<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
--------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------- ---------------
Commission File Number 0-28928
ML JWH STRATEGIC ALLOCATION FUND L.P.
-------------------------------------
(Exact Name of Registrant as
specified in its charter)
Delaware 13-3887922
- ------------------------------- --------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
c/o Merrill Lynch Investment Partners Inc.
Merrill Lynch World Headquarters - South Tower, 6th Fl.
World Financial Center New York, New York 10080-6106
----------------------------------------------------
(Address of principal executive offices)
(Zip Code)
212-236-9757
---------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ML JWH STRATEGIC ALLOCATION FUND L.P.
------------------------------------
(a Delaware limited partnership)
--------------------------------
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
----------------- -----------------
<S> <C> <C>
ASSETS
Accrued interest $2,228,109 $196,088
U.S. Government obligations 178,087,357 172,586,264
Equity in commodity futures trading accounts:
Cash and options premium 35,321,356 41,484,775
Net unrealized profit on open contracts 8,520,707 14,898,289
----------------- -----------------
TOTAL $224,157,529 $229,165,416
================= =================
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Broker payables $5,009,766 $ -
Redemptions payable 2,266,624 1,116,238
Profit Share payable - 2,640,194
Brokerage commissions payable 1,415,345 1,473,380
Organizational and initial offering costs payable 65,686 114,951
Administrative fees payable 45,655 47,527
----------------- -----------------
Total liabilities 8,803,076 5,392,290
----------------- -----------------
MINORITY INTEREST 135,576 135,830
PARTNERS' CAPITAL:
General Partner (18177 and 18177 Units) 2,421,698 2,455,940
Limited Partners (1594546 and 1634252 Units) 212,797,179 221,181,356
----------------- -----------------
Total partners' capital 215,218,877 223,637,296
----------------- -----------------
TOTAL $224,157,529 $229,165,416
================= =================
NET ASSET VALUE PER UNIT (NOTE 2)
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
ML JWH STRATEGIC ALLOCATION FUND L.P.
-------------------------------------
(a Delaware limited partnership)
--------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
<TABLE>
<CAPTION>
For the three For the three
months ended months ended
March 31, March 31,
1998 1997
----------------- ---------------------
<S> <C> <C>
REVENUES:
Trading profit (loss):
Realized $4,511,184 $8,668,317
Change in unrealized (6,377,582) (92,283)
----------------- ---------------------
Total trading results (1,866,398) 8,576,034
----------------- ---------------------
Interest income 3,135,549 2,773,698
----------------- ---------------------
Total revenues 1,269,151 11,349,732
----------------- ---------------------
EXPENSES:
Administrative fees 137,578 137,516
Brokerage commissions 4,264,908 4,263,014
----------------- ---------------------
Total expenses 4,402,486 4,400,530
----------------- ---------------------
NET (LOSS) INCOME BEFORE
MINORITY INTEREST AND
PROFIT SHARE ALLOCATION (3,133,335) 6,949,202
Profit Share Allocation - -
Minority Interest 257 (978,363)
----------------- ---------------------
NET (LOSS) INCOME $(3,133,078) $5,970,839
================= =====================
NET (LOSS) INCOME PER UNIT:
Weighted average number of units
outstanding 1,641,697 1,713,819
================= =====================
Net (loss) income per weighted average
General Partner and Limited Partner Unit $(1.91) $3.48
================= =====================
</TABLE>
3
<PAGE>
ML JWH STRATEGIC ALLOCATION FUND L.P.
-------------------------------------
(a Delaware limited partnership)
--------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
-------------------------------------------------------
For the three months ended March 31, 1998 and 1997
--------------------------------------------------
<TABLE>
<CAPTION>
Limited General Subscriptions
Units Partners Partner Receivable Total
---------------- ----------------- ------------------ ----------------- ------------------
<S> <C> <C> <C> <C> <C>
PARTNERS' CAPITAL,
December 31, 1996 1,403,427 $188,284,065 $2,038,044 $(18,248,494) $172,073,615
Subscriptions 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
================ ================= ================= ================= ==================
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.
