<Page>

                      ML PRINCIPAL PROTECTION L.P.

                      (A DELAWARE LIMITED PARTNERSHIP)

                      Consolidated Financial Statements for the
                      years ended December 31, 2002, 2001 and 2000
                      and Independent Auditors' Report

[MERRILL LYNCH LOGO]

<Page>

ML PRINCIPAL PROTECTION L.P.
(A DELAWARE LIMITED PARTNERSHIP)

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

<Table>
<Caption>
                                                                                                              PAGE
                                                                                                              ----
<S>                                                                                                           <C>
INDEPENDENT AUDITORS' REPORT                                                                                     1

CONSOLIDATED FINANCIAL STATEMENTS:

  Consolidated Statements of Financial Condition as of December 31, 2002 and 2001                                2

  Consolidated Statements of Income for the years ended December 31, 2002, 2001 and 2000                         3

  Consolidated Statements of Changes in Partners' Capital for the years ended December 31, 2002,
      2001 and 2000                                                                                              4

  Financial Data Highlights for the year ended December 31, 2002                                                 5

  Notes to Consolidated Financial Statements                                                                  6-13
</Table>

<Page>

INDEPENDENT AUDITORS' REPORT

To the Partners of
 ML Principal Protection L.P.:

We have audited the accompanying consolidated statements of financial condition
of ML Principal Protection L.P. (the "Partnership") as of December 31, 2002 and
2001, and the related consolidated statements of income and of changes in
partners' capital for each of the three years in the period ended December 31,
2002 and the financial data highlights for the year ended December 31, 2002.
These financial statements and financial data highlights are the responsibility
of the Partnership's management. Our responsibility is to express an opinion on
these financial statements and financial data highlights 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 and financial data highlights 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 and financial data
highlights present fairly, in all material respects, the financial position of
ML Principal Protection L.P. as of December 31, 2002 and 2001, and the results
of their operations and changes in their partners' capital and the financial
data highlights for each of the periods presented in conformity with accounting
principles generally accepted in the United States of America.


DELOITTE & TOUCHE LLP


New York, New York
March 3, 2002

<Page>

ML PRINCIPAL PROTECTION L.P.
(A DELAWARE LIMITED PARTNERSHIP)

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 2002 AND 2001

--------------------------------------------------------------------------------

<Table>
<Caption>
                                                      2002            2001
                                                  ------------     ------------
<S>                                               <C>              <C>
ASSETS

Equity in commodity futures trading accounts:
    Cash and options premiums                     $  1,960,792     $  3,978,866
Investment in MM LLC (Note 2)                       16,280,408       17,346,923
Receivable from Investment in MM LLC (Note 2)                -          158,259
Accrued interest receivable (Note 3)                     2,028            5,933
                                                  ------------     ------------

                TOTAL                             $ 18,243,228     $ 21,489,981
                                                  ============     ============

LIABILITIES AND PARTNERS' CAPITAL

LIABILITIES:
    Redemptions payable (Note 1)                  $    497,074     $    184,701
    Payable to Investment in MM LLC (Note 2)           305,592                -
                                                  ------------     ------------

            Total liabilities                          802,666          184,701
                                                  ------------     ------------

PARTNERS' CAPITAL:
 General Partners (1,584 and 2,105 Units)              185,021          233,900
 Limited Partners (147,723 and 189,440 Units)       17,255,541       21,071,380
                                                  ------------     ------------

            Total partners' capital                 17,440,562       21,305,280
                                                  ------------     ------------

                TOTAL                             $ 18,243,228     $ 21,489,981
                                                  ============     ============
</Table>

NET ASSET VALUE PER UNIT (Note 6)

See notes to consolidated financial statements.

                                        2
<Page>

ML PRINCIPAL PROTECTION L.P.
(A DELAWARE LIMITED PARTNERSHIP)

CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

<Table>
<Caption>
                                                             2002             2001              2000
                                                         ------------     ------------      ------------
<S>                                                      <C>              <C>               <C>
REVENUES

Trading profit (loss):
    Realized                                             $  1,544,945     $  2,827,944      $    388,404
    Change in unrealized                                      404,007       (1,336,518)        1,082,050
    Settlement proceeds (Note 9)                              308,142                -                 -
                                                         ------------     ------------      ------------

        Total trading results                               2,257,094        1,491,426         1,470,454

Interest income (Note 3)                                      364,235          847,680         1,936,380
                                                         ------------     ------------      ------------

            Total revenues                                  2,621,329        2,339,106         3,406,834
                                                         ------------     ------------      ------------

