<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, 2001
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 MLIM ALTERNATIVE STRATEGIES LLC
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, 2002, limited partnership units with an aggregate value of
$25,683,482 were outstanding and held by non-affiliates.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant's "2001 Annual Report and Independent Auditors' Report," the
annual report to security holders for the fiscal year ended December 31, 2001,
is incorporated by reference into Part II, Item 8 and Part IV hereof and filed
as an Exhibit herewith.
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JOHN W. HENRY & CO./MILLBURN L.P.
ANNUAL REPORT FOR 2001 ON FORM 10-K
TABLE OF CONTENTS
<Table>
<Caption>
PART I PAGE
------ ----
Item 1. Business...................................................................................... 1
Item 2. Properties.................................................................................... 5
Item 3. Legal Proceedings............................................................................. 5
Item 4. Submission of Matters to a Vote of Security Holders........................................... 6
PART II
-------
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters......................... 6
Item 6. Selected Financial Data....................................................................... 6
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations......... 12
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.................................... 16
Item 8. Financial Statements and Supplementary Data................................................... 23
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.......... 23
PART III
--------
Item 10. Directors and Executive Officers of the Registrant............................................ 23
Item 11. Executive Compensation........................................................................ 25
Item 12. Security Ownership of Certain Beneficial Owners and Management................................ 25
Item 13. Certain Relationships and Related Transactions................................................ 25
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............................... 26
</Table>
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PART I
ITEM 1: BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS:
John W. Henry & Co./Millburn L.P. (the "Partnership") 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 (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 (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 Partnership'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 between the Partnership's two trading advisors --
John W. Henry & Company, Inc. ("JWH") and Millburn Ridgefield Corporation
("Millburn") (collectively, the "Advisors").
MLIM Alternative Strategies LLC ("MLIM AS LLC"), formerly
Merrill Lynch Investment Partners Inc. ("MLIP"), an indirect wholly-owned
subsidiary of Merrill Lynch Investment Managers, LP ("MLIM") which, in turn, is
an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("Merrill
Lynch"), is the general partner of the Partnership. Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MLPF&S"), the successor to Merrill Lynch
Futures, Inc. ("MLF") by merger, is the Partnership's commodity broker.
Effective May 31, 2001, MLIP converted to a Delaware limited
liability company and changed its name. Effective August 14, 2001, Merrill Lynch
Group, Inc. contributed all of the issued and outstanding shares of MLIM AS LLC
to its affiliate MLIM in a tax-free reorganization. All of the officers of MLIP
at the time continued with their former roles with MLIM AS LLC. The changes had
no impact on the Partnership's investors. Effective November 2, 2001, MLF merged
into its affiliate, MLPF&S, a wholly owned subsidiary of Merrill Lynch. MLPF&S
became the successor party to the agreements between MLF and the Partnership.
The terms of the agreements remained unchanged and the merger had no effect on
the terms on which the Partnership's transactions were executed.
The 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, 2001, 50% of the capital of each series of units
was allocated to JWH and 50% 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 LLCs") sponsored by MLIM AS LLC, each one 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 MLIM AS LLC.
As of December 31, 2001, the aggregate capitalization of the
Partnership was $26,155,682, the total capitalization of the Series A, Series B
and Series C Units was $6,932,554, $12,129,855 and $7,093,273, 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 $267.82 (excluding a $20 per Series A Unit distribution paid as of
November 30, 1990), $217.61 and $169.60, respectively.
The highest month-end Net Asset Value per Series A Unit
through December 31, 2001 was $339.42 (June 30, 1999, adding back a $20
distribution paid in 1990) and the lowest $100.31 (May 31, 1990); the highest
month-end Net Asset Value per Series B Unit through December 31, 2001 was
$259.56 (June 30, 1999) and the lowest $91.20
1
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(May 31, 1992); the highest month-end Net Asset Value per Series C Unit through
December 31, 2001 was $202.28 (June 30, 1999) and the lowest $75.87 (May 31,
1992).
(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 Partnership trades (currently through its investment in
the Trading LLCs) 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 market.
One of the objectives of the Partnership 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 Partnership's returns have, in fact,
frequently been significantly non-correlated with the United States stock and
bond markets.
The Partnership accesses the Advisors not by opening
individual managed accounts with them, but rather through investing in private
funds sponsored by MLIM AS LLC through which the trading accounts of different
MLIM AS LLC-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 Partnership's trading increases volatility and
market risk.
MARKET TYPES.
The Partnership trades on a variety of United States and
foreign futures exchanges. Substantially all of the Partnership'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. 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.
2
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As in the case of its market sector allocations, the
Partnership's commitments to different types of markets -- U.S. and non-U.S.,
regulated and non regulated -- differ substantially from time to time, as well
as over time. The Partnership has no policy restricting its relative commitment
to any of these different types of markets.
CUSTODY OF ASSETS.
All of the Partnership's assets are currently held in customer
accounts at Merrill Lynch.
INTEREST PAID BY MERRILL LYNCH ON THE PARTNERSHIP'S U.S.
DOLLAR AND NON U.S. DOLLAR ASSETS.
The Partnership's U.S. dollar assets are maintained at MLPF&S.
On assets held in U.S. dollars, Merrill Lynch credits the Partnership with
interest at the prevailing 91-day U.S. Treasury bill rate. The Partnership 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 Partnership, from possession of such assets.
Merrill Lynch charges the Partnership Merrill Lynch's cost of
financing realized and unrealized losses on the Partnership'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 2001 and 2000, all of the Partnership's assets were
invested in the two Trading LLCs mentioned above. Therefore, no direct charges
were incurred by the Partnership during these two years.
The Partnership's average month-end Net Assets during 2001,
2000 and 1999 equaled $28,586,131, $30,694,862 and $51,197,421, respectively.
The Partnership pays brokerage commissions to MLPF&S at a flat
monthly rate of .708 of 1% (an 8.50% annual rate) of the Partnership's month-end
assets. Prior to October 1, 2000, the rate was .792 of 1% (a 9.50% annual rate),
and the Partnership pays MLIM AS LLC a monthly administrative fee of .021 of 1%
(a 0.25% annual rate) of the Partnership's month-end assets.
