<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, 2000
--------------
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)
AND JOINT VENTURE
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
(unaudited)
------------------- ------------------
<S> <C> <C>
ASSETS
Equity in commodity futures trading accounts:
Cash and options premium $ 43,630,635 $ 49,466,829
Net unrealized profit on open contracts 18,140,379 15,377,657
Government Securities
(Cost $277,406,848 and $305,569,068, respectively) 275,306,752 302,660,752
Cash 323 15,003
Accrued interest 2,924,295 3,127,363
------------------- ------------------
TOTAL $ 340,002,384 $ 370,647,604
=================== ==================
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Redemptions payable $ 11,156,459 $ 3,609,053
Profit share payable - 4,207,026
Brokerage commissions payable 2,195,800 2,366,595
Administrative fees payable 70,832 76,341
Ongoing offering costs payable 21,755 21,755
------------------- ------------------
Total liabilities 13,444,846 10,280,770
------------------- ------------------
MINORITY INTEREST 151,518 146,975
PARTNERS' CAPITAL:
General Partner (26,383 and 27,921 Units) 3,782,948 4,087,563
Limited Partners (2,250,039 and 2,432,642 Units) 322,623,072 356,132,296
------------------- ------------------
Total partners' capital 326,406,020 360,219,859
------------------- ------------------
TOTAL $ 340,002,384 $ 370,647,604
=================== ==================
NET ASSET VALUE PER UNIT
(Based on 2,276,422, and 2,460,563, Units outstanding) $ 143.39 $ 146.40
=================== ==================
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
ML JWH STRATEGIC ALLOCATION FUND L.P.
(A DELAWARE LIMITED PARTNERSHIP)
AND JOINT VENTURE
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
For the three For the three
months ended months ended
March 31, March 31,
2000 1999
----------------- ---------------------
<S> <C> <C>
REVENUES:
Trading income (loss):
Realized $ (7,382,827) $ 13,775,693
Change in unrealized 3,484,300 (15,834,743)
----------------- ---------------------
Total trading results (3,898,527) (2,059,050)
Interest income 4,341,710 3,896,459
----------------- ---------------------
Total revenues 443,183 1,837,409
----------------- ---------------------
EXPENSES:
Administrative fees 223,754 204,843
Brokerage commissions 6,936,385 6,350,137
Ongoing Offering Expense 65,266 -
----------------- ---------------------
Total expenses 7,225,405 6,554,980
----------------- ---------------------
LOSS BEFORE
MINORITY INTEREST AND
PROFIT SHARE ALLOCATION (6,782,222) (4,717,570)
Profit Share Allocation - (7,967)
Minority Interest (4,639) 2,231
----------------- ---------------------
NET LOSS $ (6,786,861) $ (4,723,306)
================= =====================
NET LOSS PER UNIT:
Weighted average number of units
outstanding 2,417,511 2,141,103
================= =====================
Net loss per weighted average
General Partner and Limited Partner Unit $ (2.81) $ (2.21)
================= =====================
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
ML JWH STRATEGIC ALLOCATION FUND L.P.
(A DELAWARE LIMITED PARTNERSHIP)
AND JOINT VENTURE
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND MARCH 31, 1999
(unaudited)
<TABLE>
<CAPTION>
General Limited
Units Partner Partners Total
-------------- ------------------ -----------------------------------
<S> <C> <C> <C> <C>
PARTNERS' CAPITAL,
December 31, 1998 2,037,826 $2,667,093 $ 311,845,818 $ 314,512,911
Additions 185,508 463 28,391,219 28,391,682
Net loss - (38,427) (4,684,879) (4,723,306)
Redemptions (56,500) - (8,574,405) (8,574,405)
-------------- ------------------ --------------- ------------------
PARTNERS' CAPITAL,
March 31, 1999 2,166,834 $2,629,129 $ 326,977,753 $ 329,606,882
============== ================== =============== ==================
PARTNERS' CAPITAL,
December 31, 1999 2,460,563 $4,087,563 $ 356,132,296 $ 360,219,859
Additions 67,619 23,716 9,977,346 10,001,062
Net loss - (73,994) (6,712,867) (6,786,861)
Redemptions (251,760) (254,337) (36,773,703) (37,028,040)
-------------- ------------------ --------------- ------------------
PARTNERS' CAPITAL,
March 31, 2000 2,276,422 $3,782,948 $ 322,623,072 $ 326,406,020
============== ================== =============== ==================
</TABLE>
4
<PAGE>
ML JWH STRATEGIC ALLOCATION FUND L.P.