EXPENSES

Brokerage commissions (Note 3)                              1,142,131        1,351,049         1,923,409
Administrative fees (Note 3)                                   38,071           45,035            71,476
Profit Shares (Note 5)                                        273,852          250,522           270,203
                                                         ------------     ------------      ------------

            Total expenses                                  1,454,054        1,646,606         2,265,088
                                                         ------------     ------------      ------------

INCOME BEFORE MINORITY INTEREST                             1,167,275          692,500         1,141,746

Minority interest income                                            -                -           (48,173)
                                                         ------------     ------------      ------------

NET INCOME                                               $  1,167,275     $    692,500      $  1,093,573
                                                         ============     ============      ============

NET INCOME PER UNIT:

     Weighted average number of General Partner
     and Limited Partner Units outstanding (Note 7)           172,404          214,642           312,054
                                                         ============     ============      ============

     Net income per weighted average General Partner
     and Limited Partner Unit                            $       6.77     $       3.23      $       3.50
                                                         ============     ============      ============
</Table>

All items of income and expenses prior to September 1, 2000 was derived from the
invesment in MM LLC.

See notes to consolidated financial statements.

                                        3
<Page>

ML PRINCIPAL PROTECTION L.P.
(A DELAWARE LIMITED PARTNERSHIP)

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

<Table>
<Caption>
                                                       GENERAL           LIMITED
                                       UNITS           PARTNER           PARTNERS           TOTAL
                                   ------------      ------------      ------------      ------------
<S>                                    <C>           <C>               <C>               <C>
PARTNERS' CAPITAL,
  DECEMBER 31, 1999                     390,741      $  1,023,562      $ 40,659,206      $ 41,682,768

Net income                                    -            18,730         1,074,843         1,093,573

Distributions                                 -            (9,355)         (618,842)         (628,197)

Redemptions                            (148,405)         (733,977)      (14,715,316)      (15,449,293)
                                   ------------      ------------      ------------      ------------

PARTNERS' CAPITAL,
  DECEMBER 31, 2000                     242,336           298,960        26,399,891        26,698,851

Net income                                    -            11,088           681,412           692,500

Distributions                                 -            (5,849)         (448,788)         (454,637)

Redemptions                             (50,791)          (70,299)       (5,561,135)       (5,631,434)
                                   ------------      ------------      ------------      ------------

PARTNERS' CAPITAL,
  DECEMBER 31, 2001                     191,545           233,900        21,071,380        21,305,280

Net income                                    -            14,013         1,153,262         1,167,275

Distributions                                 -            (2,890)         (232,557)         (235,447)

Redemptions                             (42,238)          (60,002)       (4,736,544)       (4,796,546)
                                   ------------      ------------      ------------      ------------

PARTNERS' CAPITAL,
  DECEMBER 31, 2002                     149,307      $    185,021      $ 17,255,541      $ 17,440,562
                                   ============      ============      ============      ============
</Table>

See notes to consolidated financial statements.

                                        4
<Page>

ML PRINCIPAL PROTECTION L.P.
(A DELAWARE LIMITED PARTNERSHIP)

FINANCIAL DATA HIGHLIGHTS
FOR THE YEAR ENDED DECEMBER 31, 2002
--------------------------------------------------------------------------------

The following per Unit data ratios have been derived from information provided
in the financial statements.

Increase (Decrease) in Net Asset Value

<Table>
<Caption>
                                       SERIES A    SERIES B    SERIES C    SERIES D    SERIES E    SERIES F    SERIES G    SERIES H
                                       --------    --------    --------    --------    --------    --------    --------    --------
PER UNIT OPERATING PERFORMANCE:
<S>                                    <C>         <C>         <C>         <C>         <C>         <C>         <C>         <C>
Net asset value, beginning of period   $ 112.51    $ 111.80    $ 107.78    $ 106.95    $ 108.39    $ 107.16    $ 105.91    $ 104.16

Realized trading profit                   12.45       11.97       13.62       10.72        6.18        1.17        1.15       (1.72)
Change in unrealized                       3.49        3.36        3.05        1.26        2.43       (0.53)      (0.56)      (0.50)
Settlement proceeds                        1.86        1.79        1.76        1.71        1.78        1.68        1.67        1.64
Interest income                            2.21        2.13        2.01        1.92        1.96        1.77        1.76        1.73
Expenses                                 (10.50)     (10.29)      (9.50)      (6.97)      (6.15)      (0.17)      (0.18)      (0.16)
                                       --------------------------------------------------------------------------------------------

Net Asset Value, before distributions    122.02      120.76      118.72      115.59      114.59      111.08      109.75      105.15
Cash distribution                             -       (3.50)      (3.50)      (3.50)      (3.50)      (3.50)      (3.50)      (3.50)
                                       --------------------------------------------------------------------------------------------

