<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(x) Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended: December 31, 1999
or
( ) Transition Report Pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934
Commission file number: 0-18215
JOHN W. HENRY & CO./MILLBURN L.P.
---------------------------------
(Exact name of registrant as specified in its charter)
Delaware 06-1287586
-------------------------------------- ------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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)
Registrant's telephone number, including area code: (609) 282-6996
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Limited Partnership
Units
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 _______
-----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Aggregate market value of the voting and non-voting common equity held by non-
affiliates of the registrant: the registrant is a limited partnership; as of
February 1, 2000, limited partnership units with an aggregate value of
$40,807,414 were outstanding and held by non-affiliates.
Documents Incorporated by Reference
The registrant's "1999 Annual Report and Independent Auditors' Report," the
annual report to security holders for the fiscal year ended December 31, 1999,
is incorporated by reference into Part II, Item 8 and Part IV hereof and filed
as an Exhibit herewith.
<PAGE>
JOHN W. HENRY & CO./MILLBURN L.P.
ANNUAL REPORT FOR 1999 ON FORM 10-K
Table of Contents
-----------------
<TABLE>
<CAPTION>
PART I PAGE
------ ----
<S> <C>
Item 1. Business..................................................................................... 1
Item 2. Properties................................................................................... 5
Item 3. Legal Proceedings............................................................................ 5
Item 4. Submission of Matters to a Vote of Security Holders.......................................... 5
PART II
-------
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters....................... 5
Item 6. Selected Financial Data..................................................................... 7
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations....... 12
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.................................. 15
Item 8. Financial Statements and Supplementary Data................................................. 21
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........ 21
PART III
--------
Item 10. Directors and Executive Officers of the Registrant.......................................... 22
Item 11. Executive Compensation...................................................................... 24
Item 12. Security Ownership of Certain Beneficial Owners and Management.............................. 24
Item 13. Certain Relationships and Related Transactions.............................................. 24
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............................... 26
</TABLE>
<PAGE>
PART I
Item 1: Business
--------
(a) General Development of Business:
-------------------------------
John W. Henry & Co./Millburn L.P. (the "Partnership" or the
"Fund") was organized under the Delaware Revised Uniform Limited Partnership Act
on August 29, 1989. The original public offering of the Partnership"s units of
limited partnership interest (the "Series A Units") commenced on September 29,
1989, and the Partnership commenced trading with respect to the Series A Units
on January 5, 1990. A second public offering of Series B Units of limited
partnership interest (the "Series B Units") commenced on December 14, 1990. The
Partnership began trading with respect to the Series B Units on January 28,
1991. A third public offering of Series C Units of limited partnership interest
(the "Series C Units") commenced on September 13, 1991. The Partnership began
trading with respect to the Series C Units on January 2, 1992. The Fund's
objective is achieving, through speculative trading, substantial capital
appreciation over time.
The proceeds of each of the three series of Units were each
initially allocated equally among the Partnership's two trading advisors -- John
W. Henry & Company, Inc. ("JWH") and Millburn Ridgefield Corporation
("Millburn") (collectively, the "Advisors").
Merrill Lynch Investment Partners Inc. ("MLIP") acts as the
general partner of the Partnership. Merrill Lynch Futures Inc. ("MLF") is the
Partnership's commodity broker. The General Partner is a wholly-owned subsidiary
of Merrill Lynch Group Inc., which, in turn, is a wholly-owned subsidiary of
Merrill Lynch & Co., Inc. The Commodity Broker is an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. (Merrill Lynch & Co., Inc. and its
affiliates are hereinafter sometimes referred to do "Merrill Lynch").
JWH and Millburn (each an "Advisor", together, "Advisors") have
been the Partnership's only trading advisors since inception. Each Advisor was
allocated 50% of the total assets of each Series as of the date such Series
began trading. Subsequently, these allocations have varied over time, but have
been periodically rebalanced to 50%/50%. All series have the same percentage
allocation of assets between the Advisors. As of December 31, 1999, 46% of the
capital of each series of units was allocated to JWH and 54% was allocated to
Millburn. As of December 1, 1996, the Partnership placed all of its assets under
the management of the Advisors through investing in two private limited
liability companies ("Trading LLC's or "LLC's) sponsored by MLIP, each one of
which was traded by one of the Advisors. Investing assets in the Trading LLCs
rather than trading directly did not change the operation or fee structure of
the Partnership. The administrative authority over the Partnership remains with
MLIP.
As of December 31, 1999, the aggregate capitalization of the Fund
was $42,876,172, the total capitalization of the Series A, Series B and Series C
Units was $10,363,793, $21,524,846 and $10,987,533, respectively, and the Net
Asset Value per Series A, Series B and Series C Units, originally $100 as of
January 5, 1990, January 28, 1991 and January 2, 1992, respectively, had risen
to $260.14 (excluding a $20 per Series A Unit distribution paid as of November
30, 1990), $211.47 and $164.80, respectively.
The highest month-end Net Asset Value per Series A Unit through
December 31, 1999 was $319.42 (June 30, 1999) and the lowest $100.31 (May
31, 1990); the highest month-end Net Asset Value per Series B Unit through
December 31, 1999 was $259.56 (June 30, 1999) and the lowest $91.20 (May
31, 1992); the highest month-end Net Asset Value per Series C Unit through
December 31, 1999 was $202.28 (June 30, 1999) and the lowest $75.87 (May 31,
1992).
-1-
<PAGE>
(b) Financial Information about Segments:
------------------------------------
The Partnership's business constitutes only one segment for financial
reporting purposes, i.e., a speculative "commodity pool." The Partnership does
not engage in sales of goods or services.
(c) Narrative Description of Business:
---------------------------------
General
The Fund trades (currently through its investment in Trading LLC's) in
the international futures, options on futures and forward markets with the
objective of achieving substantial capital appreciation.
The Partnership has entered into advisory agreements with each Advisor
(the "Advisory Agreement"). JWH trades the Partnership's assets allocated to it
in four market sectors -- interest rates, stock indices, currencies and metals
- -- pursuant to its Financial and Metals Program. Millburn trades the
Partnership's assets allocated to it pursuant to its currency program, which
concentrates exclusively on currency trading, primarily in the interbank
monetary market.
One of the objectives of the Fund is to provide diversification to a
limited portion of the risk segment of the Limited Partners' portfolios.
Commodity pool performance has historically often demonstrated a low degree of
performance correlation with traditional stock and bond holdings. Since it began
trading, the Fund's returns have, in fact, frequently been significantly non-
correlated with the United States stock and bond markets.
The Fund accesses the Advisors not by opening individual managed
accounts with them, but rather through investing in private funds (Trading
LLC's) sponsored by MLIP through which the trading accounts of different MLIP-
sponsored funds managed by the same Advisor and pursuant to the same strategy
are consolidated.
Use of Proceeds and Interest Income
Market Sectors. Under the direction of the two Advisors, the
--------------
Partnership trades a portfolio which is concentrated in the financial, currency
and metals markets. The limited focus of the Fund's trading increases
volatility and market risk.
Market Types. The Fund trades on a variety of United States and
------------
foreign futures exchanges. Substantially all of the Fund's off-exchange trading
takes place in the highly liquid, institutionally-based currency forward
markets.
Many of the Partnership's currency trades are executed in the spot and
forward foreign exchange markets (the "FX Markets") where there are no direct
execution costs. Instead, the participants, banks and dealers, in the FX Markets
take a "spread" between the prices at which they are prepared to buy and sell a
particular currency and such spreads are built into the pricing of the spot or
forward contracts with the Partnership.
In its exchange of futures for physical ("EFP") trading, the
Partnership acquires cash currency positions through banks and dealers,
including Merrill Lynch. The Partnership pays a spread when it exchanges these
positions for futures. This spread reflects, in part, the different settlement
dates of the cash and the futures contracts, as well as prevailing interest
rates, but also includes a pricing spread in favor of the banks and dealers,
which may include a Merrill Lynch entity.
As in the case of its market sector allocations, the Fund's
commitments to different types of markets -- U.S. and non-U.S., regulated and
unregulated -- differ substantially from time to time as well as over time. The
Fund has no policy restricting its relative commitment to any of these different
types of markets.
-2-
<PAGE>
The Fund's financial statements contain information relating to the
types of markets traded by the Fund. There can, however, be no assurance as to
which markets the Fund may trade or as to how the Fund's trading may be
concentrated at any one time or over time.
Custody of Assets. All of the Fund's assets are currently held in
-----------------
customer accounts at Merrill Lynch.
Interest paid by Merrill Lynch on the Fund's U.S. Dollar and Non U.S.
---------------------------------------------------------------------
Dollar Assets. The Fund's U.S. dollar assets are maintained at MLF. On assets
- --------------
held in U.S. dollars, Merrill Lynch credits the Fund with interest at the
prevailing 91-day U.S. Treasury bill rate. The Fund is credited with interest on
any of its net gains actually held by Merrill Lynch in non-U.S. dollar
currencies at a prevailing local rate received by Merrill Lynch. Merrill Lynch
may derive certain economic benefit, in excess of the interest which Merrill
Lynch pays to the Fund, from possession of such assets.
Merrill Lynch charges the Fund Merrill Lynch's cost of financing
realized and unrealized losses on the Fund's non-U.S. dollar-denominated
positions.
Charges
Each of the series of Units is subject to the same charges. However,
these charges are calculated separately with respect to each Series, each of
which maintains its own Net Asset Value.
During 1999 and 1998, all of the Fund's assets were invested in the
two Trading LLCs mentioned above. Therefore, no direct charges were incurred by
the Fund during these two years.
____________________________
The Fund's average month-end Net Assets during 1999, 1998 and 1997
equaled $51,751,051, $56,223,504, and $62,234,507, respectively.
During 1999 and 1998, all of the Fund's assets were invested in the
two Trading LLCs mentioned above. Therefore, no direct interest was earned by
the Fund during these two years.
The Partnership pays brokerage commissions to MLF at a flat monthly
rate of .792 of 1% (a 9.50% annual rate) of the Partnership's month-end assets.
Prior to February 1, 1997, the rate was .979 of 1% (an 11.75% annual rate)
The Partnership also pays MLIP a monthly administative fee of .21 of 1% (.25%
annual rate) of the Partnership's month-end assets.
-3-
<PAGE>
<TABLE>
<S> <C> <C>
Recipient Nature of Payment Amount of Payment
MLF Brokerage Commissions A flat-rate monthly commission of 0.7917 of 1% of
the Fund's month-end assets (a 9.50% annual rate).
MLIP estimates that the round-turn equivalent
rates charged to ML Millburn Global L.L.C.
(Millburn LLC) during the years ended 1999, 1998 and
1997 were approximately $461, $151, and 162,
respectively. MLIP estimates that the round-turn
equivalent rates charged to ML JWH Financial and
Metals Portfolio L.L.C. ("JWH LLC") during the
years ended 1999, 1998 and 1997 were approximately
$316, $133 and $198, respectively.
MLF Use of Fund assets Merrill Lynch may derive an economic benefit from
the deposit of certain of the Fund's U.S. dollar
assets in offset accounts.
MLIP Administrative Fees The Fund pays MLIP a monthly Administrative Fee
equal to 0.020833 of 1% of the Fund's month-end
assets (0.25% annually). MLIP pays all of the
Fund's routine administrative costs.
MLIB; Other Bid-ask spreads Bid-ask spreads on forward and related trades.
Counterparties
Advisors Profit Shares Prior to January 1, 1997, quarterly profit shares
of 15% and 20% of any New Trading Profit achieved
by each Advisor's Fund account, individually,
were paid to JWH and Millburn, respectively.
Beginning January 1, 1997, Millburn's Profit
Share began to be calculated on an annual basis.
Profit Shares are also paid upon redemption of
Units. New Trading Profit is calculated
separately in respect of each Advisor,
irrespective of the overall performance of the
Fund.
Advisors Consulting Fees MLF pays the Advisors annual consulting fees up
to 4% of the average month-end assets allocated
to them for management.
MLF; Extraordinary expenses Actual costs incurred; none paid to date.
Others
</TABLE>
Regulation
MLIP, the Advisors and MLF are each subject to regulation by the
Commodity Futures Trading Commission (the "CFTC") and the National Futures
Association. Other than in respect of its periodic reporting requirements under
the Securities Exchange Act of 1934, the Partnership itself is generally not
subject
-4-
<PAGE>
to regulation by the Securities and Exchange Commission. However, MLIP itself is
registered as an "investment adviser" under the Investment Advisers Act of 1940.
(i) through (xii) - not applicable.
(xiii) The Partnership has no employees.
(d) Financial Information about Geographic Areas
--------------------------------------------
The Partnership trades on a number of foreign commodity
exchanges. The Partnership does not engage in the sales of goods or services.
Item 2: Properties
----------
The Partnership does not use any physical properties in the
conduct of its business.
The Partnership's only place of business is the place of business
of MLIP (Princeton Corporate Campus, 800 Scudders Mill Road -Section 2G,
Plainsboro, New Jersey 08536). MLIP performs all administrative services for the
Partnership from MLIP's offices.
Item 3: Legal Proceedings
-----------------
ML&Co. - the sole stockholder of Merrill Lynch Group, Inc. (which
is the sole stockholder of MLIP and MLF and the 100% indirect owner of all
Merrill Lynch entities involved in the operation of the Fund) - as well as
certain of its subsidiaries and affiliates have been named as defendants in
civil actions, arbitration proceedings and claims arising out of their
respective business activities. Although the ultimate outcome of these actions
cannot be predicted at this time and the results of legal proceedings cannot be
predicted with certainty, it is the opinion of management that the result of
these matters will not be materially adverse to the business operations or
financial condition of MLIP or the Fund.
MLIP itself has never been the subject of any material
litigation.
Item 4: Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The Partnership has never submitted any matter to a vote of its
Limited Partners.
PART II
Item 5: Market for Registrant's Common Equity and Related Stockholder Matters
---------------------------------------------------------------------
Item 5(a)
(a) Market Information:
------------------
There is no established public trading market for the Units, nor
will one develop. Rather, Limited Partners may redeem Units as of the end of
each month at Net Asset Value.
(b) Holders:
-------
As of December 31, 1999, there were 354, 1,049 and 514 holders of
the Series A, B and C Units, respectively, including the General Partner.
-5-
<PAGE>
(c) Dividends:
---------
The Partnership has made only one distribution ($20 per Series A
Unit payable as of November 30, 1990) since trading commenced. The General
Partner does not presently intend to make any further distributions.
Item 5(b)
Not applicable.
-6-
<PAGE>
Item 6: Selected Financial Data
-----------------------
The following selected financial data has been derived from the audited
financial statements of the Partnership.
