthly installments.
reimbursement
MLF Brokerage commissions A flat-rate monthly Brokerage Commission of 0.646 of 1% of the Fund/JWH joint
venture's month-end assets (a 7.75% annual rate).
During the first 5 1/2 months of trading the round-turn (each purchase and
sale or sale and purchase of a single futures contract) equivalent rate of
the Funds' flat-rate Brokerage Commissions was approximately $208.
MLF Use of Fund assets MLF may derive an economic benefit from the deposit of certain of the Fund's
U.S. dollar Available Assets not managed by MLAM in offset accounts; this
benefit to date has not exceeded 3/4 of 1% of such average daily U.S. dollar
Available Assets.
MLIP Administrative Fee An Administrative Fee of 0.25% per annum of the Fund/JWH joint venture's
month-end assets is paid to MLIP, which pays all routine administrative
expenses of the joint venture, other than the Fund's ongoing offering costs.
MLIB Bid-ask spreads Under MLIP's F/X Desk arrangements, MLIB receives bid-ask spreads on the
forward trades which it executes with the Fund.
Other Counterparties Bid-ask spreads The counterparties' other than MLIB, with which the F/X Desk trades each
receive bid-ask spreads on the forward trades executed with the joint venture.
MLIP F/X Desk service fees Under the F/X Desk arrangements, MLIP receives a service fee equal, at
current exchange rates, to approximately $5.00 to $12.50 on each purchase or
sale of a futures contract-equivalent face amount of a currency executed with
counterparties other than MLIB.
MLIB EFP differentials MLIB or an affiliate receives a differential spread for exchanging the joint
venture's spot currency positions (which are acquired through the F/X Desk,
as described above) for equivalent futures positions.
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7
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DESCRIPTION OF CURRENT CHARGES (CONT.)
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RECIPIENT NATURE OF PAYMENT AMOUNT OF PAYMENT
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Government Securities Bid-ask spreads The dealers with which MLAM executes Government Securities trades include
Dealers bid-ask spreads in the prices they quote to the Fund.
Third Parties Ongoing offering costs The Fund does not pay its routine administrative expenses (these are paid by
MLIP, as described above); however, the Fund pays the costs, as incurred, of
the ongoing offering of the Units, subject to MLIP absorbing (without
reimbursement) any such costs to the extent that they exceed 0.25% of the
Fund's average month-end Net Assets in any fiscal year.
The ongoing offering costs payable by the Fund do not include the selling
commissions or ongoing compensation payable to the Selling Agent in respect
of the Units. Such commissionsand ongoing compensation are paid by MLIP.
JWH Profit Share 15% of any New Trading Profits, i.e. any cumulative calendar quarter-end
Trading Profit in excess of the highest level of such cumulative Trading
Profit as of any previous calendar quarter-end, are specially allocated by
the joint venture to JWH (as the Fund owns substantially all of the Fund/JWH
joint venture, such special allocation effectively is made out of Trading
Profits which the Fund would otherwise have received).
Trading Profit does not include interest income.
Trading Profit is calculated after reduction for annual brokerage commissions
calculated at a 5.00% rather than a 7.75% annual rate. Trading Profit is not
reduced by the Administrative Fee, organizational and initial offering cost
reimbursements or ongoing offering costs.
Trading Profit is calculated on the basis of the overall performance of the
joint venture, not the performance of each JWH Trading Program considered
individually.
</TABLE>
8
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DESCRIPTION OF CURRENT CHARGES (CONT.)
<TABLE>
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RECIPIENT NATURE OF PAYMENT AMOUNT OF PAYMENT
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JWH Profit Share Because the Profit Share is calculated on the basis of any Trading Profits
(cont.) achieved by the joint venture in excess of the highest level of cumulative
Trading Profits achieved by the joint venture as of any previous calendar
quarter-end, rather than on the basis of increases in the Net Asset Value per
Unit over the highest Net Asset Value per Unit as of any previous calendar
quarter-end, the Profit Shares allocated to JWH may not reflect the
investment experience of any particular Limited Partner. In fact, JWH may be
allocated substantial Profit Shares (allocated equally among all outstanding
Units) even though many Units have declined significantly in value from their
initial purchase price.
As Profit Shares are calculated on the basis of quarter-end highs in
cumulative Trading Profit, substantial Profit Shares may (irrespective of the
fact that Units are purchased at different times and prices, and may have
materially different investment experiences during a year) be accrued during
a calendar year even though the joint venture has an overall loss for such
year.
MLF; Other Extraordinary expenses Actual payments to third parties; expected to be negligible.
Third Parties
</TABLE>
REGULATION
The General Partner, JWH and the Commodity Broker are each subject to
regulation by the Commodity Futures Trading Commission and the National Futures
Association. Other than in respect of its periodic reporting requirements, and
the registration of the Units for continuous public distribution under the
Securities Act of 1933, the Partnership itself is generally not subject to
regulation by the Securities and Exchange Commission. However, MLIP itself is
registered as an "investment adviser" under the Investment Advisers Act of 1940.
(i) through (xii) -- not applicable.
(xiii) The Partnership has no employees.
(d) Financial Information about Foreign and Domestic Operations
-----------------------------------------------------------
and Export Sales:
- ----------------
The Partnership and the Joint Venture do not engage in material
operations in foreign countries, nor is a material portion of the Partnership's
revenues derived from customers in foreign countries. The Joint Venture does,
however, trade, from the United States, on a number of foreign commodity
exchanges.
9
<PAGE>
ITEM 2: PROPERTIES
----------
The Partnership does not use any physical properties in the
conduct of its business.
The Partnership's only place of business is the place of business
of the General Partner (see Item 10 herein). The General Partner performs all
administrative services for the Partnership from the General Partner's offices.
ITEM 3: LEGAL PROCEEDINGS
-----------------
There are no pending legal proceedings to which the Partnership
or the General Partner is a party.
In September 1996, JWH was named as a co-defendant in class
action lawsuits brought in the California Superior Court, Los Angeles County and
in the New York Supreme Court, New York County. In November, JWH was named as a
co-defendant in a class action complaint filed in Superior Court of the State of
Delaware for Newcastle County that contained the same allegations as the New
York and California complaints. The actions, which seek unspecified damages,
purport to be brought on behalf of investors in certain Dean Witter, Discover &
Co. ("Dean Witter") commodity pools, some of which are advised by JWH, and are
primarily directed at Dean Witter's alleged fraudulent selling practices in
connection with the marketing of those pools. JWH is essentially alleged to have
aided and abetted or directly participated with Dean Witter in those practices.
JWH believes the allegations against it are without merit; it intends to contest
these allegations vigorously, and is convinced that it will be shown to have
acted properly and in the best interest of the investors.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
The Partnership has never submitted any matters to a vote of its
Limited Partners.
PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
-------------------------------------------------------------
MATTERS
- -------
(a) Market Information:
------------------
There is no established public trading market for the Units,
nor will one develop. Rather, Limited Partners may purchase or redeem Units as
of the end of each month at Net Asset Value, subject to certain early redemption
charges.
(b) Holders:
-------
As of December 31, 1996, there were 5,325 holders of Units,
including the General Partner and JWH.
(c) Dividends:
---------
The General Partner has not made, and does not contemplate
making, any distributions on the Units.
10
<PAGE>
ITEM 6: SELECTED FINANCIAL DATA
-----------------------
The following selected financial data has been derived from the
audited financial statements the Partnership:
<TABLE>
<CAPTION>
JULY 15, 1996 TO
INCOME STATEMENT DATA DECEMBER 31, 1996
- --------------------- ------------------
<S> <C>
Revenues:
Realized Gain 29, 800, 074
Change in Unrealized Gain 4,696,372
-------------
Total Trading Results 34,496,446
Interest Income 3,030,330
-------------
Total Revenues 37,526,776
Expenses:
Brokerage Commissions 4,873,368
Administrative Fees 157,205
-------------
Total Expenses 5,030,573
-------------
Net Income Before Minority Interest 32,496,203
Special Profit Share Allocation (4,683,010)
Minority Interest in income (23,383)
-------------
Net Income 27,789,810
=============
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET DATA* DECEMBER 31, 1996 JULY 15, 1996
- ------------------------------------- ----------------- ----------------
<S> <C> <C>
Aggregate Net Asset Value $ 172,844,448 $102,000,000
Net Asset Value per Unit $123.16 $ 100
</TABLE>
* Balance sheet data is based on redemption values which differ immaterially
from Net Asset Values as determined under Generally Accepted Accounting
Principles ("GAAP") due to the treatment of organizational and initial offering
cost reimbursements.
<TABLE>
<CAPTION>
MONTH-END NET ASSET VALUE PER UNIT
- ----------------------------------------------------------
JULY AUG. SEPT. OCT. NOV. DEC.