4
<PAGE>
ML JWH STRATEGIC ALLOCATION FUND L.P.
-------------------------------------
(a Delaware limited partnership)
--------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
These consolidated financial statements have been prepared without audit. In the
opinion of management, the consolidated financial statements contain all
adjustments (consisting of only normal recurring adjustments) necessary to
present fairly the financial position of Partnership as of March 31, 1998 and
the results of its operations for the three months ended March 31, 1998.
However, the operating results for the interim periods may not be indicative of
the results expected for the full year.
Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these financial statements be
read in conjunction with the financial statements and notes thereto included in
the Partnership's Annual Report on form 10-K filed with the Securities and
Exchange Commission for the year ended December 31, 1997 (the "Annual Report").
2. NET ASSET VALUE PER UNIT
For financial reporting purposes with respect to the Units, the Partnership
deducts organizational and offering costs that are payable to the General
Partner in determining the net asset value per unit. For all other purposes
(including computing net asset value for redemptions) the Partnership deducts
only the organizational and offering reimbursement actually paid. The net asset
value per unit was $133.45 and $135.34 for financial reporting purposes and
$133.48 and $135.40 for all other purposes at March 31, 1998 and December 31,
1997, respectively.
3. FAIR VALUE AND OFF-BALANCE SHEET RISK
The Partnership's total trading results by reporting category for the respective
periods were as follows:
For the three For the three
months ended months ended
March 31, March 31,
1998 1997
------------------ --------------------
Interest rates & Stock indices $(833,644) $(860,088)
Commodities (862,512) 2,079,268
Currencies (1,864,832) 9,079,867
Energy 5,173,485 (2,023,620)
Metals (3,478,895) 300,607
------------------ --------------------
$(1,866,398) $8,576,034
================== ====================
5
<PAGE>
The contract/notional values of the Partnership's open derivative instrument
positions as of March 31, 1998 and December 31, 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
-------------------------------------------- -------------------------------------------
Commitment to Commitment to Commitment to Commitment to
Purchase (Futures, Sell (Futures, Purchase (Futures, Sell (Futures,
Options & Forwards) Options & Forwards) Options & Forwards) Options & Forwards)
--------------------- -------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Interest rate and
Stock Indices $895,592,636 $447,337,403 $926,562,961 $351,175,040
Commodities 14,092,382 36,834,563 21,239,916 27,160,968
Currencies 137,956,391 287,767,740 199,371,182 390,721,620
Energy 6,065,280 31,046,095 - 39,106,920
Metals 13,197,771 11,511,355 18,503,375 43,958,106
------------------- ------------------- ------------------ ------------------
$1,066,904,460 $814,497,156 $1,165,677,434 $852,122,654
=================== =================== ================== ==================
</TABLE>
The contract/notional values of the Partnership's exchange-traded and
non-exchange-traded open derivative instrument positions as of March 31, 1998
and December 31, 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
-------------------------------------------- -------------------------------------------
Commitment to Commitment to Commitment to Commitment to
Purchase (Futures, Sell (Futures, Purchase (Futures, Sell (Futures,
Options & Forwards) Options & Forwards) Options & Forwards) Options & Forwards)
--------------------- -------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Exchange
traded $927,093,138 $523,411,092 $791,818,184 $468,259,393
Non-Exchange
traded 139,811,322 291,086,064 373,859,250 383,863,261
------------------- ------------------- ------------------- ------------------
$1,066,904,460 $814,497,156 $1,165,677,434 $852,122,654
=================== =================== =================== ==================
</TABLE>
The average fair values, based on contract/notional values, of the derivative
instruments held or issued as of the end of each calendar month during the three
months ended March 31, 1998 and the year ended December 31, 1997 were as
follows:
<TABLE>
<CAPTION>
1998 1997