3
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<Table>
<Caption>
DESCRIPTION OF CURRENT CHARGES
RECIPIENT NATURE OF PAYMENT AMOUNT OF PAYMENT
MLPF&S Brokerage Commissions A flat-rate monthly commission of 0.708 of 1% of the
Partnership's month-end assets (an 8.50% annual rate). Prior
to October 1, 2000, the rate was 0.792 of 1% (a 9.50% annual
rate).
MLIM AS LLC estimates that the round-turn equivalent rates
charged to ML Millburn Global L.L.C. ("Millburn LLC") during
the years ended 2001, 2000 and 1999 were approximately $242,
324 and $461, respectively. MLIM AS LLC estimates that the
round-turn equivalent rates charged to ML JWH Financial and
Metals Portfolio L.L.C. ("JWH LLC") during the years ended
2001, 2000 and 1999 were approximately $155, $146 and $316,
respectively.
MLPF&S Use of Partnership assets Merrill Lynch may derive an economic benefit from the
deposit of certain of the Partnership's U.S. dollar assets.
MLIM AS LLC Administrative Fees The Partnership pays MLIM AS LLC a monthly Administrative
Fee equal to 0.0020833 of 1% (0.25% annually) of the
Partnership's month-end assets. MLIM AS LLC pays all of the
Partnership's routine administrative costs.
</Table>
4
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<Table>
Other Bid-ask spreads Bid-ask spreads on forward and related trades.
Counterparties
Advisors Profit Shares Profit shares of 20% of any New Trading Profit, either as of
the end of each calendar quarter or year, achieved by each
Advisor's Partnership account, individually, were paid to JWH
and Millburn, respectively. 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 Partnership.
Advisors Consulting Fees MLPF&S pays the Advisors annual consulting fees of 2% of the
average month-end assets allocated to them for management.
MLPF&S; Extraordinary expenses Actual costs incurred; none paid to date.
Others
</Table>
REGULATION
MLIM AS LLC, the Advisors and MLPF&S are each subject to
regulation by the Commodity Futures Trading Commission (the "CFTC") and the
National Futures Association (the "NFA"). Other than in respect of its periodic
reporting requirements under the Securities Exchange Act of 1934, the
Partnership itself is generally not subject to regulation by the Securities and
Exchange Commission (the "SEC"). However, MLIM AS LLC itself is registered as
an "investment adviser" under the Investment Advisers Act of 1940. MLPF&S is
also regulated by the SEC and the National Association of Securities Dealers.
(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 MLIM AS LLC (Princeton Corporate Campus, 800 Scudders Mill Road -
Section 2G, Plainsboro, New Jersey 08536). MLIM AS LLC performs all
administrative services for the Partnership from MLIM AS LLC's offices.
ITEM 3: LEGAL PROCEEDINGS
Merrill Lynch, a partner of MLIM, which is the sole member of
MLIM AS LLC, and MLPF&S and the 100% indirect owner of all Merrill Lynch
entities involved in the operation of the Partnership, 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
5
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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 MLIM AS LLC or the Partnership.
MLIM AS LLC 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. Limited Partners may redeem Units as of the end of each
month at Net Asset Value.
(b) HOLDERS:
As of December 31, 2001, there were 241, 685 and 361 holders
of the Series A, B and C Units, respectively, including MLIM AS LLC.
(c) DIVIDENDS:
The Partnership has made only one distribution ($20 per Series
A Unit payable as of November 30, 1990) since trading commenced. MLIM AS LLC
does not presently intend to make any further distributions.
Item 5(b)
Not applicable.
ITEM 6: SELECTED FINANCIAL DATA
The following selected financial data has been derived from the audited
financial statements of the Partnership.
6
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<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 2001 2000 1999 1998 1997
- --------------------------------------------------------------------------------------------------------------------------
| | | | |
Revenues: | | | | |
| | | | |
Income (Loss) from Investments 1,265,275| (2,426,515)| (6,145,111)| 1,867,451| 7,357,688 |
----------------|-----------------|----------------|--------------|-----------------|
Net Income (Loss) $ 1,265,275| $ (2,426,515)| $ (6,145,111)| $ 1,867,451| $ 7,357,688 |
====================================================================================
</Table>
<Table>
<Caption>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
BALANCE SHEET DATA 2001 2000 1999 1998 1997
- --------------------------------------------------------------------------------------------------------------------------
| | | | |
Partnership Net Asset Value $26,155,682| $29,423,145| $42,876,172| $56,163,313| $63,024,164 |
Net Asset Value per Series A Unit $267.82| $258.05| $260.14| $296.13| $284.11 |
Net Asset Value per Series B Unit $217.61| $209.67| $211.47| $240.61| $230.87 |
Net Asset Value per Series C Unit $169.60| $163.40| $164.80| $187.52| $179.92 |
</Table>
Variations in income statement line items are due to investing assets in the
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.
- -------------------------------------------------------------------------------------------------------------------------------
| | | | | | | | | | | |
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 |
- -----------------|--------|---------|---------|---------|--------|---------|---------|---------|----------|---------|----------|
2000 $255.72| $238.38| $230.44| $230.52| $221.13| $201.51| $199.30| $197.17| $189.80| $203.48| $220.58| $258.05 |
- -----------------|--------|---------|---------|---------|--------|---------|---------|---------|----------|---------|----------|
2001 $264.13| $265.03| $297.36| $274.43| $279.83| $265.64| $253.76| $273.60| $283.68| $296.39| $254.29| $267.82 |
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
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<Table>
<Caption>
- -------------------------------------------------------------------------------------------------------------------------------
MONTH-END NET ASSET VALUE PER SERIES B UNIT
- -------------------------------------------------------------------------------------------------------------------------------
Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec.
- -------------------------------------------------------------------------------------------------------------------------------
| | | | | | | | | | | |
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 |
- -----------------|--------|---------|---------|---------|--------|---------|---------|---------|----------|---------|----------|
2000 $207.89| $193.79| $187.32| $187.37| $179.72| $163.78| $161.98| $160.25| $154.25| $165.39| $179.25| $209.67 |
- -----------------|--------|---------|---------|---------|--------|---------|---------|---------|----------|---------|----------|
2001 $214.61| $215.32| $241.58| $222.96| $227.36| $215.83| $206.18| $222.29| $230.47| $240.80| $206.64| $217.61 |
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------------------------------------
MONTH-END NET ASSET VALUE PER SERIES C UNIT
- -------------------------------------------------------------------------------------------------------------------------------
Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec.
