<PAGE>
 
                                                                   EXHIBIT 13.01

 
                JOHN W. HENRY & CO./MILLBURN L.P.
 
                (A DELAWARE LIMITED PARTNERSHIP)
 
 
                Financial Statements for the years ended
                December 31, 1996, 1995 and 1994
                and Independent Auditors' Report
<PAGE>
 
To:  The Limited Partners of

     JOHN W. HENRY & CO./MILLBURN L.P. -
     SERIES A



John W. Henry & Co./Millburn L.P. - Series A (the "Fund" or the "Partnership")
ended its seventh fiscal year of trading on December 31, 1996 with a Net Asset
Value ("NAV") per Unit of $252.54, representing an increase of 20.09% from the
December 31, 1995 NAV per Unit of $210.29.  During the fiscal year, profits
generated in interest rate, currency and metals trading exceeded losses in stock
index trading.

In 1996, strong price trends prevailed in several key markets enabling the
Fund's Trading Advisors to trade profitably for the Fund.  Although trading in
stock index markets may have been lackluster, the global bond and currency
markets offered substantial trading opportunities.  Interest rate and currency
price trends resulted in profitable trading opportunities in these markets
throughout the year.

As the new year began, the U.S. dollar rallied throughout most of January, after
being locked in a tight trading range for the two prior months.  However, the
dollar weakened against major currencies in February, and returned to a
relatively narrow trading range.

Difficult trading conditions in many markets prevailed and a lack of clear price
trends in key markets negatively impacted the Fund's performance in May and
June.  For example, U.S. bond markets remained trendless as continued
volatility, reflected investor confusion over conflicting reports on the
direction of the economy.

As the third quarter of 1996 began, it was the U.S. stock market that
experienced increased volatility coupled with sharp declines in July.  In the
currency markets, the U.S. dollar posted its biggest one-day gain against the
Deutsche mark in almost four months on August 14, after comments from the
Bundesbank's chief economist encouraged expectations for lower German interest
rates.

Despite continued price volatility during the final quarter of 1996, the Fund's
Trading Advisors were able to single out trends in key markets, such as the
world's major bond markets which rallied into October and November.
Additionally, price trends prevailed in several major foreign currency markets,
for instance, the British pound extended its rally into November, as it soared
to a 4-year high against the U.S. dollar and a 29-month high against the
Deutsche mark on November 20.  In December, however, the world's major bond
market rallies came to an abrupt halt early in the month.  Specifically, U.S.
Treasury prices dropped on reports of strength in the economy, as well as a
weaker dollar which further encouraged investor selling of treasury securities.
<PAGE>
 
1996 proved to be a profitable year for the Fund.  We continue to work
diligently with the Trading Advisors to meet the Fund's objective of achieving,
through speculative trading, substantial capital appreciation over time.  We
look forward to 1997 and the trading opportunities it may bring.


                              Sincerely,

                              John R. Frawley, Jr.
                              President and Chief Executive Officer
                              MERRILL LYNCH INVESTMENT PARTNERS INC.
                              (General Partner)


FUTURES TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. PAST
PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
<PAGE>
 
To:  The Limited Partners of

     JOHN W. HENRY & CO./MILLBURN L.P. -
     SERIES B



John W. Henry & Co./Millburn L.P. - Series B (the "Fund" or the "Partnership")
ended its sixth fiscal year of trading on December 31, 1996 with a Net Asset
Value ("NAV") per Unit of $205.27, representing an increase of 20.03% from the
December 31, 1995 NAV per Unit of $171.02. During the fiscal year, profits
generated in interest rate, currency and metals trading exceeded losses in stock
index trading.

In 1996, strong price trends prevailed in several key markets enabling the
Fund's Trading Advisors to trade profitably for the Fund.  Although trading in
stock index markets may have been lackluster, the global bond and currency
markets offered substantial trading opportunities.  Interest rate and currency
price trends resulted in profitable trading opportunities in these markets
throughout the year.

As the new year began, the U.S. dollar rallied throughout most of January, after
being locked in a tight trading range for the two prior months.  However, the
dollar weakened against major currencies in February, and returned to a
relatively narrow trading range.

Difficult trading conditions in many markets prevailed and a lack of clear price
trends in key markets negatively impacted the Fund's performance in May and
June.  For example, U.S. bond markets remained trendless as continued
volatility, reflected investor confusion over conflicting reports on the
direction of the economy.

As the third quarter of 1996 began, it was the U.S. stock market that
experienced increased volatility coupled with sharp declines in July.  In the
currency markets, the U.S. dollar posted its biggest one-day gain against the
Deutsche mark in almost four months on August 14, after comments from the
Bundesbank's chief economist encouraged expectations for lower German interest
rates.

Despite continued price volatility during the final quarter of 1996, the Fund's
Trading Advisors were able to single out trends in key markets, such as the
world's major bond markets which rallied into October and November.
Additionally, price trends prevailed in several major foreign currency markets,
for instance, the British pound extended its rally into November, as it soared
to a 4-year high against the U.S. dollar and a 29-month high against the
Deutsche mark on November 20.  In December, however, the world's major bond
market rallies came to an abrupt halt early in the month.  Specifically, U.S.
Treasury prices dropped on reports of strength in the economy, as well as a
weaker dollar which further encouraged investor selling of treasury securities.
<PAGE>
 
1996 proved to be a profitable year for the Fund.  We continue to work
diligently with the Trading Advisors to meet the Fund's objective of achieving,
through speculative trading, substantial capital appreciation over time.  We
look forward to 1997 and the trading opportunities it may bring.