-------------------------------------------- -------------------------------------------
Commitment to Commitment to Commitment to Commitment to
Purchase (Futures, Sell (Futures, Purchase (Futures, Sell (Futures,
Options & Forwards) Options & Forwards) Options & Forwards) Options & Forwards)
--------------------- -------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Interest rate and
Stock Indices $1,063,270,597 $287,680,295 $1,010,667,321 $263,783,626
Commodities 16,584,173 36,485,817 25,901,996 21,055,353
Currencies 390,325,862 533,328,897 395,236,535 484,258,015
Energy 3,775,190 33,954,848 22,168,532 21,307,623
Metals 20,409,359 8,318,771 9,266,297 36,089,734
------------------- ------------------- ------------------ ------------------
$1,494,365,181 $899,768,628 $1,463,240,681 $826,494,351
=================== =================== ================== ==================
</TABLE>
6
<PAGE>
The gross unrealized profit and the net unrealized profit on the Partnership's
open derivative instrument positions as of March 31, 1998 and December 31, 1997
were as follows:
<TABLE>
<CAPTION>
1998 1997
----------------------------------- ------------------------------------
Gross Net Gross Net
Unrealized Unrealized Unrealized Unrealized
Profit Profit Profit Profit
--------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Exchange
traded $4,102,721 $1,329,995 $14,037,333 $12,316,384
Non-Exchange
traded 7,089,251 7,190,712 8,613,088 2,581,905
--------------- -------------- --------------- ---------------
$11,191,972 $8,520,707 $22,650,421 $14,898,289
=============== ============== =============== ===============
</TABLE>
Item 2: Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations
-----------------------------------
Performance Summary
January 1, 1997 to March 31, 1997
The Fund was profitable in the first quarter, largely reflecting opportunities
in foreign exchange and agricultural commodity markets.
The quarter began with gains recorded in the foreign exchange sector as
movements in key currencies mirrored the trends of 1996. The U.S. dollar
continued to strengthen against the Japanese yen, German mark and Swiss franc.
Gold prices declined to levels not seen since October 1993 as investors shifted
assets into booming equity markets. The U.S. government bond market was
volatile, reflecting revived inflation concerns. Crude oil prices were buffeted,
in part, by the quirky structure of the U.N./Iraq oil agreement which
exaggerated market movements, both up and down.
By February, world financial markets had grown more volatile and long-term
trends in some sectors, notably gold, were reversed, reducing opportunities for
profit. Gains were generated, however, in positions on coffee, as prices were
pushed up by unfavorable weather threatening crop production in Brazil and
Colombia. In the currency markets, the U.S. dollar remained strong against most
major currencies, despite jawboning by finance ministers at the G-7 conference
early in the month. Global interest rate markets were buffeted by continued
speculation on the direction of interest rates in the U.S., United Kingdom, and
Germany.
Positions in agricultural commodities contributed to profits again in March,
particularly in coffee, as coffee roasters drew down on already limited reserves
of coffee beans. A classic "short squeeze"--where not enough immediate supply
was available to meet current demand - sent coffee futures prices to their
highest levels since 1994. Crude oil positions were unprofitable as a
bigger-than-anticipated buildup in U.S. stocks pushed prices down. Opportunities
for gain in interest rate markets were limited as continued speculation over the
direction of U.S. interest rates produced volatile and trendless markets.
January 1, 1998 to March 31, 1998
Much of the first quarter of 1998 offered a less-than-ideal trading environment
for the Fund. In January and February, well-established trends in key markets
were interrupted, and many markets traded within a tight range, reducing
opportunities for profit. But the profit picture improved in March, as the U.S.
dollar and other currencies returned to their prior patterns of price movement.
For the period, losses were incurred in positions in most currencies, metals,
stock indices and agricultural commodities. These losses more than offset gains
in 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
continued to decline as markets of the EMU nations converged.