- -------------------------------------------------------------------------------------------------------------------------------
| | | | | | | | | | | |
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 |
- -----------------|--------|---------|---------|---------|--------|---------|---------|---------|----------|---------|----------|
2000 $162.02| $151.03| $145.99| $146.03| $140.07| $127.64| $126.24| $124.89| $120.24| $ 128.90| $139.70| $163.40 |
- -----------------|--------|---------|---------|---------|--------|---------|---------|---------|----------|---------|----------|
2001 $167.25| $167.81| $188.27| $173.76| $177.19| $168.20| $160.69| $173.24| $179.62| $ 187.67| $161.04| $169.60 |
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
Pursuant to CFTC policy, monthly performance is presented from January 1, 1997
even though all Series were outstanding prior to such date.
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JOHN W. HENRY & CO./MILLBURN L.P.
(SERIES A UNITS)
DECEMBER 31, 2001
TYPE OF POOL: Selected-Advisor/Publicly-Offered/Non-"Principal Protected"(1)
INCEPTION OF TRADING: January 5, 1990
AGGREGATE SUBSCRIPTIONS: $18,182,000
CURRENT CAPITALIZATION: $6,932,554
WORST MONTHLY DRAWDOWN(2):(14.20)% (11/01)
WORST PEAK-TO-VALLEY DRAWDOWN(3):(40.59)% (7/99-9/00)
NET ASSET VALUE PER SERIES A UNIT, DECEMBER 31, 2001: $267.82
<Table>
<Caption>
- -----------------------------------------------------------------------------------
MONTHLY RATES OF RETURN(4)
- -----------------------------------------------------------------------------------
MONTH 2001 2000 1999 1998 1997
- -----------------------------------------------------------------------------------
| | | |
January 2.36% (1.70)%| (2.79)%| (1.09)%| 8.31% |
- ------------------------------------------------|-----------|----------|-----------|
February 0.34 (6.78) | 1.17 | (4.32) | (1.07) |
- ------------------------------------------------|-----------|----------|-----------|
March 12.20 (3.33) | (1.06) | 0.48 | (0.98) |
- ------------------------------------------------|-----------|----------|-----------|
April (7.71) 0.03 | 3.09 | (7.97) | (2.58) |
- ------------------------------------------------|-----------|----------|-----------|
May 1.97 (4.07) | 2.05 | 3.38 | (3.83) |
- ------------------------------------------------|-----------|----------|-----------|
June (5.07) (8.87) | 5.38 | (2.86) | 2.47 |
- ------------------------------------------------|-----------|----------|-----------|
July (4.47) (1.10) | (2.93) | (4.58) | 10.38 |
- ------------------------------------------------|-----------|----------|-----------|
August 7.82 (1.07) | (2.53) | 13.34 | (4.90) |
- ------------------------------------------------|-----------|----------|-----------|
September 3.69 (3.74) | (4.25) | 13.30 | 1.66 |
- ------------------------------------------------|-----------|----------|-----------|
October 4.48 7.21 | (8.83) | (2.39) | (0.25) |
- ------------------------------------------------|-----------|----------|-----------|
November (14.20) 8.40 | (0.80) | (6.05) | 1.26 |
- ------------------------------------------------|-----------|----------|-----------|
December 5.32 16.99 | (0.61) | 5.56 | 2.46 |
- ------------------------------------------------|-----------|----------|-----------|
Compound Annual 3.79% (0.81)%| (12.15)%| 4.24% | 12.49% |
Rate of Return
- -----------------------------------------------------------------------------------
</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 Partnership 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 MLIM AS LLC, 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, 1997 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, 1997 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.
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JOHN W. HENRY & CO./MILLBURN L.P.
(SERIES B UNITS)
DECEMBER 31, 2001
TYPE OF POOL: Selected-Advisor/Publicly-Offered/Non-"Principal Protected"(1)
INCEPTION OF TRADING: January 28, 1991
AGGREGATE SUBSCRIPTIONS: $50,636,000
CURRENT CAPITALIZATION: $12,129,855
WORST MONTHLY DRAWDOWN(2): (14.19)% (11/01)
WORST PEAK-TO-VALLEY DRAWDOWN(3):(40.57)% (7/99-9/00)
-------------
NET ASSET VALUE PER SERIES B UNIT, DECEMBER 31, 2001: $217.61
<Table>
<Caption>
- -----------------------------------------------------------------------------------
MONTHLY RATES OF RETURN(4)
- -----------------------------------------------------------------------------------
MONTH 2001 2000 1999 1998 1997
- -----------------------------------------------------------------------------------
| | | |
January 2.36% (1.69)%| (2.78)%| (1.09)%| 8.31% |
- ------------------------------------------------|-----------|----------|-----------|
February 0.33 (6.78) | 1.17 | (4.33) | (1.08) |
- ------------------------------------------------|-----------|----------|-----------|
March 12.20 (3.34) | (1.06) | 0.49 | (0.98) |
- ------------------------------------------------|-----------|----------|-----------|
April (7.71) 0.02 | 3.10 | (7.96) | (2.58) |
- ------------------------------------------------|-----------|----------|-----------|
May 1.97 (4.08) | 2.04 | 3.38 | (3.81) |
- ------------------------------------------------|-----------|----------|-----------|
June (5.07) (8.87) | 5.38 | (2.86) | 2.46 |
- ------------------------------------------------|-----------|----------|-----------|
July (4.47) (1.10) | (2.93) | (4.60) | 10.36 |
- ------------------------------------------------|-----------|----------|-----------|
August 7.81 (1.07) | (2.52) | 13.33 | (4.90) |
- ------------------------------------------------|-----------|----------|-----------|
September 3.68 (3.73) | (4.24) | 13.30 | 1.66 |
- ------------------------------------------------|-----------|----------|-----------|
October 4.48 7.20 | (8.83) | (2.39) | (0.26) |
- ------------------------------------------------|-----------|----------|-----------|
November (14.19) 8.38 | (0.79) | (6.05) | 1.26 |
- ------------------------------------------------|-----------|----------|-----------|
December 5.31 16.97 | (0.60) | 5.54 | 2.46 |
- ------------------------------------------------|-----------|----------|-----------|
Compound Annual 3.78% (0.86)%| (12.11)%| 4.20% | 12.46% |
Rate of Return
- -----------------------------------------------------------------------------------
</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 Partnership 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 MLIM AS LLC, 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, 1997 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, 1997 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, 2001
TYPE OF POOL: Selected-Advisor/Publicly-Offered/Non-"Principal Protected"(1)
INCEPTION OF TRADING: January 2, 1992
AGGREGATE SUBSCRIPTIONS: $40,000,000
CURRENT CAPITALIZATION: $7,093,273
WORST MONTHLY DRAWDOWN(2): (14.19)% (11/01)
