<PAGE>
As filed with the Securities and Exchange Commission on June 30, 1998
Registration No. 333-47439
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
____________________
ML JWH STRATEGIC ALLOCATION FUND L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 6793 13-3887922
(State of Organization) (Primary Standard Industrial (IRS Employer
Classification Code Number) Identification Number)
C/O MERRILL LYNCH INVESTMENT PARTNERS INC.
SOUTH TOWER
MERRILL LYNCH WORLD HEADQUARTERS
WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10080-6106
(212) 236-4167
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
JOHN R. FRAWLEY, JR.
MERRILL LYNCH INVESTMENT PARTNERS INC.
SOUTH TOWER
MERRILL LYNCH WORLD HEADQUARTERS
WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10080-6106
(212) 236-4167
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
_____________________
COPIES TO:
David R. Sawyier
Joshua B. Rovine
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
_____________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
_____________________
<PAGE>
ML JWH STRATEGIC ALLOCATION FUND L.P.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM
NO. PROSPECTUS HEADING
- ----- -----------------------------------------------------------
<S> <C>
1. Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus.................................... Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus........................... Inside Cover Page; Table of Contents
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges............ Summary; The Risks You Face; Performance of the Fund;
Selected Financial Data; Management's Analysis of Operations
4. Use of Proceeds............................... Summary; How the Fund Works
5. Determination of Offering Price............... Cover Page; How the Fund Works--Buying Units
6. Dilution...................................... Not Applicable
7. Selling Security Holders...................... Not Applicable
8. Plan of Distribution.......................... Cover Page; How the Fund Works--Buying Units;
Selling Commissions
9. Description of Securities to Be
Registered.................................... Cover Page; Summary; The Risks You Face; How the Fund
Works; Performance of the Fund; Selected Financial Data;
Management's Analysis of Operations; Interest Income Arrangements;
Net Asset Value; Summary of the Limited Partnership Agreement;
Tax Consequences
10. Interests of Named Experts and
Counsel....................................... Lawyers; Accountants
11. Information with Respect to the
Registrant.................................... Cover Page; Summary; The Risks You Face; How the Fund Works;
Performance of the Fund; Selected Financial Data; Management's Analysis
of Operations; Interest Income Arrangements; Analysis of Fees and
Expenses Paid by the Fund; JWH Trading Programs; John W. Henry &
Company, Inc.; JWH Principals; JWH Performance; Merrill Lynch
Investment Partners Inc.; Net Asset Value; Conflicts of Interest;
Transactions Between the Fund and Merrill Lynch; Summary of the Limited
Partnership Agreement; Tax Consequences; Selling Commissions; Financial
Statements; Futures Markets and Trading Methods
12. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities............................... Not Applicable
</TABLE>
<PAGE>
PART ONE
- --------------------------------------------------------------------------------
ML JWH STRATEGIC ALLOCATION FUND L.P.
2,000,000
LIMITED PARTNERSHIP UNITS
THE FUND FUND MANAGER THE UNITS
Trades in the U.S. John W. Henry & Company, Inc. As of June 1, 1998, had
and international ("JWH"), a professional increased in net asset
futures and managed futures advisor, value by 34% since the
forward markets allocates the Fund's assets since the fund began
across multiple JWH trading trading on July 15, 1996.
programs Past results are not
Seeks substantial not necessarily indicative
long-term capital of future results.
appreciation
May provide a
valuable element of Will be available on the
diversification first day of each month
to a portfolio beginning August 1, 1998
THE RISKS
- ---------
These are speculative securities. Before you decide whether to invest,read
carefully and consider The Risks You Face beginning on page 8.
The Fund is You could lose all or JWH has total
speculative and substantially all of your discretionary trading
leveraged. investment in the Fund. authority over the
Fund.
Performance has been The use of a single advisor
volatile. applying generally similar Substantial expenses
The Net Asset Value trading programs could mean be offset by trading
per Unit lack of diversification and profits and interset
has fluctated as much high risk. income.
as 10% in a single
month.
Minimum Initial Investments
- ---------------------------
First-time investors: IRA, other tax-exempt accounts and current investors:
50 units or $5,000, 20 units or $2,000, whichever is less
whichever is less
-----------------
THIS PROSPECTUS IS IN TWO PARTS. THESE PARTS ARE BOUND TOGETHER, AND BOTH
CONTAIN IMPORTANT INFORMATION.
-----------------
THE COMMODITY FUTURES TRADING COMMISSION HAS NOT PASSED UPON THE MERITS
OF PARTICIPATING IN THIS POOL NOR HAS THE COMMISSION PASSED ON THE
THE ADEQUACY OR ACCURACY OF THIS DISCLOSURE DOUMENT.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------------
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
SELLING AGENT
MERRILL LYNCH INVESTMENT PARTNERS INC.
GENERAL PARTNER
JULY __, 1998
<PAGE>
COMMODITY FUTURES TRADING COMMISSION
RISK DISCLOSURE STATEMENT
YOU SHOULD CAREFULLY CONSIDER WHETHER YOUR FINANCIAL CONDITION PERMITS YOU
TO PARTICIPATE IN A COMMODITY POOL. IN SO DOING, YOU SHOULD BE AWARE THAT
FUTURES AND OPTIONS TRADING CAN QUICKLY LEAD TO LARGE LOSSES AS WELL AS GAINS.
SUCH TRADING LOSSES CAN SHARPLY REDUCE THE NET ASSET VALUE OF THE POOL AND
CONSEQUENTLY THE VALUE OF YOUR INTEREST IN THE POOL. IN ADDITION, RESTRICTIONS
ON REDEMPTIONS MAY AFFECT YOUR ABILITY TO WITHDRAW YOUR PARTICIPATION IN THE
POOL.
FURTHER, COMMODITY POOLS MAY BE SUBJECT TO SUBSTANTIAL CHARGES FOR
MANAGEMENT, AND ADVISORY AND BROKERAGE FEES. IT MAY BE NECESSARY FOR THOSE POOLS
THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO AVOID
DEPLETION OR EXHAUSTION OF THEIR ASSETS. THIS DISCLOSURE DOCUMENT CONTAINS A
COMPLETE DESCRIPTION OF EACH EXPENSE TO BE CHARGED THIS POOL AT PAGES 23 TO 24
AND A STATEMENT OF THE PERCENTAGE RETURN NECESSARY TO BREAKEVEN, THAT IS, TO
RECOVER THE AMOUNT OF YOUR INITIAL INVESTMENT, AT PAGE 7.
THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER FACTORS
NECESSARY TO EVALUATE YOUR PARTICIPATION IN THIS COMMODITY POOL. THEREFORE,
BEFORE YOU DECIDE TO PARTICIPATE IN THIS COMMODITY POOL, YOU SHOULD CAREFULLY
STUDY THIS DISCLOSURE DOCUMENT, INCLUDING A DESCRIPTION OF THE PRINCIPAL RISK
FACTORS OF THIS INVESTMENT, AT PAGES 8 TO 12.
YOU SHOULD ALSO BE AWARE THAT THIS COMMODITY POOL MAY TRADE FOREIGN FUTURES
OR OPTIONS CONTRACTS. TRANSACTIONS ON MARKETS LOCATED OUTSIDE THE UNITED
STATES, INCLUDING MARKETS FORMALLY LINKED TO A UNITED STATES MARKET, MAY BE
SUBJECT TO REGULATIONS WHICH OFFER DIFFERENT OR DIMINISHED PROTECTION TO THE
POOL AND ITS PARTICIPANTS. FURTHER, UNITED STATES REGULATORY AUTHORITIES MAY BE
UNABLE TO COMPEL THE ENFORCEMENT OF THE RULES OF REGULATORY AUTHORITIES OR
MARKETS IN NON-UNITED STATES JURISDICTIONS WHERE TRANSACTIONS FOR THE POOL MAY
BE EFFECTED.
THIS PROSPECTUS DOES NOT INCLUDE ALL OF THE INFORMATION OR EXHIBITS IN THE
FUND'S REGISTRATION STATEMENT. YOU CAN READ AND COPY THE ENTIRE REGISTRATION
STATEMENT AT THE PUBLIC REFERENCE FACILITIES MAINTAINED BY THE SEC IN
WASHINGTON, D.C.
THE FUND FILES QUARTERLY AND ANNUAL REPORTS WITH THE SEC. YOU CAN READ AND
COPY THESE REPORTS AT THE SEC PUBLIC REFERENCE FACILITIES IN CHICAGO, NEW YORK
OR WASHINGTON, D.C. PLEASE CALL THE SEC AT 1-800-SEC-0300 FOR FURTHER
INFORMATION.
THE FUND'S FILINGS ARE POSTED AT THE SEC WEBSITE AT HTTP://WWW.SEC.GOV.
_________________________
MERRILL LYNCH INVESTMENT PARTNERS INC.
GENERAL PARTNER
SOUTH TOWER
WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10080-6106
(212) 236-4167
-1-
<PAGE>
ML JWH STRATEGIC ALLOCATION FUND L.P.
Organizational Chart
<TABLE>
<S> <C>
----------------------
Merrill Lynch
& Co., Inc.
ML & Co. Limited Partnership
----------------------
Wholly-owned Interest
---------------------------------------------------------------------------------------------------------------------
- ---------------------- ------------------ ------------- ----------------------
Merrill Lynch
Merrill Lynch, Pierce. Merrill Lynch Merrill Lynch Asset Management, L.P.
Fenner & Smith International Inc. Group Inc. MLAM
------------------ -------------
Incorporated Cash Management
Services
Selling Agent Wholly-owned Wholly-owned
- ---------------------- ------------------ --------------------
----------------------
Merrill Lynch Princeton General Partnership
International Banks Services. Inc. Interest
MLIB Wholly-owned
---------------------- ------------------
-------------------- --------------------
General Partnership
Merrill Lynch Merrill Lynch Interest
Futures Inc. Investment ----------------------
MLF Partners Inc.
-------------------- MLIP
--------------------
Selling Agreement ML JWH Strategic Investment
-------------------------------------------------------------------------------------------------
Allocation Advisory
Fund L.P. Agreement
Fund
----------------------
----------------------
ML JWH Strategic Investment
Customer Agreement Joint Venture Advisory
The Fund & Trading Agreement
F/X Desk Agreement Accounts
---------------------------------------------------------------------------------------------------------
----------------------
John W. Henry
& Company
Trading Advisor
----------------------
----------------------
International Futures
Markets
----------------------
</TABLE>
Other than John W. Henry & Company, Inc., all of the entities indicated in
the foregoing organizational chart are Merrill Lynch affiliates. See "Conflicts
of Interest" and "Transactions Between the Fund And Merrill Lynch."
For convenience, ML&Co. and entities affiliated with it are sometimes
collectively referred to as "Merrill Lynch."
-2-
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
PART ONE
<S> <C>
Summary................................................................. 3
The Risks You Face...................................................... 8
How the Fund Works...................................................... 12
Performance of the Fund................................................. 14
Performance of Other MLIP Single-Advisor Public Funds................... 16
Selected Financial Data................................................. 17
Management's Analysis of Operations..................................... 18
Interest Income Arrangements............................................ 20
Analysis of Fees and Expenses Paid by the Fund.......................... 23
Managed Futures Funds in General........................................ 26
The Role of Managed Futures in Your Portfolio........................... 28
JWH Trading Programs.................................................... 31
John W. Henry & Company, Inc............................................ 37
JWH Principals.......................................................... 40
JWH Performance......................................................... 44
Merrill Lynch Investment Partners Inc................................... 56
Litigation.............................................................. 58
Net Asset Value......................................................... 60
Conflicts of Interest................................................... 60
Transactions Between the Fund and Merrill Lynch......................... 63
Summary of the Limited Partnership Agreement............................ 63
Tax Consequences........................................................ 64
Selling Commissions..................................................... 66
Lawyers; Accountants.................................................... 66
Financial Statements.................................................... 67
Performance of Other MLIP Funds......................................... 87
PART TWO
Futures Markets and Trading Methods..................................... 96
</TABLE>
_______________
Exhibit A -- Limited Partnership Agreement.............................. LPA-1
Exhibit B -- Subscription Requirements ................................. SR-1
Exhibit C -- Subscription Agreement..................................... SA-1
_______________
SUMMARY
GENERAL
The Fund trades speculatively in a wide range of U.S. and international
futures and for ward markets with the primary objective of substantial long-
term capital appreciation. If successful, the Fund can improve the risk/reward
profile of an overall portfolio by providing both profits and performance
unrelated to the general U.S. stock and bond markets. Merrill Lynch Investment
Partners Inc. is the Fund's general partner. John W. Henry & Company, Inc.
is its trading advisor.
JWH(R) AND ITS PROGRAMS
JWH
JWH has been the sole trading advisor for the Fund since inception. JWH
manages capital in commodities, interest rate and foreign exchange markets for
international banks, brokerage firms, pension funds, institutions and high net
worth individuals. JWH trades a wide range of futures and forward contracts --
approximately 60 markets as of the date of this prospectus -- on a 24-hour basis
in the United States, Europe and Asia. JWH is one of the largest managed futures
advisors in terms of assets under management, trading approximately $2.1 billion
in client capital as of May 1, 1998.
The Fund Uses Multiple JWH Programs
JWH makes use of a combination of trading programs to manage the Fund, an
approach JWH calls the JWH Strategic Allocation Program. There are no formal JWH
policies that determine the programs used for the Fund.
JWH's programs have certain basic similarities. The use of a single
advisor decreases diversification and increases risk compared to a multi-advisor
fund.
The Fund's Current Programs
To date, the Fund and its offshore counterpart are the only accounts which
have
-3-
<PAGE>
had access to the Strategic Allocation Program. As of the date of this
prospectus, JWH allocated the Fund's assets among the following eight of its
eleven active trading programs.
June 1, 1998 Fund Allocations
Among JWH Programs
Due to performance differences, the following portfolio allocations may
differ from the cash allocations among the programs. JWH changes the programs
and the allocations used for the Fund from time to time.
<TABLE>
<CAPTION>
% of
Fund Assets
<S> <C>
Financial and Metals Portfolio 19.7%
Original Investment Program 18.6%
JWH GlobalAnalytics(TM) Programs 15.9%
Global Financial Portfolio 13.9%
G-7 Currency Portfolio 11.5%
Global Diversified Portfolio 9.0%
Dollar Program 6.8%
Worldwide Bond Program 4.6%
------
100%
======
</TABLE>
JUNE 1, 1998 FUND ALLOCATIONS
AMONG JWN PROGRAMS
<TABLE>
<CAPTION>
<S> <C>
Worldwide Bond Program 4.60%
JWH GlobalAnalytics (TM) Programs 15.90%
Dollar Program 6.80%
Financial and Metals Portfolio 19.70%
G-7 Currency Portfolio 11.50%
Global Diversified Portfolio 9.00%
Global Financial Portfolio 13.90%
Original Investment Program 18.60%
</TABLE>
See "JWH Trading Programs" at page 31 and "JWH Performance" at page 44 for
performance and other information regarding the JWH Programs.
Average Compounded
Annualized Rates of Return
<TABLE>
<CAPTION>
JANUARY 1, 1993-
Name of Program April 30, 1998
<S> <C>
Global Diversified Portfolio 20.0%
Original Investment Program 19.1
Financial and Metals Portfolio 18.0
The World Financial Perspective 15.6
International Currency and Bond Portfolio 14.3
Worldwide Bond Program 14.3
(7/1/96-4/30/98)
JWH Globalanalytics(TM) Family
of Programs 13.8
(6/1/97-4/30/98)
Global Financial Portfolio 12.0
(6/1/94-4/30/98)
International Foreign Exchange Program 10.5
G-7 Currency Portfolio 8.8
Dollar Program 6.9
(7/1/96-4/30/98)
ML JWH Strategic Allocation Fund L.P. 16.2%
(7/15/96-5/31/98)
</TABLE>
The Compounded Annualized rate of return is the annual rate of return which
would result in the same cumulative return if compounded yearly over the same
period.
Past performance is not necessarily indicative of future results.
The JWH Programs are Technical and Trend-Following, Computerized Systems
JWH programs include the computerized system which generates the trading
signals and applies the risk management principles. See "JWH Trading Programs"
at page 31.
The mathematical models used by the programs are technical systems,
generating trading signals on the basis of statistical research into past market
prices. JWH does not attempt to analyze underlying economic factors, identify
mispricings in the market or predict future prices. its analysis focuses
exclusively on past price movements.
As a trend-following advisor, JWH'S objective is to participate in major
price trends -- sustained price movements either up or down. Such price trends
may be relatively infrequent. Trend-following advisors anticipate that over
half of their positions will be unprofitable. Their strategy is based on making
sufficiently large profits from the trends which they identify and follow to
generate overall profits despite the more numerous but, hopefully, smaller
losses incurred on the majority of their positions.
See "The Risks You Face" beginning at page 8.
-4-
<PAGE>
MARKETS TRADED BY THE JWH PROGRAMS FOR THE FUND
The JWH programs emphasize trading currencies and financial instruments,
but participate in most major sectors of the global economy, including but not
limited to:
Currencies
- ----------
Australian Dollar Japanese Yen
*Belgian Franc *Malaysian Ringgit
British Pound *New Zealand Dollar
*Canadian Dollar Norwegian Krone
*Danish Krone *Singapore Dollar
Deutsche Mark *South African Rand
*French Franc *Spanish Peseta
Hong Kong Dollar *Swedish Krone
*Italian Lira Swiss Franc
Financial Instruments
- ---------------------
Australian (90-day) French PIBOR
Bank Bills German Bonds
Australian (3-year and Italian Bonds
10-year) Treasury Bonds Japanese Bonds
*Canadian Bonds *Spanish Bonds
Eurodollar Spanish MIBOR
Eurolira U.K. Long "Gilts"
Euromark U.K. Short Sterling
Euroswiss U.S. 10-year Treasury
Euroyen Notes
French Notionnel Bonds U.S. Treasury Bonds
Stock Indices
- -------------
*Australian All Ordinaries FTSE 100 (UK)
Index *New York Composite
*CAC 40 Stock Index Nikkei 225 Index
(France) (Japan)
*DAX (German) *S&P 500 Stock Index
METALS
- ------
*Aluminum *Palladium
Copper *Platinum
Gold Silver
*Lead *Tin
*Nickel *Zinc
Agricultural Products
- ---------------------
*Cattle *Orange Juice
Cocoa Soybeans
Coffee Soymeal
Corn Soy Oil
Cotton Sugar
*Hogs *Wheat
*Lumber
Energy
- ------
Crude Oil No. 2 Heating Oil
Natural Gas Unleaded Gasoline
* These markets are traded if and when contract liquidity, legal constraints,
market conditions and data reliability standards meet JWH's specifications.
There is no way to predict which markets the fund will trade or what its
relative commitments to the different markets will be.
As of June 1, 1998, the JWH trading programs used for the Fund, had the
following approximate market sector commitments.
Financial Instruments 32%
Currencies 23%
Commodities 23%
Metals 13%
Stock Indices 9%
The Fund's market sector weightings vary significantly over time.
MARKET SECTORS TRADED
AS OF JUNE 1, 1998
<TABLE>
<S> <C>
Currencies 23.00%
Stock Indices 9.00%
Financial Instruments 32.00%
Commodities 23.00%
Metals 13.00%
</TABLE>
The sector weightings may change substantially over time.
Varying the Size of the Fund's Market Positions
JWH attempts to adjust the Fund's position sizes and market exposure to
meet its profit and risk-control objectives. Generally only between 2% and 15%
of the face value of a
-5-
<PAGE>
futures or forward position is required as margin to put on the position.
Consequently, JWH has considerable flexibility to make significant changes in
the size of the Fund's open positions. For example, the margin requirement for
the Treasury bond futures contract is only approximately 2% of the face value of
each contract. This means that JWH could acquire, for each $100,000 of Fund
capital, positions ranging from a single Treasury bond contract with a face
value of $100,000 up to 50 such contracts with a face value of $5,000,000. The
greater the market exposure of the Fund, the more profit or loss it will
recognize as a result of the same price movements, and the greater its risk,
profit potential and expected performance volatility.
MLIP
General
Offering hedge funds, managed futures and currency investments for
individuals, corporations and financial institutions, MLIP has operated with one
primary objective since its inception in 1986. This objective is to provide
investors with an opportunity for long-term capital appreciation and
diversification through professionally managed investments in equity, debt,
currency, interest rate, metals, energy and agricultural markets, utilizing a
wide variety of instruments and trading strategies. As of May 1, 1998, MLIP
was acting as trading manager or sponsor to funds in which approximately $3.1
billion of client assets were invested.
See the organizational chart of the Merrill Lynch entities at page 2 and
"Transactions Between the Fund and Merrill Lynch" at page 63.
MLIP'S Exclusive Access to the Strategic Allocation Program
JWH has granted MLIP the exclusive right to market both public and private
funds using the JWH Strategic Allocation Program. This exclusive right will
continue until the end of the twelfth full month after the initial sale of Units
under this prospectus. MLIP and JWH presently intend to extend this exclusive
arrangement on a year-to-year basis, but there can be no assurance that they
will do so.
CASH MANAGEMENT
Merrill Lynch Asset Management, L.P. provides cash management services to
the Fund, investing in U.S. Government and agency securities within parameters
established by MLIP for which MLAM assumes no responsibility. As of May 1, 1998,
the Asset Management Group of Merrill Lynch Co., Inc. (which includes MLAM) had
a total of approximately $485 billion in investment company and other portfolio
assets under management. This figure includes assets managed for some of MLAM's
affiliates.
MAJOR RISKS OF THE FUND
The Fund is a speculative investment. It is not possible to predict how
the Fund will perform over either the long or short term.
Investors must be prepared to lose all or substantially all of their
investment in the Units.
There can be no assurance that the past performance of either the Fund or
JWH is indicative of how they will perform in the future.
The performance of the JWH programs is dependent upon market trends of the
type that their models are designed to identify. Trendless periods are frequent,
and during such periods the Fund is unlikely to be profitable.
The Fund is subject to substantial charges. The Fund must earn overall
trading profits and interest income of approximately 9%-10% of its average Net
Asset Value each year simply to break even after operating expenses.
Because its performance is entirely unpredictable, there is no way of
telling when is a good time to invest in the Fund. Investors have no means of
knowing whether they are buying Units at a time when major price trends followed
by the JWH programs are ending, beginning, or not in progress.
-6-
<PAGE>
The Net Asset Value per Unit has varied by as much as 10% in a single
month. Because investors must submit irrevocable subscriptions as well as
redemption notices at least 10 days before the purchase or redemption of Units
- --and can do so up to approximately a month before -- they cannot know the Net
Asset Value at which they will acquire or redeem Units. The Fund could incur
material losses between the time investors subscribe and the time they receive
their Units. In addition, investors cannot control the maximum losses on
their Units because they cannot be sure of the redemption value of their
Units.
As limited partners, investors have no voice in the operation of the
Fund; they are entirely dependent on the management of MLIP and JWH for the
success of their investment.
FEES AND EXPENSES
The Profit Share payable to JWH is calculated on a quarterly basis and
could be substantial even in a breakeven or losing year. The Fund's other
significant expenses are its Brokerage Commissions and Administrative Fees .
If the Fund's Net Asset Value increases, the absolute dollar amount of these
percentage-of-assets fees will also, but they will have the same effect on the
Fund's rate of return. The Fund's ongoing offering and currency trading costs
are estimated but small -- in fact, to date significantly less than the
estimates in the breakeven table.
The Fund pays redemption charges to MLIP by reducing the redemption
proceeds otherwise payable to investors.
BREAKEVEN TABLE
---------------
<TABLE>
<CAPTION> TWELVE-MONTH
DOLLAR
TWELVE-MONTH BREAKEVEN
PERCENTAGE ($5,000 INITIAL
EXPENSES BREAKEVEN INVESTMENT)++
- -------- --------- ---------------
<S> <C> <C>
Ongoing Offering Costs 0.20% $ 10.00
Brokerage Commissions 7.75% $ 387.50
Administrative Fees 0.25% $ 12.50
Profit Share* 1.00% $ 50.00
Currency Trading Costs* 0.25% $ 12.50
Interest Income* (5.00)% $(250.00)
TWELVE-MONTH
BREAKEVEN WITHOUT
REDEMPTION CHARGE 4.45% $ 222.50
------- --------
Redemption Charge
(first twelve months only) 3.00% $ 150.00
TWELVE-MONTH
BREAKEVEN WITH
REDEMPTION CHARGE 7.45% $ 372.50
----- --------
</TABLE>
_______________
* Estimated. The Profit Share is 15% of New Trading Profits quarterly;
consequently, a Profit Share could be due in a breakeven or losing year.
++ Assumes a constant $5,000 Net Asset Value.
SEE "ANALYSIS OF FEES AND EXPENSES
PAID BY THE FUND" AT PAGE 25.
PRINCIPAL TAX ASPECTS OF OWNING UNITS
Investors are taxed each year on any gains recognized by the Fund whether
or not they redeem any Units or receive any distributions from the
Fund.
40% of any trading profits on U.S. exchange-traded contracts are taxed as
short-term capital gains at the 39.6% ordinary income rate, while 60% of
such gains are taxed as long-term capital gain at a 20% maximum rate for
individuals. The Fund's trading gains from other contracts will be primarily
short-term capital gain. This tax treatment applies regardless of how long an
investor holds Units. If, on the other hand, an investor held a stock or
bond for 18 months or longer, all the
-7-
<PAGE>
gain realized on its sale would generally be taxed at a 20% maximum rate.
Losses on the Units may be deducted against capital gains. Any losses in
excess of capital gains may only be deducted against ordinary income to the
extent of $3,000 per year. Consequently, investors could pay tax on the
Fund's interest income even though they have lost money on their Units. See "Tax
Consequences " at page 64.
An Investment in the Units Should Be Considered as a Long-term Commitment
The market trends which the programs attempt to follow occur infrequently.
An investor should plan to hold Units for long enough to have a realistic
opportunity for a number of such trends to develop.
MLIP believes that investors should consider the Units at least a 3 - to
5-year commitment.
See "EXHIBIT B -- Subscription Requirements." Is the Fund a Suitable Investment
for You?
You should consider investing in the Fund if you are interested in its
potential to produce enhanced returns over the long-term that are generally
unrelated to the returns of the traditional debt and equity markets and you are
prepared to risk significant losses. Your Financial Consultant can assist you
in deciding whether the Units are suitable for your portfolio.
No one should invest more than 10% of their readily marketable assets in
the Fund.
THE RISKS YOU FACE
Possible Total Loss of an Investment in the Fund
You could lose all or substantially all of your investment in the
Fund.
The Large Size of the Fund's Trading Positions Increases the Risk of Sudden,
Major Losses
The Fund takes positions with face values up to as much as approximately 5
times its total equity. Consequently, even small price movements can cause
major losses.
Investors Must Not Rely on the Past Performance of Either JWH or the Fund in
Deciding Whether to Buy Units
The future performance of the Fund is entirely unpredictable, and the past
performance of the Fund as well as of JWH is not necessarily indicative of their
future results.
The price data which JWH has researched in developing its programs may not
reflect the changing dynamics of future markets. If not, the JWH programs would
have little chance of being profitable. A number of trend-following systematic
traders have had long losing periods immediately after long periods of success.
An influx of new market participants, changes in market regulation,
international political developments, demographic changes and numerous other
factors can contribute to once-successful technical systems becoming outdated.
not all of these factors can be identified, much less quantified. JWH regularly
conducts research on the markets and its programs, but there can be no assurance
that it will be able to continue to trade profitably.
JWH Analyzes Only Technical Market Data, Not Any Economic Factors External to
Market Prices
The JWH programs focus exclusively on statistical analysis of market
prices. Consequently, any factor external to the market itself which dominates
prices is likely to cause major losses. For example, a pending political or
economic event may be very likely to cause a major price movement, but JWH would
continue to maintain positions that would incur major losses as a result of any
such movement, if its programs indicated that it should do so.
The likelihood of the Units being profitable could be materially
diminished
-8-
<PAGE>
during periods when events external to the markets themselves have an important
impact on prices. During such periods, JWH's historical price analysis could
establish positions on the wrong side of the price movements caused by such
events.
Lack of Price Trends or of the Types of Price Trends Which JWH Programs Can
Identify Will Cause Major Losses
The Fund cannot trade profitably unless major price trends occur in at
least certain markets traded by it. Many markets are trendless most of the
time, and in static markets the JWH programs are likely to incur losses. In
fact, JWH expects more than half of its trades to be unprofitable; it depends on
significant gains from a few major trends to offset these losses. Moreover, it
is not just any price trend, but price trends of the type which JWH's systems
have been designed to identify, which are necessary for the fund to be
profitable.
The Danger to the Fund of "Whipsaw" Markets
Often, the most unprofitable market conditions for the Fund are those in
which prices "whipsaw," moving quickly upward, then reversing, then moving
upward again, then reversing again. In such conditions, the programs may
establish positions based on incorrectly identifying both the brief upward or
downward price movements as trends, whereas in fact no trends sufficient to
generate profits develop.
The Similarities Among the JWH Programs Reduce Diversification, Increasing The
Risk of Loss
The similarities among the programs, including the common statistical
models and data bases which they use, reduce the Fund's diversification. The
less diversification, the higher the risk that the market will move against a
large number of positions held by different programs at the same time,
increasing losses.
Overlap of the Markets Traded by JWH Also Reduces Diversification, Increasing
the Risk of Loss
In addition to the similarities among the programs, the markets they trade
overlap. As of the date of this prospectus, the programs concentrate
approximately 50% of their positions in the financial instrument and currency
markets. The degree of market overlap changes as different programs react
differently to changing market conditions and cannot be predicted. However, in
general, MLIP would expect approximately a minimum 50% concentration in these
two sectors. Market concentration increases the risk of major losses and
unstable Unit values, as the same price movements adversely affect many of the
Fund's concentrated positions at or about the same time.
As it is impossible to predict where price trends will occur, certain
trend-following managers attempt to maximize the chance of exploiting such
trends by taking positions in as many different markets and market sectors as
feasible. The Fund does not follow this approach and, as a result, may not
capture trends which would have been highly profitable. See "Summary --JWH(R)
and Its Programs -- Markets Traded by the JWH Programs for the Fund" at page
5.
The JWH Strategic Allocation Program Is Not A Formal Program Or System
The JWH Strategic Allocation Program is not a systematic selection process,
and JWH does not apply any formal selection policies or criteria in choosing
combinations of programs for the Fund. Such combinations are developed solely
on the basis of the subjective market judgment and experience of certain JWH
principals. Subjective, judgmental decision-making may be less disciplined and
objective than a more systematic method, and there can be no assurance that JWH
will select the optimal combinations of programs for the Fund.
Its Substantial Expenses Will Cause Losses For The Fund Unless Offset By
Profits
The Fund pays fixed annual expenses of 8% of its average month-end assets.
Ongoing costs and currency trading costs, paid as incurred, could equal as much
as 0.5% of the
-9-
<PAGE>
Fund's average month-end assets annually. In addition to this 8.5% annual
expense level, the Fund is also subject to 15% quarterly Profit Shares during
its profitable quarters. Because these Profit Shares are calculated quarterly,
they could represent a substantial expense to the Fund even in a breakeven or
losing year. Based on MLIP's experience with its other funds, MLIP expects that
approximately 1% of the Fund's average month-end assets might be paid out in
Profit Shares even during a losing year. Overall, investors must expect that the
Fund will pay about 9.5% per year in expenses, 12.5% including the 3% redemption
charge in effect for the first twelve months after a Unit is issued. The Fund's
expenses could, over time, result in significant losses. Except for the Profit
Share, these expenses are not contingent and are payable whether or not the Fund
is profitable. See "Summary -- Fees and Expenses" at page 7.
Unit Values Are Unpredictable And Vary Significantly Month-to-month
The Net Asset Value per Unit varies significantly month-to-month. In
October 1996, there was over a 10% change in the value of a Unit. Investors
cannot know at the time they submit a redemption request what the redemption
value of the Units will be.
The only way to take money out of the Fund is to redeem Units. You can
only redeem Units at month-end upon at least 10 days' advance notice and subject
to possible redemption charges. The restrictions imposed on redemptions limit
your ability to protect yourself against major losses by redeeming part or all
of your Units.
In addition, investors are unable to know whether they are subscribing
after a significant upswing in the Net Asset Value per Unit -- often a time when
Fund has an increased probability of entering into a losing period.
Investing In The Units Might Not Diversify An Overall Portfolio
One of the objectives of the Fund is to add a valuable element of
diversification to a traditional securities portfolio. While the Fund may
perform in a manner largely independent from the general stock and bond markets,
there is no assurance it will do so. An investment in the Fund could increase
rather than reduce overall portfolio losses during periods when the Fund as well
as stocks and bonds decline in value. There is no way of predicting whether
the Fund will lose more or less than stocks and bonds in declining markets.
Investors must not rely on the Fund as any form of hedge against losses in
their core securities portfolios.
Prospective investors should consider whether diversification in itself
is worthwhile even if the Fund is unprofitable.
Increased Competition From Other Trend-following Traders Could Reduce JWH's
Profitability
There has been a dramatic increase over the past 10 to 15 years in the
amount of assets managed by trend-following trading systems like the JWH
programs. In 1980, the amount of assets in the managed futures industry were
estimated at approximately $300 million; by the end of 1997, this estimate had
risen to approximately $34.9 billion. It is also estimated that over half of all
managed futures trading advisors rely primarily on trend-following systems. This
means increased trading competition. The more competition there is for the same
positions, the more costly and harder they are to acquire.
JWH's High Equity Under Management Could Lead To Diminished Returns
As of the date of this prospectus, JWH has a significant amount of assets
under management. As of January 1, 1990, JWH had approximately $197 million
under management; as of May 1, 1998, this figure had risen to approximately $2.1
billion. The more money JWH manages, the more difficult it may be for JWH to
trade profitably because of the difficulty of trading larger positions
without adversely affecting prices and performance. Executing large trades
results in more price slippage than do smaller orders.
-10-
<PAGE>
Illiquid Markets Could Make It Impossible for the Fund to Realize Profits or
Limit Losses
In illiquid markets, the Fund might not be able to execute the trades
indicated by the programs. JWH could be unable to close out positions against
which the market is moving so as to limit the Fund's losses or to take positions
in order to follow trends identified by the programs. There are too many
different factors which can contribute to market illiquidity to predict when or
where illiquid markets may occur. JWH attempts to limit its trading to highly
liquid markets, but there can be no assurance that a market which has been
highly liquid in the past will not experience periods of unexpected
illiquidity.
Unexpected market illiquidity has caused major losses in recent years in
such sectors as emerging markets and mortgage-backed securities. There can be
no assurance that the same will not happen to the Fund at any time or from time
to time. The large size of the positions which JWH acquires for the Fund
increases the risk of illiquidity by both making its positions more difficult to
liquidate and increasing the losses incurred while trying to do so.
JWH Trades Extensively in Foreign Markets; These Markets Are Less Regulated Than
U.S. Markets and Are Subject to Exchange Rate, Market Practices and Political
Risks
The programs trade a great deal outside the U.S. From time to time, as
much as 30%-50% of the Fund's overall market exposure could involve positions
taken on foreign markets. Foreign trading involves risks -- including exchange-
rate exposure, possible governmental intervention and lack of regulation --
which U.S. trading does not. In addition, the Fund may not have the same
access to certain positions on foreign exchanges as do local traders, and the
historical market data on which JWH bases its strategies may not be as reliable
or accessible as it is in the United States. Certain foreign exchanges may also
be in a more or less developmental stage so that prior price histories may not
be indicative of current price dynamics. The rights of clients in the event of
the insolvency or bankruptcy of a non-U.S. market are likely to be more limited
than in the case of U.S. markets.
The Fund's Cash Management Strategies Could Lose Both Yield and Principal
MLAM's cash management will try to generate yield in excess of the 91-day
Treasury bill rate. However, there can be no assurance that the securities MLAM
invests in for the Fund will not lose value. If this occurs, the Fund could lose
not only the interest it hopes to gain, but also the principal it originally
invested.
The Fund Could Lose Assets and Have Its Trading Disrupted Due to the Bankruptcy
of MLF or Others
The Fund is subject to the risk of MLF, exchange or clearinghouse
insolvency. Fund assets could be lost or impounded in such an insolvency during
lengthy bankruptcy proceedings. Were a substantial portion of the Fund's
capital tied up in a bankruptcy, MLIP might suspend or limit trading, perhaps
causing the Fund to miss significant profit opportunities. No MLIP fund has
ever lost any assets due to the bankruptcy or default of a broker, exchange or
clearinghouse, but there can be no assurance that this will not happen in the
future.
Regulatory Changes Could Restrict the Fund's Operations
The Fund implements a speculative, highly leveraged strategy. From time to
time there is governmental scrutiny of these types of strategies and political
pressure to regulate their activities. For example, the Malaysian government
during 1997 blamed the collapse of its currency on speculative funds and called
for international restrictions on their operations.
Regulatory changes could adversely affect the Fund by restricting its
markets, limiting its trading and/or increasing the taxes to which the
Unitholders are subject. As an example, in the mid-1980s the CFTC raised doubts
concerning the legality of futures funds trading currency forwards. If JWH
could not
-11-
<PAGE>
trade currency forwards for the Fund, the effect on the Fund could be material
and adverse. MLIP is not aware of any pending or threatened regulatory
developments which might adversely affect the Fund. However, adverse regulatory
initiatives could develop suddenly and without notice.
____________________
The following are not risks but rather important tax features of
investing in the Fund which all prospective investors should carefully consider
before deciding whether to purchase Units.
Investors Are Taxed Every Year on Their Share of the Fund's Profits -- Not Only
When They Redeem as Would Be the Case if They Held Stocks or Bonds
Investors are taxed each year on their investment in the Fund, irrespective
of whether they redeem any Units. In contrast, an investor holding stocks
or bonds generally pays no tax on their capital appreciation until the
securities are sold. Over time, the deferral of tax on stock and bond
appreciation has a compounding effect.
All performance information included in this prospectus is presented on a
pre-tax basis; the investors who experienced such performance had to pay the
related taxes from other sources.
The Fund's Trading Gains Taxed at Higher Capital Gains Rate
Investors are taxed on their share of any trading profits of the Fund at
short- and long-term capital gain rates depending on the mix of U.S.
exchange-traded contracts and non-U.S. contracts traded. These tax rates are
determined irrespective of how long an investor holds units. The tax rate on
the Fund's trading gains may be higher than those applicable to other
investments held by an investor for a comparable period.
Tax Could Be Due From Investors on Their Share of the Fund's Interest Income
Despite Overall Losses
Investors may be required to pay tax on their allocable share of the Fund's
interest income, even though the Fund incurs overall losses. Trading losses can
only be used to offset trading gains and $3,000 of interest income each year.
Consequently, if an investor were allocated $5,000 of interest income and
$10,000 of net trading losses, the investor would owe tax on $2,000 of interest
income even though the investor would have a $5,000 loss for the year. The
$7,000 capital loss would carry forward, but subject to the same limitation on
its deductibility against interest income.
HOW THE FUND WORKS
BUYING UNITS
You buy Units as of the first business day of any month at Net Asset Value,
but your subscription must be submitted by the 20th day of the preceding month.
Subscriptions submitted after the 20th of a month will be applied to unit sales
as of the beginning of the second month after receipt, unless revoked.
Units are purchased at Net Asset Value. Merrill Lynch officers and
employees subscribe at 97% of Net Asset Value. MLIP adds the remaining 3% to
their subscriptions, so that the Fund receives subscription proceeds of 100% of
the Net Asset Value per Unit.
Only first-time investors need to submit Subscription Agreements,
unless the selling Agent feels it is necessary to reconfirm their suitability in
writing. To purchase additional Units, contact your Financial
Consultant.
The minimum purchase for first-time investors is 50 Units (or $5,000,
whichever is less); 20 Units (or $2,000, whichever is less) for IRAs, other
tax-exempt accounts and current investors.
-12-
<PAGE>
You may only purchase whole Units. Subscription amounts which
cannot be invested in whole Units are never deducted from subscribers'
customer securities accounts.
USE OF PROCEEDS
100% of all subscription proceeds are invested directly into the Fund.
Neither the Fund nor any subscriber pays any selling commissions. MLIP pays all
such commissions as part of the start-up costs of the Fund. In return, MLIP
receives substantial revenues from the Fund over time.
The fund uses subscription proceeds to margin its speculative futures
trading, as well as to pay trading losses and expenses. At the same time
that the Fund's assets are being used as margin, they are also available for
cash management. Substantially all the cash management return earned on the
Fund's assets is paid to the Fund, although Merrill Lynch does retain certain
economic benefits from possession of the Fund's assets, as described in more
detail under "Interest Income Arrangements" at page 20.
The Fund's assets are held either in bank custodial accounts or in
regulated customer accounts maintained at one or more Merrill Lynch entities.
MLAM applies its yield-enhancement strategies to the approximately 80% of the
Fund's assets deposited in custodial accounts. While being managed by MLAM,
these assets are also available to support the fund's futures and forwards
trading.
REDEEMING UNITS
You can redeem Units monthly. To redeem at month-end, contact your
Financial Consultant by the 20th of the month. Financial Consultants may be
contacted by telephone; written redemption requests are not required.
Your Merrill Lynch customer securities account will be credited with the
proceeds within 10 business days of redemption.
Those limited partners who no longer have a Merrill Lynch account must send
their redemption requests in writing (signature guaranteed) directly to MLIP,
Attention: Mr. Winston Clinton, Merrill Lynch World Headquarters, South Tower,
World Financial Center, New York, New York 10080-6106.
The proceeds of Units redeemed within 12 months of purchase are reduced
by a charge of 3% of such Net Asset Value, which is paid to MLIP. If a
limited partner acquires Units at more than one closing, the units purchased
first by such investor and, accordingly, least likely to be subject to
redemption charges, are assumed to be those first redeemed, thereby minimizing
to redemption charges.
UNCERTAIN SUBSCRIPTION AND REDEMPTION VALUE OF UNITS
The Fund sells and redeems Units at subscription or redemption date Net
Asset Value, not at the Net Asset Value as of the date that subscriptions or
redemption requests are submitted. Investors must submit irrevocable
subscriptions and redemption requests at least 10 days prior to the effective
date of subscription or redemption. Because of the volatility of Unit values,
this delay means that investors cannot know the value at which they will
purchase or redeem their Units. Materially adverse changes in the Fund's
financial position could occur between the time a limited partner irrevocably
commits to acquire or redeem Units and the time the purchase or redemption is
made.
MANDATORY TRADING SUSPENSION IF UNIT VALUE FALLS TO $50 OR LESS
In the event that the Net Asset Value per Unit declines to $50 or less, the
Fund must liquidate all open positions, suspend trading and offer all limited
partners an opportunity to redeem their Units before trading resumes. Only if
sufficient capital remains in the Fund after any such special redemption date
would the Fund continue operations.
-13-
<PAGE>
Distributions
The Fund does not anticipate making any distributions to investors. No
distributions have been made to date.
Small Minimum Investment
By investing in the Fund, you participate in multiple JWH trading programs
with a minimum investment of only 50 Units or $5,000, whichever is less; 20
Units or $2,000, whichever is less, for IRAs, other tax-exempt accounts and
existing investors. Certain public futures Funds, but not the fund, permit all
investors, not just IRAs, other tax-exempt and existing investors, to invest in
$2,000 minimums.
Even if available, a direct investment in a single JWH program would
require a minimum account size of $5 million. A prospective investor could
trade futures directly or invest in other managed futures accounts for much less
than $5 million, but this is JWH's minimum account size.
Limited Liability for Fund Investors
Investors who open individual futures accounts are personally liable for
all losses, including margin calls potentially in excess of their investment.
As a Unitholder, you can never lose more than your investment and profits.
Administrative Convenience
MLIP provides all administrative services needed for the Fund, including
trade processing and financial and tax reporting.
The Net Asset Value per Unit is available at any time upon request.
Contact your Financial Consultant or MLIP at (800) 765-0995.
Investors receive monthly financial summaries and annual audited
financials.
-14-
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
-15-
<PAGE>
PERFORMANCE OF THE FUND
The following are the monthly rates of return and the month-end Net Asset
Value Unit from the inception of the Fund through May 31, 1998. Monthly rate of
return is determined by dividing the net performance of the Fund during a month
by its Net Asset Value as of the beginning of the month. There can be no
assurance that the Fund will continue to perform in the future the way it has in
the past.
ML JWH STRATEGIC ALLOCATION FUND L.P.