The quarter began with political and financial scandals in Japan. Even so,
investors were hopeful that the Japanese government would rescue the nation's
economy with a much-anticipated economic stimulus package. 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 key metals. The price of gold rose as the dollar
weakened, turning profitable positions in the metal into losses. Gains were
recorded in European and U.S. government bond markets and in crude oil.
7
<PAGE>
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 range during the month. Gains continued to be
recorded, however, 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, which succumbed to weakening fundamentals.
The quarter ended with a sharp revival of the U.S. dollar in world markets,
especially against the yen, and a soaring British pound, which investors viewed
as a safe haven from EMU jitters. 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 during the
month, 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 overall. Positions in metals and agricultural commodities were
unprofitable overall.
MONTH-END NET ASSET VALUE PER UNIT
----------------------------------
Jan Feb Mar
--------------------------------------------
1997 $126.87 $126.83 $126.92
--------------------------------------------
1998 $133.35 $132.47 $133.48
--------------------------------------------
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable
8
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no pending proceedings to which the Partnership or the
General Partner is a party.
Item 2. Changes in Securities and Use of Proceeds
(a) None.
(b) None.
(c) None.
(d) The Fund registered $200,000,000 of limited
partnership interest . The Fund has sold
1,971,418 Units of limited partnership
interest, with an aggregate price of
$198,061,545. During the quarter ended March
31, 1998, no units of limited partnership
interest have been sold.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
Mr. Michael A. Karmelin, Chief Financial Officer, Vice President and
Treasurer of Merrill Lynch Investment Partners Inc. ("MLIP"), has announced that
he will resign from MLIP effective April 15, 1998 to pursue other business
opportunities. MLIP expects to announce his successor in the near future.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
There are no exhibits required to be filed as part of this
report.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the first three months
of fiscal 1998.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ML JWH STRATEGIC ALLOCATION FUND L.P.
By: MERRILL LYNCH INVESTMENT PARTNERS INC.
(General Partner)
Date: May 11, 1998 By /s/JOHN R. FRAWLEY, JR.
-----------------------
John R. Frawley, Jr.
Chairman, Chief Executive Officer,
President and Director
Date: May 11, 1998 By /s/ SERGIO M. PAVONE
--------------------
Sergio M. Pavone
Vice President and Controller
(Chief Accounting Officer)
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> BD
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> MAR-31-1998 MAR-31-1997
<CASH> 0 0
<RECEIVABLES> 46,070,172 66,464,892
<SECURITIES-RESALE> 0 0
<SECURITIES-BORROWED> 0 0
<INSTRUMENTS-OWNED> 178,087,357 164,035,194
<PP&E> 0 0
<TOTAL-ASSETS> 224,157,529 230,500,086
<SHORT-TERM> 0 0
<PAYABLES> 8,938,652 4,092,953
<REPOS-SOLD> 0 0
<SECURITIES-LOANED> 0 0
<INSTRUMENTS-SOLD> 0 0
<LONG-TERM> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 215,218,877 226,407,133
<TOTAL-LIABILITY-AND-EQUITY> 224,157,529 230,500,086
<TRADING-REVENUE> (1,866,398) 8,576,034
<INTEREST-DIVIDENDS> 3,135,549 2,773,678
<COMMISSIONS> 4,402,229 5,378,893
<INVESTMENT-BANKING-REVENUES> 0 0
<FEE-REVENUE> 0 0
<INTEREST-EXPENSE> 0 0
<COMPENSATION> 0 0
<INCOME-PRETAX> (3,133,078) 5,970,839
<INCOME-PRE-EXTRAORDINARY> (3,133,078) 5,970,839
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (3,133,078) 5,970,839
<EPS-PRIMARY> (1.91) 3.48
<EPS-DILUTED> (1.91) 3.48
</TABLE>