WORST PEAK-TO-VALLEY DRAWDOWN(3): (40.57)% (7/99-9/00)
-------------
NET ASSET VALUE PER SERIES C UNIT, DECEMBER 31, 2001: $169.60
<Table>
<Caption>
- -----------------------------------------------------------------------------------
MONTHLY RATES OF RETURN(4)
- -----------------------------------------------------------------------------------
MONTH 2001 2000 1999 1998 1997
- -----------------------------------------------------------------------------------
| | | |
January 2.36% (1.69)%| (2.78)%| (1.08)%| 8.31% |
- ------------------------------------------------|-----------|----------|-----------|
February 0.33 (6.78) | 1.17 | (4.33) | (1.07) |
- ------------------------------------------------|-----------|----------|-----------|
March 12.20 (3.34) | (1.06) | 0.49 | (0.97) |
- ------------------------------------------------|-----------|----------|-----------|
April (7.71) 0.02 | 3.10 | (7.97) | (2.58) |
- ------------------------------------------------|-----------|----------|-----------|
May 1.97 (4.08) | 2.04 | 3.38 | (3.82) |
- ------------------------------------------------|-----------|----------|-----------|
June (5.07) (8.87) | 5.38 | (2.86) | 2.46 |
- ------------------------------------------------|-----------|----------|-----------|
July (4.47) (1.10) | (2.93) | (4.60) | 10.36 |
- ------------------------------------------------|-----------|----------|-----------|
August 7.81 (1.07) | (2.52) | 13.33 | (4.90) |
- ------------------------------------------------|-----------|----------|-----------|
September 3.68 (3.73) | (4.24) | 13.29 | 1.67 |
- ------------------------------------------------|-----------|----------|-----------|
October 4.48 7.20 | (8.83) | (2.38) | (0.26) |
- ------------------------------------------------|-----------|----------|-----------|
November (14.19) 8.38 | (0.79) | (6.05) | 1.26 |
- ------------------------------------------------|-----------|----------|-----------|
December 5.31 16.97 | (0.60) | 5.54 | 2.45 |
- ------------------------------------------------|-----------|----------|-----------|
Compound Annual 3.79% (0.86)%| (12.11)%| 4.20% | 12.47% |
Rate of Return
- -----------------------------------------------------------------------------------
</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 Partnership allocates approximately 50% of its assets
to each of JWH and Millburn, it is referred to as a "Selected-Advisor" fund.
Certain funds, including funds sponsored by MLIM AS LLC, 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, 1997 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, 1997 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.
11
<Page>
(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.
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
GENERAL
JWH and Millburn have been the Partnership's two Advisors
since inception. Although from time to time one of the Advisors is allocated a
greater percentage of the Partnership's assets than the other as a result of
differential performance, MLIM AS LLC periodically rebalances the Partnership'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 numerous market participants 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 Partnership'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
Partnership 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
12
<Page>
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 Partnership.
13
<Page>
2001
The Partnership's overall trading strategy was profitable for 2001. Trading
in the interest rate and stock index sectors accounted for most of the gains.
Trading in the interest rate markets was the most successful strategy.
Eurodollar trading was profitable in January as the weakening U.S. economy
and the Federal Reserve's move to cut interest rates caused Eurodollar
futures contracts to rise dramatically from December 2000 lows. The global
fixed income markets rallied strongly after the September 11 events but the
rally subsided by year-end as stronger than expected retail sales figures in
the U.S. prompted a sharp decline in global bond prices.
Despite volatile conditions, stock index trading was successful. Global
equity markets remained caught between negative news about earnings and the
potential positive effects of monetary easings. Short positions fueled the
sector as indices fell on poor corporate earnings and investors anxiety that
the terrorist attacks would cause the global economic slump to worsen.
Positive reports on the U.S. economy and growing optimism for a brighter 2002
caused stock markets to rally at year-end.
Currency trading was also profitable. The Euro fell from a near high 96 cents
back to the 90 cent level, resulting in losses in long Euro positions. Losses
were sustained in Japanese yen positions as the further weakening of the
Japanese yen displayed how the global economy is not immune to the slowdown
of the U.S. economy. By year end, the U.S. dollar continued to appreciate
versus the Euro and the Japanese yen as the European Central Bank maintained
its cautious monetary easing stance and the Japanese economy deteriorated.
Trading in the metals sector was the only unprofitable strategy. Weakness in
the Euro, a decline in the Australian dollar to all time lows and producer
and European Central Bank selling sent gold prices lower. Copper trading
sustained losses despite a number of bullish developments to existing demand
constraints. Long gold positions were profitable in September as investors
flocked to gold as a safe haven in the aftermath of the attacks.
2000
Trading in the currency and interest rate sectors was
profitable for the Partnership in 2000. However, losses sustained in stock
market index and metals sectors more than offset those gains as the
Partnership's overall trading strategy was unprofitable.
Currency trading alternated throughout the year until
December, when most of the gains were realized. The year began with the
decline in the Euro as officials from the Group of Seven met and failed to
express concern about the low levels of the European currency. The Euro's
weakness can be attributed to a number of factors, including the slow pace of
microeconomic reform in Europe, plans for a European withholding tax and the
scale of direct investments outside of Europe. In April, long Swiss franc
positions proved profitable despite interest rate hikes by the Swiss National
Bank. Losses in Japanese yen occurred as the yen finished weaker against the
U.S. dollar in anticipation that the U.S. Federal Reserve would continue to
increase interest rates. The Euro hit all time lows against the U.S. dollar
and the Japanese yen in early September despite European Central Bank
intervention, benefiting the Partnership's short Euro positions. December was
quite profitable on the resurgence of the Euro versus both the U.S. dollar
and the Japanese yen and the weakness of the Japanese yen versus the U.S.
dollar.