<TABLE>
<CAPTION>
For the Year For the Year For the Year For the Year For the Year
Ended Ended Ended Ended Ended
December 31, December 31, December 31, December 31, December 31,
Income Statement Data 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Trading Profits
Realized Gain $ - $ - $ - $ 8,749,410 $ 23,852,578
Change in Unrealized Loss - - - (1,760,218) (651,118)
--------------------------------------------------------------------------------
Total Trading Results - - - 6,989,192 23,201,460
--------------------------------------------------------------------------------
Interest Income - - - 1,842,887 2,863,384
--------------------------------------------------------------------------------
Total Revenues - - - 8,832,079 26,064,844
--------------------------------------------------------------------------------
Expenses:
Brokerage Commissions - - - 5,406,851 7,412,789
Administrative Fees - - - 115,039 -
Profit Shares - - - 97,468 729,138
--------------------------------------------------------------------------------
Total Expenses - - - 5,619,358 8,141,927
--------------------------------------------------------------------------------
Income (loss) from Investments (6,145,111) 1,867,451 7,357,688 7,171,609 -
--------------------------------------------------------------------------------
Net Income (Loss) $ (6,145,111) $ 1,867,451 $ 7,357,688 $ 10,384,330 $ 17,922,917
================================================================================
</TABLE>
<TABLE>
<CAPTION>
December 31, December 31, December 31, December 31, December 31,
Balance Sheet Data 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fund Net Asset Value $42,876,172 $56,163,313 $63,024,164 $60,834,088 $57,921,834
Net Asset Value per Series A Unit $ 260.14 $ 296.13 $ 284.11 $ 252.54 $ 210.29
Net Asset Value per Series B Unit $ 211.47 $ 240.61 $ 230.87 $ 205.27 $ 171.02
Net Asset Value per Series C Unit $ 164.80 $ 187.52 $ 179.92 $ 159.97 $ 133.82
</TABLE>
1999, 1998 and 1997 variations in income statement line items are due to
investing assets in Trading LLCs.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
MONTH-END NET ASSET VALUE PER SERIES A UNIT
- ------------------------------------------------------------------------------------------------------------------------------------
Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 $146.85 $167.54 $204.80 $214.46 $216.21 $212.68 $207.03 $212.10 $207.87 $208.79 $209.51 $210.29
- ------------------------------------------------------------------------------------------------------------------------------------
1996 $231.67 $209.48 $205.35 $213.42 $204.22 $207.21 $206.87 $201.95 $208.39 $237.92 $255.50 $252.54
- ------------------------------------------------------------------------------------------------------------------------------------
1997 $273.52 $270.58 $267.94 $261.04 $251.03 $257.22 $283.93 $270.03 $274.52 $273.84 $277.30 $284.11
- ------------------------------------------------------------------------------------------------------------------------------------
1998 $281.00 $268.85 $270.14 $248.62 $257.02 $249.67 $238.22 $270.01 $305.92 $298.60 $280.52 $296.13
- ------------------------------------------------------------------------------------------------------------------------------------
1999 $287.86 $291.22 $288.12 $297.02 $303.11 $319.42 $310.07 $302.24 $289.40 $263.84 $261.74 $260.14
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
MONTH-END NET ASSET VALUE PER SERIES B UNIT
- ------------------------------------------------------------------------------------------------------------------------------------
Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 $119.62 $136.63 $166.77 $174.39 $175.54 $172.89 $168.13 $172.70 $169.17 $169.98 $170.50 $171.02
- ------------------------------------------------------------------------------------------------------------------------------------
1996 $188.93 $171.14 $167.47 $173.94 $166.31 $168.64 $168.41 $164.21 $169.49 $193.51 $207.63 $205.27
- ------------------------------------------------------------------------------------------------------------------------------------
1997 $222.32 $219.93 $217.78 $212.17 $204.08 $209.10 $230.77 $219.46 $223.11 $222.53 $225.33 $230.87
- ------------------------------------------------------------------------------------------------------------------------------------
1998 $228.36 $218.48 $219.55 $202.07 $208.90 $202.93 $193.60 $219.40 $248.57 $242.64 $227.97 $240.61
- ------------------------------------------------------------------------------------------------------------------------------------
1999 $233.92 $236.65 $234.15 $241.40 $246.31 $259.56 $251.96 $245.60 $235.20 $214.43 $212.74 $211.47
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
MONTH-END NET ASSET VALUE PER SERIES C UNIT
- ------------------------------------------------------------------------------------------------------------------------------------
Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 $ 93.13 $106.27 $129.98 $135.87 $136.83 $134.85 $131.16 $134.97 $132.39 $133.17 $133.60 $133.82
- ------------------------------------------------------------------------------------------------------------------------------------
1996 $147.90 $133.80 $130.88 $135.93 $129.91 $131.79 $131.69 $128.12 $132.22 $150.96 $161.74 $159.97
- ------------------------------------------------------------------------------------------------------------------------------------
1997 $173.26 $171.40 $169.73 $165.35 $159.04 $162.96 $179.85 $171.03 $173.88 $173.43 $175.61 $179.92
- ------------------------------------------------------------------------------------------------------------------------------------
1998 $177.97 $170.27 $171.11 $157.48 $162.80 $158.15 $150.88 $170.99 $193.72 $189.10 $177.67 $187.52
- ------------------------------------------------------------------------------------------------------------------------------------
1999 $182.30 $184.43 $182.48 $188.13 $191.96 $202.28 $196.36 $191.41 $183.30 $167.12 $165.80 $164.80
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Pursuant to CFTC policy, monthly performance is presented from January 1, 1995
even though all Series were outstanding prior to such date.
-8-
<PAGE>
JOHN W. HENRY & CO./MILLBURN L.P.
(SERIES A UNITS)
December 31, 1999
Type of Pool: Selected-Advisor/Publicly-Offered/Non-"Principal Protected"/(1)/
Inception of Trading: January 5, 1990
Aggregate Subscriptions: $18,182,000
Current Capitalization: $10,363,793
Worst Monthly Drawdown/(2)/: (9.58)% (2/96)
Worst Peak-to-Valley Drawdown/(3)/: (19.33)% (7/94-1/95)
Net Asset Value per Series A Unit, December 31, 1999: $260.14
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
Monthly Rates of Return(4)
-----------------------------------------------------------------------------------------
Month 1999 1998 1997 1996 1995
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
January (2.79)% (1.09)% 8.31% 10.17% (5.81)%
-----------------------------------------------------------------------------------------
February 1.17 (4.32) (1.07) (9.58) 14.09
-----------------------------------------------------------------------------------------
March (1.06) 0.48 (0.98) (1.97) 22.24
-----------------------------------------------------------------------------------------
April 3.09 (7.97) (2.58) 3.93 4.72
-----------------------------------------------------------------------------------------
May 2.05 3.38 (3.83) (4.31) 0.81
-----------------------------------------------------------------------------------------
June 5.38 (2.86) 2.47 1.46 (1.63)
-----------------------------------------------------------------------------------------
July (2.93) (4.58) 10.38 (0.17) (2.66)
-----------------------------------------------------------------------------------------
August (2.53) 13.34 (4.90) (2.38) 2.45
-----------------------------------------------------------------------------------------
September (4.25) 13.30 1.66 3.19 (1.99)
-----------------------------------------------------------------------------------------
October (8.83) (2.39) (0.25) 14.17 0.45
-----------------------------------------------------------------------------------------
November (0.80) (6.05) 1.26 7.39 0.34
-----------------------------------------------------------------------------------------
December (0.61) 5.56 2.46 (1.16) 0.38
-----------------------------------------------------------------------------------------
Compound Annual
Rate of Return (12.15)% 4.24% 12.49% 20.09% 34.89%
-----------------------------------------------------------------------------------------
</TABLE>
(1) Pursuant to applicable CFTC regulations, a "Multi-Advisor"
fund is defined as one that allocates no more than 25% of its trading assets to
any single manager. As the Fund allocates over 25% of its assets to each of JWH
and Millburn, it is referred to as a "Selected-Advisor" fund. Certain funds,
including funds sponsored by MLIP, are structured so as to guarantee to
investors that their investment will be worth no less than a specified amount
(typically, the initial purchase price) as of a date certain after the date of
investment. The CFTC refers to such funds as "principal protected." The
Partnership has no such feature.
(2) Worst Monthly Drawdown represents the largest negative
Monthly Rate of Return experienced since January 1, 1995 by the Series; a
drawdown is measured on the basis of month-end Net Asset Value only, and does
not reflect intra-month figures.
(3) Worst Peak-to-Valley Drawdown represents the greatest
percentage decline since January 1, 1995 from a month-end cumulative Monthly
Rate of Return without such cumulative Monthly Rate of Return being equaled or
exceeded as of a subsequent month-end. For example, if the Monthly Rate of
Return was (1)% in each of January and February, 1% in March and (2)% in April,
the Peak-to-Valley Drawdown would still be continuing at the end of April in the
amount of approximately (3)%, whereas if the Monthly Rate of Return had been
approximately 3% in March, the Peak-to-Valley Drawdown would have ended as of
the end of February at approximately the (2)% level.
(4) Monthly Rate of Return is the net performance of the Series
during the month of determination (including interest income and after all
expenses have been accrued or paid) divided by the total equity of the Series as
of the beginning of such month.
-9-
<PAGE>
JOHN W. HENRY & CO./MILLBURN L.P.
(SERIES B UNITS)
December 31, 1999
Type of Pool: Selected-Advisor/Publicly-Offered/Non-"Principal Protected"/(1)/
Inception of Trading: January 28, 1991
Aggregate Subscriptions: $50,636,000
Current Capitalization: $21,524,846
Worst Monthly Drawdown/(2)/: (9.41)% (2/96)
Worst Peak-to-Valley Drawdown/(3)/: (19.32)% (7/94-1/95)
_____________
Net Asset Value per Series B Unit, December 31, 1999: $211.47
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
Monthly Rates of Return(4)
-----------------------------------------------------------------------------------------
Month 1999 1998 1997 1996 1995
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
January (2.78)% (1.09)% 8.31% 10.47% (5.93)%
-----------------------------------------------------------------------------------------
February 1.17 (4.33) (1.08) (9.41) 14.22
-----------------------------------------------------------------------------------------
March (1.06) 0.49 (0.98) (2.14) 22.06
-----------------------------------------------------------------------------------------
April 3.10 (7.96) (2.58) 3.86 4.57
-----------------------------------------------------------------------------------------
May 2.04 3.38 (3.81) (4.38) 0.66
-----------------------------------------------------------------------------------------
June 5.38 (2.86) 2.46 1.40 (1.52)
-----------------------------------------------------------------------------------------
July (2.93) (4.60) 10.36 (0.14) (2.75)
-----------------------------------------------------------------------------------------
August (2.52) 13.33 (4.90) (2.49) 2.71
-----------------------------------------------------------------------------------------
September (4.24) 13.30 1.66 3.22 (2.04)
-----------------------------------------------------------------------------------------
October (8.83) (2.39) (0.26) 14.17 0.48
-----------------------------------------------------------------------------------------
November (0.79) (6.05) 1.26 7.30 0.31
-----------------------------------------------------------------------------------------
December (0.60) 5.54 2.46 (1.14) 0.31
-----------------------------------------------------------------------------------------
Compound Annual
Rate of Return (12.11)% 4.20% 12.46% 20.03% 34.49%
-----------------------------------------------------------------------------------------
</TABLE>
(1) Pursuant to applicable CFTC regulations, a "Multi-Advisor"
fund is defined as one that allocates no more than 25% of its trading assets to
any single manager. As the Fund allocates over 25% of its assets to each of JWH
and Millburn, it is referred to as a "Selected-Advisor" fund. Certain funds,
including funds sponsored by MLIP, are structured so as to guarantee to
investors that their investment will be worth no less than a specified amount
(typically, the initial purchase price) as of a date certain after the date of
investment. The CFTC refers to such funds as "principal protected." The
Partnership has no such feature.
(2) Worst Monthly Drawdown represents the largest negative
Monthly Rate of Return experienced since January 1, 1995 by the Series; a
drawdown is measured on the basis of month-end Net Asset Value only, and does
not reflect intra-month figures.
(3) Worst Peak-to-Valley Drawdown represents the greatest
percentage decline since January 1, 1995 from a month-end cumulative Monthly
Rate of Return without such cumulative Monthly Rate of Return being equaled or
exceeded as of a subsequent month-end. For example, if the Monthly Rate of
Return was (1)% in each of January and February, 1% in March and (2)% in April,
the Peak-to-Valley Drawdown would still be continuing at the end of April in the
amount of approximately (3)%, whereas if the Monthly Rate of Return had been
approximately 3% in March, the Peak-to-Valley Drawdown would have ended as of
the end of February at approximately the (2)% level.
(4) Monthly Rate of Return is the net performance of the Series
during the month of determination (including interest income and after all
expenses have been accrued or paid) divided by the total equity of the Series as
of the beginning of such month.
-10-
<PAGE>
JOHN W. HENRY & CO./MILLBURN L.P.
(SERIES C UNITS)
December 31, 1999
Type of Pool: Selected-Advisor/Publicly-Offered/Non-"Principal Protected"/(1)/
Inception of Trading: January 2, 1992
Aggregate Subscriptions: $40,000,000
Current Capitalization: $10,987,533
Worst Monthly Drawdown/(2)/: (9.54)% (2/96)
Worst Peak-to-Valley Drawdown/(3)/: (19.20)% (7/94-1/95)
_____________
Net Asset Value per Series C Unit, December 31, 1999: $164.80
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
Monthly Rates of Return(4)
-----------------------------------------------------------------------------------------
Month 1999 1998 1997 1996 1995
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
January (2.78)% (1.08)% 8.31% 10.52% (6.00)%
-----------------------------------------------------------------------------------------
February 1.17 (4.33) (1.07) (9.54) 14.12
-----------------------------------------------------------------------------------------
March (1.06) 0.49 (0.97) (2.18) 22.31
-----------------------------------------------------------------------------------------
April 3.10 (7.97) (2.58) 3.86 4.53
-----------------------------------------------------------------------------------------
May 2.04 3.38 (3.82) (4.43) 0.70
-----------------------------------------------------------------------------------------
June 5.38 (2.86) 2.46 1.45 (1.44)
-----------------------------------------------------------------------------------------
July (2.93) (4.60) 10.36 (0.08) (2.74)
-----------------------------------------------------------------------------------------
August (2.52) 13.33 (4.90) (2.71) 2.90
-----------------------------------------------------------------------------------------
September (4.24) 13.29 1.67 3.21 (1.91)
-----------------------------------------------------------------------------------------
October (8.83) (2.38) (0.26) 14.17 0.59
-----------------------------------------------------------------------------------------
November (0.79) (6.05) 1.26 7.14 0.32
-----------------------------------------------------------------------------------------
December (0.60) 5.54 2.45 (1.09) 0.17
-----------------------------------------------------------------------------------------
Compound Annual
Rate of Return (12.11)% 4.20% 12.47% 19.54% 35.08%
-----------------------------------------------------------------------------------------
</TABLE>
(1) Pursuant to applicable CFTC regulations, a "Multi-Advisor" fund
is defined as one that allocates no more than 25% of its trading assets to any
single manager. As the Fund allocates over 25% of its assets to each
of JWH and Millburn, it is referred to as a "Selected-Advisor" fund. Certain
funds, including funds sponsored by MLIP, are structured so as to guarantee to
investors that their investment will be worth no less than a specified amount
(typically, the initial purchase price) as of a date certain after the date of
investment. The CFTC refers to such funds as "principal protected." The
Partnership has no such feature.
(2) Worst Monthly Drawdown represents the largest negative Monthly
Rate of Return experienced since January 1, 1995 by the Series; a drawdown is
measured on the basis of month-end Net Asset Value only, and does not reflect
intra-month figures.
(3) Worst Peak-to-Valley Drawdown represents the greatest percentage
decline since January 1, 1995 from a month-end cumulative Monthly Rate of Return
without such cumulative Monthly Rate of Return being equaled or exceeded as of a
subsequent month-end. For example, if the Monthly Rate of Return was (1)% in
each of January and February, 1% in March and (2)% in April, the Peak-to-Valley
Drawdown would still be continuing at the end of April in the amount of
approximately (3)%, whereas if the Monthly Rate of Return had been approximately
3% in March, the Peak-to-Valley Drawdown would have ended as of the end of
February at approximately the (2)% level.
(4) Monthly Rate of Return is the net performance of the Series
during the month of determination (including interest income and after all
expenses have been accrued or paid) divided by the total equity of the Series as
of the beginning of such month.
-11-
<PAGE>
Item 7: Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
- -------------
Results of Operations
- ---------------------
General
- -------
JWH and Millburn have been the Fund's two Advisors since inception.
Although from time to time one of the Advisors is allocated a greater percentage
of the Fund's assets than the other as a result of differential performance,
MLIP periodically rebalances the Fund's asset allocation to approximately
50%/50%.
The Advisors are both trend-following traders, whose programs do not
attempt to predict price movements. No fundamental economic supply or demand
analyses are used by either JWH or Millburn, and no macroeconomic assessments of
the relative strengths of different national economies or economic sectors.
Instead, their programs apply proprietary computer models to analyzing past
market data, and from this data alone attempt to determine whether market prices
are trending. As technical traders, JWH and Millburn base their strategies on
the theory that market prices reflect the collective judgment of JWH and
Millburn 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 an Advisor'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 Advisors' 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 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 trend-following programs such as those
implemented by JWH and Millburn, economic conditions, political events, weather
factors, etc., are not directly relevant because only market data has any input
into trading results. Furthermore, 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 their
programs are designed to identify, either or both Advisors may miss the trend
altogether.