                              Sincerely,
                              John R. Frawley, Jr.
                              President and Chief Executive Officer
                              MERRILL LYNCH INVESTMENT PARTNERS INC.
                              (General Partner)


FUTURES TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. PAST
PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
<PAGE>
 
To:  The Limited Partners of

     JOHN W. HENRY & CO./MILLBURN L.P. -
     SERIES C



John W. Henry & Co./Millburn L.P. - Series C (the "Fund" or the "Partnership")
ended its fifth fiscal year of trading on December 31, 1996 with a Net Asset
Value ("NAV") per Unit of $159.97, representing an increase of 19.54% from the
December 31, 1995 NAV per Unit of $133.82. During the fiscal year, profits
generated in interest rate, currency and metals trading exceeded losses in stock
index trading.

In 1996, strong price trends prevailed in several key markets enabling the
Fund's Trading Advisors to trade profitably for the Fund.  Although trading in
stock index markets may have been lackluster, the global bond and currency
markets offered substantial trading opportunities.  Interest rate and currency
price trends resulted in profitable trading opportunities in these markets
throughout the year.

As the new year began, the U.S. dollar rallied throughout most of January, after
being locked in a tight trading range for the two prior months.  However, the
dollar weakened against major currencies in February, and returned to a
relatively narrow trading range.

Difficult trading conditions in many markets prevailed and a lack of clear price
trends in key markets negatively impacted the Fund's performance in May and
June.  For example, U.S. bond markets remained trendless as continued
volatility, reflected investor confusion over conflicting reports on the
direction of the economy.

As the third quarter of 1996 began, it was the U.S. stock market that
experienced increased volatility coupled with sharp declines in July.  In the
currency markets, the U.S. dollar posted its biggest one-day gain against the
Deutsche mark in almost four months on August 14, after comments from the
Bundesbank's chief economist encouraged expectations for lower German interest
rates.

Despite continued price volatility during the final quarter of 1996, the Fund's
Trading Advisors were able to single out trends in key markets, such as the
world's major bond markets which rallied into October and November.
Additionally, price trends prevailed in several major foreign currency markets,
for instance, the British pound extended its rally into November, as it soared
to a 4-year high against the U.S. dollar and a 29-month high against the
Deutsche mark on November 20.  In December, however, the world's major bond
market rallies came to an abrupt halt early in the month.  Specifically, U.S.
Treasury prices dropped on reports of strength in the economy, as well as a
weaker dollar which further encouraged investor selling of treasury securities.
<PAGE>
 
1996 proved to be a profitable year for the Fund.  We continue to work
diligently with the Trading Advisors to meet the Fund's objective of achieving,
through speculative trading, substantial capital appreciation over time.  We
look forward to 1997 and the trading opportunities it may bring.


                              Sincerely,
                              John R. Frawley, Jr.
                              President and Chief Executive Officer
                              MERRILL LYNCH INVESTMENT PARTNERS INC.
                              (General Partner)


FUTURES TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. PAST
PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
<PAGE>
 
JOHN W. HENRY & CO./MILLBURN L.P.
(A Delaware Limited Partnership)
 ------------------------------ 


TABLE OF CONTENTS
--------------------------------------------------------------------------------

                                                                Page
                                                                ----

        INDEPENDENT AUDITORS' REPORT                             1
                                                      
                                                      
        FINANCIAL STATEMENTS FOR THE YEARS ENDED              
         DECEMBER 31, 1996, 1995 AND 1994:                    
                                                      
         Statements of Financial Condition                       2
                                                              
         Statements of Operations                                3
                                                      
         Statements of Changes in Partners' Capital              4
                                                      
         Notes to Financial Statements                        5-14
<PAGE>
 
INDEPENDENT AUDITORS' REPORT
----------------------------



To the Partners of
 John W. Henry & Co./Millburn L.P.:

We have audited the accompanying statements of financial condition of John W.
Henry & Co./Millburn L.P. (a Delaware limited partnership; the "Partnership") as
of December 31, 1996 and 1995, and the related statements of operations and
changes in partners' capital for each of the three years in the period ended
December 31, 1996.  These financial statements are the responsibility of the
Partnership's management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of John W. Henry & Co./Millburn L.P. as of
December 31, 1996 and 1995,  and the results of its operations for the three
years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles.


Deloitte & Touche LLP
New York, New York


February 3, 1997
<PAGE>
 
JOHN W. HENRY & CO./MILLBURN L.P.
(A Delaware Limited Partnership)
 ------------------------------ 

STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1996 AND 1995
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                       1996                    1995
                                                                  --------------          --------------
<S>                                                               <C>                     <C>
ASSETS
------
  Investments (Note 6)                                               $60,834,087             $         -
  Accrued interest (Note 2)                                                    -                 236,588
  Equity in commodity futures trading accounts:
    Cash and option premiums                                                   -              57,465,987
    Net unrealized profit on open contracts                                    -               1,760,218
  Receivable from investments (Note 6)                                   779,075                       -
                                                                ----------------        ----------------
 
                TOTAL                                                $61,613,162             $59,462,793
                                                                ================        ================
 
