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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 2002
--------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-18215
JOHN W. HENRY & CO./MILLBURN L.P.
---------------------------------
(Exact Name of Registrant as
specified in its charter)
Delaware 06-1287586
- ----------------------------------- ------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
c/o MLIM Alternative Strategies LLC
Princeton Corporate Campus
800 Scudders Mill Road - Section 2G
Plainsboro, New Jersey 08536
----------------------------------------
(Address of principal executive offices)
(Zip Code)
609-282-6996
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
JOHN W. HENRY & CO./MILLBURN L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENTS OF FINANCIAL CONDITION
<Table>
<Caption>
MARCH 31, DECEMBER 31,
2002 2001
(unaudited)
-------------- --------------
ASSETS
Investments $ 22,881,456 $ 26,155,682
Receivable from investments 200,535 220,310
-------------- --------------
TOTAL $ 23,081,991 $ 26,375,992
============== ==============
LIABILITY AND PARTNERS' CAPITAL
Redemptions payable $ 200,535 $ 220,310
-------------- --------------
Total liabilities 200,535 220,310
-------------- --------------
PARTNERS' CAPITAL:
General Partner:
(284 and 284 Series A Units) 68,794 76,061
(613 and 613 Series B Units) 120,652 133,398
(450 and 450 Series C Units) 69,026 76,317
Limited Partners:
(24,326 and 25,601 Series A Units) 5,892,513 6,856,493
(53,317 and 55,127 Series B Units) 10,493,960 11,996,457
(40,657 and 41,374 Series C Units) 6,236,511 7,016,956
-------------- --------------
Total partners' capital 22,881,456 26,155,682
-------------- --------------
TOTAL $ 23,081,991 $ 26,375,992
============== ==============
NET ASSET VALUE PER UNIT:
Series A (Based on 24,610 and $ 242.23 $ 267.82
25,885 Units Outstanding) ============== ==============
Series B (Based on 53,930 and $ 196.82 $ 217.61
55,740 Units Outstanding) ============== ==============
Series C (Based on 41,107 and $ 153.39 $ 169.60
41,824 Units Outstanding) ============== ==============
</Table>
See notes to financial statements.
2
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JOHN W. HENRY & CO./MILLBURN L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
(unaudited)
<Table>
<Caption>
FOR THE THREE FOR THE THREE
MONTHS ENDED MONTHS ENDED
MARCH 31, 2002 MARCH 31, 2001
-------------- --------------
REVENUES:
Income (loss) from investments $ (2,450,945) $ 4,343,692
-------------- --------------
NET INCOME (LOSS) $ (2,450,945) $ 4,343,692
============== ==============
NET INCOME (LOSS) PER UNIT:
Weighted average number of General Partner
and Limited Partner Units outstanding 122,020 141,368
============== ==============
Weighted average net income (loss)
per General Partner and
Limited Partner Unit $ (20.09) $ 30.73
============== ==============
</Table>
See notes to financial statements.
