**Exhibit 13.01**

 

***ML JWH STRATEGIC ALLOCATION FUNDL.P.***

***(A Delaware Limited Partnership)***

***AND JOINT VENTURE***

 

ConsolidatedFinancial Statements for the years ended

December 31,2005, 2004 and 2003

and Reportof Independent Registered Public Accounting Firm

 

 

 

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ML JWH STRATEGICALLOCATION FUND L.P.

(A Delaware LimitedPartnership) AND JOINT VENTURE

 

TABLE OF CONTENTS

 
| ** **                                                                                                              | **Page** |
|-------------------------------------------------------------------------------------------------------------------------|----------|
|                                                                                                                    |     |
| REPORT OF  INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                                                                | 1        |
|                                                                                                                    |     |
| CONSOLIDATED  FINANCIAL STATEMENTS:                                                                                     |     |
|                                                                                                                    |     |
| Consolidated Statements of Financial Condition as of  December 31, 2005 and 2004                                   | 2        |
|                                                                                                                    |     |
| Consolidated Statements of Operations for the years  ended December 31, 2005, 2004 and 2003                        | 3        |
|                                                                                                                    |     |
| Consolidated Statements of Changes in Partners’  Capital for the years ended December 31, 2005, 2004 and 2003 | 4        |
|                                                                                                                    |     |
| Consolidated Financial Data Highlights for the year  ended December 31, 2005                                       | 5        |
|                                                                                                                    |     |
| Notes to Consolidated Financial Statements                                                                              | 6-12     |

 

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REPORT OF INDEPENDENTREGISTERED PUBLIC ACCOUNTING FIRM

 

To the Partners of

ML JWH StrategicAllocation Fund L.P.:

 

We have audited theaccompanying consolidated statements of financial condition of ML JWH StrategicAllocation Fund L.P. (the “Partnership”) and ML/JWH Strategic Joint Venture asof December 31, 2005 and 2004, and the related consolidated statements ofoperations and changes in partners’ capital for each of the three years in theperiod then ended and the consolidated financial data highlights for the yearended December 31, 2005. These consolidated financial statements and consolidatedfinancial data highlights are the responsibility of the Partnership’smanagement. Our responsibility is to express an opinion on these financialstatements and financial data highlights based on our audits.

 

We conducted our auditsin accordance with the standards of the Public Company Accounting OversightBoard (United States). Those standards require that we plan and perform theaudits to obtain reasonable assurance about whether the financial statementsand financial data highlights are free of material misstatement. The Partnershipis not required to have, nor were we engaged to perform, an audit of itsinternal control over financial reporting. Our audits included consideration ofinternal control over financial reporting as a basis for designing auditprocedures that are appropriate in the circumstances but not for the purpose ofexpressing an opinion on the effectiveness of the Partnership’s internalcontrol over financial reporting. Accordingly, we express no such opinion. Anaudit also includes examining, on a test basis, evidence supporting the amountsand disclosures in the financial statements, assessing the accountingprinciples used and significant estimates made by management, as well asevaluating the overall financial statement presentation. We believe that ouraudits provide a reasonable basis for our opinion.

 

In our opinion, such consolidated financial statementsand consolidated financial data highlights present fairly, in all materialrespects, the financial position of ML JWH Strategic Allocation Fund L.P. andML/JWH Strategic Joint Venture as of December 31, 2005 and 2004, and theresults of their operations, changes in their partners’ capital, and thefinancial data highlights for each of the periods presented in conformity withaccounting principles generally accepted in the United States of America.

 

 

/s/ Deloitte & Touche LLP

 

New York, New York

February 24, 2006

 

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ML JWH STRATEGICALLOCATION FUND L.P.

(A Delaware LimitedPartnership) AND JOINT VENTURE

 

