<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 September 30, 1999
------------------
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.
Princeton Corporate Campus
800 Scudders Mill Road - Section 2G
Plainsboro, New Jersey 08536
----------------------------
(Address of principal executive offices)
(Zip Code)
609-282-6996
--------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___
---
<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>
September 30, December 31,
1999 1998
---------------- ---------------
<S> <C> <C>
ASSETS
- ------
Equity in commodity futures trading accounts:
Cash and options premium $ 40,235,355 $ 34,991,460
Net unrealized profit on open contracts 5,144,250 26,157,000
Government Securities
(Cost $345,379,119 and $263,057,253, respectively) 343,267,792 263,939,939
Cash 86 57,273
Accrued interest 2,859,908 3,064,653
--------------- ---------------
TOTAL $ 391,507,391 $ 328,210,325
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
LIABILITIES:
Redemptions payable $ 5,285,001 $ 5,952,585
Profit share payable - 5,436,351
Brokerage commissions payable 2,501,662 2,086,278
Administrative fees payable 80,699 67,299
Ongoing offering expenses payable 21,755 -
--------------- ---------------
Total liabilities 7,889,117 13,542,513
--------------- ---------------
MINORITY INTEREST 4,309,997 154,901
PARTNERS' CAPITAL:
General Partner (28,456 and 17,281 Units) 4,442,825 2,667,093
Limited Partners (2,400,990 and 2,020,545 Units) 374,865,452 311,845,818
--------------- ---------------
Total partners' capital 379,308,277 314,512,911
--------------- ---------------
TOTAL $ 391,507,391 $ 328,210,325
=============== ===============
NET ASSET VALUE PER UNIT
(Based on 2,429,446 and 2,037,826 Units outstanding) $ 156.13 $ 154.34
=============== ===============
</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 For the nine For the nine
months ended months ended months ended months ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
-------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUES:
Trading (loss) profit:
Realized $ 4,302,870 $ (2,916,484) $ 40,090,981 $ 12,907,329
Change in unrealized (20,829,286) 49,608,048 (23,784,619) 31,026,507
-------------- -------------- -------------- --------------
Total trading results (16,526,416) 46,691,564 16,306,362 43,933,836
-------------- -------------- -------------- --------------
Interest income 4,822,038 3,154,307 13,007,356 9,108,742
-------------- -------------- -------------- --------------
Total revenues (11,704,378) 49,845,871 29,313,718 53,042,578
-------------- -------------- -------------- --------------
EXPENSES:
Administrative fees 239,279 155,388 675,066 423,017
Brokerage commissions 7,417,624 4,817,019 20,927,045 13,113,522
Ongoing offering expenses 43,511 - 43,511 -
-------------- -------------- -------------- --------------
Total expenses 7,700,414 4,972,407 21,645,622 13,536,539
-------------- -------------- -------------- --------------
INCOME BEFORE
MINORITY INTEREST AND
PROFIT SHARE ALLOCATION (19,404,792) 44,873,464 7,668,096 39,506,039
Profit Share Allocation - - - -
Minority Interest (33,927) (5,136,589) (4,155,830) (5,135,013)
-------------- -------------- -------------- --------------
NET INCOME $ (19,438,719) $ 39,736,875 $ 3,512,266 $ 34,371,026
============== ============== ============== ==============
NET INCOME PER UNIT:
Weighted average number of units
outstanding 2,398,632 1,705,868 2,270,203 1,638,537
============== ============== ============== ==============
Net income per weighted average
General Partner and Limited
Partner Unit $ (8.10) $ 23.29 $ 1.55 $ 20.98
============== ============== ============== ==============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
ML JWH STRATEGIC ALLOCATION FUND L.P.