Performance Summary
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. In addition, the general causes to which certain price movements
are attributed may or may not in fact have caused such movements, but simply
occurred at or about the same time.
Both Advisors are unlikely to be profitable in markets in which such
trends do not occur. Static or erratic prices are likely to result in losses.
Similarly, unexpected events (for example, a political upheaval, natural
disaster or governmental intervention) can lead to major short-term losses as
well as gains.
While there can be no assurance that either Advisor will be
profitable, under any given market condition, markets in which substantial and
sustained price movements occur typically offer the best profit potential for
the Fund.
-12-
<PAGE>
1999
John W.Henry & Co./Millburn, LP finished 1999 with gains in currencies and stock
index trading and losses in metals and interest rate trading. Commodities spent
1999 in a transition phase, shifting from bear market trading to more neutral
positions. Lack of demand, particularly in Asia, was the dominant factor in the
overall decline in commodity prices.
Currency trading produced gains throughout the year. The Bank of Japan lowered
rates to keep their economy sufficiently liquid to allow fiscal spending to
restore some growth to the economy and to drive down the surging yen. The yen
continued to grow and reached a two-year high in the third quarter. The European
Central Bank raised the repo rate in November due to inflation pressures. On a
trade-weighted basis, the Swiss franc ended the first quarter to close at a
seven-month low, mostly as a result of the stronger US dollar, yet regained
strength in November. The Canadian dollar also underwent similar fluctuations
throughout the year.
Stock index trading was profitable for 1999. The Dow Jones Industrial Average
closed above the 10,000 mark for the first time in March, setting a record for
the index. Equity markets rallied worldwide in April and June. In the second
half of the year, the Fund suffered losses in stock index positions as trading
was mixed due to significant volatility globally. However, there was profitable
trading in the Hang Seng and Nikkei 225 positions resulting in gains during
November and December. This activity depicted evidence of Japan's stronger than
expected recovery coupled with a sudden decline in the unemployment rate.
Metals trading was mixed for the year as gold played a major part in the
volatility of the metals market. Gold had failed to maintain its status as a
safety vehicle and a monetary asset during the first half of 1999. In early
June, gold had reached its lowest level in over 20 years. A major statement from
the president of the European Central Bank stated that the member banks had
agreed not to expand their gold lending. This sent gold prices sharply higher in
late September. Unfortunately, the Fund held short positions in gold futures at
that time. Gold prices had stabilized in the fourth quarter following the price
surge. Early in the year, burdensome warehouse stocks and questionable demand
prospects weighed on base metals as aluminum fell to a five-year low and copper
fell to nearly an 11-year low. The economic scenario for Asia, Brazil, Europe
and emerging market nations helped to keep copper and other base metals on the
defensive as demand receded with virtually no supply side response in the second
quarter. A substantial increase in Chinese imports combined with recovery in the
rest of Asia and Europe had significantly improved demand for aluminum pushing
prices higher during December.
Interest rate trading was also volatile as the flight to quality in the bond
market reversed during the first half of 1999 and the Federal Reserve raised
interest rates three times during the year. Early in the year, interest rate
trading proved unprofitable for the fund, which was triggered by the Japanese
Trust Fund Bureau's decision to absorb a smaller share of futures issues,
leaving the burden of financing future budget deficits to the private sector.
Interest rate trading did gain strength at mid-year as the flight to quality in
the bond market reversed and concerns about higher interest rates in the U.S.
continued to rattle the financial markets. During the third quarter, Eurodollar
trading generated losses amidst speculation of the probability of a tightening
by the U.S. Federal Reserve, which became evident with the higher interest rates
in their November 16 meeting due to concerns of inflation. In December, the
yield on the 30-year Treasury bond recently surpassed its October high propelled
by inflation worries and fears the Federal Reserve might tighten further in
2000.
Trading results are not included for 1999 because the Fund traded exclusively
through investing in LLC's.
1998
Global interest rate markets provided the Fund with its most
profitable positions in the first quarter, particularly in European bonds where
an extended bond market rally continued despite an environment of robust growth
in the United States, Canada and the United Kingdom, as well as a strong pick up
in growth in continental Europe. In the second quarter, swings in the U.S.
dollar and developments in Japan affected bond markets, causing the Fund's
interest rate trading to result in losses. This was turned around in the third
quarter, as markets worldwide were turned upside down and the Fund's non-
correlation with general equity and debt markets was strongly exhibited. Global
investors staged a major flight to quality, resulting in a significant widening
of credit spreads on a global basis. In October, investors pushed the yields on
U.S. Treasury bonds to a 31-year low. The long bond yield fell about 75 basis
points in 1998 as the world economy slowed more than expected, inflation
continued to fall, the anticipated small U.S. budget deficit turned into
substantial surplus, and the Federal Reserve lowered interest rates.
Gold prices began the year drifting sideways, and continued to weaken
following news in the second quarter of a European Central Bank consensus that
ten to fifteen percent of reserves should be made up of gold bullion, which was
at the low end of expectations. Gold was unable to extend third quarter rallies
or to build any significant upside momentum, resulting in a trendless
environment. This was also the case in the fourth quarter, as gold's cost of
production declined. Also, silver markets remained range-bound, while also
experiencing a significant selloff in November, and aluminum traded at its
lowest levels since 1994, with many aluminum smelters operating at a loss.
In currency markets, results early in the year were mixed, although
marginally unprofitable. During the second quarter, the Japanese yen weakened
during June to an eight-year low versus the U.S. dollar. In the third quarter,
Japan's problems spread to other sectors of the global economy, causing
commodities prices to decline as demand from the Asian economies weakened, and
Japan's deepening recession and credit crunch continued through the fourth
quarter.
Trading results in stock index markets were also mixed in early 1998,
despite a strong first-quarter performance by the U.S. equity market as several
consecutive weekly gains were recorded with most market averages setting new
highs. Second quarter results were profitable as the Asia-Pacific region's
equity markets weakened across the board. In particular, Hong Kong's Hang Seng
index trended downward during most of the second quarter and traded at a three-
year low. As U.S. equity markets declined in July and August, the Fund profited
from short positions in the S&P 500, most notably during August, when the index
dropped 14.5%. Volatility in September made for a difficult trading environment
in the stock index sector, and the Fund incurred modest losses, although results
remained profitable for the quarter and the year overall in these markets.
Trading results are not included for 1998 because the Fund traded
exclusively through investing in LLC's.
1997
Trend reversals and extreme market volatility, affected by such
factors as the Asian flu and El Nino, were characteristic of most of 1997.
However, the year proved to be a profitable one overall for the Fund as trends
in several key markets enabled the Trading Advisors to profit despite the
significant obstacles. Although trading results in several sectors may have
been lackluster, the global currency and bond markets offered noteworthy trading
opportunities, which resulted in significant profits in these markets during the
year. Additionally, the currency and interest rate sectors of the Fund's
portfolio represented its largest percentage of market commitments.
In currency markets, the U.S. dollar rallied and started 1997 on a
strong note, rising to a four-year high versus the Japanese yen and two-and-a-
half year highs versus the Deutsche mark and the Swiss franc. However, the
dollar
-13-
<PAGE>
underwent two significant corrections during the year. The first correction
occurred in the Spring against the Japanese yen, due to the G7 finance
ministers' determination that a further dollar advance would be counter-
productive to their current goals. From August through mid-November, the dollar
corrected against the Eurocurrencies in advance of a well-advertised tightening
by the Bundesbank. By mid-December the dollar had bounced back to new highs
against the yen and was rallying against the mark.
Global interest rate markets began the year on a volatile note, as
investors evaluated economic data for signs of inflation. By the middle of the
year, economic data in key countries was positive indicating lower inflation and
igniting a worldwide rally in the bond markets. Specifically, investor
sentiment was particularly strong in the U.S., where prices on the 30-year
Treasury bond and 10-year Treasury note rose to their highest levels in over two
years. This followed a largely positive economic report delivered by Federal
Reserve Chairman Greenspan in testimony before Congress. Effects of the plunge
in the Hong Kong stock market in late October spread rapidly throughout the
world's financial markets, including global bond markets. After continued
volatility in subsequent months made trading difficult, 1997 interest rate
trading ended on a positive note when U.S. and Japanese bond markets rallied as
a flight to safety from plunging stock markets around the world occurred in
December.
Trading results are not included for 1997 because the Fund traded
exclusively through investing in LLC's.
Variables Affecting Performance
- -------------------------------
The principal variables which determine the net performance of the
Fund are gross profitability and interest income.
During all periods set forth under "Selected Financial Data," the
interest rates in many countries were at unusually low levels. The low interest
rates in the United States (although higher than in many other countries)
negatively impacted revenues because interest income is typically a major
component of the Fund's profitability. In addition, low interest rates are
frequently associated with reduced fixed income market volatility, and in static
markets the Fund's profit potential generally tends to be diminished. On the
other hand, during periods of higher interest rates, the relative attractiveness
of a high risk investment such as the Fund may be reduced as compared to high
yielding and much lower risk fixed-income investments.
The Fund's Brokerage Commissions and Administrative Fees are a
constant percentage of the Fund's assets allocated to trading. The only Fund
costs (other than the insignificant currency trading costs) which are not based
on a percentage of the Fund's assets (allocated to trading or total) are the
Profit Shares payable to each of JWH and Millburn separately on their individual
performance, irrespective of the overall performance of the Fund. During
periods when Profit Shares are a high percentage of net trading gains, it is
likely that there has been substantial performance non-correlation between JWH
and Millburn (so that the total Profit Shares paid to the Advisor which has
traded profitably are a high percentage, or perhaps even in excess, of the total
profits recognized, as the other Advisor incurred offsetting losses, reducing
overall trading gains but not the Profit Shares paid to the successful Advisor)
- - suggesting the likelihood of generally trendless, non-consensus markets.
Unlike many investment fields, there is no meaningful distinction in
the operation of the Fund between realized and unrealized profits. Most of the
contracts traded by the Fund are highly liquid and can be closed out at any
time.
Except in unusual circumstances, factors - regulatory approvals, cost
of goods sold, employee relations and the like - which often materially affect
an operating business have virtually no impact on the Fund.
-14-
<PAGE>
Liquidity; Capital Resources
- ----------------------------
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.
Substantially all of the Fund's assets are held in cash. The Net
Asset Value of the Fund's cash is not affected by inflation. However, 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 strategies might
successfully follow.
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 an Advisor to
limit losses as well as reduce market exposure on short notice should its
strategies indicate doing 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 ten business days
to receive the full redemption proceeds of their Units.
Year 2000 Compliance Initiative
In 1999, Merrill Lynch completed its efforts to address the Year 2000
issue (the "Y2K issue"). The Y2K issue was the result of a widespread
programming technique that caused computer systems to identify a date based on
the last two numbers of a year, with the assumption that the first two numbers
of the year are "19". As a result, the year 2000 would be stored as "00",
causing computers to incorrectly interpret the year as 1900. Left uncorrected,
the Y2K issue may have caused serious failures in information technology systems
and other systems.
In 1995, Merrill Lynch established the Year 2000 Compliance Initiative
to address the internal and external risks associated with the Y2K issue. The
initiative consisted of six phases, completed by the millennium; planning, pre-
renovation, renovation, production testing, certification, and integration
testing. Contingency plans were established in the event of any failures or
disruptions.
Through the date of this filing, there have been no material failures
or disruptions of systems or services at Merrill Lynch attributable to the Y2K
issue. Similarly we have not been notified of any material failure or disruption
of systems or services affecting third parties in their capacity to transact
business with Merrill Lynch or in Merrill Lynch's capacity to transact business
with others. Merrill Lynch continues to monitor the performance of its systems
for any possible future failures or disruptions attributable to the Y2K issue.
As of December 31, 1999, the total estimated expenditures of existing
and incremental resources for the entire Year 2000 Compliance Initiative was
approximately $510 million, including $102 million of occupancy, communications,
and other related overhead expenditures, as Merrill Lynch is applying a fully
costed pricing methodology for this project. At December 31, 1999, of the total
estimated expenditures, approximately $12 million, related to continued testing,
contingency planning, risk management, and the wind down of the efforts, had not
yet been spent.
Item 7A: Quantitative and Qualitative Disclosures About Market Risks.
-----------------------------------------------------------
Introduction
Past Results Not Necessarily Indicative of Future Performance
-------------------------------------------------------------
The Fund is a speculative commodity pool. Unlike an operating
company, the risk of market sensitive instruments is integral, not incidental,
to the Fund's main line of business.
Market movements result in frequent changes in the fair market value
of the Fund's open positions and, consequently, in its earnings and cash flow.
The Fund's market risk is influenced by a wide variety of factors, including the
level and volatility of interest rates, exchange rates, equity price levels, the
market value of financial instruments and contracts, the diversification effects
among the Fund's open positions and the liquidity of the markets in which it
trades.
The Fund, under the direction of the two Advisors which it has
retained since inception, rapidly acquires and liquidates both long and short
positions in a wide range of different markets. Consequently, it is not possible
to predict how a particular future market scenario will affect performance, and
the Fund's past performance is not necessarily indicative of its future results.
Value at Risk is a measure of the maximum amount which the Fund could
reasonably be expected to lose in a given market sector. However, the inherent
uncertainty of the Fund's speculative trading and the recurrence in the markets
traded by the Fund of market movements far exceeding expectations could result
in actual trading or non-trading losses far beyond the indicated Value at Risk
or the Fund's experience to date (i.e., "risk of ruin"). In light of the
foregoing as well as the risks and uncertainties intrinsic to all future
projections, the quantifications included in this section should not be
considered to constitute any assurance or representation that the Fund's losses
in any market sector will be limited to Value at Risk or by the Fund's attempts
to manage its market risk.
-15-
<PAGE>
Quantifying the Fund's Trading Value at Risk
Quantitative Forward-Looking Statements
---------------------------------------
The following quantitative disclosures regarding the Fund's market
risk exposures contain "forward-looking statements" within the meaning of the
safe harbor from civil liability provided for such statements by the Private
Securities Litigation Reform Act of 1995 (set forth in Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934).
All quantitative disclosures in this section are deemed to be forward-looking
statements for purposes of the safe harbor, except for statements of historical
fact.
The Fund's risk exposure in the various market sectors traded by the
Advisors is quantified below in terms of Value at Risk. Due to the Fund's mark-
to-market accounting, any loss in the fair value of the Fund's open positions is
directly reflected in the Fund's earnings (realized or unrealized) and cash flow
(at least in the case of exchange-traded contracts in which profits and losses
on open positions are settled daily through variation margin).
Exchange maintenance margin requirements have been used by the Fund as
the measure of its Value at Risk. Maintenance margin requirements are set by
exchanges to equal or exceed the maximum loss in the fair value of any given
contract incurred in 95%-99% of the one-day time periods included in the
historical sample (generally approximately one year) researched for purposes of
establishing margin levels. The maintenance margin levels are established by
dealers and exchanges using historical price studies as well as an assessment of
current market volatility (including the implied volatility of the options on a
given futures contract) and economic fundamentals to provide a probabilistic
estimate of the maximum expected near-term one-day price fluctuation.
In the case of market sensitive instruments which are not exchange-
traded (almost exclusively currencies in the case of the Fund), the margin
requirements for the equivalent futures positions have been used as Value at
Risk. In those rare cases in which a futures-equivalent margin is not
available, dealers' margins have been used.
The fair value of the Fund's futures and forward positions does not
have any optionality component. However, both JWH and Millburn trade options on
futures to a limited extent. The Value at Risk associated with options is
reflected in the following table as the margin requirement attributable to the
instrument underlying each option.
100% positive correlation in the different positions held in each
market risk category has been assumed. Consequently, the margin requirements
applicable to the open contracts have been aggregated to determine each trading
category's aggregate Value at Risk. The diversification effects resulting from
the fact that the Fund's positions are rarely, if ever, 100% positively
correlated have not been reflected.
The Fund's Trading Value at Risk in Different Market Sectors
The following table indicates the average, highest and lowest trading
Value at Risk associated with the Fund's open positions by market category for
the fiscal year 1999. During the fiscal year 1999, the Fund's average
capitalization was approximately $51,751,051. As of December 31, 1998, the
Fund's total capitalization was approximately $56,163,313.