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
LIABILITIES:
    Redemptions payable                                              $   778,385             $   946,331
    Brokerage commissions payable (Note 2)                                     -                 594,628
    Profit shares                                                            689                       -
                                                                ----------------        ----------------
 
 
            Total liabilities                                            779,074               1,540,959
                                                                ----------------        ----------------
 
PARTNERS' CAPITAL:
    General Partner:
        (780 and 780 Series A Units outstanding)                         196,983                 164,028
        (1,976 and 1,976 Series B Units outstanding)                     405,594                 337,920
        (1,439 and 1,439 Series C Units outstanding)                     230,192                 192,564
    Limited Partners:
        (55,596 and 62,793 Series A Units outstanding)                14,040,479              13,205,024
        (146,552 and 166,361 Series B Units outstanding)              30,082,484              28,450,897
        (99,256 and 116,358 Series C Units outstanding)               15,878,356              15,571,401
                                                                ----------------        ----------------
 
            Total partners' capital                                   60,834,088              57,921,834
                                                                ----------------        ----------------
 
                TOTAL                                                $61,613,162             $59,462,793
                                                                ================        ================
 
NET ASSET VALUE PER UNIT
    Series A                                                         $    252.54             $    210.29
                                                                ================        ================
    Series B                                                         $    205.27             $    171.02
                                                                ================        ================
    Series C                                                         $    159.97             $    133.82
                                                                ================        ================
</TABLE> 

See notes to financial statements.

                                     - 2 -
<PAGE>
 
JOHN W. HENRY & CO./MILLBURN L.P.
(A Delaware Limited Partnership)
 ------------------------------ 

STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                          1996                     1995                     1994
                                                     ---------------          ---------------          ---------------
<S>                                                  <C>                      <C>                      <C>
REVENUES:
Trading profit (loss):
      Realized                                          $ 8,749,410              $23,852,578              $ 3,650,307
      Change in unrealized                               (1,760,218)                (651,118)              (2,731,447)
                                                   ----------------         ----------------         ----------------
 
            Total trading results                         6,989,192               23,201,460                  918,860
 
    Interest income (Note 2)                              1,842,887                2,863,384                1,998,830
                                                   ----------------         ----------------         ----------------
 
 
            Total revenues                                8,832,079               26,064,844                2,917,690
                                                   ----------------         ----------------         ----------------
 
EXPENSES:
    Profit shares (Note 3)                                   97,468                  729,138                  508,502
    Brokerage commissions (Note 2)                        5,406,851                7,412,789                7,717,269
    Administrative fees (Note 2)                            115,039                        -                        -
                                                   ----------------         ----------------         ----------------
 
            Total expenses                                5,619,358                8,141,927                8,225,771
                                                   ----------------         ----------------         ----------------
 
INCOME FROM INVESTMENTS (Note 6)                          7,171,609                        -                        -
                                                   ----------------         ----------------         ----------------
 
NET INCOME (LOSS)                                       $10,384,330              $17,922,917              $(5,308,081)
                                                   ================         ================         ================
 
NET INCOME (LOSS) PER UNIT:
    Weighted average number of Units
        outstanding (Note 5)                                327,875                  387,956                  496,530
                                                   ================         ================         ================
 
 Net income (loss) per weighted average
     General Partner and Limited
     Partner Unit                                            $31.67                   $46.20                  $(10.69)
                                                   ================         ================         ================
</TABLE> 
 
 
See notes to financial statements.

                                     - 3 -
<PAGE>
 
JOHN W. HENRY & CO./MILLBURN L.P.
(A Delaware Limited Partnership)
 ------------------------------ 

STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                    Limited Partners               
                            Series       Series       Series      ----------------------------------------------
                               A            B           C            Series             Series          Series     
                             Units        Units       Units            A                  B               C        
                           -------      -------      -------      -----------       -----------      -----------   
<S>                        <C>          <C>          <C>          <C>               <C>              <C>        
PARTNERS' CAPITAL,                                                                                                 
  DECEMBER 31, 1993         81,194      245,779      220,952      $13,706,790       $33,739,138      $23,429,671   
                                                                                                                   
Redemptions                 (6,584)     (32,669)     (66,957)      (1,094,094)       (4,380,116)      (6,879,495)  
                                                                                                                   
Net loss                         -            -            -       (1,116,848)       (2,618,789)      (1,504,703)  
                            ------      -------      -------      -----------       -----------      -----------   
                                                                                                                   
PARTNERS' CAPITAL,                                                                                                 
  DECEMBER 31, 1994         74,610      213,110      153,995       11,495,848        26,740,233       15,045,473   
                                                                                                                   
Redemptions                (11,037)     (44,773)     (36,198)      (2,147,231)       (7,077,021)      (4,508,984)  
                                                                                                                   
Net income                                                          3,856,407         8,787,685        5,034,912   
                            ------      -------      -------      -----------       -----------      -----------   
                                                                                                                   
PARTNERS' CAPITAL,                                                                                                 
  DECEMBER 31, 1995         63,573      168,337      117,797       13,205,024        28,450,897       15,571,401    
                                                                                                                   
Redemptions                 (7,197)     (19,809)     (17,102)      (1,650,602)       (3,458,479)      (2,362,995)  
                                                                                                                   
Net income                       -            -            -        2,486,057         5,090,066        2,669,950   
                            ------      -------      -------      -----------       -----------      -----------   
                                                                                                                   