-------------------------------------
(a Delaware limited partnership)
------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
-------------------------------------------------------
For the nine months ended September 30, 1999 and 1998
-----------------------------------------------------
<TABLE>
<CAPTION>
Limited General
Units Partners Partner Total
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
PARTNERS' CAPITAL,
December 31, 1997 1,652,429 $ 221,181,356 $ 2,455,940 $ 223,637,296
Additions 412,648 55,482,679 101,403 55,584,082
Net Income - 34,017,667 353,359 34,371,026
Redemptions (214,703) (28,496,960) (313,118) (28,810,078)
---------- ------------- ----------- -------------
PARTNERS' CAPITAL,
September 30, 1998 1,850,374 $ 282,184,742 $ 2,597,584 $ 284,782,326
========== ============= =========== =============
PARTNERS' CAPITAL,
December 31, 1998 2,037,826 $ 311,845,818 $ 2,667,093 $ 314,512,911
Additions 566,800 86,865,746 1,788,180 88,653,926
Net Income - 3,524,714 (12,448) 3,512,266
Redemptions (175,180) (27,370,826) - (27,370,826)
---------- ------------- ----------- -------------
PARTNERS' CAPITAL,
September 30, 1999 2,429,446 $ 374,865,452 $ 4,442,825 $ 379,308,277
========== ============= =========== =============
</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 ML JWH Strategic Allocation
Fund L.P (the "Partnership" or the "Fund") as of September 30, 1999, and
the results of its operations for the three and nine month periods ended
September 30, 1999 and 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, 1998 (the "Annual Report").
2. FAIR VALUE AND OFF-BALANCE SHEET RISK
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (the "Statement"), effective for fiscal
years beginning after June 15, 2000, however, the Fund has adopted the
Statement effective January 1, 1999. This Statement supercedes SFAS No. 119
("Disclosure about Derivative Financial Instruments and Fair Value of
Financial Instruments") and SFAS No. 105 ("Disclosure of information about
Financial Instruments with Off-Balance Sheet Risk and Financial Instruments
with Concentrations of Credit Risk") whereby disclosure of average
aggregate fair values and contract/notional values, respectively, of
derivative financial instruments is no longer required for an entity such
as the Partnership which carries its assets at fair value. Such Statement
sets forth a much broader definition of a derivative instrument. The
General Partner does not believe that the application of the provisions of
such statement has a significant effect on the financial statements.
SFAS No. 133 defines a derivative as a financial instrument or other
contract that has all three of the following characteristics (1) one or
more underlyings, notional amounts or payment provisions (2) requires no
initial net investment or a smaller initial net investment than would be
required relative to changes in market factors (3) terms require or permit
net settlement. Generally, derivatives include a future, forward, swap or
option contract, or other financial instrument with similar characteristics
such as caps, floors and collars.
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 the market values of the financial instruments
or commodities underlying such derivative instruments frequently result in
changes in the Partnership's net unrealized profit (loss) on such
derivative instruments as reflected in the 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 such derivative instruments are
traded.
The General Partner has procedures in place intended to control market risk
exposure, although there can be no assurance that they will, in fact,
succeed in doing so. 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 (which has not occurred to
date), the General Partner's basic risk control procedures consist simply
of monitoring JWH, with the market risk controls being applied by JWH
itself.
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. Margin, 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.
5
<PAGE>
The credit risk associated with these instruments from counterparty non-
performance is the net unrealized profit included on the Consolidated
Statements of Financial Condition.
The Joint Venture has credit risk in respect to its counterparties and
brokers, but attempts to control this risk by dealing almost exlusively
with Merrill Lynch entities as counterparties and brokers.
Item 2: Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations
-----------------------------------
<TABLE>
<CAPTION>
MONTH-END NET ASSET VALUE PER UNIT
---------------------------------------------------------------------------------------------------------
Jan Feb Mar Apr May Jun Jul Aug Sep
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998 $133.35 $132.47 $133.48 $128.97 $134.18 $132.11 $130.50 $143.13 $153.91
---------------------------------------------------------------------------------------------------------
1999 $149.98 $153.82 $152.11 $158.66 $158.41 $164.26 $159.64 $159.75 $156.13
---------------------------------------------------------------------------------------------------------
</TABLE>
The Net Asset Value per Unit varies, until June 30, 1998, from how it would be
calculated for purposes of GAAP, due to the amortization of organization and
initial offering costs.
Performance Summary
January 1, 1998 to September 30, 1998
- -------------------------------------
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 nine 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.
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.