- ----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996 $98.98 $98.89 $104.32 $114.96 $122.58 $123.16
- ----------------------------------------------------------
</TABLE>
The Net Asset value per Unit varies from how it would be calculated
for purposes of GAAP due to the amortization of organizational and initial
offering costs.
11
<PAGE>
ML JWH STRATEGIC ALLOCATION FUND L.P.
DECEMBER 31, 1996
Type of Pool: Single-Advisor/Publicly-Offered/Not "Principal Protected"/(1)/
Inception of Trading: July 15, 1996
Aggregate Subscriptions: $166,774,217
Current Capitalization: $172,844,448
Worst Monthly Drawdown:/(2)/ (1.02)% (7/96)
Worst Peak-to-Valley Drawdown:/(3)/ (1.02)% (7/96)
<TABLE>
<CAPTION>
--------------------------------------
1996 MONTHLY RATES OF RETURN/(4)/
--------------------------------------
MONTH 1996
--------------------------------------
<S> <C>
July ( 1/2 month) (1.02)%
August (0.09)%
September 5.31%
October 8.80%
November 6.01%
December 0.43%
Compound Rate of 20.63%
Return (5 1/2 months)
--------------------------------------
</TABLE>
_________________________
(1) Certain funds, including funds sponsored by MLIP, are structured
so as to guarantee to investors that their investment will be worth no less than
a specified amount (typically, the amount initially invested) as of a date
certain after the date of investment. The CFTC refers to such funds as
"principal protected." The Fund has no such feature.
(2) Worst Monthly Drawdown represents the largest negative Monthly
Rate of Return experienced by the Fund; a drawdown is measured on the basis of
month-end Net Asset Value only, and does not reflect intra-month figures.
(3) Worst Peak-to-Valley Drawdown represents the greatest percentage
decline from a month-end cumulative Monthly Rate of Return without such
cumulative Monthly Rate of Return being equaled or exceeded as 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, the Peak-to-Valley Drawdown
would still be continuing at the end of April in the amount of approximately
(3)%, whereas if the Monthly Rate of Return had been approximately 3% in March,
the Peak-to-Valley Drawdown would have ended as of the end of February at
approximately the (2)% level.
(4) Monthly Rate of Return is the net performance of the Fund during
the month of determination (including interest income and after all expenses
accrued or paid) divided by the total equity of the Fund as of the beginning of
such month.
12
<PAGE>
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATION
- ------------
The Fund's results of operations depend on JWH's ability to select
Programs and the Programs' ability to trade profitably. JWH's selection
procedures and trading leveraging analysis, as well as the Programs themselves,
are confidential, so that substantially the only available information relevant
to the Fund's results of operations is its actual performance record to date.
However, because of the speculative nature of its trading, the Fund's past
performance is not necessarily indicative of its future results.
In the Partnership's trading, JWH did not change any of the Programs
used for the Fund, but did deleverage trading significantly in December 1996.
See "-- JWH Trading Program Allocation," below.
RESULTS OF OPERATIONS
General. MLIP believes that the Fund should be regarded as medium-
-------
to-long-term (i.e., three to five years) investments, but it is difficult to
identify "trends" in the Fund's operations and virtually impossible to make any
predictions regarding future results based on the results to date. An
investment in the Fund may be less successful over a longer than a shorter
period.
Markets with sustained price trends tend to be more favorable to
managed futures investments than "whipsaw," "choppy" markets, but (i) this is
not always the case, and (ii) it is impossible to predict when price trends will
occur.
MLIP attempts to control credit risk in the Fund's futures, forward
and options trading (the Fund does not trade derivatives other than futures and
forward contracts and related options) by trading only through MLF. MLF acts
solely as a broker or counterparty to the Fund's trades; it does not advise with
respect to, or direct, any such trading.
MLIP may consider making distributions to investors under certain
circumstances (for example, if substantial profits are recognized); however,
MLIP has not done so to date and does not presently intend to do so.
JWH TRADING PROGRAM ALLOCATIONS
Of the 11 Programs which JWH currently includes in the JWH Strategic
Allocation Program, the following seven were being used for the Fund as of
December 31, 1996 (the selection of, and percentage of the Fund's assets
allocated among, such Programs may be changed at any time in JWH's discretion):
ML JWH STRATEGIC ALLOCATION FUND L.P.
STRATEGIC ALLOCATION PROGRAM
DECEMBER 31, 1996
<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE
% OF FUND ASSETS % OF FUND ASSETS
---------------- ----------------
<S> <C> <C> <C>
DOLLAR PROGRAM 7.0% GLOBAL FINANCIAL PORTFOLIO 21.0%
FINANCIAL AND METALS 15.5% ORIGINAL INVESTMENT PROGRAM 26.0%
PORTFOLIO
G-7 CURRENCY PORTFOLIO 15.5% WORLDWIDE BOND PROGRAM 5.0%
GLOBAL DIVERSIFIED 10.0%
PORTFOLIO
</TABLE>
As of December 31, 1996, these JWH Trading Programs, weighted as set forth
above, had approximately the following market sector commitments:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CURRENCIES 29.2% METALS 10.5%
FINANCIAL INSTRUMENTS 31.5% STOCK INDICES 5.6%
COMMODITIES 8.1% ENERGY 15.1%
</TABLE>
13
<PAGE>
JWH, in its discretion, may from time to time allocate Fund assets to
other JWH Programs deemed suitable by JWH. JWH may also choose to remove
certain Programs from, or not to include certain new Programs in, the Fund's
portfolio for one or more of a wide variety of reasons (e.g., overlap with
other Programs, the lack of a sustained proprietary or client performance
record, etc.).
The factors which JWH considers in allocating assets to, or reallocating
assets away from, a particular Program include, but are not limited to: recent
or anticipated market conditions, perceived rate of return potential,
performance (absolute performance, performance of the Program relative to
other JWH Programs and the Program's recent performance relative to its
historical returns), reward/risk ratios (both absolute and comparing one
Program to another) and continuing Program and portfolio research.
There is no pre-established range for the percentage allocations of the
Fund's assets which may be made to any particular JWH Trading Program, and JWH
believes that it is in the best interests of the Fund for JWH to maintain
significant flexibility in making such allocations. However, it would be only
in exceptional circumstances that JWH would allocate more than approximately
25% of the Fund's trading level (which trading level may potentially
constitute as much as 150% of the Fund's Net Assets) to any single Program.
JWH may make adjustments to the Fund's combination of JWH Trading
Programs at any time. However, both MLIP and JWH believe that frequent
reallocations among different JWH Trading Programs would risk incurring
substantial opportunity costs as well as running counter to the long-term
nature of these Programs' profit potential.
LEVERAGE CONSIDERATIONS
Because of the low margins required to trade in the futures and forward
markets, it is possible to adjust the market commitment of the Fund to levels
considered by JWH to be consistent with the Fund's intended reward/risk profile,
with little regard to the actual capital available to it. In highly volatile
markets, for example, JWH might determine that positions of a magnitude that
would ordinarily be acquired for a $50 million account represented a level of
risk consistent with the objectives of an account with $75 million in equity. On
the other hand, a particular allocation among various JWH Trading Programs might
be considered to have a sufficient degree of inter-Program non-correlation that
JWH would decide that positions of a magnitude that would ordinarily be acquired
for a $50 million account could prudently be held by an account of only $30
million. By varying the Fund's "trading level," JWH can, if successful, position
the Fund to have a degree of market exposure consistent, in JWH's analysis, with
the Fund's reward/risk and profit objectives across a broad range of different
market conditions. JWH may determine that for sustained periods of time it is in
the Fund's best interests to trade at either above or below 100% leverage --
i.e., with the JWH Trading Programs managing aggregate Fund capital commitments
either greater or less than the actual equity in the Fund (JWH does not
presently intend to trade, except perhaps on an occasional interim basis, at
less than approximately 50% nor more than approximately 150% leverage).
Increasing trading level over actual Fund capital can, if JWH's trading is
successful, significantly offset the opportunity costs of the multi-strategy
structure (while correspondingly increasing expected performance volatility). On
the other hand, decreasing the Fund's trading level below its actual equity can
help to conserve assets in unfavorable markets (while correspondingly reducing
profit potential).
At certain times, JWH may reach the conclusion that the Fund's portfolio
offers more risk than reward. Such a conclusion may be reached, for example,
after a prolonged or dramatic "run-up" in the markets traded by several
Programs. At these times, JWH has the ability to allocate the Fund's assets away
from the Programs, in whole or in part, thereby both taking profits and reducing
or eliminating exposure to adverse market movements. JWH may also conclude that
it is appropriate to reduce the Fund's market commitment in unusually volatile
or trendless periods. This, in fact, happened in early December 1996, when JWH
significantly deleveraged the Fund's trading and was able, as a result, to avoid
the major losses incurred by a number of systematic traders during that month.