Although profitable at year end, trading in the interest
rate markets was volatile. Losses were realized in the Japanese 10-year bond,
10-year U.S. Treasury note positions and long U.S. Treasury positions as the
yield curve fluctuated widely during the first quarter. U.S. Treasury yields
continued to fall mid year as investors shifted to U.S. Treasuries due to
increased volatility in the NASDAQ and other equity markets. Short Euro
positions resulted in losses as the Euro improved after the European Central
Bank's 50 basis point repo rate hike. Japanese government bonds were slightly
profitable in the third quarter. In November and December, gains were
realized from the Japanese 10-year bond and U.S. 10-year note trading as
uncertainty surrounding the U.S. Presidential election resulted in investors
favoring bond markets over equities.
Stock Index markets trading was unprofitable. Early on,
positions in the FTSE Financial Times Stock Index resulted in profits as the
United Kingdom economy grew at a robust rate and was accompanied by low
inflation. Losses were sustained in Nikkei 225 and S&P 500 positions in the
second quarter as signs of rising inflation fueled fears that the U.S. Federal
Reserve would continue to raise interest rates to slow the robust economy. As
the Federal Reserve raised rates throughout the year, investors shifted to the
safehaven of Treasuries, away from an increasingly volatile NASDAQ.
Trading in the metals markets was also unprofitable. Concerns
about higher U.S. interest rates and sharp declines in global equity prices
during January created a somewhat nervous and defensive tone in base metals
trading. Trading in long Copper positions resulted in losses as a Freeport,
Indonesia mine announced output cuts would not be as large as the Indonesian
government forecast. Gold prices dropped in July as a result of the Bank of
England's bullion auction. Nickel prices declined as demand slowed for stainless
steel in Europe and Asia. Gold prices were impacted during December by adverse
currency movements.
Trading results are not included for 2000 because the
Partnership traded exclusively through investing in Trading LLC's.
1999
The Partnership finished 1999 with gains in currencies and
stock index trading and losses in metals
14
<Page>
and interest rate trading.
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 Japanese yen. The Japanese 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 U.S. 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 Partnership 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 Partnership 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 Partnership, 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
Partnership traded exclusively through investing in Trading LLC's.
VARIABLES AFFECTING PERFORMANCE
The principal variables which determine the net performance of
the Partnership are gross profitability and interest income.
During all periods set forth under "Selected Financial Data,"
the interest rates in many countries were
15
<Page>
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 Partnership's
profitability. In addition, low interest rates are frequently associated with
reduced fixed income market volatility, and in static markets the Partnership'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 Partnership may be reduced as compared to high yielding
and much lower risk fixed-income investments.
The Partnership's Brokerage Commissions and Administrative
Fees are a constant percentage of the Partnership's assets allocated to trading.
The only Partnership costs (other than the insignificant currency trading costs)
which are not based on a percentage of the Partnership'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 Partnership. 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 Partnership between realized and unrealized
profits. Most of the contracts traded by the Partnership 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
Partnership.
LIQUIDITY; CAPITAL RESOURCES
The Partnership 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 Partnership's U.S.
dollar deposits. These borrowings are at a prevailing short-term rate in the
relevant currency.
Substantially all of the Partnership's assets are held in
cash. The Net Asset Value of the Partnership'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 Partnership's profit potential generally
increases. Inflation in commodity prices could also generate price movements
which the strategies might successfully follow.
Substantially all of the Partnership's assets are held in
cash. Accordingly, except in very unusual circumstances, the Partnership 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 Partnership's positions and assets, the
Partnership'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.
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.
INTRODUCTION
PAST RESULTS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE
The Partnership is a speculative commodity pool. Unlike an
operating company, the risk of market
16
<Page>
sensitive instruments is integral, not incidental, to the Partnership's main
line of business.
Market movements result in frequent changes in the fair market
value of the Partnership's open positions and, consequently, in its earnings and
cash flow. The Partnership'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 Partnership's open positions and the
liquidity of the markets in which it trades.
The Partnership, 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 Partnership's past performance is not necessarily
indicative of its future results.
Value at Risk is a measure of the maximum amount which the
Partnership could reasonably be expected to lose in a given market sector.
However, the inherent uncertainty of the Partnership's speculative trading and
the recurrence in the markets traded by the Partnership of market movements far
exceeding expectations could result in actual trading or non-trading losses far
beyond the indicated Value at Risk or the Partnership'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 Partnership's losses in any market sector will be
limited to Value at Risk or by the Partnership's attempts to manage its market
risk.
QUANTIFYING THE PARTNERSHIP'S TRADING VALUE AT RISK
QUANTITATIVE FORWARD-LOOKING STATEMENTS
The following quantitative disclosures regarding the
Partnership'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 Partnership's risk exposure in the various market sectors
traded by the Advisors is quantified below in terms of Value at Risk. Due to the
Partnership's mark-to-market accounting, any loss in the fair value of the
Partnership's open positions is directly reflected in the Partnership'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
Partnership 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 Partnership),
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.
17
<Page>
The fair value of the Partnership'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 Partnership's positions are rarely, if ever,
100% positively correlated have not been reflected.
THE PARTNERSHIP'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 Partnership's open positions by market
category for the fiscal year 2001. During the fiscal year 2001, the
Partnership's average capitalization was approximately $28,586,131. As of
December 31, 2000, the average capitalization was approximately $30,694,862.
The Partnership does not trade commodities or energy futures.
<Table>
<Caption>
Fiscal Year 2001
AVERAGE VALUE % OF AVERAGE HIGHEST VALUE LOWEST VALUE
MARKET SECTOR AT RISK CAPITALIZATION AT RISK AT RISK
- ------------- ---------------- ------------------- ----------------- ----------------
Interest Rates $ 1,323,842 4.63% 1,685,684 1,120,678
Currencies 1,331,945 4.66% 1,452,519 1,194,436
Stock Indices 390,151 1.36% 597,693 269,104
Metals 258,383 0.90% 305,800 201,216
---------------- ------------------- ----------------- ----------------
TOTAL $ 3,304,321 11.56% 4,041,696 2,785,434
================ =================== ================= ================
</Table>
Average, highest and lowest value at Risk amounts relate to
quarter-end amounts for each calendar quarter-end during the fiscal year.
