-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ASlQTx0ZE9TAcoZFzB0hK0YTcqczHhhM1+yqeeoeZGyp8eIXOePR3DCPS2jWR6jI brFB8oowZOxcYXlj1elWmg== 0000950130-99-004758.txt : 19990813 0000950130-99-004758.hdr.sgml : 19990813 ACCESSION NUMBER: 0000950130-99-004758 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HENRY JOHN W & CO/MILLBURN L P CENTRAL INDEX KEY: 0000853456 STANDARD INDUSTRIAL CLASSIFICATION: [6221] IRS NUMBER: 061287586 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-18215 FILM NUMBER: 99685373 BUSINESS ADDRESS: STREET 1: WORLD FINANCIAL CTR SOUTH TWR-6TH FLR STREET 2: C/O ML FUTURE INVESTMENT PARTNERS INCAGE CITY: MERRILL LYNCH WORLD STATE: NY ZIP: 10080 BUSINESS PHONE: 2122364161 MAIL ADDRESS: STREET 1: MERRILL LYNCH & CO STREET 2: WORLD FINANCIAL CTR, SOUTH TOWER, 6TH FL CITY: NEW YORK STATE: NY ZIP: 10080-6106 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1999 ------------- OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to ________________ Commission File Number 0-18215 JOHN W. HENRY & CO./MILLBURN L.P. --------------------------------- (Exact Name of Registrant as specified in its charter) Delaware 06-1287586 - -------------------------------- --------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) c/o Merrill Lynch Investment Partners Inc. Princeton Corporate Campus 800 Scudders Mill Road - Section 2G Plainsboro, New Jersey 08536 ---------------------------- (Address of principal executive offices) (Zip Code) 609-282-6996 ------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- PART I - FINANCIAL INFORMATION Item 1. Financial Statements JOHN W. HENRY & CO./MILBURN L.P. (a Delaware limited partnership) -------------------------------- STATEMENTS OF FINANCIAL CONDITION ---------------------------------
June 30, December 31, 1999 1998 ------------- ------------- ASSETS - ------ Investments $ 56,864,254 $ 56,163,313 Receivable from investments 265,749 259,704 ------------- ------------- TOTAL $ 57,130,003 $ 56,423,017 ============= ============= LIABILITY AND PARTNERS' CAPITAL - ------------------------------- Liability-Redemptions payable $ 265,750 $ 259,704 PARTNERS' CAPITAL: General Partner: (504 and 504 Series A Units) 160,984 149,246 (1,338 and 1,338 Series B Units) 347,263 321,921 (926 and 926 Series C Units) 187,303 173,635 Limited Partners: (42,681 and 44,678 Series A Units) 13,632,986 13,230,285 (106,580 and 115,421 Series B Units) 27,663,408 27,771,959 (73,522 and 77,411 Series C Units) 14,872,309 14,516,267 ------------- ------------- Total partners' capital 56,864,253 56,163,313 ------------- ------------- TOTAL $ 57,130,003 $ 56,423,017 ============= ============= NET ASSET VALUE PER UNIT Series A (Based on 43,185 and 45,182 Units outstanding) $ 319.42 $ 296.13 ============= ============= Series B (Based on 107,918 and 116,759 Units outstanding) $ 259.56 $ 240.61 ============= ============= Series C (Based on 74,448 and 78,337 Units outstanding) $ 202.28 $ 187.52 ============= =============
See notes to financial statements. 2 JOHN W. HENRY & CO./MILLBURN L.P. --------------------------------- (a Delaware limited partnership) ------------------------------ STATEMENTS OF OPERATIONS ------------------------
For the three For the three For the six For the six months ended months ended months ended months ended June 30, June 30, June 30, June 30, 1999 1998 1999 1998 --------------- --------------- -------------- --------------- REVENUES: Income (loss) from Investments $ 5,647,083 $ (4,405,863) $ 4,139,449 $ (7,484,700) --------------- --------------- -------------- --------------- NET INCOME (LOSS) $ 5,647,083 $ (4,405,863) $ 4,139,449 $ (7,484,700) =============== =============== ============== =============== NET INCOME (LOSS) PER UNIT: Weighted average number of units outstanding 229,463 272,144 233,331 276,010 =============== =============== ============== =============== Weighted average net income (loss) per Limited Partner and General Partner Unit $ 24.61 $ (16.19) $ 17.74 $ (27.12) =============== =============== ============== ===============
See notes to financial statements. 3 JOHN W. HENRY & CO./MILLBURN L.P. (a Delaware limited partnership) ------------------------------ STATEMENTS OF CHANGES IN PARTNERS' CAPITAL ------------------------------------------ For the six months ended June 30, 1999 and 1998 -----------------------------------------------