3
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JOHN W. HENRY & CO./MILLBURN L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001
(unaudited)
<Table>
<Caption>
UNITS GENERAL PARTNER
----- ---------------
SERIES A SERIES B SERIES C SERIES A SERIES B SERIES C
----------- ----------- ----------- ----------- ----------- -----------
PARTNERS' CAPITAL,
December 31, 2000 29,064 67,053 48,130 $ 84,379 $ 152,621 $ 86,921
Net income -- -- -- 12,857 23,249 13,240
Redemptions (1,560) (3,787) (2,832) -- -- --
----------- ----------- ----------- ----------- ----------- -----------
PARTNERS' CAPITAL,
March 31, 2001 27,504 63,266 45,298 $ 97,236 $ 175,870 $ 100,161
=========== =========== =========== =========== =========== ===========
PARTNERS' CAPITAL,
December 31, 2001 25,885 55,740 41,824 $ 76,061 $ 133,398 $ 76,317
Net loss -- -- -- (7,267) (12,746) (7,291)
Redemptions (1,275) (1,810) (717) -- -- --
----------- ----------- ----------- ----------- ----------- -----------
PARTNERS' CAPITAL,
March 31, 2002 24,610 53,930 41,107 $ 68,794 $ 120,652 $ 69,026
=========== =========== =========== =========== =========== ===========
<Caption>
LIMITED PARTNERS
----------------
SERIES A SERIES B SERIES C TOTAL
----------- ----------- ----------- -----------
PARTNERS' CAPITAL,
December 31, 2000 $ 7,415,475 $13,906,094 $ 7,777,655 $29,423,145
Net income 1,083,035 2,054,426 1,156,885 4,343,692
Redemptions (417,162) (852,696) (506,268) (1,776,126)
----------- ----------- ----------- -----------
PARTNERS' CAPITAL,
March 31, 2001 $ 8,081,348 $15,107,824 $ 8,428,272 $31,990,711
=========== =========== =========== ===========
PARTNERS' CAPITAL,
December 31, 2001 $ 6,856,493 $11,996,457 $ 7,016,956 $26,155,682
Net loss (637,777) (1,123,010) (662,854) (2,450,945)
Redemptions (326,203) (379,487) (117,591) (823,281)
----------- ----------- ----------- -----------
PARTNERS' CAPITAL,
March 31, 2002 $ 5,892,513 $10,493,960 $ 6,236,511 $22,881,456
=========== =========== =========== ===========
</Table>
See notes to financial statements.
4
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JOHN W. HENRY & CO./MILLBURN L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
(unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements have been prepared without audit. In the opinion
of management, the financial statements contain all adjustments (consisting
of only normal recurring adjustments) necessary to present fairly the
financial position of John W. Henry & Co./Millburn L.P. (the "Partnership")
as of March 31, 2002, and the results of its operations for the three
months ended March 31, 2002 and 2001. However, the operating results for
the interim periods may not be indicative of the results expected for the
full year.
Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been omitted.
It is suggested that these financial statements be read in conjunction
with the financial statements and notes thereto included in the
Partnership's Annual Report on Form 10-K filed with the Securities and
Exchange Commission for the year ended December 31, 2001 (the "Annual
Report").
2. INVESTMENTS
As of March 31, 2002, the Partnership had investments in ML JWH
Financials and Metals Portfolio LLC ("JWH LLC") and Millburn Global LLC
("Millburn LLC") of $11,440,728 and $11,440,728 respectively. At December
31, 2001, the Partnership had investments in JWH LLC and Millburn LLC of
$13,077,841 and $13,077,841, respectively.
Total revenues and fees with respect to the Partnership's investment are
set forth as follows:
<Table>
<Caption>
FOR THE THREE
MONTHS
ENDED MARCH 31, CHANGE IN INTEREST BROKERAGE ADMINISTRATIVE LOSS FROM
2002 REALIZED UNREALIZED INCOME COMMISSIONS FEES INVESTMENTS
(unaudited) -------------- -------------- -------------- -------------- -------------- --------------
SERIES A UNITS
JWH LLC $ (203,777) $ (166,090) $ 13,589 $ 67,752 $ 1,995 $ (426,025)
Millburn LLC 112,628 (271,538) 13,684 71,686 2,108 (219,020)
-------------- -------------- -------------- -------------- -------------- --------------
Total $ (91,149) $ (437,628) $ 27,273 $ 139,438 $ 4,103 $ (645,045)
============== ============== ============== ============== ============== ==============
SERIES B UNITS
JWH LLC $ (358,739) $ (292,374) $ 23,869 $ 119,014 $ 3,500 $ (749,758)
Millburn LLC 197,818 (478,221) 24,037 125,927 3,704 (385,997)
-------------- -------------- -------------- -------------- -------------- --------------
Total $ (160,921) $ (770,595) $ 47,906 $ 244,941 $ 7,204 $ (1,135,755)
