<PAGE>

                                                THE FUTURES EXPANSION FUND
                                                LIMITED PARTNERSHIP
                                                (A DELAWARE LIMITED PARTNERSHIP)
                                                AND JOINT VENTURE



                                                Consolidated Financial
                                                Statements for the years ended
                                                December 31, 2000, 1999 and 1998
                                                and Independent Auditors' Report











[MERRILL LYNCH LOGO]

<PAGE>

THE FUTURES EXPANSION FUND LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP) AND JOINT VENTURE
 -------------------------------------------------


TABLE OF CONTENTS
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INDEPENDENT AUDITORS' REPORT                                                  1

CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
 DECEMBER 31, 2000, 1999 AND 1998:

 Consolidated Statements of Financial Condition                               2

 Consolidated Statements of Operations                                        3

 Consolidated Statements of Changes in Partners' Capital                      4

 Notes to Consolidated Financial Statements                                 5-9

<PAGE>

INDEPENDENT AUDITORS' REPORT




To the Partners of
  The Futures Expansion Fund Limited Partnership:

We have audited the accompanying consolidated statements of financial condition
of The Futures Expansion Fund Limited Partnership (the "Partnership") and its
joint venture (the "Joint Venture") with Millburn Ridgefield Corporation as of
December 31, 2000 and 1999, and the related consolidated statements of
operations and of changes in partners' capital for each of the three years in
the period ended December 31, 2000. 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 auditing standards generally accepted
in the United States of America. 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 consolidated financial statements present fairly, in all
material respects, the financial position of The Futures Expansion Fund Limited
Partnership and its Joint Venture as of December 31, 2000 and 1999 and the
results of their operations and changes in their partners' capital for each of
the three years in the period ended December 31, 2000 in conformity with
accounting principles generally accepted in the United States of America.



DELOITTE & TOUCHE LLP



New York, New York
February 5, 2001
<PAGE>

THE FUTURES EXPANSION FUND LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP) AND JOINT VENTURE
 -------------------------------------------------

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 2000 AND 1999
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                            2000            1999
                                                       -------------   -------------
<S>                                                    <C>             <C>
ASSETS

Equity in commodity futures trading accounts:
  Cash and options premiums                            $   5,413,422   $   6,714,860
  Net unrealized profit on open contracts                  1,181,558         321,369
Accrued interest (Note 3)                                     29,316          32,088
                                                       -------------   -------------

              TOTAL                                    $   6,624,296   $   7,068,317
                                                       =============   =============

LIABILITIES AND PARTNERS' CAPITAL

LIABILITIES:
  Brokerage commissions payable (Note 3)               $      52,441   $      55,913
  Profit Shares payable (Note 2)                             154,404           5,571
  Administrative fees payable (Note 3)                         1,380           1,471
  Redemptions payable                                        140,105          51,928
                                                       -------------   -------------

          Total liabilities                                  348,330         114,883
                                                       -------------   -------------

PARTNERS' CAPITAL:
    General Partner (245 Units and 339 Units)                 68,514          88,018
    Limited Partners (22,197 Units and 26,442 Units)       6,207,452       6,865,416
                                                       -------------   -------------

          Total partners' capital                          6,275,966       6,953,434
                                                       -------------   -------------

              TOTAL                                    $   6,624,296   $   7,068,317
                                                       =============   =============

NET ASSET VALUE PER UNIT
(Based on 22,442 and 26,781 Units outstanding)         $      279.65   $      259.64
                                                       =============   =============
</TABLE>

See notes to consolidated financial statements.


                                       2
<PAGE>

THE FUTURES EXPANSION FUND LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP) AND JOINT VENTURE
 -------------------------------------------------

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                       2000             1999             1998
                                                  -------------    -------------    -------------
<S>                                               <C>              <C>              <C>
REVENUES:

Trading profit (loss):
    Realized                                      $     (92,810)   $    (160,036)   $     761,007
    Change in unrealized                                860,160           62,797         (176,383)
                                                  -------------    -------------    -------------
        Total trading results                           767,350          (97,239)         584,624

Interest income (Note 3)                                363,374          383,867          433,501
                                                  -------------    -------------    -------------
        Total revenues                                1,130,724          286,628        1,018,125
                                                  -------------    -------------    -------------
EXPENSES:

    Brokerage commissions (Note 3)                      586,401          761,747          860,552
    Profit Shares (Note 2)                              154,404            5,571          118,954
    Administrative fees (Note 3)                         15,432           20,044           22,646
                                                  -------------    -------------    -------------
        Total expenses                                  756,237          787,362        1,002,152
                                                  -------------    -------------    -------------
NET INCOME (LOSS)                                 $     374,487    $    (500,734)   $      15,973
                                                  =============    =============    =============

NET INCOME (LOSS) PER UNIT:

    Weighted average number of General Partner
       and Limited Partner Units outstanding
       (Note 4)                                          25,069           28,830           33,048
                                                  =============    =============    =============

    Net income (loss) per weighted average
       General Partner and Limited
       Partner Unit                               $       14.94    $      (17.37)   $        0.48
                                                  =============    =============    =============
</TABLE>

See notes to consolidated financial statements.


                                       3
<PAGE>

THE FUTURES EXPANSION FUND LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP) AND JOINT VENTURE
 -------------------------------------------------

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                    Units      General Partner      Limited Partners          Total
                                ----------    -----------------    ------------------    --------------
<S>                             <C>           <C>                  <C>                   <C>

PARTNERS' CAPITAL,
  DECEMBER 31, 1997               34,965     $    142,826         $    9,497,912       $    9,640,738

Redemptions                       (4,136)         (47,442)            (1,049,658)          (1,097,100)

Net income (loss)                 -                (1,262)                17,235               15,973
                                ----------    -----------------    ------------------    -------------

PARTNERS' CAPITAL,
  DECEMBER 31, 1998               30,829           94,122              8,465,489            8,559,611

Redemptions                       (4,048)         -                   (1,105,443)          (1,105,443)

Net loss                          -                (6,104)              (494,630)            (500,734)
                                ----------    -----------------    ------------------    -------------
PARTNERS' CAPITAL,
  DECEMBER 31, 1999               26,781           88,018              6,865,416            6,953,434

Redemptions                       (4,339)         (23,980)            (1,027,975)          (1,051,955)

Net income                        -                 4,476                370,011              374,487
                                ----------    -----------------    ------------------    -------------
PARTNERS' CAPITAL,
  DECEMBER 31, 2000               22,442     $     68,514         $    6,207,452        $   6,275,966
                                ==========    =================    ==================    =============
</TABLE>

See notes to consolidated financial statements.


                                       4
<PAGE>

THE FUTURES EXPANSION FUND LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP) AND JOINT VENTURE
 -------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

--------------------------------------------------------------------------------
1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     ORGANIZATION

     The Futures Expansion Fund Limited Partnership (the "Partnership") was
     organized under the Delaware Revised Uniform Limited Partnership Act on
     August 13, 1986 and commenced trading activities on January 2, 1987. The
     Partnership, through its joint venture (the "Joint Venture") with Millburn
     Ridgefield Corporation (the "Trading Manager"), engages in the speculative
     trading of futures, options on futures and forward contracts on a wide
     range of commodities. Merrill Lynch Investment Partners Inc. ("MLIP"), 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. Merrill Lynch Futures Inc. ("MLF"),
     an affiliate of Merrill Lynch, is the Joint Venture's commodity broker.
     MLIP has agreed to maintain a general partner's interest of at least 1% of
     the total capital of the Partnership. MLIP and each Limited Partner share
     in the profits and losses of the Partnership in proportion to their
     respective interests in it.


     MLIP, an indirect subsidiary of Merrill Lynch, became a member of Merrill
     Lynch Investment Managers ("MLIM") - Alternative Investments Group during
     October 2000. MLIM's Alternative Investments Group creates and manages a
     variety of alternative investment products, including managed futures
     funds, hedge funds, funds of funds, exchange funds and private equity
     funds. MLIP, organized in 1986, is the hedge fund, fund of funds and
     managed futures sponsor within MLIM's Alternative Investments Group.

     The consolidated financial statements include the accounts of the Joint
     Venture with the Trading Manager to which the Partnership contributed
     substantially all of its available capital, representing a current equity
     interest in the Joint Venture of approximately 95%. The Partnership and the
     Trading Manager share in the profits and losses of the Joint Venture in
     proportion to their respective interests in it, except to the extent of the
     Profit Share. All transactions between the Partnership and the Joint
     Venture are eliminated in consolidation. References to the Partnership
     include references to the Joint Venture unless the context otherwise
     requires.