CONSOLIDATED STATEMENTSOF FINANCIAL CONDITION

DECEMBER 31, 2005AND 2004

 
| ** **                                                                        | ** ** | **2005**      | ** **    | **2004**      | ** ** |
|-----------------------------------------------------------------------------------|------------|---------------|---------------|---------------|------------|
| **ASSETS**                                                                        |       |          |          |          |       |
| Equity in  commodity futures trading accounts:                                    |       |          |          |          |       |
| Cash                                                                              |       | $             | 1,259,995,704 |          | $          | 1,283,896,801 |   |
| Net unrealized profit (loss) on open contracts                                    |       | (4,725,026    | )             | 145,214,452   |       |
| Accrued interest                                                                  |       | 4,186,964     |          | 2,215,147     |       |
| Subscriptions  receivable                                                         |       | 11,450        |          | 33,098        |       |
|                                                                              |       |          |          |          |       |
| **TOTAL ASSETS**                                                                  |       | $             | 1,259,469,092 |          | $          | 1,431,359,498 |   |
|                                                                              |       |          |          |          |       |
| **LIABILITIES  AND PARTNERS’ CAPITAL AND MINORITY INTEREST:**                |       |          |          |          |       |
| **LIABILITIES:**                                                                  |       |          |          |          |       |
| Brokerage commissions payable                                                     |       | $             | 6,034,745     |          | $          | 6,821,515 |   |
| Profit Share payable                                                              |       | 6,312         |          | 39,051,490    |       |
| Redemptions payable                                                               |       | 18,710,981    |          | 13,106,314    |       |
| Ongoing offering costs payable                                                    |       | 75,000        |          | —        |       |
| Administrative fees payable                                                       |       | 283,221       |          | 318,595       |       |
|                                                                              |       |          |          |          |       |
| Total liabilities                                                                 |       | 25,110,259    |          | 59,297,914    |       |
|                                                                              |       |          |          |          |       |
| **PARTNERS’  CAPITAL:**                                                      |       |          |          |          |       |
| General Partner (61,381 Units and 51,570 Units)                                   |       | 12,613,943    |          | 13,425,275    |       |
| Limited Partners (5,944,149 Units and 5,217,892  Units)                           |       | 1,221,537,583 |          | 1,358,373,840 |       |
|                                                                              |       |          |          |          |       |
| Total partners’ capital                                                      |       | 1,234,151,526 |          | 1,371,799,115 |       |
|                                                                              |       |          |          |          |       |
| **MINORITY  INTEREST**                                                            |       | 207,307       |          | 262,469       |       |
|                                                                              |       |          |          |          |       |
| **TOTAL LIABILITIES, PARTNERS’ CAPITAL AND  MINORITY INTEREST**              |       | $             | 1,259,469,092 |          | $          | 1,431,359,498 |   |
|                                                                              |       |          |          |          |       |
| **NET ASSET VALUE PER UNIT:**(Based on 6,005,530 and 5,269,462 Units outstanding) |       | $             | 205.50        |          | $          | 260.33 |   |

 

See notes to consolidated financial statements.

 

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ML JWH STRATEGICALLOCATION FUND L.P.

(A Delaware LimitedPartnership) AND JOINT VENTURE

 

CONSOLIDATED STATEMENTSOF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31,2005, 2004 AND 2003

 
| ** **                                                                        | ** ** | **2005**     | ** **   | **2004**    | ** ** | **2003**    | ** ** |
|-----------------------------------------------------------------------------------|------------|--------------|--------------|-------------|------------|-------------|------------|
| **TRADING  PROFITS (LOSSES):**                                                    |       |         |         |        |       |        |       |
| Realized                                                                          |       | $            | (112,908,397 | )           | $          | 151,296,416 |       | $ | 24,882,048 |   |
| Change in unrealized                                                              |       | (150,020,999 | )            | 91,466,219  |       | 20,384,664  |       |
|                                                                              |       |         |         |        |       |        |       |
| Total trading profits (losses)                                                    |       | (262,929,396 | )            | 242,762,635 |       | 45,266,712  |       |
|                                                                              |       |         |         |        |       |        |       |
| **INVESTMENT  INCOME:**                                                           |       |         |         |        |       |        |       |
| Interest                                                                          |       | 39,816,009   |         | 14,133,423  |       | 5,168,611   |       |
|                                                                              |       |         |         |        |       |        |       |
| **EXPENSES:**                                                                     |       |         |         |        |       |        |       |
| Brokerage  commissions                                                            |       | 73,622,017   |         | 57,501,150  |       | 30,474,397  |       |
| Administrative  fees                                                              |       | 3,450,957    |         | 2,889,337   |       | 1,699,677   |       |
| Ongoing offering  costs                                                           |       | 475,000      |         | 348,101     |       | 1,198,256   |       |
|                                                                              |       |         |         |        |       |        |       |
| Total expenses                                                                    |       | 77,547,974   |         | 60,738,588  |       | 33,372,330  |       |
|                                                                              |       |         |         |        |       |        |       |
| **NET  INVESTMENT LOSS**                                                          |       | (37,731,965  | )            | (46,605,165 | )          | (28,203,719 | )          |
|                                                                              |       |         |         |        |       |        |       |
| **INCOME (LOSS) BEFORE MINORITY INTEREST AND  PROFIT SHARE ALLOCATION**           |       | (300,661,361 | )            | 196,157,470 |       | 17,062,993  |       |
|                                                                              |       |         |         |        |       |        |       |
| Profit Share  allocation                                                          |       | (6,312       | )            | (39,051,490 | )          | (5,840,767  | )          |
| Minority  interest in (income) loss                                               |       | 55,162       |         | (25,137     | )          | (16,777     | )          |
|                                                                              |       |         |         |        |       |        |       |
| **NET  INCOME (LOSS)**                                                            |       | $            | (300,612,511 | )           | $          | 157,080,843 |       | $ | 11,205,449 |   |
|                                                                              |       |         |         |        |       |        |       |
| **NET  INCOME (LOSS) PER UNIT:**                                                  |       |         |         |        |       |        |       |
| Weighted average number of General Partner and  Limited Partner Units outstanding |       | 5,970,850    |         | 4,351,797   |       | 2,152,461   |       |
|                                                                              |       |         |         |        |       |        |       |
| Net income (loss) per weighted average General  Partner and Limited Partner Unit  |       | $            | (50.35       | )           | $          | 36.10       |       | $ | 5.21 |   |