JULY 15, 1996 - MAY 31, 1998
AGGREGATE SUBSCRIPTIONS: $199,895,865
CURRENT CAPITALIZATION: $204,923,068
WORST MONTHLY DECLINE (MONTH/YEAR): (3.38)% (4/98)
WORST PEAK-TO-VALLEY DECLINE (MONTH/YEAR): (4.74)% (1/98-4/98)
NET ASSET VALUE PER UNIT, MAY 31, 1998: $134.18
NUMBER OF LIMITED PARTNERS, MAY 31, 1998: 6,003
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
MONTHLY RATES OF RETURN MONTH-END NAV PER UNIT
- ------------------------------------------------------------------------------------
<S> <C> <C>
1996
- ------------------------------------------------------------------------------------
July ( 1/2 month) (1.02)% [ ] $ 98.98
- ------------------------------------------------------------------------------------
August (0.09) 98.89
- ------------------------------------------------------------------------------------
September 5.49 104.32
- ------------------------------------------------------------------------------------
October 10.20 114.86
- ------------------------------------------------------------------------------------
November 6.62 122.68
- ------------------------------------------------------------------------------------
December 0.47 123.16
- ------------------------------------------------------------------------------------
COMPOUND RATE OF RETURN (5 1/2 MONTHS) 23.15%
- ------------------------------------------------------------------------------------
1997
- ------------------------------------------------------------------------------------
January 3.01% $126.87
- ------------------------------------------------------------------------------------
February (0.03) 126.83
------------------------------------------------------------------------------------
March 0.07 126.92
------------------------------------------------------------------------------------
April (0.46) 126.34
------------------------------------------------------------------------------------
May (3.11) 122.41
------------------------------------------------------------------------------------
June 0.27 122.74
------------------------------------------------------------------------------------
July 7.11 131.47
------------------------------------------------------------------------------------
August (3.31) 127.12
------------------------------------------------------------------------------------
September (0.66) 126.28
------------------------------------------------------------------------------------
October 2.58 129.54
------------------------------------------------------------------------------------
November 0.97 130.80
------------------------------------------------------------------------------------
December 3.52 135.40
------------------------------------------------------------------------------------
COMPOUND ANNUAL RATE OF RETURN 9.93%
- -------------------------------------------------------------------------------------
1998
- -------------------------------------------------------------------------------------
JANUARY (1.51)% $133.35
- -------------------------------------------------------------------------------------
FEBRUARY (0.66) 132.47
- -------------------------------------------------------------------------------------
MARCH 0.77 133.48
- -------------------------------------------------------------------------------------
APRIL (3.38) 128.97
- -------------------------------------------------------------------------------------
MAY 4.04 134.18
- -------------------------------------------------------------------------------------
COMPOUND RATE OF RETURN (5 MONTHS) (0.89)%
- -------------------------------------------------------------------------------------
</TABLE>
CUMULATIVE STATISTICS
Correlation Coefficient vs. S&P 500: 0.40
Beta vs. S&P 500: 0.34
Sharpe Ratio: 1.16
All financial information relates to the performance of the
joint venture between the Fund and JWH, not the Fund itself.
See Notes to performance of the Fund on page 15.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
-16-
<PAGE>
NOTES TO PERFORMANCE OF THE FUND
Monthly Rates of Return are calculated by dividing the Fund's net
performance during a month by the Fund's Net Asset Value as of the beginning
of such month.
Compound Annual Rate of Return is calculated by compounding the monthly
rates of return. For example, the compound annual rate of return for 1996 was
calculated by multiplying (0.9898 X 0.9991 X 1.0549 X 1.1020 X 1.0662 X 1.0047)
- - 1 = 23.15%
Worst Peak-to-Valley Decline is the largest decline in the Net Asset
Value per Unit without such Net Asset Value per Unit being subsequently equalled
or exceeded. For example, if the Net Asset Value per Unit dropped (1)% in each
of January and February, rose 1% in March and dropped (2)% in April, the
peak-to-valley decline would still be continuing at the end of April in the
amount of approximately (3)%, whereas if the Net Asset Value per Unit had risen
approximately 2% or more in March, the peak-to-valley decline would have ended
as of the end of February at approximately the (2)% level.
Correlation Coefficient vs. S&P 500: Every investment asset, by
definition, has a correlation coefficient of 1.0 with itself; 1.0 indicates
100% positive correlation. Two investments which always move in the opposite
direction from each other have a correlation coefficient of -1.0; -1.0 indicates
100% negative correlation. Two investments which perform entirely independently
of each other have a correlation coefficient of 0; 0 indicates 100% non-
correlation. Since inception, the Fund has had a positive correlation
coefficient of 0.40 with the S&P 500. For every up-move of the S&P 500 above its
average monthly return, the Fund has moved in the same direction above its
average monthly return in approximately 40% of the months.
The Fund has not been non-correlated, much less negatively correlated, to
the S&P 500. For the Fund to serve as a hedge to an investor's stock position,
the Fund would need to be negatively correlated, and the more positively
correlated the Fund is to the S&P 500, the less an investment in the Fund
constitutes a diversification from the equity markets.
Beta vs. S&P 500: The S&P has, by definition, a Beta of 1. Any
investment with a Beta higher than 1 has greater variability in its monthly
rates of return than the S&P. Consequently, the Fund's Beta of 0.34 means that
it has to date been approximately one-third as volatile as the S&P.
Sharpe Ratio: The Sharpe Ratio compares the annualized rate of return
minus the annualized risk-free rate of return to the annualized
variability -- often referred to as the "standard deviation" -- of the monthly
rates of return. A Sharpe Ratio of 1:1 or higher indicates that, according
to the measures used in calculating the Ratio, the rate of return achieved by a
particular strategy has equaled or exceeded the risks assumed by such
strategy.
The Fund's 1.16 Sharpe Ratio indicates that to date the Fund's return
has only marginally exceeded its risk, as compared to a "risk-free" 91-day
Treasury Bill.
_______________
-17-
<PAGE>
PERFORMANCE OF OTHER MLIP SINGLE-ADVISOR PUBLIC FUNDS
Each of the following funds, other than ML JWH Strategic Allocation
Fund Ltd., is a materially different investment than the Fund. Their
performance is included at this point in the prospectus due to applicable CFTC
regulations which require that the performance summaries of all commodity pools
of same "class" as the pool being offered immediately follow the performance
summary of such pool. The Fund is a publicly-offered single advisor fund, as
are the funds included in the following table.
- --------------------------------------------------------------------------------
MERRILL LYNCH INVESTMENT PARTNERS INC. PUBLICLY-OFFERED SINGLE ADVISOR FUNDS
WITH AND WITHOUT "PRINCIPAL PROTECTION" FEATURES
MAY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Worst Monthly Worst
Decline Peak-to-Valley
NAME OF Type of Inception Aggregate May 31, 1998 Decline
FUND Offering of Trading Subscriptions CapitaLization % Month % Period
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ML JWH Private July 1996 $265,977,547 $180,240,514 (3.66)% (4/98) (5.30)% (1/98-4/98)
Strategic
Allocation Fund
Ltd.*
- -------------------------------------------------------------------------------------------------------------------------------
The Growth & Public Aug. 1987 $148,349,450 $ 11,322,073 (4.70)% (8/97) (6.93)% (2/94-6/94)
Guarantee Fund
L.P. - Series A
Units
- -------------------------------------------------------------------------------------------------------------------------------
The Futures Public Jan. 1987 $ 56,741,035 $ 8,801,296 (10.92)% (2/96) (13.75)% (8/97-4/98)
Expansion Fund
Limited
Partnership
- -------------------------------------------------------------------------------------------------------------------------------
World Private Aug. 1987 $ 47,814,293 dissolved as (9.14)% (11/94) (35.81)% (9/92-1/95)
Currencies of 4/11/96
Limited
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Supplemental
Information
Regarding
Cummulative
Rate of
Return
Jan 1. 1993 1998 1997 1996 1995 1994 1993
(or inception) Compound Compound Compound Compound Compound Compound
to Rate of Annual Annual Annual Annual Annual
May 31, 1998 Return Rate of Rate of Rate of Rate of Rate of
(or dissolution) (5 months) Return Return Return Return Return
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ML JWH 29.87% (1.57)% 8.32% 21.81% N/A N/A N/A
Strategic (6 mos.)
Allocation Fund
Ltd.*
- -------------------------------------------------------------------------------------------------------------------------------
The Growth & 114.30% 9.04% 23.76% 17.09% 32.01% (2.34)% 5.20%
Guarantee
Fund L.P. - Series A
Units
- -------------------------------------------------------------------------------------------------------------------------------
The Futures 47.56% (3.88)% 5.93% 8.93% 21.95% 5.55% 3.36%
Expansion Fund
Limited
Partnership
- -------------------------------------------------------------------------------------------------------------------------------
World (11.36)% N/A N/A 1.20% 12.23% (12.84)% (10.46)%
Currencies (3 1/2 mos.)
Limited
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* This Fund is the offshore counterpart of the Fund.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
THE MERRILL LYNCH INVESTMENT PARTNERS INC. POOLS INCLUDED IN THE FOREGOING TABLE
ARE MATERIALLY DIFFERENT INVESTMENTS THAN THE FUND.
-18-
<PAGE>
SELECTED FINANCIAL DATA
The Selected Financial Data is taken from the 1996 and 1997 financial
statements of the Fund audited by Deloitte & Touche LLP. See "Financial
Statements" at page 69.
____________________
<TABLE>
<CAPTION>
JANUARY 1, 1998 JANUARY 1, 1997 JULY 15, 1996
TO TO JANUARY 1, 1997 (INCEPTION)
INCOME MARCH 31, 1998 MARCH 31, 1997 TO TO
STATEMENT DATA (UNAUDITED) (UNAUDITED) DECEMBER 31, 1997 DECEMBER 31, 1996
- -------------- -------------- -------------- ----------------- -----------------
<S> <C> <C> <C> <C>
REVENUES:
- --------
Realized Gain $ 4,511,184 $ 8,668,317 $ 18,820,033 $ 29,800,074
Change in Unrealized (6,377,582) (92,283) 10,201,917 4,696,372
------------ ------------
Total Trading Results (1,866,398) 8,576,034 29,021,950 34,496,446
Interest Income 3,135,548 2,773,698 12,021,263 3,030,330
Total Revenues 1,269,150 11,349,732 41,043,213 37,526,776
------------- ------------ ------------ ------------
EXPENSES:
- ---------
Administrative Fees 137,578 137,516 560,556 157,205
Brokerage Commissions 4,264,908 4,263,014 17,377,236 4,873,368
------------- ------------ ------------ ------------
Total Expenses 4,402,486 4,400,530 17,937,792 5,030,573
------------- ------------ ------------ ------------
NET (LOSS) INCOME BEFORE
MINORITY INTEREST AND
PROFIT SHARE ALLOCATION: (3,133,336) 6,949,202 23,105,421 32 ,496,203
- ---------------------------
Profit Share
Allocation -- -- (2,640,194) (4,683,010)
Minority interest on
Income 257 (978,363) (12,447) (23,383)
-------------- -------------
NET (LOSS) INCOME: $ (3,133,079) $ 5,970,839 $ 20,452,780 $ 27,789,810
- ------------------ ============= ============== ============== =============
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, MARCH 31, JULY 15,
BALANCE 1998 1997 DECEMBER 31, DECEMBER 31, 1996
SHEET DATA* (UNAUDITED) (UNAUDITED) 1997 1996 (INCEPTION)
- ----------- ------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Aggregate Net
Asset Value $215,218,877 226,407,133 $ 223,637,296 $172,073,615 $102,000,000
Net Asset Value
Per Unit $ 133.48 $126.92 $ 135.34 $ 122.61 $ 100.00
</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.
__________________________
-19-
<PAGE>
MANAGEMENT'S ANALYSIS OF OPERATIONS
RESULTS OF OPERATIONS
General
- -------
JWH programs do not predict price movements. No fundamental economic
supply or demand analysis is used in attempting to identify mispricings in the
market, and no macroeconomic assessments of the relative strengths of different
national economies or economic sectors. Instead, the programs apply proprietary
computer models to analyzing past market data, and from this data alone attempt
to determine whether market prices are trending. Technical traders such as JWH
base their strategies on the theory that market prices reflect the collective
judgment of numerous different traders and are, accordingly, the best and most
efficient indication of market movements. However, there are frequent periods
during which fundamental factors external to the market dominate prices.
If JWH'S models identify a trend, they signal positions which follow
it. When these models identify the trend as having ended or reversed, these
positions are either closed out or reversed. Due to their trend-following
character, the JWH programs do not predict either the commencement or the end of
a price movement. Rather, their objective is to identify a trend early enough to
profit from it and to detect its end or reversal in time to close out the Fund's
positions while retaining most of the profits made from following the
trend.
In analyzing the performance of JWH,s trend-following programs, economic
conditions, political events, weather factors, etc., are not directly relevant
because only market data has any input into JWH's trading results. There is no
direct connection between particular market conditions and price trends. There
are so many influences on the markets that the same general type of economic
event may lead to a price trend in some cases but not in others. The analysis
is further complicated by the fact that the programs are designed to recognize
only certain types of trends and to apply only certain criteria of when a trend
has begun. Consequently, even though significant price trends may occur, if
these trends are not comprised of the type of intra-period price movements which
the programs are designed to identify, the Fund may miss the trend
altogether.
The following performance summary outlines certain major price trends which
the JWH programs have identified for the Fund since inception. The fact that
certain trends were captured does not imply that others, perhaps larger and
potentially more profitable trends, were not missed or that JWH will be able to
capture similar trends in the future. Moreover, the fact that the programs were
profitable in certain market sectors in the past does not mean that they will be
so in the future.
This performance summary is an outline description of how the Fund
performed in the past, not necessarily any indication of how it will perform in
the future. Furthermore, the general causes to which certain trends are
attributed may or may not in fact have caused such trends, as opposed to simply
having occurred at about the same time.
Performance Summary
- -------------------
1998 (3 Months)
Much of the first quarter of 1998 offered a less-than-ideal trading
environment for the Fund. In January and February, a number of well-established
market trends were interrupted, and many markets traded within a tight price
range, reducing opportunities for profit. However, the profit picture improved
in March as the U.S. dollar and other currencies returned to their prior price
movement patterns. For the quarter, losses were incurred in most currencies,
metals, stock indices and agricultural commodities. These losses more than
offset gains in the energy markets which, despite interim turbulence, ultimately
succumbed to the bearish fundamentals which have pressured prices downward for
over six months. Small gains were also recorded in positions in European
interest rates, which
-20-
<PAGE>
contained to decline as markets of the EMU nations converged.
The quarter began with political and financial scandals in Japan. Even so,
investor optimism supported the Nikkei and caused the Japanese yen to gain
against the U.S. dollar. Positions in the Nikkei and the yen were unprofitable.
January was also a month of reversals in metal prices. The price of gold rose
as the dollar weakened, turning profitable positions into losses. Gains were
recorded in European and U.S. government bond markets as well as in crude
oil.
Financial markets lacked direction in February. Losses were incurred in
nearly all currencies traded. Trading was also unprofitable in U.S. Treasury
bonds, which traded within a narrow price range. Gains continued to be recorded
in European bond markets where yields approached post-war lows. The silver
market hit a 9-1/2 year high on news that a major investor had purchased 20% of
the world's yearly mining output. Strong gains were realized in silver and in
crude oil, as oil prices dropped in the face of weak demand and oversupply.
The quarter ended with a sharp revival of the U.S. dollar in world markets,
especially against the yen, and a soaring British pound. Investment programs
with large currency components benefited from decisive moves in these markets as
well as in the Swiss franc and German mark. The price of crude oil rose
sharply, following the surprise decision by OPEC and non-OPEC oil-producing
nations to cut production. By month-end, however, investors had judged the
cutbacks insufficient and prices fell back. Positions in energy markets were
profitable, and positions in metals and agricultural commodities unprofitable,
overall.
1997
The Fund's most profitable positions in 1997 were in the currency markets.
Gains were realized in the German mark, which trended downward, apparently as
hopes for European Monetary Union rose. The U.S. dollar, on the other hand,
moved upward (setting new records against the mark, yen and Swiss franc) in a
trend followed by most of the programs.
Gains were also recognized in global interest rates, particularly in
Japanese Government bonds where yields trended to historic lows. The declining
yield environment generated clearly defined trends in the Government bond.
Profits were achieved in Australian 10-year and three-year bonds and in German
and Italian bonds as each of these markets trended and the programs followed. In
the U.S., yields on the benchmark 30-year Treasury bond dipped below 6% in the
final quarter of the year, possibly reflecting an influx of foreign capital amid
increasing turbulence in Asian markets. The upward trend in the U.S. bond market
was followed by the Fund.
Positions in gold and the Nikkei were profitable. Gold prices trended
downward to the lowest level in over a decade during a period which saw the
metal declining in value as an alternative monetary asset as central banks
increased their willingness to sell or lease the precious metal. The Nikkei
suffered the same fate as the Japanese yen.
In marked contrast, the agricultural markets generated few trends
during the year despite strong upward pressure on coffee prices late in the
year. Energy markets were also generally trendless as ample world inventories
and mild weather kept supply and demand in balance. In this trendless
environment, the fund incurred losses in these sectors.
1996 (5 1/2 months)
The Fund's programs outperformed the major stock markets of the world
during the period which it traded in 1996. The Worldwide Bond Program, in
particular, successfully followed upward trending interest rates in the U.S. and
downward trending rates elsewhere.
The Fund's trading began on July 15 amid sharp declines in U.S. and
global stock markets but without significant trends developing. The U.S. dollar
weakened against most major currencies. Performance was mixed
-21-
<PAGE>
throughout the summer, with some programs following the major trends in the
energy markets while others traded unsuccessfully in the trendless global
interest rate and currency markets. The agricultural markets "whipsawed,"
causing losses.
All of the fund's programs were up in September and October, as they
were able to follow the consensus upward trend of the U.S. dollar against most
major currencies. The one exception was the British pound, which soared against
the dollar against a background of increasingly positive economic indicators in
the U.K. Positions in global interest rates and currencies resulted in gains as
these markets also trended broadly.
By year-end, however, most markets were experiencing seasonal illiquidity
and trendless, "whipsaw" patterns. Early in December, JWH completed a reduction
in the size of the positions held by the Fund in order to reduce its exposure to
these unfavorable market conditions and help retain the profits made in the
second half of 1996.
LIQUIDITY AND CAPITAL RESOURCES
The amount of assets invested in the Fund generally does not affect its
performance, as typically this amount is not a limiting factor on the positions
acquired by JWH, and the Fund's expenses are primarily charged as a fixed
percentage of its asset base, however large.
The Fund sells no securities other than the Units. The Fund borrows only to
a limited extent and only on a strictly short-term basis in order to finance
losses on non-U.S. dollar denominated trading positions pending the conversion
of the Fund's dollar deposits. These borrowings are at a prevailing short-term
rate in the relevant currency. They have been immaterial to the Fund's operation
to date and are expected to continue to be so. See "Interest Income Arrangements
- -- Interest Paid by Merrill Lynch on the Fund's Non-U.S. Dollar Available
Assets."
The Fund's assets are held primarily in short-term debt securities with
maturities under one year, and to a lesser extent in short- and mid-term debt
securities with maturities up to five years, as well as in cash. The Net Asset
Value of the Fund's cash and financial instruments is not materially affected by
inflation. Changes in interest rates, which are often associated with
inflation, could cause the value of certain of the Fund's securities to decline,
but only to a limited extent. More importantly, changes in interest rates could
cause periods of strong up or down price trends, during which the Fund's profit
potential generally increases. Inflation in commodity prices could also
generate price movements which the programs could successfully follow.
The Fund's assets are held in cash and highly liquid U.S. government
securities. Accordingly, except in very unusual circumstances, the Fund should
be able to close out any or all of its open trading positions and liquidate any
or all of its securities holdings quickly and at market prices. This permits
JWH to limit losses as well as reduce market exposure on short notice should its
programs direct reduced market exposure to do so. In addition, because there is
a readily available market value for the Fund's positions and assets, the Fund's
monthly Net Asset Value calculations are precise, and investors need only wait
10 business days to receive the full redemption proceeds of their Units.
-22-
<PAGE>
INTEREST INCOME ARRANGEMENTS
Custody of Assets
All of the Fund's assets are currently held either in custodial or customer
accounts at Merrill Lynch. Fund assets managed by MLAM are generally held in
custodial accounts at a major bank, separate from all other Merrill Lynch or
banking client assets. Assets held in customer accounts are held at Merrill
Lynch, Pierce, Fenner & Smith Incorporated or MLF. These customer accounts are
maintained in the Fund's name, but the assets deposited by the Fund in such
accounts are commingled with those of other Merrill Lynch, Pierce, Fenner &
Smith Incorporated and MLF customers.
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 Treasury bills or Government Securities. Available Assets are held
primarily in U.S. dollars or in U.S. dollar denominated Government Securities,
and to a lesser extent in foreign currencies, and are comprised of the
following: (a) the Fund's assets managed by MLAM and the Fund's cash balances
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.
The Fund'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 Fund's U.S. Dollar Available Assets Managed By MLAM
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. However, cash
management returns cannot be assured, and there may be losses of principal.
The Government Securities acquired by MLAM on behalf of the Fund are
maintained in a custodial account at Merrill Lynch and are specifically
traceable to the Fund. All income earned on such Government Securities inures
to the benefit of the Fund. All fees due to MLAM are paid at no additional
cost to the Fund.
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.
Offset Accounts and Short-Term Treasury Bills
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.
-23-
<PAGE>
MLF credits the Fund, 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.
Possible Discontinuation of the Offset Accounts
The use of the offset account arrangements for the Fund'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 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.
Offset Account Benefit to Merrill Lynch
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, 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 (of
approximately 0.25% per annum) paid to the offset banks --from the offset
accounts have not exceeded of 0.75% per annum of the Fund's average daily U.S.
dollar Available Assets held in the offset accounts. These benefits 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 Fund, the
fund itself does not deposit foreign currencies to margin trading in non-U.S.
dollar denominated futures contracts and, if any, MLF provides the necessary
margin, permitting the Fund to retain the monies which would otherwise be
required for such margin as part of the Fund's U.S. dollar Available Assets. The
Fund does not earn interest on foreign margin deposits provided by MLF. The Fund
does, however, earn interest on its non-U.S. dollar Available Assets.
Specifically, the Fund is credited by Merrill Lynch with interest at prevailing
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. Merrill
Lynch charges the Fund Merrill Lynch's cost of financing realized and unrealized
losses on such positions.
The Fund 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 Fund'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 Fund while held in foreign currencies are subject to
exchange-rate risk.
-24-
<PAGE>
ANALYSIS OF FEES AND EXPENSES PAID BY THE FUND
<TABLE>
<CAPTION>
Fees and Expenses to Date
1/1/97 - 12/31/97 7/15/96 -12/31/96
------------------ ------------------
<S> <C> <C>
Dollar Dollar
Cost Amount Amount
Brokerage Commissions $17,377,236 $4,873,368
Profit Shares 2,640,194 4,683,010
Administrative Fees 560,556 157,205
Organizational and Initial Offering
Costs 298,039 232,956
Ongoing Offering Costs -- --
------------------ ------------------
Total $20,876,025 $ 946,539
================== ==================
</TABLE>
_______________
Fees and Expenses Paid by the Fund
The dollar amounts indicated in parentheses represent the amount of the
relevant flat-rate charge assuming an average Fund capitalization of $220
million.
<TABLE>
<CAPTION>
PAID TO TYPE AMOUNT
<S> <C> <C>
MLIP Reimbursement of $629,523 in organizational and initial offering costs
start-up costs was Reimbursed to MLIP by the Fund.
MLF Brokerage Monthly Brokerage Commissions are paid on a
Commissions percentage-of-assets basis at the rate of 0.646 of 1% of
the Fund's month-end assets (a 7.75% annual rate;
$17,050,000).
MLF Use of Fund assets The benefit from the use of the Fund's U.S. dollar
Available Assets, net of interest credits. To date, this
benefit has not exceeded 3/4 of 1% of such average daily
Available Assets ($1,650,000).
MLIP Administrative Fees Monthly Administrative Fees of 0.021 of 1% of the
Fund's average month-end assets; a 0.25 of 1%
($550,000).
MLIB; Other Bid-ask spreads Bid-ask spreads on forward and related trades.
Counterparties
MLIP F/X Desk service fees A service fee on F/X Desk trades with counterparties
other than MLIB.
Government Bid-ask spreads Bid-ask spreads on Government Securities trades.
Securities
Dealers All spreads and service fees are estimated not to exceed
0.25% of average month-end assets annually
($550,000).
</TABLE>
-25-
<PAGE>
FEES AND EXPENSES PAID BY THE FUND (CONT'D)
<TABLE>
<CAPTION>
Paid To Type Amount
<S> <C> <C>
Third Parties Ongoing offering The costs, other than selling commissions and ongoing
costs compensation, of the ongoing offering of the Units,
subject to a ceiling of 0.25% of the Fund's average
month-end Net Assets in any fiscal year. An estimated
$600,000 of such costs will be amortized in twelve equal
monthly installments beginning july 31, 1998.
JWH Profit Share 15% of any New Trading Profits as of the end of each
calendar quarter.
_______________________________
</TABLE>
Brokerage Commissions; Administrative Fees
Month-end assets are not reduced for purposes of calculating Brokerage
Commissions or Administrative Fee by any accrued but unpaid Profit Shares, or by
the accrued Brokerage Commissions or Administrative Fees being calculated.
During 1996 and 1997, the Fund's percentage-of-assets Brokerage Commissions
were the equivalent of about $208 and $212, respectively, per round-turn trade.
A round-turn trade includes the purchase and sale or sale and purchase of a
single futures contract). However, these Brokerage Commissions are an all-
inclusive "wrap fee" which, together with the Administrative Fee, cover all of
the Fund's costs and expenses other than extraordinary expenses and ongoing
offering costs. The Fund could negotiate lower rates from firms other than
MLF.
The Fund's Brokerage Commissions and Administrative Fees constitute a "wrap
fee," which cover all of Merrill Lynch's costs and expenses, not just the cost
of brokerage executions.
The Brokerage Commissions and Administrative Fees may not be increased
above the current 8% level without the unanimous consent of all limited
partners.
Currency Trading Costs
The Fund trades currency forward contracts and converts foreign currency
gains and losses through the F/X Desk. The F/X Desk gives the Fund access to
MLIB as well as other counterparties. Merrill Lynch charges a service fee of
approximately $5.00 to $12.50 on each purchase or sale of a futures contract-
equivalent amount of a currency. This fee fluctuates with exchange rates. No
service fees are charged on trades awarded to MLIB because MLIB receives bid-ask
spreads on such trades.
In its exchange of futures for physical trading with Merrill Lynch, the
Fund acquires cash currency positions through the F/X Desk. The Fund pays a
spread when it exchanges these positions for futures.
Ongoing Offering Costs
Ongoing offering costs will be incurred in connection with the new offering
of Units under this prospectus. These costs are estimated at $600,000 and will
be charged in equal monthly installments beginning July 31, 1998; provided, that
(i) such installments will not in the aggregate exceed the ongoing offering
costs actually incurred, and (ii) MLIP will absorb all such costs to the extent
they exceed 0.25 of 1% of the Fund's average month-end assets during any
fiscal year.
-26-
<PAGE>
Extraordinary Expenses
The Fund will be required to pay any extraordinary expenses, such as taxes,
incurred in its operation. The Fund has had no such expenses to date, and in
MLIP's experience, such expenses have been negligible. Extraordinary expenses,
if any, would not reduce Trading Profits for purposes of calculating the Profit
Shares.
Profit Shares Allocated to JWH
Method of Calculating
The Fund allocates to JWH 15% of any New Trading Profit as of the end of
each calendar quarter. New Trading Profit is any cumulative Trading Profit in
excess of the highest level -- the "High Water Mark" -- of cumulative Trading
Profit as of any previous calendar quarter-end.
Trading Profit (i) includes realized and unrealized profits and losses,
(ii) excludes interest income and (iii) is reduced by annual Brokerage
Commissions and Additional Fees of 5%, not 8.00% of average month-end assets and
by no other costs.
Accrued Profit Shares on redeemed Units are allocated to JWH. Any shortfall
between cumulative Trading Profit and the High Water Mark is proportionately
reduced when Units are redeemed.
Trading Profit is not reduced by redemption charges.
For example, assume that as of January 1, 1999, the fund is at a High Water
Mark. If, at the end of the month, Trading Profit equaled $500,000, all of such
Trading Profit would be New Trading Profit, resulting in an accrued $75,000
Profit Share. Assume also that by the end of the next month, losses and 5.00%
Brokerage Commissions and Administrative fees have reduced the initial $500,000
Trading Profit to a loss of $(180,000). If the Fund then withdrew 50% of its
assets, this $(180,000) loss carryforward would be reduced by 50% to($90,000)
for Profit Share calculation purposes. If during the following month Trading
Profit equaled $200,000, New Trading Profit of $110,000 would be accrued as of
the end of such quarter, and JWH would be entitled to an additional Profit Share
of $16,500.
Paid Equally by All Units
New Trading Profit may be generated even though the Net Asset Value per
Unit has declined below the purchase price of certain Units. Conversely, if new
Units are purchased at a Net Asset Value reduced by an accrued Profit Share
which is subsequently reversed, the reversal is allocated equally among all
Units, although the accrual itself was attributable only to the previously
outstanding Units.
______________
Fees and Expenses Paid by Merrill Lynch
Selling Commissions; Ongoing Compensation
MLIP pays all selling commissions due to MLPF&S on initial Unit sales, as
well as all ongoing compensation on Units outstanding for more than twelve
months. See "Selling Commissions" at page 68.
JWH's Management Fees
MLF pays monthly Management Fees to JWH at a rate of 0.333% (a 4% annual
rate; $8,448,000 assuming a Fund average capitalization of $220 million) of the
month-end assets of the Fund, after reduction by a portion of the Brokerage
Commissions and Administrative Fees charged, but before reduction for any Profit
Share or other costs. The Management Fees are not affected by JWH's adjustments
to the fund's trading leverage.
During 1996 and 1997, MLF paid management fees of $2,507,682 and
$8,940,868, respectively, to JWH.
-27-
<PAGE>
MLAM Fees
MLAM receives annual cash management fees of approximately 0.20 of 1% on
the first $25 million of certain assets ("Capital"), including assets of the
Fund, managed by MLAM, 0.15 of 1% on the next $25 million of capital, 0.125 of
1% on the next $50 million, and 0.10 of 1% on capital in excess of $100
million.
During 1996 and 1997, MLIP paid fees of $136,000 and $173,853,
respectively, to MLAM.
_______________
Redemption Charges
For Units redeemed on or before the end of the first 12 months after an
investment, a redemption charge of 3% of the redemption date Net Asset Value per
Unit is deducted from investors' redemption proceeds and paid to MLIP.
MANAGED FUTURES FUNDS IN GENERAL
The Fund is one of many different varieties of managed futures funds. All
of these investments offer, in varying degrees, the possibility of achieving
substantial capital appreciation as well as diversifying a portion of a
traditional portfolio. The purpose of this section is to give prospective
investors a general overview of where in the spectrum of managed futures funds
the Fund is positioned, and to indicate the general types of other managed
futures funds available for investment.
MANAGED FUTURES FUNDS
A futures fund is a professionally managed portfolio typically trading in a
wide range of markets. These markets may include global currencies, interest
rates, energy, metals and agriculture through futures, forwards and options
contracts. Futures funds trade either or both the short or long side of the
market, often on a 24-hour basis, under the direction of independent trading
advisors and are generally higher risk and have more volatile performance than
many other investments. Professional management can be an important advantage in
this highly complex and specialized investment area.
Not all managed futures funds are the same. Like other investment products,
futures funds are designed with a variety of risk/reward parameters. The variety
of available funds matches a wide range of individual investment objectives.
THE DIFFERENT TYPES OF MANAGED FUTURES FUNDS
Risk/reward parameters of a managed futures fund may be modified by
adjusting the number of managers, trading strategies and/or markets traded.
Increasing diversification in one or more of these categories is generally
expected to produce lower but more consistent returns.
Certain managed futures funds are more aggressive than others. For
example, single advisor, single strategy funds are typically expected to have
higher profit potential as well as risk because of their dependence upon just
one advisor's performance and, often, a limited number of markets traded. Their
returns often fluctuate significantly from month to month.
Volatility can be reduced by a multi-advisor approach. Multi-advisor funds
typically have lower returns, but also lower risk and volatility than single-
advisor managed futures funds (although more than many other investments). The
Fund is a single-advisor, multi-strategy, not a multi-advisor, investment.
Investors can also choose "principal protected" funds which guarantee at
least the return of their initial investment at a future date. If the fund is
profitable, investors receive the benefits. If there are losses, investors who
remain in until the guarantee date are nevertheless assured of the return of at
least their initial subscription, limiting losses to the time-value of their
capital. The Fund has no "principal protection" feature, and investors could
lose all or substantially all of their investment.
-28-
<PAGE>
MANAGED FUTURES AND THE ASSET ALLOCATION PROCESS
Traditional portfolios invested in stocks, bonds and cash equivalents can
be diversified by allocating a portion of the assets to non-traditional
investments such as managed futures. Because of its potential non-correlation
with the performance of stocks and bonds, the non-traditional component can help
to improve long-term returns and reduce portfolio volatility. In its performance
to date, the fund has demonstrated some positive correlation to the S&P 500
Stock Index. Each investment responds differently to different economic cycles
and market conditions. An investment's profit potential, risk and the
relationship to the rest of the portfolio are the primary objectives of asset
allocation.
"Non-traditional" or "alternative" are terms commonly used to describe
strategies whose profitability is not based exclusively on long positions in
stocks and bonds, but rather on trading approaches whose success should be
largely independent of overall debt and equity market movements.
THE POTENTIAL BENEFITS OF INCORPORATING MANAGED FUTURES INTO A PORTFOLIO
Managed futures investments have often performed differently from stocks
and bonds. This historical non-correlated performance suggests that such
investments can help diversify a portfolio. Diversification is one of the
primary potential benefits of investing in managed futures.
* * * *
You should carefully evaluate managed futures, weighing its return and
diversification potential against the risks, before you invest. These are
speculative investments and are not appropriate for everyone. There can be no
assurance that these investments will be profitable. However, if profitable,
managed futures can provide valuable portfolio diversification and capital
appreciation. Your Financial Consultant can help you decide whether the Fund has
a place in your portfolio.
-29-
<PAGE>
THE ROLE OF MANAGED FUTURES IN YOUR PORTFOLIO
This Section outlines certain points to consider in deciding whether to
diversify a limited portion of your holdings into managed futures. There is no
assurance that an investment in the Fund will achieve any of its intended
objectives.
THE FUND IN YOUR PORTFOLIO
The Fund is a speculative investment, and Limited Partners may lose all or
substantially of their investment in the Units. If the Fund is not successful,
it cannot serve as a beneficial component of any asset allocation strategy.
However, the Fund does have the potential to be (i) non-correlated (not,
however, negatively correlated) with the debt and equity markets and (ii)
profitable. If the Fund is both, and only if it is both, a suitably limited
investment in the Units can be a beneficial component in an investor's overall
portfolio.
ASSET ALLOCATION STRATEGIES
World political and economic events often have a dramatic influence on the
markets. Stable, consistent asset growth can be difficult to achieve in today's
market environment. At the same time, the increasing globalization of the
world's economy offers significant new profit and diversification opportunities.
Successful portfolios must have the ability to adapt to changing market
conditions resulting from a wide range of social, political and economic
factors. By committing assets to investments which would not otherwise be
represented in a portfolio, a well-diversified asset allocation strategy can
enhance this ability and offer a flexible approach to building and protecting
wealth.
An asset allocation strategy diversifies a portfolio into a variety of
different components, including non-traditional investments such as managed
futures. Managed futures investments do not assure diversification; they may
perform similarly to stocks and bonds during certain periods. However, managed
futures has the potential to produce returns generally non-correlated to the
stock and bond markets. Each investment responds differently to different
economic cycles and shifts in the financial markets, and each makes different
contributions to overall performance.
A wide range of non-traditional, alternative investments are
available -- venture capital, hedge funds, natural resources, real estate,
private lending and managed futures are only a few of the options. Many of these
investments are expected to produce results generally non-correlated to the debt
and equity markets. However, managed futures investments, while significantly
less liquid than most stocks and bonds, are generally more liquid than many
alternative investments, and estimated net asset value are generally available
on a daily basis.
A successful managed futures investment may increase portfolio return while
reducing risk. The Fund can be highly volatile, and there can be no assurance
that an investment in the Units will either increase returns or reduce portfolio
risk. However, if successful, the Fund has the potential to help achieve both
these objectives.
GLOBAL MARKETS
In recent years, the futures markets have expanded to include a wide range
of instruments representing major sectors of the world's economy. The expansion
of trading on major exchanges in Chicago, Frankfurt, London, New York, Paris,
Singapore, Sydney and Tokyo gives investors access to international markets and
global diversification. Futures managers can move capital quickly across
markets, in contrast to the traditional portfolio's dependence on a single
nation's economy and currency.
The internationalization of the markets has greatly expanded the
opportunities for both profit and diversification. Rapid geographical expansion
and the introduction of an array of innovative products have created new
opportunities but also made trading much more complex. Managed futures funds
provide an opportunity to participate in global markets under the direction of
professional advisors.
-30-
<PAGE>
Futures Volume By Market Sector
[Graphic Appears Here]
1980 1996
Agriculture 64.20% Agriculture 15.26%
Currencies 4.60% Currencies 6.41%
Interest Rates 13.50% Interest Rates 54.64%
Energy 0.30% Energy 13.04%
Metals 16.30% Metals 5.56%
Other 1.10% Other 5.09%
The futures volume figures and market sector distributions
presented above include both speculative and hedging
transactions, as well as options on futures. Sources:
Futures Industry Association 1997 figures are not yet
available.
SUBSTANTIAL INVESTOR PARTICIPATION
In 1980, client assets in the managed futures industry were estimated at
approximately $300 million. As of the end of 1997, the estimate had grown to
approximately $34.9 billion.
Growth in Managed Futures Industry
[Chart Appears Here]
Source: Managed Account Reports, Inc. $ Billions
80 0.3
81 0.3
82 0.5
83 0.5
84 0.7
85 1
86 1.4
87 2.6
88 4.3
89 5.2
90 8.5
91 11.4
92 19
93 22.6
94 19.1
95 22.8
96 28.8
97 34.9
The assets categorized above as invested in managed futures
are Invested in a wide range of different products, including
single-advisor and multi-advisor funds, "funds of funds,"
"principle protection" pools (in which only a fraction of the
assets invested are committed to trading) and individual
managed accounts.
NON-CORRELATION -- A POTENTIALLY IMPORTANT COMPONENT OF RISK REDUCTION
Managed futures investments have often performed differently than stocks
and bonds. In addition, different types of alternative investments are
frequently non-correlated with each other. This created the potential to
assemble a combination of alternative investments able to profit in different
economic cycles and international markets, while reducing the portfolio
concentration of traditional long equity and debt holdings. (Non-correlation is
not negative correlation; managed futures' performance is not expected to be
generally opposite, but rather unrelated, to stocks and bonds.)
The following chart compares the Fund's performance since inception with
the S&P Stock Index (assuming the reinvestment of all dividends), the ML
Domestic Bond Index (including all interest paid), the MAR (Managed Account
Reports, a managed futures industry trade publication) Public Funds Index and
91-day Treasury bills (including all interest paid). The chart begins with 1,000
as the arbitrary starting point for all five graphics and tracks the monthly
rates of return for each. The periods during which the graph of the Fund's
performance diverges from that of an index indicates, when compared to the
periods during which their respective performance graphs are similar, the extent
of the non-correlation between them. Past performance, including past non-
correlation patterns, is not necessarily indicative of future results.
-31-
<PAGE>
COMPARISON OF ML JWH STRATEGIC ALLOCATION FUND L.P. AND
CERTAIN GENERAL SECURITIES MARKET AND
MANAGED FUTURES INDICES
Jul. 1, 1996 - Jan 31, 1998
<TABLE>
<CAPTION>
ML Domestic Master S&P 500 Stock U.S. 91-Day MAR Public Funds ML JWH Strategic
Bond Index (Total Index (Dividends Treasury Bills Index Allocation Fund
Return Basis Reinvested) L.P.
<S> <C> <C> <C> <C> <C>
Jul-1-96 1000 1000 1000 1000 1000
Jul-96 1002.84 955.84 1004.54 984.7 989.8
Aug-96 1001.315683 976.0311642 1009.070475 981.84437 988.9
Sep-96 1018.418155 1030.917301 1013.813107 1018.172612 1043.2
Oct-96 1040.874275 1059.339691 1018.152227 1091.175588 1149.6
Nov-96 1059.027123 1139.342083 1022.499737 1152.936126 1225.8
Dec-96 1049.485288 1116.771717 1027.019186 1125.150366 1231.6
Jan-97 1052.444837 1186.502943 1031.712663 1165.655779 1268.7
Feb-97 1054.328713 1195.816991 1035.736343 1194.330911 1268.3
Mar-97 1043.679993 1146.776536 1040.10715 1186.687193 1269.2
Apr-97 1059.575239 1215.178316 1045.068461 1164.021468 1263.4
May-97 1069.026651 1289.11341 1050.429662 1145.513526 1224.1
Jun-97 1081.780139 1346.836042 1054.263731 1154.792186 1227.4
Jul-97 1111.063927 1453.970114 1059.007917 1229.160803 1314.7
Aug-97 1101.55322 1372.591407 1063.540471 1181.715196 1271.2
Sep-97 1117.955347 1447.761376 1068.411187 1194.950406 1262.8
Oct-97 1134.456368 1399.464056 1072.96292 1176.070189 1295.4
Nov-97 1139.130328 1464.193467 1077.147475 1187.47807 1308
Dec-97 1150.817805 1489.320491 1081.768438 1210.871388 1354
Jan-98 1166.066141 1505.775993 1086.831114 1213.293131 1333.5
Feb-98 1165.086646 1614.316844 1090.689364 1202.616152 1324.7
Mar-98 1169.479022 1696.918208 1095.848325 1204.420076 1334.8
Apr-98 1175.16269 1713.984115 1100.788684 1155.641063 1289.7
May-98 1186.808553 1884.555008 1105.347882 1194.701731 1341.8
</TABLE>
The graph reflects the percentage changes in Net Asset
Value per Unit and in the indices. For comparative
purposes, the performance of the indicies have been
presented from a "normalized" starting point of 1,000
as of July 1, 1996.
Past results are not necessarily indicative of future
performance. The comparison of the Fund, an actively
managed investment, to passive indicies of general
securities returns as well as to the MAR Public Funds
Index has certain inherent material limiations.
The S&P 500 Stock Index is a capitalization-weighted index of the common stocks
of publicly-traded United States issuers. The ML Domestic Master Bond Index is a
total-return index comprised of 6,764 investment-grade corporate bonds,
Treasuries, and mortgage issues; average maturity 6.17 years (calculated on a
market-weighted basis as of May 31, 1998).
The MAR Public Funds Index represents the composite performance of a large
number of United States publicly-offered futures funds, weighting the returns
recognized by each such fund on the basis of relative capitalization. The funds
included in the MAR Public Funds Index represent a wide variety of materially
different products, including single and multi-advisor funds, as well as funds
with and without "principal protection" features. Combining the results of funds
with materially different performance objectives and fee structures into a
single index is subject to certain inherent and material limitations. There can
be no assurance that the MAR Public Funds Index provides any meaningful
indication of how managed futures investments, in general, have performed in the
past or will perform in the future. Nevertheless, the MAR Public Funds Index is
one of several widely-used benchmarks of general U.S. managed futures industry
performance.
Graphic comparisons of securities indices and the Fund may not adequately
reflect the differences between the securities and futures markets or between
passive and managed investments.
Prudence demands that you carefully evaluate managed futures, weighing its
profit and diversification potential against its significant risks. A managed
futures investment is not appropriate for all investors, and no one should
invest more than a limited portion of the risk segment of his or her portfolio
in managed futures. However, for the investor who finds the risks acceptable,
managed futures has the potential to provide profits as well as portfolio
diversification.
-32-
<PAGE>
JWH TRADING PROGRAMS
The Programs
The following are brief summaries of the active JWH programs. Not all
of them are presently used by JWH in trading for the Fund, but any of them may
be.
All of the programs have been designed using the same basic principles, and
all rely on computerized, technical trading systems. However, they employ
computerized statistical models to analyze price movements applying various
different quantitative criteria in attempting to identify price trends and
reversals. They also trade in different (but frequently overlapping) market
sectors, as indicated in their respective descriptions.
From the inception of trading of the JWH programs (the performance of the
programs prior to January 1993 is not presented in this prospectus in accordance
with applicable CFTC policy), the cumulative percentage decline in daily net
asset value experienced in any single program was nearly 60% on a composite
basis, and certain individual accounts included in such program experienced even
greater declines. Certain JWH accounts have lost 10% or more in a single trading
day. Prospective investors should understand that similar or greater drawdowns
are possible in the future. There can be no assurance that JWH will trade
profitably for the Fund or avoid sudden and severe losses.