Average Capitalization is the average or the Partnership's capitalization at the
end of each quarter of fiscal year 2001.
<Table>
<Caption>
Fiscal Year 2000
AVERAGE VALUE % OF AVERAGE HIGHEST VALUE LOWEST VALUE
MARKET SECTOR AT RISK CAPITALIZATION AT RISK AT RISK
- ------------- ---------------- ------------------- ----------------- ----------------
| | | |
Interest Rates $ 1,613,452 | 5.26% | 1,946,896 | 1,251,901 |
Currencies 1,368,913 | 4.46% | 1,799,436 | 1,410,850 |
Stock Indices 509,390 | 1.66% | 597,509 | 411,258 |
Metals 441,829 | 1.44% | 723,667 | 252,200 |
----------------| -------------------| -----------------| ----------------|
TOTAL $ 3,933,584 | 12.82% | 5,067,508 | 3,326,209 |
================ =================== ================= ================
</Table>
Average, highest and lowest value at Risk amounts relate to
quarter-end amounts for each
18
<Page>
calendar quarter-end during the fiscal year. Average Capitalization is the
average or the Partnership's capitalization at the end of each quarter of fiscal
year 2000.
MATERIAL LIMITATIONS ON VALUE AT RISK AS AN ASSESSMENT OF MARKET RISK
The face value of the market sector instruments held by the
Partnership 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 Partnership. The magnitude of the Partnership'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
Partnership to incur severe losses over a short period of time. The foregoing
Value at Risk table -- as well as the past performance of the Partnership --
give no indication of this "risk of ruin."
NON-TRADING RISK
FOREIGN CURRENCY BALANCES; CASH ON DEPOSIT WITH MLPF&S
The Partnership 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 Partnership also has non-trading market risk on the
approximately 90%-95% of its assets which are held in cash at MLPF&S. 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
Partnership's market risk exposures -- except for (i) those disclosures that are
statements of historical fact and (ii) the descriptions of how the Partnership
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 Partnership's primary market risk
exposures as well as the strategies used and to be used by MLIM AS LLC and the
Partnership'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 Partnership'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 Partnership. There can be no assurance that
the Partnership'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 Partnership.
The following were the primary trading risk exposures of the
Partnership as of December 31, 2001, by market sector.
INTEREST RATES.
19
<Page>
Interest rate risk is the principal market exposure of the
Partnership. Interest rate movements directly affect the price of derivative
sovereign bond positions held by the Partnership 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
Partnership's profitability. The Partnership's primary interest rate exposure is
to interest rate fluctuations in the United States and the other G-7 countries.
However, the Partnership also takes positions in the government debt of smaller
nations -- e.g., New Zealand and Australia. MLIM AS LLC anticipates that G-7
interest rates will remain the primary market exposure of the Partnership for
the foreseeable future.
CURRENCIES.
The Partnership trades in a large number of currencies,
including cross-rates -- i.e., positions between two currencies other than
the U.S. dollar. However, the Partnership's major exposures have typically
been in the U.S. dollar/Japanese yen and U.S. dollar/Euro positions. MLIM AS
LLC does not anticipate that the risk profile of the Partnership'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
U.S. dollar-based Partnership in expressing Value at Risk in a functional
currency other than U.S. dollars.
STOCK INDICES.
The Partnership's primary equity exposure is to equity index
price movements. The stock index futures traded by the Partnership are by law
limited to futures on broadly based indices. As of December 31, 2001, the
Partnership's primary exposures were in the S&P 500, Financial Times (England),
Nikkei (Japan) and DAX (Germany) stock indices. MLIM AS LLC anticipates little,
if any, trading in non-G-7 stock indices. The Partnership is primarily exposed
to the risk of adverse price trends or static markets in the major U.S.,
European and Japanese indices.
METALS.
The Partnership's primary metals market exposure is to
fluctuations in the price of gold. 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 Partnership have consistently been in the
precious metals, gold and silver. However, gold 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. MLIM AS LLC
anticipates that gold will remain the primary metals market exposure for the
Partnership.
QUALITATIVE DISCLOSURES REGARDING NON-TRADING RISK EXPOSURE
The following were the only non-trading risk exposures of the
Partnership as of December 31, 2001.
FOREIGN CURRENCY BALANCES.
The Partnership's primary foreign currency balances are in
Japanese yen, British pounds and Euros. The Partnership has de minimis exchange
rate exposure on these balances.
20
<Page>
U.S. DOLLAR CASH BALANCE.
The Partnership holds U.S. dollars only in cash at MLPF&S. The
Partnership has immaterial cash flow interest rate risk on its cash on deposit
with MLPF&S in that declining interest rates would cause the income from such
cash to decline.
QUALITATIVE DISCLOSURES REGARDING MEANS OF MANAGING RISK EXPOSURE
TRADING RISK
MLIM AS LLC 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 Partnership accounts managed by
the two Advisors as of the close of business on each day and reviewing
outstanding positions for over-concentrations. While MLIM AS LLC does not itself
intervene in the markets to hedge or diversify the Partnership's market
exposure, MLIM AS LLC 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
21
<Page>
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.
MILLBURN RISK MANAGEMENT
Millburn 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 limits its trading
to markets which it believes are sufficiently liquid in respect of the amount of
trading it contemplates conducting.
Millburn 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 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 also attempts to assess market volatility as a means
of monitoring and evaluating risk. In doing so, Millburn 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'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 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 considers the drawdown too severe, it reduces the
leverage or portfolio size.
Millburn determines asset allocation among markets and
position size on the basis of the money management principles and trading data
research discussed above and the market experience of Millburn's principles.
From time to time Millburn 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.
22
<Page>
NON-TRADING RISK
The Partnership controls the non-trading exchange rate risk by
regularly converting foreign balances back into U.S. dollars (no less frequently
than twice a month, and more frequently if a particular foreign currency balance
becomes unusually high).