The Fund does not trade agriculture or energy futures.
-16-
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year 1999
Average Value % of Average Highest Value at Lowest Value at
Market Sector at Risk Capitalization Risk Risk
- ------------- ------------- -------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Interest Rates $2,136,156 4.13% $3,515,796 $1,371,379
Currencies 2,188,695 4.23% 2,213,543 1,981,912
Stock Indices 670,728 1.30% 1,443,880 440,776
Metals 651,854 1.26% 932,200 464,883
-------------- -------------- ---------------- ---------------
TOTAL $5,647,433 10.91% 8,105,419 4,258,950
============== ============== ================ ===============
</TABLE>
Average, highest and lowest Value at Risk amounts relate to the quarter-end
amunts for each calendar quarter-end during the fiscal year. Average
Capitalization is the average of the Fund's capitalization at the end of each
quarter of fiscal year 1999.
% of Total
Market Sector Value at Risk Capitalization
- ------------- ----------------- --------------------
Interest Rates $3,110,066 5.54%
Currencies 1,822,438 3.25%
Stock Indices 558,504 0.99%
Metals 459,900 0.82%
-------------- --------------------
TOTAL $5,950,908 10.60%
============== ====================
Material Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the Fund is
typically many times the applicable maintenance margin requirement (maintenance
margin requirements generally ranging between approximately 1% and 10% of
contract face value) as well as many times the capitalization of the Fund. The
magnitude of the Fund's open positions creates a "risk of ruin" not typically
found in most other investment vehicles. Because of the size of its positions,
certain market conditions - unusual, but historically recurring from time to
time - could cause the Fund to incur severe losses over a short period of time.
The foregoing Value at Risk table - as well as the past performance of the Fund
- - give no indication of this "risk of ruin."
Non-Trading Risk
Foreign Currency Balances; Cash on Deposit with MLF
The Fund has non-trading market risk on its foreign cash balances not
needed for margin. However, these balances (as well as the market risk they
represent) are immaterial.
The Fund also has non-trading market risk on the approximately 90%-95%
of its assets which are held in cash at MLF. The value of this cash is not
interest rate sensitive, but there is cash flow risk in that if interest rates
decline so will the cash flow generated on these monies. This cash flow risk is
immaterial.
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Fund's market risk
exposures - except for (i) those disclosures that are statements of historical
fact and (ii) the descriptions of how the Fund manages its primary market risk
exposures -- constitute forward-looking statements within the meaning of Section
27A of the Securities Act and Section 21E of the Securities Exchange Act. The
Fund's primary market risk exposures as well as the strategies used and to be
used by MLIP and the Fund's two Advisors for managing such exposures are subject
to numerous uncertainties, contingencies and risks, any one of which could cause
the actual results of the Fund's risk controls to differ materially from the
objectives of such strategies. Government interventions, defaults and
expropriations, illiquid markets, the emergence of dominant fundamental factors,
political upheavals, changes in historical price relationships, an influx of new
market participants, increased regulation and many other factors could result in
material losses as well as in material changes to the risk exposures and the
risk management strategies of the Fund. There can be no assurance that the
Fund's current market exposure and/or risk management strategies will not change
materially or that any such strategies will be effective in either the short- or
long-term. Investors must be prepared to lose all or substantially all of the
time value of their investment in the Fund.
-17-
<PAGE>
The following were the primary trading risk exposures of the Fund as of
December 31, 1999, by market sector.
Interest Rates. Interest rate risk is the principal market exposure
--------------
of the Fund. Interest rate movements directly affect the price of derivative
sovereign bond positions held by the Fund and indirectly the value of its stock
index and currency positions. Interest rate movements in one country as well as
relative interest rate movements between countries materially impact the Fund's
profitability. The Fund's primary interest rate exposure is to interest rate
fluctuations in the United States and the other G-7 countries. However, the
Fund also takes positions in the government debt of smaller nations -- e.g., New
Zealand and Australia. The General Partner anticipates that G-7 interest rates
will remain the primary market exposure of the Fund for the foreseeable future.
Currencies. The Fund trades in a large number of currencies,
----------
including cross-rates -- i.e., positions between two currencies other than the
U.S. dollar. However, the Fund's major exposures have typically been in the
dollar/yen, and dollar/Euro positions. MLIP does not anticipate that the risk
profile of the Fund's currency sector will change significantly in the future.
The currency trading Value at Risk figure includes foreign margin amounts
converted into U.S. dollars with an incremental adjustment to reflect the
exchange rate risk inherent to the dollar-based Fund in expressing Value at Risk
in a functional currency other than dollars.
Stock Indices. The Fund's primary equity exposure is to equity index
-------------
price movements. The stock index futures traded by the Fund are by law limited
to futures on broadly based indices. As of December 31, 1999, the Fund's primary
exposures were in the S&P 500, Financial Times (England), Nikkei (Japan), Hang
Seng (Hong Kong) and DAX (Germany) stock indices. MLIP anticipates little, if
any, trading in non-G-7 stock indices. The Fund is primarily exposed to the risk
of adverse price trends or static markets in the major U.S., European and Asian
indices.
Metals. The Fund's primary metals market exposure is to fluctuations
------
in the price of gold and silver. Although certain of the Advisors will from time
to time trade base metals such as aluminum, copper and tin, the principal market
exposures of the Fund have consistently been in the precious metals, gold and
silver (and, to a much lesser extent, platinum). However, silver prices
have remained volatile over this period, and the Advisors have from time to time
taken substantial positions as they have perceived market opportunities to
develop. MLIP anticipates that gold and silver will remain the primary metals
market exposure for the Fund.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following were the only non-trading risk exposures of the Fund as
of December 31, 1999.
Foreign Currency Balances. The Fund's primary foreign currency
-------------------------
balances are in Japanese yen, British Pounds and Euros. The Fund has de minimis
exchange rate exposure on these balances.
-18-
<PAGE>
U.S. Dollar Cash Balance. The Fund holds U.S. dollars only in cash at
------------------------
MLF. The Fund has immaterial cash flow interest rate risk on its cash on
deposit with MLF in that declining interest rates would cause the income from
such cash to decline.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
Trading Risk
MLIP has procedures in place intended to control market risk, although
there can be no assurance that they will, in fact, succeed in doing so. These
procedures focus primarily on monitoring the trading of JWH and Millburn,
calculating the Net Asset Value of the Fund accounts managed by the two Advisors
as of the close of business on each day and reviewing outstanding positions for
over-concentrations. While MLIP does not itself intervene in the markets to
hedge or diversify the Fund's market exposure, MLIP may urge either or both of
JWH and Millburn to reallocate positions managed by the two Advisors, in an
attempt to avoid over-concentrations. However, such interventions are unusual.
Each of JWH and Millburn applies its own risk management policies to
its trading.
JWH Risk Management
JWH attempts to control risk in all aspects of the investment process
- -- from confirmation of a trend to determining the optimal exposure in a given
market, and to money management issues such as the startup or upgrade of
investor accounts. JWH double checks the accuracy of market data, and will not
trade a market without multiple price sources for analytical input. In
constructing a portfolio, JWH seeks to control overall risk as well as the risk
of any one position, and JWH trades only markets that have been identified as
having positive performance characteristics. Trading discipline requires plans
for the exit of a market as well as for entry. JWH factors the point of exit
into the decision to enter (stop loss). The size of JWH's positions in a
particular market is not a matter of how large a return can be generated but of
how much risk it is willing to take relative to that expected return.
To attempt to reduce the risk of volatility while maintaining the
potential for excellent performance, proprietary research is conducted on an
ongoing basis to refine the JWH investment strategies. Research may suggest
substitution of alternative investment methodologies with respect to particular
contracts; this may occur, for example, when the testing of a new methodology
has indicated that its use might have resulted in different historical
performance. In addition, risk management research and analysis may suggest
modifications regarding the relative weighting among various contracts, the
addition or deletion of particular contracts from a program, or a change in
position size in relation to account equity. The weighting of capital committed
to various markets in the investment programs is dynamic, and JWH may vary the
weighting at its discretion as market conditions, liquidity, position limit
considerations and other factors warrant.
JWH may determine that risks arise when markets are illiquid or
erratic, such as may occur cyclically during holiday seasons, or on the basis of
irregularly occurring market events. In such cases, 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.
Adjustments in position size in relation to account equity have been
and continue to be an integral part of JWH's investment strategy. At its
discretion, JWH may adjust the size of a position in relation to equity in
certain markets or entire programs. Such adjustments may be made at certain
times for some programs but not for others. Factors which may affect the
decision to adjust the size of a position in relation to account equity include
ongoing research, program volatility, assessments of current market volatility
and risk exposure, subjective judgment, and evaluation of these and other
general market conditions.
-19-
<PAGE>
Millburn Ridgefield Risk Management
Millburn Ridgefield attempts to control risk through the systematic
application of its trading method, which includes a multi-system approach to
price trend recognition, an analysis of market volatility, the application of
certain money management principles, which may be revised from time to time, and
adjusting leverage or portfolio size. In addition, Millburn Ridgefield limits
its trading to markets which it believes are sufficiently liquid in respect of
the amount of trading it contemplates conducting.
Millburn Ridgefield develops trading systems using various classes of
quantitative models and data such as price, volume and interest rates, and tests
those systems in numerous markets against historical data to simulate trading
results. Millburn Ridgefield then analyses the profitability of the systems
looking at such features as the percentage of profitable trades, the worst
losses experienced, the average giveback of maximum profits on profitable trades
and risk adjusted returns. The performance of all systems in the market are
then ranked, and three or four systems are selected which make decisions in
different ways at different times. This multi-system approach ensures that the
total risk intended to be taken in a market is spread over several different
strategies.
Millburn Ridgefield also attempts to assess market volatility as a
means of monitoring and evaluating risk. In doing so, Millburn Ridgefield uses a
volatility overlay system which measures the risk in a portfolio's position in a
market and signals a decrease in position size when risk increases and an
increase in position size when risk decreases. Millburn's volatility overlay
maintains overall portfolio risk and distribution of risk across markets within
designated ranges.
Millburn Ridgefield's risk management also focuses on money management
principles applicable to a portfolio as a whole rather than to individual
markets. The first principle is reducing overall portfolio volatility through
diversification among markets. Millburn Ridgefield seeks a portfolio in which
returns from trading in different markets are not highly correlated, that is, in
which returns are not all positive or negative at the same time. Additional
money management principles include limiting the assets committed as margin or
collateral, generally within a range of 15% to 30% of an account's net assets;
avoiding the use of unrealized profits in a particular market as margin for
additional positions in the same market; and changing the equity used for
trading an account solely on a controlled periodic basis, not automatically due
to an increase in equity from trading profits.
Another important risk management function is the careful control of
leverage or portfolio size. Leverage levels are determined by simulating the
entire portfolio over the past five or ten years to determine the worst case
experienced by the portfolio in the simulation period. The worst case or peak-
to-trough drawdown, is measured from a daily high in portfolio assets to the
subsequent daily low whether that occurs days, weeks or months after the daily
high. If Millburn Ridgefield considers the drawdown too severe, it reduces the
leverage or portfolio size.
Millburn Ridgefield determines asset allocation among markets and
position size on the basis of the money management principals and trading data
research discussed above and the market experience of Millburn Ridgefield's
principals. From time to time Millburn Ridgefield may adjust the size of a
position, long or short, in any given market. Decisions to make such adjustments
require the exercise of judgment and may include consideration of the volatility
of the particular market; the pattern of price movements, both inter-day and
intra-day; open interest; volume of trading; changes in spread relationships
between various forward contracts; and overall portfolio balance and risk
exposure.
Non-Trading Risk
The Fund controls the non-trading exchange rate risk by regularly
converting foreign balances back into dollars (usually weekly but no less
frequently than twice a month, and more frequently if a particular foreign
currency balance becomes unusually high).
The Fund has cash flow interest rate risk on its cash on deposit with
MLF in that declining interest rates
-20-
<PAGE>
would cause the income from such cash to decline. However, a certain amount of
cash or cash equivalents must be held by the Fund in order to facilitate margin
payments and pay expenses and redemptions. MLIP does not take any steps to limit
the cash flow risk on its cash held on deposit at MLF.
Item 8: Financial Statements and Supplementary Data
-------------------------------------------
The financial statements required by this Item are included in
Exhibit 13.01.
The supplementary financial information ("selected quarterly
financial data" and "information about oil and gas producing activities")
specified by Item 302 of Regulation S-K is not applicable. MLIP promoted the
Fund and is its controlling person.
Item 9: Changes in and Disagreements with Accountants on Accounting and
---------------------------------------------------------------
Financial Disclosure
- --------------------
There were no changes in or disagreements with independent
auditors on accounting or financial disclosure.
-21-
<PAGE>
PART III
Item 10: Directors and Executive Officers of the Registrant
- ------------------------------------------------------------
10(a) & 10(b) Identification of Directors and Executive Officers:
--------------------------------------------------=
As a limited partnership, the Partnership itself has no officers or
directors and is managed by the General Partner. Trading decisions are made by
the Trading Advisors on behalf of the Partnership.
The directors and executive officers of MLIP and their business
backgrounds are as follows.
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
Michael L. Pungello Vice President, Chief Financial Officer and Treasurer
Allen N. Jones Director
Stephen G. Bodurtha Director
Michael J. Perini 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 MLF. He
joined Merrill Lynch Pierce Fenner & Smith Incorporated ("MLPF&S") in 1966 and
has served in various positions, including Retail and Institutional Sales,
Manager of New York Institutional Sales, Director of Institutional Marketing,
Senior Vice President of Merrill Lynch Capital Markets and Director of
International Institutional Sales. Mr. Frawley holds a Bachelor of Science
degree from Canisius College. Mr. Frawley served on the CFTC's Regulatory
Coordination Advisory Committee from its formation in 1990 through its
dissolution in 1994. Mr. Frawley has served four consecutive one-year terms as
Chairman of the Managed Funds Association (formerly, the Managed Futures
Association), a national trade association that represents the managed futures,
hedge funds and fund of funds industry. Mr. Frawley currently serves as a
member of the CFTC's 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
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. Mr. Chandor is serving a
two-year term as a director of the Managed Funds Association.
Michael L. Pungello was born in 1957. Effective May 1, 1999, Mr.
Pungello became Vice President, Chief Financial Officer and Treasurer of
MLIP. He was First Vice President and Senior Director of Finance for Merrill
Lynch's Operations, Services and Technology Group from January 1998 to March
1999. Prior to that, Mr. Pungello spent over 18 years with Deloitte & Touche
LLP, and was a partner in their Financial Services practice from June 1990 to
December 1997. He graduated from Fordham University in 1979 with a Bachelor of
Science degree in accounting and received his Master of Business Administration
degree in Finance from New York University in 1987.
-22-
<PAGE>
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 magna cum laude from Wesleyan University,
Middletown, Connecticut with a Bachelor of Arts degree in Government. 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 to
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.
Michael J. Perini was born in 1947. Effective May 11, 1999, Mr. Perini
became a Director of MLIP. Since February 1998, Mr. Perini has been First Vice
President and Senior Director of the Defined and Managed Funds Group, which
includes Defined Asset Funds, Special Investments and MLIP. This is part of the
Investment Strategy Product Group of Merrill Lynch Private Client. Previously
Michael Perini was Director of Defined Asset Funds and has held various
management positions since he joined Merrill Lynch in 1970. Mr. Perini attended
St. John's University and New York University as well as The Stanford University
Marketing Management Program. He was elected to the Board of Governors of the
Investment Company Institute in Washington, D.C., and is Chairman of the Unit
Investment Trust Committee of the Institute.
Steven B. Olgin was born in 1960. Mr. Olgin is Vice President,
Secretary and the Director of Administration of MLIP. He joined MLIP in July
1994 and became a Vice President in July 1995. From 1986 until July 1994, Mr.
Olgin was an associate of the law firm of Sidley & Austin. In 1982, Mr. Olgin
graduated from The American University with a Bachelor of Science degree in
Business Administration and a Bachelor of Arts degree in Economics. In 1986, he
received his Juris Doctor degree from The John Marshall Law School. Mr. Olgin
is a member of the Managed 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.