 

See notes to consolidatedfinancial statements.

 

3

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ML JWH STRATEGIC ALLOCATIONFUND L.P.

(A Delaware LimitedPartnership) AND JOINT VENTURE

 

CONSOLIDATED STATEMENTSOF CHANGES IN PARTNERS’ CAPITAL

FOR THE YEARS ENDED DECEMBER 31,2005, 2004 AND 2003

 
| ** **                                      | ** ** | **Units** | ** ** | **General Partner** | ** ** | **Limited Partners** | ** ** | **Total**     | ** ** |
|-------------------------------------------------|------------|-----------|------------|---------------------|------------|----------------------|------------|---------------|------------|
| PARTNERS’  CAPITAL, DECEMBER 31, 2002 |       | 1,450,002 |       | $                   | 3,438,707  |                 | $          | 314,858,961   |       | $ | 318,297,668 |   |
|                                            |       |      |       |                |       |                 |       |          |       |
| Additions                                       |       | 1,667,555 |       | 4,541,553           |       | 402,322,372          |       | 406,863,925   |       |
|                                            |       |      |       |                |       |                 |       |          |       |
| Net income                                      |       | —    |       | 235,091             |       | 10,970,358           |       | 11,205,449    |       |
|                                            |       |      |       |                |       |                 |       |          |       |
| Redemptions                                     |       | (165,642  | )          | (32,400             | )          | (40,857,235          | )          | (40,889,635   | )          |
|                                            |       |      |       |                |       |                 |       |          |       |
| PARTNERS’  CAPITAL, DECEMBER 31, 2003 |       | 2,951,915 |       | 8,182,951           |       | 687,294,456          |       | 695,477,407   |       |
|                                            |       |      |       |                |       |                 |       |          |       |
| Additions                                       |       | 2,640,813 |       | 3,565,324           |       | 590,809,888          |       | 594,375,212   |       |
|                                            |       |      |       |                |       |                 |       |          |       |
| Net income                                      |       | —    |       | 1,718,705           |       | 155,362,138          |       | 157,080,843   |       |
|                                            |       |      |       |                |       |                 |       |          |       |
| Redemptions                                     |       | (323,266  | )          | (41,705             | )          | (75,092,642          | )          | (75,134,347   | )          |
|                                            |       |      |       |                |       |                 |       |          |       |
| PARTNERS’  CAPITAL, DECEMBER 31, 2004 |       | 5,269,462 |       | 13,425,275          |       | 1,358,373,840        |       | 1,371,799,115 |       |
|                                            |       |      |       |                |       |                 |       |          |       |
| Additions                                       |       | 1,613,068 |       | 2,102,855           |       | 348,829,251          |       | 350,932,106   |       |
|                                            |       |      |       |                |       |                 |       |          |       |
| Net loss                                        |       | —    |       | (2,914,187          | )          | (297,698,324         | )          | (300,612,511  | )          |
|                                            |       |      |       |                |       |                 |       |          |       |
| Redemptions                                     |       | (877,000  | )          | —              |       | (187,967,184         | )          | (187,967,184  | )          |
|                                            |       |      |       |                |       |                 |       |          |       |
| PARTNERS’  CAPITAL, DECEMBER 31, 2005 |       | 6,005,530 |       | $                   | 12,613,943 |                 | $          | 1,221,537,583 |       | $ | 1,234,151,526 |   |

 

See notes to consolidatedfinancial statements.