The Partnership has cash flow interest rate risk on its cash
on deposit with MLPF&S in that declining interest rates would cause the income
from such cash to decline. However, a certain amount of cash or cash equivalents
must be held by the Partnership in order to facilitate margin payments and pay
expenses and redemptions. MLIM AS LLC does not take any steps to limit the cash
flow risk on its cash held on deposit at MLPF&S.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
SELECTED QUARTERLY FINANCIAL DATA
JOHN W. HENRY & CO. / MILLBURN L.P.
Net Income by Quarter
Eight Quarters through December 31, 2001
<Table>
<Caption>
FOURTH THIRD SECOND FIRST FOURTH THIRD SECOND FIRST
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
2001 2001 2001 2001 2000 2000 2000 2000
---- ---- ---- ---- ---- ---- ---- ----
Total Income $ (933,951) $2,448,970 $(2,741,806) $5,021,015 $8,638,624 $ (920,982) $(3,342,173) $(3,818,135)
Total Expenses 599,781 612,160 639,689 677,323 595,710 652,496 779,296 956,347
--------------------------------------------------------------------------------------------------------
Net Income $(1,533,732) $1,836,810 $(3,381,495) $4,343,692 $8,042,914 $(1,573,478) $(4,121,469) $(4,774,482)
Net Income per Unit $ (12.18) $ 14.16 $ (25.19) $ 30.73 $ 53.39 $ (9.19) $ (22.45) $ (23.47)
</Table>
The financial statements required by this Item are included in
Exhibit 13.01.
The supplementary financial information ("information about
oil and gas producing activities") specified by Item 302 of Regulation S-K is
not applicable. MLIM AS LLC promoted the Partnership 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.
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 MLIM AS LLC. Trading decisions are made
by the Advisors on behalf of the Partnership.
The managers and executive officers of MLIM AS LLC and their
business backgrounds are as follows.
<Table>
FABIO P. SAVOLDELLI Chairman, Chief Executive Officer and Manager
ROBERT M. ALDERMAN Manager
FRANK M. MACIOCE Vice President and Manager
STEVEN B. OLGIN Vice President, Chief Administrative Officer and Manager
MICHAEL L. PUNGELLO Vice President, Chief Financial Officer and Treasurer
</Table>
Fabio P. Savoldelli was born in 1961. Mr. Savoldelli is
Chairman, Chief Executive Officer and a Manager of MLIM AS LLC. He oversees
the Partnership's investments. Most recently, Mr. Savoldelli was Chief
Investment Officer for the Americas at the Chase Manhattan Private Bank,
responsible for managers investing assets in international and domestic
institutional, private client and ERISA funds. Previously, he was Deputy Chief
Investment Officer
23
<Page>
and Head of Fixed Income and Foreign Exchange at Swiss Bank Corp. London
Portfolio Management International. Mr. Savoldelli was educated at the
University of Windsor, Canada, and the London School of Economics.
Effective March 1, 2002, Mr. Robert M. Alderman was elected
a manager of MLIM AS LLC. Mr. Alderman was born in 1960. Mr. Alderman is a
Managing Director of MLIM and global head of Retail Sales and Business
Management for Alternative Investments. Prior to re-joining Merrill Lynch and
the International Private Client Group in 1999, he was a partner in the
Nashville, Tennessee based firm of J.C. Bradford & Co. where he was the Director
of Marketing, and a National Sales Manager for Prudential Investments. Mr.
Alderman first joined Merrill Lynch in 1987 where he worked until 1997. During
his tenure at Merrill Lynch, Mr. Alderman has held positions in Financial
Planning, Asset Management and High Net Worth Services. He received his Master's
of Business Administration from the Carroll School of Management Boston College
and a Bachelor of Arts from Clark University. Mr. Alderman was elected as a
Manager effective March 1, 2002.
Frank M. Macioce was born in 1945. Mr. Macioce is a Vice
President and a Manager of MLIM AS LLC and the senior legal counsel responsible
for Alternative Investments. He joined MLIM in February 2000. From 1995 to 2000,
Mr. Macioce was General Counsel of Operations, Services and Technology for
Merrill Lynch, and from 1993 to 1995 served as Merrill Lynch Investment Banking
General Counsel. From 1980 to 1993 he served as Assistant General Counsel of
Merrill Lynch responsible for Corporate Law. During his 28 years with Merrill
Lynch, he has served as a director and officer of a number of its affiliates.
Mr. Macioce graduated from Purdue University with a Bachelor of Science in
Economics and Psychology in 1967 and from Vanderbilt Law School with a Juris
Doctor in 1972. Mr. Macioce is a member of the New York Bar.
Steven B. Olgin was born in 1960. Mr. Olgin is Vice President,
Chief Adminstrative Officer and a Manager of MLIM AS LLC. He joined MLIM AS LLC
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 in
Business Administration and a Bachelor of Arts in Economics. In 1986, he
received his Juris Doctor 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 National Futures Association. Mr. Olgin is a
member of the Illinois Bar.
Michael L. Pungello was born in 1957. Mr. Pungello is Vice
President, Chief Financial Officer and Treasurer of MLIM AS LLC. 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 in
Accounting and received his Master's of Business Administration in Finance from
New York University in 1987.
As of December 31, 2001, the principals of MLIM AS LLC had no
investment in the Partnership, and MLIM AS LLC's general partnership interest
was valued at $285,778.
MLIM AS LLC 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 Partnership. Because MLIM AS LLC serves as the sole general partner
of each of these funds, the officers and managers of MLIM AS LLC effectively
manage them as officers and directors of such funds.
(c) IDENTIFICATION OF CERTAIN SIGNIFICANT EMPLOYEES:
None.
(d) FAMILY RELATIONSHIPS:
None.
(e) BUSINESS EXPERIENCE:
See Items 10(a) and (b) above.
24
<Page>
(f) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS:
None.
(g) PROMOTERS AND CONTROL PERSONS:
Not applicable.
ITEM 11: EXECUTIVE COMPENSATION
The officers of MLIM AS LLC are remunerated by MLIM AS LLC in
their respective positions. The Partnership does not itself have any officers,
directors or employees. The Partnership pays Brokerage Commissions to an
affiliate of MLIM AS LLC and Administrative Fees to MLIM AS LLC. MLIM AS LLC or
its affiliates also may receive certain economic benefits from holding the
Partnership's dollar assets in offset accounts, as described in Item 1(c) above.