As of December 31, 1999, the principals of MLIP had no investment in
the Fund, and MLIP's general partnership interest was valued at $566,633.
MLIP acts as general partner to eleven public futures funds whose
units of limited partnership interest are registered under the Securities
Exchange Act of 1934: The Futures Expansion Fund Limited Partnership, ML
Futures Investments L.P., ML Futures Investments II L.P. , The S.E.C.T.O.R.
Strategy Fund (SM) L.P., The SECTOR Strategy Fund (SM) II L.P., The SECTOR
Strategy Fund (SM) V L.P., The SECTOR Strategy Fund (SM) VI L.P., ML Global
Horizons L.P., ML Principal Protection L.P., ML JWH Strategic Allocation Fund
L.P. and the Fund. Because MLIP serves as the sole general partner of each of
these funds, the officers and directors of MLIP effectively manage them as
officers and directors of such funds.
(c) Identification of Certain Significant Employees:
-----------------------------------------------
None.
(d) Family Relationships:
--------------------
-23-
<PAGE>
None.
(e) Business Experience:
-------------------
See Item 10(a)(b) above.
(f) Involvement in Certain Legal Proceedings:
----------------------------------------
None.
(g) Promoters and Control Persons:
-----------------------------
Not applicable.
Item 11: Executive Compensation
----------------------
The officers of MLIP are remunerated by MLIP in their respective
positions. The Partnership does not itself have any officers, directors or
employees. The Partnership pays Brokerage Commissions to an affiliate of MLIP
and Administrative Fees to MLIP. MLIP or its affiliates also may receive certain
economic benefits from holding the Fund's dollar assets in offset accounts, as
described in Item 1(c) above. The directors and officers receive no "other
compensation" from the Partnership, and the directors receive no compensation
for serving as directors of MLIP. There are no compensation plans or
arrangements relating to a change in control of either the Partnership or MLIP.
Item 12: Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners:
-----------------------------------------------
As of December 31, 1999, no person or "group" is known to be or
have been the beneficial owner of more than 5% of the Units. All of the
Partnership's units of general partnership interest are owned by MLIP.
(b) Security Ownership of Management:
--------------------------------
As of December 31, 1999, the Advisors owned 515 Series A Units,
500 Series B Units and 1,000 Series C Units and the General Partner owned 504
Series A Units, 1,338 Series B Units and 926 Series C Units (unit-equivalent
general partnership interests) which was, in each case, less than 2% of each
series of the total Units outstanding, respectively.
(c) Changes in Control:
------------------
None.
Item 13: Certain Relationships and Related Transactions
----------------------------------------------
(a) Transactions Between Merrill Lynch and the Fund
-----------------------------------------------
All of the service providers to the Fund, other than the Advisors,
are affiliates of Merrill Lynch. Merrill Lynch negotiated with the Advisors over
the level of its advisory fees and Profit Shares. However, none of the fees paid
-24-
<PAGE>
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 bid-ask spreads on forward currency trades. The
Fund also pays MLF interest on short-term loans extended by MLF to cover losses
on foreign currency positions.
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 revenues.
No loans have been, are or will be outstanding between MLIP or
any of its principals and the Fund.
MLIP pays substantial selling commissions and trailing
commissions to MLPF&S for distributing the Units. MLIP is ultimately paid back
for these expenditures from the revenues it receives from the Fund.
(b) Certain Business Relationships:
------------------------------
MLF, an affiliate of MLIP, acts as the principal commodity broker
for the Partnership.
In 1999, the Partnership expensed through its investment in the
Trading LLC's: (i) Brokerage Commissions of $4,979,159 to MLF which included
$1,556,794 in consulting fees earned by the Advisors; and (ii) Administrative
Fees of $131,028 to MLIP. In addition, MLIP and its affiliates may have derived
certain economic benefits from possession of the Fund's assets, as well as from
foreign exchange and EFP trading.
(c) Indebtedness of Management:
--------------------------
The Partnership is prohibited from making any loans, to
management or otherwise.
(d) Transactions with Promoters:
---------------------------
Not applicable.
-25-
<PAGE>
PART IV
Item 14: Exhibits, Financial Statement Schedules and Reports on Form 8-K
---------------------------------------------------------------
<TABLE>
<CAPTION>
(a)1. Financial Statements: Page
--------------------- ----
<S> <C>
Independent Auditors' Report 1
Statements of Financial Condition as of December 31, 1999 and 1998 2
For the years ended December 31, 1999, 1998 and 1997:
Statements of Operations 3
Statements of Changes in Partners' Capital 4
Notes to Financial Statements 5-14
</TABLE>
(a)2. Financial Statement Schedules:
-----------------------------
Financial statement schedules not included in this Form 10-K
have been omitted for the reason that they are not required or are not
applicable or that equivalent information has been included in the financial
statements or notes thereto.
(a)3. Exhibits:
--------
The following exhibits are incorporated by reference or are
filed herewith to this Annual Report on Form 10-K:
Designation Description
- ----------- -----------
3.01(ii) Amended and Restated Limited Partnership Agreement of the
Partnership.
Exhibit 3.01(ii): Is incorporated herein by reference from Exhibit 3.01(ii)
- ----------------
contained in Amendment No. 1 (as Exhibit A) to the
Registration Statement (File No. 33-41373) filed on August
20, 1991, on Form S-1 under the Securities Act of 1933 (the
"Registrant's Registration Statement").
3.02(c) Amended and Restated Certificate of Limited Partnership of
the Partnership, dated July 27, 1995.
Exhibit 3.02(c): Is incorporated by reference from Exhibit 3.02(c) contained
- ---------------
in the Registrant's report on Form 10-Q for the Quarter
Ended June 30, 1995.
10.01(o) Form of Advisory Agreement between the Partnership, Merrill
Lynch Investment Partners Inc., Merrill Lynch Futures Inc.
and each of John W. Henry & Company, Inc. and Millburn
Ridgefield Corporation.
Exhibit 10.01(o): Is incorporated by reference from Exhibit 10.01(o)
- ----------------
contained in the Registrant's report on Form 10-Q for the
Quarter Ended June 30, 1995.
10.02(a) Form of Consulting Agreement between each Advisor, the
Partnership and Merrill Lynch Futures Inc.
-26-
<PAGE>
Exhibit 10.02(a): Is incorporated herein by reference from Exhibit 10.02(a)
- ----------------
contained in Amendment No. 1 to the Registration Statement
(File No. 33-30096) dated as of September 21, 1989, on Form
S-1 under the Securities Act of 1933.
10.03 Form of Customer Agreement between the Partnership and
Merrill Lynch Futures Inc.
Exhibit 10.03: Is incorporated herein by reference from Exhibit 10.03
- -------------
contained in the Registrant's Registration Statement.
10.06 Foreign Exchange Desk Service Agreement, dated July 1, 1993
among Merrill Lynch Investment Partners Inc., Merrill Lynch
Futures Inc. and the Fund.
Exhibit 10.06: Is incorporated herein by reference from Exhibit 10.06
- --------------
contained in the Registrant's report on Form 10-K for the
year ended December 31, 1996.
10.07(a) Form of Advisory and Consulting Agreement Amendment among
Merrill Lynch Investment Partners Inc., each Advisor, the
Fund and Merrill Lynch Futures.
Exhibit 10.07(a): Is incorporated herein by reference from Exhibit 10.07(a)
- ----------------
contained in the Registrant's report on Form 10-K for the
year ended December 31, 1996.
10.07(b) Form of Amendment to the Customer Agreement among the
Partnership and Merrill Lynch Futures.
Exhibit 10.07(b) Is incorporated herein by reference from Exhibit 10.07(b)
- ----------------
contained in the Registrant's report on Form 10-K for the
year ended December 31, 1996.
13.01 1999 Annual Report and Independent Auditors' Report.
Exhibit 13.01: Is filed herewith.
- --------------
13.01(a) 1999 Annual Reports and Independent Auditors' Reports for
the following Trading Limited Liability Companies sponsored
by Merrill Lynch Investment Partners' Inc.: ML Millburn
Global L.L.C.
ML JWH Financial and Metals Portfolio L.L.C.
Exhibit 13.01(a): Is incorporated herewith
- -----------------
28.01 Prospectus of the Partnership dated September 29, 1989.
Exhibit 28.01: Is incorporated by reference as filed with the Securities
- -------------
and Exchange Commission pursuant to Rule 424 under the
Securities Act of 1933, as amended, on October 10, 1989.
28.02 Prospectus of the Partnership dated December 14, 1990.
Exhibit 28.02: Is incorporated by reference as filed with the Securities
- -------------
and Exchange Commission pursuant to Rule 424 under the
Securities Act of 1933, as amended, on December 20, 1990.
-27-
<PAGE>
28.03 Prospectus of the Partnership dated September 13, 1991.
Exhibit 28.03: Is incorporated by reference as filed with the Securities
- --------------
and Exchange Commission pursuant to Rule 424 under the
Securities Act of 1933, Registration Statement on September
23, 1991.
(b) Report on Form 8-K:
No reports on Form 8-K were filed during the fourth quarter of
1999.
-28-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
JOHN W. HENRY & CO./MILLBURN L.P.
By: MERRILL LYNCH INVESTMENT PARTNERS INC.
General Partner
By: /s/John R. Frawley, Jr.
----------------------
John R. Frawley, Jr.
Chairman, Chief Executive Officer,
President and Director
(Principal Executive Officer)
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed on March 30, 2000 by the
following persons on behalf of the Registrant and in the capacities indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ John R. Frawley, Jr. Chairman, Chief Executive Officer, President and Director March 30, 2000
- --------------------------
John R. Frawley, Jr. (Principal Executive Officer)
/s/ Michael L. Pungello Vice President, Chief Financial Officer, and Treasurer March 30, 2000
- --------------------------
Michael L. Pungello (Principal Financial and Accounting Officer)
/s/ Jeffrey F. Chandor Senior Vice President, Director of Sales, March 30, 2000
- --------------------------
Jeffrey F. Chandor Marketing and Research, and Director
/s/ Michael J. Perini Director March 30, 2000
- --------------------------
Michael J. Perini
</TABLE>
(Being the principal executive officer, the principal financial and accounting
officer and a majority of the directors of Merrill Lynch Investment Partners
Inc.)
MERRILL LYNCH INVESTMENT General Partner of Registrant March 30, 2000
PARTNERS INC.
By: /s/John R. Frawley, Jr.
- ---------------------------
John R. Frawley, Jr.
-29-
<PAGE>
JOHN W. HENRY & CO./MILLBURN L.P.
1999 FORM 10-K
INDEX TO EXHIBITS
-----------------
Exhibit
-------
Exhibit 13.01 1999 Annual Report and Independent Auditors' Report
Exhibit 13.01(a) 1999 Annual Report and Independent
Auditors' Report for:
ML Millburn Global, LLC
ML JWH Financials and Metals Portfolio, LLC
30
<PAGE>
Exhibit 13.01
JOHN W. HENRY & CO./ MILLBURN L.P.
(A Delaware Limited Partnership)
Financial Statements for the years ended
December 31, 1999, 1998 and 1997
and Independent Auditors' Report
[LOGO] Merrill Lynch
<PAGE>
JOHN W. HENRY & CO./MILLBURN L.P.
(A Delaware Limited Partnership)
------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------
Page
----
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 1999, 1998 AND 1997:
Statements of Financial Condition 2
Statements of Operations 3
Statements of Changes in Partners' Capital 4
Notes to Financial Statements 5-14
<PAGE>
INDEPENDENT AUDITORS' REPORT
- ----------------------------
To the Partners of
John W. Henry & Co./Millburn L.P.:
We have audited the accompanying statements of financial condition of John W.
Henry & Co./Millburn L.P. (the "Partnership") as of December 31, 1999 and 1998,
and the related statements of operations and of changes in partners' capital for
each of the three years in the period ended December 31, 1999. 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, such financial statements present fairly, in all material
respects, the financial position of John W. Henry & Co./Millburn L.P. as of
December 31, 1999 and 1998, and the results of its operations and changes in
partners' capital for each of the three years in the period ended December 31,
1999 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
February 4, 2000
<PAGE>
JOHN W. HENRY & CO./MILLBURN L.P.
(A Delaware Limited Partnership)
------------------------------
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
------------------------- --------------------------
<S> <C> <C>
ASSETS
Investments (Note 6) $ 42,876,172 $ 56,163,313
Receivable from investments (Note 6) 1,007,250 259,704
------------------------- --------------------------
TOTAL $ 43,883,422 $ 56,423,017
========================= ==========================
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Redemptions payable $ 1,007,250 $ 259,704
------------------------- --------------------------
Total liabilities 1,007,250 259,704
------------------------- --------------------------
PARTNERS' CAPITAL:
General Partner:
(504 and 504 Series A Units outstanding) 131,110 149,246
(1,338 and 1,338 Series B Units outstanding) 282,923 321,921
(926 and 926 Series C Units outstanding) 152,600 173,635
Limited Partners:
(39,335 and 44,678 Series A Units outstanding) 10,232,683 13,230,285
(100,451 and 115,421 Series B Units outstanding) 21,241,923 27,771,959
(65,744 and 77,411 Series C Units outstanding) 10,834,933 14,516,267
------------------------- --------------------------
Total partners' capital 42,876,172 56,163,313
------------------------- --------------------------
TOTAL $ 43,883,422 $ 56,423,017
========================= ==========================
NET ASSET VALUE PER UNIT
Series A $ 260.14 $ 296.13
========================= ==========================
Series B $ 211.47 $ 240.61
========================= ==========================
Series C $ 164.80 $ 187.52
========================= ==========================
</TABLE>
See notes to financial statements.
2
<PAGE>
JOHN W. HENRY & CO./MILLBURN L.P.
(A Delaware Limited Partnership)
------------------------------
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
-------------------- ------------------- -------------------
<S> <C> <C> <C>
INCOME (LOSS) FROM INVESTMENTS (Note 6) $ 6,145,111) $ 1,867,451 $ 7,357,688
-------------------- ------------------- -------------------
NET INCOME (LOSS) (6,145,111) 1,867,451 7,357,688
==================== =================== ===================
NET INCOME (LOSS) PER UNIT:
Weighted average number of General Partner
and Limited Partner Units outstanding (Note 5) 226,394 264,787 294,640
==================== =================== ===================
Net income (loss) per weighted average
General Partner and Limited
Partner Unit $ (27.14) $ 7.05 $ 24.97
==================== =================== ===================
</TABLE>
See notes to financial statements.
3
<PAGE>
JOHN W. HENRY & CO./MILLBURN L.P.
(A Delaware Limited Partnership)
------------------------------
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Series Series Series General Partner
----------------------------------------------------
A B C Series Series Series
Units Units Units A B C
------------- -------------- --------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
PARTNERS' CAPITAL,
DECEMBER 31, 1996 56,376 148,528 100,695 $ 196,983 $ 405,594 $ 230,192
Redemptions (4,604) (11,308) (8,236) - - -
Net income - - - 24,622 50,580 28,707
------------- -------------- --------------- ---------------- ---------------- ---------------
PARTNERS' CAPITAL,
DECEMBER 31, 1997 51,772 137,220 92,459 221,605 456,174 258,899
Redemptions (6,590) (20,461) (14,122) (70,937) (133,279) (82,775)
Net income (loss) - - - (1,422) (974) (2,489)
------------- -------------- --------------- ---------------- ---------------- ---------------
PARTNERS' CAPITAL,
DECEMBER 31, 1998 45,182 116,759 78,337 149,246 321,921 173,635
Redemptions (5,343) (14,970) (11,667) - - -
Net income (loss) - - - (18,136) (38,998) (21,035)
------------- -------------- --------------- ---------------- ---------------- ---------------
PARTNERS' CAPITAL,
DECEMBER 31, 1999 39,839 101,789 66,670 $ 131,110 $ 282,923 $ 152,600
============= ============== =============== ================ ================ ===============
<CAPTION>
Limited Partners
----------------------------------------------------------
Series Series Series
A B C Total
------------------ -------------------- ---------------- ----------------
<S> <C> <C> <C> <C>
PARTNERS' CAPITAL,
DECEMBER 31, 1996 $ 14,040,479 $ 30,082,484 $ 15,878,356 $60,834,088
Redemptions (1,255,814) (2,498,029) (1,413,769) (5,167,612)
Net income 1,702,808 3,638,849 1,912,122 7,357,688
------------------- -------------------- ------------------ ---------------
PARTNERS' CAPITAL,
DECEMBER 31, 1997 14,487,473 31,223,304 16,376,709 63,024,164
Redemptions (1,665,001) (4,413,933) (2,362,377) (8,728,302)
Net income (loss) 407,813 962,588 501,935 1,867,451
------------------- -------------------- ------------------- --------------
PARTNERS' CAPITAL,
DECEMBER 31, 1998 13,230,285 27,771,959 14,516,267 56,163,313
Redemptions (1,552,673) (3,480,805) (2,108,552) (7,142,030)
Net income (loss) (1,444,929) (3,049,231) (1,572,782) (6,145,111)
------------------- -------------------- ------------------- --------------
PARTNERS' CAPITAL,
DECEMBER 31, 1999 $ 10,232,683 $ 21,241,923 $ 10,834,933 $42,876,172
====================== ==================== ================ ==============
</TABLE>
See notes to financial statements.