 

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ML JWH STRATEGICALLOCATION FUND L.P.

(A Delaware LimitedPartnership) AND JOINT VENTURE

 

CONSOLIDATED FINANCIALDATA HIGHLIGHTS

FOR THE YEAR ENDED DECEMBER 31,2005

 

The following per unitdata and ratios have been derived from information provided in the consolidatedfinancial statements.

 
| **Per  Unit Operating Performance:**                   | ** ** | ** ** | ** ** |
|--------------------------------------------------------|------------|------------|------------|
| Net asset value,  beginning of year                    |       | $          | 260.33     |   |
|                                                   |       |       |       |
| Realized trading  loss                                 |       | (21.04     | )          |
| Change in  unrealized trading loss                     |       | (27.45     | )          |
| Interest income                                        |       | 6.64       |       |
| Minority  interest in loss and Profit Share allocation |       | 0.01       |       |
| Expenses                                               |       | (12.99     | )          |
|                                                   |       |       |       |
| Net asset value,  end of year                          |       | $          | 205.50     |   |
|                                                   |       |       |       |
| **Total  return:**                                     |       |       |       |
|                                                   |       |       |       |
| Total return,  before Profit Share allocation          |       | -21.06     | %          |
| Profit Share  allocation                               |       | 0.00       | %          |
| Total return                                           |       | -21.06     | %          |
|                                                   |       |       |       |
| **Ratios  to Average Net Assets:**                     |       |       |       |
| ** **                                             |       |       |       |
| Expenses                                               |       | 6.12       | %(i)       |
|                                                   |       |       |       |
| Net investment  loss                                   |       | (2.98      | )%(i)      |

 

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(i)  Impact ofProfit Share allocation and minority interest less than .01%

 

See notes to consolidatedfinancial statements.

 

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ML JWH STRATEGICALLOCATION FUND L.P.

(A Delaware LimitedPartnership) AND JOINT VENTURE

 

NOTESTO CONSOLIDATED FINANCIAL STATEMENTS

 

1.               SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES

 

Organization

 

ML JWHStrategic Allocation Fund L.P. (the “Partnership”) was organized under theDelaware Revised Uniform Limited Partnership Act on December 11, 1995and commenced trading on July 15, 1996. The Partnership engages in thespeculative trading of futures, options on futures and forward contracts on awide range of commodities through its joint venture (the “Joint Venture”) withJohn W. Henry & Company, Inc. (“JWH**®**”),the trading advisor for the Partnership. Merrill Lynch Alternative InvestmentsLLC (“MLAI”) is the general partner of the Partnership. MLAI is a wholly-ownedsubsidiary of Merrill Lynch Investment Managers, LP (“MLIM”), which in turn, isan indirect wholly-owned subsidiary of Merrill Lynch & Co. Inc. (“MerrillLynch”). Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”),a wholly-owned subsidiary of Merrill Lynch, is the Partnership’s commoditybroker. MLAI has agreed to maintain a general partner interest of at least 1%of the total capital of the Partnership. MLAI and each Limited Partner share inthe profits and losses of the Partnership in proportion to their respectiveeconomic interests.

 

TheJoint Venture trades in the international futures and forward markets, applyingmultiple proprietary trading strategies under the direction of JWH®.JWH® selects, allocates and reallocates the Partnership’s assetsamong different combinations of JWH®’s programs—an approach which JWH®refers to as the “JWH Strategic Allocation Program.”

 

Theconsolidated financial statements include the accounts of the Joint Venture towhich the Partnership contributed substantially all of its capital,representing a current equity interest in the Joint Venture of approximately99%. All related transactions between the Partnership and the Joint Venture areeliminated in consolidation.