============== ============== ============== ============== ============== ==============
SERIES C UNITS
JWH LLC $ (209,830) $ (173,631) $ 14,037 $ 69,968 $ 2,058 $ (441,450)
Millburn LLC 118,216 (284,837) 14,140 74,036 2,178 (228,695)
-------------- -------------- -------------- -------------- -------------- --------------
Total $ (91,614) $ (458,468) $ 28,177 $ 144,004 $ 4,236 $ (670,145)
============== ============== ============== ============== ============== ==============
TOTAL ALL UNITS
JWH LLC $ (772,346) $ (632,095) $ 51,495 $ 256,734 $ 7,553 $ (1,617,233)
Millburn LLC 428,662 (1,034,596) 51,861 271,649 7,990 (833,712)
-------------- -------------- -------------- -------------- -------------- --------------
Total $ (343,684) $ (1,666,691) $ 103,356 $ 528,383 $ 15,543 $ (2,450,945)
============== ============== ============== ============== ============== ==============
</Table>
5
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<Table>
<Caption>
FOR THE THREE MONTHS
ENDED MARCH 31, CHANGE IN INTEREST BROKERAGE ADMINISTRATIVE INCOME FROM
2001 REALIZED UNREALIZED INCOME COMMISSIONS FEES INVESTMENTS
(unaudited) --------------- --------------- --------------- --------------- --------------- ---------------
SERIES A UNITS
JWH LLC $ 1,134,899 $ (396,600) $ 48,402 $ 88,174 $ 2,593 $ 695,934
Millburn LLC 496,958 (58,022) 41,170 77,858 2,290 399,958
--------------- --------------- --------------- --------------- --------------- ---------------
Total $ 1,631,857 $ (454,622) $ 89,572 $ 166,032 $ 4,883 $ 1,095,892
=============== =============== =============== =============== =============== ===============
SERIES B UNITS
JWH LLC $ 2,144,485 $ (748,069) $ 91,386 $ 166,636 $ 4,901 $ 1,316,265
Millburn LLC 945,329 (109,604) 78,383 148,336 4,362 761,410
--------------- --------------- --------------- --------------- --------------- ---------------
Total $ 3,089,814 $ (857,673) $ 169,769 $ 314,972 $ 9,263 $ 2,077,675
=============== =============== =============== =============== =============== ===============
SERIES C UNITS
JWH LLC $ 1,207,524 $ (421,426) $ 51,330 $ 93,629 $ 2,754 $ 741,045
Millburn LLC 531,040 (60,194) 44,024 83,338 2,452 429,080
--------------- --------------- --------------- --------------- --------------- ---------------
Total $ 1,738,564 $ (481,620) $ 95,354 $ 176,967 $ 5,206 $ 1,170,125
=============== =============== =============== =============== =============== ===============
TOTAL ALL UNITS
JWH LLC $ 4,486,908 $ (1,566,095) $ 191,118 $ 348,439 $ 10,248 $ 2,753,244
Millburn LLC 1,973,327 (227,820) 163,577 309,532 9,104 1,590,448
--------------- --------------- --------------- --------------- --------------- ---------------
Total $ 6,460,235 $ (1,793,915) $ 354,695 $ 657,971 $ 19,352 $ 4,343,692
=============== =============== =============== =============== =============== ===============
</Table>
Condensed statements of financial condition and statements of operations for JWH
LLC and Millburn LLC are set forth as follows:
<Table>
<Caption>
MARCH 31, 2002 DECEMBER 31, 2001
(unaudited) (unaudited)
--------------------------------- ---------------------------------
JWH MILLBURN JWH MILLBURN
LLC LLC LLC LLC
--------------- --------------- --------------- ---------------
Assets $ 11,522,681 $ 12,014,853 $ 13,692,020 $ 13,171,887
=============== =============== =============== ===============
Liabilities $ 81,953 $ 574,125 $ 614,179 $ 94,046
Members' Capital 11,440,728 11,440,728 13,077,841 13,077,841
--------------- --------------- --------------- ---------------
Total $ 11,522,681 $ 12,014,853 $ 13,692,020 $ 13,171,887
=============== =============== =============== ===============
</Table>
<Table>
<Caption>
FOR THE THREE FOR THE THREE FOR THE THREE FOR THE THREE
MONTHS MONTHS MONTHS MONTHS
ENDED MARCH 31, ENDED MARCH 31, ENDED MARCH 31, ENDED MARCH 31,
2002 2002 2001 2001
(unaudited) (unaudited) (unaudited) (unaudited)
--------------- --------------- --------------- ---------------
Revenues $ (1,352,944) $ (554,075) $ 3,111,932 $ 1,909,084
Expenses 264,289 279,637 358,687 318,637
--------------- --------------- --------------- ---------------
Net Income (loss) $ (1,617,233) $ (833,712) $ 2,753,245 $ 1,590,447
=============== =============== =============== ===============
</Table>
6
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4. FAIR VALUE AND OFF-BALANCE SHEET RISK
The nature of this Partnership has certain risks, which can not be
presented on the financial statements. The following summarizes some of
those risks.