<TABLE>
<CAPTION>
APPROXIMATE
ASSETS MANAGED
FINANCIAL AND METALS PORTFOLIO MAY 1, 1998
- ------------------------------ --------------
<S> <C>
Program Composition: $1,086,136,345
Global Interest Rates
Global Stock Indices
Foreign Exchange
Precious Metals
WORST MONTHLY DECLINE ON
AN INDIVIDUAL ACCOUNT BASIS: (9.8)% (7/94)
WORST PEAK-TO-VALLEY DECLINE
ON AN INDIVIDUAL ACCOUNT BASIS: (30.5)%
(6/94-1/95)
1998 COMPOUND ANNUAL RATE OF RETURN: (16.0)% (4 MOS.)
1997 COMPOUND ANNUAL RATE OF RETURN: 15.2%
1996 COMPOUND ANNUAL RATE OF RETURN: 29.7%
1995 COMPOUND ANNUAL RATE OF RETURN: 38.5%
1994 COMPOUND ANNUAL RATE OF RETURN: (5.3)%
1993 COMPOUND ANNUAL RATE OF RETURN: 46.8%
COMPOUNDED ANNUALIZED RATE OF RETURN: 36.4%
</TABLE>
JWH's largest program, the Financial and Metals Portfolio, attempts to
deliver attractive risk-adjusted returns in global financial and precious metals
markets. Currency positions are held both as outrights-- trading positions taken
in foreign currencies versus the dollar -- and cross-rates -- trading foreign
currencies against each other -- in the interbank market and occasionally
futures exchanges. This program is designed to identify and capitalize on
intermediate and long-term price movements in these markets using a systematic
approach to ensure disciplined investment decisions. If a trend is identified,
the program attempts to take a position; in nontrending market environments,
the program may remain neutral or liquidate open positions. This program
began trading client capital in October 1984.
Please see "JWH Performance" beginning on page 44.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
-33-
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE
ASSETS MANAGED
ORIGINAL INVESTMENT PROGRAM MAY 1, 1998
- --------------------------- ---------------
<S> <C>
Program Composition: $362,882,534
Global Interest Rates
Global Stock Indices
Foreign Exchange
Fiber
Energy
Softs
Grains
Precious and Base Metals
WORST MONTHLY DECLINE ON
AN INDIVIDUAL ACCOUNT BASIS: (16.3)% (10/94)
WORST PEAK-TO-VALLEY DECLINE
ON AN INDIVIDUAL ACCOUNT BASIS: (31.0)%
(7/94-10/94)
1998 COMPOUND ANNUAL RATE OF RETURN: (3.7)% (4 MOS.)
1997 COMPOUND ANNUAL RATE OF RETURN: 5.7%
1996 COMPOUND ANNUAL RATE OF RETURN: 22.6%
1995 COMPOUND ANNUAL RATE OF RETURN: 53.2%
1994 COMPOUND ANNUAL RATE OF RETURN: (5.7)%
1993 COMPOUND ANNUAL RATE OF RETURN: 40.6%
COMPOUNDED ANNUALIZED RATE OF RETURN: 16.5%
</TABLE>
The Original Investment Program, the first program Offered by JWH,
offers access to a spectrum of worldwide financial and non-financial futures
markets using a disciplined trend identification investment approach. The
Original Investment Program utilizes a long-term quantitative approach which
always maintains a position -- long or short -- in every market traded by the
program. This program began trading client capital in October 1982.
<TABLE>
<CAPTION>
APPROXIMATE
ASSETS MANAGED
GLOBAL DIVERSIFIED PORTFOLIO MAY 1, 1998
- ---------------------------- ---------------
<S> <C>
Program Composition: $171,847,783
Global Interest Rates
Global Stock Indices
Foreign Exchange
Fiber
Energy
Softs
Grains
Precious and Base Metals
WORST MONTHLY DECLINE ON
AN INDIVIDUAL ACCOUNT BASIS: (11.2)% (2/96)
WORST PEAK-TO-VALLEY DECLINE
ON AN INDIVIDUAL ACCOUNT BASIS: (24.1)% (6/95-10/95)
1998 COMPOUND ANNUAL RATE OF RETURN: (4.1)% (4 MOS.)
1997 COMPOUND ANNUAL RATE OF RETURN: 3.3%
1996 COMPOUND ANNUAL RATE OF RETURN: 26.9%
1995 COMPOUND ANNUAL RATE OF RETURN: 19.6%
1994 COMPOUND ANNUAL RATE OF RETURN: 10.1%
1993 COMPOUND ANNUAL RATE OF RETURN: 59.8%
COMPOUNDED ANNUALIZED RATE OF RETURN: 21.7%
</TABLE>
The Global Diversified Portfolio is one of JWH's most diversified
programs. The Global Diversified Portfolio is designed to identify and
capitalize on long-term price movements in a spectrum of financial and
nonfinancial markets using a systematic approach. The program does not
maintain continuous positions and, in fact, may take a neutral stance (i.e., no
position) if a long-term trend fails to develop or during periods of non-
trending markets. This program began trading client capital in June
1988.
-34-
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE
ASSETS MANAGED
GLOBAL FINANCIAL PORTFOLIO MAY 1, 1998
- -------------------------- ---------------
<S> <C>
Program Composition: $138,988,648
Global Interest Rates
Global Stock Indices
Foreign Exchange
Energy
Precious Metals
WORST MONTHLY DECLINE ON
AN INDIVIDUAL ACCOUNT BASIS: (19.5)% (11/94)
WORST PEAK-TO-VALLEY DECLINE
ON AN INDIVIDUAL ACCOUNT BASIS: (48.9)% (7/94-1/95)
1998 COMPOUND ANNUAL RATE OF RETURN: (3.1)% (4 MOS.)
1997 COMPOUND ANNUAL RATE OF RETURN: 4.9%
1996 COMPOUND ANNUAL RATE OF RETURN: 32.4%
1995 COMPOUND ANNUAL RATE OF RETURN: 86.2%
1994 COMPOUND ANNUAL RATE OF RETURN: (37.7)% (7 MOS.)
COMPOUNDED ANNUALIZED RATE OF RETURN: 12.0%
</TABLE>
The Global Financial Portfolio offers access to a small group of energy and
financial markets, including global currencies, interest rates and stock
indices. This program is designed to identify and capitalize on long-term
price movements using a disciplined trend identification approach. This
program always maintains a futures position -- long or short -- in every market
traded by the program. In 1997, the sector allocation for this program
was altered to include precious metals. This program began trading client
capital in June 1994.
<TABLE>
<CAPTION>
APPROXIMATE
INTERNATIONAL FOREIGN ASSETS MANAGED
EXCHANGE PROGRAM MAY 1, 1998
- ---------------- --------------
<S> <C>
Program Composition: $79,977,747
Foreign Exchange
WORST MONTHLY DECLINE ON
AN INDIVIDUAL ACCOUNT BASIS: (8.3)% (5/97)
WORST PEAK-TO-VALLEY DECLINE
ON AN INDIVIDUAL ACCOUNT BASIS: (35.9)% (9/92-1/95)
1998 COMPOUND ANNUAL RATE OF RETURN: (8.1)% (4 MOS.)
1997 COMPOUND ANNUAL RATE OF RETURN: 71.1%
1996 COMPOUND ANNUAL RATE OF RETURN: 3.7%
1995 COMPOUND ANNUAL RATE OF RETURN: 16.9%
1994 COMPOUND ANNUAL RATE OF RETURN: (6.3)%
1993 COMPOUND ANNUAL RATE OF RETURN: (4.5)%
COMPOUNDED ANNUALIZED RATE OF RETURN: 16.0
</TABLE>
The International Foreign Exchange Program ("Forex") is designed to
identify and capitalize on intermediate and long-term price movements in a broad
range of major and minor currencies on the interbank market. Positions are
taken as outrights against the dollar, or cross-rates, which reduce dependence
on the dollar. Forex attempts to take a position if a trend is identified, and
attempts to eliminate the position quickly -- i.e., a neutral stance is taken --
if long-term trends fail to continue or during periods of nontrending markets.
This program began trading client capital in August 1986.
-35-
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE
ASSETS MANAGED
G-7 CURRENCY PORTFOLIO MAY 1, 1998
- ---------------------- --------------
<S> <C>
Program Composition: $68,065,898
Foreign Exchange
WORST MONTHLY DECLINE ON
AN INDIVIDUAL ACCOUNT BASIS: (12.3)% (11/94)
WORST PEAK-TO-VALLEY DECLINE
ON AN INDIVIDUAL ACCOUNT BASIS: (31.4)% (10/92-1/95)
1998 COMPOUND ANNUAL RATE OF RETURN: (4.0)% (4 MOS.)
1997 COMPOUND ANNUAL RATE OF RETURN: 21.0%
1996 COMPOUND ANNUAL RATE OF RETURN: 14.5%
1995 COMPOUND ANNUAL RATE OF RETURN: 32.2%
1994 COMPOUND ANNUAL RATE OF RETURN: (4.9)%
1993 COMPOUND ANNUAL RATE OF RETURN: (6.3)%
COMPOUNDED ANNUALIZED RATE OF RETURN: 14.5%
</TABLE>
The G-7 Currency Portfolio invests in the highly liquid currencies of the
Group of Seven industrialized nations and Switzerland. Not all of these
currencies are traded at all times. Forward positions are primarily taken in
the interbank market as outrights against the dollar, or as cross-rates, which
reduce dependence on the dollar. Because the G-7 Currency Portfolio excludes
minor currencies, which may be less liquid, and maintains a lower degree of
leverage, the performance characteristics are different from those of Forex.
The program is designed to identify and capitalize on intermediate and
The G-7 Currency Portfolio attempts to take a position if a trend is identified,
and attempts to eliminate the position quickly -- i.e., a neutral stance is
taken -- if long-term trends fail to develop or during periods of nontrending
markets. This program began trading client capital in February 1991.
<TABLE>
<CAPTION>
APPROXIMATE
JWH GLOBALANALYTICS(TM) ASSETS MANAGED
FAMILY OF PROGRAMS MAY 1, 1998
- ------------------ --------------
<S> <C>
Program Composition: $68,670,894
Global Interest Rates
Global Stock Indices
Foreign Exchange
Energy
Agriculture
Precious Metals
WORST MONTHLY DECLINE ON
AN INDIVIDUAL ACCOUNT BASIS: (5.0)% (4/98)
WORST PEAK-TO-VALLEY DECLINE
ON AN INDIVIDUAL ACCOUNT BASIS: (5.0)% (4/98)
1998 COMPOUND RATE OF RETURN: (3.2)% (4 MOS.)
1997 COMPOUND RATE OF RETURN: 17.6% (7 MOS.)
COMPOUNDED ANNUALIZED RATE OF RETURN: N/A
</TABLE>
JWH GlobalAnalytics(TM) Family of Programs is an integrated investment
system consisting of a family of programs, collectively known as JWH
GlobalAnalytics. The family of programs combines different trend identification
methodologies into a single, broadly diversified investment portfolio. JWH
GlobalAnalytics trades a wide range of financial and commodity markets. Certain
energy and agricultural contracts not previously available through other JWH
investment programs are also included.
Unlike other JWH programs, which generally take an intermediate to long-
term perspective on markets, JWH GlobalAnalytics identifies, offsets and invests
in a broad spectrum of price trends -- from very short to exceptionally long-
term. The family of programs tracks key asset classes, remaining neutral if no
substantive trends are apparent, building or reducing positions over time as
appropriate.
JWH GlobalAnalytics is the result of an extensive period of research and
testing. This family of programs manages positions which can be modified
quickly, allowing timely substitution of one market for another. JWH's research
indicates that the potential benefits of this approach include increased trend
sensitivity and lower overall volatility. This program began trading client
capital in June 1997, when it was first used to manage assets for the Fund.
-36-
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE
INTERNATIONAL CURRENCY ASSETS MANAGED
AND BOND PORTFOLIO MAY 1, 1998
- ----------------------- --------------
<S> <C>
Program Composition: $29,710,453
Foreign Exchange
Global Interest Rates
WORST MONTHLY DECLINE ON
AN INDIVIDUAL ACCOUNT BASIS: (7.8)% (7/94)
WORST PEAK-TO-VALLEY DECLINE
ON AN INDIVIDUAL ACCOUNT BASIS: (23.6)% (7/94-1/95)
1998 COMPOUND RATE OF RETURN: (4.1)% (4 MOS.)
1997 COMPOUND ANNUAL RATE OF RETURN: 17.0%
1996 COMPOUND ANNUAL RATE OF RETURN: 19.9%
1995 COMPOUND ANNUAL RATE OF RETURN: 36.5%
1994 COMPOUND ANNUAL RATE OF RETURN: (2.3)%
1993 COMPOUND ANNUAL RATE OF RETURN: 14.8%
COMPOUNDED ANNUALIZED RATE OF RETURN: 14.5%
</TABLE>
Using a more conservative approach to leverage compared to that used in
other JWH programs, the International Currency and Bond Portfolio ("ICB")
targets the long end of interest rate and currency futures of major
industrialized nations. Foreign exchange positions are held both as outrights --
positions taken in foreign currencies versus the dollar -- and cross-rates --
trading foreign currencies against each other. ICB is designed to identify and
capitalize on intermediate and long-term price movements in the world's bond and
foreign exchange markets using a systematic approach to ensure disciplined
investment decisions. If a trend is identified, the program will take a
position; in nontrending market environments, the program may liquidate
positions and remain neutral. This program began trading client capital in
January 1993.
<TABLE>
<CAPTION>
APPROXIMATE
THE WORLD FINANCIAL ASSETS MANAGED
PERSPECTIVE MAY 1, 1998
- ------------------- --------------
<S> <C>
Program Composition: $31,343,763
Global Interest Rates
Global Stock Indices
Foreign Exchange
Energy
Precious Metals
WORST MONTHLY DECLINE ON
AN INDIVIDUAL ACCOUNT BASIS: (11.6)% (3/93)
WORST PEAK-TO-VALLEY DECLINE
ON AN INDIVIDUAL ACCOUNT BASIS: (25.9)% (7/94-1/95)
1998 COMPOUND RATE OF RETURN: 2.7% (4 MOS.)
1997 COMPOUND ANNUAL RATE OF RETURN: 10.4%
1996 COMPOUND ANNUAL RATE OF RETURN: 40.9%
1995 COMPOUND ANNUAL RATE OF RETURN: 32.2%
1994 COMPOUND ANNUAL RATE OF RETURN: (15.2)%
1993 COMPOUND ANNUAL RATE OF RETURN: 13.7%
COMPOUNDED ANNUALIZED RATE OF RETURN: 15.4%
</TABLE>
The World Financial Perspective seeks to capitalize on market opportunities
by holding positions from multiple currency perspectives, including the British
pound, German mark, Japanese yen, Swiss franc and dollar. This program is
designed to systematically identify long-term price movements in financial,
metals and energy markets. The World Financial Perspective always maintains a
futures position -- long or short -- in every market traded by the program. This
Program began trading client capital in April 1987.
-37-
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE
ASSETS MANAGED
DOLLAR PROGRAM MAY 1, 1998
- -------------- --------------
<S> <C>
Program Composition: $29,476,404
Foreign Exchange
WORST MONTHLY DECLINE ON
AN INDIVIDUAL ACCOUNT BASIS: (8.4)% (5/97)
WORST PEAK-TO-VALLEY DECLINE
ON AN INDIVIDUAL ACCOUNT BASIS: (11.6)% (5/97-9/97)
1998 COMPOUND RATE OF RETURN: (4.3)% (4 MOS.)
1997 COMPOUND ANNUAL RATE OF RETURN: 6.8%
1996 COMPOUND ANNUAL RATE OF RETURN: 10.6% (6 MOS.)
COMPOUNDED ANNUALIZED RATE OF RETURN: 6.9 %
</TABLE>
The Dollar Program specializes in the foreign exchange sector using
outright trading, an approach that has significantly contributed to the success
of other JWH programs. The Dollar Program trades four of the world's major
currencies -- Japanese yen, German mark, Swiss franc and British pound -- versus
the dollar. This program is designed to identify and capitalize on intermediate
and long-term price movements using a disciplined trend identification
methodology which attempts to employ a neutral stance during periods of
nontrending markets.
Unlike some JWH programs, the Dollar program does not participate in cross-
rates. Because this program invests in a limited number of contracts, it may
experience greater volatility than other JWH foreign exchange programs. This
program began trading client capital in July 1996.
<TABLE>
<CAPTION>
APPROXIMATE
ASSETS MANAGED
WORLDWIDE BOND PROGRAM MAY 1, 1998
- ---------------------- --------------
<S> <C>
Program Composition: $19,889,641
Interest Rates
WORST MONTHLY DECLINE ON
AN INDIVIDUAL ACCOUNT BASIS: (3.8)% (4/97)
WORST PEAK-TO-VALLEY DECLINE
ON AN INDIVIDUAL ACCOUNT BASIS: (6.2)% (12/96-5/97)
1998 COMPOUND RATE OF RETURN: (1.0)% (4 MOS.)
1997 COMPOUND ANNUAL RATE OF RETURN: 9.5%
1996 COMPOUND ANNUAL RATE OF RETURN: 17.8% (6 MOS.)
ANNUAL COMPOUND ANNUAL RATE OF RETURN: 14.3%
</TABLE>
The Worldwide Bond Program ("WWB") invests through financial futures in the
long-term portion of global interest rate markets, including the U.S. 30-year
bond, U.S. 10-year note, British long gilt, the French, German and Italian bond
and the Australian 10-year bond. WWB is not limited to investments that have the
potential to profit in a stable or declining interest rate environment; rather,
the program attempts to capitalize on dominant trends, whether rising or
falling, in bond markets around the world. Although WWB concentrates in one
sector, diversification is achieved by trading futures contracts on the interest
rate instruments of numerous countries.
WWB utilizes intermediate and long-term quantitative trend identification
models, some of which attempt to employ neutral stances during periods of
nontrending markets. In an effort to control risks, WWB's investment methodology
uses lower levels of leverage compared to JWH programs that participate in
multiple market sectors. This program began trading client capital in July
1996.
___________
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JWH Program Selection
JWH'S 11 active programs are all available to the JWH Strategic Allocation
Program. As of May 1, 1998, eight programs -- listed above at page 4 -- were
being used for the Fund.
The Strategic Allocation Program is not a systematic or even a
formalized strategy for selecting combinations of JWH programs. On the
contrary, program selections and the size of the allocations among them are made
entirely by the subjective, collective judgment of certain JWH principals. From
time to time, these principals consider a wide range of different factors in
deciding which programs to use for the Fund. There is no way to predict which
programs will be used or what allocation of the Fund's assets will be made among
the various programs chosen at any given time or over time. It is also not
possible to predict which factors the JWH principals may consider in selecting
any individual program or program combination.
There is no maximum allocation that may be made to any particular
trading program, but JWH does not expect any allocation to exceed 25% of the
Fund's total trading level (which may range from 50% to 150% of the Fund's Net
Assets).
Leverage Considerations
The larger the Fund's market commitment (generally equivalent to the amount
of the positions held) in relation to its assets, the higher the leverage at
which the Fund is said to be trading. In general, the larger the Fund's market
commitment, the greater the profit potential as well as risk of loss. JWH
adjusts the Fund's market commitment to levels which JWH believes are consistent
with the Fund's desired internal risk/reward profile. For example, in volatile
markets, JWH might decide -- in order to reduce market exposure and,
accordingly, the risk of loss, but with a corresponding decrease in profit
potential -- that the positions ordinarily appropriate for a $50 million Fund
allocation are all a $75 million allocation should acquire. On the other hand,
market factors might cause JWH to decide -- in order to increase market exposure
and, accordingly, profit potential as well as risk of loss -- that the positions
ordinarily indicated for a $100 million allocation are appropriate for a Fund
allocation of only $50 million.
At certain times -- such as after substantial gains in several of the
programs -- JWH may conclude that the Fund's portfolio offers more risk than
reward. If so, JWH may reduce the Fund's market commitment, both taking profits
and controlling risk. Conversely, JWH may commit more than the total assets of
the Fund to the markets if the profit potential seems to justify the added
risk.
JOHN W. HENRY & COMPANY, INC.
BACKGROUND
John W. Henry & Company began managing assets in 1981 as a sole
proprietorship and was later incorporated in the State of California as John W.
Henry & Co., Inc. to conduct business as a commodity trading advisor. JWH
reincorporated in Florida in 1997. JWH's offices are at 301 Yamato Road, Suite
2200, Boca Raton, Florida 33431-4931, (561) 241-0018 and One Glendinning Place,
Westport, Connecticut 06880, (203) 221-0431. JWH's registration as a Commodity
Trading Advisor ("CTA"; a person which directs the trading of futures accounts
for clients, including commodity pools) became effective in November 1980. JWH
is a member of the National Futures Association ("NFA") in this capacity.
For a description of the principals of JWH, see "JWH Principals" at page
40.
TRADING STRATEGY
The following description of JWH'S Trading strategy relates to JWH
generally and not to the Fund itself.
GENERAL
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JWH specializes in managing institutional and individual capital in the
global futures, interest rate and foreign exchange markets. Since 1981, JWH has
developed and implemented proprietary trend-following trading techniques that
focus on long-term rather than short-term, day-to-day trends. As of the date of
this prospectus, JWH operates eleven trading programs.
A DISCIPLINED INVESTMENT PROCESS
Regardless of recent performance in any one market, or widely held opinions
on futures market direction, JWH maintains a disciplined investment process. The
consistent application of JWH's investment techniques facilitates the ability to
participate in rising or falling markets without bias.
IMPLEMENTING THE PROGRAM
The first step in the JWH investment process is the identification of
sustained price movements --or trends -- in a given market. While there are many
ways to identify trends, JWH uses mathematical models that attempt to
distinguish real trends from interim volatility. It also presumes that trends
often exceed in duration the expectation of the general marketplace.
JWH's historical performance demonstrates that, because trends often last
longer than most market participants expect, significant returns can be
generated from positions held over a long period of time. The first step in the
JWH investment process is the identification of a price trend. JWH focuses on
attempting to implement a trading methodology which identifies a majority of the
significant, as opposed to the more numerous small, price trends in a given
market.
JWH attempts to pare losing positions relatively quickly while allowing
profitable positions to mature. Most losing positions are closed within a few
days or weeks, while others -- those where a profitable trend continues -- are
retained. Positions held for two to four months are not unusual, and positions
have been held for more than one year. Historically, only 30% to 40% of all
trades made pursuant to the investment methods have been profitable. Large
profits on a few trades in positions that typically exist for several months
have produced favorable results overall. Generally, most losing positions are
liquidated within weeks.
Since the inception of trading of the JWH programs, the greatest cumulative
percentage decline in daily net asset value which JWH has experienced in any
single program was nearly 60% on a composite basis. Prospective investors in the
Fund should understand that similar or greater drawdowns are possible in the
future.
To reduce exposure to volatility in any particular market, most JWH
programs participate in several markets at one time. In total, JWH participates
in up to 60 markets, encompassing interest rates, foreign exchange, and
commodities such as agricultural products, energy and precious metals. Most
investment programs maintain a consistent portfolio composition to allow
opportunities in as many major market trends as possible.
Throughout the investment process, risk controls designed to reduce the
possibility of an extraordinary loss in any one market are maintained.
Proprietary research is conducted on an ongoing basis to refine the JWH
investment strategies and attempt to reduce volatility while maintaining the
potential for excellent performance.
JWH at its sole discretion may override computer-generated signals, and may
at times use discretion in the application of its quantitative models which may
affect performance positively or negatively. This could occur, for example, when
JWH determines that markets are illiquid or erratic, such as may occur during
holiday seasons. Subjective aspects of JWH's quantitative models also include
the determination of the size of the position to be acquired in comparison with
the size of an account, when an account should commence trading, markets traded,
contracts traded, contract month selection, margin utilization and effective
trade execution.
PROGRAM MODIFICATIONS
In an effort to maintain and improve performance, JWH has engaged, and
continues to engage, in extensive research. While the basic philosophy
underlying the firm's investment methodology has remained intact throughout its
history, the potential
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<PAGE>
benefits of employing more than one investment methodology, alternatively, or in
varying combinations, is a subject of continual testing, review and evaluation.
Extensive research and analysis may suggest substitution of alternative
investment methodologies with respect to particular contracts in light of
relative differences in historical performance achieved through testing
different methodologies. In addition, risk management research and analysis may
suggest modifications regarding the relative weighting among various contracts,
the addition or deletion of particular contracts for a program or a change in
the degree of leverage employed.
As capital in each JWH trading program increases, additional emphasis and
weighting may be placed on certain markets which have historically demonstrated
the greatest liquidity and profitability. Furthermore, the weighting of capital
committed to various markets in the trading programs is dynamic, and JWH may
vary the weighting at its discretion as market conditions, liquidity, position
limit considerations and other factors warrant. MLIP will generally not be
informed of any such changes.
Adjusting the Size of the Trading Positions Taken
Adjustments to the size of the trading positions taken for an account with
a given amount of equity (a relationship commonly referred to as the "leverage"
of the strategy) have been and continue to be an integral part of JWH's
investment strategy. At its discretion, JWH may adjust leverage in certain
markets or entire programs. Leverage adjustments may be made at certain times
for some accounts but not for others. Factors which may affect the decision to
adjust leverage include: ongoing research; program volatility; current market
volatility; risk exposure; and subjective judgment and evaluation of these and
other general market conditions. Such decisions to change leverage may
positively or negatively affect performance, and will alter risk exposure for an
account. Leverage adjustments may lead to greater profits or losses, more
frequent and larger margin calls and greater brokerage expense. No assurance is
given that such leverage adjustments will be to the financial advantage of
investors in the Fund. JWH reserves the right, at its sole discretion, to adjust
its leverage policy without notification to MLIP.
ADDITION, REDEMPTION AND REALLOCATION OF CAPITAL FOR COMMODITY POOL OR FUND
ACCOUNTS
Investors purchase or redeem Units at Net Asset Value on the close of
business on the last business day of the month. In order to provide market
exposure commensurate with the Fund's equity on the date of these transactions,
JWH's general practice is to adjust positions as near as possible to the close
of business on the last trading date of the month. The intention is to provide
for additions and redemptions at an NAV that will be the same for each of these
transactions, and to eliminate possible variations in Net Asset Values that
could occur as a result of inter-day price changes if, for example, additions
were calculated on the first day of the subsequent month. Therefore, JWH may, at
its sole discretion, adjust its investment of the assets associated with the
addition or redemption as near as possible to the close of business on the last
business day of the month to reflect the amount then available for trading.
Based on JWH's determination of liquidity or other market conditions, JWH may
decide to commence trading earlier in the day on, or before, the last business
day of the month, or at its sole discretion, delay adjustments to trading for an
account to a date or time after the close of business on the last day of the
month. No assurance is given that JWH will be able to achieve the objectives
described above in connection with Fund equity level changes. The use of
discretion by JWH in the application of this procedure may affect performance
positively or negatively.
PHYSICAL AND CASH COMMODITIES
JWH may from time to time trade in physical or cash commodities for
immediate or deferred delivery, including specifically gold bullion, as well as
futures and forward contracts when JWH believes that cash markets offer
comparable or superior market liquidity or the ability to execute transactions
at a single price. The CFTC does not regulate cash transactions, which are
subject to the risk of these entities' failure, inability or refusal to perform
with respect to such contracts.
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<PAGE>
The Joint Venture Agreement
The advisory arrangement between the Fund and JWH is a joint venture, a
general partnership structure. The Joint Venture Agreement establishing the
joint venture terminates September 30, 1998, subject to one one-year renewal, on
the same terms, at the option of the Fund.
The Fund has agreed to indemnify JWH and related persons for any claims or
proceedings involving the business or activities of the Fund, provided that the
conduct of such persons does not constitute gross negligence, misconduct or
breach of the Joint Venture Agreement or of any fiduciary obligation to the Fund
and was done in good faith and in a manner reasonably believed to be in, or not
opposed to, the best interests of the Fund.
JWH and related persons will not be liable to the Joint Venture, the Fund
or any of the Partners in connection with JWH's management of the Fund's assets
except (i) by reason of acts or omissions in breach of the Joint Venture
Agreement, (ii) due to their misconduct or negligence, or (iii) by reason of not
having acted in good faith and in the reasonable belief that such actions or
omissions were in, or not opposed to, the best interests of the Fund. Mr. John
W. Henry will not be liable except for his fraud and wilful misconduct.
JWH has invested $100,000 in the joint venture.
JWH PRINCIPALS
The following are the principals of JWH:
The sole shareholder of JWH is the John W. Henry Trust dated July 27, 1990.
Mr. John W. Henry is chairman of the JWH Board of Directors and is trustee and
sole beneficiary of the John W. Henry Trust. Mr. Henry is also a member of the
Investment Policy Committee of JWH. He currently concentrates his activities at
JWH on portfolio management, business issues and frequent dialogue with trading
supervisors. Mr. Henry is the exclusive owner of certain trading systems
licensed to Elysian Licensing Corporation, a corporation wholly-owned by Mr.
Henry and sublicensed by Elysian Licensing Corporation to JWH and utilized by
JWH in managing client accounts.
Mr. Henry has served on the Board of Directors of the National Association
of Futures Trading Advisors ("NAFTA") and the Managed Futures Trade Association,
and has served on the Nominating Committee of the NFA. Mr. Henry currently
serves on the Board of Directors of the Futures Industry Association ("FIA") and
is chairman of the FIA Task Force on Derivatives for Investment. He also
currently serves on a panel created by the Chicago Mercantile Exchange and the
Chicago Board of Trade to study cooperative efforts related to electronic
trading, common clearing and issues regarding a potential merger. In 1989, Mr.
Henry established residency in Florida, and since that time has performed
services from that location as well as from the offices of JWH in Westport,
Connecticut. Mr. Henry is a principal of Westport Capital Management
Corporation, Global Capital Management Limited, JWH Investment Management, Inc.,
JWH Asset Management, Inc. and JWH Financial Products, Inc., all of which are
affiliates of JWH. Since the beginning of 1987, Mr. Henry has devoted, and will
continue to devote, considerable time to activities in businesses other than JWH
and its affiliates.
Mr. Mark H. Mitchell is vice chairman, counsel to the firm and a member of
the JWH Board of Directors. He is also vice chairman and a director of JWH
Investment Management, Inc., JWH Asset Management, Inc. and JWH Financial
Products, Inc. Prior to his employment at JWH commencing in January 1994, Mr.
Mitchell was a partner at Chapman and Cutler, a Chicago law firm, where he
headed its futures law practice since August 1983. From August 1980 to March
1991, he served as General Counsel of NAFTA and, from March 1991 to December
1993, he served as General Counsel of the Managed Futures Association, now the
Managed Funds Association ("MFA"). Mr. Mitchell is currently a member of the
Commodity Pool Operator/Commodity Trading Advisor Advisory Committee and
the
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<PAGE>
Special Committee for the Review of Multi-tiered Regulatory Approach to NFA
Rules, both of the NFA. In addition, he has served as a member of the Government
Relations Committee of the MFA and the Executive Committee of the Law and
Compliance Division of the FIA. In 1985, he received the Richard P. Donchian
Award for Outstanding Contributions to the Field of Commodity Money Management.
He has been an editor of Futures International Law Letter and its predecessor
publication, Commodities Law Letter. He received an A.B. with honors from
Dartmouth College and a J.D. from the University of California at Los Angeles,
where he was named to the Order of the Coif, the national legal honorary
society.
Mr. Verne O. Sedlacek is the chief operating officer of JWH. He will be a
principal of JWH as soon as his CFTC registration is granted. Mr. Sedlacek is
responsible for the day-to-day management of the firm. Prior to joining JWH in
July 1998, Mr. Sedlacek was the executive vice president and chief financial
officer of Harvard Management Company, Inc., a wholly-owned subsidiary of
Harvard University, which at the time of his departure managed approximately $14
billion of University-related funds. He joined Harvard Management Company in
March 1983 and was responsible for managing the areas of personnel, budgets,
systems, performance analysis, contracts, credit, compliance, custody,
operations, cash management, securities lending and market risk evaluation. Mr.
Sedlacek currently serves on the Board of Directors of the FIA, and the Chicago
Mercantile Exchange, and is a member of the Global Markets Advisory Committee of
the CFTC. Mr. Sedlacek received his B.A. in Economics from Princeton University,
M.B.A. in Accounting from New York University and received his C.P.A. from the
State of New York in 1978.
Mr. Mark S. Rzepczynski, Ph.D., is the director of research and trading at
JWH. Mr. Rzepczynski will be a principal of JWH as soon as his CFTC
registration is granted. He is responsible for overseeing research and trading
functions at the firm. Prior to joining JWH, Mr.Rzepczynski's last management
responsibility was as vice president and director of taxable credit and
quantitative research in the fixed-income division of Fidelity Management and
Research. While at Fidelity from May 1995 to April 1998, he oversaw credit and
quantitative research recommendations for all fidelity taxable fixed-income
Funds. From April 1993 to April 1995, Mr. Rzepczynski was a portfolio manager
and director of research for CSI Asset Management, Inc., a fixed-income money
management subsidiary of prudential Insurance. Mr. Rzepczynski has a B.A. cum
laude in Economics from Loyola University of Chicago, and an A.M. and Ph.D. in
Economics from Brown University.
Ms. Elizabeth A. M. Kenton is chief administrative officer, a senior vice
president and the director of compliance of JWH. Since joining JWH in March
1989, Ms. Kenton has held positions of increasing responsibility in research and
development, administration and regulatory compliance. Ms. Kenton is also senior
vice president of JWH Investment Management, Inc., a director of Westport
Capital Management Corporation, the vice president of JWH Asset Management, Inc.
and JWH Financial Products, Inc., and a director of Global Capital Management
Limited. Prior to her employment at JWH, Ms. Kenton was associate manager of
Financial and Trading Operations at Krieger Investments, a currency and
commodity trading firm. From July 1987 to September 1988, Ms. Kenton worked for
Bankers Trust Company as a product specialist for foreign exchange and treasury
options trading. She received a B.S. in Finance from Ithaca College.
Mr. David M. Kozak is general counsel, vice president and secretary of JWH.
He is also secretary of JWH Investment Management, Inc., JWH Asset Management,
Inc., and JWH Financial Products, Inc. and a director and secretary of Westport
Capital Management Corporation. Prior to joining JWH in September 1995, Mr.
Kozak was employed at Chapman and Cutler, where he was an associate from
September 1983 and a partner from 1989. Mr. Kozak has concentrated in commodity
futures law since 1981, with emphasis in the area of commodity money management.
Mr. Kozak is currently a director of
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the MFA, chairman of the subcommittee on CTA and CPO issues of the Committee on
Futures Regulation of the Association of the Bar of the City of New York, a
member of the Government Relations Committee of the MFA, the NFA Special
Committee on CPO/CTA Disclosure Issues, and the Visiting Committee of The
University of Chicago Library. He received a B.A. from Lake Forest College, an
M.A. from The University of Chicago, and a J.D. from Loyola University of
Chicago.
Mr. Kevin S. Koshi is executive vice president and a member of the
Investment Policy Committee of JWH. He is responsible for the implementation and
oversight of the firm's proprietary strategies and investments. Mr. Koshi joined
JWH in August 1988 as a professional in the Finance Department, and since 1990
has held positions of increasing responsibility in the Trading Department. He
received a B.S. in Finance from California State University at Long Beach.
Mr. Matthew J. Driscoll is chief trader, vice president, and a member of
the Investment Policy Committee of JWH. He is responsible for the supervision
and administration of all aspects of order execution strategies and
implementation of trading policies and procedures. Mr. Driscoll joined JWH in
March 1991 as a member of its trading department. Since joining the firm he has
held positions of increasing responsibility as they relate to the development
and implementation of JWH's trading strategies and procedures. In 1993, Mr.
Driscoll was promoted to manager of JWH's overseas trading desk. He has played a
major role in the development of JWH's 24-hour trading operation. Mr. Driscoll
attended Pace University.
Mr. Christopher E. Deakins is director of investor services and a vice
president of JWH. Mr. Deakins is responsible for general business development
and investor services functions. Prior to joining JWH in August 1995, he was a
vice president, national sales, and a member of the Management Team for RXR
Capital Management, Inc. His responsibilities consisted of business development,
institutional sales, and broker-dealer support. Prior to joining RXR in August
1986, he was engaged as an account executive for Prudential-Bache Securities
starting in February 1985. Prior to that, Mr. Deakins was an account executive
for Merrill Lynch. He received a B.A. in Economics from Hartwick College.
Mr. Edwin B. Twist is a director of JWH and has held that position since
August 1993. Mr. Twist is also a director of JWH Investment Management, Inc.,
JWH Asset Management, Inc. and JWH Financial Products, Inc. Mr. Twist joined JWH
as internal projects manager in September 1991. Mr. Twist's responsibilities
include assisting with the day-to-day administration and internal projects of
JWH'S Florida office. Mr. Twist was secretary and treasurer of J. W. Henry
Enterprises Corp., a Florida corporation engaged in administrative and financial
consulting services, for which he performed financial, consulting and
administrative services from January 1991 to August 1991.
Ms. Nancy O. Fox, C.P.A., is a vice president and director of investment
support. She is responsible for the day-to-day activities of the Investment
Support Department, including all aspects of operations and performance
reporting. Ms. Fox is also president and director of Global Capital Management
Limited. Prior to joining JWH in January 1992, Ms. Fox was a senior accountant
at Deloitte & Touche, where she served commodities and security industry clients
and held positions of increasing responsibility since July 1987. Ms. Fox is a
member of the AICPA and the New Jersey Society of C.P.A.s. She received a B.S.
in Accounting and Finance from Fairfield University and an M.B.A. from the
University of Connecticut.
Mr. Julius A. Staniewicz is the senior strategist in JWH's Product
Development Department and a member of the Investment Policy Committee of JWH.
He is also President of JWH Asset Management, Inc. and JWH Financial Products,
Inc. and a Vice President of Westport Capital Management Corporation. Prior to
joining JWH in March of 1992, Mr. Staniewicz was employed with Shearson Lehman
Brothers as
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a financial consultant starting in April 1991. Prior to that, beginning in 1990,
Mr. Staniewicz was a vice president of Phoenix Asset Management, a commodity
pool operator and introducing broker, where he helped develop futures funds for
syndication and institutional investors. From 1986 to 1989, Mr. Staniewicz
worked in the managed futures department at Prudential-Bache Securities, Inc.,
lastly as an assistant vice president and co-director of managed futures. In
this capacity, Mr. Staniewicz oversaw all aspects of forming and offering
futures funds, including the selection and monitoring of CTAs. Mr. Staniewicz
received a B.A. in Economics from Cornell University.
Ms. Eilene Nicoll is the vice president of trading administration and is a
member of the Investment Policy Committee of JWH. Prior to joining JWH in July
1997, Ms. Nicoll was a vice president beginning in January 1997 at Commercial
Materials, L.L.C., a newly-organized corporation which had not yet begun
operations. She was a vice president and director at West Course Capital, Inc.,
a commodity trading advisor, from January 1994 until it dissolved in December
1996. At West Course Capital, Inc. Ms. Nicoll was responsible for operations and
administration. Prior to joining West Course Capital, Inc., she was a vice
president at REFCO, Inc. from May 1991 to December 1993. While at REFCO, Inc.,
she was also a principal of Nikkah & Nicoll Asset Management, Inc., a commodity
pool operator. Ms. Nicoll was at Shearson Lehman Brothers from January 1987 to
December 1990 as vice president-futures, and subsequently from January 1991 to
May 1991 at Moore Capital Management, Inc. where she was involved in all aspects
of the commodity trading advisor business, including administration, marketing
and allocation of proprietary capital. Ms. Nicoll received her B.A. in
Psychology from Brooklyn College.
Mr. Paul D. Braica, C.P.A. is the managing director of administration of
JWH. He is also treasurer of JWH Financial Products, Inc. Since joining JWH in
April 1996, Mr. Braica has held positions of increasing responsibility in
internal audit, risk management and administration. Prior to joining JWH, he was
employed with Ernst & Young LLP as an Auditor from December 1994 to March 1996
and as a Tax Manager from July 1986 to September 1993. From October 1993 to
November 1994 he was the director of fund accounting at Organizer Systems, Inc.
Mr. Braica received his B.A. in Economics from Gettysburg College, his M.B.A.
from Rutgers University and his M.S. in Taxation from Seton Hall University.
Mr. Kevin J. Treacy, F.C.A., is vice president of JWH. He is also treasurer
of JWH Asset Management, Inc. Prior to joining JWH in September 1997, Mr. Treacy
was the chief financial officer of Kenmar Advisory Corp., a registered CPO, from
August 1993 to August 1997. While at Kenmar, Mr. Treacy was also a principal of
multiple Kenmar affiliates which were registered as CTAs, CPOs and an
Introducing Broker. At Kenmar, he was responsible for corporate finance and
administration for the firm and its affiliates. Beginning in September 1986, Mr.
Treacy worked for E.S. Jacobs & Co., a corporation specializing in leveraged
buy-outs and venture capital investments, where he held positions of increasing
responsibility, lastly as the firm's chief financial officer until July 1993. He
received his Bachelor of Commerce and Master's in Accounting from University
College Dublin.
Ms. Florence Y. Sofer is director of marketing of JWH. She is responsible
for the development and implementation of strategic marketing and communications
programs. Ms. Sofer joined JWH as a marketing manager in June 1997 from GAM
Funds, Inc., where she was a marketing manager from June 1994 to May 1997. From
October 1993 to June 1994, Ms. Sofer was in the process of relocating from
Washington, D.C. to New York, New York. Prior to such time, she was a senior
marketing analyst with MCI Telecommunications, Inc. from May 1992 to October
1993. She received her B.A. in Economics and International Relations from The
American University and an M.B.A. with an emphasis on marketing from George
Washington University.
The additional principals of JWH have the following titles: Lynn Rodlauer
Lubell, Vice
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President of the Office of Chairman of JWH (Ms. Lubell will be a principal of
JWH as soon as her CFTC registration is granted); Andrew D. Willard, Director of
Technology; William G. Kelley, Vice President; Robert B. Lendrim, Vice
President; Wendy B. Goodyear, Assistant Vice President; Mark W. Sprankel,
Assistant Vice President; Kenneth S. Webster, CPA, Assistant Vice President; and
Michael P. Flannery, Assistant Vice President.
The Investment Policy Committee
- -------------------------------
The Investment Policy Committee (the "IPC"), which is composed of key
professionals from throughout JWH, is one vehicle for decision-making at JWH
concerning the content and application of JWH investment programs. The
composition of the IPC, and the level of participation in its discussions and
decisions by non-members, may vary over time. The IPC is an interdepartmental
advisory body which meets periodically to discuss issues relating to the JWH
investment programs and their application to markets, including research on
markets and strategies in relation to the proprietary trading models employed by
JWH. JWH's proprietary research group may determine new markets which should be
traded in given portfolios, or determine markets which should be removed from
given portfolios. Non-proprietary recommendations from research are then
presented to and discussed by the IPC, which may recommend them to the chairman
for approval. Proprietary research findings are reviewed directly by the
chairman before implementation. All recommendations of the IPC are subject to
final approval by the chairman. The IPC does not make particular trading
decisions. The Trading Department initiates and liquidates positions and manages
JWH portfolios in accordance with the firm's proprietary trading methodology,
which is not overridden unless the chief trader or director of trading
administration determines that doing so is in the best interest of clients. No
trade indications are overruled without the express approval of the chairman.
The Chairman may also notify the Trading Department at any time of special
situations which he deems may require a modification in applying the
methodology.
JWH PEFORMANCE
- --------------
General
- -------
The following is the composite performance of all accounts managed by JWH
and JWH Investments, Inc., an affiliate of JWH which has ceased operations All
performance information is current as of April 30, 1998. Not all of these
programs are presently used by the fund, but any of them might be in the future.
From the inception of trading of the JWH programs (the performance of the
programs prior to January 1993 is not presented in this prospectus in accordance
with applicable CFTC policy), the greatest cumulative percentage decline in
daily net asset value experienced in any single program was nearly 60% on a
composite basis, and certain individual accounts included in such program
experienced even greater declines. Certain JWH accounts have lost 10% or more in
a single trading day. Prospective investors should understand that similar or
greater drawdowns are possible in the future. There can be no assurance that JWH
will trade profitably for the Fund or avoid sudden and severe losses.
An investor should note that the composite capsule performance
presentations include individual accounts which, even though traded according to
the same investment program, have materially different rates of return. The
reasons for this are numerous material differences among accounts: (a)
procedures governing timing for the commencement of trading and means of moving
toward full portfolio commitment of new accounts; (b) the period during which
accounts are active; (c) client trading restrictions, including futures versus
forward contracts and contract months; (d) trading size to equity ratio
resulting from procedures for the commencement of trading and the appropriate
means of moving toward full portfolio commitment of new accounts and new
capital; (e) the size of the account, which can
-46-
<PAGE>
influence the size of positions taken and restrict the account from
participating in all markets available to a particular program; (f) the amount
of interest income earned by an account, which will depend on the rates paid by
futures commission merchants on equity deposits and/or on the portion of an
account invested in interest-bearing obligations such as Treasury bills; (g) the
amount of management and incentive fees paid to JWH and the amount of brokerage
commissions paid, which will vary and will depend on the fees negotiated by the
client with the broker; (h) the timing of orders to open or close positions; (i)
the market conditions, which in part determine the quality of trade executions;
(j) variations in fill prices; and (k) the timing of additions and withdrawals.
Notwithstanding these material differences among accounts, the composite remains
a valid representation of the accounts included therein.