April 1, 1998 to June 30, 1998
Investor optimism regarding developments in Japan dissipated rapidly in the
second quarter, as economic reports grew bleak. Performance of the Fund
reflected the erratic behavior of the markets as investors grappled with the
possible impact of a Japanese recession on diverse global markets. Losses were
incurred overall in the three month period ended June 30, 1998, despite strong
gains realized in May.
The quarter began with trendless trading conditions in financial markets as
prospects for interest rate hikes in the U.S. and Germany gave stock and bond
markets on both sides of the Atlantic a good case of the jitters.
6
<PAGE>
Interventions by the Bank of Japan to support the Japanese yen kept the currency
markets on edge for much of the month. Gains in some agricultural commodities
traded failed to offset losses in financial markets. The Fund recorded strong
gains in May, however, as financial market trends showed more definition. Gains
were substantial overall in positions on the yen, which hit a seven year low
against the U.S. dollar.
In a move that surprised the markets, the U.S. and Japan jointly intervened on
June 17 on behalf of the Japanese currency, selling dollars and buying yen in
global foreign exchange markets. The impact on the Fund was sharp, if brief.
Losses were incurred in short positions on the yen, as the Japanese currency
rose against the dollar. But by month's end, the market had returned to
fundamentals, and yen losses were reversed, resulting in small gains in the
currency overall. Nonetheless, the Fund's performance was spotty in June, with
moderate losses recorded overall for the month.
Despite U.S./Japan intervention, the Fund realized sizeable gains in positions
on the yen in the second quarter. Positions in the Japanese Government bond,
where yields declined to historic lows, also resulted in strong gains in the
quarter, as did positions in short sterling; but these gains failed to offset
losses in other interest rate markets traded.
Also in the second quarter, the Fund recorded solid gains in crude oil positions
as prices fell on ample world supply. Profitable positions in coffee, sugar,
corn and wheat offset losses in other agricultural commodities traded in the
period. With the exception of London Metals Exchange aluminum, positions in
other metals traded resulted in losses overall, as did positions in stock
indices.
July 1, 1998 to September 30, 1998
The Fund recorded strong gains during the quarter - capitalizing for the most
part on trending opportunities in interest rate and agricultural commodity
markets worldwide - in the majority of the Fund's programs, reversing the modest
losses experienced in the first half of the year. This favorable performance for
the quarter was in direct contrast with the performance of world equity markets,
which were down substantially.
Worldwide economic turmoil was the focus of investors during the quarter. Global
investor uncertainty, the Russian default on its debt, decline in financial
market liquidity, fears of recession, commodity deflation and a flight to
quality, all contributed to the development of trends in key markets. Chief
among these trends were the rising government bond markets, particularly in
Germany and the U.S., where yields - which move in the opposite direction to
prices - fell to historic lows. Positions in this sector resulted in substantial
gains for the quarter.
Prices for agricultural commodities continued to be pressured downward by
reduced demand from emerging markets as well as expectations of large crops from
producer nations, the result of nearly ideal growing conditions. Corn and sugar
prices plummeted to 11-year lows on the bearish fundamentals; positions in both
commodities were profitable as were positions in wheat, cocoa, soybeans, soybean
oil and meal, offsetting losses in other commodities traded.
Currencies afforded fewer opportunities for profit. The U.S. dollar, rangebound
against the Japanese yen for much of the quarter, began a steep decline in
September, as Japanese officials renewed their threats of intervention in the
currency markets and prospects for passage of a bank reform bill in Parliament
improved. The German mark rose against its major counterparts, including the
dollar which suffered from its association with the declining U.S. equity
market. Trends in other currencies also shifted, negatively impacting positions
taken.
On balance for the quarter, profitable positions in interest rates and
agricultural commodities more than offset losses in currencies, metals and stock
indices. Performance in energy markets was mixed.
January 1, 1999 to September 30, 1999
- -------------------------------------
January 1, 1999 to March 31, 1999
ML JWH Strategic Allocation Fund L.P. (the "Fund") recorded slight losses in the
three month period ended March 31, 1999, largely reflecting poor performance in
the interest rate and metals market sectors.