 

Estimates

 

Thepreparation of financial statements in conformity with accounting principlesgenerally accepted in the United States of America requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date ofthe financial statements and the reported amounts of revenues and expensesduring the reporting period. Actual results could differ from those estimates.

 

RevenueRecognition

 

Commodityfutures, options on futures and forward contract transactions are recorded onthe trade date, and open contracts are reflected in “net unrealized profit (loss)on open contracts” in the Consolidated Statements of Financial Condition as thedifference between the original contract value and the market value (for thosecommodity interests for which market quotations are readily available) or atfair value. The change in net unrealized profit (loss) on open contracts fromone period to the next is reflected in “change in unrealized” under tradingprofits (losses) in the Consolidated Statements of Operations.

 

6

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ForeignCurrency Transactions

 

ThePartnership’s functional currency is the U.S. dollar; however, it transactsbusiness in currencies other than the U.S. dollar. Assets and liabilitiesdenominated in currencies other than the U.S. dollar are translated into U.S.dollars at the rates in effect at the dates of the Consolidated Statements ofFinancial Condition. Income and expense items denominated in currencies otherthan the U.S. dollar are translated into U.S. dollars at the rates in effectduring the period. Gains and losses resulting from the translation to U.S.dollars are reported in “realized” in the Statement of Operations.

 

OngoingOffering Costs, Operating Expenses and Selling Commissions

 

MLAIis entitled to receive, from the Partnership, ongoing offering costreimbursements subject to a ceiling of up to .25 of 1% of the Partnership’saverage month-end assets in any fiscal year.

 

MLAIpays for all routine operating costs excluding the State of New Jersey filingfee (which is borne by the Partnership) (See Note 4) but including legal,accounting, printing, postage and similar administrative expenses of thePartnership, including the Partnership’s share of any such costs incurred bythe Joint Venture (See Note 3). MLAI receives an administrative fee from thePartnership, as well as a portion of the brokerage commissions paid toMLPF&S by the Joint Venture (See Note 4).

 

Noselling commissions have been or are paid directly by the Limited Partners. Allselling commissions are paid by MLAI.

 

IncomeTaxes

 

Noprovision for income taxes has been made in the accompanying consolidatedfinancial statements as each Partner is individually responsible for reportingincome or loss based on such Partner’s respective share of the Partnership’sincome and expenses as reported for income tax purposes.

 

Distributions

 

TheLimited Partners are entitled to receive, equally per Unit, any distributionwhich may be made by the Partnership. No such distributions have beendeclared for the years ended December 31, 2005, 2004 or 2003.

 

Subscriptions

 

Unitsare offered as of the close of business at the end of each month. Shares arepurchased as of the first business day of any month at Net Asset Value, but thesubscription request must be submitted at least three calendar days before theend of the preceding month. Subscriptions submitted less than three days beforethe end of a month will be applied to Units subscriptions as of the beginningof the second month after receipt, unless revoked by MLAI.

 

Redemptions

 

ALimited Partner may redeem some or all of such Partner’s Units at NetAsset Value as of the close of business, on the last business day of any month,upon ten calendar days’ notice. Units redeemed on or prior to the end of thetwelfth full month after purchase are assessed an early redemption charge of 3%of their Net Asset Value as of the date of redemption. If an investor acquiredUnits at more than one time, Units are treated on a “first-in, first-out” basisfor purposes of determining whether redemption charges are applicable. Redemptioncharges, if any, are subtracted from redemption proceeds and paid to MLAI.

 

7

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Dissolutionof the Partnership

 

ThePartnership will terminate on December 31, 2026 or at an earlier date ifcertain conditions occur, as well as under certain other circumstances as setforth in the Limited Partnership Agreement.

 

Indemnifications

 

In thenormal course of business, the Partnership enters into contracts and agreementsthat contain a variety of representations and warranties and which providegeneral indemnifications. The Partnership’s maximum exposure under thesearrangements is unknown, as this would involve future claims that may bemade against the Partnership that have not yet occurred. The Partnershipexpects the risk of any future obligation under these indemnifications to beremote.