On the other hand, JWH's flexibility in controlling the leverage of the Fund's
trading need not be applied solely in a defensive manner. If, for example, JWH's
market analysis identifies what it believes to be an attractive opportunity but
the Fund's assets are already fully committed, JWH has the ability to commit
more than the total assets of the Fund to the markets through upleveraging the
Fund's trading so that its collective market commitments to the various Programs
exceed the Fund's actual equity.
14
<PAGE>
"Deleveraging" the Fund's trading involves significant potential
opportunity costs; "upleveraging" such trading involves correspondingly
increased risk. There can be no assurance that JWH's leverage adjustments will
not result in losses or cause the Fund to miss profit opportunities which a
static leveraging policy would have avoided or capitalized upon, respectively.
PERFORMANCE SUMMARY
1996 (5 1/2 months)
Statistics. From July 15, 1996 (commencement of operations) through
----------
December 31, 1996, the Fund's average month-end Net Assets equaled $132,779,232.
The Fund recognized gross trading gains of $34,496,446, and incurred Brokerage
Commissions of $4,873,368, Administrative Fees of $157,205 and Profit Shares of
$4,706,392 (or 25.98%, 3.67%, 0.12% and 3.54% respectively, of average month-end
Net Assets). Interest income of $3,030,330 or 2.28% of average month-end Net
Assets resulted in a net income of $27,789,810 (before organizational and
initial offering cost reimbursement payments of $229,167 and after deducting
JWH's $4,706,393 minority interest in the profits and losses of the Joint
Venture) or 20.92% of average month-end Net Assets, which resulted in a 23.16%
increase in the Net Asset Value per Unit.
Overview. The first 5 1/2 months of the Fund's trading were
--------
characterized by difficult trading conditions in many markets and a lack of
clear price trends in key markets. The Fund's trading performance was slightly
negative from the commencement of its operations on July 15, 1996 through the
end of August 1996, as currencies and agricultural commodities provided JWH with
particularly volatile and difficult trading environments. Performance rebounded
significantly in September 1996; currency markets exhibited less volatility than
they had in the first six weeks of the Fund's operations, energy prices rose
significantly, and the bond markets remained unsettled. In September heating oil
hit a five- year high on soaring prices in Europe, and the Fund was also able to
capitalize on downward trends in the metals markets. Strong trends in the
currency and global bond markets produced significant gains in October and
November, but the year ended with declining performance as December witnessed
the reversal of several strong upward trends and increased volatility in key
markets. JWH had deleverged the Fund's trading positions to a significant extent
in December, a strategy which was effective in controlling losses in this month.
PERFORMANCE OVERVIEW
The principal variables which determine the net performance of the Fund
are gross profitability and interest income. During all periods set forth under
"Selected Financial Data," the interest rates in many countries were at
unusually low levels. This negatively impacted revenues because interest income
is typically a major component of commodity pool profitability. In addition, low
interest rates are frequently associated with reduced fixed-income market
volatility, and in static markets the Fund's profit potential generally tends to
be diminished. On the other hand, during periods of higher interest rates, the
relative attractiveness of a high risk investment such as the Fund may be
reduced as compared to high yielding and much lower risk fixed-income
investments.
The Partnership's Brokerage Commissions and Administrative Fees are a
constant percentage of assets. The only Fund costs (other than the insignificant
F/X Desk service fees, EFP differentials, as well as bid-ask spreads and forward
contracts and organizational and offering cost reimbursement payments) which are
not based on a percentage of the Fund's assets are the Profit Shares payable to
JWH. (Brokerage Commissions and Administrative Fees are not adjusted to reflect
any "upleveraging" or "deleveraging" of the Fund's trading which may be
implemented by JWH.)
The events that primarily determine the Fund's profitability are those
that produce sustained and major price movements. It does not matter whether
such movements are up or down -- JWH is generally more likely to be able to
profit from sustained trends, irrespective of their direction than from
trendless markets. During the course of the Fund's performance to date, such
events have ranged from the apparent refusal of Iraq to arrive at a settlement
which would permit it to sell oil internationally and a combination of drought
and excessive rain negatively impacting U.S. agricultural harvesting as well as
planting. While these events are representative of the type of circumstances
which materially affect the Fund, the specific events which will do so in the
future, and what their effects will be, cannot be predicted or identified.
15
<PAGE>
Unlike many investment fields, there is no meaningful distinction in
the operation of the Fund between realized and unrealized profits. Most of the
contracts traded by the Fund are highly liquid and can be closed out at any
time. Furthermore, the profits on many open positions are effectively realized
on a daily basis through the payment of variation margin.
Except in unusual circumstances, factors such as regulatory approvals,
cost of goods sold, employee relations and the like -- which often materially
affect an operating business -- have virtually no impact on the Fund.
LIQUIDITY AND CAPITAL RESOURCES
The amount of capital raised for the Fund should not have a significant
impact on its operations, except at extremely large levels of capitalization.
The Fund's costs are generally proportional to its asset base, and within broad
ranges of capitalization, JWH's trading positions, and the resulting gains or
losses, should increase or decrease in approximate proportion to the size of the
Fund.
The Fund raises additional capital only through the continuous offering
of its Units.
Inflation per se is not a significant factor in the Fund's
profitability, although inflationary cycles can give rise to the type of major
price movements that can have a materially favorable or adverse impact on the
Fund's performance.
In its trading to date, the Fund has had, from time to time,
substantial unrealized gains and losses on its open positions. These gains or
losses are received or paid on a periodic basis as part of the routine clearing
cycle on the exchanges or in the unregulated markets (in the case of the Fund,
exclusively the inter-bank forward market in currencies) in which the Fund
trades. In highly unusual circumstances, market illiquidity could make it
difficult for JWH to close out open positions, and any such illiquidity could
expose the Fund to significant losses, or cause it to be unable to recognize
unrealized gains. However, in general, there is no meaningful difference between
the Fund's realized and unrealized gains.
In terms of cash flow, it makes little difference whether a market
position remains open (so that profit or loss on such positions remains
"unrealized") as cash settlement of "unrealized" gains and losses occurs
periodically whether or not positions are closed out. The only meaningful
difference between realized and unrealized gains or losses in the case of the
Fund is that unrealized items reflect gains or losses on positions which the
Advisors have determined not to close out (presumably, in the expectation of
future profits), whereas realized gains or losses reflect amounts received or
paid in respect of positions no longer being maintained.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The financial statements required by this Item are included in Exhibit
13.01.
The supplementary financial information ("selected quarterly financial
data" and "information about oil and gas producing activities") specified by
Item 302 of Regulation S-K is not applicable.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE
- --------------------
There were no changes in or disagreements with accountants on
accounting and financial disclosure.
16
<PAGE>
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
(a,b) Identification of Directors and Executive Officers:
--------------------------------------------------
As a limited partnership, the Partnership itself has no
officers or directors and is managed by the General Partner. Trading decisions
are made by JWH on behalf of the Partnership.
The principal officers of MLIP and their business backgrounds are as
follows.
<TABLE>
<CAPTION>
<S> <C>
John R. Frawley, Jr. Chief Executive Officer, President
and Director
James M. Bernard Chief Financial Officer,
Senior Vice President and Treasurer
Jeffrey F. Chandor Senior Vice President, Director of
Sales, Marketing and Research and
Director
Allen N. Jones Chairman and Director
Steven B. Olgin Vice President, Secretary and
Director of
Administration
</TABLE>
John R. Frawley, Jr. was born in 1943. Mr. Frawley is Chief Executive
Officer, President and a Director of MLIP as well as Co-Chairman of MLF. He
joined Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S") in 1966 and
has served in various positions, including Retail and Institutional Sales,
Manager of New York Institutional Sales, Director of Institutional Marketing,
Senior Vice President of Merrill Lynch Capital Markets, and Director of
International Institutional Sales. Mr. Frawley holds a Bachelor of Science
degree from Canisius College. Mr. Frawley served on the CFTC's Regulatory
Coordination Advisory Committee from its inception in 1990 through its
dissolution in 1994. Mr. Frawley is currently a member of the CFTC's Financial
Products Advisory Committee. In January 1996, he was re-elected to a one-year
term as Chairman of the Managed Futures Association, the national trade
association of the United States managed futures industry. Mr. Frawley is a
Director of that organization, and a Director of the Futures Industry Institute.
Mr. Frawley also currently serves on a panel created by the Chicago Mercantile
Exchange and The Board of Trade of the City of Chicago to study cooperative
efforts related to electronic trading, common clearing, and issues regarding a
potential merger.
James M. Bernard was born in 1950. Mr. Bernard is Chief Financial
Officer, Senior Vice President and Treasurer of MLIP. He joined MLF in 1983.
Before that he was the Commodity Controller for Nabisco Brands Inc. from
November 1976 to 1982 and a Supervisor at Ernst & Whinney from 1972 to November
1976. Mr. Bernard is a member of the American Institute of Certified Public
Accountants and holds a Bachelor of Science degree from St. John's University
and a Master of Business Administration degree from Fordham University.