Composite performance presentation is only allowed for accounts which are
not materially different. To decide if there are material differences among
accounts traded pursuant to the same trading program, the gross trading
performance of each JWH investment program and each individual JWH account
within the relevant program is reviewed and the following parameters established
by interpretations of the Division of Trading and Markets of the CFTC applied
(i) if the arithmetic average of two percentages is greater than 10 percentage
points and the difference between the two is less than 10% of their average;
(ii) if the arithmetic average of the two percentages is greater than 5
percentage points but less than 10 percentage points and the difference between
the two is 1.5 percentage points or less; and (iii) if the arithmetic average of
the two percentages is less than 5 percentage points and the difference between
the two is 1.0 percentage point or less. If one of the parameters (i) - (iii) is
satisfied in the review, then the results within the designated range are deemed
"materially the same" or "not materially different." The parameters (i) - (iii)
determine if differences between accounts are material. JWH further evaluates
performance on a gross trading basis for materiality in an overall context for
each JWH investment program and each individual JWH account within the relevant
program not satisfying the above parameters to determine whether any material
differences that are detected could produce misleading composite performance
results after review of the reasons for the differences. With the exception of
accounts that were established at levels below JWH's current minimum account
size, JWH's policy is to provide separate performance capsules when an account
is consistently performing differently on a gross trading basis than the other
JWH accounts traded pursuant to the same trading program and the continued
inclusion of that account in the composite would create a distortion in the
composite rate of return.
During the periods covered by the performance summaries, JWH increased and
decreased leverage in certain markets and entire trading programs, and also
altered the composition of the markets and contracts that it traded for certain
programs. In addition, the subjective aspects of JWH's trading methods may have
been utilized more often in recent years and, therefore, have had a more
pronounced effect on performance results during recent periods. Additionally,
the investment program used (although all accounts may be traded in accordance
with the same approach, such approach may be modified periodically as a result
of ongoing research and development by JWH) may have an effect on performance
results. In reviewing the JWH capsule performance records, prospective investors
should bear in mind the possible effect of these variations on rate of return
and in the application of JWH's investment methods. JWH has decreased leverage
in certain markets and entire programs on several occasions over the last five
years.
The composite rates of return indicated should not be taken as
representative of the rates of return actually achieved by any of the accounts
represented in the performance summaries. The degree of leverage utilized
currently or in the future may be significantly different from that used during
previous time periods.
-47-
<PAGE>
The JWH programs' performance summaries and monthly rate of return table
are presented on a cash basis except as otherwise stated below. The recording of
items on a cash basis should not, for most months, be materially different to
presenting such rates of return on an accrual basis. Beginning with the change
to the accrual basis of accounting for incentive fees in december 1991 for JWH,
and July 1992 for JWH Investments, Inc., the net effect to monthly net
performance and the rate of return in the performance summaries and the monthly
rate of return table of continuing to record interest income, management fees,
commissions and other expenses on a cash basis is materially equivalent to the
full accrual basis. In July 1992, JWH began reflecting all items of net
performance on an accrual basis for the G-7 Currency Portfolio, in January 1993
for the International Currency and Bond Portfolio, in July 1996 for the
Worldwide Bond Program and Dollar Program, and in June 1997 for the
GlobalAnalytics(TM) Family of Programs.
When JWH began to manage the Fund, it developed a new method for treating
the accrual of incentive fees for the multi-advisor funds and multi-program
accounts. This method calculates incentive fees due for each program on a stand-
alone basis irrespective of the actual incentive fees paid by multi-program
accounts. The new method was first applied to august 1996 performance. In that
month, a one-time adjustment to rate of return was made to each affected program
to show the impact of this adjustment from program inception through August
1996. In the case of certain programs, the adjustments had a material, i.e.,
greater than 10%, impact on the rate of return that otherwise would have been
shown. In the case of accounts that closed before JWH received an incentive fee
due to the operation of such netting arrangements, a balancing entry was made to
offset the effect of incentive fee accruals on ending equity.
Advisory Fees vary from account to account managed pursuant to all
programs. In addition, the calculation of management and incentive fees is
subject to variation due to agreed-upon definitions contained in each account's
advisory agreement. Management fees vary from 0% to 6% of assets under
management; incentive fees vary from 0% to 25% of profits. Such variations in
advisory fees may have a material impact on the performance of an account from
time to time.
Notes to JWH Programs' Capsule
Performance Summaries and the Monthly Rates of Return Table
Number of open Accounts is the number of accounts directed by JWH pursuant
to the investment program shown as of April 30, 1998.
Assets under management in a program is the aggregate amount of total
equity, excluding "notional" equity under management, unless otherwise noted, of
JWH in the investment program shown as of April 30, 1998. Refer to the
additional note below for more information on notional funds.
Worst monthly decline on an individual account basis within the past five
years is the largest monthly loss experienced by any single account in the
relevant investment program in any calendar month covered by the capsule. "Loss"
for these purposes is calculated on the basis of the loss experienced by the
individual account, expressed as a percentage of total equity (including
"notional" equity) in the account. Worst monthly decline information includes
the month and year of such decline.
Worst peak-to-valley decline on an individual account basis is the largest
percentage decline by any single account in the relevant investment program
(after eliminating the effect of additions and withdrawals) during the period
covered by the capsule from any month-end net asset value, without such month
end net asset value being equaled or exceeded as of a subsequent month-end by
the individual account, expressed as a percentage of the total equity (including
"notional" equity) in the account. The worst peak-to-valley decline since
inception is the worst peak-to-valley decline by the program as a composite.
-48-
<PAGE>
Compound Annual Rate of Return is calculated by compounding the monthly
rates of return over the number of periods in a given year. For example, each
month's monthly rate of return in hundredths is added to one (1) and the result
is multiplied by the previous month's compounded monthly rate of return
similarly expressed. One (1) is then subtracted from the product. For periods
less than one year, the results are year to date. Average Compounded Annualized
rate of return is similarly calculated, except that before subtracting one (1)
from the product, the product is exponentially changed by the factor of one (1)
divided by the number of years in the program's performance record, then one (1)
is subtracted.
Monthly Rates of Return are calculated by dividing net performance by the
sum of beginning equity, plus additions minus withdrawals. For such purposes all
additions and withdrawals are effectively treated as if they had been made on
the first day of the month, even if, in fact, they occurred later. Beginning in
December 1991, if additions and withdrawals are material to the program's
performance, they are time-weighted. If time-weighting is materially misleading,
then the only accounts traded method is utilized.
Proprietary capital is included in the rates of return for the Financial
and Metals Portfolio, the Original Investment Program, the Global Diversified
Portfolio, the Global Financial Portfolio, the International Currency and Bond
Portfolio and the G-7 Currency Portfolio, but does not have a material impact on
the rates of return.
Additional Note to the Financial and Metals Portfolio Composite Performance
Summary and Monthly Rates of Return Table
The Financial and Metals Portfolio performance information includes the
performance of several accounts that do not participate in global markets due to
their smaller account equities which do not meet the minimums established for
this program. Accounts not meeting such minimums can experience performance
materially different from the performance of an account which meets the minimum
account size. The performance of such accounts has no material effect on the
overall financial and Metals Portfolio performance information.
Additional Note to the Yen Financial Portfolio Performance Summary and Monthly
Rates of Return Table
The Yen Financial Portfolio began trading client capital in January 1992
and ceased trading in March 1997.
The Yen Financial Portfolio was traded from the Japanese yen perspective.
accounts were opened with either U.S. dollar or Japanese yen deposits. Accounts
originally opened with U.S. dollars established additional interbank positions
in Japanese yen in an effort to enable such accounts to generate returns similar
to the returns generated by accounts with yen-denominated balances. Over time,
as profits and losses were recognized in yen-denominated Japanese markets,
accounts held varying levels of U.S. dollars and Japanese yen. Additionally, the
interbank positions were adjusted periodically to reflect the actual portions of
the account balances remaining in U.S. dollars. As the equity mix between U.S.
dollars and Japanese yen varied, performance from each perspective also varied.
The performance of the Yen Financial Portfolio is presented on an
individual account basis due to material differences among accounts' historical
performance. Account performance varied historically due to a number of factors
unique to this portfolio, including whether the portfolio was denominated in
dollars or yen, the extent of hedging currency conversions, the amounts and
frequency of currency conversions, and account size. Several of these factors
that materially influenced performance depended on clients' specific choices
that effectively resulted in customized client portfolios.
-49-
<PAGE>
Additional Note to the Global Financial Portfolio Composite Performance Summary
and Monthly Rates of Return Table
Since the inception of the Global Financial Portfolio, the timing of
individual account openings has had a material impact on compound rates of
return. Based on the account startup methodology used by JWH, the performance of
individual accounts comprising the Global Financial Portfolio composite
performance summary has varied. In 1994, the two accounts that were open
generated separate rates of return of (44)% and (17)%, respectively. For the
period January 1995 through June 1995, the three open accounts achieved separate
rates of return of 101%, 75% and 67%, respectively. By the end of June 1995,
these accounts maintain mature positions and are performing consistently with
each other. Due to the six month period in 1995 of varied performance, the three
accounts achieved annual rates of return for 1995 of 122%, 92% and 78%,
respectively. In April 1995, JWH established a new leverage level for the Global
Financial Portfolio. This new level trades at one-half of the leverage level
previously employed.
Additional Note to the Fully-Funded Subset Summaries (JWH Investments, Inc.
InterRate(TM) and the Global Diversified Portfolio)
"Notional" equity is the amount by which the trading level of an
account exceeds its actual assets. The amount of "notional" equity in the
accounts that comprise the Fully-Funded Subset Summaries requires additional
disclosure under current CFTC policy.
To qualify for the use of the Fully-Funded Subset method of performance
presentation (which permits including accounts which trade "notional" equity in
the same performance composite as accounts which do not), the CFTC requires that
certain computations be made. These computations have been performed for the
Global Diversified Portfolio from January 1, 1993 to June 30, 1996 (when JWH
discontinued using the Fully-Funded Subset method for the Global Diversified
Portfolio) and for JWH Investments, Inc.'s InterRate(TM) from January 1, 1993 to
its close. Such computations were designed to provide assurance that the
performance presented in the Fully-Funded Subset Summaries and calculated on a
Fully-Funded Subset basis would be representative of such performance calculated
on a basis which included "notional" funds in beginning equity. JWH and JWH
Investments, Inc. believe that both methods yielded substantially the same
adjusted rates of return, and that the rates of return presented in the Fully-
Funded Subset Summaries are representative of the performance of the programs in
question for the periods presented.
Additional Note to the Performance Summaries of the Discontinued Programs
Performance summaries are included for InterRate(TM), the Delevered Yen
Denominated Financial and Metals Profile, the KT Diversified Program and the Yen
Financial Portfolio. All of these programs have been discontinued.
______________________
-50-
<PAGE>
JOHN W. HENRY & COMPANY, INC. PROGRAMS
JANUARY 1, 1993 - APRIL 30, 1998
<TABLE>
<CAPTION>
Original
Financial and Investment Global Diversified Global Financial
Name of Program: Metals Portfolio Program Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inception of Client Account
Trading in Program: October 1984 October 1982 June 1988 June 1994
----------------------------------------------------------------------------------------------
Number of Open Accounts: 35 23 10 7
----------------------------------------------------------------------------------------------
Aggregate Assets (excluding
"notional" equity) in Program: $1,086,136,345 $362,882,534 $171,847,783 $138,988,648
----------------------------------------------------------------------------------------------
Aggregate Assets (including
"notional" equity) in Program: $1,086,136,345 $368,135,195 $171,847,783 $138,988,648
----------------------------------------------------------------------------------------------
Aggregate assets (excluding
"notional" equity) Overall $2.1 billion $2.1 billion $2.1 billion $2.1 billion
----------------------------------------------------------------------------------------------
Aggregate assets (including
"notional" equity) Overall: $2.1 billion $2.1 billion $2.1 billion $2.1 billion
----------------------------------------------------------------------------------------------
Worst Monthly Decline on an
Individual Account Basis: (9.8)% (7/94) (16.3)% (10/94) (11.2)% (2/96) (19.5)% (11/94)
----------------------------------------------------------------------------------------------
Worst Peak-to-Valley Decline
on an Individual Account Basis: (30.5)% (6/94-1/95) (31.0)% (7/94-10/94) (24.1)% (6/95-10/95) (48.9)% (7/94-1/95)
----------------------------------------------------------------------------------------------
1998 Rate of Return (4 mos.) (16.0)% (3.7)% (4.1)% (3.1)%
----------------------------------------------------------------------------------------------
1997 Compound Annual Rate of Return: 15.2 % 5.7% 3.3% 4.9%
----------------------------------------------------------------------------------------------
1996 Compound Annual Rate of Return: 29.7% 22.6% 26.9% 32.4%
----------------------------------------------------------------------------------------------
1995 Compound Annual Rate of Return: 38.5% 53.2% 19.6% 86.2%
----------------------------------------------------------------------------------------------
1994 Compound Annual Rate of Return: (5.3)% (5.7)% 10.1% (37.7)%
(7 months)
----------------------------------------------------------------------------------------------
1993 Compound Annual Rate of Return: 46.8% 40.6% 59.8% N/A
----------------------------------------------------------------------------------------------
<CAPTION>
International JWH International
Foreign Exchange G-7 Currency Global-Analytics(TM) Currency and
Name of Program: Program Portfolio Family of Programs Bond Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inception of Client Account
Trading in Program: August 1986 February 1991 June 1997 January 1993
----------------------------------------------------------------------------------------------
Number of Open Accounts: 4 6 2 2
----------------------------------------------------------------------------------------------
Aggregate Assets (excluding
"notional" equity) in Program: $79,977,747 $68,065,898 $68,670,894 $29,710,453
----------------------------------------------------------------------------------------------
Aggregate Assets (including
"notional" equity) in Program: $79,977,747 $68,065,898 $68,670,894 $29,710,453
----------------------------------------------------------------------------------------------
Aggregate assets (excluding
"notional" equity) Overall $2.1 billion $2.1 billion $2.1 billion $2.1 billion
----------------------------------------------------------------------------------------------
Aggregate assets (including
"notional" equity) Overall: $2.1 billion $2.1 billion $2.1 billion $2.1 billion
----------------------------------------------------------------------------------------------
Worst Monthly Decline on an
Individual Account Basis: (8.3)% (5/97) (12.3)% (11/94) (5.0)% (4/98) (7.8)% (7/94)
----------------------------------------------------------------------------------------------
Worst Peak-to-Valley Decline
on an Individual Account Basis: (35.9)% (9/92-1/95) (31.4)% (10/92-1/95) (5.0)% 4/98 (23.6)% (7/94-1/95)
----------------------------------------------------------------------------------------------
1998 Rate of Return (4 mos.) (8.1)% (4.0)% (3.2)% (4.1)%
----------------------------------------------------------------------------------------------
1997 Compound Annual Rate of Return: 71.1% 21.0% 17.6% 17.0%
(7 months)
----------------------------------------------------------------------------------------------
1996 Compound Annual Rate of Return: 3.7% 14.5% N/A 19.9%
----------------------------------------------------------------------------------------------
1995 Compound Annual Rate of Return: 16.9% 32.2% N/A 36.5%
----------------------------------------------------------------------------------------------
1994 Compound Annual Rate of Return: (6.3)% (4.9)% N/A (2.3)%
----------------------------------------------------------------------------------------------
1993 Compound Annual Rate of Return: (4.5)% (6.3) % N/A 14.8%
----------------------------------------------------------------------------------------------
</TABLE>
Worst Monthly Decline on an Individual Account Basis is the worst Monthly
Rate of Return during any month.
Worst Peak-to-Valley Decline is the largest percentage loss without such
loss being earned back. For example, if the Monthly Rate of Return was
(1)% in each of July and August, 1% in September and (2)% in October, the
"Peak-to-Valley Decline" would still be continuing at the end of October in
the amount of approximately (3)%, whereas if the Monthly Rate of Return had
been approximately 3% in September, the "Peak-to-Valley Decline" would have
ended as of the end of August at approximately the (2)% level.
51
<PAGE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
JOHN W. HENRY & COMPANY, INC. PROGRAMS
JANUARY 1, 1993 - APRIL 30, 1998 (CONT'D)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
Delivered Yen
The World Denominated
Name of Program: Financial Dollar Worldwide Financial and
Perspective Program Bond Program Metals Profile InterRate(TM)
-----------------------------------------------------------------------------------------
October 1995; December 1988;
Inception of Client Account April 1987 July 1996 July 1996 ceased trading ceased trading 2/94
Trading Program: 2/96 7/96
<S> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------
Number of Open Accounts: 2 2 2 0 0
-----------------------------------------------------------------------------------------
Aggregate Assets (excluding $31,343,763 $29,476,404 19,889,641 $0 $0
"notional" equity in Program:
-----------------------------------------------------------------------------------------
Aggregate Assets (including $31,343,763 $29,476,404 19,889,641 $0 $0
"notional" equity in Program:
-----------------------------------------------------------------------------------------
Aggregate Assets (excluding $2.1 billion $2.1 billion $2.1 billion $2.1 billion $2.1 billion
"notional" equity in Program:
-----------------------------------------------------------------------------------------
Aggregate Assets (including $2.1 billion $2.1 billion $2.1 billion $2.1 billion $2.1 billion
"notional" equity in Program:
-----------------------------------------------------------------------------------------
Worst Monthly Decline on a (11.6)% (3/93) (8.4)% (5/97) (3.8)% (4/97) (3.2)% (2/96) (3.1)% (11/94)
Individual Account Basis:
-------------------------------------------------------------------------------------------
Worst Peak-to-Valley Decline (25.9)% (7/94- (11.6)% (6.2)% (12/96- (5.1% (2/96-B/96) (19.7% (9/92-
on a Individual account Basis: 1/95 (5/97-9/97) (5/97) 11,93)
------------------------------------------------------------------------------------------
1998 Rate of Return (4 mos.) 2.7% (4.3)% (1.0)% N/A N/A
------------------------------------------------------------------------------------------
1997 Compound Annual Rate of Return: 10.4% 6.8% 9.5% N/A N/A
------------------------------------------------------------------------------------------
1996 Compound Annual Rate of Return: 40.9% 10.6% 17.8% 9.4% 5.79%
(6 months) (6 months) (7 months)
------------------------------------------------------------------------------------------
1995 Compound Annual Rate of Return: 32.2% N/A N/A 0.2% 5.19%
------------------------------------------------------------------------------------------
1994 Compound Annual Rate of Return: (15.2)% N/A N/A N/A 3.42%
------------------------------------------------------------------------------------------
1993 Compound Annual Rate of Return: 13.7% N/A N/A N/A (5.35)%
-------------------------------------------------------------------------------------------
<CAPTION>
JWH II
Name of Program: KT Diversified Financial and JWH II
Program Metals Portfolio InterRate
------------------------------------------------------------------------------------------
Inception of Client Account January 1984; September 1991; February 1992;
Trading Program: ceased trading 2/94 ceased trading ceased trading
7/95 11/93
--------------------------------------------------------------
Number of Open Account: 0 0 0
--------------------------------------------------------------
Aggregate Assets (excluding $0 $0 $0
"notional" equity in Program:
--------------------------------------------------------------
Aggregate Assets (including $0 $0 $0
"notional" equity in Program:
--------------------------------------------------------------
Aggregate Assets (excluding $2.1 billion $0 $0
"notional" equity in Program:
--------------------------------------------------------------
Aggregate Assets (including $2.1 billion $0 $0
"notional" equity in Program:
--------------------------------------------------------------
Worst Monthly Decline on a (19.6)% (8/93) (4.8)% (7/94) (4.0)% (11/93)
Individual Account Basis:
--------------------------------------------------------------
Worst Peak-to-Valley Decline (33.9)% (8/93- (12.2)% (7/94- (20.6)% (9/92-
on a Individual account Basis: (2/94) (2/94) (1/93)
--------------------------------------------------------------
1998 Rate of Return (4 mos.) N/A N/A N/A
--------------------------------------------------------------
1997 Compound Annual Rate of Return: N/A N/A N/A
--------------------------------------------------------------
1996 Compound Annual Rate of Return: N/A N/A N/A
--------------------------------------------------------------
1995 Compound Annual Rate of Return: N/A 30.3% N/A
(7 months)
--------------------------------------------------------------
1994 Compound Annual Rate of Return: 14.0)% (0.8)% N/A
(2 months)
--------------------------------------------------------------
1993 Compound Annual Rate of Return: 20.6% 46.1% (9.9)%
(11 months)
--------------------------------------------------------------
</TABLE>
* Managed by JWH Investments, Inc. which began managing client
assets in September 1991. JWH investments, Inc. no longer manages client
funds.
Worst Monthly Decline on an Individual Account Basis is the worst Monthly Rate
of Return during any month.
Worst Peak-to-Valley Decline is the largest percentage loss without such loss
being earned back. For example, if the Monthly Rate of Return was (1)% in each
of July and August, 1% in September and (2)% in October, the "Peak-to-Valley
Decline" would still be continuing at the end of October in the amount of
approximately (3)%, whereas if the Monthly Rate of Return had been approximately
3% in September, the "Peak-to-Valley Decline" would have ended as of the end of
August at approximately the (2)% level.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
52
<PAGE>
JOHN W. HENRY & COMPANY, INC. PROGRAMS
January 1, 1993 - April 30, 1998
YEN FINANCIAL PORTFOLIO
Inception of Client Account Trading in Program: January 1992
Number of Open Accounts: 0
Aggregate Assets (excluding "notional" equity) in Program: $0
Aggregate Assets (including "notional" equity) in Program: $0
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Aggregate Worst Worst
Account No. Inception of Assets Compound Annual Rate Monthly Peak-to-Valley
Trading March 31, 1998 of Return % Decline % Decline %
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 1/92 closed - 3/97 1997: (3.3) (3 months) (7.3) - 7/95 (30.5) - 4/95 - 7/96
1996: (8.5)
1995: 20.6
1994: (13.0)
1993: 76.4
- -----------------------------------------------------------------------------------------------------------------------------------
2 1/93 closed - 1/97 1997: (0.1) (1 month) (6.9) - 7/95 (29.0) - 4/95 - 7/96
1996: (9.9)
1995: 21.0
1994: (8.8)
1993: 71.4
- -----------------------------------------------------------------------------------------------------------------------------------
3 1/94 closed - 1/97 1997: (2.4) (1 month) (6.0) - 7/95 (26.0) - 4/95 - 7/96
1996: (10.9)
1995: 22.4
1994: (7.5)
- -----------------------------------------------------------------------------------------------------------------------------------
4 6/94 closed - 3/97 1997: 1.4 (3 months) (6.5) - 7/95 (22.3) - 4/95 - 7/96
1996: (0.6)
1995: 24.2
1994: (1.6) (7 months)
- -----------------------------------------------------------------------------------------------------------------------------------
5 8/94 closed - 3/97 1997: (2.4) (3 months) (7.1) - 7/95 (30.4) - 4/95 - 7/96
1996: (6.0)
1995: 21.1
1994: (4.3) (5 months)
- -----------------------------------------------------------------------------------------------------------------------------------
6 1/95 closed - 3/97 1997: (3.7) (3 months) (7.5) - 7/95 (35.5) - 4/95 - 7/96
1996: (13.5)
1995: 13.2
- -----------------------------------------------------------------------------------------------------------------------------------
7 3/94 closed - 3/97 1997: 4.0 (3 months) (6.7) - 7/96 (15.9) - 2/95 - 7/96
1996: 7.8
1995: 28.1
1994: (11.2) (10 months)
- -----------------------------------------------------------------------------------------------------------------------------------
8 4/92 closed - 9/93 1993: 62.6 (9 months) (3.9) - 9/93 (3.9) - 9/93 - 9/93
- -----------------------------------------------------------------------------------------------------------------------------------
9 3/94 closed - 12/94 1994: (7.4) (10 months) (5.4) - 5/94 (10.5) - 4/94 - 12/94
- -----------------------------------------------------------------------------------------------------------------------------------
10 11/93 closed - 8/95 1995: 20.0 (8 months) (9.0) - 8/95 (18.8) - 4/95 - 8/95
1994: (13.4)
1993: 5.2 (2 months)
- -----------------------------------------------------------------------------------------------------------------------------------
11 11/93 closed - 1/95 1995: (0.6) (1 month) (6.3) - 5/94 (16.5) - 4/94 - 1/95
1994: (15.0)
1993: 4.8 (2 months)
- -----------------------------------------------------------------------------------------------------------------------------------
12 12/92 closed - 3/96 1996: (4.1) (3 months) (4.9) - 7/95 (15.8) - 12/93 - 1/95
1995: 31.4
1994: (14.1)
1993: 69.2
- -----------------------------------------------------------------------------------------------------------------------------------
13 1/93 closed - 12/95 1995: 10.9 (6.2) - 7/95 (15.8) - 4/95 - 12/95
1994: (4.1)
1993: 43.6
- -----------------------------------------------------------------------------------------------------------------------------------
14 4/93 closed - 9/94 1994: (19.0) (9 months) (5.8) - 5/94 (19.9) - 11/93 - 9/94
1993: 25.3 (9 months)
- -----------------------------------------------------------------------------------------------------------------------------------
15 1/94 closed - 8/94 1994: (6.7) (8 months) (5.5) - 5/94 (11.0) - 4/94 - 8/94
- -----------------------------------------------------------------------------------------------------------------------------------
16 12/92 closed - 1/96 1996: 0.3 (6.0) - 7/95 (12.4) - 4/95 - 10/95
(1 month)
1995: 26.6
1994: (5.1)
1993: 73.9
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
-53-
<PAGE>
JOHN W. HENRY & COMPANY, INC. PROGRAMS
JANUARY 1, 1993 - APRIL 30, 1998
YEN FINANCIAL PORTFOLIO (CONT'D)
Inception of Client Account Trading in Program: January 1992
Number of Open Accounts: 0
Aggregate Assets (excluding "notional" equity) in Program: $0
Aggregate Assets (including "notional" equity) in Program: $0
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Aggregate Worst Worst
Account No. Inception of Assets Compound Annual Rate Monthly Peak-to Valley
Trading March 31, 1998 of Return % Decline % Decline %
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
17 3/94 closed -- 4/96 1996: (6.3) (4 months) (6.2) -- 7/95 (18.5) -- 4/95 -- 4/96
1995: 8.5
1994: (10.1) (10 months)
- ------------------------------------------------------------------------------------------------------------------------
18 12/94 closed -- 4/96 1996: (7.8) (4 months) (6.6) -- 7/95 (21.1) -- 4/95 -- 4/96
1995: 18.3
1994: 0.2 (1 month)
- ------------------------------------------------------------------------------------------------------------------------
19 6/94 closed -- 12/94 1994: (7.9) (7 months) (5.1) -- 7/94 (10.4) -- 6/94 -- 11/94
- ------------------------------------------------------------------------------------------------------------------------
20 6/94 closed -- 3/95 1995: 48.1 (3 months) (3.6) -- 7/94 (9.9) -- 6/94 -- 1/95
1994: (6.6) (7 months)
- ------------------------------------------------------------------------------------------------------------------------
21 4/94 closed -- 9/94 1994: (4.6) (6 months) (4.7) -- 5/94 (7.0) -- 4/94 -- 9/94
- ------------------------------------------------------------------------------------------------------------------------
22 3/94 closed -- 9/94 1994: (9.7) (7 months) (6.3) -- 5/94 (11.0) -- 4/94 -- 9/94
- ------------------------------------------------------------------------------------------------------------------------
23 4/94 closed -- 9/94 1994: (9.8) (6 months) (9.1) -- 5/94 (12.9) -- 4/94 -- 9/94
- ------------------------------------------------------------------------------------------------------------------------
24 4/93 closed -- 12/94 1994: (16.6) (6.1) -- 5/94 (17.9) -- 11/93 -- 12/94
1993: 26.5 (9 months)
- ------------------------------------------------------------------------------------------------------------------------
25 9/93 closed -- 12/94 1994: (12.4) (6.0) -- 5/94 (14.1) -- 4/94 -- 12/94
1993: 3.2 (4 months)
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Yen Financial Portfolio closed in March 1997.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
-54-
<PAGE>
THE JWH PROGRAMS MONTHLY RATES OF RETURN
<TABLE>
<CAPTION>
International International
Financial Original Foreign The World Global G-7 Currency Global
and Metals Investment Exchange Financial Diversified Currency and Bond Financial
Portfolio Program Program Perspective Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1998
January (3.5)% (1.3)% (1.6)% 1.8% (3.2)% (4.1)% 1.0% (1.5)%
February (4.0) 2.2 (6.0) 2.5 3.8 (2.6) (2.3) (0.1)
March (1.6) (4.1) 2.9 1.6 (1.4) 4.7 1.3 2.0
April (7.9) (0.5) (3.4) (3.1) (3.2) (1.9) (4.0) (3.5)
Compound
ROR (4 mos.) (16.0)% (3.7)% (8.1)% 2.7% (4.1)% (4.0)% (4.1)% (3.1)%
1997
January 4.4% 3.4% 2.9% 1.1% 1.5% 2.5% 2.2% 2.7%
February (2.2) 0.2 9.7 0.2 (0.4) 3.9 1.4 (0.6)
March (0.7) 1.6 4.1 (2.3) (1.0) 0.4 0.0 (0.4)
April (2.9) 0.5 5.0 (0.8) (7.2) 3.1 (1.9) (0.4)
May (8.3) 1.1 (6.9) (5.2) (0.8) (3.3) (2.9) (3.7)
June 4.1 (4.4) 1.5 4.5 (2.1) 5.7 4.9 (2.2)
July 15.8 2.0 9.5 6.0 11.5 4.1 10.2
5.4
August (3.7) (0.8) 7.0 (6.4) (7.8) (3.5) (6.1) (1.4)
September 2.2 (6.0) 2.4 1.1 (0.2) (1.2) 2.8 (2.1)
October 2.0 3.6 5.1 (1.3) 4.5 1.2 2.7 4.2
November 2.5 (0.0) 6.5 8.4 (0.5) 6.0 2.0 (1.5)
December 2.9 4.9 9.2 5.9 7.3 0.9 1.3 5.3
Compound
Annual ROR 15.2% 5.7% 71.1% 10.4% 3.3% 21.0% 17.0%* 4.9%
1996
January 6.0% 5.3% 2.3% 7.4% (1.3)% 2.9% 3.6% 4.8%
February (5.5) (7.4) (4.8) (5.5) (9.8) (4.2) (4.6) (4.2)
March 0.7 1.0 2.9 6.7 1.3 (0.4) 1.1 2.4
April 2.3 3.8 1.0 2.4 7.1 2.2 0.1 1.3
May (1.7) (6.5) 2.0 (2.0) (9.1) 0.7 (0.3) (1.5)
June 2.2 8.0 1.0 2.7 1.7 1.8 (0.8) 1.4
July (1.1) (4.4) (3.0) (2.9) 2.2 (2.7) (2.5)
(3.1)
August (0.8) (2.3) (8.1) 1.6 4.5 (4.3) (0.8) 4.3
September 3.2 8.2 1.2 7.8 7.6 1.6 5.2 8.1
October 14.3 10.4 6.1 9.3 14.6 10.9 12.2 8.8
November 10.9 5.2 3.1 9.1 9.1 4.1 7.6 6.3
December (2.6) 1.1 0.7 (0.6) (1.0) 1.8 (1.4) 0.8
Compound
Annual ROR 29.7% 22.6% 3.7% 40.9% 26.9% 14.5% 19.9%* 32.4%
1995
January (3.8)% 2.2% (6.1)% (3.7)% (6.9)% (3.0)% (3.7)% (4.7)%
February 15.7 17.9 7.2 13.7 13.5 9.6 11.1 25.6
March 15.3 16.6 22.2 18.3 8.5 21.2 11.2 44.4
April 6.1 9.1 2.5 3.7 7.3 2.2 3.7 7.0
May 1.2 (4.4) (5.3) (3.3) 1.2 (4.3) 7.7 (5.1)
June (1.7) 1.7 (0.6) (2.6) (1.7) (0.2) (2.0) (1.0)
July (2.3) (0.0) (5.5) 0.5 (8.9) (1.8) (2.8)
1.4
August 2.1 (3.9) 5.8 1.7 (5.0) 5.3 (0.3) 4.6
September (2.1) (3.9) 0.5 (3.9) (5.1) 1.8 0.7 (4.9)
October 0.3 3.3 1.5 3.9 (2.2) 2.0 0.6* 4.0
November 2.6 1.1 (2.8) (0.1) 5.9 (1.3) 5.1 0.4
December 1.7 6.8 (0.6) 2.4 14.9 (0.8) 1.5 1.8
Compound
Annual ROR 38.5% 53.2% 16.9% 32.2% 19.6% 32.2% 36.5%* 86.2%
</TABLE>
- ---------------
*Beginning in October 1995, this program is comprised of one proprietary
account.
Monthly Rate of Return is net performance divided by beginning equity; "ROR"
means "Rate of Return."
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
-55-
<PAGE>
THE JWH PROGRAMS MONTHLY RATES OF RETURN (cont'd)
<TABLE>
<CAPTION>
International International
Financial Original Foreign The World Global G-7 Currency Global
and Metals Investment Exchange Financial Diversified Currency and Bond Financial
Portfolio Program Program Perspective Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1994
January (2.9)% (2.9)% 1.0% (4.6)% (2.6)% (1.3)% (2.2)% N/A
February (0.6) 1.5 (3.0) (0.0) (0.8) (1.7) 1.5 N/A
March 7.2 4.4 (0.2) 9.2 4.0 0.9 5.4 N/A
April 0.9 0.2 (1.7) 0.9 0.9 (1.3) 3.0 N/A
May 1.3 5.5 (1.8) 2.4 7.9 (1.0) 4.3 N/A
June 4.5 6.6 3.2 1.7 10.8 7.9 4.8 9.8%
July (6.1) (7.1) (2.5) (8.9) (2.6) (3.5) (6.7)
(7.4)
August (4.1) (4.7) (0.3) (3.1) (6.4) (0.3) (3.0) (8.8)
September 1.5 (2.8) 2.7 (0.0) 2.1 2.9 0.9 (4.0)
October 1.7 (14.1) 4.2 0.2 (3.6) 4.1 0.1 (8.3)
November (4.4) 10.2 (6.7) (5.8) 5.6 (7.2) (4.8) (17.4)
December (3.5) (0.0) (0.8) (6.8) (4.1) (3.6) (4.7) (7.7)
Compound
Annual ROR (5.3)% (5.7)% (6.3)% (15.2)% 10.1% (4.9)% (2.3)% (37.7)%
(7 mos.)
</TABLE>
<TABLE>
<CAPTION>
International International
Financial Original Foreign The World Global G-7 Currency
and Metals Investment Exchange Financial Diversified Currency and Bond
Portfolio Program Program Perspective Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C> <C> <C>
1993
January 3.3% (0.8)% (5.2)% (1.9)% 1.7% (4.4)% (1.6)%
February 13.9 9.5 5.3 11.0 16.6 7.9 7.3
March (0.3) (3.5) 0.4 (10.3) 2.9 (0.3) (0.9)
April 9.3 10.4 (2.7) 6.6 6.6 (1.8) (1.3)
May 3.3 0.1 1.9 2.7 1.5 (1.0) (0.3)
June 0.1 (4.1) 3.9 1.5 1.0 4.6 3.3
July 9.7 14.9 5.0 12.3 14.3 2.6 4.1
August (0.8) (3.6) (4.5) (5.2) (0.0) (5.0) 3.7
September 0.2 0.6 (1.0) 0.3 (4.2) (1.8) 0.1
October (1.1) (1.5) (4.0) (7.1) 0.1 (5.4) (1.6)
November (0.3) 3.5 (3.1) (2.6) 3.1 (0.6) (0.4)
December 2.9 11.4 0.4 8.4 6.1 (0.5) 1.9
Compound
Annual ROR 46.8% 40.6% (4.5)% 13.7% 59.8% (6.3)% 14.8%
</TABLE>
--------------------
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
-56-
<PAGE>
THE JWH PROGRAMS MONTHLY RATES OF RETURN (cont'd)
<TABLE>
<CAPTION>
Dollar Worldwide JWH GlobalAnalytics(TM)
Program Bond Program Family of Programs
<S> <C> <C> <C>
1998
January (1.9)% 3.4% (1.8)%
February (3.5) (0.8) (1.1)
March 3.5 (0.7) 4.7
April (2.4) (2.8) (7.9)
Compound
ROR (4 mos.) (4.3)% (1.0)% (3.2)%
1997
January 7.2% 0.9% N/A
February 1.7 (0.6) N/A
March 1.1 (0.1) N/A
April 2.9 (3.7) N/A
May (8.4) (0.6) N/A
June (1.0) 1.8 3.2%
July 2.3 9.3 8.4
August (3.5) (3.1) (4.4)
September (1.0) 4.0 3.4
October 1.7 1.7 0.7
November 4.4 (1.5) 0.5
December (0.1) 1.7 5.0
Compound
Annual ROR 6.8% 9.5% 17.6%
(7 mos.)
1996
January N/A N/A N/A
February N/A N/A N/A
March N/A N/A N/A
April N/A N/A N/A
May N/A N/A N/A
June N/A N/A N/A
July (1.2)% 1.4% N/A
August (2.3) 1.4 N/A
September 0.1 3.7 N/A
October 7.4 6.9 N/A
November 3.8 5.9 N/A
December 2.7 (2.3) N/A
Compound
Annual ROR 10.6% 17.8% N/A
(6 mos.) (6 mos.)
</TABLE>
_______________
Monthly Rate of Return is net performance divided by beginning equity; "ROR"
means "Rate of Return."
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
-57-
<PAGE>
MERRILL LYNCH INVESTMENT PARTNERS INC.
BACKGROUND AND PRINCIPALS
Merrill Lynch Investment Partners Inc., a subsidiary of ML&Co., has as its
primary objective providing quality alternative investments for its clients.
MLIP is one of the largest sponsors of managed futures funds in terms both of
assets invested in funds for which it serves as trading manager or sponsor, and
of financial and personnel resources. Offering hedge fund, managed futures and
currency investments for individuals, corporations and financial institutions,
MLIP has operated with one primary objective since its inception in 1986 -- to
provide investors with an opportunity for long-term capital appreciation and
diversification through quality investments in equity, debt, currency, interest
rate, metals, energy and agricultural markets, utilizing a variety of
instruments and trading strategies. While MLIP concentrated its efforts
primarily on managed futures investments during its early years of operation,
since 1996 MLIP has offered a number of multi-advisor and single-advisor hedge
funds. MLIP has dedicated significant resources to the growth of its hedge fund
business, and has the investment management, operational, administrative,
research and risk management experience to manage substantial assets in both
hedge funds and managed futures investments in the global financial markets. As
of May 1, 1998, MLIP was acting as trading manager or sponsor to futures and
hedge funds in which approximately $3.1 billion of client capital was
invested.
MLIP's registration as a commodity pool operator ("CPO"; a person which
organizes or manages investment funds which trade futures) became effective in
october 1986.
The following are the principal officers and the directors of MLIP.
JOHN R. FRAWLEY, JR. Chairman, Chief Executive Officer,
President and Director
JEFFREY F. CHANDOR Senior Vice President, Director of
Sales, Marketing and Research and
Director
JO ANN DI DARIO Vice President, Chief Financial Officer
And Treasurer
JOSEPH H. MOGLIA Director
ALLEN N. JONES Director
STEPHEN G. BODURTHA Director
STEVEN B. OLGIN Vice President, Secretary and
Director of Administration
John R. Frawley, Jr. was born in 1943. Mr. Frawley is Chairman, Chief
Executive Officer, President and a Director of MLIP and Co-Chairman of Merrill
Lynch Futures. 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 formation in 1990 through
its dissolution in 1994. Mr. Frawley is currently serving his fourth consecutive
one-year term as Chairman of the U.S. Managed Funds Association (formerly, the
Managed Futures Association), a U.S. national trade association that represents
the managed futures, hedge funds and fund of funds industry. Mr. Frawley is also
a Director of that organization. Mr. Frawley 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
the issues regarding a potential merger. Mr. Frawley currently serves as a
member of the CFTC Global Markets Advisory Committee.
Jeffrey F. Chandor was born in 1942. Mr. Chandor is Senior Vice President,
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 International
-58-
<PAGE>
Institutional Equities, Equity Derivatives 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.
Jo Ann Di Dario was born in 1946. Ms. Di Dario is a Vice President, Chief
Financial Officer and Treasurer of MLIP. Before joining MLIP in May 1998, she
was unemployed for one year. From February 1996 to May 1997, she worked as a
consultant for Global Asset Management, an international mutual fund organizer
and operator headquartered in London, where she offered advice on restructuring
their back-office operations. From May 1992 to January 1996, she served as a
Vice President of Meridian Bank Corporation, a regional bank holding company.
she was responsible for managing the treasury operations of the Bank Corporation
including its wholly-owned subsidiary, Meridian Investment Company Inc. From
September 1992 to May 1992, Ms. Di Dario managed the Domestic Treasury
Operations of First Fidelity Bank, a regional bank. From January 1991 to
September 1991, Ms. Di Dario was unemployed. For the previous five years,
beginning in December 1990, Ms. Di Dario was Vice President, Secretary and
Controller of Caxton Corporation, a Commodity Pool Operator and Trading Advisor.
Her background includes seven years of public accounting experience and she
graduated with high honors from Stockton State College with a Bachelor of
Science degree in Accounting.
Joseph H. Moglia was born in 1949. Mr. Moglia is a Director of MLIP. In
1971, he graduated from Fordham University with a Bachelor of Arts degree in
Economics. He later received his Master of Science degree from the University of
Delaware. He taught at the high school and college level for sixteen years. Mr.
Moglia joined MLPF&S in 1984, and has served in a number of senior roles,
including Director of New York Fixed Income Institutional Sales, Director of
Global Fixed Institutional Sales, and Director of the Municipal Division. He is
currently Senior Vice President and Director of the Investment Strategy and
Product Group in Merrill Lynch Private Client, and Director of Middle Markets.
Allen N. Jones was born in 1942. Mr. Jones is a Director of MLIP and, from
July 1995 until January 1998, Mr. Jones was also Chairman of the Board of
Directors 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. From February 1994 to April
1997, Mr. Jones was the Director of Individual Financial Services of the Merrill
Lynch Private Client Group. In April 1997, Mr. Jones became the Director of
Private Client marketing.
Stephen G. Bodurtha was born in 1958. Mr. Bodurtha is a Director of MLIP.
In 1980, Mr. Bodurtha graduated from Wesleyan University, Middletown,
Connecticut with a Bachelor of Arts degree in Government, magna cum laude. From
1980 to 1983, Mr. Bodurtha worked in the Investment Banking Division of Merrill
Lynch. In 1985, he was awarded his Master of Business Administration degree
from Harvard University, where he also served as Associates Fellow (1985-1986).
From 1986 to 1989, Mr. Bodurtha held the positions of Associate and Vice
President with Kidder, Peabody & Co., Incorporated where he worked in their
Financial Futures & Options Group. Mr. Bodurtha joined MLPF&S in 1989 and has
held the position of First Vice President since 1995. He has been the Director
in charge of the Structured Investments Group of MLPF&S since 1995.
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
-59-
<PAGE>
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 Funds Association's Government Relations Committee and has served
as an arbitrator for the NFA. Mr. Olgin is also a member of the Committee on
Futures Regulation of the Association of the Bar of the City of New York.
The performance of the other funds for which MLIP has acted as trading
manager or sponsor is set forth beginning at page 87 of this prospectus.
Most of these funds, however, are materially different investments from the
Fund, either using advisors other than JWH or multiple independent advisors in
addition to JWH.
YEAR 2000 COMPLIANCE
Merrill Lynch's modifications for Year 2000 systems compliance are
proceeding according to plan and are expected to be completed in early 1999.
These modifications will include all systems which affect the operations of the
Fund. Based on information currently available, the remaining expenditures are
estimated at $200 million and will cover hardware and software upgrades, systems
consulting and computer maintenance. These expenditures are not expected to
have a material adverse impact on Merrill Lynch's financial position, results of
operations or cash flows in future periods. However, the failure of Merrill
Lynch's securities exchanges, clearing organizations, vendors, clients or
regulators to resolve their own processing issues in a timely manner could
result in a material financial risk. Merrill Lynch is devoting necessary
resources to address all Year 2000 issues in a timely manner.
JWH is taking immediate action to identify any of its computer systems that
are Year 2000 vulnerable. If such systems are identified that negatively affect
its services (e.g., trade details, fee information), it will take immediate
action to update those systems, extensively test the systems internally and, if
appropriate, with other parties, to ensure that system interdependencies have
been adequately addressed, and establish contingency plans and provide such
plans in the event of malfunction of any part of the systems. If JWH has a year
2000 vulnerable system which is unable to be corrected by the year 2000, it will
notify MLIP in a timely manner, and MLIP will promptly notify investors.
JWH foresees no reason why it would not be ready to accept and process data
related to the Euro before January 1, 1999. A management working group is
responsible for planning and preparing for the Euro conversion. The group meets
on a regular basis to review information as it becomes available on this issue,
determine what actions are necessary and establish policies and monitor tasks as
appropriate. If unanticipated difficulties arise in connection with the
conversion, JWH will notify the fund.
MERRILL LYNCH FUTURES INC.