Units Limited Partners General Partner ----- ---------------- --------------- Series A Series B Series C Series A Series B Series C Series A Series B --------- --------- --------- ------------ ------------ ------------ --------- --------- PARTNERS' CAPITAL, December 31, 1997 51,772 137,220 92,459 $ 14,487,473 $ 31,223,304 $ 16,376,709 $ 221,605 $ 456,174 Redemptions (3,628 ) (8,075) (5,795) (872,040) (1,564,157) (876,807) (70,937) (133,278) Net loss - - - (1,721,386) (3,722,972) (1,935,313) (24,838) (51,390) --------- --------- --------- ------------ ------------ ------------ --------- --------- PARTNERS' CAPITAL, June 30, 1998 48,144 129,145 86,664 $ 11,894,047 $ 25,936,175 $ 13,564,589 $ 125,830 $ 271,506 ========= ========= ========= ============ ============ ============ ========= ========= PARTNERS' CAPITAL, December 31, 1998 45,182 116,759 78,337 $ 13,230,285 $ 27,771,959 $ 14,516,267 $ 149,246 $ 321,921 Redemptions (1,997 ) (8,841 ) (3,889) (594,092) (2,110,389) (734,028) - - Net income - - - 996,793 2,001,838 1,090,070 11,738 25,342 --------- --------- --------- ------------ ------------ ------------ --------- --------- PARTNERS' CAPITAL, June 30, 1999 43,185 107,918 74,448 $ 13,632,986 $ 27,663,408 $ 14,872,309 $ 160,984 $ 347,263 ========= ========= ========= ============ ============ ============ ========= ========= Series C Total --------- ------------- PARTNERS' CAPITAL, December 31, 1997 $ 258,899 $ 63,024,164 Redemptions (88,401) (3,605,620) Net loss (28,801) (7,484,700) --------- ------------- PARTNERS' CAPITAL, June 30, 1998 $ 141,697 $ 51,933,844 ========= ============= PARTNERS' CAPITAL, December 31, 1998 $ 173,635 $ 56,163,313 Redemptions - (3,438,509) Net income 13,668 4,139,449 --------- ------------- PARTNERS' CAPITAL, June 30, 1999 $ 187,303 $ 56,864,253 ========= =============
See notes to financial statements. 4 JOHN W. HENRY & CO./MILLBURN L.P. (A Delaware Limited Partnership) ------------------------------ NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES These financial statements have been prepared without audit. In the opinion of management, the financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position of John W. Henry & Co./Millburn L.P. (the "Partnership" or the "Fund") as of June 30, 1999, and the results of its operations for the three and six month periods ended June 30, 1999 and 1998. However, the operating results for the interim periods may not be indicative of the results expected for the full year. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with general accepted accounting principles have been omitted. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Partnership's Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1998 (the "Annual Report"). As of December 1, 1996, the Partnership invested all of its assets in Trading LLCs. The Partnership was, thus, invested indirectly in the trading of derivative instruments, but did not itself hold any derivative positions. Consequently, no such positions subsequent to November 30, 1996 are reflected in these financial statements. 2. INVESTMENTS As of June 30, 1999, the Partnership had an investment in JWH LLC and Millburn LLC of $28,811,531 and $28,052,723, respectively. For the period ending December 31, 1998, the Partnership had an investment in JWH LLC and Millburn LLC of $28,886,199 and $27,277,114, respectively. 5
For the three months Total Brokerage Administrative Profit Income (loss) from ended June 30, 1999 Revenue Commissions Fees Shares Investment ------------------- ------------------ ----------------- ------------------ ------------------- Series A Units JWH LLC $ 1,011,896 $ 161,295 $ 4,244 $ - $ 846,357 Millburn LLC 823,753 163,495 4,303 132,399 523,556 ------------------- ------------------ ----------------- ------------------ ------------------- Total $ 1,835,649 $ 324,790 $ 8,547 $ 132,399 $ 1,369,913 =================== ================== ================= ================== =================== Series B Units JWH LLC $ 2,044,696 $ 326,120 $ 8,584 $ - $ 1,709,992 Millburn LLC 1,682,105 333,312 8,771 270,468 1,069,554 ------------------- ------------------ ----------------- ------------------ ------------------- Total $ 3,726,801 $ 659,432 $ 17,355 $ 270,468 $ 2,779,546 =================== ================== ================= ================== =================== Series C Units JWH LLC $ 1,101,309 $ 175,701 $ 4,623 $ - $ 920,985 Millburn LLC 906,766 179,580 4,726 145,821 576,639 ------------------- ------------------ ----------------- ------------------ ------------------- Total $ 2,008,075 $ 355,281 $ 9,349 $ 145,821 $ 1,497,624 =================== ================== ================= ================== =================== Total All Units --------------- JWH LLC $ 4,157,901 $ 663,116 $ 17,451 $ - $ 3,477,334 Millburn LLC 3,412,624 676,387 17,800 548,688 2,169,749 ------------------- ------------------ ----------------- ------------------ ------------------- Total $ 7,570,525 $ 1,339,503 $ 35,251 $ 548,688 $ 5,647,083 =================== ================== ================= ================== =================== For the three months Total Brokerage Administrative Profit Income (loss) from ended June 30, 1998 Revenue Commissions Fees Shares Investment ------------------- ------------------ ----------------- ------------------ ------------------- Series A Units JWH LLC $ (513,652) $ 145,270 $ 3,823 $ - $ (662,745) Millburn LLC (202,961) 156,246 4,111 - (363,318) ------------------- ------------------ ----------------- ------------------ ------------------- Total $ (716,613) $ 301,516 $ 7,934 $ - $ (1,026,063) =================== ================== ================= ================== =================== Series B Units JWH LLC $ (1,111,028) $ 312,981 $ 8,235 $ - $ (1,432,244) Millburn LLC (444,222) 339,418 8,932 - (792,572) ------------------- ------------------ ----------------- ------------------ ------------------- Total $ (1,555,250) $ 652,399 $ 17,167 $ - $ (2,224,816) =================== ================== ================= ================== =================== Series C Units JWH LLC $ (577,062) $ 163,031 $ 4,290 $ - $ (744,383) Millburn LLC (229,143) 176,806 4,652 - (410,601) ------------------- ------------------ ----------------- ------------------ ------------------- Total $ (806,205) $ 339,837 $ 8,942 $ - $ (1,154,984) =================== ================== ================= ================== =================== Total All Units --------------- JWH LLC $ (2,201,742) $ 621,282 $ 16,348 $ - $ (2,839,372) Millburn LLC (876,326) 672,470 17,695 - (1,566,491) ------------------- ------------------ ----------------- ------------------ ------------------- Total $ (3,078,068) $ 1,293,752 $ 34,043 $ - $ (4,405,863) =================== ================== ================= ================== ===================
6
For the six months Total Brokerage Administrative Profit Income (loss) from ended June 30, 1999 Revenue Commissions Fees Shares Investment ------------------- ------------------ ----------------- ------------------ ------------------- Series A Units JWH LLC $ 731,487 $ 317,743 $ 8,361 $ - $ 405,383 Millburn LLC 1,083,825 318,765 8,389 153,523 603,148 ------------------- ------------------ ----------------- ------------------ ------------------- Total $ 1,815,312 $ 636,508 $ 16,750 $ 153,523 $ 1,008,531 =================== ================== ================= ================== =================== Series B Units JWH LLC $ 1,461,478 $ 647,492 $ 17,041 $ - $ 796,945 Millburn LLC 2,216,144 654,819 17,232 313,857 1,230,236 ------------------- ------------------ ----------------- ------------------ ------------------- Total $ 3,677,622 $ 1,302,311 $ 34,273 $ 313,857 $ 2,027,181 =================== ================== ================= ================== =================== Series C Units JWH LLC $ 795,118 $ 346,758 $ 9,124 $ - $ 439,236 Millburn LLC 1,193,590 350,743 9,230 169,115 664,502 ------------------- ------------------ ----------------- ------------------ ------------------- Total $ 1,988,708 $ 697,501 $ 18,354 $ 169,115 $ 1,103,738 =================== ================== ================= ================== =================== Total All Units --------------- JWH LLC $ 2,988,083 $ 1,311,993 $ 34,526 $ - $ 1,641,564 Millburn LLC 4,493,559 1,324,327 34,851 636,495 2,497,886 ------------------- ------------------ ----------------- ------------------ ------------------- Total $ 7,481,642 $ 2,636,320 $ 69,377 $ 636,495 $ 4,139,450 =================== ================== ================= ================== =================== For the six months Total Brokerage Administrative Profit Income (Loss) from ended June 30, 1998 Revenue Commissions Fees Shares Investments ------------------- ------------------ ----------------- ------------------ ------------------- Series A Units JWH LLC $ (1,007,264) $ 312,124 $ 8,216 $ - $ (1,327,604) Millburn LLC (84,634) 325,301 8,560 125 (418,620) ------------------- ------------------ ----------------- ------------------ ------------------- Total $ (1,091,898) $ 637,425 $ 16,776 $ 125 $ (1,746,224) =================== ================== ================= ================== =================== Series B Units JWH LLC $ (2,170,716) $ 670,783 $ 17,650 $ - $ (2,859,149) Millburn LLC (191,597) 704,913 18,550 153 (915,213) ------------------- ------------------ ----------------- ------------------ ------------------- Total $ (2,362,313) $ 1,375,696 $ 36,200 $ 153 $ (3,774,362) =================== ================== ================= ================== =================== Series C Units JWH LLC $ (1,131,080) $ 350,012 $ 9,212 $ - $ (1,490,304) Millburn LLC (96,075) 367,793 9,678 264 (473,810) ------------------- ------------------ ----------------- ------------------ ------------------- Total $ (1,227,155) $ 717,805 $ 18,890 $ 264 $ (1,964,114) =================== ================== ================= ================== =================== Total All Units --------------- JWH LLC $ (4,309,060) $ 1,332,919 $ 35,078 $ - $ (5,677,057) Millburn LLC (372,306) 1,398,007 36,788 542 (1,807,643) ------------------- ------------------ ----------------- ------------------ ------------------- Total $ (4,681,366) $ 2,730,926 $ 71,866 $ 542 $ (7,484,700) =================== ================== ================= ================== ===================
7 Condensed statements of financial condition and statements of operations for JWH LLC and Millburn LLC are set forth as follows:
June 30, 1999 December 31, 1998 ------------------------------------- -------------------------------------- JWH Millburn JWH Millburn LLC LLC LLC LLC ------------------ ------------------ ------------------ ------------------ Assets $ 29,203,291 $ 29,048,696 $ 29,277,397 $ 27,815,000 ================== ================== ================== ================== Liabilities $ 391,760 $ 995,973 $ 391,198 $ 537,886 Members' Capital 28,811,531 28,052,723 28,886,199 27,277,114 ------------------ ------------------ ------------------ ------------------ Total $ 29,203,291 $ 29,048,696 $ 29,277,397 $ 27,815,000 ================== ================== ================== ================== JWH LLC For the three For the three For the six For the six months months months months ended June 30, ended June 30, ended June 30, ended June 30 1999 1998 1999 1998 ------------------ ------------------ ------------------ ------------------ Revenues $ 1,818,266 $ (3,235,723) $ 2,988,082 $ (7,262,323) Expenses 680,566 991,700 1,346,519 2,333,897 ------------------ ------------------ ------------------ ------------------ Net Income (Loss) $ 1,137,700 $ (4,227,423) $ 1,641,563 $ (9,596,220) ================== ================== ================== ================== Millburn LLC For the three For the three For the six For the six months months months months ended June 30, ended June 30, ended June 30, ended June 30 1999 1998 1999 1998 ------------------ ------------------ ------------------ ------------------ Revenues $ 3,412,625 $ (957,177) $ 4,493,559 $ (404,166) Expenses 1,242,876 731,818 1,995,673 1,544,886 ------------------ ------------------ ------------------ ------------------ Net Income (Loss) $ 2,169,749 $ (1,688,995) $ 2,497,886 $ (1,949,052) ================== ================== ================== ==================
3. FAIR VALUE AND OFF-BALANCE SHEET RISK In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities" (the "Statement"), effective for fiscal years beginning after June 15, 2000, however, the Fund has adopted the Statement effective January 1, 1999. This Statement supercedes SFAS No. 119 ("Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments") and SFAS No. 105 ("Disclosure of information about Financial Instruments with Off-Balance Sheet Risk and Financial Instruments with Concentrations of Credit Risk") whereby disclosure of average aggregate fair values and contract/notional values, respectively, of derivative financial instruments is no longer required for an entity such as the Partnership which carries its assets at fair value. Such Statement sets forth a much broader definition of a derivative instrument. The General Partner does not believe that the application of the provisions of such statement has a significant effect on the financial statements. SFAS No. 133 defines a derivative as a financial instrument or other contract that has all three of the following characteristics (1) one or more underlyings, notional amounts or payment provisions (2) requires no initial net investment or a smaller initial net investment than would be required relative to changes in market factors (3) terms require or permit net settlement. Generally, derivatives include a future, forward, swap or option contract, or other financial instrument with similar characteristics such as caps, floors and collars. 8 Market Risk ----------- Derivative instruments involve varying degrees of off-balance sheet market risk, and changes in the level or volatility of interest rates, foreign currency exchange rates or the market values of the financial instruments or commodities underlying such derivative instruments frequently result in changes in the Partnership's unrealized profit (loss) on such derivative instruments as would have been reflected in the Statements of Financial Condition had the Partnership not invested all of its assets in the Trading LLCs. 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 as well as the volatility and liquidity of the markets in which such derivative instruments are traded. The General Partner has procedures in place intended to control market risk exposure, although there can be no assurance that they will, in fact, succeed in doing so. These procedures focus primarily on monitoring the trading of the two Advisors, calculating the Net Asset Value of the Advisors' respective Partnership accounts as of the close of business on each day and reviewing outstanding positions for over-concentrations. While the General Partner does not itself intervene in the markets to hedge or diversify the Partnership's market exposure, the General Partner may urge either or both of the Advisors to reallocate positions. However, such interventions are unusual. Except in cases in which it appears that an Advisor has begun to deviate from past practice or trading policies or to be trading erratically (which has not occurred to date), the General Partner's basic risk control procedures consist simply of the ongoing process of Advisor monitoring, with the market risk controls being applied by the Advisors themselves. 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 brokers. 