     ESTIMATES

     The preparation of financial statements in conformity with accounting
     principles generally accepted in the United States of America 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 and the reported
     amounts of revenues and expenses during the reporting period. Actual
     results could differ from those estimates.

     REVENUE RECOGNITION

     Commodity futures, options on futures and forward contract transactions are
     recorded on the trade date and open contracts are reflected in net
     unrealized profit on open contracts in the Consolidated Statements


                                       5
<PAGE>

     of Financial Condition at the difference between the original contract
     value and the market value (for those commodity interests for which market
     quotations are readily available) or at fair value. The change in net
     unrealized profit (loss) on open contracts from one period to the next is
     reflected in Change in unrealized under Trading profit (loss) in the
     Statements of Operations.

     FOREIGN CURRENCY TRANSACTIONS

     The Partnership's functional currency is the U.S. dollar; however, it
     transacts business in currencies other than the U.S. dollar. Assets and
     liabilities denominated in currencies other than the U.S. dollar are
     translated into U.S. dollars at the rates in effect at the dates of the
     Statements of Financial Condition. Income and expense items denominated in
     currencies other than the U.S. dollar are translated into U.S. dollars at
     the rates in effect during the period. Gains and losses resulting from the
     translation to U.S. dollars are reported in total trading results.

     OPERATING EXPENSES

     MLIP pays for all routine operating costs (including legal, accounting,
     printing, postage and similar administrative expenses of the Partnership,
     including the Partnership's share of any such costs incurred by the Joint
     Venture (Note 2). MLIP receives an administrative fee as well as a portion
     of the brokerage commission paid to MLF by the Joint Venture.

     INCOME TAXES

     No provision for income taxes has been made in the accompanying
     consolidated financial statements as each Partner is individually
     responsible for reporting income or loss based on such Partner's respective
     share of the Partnership's income and expenses as reported for income tax
     purposes.

     DISTRIBUTIONS

     The Limited Partners are entitled to receive, equally per Unit, any
     distributions which may be made by the Partnership. No such distributions
     had been declared for the years ended December 31, 2000, 1999 or 1998.

     REDEMPTIONS

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

     DISSOLUTION OF THE PARTNERSHIP

     The Partnership will terminate on December 31, 2006, 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.   JOINT VENTURE AGREEMENT

     The Partnership and Millburn Partners entered into a Joint Venture
     Agreement whereby Millburn Partners contributed $100,000 to the Joint
     Venture and the Partnership contributed all of its available capital
     (except for an administrative reserve). Subsequently, Millburn Partners
     assigned its rights and obligations under the Joint


                                       6
<PAGE>

     Venture Agreement to the Trading Manager. The Joint Venture Agreement is in
     effect for successive one-year terms, but, in fact, given the single
     advisor structure of the Joint Venture, the Joint Venture and the
     Partnership would terminate were the Joint Venture Agreement not to be
     renewed. The Joint Venture Agreement was renewed for the year ended
     December 31, 2001. MLIP is the manager of the Joint Venture, while the
     Trading Manager has sole discretion in determining the commodity futures,
     options on futures and forward trades to be made on its behalf.

     Pursuant to the Joint Venture Agreement, the Trading Manager and the
     Partnership share in the profits of the Joint Venture based on equity
     ownership after 20% of annual New Trading Profits, as defined, are
     allocated to the Trading Manager. Losses are allocated to the Trading
     Manager and the Partnership based on equity ownership.

3.   RELATED PARTY TRANSACTIONS

     The Joint Venture's U.S. dollar assets are maintained at MLF. On assets
     held in U.S. dollars, Merrill Lynch credits the Joint Venture with interest
     at the prevailing 91-day U.S. Treasury bill rate. The Joint Venture is
     credited with interest on any of its net gains actually held by Merrill
     Lynch in non-U.S. dollar currencies at a prevailing local rate received by
     Merrill Lynch. Merrill Lynch may derive certain economic benefit, in excess
     of the interest which Merrill Lynch pays to the Joint Venture, from
     possession of such assets.

     Merrill Lynch charges the Joint Venture Merrill Lynch's cost of financing
     realized and unrealized losses on the Joint Venture's non-U.S.
     dollar-denominated positions.