Jeffrey F. Chandor was born in 1942. Mr. Chandor is Senior Vice
President and the Director of Sales, Marketing and Research and a Director of
MLIP. He joined MLPF&S in 1971 and has served as the Product Manager of Equity,
Derivative Products and Mortgage-Backed Securities as well as Managing Director
of International 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.
Allen N. Jones was born in 1942. Mr. Jones is Chairman and a Director of
MLIP. Mr. Jones graduated from the University of Arkansas with a Bachelor of
Science, Business Administration degree in 1964. Since June 1992, Mr. Jones has
held the position of Senior Vice President of MLPF&S. From June 1992 through
February 1994, Mr. Jones was the President and Chief Executive Officer of
Merrill Lynch Insurance Group, Inc. ("MLIG") and remains on the Board of
Directors of MLIG and its subsidiary companies. In February 1994, Mr. Jones
became the Director of Individual Financial
17
<PAGE>
Services of the Merrill Lynch Private Client Group. From January 1992 to June
1992, he held the position of First Vice President of MLPF&S. From January 1990
to June 1992, he held the position of District Director of MLPF&S. Before
January 1990, he held the position of Senior Regional Vice President of MLPF&S.
Steven B. Olgin was born in 1960. Mr. Olgin is Vice President, Secretary
and the Director of Administration of MLIP. He joined MLIP in July 1994 and
became a Vice President in July 1995. From 1986 until July 1994, Mr. Olgin was
an associate of the law firm of Sidley & Austin. In 1982, Mr. Olgin graduated
from The American University with a Bachelor of Science degree in Business
Administration and a Bachelor of Arts degree in Economics. In 1986, he received
his Juris Doctor degree from The John Marshall Law School. Mr. Olgin is a member
of the Managed Futures Association's Government Relations Committee and has
served as an arbitrator for the NFA.
At its December 1996 Board of Directors meeting, MLIP formed a Finance
Committee composed of representatives of several different operating and
administrative units at Merrill Lynch to oversee the financial controls and
accounting procedures implemented by MLIP. The Finance Committee will meet
periodically to review MLIP's financial reporting, monitoring and record
keeping, as well as all proposed changes affecting the operations of the Fund.
As of December 31, 1996, the principals of MLIP had $8,006 invested in
the Fund and MLIP's general partner interest in the Fund was valued at
approximately $2 million.
MLIP acts as general partner to thirteen public futures funds whose
units of limited partnership interest are registered under the Securities
Exchange Act of 1934: The Futures Expansion Fund Limited Partnership, The Growth
and Guarantee Fund L.P., ML Futures Investments II L.P., ML Futures Investments
L.P., John W. Henry & Co./Millburn L.P., The S.E.C.T.O.R. Strategy Fund(SM)
L.P., The SECTOR Strategy Fund(SM) II L.P., The SECTOR Strategy Fund(SM) IV
L.P., The SECTOR Strategy Fund(SM) V L.P., The SECTOR Strategy Fund(SM) VI L.P.,
ML Global Horizons L.P., ML Principal Protection L.P. (formerly, ML Principal
Protection Plus L.P.) and the Fund. Because MLIP serves as the sole general
partner of each of these funds, the officers and directors of MLIP effectively
manage them as officers and directors of such funds.
(c) Identification of Certain Significant Employees:
-----------------------------------------------
John W. Henry & Company, Inc. is the Trading Advisor of the Fund.
Were JWH's services no longer to be available to the Fund, the Fund would, in
all likelihood, dissolve.
(d) Family Relationships:
--------------------
None.
(e) Business Experience:
-------------------
See Item 10(a)(b) above.
(f) Involvement in Certain Legal Proceedings:
----------------------------------------
None.
(g) Promoters and Control Persons:
-----------------------------
The General Partner is the sole promoter and controlling person of
the Partnership.
ITEM 11: EXECUTIVE COMPENSATION
----------------------
The officers of the General Partner are remunerated in their
respective positions. The Partnership does not itself have any officers,
directors or employees. The Partnership pays Brokerage Commissions to an
affiliate of the General Partner and Administrative Fees to the General
Partner. The General Partner or its affiliates may also receive certain
economic benefits from holding certain of the Fund's dollar Available Assets in
offset accounts, as described in Item 1(c)
18
<PAGE>
above. The directors and officers receive no "other compensation" from the
Partnership, and the directors receive no compensation for serving as directors
of the General Partner. There are no compensation plans or arrangements relating
to a change in control of either the Partnership or the General Partner.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners:
-----------------------------------------------
As of December 31, 1996, no person or "group" is known to be or
have been the beneficial owner of more than five percent of the Units. All of
the Partnership's units of general partnership interest are owned by the General
Partner.
(b) Security Ownership of Management:
--------------------------------
As of December 31, 1996, the General Partner owned 16,643 Units
(unit-equivalent general partnership interests), which was less than 2% of the
total Units outstanding.
(c) Changes in Control:
------------------
None.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
(a) Transactions with Management and Others:
---------------------------------------
The General Partner acts as administrative and trading manager of
the Fund. The General Partner provides all normal ongoing administrative
functions of the Partnership, such as accounting, legal and printing services.
The General Partner, which receives the Administrative Fee, pays all expenses
relating to such services.
(b) Certain Business Relationships:
------------------------------
MLF, an affiliate of the General Partner, acts as the principal
commodity broker for the Partnership.
In 1996, the Partnership paid: (i) Brokerage Commissions of
$4,873,368 to the Commodity Broker, which included $2,507,682 in Management Fees
paid by the Commodity Broker to JWH; and (ii) Administrative Fees of $157,205 to
MLIP. In addition, MLIP and its affiliates may have derived certain economic
benefit from maintaining a portion of the Fund's assets in "offset accounts" as
described under Item 1(c), "Narrative Description of Business -- Use of Proceeds
and Cash Management Income -- Interest Earned or the Fund's U.S. Dollar
Available Assets Not Managed by MLAM," and Item 11, "Executive Compensation"
herein, as well from the Fund's F/X Desk and exchange of futures for physical
("EFP") trading.
See Item 1(c), "Narrative Description of Business -- Charges" and
"--Description of Current Charges" for a discussion of other business dealings
between MLIP affiliates and the Partnership.
(c) Indebtedness of Management:
--------------------------
The Partnership is prohibited from making any loans, to management
or otherwise.
(d) Transactions with Promoters:
---------------------------
Not applicable.
19
<PAGE>
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
---------------------------------------------------------------
<TABLE>
<CAPTION>
(a)1. Financial Statements (found in Exhibit 13.01): Page
-------------------------------------------- ----
<S> <C>
Independent Auditors' Report 1
Consolidated Statement of Financial Condition as of December 31, 1996 2
For the period from July 15, 1996 (commencement of trading) to
December 31, 1996:
Consolidated Statement of Operations 3
Consolidated Statement of Changes in Partners' Capital 4
Notes to Financial Statements 5-12
</TABLE>
(a)2. Financial Statement Schedules:
-----------------------------
Financial statement schedules not included in this Form 10-K
have been omitted for the reason that they are not required or are not
applicable or that equivalent information has been included in the financial
statements or notes thereto.
(a)3. Exhibits:
---------
The following exhibits are incorporated by reference or are
filed herewith to this Annual Report on Form 10-K:
<TABLE>
<CAPTION>
Designation Description
- ----------- -----------
<S> <C>
1.01
Form of Selling Agreement among the Registrant, MLIP, Merrill Lynch Futures Inc. ("Merrill
Lynch Futures"), Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Selling Agent") and
JWH.
Exhibit 1.01: Is incorporated herein by reference from Exhibit 1.01 contained in Amendment No. 2 to the
- ------------
Registration Statement (File No. 333-80509) filed on April 23, 1996, on Form S-1 under the
Securities Act of 1993 (the "Registrant's Registration Statement.")
3.01(i) Certificate of Limited Partnership of the Registrant.
Exhibit 3.01(i): Is incorporated herein by reference from Exhibit 3.01 contained in the Registrant's Registration
- ---------------
Statement.
10.01 Form of Joint Venture Agreement among the Registrant, MLIP, Merrill Lynch Futures Inc. and
JWH.
Exhibit 10.01: Is incorporated herein by reference from Exhibit 10.01 contained in the Registrant's Registration
- -------------
Statement.
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
<C> <S>
10.02 Form of Customer Agreement between the Registrant's joint venture with JWH and Merrill
Lynch Futures Inc.
Exhibit 10.02: Is incorporated herein by reference from Exhibit 10.02 contained in the Registrant's Registration
- -------------
Statement.
10.03 Foreign Exchange Desk Service Agreement among Merrill Lynch Investment Bank, Merrill
Lynch Investment Partners Inc., Merrill Lynch Futures Inc. and the Fund.
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 (included as Exhibit C to the
Prospectus.)
Exhibit 10.05 Is incorporated herein by reference from Exhibit 10.05 contained in the Registrant's Registration
- -------------
Statement.