MARKET RISK
Derivative instruments involve varying degrees of off-balance sheet market
risk. Changes in the level or volatility of interest rates, foreign
currency exchange rates or the market values of the financial instruments
or commodities underlying such derivative instruments frequently resulted
in changes in the net unrealized profit (loss) as reflected in the
respective Statements of Financial Condition of the Trading LLCs. The
Partnership's exposure to market risk is influenced by a number of factors,
including the relationships among the derivative instruments held by the
Partnership, through the Trading LLCs, as well as the volatility and
liquidity of such markets in which such derivative instruments are traded.
MLIM Alternative Strategies LLC ("MLIM AS LLC") has procedures in place
intended to control market risk exposure, although there can be no
assurance that they will, in fact, succeed in doing so. These procedures
focus primarily on monitoring the trading of the Advisors selected from
time to time for the Partnership, calculating the Net Asset Value of the
Advisors' respective Trading LLC accounts as of the close of business on
each day and reviewing outstanding positions for over-concentrations
both on an Advisor-by-Advisor and on an overall Partnership basis. While
MLIM AS LLC does not itself intervene in the markets to hedge or
diversify the Partnership's market exposure, MLIM AS LLC may urge
Advisors to reallocate positions or itself reallocate Partnership assets
among Advisors (although typically only as of the end of a month) in an
attempt to avoid over-concentration. However, such interventions are
unusual. Except in cases in which it appears that an Advisor has begun
to deviate from past practice and trading policies or to be trading
erratically, MLIM AS LLC's basic risk control procedures consist simply
of the ongoing process of advisor monitoring and selection, with the
market risk controls being applied by the Advisors themselves.
CREDIT RISK
The risks associated with exchange-traded contracts are typically perceived
to be less than those associated with over-the-counter
(non-exchange-traded) transactions, because exchanges typically (but not
universally) provide clearinghouse arrangements in which the collective
credit (in some cases limited in amount, in some cases not) of the members
of the exchange is pledged to support the financial integrity of the
exchange. In over-the-counter transactions, on the other hand, traders must
rely solely on the credit of their respective individual counterparties.
Margins, which may be subject to loss in the event of a default, are
generally required in exchange trading, and counterparties may also require
margin in the over-the-counter markets.
The Partnership, through the Trading LLCs, has credit risk in respect of
its counterparties and brokers, but attempts to mitigate this risk by
dealing almost exclusively with Merrill Lynch entities as clearing
brokers.The Partnership, through the Trading LLCs, in its normal course of
business, enters into various contracts, with Merrill Lynch Pierce
Fenner & Smith Inc. ("MLPF&S") acting as its commodity broker. Pursuant
to the brokerage agreement with MLPF&S (which includes a netting
arrangement), to the extent that such trading results in receivables
from and payables to MLPF&S, these receivables and payables are offset
and reported as a net receivable or payable and included in the
Statements of Financial Condition under Equity in commodity futures
trading accounts.
7
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Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
MONTH-END NET ASSET VALUE PER SERIES A UNIT
<Table>
<Caption>
----------------------------------
JAN. FEB. MAR.
----------------------------------
2001 $264.13 $265.03 $297.36
----------------------------------
2002 $269.22 $255.81 $242.23
----------------------------------
</Table>
MONTH-END NET ASSET VALUE PER SERIES B UNIT
<Table>
<Caption>
-----------------------------------
JAN. FEB. MAR.
-----------------------------------
2001 $214.61 $215.32 $241.58
----------------------------------
2002 $218.75 $207.86 $196.82
----------------------------------
</Table>
MONTH-END NET ASSET VALUE PER SERIES C UNIT
<Table>
<Caption>
----------------------------------
JAN. FEB. MAR.