Net asset value, end of the period     $ 122.02    $ 117.26    $ 115.22    $ 112.09    $ 111.09    $ 107.58    $ 106.25    $ 101.65
                                       ============================================================================================
Total investment return,
 compounded monthly                        8.45%       8.27%      10.53%       8.35%       5.72%       3.79%       3.76%       0.98%
                                       ============================================================================================

RATIOS TO AVERAGE NET ASSETS:

Expenses                                   9.24%       9.37%       8.62%       6.40%       5.66%       0.17%       0.20%       0.19%
                                       ============================================================================================

Net income                                 7.51%       6.74%       9.51%       7.81%       5.43%       3.66%       3.45%       0.81%
                                       ============================================================================================
</Table>

Increase (Decrease) in Net Asset Value

<Table>
<Caption>
                                   SERIES K   SERIES L   SERIES M   SERIES N   SERIES O   SERIES P   SERIES Q   SERIES R   SERIES S
                                   --------   --------   --------   --------   --------   --------   --------   --------   --------
<S>                                 <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
PER UNIT OPERATING PERFORMANCE:

Net asset value, beginning of
 period                             $117.09    $114.12    $115.73    $111.59    $111.91    $114.15    $105.53    $106.57    $107.41

Realized trading profit                9.59       9.35       9.48       9.14       9.17       9.35       8.64       8.73       8.80
Change in unrealized                   3.57       3.48       3.53       3.41       3.42       3.48       3.22       3.25       3.28
Settlement proceeds                    1.94       1.89       1.92       1.85       1.85       1.89       1.75       1.76       1.78
Interest income                        2.29       2.23       2.26       2.18       2.19       2.23       2.06       2.08       2.10
Expenses                             (10.81)    (10.54)    (10.69)    (10.32)    (10.37)    (10.55)     (9.76)     (9.85)     (9.93)
                                    -----------------------------------------------------------------------------------------------

Net asset value, end of the period  $123.67    $120.53    $122.23    $117.85    $118.17    $120.55    $111.44    $112.54    $113.44
                                    ===============================================================================================
Total investment return,
 compounded monthly                    5.62%      5.62%      5.61%      5.61%      5.60%      5.60%      5.61%      5.61%      5.61%
                                    ===============================================================================================

RATIOS TO AVERAGE NET ASSETS:

Expenses                               9.22%      9.25%      9.69%      9.19%      9.28%      9.26%      9.27%      9.19%      9.23%
                                    ===============================================================================================

Net income                             4.86%      5.38%      6.30%      4.52%      5.55%      5.44%      5.50%      5.03%      4.62%
                                    ===============================================================================================
</Table>

See note to consolidated financial statements.

                                        5
<Page>

     ML PRINCIPAL PROTECTION L.P.
     (A DELAWARE LIMITED PARTNERSHIP)

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
     ---------------------------------------------------------------------------
1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     ORGANIZATION

     ML Principal Protection L.P (the "Partnership") was organized as an
     open-end fund under the Delaware Revised Uniform Limited Partnership Act on
     January 3, 1994 and commenced trading activities on October 12, 1994. The
     Partnership engages (currently, through a limited liability company (see
     below)) in the speculative trading of futures, options on futures, forwards
     and options on forward contracts on a wide range of commodities. MLIM
     Alternative Strategies LLC ("MLIM AS LLC"), a wholly-owned subsidiary of
     Merrill Lynch Investment Managers, LP ("MLIM"), which, in turn, is an
     indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("Merrill
     Lynch"), is the general partner of the Partnership. Merrill Lynch, Pierce,
     Fenner & Smith Incorporated ("MLPF&S") is the Partnership's commodity
     broker. All of the Partnership's assets are held in accounts maintained at
     MLPF&S. MLIM AS LLC intends to maintain a general partner's interest of at
     least 1% of the total capital in each series of units. MLIM AS LLC and the
     Limited Partners share in the profits and losses of the Partnership in
     proportion to the respective interests in the Partnership.