9 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations MONTH-END NET ASSET VALUE PER SERIES A UNIT Jan. Feb. Mar. Apr. May Jun ---------------------------------------------------------------------- 1998 $281.00 $268.85 $270.14 $248.62 $257.02 $249.67 ---------------------------------------------------------------------- 1999 $287.86 $291.22 $288.12 $297.02 $303.11 $319.42 ---------------------------------------------------------------------- MONTH-END NET ASSET VALUE PER SERIES B UNIT Jan. Feb. Mar. Apr. May Jun. ---------------------------------------------------------------------- 1998 $228.36 $218.48 $219.55 $202.07 $208.90 $202.93 ---------------------------------------------------------------------- 1999 $233.92 $236.65 $234.15 $241.40 $246.31 $259.56 ---------------------------------------------------------------------- MONTH-END NET ASSET VALUE PER SERIES C UNIT Jan. Feb. Mar. Apr. May Jun. ---------------------------------------------------------------------- 1998 $177.97 $170.27 $171.11 $157.48 $162.80 $158.15 ---------------------------------------------------------------------- 1999 $182.30 $184.43 $182.48 $188.13 $191.96 $202.28 ---------------------------------------------------------------------- Performance Summary January 1, 1998 to June 30, 1998 - -------------------------------- January 1, 1998 to March 31, 1998 The Fund's positions in the global interest rate markets were profitable during the quarter. In Europe, 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. Gold prices drifted sideways and lower as Asian demand continued to slow and demand in the Middle East was affected by low oil prices. Initially buoyed on concerns about a U.S.-led military strike against Iraq, crude oil fell to a nine year low, as the globally warm winter, the return of Iraq as a producer and the Asian economic crisis added to OPEC's supply glut problems. Trading results in stock index markets were mixed, but profitable, 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. Results in currency trading were also mixed, but profitable. In particular, the Swiss franc weakened versus the U.S. dollar. Agricultural commodity markets provided profitable trading results overall. Live cattle and hog prices trended downward throughout the quarter. Cotton prices moved mostly upward during the quarter, but prices dropped off sharply at the end of March. April 1, 1998 to June 30, 1998 The Fund's most profitable positions during the quarter were in the global interest rate markets. In Europe, 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. Gold prices drifted sideways and lower as Asian demand continued to slow and demand in the Middle East was affected by low oil prices. Trading results in stock index markets were mixed, but unprofitable, 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. Results in currency trading were also mixed, but unprofitable. In particular, the Swiss franc weakened versus the U.S. dollar. January 1, 1999 to June 30, 1999 - -------------------------------- January 1, 1999 to March 31, 1999 The Fund produced gains in currency trading during the quarter. On a trade- weighted basis, the Swiss franc ended the quarter at close to a seven-month low, mostly as a result of the stronger U.S. dollar. In January, the yen had advanced by nearly 35% against the dollar since early in August, and the Bank of 10 Japan lowered rates to keep the economy sufficiently liquid so as to allow fiscal spending to restore some growth to the economy and to drive down the surging yen. Stock index trading was also profitable. Also of note, the Dow Jones Industrial Average closed above the 10,000 mark for the first time ever at the end of March, setting a record for the index. Interest rate trading proved unprofitable for the Fund. Early in January, the yield on the Japanese government 10-year bond increased to 1.8%, sharply above the record low of 0.695% it reached on October 7, 1998. This was triggered by the Japanese Trust Fund Bureau's decision to absorb a smaller share of future issues, leaving the burden of financing future budget deficits to the private sector. In January, burdensome warehouse stocks and questionable demand prospects weighed on base metals as aluminum fell to a 5-year low and copper fell to nearly an 11-year low. Major surpluses in both metals were expected, keeping prices down, and there was no supply side response to weak demand and lower prices. However, the end of March showed copper and aluminum leading a surge in base metals as prices recovered from multi-year lows. In precious metals, gold failed to sustain a rally, and gold's role as a flight to safety vehicle has clearly been greatly diminished as has its role as a monetary asset. April 1, 1999 to June 30, 1999 During the second quarter of 1999, the Fund's NAV increased as the Fund profited from trading in the interest rate, metals, stock indices and currencies markets. Interest rate trading was profitable as the flight to quality in the bond market reversed during the first