 

8

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2.               CONDENSEDSCHEDULES OF INVESTMENTS

 

The Partnership’s investments, defined as “netunrealized profit (loss) on open contracts” in the Consolidated Statements ofFinancial Condition, as of December 31, 2005 and 2004, are as follows.

 
| **2005**                 | ** ** | ** **    | ** ** | **Long Positions**    | ** **  | ** **          | ** ** | ** **    | ** ** | **Short Positions**   | ** ** | ** **          | ** ** | ** **             | ** ** | ** **          | ** ** | ** **                        | ** ** |
|--------------------------|------------|---------------|------------|-----------------------|-------------|---------------------|------------|---------------|------------|-----------------------|------------|---------------------|------------|------------------------|------------|---------------------|------------|-----------------------------------|------------|
| **Commodity**            | ** ** | ** **    | ** ** | **Unrealized profit** | ** **  | **Percent of**      | ** ** | ** **    | ** ** | **Unrealized profit** | ** ** | **Percent of**      | ** ** | **Net unrealized**     | ** ** | **Percent of**      | ** ** | ** **                        | ** ** |
| **Industry Sector** | ** ** | **Contracts** | ** ** | **(loss)**            | ** **  | **Net Assets** | ** ** | **Contracts** | ** ** | **(loss)**            | ** ** | **Net Assets** | ** ** | **profit (loss)** | ** ** | **Net Assets** | ** ** | **Maturity Date**            | ** ** |
| Agriculture              |       | 5,556         |       | $                     | 11,909,746  |                | 0.97       | %             | (6,708     | )                     | $          | (6,253,534          | )          | -0.51                  | %          | $                   | 5,656,212  |                              | 0.46       | % | February 06  - March 06 |   |
| Currencies               |       | 88,543,161    |       | (16,746,107           | )           | -1.36               | %          | (136,037,421  | )          | 31,431,492            |       | 2.55                | %          | 14,685,385             |       | 1.19                | %          | March 06                     |       |
| Energy                   |       | 1,339         |       | (47,729,890           | )           | -3.86               | %          | (4,738        | )          | (3,178,724            | )          | -0.26               | %          | (50,908,614            | )          | -4.12               | %          | February 06  - April 06 |       |
| Interest rates           |       | 28            |       | 17,183                |        | 0.00                | %          | (31,727       | )          | (11,273,093           | )          | -0.91               | %          | (11,255,910            | )          | -0.91               | %          | March 06 - December 06  |       |
| Metals                   |       | 8,945         |       | 33,434,352            |        | 2.71                | %          | (1,201        | )          | (3,546,988            | )          | -0.29               | %          | 29,887,364             |       | 2.42                | %          | January 06 -  March 06  |       |
| Stock indices            |       | 7,285         |       | 7,210,537             |        | 0.58                | %          | —        |       | —                |       | 0.00                | %          | 7,210,537              |       | 0.58                | %          | March 06                     |       |
|                     |       |          |       |                  |        |                |       |          |       |                  |       |                |       |                   |       |                |       |                              |       |
| Total                    |       |          |       | $                     | (11,904,179 | )                   | -0.96      | %             |       |                  | $          | 7,179,153           |       | 0.58                   | %          | $                   | (4,725,026 | )                                 | -0.38      | % |   |   |