10.06 Form of Investment Advisory Contract among the Registrant's joint venture with JWH, MLIP,
Merrill Lynch Futures Inc. and Merrill Lynch Asset Management, L.P.
Exhibit 10.06: Is incorporated herein by reference from Exhibit 10.06 contained in the Registrant's Registration
- -------------
Statement.
10.07 Form of Custody Agreement among the Registrant's joint venture with JWH and Merrill Lynch
Futures Inc.
Exhibit 10.07: Is incorporated herein by reference from Exhibit 10.07 contained in the Registrant's Registration
- -------------
Statement.
13.01 1996 Annual Report and Independent Auditors' Report.
Exhibit 13.01: Is filed herewith.
- -------------
28.01 Prospectus of the Partnership dated April 25, 1996.
Exhibit 28.01: Is incorporated herein by reference as filed with the Securities and Exchange Commission
- -------------
pursuant to Rule 424 under the Securities Act of 1933, Registration Statement (File No. 333-
80509) on Form S-1, effective April 25, 1996.
</TABLE>
(b) Report on Form 8-K:
------------------
No reports on Form 8-K were filed during the fourth quarter of
1996.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ML JWH STRATEGIC ALLOCATION FUND L.P.
By: MERRILL LYNCH INVESTMENT PARTNERS, INC.
General Partner
By: ________________________________________________
John R. Frawley, Jr.
President, Chief Executive Officer and Director
(Principal Executive Officer)
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed on March 14, 1997 by the
following persons on behalf of the Registrant and in the capacities indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<C> <S> <C>
/s/John R. Frawley, Jr. President and Chief Executive Officer and Director March 14, 1997
- -----------------------
John R. Frawley, Jr.
/s/James M. Bernard Chief Financial Officer, Treasurer (Principal Financial March 14, 1997
- -----------------------
James M. Bernard and Accounting Officer) and Senior Vice President
/s/Jeffrey F. Chandor Senior Vice President and Director of Sales, March 14, 1997
- -----------------------
Jeffrey F. Chandor Marketing and Research, and Director
/s/Allen N. Jones Director March 14, 1997
- -----------------------
Allen N. Jones
</TABLE>
(Being the principal executive officer, the principal financial and accounting
officer and a majority of the directors of Merrill Lynch Investment Partners
Inc.)
MERRILL LYNCH INVESTMENT General Partner of Registrant March 14, 1997
PARTNERS INC.
By: /s/John R. Frawley, Jr.
-----------------------
John R. Frawley, Jr.
22
<PAGE>
ML JWH STRATEGIC ALLOCATION FUND L.P.
1996 FORM 10-K
INDEX TO EXHIBITS
-----------------
<TABLE>
<CAPTION>
Exhibit
-------
<C> <S>
Exhibit 13.01 1996 Annual Report and Independent Auditors' Report
</TABLE>
23
<PAGE>
To the best of the knowledge and belief of the
undersigned, the information contained in
this report is accurate and complete.
James M. Bernard
Chief Financial Officer
Merrill Lynch Investment Partners Inc.
General Partner of
ML JWH STRATEGIC ALLOCATION FUND L.P.
24
<PAGE>
ML JWH Strategic Allocation Fund L. P.
(A Delaware Limited Partnership)
and Joint Venture
Consolidated Financial Statements for the
Period from July 15, 1996 (Commencement
of Operations) to December 31, 1996
and Independent Auditors' Report
<PAGE>
To: The Limited Partners of ML JWH Strategic Allocation Fund L.P.
We are pleased to provide you with the first annual report for ML JWH Strategic
Allocation Fund L.P. (the "Fund" or the "Partnership"). The Fund began trading
on July 15, 1996, and its Net Asset Value ("NAV") per Unit increased 23.16% from
its initial NAV per Unit of $100.00 at the inception of trading to the December
31, 1996 NAV per Unit of $123.16.
Set forth below is a report from John W. Henry & Company, Inc. ("JWH")
addressing performance for 1996. This report is included for the convenience of
the Fund's investors and may not reflect the opinions or recommendations of the
General Partner.
1996 proved to be a profitable year for the Fund. We continue to work diligently
with the Trading Advisor to meet the Fund's objective of achieving, through
speculative trading, substantial capital appreciation over time. We look forward
to 1997 and the trading opportunities it may bring.
Sincerely,
John R. Frawley, Jr.
President and Chief Executive Officer
Merrill Lynch Investment Partners Inc.
(General Partner)
Report of the Trading Advisor
John W. Henry & Company, Inc.
1996 marked an excellent beginning for the Fund. For limited partners, gains
were considerable as the Fund's investment programs outperformed the major stock
markets of the world. The Worldwide Bond Program capitalized both on rising
interest rates in the U.S. and falling rates elsewhere, demonstrating one of the
key benefits of investing in futures -- the potential to profit from rising or
declining markets.
Trading began on July 15 amid sharp declines in U.S. and global stock markets.
The U.S. dollar weakened against most major currencies as investors fled U.S.
assets in search of safe havens overseas. Investors remained cautious through
August, unwilling to take positions prior to key central bank policy meetings
and economic reports slated at month end. Performance was mixed in July and
August, with some investment programs benefiting from the soaring energy markets
while others reflected the difficult trading environments for global interest
rates and currencies. Changing weather patterns buffeted agricultural commodity
markets.
<PAGE>
By September, a combination of global economic and political developments
reduced the level of volatility in major interest rate and currency markets.
Chief among these was the decision by the U.S. Federal Reserve Board's policy
making committee to keep interest rates at current levels. Convinced that
European nations seeking membership in the European Monetary Union would
continue to keep rates low, investors turned again to higher yielding U.S.
dollar-denominated assets. Foreign central banks were heavy buyers of U.S.
bonds. The U.S. dollar strengthened. Performance was strong in all markets.
All of the Fund's investment programs recorded strong performance in October.
Sound economic fundamentals kept the U.S. dollar strong against most major
currencies. The one exception was the British pound, which soared against the
dollar as a result of positive economic indicators. Many global bourses broke
new records during the month. Cash flooded the bond and equity markets in
October and November. Positions in global interest rates and currencies resulted
in gains.
By year-end, however, most markets were experiencing seasonal illiquidity and
were becoming highly volatile. Early in December, JWH completed a significant
reduction in leverage in some investment programs to reduce investor's exposure
to that volatility and to help them experience a greater retention of the
substantial profits made in the second half of 1996.
As the Fund begins its first full calendar year of operation, stock market
performance and volatility are reaching new heights and investors are growing
more concerned about their traditional investments. In these uncertain times,
there may be good profit opportunities for the Fund, and it may offer a source
of particularly valuable portfolio diversification.
INDIVIDUAL INVESTMENT PROGRAMS
Original Investment Program
Substantial gains were realized, reflecting profitable positions in global
interest rate, currency and energy markets. These gains offset losses in
agricultural commodities, stock indices and metals. In the currency markets,
positions in the Japanese yen were particularly profitable as the Japanese
currency continued to weaken against the U.S. dollar, reflecting Japan's weak
economic recovery and the relative strength of the U.S. economy. The Bank of
England's surprise decision to hike a key interest rate added to the buoyancy of
the British pound; positions in the pound also resulted in strong gains. The
Japanese Government bond reached new highs following elections which kept the
fiscally conservative Liberal Democratic Party in power. Solid gains were
recorded in Japanese Government bond positions. In the energy sector, crude oil
prices were supported by continuing concerns about worldwide inventory
shortages.
<PAGE>
Global Financial Portfolio
Strong performance reflected profitable positions in global interest rate,
currency and energy markets. In the currency sector, strong gains were achieved
in Japanese yen and British pound positions with smaller profits in the Swiss
franc. Despite jawboning during the year from Japanese officials determined to
end the yen's weakening position against the U.S. dollar, the yen continued to
decline against the dollar and other major currencies. The Swiss franc was
pushed downward in global trading reflecting the Swiss government's concern over
the health of the nation's key export business. Except for the U.S. 30-year
bond, positions in all other bond markets were profitable. Positions in crude
oil benefited from continuing concerns about shrinking world inventories.
Financial and Metals Portfolio
The program benefited from strong performance in global interest rate markets
and smaller gains in currencies and metals. These gains offset losses in stock
indices. Positions in Japanese Government bond, German, French, and Italian
bonds, and Australian 10-year bonds and 3-year notes were profitable as economic
reports and central bank policy decisions in key nations overcame market
uncertainties, and higher yielding markets attracted investors. Currency markets
reflected economic fundamentals as well as political developments, particularly
the progress of the planned European Monetary Union. Profitable positions in
British pound, Swiss franc and Japanese yen offset losses in Australian dollar.
Moderate inflation worldwide and the weakening status of gold in the world
monetary system drove prices down; positions in the precious metal were
profitable.