PARTNERS' CAPITAL,                                                                                                 
  DECEMBER 31, 1996         56,376      148,528      100,695      $14,040,479       $30,082,484      $15,878,356   
                            ======      =======      =======      ===========       ===========      ===========
</TABLE>

<TABLE>
<CAPTION>
                                         General Partner
                           --------------------------------------
                            Series           Series        Series
                              A                B             C           Total
                           --------       ---------     ---------     ------------
<S>                        <C>            <C>           <C>           <C>       
PARTNERS' CAPITAL,                    
  DECEMBER 31, 1993        $148,458       $ 392,440     $ 333,283     $ 71,749,780
                                       
Redemptions                       -               -      (100,550)     (12,454,255)
                                       
Net loss                    (12,830)        (33,089)      (21,822)      (5,308,081)
                           --------       ---------     ---------     ------------
                                       
PARTNERS' CAPITAL,                     
  DECEMBER 31, 1994         135,628         359,351       210,911       53,987,444
                                       
Redemptions                 (18,791)       (144,587)      (91,913)     (13,988,527)
                                       
Net income                   47,191         123,156        73,566       17,922,917
                           --------       ---------     ---------     ------------
                                       
PARTNERS' CAPITAL,                     
  DECEMBER 31, 1995         164,028         337,920       192,564       57,921,834
                                       
                                       
Redemptions                       -               -             -       (7,472,076)
                                       
Net income                   32,955          67,674        37,628       10,384,330
                           --------       ---------     ---------     ------------
                                       
PARTNERS' CAPITAL,                     
  DECEMBER 31, 1996        $196,983       $ 405,594     $ 230,192     $ 60,834,088
                           ========       =========     =========     ============
</TABLE>

See notes to financial statements.


                                     - 4 -
<PAGE>
 
JOHN W. HENRY & CO./MILLBURN L.P.
(A Delaware Limited Partnership)
 ------------------------------ 

NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   Organization
   ------------

   John W. Henry & Co./Millburn L.P. (the "Partnership") was organized under the
   Delaware Revised Uniform Limited Partnership Act on August 29, 1989. The
   Partnership raised $18,182,000 in its initial offering of Units of limited
   partnership interest ("Series A Units") and commenced trading activities on
   January 5, 1990. The Partnership raised an additional $50,636,000 in a second
   offering of Units of limited partnership interest ("Series B Units") and
   commenced trading activities of the Series B Units on January 28, 1991. The
   Partnership raised an additional $40,000,000 in a third offering of Units of
   limited partnership interest ("Series C Units") and commenced trading
   activities of the Series C Units on January 2, 1992. (Series A, B and C units
   are hereinafter collectively referred to as "Units.") The Partnership engages
   in the speculative trading of futures, options on futures and forward
   contracts on a wide range of commodities. Merrill Lynch Investment Partners
   Inc. (formerly, ML Futures Investment Partners Inc.) ("MLIP" or the "General
   Partner"), a wholly-owned subsidiary of Merrill Lynch Group Inc. which in
   turn, is a wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("Merrill
   Lynch"), is the general partner of the Partnership, and Merrill Lynch Futures
   Inc. ("MLF"), also an affiliate of Merrill Lynch, is its commodity broker.
   MLIP has agreed to maintain a general partner's interest of at least 1% of
   total capital of each Series of Units. MLIP and each Limited Partner share in
   the profits and losses of each Series in proportion to their respective
   interests in it.

   John W. Henry & Company, Inc. and Millburn Ridgefield Corporation 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.  MLIP
   may, in its discretion, reallocate assets among the Advisors as of any month-
   end.

   Estimates
   ---------

   The preparation of financial statements in conformity with generally accepted
   accounting principles requires management to make estimates and assumptions
   that affect the reported amounts of assets and liabilities and disclosure of
   contingent assets and liabilities at the date of the financial statements as
   well as the reported amounts of revenues and expenses during the reporting
   period.  Actual results could differ from those estimates.

   Revenue Recognition
   -------------------

   Commodity futures, options, and forward contract transactions are recorded on
   the trade date and open contracts are reflected in net unrealized profit
   (loss) on open contracts in the Statements of Financial Condition at the
   difference between the original contract amount and the fair value.  The
   change in net unrealized profit (loss) on open contracts from one period to
   the next is reflected in change in unrealized in the Statements of
   Operations. Fair value is based on quoted market prices on the exchange or
   market on which the contract is traded.


                                     - 5 - 
<PAGE>
 
   Organization Costs and Operating Expenses
   -----------------------------------------

   The General Partner paid all organization and offering costs in connection
   with the offering of the Partnership's Series A and Series B Units and the
   General Partner advanced the offering expenses in connection with the
   offering of the Series C Units for which it was reimbursed from the proceeds
   of Series C subscriptions in 24 equal monthly installments; provided, that
   the General Partner absorbed any such costs to the extent they exceeded 1.5%
   of the Series C capitalization. The General Partner pays all routine
   operating expenses, including legal, accounting, printing, postage and
   similar administrative expenses.

   The General Partner receives an administrative fee as well as a portion of
   the brokerage commissions paid to MLF by the Partnership as reimbursement for
   the foregoing expenses.

   Income Taxes
   ------------

   No provision for income taxes has been made in the accompanying financial
   statements as each Partner is individually responsible for such Partner's
   respective share of each Series' income and expenses as reported for income
   tax purposes.

