ML JWH STRATEGIC ALLOCATION FUND LP - 10-Q Quarterly Report

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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, 2003
--------------

OR

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from to
---------------- ----------------

Commission File Number 0-28928

ML JWH STRATEGIC ALLOCATION FUND L.P.
-------------------------------------
(Exact Name of Registrant as
specified in its charter)

Delaware 13-3887922
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)

c/o Merrill Lynch Alternative Investments 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
--- ---

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

ML JWH STRATEGIC ALLOCATION FUND L.P.
-------------------------------------
(a Delaware limited partnership)
--------------------------------

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------

See notes to consolidated financial statements.

2

ML JWH STRATEGIC ALLOCATION FUND L.P.
-------------------------------------
(a Delaware limited partnership)
--------------------------------

CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(unaudited)

See notes to consolidated financial statements.

3

ML JWH STRATEGIC ALLOCATION FUND L.P.
-------------------------------------
(a Delaware limited partnership)
--------------------------------

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
-------------------------------------------------------
For the three months ended March 31, 2003 and 2002
--------------------------------------------------
(unaudited)

See notes to consolidated financial statements.

4

ML JWH STRATEGIC ALLOCATION FUND L.P.
-------------------------------------
(a Delaware limited partnership)
--------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)
-----------

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These consolidated financial statements have been prepared without audit.
In the opinion of management, the consolidated financial statements contain
all adjustments (consisting of only normal recurring adjustments) necessary
to present fairly the financial position of ML JWH Strategic Allocation
Fund L.P (the "Partnership") as of March 31, 2003, and the results of its
operations for the three months ended March 31, 2003 and 2002. The
operating results for the interim periods may not be indicative of the
results 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, 2002.

2. 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 result in
changes in the Partnership's net unrealized profit (loss) on such
derivative instruments as reflected in the Consolidated Statements of
Financial Condition. The Partnership's exposure to market risk is
influenced by a number of factors, including the relationships among the
derivative instruments held by the Partnership as well as the volatility
and liquidity of the markets in which the derivative instruments are
traded.

The General Partner, Merrill Lynch Alternative Investments LLC ("MLAI
LLC"), formerly MLIM Alternative Strategies 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 John W. Henry & Co., Inc.,
("JWH(R)"), the trading advisor, calculating the Net Asset Value of the
Partnership as of the close of business on each day and reviewing
outstanding positions for over-concentrations. While MLAI LLC does not
itself intervene in the markets to hedge or diversify the Partnership's
market exposure, MLAI LLC may urge JWH(R) to reallocate positions in an
attempt to avoid over-concentration. However, such interventions are
unusual. Except in cases in which it appears that JWH(R) has begun to
deviate from past practice and trading policies or to be trading
erratically, MLAI LLC's basic risk control procedures consist simply of the
ongoing process of advisor monitoring, with the market risk controls being
applied by JWH(R) itself.

Credit Risk
-----------

5

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 credit risk associated with these instruments from counterparty
nonperformance is the net unrealized profit (loss) on open contracts, if
any, included in the Consolidated Statements of Financial Condition. The
Partnership attempts to mitigate this risk by dealing exclusively with
Merrill Lynch entities as clearing brokers.

The Partnership, 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 Consolidated Statements of Financial Condition under Equity
in commodity futures trading accounts.

Item 2: Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------

MONTH-END NET ASSET VALUE PER UNIT

PERFORMANCE SUMMARY

January 1, 2003 to March 31, 2003

The Partnership experienced gains in the interest rate, energy, stock index
and currency sectors and losses in the metals and agricultural commodity
sectors. Overall, for the quarter, the Partnership experienced a positive
rate of return of almost 15%.

Interest rate futures were the best performers for the quarter. Interest
rates continued to push lower as economic data for the fourth quarter
announced an annual growth rate for the economy of about 1% for 2002.
Consumer spending and confidence remained low and even the housing market
stumbled in March. The global fixed income markets continued their upward
climb until mid-March when expectations of a short conflict triggered the
liquidation of many fixed income investments hurting long exposures.