MLF, the exclusive clearing futures broker for the Fund, is a clearing
member of The Board of Trade of the City of Chicago, the Chicago Mercantile
Exchange, the New York Mercantile Exchange and all other principal United States
commodity exchanges. The principal office of MLF is located at World Financial
Center, 250 Vesey Street, 23rd Floor, New York, New York 10281-1323.
The Customer Agreement between MLF and the Fund provides that MLF will not
be liable except for actions constituting negligence or misconduct, or for
actions taken by it in compliance with instructions given by JWH.
-60-
<PAGE>
LITIGATION
JWH LITIGATION
Except as may be described below, there neither now exists nor has there
previously ever been any administrative, civil or criminal action against JWH or
its principals.
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. Additional complaints containing the
same allegations as the earlier California complaints were filed in California
in March 1997.
The actions in question 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 allege fraudulent selling practices in
connection with the marketing of those pools and breach of fiduciary duty on
the part of Dean Witter as general partner of these pools. No federal
securities law violations are alleged. JWH itself is alleged to have aided and
abetted as well as directly participated with Dean Witter in its
fraudulent selling practices. The actions in question seek both unspecified and
compensatory damages. No injunctive relief is required.
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 investors. JWH manages, and has
managed, numerous managed futures accounts and funds other than the dean witter
pools involved in the litigation described below. there has never been any
litigation relating to any such other accounts.
The names and filing dates of the various original actions described above
prior to their consolidations, are as follows:
California
In all California cases, the plaintiffs seek compensatory damages in an
amount to be proven, trebled in accordance with California law, punitive damages
and equitable and injunctive relief to be determined by the court.
Kozlowski et al. v. John W. Henry & Co. et al., BC156941 (Superior Court of the
State of California, Los Angeles County, September 6, 1996).
Gurevitz et al. v. John W. Henry & Co. et al., BC156922 (Superior Court of the
State of California, Los Angeles County, September 10, 1996).
Shifflet et al. v. John W. Henry & Co. et al., BC157596 (Superior Court of the
State of California, Los Angeles County, September 20, 1996).
Redd et al. v. John W. Henry & Co. et al., BC167463; Gibson et al. v. John W.
Henry & Co. et al., BC167469; and Kendall et al. v. John W. Henry & Co. et al.,
BC167470 (Superior Court of the State of California, Los Angeles County, March
13, 1997; Krieger et al. v. John W. Henry & Co. et al. BC167636 (Superior Court
of the State of California, Los Angeles County, March 17, 1997).
New York
In the Malichio et al. and Hamel et. al. New York suits, compensatory and
punitive damages and compensatory damages are sought.
Malichio et al. v. John W. Henry & Co. et al., #116698-96 (superior court of the
State of New York, New York County, September 18, 1996).
Hamel et al. v. John W. Henry & Co. et al. #604775/96 (Supreme Court of the
state of New York, New York County, September 20, 1996).
-61-
<PAGE>
The California complaints were consolidated under the caption "In re Dean
Witter Managed Futures Litigation" in May 1997.
The New York complaints were consolidated under the caption "In re Dean
Witter Managed Futures Partnerships Litigation" in July 1997.
The foregoing claims do not vary significantly in the remedies they seek.
These remedies are generally the following:
(i) to recover damages sustained by all persons in the class in an amount to
be proven at trial;
(ii) to receive reasonable attorneys' fees, costs and expenses incurred;
(iii) to be awarded pre- and post-judgment interest;
(iv) to be awarded punitive damages (in certain cases); and
(v) to receive such other and further relief as the court may deem necessary
or appropriate.
None of the foregoing actions involve the Fund. Furthermore, the Fund's
operations, earnings and assets are largely unaffected by JWH's financial
condition. It would only be in the highly unlikely event that such financial
condition was impaired to the point that JWH could no longer effectively manage
the Fund's assets that the Fund would itself be affected by any of the
proceedings described above.
The outcome of all litigation is uncertain, but JWH believes -- based in
part on discussions with its counsel -- that the foregoing suits will not have a
material adverse effect on JWH's operations, earnings or assets. Based on this
conclusion, MLIP does not believe that any of the foregoing actions will have an
adverse effect on the Fund's operations, earnings or assets.
MERRILL LYNCH LITIGATION
MLIP has never been the subject of any material litigation.
Applicable CFTC rules require that the following proceeding be disclosed,
although MLIP does not consider it to be material.
On June 24, 1997, the CFTC accepted an Offer of Settlement from MLF and
others, in a matter captioned "In the Matter of Mitsubishi Corporation and
Merrill Lynch Futures Inc., et al.," CFTC Docket No. 97-10, pursuant to which
MLF, without admitting or denying the allegations against it, consented to a
finding by the Commission that MLF had violated Section 4c(a)(A) of the
Commodity Exchange Act, relating to wash sales (the CFTC alleged that the
customer entered nearly simultaneous orders without the intent to engage in a
bona fide trading transaction), and CFTC Regulation 1.37(a), relating to
recordkeeping requirements. MLF agreed to cease and desist from violating
Section 4c(a)(A) of the Act and Regulation 1.37(a), and to pay a civil monetary
penalty of $175,000.
NET ASSET VALUE
The Net Asset Value of the Fund equals its assets less its liabilities,
generally as determined in accordance with Generally Accepted Accounting
Principles, including any unrealized profits and losses on its open positions.
More specifically, the Net Asset Value of the Fund equals the sum of all cash,
the liquidating value (or cost of liquidation, as the case may be) of all
futures, forward and options ON FUTURES positions and the fair market value of
all other assets of the Fund, less all liabilities of the Fund (including
accrued liabilities, irrespective of whether such liabilities -- for example,
Profit Shares -- may in fact never be paid), in each case as determined by MLIP
generally in accordance with Generally Accepted Accounting Principles.
-62-
<PAGE>
CONFLICTS OF INTEREST
GENERAL
Neither MLIP nor JWH has established any formal procedures to resolve the
following conflicts of interest. Consequently, there is no independent control
on how MLIP or JWH resolve these conflicts which can be relied upon by investors
as ensuring that the fund is treated equitably with other MLIP or JWH
clients.
Because no formal procedures are in place for resolving conflicts, they may
be resolved by MLIP and/or JWH in a manner which causes the Fund losses. The
value of limited partners' investment may be diminished by actions or omissions
which independent third parties could have prevented or corrected.
Although the following conflicts of interest are present in the operation
of the Fund, MLIP does not believe that they are likely to have a material
adverse effect on its performance. This belief is based on a number of factors,
including the following.
(i) JWH trades all similarly situated MLIP accounts in parallel, placing bulk
orders which are allocated among the JWH accounts pursuant to pre-
established procedures. Consequently, JWH has little opportunity to
prefer another MLF client over the Fund.
(ii) MLF simply receives and executes JWH's bulk orders based on pre-
established procedures. MLF has no ability in allocating positions to
favor one account over another.
(iii) JWH charges all similar accounts the same fees.
(iv) MLIP, as a fiduciary, is prohibited from benefiting itself at the expense
of the fund.
In MLIP's view, the most important conflict of interest relating to the
Fund is that the business terms applicable to Merrill Lynch's dealings with the
Fund were not negotiated when they were initially established. These business
terms are described in detail in this prospectus in order to give prospective
investors ample opportunity to accept or reject such terms. However, it may be
difficult for investors to assess, for example, the extent of the adverse impact
which the high level of the Fund's brokerage commissions has on its long-term
prospects for profitability.
MLIP
MLIP has organized and controls the Fund. MLIP and its affiliates are the
primary service providers to the Fund and will remain so even if using other
firms might be better for the Fund. Futures trading is highly competitive. To
the extent that Merrill Lynch entities continue to be retained by the Fund
despite providing non-competitive services, the Fund is likely to incur
losses.
MLIP allocates its resources among a number of different funds. MLIP has
financial incentives to favor certain funds over the Fund. To the extent that
MLIP actually does so, the Net Asset Value per Unit is likely to decline.
The business terms of the Fund -- other than the fees and Profit Shares due
to JWH which were negotiated between MLIP and JWH -- were not negotiated. MLIP
unilaterally established these terms, balancing marketing and performance
considerations and its interest in maximizing the revenues generated to
MLIP.
MLIP'S INTEREST IN MAXIMIZING ITS REVENUES COULD CAUSE IT TO TAKE ACTIONS
WHICH ARE DETRIMENTAL TO THE FUND IN ORDER TO INCREASE MLIP'S INCOME FROM THE
FUND OR DECREASE ITS COSTS IN SPONSORING THE FUND. ALSO, BECAUSE MLIP DOES NOT
HAVE TO COMPETE WITH THIRD PARTIES TO PROVIDE SERVICES TO THE FUND, THERE IS NO
INDEPENDENT CHECK ON THE QUALITY OF SUCH SERVICES. MLIP MAY LOWER THE QUALITY
OF SUCH SERVICES IN ORDER TO MAXIMIZE THE NET REVENUES WHICH IT RECEIVES FROM
THE FUND, WHILE AT THE SAME TIME CAUSING THE NET ASSET VALUE PER UNIT TO
DECLINE.
-63-
<PAGE>
MLF; MLIB; MLAM
General
MLF executes trades for different clients in the same markets at the same
time. Consequently, other clients may receive better prices on the same trades
than the Fund, causing the Fund to pay higher prices for its positions.
Many MLF clients pay lower brokerage rates than the Fund. Brokerage
commissions are a major drag on the Fund's performance and the cumulative effect
of the higher rates paid by the Fund is material.
MLF, MLIB and MLAM each must allocate their resources among many different
clients. They all have financial incentives to favor certain accounts over the
Fund. Because of the competitive nature of the markets in which they trade, to
the extent that any of MLF, MLIB or MLAM prefer other clients over the Fund, the
Fund is likely to incur losses.
MLF, MLIB AND MLAM DO NOT HAVE TO COMPETE TO PROVIDE SERVICES TO THE FUND;
CONSEQUENTLY, THERE IS NO INDEPENDENT CHECK ON THE QUALITY OF THEIR
SERVICES.
JWH
General
JWH manages many accounts other than the Fund. Consequently, JWH may devote
less resources to the fund's trading than JWH otherwise might, to the detriment
of the Fund.
Some of JWH'S principals devote a substantial portion of their business
time to ventures other than managing the Fund, including ventures unrelated to
futures trading. The Fund may be at a competitive disadvantage to other accounts
which are managed by advisors whose principals devote their entire attention to
futures trading.
JWH may not be willing to make certain highly successful programs available
to the Fund due to the Fund's expense level or other reasons.
THE LESS SUCCESSFUL THE PROGRAMS CHOSEN FOR THE FUND BY JWH, THE LESS
SUCCESSFUL THE FUND. IF JWH DOES NOT MAKE CERTAIN PROGRAMS AVAILABLE TO THE FUND
FOR REASONS OTHER THAN WHAT JWH CONSIDERS TO BE THE FUND'S BEST INTERESTS, THE
FUND WILL SUFFER.
Financial Incentives to Disfavor the Fund
The Profit Shares received by JWH are based on the Fund's overall
performance, not the performance of any individual program. JWH could increase
the Profit Shares it could receive from some programs included in the strategic
allocation program by using them on a stand-alone basis for clients other than
the Fund.
If the Fund has losses, JWH may have an incentive to prefer other clients
because JWH could begin to receive incentive compensation from such clients
without having to earn back any losses.
ANY ACTION WHICH JWH TAKES TO MAXIMIZE ITS REVENUES BY DISFAVORING THE
FUND, EITHER IN RESPECT OF THE RESOURCES DEVOTED TO ITS TRADING OR THE PROGRAMS
SELECTED FOR IT, COULD ADVERSELY AFFECT THE FUND'S PERFORMANCE, PERHAPS TO A
MATERIAL EXTENT.
In selecting the programs for the Fund, JWH has an opportunity to promote
new programs, even if such programs are not yet proven managing client assets
and may cause significant losses to the Fund.
FINANCIAL CONSULTANTS
Financial Consultants are the individual Merrill Lynch brokers who deal
directly with Merrill Lynch clients. Financial Consultants are compensated, in
part, on the basis of the amount of securities commissions which they generate
from client transactions. Financial Consultants receive initial selling
commissions and ongoing compensation on the Units they sell and have a financial
incentive to encourage investors to purchase and not to redeem their Units.
-64-
<PAGE>
IF A FINANCIAL CONSULTANT DOES NOT GIVE A CLIENT THE ADVICE WHICH THE
FINANCIAL CONSULTANT BELIEVES TO BE IN THE BEST INTERESTS OF THE CLIENT DUE TO
THE FINANCIAL CONSULTANT'S DESIRE TO INCREASE HIS OR HER INCOME, THE CLIENT
COULD INCUR SUBSTANTIAL LOSSES OR CONTINUE TO INVEST IN THE FUND EVEN THOUGH THE
UNITS HAVE BECOME AN UNSUITABLE INVESTMENT FOR THE CLIENT.
PROPRIETARY TRADING
MLIP, its affiliates and related persons may trade in the commodity markets
for their own accounts as well as for the accounts of their clients. Such
persons may take positions which are the same as or opposite to those held by
the Fund.
JWH and Mr. Henry may engage in discretionary trading for their own
accounts, and may trade for the purpose of testing new investment programs and
concepts, as long as such trading does not amount to a breach of fiduciary duty.
In the course of such trading, JWH and Mr. Henry may take positions in their own
accounts which are the same or opposite from client positions, due to testing a
new quantitative model or program, a neutral allocation system, and/or trading
pursuant to individual discretionary methods; on occasion, their orders may
receive better fills than client accounts. Records for these accounts will not
be made available to limited partners.
Employees and principals of JWH (other than Mr. Henry) are not permitted to
trade on a discretionary basis in futures, options on futures or forward
contracts. However, such principals and employees may invest in investment
vehicles that trade futures, options on futures or forward contracts when an
independent trader manages trading in that vehicle, and the JWH Employee Fund,
L.P., for which JWH is the trading advisor. The records of their accounts will
not be made available to limited partners.
Records of proprietary trading will not be available for inspection by
limited partners.
Proprietary trading by MLIP, JWH or their respective officers or employees
could, if substantial in size, cause losses for the Fund by increasing the cost
at which it must acquire and liquidate positions. Over time, the losses
resulting from such increased prices could make it difficult for the Fund to
earn profits even if its trading were otherwise successful.
TRANSACTIONS BETWEEN MERRILL LYNCH AND THE FUND
All of the service providers to the fund, other than JWH, are affiliates of
Merrill Lynch. Merrill Lynch negotiated with JWH over the level of its advisory
fees. However, none of the fees paid by the Fund to any Merrill Lynch party were
negotiated, and they are higher than would have been obtained in arm's-length
bargaining.
The Fund pays Merrill Lynch substantial brokerage commissions and
administrative fees as well as currency trading costs. The Fund also pays MLF
interest on short-term loans extended by MLF to cover losses on foreign currency
positions and permits Merrill Lynch to retain a portion of the benefit derived
from possession of the Fund's assets.
Within the Merrill Lynch organization, MLIP is the direct beneficiary of
the revenues received by different Merrill Lynch entities from the Fund. MLIP
controls the management of the Fund and serves as its promoter. Although MLIP
has not sold any assets, directly or indirectly, to the Fund, MLIP makes
substantial profits from the Fund due to the foregoing payments.
No loans have been, are or will be outstanding between MLIP or any of its
principals and the Fund.
MLIP pays substantial selling commissions (4% of the subscription price of
units) and trailing commissions (2% annually of the average net asset value per
unit, beginning in the thirteenth month after a unit is sold) to Merrill Lynch,
Pierce, Fenner & Smith Incorporated for distributing the units. MLIP is
ultimately paid back for these expenditures from the revenues it receives from
the Fund.
Descriptions of the dealings between the Fund and Merrill Lynch are set
forth under
-65-
<PAGE>
"Selected Financial Data," "Interest Income Arrangements" and "Analysis of Fees
and Expenses Paid by the Fund."
SUMMARY OF THE LIMITED PARTNERSHIP AGREEMENT
The Fund's Limited Partnership Agreement effectively gives MLIP, as general
partner, full control over the management of the Fund. Limited partners have no
voice in its operations. In addition, MLIP in its operation of the Fund is
specifically authorized to engage in the transactions described herein
(including those involving affiliates of MLIP), and is exculpated and
indemnified by the Fund against claims sustained in connection with the Fund,
provided that such claims were not the result of negligence or misconduct and
that MLIP determined that such conduct was in the best interests of the
Fund.
Although as limited partners, investors have no right to participate in the
control or management of the Fund, they are entitled to: (i) vote on a variety
of different matters; (ii) receive annual audited financial statements,
unaudited monthly reports and timely tax information; (iii) inspect the Fund's
books and records; (iv) redeem Units; and (v) not to have the business terms of
the Fund changed in a manner which increases the compensation received by MLIP
or its affiliates without their unanimous consent.
Limited partners' voting rights extend to any proposed change in the
Limited Partnership Agreement which would adversely affect them, as well as to
their right to terminate the Fund's contracts with affiliates of MLIP. Limited
partners also have the right to call meetings of the Fund in order to permit
limited partners to vote on any matter on which they are entitled to vote,
including the removal of MLIP as general partner of the Fund.
Limited partners or their duly authorized representatives may inspect the
Fund's books and records, for any purpose reasonably related to their status as
limited partners in the Fund, during normal business hours upon reasonable
written notice to the MLIP. They may also obtain copies of such records upon
payment of reasonable reproduction costs; provided, however, that such limited
partners shall represent that the inspection and/or copies of such records will
not be for commercial purposes unrelated to such limited partners' interest in
the Fund.
The Limited Partnership Agreement contains restrictions on MLIP's ability
to raise Brokerage Commissions, Administrative Fees and other revenues received
by Merrill Lynch from the Fund, as well as certain other limitations on the
various conflicts of interest to which MLIP is subject in operating the Fund.
The Limited Partnership Agreement provides for the economic and tax
allocations of the Fund's profit and loss. Economic allocations are based on
investors' capital accounts, and the tax allocations generally attempt to
equalize tax and capital accounts by, for example, making a priority
allocation of taxable income to limited partners who redeem at a profit.
The General Partner may amend the Limited Partnership Agreement in any
manner not adverse to the limited partners without need of obtaining their
consent.
TAX CONSEQUENCES
In the opinion of Sidley & Austin, the following summary of the tax
consequences TO United States taxpayers who are individuals is materially
correct. Sidley & Austin's opinion is filed as an Exhibit to the registration
statement of which this prospectus is a part.
PARTNERSHIP TAX STATUS OF THE FUND
Both the Fund and the Fund/JWH joint venture company are taxed as
partnerships and do not pay federal income tax. Based on the income expected to
be earned by the Fund and the Fund/JWH joint venture, neither will be taxed as a
"publicly-traded partnership."
-66-
<PAGE>
TAXATION OF PARTNERS ON PROFITS OR LOSSES OF THE FUND
Each Partner must pay tax on his share of the Fund's income and gains. Such
share must be included each year in a Partner's taxable income whether or not
such Partner has redeemed Units. In addition, a Partner may be subject to paying
taxes on the Fund's interest income even though the Net Asset Value per Unit has
decreased due to trading losses. See "-- Tax on Capital Gains and Losses;
Interest Income," below.
The Fund provides each Partner with an annual schedule of his share of such
items. The Fund generally allocates these items equally to each Unit. However,
when a Partner redeems Units, the Fund allocates capital gains or losses so as
to eliminate any difference between the redemption proceeds and the tax accounts
of such Units.
LIMITED DEDUCTIBILITY OF FUND LOSSES AND DEDUCTIONS
A Partner may not deduct Fund losses or deductions in excess of his tax
basis in his Units as of year-end. Generally, a Partner's tax basis in his
Units is the amount paid for such Units reduced (but not below zero) by his
share of any Fund distributions, losses and deductions and increased by his
share of the Fund's income and gains.
LIMITED DEDUCTIBILITY FOR CERTAIN EXPENSES
Individual taxpayers are subject to material limitations on their ability
to deduct investment advisory expenses and other expenses of producing income.
Sidley & Austin has opined that the amount, if any, of the Fund's expenses which
might be subject to this limitation should be de minimis. However, the IRS could
take a different position. The Fund's Profit Share is structured as a priority
allocation of the Fund's trading profits (if any) to JWH. The IRS could contend
that the Profit Share should be characterized as an investment advisory expense.
If the Profit Share were treated as an investment advisory expense, individual
taxpayers would pay tax on $100 of net profits for every $85 increase in Net
Asset Value of their Units and the Profit Share would be subject to limited
deductibility.
Individuals cannot deduct investment advisory expenses in calculating their
alternative minimum tax.
YEAR-END MARK-TO-MARKET OF OPEN POSITIONS
Section 1256 Contracts are futures, futures options traded on U.S.
exchanges, certain foreign currency contracts and stock index options. Certain
of the Fund's open positions are Section 1256 Contracts. Section 1256
Contracts which remain open at the end of each year are treated for tax purposes
as if such positions had been sold and any gain or loss recognized. The gain
or loss on Section 1256 Contracts is characterized as 40% short-term capital
gain or loss and 60% long-term capital gain or loss regardless of how long any
given position has been held. Non-U.S. exchange-traded futures and forwards are
Non-Section 1256 Contracts. Gain or loss on Non-Section 1256 Contracts will be
recognized when sold by the Fund and will be primarily short-term gain or
loss.
TAX ON CAPITAL GAINS AND LOSSES; INTEREST INCOME
As described under "-- Year-End Mark-To-Market of Open Positions, "the
Fund's trading, not including its cash management, which generates primarily
ordinary income, generates 60% long-term capital gains or losses and 40% short-
term capital gains or losses from its Section 1256 Contracts and primarily
short-term capital gain, or loss from its non-Section 1256 Contracts.
Individuals pay tax on long-term capital gains, other than gains on assets held
for more than one year but less than 18 months at a maximum rate of 20%. Short-
term capital gains are subject to tax at the same rates as ordinary income, with
a maximum rate of 39.6% for individuals.
Individual taxpayers may deduct capital losses only to the extent of their
capital gains plus $3,000. Accordingly, the Fund could incur significant losses
but a limited partner may be
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<PAGE>
required to pay taxes on his share of the Fund's interest income.
If an individual taxpayer incurs a net capital loss for a year, he may
elect to carryback (up to three years) the portion of such loss which consists
of a net loss on Section 1256 Contracts. A taxpayer may deduct such losses
only against net capital gain for a carryback year to the extent that such gain
includes gains on Section 1256 Contracts. To the extent that a taxpayer could
not use such losses to offset gains on Section 1256 Contracts in a carryback
year, the taxpayer may carryforward such losses indefinitely as losses on
Section 1256 Contracts.
SYNDICATION EXPENSES
The $660,895 in organizational and initial offering costs and any ongoing
offering expenses paid by the Fund and reimbursed to MLIP were non-deductible
syndication expenses, as will be the estimated $600,000 in costs associated with
the offering of the Units under this prospectus. The IRS could also contend that
a portion of the Brokerage Commissions paid to MLF and/or the Administrative
Fees paid to MLIP also constitute non-deductible syndication expenses.
THE 3% EMPLOYEE DISCOUNT
MLIP contributes 3% of the purchase date Net Asset Value per Unit to the
Fund for each Unit purchased by Merrill Lynch officers and employees. The
officers and employees report the MLIP contribution as ordinary income in the
year of purchase, and acquire a tax basis of 100% of the purchase date Net Asset
Value of their Units.
UNRELATED BUSINESS TAXABLE INCOME
Tax-exempt limited partners will not be required to pay tax on their share
of income or gains of the Fund, provided that such plans and entities do not
purchase Units with borrowed funds.
IRS AUDITS OF THE FUND AND ITS PARTNERS
The IRS is required to audit Fund-related items at the Fund rather than the
Partner level. MLIP is the Fund's "tax matters partner" with general authority
to determine the Fund's responses to a tax audit. If an audit of the Fund
results in an adjustment, all Partners may be required to pay additional taxes
plus interest as well as penalties, and could themselves be audited.
STATE AND OTHER TAXES
In addition to the federal income tax consequences described above, the
Fund and the Partners may be subject to various state and other taxes.
____________________
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX
ADVISERS BEFORE DECIDING WHETHER TO INVEST.
SELLING COMMISSIONS
No selling commissions are paid from the proceeds of subscriptions. MLIP
provides production credits to the Selling Agent on Unit sales. Production
credits are internal bookkeeping entries, a percentage of which are paid by MLIP
in cash to the Selling Agent.
The Selling Agent receives initial production credits of 4% of the purchase
price of all Units. However, no initial production credits are provided on
sales of Units to officers and employees of Merrill Lynch at 97% of Net Asset
Value.
MLIP also provides ongoing production credits on Units which remain
outstanding more than twelve months. Ongoing production credits are only paid
on Units sold by Financial Consultants registered with the CFTC and who have
passed either the Series 3 National Commodity Futures Examination or the Series
31 Managed Futures Funds Examination. Ongoing production credits equal 3% per
annum of the average month-end Net Asset Value per Unit, beginning in the second
year after sale.
-68-
<PAGE>
In the Selling Agreement, JWH and MLIP have agreed to indemnify the Selling
Agent against certain liabilities that the Selling Agent may incur as a result
of their respective conduct in connection with the offering and sale of the
Units, including liabilities under the Securities Act of 1933 and the Commodity
Exchange Act.
LAWYERS; ACCOUNTANTS
Sidley & Austin has advised MLIP, MLF and MLPF&S on the offering of the
Units. Sidley & Austin drafted "Tax Consequences."
The balance sheet of MLIP as of December 26, 1997 and the consolidated
financial statements of the Fund as of December 31, 1996 and 1997 included
herein have been audited by Deloitte & Touche LLP.
-69-
<PAGE>
FINANCIAL STATEMENTS
Schedules are 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.
_______________
INDEPENDENT AUDITORS' REPORT
TO THE PARTNERS OF
ML JWH STRATEGIC ALLOCATION FUND L.P.:
We have audited the accompanying consolidated statements of financial condition
of ML JWH Strategic Allocation Fund L.P. (a Delaware limited partnership; the
"Partnership") and its joint venture with John W. Henry & Company, Inc. (the
"Joint Venture") as of December 31, 1997 and 1996, and the related consolidated
statements of income and changes in partners' capital for the year ended
December 31, 1997 and the 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 audits.
We conducted our audits 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 audits provide 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. and the Joint Venture as of December 31, 1997 and 1996 and the results
of their operations for the year ended December 31, 1997 and the period from
July 15, 1996 (commencement of operations) to December 31, 1996 in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
February 6, 1998
New York, New York
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<PAGE>
ML JWH STRATEGIC ALLOCATION FUND L. P.
(A DELAWARE LIMITED PARTNERSHIP) AND JOINT VENTURE
-------------------------------------------------
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
March 31, 1998, DECEMBER 31, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
MARCH 31,
1998 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1997 1996
-------------- ------------- -------------
<S> <C> <C> <C>
ASSETS
Cash on deposit at brokers $ -- $ -- $ 726
Accrued interest (Note 3) 2,228,109 196,088 184,577
U. S. Government obligations 178,087,357 172,586,264 121,535,012
Equity in commodity futures trading accounts:
Cash and options premiums 35,321,356 41,484,775 54,132,103
Net unrealized profit on open contracts 8,520,707 14,898,289 4,696,372
------------- ------------- -------------
TOTAL $224,157,529 $229,165,416 $180,548,790
============= ============= =============
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Broker payables $ 5,009,766 $ -- $ --
Profit share payable (Note 2) -- 2,640,194 4,683,010
Redemptions payable 2,266,624 1,116,238 1,661,675
Brokerage commissions payable (Note 3) 1,415,345 1,473,380 1,160,945
Administrative fees payable (Note 3) 45,655 47,527 37,450
Organizational and initial offering
costs payable (Note 1) 65,686 114,951 808,712
--------------- ------------- -------------
Total liabilities 8,803,076 5,392,290 8,351,792
--------------- ------------- -------------
MINORITY INTEREST 135,576 135,830 123,383
--------------- ------------- -------------
PARTNERS' CAPITAL:
General Partner (18,177, 18,177 and 16,643
units) 2,421,698 2,455,940 2,038,044
Limited Partners (1,594,546, 1,634,252
and 1,534,953 units) 212,797,179 221,181,356 188,284,065
Subscriptions receivable (0, 0 and 148,169
units) -- -- (18,248,494)
--------------- ------------- -------------
Total partners' capital 215,218,877 223,637,296 172,073,615
--------------- ------------- -------------
TOTAL $224,157,529 $229,165,416 $180,548,790
=============== ============= =============
NET ASSET VALUE PER UNIT (NOTE 4)
See notes to consolidated financial statements.
</TABLE>
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<PAGE>
ML JWH STRATEGIC ALLOCATION FUND L.P.
(A Delaware Limited Partnership) AND JOINT VENTURE
-------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME FOR
THE PERIODS JANUARY 1, 1997 TO MARCH 31, 1997 (UNAUDITED)
AND JANUARY 1, 1998 TO MARCH 31, 1998 (UNAUDITED)
THE YEAR ENDED DECEMBER 31, 1997
AND THE PERIOD FROM JULY 15, 1996
(COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
JANUARY 1, JANUARY 1, JANUARY 1, JULY 15,
1998 1997 1997 1996
TO TO TO TO
MARCH 31, MARCH 31, DECEMBER 31, DECEMBER 31,
1998 1997 1997 1996
--------- --------- ------------ ------------
<S> <C> <C> <C> <C>
REVENUES:
Trading profit:
Realized $ 4,511,184 $ 8,668,317 $18,820,033 $29,800,074
Change in unrealized (6,377,582) (92,283) 10,201,917 4,696,372
----------- ----------- ----------- -----------
Total trading results (1,866,398) 8,576,034 29,021,950 34,496,446
Interest income (Note 3) 3,135,548 2,773,698 12,021,263 3,030,330
----------- ----------- ----------- -----------
Total revenues 1,269,150 11,349,732 41,043,213 37,526,776
----------- ----------- ----------- -----------
EXPENSES:
Brokerage commissions (Note 3) 4,264,908 4,263,014 17,377,236 4,873,368
Administrative fees (Note 3) 137,578 137,516 560,556 157,205
----------- ----------- ----------- -----------
Total expenses 4,402,486 4,400,530 17,937,792 5,030,573
----------- ----------- ----------- -----------
NET (LOSS) INCOME BEFORE
MINORITY INTEREST AND
PROFIT SHARE ALLOCATION (3,133,336) 6,949,202 23,105,421 32,496,203
Profit Share Allocation (Note 2) -- -- (2,640,194) (4,683,010)
Minority interest in income/(loss) 257 (978,363) (12,447) (23,383)
----------- ----------- ----------- -----------
NET (LOSS) INCOME $(3,133,079) $ 5,970,839 $20,452,780 $27,789,810
----------- ----------- ----------- -----------
NET INCOME PER UNIT:
Weighted average number of Units
outstanding (Note 5) 1,641,697 1,713,819 1,739,531 1,163,568
Net income per weighted average
General Partner and Limited
Partner Unit $ (1.91) $ 3.48 $ 11.76 $ 23.88
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
ML JWH STRATEGIC ALLOCATION FUND L.P.
(A Delaware Limited Partnership) AND JOINT VENTURE
-------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME FOR
THE PERIODS JANUARY 1, 1997 TO MARCH 31, 1997 (UNAUDITED)
AND JANUARY 1, 1998 TO MARCH 31, 1998 (UNAUDITED)
THE YEAR ENDED DECEMBER 31, 1997
AND THE PERIOD FROM JULY 15, 1996
(COMMENCEMENT OF OPERATIONS) TO DECEMBER31, 1996
<TABLE>
<CAPTION>
LIMITED GENERAL SUBSCRIPTIONS
UNITS PARTNERS PARTNER RECEIVABLE TOTAL
----------- ------------- ------------ -------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Initial offering 14,832 $100,516,800 $1,483,200 $ - $102,000,000
Organizational 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
Additions 409,237 32,927,078 194,571 18,248,494 51,370,143
Net Income -- 5,906,979 63,860 -- 5,970,839
Redemptions (23,703) (3,007,464) -- -- (3,007,464)
----------- ------------- ------------ -------------- -----------------
PARTNERS' CAPITAL,
MARCH 31, 1997 1,788,961 $224,110,658 $2,296,475 $ -- $226,407,133
=========== ============= ============ =================
Organizational and initial
offering cost recovery - 366,712 3,765 - 370,477
Additions 409,237 32,969,453 152,196 18,248,494 51,370,143
Redemptions (160,235) (20,629,719) - - (20,629,719)
Net Income - 20,190,845 261,935 - 20,452,780
----------- ------------- ------------ -------------- -----------------
PARTNERS' CAPITAL,
DECEMBER 31, 1997 1,652,429 221,181,356 2,455,940 - 223,637,296
Net Loss -- (3,098,837) (34,242) -- (3,133,079)
Redemptions (39,706) (5,285,340) -- -- (5,285,340)
----------- ------------- ------------ -------------- -----------------
PARTNERS' CAPITAL,
MARCH 31, 1998 1,612,723 $212,797,179 $2,421,698 $ -- $215,218,877
=========== ============= ============ ============== =================
</TABLE>
See notes to consolidated financial statements.
-73-
<PAGE>
ML JWH STRATEGIC ALLOCATION FUND L.P.
(A Delaware Limited Partnership) AND JOINT VENTURE
-------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS JANUARY 1, 1998 TO MARCH 31, 1998 (UNAUDITED
AND JANUARY 1, 1997 TO MARCH 31, 1997 (UNAUDITED),
THE YEAR ENDED DECEMBER 31, 1997
AND 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. When available for investment, 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. MLIP (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. MLF is the
Partnership's commodity broker and MLAM, also an affiliate of Merrill Lynch,
provides cash management services to the Partnership. Substantially all of the
Partnership's assets are 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 controlling 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.
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.
-74-
<PAGE>
ML JWH STRATEGIC ALLOCATION FUND L.P.
(A Delaware Limited Partnership) AND JOINT VENTURE
-------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS JANUARY 1, 1998 TO MARCH 31, 1998 (UNAUDITED
AND JANUARY 1, 1997 TO MARCH 31, 1997 (UNAUDITED),
THE YEAR ENDED DECEMBER 31, 1997
AND THE PERIOD FROM JULY 15, 1996
(COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1996
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 on open contracts in the Consolidated Statements of Financial Condition
at the difference between the original contract amount and the fair value. The
change in net unrealized profit on open contracts from one period to the next is
reflected in change in unrealized in the Consolidated Statements of Income.
Fair value is based on quoted market prices on the exchange or market on which
the contract is traded.
ORGANIZATIONAL AND INITIAL OFFERING COSTS,
OPERATING EXPENSES AND SELLING COMMISSIONS
- ------------------------------------------
The General Partner advanced all organizational and initial offering costs
relating to the Partnership. The Partnership is reimbursing the General Partner
for such costs in 24 monthly installments. For financial reporting purposes,
the Partnership deducted the estimated organizational 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 organizational and initial offering cost reimbursements
only as actually paid. Adjustments in the final organizational and initial
offering costs were added back to the Partners' capital.
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.
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.
-75-
<PAGE>
ML JWH STRATEGIC ALLOCATION FUND L.P.
(A Delaware Limited Partnership) AND JOINT VENTURE
-------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS JANUARY 1, 1998 TO MARCH 31, 1998 (UNAUDITED
AND JANUARY 1, 1997 TO MARCH 31, 1997 (UNAUDITED),
THE YEAR ENDED DECEMBER 31, 1997
AND THE PERIOD FROM JULY 15, 1996
(COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1996
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
first renewal option was exercised at September 30, 1997. 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 U.S. Treasury bills or such share of
profits may participate in the profits and losses of the Joint Venture. For the
year ended December 31, 1997, JWH received a profit share allocation of
$2,601,187 and earned interest of $39,006 on such amount. 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
Approximately 80% of the Joint Venture's U.S. dollar assets are managed by
MLAM pursuant to the guidelines established by MLIP for which MLAM assumes no
responsibility, in the Government Securities market. 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.
A portion of the Joint Venture's U.S. dollar assets are held at MLF in
cash. On the cash held at MLF, the Joint Venture receives interest from Merrill
Lynch at the prevailing 91-day U.S. 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 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.
-76-
<PAGE>
ML JWH STRATEGIC ALLOCATION FUND L.P.
(A Delaware Limited Partnership) AND JOINT VENTURE
-------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS JANUARY 1, 1998 TO MARCH 31, 1998 (UNAUDITED
AND JANUARY 1, 1997 TO MARCH 31, 1997 (UNAUDITED),
THE YEAR ENDED DECEMBER 31, 1997
AND THE PERIOD FROM JULY 15, 1996
(COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1996
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 year ended December 31, 1997 and the period from
July 15, 1996 (commencement of operations) to December 31, 1996 was
approximately $212 and $208 (not including, in calculating round-turn
equivalents, forward contracts on a futures-equivalent basis).
MLF pays JWH annual Consulting Fees of 4% of the Partnership's average
month-end assets, after reduction for a portion of the brokerage commissions.
The Joint Venture trades forward contracts through a foreign exchange
service desk (the "F/X Desk") established by MLIP. The F/X Desk gives the
Partnership access to counterparties in addition to (but also including) Merrill
Lynch International Bank ("MLIB"). MLIP or another Merrill Lynch entity charges
a service fee equal, at current exchange rates, to approximately $5.00 to $12.50
on each purchase or sale (not round-turn) of a futures-contract equivalent face
amount of a given foreign currency. No service fees are charged on trades
awarded to MLIB (which receives bid-ask spreads on such trades).
In its exchange of futures for physical ("EFP") trading with Merrill Lynch,
the Joint Venture acquires spot or forward (collectively, "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 the two positions. This differential reflects, in part, the different
settlement dates of the cash and the futures contracts and prevailing interest
rates, but also includes a pricing spread in favor of MLIB or another Merrill
Lynch entity. JWH, to date, has made little use of EFPs.
The Joint Venture's F/X Desk service fee and EFP differential costs have,
to date, totalled no more than .25 of 1% of the Partnership's average month-end
assets.
4. NET ASSET VALUE PER UNIT
For financial reporting purposes, the Partnership deducted the total
organizational 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 organizational and initial offering
cost reimbursement only as actually paid. Consequently, as of December 31, 1997
and 1996, the Net Asset Value per Unit was $135.34 and $122.61 for financial
reporting purposes and $135.40 and $123.16 for all other purposes, respectively.
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, 1997 and 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.
-77-
<PAGE>
ML JWH STRATEGIC ALLOCATION FUND L.P.
(A Delaware Limited Partnership) AND JOINT VENTURE
-------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS JANUARY 1, 1998 TO MARCH 31, 1998 (UNAUDITED
AND JANUARY 1, 1997 TO MARCH 31, 1997 (UNAUDITED),
THE YEAR ENDED DECEMBER 31, 1997
AND THE PERIOD FROM JULY 15, 1996
(COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1996
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 total trading results by reporting category for the period
January 1, 1998 to March 31, 1998 and the years ended December 31, 1997 and 1996
were as follows:
<TABLE>
<CAPTION>
MARCH 31, 1998
TRADING RESULTS
<S> <C>
Interest rates and
stock indices $(833,644)
Commodities (862,512)
Currencies (1,864,832)
Energy 5,173,485
Metals (3,478,895)
-----------
$(1,866,398)
===========
</TABLE>
<TABLE>
<CAPTION>
1997 TOTAL 1996 TOTAL
TRADING RESULTS TRADING
--------------- -------
RESULTS
- -------
<S> <C> <C>
Interest rates and
stock indices $ 19,982,977 $18,719,739
Commodities (2,328,550) (2,473,692)
Currencies 19,023,250 10,116,005
Energy (14,267,006) 6,404,320
Metals 6,611,279 1,730,074
------------ -----------
$ 29,021,950 $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 on such derivative instruments as
reflected in the Consolidated Statements 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 traded by the Joint Venture are marked to market
daily with the resulting unrealized profit recorded in the Consolidated
Statements of Financial Condition and the related profit reflected in trading
revenues in the Consolidated Statements of Income.
The contract/notional values of the open derivative instrument positions as
of March 31, 1998, December 31, 1997 and December 31, 1996 were as follows:
-78-
<PAGE>
ML JWH STRATEGIC ALLOCATION FUND L.P.
(A DELAWARE LIMITED PARTNERSHIP) AND JOINT VENTURE
-------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS JANUARY 1, 1998 TO MARCH 31, 1998 (UNAUDITED)
AND JANUARY 1, 1997 TO MARCH 31, 1997 (UNAUDITED)
THE YEAR ENDED DECEMBER 31, 1997
AND THE PERIOD FROM JULY 15, 1996
(COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
March 31, 1998
----------------------------
Commitment Commitment
to Purchase to Sell
(Futures, Options (Futures, Options
and Forwards) and Forwards)
------------- -------------
<S> <C> <C>
Interest rates and
stock indices $ 895,592,636 $447,337,403
Commodities 14,092,382 36,834,563
Currencies 137,956,391 287,767,740
Energy 6,065,280 31,046,095
Metals 13,197,771 11,511,355
-------------- ------------
$1,066,904,460 $814,497,156
============== ============
</TABLE>
<TABLE>
<CAPTION>
1997
-----------------------
Commitment Commitment
to Purchase to Sell
(Futures, Options (Futures, Options
and Forwards) and Forwards)
------------- -------------
<S> <C> <C>
Interest rates and
stock indices $926,562,961 $351,175,040
Commodities 21,239,916 27,160,968
Currencies 199,371,182 390,721,620
Energy - 39,106,920
Metals 18,503,375 43,958,106
------------ ----------
$ 1,165,677,434 $ 852,122,654
================ ==============
</TABLE>
<TABLE>
<CAPTION>
1996
----------------------
Commitment Commitment
to Purchase to Sell
(Futures, Options (Futures, Options
and Forwards) and Forwards)
------------- -------------
<S> <C> <C>
Interest rates and
stock indices $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 March 31, 1998, December 31, 1997, expire within one
year.
The contract/notional values of the Joint Venture's open exchange-traded
and non-exchange- traded open derivative instrument positions as of March 31,
1998, December 31, 1997 and December 31, 1996 were as follows:
<TABLE>
<CAPTION>
March 31, 1998
------------------------------
Commitment Commitment
to Purchase to Sell
(Futures, Options (Futures, Options
and Forwards) and Forwards)
--------------- ---------------
<S> <C> <C>
Exchange-Traded $ 927,093,138 $523,411,092
Non-Exchange-Traded 139,811,322 291,086,064
------------
$1,066,904,460 $814,497,156
============== ============
</TABLE>
<TABLE>
<CAPTION>
1997
Commitment Commitment
to Purchase to Sell
(Futures, Options (Futures, Options
and Forwards) and Forwards)
<S> <C> <C>
Exchange-Traded $ 791,818,184 $ 468,259,393
Non-Exchange-Trade 373,859,250 383,863,261
-------------- -------------
$ 1,165,677,434 $ 852,122,654
=============== ==============
</TABLE>
-79-
<PAGE>
ML JWH STRATEGIC ALLOCATION FUND L.P.
(A DELAWARE LIMITED PARTNERSHIP) AND JOINT VENTURE
-------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS JANUARY 1, 1998 TO MARCH 31, 1998 (UNAUDITED)
AND JANUARY 1, 1997 TO MARCH 31, 1997 (UNAUDITED)
THE YEAR ENDED DECEMBER 31, 1997
AND THE PERIOD FROM JULY 15, 1996
(COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
1996
----------------------
Commitment Commitment
to Purchase to Sell
(Futures, Options (Futures, Options
and Forwards) and 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 values, based on contract/notional values, of the
Joint Venture's derivative instrument positions which were open as of the end of
each calendar month for the period ended March 31, 1998 and for the years ended
December 31, 1997 and December 31, 1996 were as follows:
<TABLE>
<CAPTION>
March 31, 1998
------------------------------
Commitment Commitment
to Purchase to Sell
(Futures, Options (Futures, Options
and Forwards) and Forwards)
------------- -------------
<S> <C> <C>
Interest rates and
stock indices $1,063,270,597 $287,680,295
Commodities 16,584,173 36,485,817
Currencies 390,325,862 533,328,897
Energy 3,775,190 33,954,848
Metals 20,409,359 8,318,771
-------------- ------------
$1,494,365,181 $899,768,628
============== ============
</TABLE>
<TABLE>
<CAPTION>
1997
----------------------
Commitment Commitment
to Purchase to Sell
(Futures, Options (Futures, Options
and Forwards) and Forwards)
------------- -------------
<S> <C> <C>
Interest rates and
stock indices $ 1,010,667,321 $ 263,783,626
Commodities 25,901,996 21,055,353
Currencies 395,236,535 484,258,015
Energy 22,168,532 21,307,623
Metals 9,266,297 36,089,734
---------- ----------
$1,463,240,681 $ 826,494,351
============== ==============
</TABLE>
-80-
<PAGE>
ML JWH STRATEGIC ALLOCATION FUND L. P.