Interest rate markets for the first part of the quarter moved upward; however,
March saw a significant decline in European rates as an economic slowdown became
more evident in the European Union. The expectation, realized in early April,
was that the European Central Bank (ECB) would lower rates in Europe to provide
a more favorable interest rate environment. Coupled with the change in direction
in European markets, there was increased volatility in Japanese interest rate
markets as the Bank of Japan switched from interest rate targeting to a monetary
growth targeting policy. In an effort to stem the current recession, Japanese
policy officials have attempted various fiscal and monetary stimuli, which have
caused significant directional changes in interest rates. U.S. interest rates
have continued to inch upward for the quarter. There are few signs that the U.S.
economy will slow during 1999.
Commodity markets have had mixed performance. Metals markets have been choppy
for the entire quarter and have not exhibited any clear trends. This lack of
direction has caused poor performance in the precious metals area to be somewhat
offset by base metal profits. The energy sector performed well for the quarter
with a major trend developing in March. Since the beginning of March there has
been a significant upward trend in crude oil prices.
7
<PAGE>
Agriculture commodities experienced mixed performance with many markets showing
potential signs of reversal. Overall, the Fund had slight losses in these
markets.
Currencies have provided positive performance for the Fund. A continuation of
the strong dollar, especially relative to the new euro, offset some of the
losses in other markets. Contrary to the belief of many investment banking
economists, the euro has not started out as a strong currency and there seems to
be little flow into this new potential reserve currency. With a decline of over
seven percent for the quarter, the euro has not lived up to its potential
expectations.
Index performance was positive for the quarter with early losses offset by
significant gains in March with the increase in the Nikkei stock index.
On the balance for the quarter, profitable positions in global currencies,
energy, and agricultural commodities were offset by losses in interest rates and
metals.
April 1, 1999 to June 30, 1999
Interest rate markets followed a consistent pattern throughout the quarter
toward lower prices as strong economic growth in the U.S. was coupled by fears
of Federal Reserve bias to higher interest rates. Long-term rates rose above the
6% mark leading to the highest interest rates in over a year. Though only taking
a neutral policy stand at the end of the quarter, the Fed raised rates 25 basis
points on June 30. Europe, though having overall slower growth also showed the
same trend toward higher rates especially in the last two months. This rise in
longer-term yields came in spite of a rate cut by the European Central Bank in
early April in an effort to stem the slowing growth in key economies.
Commodity markets have had mixed performance. While many agricultural
commodities have continued to show a downtrend, the descent has been muted and
volatility has picked up as markets headed into the key summer season. In spite
of the lackluster trend performance in many agricultural commodities, there was
good performance from both the gold market and energy complexes. The gold market
has been in steep decline after the Bank of England announced that it would
begin auctioning some of its gold reserves starting in July. The energy markets
also have shown favorable trends with oil prices continuing their upward trend.
Currencies have provided positive performance for the Fund with the decline in
the euro that began with its introduction at the beginning of the year still in
place. The key European currency has fallen from $1.17 to below $1.03 since the
beginning of the year. The yen has been rangebound for the more recent period
caused by intervention by the Bank of Japan which has tried to stop the yen from
appreciating. Other key currencies have not shown as significant trends as the
euro and thus had a smaller contribution to overall performance.
The Nikkei index continued to show upward trends during the quarter in response
to the latest economic numbers that suggest the Japanese economy is firming
after its long decline.
July 1, 1999 to September 30, 1999
ML JWH Strategic Allocation Fund L.P. (the Fund) was unprofitable for the
three-month period ending September 30, 1999. While certain markets traded were
profitable, the overall market environment was marked by volatility and trend
reversals. In such an environment, the Fund had a difficult time generating
profits.
The interest rate sector provided a good example of volatility and trend
reversals. Interest rates in the U.S. had been steadily rising for most of the
year. This had generated profits for the Fund through most of 1999. During the
third quarter, the market became choppy, as U.S. interest rates changed
direction several times. As a result, this was an unprofitable market for the
Fund. Interest rates in the Pacific rim performed similarly. However, European
interest rates continued a long-term trend of rising, but were not enough to
offset losses incurred in the U.S. and Pacific rim markets.