4
<PAGE>
JOHN W. HENRY & CO./MILLBURN L.P.
(A Delaware Limited Partnership)
------------------------------
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
------------
John W. Henry & Co./Millburn L.P. (the "Partnership") was organized under the
Delaware Revised Uniform Limited Partnership Act on August 29, 1989. The
Partnership raised $18,182,000 in its initial offering of Units of limited
partnership interest ("Series A Units") and commenced trading activities on
January 5, 1990. The Partnership raised an additional $50,636,000 in a second
offering of Units of limited partnership interest ("Series B Units") and
commenced trading activities with respect to the Series B Units on January
28, 1991. The Partnership raised an additional $40,000,000 in a third
offering of Units of limited partnership interest ("Series C Units") and
commenced trading activities with respect to the Series C Units on January 2,
1992. (Series A, B and C units are, hereinafter, collectively referred to as
"Units.") The Partnership engages (currently, through investments in limited
liability companies (see below)) in the speculative trading of futures,
options on futures and forward contracts on a wide range of commodities.
Merrill Lynch Investment Partners Inc. ("MLIP"), a wholly-owned subsidiary of
Merrill Lynch Group, Inc., which, in turn, is a wholly-owned subsidiary of
Merrill Lynch & Co., Inc. ("Merrill Lynch"), is the general partner of the
Partnership. Merrill Lynch Futures Inc. ("MLF"), an affiliate of Merrill
Lynch, is the Partnership's commodity broker. MLIP has agreed to maintain a
general partner's interest of at least 1% of total capital of each Series of
Units. MLIP and each Limited Partner share in the profits and losses of such
Series in proportion to their respective interests in it.
John W. Henry & Company, Inc. and Millburn Ridgefield Corporation (each an
"Advisor", together, "Advisors") have been the Partnership's only trading
advisors since inception. Each Advisor was allocated 50% of the total assets
of each Series as of the date such Series began trading. Subsequently, these
allocations have varied over time. MLIP may, in its discretion, reallocate
assets as of any month-end. The Partnership has placed all of its assets
under the management of the Advisors through investing in private limited
liability companies ("Trading LLCs"), as described in Note 6. Certain of the
following notes to financial statements are directly related to Partnership
assets managed by the Advisors in the Trading LLC's.
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 as
well as the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Revenue Recongnition
--------------------
See Note 6 for discussion of revenue recognition for the Partnership's
investment in Trading LLC's.
Operating Expenses
------------------
MLIP pays all routine operating expenses, including legal, accounting,
printing, postage and similar administrative expenses. MLIP receives an
administrative fee as well as a portion
5
<PAGE>
of the brokerage commissions paid to MLF by the Partnership (see Note 2).
Income Taxes
------------
No provision for income taxes has been made in the accompanying financial
statements as each Partner is individually responsible for such Partner's
respective share of the income and expenses of the series in which such
partner is invested as reported for income tax purposes.
Redemptions
-----------
A Limited Partner may 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.
Dissolution of the Partnership
------------------------------
The Partnership will terminate on December 31, 2016 or at an earlier date if
certain conditions occur, as well as under certain other circumstances as set
forth in the Limited Partnership Agreement.
2. RELATED PARTY TRANSACTIONS
The Partnership's U.S. dollar assets invested in Trading LLC's are maintained
at MLF. On assets held in U.S. dollars, Merrill Lynch credits the Trading
LLC's with interest at the prevailing 91-day U.S. Treasury bill rate. The
Trading LLC's are credited with interest on any of its net gains actually
held by Merrill Lynch in non-U.S. dollar currencies at a prevailing local
rate received by Merrill Lynch. Merrill Lynch may derive certain economic
benefit, in excess of the interest which Merrill Lynch pays to the Trading
LLC's, from possession of such assets.
Merrill Lynch charges the Trading LLC's Merrill Lynch's cost of financing
realized and unrealized losses on the Trading LLC's non-U.S. dollar-
denominated positions.
The Partnership pays brokerage commissions to MLF through the Trading LLC's
at a flat monthly rate of .792 of 1% (a 9.50% annual rate) of the
Partnership's month-end assets. Prior to February 1, 1997, the rate was .979
of 1% (an 11.75% annual rate). The Partnership also pays MLIP a monthly
administrative fee through the Trading LLC's of .21 of 1% (an .25% annual
rate) of the Partnership's month-end assets. Month-end assets are not
reduced, for purposes of calculating brokerage commissions and administrative
fees, by any accrued brokerage commissions, administrative fees, Profit
Shares or other fees or charges.
MLF pays the Advisors annual consulting fees up to 4% of the average month-
end assets allocated to them for management.
3. AGREEMENTS
The Trading LLCs entered the Advisory Agreements with the Advisors (see Note
6).
Profit Shares of either 15% or 20%, of any New Trading Profit, as defined,
either as of the end of each calendar quarter or year, were paid to each
Advisor based on the performance of the Partnership account managed by such
Advisor, irrespective of the overall performance of the Partnership. Profit
Shares are also paid out in respect of Units redeemed as of the end of
interim months, to the extent the applicable percentage of any New Trading
Profits attributable to such Units.
6
<PAGE>
4. STATEMENT OF INCOME BY SERIES
The profit and loss of the Series A, Series B and Series C Units for the
years ended December 31, 1999, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
Series A Series B
------------------------------------------------ ---------------------------------------------
1999 1998 1997 1999 1998 1997
---------------- ----------- --------------- ---------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Income (loss) from
investments (Note 6) (1,463,065) 406,391 1,727,430 (3,088,229) 961,614 3,689,429
---------------- ----------- --------------- ---------------- ---------- ---------------
NET INCOME (LOSS) $ (1,463,065) $ 406,391 $ 1,727,430 $ (3,088,229) $ 961,614 $ 3,689,429
================ =========== =============== ================ ========== ===============
NET INCOME (LOSS) PER
UNIT OF PARTNERSHIP
INTEREST:
Weighted average number
of units outstanding (Note 5) 42,998 48,581 54,036 108,954 129,195 143,414
---------------- ----------- --------------- ---------------- ---------- ---------------
Net income (loss) per weighted
Average General Partner and
Limited Partner Unit $ (34.03) $ 8.37 $ 31.97 $ (28.34) $ 7.44 $ 25.73
================ =========== =============== ================ ========== ===============
<CAPTION>
Series C
----------------------------------------------
1999 1998 1997
--------------- ----------- ----------------
<S> <C> <C> <C>
Income (loss) from
investments (Note 6) (1,593,817) 499,446 1,940,829
--------------- ----------- ----------------
NET INCOME (LOSS) $ (1,593,817) $ 499,446 $1,940,829
=============== =========== ================
NET INCOME (LOSS) PER
UNIT OF PARTNERSHIP
INTEREST:
Weighted average number
of units outstanding (Note 5) 74,442 87,011 97,190
--------------- ----------- ----------------
Net income (loss) per weighted
average General Partner and
Limited Partner Unit $ (21.41) $ 5.74 $ 19.97
=============== =========== ================
</TABLE>
7
<PAGE>
5. WEIGHTED AVERAGE UNITS
The weighted average number of Units of each series outstanding was computed
for purposes of disclosing net income per weighted average Unit. The weighted
average number of Units of each series outstanding for the years ended
December 31, 1999, 1998 and 1997 equals the Units of such series outstanding
as of such date, adjusted proportionately for Units redeemed based on the
respective length of time each was outstanding during the year.
6. INVESTMENTS
The investments in the Trading LLC's are reflected in the financial
statements at fair value based upon the interest of each series of Units in
each Trading LLC. Fair value is equal to the market value of the net assets
of the Trading LLC's. The resulting difference between cost and fair value is
reflected on the Statements of Operations as Income (loss) from investments.
At December 31, 1999 and 1998, the Partnership had investments in the ML JWH
Financial and Metals Portfolio LLC ("JWH LLC") and ML Millburn Global LLC
("Millburn LLC") as follows:
1999 1998
--------------- ---------------
JWH LLC $ 19,843,543 $28,886,199
Millburn LLC 23,032,629 27,277,114
--------------- ---------------
Total $ 42,876,172 $56,163,313
=============== ===============
8
<PAGE>
Total revenues and fees with respect to such investments are set forth as
follows:
<TABLE>
<CAPTION>
For the year ended Total Brokerage Administrative
December 31, 1999 Revenues Commissions Fees
---------------------------- ----------------------------------------------------------
Series A Units
- ------------------------------------
<S> <C> <C> <C>
JWH LLC $ (710,851) $ 593,051 $ 15,604
Millburn LLC 484,166 605,625 15,937
---------------------------- ------------------------- -----------------------
Total $ (226,685) $ 1,198,676 $ 31,541
============================ ========================= =======================
Series B Units
- ------------------------------------
JWH LLC $ (1,520,888) $ 1,214,897 $ 31,972
Millburn LLC 973,195 1,251,363 32,930
---------------------------- ------------------------- -----------------------
Total $ (547,693) $ 2,466,260 $ 64,902
============================ ========================= =======================
Series C Units
- ------------------------------------
JWH LLC $ (775,390) $ 647,501 $ 17,040
Millburn LLC 537,575 666,722 17,545
---------------------------- ------------------------- -----------------------
Total $ (237,815) $ 1,314,223 $ 34,585
============================ ========================= =======================
Total - All Series
- ------------------------------------
JWH LLC $ (3,007,129) $ 2,455,449 $ 64,616
Millburn LLC 1,994,936 2,523,710 66,412
---------------------------- ------------------------- -----------------------
Total $ (1,012,193) $ 4,979,159 $ 131,028
============================ ========================= =======================
<CAPTION>
For the year ended Profit Income from
December 31, 1999 Shares Investments
------------------------------- ---------------------------
Series A Units
- ------------------------------------
<S> <C> <C>
JWH LLC $ - $ (1,319,506)
Millburn LLC 6,163 (143,559)
-------------------------- ---------------------------
Total $ 6,163 $ (1,463,065)
========================== ===========================
Series B Units
- ------------------------------------
JWH LLC $ - $ (2,767,757)
Millburn LLC 9,374 (320,472)
-------------------------- ---------------------------
Total $ 9,374 $ (3,088,229)
========================== ===========================
Series C Units
- ------------------------------------
JWH LLC $ - $ (1,439,931)
Millburn LLC 7,194 (153,886)
-------------------------- ---------------------------
Total $ 7,194 $ (1,593,817)
========================== ===========================
Total - All Series
- ------------------------------------
JWH LLC $ - $ (5,527,194)
Millburn LLC 22,731 (617,917)
-------------------------- ---------------------------
Total $ 22,731 $ (6,145,111)
========================== ===========================
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
For the year ended Total Brokerage Administrative
December 31, 1998 Revenues Commissions Fees
---------------------------- ------------------------------------------------------------
Series A Units
- ----------------------------------
<S> <C> <C> <C>
JWH LLC $ 995,747 $ 630,513 $ 16,592
Millburn LLC 829,825 633,628 16,674
---------------------------- ------------------------- -----------------------
Total $ 1,825,572 $ 1,264,141 $ 33,266
============================ ========================= =======================
Series B Units
- ----------------------------------
JWH LLC $ 2,200,199 $ 1,356,787 $ 35,705
Millburn LLC 1,832,991 1,374,689 36,176
---------------------------- ------------------------- -----------------------
Total $ 4,033,190 $ 2,731,476 $ 71,881
============================ ========================= =======================
Series C Units
- ----------------------------------
JWH LLC $ 1,148,318 $ 712,552 $ 18,752
Millburn LLC 962,693 721,776 18,994
---------------------------- ------------------------- -----------------------
Total $ 2,111,011 $ 1,434,328 $ 37,746
============================ ========================= =======================
Total - All Series
- ----------------------------------
JWH LLC $ 4,344,264 $ 2,699,852 $ 71,049
Millburn LLC 3,625,509 2,730,093 71,844
---------------------------- ------------------------- -----------------------
Total $ 7,969,773 $ 5,429,945 $ 142,893
============================ ========================= =======================
<CAPTION>
For the year ended Profit Income from
December 31, 1998 Shares Investments
----------------------------- ---------------------------
Series A Units
- ----------------------------------
<S> <C> <C>
JWH LLC $ 76,657 $ 271,985
Millburn LLC 45,117 134,406
-------------------------- ---------------------------
Total $ 121,774 $ 406,391
========================== ===========================
Series B Units
- ----------------------------------
JWH LLC $ 167,835 $ 639,872
Millburn LLC 100,384 321,742
-------------------------- ---------------------------
Total $ 268,219 $ 961,614
========================== ===========================
Series C Units
- ----------------------------------
JWH LLC $ 88,069 $ 328,945
Millburn LLC 51,422 170,501
-------------------------- ---------------------------
Total $ 139,491 $ 499,446
========================== ===========================
Total - All Series
- ----------------------------------
JWH LLC $ 332,561 $1,240,802
Millburn LLC 196,923 626,649
-------------------------- ---------------------------
Total $ 529,484 $1,867,451
========================== ===========================
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
For the year ended Total Brokerage Administrative
December 31, 1997 Revenues Commissions Fees
---------------------------- ---------------------------------------------------------
Series A Units
- -------------------------------------
<S> <C> <C> <C>
JWH LLC $ 1,759,089 $ 690,201 $ 17,813
Millburn LLC 1,758,987 751,834 19,390
---------------------------- ------------------------- -----------------------
Total $ 3,518,076 $ 1,442,035 $ 37,203
============================ ========================= =======================
Series B Units
- -------------------------------------
JWH LLC $ 3,771,359 $ 1,484,456 $ 38,315
Millburn LLC 3,773,695 1,625,922 41,942
---------------------------- ------------------------- -----------------------
Total $ 7,545,054 $ 3,110,378 $ 80,257
============================ ========================= =======================
Series C Units
- -------------------------------------
JWH LLC $ 1,981,710 $ 783,770 $ 20,229
Millburn LLC 1,995,533 858,854 22,154
---------------------------- ------------------------- -----------------------
Total $ 3,977,243 $ 1,642,624 $ 42,383
============================ ========================= =======================
Total - All Series
- -------------------------------------
JWH LLC $ 7,512,158 $ 2,958,427 $ 76,357
Millburn LLC 7,528,215 3,236,610 83,486
---------------------------- ------------------------- -----------------------
Total $ 15,040,373 $ 6,195,037 $ 159,843
============================ ========================= =======================
<CAPTION>
For the year ended Profit Income from
December 31, 1997 Shares Investments
-------------------------------- ---------------------------
Series A Units
- -------------------------------------
<S> <C> <C>
JWH LLC $ 103,624 $ 947,451
Millburn LLC 207,784 779,979
-------------------------- ---------------------------
Total $ 311,408 $1,727,430
========================== ===========================
Series B Units
- -------------------------------------
JWH LLC $ 221,754 $2,026,834
Millburn LLC 443,236 1,662,595
-------------------------- ---------------------------
Total $ 664,990 $3,689,429
========================== ===========================
Series C Units
- -------------------------------------
JWH LLC $ 116,818 $1,060,893
Millburn LLC 234,589 879,936
-------------------------- ---------------------------
Total $ 351,407 $1,940,829
========================== ===========================
Total - All Series
- -------------------------------------
JWH LLC $ 442,196 $4,035,178
Millburn LLC 885,609 3,322,510
-------------------------- ---------------------------
Total $ 1,327,805 $7,357,688
========================== ===========================
</TABLE>
11
<PAGE>
Condensed statements of financial condition and statements of operations for JWH
LLC and Millburn LLC are set forth as follows:
<TABLE>
<CAPTION>
JWH Millburn JWH
LLC LLC LLC
December 31, 1999 December 31, 1999 December 31, 1998
------------------------------ ------------------------------ ------------------------------
<S> <C> <C> <C>
Assets $ 20,495,709 $ 23,769,789 $ 29,277,397
============================== ============================== ==============================
Liabilities $ 652,166 $ 737,160 $ 391,198
Members' Capital 19,843,543 23,032,629 28,886,199
------------------------------ ------------------------------ ------------------------------
Total $ 20,495,709 $ 23,769,789 $ 29,277,397
============================== ============================== ==============================
For the year ended For the year ended For the year ended
December 31, 1999 December 31, 1999 December 31, 1998
------------------------------ ------------------------------ ------------------------------
Revenues $ (3,007,129) $ 1,994,936 $ 1,391,001
Expenses 2,520,065 2,612,853 4,069,362
------------------------------ ------------------------------ ------------------------------
Net Income (Loss) $ (5,527,194) $ (617,917) $ (2,678,361)
============================== ============================== ==============================
<CAPTION>
Millburn JWH Millburn
LLC LLC LLC
December 31, 1998
------------------------------
<S> <C> <C> <C>
Assets $ 27,815,000
==============================
Liabilities $ 537,886
Members' Capital 27,277,114
------------------------------
Total $ 27,815,000
==============================
For the year ended For the year ended For the year ended
December 31, 1998 December 31, 1997 December 31, 1997
------------------------------ ------------------------------ ------------------------------
Revenues $ 3,593,650 $ 15,279,401 $ 8,303,430
Expenses 3,108,411 6,714,041 4,600,706
------------------------------ ------------------------------ ------------------------------
Net Income (Loss) $ 485,239 $ 8,565,360 $ 3,702,724
============================== ============================== ==============================
</TABLE>
12
<PAGE>
7. FAIR VALUE AND OFF-BALANCE SHEET RISK
For the year ended December 31, 1999, the Partnership invested all of its
assets in Trading LLC's. Accordingly, the Partnership is invested indirectly
in derivative instruments, but does not itself hold any derivative instrument
positions. As such, MLIP does not believe that the adoption of the provisions
of Statement of Financial Accouting Standards No. 133 had a significant
effect on the financial statements of the Partnership.