   Redemptions
   -----------

   A Limited Partner may require the Partnership to redeem some or all of such
   Partner's Units at  Net Asset Value as of the close of business on the last
   business day of any month upon ten calendar days' notice.

   Dissolution of the Partnership
   ------------------------------

   The Partnership will terminate on December 31, 2016 or at an earlier date if
   certain conditions occur, as well as under certain other circumstances, as
   set forth in the Limited Partnership Agreement.

2. RELATED PARTY TRANSACTIONS

   The Partnership's U.S. dollar-denominated assets are held at MLF in cash or
   short-term Treasury bills.  The Partnership receives all interest paid on
   such Treasury bills.  On the cash held at MLF, the Partnership receives
   interest from Merrill Lynch at rates ranging from .50 of 1% per annum below
   the prevailing 91-day Treasury bill rate up to the full prevailing 91-day
   Treasury bill rate.  Merrill Lynch may derive certain economic benefits, in
   excess of the interest which Merrill Lynch pays to the Partnership, from
   possession of such cash.

   Merrill Lynch credits the Partnership with interest on the Partnership's non-
   U.S. dollar-denominated available assets based on local short-term rates.
   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.

   The Partnership paid brokerage commissions to MLF at a flat monthly rate of
   1% (a 12% annual rate) of the Partnership's month-end assets. Effective
   January 1, 1996, the percentage was reduced to .979 of 1% (an 11.75% annual
   rate) of the Partnership's month-end assets and the Partnership began to pay
   MLIP a monthly administrative fee of .021 of 1% (a .25% annual rate) of the
   Partnership's month-end assets (this recharacterization had no economic
   effect on the Partnership). Month-end assets are not reduced, for purposes of
   calculating brokerage commissions and administrative fees, by any accrued
   brokerage commissions, administrative fees, profit shares or other fees or
   charges.

                                     - 6 -
<PAGE>
 
   MLIP estimates that the round-turn equivalent commission rate charged to the
   Partnership during the years ended December 31, 1996, 1995 and 1994, was
   approximately $143, $207 and $56, respectively (not including, in calculating
   round-turn equivalents, forward contracts on a future-equivalent basis).

   MLF pays the Advisors annual consulting fees equal to 4% of the average 
   month-end net assets.

   The Partnership trades forward contracts through a Foreign Exchange Service
   Desk (the "F/X Desk") established by MLIP, that contacts at least two
   counterparties, along with Merrill Lynch International Bank ("MLIB"), for all
   of the Partnership's currency trades. All counterparties other than MLIB are
   unaffiliated with any Merrill Lynch entity. The F/X Desk charges a service
   fee equal (at current exchange rates) to approximately $5.00 to $12.50 on
   each purchase or sale of a futures contract- equivalent face amount of a
   foreign currency on each transaction. No service fees are charged on trades
   awarded to MLIB (which receives a "bid-ask" spread on such trades). MLIB is
   awarded trades only if its price (which includes no service fee) is equal to
   or better than the best price (including the service fee) offered by any of
   the other counterparties contacted.

   The F/X Desk trades on the basis of credit lines provided by a Merrill Lynch
   entity.  The Partnership is not required to margin or otherwise guarantee its
   F/X Desk trading.

   Certain of the Partnership's currency trades are executed in the form of
   "exchange of futures for physical" ("EFP") transactions involving MLIB and
   MLF.  In these transactions, a spot or forward (collectively referred to as
   "cash") currency position is acquired and exchanged for an equivalent futures
   position on the Chicago Mercantile Exchange's International Monetary Market.
   In its EFP trading, the Partnership acquires cash currency positions through
   the F/X Desk in the same manner and on the same terms as in the case of the
   Partnership's other F/X Desk trading.  When the Partnership exchanges these
   positions for futures, there is a "differential" between the prices of these
   two positions.  This "differential" 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 MLIB or
   another Merrill Lynch entity.

   The Partnership's F/X Desk service fee and EFP differential costs have, to
   date, totaled no more than 0.25 of 1% of the Partnership's average month-end
   Net Assets.

3. AGREEMENTS

   The Partnership and the Advisors have each entered into Advisory Agreements.
   The Advisory Agreements with each Trading Advisor for each series of Units
   are largely identical. The Advisory Agreements for Series A Units, Series B
   Units and Series C Units have been renewed and will terminate on January 31,
   1997 with the option to renew for up to an additional one-year period.

   In the case of Trading LLCs, as defined in Note 6, the Trading LLCs entered
   the Advisory Agreements with the Advisors.

   Fifteen percent of any New Trading Profit (as defined in the Limited
   Partnership Agreement) as of the end of each calendar quarter is paid to each
   Advisor based on the performance of the Partnership account managed by such
   Advisor, irrespective of the overall performance of the Partnership. Profit
   shares are also paid out in respect of Units redeemed as of the end of
   interim months during a calendar quarter, to the extent of 15% of any New
   Trading Profits attributable to such Units.