In the currency markets the strength in the Japanese yen yielded profits for the
Fund, despite attempts by the Japanese central bank to talk the dollar up and,
on a small scale, to intervene outright to prop up the dollar versus the yen.
But the profit in the yen was more than eroded by trading in European
currencies, and the sector overall was unprofitable.
Extreme heat in the United States led to volatility in agricultural prices.
While the long-term trend had been a decline in prices in the agricultural
sector, in the third quarter it was punctuated by sharp rises in certain
agricultural markets, which led to Fund losses. A multi-year down trend in gold
was abruptly reversed in the last days of the quarter and losses were registered
in metals.
During the third quarter the strongest performing sector for the Fund was
energy. The doubling of the price of crude oil through 1999 has been a very
profitable trend for the Fund.
YEAR 2000 COMPLIANCE
As the Year 2000 approaches, Merrill Lynch has undertaken initiatives to address
the Year 2000 problem (the "Y2K problem"), as more fully described in the 1998
Annual Report. The failure of Merrill Lynch's technology systems relating to a
Y2K problem would likely have a material adverse effect on the company's
business, results of operations, and financial condition. This effect could
include disruption of normal business transactions, such as the settlement,
execution, processing, and recording of trades in securities, commodities,
currencies, and other assets. The Y2K problem could also increase Merrill
Lynch's exposure to risk and legal liability and its need for liquidity.
The renovation phase of Merrill Lynch's Year 2000 system efforts, as described
in the 1998 Annual Report, was 100% completed as of June 30, 1999, and
production testing was 100% completed as of that date. In March and April 1999,
Merrill Lynch successfully participated in U.S. industrywide testing sponsored
by the Securities Industry Association. These tests involved an expanded number
of firms, transactions, and conditions compared with those previously conducted.
Merrill Lynch has participated in and continues to participate in numerous
industry tests throughout the world.
8
<PAGE>
Merrill Lynch's business units have developed and tested contingency plans. The
plans identify critical processes, potential Y2K problems, and personnel,
processes, and available resources needed to maintain operations. However, the
failure of exchanges, clearing organizations, vendors, service providers,
clients and counterparties, regulators, or others to resolve their own
processing issues in a timely manner could have a material adverse effect on
Merrill Lynch's business, results of operations, and financial condition.
In light of the interdependency of the parties in or serving the financial
markets, there can be no assurance that all Y2K problems will be identified and
remedied on a timely basis or that all remediation and contignency planning will
be successful. Public uncertainty regarding successful remediation of the Y2K
problem may cause a reduction in activity in the financial markets. This could
result in reduced liquidity as well as increased volatility. Disruption or
suspension of activity in the world's financial markets is also possible. In
some non-U.S. markets in which Merrill Lynch does business, the level of
awareness and remediation efforts relating to the Y2K problem are thought to be
less advanced than in the U.S. Management is unable at this point to ascertain
whether all significant third parties will successfully address the Y2K problem.
Merrill Lynch will continue to monitor third parties' Year 2000 readiness to
determine if additional or alternative measures are necessary. Contingency plans
have been established for all business units. Merrill Lynch's year-end balance
sheet levels will depend on Y2K risks and many other factors, including business
opportunities and customer demand.
As of September 24, 1999, the total estimated expenditures of existing and
incremental resources for the Year 2000 compliance initiative are approximately
$520 million. This estimate includes $104 million of occupancy, communications,
and other related overhead expenditures, as Merrill Lynch is applying a fully
costed pricing methodology for this project. Of the total estimated
expenditures, approximately $40 million, related to continued testing,
contingency planning, and risk management. There can be no assurance that the
costs associated with such efforts will not exceed those currently anticipated
by Merrill Lynch, or that the possible failure of such efforts will not have a
material adverse effect on Merrill Lynch's business, results of operations, or
financial condition.
9
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The following table indicates the trading Value at Risk associated with the
Fund's open positions by market category as of September 30, 1999 and December
31, 1998, and the average of the three and nine month periods ending September
30, 1999. As of September 30, 1999 and December 31, 1998, the Fund's total
capitalization was approximately $379 million and $314 million, all of which was
allocated to trading.