(A DELAWARE LIMITED PARTNERSHIP)
AND JOINT VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
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 "Joint Venure", "Partnership" or the "Fund") as
of March 31, 2000, and the results of its operations for the three
months ended March 31, 2000 and March 31, 1999. 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, 1999 (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, as amended by SFAS No. 137.
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 had
a significant effect on the consolidated 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 futures, forwards, swaps,
options or other financial instruments with similar characteristics such
as caps, floors and collars.
MARKET RISK
Derivative instruments involve varying degrees of off-balance sheet market
risk. 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, calculating the Net Asset Value of the Partnership
as of the close of business each day 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.
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 Partnership attempts to mitigate credit risk by dealing almost
exlusively with Merrill Lynch entities as clearing brokers.
The Fund, in its normal course of business, enters ito various
contracts, with MLF acting as its commodity broker. Pursuant to the
brokerage agreement with MLF (which includes a 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 and included in the Consolidated Statements of
Financial Condition under equity in commodity futures accounts.
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
MONTH-END NET ASSET VALUE PER UNIT
-----------------------------------------
Jan Feb Mar
-----------------------------------------
1999 $149.98 $153.81 $152.11
-----------------------------------------
2000 $147.98 $149.61 $143.39
-----------------------------------------
Performance Summary
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. 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.
JANUARY 1, 2000 TO MARCH 31, 2000
Trading in the energy sector produced profits for the quarter. Crude and heating
oil prices surged in January as heating demand rose during several snowstorms in
the Northeast -- the biggest world consumer of heating oil. Continued supply
restrictions by OPEC further pushed the price of oil to price levels near that
of the Gulf War. Profits were hindered in March after OPEC and Mexico said they
would raise oil production beginning April 1.
Performance of agricultural commodities was mixed, however, a profit was
produced for the quarter. Coffee prices were lower for the quarter due to an
oversupplied market, limiting the trading profits .
Currency trading provided modest gains as the dollar rose against the British
pound and to a 3 1/2 month high against the Japanese yen, as the U.S. economy
continued to outperform global economies. Currency markets provided gains as the
yen formed a profitable trend with its continued depreciation and contributed
significant profits. The Bank of Japan bought dollars for yen in an effort to
weaken the yen, however the yen moved higher despite the intervention.
The stock sector suffered losses in the Nikkei 225 Stock Index and the All
Ordinaries Share Price Index when the market fell in response to speculation
that the Group of Seven would take steps to weaken the yen. Towards the end of
the quarter, the Fund fluctuated with gains and then losses in positions in the
Nikkei 225 Stock Index, the All Ordinaries Share Index and FTSE 100 Index.
In metals trading, the fourth Bank of England auction of gold reserves was well
received and positions in gold were profitable, reaching a February high and
then falling nearly 10% at month-end. News that the Bank of France might sell
gold reserves drove the price of gold down by quarter-end producing losses for
the quarter.
Positions in interest rates were unprofitable. Many major central banks raised
rates in order to protect against the perception of impending inflation;
nevertheless, almost all bond markets experienced rallies in response to these
rate hikes which proved unprofitable for the sector.
6
<PAGE>
MLAM'S Cash Management
MLAM invests approximately 80% of the Fund's assets in Government Securities.
As of March 31, 2000 and December 31, 1999, the Fund's MLAM account totalled
approximately $275 million and $303 million, respectively.