Energy was also a strong performer for the quarter. With the continuation
of the strike in Venezuela, the tensions with Iraq and the cold winter,
long positions in oil and natural gas were profitable in the beginning of
the year. In February, the best performing month, natural gas prices rose
nearly 40% in a single day citing expected severely cold weather and supply
shortages. Prices plummeted within a week of the start of the war with
Iraq, causing the loss of almost half of the profits earned in January and
February.

Trading in stock indices posted gains for each of the months in the
quarter. European stock markets attempted to start the year with some
optimism only to succumb to eroding prices throughout the quarter. Global
economies suffered throughout the quarter, however in mid-March the
equities market did react with

6

the currency and fixed income markets. Equities appeared to be more in tune
to the overall market fundamental and were quick to resume their downward
trend.

The currency forward and futures trading had gains for the quarter. The
weakening U.S. dollar was continuing to decline as it has for over a year
and the Partnership was well positioned to capitalize on its U.S dollar
positions against other currencies. In March, on hopes that the war with
Iraq would be short, the U.S. dollar strengthened and returned some of the
profits earned early in the year.

The metals sector had slight losses for the quarter. Gold drove profits in
January as it continued its run up. The general perception of risks in the
financial markets and the geopolitical situation unfolding was the main
driver for the gold market in January. The Partnership sustained losses in
February as the long bias in precious metals hurt the portfolio when gold
reversed its rising trend in February with the announcement that the German
Bundesbank had sold a portion of its gold reserves. Industrial metals
markets were choppy throughout the quarter.

Trading in agricultural commodities posted losses for the quarter. The
Partnership held positions in sugar, corn, wheat, cocoa, coffee and the
soybean complex. Agricultural trading represents about 5% of the
Partnership's trading.

January 1, 2002 to March 31, 2002

Trading in the energy markets was profitable. Trading in natural gas and
crude oil resulted in gains. All markets posted gains in March, as crude
and Brent oil, gas oil, heating oil and unleaded gas produced profits.

Metals trading was moderately profitable. The Japanese government announced
that at the end of March they would no longer guarantee time deposits in
excess of ten million yen. Concerned Japanese citizens purchased physical
gold, causing a rally. Profits were realized in copper, zinc, nickel and
silver as industrial demand in anticipation of a strong global economic
recovery pushed prices higher.

Losses were posted across the board in agricultural commodity trading.
Soybean and sugar combined for the largest losses. The sector was flat by
quarter end.

Stock index trading was unprofitable as volatile conditions made it
difficult to generate profits. Losses were realized in the Nikkei, DAX,
Eurostoxx and NASDAQ indices.

The interest rate sector sustained losses throughout the quarter. Optimism
surrounding the Japanese government's proposed anti-deflation measures had
a negative effect on Japanese government bonds. The sector as a whole was
unprofitable, as U.S. and Japanese interest rate contracts were
unprofitable.

Significant losses occurred in the currency markets. The U.S. dollar
weakened against major currencies, particularly the Japanese yen. The
sector performed poorly, specifically the U.S. dollar/Japanese yen cross
trades, as Japanese fiscal year-end considerations made trading extremely
volatile. Positions in Swiss franc, Euro and British pound also turned in
negative performances.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable

7

Item 4. Controls and Procedures

Merrill Lynch Alternative Investments LLC, formerly MLIM Alternative
Strategies LLC, the General Partner of ML JWH Strategic Allocation Fund
L.P., with the participation of the General Partner's Chief Executive
Officer and the Chief Financial Officer, has evaluated the effectiveness of
the design and operation of its disclosure controls and procedures with
respect to the Partnership within 90 days of the filing date of this
quarterly report, and, based on their evaluation, have concluded that these
disclosure controls and procedures are effective. Additionally, there were
no significant changes in the Partnership's internal controls or in other
factors that could significantly affect these controls subsequent to the
date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

8

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

There are no pending proceedings to which the Partnership or MLAI LLC
is a party.

Item 2. Changes in Securities and Use of Proceeds

(a) None.
(b) None.
(c) None.
(d) The Partnership originally registered 2,000,000 units of limited
partnership interest. The Partnership subsequently registered an
additional 3,310,000 units of limited partnership interest. As of
March 31, 2003, the Partnership has sold 4,054,996 units of limited
partnership interest, with an aggregate price of $555,894,135.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders

None.