                                     - 7 -
<PAGE>
 
4. INCOME/(LOSS) PER SERIES

   The profit and loss of the Series A, Series B and Series C Units for the
years ended December 31, 1996, 1995 and 1994 is as follows:

<TABLE>
<CAPTION>
                                                       Series A                              Series B                  
                                      -------------------------------------   --------------------------------------   
                                          1996        1995           1994        1996          1995          1994      
<S>                                   <C>          <C>          <C>           <C>          <C>           <C>     
REVENUES:                                                                                                              
  Trading profit (loss):                                                                                               
    Realized                          $2,029,650   $5,237,341   $   545,961   $4,349,607   $11,857,130   $ 1,596,784   
    Change in unrealized                (382,321)    (147,478)     (415,175)    (877,666)     (317,074)   (1,228,091)  
                                      ----------   ----------   -----------   ----------   -----------   -----------   
                                                                                                                       
  Total trading results                1,647,329    5,089,863       130,786    3,471,941    11,540,056       368,693   
                                                                                                                       
    Interest income (Note 2)             417,739      636,781       414,937      920,755     1,431,186       987,769   
                                      ----------   ----------   -----------   ----------   -----------   -----------   
                                                                                                                       
      Total revenues                   2,065,068    5,726,644       545,723    4,392,696    12,971,242     1,356,462   
                                      ----------   ----------   -----------   ----------   -----------   -----------   
                                                                                                                       
                                                                                                                       
EXPENSES:                                                                                                              
  Brokerage commissions (Note 2)       1,239,114    1,654,078     1,572,088    2,695,105     3,698,343     3,760,979   
  Allocation of new profit                                                                                             
    share to trading advisors (Note       26,690      168,968       103,313       44,910       362,058       247,361   
     3)                                                                                                                
  Administrative fees (Note 2)            26,364            -             -       57,343             -             -   
                                      ----------   ----------   -----------   ----------   -----------   -----------   
                                                                                                                       
      Total expenses                   1,292,168    1,823,046     1,675,401    2,797,358     4,060,401     4,008,340   
                                      ----------   ----------   -----------   ----------   -----------   -----------   
                                                                                                                       
Income from investments (Note 6)       1,746,113            -             -    3,562,401             -             -   
                                      ----------   ----------   -----------   ----------   -----------   -----------   
                                                                                                                       
NET INCOME (LOSS)                     $2,519,013   $3,903,598   $(1,129,678)  $5,157,739   $ 8,910,841   $(2,651,878)  
                                      ==========   ==========   ===========   ==========   ===========   ===========   
                                                                                                                       
NET INCOME (LOSS) PER                                                                                                  
UNIT OF PARTNERSHIP                                                                                                    
INTEREST:                                                                                                              
                                                                                                                       
  Weighted average number                                                                                              
  of units outstanding (Note 5)           59,766       67,833        78,366      158,197       186,768       230,166   
                                      ----------   ----------   -----------   ----------   -----------   -----------   
                                                                                                                       
Net income (loss) per weighted                                                                                         
  Average General Partner and                                                                                          
  Limited Partner Unit                    $41.15       $57.55       $(14.42)      $32.60        $47.71       $(11.52)  
                                      ==========   ==========   ===========   ==========   ===========   ===========   
</TABLE>

<TABLE>
<CAPTION>
                                                       Series C
                                       ------------------------------------------
                                           1996         1995             1994
                                       ----------    ---------        -----------
<S>                                    <C>           <C>              <C>   
REVENUES:                             
  Trading profit (loss):              
    Realized                           $2,339,762    6,758,107        $ 1,507,562
    Change in unrealized                 (469,840)    (186,566)        (1,088,181)
                                       ----------    ---------        -----------
                                      
  Total trading results                 1,869,922    6,571,541            419,381
                                      
    Interest income (Note 2)              504,393      795,417            596,124
                                       ----------    ---------        -----------
                                      
      Total revenues                    2,374,315    7,366,958          1,015,505
                                       ----------    ---------        -----------
                                      
                                      
EXPENSES:                             
  Brokerage commissions (Note 2)        1,472,632    2,060,368          2,384,202
  Allocation of new profit            
    share to trading advisors (Note        25,868      198,112            157,828
     3)                               
  Administrative fees (Note 2)             31,332            -                  -
                                       ----------    ---------        -----------
                                      
      Total expenses                    1,529,832    2,258,480          2,542,030
                                       ----------    ---------        -----------
                                      
Income from investments (Note 6)        1,863,095            -                  -
                                       ----------    ---------        -----------
                                      
NET INCOME (LOSS)                      $2,707,578    5,108,478        $(1,526,525)
                                       ==========    =========        ===========
                                      
NET INCOME (LOSS) PER                 
UNIT OF PARTNERSHIP                   
INTEREST:                             
                                      
  Weighted average number             
  of units outstanding (Note 5)           109,912      133,357            187,998
                                       ----------    ---------        -----------
                                      
Net income (loss) per weighted        
  Average General Partner and         
  Limited Partner Unit                     $24.63       $38.31             $(8.12)
                                       ==========    =========        ===========
</TABLE>

                                     - 8 -
<PAGE>
 
5. WEIGHTED AVERAGE UNITS

   The weighted average number of Units outstanding was computed for purposes of
   disclosing net income per weighted average Unit.  The weighted average number
   of Units outstanding at December 31, 1996, 1995 and 1994 equals the Units
   outstanding as of such date, adjusted proportionately for Units redeemed
   based on the respective length of time each was outstanding during the
   preceding period.

6. INVESTMENTS

   The Partnership places assets under the management of the Advisors not
   through opening managed accounts with them but rather through investing in
   private limited liability companies ("Trading LLCs") sponsored by MLIP.  The
   only members of the Trading LLCs are commodity pools sponsored by MLIP.  Each
   Trading LLC trades under the management of one of the Advisors pursuant to a
   single strategy and at a uniform degree of leverage.  Placing assets with an
   Advisor through investing in a Trading LLC rather than a managed account has
   no economic effect on the Partnership, except to the extent that the
   Partnership benefits from the Advisor not having to allocate trades among a
   number of different accounts (rather than acquiring a single position for the
   Trading LLC as a whole).