(A DELAWARE LIMITED PARTNERSHIP) AND JOINT VENTURE
-------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
FOR THE PERIODS JANUARY 1, 1998 TO MARCH 31, 1998 (UNAUDITED)
AND JANUARY 1, 1997 TO MARCH 31, 1997 (UNAUDITED),
THE YEAR ENDED DECEMBER 31, 1997
AND THE PERIOD FROM JULY 15, 1996
(COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
1996
--------------
COMMITMENT COMMITMENT
TO PURCHASE TO SELL
(FUTURES, OPTIONS (FUTURES, OPTIONS
AND FORWARDS) AND FORWARDS)
------------- -------------
<S> <C> <C>
Interest rates and
stock indices $ 732,721,810 $ 97,200,016
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.
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 profit, if any, included on the Consolidated Statements 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 on the Joint
Venture's open derivative instrument positions as of March 31, 1998, December
31, 1997 and December 31, 1996 were as follows:
<TABLE>
<CAPTION>
MARCH 31, 1998
==============
GROSS NET
UNREALIZED PROFIT UNREALIZED PROFIT
----------------- -----------------
<S> <C> <C>
EXCHANGE-
TRADED $ 4,102,721 $ 1,329,995
NON-EXCHANGE-
TRADED 7,089,251 7,190,712
$11,191,972 $ 8,520,707
</TABLE>
<TABLE>
<CAPTION>
1997
--------------
GROSS NET
UNREALIZED PROFIT UNREALIZED PROFIT
----------------- -----------------
<S> <C> <C>
Exchange-
Traded $14,037,333 $12,316,384
Non-Exchange-
Traded 8,613,088 2,581,905
----------- -----------
$22,650,421 $14,898,289
=========== ===========
</TABLE>
-81-
<PAGE>
ML JWH STRATEGIC ALLOCATION FUND L. P.
(A DELAWARE LIMITED PARTNERSHIP) AND JOINT VENTURE
-------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
FOR THE PERIODS JANUARY 1, 1998 TO MARCH 31, 1998 (UNAUDITED)
AND JANUARY 1, 1997 TO MARCH 31, 1997 (UNAUDITED),
THE YEAR ENDED DECEMBER 31, 1997
AND THE PERIOD FROM JULY 15, 1996
(COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
1996
--------------
COMMITMENT COMMITMENT
TO PURCHASE TO SELL
(FUTURES, OPTIONS (FUTURES, OPTIONS
AND FORWARDS) AND FORWARDS)
------------- -------------
<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 Joint Venture, in its normal course of business, enters into various
contracts with MLF acting as its commodity broker. Pursuant to the brokerage
arrangement with MLF (which includes a master netting arrangement), to the
extent that such trading results in receivables from and payables to MLF, these
receivables and payables are offset and reported as a net receivable or payable.
-82-
<PAGE>
INDEPENDENT AUDITORS' REPORT
MERRILL LYNCH INVESTMENT PARTNERS INC.:
We have audited the accompanying balance sheet of Merrill Lynch Investment
Partners Inc. (the "Company") (formerly, ML Futures Investment Partners Inc.) as
of December 26, 1997. This financial statement is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement 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 balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall balance sheet presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, such balance sheet presents fairly, in all material respects,
the financial position of the Company as of December 26, 1997 in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
February 6, 1998
New York, New York
-83-
<PAGE>
MERRILL LYNCH INVESTMENT PARTNERS INC.
(FORMERLY, ML FUTURES INVESTMENT PARTNERS INC.)
BALANCE SHEETS
MARCH 27, 1998 (UNAUDITED) AND DECEMBER 26, 1997
<TABLE>
<CAPTION>
MARCH 27, DECEMBER 26,
1998 1997
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CASH $ 444,947 $ 78,186
Investments in affiliated partnerships 16,116,956 15,911,448
Due from parent and affiliate 129,888,782 136,766,271
Receivables from affiliated partnerships 4,090,155 4,292,430
Deferred charges 27,347,610 26,005,943
Advances and other receivables 12,116,201 12,410,505
Fixed assets -- net of accumulated depreciation of
$1,274,340 and $1,227,840 471,409 356,102
Other assets 156,000 154,000
------------ ------------
TOTAL ASSETS $190,632,060 $195,974,885
============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Accounts payable and accrued expenses $ 9,337,322 $ 11,194,543
Due to affiliate 4,812,037 23,907,704
Current and deferred income taxes 20,292,148 18,072,851
------------ ------------
Total liabilities $ 34,441,507 53,175,098
------------ ------------
STOCKHOLDER'S EQUITY:
Preferred stock, par value $10.00 per share --
1,000 shares authorized; none outstanding -- --
Common stock, par value $10.00 per share --
1,000 shares authorized; 100 shares outstanding 1,000 1,000
Additional paid-in capital 16,915,000 16,915,000
Retained earnings 139,274,553 125,883,787
------------ ------------
Total stockholder's equity $156,190,553 $142,799,787
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $190,632,060 $195,974,885
============ ============
</TABLE>
PURCHASES OF UNITS WILL
ACQUIRE NO INTEREST IN THIS COMPANY
-84-
<PAGE>
MERRILL LYNCH INVESTMENT PARTNERS INC.
(FORMERLY, ML FUTURES INVESTMENT PARTNERS INC.)
NOTES TO BALANCE SHEETS
MARCH 27, 1998 (UNAUDITED) AND DECEMBER 26, 1997
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
- ------------
Merrill Lynch Investment Partners Inc. (formerly, ML Futures Investment
Partners Inc.) (the "Company") is a wholly-owned subsidiary of Merrill Lynch
Group, Inc., a wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML&Co.").
The Company is registered as a commodity pool operator and a commodity trading
advisor. The Company serves as the sole general partner of 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. (Safety of Equity
Capital; Targeting Overall Return), The SECTOR Strategy Fund(SM) II L.P., The
JWH Global Asset Fund L.P., The SECTOR Strategy Fund(SM) V L.P., ML Global
Horizons L.P., ML/AIS L.P., ML Select Hedge I L.P., The SECTOR Strategy Fund(SM)
VI L.P., ML Principal Protection L.P., ML Chesapeake L.P., ML JWH Strategic
Allocation Fund L.P. (collectively, the "Affiliated Partnerships"). The Company
is also an investor in a joint venture (ML/AIG Asset Management L.L.C.) which is
the general partner of ML/AIG Multi-Strategy Fund L.P. Additionally, the Company
has sponsored or initiated the formation of various offshore entities engaged in
the speculative trading of futures, options and forward contracts.
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.
INVESTMENTS IN AFFILIATED PARTNERSHIPS
- --------------------------------------
The Company's investments in its Affiliated Partnerships are accounted for
under the equity method of accounting.
DEFERRED CHARGES
- ----------------
Deferred charges represent compensation to ML&Co. affiliates for the sale
of fund units to their customers. Such costs are amortized over 12, 24, 36 or
48-month periods.
2. RELATED PARTIES
The Company's officers and directors are also officers of other
subsidiaries of ML&Co. An affiliate bears all of the Company's facilities and
employee costs, for which it is reimbursed by the Company. Another affiliate,
Merrill Lynch Futures Inc., executes and clears the Affiliated Partnerships'
trades, as well as those of various offshore funds sponsored or managed by the
Company, for which it receives a fee, generally based on the net assets of the
Affiliated Partnerships and offshore funds.
PURCHASERS OF UNITS WILL
ACQUIRE NO INTEREST IN THIS COMPANY.
-85-
<PAGE>
MERRILL LYNCH INVESTMENT PARTNERS INC.
(FORMERLY, ML FUTURES INVESTMENT PARTNERS INC.)
NOTES TO BALANCE SHEETS
MARCH 27, 1998 (UNAUDITED) AND DECEMBER 26, 1997
ML&Co. is holder of the Company's excess cash, which is available on demand
to meet current liabilities. ML&Co. credits the Company with interest, at a
floating rate approximating ML&Co.'s average borrowing rate, based on the
Company's average daily balances receivable. At March 27, 1998, approximately
$129,900,000 and at December 26, 1997, approximately $136,800,000 was subject to
this agreement.
At March 27, 1998 and December 26, 1997, the Company had receivables from
Affiliated Partnerships and offshore funds for certain administrative,
management and redemption fees, all of which are expected to be collected within
90 days. Additionally, the Company had receivables from certain Affiliated
Partnerships and offshore funds for organizational and initial offering costs
paid on behalf of such funds which are being reimbursed to the Company over
various time periods (not exceeding three years).
During 1997 and the first quarter of 1998, the Company did not declare or
pay a dividend.
The Company has determined that there may have been a miscalculation in the
interest credited by an affiliate of the Company, to certain Affiliated
Partnerships and related offshore entities of which the Company is the sponsor,
for a period prior to November 1996. Accordingly, ML&Co. is crediting current
and former investors in affected funds, with additional interest amounts
totaling approximately $28,500,000, which includes compound interest.
Approximately $21,300,000 was paid to investors through March 31, 1998 with the
remaining balance of $7,200,000 as a liability on the balance sheet. The Company
has determined that interest has been calculated appropriately since November
1996.
PURCHASERS OF UNITS WILL
ACQUIRE NO INTEREST IN THIS COMPANY.
-86-
<PAGE>
MERRILL LYNCH INVESTMENT PARTNERS INC.
(FORMERLY, ML FUTURES INVESTMENT PARTNERS INC.)
NOTES TO BALANCE SHEETS
MARCH 27, 1998 (UNAUDITED) AND DECEMBER 26, 1997
3. INVESTMENTS IN AFFILIATED PARTNERSHIPS
The limited partnership agreements of the Affiliated Partnerships require
the Company to make certain minimum capital contributions to them. At March 27,
1998 and December 26, 1997, the Company was in compliance with all such
requirements.
At March 27, 1998 and December 26, 1997, the Company's investments in its
Affiliated Partnerships were as follows:
<TABLE>
<CAPTION>
MARCH 27, 1998 DECEMBER 26, 1997
-------------- -----------------
<S> <C> <C>
ML Principal Protection L.P. $ 3,324,942 $ 3,328,707
ML Global Horizons L.P. 1,700,021 1,652,159
The SECTOR Strategy Fund(SM) II L.P 945,373 956,384
John W. Henry & Company/Millburn L.P. 890,735 936,678
The SECTOR Strategy Fund(SM) VI L.P. 814,972 820,070
The JWH Global Asset Fund L.P. 670,128 729,776
The S.E.C.T.O.R. Strategy Fund(SM) L.P. 440,499 465,225
ML Futures Investments L.P. 414,815 402,373
The SECTOR Strategy Fund(SM) V L.P. 379,464 391,026
ML Futures Investments II L.P. 217,580 218,183
The Growth and Guarantee Fund L.P. 440,303 332,114
The Futures Expansion Fund Limited Partnership 143,629 142,826
ML Chesapeake L.P. 89,899 90,570
ML/AIG Asset Management L.L.C. 2,349,068 2,309,068
ML JWH Strategic Allocation Fund L.P. 2,427,038 2,461,884
ML Select Hedge I L.P. 516,485 500,000
ML/AIS L.P. 352,005 174,405
----------- -----------
Total $16,116,956 $15,911,448
=========== ===========
</TABLE>
PURCHASERS OF UNITS WILL
ACQUIRE NO INTEREST IN THIS COMPANY.
-87-
<PAGE>
MERRILL LYNCH INVESTMENT PARTNERS INC.
(FORMERLY, ML FUTURES INVESTMENT PARTNERS INC.)
NOTES TO BALANCE SHEETS
MARCH 27, 1998 (UNAUDITED) AND DECEMBER 26, 1997
The following represents condensed combined financial information of the
Affiliated Partnerships as of March 27, 1998 and December 26, 1997 (in
thousands):
<TABLE>
<CAPTION>
MARCH 27, 1998
--------------
<S> <C>
ASSETS $827,978
LIABILITIES 30,622
PARTNERS' CAPITAL 797,356
--------
TOTAL $827,978
========
</TABLE>
<TABLE>
DECEMBER 26, 1997
-----------------
<S> <C>
Assets $877,131
Liabilities 17,325
Partners' capital 859,806
--------
Total $877,131
========
</TABLE>
The Company's Affiliated Partnerships trade various futures, options and
forward contracts. Risk to such partnerships arises from the possible adverse
changes in the market value of such contracts and the potential inability of
counterparties to perform under the terms of the contracts. The risk to the
Company is represented by the portion of its investments in Affiliated
Partnerships derived from the unrealized gains contained in such Partnerships'
net asset values.
4. INCOME TAXES
The results of operations of the Company are included in the consolidated
Federal and combined state and local income tax return of ML&Co. It is the
policy of ML&Co. to allocate current and deferred taxes associated with such
operating results to its respective subsidiaries in a manner which approximates
the separate company method. ML&Co. and its affiliates use the asset and
liability method in providing income tax on all transactions that have been
recognized in the financial statements.
The Company provides for deferred income taxes resulting from temporary
differences which arise from recording deferred charges in different years for
income tax reporting purposes than for financial reporting purposes. At March
31, 1998 and December 26, 1997, the Company had no deferred tax assets.
Deferred tax liabilities consisted of the following:
<TABLE>
<CAPTION>
MARCH 27, 1998
--------------
<S> <C>
STATE AND LOCAL $ 2,734,903
FEDERAL 8,614,604
-----------
$11,349,507
===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 26, 1997
-----------------
<S> <C>
State and local $ 2,600,736
Federal 8,191,979
-----------
$10,792,715
===========
</TABLE>
As part of the consolidated group, the Company transfers to ML&Co. its
current Federal, state and local tax liabilities. During 1997, the Company
transferred $14,964,135, in current taxes payable to ML&Co. At March 27, 1998
and December 26, 1997, the Company had a current tax payable with ML&Co. of
$8,942,641 AND $7,280,136, respectively.
PURCHASERS OF UNITS WILL
ACQUIRE NO INTEREST IN THIS COMPANY.
-88-
<PAGE>
MERRILL LYNCH INVESTMENT PARTNERS INC.
(FORMERLY, ML FUTURES INVESTMENT PARTNERS INC.)
NOTES TO BALANCE SHEETS
MARCH 27, 1998 (UNAUDITED) AND DECEMBER 26, 1997
5. NET WORTH AGREEMENTS
Pursuant to the limited partnership agreements of the Affiliated
Partnerships, the Company is required to meet certain net worth requirements.
The Company's net worth, as defined, approximated $136,000,000 at March 27, 1998
and $122,600,000 at December 26, 1997, which, in the opinion of the Company's
counsel, met all such requirements.
6. COMMITMENTS
The Company is obligated to pay to affiliates, from its own funds and
without reimbursement by its Affiliated Partnerships, ongoing fees for units in
such partnerships outstanding as of the end of various periods.
-89-
<PAGE>
PERFORMANCE OF OTHER MLIP FUNDS
GENERAL
The following performance information is required by the CFTC. However, the
Fund and its offshore counterpart are the only MLIP Funds which use the JWH
Strategic Allocation Program.
The performance summaries for the other publicly-offered single advisor
funds sponsored by MLIP is included above at page 16.
MLIP deleverages the trading of its "principal protection" funds in order
to protect ML&Co. under its guarantee. Multi-advisor funds without "principal
protection" features typically trade on a fully-leveraged basis. The Fund has
no "principal protection" feature and may trade on either an "upleveraged" or a
"deleveraged" basis.
The "Managed Account Program" is MLIP'S program of privately offered
Funds.
The CFTC defines a "multi-advisor" fund as one in which no advisor is
allocated more than 25% of the fund's assets available for trading. "Selected-
advisor" fund is the term used by MLIP to describe funds with a number of
advisors but in which certain advisors may, at least from time to time, be
allocated in excess of 25% of the fund's trading assets.
Performance prior to January 1, 1993 has not been included in accordance
with CFTC policy.
INTEREST INCOME MAY BE A SIGNIFICANT PORTION OF A COMMODITY POOL'S INCOME
AND CAN RESULT IN PROFITS DESPITE TRADING LOSSES.
___________________
See the definitions of Worst Monthly Decline, Worst Peak-to-Valley
Decline and Monthly Rate of Return at Page 46.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGES
-----
<S> <C>
A. MLIP MANAGED ACCOUNT PROGRAM SINGLE-ADVISOR FUNDS
(WITHOUT "PRINCIPAL PROTECTION" FEATURES).................... 88-90
B. MLIP SELECTED-ADVISOR AND MULTI-ADVISOR FUNDS
(WITHOUT "PRINCIPAL PROTECTION" FEATURES).................... 91-93
C. MLIP SELECTED-ADVISOR AND MULTI-ADVISOR FUNDS
(WITH "PRINCIPAL PROTECTION" FEATURES)....................... 94-95
</TABLE>
-90-
<PAGE>
- --------------------------------------------------------------------------------
MLIP MANAGED ACCOUNT PROGRAM SINGLE ADVISOR POOLS
(WITHOUT "PRINCIPAL PROTECTION" FEATURES)
May 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Worst Monthly Worst
Type of Inception of Aggregate May 31, 1998 Decline Peak-to-Valley Decline
NAME OF FUND Offering Trading Subscriptions Capitalization % Month % Period
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ML/AIS Ltd. Private July 1997 $ 43,698,119 $ 27,117,592 (10.81)% (3/98) (27.24)% (7/97-5/98)
- --------------------------------------------------------------------------------------------------------------------------------
ML/AIS L.P. Private July 1997 $ 42,448,690 $ 31,846,204 (10.73)% (3/98) ((27.14)% (7/97-5/98)
- --------------------------------------------------------------------------------------------------------------------------------
ML Global Investments Fund
Ltd. Private April 1997 $ 61,906,000 $ 74,707,280 (3.36)% (2/98) (3.56)% (1/98-2/98)
- --------------------------------------------------------------------------------------------------------------------------------
ML/APAM Ltd. Private April 1997 $ 85,421,080 $ 66,437,862 (3.56)% (3/98) (6.25)% (1/98-5/98)
- --------------------------------------------------------------------------------------------------------------------------------
ML Chesapeake L.P. Private April 1996 $ 9,606,574 $ 8,084,223 (7.86)% (8/97) (7.86)% (8/97)
- --------------------------------------------------------------------------------------------------------------------------------
ML Strategic Portfolio Fund Private July 1995 $ 55,530,000 dissolved as (1.58)% (6/97) (1.58)% ( 6/97)
Ltd. of 2/28/98
- --------------------------------------------------------------------------------------------------------------------------------
The JWH Global Asset Fund Private June 1995 $195,104,782 $131,612,731 (8.17)% (5/97) (16.25)% (1/98-4/98)
Ltd. - Series B
- --------------------------------------------------------------------------------------------------------------------------------
dissolved as
The RXR Defensive Equity of
Alternative Account L.P.I. Private Nov. 1993 $ 45,455,000 5/31/96 (17.91)% (2/96) (42.98)%(1/94-12/94)
- --------------------------------------------------------------------------------------------------------------------------------
ML Chesapeake Ltd. Private Aug. 1993 $ 65,928,644 $ 23,022,518 (7.73)% (8/97) (8.58)% (5/96-7/96)
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Supplemental
Information
Regarding
Cumulative Rate
of Return
Jan. 1, 1993 1998 1997 1996 1995 1994 1993
(or inception) Compound Compound Compound Compound Compound Compound
to Rate of Annual Annual Annual Annual Annual
May 31, 1998 Return Rate of Rate of Rate of Rate of Rate of
NAME OF FUND (or dissolution) (5 months) Return Return Return Return Return
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ML/AIS Ltd. (27.24)% (23.09) (5.40)% N/A N/A N/A N/A
% (6 mos.)
- -----------------------------------------------------------------------------------------------------------------------------------
ML/AIS L.P. (27.14)% (22.72) (5.72) N/A N/A N/A N/A
% %
(6 mos.)
- -----------------------------------------------------------------------------------------------------------------------------------
ML Global Investments Fund 20.49% 7.33% 12.26% N/A N/A N/A N/A
Ltd. (9 mos.)
Composite* Composite* Composite*
- -----------------------------------------------------------------------------------------------------------------------------------
ML/APAM Ltd. (0.14)% (6.25) 3.58% N/A N/A N/A N/A
% (8 mos.)
Composite* Composite* Composite*
- ------------------------------------------------------------------------------------------------------------------------------------
ML Chesapeake L.P. 27.17% 9.40% 9.44% 6.23% N/A N/A N/A
(9 mos.)
- -----------------------------------------------------------------------------------------------------------------------------------
ML Strategic Portfolio Fund 93.31% 1.31% 14.66% 38.69% 19.99% N/A N/A
Ltd. (2 mos.) (6 mos.)
- -----------------------------------------------------------------------------------------------------------------------------------
The JWH Global Asset Fund 31.73% (13.68)% 20.50% 27.64% (0.78)% N/A N/A
Ltd. - Series B (7 mos.)
- -----------------------------------------------------------------------------------------------------------------------------------
The RXR Defensive Equity (1.61)% N/A N/A (18.46)% 103.03% (42.98)% 4.23%
Alternative Account L.P.I. (5 mos.) (2 mos)
- ------------------------------------------------------------------------------------------------------------------------------------
ML Chesapeake Ltd. 69.41% 8.99% 8.71% 9.32% 8.29% 16.45% 3.72%
(5 mos)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The composite return of the fund, not the performance of any individual series
of units or shares.
-91-
<PAGE>
MLIP MANAGED ACCOUNT PROGRAM SINGLE ADVISOR POOLS
(WITHOUT "PRINCIPAL PROTECTION" FEATURES)
MAY 31, 1998
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Worst Monthly Worst
Type of Inception of Aggregate May 31, 1998 Decline Peak-to-Valley Decline
NAME OF FUND Offering of Trading Subscription Capitalization % Month % Period
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ML Hyman Beck Ltd. Private Aug.1993 $ 28,963,729 7,006,175 (9.04)% (2/96) (19.02)% (7/95-2/96)
- ------------------------------------------------------------------------------------------------------------------------
dissolved as
ML Mountain Partners Ltd. Private July 1993 $ 29,571,566 of 12/22/94 (17.17)% (2/94) (60.57)% (8/93-8/94)
- ------------------------------------------------------------------------------------------------------------------------
The JWH Global Asset Fund,
L.P. Private Aug. 1991 $ 96,867,360 $ 44,415,260 (8.03)% (4/98) (15.50)% (1/98-4/98)
- ------------------------------------------------------------------------------------------------------------------------
The JWH Global Asset Fund
Ltd. - Series A Private June 1990 $ 97,112,854 $ 42,059,382 (6.53)% (2/96) (16.91)% (7/94-1/95)
- ------------------------------------------------------------------------------------------------------------------------
The Moore Capital Fund II
Ltd. Private Sep. 1992 Ecu 7,763,565 Ecu 1,738,227 (8.10)% (11/94) (26.79)% (2/94-2/95)
- ------------------------------------------------------------------------------------------------------------------------
The Moore Global dissolved as
Investment Fund Ltd. Private Sep. 1990 $ 77,853,580 of 5/31/95 (7.30)% (2/94) (23.05)% (2/94-2/95)
- ------------------------------------------------------------------------------------------------------------------------
The Leyden Investment Fund dissolved as
Ltd. Private June 1991 $ 6,708,424 of 10/31/96 (17.91)% (2/96) (28.53)% (2/96-9/96)
- ------------------------------------------------------------------------------------------------------------------------
The Leyden Investment Fund dissolved as
L.P. Private June 1991 $ 30,637,006 of 12/31/94 (19.68)% (3/94) (28.91)% (9/93-12/94)
- ------------------------------------------------------------------------------------------------------------------------
ML Liberty Management Fund
Ltd. Private Oct. 1992 $ 20,495,843 $ 1,821,708 (5.17)% (7/94) (10.25)% (22/92-6/93)
- ------------------------------------------------------------------------------------------------------------------------
ML North Cove Fund Ltd. Private Jan. 1993 $ 98,273,603 $ 37,593,934 (6.22)% (2/94) (23.99)% (2/94-2/95)
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Supplemental
Information
Regarding
Cumulative Rate
of Return
Jan. 1, 1993 1998 1997 1996 1995 1994 1993
(or inception) Compound Compound Compound Compound Compound Compound
to Rate of Annual Annual Annual Annual Annual
May 31, 1998 Return Rate of Rate of Rate of Rate of Rate of
(or dissolution) (5 months) Return Return Return Return Return
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ML Hyman Beck Ltd. 9.74 % (7.92)% (4.59)% 2.54% 6.79% (9.31)% (0.88) %
(5 mos.)
- ----------------------------------------------------------------------------------------------------------------------------------
ML Mountain Partners Ltd. (53.27)% N/A N/A N/A N/A (32.20)% (31.07) %
(6 mos.)
- ----------------------------------------------------------------------------------------------------------------------------------
The JWH Global Asset Fund,
L.P. 116.79 % (12.92)% 14.74 % 29.83% 39.62% (4.86)% 25.81 %
- ----------------------------------------------------------------------------------------------------------------------------------
The JWH Global Asset Fund
Ltd. - Series A 100.26 % (11.60)% 7.13% 28.14% 38.19% (9.24)% 25.81 %
- ----------------------------------------------------------------------------------------------------------------------------------
The Moore Capital Fund II
Ltd. 160.64 % 15.26% 27.15% 24.95% 21.27% (22.58)% 51.60 %
- ----------------------------------------------------------------------------------------------------------------------------------
The Moore Global
Investment Fund Ltd. 18.08 % N/A N/A N/A 1.65% (17.73)% 44.20 %
(5 mos.)
- ----------------------------------------------------------------------------------------------------------------------------------
The Leyden Investment Fund
Ltd. (4.00)% N/A N/A (20.98)% 24.93% (14.68)% 13.98 %
(10 mos.)
- ----------------------------------------------------------------------------------------------------------------------------------
The Leyden Investment Fund
L.P. (17.14)% N/A N/A N/A N/A (27.30)% 13.98 %
- ----------------------------------------------------------------------------------------------------------------------------------
ML Liberty Management Fund
Ltd. 56.55 % 8.87% 18.01% 5.55% 15.70% 4.15% (4.20) %
- ----------------------------------------------------------------------------------------------------------------------------------
ML North Cove Fund Ltd. 130.63 % 15.93% 27.67% 27.70% 23.09% (17.07)% 19.54 %
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-92-
<PAGE>
- --------------------------------------------------------------------------------
MLIP MANAGED ACCOUNT PROGRAM SINGLE ADVISOR POOLS
(WITHOUT "PRINCIPAL PROTECTION" FEATURES)
May 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Worst Monthly Worst
Type of Inception of Aggregate May 31, 1998 Decline Peak-to-Valley Decline
NAME OF FUND Offering Trading Subscriptions Capitalization % Month % Period
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ML Harmon Cove Fund Ltd.
Private Jan. 1993 $117,766,453 $ 69,273,539 (2.54)% (3/93) (2.54)% (3/93)
- -----------------------------------------------------------------------------------------------------------------------------
Private Aug. 1991 $ 1,870,286 dissolved as (7.75)% (1/94) (11.18)% (4/96-7/96)
ML/Essex Fund Ltd. of 4/30/97
- -----------------------------------------------------------------------------------------------------------------------------
InterRate Limited Private Dec. 1988 $ 7,429,200 dissolved as (1.88)% (10/93) (17.91)% (9/92-11/93)
of 1/31/94
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Supplemental
Information
Regarding
Cumulative Rate
of Return
Jan 1, 1993 1998 1997 1996 1995 1994 1993
(or inception) Compound Compound Compound Compound Compound Compound
in Rate of Annual Annual Annual Annual Annual
May 31, 1998 Return Rate of Rate of Rate of Rate of Rate of
NAME OF FUND (or dissolution) (5 Months) Return Return Return Return Return
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ML Harmon Cove Fund Ltd.
88.13% 5.56% 12.23% 14.45% 6.08% 17.35% 11.46%
- -----------------------------------------------------------------------------------------------------------------------------
98.36% N/A 18.02% 17.46% 11.60% (6.54)% 37.19%
ML/Essex Fund Ltd. (4
months)
- -----------------------------------------------------------------------------------------------------------------------------
InterRate Limited (6.51)% N/A N/A N/A 0.55% (1 (7.02)%
month)
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
THE UNITS COULD INCUR SUBSTANTIAL LOSSES. THE MLIP POOLS INCLUDED IN THE
FOREGOING TABLE ARE MATERIALLY DIFFERENT INVESTMENTS THAN THE FUND.
-93-
<PAGE>
- --------------------------------------------------------------------------------
MLIP SELECTED-ADVISOR AND MULTI-ADVISOR FUNDS
(WITHOUT "PRINCIPAL PROTECTION" FEATURES)
May 31, 1998
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Worst
Worst Monthly Peak-to-Valley
Type of Increption Aggregate May 31, 1998 Decline Decline
NAME OF FUND Offering of Trading Subscriptions Capitalization % Month % Period
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ML Futures
Investments II L.P. Public May 1988 $269,809,800 $ 11,552,266 (9.93)% (7/96) (16.76)% (5/96-7/96)
- --------------------------------------------------------------------------------------------------------------------------------
ML Futures
Investments L. P. Public Mar. 1989 $ 86,500,700 $ 22,094,734 (5.43)% (4/98) (10.85)% (6/95-7/96)
- --------------------------------------------------------------------------------------------------------------------------------
The John W. Henry &
Co./Millburn L.P. Public Jan. 1990 $ 18,182,000 $ 12,584,958 (9.58)% (2/96) (19.33)% (7/94-1/95)
(Series A Units)
- --------------------------------------------------------------------------------------------------------------------------------
The John W. Henry &
Co./Millburn L.P. Public Jan. 1991 $ 50,636,000 $ 27,309,521 (9.41)% (2/96) (19.32)% (7/94-1/95)
(Series B Units)
- --------------------------------------------------------------------------------------------------------------------------------
The John W. Henry &
Co./Millburn L. P. Public Jan. 1992 $ 40,000,000 $ 14,252,417 (9.54)% (2/96) (19.20)% (7/94-1/95)
(Series C Units)
- --------------------------------------------------------------------------------------------------------------------------------
The SECTOR Strategy
Fund IV L.P. Public July 1992 $ 13,353,600 dissolved as (7.04)% (2/96) (11.45)% (2/96-7/96)
(Series B Units) of 6/30/97
- --------------------------------------------------------------------------------------------------------------------------------
The SECTOR Strategy
Fund International Private July 1992 $ 9,131,000 dissolved as (7.32)% (2/96) (10.79)% (1/94-1/95)
IV Ltd. (Series of 6/30/97
B Shares)
- --------------------------------------------------------------------------------------------------------------------------------
ML Global Horizons
L.P. Public Jan. 1994 $174,343,595 $127,327,279 (6.42)% (2/96) (6.42)% (2/96)
- --------------------------------------------------------------------------------------------------------------------------------
ML Global Horizons
Ltd. Private Jan. 1994 $170,520,490 $ 86,799,796 (6.29)% (2/96) (6.29)% (2/96)
(Series A)
- --------------------------------------------------------------------------------------------------------------------------------
ML Global Horizons
Ltd. Private Sept. 1994 $ 3,708,415 $ 2,242,435 (5.66)% (2/96) (6.05)% (8/97-10/97)
(Series B)
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Supplemental
Information
Regarding
Cumulative
Rate of Return 1998 1997 1996 1995 1994 1993
Jan. 1, 1993 Compound Compound Compound Compound Compound Compound
(or inception) to Rate of Annual Annual Annual Annual Annual
May 31, 1998 Return Rate of Rate of Rate of Rate of Rate of
NAME OF FUND (or dissolution) (5 months) Return Return Return Return Return
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ML Futures
Investments II L.P. 43.47% (2.09)% 4.78% 2.05% 17.07% (1.36)% 18.67%
- --------------------------------------------------------------------------------------------------------------------------------
ML Futures
Investments L. P. 53.44% (1.09)% 9.22% 5.87% 11.80% 2.95% 16.56%
- --------------------------------------------------------------------------------------------------------------------------------
The John W. Henry &
Co./Millburn L.P. 81.70% (9.53)% 12.49% 20.09% 34.89% (8.64)% 20.64%
(Series A Units)
- --------------------------------------------------------------------------------------------------------------------------------
The John W. Henry &
Co./Millburn L.P. 80.10% (9.52)% 12.46% 20.03% 34.49% (8.43)% 19.74%
(Series B Units)
- --------------------------------------------------------------------------------------------------------------------------------
The John W. Henry &
Co./Millburn L. P. 73.75% (9.52)% 12.47% 19.54% 35.08% (7.88)% 14.78%
(Series C Units)
- --------------------------------------------------------------------------------------------------------------------------------
The SECTOR Strategy
Fund IV L.P. 40.97% N/A 1.09% 12.50% 12.01% (7.44)% 19.56%
(Series B Units) (6 mos.)
- --------------------------------------------------------------------------------------------------------------------------------
The SECTOR Strategy
Fund International 33.84% N/A 0.84% 6.97% 14.51% (9.37)% 19.56%
IV Ltd. (Series (6 mos.)
B Shares)
- --------------------------------------------------------------------------------------------------------------------------------
ML Global Horizons
L.P. 48.81% (3.27)% 7.61% 14.96% 19.48% 4.08% N/A
- --------------------------------------------------------------------------------------------------------------------------------
ML Global Horizons
Ltd. 48.26% (3.12)% 6.21% 15.51% 19.77% 4.15% N/A
(Series A)
- --------------------------------------------------------------------------------------------------------------------------------
ML Global Horizons
Ltd. 52.25% (3.11)% 6.71% 15.63% 22.62% 3.86% N/A
(Series B) (4 mos.)
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
THE UNITS COULD INCUR SUBSTANTIAL LOSSES. THE MLIP POOLS INCLUDED IN THE
FOREGOING TABLE ARE MATERIALLY DIFFERENT INVESTMENTS THAN THE FUND.
94
<PAGE>
- -------------------------------------------------------------------------------
MLIP SELECTED-ADVISOR AND MULTI-ADVISOR FUNDS
(WITHOUT "PRINCIPAL PROTECTION" FEATURES)
May 31, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Supplemental
Information
Regarding
Cumulative
Rate of Return
Worst Jan. 1, 1993
Worst Monthly Peak-to-Valley (or inception) to
Type of Inception Aggregate May 31, 1998 Decline Decline May 31, 1998
NAME OF FUND Offering of Trading Subscriptions Capitalization % Month % Period (or dissolution)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
The JLI Trading Co. Private Mar. 1995 $14,300,136 dissolved as of (6.93)% (2/96) (11.18)%(4/97-10/97) 22.73%
Fund 2/28/98
- ----------------------------------------------------------------------------------------------------------------------------------
Permal F/X, Financials Private July 1992 $106,495,710 MLIP resigned (5.67)% (2/94) (12.24)%(2/94-4/94) 28.67%
& Futures Ltd. as trading
manager as of
3/31/96
- ----------------------------------------------------------------------------------------------------------------------------------
ML Japan Investment Private Aug. 1993 1,050,000,000 dissolved as of (3.52)% (7/94) (7.32)% (1/94-2/95) (2.80)%
Partners Ltd. (Yen) 6/30/96
- ----------------------------------------------------------------------------------------------------------------------------------
ML Futures Private Mar. 1989 $ 68,202,237 dissolved as of (6.17)% (2/94) (11.10)% (1/94-2/94) 10.90%
Investments Ltd. 8/31/94
- ----------------------------------------------------------------------------------------------------------------------------------
Currency Investment Private April 1991 $ 55,114,566 dissolved as of (2.39)% (7/94) (16.10)% (7/91-5/94) (6.03)%
Partners Ltd. 8/31/94
- ----------------------------------------------------------------------------------------------------------------------------------
The Managed Futures Private May 1991 $ 11,090,759 dissolved as of (1.00)% (3/93) (1.00)% (3/93) 21.53%
Trust Fund L.P. 9/24/93
- ----------------------------------------------------------------------------------------------------------------------------------
Commodity Trading Private July 1991 $ 25,797,626 dissolved as of (6.47)% (2/94) (18.26)%(1/92-2/94) 7.77%
Company, Ltd. 10/31/94
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993
Compound Compound Compound Compound Compound Compound
Rate of Annual Annual Annual Annual Annual
Return Rate of Rate of Rate of Rate of Rate of
NAME OF FUND 5 months) Return Return Return Return Return
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
The JLI Trading Co. 3.99% 4.08% 10.68% 2.45% N/A N/A
Fund (2 mos.) (10 mos.)
- ---------------------------------------------------------------------------------------------------------
Permal F/X, Financials N/A N/A 6.63% 14.78% (5.33)% 11.05%
& Futures Ltd. (3 mos.)
- ---------------------------------------------------------------------------------------------------------
ML Japan Investment N/A N/A (1.69)% 3.95% (5.95)% 1.13%
Partners Ltd. (6 mos.) (5 mos.)
- ---------------------------------------------------------------------------------------------------------
ML Futures N/A N/A N/A N/A (3.78)% 15.26%
Investments Ltd. (8 mos.)
- ---------------------------------------------------------------------------------------------------------
Currency Investment N/A N/A N/A N/A (4.05)% (2.06)%
Partners Ltd. (8 mos.)
- ---------------------------------------------------------------------------------------------------------
The Managed Futures N/A N/A N/A N/A N/A 21.53%
Trust Fund L.P. (8-2/3 mos.)
- ---------------------------------------------------------------------------------------------------------
Commodity Trading N/A N/A N/A N/A 6.21% 14.91%
Company, Ltd. (10 mos.)
- ---------------------------------------------------------------------------------------------------------
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
THE UNITS COULD INCUR SUBSTANTIAL LOSSES, THE MLIP POOLS INCLUDED IN THE
FOREGOING TABLE ARE MATERIALLY DIFFERENT INVESTMENTS THAT THE FUND.
<PAGE>
- --------------------------------------------------------------------------------
MLIP SELECTED-ADVISOR AND MULTI-ADVISOR FUNDS
(WITHOUT "PRINCIPAL PROTECTION" FEATURES)
MAY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Worst Monthly Worst
Type of Inception of Aggregate May 31, 1998 Decline Peak-to-Valley Decline
NAME OF FUND Offering Trading Subscriptions Capitalization % Month % Period
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ML Institutional dissolved as
Partners L.P. Public Feb. 1992 $ 57,312,700 of 12/31/94 (3.58)% (1/94) (8.78)% (10/93-4/94)
- ------------------------------------------------------------------------------------------------------------------------------
dissolved as
Daiwa Hudson River of
Fund Private Feb. 1994 $ 7,044,701 2/29/96 (4.72)% (3/94) (17.21)% (2/94-1/95)
- ------------------------------------------------------------------------------------------------------------------------------
ML/AIG Multi-Strategy
Fund Ltd. Private July 1996 $107,827,571 $100,652,179 (1.43)% (10/97) (1.43)% (10/97)
- ------------------------------------------------------------------------------------------------------------------------------
ML/AIG Multi-Strategy
Fund L.P. Private Jan. 1997 $ 81,850,000 $87,833,293 (0.89)% (10/97) (0.89)% (10/97)
- ------------------------------------------------------------------------------------------------------------------------------
ML Select Hedge I L.P. Private **Jan. 1998 $ 44,610,000 $ 77,702,380 __ -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
ML Select Hedge D L.P. Private **April $ 55,965,300 $ 56,534,666 -- -- -- --
1998
- ------------------------------------------------------------------------------------------------------------------------------
ML Select Hedge 1 Ltd. Private **April $ 63,959,800 $ 63,945,724 (0.01)% 4/98 (0.01)% 4/98
1998
- ------------------------------------------------------------------------------------------------------------------------------
** Note: Select Hedge D L.P and ML Select Hedge 1 Ltd. trading information is available only through April 1998. ML Select
Hedge I L.P. trading information is through April 1998.
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Cumulative
Rate of Return 1998 1997 1996 1995 1994 1993
Jan. 1, 1993 (or Compound Compound Compound Compound Compound Compound
Inception) - Rate of Rate of Annual Annual Annual Annual
May, 31 , 1998 Return Annual Rate of Rate of Rate of Rate of
NAME OF FUND (or dissolution) (5 months) Return Return Return Return Return
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
3.28% (4.06)% 7.65%
ML Institutional (composite) (composite)
Partners L.P. (composite)* N/A N/A N/A N/A * *
- ------------------------------------------------------------------------------------------------------------------------------
Daiwa Hudson River 0.26% (16.22)%
Fund 0.65% N/A N/A (2 mos.) 19.82% (11 mos.) N/A
- ------------------------------------------------------------------------------------------------------------------------------
ML/AIG Multi-Strategy 4.74%
Fund Ltd. 18.92% 2.15% 11.15% (6 mos.) N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------
ML/AIG Multi-Strategy
Fund L.P. 19.59% 2.65% 16.41% N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------
ML Select Hedge I L.P. 8.42% 8.42% N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------
ML Select Hedge D L.P. 1.55% 1.55% N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------
ML Select Hedge I Ltd. (0.01)% (0.01)% N/A N/A N/A N/A N/A
Composite* Composite*
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The composite return of the fund, not the performance of any individual
series of units or shares.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
THE UNITS COULD INCUR SUBSTANTIAL LOSSES. THE MLIP POOLS INCLUDED IN THE
FOREGOING TABLE ARE MATERIALLY DIFFERENT INVESTMENTS THAN THE FUND.
-96-
<PAGE>
- --------------------------------------------------------------------------------
MLIP SELECTED-ADVISOR AND MULTI-ADVISOR FUNDS
(WITH "PRINCIPAL PROTECTION" FEATURES)
May 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Inception Worst Monthly Worst
Type of of Aggregate May 31, 1998 Decline Peak-to-Valley Decline
NAME OF FUND Offering Trading Subscriptions Capitalization % Month % Period
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ML Principal Public Oct. $162,582,775 $102,389,671 (3.70)%(2/96) (3.70)% (2/96)
Protection L.P. 1994
- ---------------------------------------------------------------------------------------------------------------------------------
ML Principal Private Oct. $1,097,219,508 $734,912,704 (3.72)%(2/96) (3.72)% (2/96)
Protection Plus Ltd 1994
- ---------------------------------------------------------------------------------------------------------------------------------
The S.E.C.T.O.R. Public July $125,853,001 $21,164,019 (6.13)%(8/97) (12.70)% (3/97-
Strategy Fund L.P. 1990 4/98)
- ---------------------------------------------------------------------------------------------------------------------------------
The SECTOR Public Dec. $136,410,000 $11,693,726 (4.73)%(2/96) (15.93)%(8/93-1/95)
Strategy Fund II 1990
L.P. (SECTOR II
Units)
- ---------------------------------------------------------------------------------------------------------------------------------
The SECTOR Private Dec. $55,181,600 dissolved as of (4.56)%(8/94) (16.49)%(8/93-1/95)
Strategy Fund 1990 12/31/95
International II Ltd.
- ---------------------------------------------------------------------------------------------------------------------------------
The SECTOR Public July $194,005,000 $23,776,145 (8.64)%(2/96) (9.30)%(2/96-3/96)
Strategy Fund II 1991
L.P. (SECTOR III
Units)
- ---------------------------------------------------------------------------------------------------------------------------------
The SECTOR Private July $85,701,800 $4,111,259 (4.41)%(2/96) (6.77)%(4/95-9/95)
Strategy Fund 1991
International II Ltd.
(SECTOR III Shares)
- ---------------------------------------------------------------------------------------------------------------------------------
The SECTOR Public July $75,646,400 dissolved as (6.41)%(2/96) (10.45)%(2/96-7/96)
Strategy Fund IV 1992 of 6/30/97
L.P. (Series A Units)
- ---------------------------------------------------------------------------------------------------------------------------------
The SECTOR Private July $55,189,400 dissolved as (6.22)%(2/96) (8.30)%(1/94-1/95)
Strategy Fund 1992 of 6/30/97
International IV Ltd.
(Series A Shares)
- ---------------------------------------------------------------------------------------------------------------------------------
The SECTOR Public Jan. $137,500,000 $10,126,817 (7.51)%(2/96) (10.14)%(2/96-6/96)
Strategy Fund V 1993
L.P.
- ---------------------------------------------------------------------------------------------------------------------------------
SECTOR Private Sept. $163,806,100 $3,906,651 (4.60)%(2/94) (10.42)%(9/93-2/94)
International Limited 1993
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Cumulative
Rate of
Return
Jan 1, 1993
(or Inception) 1998 1997 1996 1995 1994 1993
to Compound Compound Compound Compound Compound Compound
May, 1998 Rate of Annual Annual Annual Annual Annual
(or Return Rate of Rate of Rate of Rate of Rate of
NAME OF FUND dissolution (5 months) Return Return Return Return Return
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ML Principal 29.22% (0.92)% 6.01% 9.36% 10.55% 1.76%
Protection L.P. (composite)* (composite)* (composite)* (composite)* (composite)* (22 mos.) N/A
- ---------------------------------------------------------------------------------------------------------------------------------
ML Principal 30.03% (1.60)% 6.54% 10.01% 11.10% 1.48%
Protection Plus Ltd (composite)* (composite)* (composite)* (composite)* (composite)* (22 mos.) N/A
- ---------------------------------------------------------------------------------------------------------------------------------
The S.E.C.T.O.R. 30.51% (10.10)% 0.03% 12.40% 19.25% (9.29)% 19.36%
Strategy Fund L.P.