     Many of the multi-advisor funds (the "Multi-Advisor Funds") sponsored by
     MLIM AS LLC, including the Partnership, allocate their assets to a number
     of the same independent advisors (the "Advisors"). These Multi-Advisor
     Funds invest in a limited liability company, ML Multi-Manager Portfolio LLC
     ("MM LLC"), a Delaware limited liability company, which operates a single
     account with each Advisor selected. On September 1, 2000, the Partnership
     joined MM LLC along with another Multi-Advisor Fund sponsored by MLIM AS
     LLC. MM LLC is managed by MLIM AS LLC, has no investors other than the
     Multi-Advisor Funds and serves solely as the vehicle through which the
     assets of such Multi-Advisor Funds are combined in order to be managed
     through single rather than multiple accounts. The placement of assets into
     MM LLC did not change the operations or fee structure of the Partnership;
     therefore, the following notes also relate to the operation of the
     Partnership through its investment in MM LLC. The administrative authority
     over the Partnership remains with MLIM AS LLC. MLIM AS LLC, on an ongoing
     basis, may change the number of Multi-Advisor Funds investing in MM LLC. As
     of December 31, 2002, 2001 and 2000, the Partnership's percentage of
     ownership share of MM LLC was 9.39%, 8.61% and 8.05%, respectively. MLIM AS
     LLC selects the Advisors to manage MM LLC's assets, and allocates and
     reallocates such trading assets among existing, replacement and additional
     Advisors.

     Prior to January 1, 2001 the Partnership executed all its speculative
     trading through ML Principal Protection Trading L.P. (the "Trading
     Partnership"), of which the Partnership was the sole limited partner. On
     January 1, 2001, the Trading Partnership was dissolved. MLIM AS LLC
     redeemed its entire investment and the Partnership immediately invested its
     redemption proceeds directly into MM LLC, giving the Partnership a direct
     investment in MM LLC rather than through the Trading Partnership. This
     action did not effect the operation of the Partnership or MM LLC and was
     done at no cost to the investors.

     The consolidated financial statements include the accounts of the Trading
     Partnership. All related transactions and intercompany balances between the
     Partnership and the Trading Partnership were eliminated in consolidation.

     The ownership by MLIM AS LLC in the Trading Partnership represented a
     minority interest when the financial results of the Trading Partnership
     were consolidated into those of the Partnership. MLIM AS

                                        6
<Page>

     LLC's share of the Trading Partnership's profits and losses was deducted
     from the Consolidated Statements of Operations, and MLIM AS LLC's interest
     in the Trading Partnership reduced partners' capital on the Consolidated
     Statements of Financial Condition and the Consolidated Statements of
     Changes in Partners' Capital.

     The Partnership may issue different series of units of limited partnership
     interest ("Units") generally as of the beginning of each calendar quarter.
     Each series has its own Net Asset Value per Unit. For series issued prior
     to May 1, 1997, each series may allocate different percentages of their
     total capital to trading. For series issued after May 1, 1997, all such
     series must allocate the same percentage of their total capital to trading.
     All series, regardless of when issued, trade through MM LLC, under the
     direction of the same combination of independent advisors (the "Advisors"),
     chosen from time to time by MLIM AS LLC to manage the trading.

     MLIM AS LLC determines what percentage of the Partnership's total capital
     attributable to each series of units to allocate to trading by investing in
     MM LLC, attempting to balance the desirability of reducing the opportunity
     costs of the Partnership's "principal protection" structure against the
     necessity of preventing Merrill Lynch from being required to make any
     payments to the Partnership under the Merrill Lynch guarantee (see Note 8),
     and subject to the requirement that all series issued after May 1, 1997
     must allocate the same percentage of their capital to trading, through MM
     LLC.

     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, forwards and options on forward
     contracts 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 of MM LLC 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.

     Prior to September 1, 2000, the change in unrealized profit (loss) on open
     from one period to the next is reflected under Trading profit (loss):
     Change in unrealized in the Consolidated Statements of Operations.
     Subsequent to September 1, 2000, the change in unrealized profit (loss) on
     open contracts is reflected in the financial statements of MM LLC in the
     same manner. See Note 2 for discussion of revenue recognition for the
     Partnership's investment in MM LLC.

     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
     Consolidated 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.

                                        7
<Page>

     OPERATING EXPENSES AND SELLING COMMISSIONS

     MLIM AS LLC pays all routine operating costs (including legal, accounting,
     printing, postage and similar administrative expenses) of the Partnership
     and the Trading Partnership, including the cost of the ongoing offering of
     the Units. MLIM AS LLC receives an administrative fee as well as a portion
     of the brokerage commissions paid to MLPF&S by the Partnership (through MM
     LLC after September 1, 2000)(See Note 3).

     No selling commissions have been or are paid directly by Limited Partners.
     All selling commissions are paid by MLIM AS LLC.

     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 consolidated income and expenses as reported for
     income tax purposes.

     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 business day of any
     month upon ten calendar days' notice.

     DISSOLUTION OF THE PARTNERSHIP

     The Partnership will terminate on December 31, 2024 or at an earlier date
     if certain conditions occur, as well as under certain other circumstances
     as set forth in the Limited Partnership Agreement.