   The investments are reflected in the financial statements at fair value based
   upon the Partnership's interest in each Trading LLC.  Fair value is equal to
   the market value of the net assets of the Trading LLCs.  The resulting
   difference between cost and fair value is reflected on the Statement of
   Operations as income or loss from investments.

   At December 31, 1996, the Partnership had an investment in the ML JWH
   Financial and Metals Portfolio L.L.C. ("JWH LLC") and ML Millburn Global
   L.L.C. ("Millburn LLC").

                                     - 9 -
<PAGE>
 
   Total revenues and fees with respect to such investments are set forth as
   follows:

<TABLE>
<CAPTION>
                                                                    Admin-                         Income
                                     Total          Brokerage      istrative       Profit           from
                                   Revenues        Commissions       Fees          Shares        Investment
                                ---------------  ---------------  -----------  ---------------  -------------
     <S>                        <C>              <C>              <C>          <C>              <C>
          Series A Units
     -------------------------
     JWH LLC                         $2,234,606       $  269,408      $ 5,732       $  244,358     $1,715,108
     Millburn LLC                        91,169           56,443        1,201            2,520         31,005
                                     ----------       ----------      -------       ----------     ----------
 
     Total                           $2,325,775       $  325,851      $ 6,933       $  246,878     $1,746,113
                                     ==========       ==========      =======       ==========     ==========
 
          Series B Units
          --------------
 
     JWH LLC                         $4,566,555       $  550,526      $11,714       $  509,549     $3,494,766
     Millburn LLC                       198,835          123,083        2,619            5,498         67,635
                                     ----------       ----------      -------       ----------     ----------
 
     Total                           $4,765,390       $  673,609      $14,333       $  515,047     $3,562,401
                                     ==========       ==========      =======       ==========     ==========
 
          Series C Units
          --------------
 
     JWH LLC                         $2,388,921       $  286,556      $ 6,097       $  270,114     $1,826,154
     Millburn LLC                       108,581           67,206        1,430            3,004         36,941
                                     ----------       ----------      -------       ----------     ----------
 
     Total                           $2,497,502       $  353,762      $ 7,527       $  273,118     $1,863,095
                                     ==========       ==========      =======       ==========     ==========
 
        Total - All Series
        ------------------
 
     JWH LLC                         $9,190,082       $1,106,490      $23,543       $1,024,021     $7,036,028
     Millburn LLC                       398,585          246,732        5,250           11,022        135,581
                                     ----------       ----------      -------       ----------     ----------
 
     Total                           $9,588,667       $1,353,222      $28,793       $1,035,043     $7,171,609
                                     ==========       ==========      =======       ==========     ==========
</TABLE>

                                    - 10 -
<PAGE>
 
7. FAIR VALUE AND OFF-BALANCE SHEET RISK

   The Partnership trades futures, options on futures and forward contracts in
   interest rates, stock indices, currencies and metals.  The Partnership's
   trading results by reporting category for the period January 1, 1996 to
   November 30, 1996 and the year ended December 31, 1995  were as follows:

<TABLE>
<CAPTION>
                                                   Total Trading Results
                                         ---------------------------------------
 
                                                1996                  1995
                                         -----------------     -----------------
<S>                                     <C>                      <C>
   Interest Rates                             $5,080,346              $11,532,511
   Stock Indices                                (992,453)               1,146,428
   Currencies                                  2,659,762               12,696,529
   Metals                                        241,537               (2,174,008)
                                      ------------------       ------------------
                         
                                              $6,989,192              $23,201,460
                                      ==================       ==================
</TABLE>

   Market Risk
   -----------

   Derivative instruments involve varying degrees of off-balance sheet market
   risk, and changes in the level or volatility of interest rates, foreign
   currency exchange rates or market values of the financial instruments or
   commodities underlying such derivative instruments frequently result in
   changes in the Partnership's unrealized profit (loss) on such derivative
   instruments as reflected in the 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 has procedures in place intended to control market risk,
   although there can be no assurance that they will, in fact, succeed in doing
   so.  The procedures focus primarily on monitoring the trading of the two
   Advisors, calculating the Net Asset Value of the Advisors' respective
   Partnership accounts as of the close of business on each day and reviewing
   outstanding positions for over-concentrations.  While the General Partner
   will not itself intervene in the markets to hedge or diversify the
   Partnership's market exposure, the General Partner may urge either or both of
   the Advisors to reallocate positions, or itself reallocate Partnership assets
   among the Advisors (although typically only as of the end of a month) in an
   attempt to avoid over-concentrations.  However, such interventions are
   unusual.  Except in cases in which it appears that an Advisor has begun to
   deviate from past practice or trading policies or to be trading erratically,
   the General Partner's basic risk control procedures consist simply of the
   ongoing process of Advisor monitoring, with the market risk controls being
   applied by the Advisors themselves.