Market Risk
-----------
Derivative financial 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 underlying financial
instruments or commodities underlying such derivative instruments frequently
resulted in changes in the Partnership's net unrealized profit on such
derivative instruments as reflected in the Statements of Financial Condition
or, with respect to Partnership assets invested in Trading LLC's, the net
unrealized profit as reflected in the respective Statements of Financial
Condition of the Trading LLC's. The Partnership's exposure to market risk is
influenced by a number of factors, including the relationships among the
derivative instruments held by the Partnership, through the Trading LLC's, as
well as the volatility and liquidity of such markets in which such derivative
instruments are traded.
MLIP 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. These procedures focus primarily on monitoring the trading of the
Advisors selected from time to time for the Partnership, calculating the Net
Asset Value of the Advisors' respective Partnership accounts and Trading LLC
accounts, as of the close of business on each day and reviewing outstanding
positions for over-concentrations both on an Advisor-by-Advisor and on an
overall Partnership basis. While MLIP does not itself intervene in the
markets to hedge or diversify the Partnership's market exposure MLIP may urge
Advisors to reallocate positions or itself reallocate Partnership assets
among Advisors (although typically only as of the end of a month) in an
attempt to avoid over-concentration. However, such interventions are unusual.
Except in cases in which it appears that an Advisor has begun to deviate from
past practice and trading policies or to be trading erratically, MLIP's basic
risk control procedures consist simply of the ongoing process of advisor
monitoring and selection, with the market risk controls being applied by the
Advisors themselves.
One important aspect of MLIP's risk controls is its adjustments to the
leverage at which the Partnership trades. By controlling the percentage of
the Partnership's assets allocated to trading, MLIP can directly affect the
market exposure of the Partnership. Leverage control is the principal means
by which MLIP hopes to be able to ensure that Merrill Lynch is never required
to make any payments under its guarantee that the Net Asset Value per Unit
will equal no less than a specified minimum as of the Principal Assurance
Date.
13
<PAGE>
Credit Risk
-----------
The risks associated with exchange-traded contracts are typically perceived
to be less than those associated with over-the-counter (non-exchange-traded)
transactions, 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 also require margin in the over-the-counter
markets.
The Partnership has credit risk in respect of its counterparties and brokers,
but attempts to control this risk by dealing almost exclusively with Merrill
Lynch entities as counterparties and clearing brokers.
The Partnership, through the Trading LLC's, in its normal course of business,
enters into 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 Statements of Financial
Condition under Equity in commodity futures accounts.
* * * * * * * * * *
To the best of the knowledge and belief of the
undersigned, the information contained in this
report is accurate and complete.
/s/ Michael L. Pungello
Michael L. Pungello
Chief Financial Officer
Merrill Lynch Investment Partners Inc.
General Partner of
John W. Henry & Co./Millburn L.P.
14
<PAGE>
EXHIBIT 13.01(a)
ML JWH FINANCIAL AND METALS PORTFOLIO L.L.C.
(A Delaware Limited Liability Company)
Financial Statements for the years ended
December 31, 1999 and 1998 and Independent
Auditors' Report
[LOGO] Merrill Lynch
<PAGE>
ML JWH FINANCIAL AND METALS PORTFOLIO L.L.C.
(A Delaware Limited Liability Company)
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page
----
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 1999 AND 1998.
Statements of Financial Condition 2
Statements of Operations 3
Statements of Changes in Members' Capital 4
Notes to Financial Statements 5-9
<PAGE>
INDEPENDENT AUDITORS' REPORT
- ----------------------------
To the Members of
ML JWH Financial and Metals Portfolio L.L.C.:
We have audited the accompanying statements of financial condition of ML JWH
Financial and Metals Portfolio L.L.C. (the "Company") as of December 31, 1999
and 1998, and the related statements of operations and of changes in members'
capital for the years ended December 31, 1999 and 1998. These financial
statements are the responsibility of the Company'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, such financial statements present fairly, in all material
respects, the financial position of ML JWH Financial and Metals Portfolio L.L.C.
as of December 31, 1999 and 1998, and the results of its operations and changes
in members' capital for the years ended December 31, 1999 and 1998 in comformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
February 4, 2000
<PAGE>
ML JWH FINANCIAL AND METALS PORTFOLIO L.L.C.
(A Delaware Limited Liability Company)
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
------------------ ------------------
<S> <C> <C>
ASSETS
Equity in commodity futures trading accounts:
Cash and option premiums $ 20,105,266 $ 26,100,432
Net unrealized profit on open contracts 297,749 3,074,669
Accrued interest (Note 2) 92,694 102,296
------------------ ------------------
TOTAL $ 20,495,709 $ 29,277,397
================== ==================
LIABILITIES AND MEMBERS' CAPITAL
LIABILITIES:
Brokerage commissions payable (Note 2) $ 162,099 $ 231,621
Administrative fees payable (Note 2) 4,266 6,095
Withdrawals payable 485,801 153,482
------------------ ------------------
Total liabilities 652,166 391,198
------------------ ------------------
MEMBERS' CAPITAL:
Voting Members 19,843,543 28,886,199
------------------ ------------------
Total Members' capital 19,843,543 28,886,199
------------------ ------------------
TOTAL $ 20,495,709 $ 29,277,397
================== ==================
</TABLE>
See notes to financial statements.
-2-
<PAGE>
ML JWH FINANCIAL AND METALS PORTFOLIO L.L.C.
(A Delaware Limited Liability Company)
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
- -------------------------------------------------------------------------------
1999 1998
------------------ ------------------
<S> <C> <C>
REVENUES:
Trading (loss) profit:
Realized $ (1,431,693) $ (913,823)
Change in unrealized (2,776,920) 345,682
------------------ ------------------
Total trading results (4,208,613) (568,141)
Interest income (Note 2) 1,201,484 1,959,142
------------------ ------------------
Total revenues (3,007,129) 1,391,001
------------------ ------------------
EXPENSES:
Brokerage commissions (Note 2) 2,455,447 3,638,923
Profit Shares (Note 3) - 332,560
Administrative fees (Note 2) 64,617 97,879
------------------ ------------------
Total expenses 2,520,064 4,069,362
------------------ ------------------
NET LOSS $ (5,527,193) $ (2,678,361)
================== ==================
</TABLE>
See notes to financial statements.
-3-
<PAGE>
ML JWH FINANCIAL AND METALS PORTFOLIO L.L.C.
(A Delaware Limited Liability Company)
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN MEMBERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
- -------------------------------------------------------------------------------------------------------------
Non-Voting
Voting Members Members Total
-------------------- ------------------ ------------------
<S> <C> <C> <C>
MEMBERS' CAPITAL,
DECEMBER 31, 1997 $ 59,766,977 $ 1,591,929 $ 61,358,906
Withdrawals (28,414,824) (1,379,522) (29,794,346)
Net Loss (2,465,954) (212,407) (2,678,361)
-------------------- ------------------ ------------------
MEMBERS' CAPITAL,
DECEMBER 31, 1998 28,886,199 - 28,886,199
Withdrawals (3,515,463) - (3,515,463)
Net Loss (5,527,193) - (5,527,193)
-------------------- ------------------ ------------------
MEMBERS' CAPITAL,
DECEMBER 31, 1999 $ 19,843,543 $ - $ 19,843,543
==================== ================== ==================
</TABLE>
See notes to financial statements.
-4-
<PAGE>
ML JWH FINANCIAL AND METALS PORTFOLIO L.L.C.
(A Delaware Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
------------
ML JWH Financial and Metals Portfolio L.L.C. (the "Company") was organized
under the Delaware Limited Liability Company Act on September 19, 1996 and
commenced trading activities on October 1, 1996. The Company engages in
the speculative trading of futures, options on futures and forward
contracts on a wide range of commodities. John W. Henry & Company, Inc.
("JWH(R)") is the trading advisor to the Company. Merrill Lynch Investment
Partners Inc. ("MLIP"), a wholly-owned subsidiary of Merrill Lynch Group,
Inc., which, in turn, is a wholly-owned subsidiary of Merrill Lynch & Co.,
Inc. ("Merrill Lynch"), has been delegated administrative authority over
the Company. Merrill Lynch Futures Inc. ("MLF"), an affiliate of MLIP, is
the Company's commodity broker. The Company has authorized two classes of
Membership Interests: Non-Voting Interests and Voting Interests
(collectively, "Interests"). These two classes of Interests have common
economic interests in the Company, but the Non-Voting Interests, which can
be held by non-United States investment funds sponsored by MLIP, do not
participate in the management of the Company, or engage, directly or
indirectly, in, participate in or control any portion of the business
activities or affairs of the Company. Management of the Company is vested
solely in the Voting Interests, which are held by United States limited
partnerships. The Voting Members control all business activities and
affairs of the Company by agreement of the majority in interest of such
Members, subject to the trading authority vested in and delegated to JWH
and the administrative authority vested in and delegated to MLIP. Each
Voting Member is a "commodity pool" sponsored and managed by MLIP, share
in the trading profit (loss) and interest income of the Company in
proportion to their respective capital accounts, although the Members are
subject to somewhat different fees.
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 as well as the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
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 Statements of Financial
Condition at the difference between the original contract value and the
market value (for those commodity interests for which market quotations
are readily available) or at fair value. The change in unrealized profit
on open contracts from one period to the next is reflected under Trading
(loss) profit: Change in unrealized in the Statements of Operations.
-5-
<PAGE>
Foreign Currency Transactions
-----------------------------
The Company's functional currency is the U.S. dollar; however, it
transacts business in currencies other than the U.S. dollar. Assets and
liabilities denominated in currencies other than the U.S. dollar are
translated into U.S. dollars at the rates in effect at the dates of the
Statements of Financial Condition. Income and expense items denominated in
currencies other than the U.S. dollar are translated into U.S. dollars at
the rates in effect during the period. Gains and losses resulting from the
translation to U.S. dollars are reported in total trading results
currently.
Organizational Costs
--------------------
MLIP paid all organizational costs relating to the Company without direct
reimbursement from the Company or any Member.
Operating Expenses
------------------
MLIP pays for all operating costs (including all legal, accounting,
printing, postage and similar administrative expenses) of the Company.
Income Taxes
------------
No provision for income taxes has been made in the accompanying financial
statements as each Member is individually responsible for reporting income
or loss based on such Member's respective share of the Company's income
and expenses as reported for income tax purposes.
Distributions
-------------
No distributions had been made by the Company to any Member as of December
31, 1999.
Withdrawals
-----------
Each Member may withdraw some or all of such Members' capital at the Net
Asset Value as of the close of business on any business day. There are no
withdrawal fees or charges.
Dissolution
-----------
The Company will terminate on September 30, 2046 or at an earlier date if
certain conditions occur, as well as under certain other circumstances as
set forth in the Organization Agreement.
-6-
<PAGE>
2. RELATED PARTY TRANSACTIONS
The Company's U.S. dollar assets are maintained at MLF. On assets held in
U.S. dollars, Merrill Lynch credits the Company with interest at the
prevailing 91-day U.S. Treasury bill rate. The Company is credited with
interest on any of its net gains actually held by Merrill Lynch in
non-U.S. dollar currencies at a prevailing local rate received by Merrill
Lynch. Merrill Lynch may derive certain economic benefit, in excess of the
interest which Merrill Lynch pays to the Company, from possession of such
assets.
Merrill Lynch charges the Company Merrill Lynch's cost of financing
realized and unrealized losses on the Company's non-U.S.
dollar-denominated positions.
Following the allocation of the Company's trading (loss) profit and
interest income among the Members' respective capital accounts, MLIP
calculates the brokerage commissions, Profit Shares, administrative fees
and other expenses due from the Company to third parties, in respect of
the Company's trading on behalf of the respective Members (the Company
being subject to different commissions, fees and expenses in respect of
its trading as allocable to the various different Members). Such
commissions, fees, Profit Shares and expenses are specifically allocated
as of the end of each accounting period (not pro rata based on the
Members' respective capital accounts) to, and deducted from, the
appropriate Members' capital accounts and paid out by the Company. The
Company pays brokerage commissions to MLF at flat monthly rates reflecting
the fee arrangement between each Member and MLF. During the period from
January 1, 1998 to May 31, 1998, such rates ranged from .646 of 1% (a
7.75% annual rate) to .979 of 1% (an 11.75% annual rate) of each Member's
month-end assets invested in the Company. As of May 31, 1998, Members
subject to various brokerage commission rates withdrew from the Company,
and thereafter, the rate was .792 of 1% (a 9.5% annual rate).
The Company pays MLIP a monthly administrative fee of .021 of 1% (a .25%
annual rate) of each Member's month-end assets. Month-end assets are not
reduced for purposes of calculating brokerage commissions and
administrative fees by any accrued brokerage commissions, administrative
fees, Profit Shares or other fees or charges.
MLF pays the Advisor an annual consulting fee of 4% of the Company's
average month-end assets, after reduction for a portion of the brokerage
commissions.
3. ADVISORY AGREEMENT
The Advisory Agreement between the Company and JWH(R) has remained
essentially unchanged since the inception of the Company. This Agreement
is in effect for successive one-year terms, but, in fact, given the single
advisor structure of the Company, the Company would terminate were JWH(R)
to withdraw. JWH(R) determines the commodity futures, options on futures
and forward contract trades to be made on behalf of the Company, subject
to certain Company trading policies and to certain rights reserved by
MLIP.
The Company pays to JWH(R) a quarterly Profit Share equal to 15% of any
New Trading Profit, as defined, attributable to each Member's capital
account. Profit Shares are calculated separately in respect of each
Member's Capital Account. Profit Shares are determined as of the end of
each calendar quarter and are also paid to JWH(R) upon the withdrawal of
capital from the Company by a Member for whatever purpose, other than to
pay expenses.