----------------------------------
2001 $167.25 $167.81 $188.27
----------------------------------
2002 $170.48 $161.99 $153.39
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</Table>
Performance Summary
January 1, 2002 to March 31, 2002
Trading in the metals sector was unprofitable for the quarter. Long positions in
gold suffered losses. The gold market slumped, reversing January gains. Base
metal positioning posted losses as prices soared on the hope that an economic
recovery in the United States would boost demand.
Trading in the interest rate markets produced losses on conflicting economic
reports. U.S. short rate profits offset losses incurred further out on the U.S.
curve under very choppy market conditions. European and Japanese fixed income
exposures posted losses under particularly direction-less markets. Global bond
prices declined on growing optimism for a stronger economic outlook for the
remainder of 2002, benefiting short positioning.
Stock indices trading incurred losses for the quarter. Long equity exposures
were flipped to short exposures during the quarter, added to losses in volatile
market conditions as profit forecasts fell short and concern over the Enron
accounting situation deepened. Global equity markets appreciated in March,
notably in Japan, Germany and France, which generated losses on short
positioning.
Currency trading was the most unprofitable strategy for the quarter. Early in
the quarter, strong gains were generated from short Japanese yen positions as
the Japanese yen continued to depreciate against the U.S. dollar. In February,
all of the futures traded currencies appreciated against the U.S. dollar, with
the exception of the Canadian dollar. March was a relatively volatile month for
G-7 currencies. The U.S. dollar fell from 133 to 127.50 Japanese yen during the
first week, and then almost completely reversed that move by month end,
generating substantial losses.
January 1, 2001 to March 31, 2001
Trading in the interest rate markets was profitable during the quarter. Euro
dollar trading was successful in January as the weakening U.S. economy and the
Federal Reserve's move to cut interest rates caused Euro dollar futures
contracts to rise dramatically from December 2000 lows. Japanese ten-year bonds
and Euro-bund cross futures trading was profitable in February and March.
Despite its volatility, trading in the currency markets resulted in gains.
Losses from the British pound and the Euro offset early gains from Japanese yen
positions. By February, the Euro fell from a near high 96 cents back to the
90-cent level, causing losses in long Euro positions. Profits from Japanese yen
and Swiss franc positions realized in March erased losses sustained earlier in
the quarter.
Stock index trading was moderately successful for the Partnership. Profits from
Hang Seng Index and FTSE Financial Times Stock Index outweighed losses from
Nikkei 225, DAX German Stock Index and Topix positions. Global equity markets
remain caught between negative news about earnings and the potential positive
effects of further monetary easings.
Metals trading was moderately unprofitable for the Partnership. Gold, copper and
aluminum trading alternated between profitability and unprofitability throughout
the quarter.
8
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no pending legal proceedings to which the Partnership or
MLIM AS LLC is a party.
Item 2. Changes in Securities and Use of Proceeds
None.
None.
None.
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other information
Effective March 1, 2002, Mr. Robert M. Alderman was elected a manager
of MLIM AS LLC, the Partnership's General Partner. Mr. Alderman is a
Managing Director of MLIM and global head of Retail Sales and Business
Management for Alternative Investments. In this capacity, he is
responsible for coordinating a global sales effort and managing the
retail product line, which includes hedge funds, private equity
opportunities, managed futures funds and exchange funds.
Item 6. Exhibits and Reports on Form 8-K.
(a) EXHIBITS
There are no exhibits required to be filed as part of this report.
(b) REPORTS ON FORM 8-K
There were no reports on Form 8-K filed during the first three months
of fiscal 2002.
9
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JOHN W. HENRY & CO./MILLBURN L.P.
By: MLIM ALTERNATIVE STRATEGIES LLC
(General Partner)
Date: May 15, 2002 By /s/ FABIO P. SAVOLDELLI
-----------------------
Fabio P. Savoldelli
Chairman, Chief Executive Officer
and Manager
(Principal Executive Officer)
Date: May 15, 2002 By /s/ MICHAEL L. PUNGELLO
-----------------------
Michael L. Pungello
Vice President, Chief Financial Officer
and Treasurer
(Principal Financial and Accounting Officer)
10