 
| **2004**                 | ** ** | ** **    | ** ** | **Long Positions**    | ** **  | ** **          | ** ** | ** **    | ** ** | **Short Positions**   | ** ** | ** **          | ** ** | ** **             | ** ** | ** **          | ** **  | ** **                       | ** ** |
|--------------------------|------------|---------------|------------|-----------------------|-------------|---------------------|------------|---------------|------------|-----------------------|------------|---------------------|------------|------------------------|------------|---------------------|-------------|----------------------------------|------------|
| **Commodity**            | ** ** | ** **    | ** ** | **Unrealized profit** | ** **  | **Percent of**      | ** ** | ** **    | ** ** | **Unrealized profit** | ** ** | **Percent of**      | ** ** | **Net unrealized**     | ** ** | **Percent of**      | ** **  | ** **                       | ** ** |
| **Industry Sector** | ** ** | **Contracts** | ** ** | **(loss)**            | ** **  | **Net Assets** | ** ** | **Contracts** | ** ** | **(loss)**            | ** ** | **Net Assets** | ** ** | **profit (loss)** | ** ** | **Net Assets** | ** **  | **Maturity Date**           | ** ** |
| Agriculture              |       | 4,680         |       | $                     | 9,251,018   |                | 0.67       | %             | (13,924    | )                     | $          | 2,952,375           |       | 0.22                   | %          | $                   | 12,203,393  |                             | 0.89       | % | February 05  - May 05 |   |
| Currencies               |       | 240,025,625   |       | 144,952,223           |        | 10.57               | %          | (42,646,248   | )          | (19,541,233           | )          | -1.43               | %          | 125,410,990            |       | 9.14                | %           | March 05                    |       |
| Energy                   |       | —        |       | —                |        | 0.00                | %          | (12,162       | )          | 16,461,073            |       | 1.20                | %          | 16,461,073             |       | 1.20                | %           | March 05 - April 05    |       |
| Interest rates           |       | 45,000        |       | (6,356,813            | )           | -0.46               | %          | (7,078        | )          | (1,502,097            | )          | -0.11               | %          | (7,858,910             | )          | -0.57               | %           | March 05 - December 05 |       |
| Metals                   |       | 10,015        |       | 16,564,087            |        | 1.21                | %          | (2,975        | )          | (16,018,998           | )          | -1.17               | %          | 545,089                |       | 0.04                | %           | January 05 -  March 05 |       |
| Stock indices            |       | 9,562         |       | 4,968,171             |        | 0.36                | %          | (990          | )          | (6,515,354            | )          | -0.47               | %          | (1,547,183             | )          | -0.11               | %           | March 05                    |       |
|                     |       |          |       |                  |        |                |       |          |       |                  |       |                |       |                   |       |                |        |                             |       |
| Total                    |       |          |       | $                     | 169,378,686 |                | 12.35      | %             |       |                  | $          | (24,164,234         | )          | -1.76                  | %          | $                   | 145,214,452 |                             | 10.59      | % |   |   |

 

No individual contract’s unrealized profit or losscomprised greater than 5% of the Partnership’s net assets as of December 31,2005 and 2004.

 

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3.               JOINTVENTURE AGREEMENT

 

ThePartnership and JWH® entered into a Joint Venture Agreement wherebyJWH® contributed $100,000 to the Joint Venture and the Partnershipcontributed substantially all of its capital. The Joint Venture Agreement issubject to automatic one-year renewals on the same terms, unless either the Partnershipor JWH® elects not to renew. The Joint Venture Agreement was renewedthrough the year ended December 31, 2006. MLAI is the manager of the JointVenture, while JWH® has sole discretion in determining the commodityfutures, options on futures and forward trades to be made on its behalf,subject to the trading limitations outlined in the Joint Venture Agreement.

 

Pursuantto the Joint Venture Agreement, JWH® and the Partnership share inthe profits of the Joint Venture based on equity ownership provided that 20% ofthe Partnership’s allocable quarterly New Trading Profits, as defined, areallocated to JWH®. Losses are allocated to JWH® and thePartnership based on equity ownership.

 

Pursuantto the Joint Venture Agreement, JWH®’s share of profits may earninterest at the prevailing rates for 91-day U.S. Treasury bills or such shareof profits may participate in the profits and losses of the Joint Venture.For the years ended December 31, 2005, 2004 and 2003, JWH®received a Profit Share allocation of $0, $38,968,456, and $5,790,782 andearned interest of $6,312, $83,034, and $49,985 on such amounts, respectively.

 

4.               RELATEDPARTY TRANSACTIONS

 

The Joint Venture’s U.S. dollar assets are maintainedat MLPF&S. On assets held in U.S. dollars, Merrill Lynch credits the JointVenture with interest at the prevailing 91-day U.S. Treasury bill rate. TheJoint Venture is credited with interest on any of its assets and net gainsactually held by MLPF&S in non-U.S. dollar currencies at a prevailing localrate received by Merrill Lynch. Merrill Lynch may derive certain economicbenefit in excess of the interest which Merrill Lynch pays to the JointVenture, from possession of such assets.

 

Merrill Lynch charges the Joint Venture, at prevailinglocal rates, for financing realized and unrealized losses on the Joint Venture’snon-U.S. dollar-denominated positions.

 

TheJoint Venture currently pays brokerage commissions to MLPF&S at a flatmonthly rate of .479 of 1% (a 5.75% annual rate) of the Joint Venture’smonth-end trading assets. The Joint Venture also pays MLAI a monthlyadministrative fee of .021 of 1% (a 0.25% annual rate) of the Joint Venture’smonth-end trading assets. Beginning in 2003, the Partnership reimburses MLAIfor payment of the actual State of New Jersey annual filing fee assessed on aper partner basis with a maximum of $250,000 per year which is paid on itsbehalf. Month-end trading assets are not reduced for purposes of calculatingbrokerage and administrative fees by any accrued brokerage commissions,administrative fees, Profit Shares or other fees or charges.