Item 5. Other Information

As of February 28, 2003, MLIM Alternative Strategies LLC changed its
name to Merrill Lynch Alternative Investments LLC, as part of an
internal Merrill Lynch reorganization. This change did not affect the
personnel involved in the management of the Partnership.

Item 6. Exhibits and Reports on Form 8-K.

(a) Exhibits

There are no exhibits required to be filed as part of this report.

Reports on Form 8-K.

There were no reports on Form 8-K filed during the first three months
of fiscal 2003.

9

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

ML JWH STRATEGIC ALLOCATION FUND L.P.

By: MERRIL LYNCH ALTERNATIVE
INVESTMENTS LLC
(General Partner)

Date: May 15, 2003 By /s/ ROBERT M. ALDERMAN
----------------------
Robert M. Alderman
Chairman, Chief Executive Officer and Manager
(Principal Executive Officer)

Date: May 15, 2003 By /s/ MICHAEL L. PUNGELLO
-----------------------
Michael L. Pungello
Vice President, Chief Financial Officer
and Treasurer
(Principal Financial and Accounting Officer)

10

EXHIBIT 99

Form of Certification Pursuant to Section 1350 of Chapter 63
------------------------------------------------------------
of Title 180 of the United States Code
--------------------------------------

I, Robert M. Alderman, certify that:

1. I have reviewed this quarterly report on Form 10-Q of ML JWH Strategic
Allocation Fund L.P.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls;

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: May 15, 2003

- -------------------------
By /s/ ROBERT M. ALDERMAN
----------------------
Robert M. Alderman
Chairman, Chief Executive Officer and Manager
(Principal Executive Officer)

11

EXHIBIT 99 (a)

AS ADOPTED TO
-------------
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
---------------------------------------------

In connection with this quarterly report of ML JWH Strategic Allocation Fund
L.P. on Form 10-Q for the period ended March 31, 2003 as filed with the
Securities and Exchange Commission on the date hereof, I, Robert M. Alderman,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant of the
Sarbanes-Oxley Act of 2002, that:

1. This quarterly report fully complies with the requirements of Section 13 or
15(d) of the Securities and Exchange Act of 1934; and

2. The information contained in this quarterly report fairly presents, in all
material respects, the financial condition and results of operations of ML JWH
Strategic Allocation Fund L.P.

Date: May 15, 2003

- -----------------------
By /s/ ROBERT M. ALDERMAN
----------------------
Robert M. Alderman
Chairman, Chief Executive Officer and Manager
(Principal Executive Officer)

12

EXHIBIT 99

Form of Certification Pursuant to Section 1350 of Chapter 63
------------------------------------------------------------
of Title 180 of the United States Code
--------------------------------------

I, Michael L. Pungello, certify that:

1. I have reviewed this quarterly report on Form 10-Q of ML JWH Strategic
Allocation Fund L.P.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls;

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: May 15, 2003

- --------------------------
By /s/ MICHAEL L. PUNGELLO
-----------------------
Michael L. Pungello
Vice President, Chief Financial Officer
and Treasurer
(Principal Financial and Accounting Officer)

13

EXHIBIT 99 (a)

AS ADOPTED TO
-------------
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
---------------------------------------------

In connection with this quarterly report of ML JWH Strategic Allocation Fund
L.P. on Form 10-Q for the period ended March 31, 2003 as filed with the
Securities and Exchange Commission on the date hereof, I, Michael L. Pungello,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant of the
Sarbanes-Oxley Act of 2002, that:

1. This quarterly report fully complies with the requirements of Section 13 or
15(d) of the Securities and Exchange Act of 1934; and

2. The information contained in this quarterly report fairly presents, in all
material respects, the financial condition and results of operations of ML JWH
Strategic Allocation Fund L.P.

Date: May 15, 2003
- --------------------------
By /s/ MICHAEL L. PUNGELLO
-----------------------
Michael L. Pungello
Vice President, Chief Financial Officer
and Treasurer
(Principal Financial and Accounting Officer)

14