G-7 Currency Portfolio
Solid performance was achieved. Leaders of the G-7 industrialized nations
continued to support a strong U.S. dollar, if not a stronger dollar, despite
jawboning by certain Japanese government officials. Leaders focused on economic
fundamentals which, for some, included meeting the criteria for membership in
the European Monetary Union (EMU); a stronger dollar would benefit their
economies. The British pound benefited from its relative immunity to any EMU
controversies. During the period, strong gains were posted from long pound cross
rates against the Japanese yen (up 6.4% in October) and German mark.
Global Diversified Portfolio
Positions in global interest rates and energy markets were the key drivers to a
strong performance. Smaller gains were realized in currencies and metals. Losses
in stock indices and agricultural commodities were offset by these gains. Except
for the Euro dollar and U.S. 30-year bonds and 10-year notes, positions in all
other bond markets traded were profitable. In currency markets, the British
pound seemed to know no bounds as strong economic fundamentals pushed the
sterling to new heights against a strong U.S. dollar. Positions in gold were
profitable, as the precious metal fell steadily from high levels earlier in the
year. Changing weather patterns created volatile and trend less trading patterns
in agricultural commodities.
<PAGE>
Dollar Program
Solid gains were realized as the U.S. dollar continued its climb upward against
most major currencies. The strong dollar reflected both sound economic
fundamentals and new interest among foreign investors in U.S. dollar-denominated
assets. The strength of the dollar was defied only by that of the British pound,
which assumed safe haven status against the German mark and other more volatile
currencies of nations involved in the EMU debates. The Swiss franc tumbled,
slipping from its traditional status of strength, under pressure from a Swiss
government concerned with export growth.
Worldwide Bond Program
The program recorded gains in most markets traded as global economic and
political developments reduced the volatility exhibited in global interest rate
markets in the second quarter of the year. The decision of the U.S. Federal
Reserve Board's policy making committee to keep rates at current levels and the
continuing efforts of candidate nations for the EMU to keep rates low set the
course for investors for the balance of the year. Higher yielding assets such as
those offered in the U.S. Treasury market proved a strong attraction for central
banks and other investors who, by year end, were bidding in record numbers at
U.S. auctions of 10-year Treasury notes.
FOR THE EXCLUSIVE USE OF INVESTORS IN ML JWH STRATEGIC ALLOCATION FUND L.P. THIS
ANNUAL REPORT IS NOT AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES. AN OFFER CAN ONLY BE MADE BY THE CURRENT PROSPECTUS, AS
SUPPLEMENTED, AND A RECENT MONTHLY REPORT FOR THE FUND. THESE DOCUMENTS CONTAIN
IMPORTANT INFORMATION CONCERNING RISK FACTORS, PERFORMANCE AND OTHER MATERIAL
ASPECTS OF THE FUND AND MUST BE READ CAREFULLY BEFORE INVESTING. THIS ANNUAL
REPORT MUST NOT BE REPRODUCED OR DISTRIBUTED IN ANY MANNER. FUTURES TRADING IS
SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. PAST PERFORMANCE IS NOT
NECESSARILY INDICATIVE OF FUTURE RESULTS. THE FUND'S SINGLE-ADVISOR
MULTI-STRATEGY APPROACH IS NOT ANTICIPATED TO PROVIDE THE SAME LEVEL OF RISK
CONTROL AS IS COMMONLY EXPECTED IN A MULTI-ADVISOR PORTFOLIO.
<PAGE>
ML JWH STRATEGIC ALLOCATION FUND L. P.
(A Delaware Limited Partnership) AND JOINT VENTURE
- --------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page
----
INDEPENDENT AUDITORS' REPORT 1
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM JULY 15, 1996
(COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1996:
Consolidated Statement of Financial Condition 2
Consolidated Statement of Income 3
Consolidated Statement of Changes in Partners' Capital 4
Notes to Consolidated Financial Statements 5-12
<PAGE>
INDEPENDENT AUDITORS' REPORT
- ----------------------------
To the Partners of
ML JWH Strategic Allocation Fund L.P.:
We have audited the accompanying consolidated statement of financial condition
of ML JWH Strategic Allocation Fund L.P. (a Delaware limited partnership; the
"Partnership") and its Joint Venture as of December 31, 1996, and the related
consolidated statement of income and changes in partners' capital for period
from July 15, 1996 (commencement of operations) to December 31, 1996. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of ML JWH Strategic Allocation Fund
L.P. (a Delaware limited partnership) and its Joint Venture as of December 31,
1996 and the results of their operations for the period from July 15, 1996
(commencement of operations) to December 31, 1996 in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
February 3, 1997
New York, New York
<PAGE>
ML JWH STRATEGIC ALLOCATION FUND L. P.
(A Delaware Limited Partnership) AND JOINT VENTURE
- --------------------------------------------------
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
1996
ASSETS
- ------
<S> <C>
Cash on deposit at brokers $ 726
Accrued interest (Note 3) 184,577
U. S. Government obligations 121,535,012
Equity in commodity futures trading accounts:
Cash and options premiums 54,132,103
Net unrealized profit on open contracts 4,696,372
---------------
TOTAL $ 180,548,790
===============
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
LIABILITIES:
Profit share payable (Note 2) $ 4,683,010
Redemptions payable 1,661,675
Brokerage commissions payable (Note 3) 1,160,945
Administrative fees payable (Note 3) 37,450
Organization and initial offering costs payable (Note 1) 808,712
---------------
Total liabilities 8,351,792
---------------
MINORITY INTEREST 123,383
PARTNERS' CAPITAL:
General Partner (16,643 units) 2,038,044
Limited Partners (1,534,953 units) 188,284,065
Subscriptions receivable (148,169 units) (18,248,494)
---------------
Total partners' capital 172,073,615
---------------
TOTAL $ 180,548,790
===============
NET ASSET VALUE PER UNIT (NOTE 4)
</TABLE>
See notes to consolidated financial statements.
-2-
<PAGE>
ML JWH STRATEGIC ALLOCATION FUND L. P.
(A Delaware Limited Partnership) AND JOINT VENTURE
- --------------------------------------------------
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF INCOME
FOR THE PERIOD FROM JULY 15, 1996
(COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1996
- --------------------------------------------------------------------------------
1996
<S> <C>
REVENUES:
Trading profit:
Realized $29,800,074
Change in unrealized 4,696,372
--------------
Total trading results 34,496,446
Interest income (Note 3) 3,030,330
--------------
Total revenues 37,526,776
--------------
EXPENSES:
Brokerage commissions (Note 3) 4,873,368
Administrative fees (Note 3) 157,205
--------------
Total expenses 5,030,573
--------------
INCOME BEFORE SPECIAL PROFIT SHARE ALLOCATION AND
MINORITY INTEREST 32,496,203
Special Profit Share Allocation (Note 2) (4,683,010)
Minority interest in income (23,383)
--------------
NET INCOME $27,789,810
==============
NET INCOME PER UNIT:
Weighted average number of Units
outstanding (Note 5) 1,163,568
==============
Net income per weighted average General Partner
and Limited Partner Unit $23.88
============
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE>
ML JWH STRATEGIC ALLOCATION FUND L. P.
(A Delaware Limited Partnership) AND JOINT VENTURE
- --------------------------------------------------
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE PERIOD FROM JULY 15, 1996
(COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
Limited General Subscriptions
Units Partner Partner Receivable Total
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Initial offering 14,832 $100,516,800 $1,483,200 $ -- $102,000,000
Organization and initial
offering costs -- (985,459) (14,541) -- (1,000,000)
Additions 1,565,526 64,575,292 198,925 -- 64,774,217
Redemptions (28,762) (3,241,918) -- -- (3,241,918)
Net Income -- 27,419,350 370,460 -- 27,789,810
Subscriptions Receivable (148,169) -- -- (18,248,494) (18,248,494)
-------------- -------------- -------------- -------------- --------------
PARTNERS' CAPITAL,
DECEMBER 31, 1996 1,403,427 $188,284,065 $2,038,044 $(18,248,494) $172,073,615
============== ============== ============== ============== ==============
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE>
ML JWH STRATEGIC ALLOCATION FUND L. P.
(A Delaware Limited Partnership) AND JOINT VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM JULY 15, 1996
(COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1996
- -------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
------------
ML JWH Strategic Allocation Fund L.P. (the "Partnership") was organized
under the Delaware Revised Uniform Limited Partnership Act on December 11,
1995 and commenced trading on July 15, 1996. The Partnership issues new
units of limited partnership interest ("Units") at Net Asset Value as of
the beginning of each calendar month. The Partnership engages in the
speculative trading of futures, options on futures and forward contracts
on a wide range of commodities through its joint venture (the "Joint
Venture") with John W. Henry & Company, Inc. ("JWH"), the trading advisor
for the Partnership, and investing in Government Securities, as defined.