half of 1999 and concerns about higher interest rates in the U.S. continued to rattle the financial markets. In the metals sector there were also gains. Throughout the first half of 1999, gold prices were in a state of gradual erosion and in early June, prices hit their lowest levels in over 20 years. Gold continued to show a lack of response to political and military events such as Kosovo and also lost much of its role as a monetary asset and flight to safety vehicle. The economic scenario for Asia, Brazil, emerging market nations and Europe helped keep copper and other base metals on the defensive as demand receded with virtually no supply side response. Stock Index trading also resulted in gains overall for the quarter, as equity markets rallied worldwide in April and June. Currency trading also resulted in gains for the Fund. After suffering under the weight of lower commodity prices and the Asian recession, the Canadian dollar underwent a significant rally in the first half of 1999, moving up about 3 cents from the end of 1998. It has been in a corrective mode since early May, but unlike past years has retained much of its gain. 11 YEAR 2000 COMPLIANCE As the Year 2000 approaches, Merrill Lynch has undertaken initiatives to address the Year 2000 problem (the "Y2K problem"), as more fully described in the Partnership's 1998 Form 10-K. The failure of Merrill Lynch's technology systems relating to a Y2K problem would likely have a material adverse effect on the company's business, results of operations, and financial condition. This effect could include disruption of normal business transactions, such as the settlement, execution, processing, and recording of trades in securities, commodities, currencies, and other assets. The Y2K problem could also increase Merrill Lynch's exposure to risk and legal liability and its need for liquidity. The renovation phase of Merrill Lynch's Year 2000 system efforts, as described in the Partnership's 1998 Form 10-K, was 100% completed as of June 30, 1999, and production testing was 100% completed as of that date. In March and April 1999, Merrill Lynch successfully participated in U.S. industrywide testing sponsored by the Securities Industry Association. These tests involved an expanded number of firms, transactions, and conditions compared with those previously conducted. Merrill Lynch has participated in and continues to participate in numerous industry tests throughout the world. In light of the interdependency of the parties in or serving the financial markets, there can be no assurance that all Y2K problems will be identified and remedied on a timely basis or that all remediation will be successful. Public uncertainty regarding successful remediation of the Y2K problem may cause a reduction in activity in the financial markets. Disruption or suspension of activity in the world's financial markets is also possible. In some non-U.S. markets in which Merrill Lynch does business, the level of awareness and remediation efforts relating to the Y2K problem are thought to be less advanced than in the U.S. Management is unable at this point to ascertain whether all significant third parties will successfully address the Y2K problem. Merrill Lynch will continue to monitor third parties' Year 2000 readiness to determine if additional or alternative measures are necessary. Contingency plans have been established for all business units. However, the failure of exchanges, clearing organizations, vendors, service providers, clients and counterparties, regulators, or others to resolve their own processing issues in a timely manner could have a material adverse effect on Merrill Lynch's business, results of operations, and financial condition. As of June 25, 1999, the total estimated expenditures of existing and incremental resources for the Year 2000 compliance initiative are approximately $520 million. This estimate includes $104 million of occupancy, communications, and other related overhead expenditures as Merrill Lynch is applying a fully costed pricing methodology for this project. Of the total estimated expenditures, approximately $80 million remains to be spent, primarily on continued testing, contingency planning, and risk management. There can be no assurance that the costs associated with remediation efforts will not exceed those currently anticipated by Merrill Lynch, or that the possible failure of such remediation efforts will not have a material adverse effect on Merrill Lynch's business, results of operations, or financial condition. 12 Item 3. Quantitative and Qualitative Disclosures About Market Risk The following table indicates the trading Value at Risk associated with the Fund's open positions by market category as of June 30, 1999 and December 31, 1998, and the average of the three and six month periods ending June 30, 1999. As of June 30, 1999 and December 31, 1998, the Fund's total capitalization was approximately $57 million and $56 million, all of which was allocated to trading.