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------------------ ------------------------------
% OF TOTAL % OF TOTAL
MARKET SECTOR VALUE AT RISK CAPITALIZATION VALUE AT RISK CAPITALIZATION
- ------------- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Interest Rates $ 17,009,731 4.48% $ 12,538,585 3.98%
Currencies 16,776,636 4.42% 5,492,878 1.75
Stock Indices 2,715,599 0.72% 998,918 0.32
Metals 4,294,700 1.13% 1,551,500 0.49
Commodities 2,621,997 0.69% 2,159,281 0.69
Energy 5,411,500 1.43% 3,844,500 1.22
------------- -------------- ------------- -------------
$ 48,830,163 12.87% $ 26,585,662 8.45%
============= ============== ============= =============
<CAPTION>
Average month-end Average month-end
For the Period For the Period
July 1999 through September 1999 January 1999 through September 1999
-------------------------------- -----------------------------------
% OF TOTAL % OF TOTAL
MARKET SECTOR VALUE AT RISK CAPITALIZATION VALUE AT RISK CAPITALIZATION
- ------------- -------------- -------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Interest Rates $ 15,647,089 4.15% $ 26,779,448 7.57%
Currencies 13,374,621 3.55% 12,402,195 3.51%
Stock Indices 2,976,844 0.79% 3,185,187 0.90%
Metals 3,230,467 0.86% 2,645,628 0.75%
Commodities 2,640,126 0.70% 2,596,396 0.73%
Energy 4,973,900 1.32% 4,166,222 1.18%
-------------- -------------- ---------------- ----------------
$ 42,843,047 11.37% $ 51,775,076 14.64%
============== ============== ================ ================
</TABLE>
10
<PAGE>
MLAM'S Cash Management
MLAM invests approximately 80% of the Fund's assets in Government Securities. As
of September 30, 1999 and December 31, 1998, the Fund's MLAM account totalled
approximately $343 million and $264 million, respectively.
As of September 30, 1999, the Fund's MLAM account held the following
securities:
<TABLE>
<CAPTION>
As of September 30, 1999
Par Value Description Rate Maturity Date Fair Value
- -------------- --------------------------------- ----------- ------------------- -----------------
Long-Term
- --------------
<S> <C> <C> <C> <C>
12,000,000 Federal National Mortgage Association 5.720% January 9, 2001 $ 11,954,760
25,000,000 Federal National Mortgage Association 5.625% March 15, 2001 24,859,500
23,000,000 Federal National Mortgage Association 5.375% March 15, 2002 22,590,370
59,500,000 U.S. Treasury Note 4.625% November 30, 2000 58,969,399
8,000,000 U.S. Treasury Note 4.500% January 31, 2001 7,893,124
30,000,000 U.S. Treasury Note 5.375% February 15, 2001 29,922,656
15,000,000 U.S. Treasury Note 5.000% February 28, 2001 14,886,328
13,500,000 U.S. Treasury Note 5.625% May 15, 2001 13,500,000
15,000,000 U.S. Treasury Note 5.750% June 30, 2001 15,024,609
20,000,000 U.S. Treasury Note 4.500% September 30, 2000 19,814,063
1,000,000 U.S. Treasury Note 6.000% July 31, 2002 1,007,578
13,000,000 U.S. Treasury Note 5.875% November 30, 2001 13,057,891
-----------------
Subtotal 233,480,278
-----------------
Short-Term
- --------------
18,025,000 Federal National Mortgage Association 0.000% October 15, 1999 17,987,148
61,902,000 Federal Home Loan Mortgage Corp. 0.000% October 15, 1999 61,772,006
3,000,000 U.S. Treasury Note 5.500% March 31, 2000 3,005,391
24,000,000 U.S. Treasury Note 5.375% July 31, 2000 24,007,500
3,000,000 U.S. Treasury Note 6.000% August 15, 2000 3,015,469
-----------------
Subtotal 109,787,514
-----------------
Total Government Securities $ 343,267,792
=================
</TABLE>
11
<PAGE>
As of December 31, 1998, the Fund's MLAM account held the following securities:
<TABLE>
<CAPTION>
As of December 31, 1998