                                    - 11 -
<PAGE>
 
   Fair Value
   ----------

   The derivative instruments used in the Partnership's trading activities are
   marked to market daily with the resulting unrealized profit (loss) recorded
   in the Statements of Financial Condition and the related profit (loss)
   reflected in trading revenues in the Statements of Operations.  The
   contract/notional values of open contracts as of December 31, 1995 were as
   follows (there were no open contracts as of December 31, 1996):

<TABLE>
<CAPTION>
                                        1995
                   ------------------------------------------------
                         Commitment to             Commitment to
                      Purchase (Futures,           Sell (Futures,
                      Options & Forwards)       Options & Forwards)
                   -------------------          -------------------
<S>                <C>                          <C>
 Interest Rates            $301,417,757               $ 81,485,562
 Stock Indices               14,903,382                          -
 Currencies                 115,918,767                196,448,531
 Metals                       4,396,075                 19,975,248
                     ------------------         ------------------
                           $436,635,981               $297,909,341
                     ==================         ==================
</TABLE>

  Substantially all of the Partnership's derivative instruments outstanding as
  of December 31, 1995, expired  within one year.

  The contract/notional value of the Partnership's open exchange-traded and non-
  exchange-traded open derivative instrument positions as of December 31, 1995
  were as follows (there were no open contracts as of December 31, 1996):

<TABLE>
<CAPTION>
                                             1995
                     ------------------------------------------------
                          Commitment to              Commitment to
                        Purchase (Futures,           Sell (Futures,
                       Options & Forwards)        Options & Forwards)
                     -------------------          ------------------
<S>                  <C>                          <C>
Exchange                                     
   Traded                  $317,647,209                 $ 94,328,735
 Non-Exchange                                
   Traded                   118,988,772                  203,580,606
                     ------------------           ------------------
                           $436,635,981                 $297,909,341
                     ==================           ==================
</TABLE>

                                    - 12 -
<PAGE>
 
  The average fair value of derivative instrument positions which were open as
  of the end of each calendar month during the period from January 1, 1996 to
  November 30, 1996 and the year ended December 31, 1995 were as follows:

<TABLE>
<CAPTION>
                                          1996                                                   1995
                      ---------------------------------------------        ----------------------------------------------
                        Commitment to               Commitment to            Commitment to               Commitment to
                       Purchase (Futures,           Sell (Futures,         Purchase (Futures,            Sell (Futures,
                      Options & Forwards)        Options & Forwards)       Options & Forwards)         Options & Forwards)
                      ------------------        -------------------        ------------------          ------------------
<S>                    <C>                        <C>                        <C>                        <C>
 Interest Rates            $237,102,957               $183,615,337               $283,747,133               $ 38,356,816
 Stock Indices               13,728,737                  6,759,498                 11,550,483                  6,398,948
 Currencies                 296,018,497                334,030,991                252,057,126                240,468,554
 Metals                      18,491,709                 29,682,273                 10,695,784                 24,230,482
                     ------------------         ------------------         ------------------         ------------------
                           $565,341,900               $554,088,099               $558,050,526               $309,454,800
                     ==================         ==================         ==================         ==================
</TABLE>

  A portion of the amounts indicated as off-balance sheet risk reflects
  offsetting commitments to purchase and to sell the same derivative instrument
  on the same date in the future.  These commitments are economically offsetting
  but are not, as a technical matter, offset in the forward market until the
  settlement date.

  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 fair value amounts in the above tables represent the extent of the
  Partnership's market exposure in the particular class of derivative instrument
  listed, but not the credit risk associated with counterparty nonperformance.
  The credit risk associated with these instruments from counterparty
  nonperformance is the net unrealized profit, if any, included on the
  Statements of Financial Condition.  The Partnership also has credit risk
  because the sole counterparty or broker with respect to most of the
  Partnership's assets is MLF.

  As of  December 31, 1995, $19,033,635 of the Partnership's assets, were held
  in segregated accounts at MLF in accordance with Commodity Futures Trading
  Commission regulations.

                                    - 13 -
<PAGE>
 
            The gross unrealized profit and net unrealized profit (loss) on the
  Partnership's open derivative instrument positions as of December 31, 1995
  were as follows (there were no open contracts as of December 31, 1996):

<TABLE>
<CAPTION>
                                                   1995
                                ----------------------------------------
                                Gross Unrealized         Net Unrealized
                                     Profit              Profit (Loss)
                                ----------------        ----------------
<S>                             <C>                     <C>
  Exchange Traded                     $3,112,617             $ 2,803,973
  Non-Exchange Traded                  1,175,189              (1,043,755)
                                ----------------        ----------------
                                      $4,287,806             $ 1,760,218
                                ================        ================
</TABLE>


   The Partnership controls credit risk by dealing almost exclusively with
   Merrill Lynch entities as brokers and counterparties.

   The Partnership, through its normal course of business, enters into various
   contracts with MLF acting as its commodity broker.  Pursuant to the brokerage
   arrangement with MLF, to the extent that such trading results in receivables
   from and payables to MLF, these receivables and payables are offset and
   reported as a net receivable or payable.

8. SUBSEQUENT EVENT

   Effective February 1, 1997, the Partnership's brokerage commission percentage
   was reduced to .792 of 1% (a 9.50% annual rate) of the Partnership's month-
   end assets.



                 To the best of the knowledge and belief of the
                 undersigned, the information contained in this
                        report is accurate and complete.



                                James M. Bernard
                            Chief Financial Officer
                     Merrill Lynch Investment Partners Inc.
                               General Partner of
                       John W. Henry & Co./Millburn L.P.

                                    - 14 -