     The Joint Venture pays brokerage commissions to MLF at a flat rate of .792
     of 1% (a 9.5% annual rate) of the Joint Venture's month-end assets. The
     Joint Venture also pays MLIP a monthly administrative fee of .021 of 1% (a
     .25% annual rate) of the Joint Venture's month-end assets. Month-end assets
     are not reduced, for purposes of calculating brokerage commissions and
     administrative fees, by any accrued commissions, administrative fees,
     Profit Shares or other fees or charges.

     MLIP estimates the round-turn equivalent commission rate charged to the
     Joint Venture during the years ended December 31, 2000, 1999 and 1998 was
     approximately $202, $237 and $105, respectively (not including, in
     calculating round-turn equivalents, forward contracts on a
     futures-equivalent basis).

     MLF pays the Trading Manager annual consulting fees of .167 of 1% (a 2%
     annual rate) of the Joint Venture's month-end assets after reduction for a
     portion of the brokerage commissions.

4.   WEIGHTED AVERAGE UNITS

     The weighted average number of Units outstanding was computed for purposes
     of calculating net income per weighted average Unit. The weighted average
     Units outstanding for the years ended December 31, 2000, 1999 and 1998
     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 period.

5.   FAIR VALUE AND OFF-BALANCE SHEET RISK

     In June 1998, the Financial Accounting Standards Board issued Statement of
     Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative
     Instruments and  Activities" (the "Statement"), effective for fiscal
     years beginning after June 15, 2000, as amended by SFAS No. 137. SFAS No.
     133 is further amended by SFAS No. 138, which clarifies issues surrounding
     interest risk, foreign currency denominated items, normal purchases and
     sales and net hedging. This Statement

                                       7
<PAGE>


     supercedes SFAS No. 119 ("Disclosure about Derivative Financial Instruments
     and Fair Value of Financial Instruments") and SFAS No. 105 ("Disclosure of
     Information about Financial Instruments with Off-Balance Sheet Risk and
     Financial Instruments with Concentrations of Credit Risk") whereby
     disclosure of average aggregate fair values and contract/notional values,
     respectively, of derivative financial instruments is no longer required for
     an entity such as the Partnership which carries its assets at fair value.
     Such Statement sets forth a much broader definition of a derivative
     instrument. The application of the provisions of SFAS No. 133, as amended
     by SFAS No. 137 and SFAS No. 138, did not have a significant effect on the
     financial statements.

     SFAS No. 133 defines a derivative as a financial instrument or other
     contract that has all three of the following characteristics: (1) one or
     more underlyings and notional amounts or payment provisions; (2) requires
     no initial net investment or a smaller initial net investment than would be
     required for other types of contracts that would be expected to have a
     similar response to changes in market factors; and, (3) terms that require
     or permit net settlement. Generally, derivatives include futures, forwards,
     swaps, options or other financial instruments with similar characteristics
     such as caps, floors and collars.

     MARKET RISK

     Derivative instruments involve varying degrees of off-balance sheet market
     risk. Changes in the level or volatility of interest rates, foreign
     currency exchange rates or the market values of the financial instruments
     or commodities underlying such derivative instruments frequently result in
     changes in the Partnership's net unrealized profit 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.

     MLIP has procedures in place intended to control market risk exposure,
     although there can be no assurance that they will, in fact, succeed in
     doing so. These procedures focus primarily on monitoring the trading of the
     Trading Manager, calculating the Net Asset Value of the Partnership as of
     the close of business on each day and reviewing outstanding positions for
     over-concentrations. While MLIP does not itself intervene in the markets to
     hedge or diversify the Partnership's market exposure, MLIP may urge the
     Trading Manager to reallocate positions in an attempt to avoid
     over-concentrations. However, such interventions are unusual. Except in
     cases in which it appears that the Trading Manager has begun to deviate
     from past practice or trading policies or to be trading erratically, MLIP's
     basic risk control procedures consist simply of the ongoing process of
     advisor monitoring, with the market risk controls being applied by the
     Trading Manager itself.

     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.


                                       8
<PAGE>

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

     The Partnership, in its normal course of business, enters into various
     contracts, with MLF acting as its commodity broker. Pursuant to the
     brokerage arrangement with MLF (which includes a netting arrangement), 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 and included in Equity from commodity futures trading
     accounts in the Statements of Financial Condition.



                           * * * * * * * * * * * * * *


                 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 Investment Partners Inc.
                               General Partner of
                 The Futures Expansion Fund Limited Partnership
                                And Joint Venture


                                       9