Par Value Description Rate Maturity Date Fair Value
- ----------- ------------------------------------- --------- ---------------- -------------
Long-Term
- ---------
<S> <C> <C> <C> <C>
2,000,000 U.S. Treasury Note 5.625% December 31, 1999 $ 2,019,531
13,000,000 U.S. Treasury Note 5.500% February 29, 2000 13,123,906
26,000,000 U.S. Treasury Note 5.500% March 31, 2000 26,260,000
15,000,000 U.S. Treasury Note 6.375% May 15, 2000 15,335,156
34,000,000 U.S. Treasury Note 5.375% July 31, 2000 34,377,188
3,000,000 U.S. Treasury Note 6.000% August 15, 2000 3,062,344
20,000,000 U.S. Treasury Note 4.500% September 30, 2000 19,959,375
10,000,000 U.S. Treasury Note 5.750% November 15, 2000 10,195,313
4,000,000 U.S. Treasury Note 5.625% November 30, 2000 4,071,875
20,000,000 U.S. Treasury Note 5.375% February 15, 2001 20,312,500
3,500,000 U.S. Treasury Note 5.625% May 15, 2001 3,584,766
1,000,000 U.S. Treasury Note 6.000% July 31, 2002 1,042,656
2,000,000 U.S. Treasury Note 5.750% April 30, 2003 2,082,187
5,000,000 U.S. Treasury Note 5.250% August 15, 2003 5,128,125
10,000,000 Federal National Mortgage Association 4.450% October 16, 2000 9,910,000
24,000,000 Federal National Mortgage Association 4.820% December 18, 2000 23,928,721
12,000,000 Federal National Mortgage Association 5.720% January 9, 2001 12,167,760
3,000,000 Federal National Mortgage Association 5.420% January 23, 2001 3,025,200
----------------
Subtotal 209,586,603
----------------
Short-Term
- -----------
12,849,000 Federal National Mortgage Association 5.090% January 14, 1999 12,823,301
41,655,000 Federal National Mortgage Association 5.080% January 21, 1999 41,530,035
----------------
Subtotal 54,353,336
----------------
Total Government Securities $ 263,939,939
----------------
</TABLE>
12
<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 originally registered units of limited partnership
interest. The Fund subsequently registered an additional
2,960,000 units of limited partnership interest. As of September
30, 1999, the Fund has sold 3,093,664 units of limited
partnership interest, with an aggregate price of $381,987,372.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
There are no exhibits required to be filed as part of this
report.
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed during the first nine
months of fiscal 1999.
13
<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: November 12, 1999 By /s/ JOHN R. FRAWLEY, JR.
------------------------
John R. Frawley, Jr.
Chairman, Chief Executive Officer,
President and Director
Date: November 12, 1999 By /s/ MICHAEL L. PUNGELLO
-----------------------
Michael L. Pungello
Vice President, Chief Financial Officer
and Treasurer
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> BD
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> SEP-30-1999 SEP-30-1998
<CASH> 86 57,273
<RECEIVABLES> 48,239,513 64,213,113
<SECURITIES-RESALE> 0 0
<SECURITIES-BORROWED> 0 0
<INSTRUMENTS-OWNED> 343,267,792 263,939,939
<PP&E> 0 0
<TOTAL-ASSETS> 391,507,391 328,210,325
<SHORT-TERM> 0 0
<PAYABLES> 12,199,114 13,697,414
<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> 379,308,277 314,512,911
<TOTAL-LIABILITY-AND-EQUITY> 391,507,391 328,210,325
<TRADING-REVENUE> 16,306,362 43,933,836
<INTEREST-DIVIDENDS> 13,007,356 9,108,742
<COMMISSIONS> 25,801,452 18,671,552
<INVESTMENT-BANKING-REVENUES> 0 0
<FEE-REVENUE> 0 0
<INTEREST-EXPENSE> 0 0
<COMPENSATION> 0 0
<INCOME-PRETAX> 3,512,266 34,371,026
<INCOME-PRE-EXTRAORDINARY> 3,512,266 34,371,026
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,512,266 34,371,026
<EPS-BASIC> 1.55 20.98
<EPS-DILUTED> 1.55 20.98
</TABLE>