Merrill Lynch Investment Partners Inc., ("MLIP" or the "General Partner"),
a wholly-owned subsidiary of Merrill Lynch Group Inc., which in turn is a
wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("Merrill Lynch"), is
the general partner of the Partnership. Merrill Lynch Futures Inc. ("MLF")
is the Partnership's commodity broker and Merrill Lynch Asset Management
Inc. ("MLAM"), also an affiliate of Merrill Lynch, provides cash
management services to the Partnership. Substantially all of the
Partnership's assets held in accounts maintained at Merrill Lynch, Pierce,
Fenner & Smith Incorporated, also a Merrill Lynch affiliate.
The General Partner has agreed to maintain a general partner's interest of
at least 1% of the total capital in the Partnership. The General Partner
and each Limited Partner share in the profits and losses of the
Partnership in proportion to their respective interests in it.
The Joint Venture trades in the international futures and forward markets,
applying multiple proprietary trading strategies under the direction of
JWH. JWH selects, allocates and reallocates the Partnership's assets among
different combinations of JWH's programs--an approach which JWH refers to
as the "JWH Strategic Allocation Program."
The consolidated financial statements include the accounts of the Joint
Venture to which the Partnership has contributed substantially all of its
capital, representing a current equity interest in the Joint Venture of
approximately 99%. All related transactions between the Partnership and
the Joint Venture are eliminated in consolidation.
Estimates
---------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
-5-
<PAGE>
U.S. Government Securities
--------------------------
The Partnership invests a portion of its assets in obligations of the U.S.
Treasury and certain U.S. government agencies ("Government Securities")
under the direction of MLAM within the parameters established by MLIP for
which MLAM accepts no responsibility. These investments are carried at
fair value.
Revenue Recognition
-------------------
Commodity futures, options on futures and forward contract transactions
are recorded on the trade date and open contracts are reflected in net
unrealized profit (loss) on open contracts in the Consolidated Statement
of Financial Condition at the difference between the original contract
amount and the fair value. The change in net unrealized profit (loss) on
open contracts from one period to the next is reflected in change in
unrealized in the Consolidated Statement of Income. Fair value is based on
quoted market prices on the exchange or market on which the contract is
traded.
Organization and Initial Offering Costs, Operating Expenses and Selling
-----------------------------------------------------------------------
Commissions
-----------
The General Partner advanced all organization and initial offering costs
relating to the Partnership. The Partnership is reimbursing the General
Partner for such costs in 24 equal monthly installments. For financial
reporting purposes, the Partnership deducted the organization and initial
offering reimbursement costs of $1,000,000 from the partners' capital at
inception. For all other purposes (including determining the Net Asset
Value of the Units), the Partnership deducts the organization and initial
offering cost reimbursements only as actually paid.
The General Partner pays for all routine operating costs (including legal,
accounting, printing and similar administrative expenses) of the
Partnership, including the Partnership's share of any such costs incurred
by the Joint Venture (Note 2), other than the costs of the ongoing
offering of the Units. The General Partner receives an administrative fee,
as well as a portion of the brokerage commissions paid to MLF by the Joint
Venture, as reimbursement for the foregoing expenses.
No selling commissions have been or are paid by the Limited Partners.
Income Taxes
------------
No provision for income taxes has been made in the accompanying
consolidated financial statements as each Partner is individually
responsible for reporting income or loss based on such Partner's
respective share of the Partnership's income and expenses as reported for
income tax purposes.
Redemptions
-----------
A Limited Partner may require the Partnership to redeem some or all of
such Partner's Units at Net Asset Value as of the close of business on the
last business day of any month upon ten calendar days' notice. Units
redeemed on or prior to the end of the twelfth full month after purchase
are assessed an early redemption charge of 3% of their Net Asset Value as
of the date of redemption. If an investor acquires Units at more than one
time, such Units are treated on a "first-in, first-out" basis for purposes
of determining whether redemption charges are applicable.
-6-
<PAGE>
Dissolution of the Partnership
------------------------------
The Partnership will terminate on December 31, 2026 or at an earlier date
if certain conditions occur, as well as under certain other circumstances
as defined in the Limited Partnership Agreement.
2. JOINT VENTURE AGREEMENT
The Partnership and JWH entered into a Joint Venture Agreement whereby JWH
contributed $100,000 to the Joint Venture and the Partnership contributed
substantially all of its capital. The Joint Venture Agreement terminates
September 30, 1997 subject to two one-year renewals at the option of MLIP.
The General Partner is the manager of the Joint Venture, while JWH has
sole discretion in determining the commodity futures, options on futures
and forward trades to be made on its behalf, subject to the trading
limitations outlined in the Joint Venture Agreement.
Pursuant to the Joint Venture Agreement, JWH and the Partnership share in
the profits of the Joint Venture based on equity ownership before 15% of
the Partnership's quarterly New Trading Profits, as defined, are allocated
to JWH. Losses are allocated to JWH and the Partnership based on equity
ownership.
Pursuant to the Joint Venture Agreement, JWH's share of profits may earn
interest at the prevailing rates for 91-day Treasury bills or such share
of profits may participate in the profits and losses of the Joint Venture.
For the period from July 15, 1996 to December 31, 1996 JWH received a
special profit share allocation of $4,675,905, and earned interest of
$7,105 on such amount.
3. RELATED PARTY TRANSACTIONS
A portion of the Joint Venture's U.S. dollar-denominated assets are held
at MLF in cash or short-term Treasury bills. The Joint Venture receives
all interest paid on such Treasury bills. On the cash held at MLF, the
Joint Venture receives interest from Merrill Lynch at rates ranging from
.50 of 1% per annum below the prevailing 91-day Treasury bill rate up to
the full prevailing 91-day Treasury bill rate. Merrill Lynch may derive
certain economic benefits, in excess of the interest which Merrill Lynch
pays to the Joint Venture, from possession of such cash.
Merrill Lynch credits the Joint Venture with interest on the Joint
Venture's non-U.S. dollar-denominated available assets based on local
short-term rates. Merrill Lynch charges the Joint Venture Merrill Lynch's
cost of financing realized and unrealized losses on the Joint Venture's
non-U.S. dollar-denominated positions.
The Joint Venture pays brokerage commissions to MLF at a flat rate of .646
of 1% (a 7.75% annual rate) of the Joint Venture's month-end assets, and
pays MLIP a monthly administrative fee of .021 of 1% (a .25% annual rate)
of the Joint Venture's month-end assets. Month-end assets are not reduced,
for purposes of calculating brokerage and administrative fees, by any
accrued brokerage commissions, administrative fees, profit shares or other
fees or charges.
MLIP estimates that the round-turn equivalent commission rate charged to
the Joint Venture during the period from July 15, 1996 (commencement of
operations) to December 31, 1996 was approximately $208 (not including, in
calculating round-turn equivalents, forward contracts on a
futures-equivalent basis).
-7-
<PAGE>
MLF pays MLAM annual management fees of .20 of 1% on the first $25 million
of certain assets ("Capital"), including assets of the Joint Venture
managed by MLAM, .15 of 1% on the next $25 million of Capital, .125 of 1%
on the next $50 million, and .10 of 1% on Capital in excess of $100
million. Such fees are paid quarterly in arrears and are calculated on the
basis of the average daily assets managed by MLAM.
The Joint Venture trades forward contracts through a Foreign Exchange
Service Desk (the "F/X Desk") established by MLIP, that contacts at least
two counterparties along with Merrill Lynch International Bank ("MLIB"),
for all of the Joint Venture's currency trades. All counterparties other
than MLIB are unaffiliated with any Merrill Lynch entity. The F/X Desk
charges a service fee equal (at current exchange rates) to approximately
$5.00 to $12.50 on each purchase or sale of a futures-contract equivalent
face amount of a foreign currency. No service fees are charged on trades
awarded to MLIB (which receives a "bid-ask" spread on such trades). MLIB
is awarded trades only if its price (which includes no service fee) is
equal to or better than the best price (including the service charge)
offered by any of the other counterparties contacted.
The F/X Desk trades on the basis of credit lines provided by a Merrill
Lynch entity. The Joint Venture is not required to margin or otherwise
guarantee its F/X Desk trading.
Certain of the Joint Venture's currency trades are executed in the form of
"exchange of futures for physical" ("EFP") transactions involving MLIB and
MLF. In these transactions, a spot or forward (collectively referred to as
"cash") currency position is acquired and exchanged for an equivalent
futures position on the Chicago Mercantile Exchange's International
Monetary Market. In its EFP trading with Merrill Lynch, the Joint Venture
acquires cash currency positions through the F/X Desk in the same manner
and on the same terms as in the case of the Joint Venture's other F/X Desk
trading. When the Joint Venture exchanges these positions for futures,
there is a "differential" between the prices of these two positions. This
"differential" reflects, in part, the different settlement dates of the
cash and the futures contracts as well as prevailing interest rates, but
also includes a pricing spread in favor of MLIB or another Merrill Lynch
entity.