- ---------------------------------------------------------------------------------------------------------------------------------
The SECTOR 26.29% (6.27)% 9.02% 14.60% 13.50% (9.93)% 5.49%
Strategy Fund II
L.P. (SECTOR II
Units)
- ---------------------------------------------------------------------------------------------------------------------------------
The SECTOR 15.60% N/A N/A N/A 21.27% (9.64)% 5.49%
Strategy Fund
International II Ltd.
- ---------------------------------------------------------------------------------------------------------------------------------
The SECTOR 47.42% (3.09)% 12.98% 9.74% 9.30% (3.22)% 15.99%
Strategy Fund II
L.P. (SECTOR III
Units)
- ---------------------------------------------------------------------------------------------------------------------------------
* The composite return of the fund, not the performance of any individual series of units of shares.
The SECTOR 38.76% (2.37)% 3.71% 14.01% 2.84% 0.77% 15.99%
Strategy Fund
International II Ltd.
(SECTOR III Shares)
- ---------------------------------------------------------------------------------------------------------------------------------
The SECTOR 30.61% N/A 1.16% 10.02% 9.78% (5.73)% 13.40%
Strategy Fund IV
L.P. (Series A Units)
- ---------------------------------------------------------------------------------------------------------------------------------
The SECTOR 26.57% N/A 0.46% 7.06% 11.84% (7.21)% 13.40%
Strategy Fund
International IV Ltd.
(Series A Shares)
- ---------------------------------------------------------------------------------------------------------------------------------
The SECTOR 24.00% (6.20)% 11.00% 3.11% 14.22% (3.68)% 4.99%
Strategy Fund V
L.P.
- ---------------------------------------------------------------------------------------------------------------------------------
SECTOR 8.72% (0.85)% 4.80% 4.63% 7.65% (3.99)% (3.25)%
International Limited (3-2/3
mos.)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
THE UNITS COULD INCUR SUBSTANTIAL LOSSES. THE MLIP POOLS INCLUDED IN THE
FOREGOING TABLE ARE MATERIALLY DIFFERENT INVESTMENTS THAN THE FUND.
97
<PAGE>
MLIP SELECTED-ADVISOR AND MULTI-ADVISOR FUNDS
(WITH "PRINCIPAL PROTECTION" FEATURES)
MAY 31, 1998
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Inception Worst Monthly Worst
Type of of Aggregate MAY 31, 1998 Decline Peak-to-Valley
NAME OF FUND Offering Trading Subscriptions Capitalization % Month % Period
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
The Sector Strategy
Fund Private Jan. 1993 $ 81,252,600 dissolved as of (3.53)% (8/97) (8.00)% (6/95-10/95)
International V Ltd. 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
Yen Linked ML PPP Private Oct. 1995 (Yen) (Yen) (2.12)% (7/96) (3.54)% (3/97-4/98)
Ltd. 37,997,300,000 33,627,991,930
- ------------------------------------------------------------------------------------------------------------------------------------
MLIP Management Private Nov. 1997 DM132,553,500 DM132,731,771 (1.52)% (4/98) (1.74)% (3/98-4/98)
Portfolio DM-PPP
- ------------------------------------------------------------------------------------------------------------------------------------
The SECTOR Strategy Public Sept. 1993 $ 108,693,900 $ 21,880,177 (5.89)% (7/96) (8.97)% (5/96-7/96)
Fund VI L.P.
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Cumulative
Rate of
Return
Jan. 1, 1993 1998 1997 1996 1995 1994 1993
(or Inception) Compound Compound Compound Compound Compound Compound
- Rate of Annual Annual Annual Annual Annual
May, 1998 (or Return Rate of Rate of Rate of Rate of Rate of
NAME OF FUND Dissolution) (5 months) Return Return Return Return Return
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
The SECTOR Strategy
Fund 38.31% N/A 9.39% 12.87% 11.11% (3.94)% 4.99%
International V Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
Yen Linked ML 1.86% (1.75)% 0.71% 2.78% 0.16% N/A N/A
PPP Ltd. (composite)* (composite)* (composite)* (composite)* (3 mos.)
(composite)*
- ------------------------------------------------------------------------------------------------------------------------------------
MLIP Management 0.99% 0.37% 0.62% N/A N/A N/A N/A
DM-PPP Portfolio (composite)* (composite)* (2 mos.)
(composite)*
- ------------------------------------------------------------------------------------------------------------------------------------
The SECTOR Strategy 14.82% (2.41)% 8.08% 4.62% 6.72% (0.80)% (1.72)%
Fund VI L.P. (3-% mos.)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
THE UNITS COULD INCUR SUBSTANTIAL LOSSES, THE MLIP POOLS INCLUDED IN THE
FOREGOING TABLE ARE MATERIALLY DIFFERENT INVESTMENTS THAN THE FUND.
* The composite return of the fund, not the performance of any individual
series of units of shares.
98
<PAGE>
PART TWO
ML JWH STRATEGIC ALLOCATION FUND L.P.
2,000,000
LIMITED PARTNERSHIP UNITS
_________________________
THIS IS A SPECULATIVE, LEVERAGED INVESTMENT WHICH INVOLVES THE RISK OF LOSS.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
SEE "THE RISKS YOU FACE" BEGINNING AT PAGE 7 IN PART ONE.
-----------------------------------------------------------------------
THIS PROSPECTUS IS IN TWO PARTS. THESE PARTS ARE BOUND TOGETHER AND
BOTH CONTAIN IMPORTANT INFORMATION.
-----------------------------------------------------------------------
MERRILL LYNCH, PIERCE, FENNER MERRILL LYNCH
& SMITH INCORPORATED INVESTMENT PARTNERS INC.
SELLING AGENT GENERAL PARTNER
_________________________
<PAGE>
FUTURES MARKETS AND TRADING METHODS
THE FUTURES AND FORWARD MARKETS
Futures and Forward Contracts
Futures contracts in the United States can only be traded on approved
exchanges and call for the future delivery of various commodities. These
contractual obligations may be satisfied either by taking or making physical
delivery or by making an offsetting sale or purchase of a futures contract on
the same exchange.
Forward currency contracts are traded off-exchange through banks or
dealers. In such instances, the bank or dealer generally acts as principal in
the transaction and charges "bid-ask" spreads.
Futures and forward trading is a "zero-sum," risk transfer economic
activity. For every gain there is an equal and offsetting loss.
Hedgers and Speculators
The two broad classifications of persons who trade futures are "hedgers"
and "speculators." Hedging is designed to minimize the losses that may occur
because of price changes, for example, between the time a merchandiser contracts
to sell a commodity and the time of delivery. The futures and forward markets
enable the hedger to shift the risk of price changes to the speculator. The
speculator risks capital with the hope of making profits from such changes.
Speculators, such as the Fund, rarely take delivery of the physical commodity
but rather close out their futures positions through offsetting futures
contracts.
Exchanges; Position and Daily Limits; Margins
Each of the commodity exchanges in the United States has an associated
"clearinghouse." Once trades made between members of an exchange have been
cleared, each clearing broker looks only to the clearinghouse for all payments
in respect of such broker's open positions. The clearinghouse "guarantee" of
performance on open positions does not run to customers. If a member firm goes
bankrupt, customers could lose money.
JWH trades for the Fund on a number of foreign commodity exchanges.
Foreign commodity exchanges differ in certain respects from their United States
counterparts and are not regulated by any United States agency.
The CFTC and the United States exchanges have established "speculative
position limits" on the maximum positions that JWH may hold or control in
futures contracts on certain commodities.
Most United States exchanges limit the maximum change in futures prices
during any single trading day. Once the "daily limit" has been reached, it
becomes very difficult to execute trades. Because these limits apply on a day-
to-day basis, they do not limit ultimate losses, but may reduce or eliminate
liquidity.
When a position is established, "initial margin" is deposited. On most
exchanges, at the close of each trading day "variation margin," representing the
unrealized gain or loss on the open positions, is either credited to or debited
from a trader's account. If "variation margin" payments cause a trader's
"initial margin" to fall below "maintenance margin" levels, a "margin call" is
made, requiring the trader to deposit additional margin or have his position
closed out.
TRADING METHODS
Managed futures strategies are generally classified as either (i)
systematic or discretionary; and (ii) technical or fundamental.
Systematic and Discretionary Trading Approaches
A systematic trader relies on trading programs or models to generate
trading signals. Discretionary traders make trading decisions on the basis of
their own judgment.
<PAGE>
Each approach involves inherent risks. For example, systematic traders may
incur substantial losses when fundamental or unexpected forces dominate the
markets, while discretionary traders may overlook price trends which would have
been signaled by a system.
Technical and Fundamental Analysis
Technical analysis operates on the theory that market prices, momentum and
patterns at any given point in time reflect all known factors affecting the
supply and demand for a particular commodity. Consequently, technical analysis
focuses on market data as the most effective means of attempting to predict
future prices.
Fundamental analysis, in contrast, focuses on the study of factors Risk
Control Techniques external to the markets, for example: weather, the economy of
a particular country, government policies, domestic and foreign political and
economic events, and changing trade prospects. Fundamental analysis assumes that
markets are imperfect and that market mispricings can be identified.
Trend-Following
Trend-following advisors try to take advantage of major price movements, in
contrast with traders who focus on making many small profits on short-term
trades or through relative value positions. Trend-following traders assume that
most of their trades will be unprofitable. They look for a few large profits
from big trends. During periods with no major price movements, a trend-following
trading advisor is likely to have big losses.
Risk Control Techniques
Trading advisors often adopt risk management principles. Such principles
typically restrict the size of positions taken as well as establishing stop-loss
points at which losing positions must be liquidated. No risk control technique
can assure that big losses will be avoided.
THE JWH PROGRAMS ARE SYSTEMATIC, TECHNICAL AND TREND-FOLLOWING.
<PAGE>
EXHIBIT A
ML JWH STRATEGIC ALLOCATION FUND L.P.
THIRD AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
DATED AS OF
[ ] JULY 1, 1998
MERRILL LYNCH INVESTMENT PARTNERS INC.
GENERAL PARTNER
<PAGE>
ML JWH STRATEGIC ALLOCATION FUND L.P.
THIRD AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. Formation and Name................................................................... LPA-1
2. Principal Office..................................................................... LPA-1
3. Business............................................................................. LPA-1
4. Term, Fiscal Year and Net Assets..................................................... LPA-1
(a) Term....................................................................... LPA-1
(b) Fiscal Year................................................................ LPA-2
(c) Net Assets................................................................. LPA-2
5. Net Worth of General Partner......................................................... LPA-2
6. Capital Contributions................................................................ LPA-2
7. Allocation of Profits and Losses..................................................... LPA-2
(a) Capital Accounts and Financial Allocations................................. LPA-2
(b) Tax Allocations............................................................ LPA-2
(c) Expenses................................................................... LPA-3
(d) Limited Liability of Limited Partners...................................... LPA-4
8. Management of the Partnership........................................................ LPA-4
(a) General.................................................................... LPA-4
(b) Fiduciary Duties........................................................... LPA-5
(c) Loans; Investments......................................................... LPA-5
(d) Certain Conflicts of Interest Prohibited................................... LPA-6
(e) Certain Agreements......................................................... LPA-6
(f) No "Pyramiding"............................................................ LPA-6
(g) Other Activities........................................................... LPA-6
(h) Status of Joint Venture.................................................... LPA-6
9. Audits and Reports................................................................... LPA-6
10. Assigning Units...................................................................... LPA-7
11. Redeeming Units...................................................................... LPA-7
12. Offering of Units.................................................................... LPA-8
13. Power of Attorney.................................................................... LPA-8
14. Withdrawal of a Partner.............................................................. LPA-9
15. Standard of Liability; Indemnification............................................... LPA-9
(a) Standard of Liability for the General Partner.............................. LPA-9
(b) Indemnification of the General Partner by the Partnership.................. LPA-9
(c) Indemnification of the Partnership by the Partners......................... LPA-11
16. Amendments; Meetings................................................................. LPA-11
(a) Amendments with Consent of the General Partner............................. LPA-11
(b) Amendments and Actions without Consent of the General Partner.............. LPA-11
(c) Meetings; Other Voting Matters............................................. LPA-12
17. Benefit Plan Investors............................................................... LPA-12
18. GOVERNING LAW........................................................................ LPA-13
19. Miscellaneous LAW.................................................................... LPA-13
(a) Notices.................................................................... LPA-13
(b) Binding Effect............................................................. LPA-13
(c) Captions................................................................... LPA-13
(d) Close of Business.......................................................... LPA-13
</TABLE>
MERRILL LYNCH INVESTMENT PARTNERS INC.
GENERAL PARTNER
LPA-(i)
<PAGE>
ML JWH STRATEGIC ALLOCATION FUND L.P.
THIRD AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
This Third Amended and Restated Limited Partnership Agreement (this
"Agreement") is made as of July 1, 1998, by and among Merrill Lynch
Investment Partners Inc., a Delaware corporation, as general partner (the
"General Partner"), and each Limited Partner.
WITNESSETH:
1. FORMATION AND NAME.
The parties hereby form and continue ML JWH STRATEGIC ALLOCATION FUND L.P.
(the "Partnership") under the Delaware Revised Uniform Limited Partnership Act
(the "Act").
2. PRINCIPAL OFFICE.
The principal office of the Partnership is c/o the General Partner, Sixth
Floor, South Tower, Merrill Lynch World Headquarters, World Financial Center,
New York, New York 10080-6106; telephone: (212) 236-4167. The registered
office and agent for service of process in the State of Delaware is c/o The
Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
Wilmington, New Castle County, Delaware 19801.
3. BUSINESS.
(a) Business. The Partnership's business is to trade futures and forward
contracts on all manner of commodities, financial instruments and currencies;
physical commodities; securities; and any rights, interests or options relating
to the foregoing. The Partnership may engage in all activities necessary,
convenient or incidental to the foregoing businesses
(b) Objective. The objective of the Partnership's business is substantial
capital appreciation of its assets through speculative trading.
(c) Joint Venture. The Partnership currently trades through a joint
venture (the "Joint Venture") with John W. Henry & Company, Inc. ("JWH"). As the
Partnership owns substantially all of the Joint Venture, the term "Partnership"
refers to the Partnership, the Joint Venture or both as the context may require.
4. TERM, FISCAL YEAR AND NET ASSETS.
(a) Term. The Partnership began on December 11, 1995 and will dissolve on
the earlier of: (1) December 31, 2026; (2) receipt by the General Partner of 90
days' notice to dissolve from Limited Partners owning more than 50% of the
outstanding Units; (3) withdrawal, insolvency or dissolution of the General
Partner, or any other event that causes the General Partner to cease to be a
general partner of the Partnership unless (i) at the time of such event there is
at least one remaining general partner of the Partnership who carries on the
business of the Partnership, or (ii) within 90 days after such event all
Partners agree in writing to continue the business of the Partnership and to the
appointment, effective as of the date of such event, of one or more general
partners of the Partnership; (4) a decline in the aggregate Net Assets of the
Partnership to less than $250,000; (5) a decline in the Net Asset Value per Unit
to $25 or less; (6) dissolution of the Partnership as otherwise provided in this
Agreement; or (7) any other event requiring dissolution.
Upon dissolution of the Partnership, the General Partner, or another person
approved by a majority of the Units, shall act as liquidator trustee.
LPA-1
<PAGE>
(b) Fiscal Year. January 1 through December 31.
(c) Net Assets. Net Assets are determined in accordance with generally
accepted accounting principles.
A futures or futures option traded on a United States commodity exchange is
valued at its settlement price. If such a contract cannot be liquidated, the
settlement price on the first day on which it can be liquidated is used or such
other value as the General Partner deems fair and reasonable. The liquidating
value of a forward or of a futures or futures option not traded on a United
States commodity exchange is its liquidating value as determined by the General
Partner on a basis consistently applied for each different type of contract.
The Partnership liability for reimbursing its organizational and initial
offering costs to the General Partner reduces Net Assets only as paid out in 24
monthly installments.
Reserves may be created and charged against Net Assets in the discretion of
the General Partner.
5. NET WORTH OF GENERAL PARTNER.
The General Partner agrees that it will maintain a net worth of at least 5%
of the total contributions to the Partnership and all other partnerships of
which the General Partner is general partner. This agreement may be modified if
counsel opines that such change will not adversely affect the partnership
taxation of the Partnership, and if such change meets applicable state
securities laws or guidelines.
The General Partner will not permit its net worth to decline below $10
million without the consent of a majority of the Units.
6. CAPITAL CONTRIBUTIONS.
The Partners' respective capital contributions shall be as shown on the
books and records of the Partnership.
7. ALLOCATION OF PROFITS AND LOSSES.
(a) Capital Accounts and Financial Allocations. Each Unit has a capital
account, whose initial balance is the amount paid for such Unit.
As of the close of business (as determined by the General Partner) on the
last business day of each month, any increase or decrease in the Partnership's
Net Assets during such month shall be credited or charged equally to all
outstanding Units.
(b) Tax Allocations. As of each December 31, income and expense and
capital gain or loss shall be allocated among the Partners for tax purposes.
Capital gain and capital loss shall be allocated separately and not netted.
(1) First, items of ordinary income and expense, including all items of
gain and loss attributable to MLAM's cash management activities, shall be
allocated equally among the Units outstanding as of the end of each month in
which such items accrued.
(2) Second, Capital Gain or Loss shall be allocated as follows:
(A) Each Unit has a tax account with an initial balance equal to the
amount paid for such Unit. As of the end of each month through June 30, 1998,
the balance of such tax account shall be reduced by the Unit's allocable share
of the amount paid by the Partnership to the General Partner for organizational
and initial offering cost reimbursements, as well as by the Unit's allocable
share of any amount paid by the Partnership in respect of such month for the
costs of the ongoing offering of the Units. These adjustments shall be made
prior to the following allocations of capital gain or loss.
As of the end of each fiscal year:
(i) Each tax account shall be increased by the amount of income or
Capital Gain allocated to each Unit pursuant to Sections 7(b)(1) and
7(b)(2)(C).
LPA-2
<PAGE>
(ii) Each tax account shall be decreased by the amount of expense or
Capital Loss allocated to each Unit pursuant to Sections 7(b)(1) and
7(b)(2)(E) and by the amount of any distributions paid to each Unit other
than upon redemption.
(iii) When a Unit is redeemed, its tax account is eliminated.
(B) Each Partner who redeems a Unit during or as of the end of a fiscal
year shall be allocated Capital Gain up to the amount of the excess of the
amount received on redemption (before taking into account any early redemption
charges) over the tax account allocable to such Unit (any such excess being
referred to as an "Excess"). In the event that the aggregate amount of Capital
Gain available to be allocated pursuant to this Section is less than the
aggregate amount of Capital Gain required to be so allocated, the aggregate
amount of available Capital Gain shall be allocated among all such Partners in
the ratio which each such Partner's aggregate net Excess bears to the aggregate
net Excess of all such Partners.
(C) Capital Gain remaining after the allocation described in Section
7(b)(2)(B) shall be allocated among all Partners with outstanding Units whose
capital accounts are in excess of their tax accounts based on the ratio of each
such Partner's Excess to the aggregate Excess of all such Partners. Any
remaining Capital Gain shall then be allocated equally to all Units.
(D) Each Partner who redeems a Unit during or as of the end of a fiscal
year shall be allocated Capital Loss up to the amount of the sum of the excess
of the tax accounts allocable to the Units so redeemed over the amount received
in respect of such Units (before taking into account any early redemption
charges; and such excess being referred to as a "Negative Excess"). In the event
the aggregate amount of Capital Loss available to be allocated pursuant to this
Section is less than the aggregate amount required to be so allocated, the
aggregate amount of available Capital Loss shall be allocated among all such
Partners in the ratio that each such Partner's Negative Excess bears to the
aggregate Negative Excess of all such Partners.
(E) Capital Loss remaining after the allocation described in Section
7(b)(2)(D) shall be allocated among all Partners with outstanding Units whose
tax accounts are in excess of their capital accounts based on the ratio of each
such Partner's Negative Excess to the aggregate Negative Excess of all such
Partners. Any remaining Capital Loss shall then be allocated equally to all
Units.
(F) For purposes of this Section 7(b)(2), "Capital Gain" or "Capital Loss"
shall mean gain or loss characterized as gain or loss from the sale or exchange
of a capital asset by the Internal Revenue Code of 1986, as amended (the
"Code"), provided, however, that Capital Gain and Loss shall not include gain or
loss relating to MLAM's cash management activities which shall be allocated
pursuant to Section 7(b)(1).
(3) The Partnership's intent is to allocate taxable profit and loss the
same way as financial profit and loss, trying to eliminate any difference
between a Partner's capital account and his or her tax account, consistent with
principles set forth in Section 704 of the Code, including without limitation a
"Qualified Income Offset."
(4) The allocations of profit and loss shall not exceed the allocations
permitted under Subchapter K of the Code, as determined by the General Partner.
(5) The General Partner's interest in the Partnership is treated on a
Unit-equivalent basis for allocation purposes.
The General Partner may adjust the allocations set forth in this Section
7(b), in its discretion, if the General Partner believes that doing so will
achieve more equitable allocations or ones more consistent with the Code.
(c) Expenses. The General Partner was reimbursed by the Partnership for
organizational and initial offering costs in 24 monthly
LPA-3
<PAGE>
installments ending June 30, 1998. The partnership will also pay its ongoing
offering costs.
The General Partner pays all of the Partnership's routine legal, accounting
and administrative expenses (other than as provided in the following paragraph),
and none of the General Partner's "overhead" expenses (including, but not
limited to, salaries, rent and travel expenses) are charged to the Partnership.
The General Partner receives a monthly Administrative Fee of 0.02083 of 1%
(0.25% annually) of the month-end assets of the Partnership.
The Partnership pays the costs of the continuous offering of the Units
(other than selling commissions and ongoing compensation); provided, that the
General Partner absorbs all such costs in excess of 0.25% of the Partnership's
average month-end Net Assets in any fiscal year.
Any goods and services provided to the Partnership by the General Partner
shall be provided at rates and terms at least as favorable as those which may be
obtained from third parties in arm's-length negotiations. All of the expenses
which are for the Partnership's account shall be billed directly to the
Partnership.
The General Partner pays the selling commissions and ongoing compensation
due on the Units.
The Partnership will pay any taxes applicable to it and any charges
incidental to its trading.
(d) Limited Liability of Limited Partners. Each Unit, when purchased in
accordance with this Agreement, shall be fully paid and nonassessable, except as
otherwise provided by law.
8. MANAGEMENT OF THE PARTNERSHIP.
(a) General. The General Partner shall manage the business of the
Partnership.
The General Partner shall determine what distributions, if any, shall be
made to the Partners.
The General Partner may take such actions relating to the business of the
Partnership as the General Partner deems necessary or advisable and which are
consistent with the terms of this Agreement.
All Limited Partners consent to the General Partner's selection of: (i)
John W. Henry & Company, Inc. as trading manager; (ii) MLAM as provider of cash
management services; (iii) Merrill Lynch Futures Inc. as the Partnership's
commodity broker; (iv) the General Partner's Foreign Exchange Desk; and (v)
Merrill Lynch, Pierce, Fenner & Smith Incorporated and Merrill Lynch Futures
Inc. as the custodians.
The General Partner is specifically authorized by each Limited Partner to
enter into the cash management arrangements described under "Interest Income
Arrangements" in the prospectus for the Units current at the time such Limited
Partner last purchased Units (the "Prospectus").
The General Partner is hereby specifically authorized to enter into,
deliver and perform on behalf of the Partnership, the business arrangements
referred to in the Prospectus.
The General Partner may engage such persons as the General Partner in its
sole judgment shall deem advisable for operating the business of the
Partnership; provided, that no such arrangement shall allow brokerage
commissions and Administrative Fees above those described in the Prospectus or
permitted under applicable North American Securities Administrators Association,
Inc. Guidelines for the Registration of Commodity Pool Programs (the "NASAA
Guidelines") in effect as of the date of the Prospectus, whichever is higher.
LPA-4
<PAGE>
The General Partner will reimburse the Partnership, on an annual basis, to
the extent that the Partnership's brokerage commissions plus the annual
Administrative Fee have exceeded 14% of the Partnership's average month-end Net
Assets during the preceding year.
The Partnership's brokerage commissions and Administrative Fees, taken
together, may not be increased above an annual level equal to 8.0% of the
Partnership's average month-end assets without the unanimous consent of all
Limited Partners.
The General Partner shall reimburse the Partnership for any fees paid by
the Partnership to any trading advisor during any fiscal year, to the extent
that such fees exceed the 6% annual management fees and the 15% of new trading
profits quarterly profit shares contemplated by the NASAA Guidelines during such
year. Any such reimbursement shall be made on a present value basis, fully
compensating the Partnership for having made payments at any time during the
year which would not otherwise have been due from it. The General Partner shall
disclose any such reimbursement in the Annual Report delivered to Limited
Partners.
No compensation paid by the Partnership to any party may be increased
without prior written notice to Limited Partners within sufficient time for them
to redeem prior to such increase becoming effective. Such notification shall
contain a description of Limited Partners' voting and redemption rights as well
as a description of any material effect of such increase.
Any material change in the Partnership's basic investment policies or
structure requires the approval of a majority of the Units.
The General Partner is the "tax matters partner" of the Partnership, and
the Partnership of the Joint Venture.
The General Partner has authority to cause the Partnership to take such
actions as manager of the Joint Venture as the General Partner may deem
appropriate, subject to the fiduciary obligations and other restrictions
applicable to the General Partner as general partner of the Partnership.
(b) Fiduciary Duties. The General Partner shall be under a fiduciary duty
to conduct the affairs of the Partnership in the best interests of the
Partnership. The Limited Partners will under no circumstances be deemed to have
contracted away the fiduciary obligations owed to them by the General Partner
under the common law.
The General Partner's fiduciary duty includes, among other things, the
safekeeping of all Partner ship funds and assets and the use thereof for the
benefit of the Partnership. The funds of the Partnership will not be commingled
with the funds of any other person or entity (deposit of funds with a commodity
or securities broker, clearinghouse or forward dealer or entering into joint
ventures or partnerships shall not be deemed to constitute "commingling" for
these purposes).
The General Partner shall at all times act with integrity and good faith
and exercise due diligence in all activities relating to the conduct of the
business of the Partnership and in resolving conflicts of interest. The
Partnership's brokerage arrangements shall be non-exclusive, and the brokerage
commissions paid by the Partnership shall be competitive. The Partnership shall
seek the best price and services available for its commodity transactions.
(c) Loans; Investments. The Partnership shall not make loans. The General
Partner shall make no loans to the Partnership unless approved by the Limited
Partners in accordance with Section 16(a). If the General Partner makes a loan
to the Partnership, the General Partner shall not receive interest in excess of
its interest costs, nor may the General Partner receive interest in excess of
the amounts which would be charged to the Partnership (without reference to the
General Partner's financial resources or guarantees) by unrelated banks on
comparable loans for the same purpose. The General Partner shall not receive
LPA-5
<PAGE>
"points" or other financing charges or fees regardless of the amount.
The Partnership shall not invest in any debt instruments other than
Government Securities and other CFTC-authorized investments, or invest in any
equity security without prior notice to Limited Partners.
(d) Certain Conflicts of Interest Prohibited. No person or entity may
receive, directly or indirectly, any advisory fees or profit shares from
entities in which the Partnership participates, for investment advice or
management who shares or participates in any commodity brokerage commissions
paid by the Partnership; and no broker may pay, directly or indirectly, rebates
or give-ups to any trading advisor, the General Partner or any of their
respective affiliates. Such prohibitions may not be circumvented by any
reciprocal business arrangements; provided, however, that the foregoing shall
not prohibit the payment, from the commodity brokerage commissions paid by the
Partnership, of fees for MLAM's cash management services to the Partnership. No
trading advisor for the Partnership shall be affiliated with the Partnership's
commodity broker, the General Partner or any of their affiliates.
(e) Certain Agreements. Any agreements between the Partnership and the
General Partner or any affiliate of the General Partner shall be terminable by
the Partnership no more than 60 days' written notice.
All trading advisors used by the Partnership must satisfy the experience
requirements of the NASAA Guidelines.
The maximum period covered by any contract entered into by the Partnership,
except for the various provisions of the Selling Agreement which survive the
final closing of the sale of the Units, shall not exceed one year.
(f) No "Pyramiding." The Partnership is prohibited from "pyramiding."
(g) Other Activities. The General Partner engages in other business
activities and shall not be required to refrain from any such activities,
whether or not in competition with the Partnership. Neither the Partnership nor
any of the Partners shall have any rights in such activities. Limited Partners
may similarly engage in any such other business activities.
The General Partner shall devote to the Partnership such time as the
General Partner deems advisable to conduct the Partnership's business.
(h) Status of Joint Venture. The General Partner is prohibited from using
the Joint Venture provide a means to do indirectly what the General Partner
could not do directly in managing the Partnership.
9. AUDITS AND REPORTS.
The Partnership's books shall be audited annually by an independent
certified public accountant. The Partnership will use its best efforts to cause
each Limited Partner to receive (i) within 90, but in no event later than 120
days, after the close of each fiscal year certified financial statements of the
Partnership for the fiscal year then ended, (ii) no later than March 15 all tax
information relating to the prior fiscal year necessary to complete his federal
income tax return and (iii) such other information as the CFTC may by regulation
require.
The General Partner shall include in the Annual Reports sent to Limited
Partners an estimate of the round-turn equivalent brokerage commission rate paid
by the Partnership during the preceding year.
The General Partner will, with the assistance of the Partnership's
commodity broker, make an annual review of the Partnership's commodity brokerage
arrangements. In connection with such review, the General Partner will
determine, to the extent practicable, the commodity brokerage rates charged to
other major commodity pools whose trading and operations are, in the opinion of
the General Partner, comparable to those of the Partnership, in order to assess
whether the rates
LPA-6
<PAGE>
charged to the Partnership are competitive in light of the services it receives.
If, as a result of such review, the General Partner determines that such rates
are not so competitive, the General Partner will notify the Limited Partners,
describing the rates charged to the Partnership and several funds which are, in
the General Partner's opinion, comparable to the Partnership.
In addition to the undertakings in the preceding paragraph, the Partnership
will seek the best price and services available on its commodity brokerage
transactions. All brokerage transactions will be effected at competitive rates.
The General Partner will annually review the brokerage rates paid by the
Partnership to guarantee that the criteria set forth in this paragraph are
followed. The General Partner may not rely solely on the rates charged by other
major commodity pools in complying with this paragraph.
Limited Partners or their duly authorized representatives may inspect the
Partnership's books and records, for any purpose reasonably related to their
status as Limited Partners in the Fund, during normal business hours upon
reasonable written notice to the General Partner. They may also obtain copies
of such records upon payment of reasonable reproduction costs; provided,
however, that such Limited Partners shall represent that the inspection and/or
copies of such records will not be for commercial purposes unrelated to such
Limited Partners' interest in the Partnership.
The General Partner shall calculate the approximate Net Asset Value per
Unit on a daily basis and furnish such information upon request to any Limited
Partner.
The General Partner will send written notice to each Limited Partner within
seven days of any decline in the Partnership's Net Asset Value or in the Net
Asset Value per Unit to 50% or less of such Net Asset Value as of the previous
month-end. Any such notice shall contain a description of Limited Partners'
voting rights.
The General Partner shall maintain and preserve all Partnership records for
a period of not less than 6 years.
10. ASSIGNING UNITS.
Each Limited Partner agrees that he will not assign, transfer or otherwise
dispose of any interest in his Units in violation of any applicable federal or
state securities laws or without giving written notice to the General Partner.
No assignment, transfer or disposition of Units shall be effective against the
Partnership or the General Partner until the first day of the month following
the month in which the General Partner receives such notice. The General
Partner may, in its sole discretion, waive any such notice.
No assignee, except with the consent of the General Partner, may become a
substituted Limited Partner. The General Partner intends to so consent,
provided that the General Partner and the Partnership receive an opinion of
counsel to the General Partner that such admission will not adversely affect the
tax classification of the Partnership as a partnership. If the General Partner
withholds consent, an assignee shall not become a substituted Limited Partner,
and shall not have any of the rights of a Limited Partner, except that the
assignee shall be entitled to receive that share of capital and profits and
shall have that right of redemption to which his assignor would otherwise have
been entitled.
Each Limited Partner agrees that with the consent of the General Partner
any assignee may become a substituted Limited Partner without the consent of any
Limited Partner.
11. REDEEMING UNITS.
Units may be redeemed as of the close of business on the last day of any
month, provided that all liabilities, contingent or otherwise, of the
Partnership have been paid or there remains property of the Partnership
sufficient to pay them.
LPA-7
<PAGE>
Any number of whole Units may be redeemed.
Units redeemed on or before the end of the twelfth full calendar month
after issuance are subject to early redemption charges of 3% of the Net Asset
Value at which they are redeemed. Such charges will be paid to the General
Partner. Units are issued, for purposes of determining whether an early
redemption charge is due, on the first day of the month after the related
subscription is received. No redemption charges will be applicable to Limited
Partners who redeem because the Partnership's expenses have been increased.
If a Limited Partner acquires Units at more than one time, such Units will
be treated on a "first-in, first-out" basis for purposes of applying early
redemption charges and the tax allocations in Section 7(b).
Requests for redemption must be received by the General Partner at least 10
calendar days before the requested redemption date. Such requests need not be
in writing so long as the redeeming Limited Partner has a Merrill Lynch customer
securities account.
If, as of the close of business on any day, the Net Asset Value per Unit
has decreased to $50 or less, after adding back all distributions, the
Partnership will liquidate all open positions as expeditiously as possible and
suspend trading. Within 10 business days after the suspension of trading, the
General Partner will declare a Special Redemption Date, which will be a business
day within 30 business days from the suspension of trading. The General Partner
shall mail notice of such date to each Limited Partner by first-class mail,
postage prepaid, not later than 10 business days prior to such Special
Redemption Date, together with instructions as to the procedure such Limited
Partner must follow to have his or her Units redeemed on such Date (in general,
Limited Partners will be required to redeem all of their Units on a Special
Redemption Date if any are redeemed). A Partner who redeems will receive the Net
Asset Value of his Units, determined as of the close of business on such Special
Redemption Date. No redemption charges will apply on any such Date. If, after a
Special Redemption Date, the Net Assets of the Partnership are at least $250,000
and the Net Asset Value per Unit is in excess of $25, the Partnership may, in
the discretion of the General Partner, resume trading.
The General Partner, in its discretion, may declare a Special Redemption
Date. If the General Partner does so, the General Partner need not again call a
Special Redemption Date.
The General Partner may, in its discretion, declare additional regular
redemption dates for Units, permit certain Limited Partners to redeem at other
than month-end and waive the 10-day notice period otherwise required to effect
redemptions.
Redemption payments will be made within 10 business days after the month-
end of redemption, except that under special circumstances, including, but not
limited to, inability to liquidate commodity positions as of a redemption date
or default or delay in payments due the Partnership, the Partnership may
correspondingly delay redemption payments.
The General Partner may require a Limited Partner to redeem all or part of
such Limited Partner's Units if the General Partner considers doing so to be
desirable for the protection of the Partnership, and will use best efforts to do
so to the extent necessary to prevent the Partnership from being deemed to hold
"plan assets" under the provisions of the Employee Retirement Income Security
Act of 1974 ("ERISA") or the Code.
12. OFFERING OF UNITS.
The General Partner may, in its discretion, continue or terminate the
offering of the Units on a public or private basis.
All sales of Units in the United States will be conducted by registered
brokers.
LPA-8
<PAGE>
13. POWER OF ATTORNEY.
Each Limited Partner hereby irrevocably appoints the General Partner and
each officer of the General Partner, with full power of substitution, as his or
her true and lawful attorney-in-fact, in his or her name, place and stead, to
execute, acknowledge, swear to, deliver and file, record in public offices and
publish: (i) this Agreement, including any amendments; (ii) certificates of
limited partnership or assumed name, including amendments, with respect to the
Partnership; (iii) all conveyances and other instruments which the General
Partner deems appropriate to qualify or continue the Partnership in the State of
Delaware and any other jurisdictions which may be required to be filed by the
Partnership or the Partners under the laws of any jurisdiction; and (iv) to
file, prosecute, defend, settle or compromise litigation, claims or arbitrations
on behalf of the Partnership. The Power of Attorney granted herein shall be
deemed to be coupled with an interest, shall survive and shall not be affected
by the subsequent incapacity, disability or death of a Limited Partner.
14. WITHDRAWAL OF A PARTNER.
The Partnership shall be dissolved upon the withdrawal, dissolution,
insolvency or removal of the General Partner, or any other event that causes the
General Partner to cease to be a general partner under the Act, unless the
Partnership is continued pursuant to the terms of Section 4(a)(3). In addition,
the General Partner may withdraw from the Partnership, without any breach of
this Agreement, at any time upon 120 days' written notice by first class mail,
postage prepaid, to each Limited Partner. If the General Partner withdraws as
general partner, and the Partnership's business is continued pursuant to the
terms of Section 4(a)(3)(ii), the withdrawing General Partner shall pay all
expenses incurred by the Partnership as a result of its withdrawal.
The General Partner may not assign its general partner interest or its
obligation to direct the trading of the Partnership assets without the consent
of each Limited Partner. The General Partner will notify all Limited Partners of
any change in the principals of the General Partner.
A Limited Partner ceasing to be a limited partner will not terminate or
dissolve the Partnership. No Limited Partner, including such Limited Partner's
estate, custodian or personal representative, shall have any right to redeem or
value such Limited Partner's interest in the Partnership except as provided in
Section 11. Each Limited Partner agrees that in the event of his death, he
waives on behalf of himself and of his estate, and directs the legal
representatives of his estate and any person interested therein to waive, any
inventory, accounting or appraisal of the assets of the Partnership and any
right to an audit or examination of the books of the Partnership. Nothing in
this Section 14 shall, however, waive any right for a Limited Partner to be
informed of the Net Asset Value of his Units, to receive periodic reports,
audited financial statements and other pertinent information from the General
Partner or the Partnership or to redeem or transfer Units.
15. STANDARD OF LIABILITY; INDEMNIFICATION.
(a) Standard of Liability for the General Partner. The General Partner and
its Affiliates, as defined below, shall have no liability to the Partnership or
to any Partner for any loss suffered by the Partnership which arises out of any
action or inaction of the General Partner or its Affiliates if the General
Partner, in good faith, determined that such course of conduct was in the best
interests of the Partnership, and such course of conduct did not constitute
negligence or misconduct on behalf of the General Partner or its Affiliates.
(b) Indemnification of the General Partner by the Partnership. To the
fullest extent permitted by law, subject to this Section 15, the General Partner
and its Affiliates shall be indemnified by the Partnership against any losses,
judgments, liabilities, expenses and amounts paid in settlement of any claims
sustained by them in connection with the Partnership; provided, that such claims
were not the result of negligence or misconduct on the part of the
LPA-9
<PAGE>
General Partner or its Affiliates, and the General Partner, in good faith,
determined that such conduct was in the best interests of the Partnership; and
provided further, that Affiliates of the General Partner shall be entitled to
indemnification only for losses incurred by such Affiliates in performing the
duties of the General Partner and acting wholly within the scope of the
authority of the General Partner.
Notwithstanding anything to the contrary contained in the preceding
paragraph, none of the General Partner, its Affiliates or any persons acting as
selling agent for the Units shall be indemnified for any losses, liabilities or
expenses arising from or out of an alleged violation of federal or state
securities laws unless (1) there has been a successful adjudication on the
merits of each count involving alleged securities law violations as to the
particular indemnitee and the court approves indemnification of the litigation
costs, or (2) such claims have been dismissed with prejudice on the merits by a
court of competent jurisdiction as to the particular indemnitee and the court
approves indemnification of the litigation costs, or (3) a court of competent
jurisdiction approves a settlement of the claims against a particular indemnitee
and finds that indemnification of the settlement and related costs should be
made.
In any claim for indemnification for federal or state securities law
violations, the party seeking indemnification shall place before the court the
position of the Securities and Exchange Commission, the California Department of
Corporations, the Massachusetts Securities Division, the Pennsylvania Securities
Commission, the Tennessee Securities Division, the Texas Securities Board and
any other state or applicable regulatory authority with respect to the issue of
indemnification for securities law violations.
The Partnership shall not bear the cost of that portion of any insurance
which insures any party against any liability the indemnification of which is
herein prohibited.
For the purposes of this Section 15, the term, "Affiliates," shall mean any
person acting on behalf of or performing services on behalf of the Partnership
or Joint Venture who: (1) directly or indirectly controls, is controlled by, or
is under common control with the General Partner; or (2) owns or controls 10% or
more of the outstanding voting securities of the General Partner; or (3) is an
officer or director of the General Partner; or (4) if the General Partner is an
officer, director, partner or trustee, is any entity for which the General
Partner acts in any such capacity.
Advances from Partnership funds to the General Partner and its Affiliates
for legal expenses and other costs incurred as a result of any legal action
initiated against the General Partner by a Limited Partner are prohibited.
Advances from Partnership funds to the General Partner and its Affiliates
for legal expenses and other costs incurred as a result of a legal action will
be made only if the following three conditions are satisfied: (1) the legal
action relates to the performance of duties or services by the General Partner
or its Affiliates on behalf of the Partnership (or Joint Venture); (2) the legal
action is initiated by a third party who is not a Limited Partner; and (3) the
General Partner or its Affiliates undertake to repay the advanced funds, with
interest from the initial date of such advance, to the Partnership in cases in
which they would not be entitled to indemnification under the standard of
liability set forth in Section 15(a).
In no event shall any indemnity or exculpation provided for herein be more
favorable to the General Partner or any Affiliate than that contemplated by the
NASAA Guidelines as in effect on the date of this Agreement.
In no event shall any indemnification permitted by this Section 15(b) be
made by the Partnership unless all provisions of this Section for the payment of
indemnification have been complied with in all respects. Furthermore, it shall
be a precondition of any such indemnification that the Partnership receive a
determination of qualified
LPA-10
<PAGE>
independent legal counsel in a written opinion that the party which seeks to be
indemnified hereunder has met the applicable standard of conduct set forth
herein. Receipt of any such opinion shall not, however, in itself, entitle any
such party to indemnification unless indemnification is otherwise proper
hereunder. Any indemnification payable by the Partnership hereunder shall be
made only as provided in the specific case.
In no event shall any indemnification obligations of the Partnership under
this Section 15(b) subject a Limited Partner to any liability in excess of that
contemplated by Section 7(d).
(c) Indemnification of the Partnership by the Partners. In the event the
Partnership is made a party to any claim, dispute or litigation or otherwise
incurs any loss or expense as a result of or in connection with any Partner's
activities, obligations or liabilities unrelated to the Partnership's business,
such Partner shall indemnify and reimburse the Partnership for all such loss and
expense incurred, including reasonable attorneys' fees.
The General Partner shall indemnify and hold the Partnership harmless from
all loss or expense which the Partnership may incur (including, without
limitation, any indemnity payments) as a result of (i) the differences between
MLAM's standard of liability and indemnity under the Investment Advisory
Contract, (ii) the differences between Merrill Lynch, Pierce, Fenner & Smith
Incorporated's standard of liability and indemnity under the Custody Agreement
or (iii) the differences between John W. Henry & Company, Inc.'s standard of
liability and indemnity under the Joint Venture Agreement (in case of actions by
third parties other than Limited Partners) and, in each case, the General
Partner's standard of liability as set forth herein.
The General Partner shall also indemnify and hold the Partnership harmless
from all loss and expense which the Partnership may incur (including, without
limitation, indemnity payments) as a result of the commercial relationship
between the Partnership and John W. Henry & Company, Inc., or any other advisor
selected for the Partnership, being structured as a joint venture rather than
through an advisory agreement.
16. AMENDMENTS; MEETINGS.
(a) Amendments with Consent of the General Partner. The General Partner
may amend this Agreement with the approval the majority of the Units. No meeting
procedure or specified notice period is required in the case of amendments made
with the consent of the General Partner, mere receipt of an adequate number of
unrevoked written consents being sufficient. The General Partner may also amend
this Agreement without the consent of the Limited Partners in order, (i) to
clarify any clerical inaccuracy or ambiguity or reconcile any inconsistency
(including any inconsistency between this Agreement and the Prospectus); (ii) to
effect the intent of the allocations proposed herein to the maximum extent
possible in the event of a change in the Code or the interpretations thereof
affecting such allocations; (iii) to attempt to ensure that the Partnership is
taxed as a partnership; (iv) to qualify or maintain the qualification of the
Partnership as a limited partnership in any jurisdiction; (v) to change this
Agreement as required by the Staff of the Securities and Exchange Commission,
any other federal agency or any state "Blue Sky" official or in order to opt to
be governed by any amendment or successor statute to the Act; (vi) to make any
amendment to this Agreement which the General Partner deems advisable, provided
that such amendment is not adverse to the Limited Partners; and (vii) to make
any amendment to this Agreement required by law.