As of March 31, 2000, the Fund's MLAM account held the following securities:
<TABLE>
<CAPTION>
Par Value
- ----------------
Long-Term Description Rate Maturity Date Fair Value
- ---------------- --------------------------------------- ---------------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
23,000,000 Federal National Mortgage Association 5.375% March 15, 2002 22,351,400
1,000,000 U.S. Treasury Note 6.000% July 31, 2002 989,883
43,000,000 U.S. Treasury Note 5.875% November 15, 2004 42,240,781
13,000,000 U.S. Treasury Note 6.125% December 31, 2001 12,920,275
---------------------
$ 78,502,339
Subtotal ---------------------
<CAPTION>
Short Term
- ----------------
<S> <C> <C> <C> <C>
45,985,000 Federal Home Loan Mortgage Corporation 0.000% April 11, 2000 $ 45,902,227
12,247,000 Federal Home Loan Mortgage Corporation 0.000% April 18, 2000 12,210,259
12,000,000 Federal National Mortgage Association 5.720% January 9, 2001 11,909,760
25,000,000 Federal National Mortgage Association 5.625% March 15, 2001 24,757,812
4,000,000 U.S. Treasury Note 5.375% July 31, 2000 3,991,250
14,000,000 U.S. Treasury Note 4.500% September 30, 2000 13,880,781
59,500,000 U.S. Treasury Note 4.625% November 30, 2000 58,865,488
25,500,000 U.S. Treasury Note 5.375% February 15, 2001 25,286,836
---------------------
$ 196,804,413
Subtotal ---------------------
$ 275,306,752
Total Debt =====================
</TABLE>
7
<PAGE>
As of December 31, 1999, the Fund's MLAM account held the following securities:
<TABLE>
<CAPTION>
Par Value
- ----------------
Long-Term Description Rate Maturity Date Fair Value
- ---------------- -------------------------------------- ---------------- ---------------------- --------------------
<S> <C> <C> <C> <C>
30,000,000 U.S. Treasury Note 5.375% February 15, 2001 $ 29,751,563
15,000,000 U.S. Treasury Note 5.000% February 28, 2001 14,810,156
13,500,000 U.S. Treasury Note 5.625% May 15, 2001 13,399,804
13,000,000 U.S. Treasury Note 6.125% December 31, 2001 12,972,578
1,000,000 U.S. Treasury Note 6.000% November 15, 2004 994,375
25,000,000 U.S. Treasury Note 5.875% February 15, 2001 24,513,672
12,000,000 Federal National Mortgage Association 5.720% January 9, 2001 11,926,200
25,000,000 Federal National Mortgage Association 5.625% March 15, 2001 24,781,250
23,000,000 Federal National Mortgage Association 5.375% March 15, 2002 22,468,240
--------------------
Subtotal $ 155,617,838
--------------------
<CAPTION>
Short Term
- ----------------
<S> <C> <C> <C> <C>
8,125,000 Federal Home Loan Discount Note 0.000% January 14, 2000 8,108,750
6,370,000 Federal National Discount Note 0.000% January 19, 2000 6,352,164
50,550,000 Federal Home Loan Discount Note 0.000% February 17, 2000 50,175,930
4,000,000 U.S. Treasury Note 5.375% July 31, 2000 3,989,375
20,000,000 U.S. Treasury Note 4.500% September 30, 2000 19,775,000
59,500,000 U.S. Treasury Note 4.625% November 30, 2000 58,641,695
--------------------
Subtotal $ 147,042,914
--------------------
Total Debt $ 302,660,752
====================
</TABLE>
PART II - OTHER INFORMATION
8
<PAGE>
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 2,000,000 units of limited
partnership interest. The Fund subsequently registered an
additional 2,960,000 units of limited partnership interest. As of
March 31, 2000, the Fund has sold 4,190,801 units of limited
partnership interest, with an aggregate price of $439,732,872.
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 three
months of fiscal 2000.
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 15, 2000 By /s/ JOHN R. FRAWLEY, JR.
------------------------
John R. Frawley, Jr.
Chairman, Chief Executive Officer,
President and Director
Date: May 15, 2000 By /s/ MICHAEL L. PUNGELLO
-----------------------
Michael L. Pungello
Vice President, Chief Financial Officer
and Treasurer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> BD
<CIK> 0001005177
<NAME> ML JWH STRATEGIC ALLOCATION FUND
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-2000 DEC-31-1999
<PERIOD-START> JAN-01-2000 JAN-01-1999
<PERIOD-END> MAR-31-2000 MAR-31-1999
<CASH> 323 533,233
<RECEIVABLES> 64,695,309 46,508,853
<SECURITIES-RESALE> 0 0
<SECURITIES-BORROWED> 0 0
<INSTRUMENTS-OWNED> 275,306,752 288,513,454
<PP&E> 0 0
<TOTAL-ASSETS> 340,002,384 335,555,540
<SHORT-TERM> 0 0
<PAYABLES> 13,444,846 5,948,658
<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> 326,406,020 329,606,882
<TOTAL-LIABILITY-AND-EQUITY> 340,002,384 335,555,540
<TRADING-REVENUE> (3,898,527) (2,059,050)
<INTEREST-DIVIDENDS> 4,341,710 3,896,459
<COMMISSIONS> 7,230,044 6,560,715
<INVESTMENT-BANKING-REVENUES> 0 0
<FEE-REVENUE> 0 0
<INTEREST-EXPENSE> 0 0
<COMPENSATION> 0 0
<INCOME-PRETAX> (6,786,861) (4,723,306)
<INCOME-PRE-EXTRAORDINARY> (6,786,861) (4,723,306)
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (6,786,801) (4,723,306)
<EPS-BASIC> (2.81) (2.21)
<EPS-DILUTED> (2.81) (2.21)
</TABLE>