The Joint Venture's F/X Desk service fee and EFP differential costs have,
to date, totaled no more than .25 of 1% per annum of the Joint Venture's
average month-end Net Assets.
4. NET ASSET VALUE PER UNIT
For financial reporting purposes, the Partnership deducted the total
organization and initial offering cost reimbursement payable to MLIP at
inception. For all other purposes (including computing net asset value for
redemptions), the Partnership deducts the organization and initial
offering cost reimbursement only as actually paid. Consequently, as of
December 31, 1996, the Net Asset Value per Unit was $122.61 for financial
reporting purposes and $123.16 for all other purposes.
5. WEIGHTED AVERAGE UNITS
The weighted average number of Units outstanding was computed for purposes
of disclosing net income per weighted average Unit. The weighted average
Units outstanding at December 31, 1996 equals the Units outstanding as of
such date, adjusted proportionately for Units sold and redeemed based on
the respective length of time each was outstanding during the preceding
period.
-8-
<PAGE>
6. FAIR VALUE AND OFF-BALANCE SHEET RISK
The Joint Venture trades futures, options on futures and forward contracts
in interest rates, stock indices, commodities, currencies, energy and
metals. The Joint Venture's trading results by reporting category were as
follows:
<TABLE>
<CAPTION>
1996
Total Trading Results
---------------------
<S> <C>
Interest rates and stock indices $18,719,739
Commodities (2,473,692)
Currencies 10,116,005
Energy 6,404,320
Metals 1,730,074
---------------------
$34,496,446
=====================
</TABLE>
Market Risk
-----------
Derivative instruments involve varying degrees of off-balance sheet
market risk, and changes in the level or volatility of interest rates,
foreign currency exchange rates or market values of the underlying
financial instruments or commodities underlying such derivative
instruments frequently result in changes in the Partnership's unrealized
profit (loss) on such derivative instruments as reflected in the
Consolidated Statement of Financial Condition. The Joint Venture's
exposure to market risk is influenced by a number of factors, including
the relationships among the derivative instruments held by the Joint
Venture as well as the volatility and liquidity in the markets in which
the financial instruments are traded.
The General Partner has procedures in place intended to control market
risk, although there can be no assurance that they will, in fact, succeed
in doing so. The procedures focus primarily on monitoring the trading of
JWH and reviewing outstanding positions for over-concentrations. While
the General Partner will not itself intervene in the markets to hedge or
diversify the Joint Venture's market exposure, the General Partner may
urge JWH to reallocate positions in an attempt to avoid
over-concentrations. However, such interventions are unusual. Except in
cases in which it appears that JWH has begun to deviate from past
practice and trading policies or to be trading erratically, the General
Partner's basic risk control procedures consist simply of monitoring JWH
with the market risk controls being applied by JWH itself.
Fair Value
----------
The derivative instruments used in the Joint Venture's trading activities
are marked to market daily with the resulting unrealized profit (loss)
recorded in the Consolidated Statement of Financial Condition and the
related profit (loss) reflected in trading revenues in the Consolidated
Statement of
-9-
<PAGE>
Income. The contract/notional values of the open derivative instrument
positions as of December 31, 1996 were as follows:
<TABLE>
<CAPTION>
December 31, 1996
------------------------------------------
Commitment to Commitment to
Purchase (Futures, Sell (Futures,
Options & Forwards) Options & Forwards)
------------------- -------------------
<S> <C> <C>
Interest rate $144,969,514 $ -
Commodities 6,083,206 17,321,100
Currencies 229,540,645 289,870,043
Energy 18,094,440 -
Metals 2,693,494 30,540,601
------------------- -------------------
$401,381,299 $337,731,744
=================== ===================
</TABLE>
Substantially all of the Joint Venture's derivative financial instruments
outstanding as of December 31, 1996, expire within one year.
The contract/notional value of the Joint Venture's open exchange-traded
and non-exchange traded open derivative instrument positions as of
December 31, 1996 was as follows:
<TABLE>
Commitment to Commitment to
Purchase (Futures, Sell (Futures,
Options & Forwards) Options & Forwards)
------------------- -------------------
<S> <C> <C>
Exchange Traded $170,575,723 $ 46,596,770
Non-Exchange Traded 230,805,576 291,134,974
------------------- -------------------
$401,381,299 $337,731,744
=================== ===================
</TABLE>
The average fair value of the Joint Venture's derivative instrument
positions which were open as of the end of each calendar month during the
year ended December 31, 1996 were as follows:
<TABLE>
<CAPTION>
Commitment to Commitment to
Purchase (Futures, Sell (Futures,
Options & Forwards) Options & Forwards)
------------------- -------------------
<S> <C> <C>
Interest rates $719,308,090 $ 83,716,105
Stock indices 13,413,720 13,483,911
Commodities 8,192,113 24,113,672
Currencies 300,537,708 312,830,219
Energy 22,546,285 -
Metals 3,818,246 39,804,586
------------------- -------------------
$1,067,816,162 $473,948,493
=================== ===================
</TABLE>
A portion of the amounts indicated as off-balance sheet risk reflects
offsetting commitments to purchase and sell the same derivative instrument
on the same date in the future. These commitments are economically
offsetting but are not, as a technical matter, offset in the forward market
until the settlement date.
-10-
<PAGE>
Credit Risk
-----------
The risks associated with exchange-traded contracts are typically perceived
to be less than those associated with over-the-counter transactions
(non-exchange-traded), because exchanges typically (but not universally)
provide clearinghouse arrangements in which the collective credit (in some
cases limited in amount, in some cases not) of the members of the exchange
is pledged to support the financial integrity of the exchange. In
over-the-counter transactions, on the other hand, traders must rely solely
on the credit of their respective individual counterparties. Margins, which
may be subject to loss in the event of a default, are generally required in
exchange trading, and counterparties may require margin in the
over-the-counter markets.
The fair value amounts in the above tables represent the extent of the
Joint Venture's market exposure in the particular class of derivative
instrument listed, but not the credit risk associated with counterparty
nonperformance. The credit risk associated with these instruments from
counterparty nonperformance is the net unrealized gain, if any, included
on the Consolidated Statement of Financial Condition. The Joint Venture
also has credit risk because the sole counterparty or broker with respect
to most of the Joint Venture's assets is MLF.
The gross unrealized profit and the net unrealized profit (loss) on the
Joint Venture's open derivative instrument positions as of December 31,
1996 were are as follows:
<TABLE>
<CAPTION>
Gross
Unrealized Net Unrealized
Profit Profit
-------------- ---------------
<S> <C> <C>
Exchange Traded $3,013,592 $1,424,907
Non-Exchange Traded 6,937,127 3,271,465
-------------- ---------------
$9,950,719 $4,696,372
============== ===============
</TABLE>
The Joint Venture controls credit risk by dealing almost exclusively with
Merrill Lynch entities as brokers and counterparties.
The Partnership, through its normal course of business, enters into
various contracts with MLF acting as its commodity broker. Pursuant to
the brokerage arrangement with MLF, to the extent that such trading
results in receivables from and payables to MLF, these receivables and
payables are offset and reported as a net receivable or payable.
-11-
<PAGE>
To the best of the knowledge and belief of the
undersigned, the information contained in this
report is accurate and complete.
James M. Bernard
Chief Financial Officer
Merrill Lynch Investment Partners Inc.
General Partner of
ML JWH Strategic Allocation Fund L.P.
-12-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> BD
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
STATEMENTS OF FINANCIAL CONDITION, CONSOLIDATED STATEMENTS OF INCOME,
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001005177
<NAME> ML JWH STRATEGIC ALLOCATION FUND L.P.
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JUL-15-1996 JAN-01-1995
<PERIOD-END> DEC-31-1996 DEC-31-1995
<CASH> 726 0
<RECEIVABLES> 59,013,052 0
<SECURITIES-RESALE> 0 0
<SECURITIES-BORROWED> 0 0
<INSTRUMENTS-OWNED> 121,535,012 0
<PP&E> 0 0
<TOTAL-ASSETS> 180,548,790 0
<SHORT-TERM> 0 0
<PAYABLES> 8,351,792 0
<REPOS-SOLD> 0 0
<SECURITIES-LOANED> 0 0
<INSTRUMENTS-SOLD> 0 0
<LONG-TERM> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 172,196,998 0
<TOTAL-LIABILITY-AND-EQUITY> 180,548,790 0
<TRADING-REVENUE> 34,496,446 0
<INTEREST-DIVIDENDS> 3,030,330 0
<COMMISSIONS> 4,873,368 0
<INVESTMENT-BANKING-REVENUES> 0 0
<FEE-REVENUE> 0 0
<INTEREST-EXPENSE> 0 0
<COMPENSATION> 0 0
<INCOME-PRETAX> 27,789,810 0
<INCOME-PRE-EXTRAORDINARY> 27,789,810 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 27,789,810 0
<EPS-PRIMARY> 23.88 0
<EPS-DILUTED> 23.88 0
</TABLE>