June 30, 1999 December 31, 1998 ---------------------------------------------- ---------------------------------------------- % OF TOTAL % OF TOTAL MARKET SECTOR VALUE AT RISK CAPITALIZATION VALUE AT RISK CAPITALIZATION - ---------------- ------------- -------------- ------------- -------------- Interest Rates $ 3,515,796 6.18% $ 3,110,066 5.54% Currencies 2,213,543 3.89 1,822,438 3.25 Stock Indices 1,018,359 1.79 558,504 0.99 Metals 621,400 1.09 459,900 0.82 -------------- -------------- -------------- ------------- $ 7,369,098 12.95% $ 5,950,908 10.60% ============== ============== ============== ============= Average month-end Average month-end For the Period For the Period April 1999 through June 1999 January 1999 through June 1999 ---------------------------------------------- ---------------------------------------------- % OF TOTAL % OF TOTAL MARKET SECTOR VALUE AT RISK CAPITALIZATION VALUE AT RISK CAPITALIZATION - ---------------- ------------- -------------- ------------- -------------- Interest Rates $ 2,971,683 5.41% $ 2,647,069 4.88% Currencies 2,302,879 4.19 2,278,236 4.20 Stock Indices 861,782 1.57 807,618 1.49 Metals 609,100 1.11 712,008 1.31 -------------- -------------- -------------- ------------- $ 6,745,444 12.28% $ 6,444,931 11.88% ============== ============== ============= ==============
13 PART II - OTHER INFORMATION Item 1. Legal Proceedings There are no pending legal proceedings to which the Partnership or the General Partner is a party. Item 2. Changes in Securities and Use of Proceeds (a) None. (b) None. (c) None. (d) None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other information None. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits -------- There are no exhibits required to be filed as part of this report. (b) Reports on Form 8-K ------------------- There were no reports on Form 8-K filed during the first six months of fiscal 1999. 14 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. JOHN W. HENRY & CO./MILLBURN L.P. By: MERRILL LYNCH INVESTMENT PARTNERS INC. (General Partner) Date: August 10, 1999 By /s/ JOHN R. FRAWLEY J.R. ------------------------ John R. Frawley, Jr. Chairman, Chief Executive Officer, President and Director Date: August 10, 1999 By /s/ MICHAEL L. PUNGELLO ----------------------- Michael L. Pungello Vice President, Chief Financial Officer and Treasurer 15 EX-27 2 FINANCIAL DATA SCHEDULE
BD 6-MOS 6-MOS DEC-31-1999 DEC-31-1998 JAN-01-1999 JAN-01-1998 JUN-30-1999 JUN-30-1998 0 0 57,130,003 56,423,017 0 0 0 0 0 0 0 0 57,130,003 56,423,017 0 0 265,750 259,704 0 0 0 0 0 0 0 0 0 0 0 0 0 0 56,864,253 56,163,313 57,130,003 56,423,017 0 0 0 0 0 0 4,139,449 (7,484,700) 0 0 0 0 0 0 4,139,449 (7,484,700) 0 0 0 0 0 0 4,139,449 (7,484,700) 17.74 (27.12) 17.74 (27.12)
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