 

MLAIestimates that the round-turn equivalent commission rate charged to the JointVenture by MLPF&S during the years ended December 31, 2005, 2004 and2003 was approximately $154, $110, and $117, respectively (not including, incalculating round-turn equivalents, forward contracts on a futures-equivalentbasis).

 

MLPF&Spays JWH® annual Consulting Fees of 2% of the Partnership’s averagemonth-end assets, after reduction for a portion of the brokerage commissions.

 

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5.               WEIGHTEDAVERAGE UNITS

 

Theweighted average number of Units outstanding was computed for purposes ofdisclosing net income (loss) per weighted average Unit. The weighted average Unitsoutstanding for the years ended December 31, 2005, 2004 and 2003 equalsthe Units outstanding as of such date, adjusted proportionately for Units soldand redeemed based on the respective length of time each was outstanding duringthe year.

 

6.               FAIRVALUE AND OFF-BALANCE SHEET RISK

 

The nature of this Partnership has certain risks,which cannot be presented on the consolidated financial statements. Thefollowing summarizes some of those risks.

 

MarketRisk

 

Derivativeinstruments involve varying degrees of off-balance sheet market risk. Changesin the level or volatility of interest rates, foreign currency exchange ratesor the market values of the financial instruments or commodities underlyingsuch derivative instruments frequently result in changes in the Partnership’snet unrealized profit (loss) on such derivative instruments as reflected in theConsolidated Statements of Financial Condition. The Partnership’s exposure tomarket risk is influenced by a number of factors, including the relationshipsamong the derivative instruments held by the Partnership as well as thevolatility and liquidity of the markets in which the derivative instruments aretraded.

 

MLAIhas procedures in place intended to control market risk exposure, althoughthere can be no assurance that they will, in fact, succeed in doing so. Theseprocedures focus primarily on monitoring the trading of JWH®,calculating the Net Asset Value of the Partnership as of the close of businesson each day and reviewing outstanding positions for over-concentrations. WhileMLAI does not itself intervene in the markets to hedge or diversify thePartnership’s market exposure, MLAI may urge JWH® to reallocatepositions in an attempt to avoid over-concentrations. However, suchinterventions are unusual and unless it appears that JWH® has begunto deviate from past practice or trading policies or to be trading erratically,MLAI’s basic risk control procedures consist simply of the ongoing process ofadvisor monitoring, with the market risk controls being applied by JWH®.

 

CreditRisk

 

Therisks associated with exchange-traded contracts are typically perceived to beless than those associated with over-the-counter (non-exchange-traded)transactions, because exchanges typically (but not universally) provideclearinghouse arrangements in which the collective credit (in some caseslimited in amount, in some cases not) of the members of the exchange is pledgedto support the financial integrity of the exchange. In over-the-countertransactions, on the other hand, traders must rely solely on the credit oftheir respective individual counterparties. Margins, which may be subjectto loss in the event of a default, are generally required in exchange trading,and counterparties may also require margin in the over-the-countermarkets.

 

Thecredit risk associated with these instruments from counterparty nonperformanceis the net unrealized profit on open contracts, if any, included in theConsolidated Statements of Financial Condition. The Partnership attempts tomitigate this risk by dealing exclusively with Merrill Lynch entities asclearing brokers.

 

The Partnership, in its normal course of business,enters into various contracts with MLPF&S acting as its commodity broker. Pursuantto the brokerage agreement with MLPF&S (which includes a nettingarrangement), to the extent that such trading results in receivables from andpayables to

 

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MLPF&S, these receivables and payables are offsetand reported as a net receivable or payable and included in “net unrealizedprofit (loss) on open contracts” on the Consolidated Statements of FinancialCondition.

 

*     *     *    *     *     *    *     *     *    *     *

 

To the best of the knowledge and belief of the

undersigned, the information contained in this

report is accurate and complete.

 

Michael L. Pungello

Chief Financial Officer

Merrill Lynch Alternative Investments LLC

General Partner of

ML JWH Strategic Allocation Fund L.P.

 

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