The managers and officers receive no "other compensation" from the Partnership,
and the managers receive no compensation for serving as managers of MLIM AS
LLC. There are no compensation plans or arrangements relating to a change in
control of either the Partnership or MLIM AS LLC.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS:
As of December 31, 2001, 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 MLIM AS LLC.
(b) SECURITY OWNERSHIP OF MANAGEMENT:
As of December 31, 2001, the Advisors owned 515 Series A
Units, 500 Series B Units and 1,000 Series C Units and MLIM AS LLC owned 284
Series A Units, 613 Series B Units and 450 Series C Units (unit-equivalent
general partnership interests) which was, in each case, less than 3% 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 PARTNERSHIP
All of the service providers to the Partnership, other than
the Advisors, are affiliates of Merrill Lynch. Merrill Lynch negotiated with the
Advisors over the level of their advisory fees and Profit Shares. However, none
of the fees paid by the Partnership to any Merrill Lynch party were negotiated,
and they are higher than would have been obtained in arm's-length bargaining.
The Partnership pays Merrill Lynch substantial Brokerage
Commissions and Administrative Fees as well as bid-ask spreads on forward
currency trades. The Partnership also pays MLPF&S interest on short-term loans
extended by MLPF&S to cover losses on foreign currency positions.
25
<Page>
Within the Merrill Lynch organization, MLIM AS LLC is the
direct beneficiary of the revenues received by different Merrill Lynch entities
from the Partnership. MLIM AS LLC controls the management of the Partnership and
serves as its promoter. Although MLIM AS LLC has not sold any assets, directly
or indirectly, to the Partnership, MLIM AS LLC makes substantial profits from
the Partnership due to the foregoing revenues.
No loans have been, are or will be outstanding between MLIM AS
LLC or any of its principals and the Partnership.
MLIM AS LLC pays substantial selling commissions and trailing
commissions to MLPF&S for distributing the Units. MLIM AS LLC is ultimately paid
back for these expenditures from the revenues it receives from the Partnership.
(b) CERTAIN BUSINESS RELATIONSHIPS:
MLPF&S, an affiliate of MLIM AS LLC, acts as the principal
commodity broker for the Partnership.
In 2001, the Partnership expensed through its investment in
the Trading LLCs: (i) Brokerage Commissions of $2,456,699 to MLPF&S, which
included $574,795 in consulting fees earned by the Advisors; and (ii)
Administrative Fees of $72,253 to MLIM AS LLC. In addition, MLIM AS LLC and its
affiliates may have derived certain economic benefits from possession of the
Partnership'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.
26
<Page>
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
<Table>
<Caption>
(a)1. FINANCIAL STATEMENTS: PAGE
-------------------- ----
Independent Auditors' Report 1
Financial Statements:
Statements of Financial Condition as of December 31, 2001 and 2000 2
Statements of Operations For the years ended December
31, 2001, 2000 and 1999 3
Statements of Changes in Partners' Capital For the years ended
December 31, 2001, 2000 and 1999 4
Financial Data Highlights for the year ended December 31, 2001 5
Notes to Financial Statements 6-15
</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:
<Table>
<Caption>
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, MLIM AS LLC,
MLPF&S 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.
</Table>
27
<Page>
<Table>
10.02(a) Form of Consulting Agreement between each Adviser, the
Partnership and MLPF&S.
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 MLPF&S.
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 International Bank, MLIM AS LLC, MLPF&S and the
Partnership.
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 MLIM
AS LLC, each Advisor, the Partnership and MLPF&S.
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 MLPF&S.
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 2001 Annual Report and Independent Auditors' Report.
EXHIBIT 13.01: Is filed herewith.
13.01(a) 2001 Annual Report and Independent Auditors' Report for the
following Trading Limited Liability Companies sponsored by MLIM
Alternative Strategies LLC: ML Millburn Global L.L.C. and ML JWH
Financial and Metals Portfolio L.L.C.
EXHIBIT 13.01(a): Is incorporated herein by reference from Form 10-K (fiscal year
ended December 31, 2001) Commission File number 0-18702 for The
S.E.C.T.O.R. Fund (SM) L.P. (Registration Statement File No.
33-34432 filed on May 25, 1990 under the Securities Act of 1933).
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.
</Table>
28
<Page>
<Table>
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.
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.
</Table>
(b) Report on Form 8-K:
No reports on Form 8-K were filed during the fourth quarter of
2001.
29
<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: MLIM ALTERNATIVE STRATEGIES LLC
(formerly Merrill Lynch Investment Partners Inc.)
General Partner
By: /s/
Fabio P. Savoldelli
Chairman, Chief Executive
Officer and Manager
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed on March 29, 2002 by the
following persons on behalf of the Registrant and in the capacities indicated.
<Table>
<Caption>
Signature Title Date
/s/Fabio P. Savoldelli Chairman, Chief Executive Officer and Manager March 29, 2002
- ---------------------- (Principal executive officer)
Fabio P. Savoldelli
/s/Robert M. Alderman Manager March 29, 2002
- ----------------------
Robert M. Alderman
/s/Steven B. Olgin Vice President, Chief Administrative Officer and Manager March 29, 2002
- ------------------
Steven B. Olgin
/s/Michael L. Pungello Vice President, Chief Financial Officer and Treasurer March 29, 2002
- ---------------------- (Principal financial and accounting officer)
Michael L. Pungello
(Being the principal executive officer, the principal financial and accounting
officer and a majority of the managers of MLIM Alternative Strategies LLC)
MLIM ALTERNATIVE STRATEGIES General Partner of Registrant March 29, 2002
LLC
BY: /s/Fabio P. Savoldelli
- --------------------------
Fabio P. Savoldelli
</Table>
30
<Page>
JOHN W. HENRY & CO./MILLBURN L.P.
2001 FORM 10-K
INDEX TO EXHIBITS
<Table>
<Caption>
EXHIBIT
-------
Exhibit 13.01 2001 Annual Report and Independent Auditors' Report
Exhibit 13.01(a) 2001 Annual Report and Independent Auditors' Report
ML Millburn Global, LLC
ML JWH Financials & Metals Portfolio, LLC
</Table>
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