(b) Amendments and Actions without Consent of the General Partner. In any
vote called by the General Partner or pursuant to section (c) of this Section
16, upon the affirmative vote of a majority of the Units, the following actions
may be taken, irrespective of whether the General Partner concurs: (i) this
Agreement may be amended, provided, however, that the approval of all Limited
Partners shall be required in the case of amendments changing or altering this
Section 16, extending the term of the Partnership or increasing the brokerage
commissions or Administrative Fees payable by the
LPA-11
<PAGE>
Partnership; (ii) the Partnership may be dissolved; (iii) the General Partner
may be removed and replaced; (iv) a new general partner may be elected if the
General Partner withdraws from the Partnership; (v) the sale of all or
substantially all of the assets of the Partnership may be approved; and (vi) any
contract with the General Partner or any of its affiliate may be disapproved of
and terminated upon 60 days' notice.
No reduction of any Limited Partner's capital account or modification of
the percentage of profits, losses or distributions to which a Limited Partner is
entitled shall be made without such Limited Partner's written consent;
(c) Meetings; Other Voting Matters. Any Limited Partner may obtain from
the General Partner, provided that reasonable copying and mailing costs are paid
in advance, a list of the names, addresses and number of Units held by each
Limited Partner. Such list will be mailed by the General Partner within 10 days
of the receipt of the request; provided, that the General Partner may require
any Limited Partner requesting such information to submit written confirmation
that such information will not be used for commercial purposes unrelated to such
Limited Partner's interest as a Limited Partner.
Upon receipt of a written proposal, signed by Limited Partners owning at
least 10% of the Units, that a meeting of the Partnership be called to vote on
any matter on which the Limited Partners are entitled to vote, the General
Partner will, by written notice to each Limited Partner of record sent by
certified mail within 15 days after such receipt, call the meeting. Such
meeting shall be held at least 30 but not more than 60 days after the mailing of
such notice, and such notice shall specify the date, a reasonable place and time
for such meeting, as well as its purpose.
In determining whether a majority of the Units has approved an action or
amendment, only Units owned by Limited Partners shall be counted. Any Units
acquired by the General Partner or any of its Affiliates will be non-voting, and
will not be considered outstanding for purposes of determining whether the
majority approval of the outstanding Units has been obtained.
The General Partner may not restrict the voting rights of Limited Partners
as set forth herein.
In the event that this Agreement is to be amended in any material respect,
the amendment will not become effective prior to all Limited Partners having an
opportunity to redeem their Units.
17. BENEFIT PLAN INVESTORS.
Each Limited Partner that is an "employee benefit plan" as defined in and
subject to ERISA, or a "plan" as defined in Section 4975 of the Code
(collectively, a "Plan"), and each fiduciary who has caused a Plan to become a
Limited Partner (a "Plan Fiduciary"), represents and warrants that: (a) the
Plan Fiduciary has considered an investment in the Partnership in light of the
risks relating thereto; (b) the Plan Fiduciary has determined that the
investment in the Partnership is consistent with the Plan Fiduciary's
responsibilities under ERISA; (c) the investment in the Partnership does not
violate the terms of any legal document constituting the Plan or any trust
agreement thereunder; (d) the Plan's investment in the Partnership has been duly
authorized and approved by all necessary parties; (e) none of the General
Partner, John W. Henry & Company, Inc., any of their respective affiliates or
any of their respective agents or employees: (i) has investment discretion with
respect to the assets of the Plan used to purchase Units; (ii) has authority or
responsibility to or regularly gives investment advice with respect to the
assets of the Plan used to purchase Units for a fee and pursuant to an agreement
or understanding that such advice will serve as a primary basis for investment
decisions with respect to the Plan and that such advice will be based on the
particular investment needs of the Plan; or (iii) is an employer maintaining or
contributing to the Plan; and (f) the Plan Fiduciary: (i) is authorized to make,
and is responsible for, the decision of the Plan to invest in the Partnership,
including the determination that such investment is consistent with the
requirement imposed by Section 404 of ERISA
LPA-12
<PAGE>
that Plan investments be diversified so as to minimize the risks of large
losses; (ii) is independent of the General Partner, John W. Henry & Company,
Inc. and any of their respective affiliates; and (iii) is qualified to make such
investment decision.
18. GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW; PROVIDED, THAT THE FOREGOING
CHOICE OF LAW SHALL NOT RESTRICT THE APPLICATION OF ANY STATE'S SECURITIES LAWS
TO THE SALE OF UNITS TO ITS RESIDENTS OR WITHIN SUCH STATE.
19. MISCELLANEOUS.
(a) Notices. All notices under this Agreement must be in writing and will
be effective upon personal delivery, or if sent by first class mail, postage
prepaid, upon the deposit of such notice in the United States mail.
(b) Binding Effect. This Agreement shall inure to and be binding upon all
of the parties hereto and all parties indemnified under Section 15, as well as
their respective successors and assigns, custodians, estates, heirs and personal
representatives.
For purposes of determining the rights of any Partner or assignee
hereunder, the Partnership and the General Partner may rely upon the Partnership
records as to who are Partners and assignees, and all Partners and assignees
agree that their rights shall be determined and they shall be bound thereby.
(c) Captions. Captions are not part of this Agreement.
(d) Close of Business. The General Partner will decide when the close of
business occurs.
* * * * *
THE PARTIES HEREBY EXECUTE THIS THIRD AMENDED AND RESTATED LIMITED
PARTNERSHIP AGREEMENT AS OF THE DAY AND YEAR FIRST ABOVE WRITTEN.
GENERAL PARTNER: LIMITED PARTNERS:
MERRILL LYNCH INVESTMENT MERRILL LYNCH INVESTMENT
PARTNERS INC. PARTNERS INC.
Attorney-in-Fact
By /s/ JOHN R. FRAWLEY, JR. By /s/ JOHN R. FRAWLEY, JR.
------------------------- --------------------------
John R. Frawley, Jr. John R. Frawley, Jr.
President and President and
Chief Executive Officer Chief Executive Officer
LPA-13
<PAGE>
EXHIBIT B
ML JWH STRATEGIC ALLOCATION FUND L.P.
____________________
SUBSCRIPTION REQUIREMENTS
General
By submitting a Subscription Agreement Signature Page, you (i) subscribe to
purchase Units, (ii) authorize the Selling Agent to debit your subscription from
your Merrill Lynch customer securities account and (iii) agree to the terms of
the Limited Partnership Agreement contained in Part Two.
Representations and Warranties
You represent and warrant to the Fund, MLIP and their respective affiliates
as follows:
(a) You are of legal age and legally competent to execute the Subscription
Agreement Signature Page.
(b) All information on your Subscription Agreement Signature Page is correct
and complete. You will immediately contact MLIP if there is any change in
such information.
(c) Your subscription is made with your own funds and for your own account.
(d) Your subscription, if made as custodian for a minor, is a gift you have
made to such minor or, if not a gift, the following representations as to
net worth and annual income apply to such minor personally.
(e) If you are subscribing in a representative capacity, you have full power
and authority to purchase the Units on behalf of the entity for which you
are acting, and such entity has full power and authority to purchase such
Units.
(f) You either are, or are not required to be, registered with the CFTC or a
member of the NFA.
(g) If you are acting on behalf of an "employee benefit plan," you confirm the
representations set forth in Section 17 of the Limited Partnership
Agreement.
Investor Suitability
YOU SHOULD NOT INVEST MORE THAN 10% OF YOUR READILY MARKETABLE ASSETS IN
THE FUND.
ELIGIBLE INVESTORS MUST HAVE (I) A NET WORTH OF AT LEAST $150,000
(EXCLUSIVE OF HOME, FURNISHINGS AND AUTOMOBILES) OR (II) AN ANNUAL GROSS INCOME
OF AT LEAST $45,000 AND A NET WORTH OF AT LEAST $45,000 (EXCLUSIVE OF HOME,
FURNISHINGS AND AUTOMOBILES).
THE FOLLOWING REQUIREMENTS APPLY TO RESIDENTS OF VARIOUS STATES (NET WORTH
FOR SUCH PURPOSES IN ALL CASES IS EXCLUSIVE OF HOME, FURNISHINGS AND
AUTOMOBILES).
1. Arizona, Massachusetts, Mississippi, North Carolina, Oklahoma, Oregon,
Tennessee and Texas -- Net worth of at least $225,000 or a net worth of at least
$60,000 and an annual income of at least $60,000.
2. Arkansas -- ARKANSAS RESIDENTS MUST SIGN A SUBSCRIPTION AGREEMENT
SIGNATURE PAGE SPECIFICALLY PREPARED FOR ARKANSAS RESIDENTS. A SPECIAL SET OF
SUBSCRIPTION REQUIREMENTS HAS ALSO BEEN PREPARED FOR ARKANSAS RESIDENTS.
3. California -- Net worth of at least $100,000 and an annual income of
at least $65,000 or, in the alternative, a net worth of at least $250,000.
4. Iowa -- Net worth of at least $225,000 or a net worth of at least
$60,000 and an annual taxable income of at least $60,000. Notwithstanding any
other provisions of the Prospectus, the minimum investment for individual
retirement accounts in Iowa is 25 Units or $2,500, rather than 20 Units or
$2,000.
SR-1
<PAGE>
5. Maine -- Minimum subscription per investment, both initial and
subsequent, of $5,000; net worth of at least $200,000 or a net worth of at least
$50,000 and an annual income of at least $50,000. ALL MAINE RESIDENTS, INCLUDING
EXISTING INVESTORS IN THE FUND SUBSCRIBING FOR ADDITIONAL UNITS, MUST EXECUTE A
SUBSCRIPTION AGREEMENT SIGNATURE PAGE. MAINE RESIDENTS MUST SIGN A SUBSCRIPTION
AGREEMENT SIGNATURE PAGE SPECIFICALLY PREPARED FOR MAINE RESIDENTS.
6. Michigan -- Net worth of at least $225,000 or a net worth of at least
$60,000 and taxable income in 1997 of at least $60,000. ALL MICHIGAN RESIDENTS,
INCLUDING EXISTING INVESTORS IN THE FUND SUBSCRIBING FOR ADDITIONAL UNITS, MUST
EXECUTE A SUBSCRIPTION AGREEMENT SIGNATURE PAGE.
7. Minnesota -- Net worth of at least $225,000 or a net worth of at least
$60,000 and an annual income of at least $60,000. Minnesota residents are deemed
not to represent that their receipt of the Prospectus was accompanied by summary
Fund financial information current within 60 calendar days and are deemed not to
represent that the Prospectus that they received was dated within nine months of
their subscription for Units.
8. Missouri -- Net worth of at least $225,000 or a net worth of at least
$100,000 and an annual income of at least $100,000. Missouri residents are
deemed not to represent that their receipt of the Prospectus was accompanied by
summary Fund financial information current within 60 calendar days and are
deemed not to represent that the Prospectus that they received was dated within
nine months of the date of subscription for Units.
9. New Hampshire -- Net worth of at least $250,000 or a net worth of at
least $125,000 and an annual income of at least $50,000.
10. Pennsylvania -- Net worth of a least $175,000 or a net worth of at
least $100,000 and an annual taxable income of at least $50,000. Pennsylvania
residents are deemed not to represent that their receipt of the Prospectus was
accompanied by summary Fund financial information current within 60 calendar
days and are deemed not to represent that the Prospectus that they received was
dated within nine months of their subscription for Units.
11. South Carolina -- Net worth of at least $100,000 or a net income in
1997 some portion of which was subject to maximum federal and state income tax.
12. South Dakota -- Net worth of at least $225,000 or a net worth of at
least $60,000 and an annual income of at least $60,000. South Dakota residents
are deemed not to represent that their receipt of the Prospectus was accompanied
by summary Fund financial information current within 60 calendar days and are
deemed not to represent that the Prospectus that they received was dated within
nine months of their subscription for Units.
13. Washington -- A Purchaser meets the necessary suitability standards
if: (1) the Purchaser acquires at least $150,000 of Units, and the Purchaser's
total investment does not exceed 20% of the Purchaser's net worth, or joint net
worth with the Purchaser's spouse (in each case, exclusive of home, furnishings
and automobiles); (2) irrespective of the number of Units purchased, the
Purchaser's net worth, or joint net worth with the Purchaser's spouse (in each
case, exclusive of home, furnishings and automobiles) exceeds $1,000,000; or (3)
irrespective of the number of Units purchased, the Purchaser's income has been
in excess of $200,000 in each of [_] 1996 and 1997 and the Purchaser reasonably
expects income in excess of $200,000 in [_] 1998. Any entity in which all of the
equity owners qualify under one or more of the foregoing clauses will also be
considered to have met the applicable suitability standards.
You may revoke your subscription at any time within
five business days of submission.
SR-2
<PAGE>
EXHIBIT C
ML JWH STRATEGIC ALLOCATION FUND L.P.
____________________
SUBSCRIPTION INSTRUCTIONS
YOU SHOULD CAREFULLY READ AND REVIEW BOTH PARTS OF THE PROSPECTUS AND THE
ACCOMPANYING SUMMARY FUND FINANCIAL INFORMATION.
EXISTING INVESTORS SUBSCRIBING FOR ADDITIONAL UNITS (EXCEPT ARKANSAS, MAINE
AND MICHIGAN RESIDENTS) NEED NOT COMPLETE AN ADDITIONAL SUBSCRIPTION AGREEMENT
SIGNATURE PAGE. SUCH INVESTORS' MERRILL LYNCH FINANCIAL CONSULTANTS WILL
RECONFIRM THEIR SUITABILITY.
FILL IN ALL OF THE BOXES ON PAGES SA-4 AND SA-5 TYPE OR PRINT USING BLACK
INK ONLY AND ONE LETTER OR NUMBER PER BOX, AS FOLLOWS:
Item 1 --Financial Consultants must complete the information required.
Item 2 --Enter the number of Units to be purchased or check the appropriate
dollar amount of subscription. Only whole Units will be sold. If a
$5,000/ $2,000 minimum dollar amount subscription is specified, the
largest number of whole Units will be purchased.
Item 3 --Enter customer's Merrill Lynch Account Number.
Item 4 --Enter the Social Security Number or Taxpayer ID Number. In case of
joint ownership, either Social Security Number may be used.
The Signature Page is generally self-explanatory; however, we have provided
specific instructions for the following:
Trust -- Enter the Trust name on line 7 and the trustee's name on line 8,
followed by "Trustee." If applicable, use line 9 for the custodian's name,
followed by "Custodian." Be sure to furnish the Taxpayer ID Number of the
Trust.
Custodian Under Uniform Gifts to Minors Act -- Complete line 5 with the
name of minor followed by "UGMA." On line 8 enter the custodian's name, followed
by "Custodian." Be sure to furnish the minor's Social Security Number.
Partnership or Corporation -- The Partnership or Corporation name is
required on line 7. Enter an officer's or partner's name on line 8. Be sure to
furnish the Taxpayer ID Number of the Partnership or Corporation.
Items -- Enter the exact name in which the
5,6,7 Units are to be held.
Item 9 -- Complete information as required.
Item 10 --The investor(s) (except current investors in the fund other than
residents of Arkansas, Maine or Michigan) must execute the
Subscription Agreement Signature Page (Item 10, Page SA-5) and review
the representation relating to backup withholding tax underneath the
signature and telephone number lines in Item 10.
Item 11 --Financial Consultants must complete the information required.
THE SPECIMEN COPY OF THE SUBSCRIPTION AGREEMENT SIGNATURE PAGE (PAGES SA-2
AND SA-3) SHOULD NOT BE EXECUTED.
___________________________________________
Instructions to Financial Consultants:
THE EXECUTED SUBSCRIPTION AGREEMENT
SIGNATURE PAGE MUST BE RETAINED
IN THE BRANCH OFFICE.
SUITABILITY RECONFIRMATIONS (I.E., SUBSCRIPTION AGREEMENT SIGNATURE PAGES
EXECUTED BY FINANCIAL CONSULTANTS OR ANOTHER FORM OF WRITTEN RECONFIRMATION
APPROVED BY THE BRANCH OFFICE) MUST ALSO BE RETAINED IN THE BRANCH OFFICE.
SA-i
<PAGE>
ML JWH STRATEGIC ALLOCATION [ ] FUND L.P.
LIMITED PARTNERSHIP UNITS
____________________
BY EXECUTING THIS SUBSCRIPTION AGREEMENT SUBSCRIBERS ARE
NOT WAIVING ANY RIGHTS UNDER THE SECURITIES ACT
OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934
____________________
SUBSCRIPTION AGREEMENT
ML JWH STRATEGIC ALLOCATION FUND L.P.
c/o Merrill Lynch Investment Partners Inc.
General Partner
Merrill Lynch World Headquarters
South Tower[ ]
World Financial Center
New York, New York 10080-6106
Dear Sirs:
1. I subscribe for the amount of Units indicated on the Subscription
Agreement Signature Page.
The purchase price is the Net Asset Value per Unit -- 97% of the Net
Asset Value per Unit if I am a Merrill Lynch officer or employee (retirement
accounts do not qualify for discounts).
The purchase date for my Units is the first day of the calendar month
immediately following this subscription being accepted. My Financial Consultant
will tell me the settlement date for my purchase, which will be not more than 5
business days after the purchase date. I will have the subscription funds in my
Merrill Lynch customer securities account on such settlement date.
2. I have received both parts of the Prospectus together with the
accompanying summary Fund financial information. I understand that by
submitting this Subscription Agreement I am making the representations and
warranties set forth in Exhibit B -- Subscription Requirements in the
Prospectus.
3. I irrevocably appoint MLIP as my true and lawful Attorney-in-
Fact, with full power of substitution, to execute, deliver and record any
documents or instruments which MLIP considers appropriate to carry out the
provisions of the Limited Partnership Agreement.
4. THIS SUBSCRIPTION AGREEMENT IS GOVERNED BY THE LAWS OF THE STATE
OF NEW YORK.
NO ONE SHOULD INVEST MORE THAN 10% OF HIS OR HER
READILY MARKETABLE ASSETS IN THE FUND.
SA-I
<PAGE>
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
1 Financial Consultant [____________] [_] [_______________] [______]
Name First M.I Last Sub.Order Ref.#
Financial Consultant [___]-[___]-[____] Financial Consultant Number [____] Branch Wire Code [___]
Phone Number
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ML JWH STRATEGIC ALLOCATION FUND LP.
LIMITED PARTNERSHIP UNITS
SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY SIGNATURE PAGE
Please print and type. Use BLACK ink only and only one character per box.
I subscribe for Limited Partnership Units in ML JWH Strategic Allocation Fund
L.P (the "Fund") and authorize Merrill Lynch. Pierce, Fenner & Smith
Incorporated to debit my customer securities account in the amount set forth
below. The Units are sold at Net Asset Value (97% of such Net Asset Value for
Merrill Lynch & Co.Inc. officers and employees).
I acknowledge receipt of the Prospectus of the Fund together with summary
Fund financial Information.
If I am a participant in a Merrill Lynch sponsored IRA, BASIC(TM) or SEP
account and purchasing Units for such an account. I hereby acknowledge that:
1. An amount at least equal to the purchase price for the Units is in an
IRA, BASIC(TM) or SEP account at Merrill Lynch, Pierce, Fenner & Smith
Incorporated;
2. The minimum value of all securities and funds in such IRA, BASIC(TM) or
SEP accounts is $20,000;
3. The minimum subscription is 20 Units ($2,000, if less) and the amount of
this subscription is no more than 10% of the value of the IRA, BASIC(TM) of SEP
account on the subscription date; and
4. Each separate IRA ,BASIC(TM) or SEP account of the investor seeking to
purchase Units meets the above eligibility requirements.
<TABLE>
<S> <C> <C> <C>
2 [_______] $5,000 [_] $2,000 [_] 3 [___]-[_____]
Number of Units (minimum 50 Units Merrill Lynch Account#
($5,000, if less); 20 Units ($2,000,
If less) for IRAs, tax-exempt investors
and existing Limited Partners subscribing
for additional Units, incremental investments
in one Unit multiples)
4 [___]-[__]-[____] [__]-[_______]
Social Security Number or Taxpayer ID Number
Limited Partner Name
5 [_______________] [_] [____________________]
First Name M.I Last Name
Joint Partner Name
6 [______________] [_] [____________________]
First Name M.I Last Name
Partnership, Corporate or Trust Limited Partner Name
7 [________________________________________]
Partner, Officer, Trustee, Beneficiary, Power of Attorney or Custodian under UGMA\UTMA
8 [_______________________________________]
Additional Information
9 [_______________________________________]
Residence Address of Limited Partner (P.O. Box Numbers Are Not Acceptable For Residence Address)
[______] [___________________________________________________________] - [_______]
Street Number Street Name Apt. Number
[___________] [________________________________________] - [_______] [_______________________]
Bldg. No City State Zip Code
[_______________________________________________]
Country (If Other Than U.S.A)
Mailing Address of Limited Partner (If Other Than Residence Address)
[______________] [_____________________________________________________] - [________________]
Street Address Street Name Apt. Number
[____________] [__________________] [_____________________________________] [___________] [_________________________]
Bldg. No. P.O.Box No City State Zip Code
[______________________________________]
Country (if Other Than U.S.A.)
[_] Check box if Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") is custodian.
Name of Custodian, If not Merrill Lynch
[_______________________________________________________________________________]
Mailing Address of Custodian , Other Than Merrill Lynch
[___________________________] [____________________________________________________] [________________________]
Street Number Street Name Apt. Number
[__________________________] [_______________________] [___________________________________________] [__________] [_____________]
Bldg. No P.O. Box No. City State Zip Code
[______________________________________________]
Country ( if Other Than U.S.A.)
</TABLE>
SA-2
<PAGE>
________________________________________________________________________________
________________________________________________________________________________
ML JWH STRATEGIC ALLOCATION FUND L.P.
LIMITED PARTNERSHIP UNITS
SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY SIGNATURE PAGE (continued)
- --------------------------------------------------------------------------------
10 For Use By Investor
X ________________________________ X ___________________________________
Signature of Investor Date Signature of Joint Investor (if any)
Date
( ) __ Subscription for the series of
-------------------------------- Units to be sold as of
Telephone Number of Investor ____________________ [insert date]
SUBMITTING THIS SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY SIGNATURE PAGE IN
NO RESPECT CONSTITUTES A WAIVER OF ANY RIGHTS UNDER THE SECURITIES ACT OF 1933
OR UNDER THE SECURITIES EXCHANGE ACT OF 1934, I ACKNOWLEDGE THAT I HAVE
RECEIVED THE PROSPECTUS DATED _____, 1998 AND SUMMARY FINANCIAL INFORMATION
RELATING TO THE FUND CURRENT WITHIN 60 CALENDAR DAYS.
I have checked the following box if I am subject to backup withholding under
the provisions of Section 340(a)(1)(C) of the Internal Revenue Code: [_]. Under
the penalties of perjury, by signature above I hereby certify that the Social
Security Number or Taxpayer ID Number shown on the front of this Subscription
Agreement and Power of Attorney Signature Page next to my name is my true,
correct and complete Social Security Number or Taxpayer ID Number and that the
information given in the immediately preceding sentences is true, correct and
complete.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
11 FINANCIAL CONSULTANT MUST SIGN
I have reasonable grounds to believe, based on information obtained from the
investor concerning his/her investment objectives, other investments financial
situation and needs and any other information known by me, that Investment in
the Fund is suitable for such investor in light of his/her financial position,
net worth and other suitability characteristics. I have also informed the
investor of the unlikelihood of a public trading market developing for the
Units.
The Financial Consultant MUST sign below in order to substantiate compliance
with Appendix F to Article 3, Section 34 of the NASD's Rules of Fair Practice.
X _____________________________________________________________________________
Financial Consultant Signature Date
Office Manager approved of Merrill Lynch sponsored retirement account purchases.
X _____________________________________________________________________________
Office Manager Signature Date
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Date Received Country Code Additional Order Control Number
For Office Use Only [_][_][_][_][_][_] [_][_] [_] [_][_][_][_][_]
</TABLE>
SA-3
<PAGE>
<TABLE>
<S> <C>
------------------------------------------------------------------------------------------------------------
1 Financial Consultant [____________] [_] [________________] [______]
Name First M.I. Last Sub.Order Ref.#
Financial Consultant [___] - [___]- [____] Financial Consultant Number [____] Branch Wire Code [___]
Phone Number
-------------------------------------------------------------------------------------------------------------
</TABLE>
ML JWH STRATEGIC ALLOCATION FUND L.P.
LIMITED PARTNERSHIP UNITS
SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY SIGNATURE PAGE
PLEASE PRINT OR TYPE. USE BLACK INK ONLY AND ONE CHARACTER PER BOOK.
I subscribe for Limited Partnership Units in ML JWH Strategic Allocation
Fund L.P. (the "Fund") and authorize Merrill Lynch, Pierce, Fenner & Smith
Incorporated to debit my customer securities account in the amount set forth
below. The Units are sold at Net Asset Value (97% of such Net Asset Value for
Merrill Lynch & Co., Inc. officers and employees.)
I acknowledge receipt of the Prospectus of the Fund together with summary
Fund financial information.
If I am a participant in a Merrill Lynch sponsored IRA, Basic(TM) or SEP
account and am purchasing Units for such an account, I hereby acknowledge that:
1. An amount at least equal to the purchase price for the Units is in an
IRA, Basic(TM) or SEP account at Merrill Lynch, Pierce, Fenner & Smith
Incorporated:
2. The minimum value of all securities and funds in such IRA, Basic(TM) or
SEP account is $20,000:
3. The minimum subscription is 20 Units ($2,000, if less) and the amount
of this subscription is no more than 10% of the value of the IRA,
Basic(TM) or SEP account on the subscription date; and
4. Each separate IRA, Basic(TM) or SEP account of the Investor seeking to
purchase Units meets the above eligibility requirements.
<TABLE>
<S> <C> <C> <C>
2 [_______] $5,000 [_] $2,000 [_] 3 [___]-[________________________]
Number of Units (minimum 50 Units Merrill Lynch Account #
($5,000, if less); 20 Units ($2,000, if
less) for IRAs, tax-exempt Investors
and existing Limited Partners subscrib-
ing for additional Units: Incremental
investments in one Unit multiples)
4 [___]-[__]-[____] [__]-[__________]
Social Security Number or Taxpayer ID Number
Limited Partner Name
5 [___________________________________] [_] [________________________________________________________________]
First Name M.I. Last Name
Joint Partnership Name
6 [___________________________________] [_] [________________________________________________________________]
First Name M.I. Last Name
Partnership, Corporate or Trust Limited Partner Name
7 [____________________________________________________________________________________________]
Partner, Officer, Trustee, Beneficiary, Power of Attorney or Custodian under UGMA/UTMA
8 [____________________________________________________________________________________________]
Additional Information
9 [____________________________________________________________________________________________]
Residence Address of Limited Partner (P.O. Box Numbers Are Not Acceptable For Residence Address)
[____________] [____________________________________________________________________________________] [__________]
Street Number Street Name Apt. Number
[__________] [________________________________________________________] [________] [_______________________]
Bldg. No. City State Zip Code
[______________________________________________]
Country (If Other Than U.S.A.)
Mailing Address of Limited Partner (If Other Than Residence Address)
[_____________] [____________________________________________________________________________________] [__________]
Street Number Street Name Apt. Number
[__________] [________________] [___________________________________________________] [________] [_________________]
Bldg. No. P.O. Box No. City State Zip Code
[______________________________________________]
Country (If Other Than U.S.A.)
[_] Check box if Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") is custodian.
Name of Custodian, If Not Merrill Lynch
[________________________________________________________________________]
Mailing Address of Custodian, Other Than Merrill Lynch
[____________] [____________________________________________________________________________________] [___________]
Street Number Street Name Apt. Name
[__________] [_______________] [__________________________________________________] [__________] [________________]
Bldg. No. P.O. Box No. City State Zip Code
[_____________________________________________]
Country (If Other Than U.S.A.)
</TABLE>
SA-4
<PAGE>
EXECUTION COPY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ML JWH STRATEGIC ALLOCATION FUND L.P.
LIMITED PARTNERSHIP UNITS
SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY SIGNATURE PAGE (CONTINUED)
- --------------------------------------------------------------------------------
10 FOR USE BY INVESTOR
<TABLE>
<S> <C>
X _________________________________ X ________________________________________________
Signature of Investor Date Signature of Joint Investor (if any) Date
( ) -- Subscription for the series of Units to be sold as of
_________________________________
Telephone Number of Investor [Insert date]
______________________________________
</TABLE>
SUBMITTING THIS SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY SIGNATURE PAGE IN
NO RESPECT CONSTITUTES A WAIVER OF ANY RIGHTS UNDER THE SECURITIES ACT OF 1933
OR UNDER THE SECURITIES EXCHANGE ACT OF 1934. I ACKNOWLEDGE THAT I HAVE
RECEIVED THE PROSPECTUS DATED ______, 1998 AND SUMMARY FINANCIAL INFORMATION
RELATING TO THE FUND CURRENT WITHIN 60 CALENDAR DAYS.
I have checked the following box if I am subject to backup withholding under
the provisions of Section 3406(a)(1)(C) of the Internal Revenue Code: [_].
Under the penalties of perjury, by signature above I hereby certify that the
Social Security Number or Taxpayer ID Number shown on the front of this
Subscription Agreement and Power of Attorney Signature Page next to my name is
my true, correct and complete Social Security Number or Taxpayer ID Number and
that the information given in the immediately preceding sentence is true,
correct and complete.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
11 FINANCIAL CONSULTANT MUST SIGN
I have reasonable grounds to believe, based on information obtained from the
investor concerning his/her investment objectives, other investments, financial
situation and needs and any other information known by me, that investment in
the Fund is suitable for such investor in light of his/her financial position,
net worth and other suitability characteristics. I have also informed the
investor of the unlikelihood of a public trading market developing for the
Units.
The Financial Consultant MUST sign below in order to substantiate compliance
with Appendix F to Article 3, Section 34 of the NASD's Rules of Fair Practice.
X _____________________________________________________________________________
Financial Consultant Signature Date
Office Manager approval of Merrill Lynch sponsored retirement account
purchases.
X _____________________________________________________________________________
Office Manager Signature Date
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DATE RECEIVED COUNTRY CODE ADDITIONAL ORDER CONTROL NUMBER
<S> <C> <C> <C> <C>
FOR OFFICE USE ONLY [_][_][_][_][_][_] [_][_] [_] [_][_][_][_][_]
</TABLE>
SA-5
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Merrill Lynch Investment Partners Inc. will advance all ongoing
offering costs, as described in the Prospectus, for which it shall be reimbursed
by the Registrant in 12 equal monthly installments beginning July 31, 1998. Such
ongoing offering costs are estimated at $600,000. The following is an estimate
of such costs:
<TABLE>
<CAPTION>
Approximate
Amount
------------
<S> <C>
Securities and Exchange Commission Registration Fee.......... $ 78,128*
National Association of Securities Dealers, Inc. Filing Fee.. $ 26,984*
Printing Expenses............................................ $125,000
Fees of Certified Public Accountants......................... $ 50,000
Blue Sky Expenses (Excluding Legal Fees)..................... $ 50,000
Fees of Counsel.............................................. $150,000
Escrow Fees.................................................. $ 25,000
Advertising and Sales Literature............................. $ 25,000
Miscellaneous Offering Costs................................. $ 69,888
--------
Total....................................................... $600,000
========
</TABLE>
____________________
* Fees marked with an asterisk are exact rather than estimated and approximate.
___________________
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 16 of the Limited Partnership Agreement (attached as Exhibit A to
the prospectus which forms a part of the Registration Statement) provides for
the indemnification of Merrill Lynch Investment Partners Inc. ("MLIP"), the
general partner of the Registrant, and certain of its Affiliates by the
Registrant. "Affiliates" shall mean any person performing services on behalf of
the Registrant who: (1) directly or indirectly controls, is controlled by, or is
under common control with MLIP; or (2) owns or controls 10% or more of the
outstanding voting securities of MLIP; or (3) is an officer or director of MLIP;
or (4) if MLIP is an officer, director, partner or trustee, is any entity for
which MLIP acts in any such capacity. Indemnification is to be provided for any
loss suffered by the registrant which arises out of any action or inaction, if
the party, in good faith, determined that such course of conduct was in the best
interest of the Registrant and such conduct did not constitute negligence or
misconduct. MLIP and its affiliates will only be entitled to indemnification
for losses incurred by such affiliates in performing the duties of MLIP and
acting wholly within the scope of the authority of MLIP.
In the Selling Agreement, John W. Henry & Co., Inc. ("JWH") has agreed to
indemnify each person who controls MLIP within the meaning of Section 15 of the
Securities Act of 1933 and each person who signed this Registration Statement or
is a director of MLIP against losses, claims, damages, liabilities or expenses
arising out of or based upon any untrue statement or omission or alleged untrue
statement or omission relating or with respect to JWH or any principal of JWH or
their operations, trading systems, methods or performance, which was made in any
preliminary prospectus, this Registration Statement as declared effective, the
Prospectus included in this Registration Statement when declared effective, or
in any amendment or supplement thereto and furnished by or approved by JWH for
inclusion therein. JWH has also agreed to contribute to the amounts paid by such
controlling persons, signatees or directors in respect of any such losses,
claims, damages, liabilities or expenses in the event that the foregoing
indemnity is unavailable or insufficient.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
None.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The following documents (unless otherwise indicated) are filed
herewith and made a part of this Registration Statement:
(a) Exhibits.
Exhibit
Number Description of Document
------ -----------------------
THE FOLLOWING EXHIBITS ARE FILED HEREWITH:
3.02 Third Amended and Restated Limited Partnership Agreement of the
(amended) Registrant (included as Exhibit A to the
Prospectus).
5.01(a) Opinion of Sidley & Austin relating to the legality of the Units.
8.01(a) Opinion of Sidley & Austin with respect to Federal Income Tax
consequences.
10.05 Form of Subscription Agreement and Power of Attorney (included as
(amended) Exhibit C the Prospectus).
23.09 Consent of Deloitte & Touche LLP.
23.10 Consent of Sidley & Austin.
Exhibits 3.03 and 10.08, the Certificate of Formation and the Limited
Liability Company Operating Agreement of ML JWH Strategic Joint Venture LLC,
Should be deleted from the Registration Statement, as the Fund will no longer
invest in this entity.
__________________
THE FOLLOWING EXHIBITS ARE INCORPORATED BY REFERENCE HEREIN FROM
THE EXHIBITS OF THE SAME DESCRIPTION AND NUMBER FILED WITH
AMENDMENT NO. 2 TO THE REGISTRANT'S REGISTRATION STATEMENT ON FORM
S-1 (REGISTRATION NO. 33-80509), FILED WITH THE COMMISSION ON
APRIL 23, 1996, WHICH BECAME EFFECTIVE APRIL 25, 1996).
Exhibit
Number Description of Document
------ -----------------------
1.01 Form of Selling Agreement among the Registrant, MLIP, Merrill
(amended) Lynch Futures Inc.("Merrill Lynch Futures"), Merrill Lynch,
Pierce, Fenner & Smith Incorporated (the "Selling Agent") and JWH.
3.01(i) Certificate of Limited Partnership of the Registrant.
5.01(b) Opinion of Richards, Layton & Finger relating to the legality of
the Units.
10.02 Form of Customer Agreement between the Registrant and Merrill
Lynch Futures.
10.03 Foreign Exchange Desk Service Agreement.
10.06 Form of Investment Advisory Contract among the Registrant's
joint venture with JWH, MLIP, Merrill Lynch Futures and Merrill
Lynch Asset Management, L.P.
10.07 Form of Custody Agreement among the Registrant, MLIP and the
Selling Agent.
99.01 Securities and Exchange Commission Release No. 33-6815--
Interpretation and Request for Public Comment--Statement of the
Commission Regarding Disclosure by Issuers of Interests in
Publicly Offered Commodity Pools (54 Fed. Reg. 5600; February 6,
1989).
II-2
<PAGE>
99.02 Commodity Futures Trading Commission--Interpretative Statement and
Request for Comments --Statement of the Commodity Futures Trading
Commission Regarding Disclosure by Commodity Pool Operators of
Past Performance Records and Pool Expenses and Requests for
Comments (54 Fed. Reg. 5597; February 6, 1989).
99.03 North American Security Administrators Association Guidelines for
Registration of Commodity Pool Programs.
__________________
ITEM 17.
The undersinged registrant hereby undertakes:
(a) Rule 415 Offerings
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Indemnification
Insofar as indemnification for liabilities under the Securities Act of
1933 may be permitted to officers, directors or controlling persons of the
registrant pursuant to the provisions described in Item 14 above, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by an officer, director,
or controlling person of the registrant in the successful defense of any such
action, suit or proceeding) is asserted by such officer, director or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the General
Partner of the Registrant has duly caused this Registration Statement or
Registration Statement Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York in the State of New York on
the ____ day of July, 1998.
ML JWH STRATEGIC ALLOCATION FUND L.P.
BY: MERRILL LYNCH INVESTMENT PARTNERS INC.
GENERAL PARTNER
BY: /S/ JOHN R. FRAWLEY, JR.
-----------------------------
JOHN R. FRAWLEY, JR.
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE
OFFICER
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or Registration Statement Amendment has been signed below
by the following person on behalf of Merrill Lynch Investment Partners Inc.,
General Partner of the Registrant, in the capacities and on the date indicated.
/S/ JOHN R. FRAWLEY, JR. Chairman, Chief Executive July __, 1998
- ----------------------------
JOHN R. FRAWLEY, JR. Officer, President and Director
(Principal Executive Officer)
/S/ JO ANN DI DARIO Vice President, Chief July __, 1998
- ----------------------------
JO ANN DI DARIO Financial Officer and Treasurer
(Principal Financial
and Accounting Officer)
/S/ JEFFREY F. CHANDOR Senior Vice President, July __, 1998
- ----------------------------
JEFFREY F. CHANDOR Director of Sales,
Marketing and Research and
Director
/S/ STEPHEN G. BODURTHA Director July __, 1998
- ----------------------------
STEPHEN G. BODURTHA
/S/ ALLEN N. JONES Director July __, 1998
- ----------------------------
ALLEN N. JONES
/S/ JOSEPH H. MOGLIA Director July __, 1998
- ----------------------------
JOSEPH H. MOGLIA
(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 PARTNERS INC.
GENERAL PARTNER OF REGISTRANT
BY /S/ JOHN R. FRAWLEY, JR. July __, 1998
--------------------------------
JOHN R. FRAWLEY, JR.
CHAIRMAN, CHIEF EXECUTIVE
OFFICER AND PRESIDENT
II-4
<PAGE>
As filed with the Securities and Exchange Commission on June 30, 1998.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
EXHIBITS
To
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
___________
ML JWH STRATEGIC ALLOCATION FUND L.P.
(Exact name of registrant as specified in its charter)
================================================================================
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Document
- ------- -----------------------
5.01(a) Opinion of Sidley & Austin relating to the legality of the Units.
8.01(a) Opinion of Sidley & Austin with respect to federal income tax
consequences.
23.09 Consent of Deloitte & Touche LLP.
23.10 Consent of Sidley & Austin.
<PAGE>
EXHIBIT 5.01(A)
[LETTERHEAD OF SIDLEY & AUSTIN APPEARS HERE]
June 30, 1998
Merrill Lynch Investment Partners Inc.,
as general partner of ML JWH Strategic Allocation Fund L.P.
Merrill Lynch World Headquarters
South Tower, 6th Floor
World Financial Center
New York, New York 10080-6106
RE: ML JWH STRATEGIC ALLOCATION FUND L.P.
2,000,000 UNITS OF LIMITED PARTNERSHIP INTEREST (THE "UNITS")
Dear Sir or Madam:
We refer to the Amendment No. 1 to the Registration Statement on Form S-1
(the "Registration Statement") filed by ML JWH Strategic Allocation Fund L.P., a
Delaware limited partnership (the "Partnership"), with the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act"), on or about June 30, 1998. Capitalized terms not defined
herein have the meanings specified in the Registration Statement.
We are familiar with the proceedings to date with respect to the
proposed issuance and sale of the Units pursuant to the Prospectus and have
examined such records, documents and questions of law, and satisfied ourselves
as to such matters of fact, as we have considered relevant and necessary as a
basis for this opinion.
For purposes of rendering this opinion, we have assumed the
genuineness of all signatures, the legal capacity of natural persons, the
authenticity of all documents submitted to us as originals, the conformity to
originals of all documents submitted to us as certified or photostatic copies
and the authenticity of the original of such copies.
Based on the foregoing, we are of the opinion that:
1. The Partnership has been duly formed and is validly existing in
good standing as a limited partnership under the Delaware Revised Uniform
Limited Partnership Act (the "Act").
2. The General Partner has taken all necessary corporate action
required to be taken by it to authorize the issuance and sale of the Units to
the Limited Partners and to authorize the admission to the Partnership of the
Limited Partners as limited partners of the Partnership.
3. Assuming (i) the due authorization, execution and delivery to the
General Partner of a Subscription Agreement by each subscriber for Units (the
"Subscribers"), (ii) the due acceptance by the General Partner of each
Subscription Agreement and the due acceptance by the General Partner of the
admission of each of the Subscribers as limited partners of the Partnership,
(iii) the payment by each Subscriber of the full consideration due for the Units
to which it subscribed, (iv) that the books and records of the Partnership set
forth all information required by the Limited Partnership Agreement and the Act,
including all information with respect to all persons and entities to be
<PAGE>
SIDLEY & AUSTIN CHICAGO
Merrill Lynch Investment Partners Inc.,
JUNE 30, 1998
Page 2
admitted as Partners and their contributions to the Partnership, (v) that the
Subscribers, as limited partners of the Partnership, do not participate in the
control of the business of the Partnership within the meaning of the Act, (vi)
that the Units are offered and sold as described in the Prospectus and the
Limited Partnership Agreement and (vii) that the Subscribers meet all of the
applicable suitability standards set forth in the Prospectus and that the
representations and warranties of the Subscribers in their respective
Subscription Agreements are true and correct, the Units to be issued to the
Subscribers will represent valid and legally issued limited partner interests in
the Partnership and will be fully paid and nonassessable limited partner
interests in the Partnership, as to which the Subscribers, as limited partners
of the Partnership, will have no liability in excess of their obligations to
make contributions to the Partnership, their obligations to make other payments
provided for in the Limited Partnership Agreement and their share of the
Partnership's assets and undistributed profits (subject to the obligation of a
Limited Partner to repay funds distributed to such Limited Partner by the
Partnership in certain circumstances).
4. There are no provisions in the Limited Partnership Agreement the
inclusion of which, subject to the terms and conditions therein, would cause the
Limited Partners, as limited partners of the Partnership, to be deemed to be
participating in the control of the business of the Partnership within the
meaning of the Act.
This opinion is limited to the Act and the General Corporation Law of
the State of Delaware. We express no opinion as to the application of the
securities or blue sky laws of the various states (including the State of
Delaware) to the sale of the Units.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to all references to our firm included in or made a
part of the Registration Statement.
Very truly yours,
SIDLEY & AUSTIN
<PAGE>
EXHIBIT 8.01(A)
LETTERHEAD OF SIDLEY & AUSTIN APPEARS HERE]
June 30, 1998
Merrill Lynch Investment Partners Inc.
General Partner of
ML JWH Strategic
Allocation Fund L.P.
Merrill Lynch World Headquarters
South Tower, 6th Floor
World Financial Center
New York, New York 10080-6106
Re: Registration Statement on Form S-1
----------------------------------
Dear Sir or Madam:
We have acted as your counsel in connection with the preparation and
filing with the Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended, of the Registration Statement on Form S-1,
to be filed with the SEC on or about June 30, 1998 (the "Registration
Statement"), of ML JWH Strategic Allocation Fund L.P. (the "Fund"), a limited
partnership organized under the Delaware Revised Uniform Limited Partnership
Act.
We have reviewed such data, documents, questions of law and fact and
other matters as we have deemed pertinent for the purpose of this opinion. Based
upon the foregoing, we hereby confirm our opinion that the description set forth
under the caption "Tax Consequences" in the Prospectus (the "Prospectus")
constituting a part of the Registration Statement correctly describes (subject
to the uncertainties referred to therein) the material aspects of the United
States federal income tax treatment to a United States individual taxpayer, as
of the date hereof, of an investment in the Fund.
Very truly yours,
SIDLEY & AUSTIN
<PAGE>
EXHIBIT 23.09
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to the Registration Statement No.
333-47439 of ML JWH Strategic Allocation Fund L.P. (a Delaware limited
partnership) on Form S-1 of our report dated February 6, 1998 relating to the
financial statements of ML JWH Strategic Allocation Fund L.P. and of our report
dated February 6, 1998 relating to the balance sheet of Merrill Lynch Investment
Partners Inc. (formerly, ML Futures Investment Partners Inc.), appearing in the
Prospectus, which is a part of such Registration Statement, and to the reference
to us under the headings "Selected Financial Data" and "Lawyers; Accountants" in
such Prospectus.
Deloitte & Touche LLP
June 29, 1998
New York, New York
<PAGE>
EXHIBIT 23.10
[LETTERHEAD OF SIDLEY & AUSTIN APPEARS HERE]
CONSENT OF SIDLEY & AUSTIN
Sidley & Austin hereby consents to all references made to it in the
Registration Statement on Form S-1 of ML JWH Strategic Allocation Fund L.P., as
filed with the Securities and Exchange Commission on June 30, 1998.
Date: June 30, 1998
Very truly yours,
Sidley & Austin