-7-
<PAGE>
4. 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 Company which
carries its assets at fair value. Such Statement sets forth a much broader
definition of a derivative instrument. MLIP does not believe that the
adoption of the provisions of such Statement had 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 and notional amounts or payment provisions; (2) requires
no initial net investment or a smaller initial net investment than would
be required for other types of contracts that would be expected to have a
similar response to changes in market factors; and, (3) terms that 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.
The Company trades futures, options on futures and forward contracts on
interest rates, stock indices, currencies, and metals.
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 underlying financial
instruments or commodities underlying such derivative instruments
frequently result in changes in the Company's net unrealized profit on
such derivative instruments as reflected in the Statements of Financial
Condition. The Company's exposure to market risk is influenced by a number
of factors, including the relationships among the derivative instruments
held by the Company as well as the volatility and liquidity in the markets
in which such derivative instruments are traded.
MLIP, which monitors the trading of the Company in MLIP's capacity as the
Company's administrator, 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. These procedures focus primarily on
monitoring the trading of JWH(R), calculating the Net Asset Value of the
Company and of the Members' respective capital accounts as of the close of
business on each day and reviewing outstanding positions for
over-concentrations. While MLIP does not itself intervene in the markets
to hedge or diversify the Company's market exposure, MLIP may consult with
JWH(R) concerning the possibility of JWH(R) reducing trading leverage or
market concentrations. However, such interventions are unusual. Except in
cases in which it appears that JWH(R) has begun to deviate from past
practice and trading policies or to be trading erratically (which has not
occurred to date), MLIP's basic risk control procedures consist simply of
the ongoing process of monitoring JWH(R) with the market risk controls
being applied by JWH(R).
-8-
<PAGE>
Credit Risk
The risks associated with exchange-traded contracts are typically
perceived to be less than those associated with over-the-counter
(non-exchange-traded) transactions, 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 credit risk associated with these instruments from counterparty
nonperformance is the net unrealized profit, if any, included in the
Statements of Financial Condition. The Company attempts to mitigate credit
risk by dealing exclusively with Merrill Lynch entities as clearing
brokers.
The Company, in its normal course of business, enters into 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 Statement of Financial Condition
under Equity in Commodity futures accounts.
* * * * * * * * *
To the best of the knowledge and belief of the
undersigned, the information contained in this
report is accurate and complete.
/s/ Michael L. Pungello
Michael L. Pungello
Chief Financial Officer
Merrill Lynch Investment Partners Inc.
Commodity Pool Operator
ML JWH Financial and Metals
Portfolio L.L.C.
-9-
<PAGE>
EXHIBIT 13.01(a)(2)
ML MILLBURN GLOBAL L.L.C.
(A Delaware Limited Liability Company)
Financial Statments for the years ended
December 31, 1999 and 1998 and Independent
Auditor's Report
[LOGO] Merrill Lynch
<PAGE>
ML MILLBURN GLOBAL L.L.C.
(A Delaware Limited Liability Company)
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page
----
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 1999 AND 1998:
Statements of Financial Condition 2
Statements of Operations 3
Statements of Changes in Members' Capital 4
Notes to Financial Statements 5-9
<PAGE>
INDEPENDENT AUDITORS' REPORT
- ----------------------------
To the Members of
ML Millburn Global L.L.C.
We have audited the accompanying statements of financial condition of ML
Millburn Global L.L.C. (the "Company") as of December 31, 1999 and 1998, and the
related statements of operations and of changes in members' capital for the
years ended December 31, 1999 and 1998. These financial statements are the
responsibility of the Company'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, such financial statements present fairly, in all material
respects, the financial position of ML Millburn Global L.L.C. as of December 31,
1999 and 1998, and the results of its operations and changes in members' capital
for the years ended December 31, 1999 and 1998 in comformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
February 4, 2000
<PAGE>
<TABLE>
<CAPTION>
ML MILLBURN GLOBAL L.L.C.
(A Delaware Limited Liability Company)
STATEMENT OF FINANCIAL CONDITION
DECEMBER 31, 1999 and 1998
- -----------------------------------------------------------------------------------------------------------
ASSETS 1999 1998
--------------- ---------------
<S> <C> <C>
Equity in commodity futures trading accounts:
Cash and option premiums $ 22,574,430 $ 26,414,436
Net unrealized profit on open contracts 1,088,672 1,304,531
Accrued interest (Note 2) 106,687 96,033
---------------- ----------------
TOTAL $ 23,769,789 $ 27,815,000
=============== ================
LIABILITIES AND MEMBERS' CAPITAL
LIABILITIES:
Brokerage commissions payable (Note 2) $ 188,158 $ 220,182
Profit Shares payable (Note 3) - 183,086
Administrative fees payable (Note 2) 4,952 5,794
Withdrawals payable 544,050 128,824
--------------- ---------------
Total liabilities 737,160 537,886
--------------- ---------------
MEMBERS' CAPITAL:
Voting Members 23,032,629 27,277,114
--------------- ---------------
Total Members' capital 23,032,629 27,277,114
--------------- ---------------
TOTAL $ 23,769,789 $ 27,815,000
=============== ===============
</TABLE>
See notes to financial statements.
-2-
<PAGE>
ML MILLBURN GLOBAL L.L.C.
(A Delaware Limited Liability Company)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
1999 1998
---------- ----------
REVENUES:
Trading profit:
Realized $ 936,083 $ 1,728,662
Change in unrealized (215,763) 431,034
------------ ------------
Total trading results 720,320 2,159,696
Interest income (Note 2) 1,274,615 1,433,954
------------ ------------
Total revenues 1,994,935 3,593,650
------------ ------------
EXPENSES:
Brokerage commissions (Note 2) 2,523,710 2,836,503
Profit Shares (Note 3) 22,730 197,023
Administrative fees (Note 2) 66,413 74,885
------------ ------------
Total expenses 2,612,853 3,108,411
------------ ------------
NET INCOME (LOSS) $ (617,918) $ 485,239
============ ============
See notes to financial statements.
-3-
<PAGE>
ML MILLBURN GLOBAL L.L.C.
(A Delaware Limited Liability Company)
STATEMENTS OF CHANGES IN MEMBERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
MEMBERS' CAPITAL,
DECEMBER 31, 1997 $ 34,130,278
Withdrawals (7,338,403)
Net income 485,239
------------------
MEMBERS' CAPITAL,
DECEMBER 31, 1998 $ 27,277,114
Withdrawals (3,626,567)
Net loss (617,918)
------------------
MEMBERS' CAPITAL,
DECEMBER 31, 1999 $ 23,032,629
==================
See notes to financial statements.
-4-
<PAGE>
ML MILLBURN GLOBAL L.L.C.
(A Delaware Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUTING POLICIES
Organization
------------
ML Millburn Global L.L.C. (the "Company") was organized under the Delaware
Limited Liability Company Act on November 22, 1996 and commenced trading
activities on December 2, 1996. The Company engages in the speculative
trading of futures, options on futures and forward contracts on a wide range
of commodities. Millburn Ridgefield Corporation ("Millburn") is the trading
advisor to the Company. Merrill Lynch Investment Partners ("MLIP"), a wholly-
owned subsidiary of Merrill Lynch Group, Inc., which, in turn, is a wholly-
owned subsidiary of Merrill Lynch & Co., Inc. ("Merrill Lynch"), has been
delegated administrative authority over the Company. Merrill Lynch Futures
Inc. ("MLF"), an affiliate of Merrill Lynch, is the Company's commodity
broker. The Company has authorized two classes of Membership Interests: Non-
Voting Interests and Voting Interests (collectively, "Interests"). These two
classes of Interests have common economic interests in the Company. The
Non-Voting Interests, which can be held by non-United States investment funds
sponsored by MLIP, would not participate in the management of the Company, or
engage, directly or indirectly, in, participate in or control any portion of
the business activities or affairs of the Company. Currently, there are no
Non-Voting Members. Management of the Company is vested solely in the Voting
Interests, which can be held by United States limited partnerships sponsored
by MLIP. Currently, there is only one Voting Member. The Voting Member
controls all business activities and affairs of the Company, subject to the
trading authority vested in and delegated to Millburn and the administrative
authority vested in and delegated to MLIP. The Voting Member is a "commodity
pool" sponsored and managed by MLIP.
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 financial statements as well
as the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
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 Statements of Financial Condition at the
difference between the original contract value and the market value (for
those commodity interests for which market quotations are readily available)
or at fair value. The change in unrealized profit (loss) on open contracts
from one period to the next is reflected in Trading profit: Change in
unrealized in the Statements of Operations.
-5-
<PAGE>
Foreign Currency Transactions
-----------------------------
The Company's functional currency is the U.S. dollar; however, it transacts
business in currencies other than the U.S. dollar. Assets and liabilities
denominated in currencies other than the U.S. dollars are translated into
U.S. dollars at the rates in effect at the dates of the Statements of
Financial Condition. Income and expense items denominated in currencies
other than the U.S. dollar are translated into U.S. dollars at the rates in
effect during the period. Gains and losses resulting from the translation
to U.S. dollars are reported in total trading results currently.
Organizational Costs
--------------------
MLIP paid all organizational costs relating to the Company without direct
reimbursement from the Company or any Member.
Operating Expenses
------------------
MLIP pays for all operating costs (including all legal, accounting,
printing, postage and similar administrative expenses) of the Company.
Income Taxes
------------
No provision for income taxes has been made in the accompanying financial
statements as the Member is individually responsible for reporting income
or loss based on such Member's respective share of the Company's income and
expenses as reported for income tax purposes.
Distributions
-------------
No distributions had been made by the Company to any Member as of December
31, 1999.
Withdrawals
-----------
The Member may withdraw some or all of such Members' capital at Net Asset
Value as of the close of business on any business day. There are no
withdrawal fees or charges.
Dissolution
-----------
The Company will terminate on December 31, 2046 or at an earlier date if
certain conditions occur, as well as under certain other circumstances as
set forth in the Organization Agreement.
2. RELATED PARTY TRANSACTIONS
--------------------------
The Company's U.S. dollar assets are maintained at MLF. On Assets held in
U.S. dollars, Merrill Lynch credits the Company with interest at the
prevailing 91-day U.S. Treasury bill rate. The Company is credited with
interest on any of its net gains actually held by Merrill Lynch in non-U.S.
dollar currencies at a prevailing local rate received by Merrill Lynch.
Merrill Lynch may derive certain economic benefit, in excess of the
interest which Merrill Lynch pays to the Company, from possession of such
assets.
-6-
<PAGE>
Merrill Lynch charges the Company Merrill Lynch's cost of financing
realized and unrealized losses on the Company's non-U.S. dollar-denominated
positions.
Following the allocation of the Company's trading profit (loss) and
interest income among the Members' respective capital accounts, MLIP
calculates the brokerage commissions, administrative fees, Profit Shares
and other expenses due from the Company to third parties. Such commissions,
fees and expenses are specifically calculated for each member as of the end
of each accounting period, and deducted from the appropriate Member's
capital accounts and paid out by the Company. The Company pays brokerage
commissions to MLF at flat monthly rates reflecting the fee arrangement
between the Member and MLF. During the period from January 1, 1998 to May
31, 1998, the rates ranged from .729 of 1% (an 8.75% annual rate) to .792
of 1% (a 9.50% annual rate). As of May 31, 1998, the Members subject to a
.729 of 1% (a 9.50% annual rate).
The Company pays MLIP a monthly administrative fee of .021 of 1% (a .25%
annual rate) of the Member's month-end assets. Month-end assets are not
reduced for purposes of calculating brokerage commissions and
administrative fees by any accrued brokerage commissions, administrative
fees, Profit Shares or other fees or charges.
MLF pays Millburn an annual consulting fee of 2% of the Company's average
month-end assets, after reduction for a portion of brokerage commissions.
3. ADVISORY AGREEMENT
The Advisory Agreement between the Company and Millburn has remained
essentially unchanged since the inception of the Company. This Agreement is
in effect for successive one-year terms, but, in fact, given the single
advisor structure of the Company, the Company would terminate were Millburn
to withdraw. Millburn determines the commodity futures, options on futures
and forward contract trades to be made on behalf of the Company, subject to
certain rights reserved by MLIP.
The Company pays to Millburn an annual Profit Share equal to 20% of any New
Trading Profit, as defined, attributable to the Member's Capital Account.
Profit Shares are calculated separately in respect of each Members' Capital
Account. Profit Shares are also paid to Millburn upon the withdrawal of
capital from the Company by a Member for whatever purpose, other than to
pay expenses.
4. 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 Company which carries its assets at fair
value. Such Statement sets forth a much broader definition of a derivative
instrument. MLIP does not believe that the adoption of the provisions of
such Statement had 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 and notional amounts or payment provisions; (2)
-7-
<PAGE>
requires no initial net investment or a smaller initial net investment than
would be required for other types of contracts that would be expected to have a
similar response to changes in market factors; and, (3) terms that 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,
and changes in the level or volatility of interest rates, foreign currency
exchange rates or the market values of the underlying financial instruments or
commodities underlying such derivative instruments frequently result in changes
in the Company's net unrealized profit on such derivative instruments as
reflected in the Statements of Financial Condition. The Company's exposure to
market risk is influenced by a number of factors, including the relationships
among the derivative instruments held by the Company as well as the volatility
and liquidity in the markets in which such derivative instruments are traded.
MLIP, which monitors the trading of the Company in MLIP's capacity as the
Company's administrator, 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. These procedures focus primarily on monitoring the trading of
Millburn, calculating the Net Asset Value of the Company and the Members'
respective capital accounts as of the close of business on each day reviewing
outstanding positions for over-concentrations. While MLIP does not itself
intervene in the markets to hedge or diversify the Company's market exposure,
MLIP may consult with Millburn concerning the possibility of Millburn reducing
trading leverage or market concentrations. However, such interventions are
unusual. Except in cases in which it appears that Millburn has begun to deviate
from past practice and trading policies or to be trading erratically (which has
not occurred to date), MLIP's basic risk control procedures consists simply of
the ongoing process of advisor monitoring with the market risk controls being
applied by Millburn.
Credit Risk
The risks associated with exchange-traded contracts are typically perceived to
be less than those associated with over-the-counter (non-exchange-traded)
transactions, because exchanges typically (but not universally) provide
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, 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 in exchange trading, and counterparties may require margin in the
over-the-counter markets.
The Company attempts to mitigate credit risk by dealing exclusively with Merrill
Lynch entities as clearing brokers.
The Company, in its normal course of business, enters into 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
Statement of Financial Condition under Equity in Commodity futures accounts.
-8-
<PAGE>
* * * * * * * * * * * *
To the best of the knowledge and belief of the
undersigned, the information contained in this
report is accurate and complete.
/s/ Michael L. Pungello
Michael L. Pungello
Chief Financial Officer
Merrill Lynch Investment Partners Inc.
Commodity Pool Operator of
ML Millburn Global L.L.C.
-9-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> BD
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 0 0
<RECEIVABLES> 1,007,250 259,704
<SECURITIES-RESALE> 0 0
<SECURITIES-BORROWED> 0 0
<INSTRUMENTS-OWNED> 42,876,172 56,163,313
<PP&E> 0 0
<TOTAL-ASSETS> 43,883,422 56,423,017
<SHORT-TERM> 0 0
<PAYABLES> 1,007,250 259,704
<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> 42,876,172 56,163,313
<TOTAL-LIABILITY-AND-EQUITY> 43,883,422 56,423,017
<TRADING-REVENUE> 0 0
<INTEREST-DIVIDENDS> 0 0
<COMMISSIONS> 0 0
<INVESTMENT-BANKING-REVENUES> 0 0
<FEE-REVENUE> 0 0
<INTEREST-EXPENSE> 0 0
<COMPENSATION> 0 0
<INCOME-PRETAX> (6,145,111) 1,867,451
<INCOME-PRE-EXTRAORDINARY> (6,145,111) 1,867,451
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (6,145,111) 1,867,451
<EPS-BASIC> (27.14) 7.05
<EPS-DILUTED> (27.14) 7.05
</TABLE>