     RECLASSIFICATION

     Certain 2001 and 2000 information has been reclassified to conform to
     the 2002 presentation.

2.   INVESTMENT IN MM LLC

     Effective September 1, 2000, the Partnership consolidated its trading
     accounts with those of certain other multi-advisor managed future funds
     sponsored by MLIM AS LLC. The Partnership is no longer trading through the
     Trading Partnership through managed accounts with each of its Advisors, but
     is investing in MM LLC. The consolidation was effected by having the
     Partnership close its existing individual trading accounts and invest in MM
     LLC, which maintains a single account with each Advisor selected. No
     additional fees or charges were incurred by the Partnership or any investor
     as a result of the consolidation. MLIM AS LLC absorbed all costs related to
     the consolidation.

     The financial statements of MM LLC are bound together with this report and
     should be read in conjunction with the Partnership's financial statements.
     The investment in MM LLC is reflected in the financial statements at fair
     value based upon the Partnership's interest in MM LLC. Fair value of the
     investment in MM LLC is equal to the market value of the net assets of MM
     LLC allocable to the Partnership as an investor. The resulting difference
     between cost and fair value is reflected on the Statements of Operations as
     Income from investment in MM LLC.

3.   RELATED PARTY TRANSACTIONS.

     The Partnership's U.S. dollar assets are maintained at MLPF&S. On assets
     held in U.S. dollars, Merrill Lynch credits the Partnership with interest
     at the prevailing 91-day U.S. Treasury bill rate. The Partnership 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 benefits, in
     excess of the interest, which Merrill Lynch pays to the Partnership, from
     possession of such assets. The Partnership's U.S. dollar assets invested in
     MM LLC are also maintained at MLPF&S. MLPF&S credits

                                        8
<Page>

     MM LLC with interest in the same manner. The Partnership indirectly
     receives this interest through its investment in MM LLC.

     Merrill Lynch charges the Partnership directly, and after September 1, 2000
     through MM LLC, Merrill Lynch's cost of financing realized and unrealized
     losses on the Partnership's non-U.S. dollar-denominated positions.

     The Partnership pays brokerage commissions to MLPF&S in respect of each
     series of Units at a flat monthly rate of .625 of 1% (a 7.50% annual rate)
     of such series' month-end assets invested in MM LLC, or the Trading
     Partnership prior to September 1, 2000. The Partnership also pays MLIM AS
     LLC a monthly administrative fee of .021 of 1% (a 0.25% annual rate) of the
     Partnership's total month-end assets. Assets committed to trading and total
     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.

     MLPF&S pays the Advisors annual Consulting Fees ranging up to 2.5% of the
     Partnership's average month-end assets allocated to them for management,
     after reduction for a portion of the brokerage commissions accrued with
     respect to such assets.

4.   ANNUAL DISTRIBUTIONS

     The Partnership makes annual fixed-rate distributions, payable irrespective
     of profitability, of $3.50 per Unit on Units issued prior to May 1, 1997
     until the Principal Assurance Date (see Note 8). The Partnership may also
     pay discretionary distributions on such series of Units of up to 50% of any
     Distributable New Appreciation, as defined on such Units. No distributions
     are payable on Units issued after May 1, 1997. For the years ended December
     31, 2002, 2001 and 2000, the Partnership made the following distributions:

                                        9
<Page>

<Table>
<Caption>
                          DISTRIBUTION        FIXED-RATE    DISCRETIONARY
           SERIES              DATE          DISTRIBUTION    DISTRIBUTION
       -------------- ---------------------------------------------------
     <S>                      <C>                 <C>                <C>
     2002
     -----
         Series B             01/1/2002           $ 3.50             $ -
         Series C             04/1/2002             3.50               -
         Series D             07/1/2002             3.50               -
         Series E             10/1/2002             3.50               -
         Series F             01/1/2002             3.50               -
         Series G             04/1/2002             3.50               -
         Series H             07/1/2002             3.50               -
     2001
     ----
         Series A             10/1/2001           $ 3.50             $ -
         Series B             01/1/2001             3.50               -
         Series C             04/1/2001             3.50               -
         Series D             07/1/2001             3.50               -
         Series E             10/1/2001             3.50               -
         Series F             01/1/2001             3.50               -
         Series G             04/1/2001             3.50               -
         Series H             07/1/2001             3.50               -
     2000
     -----
         Series A             10/1/2000           $ 3.50             $ -
         Series B             01/1/2000             3.50               -
         Series C             04/1/2000             3.50               -
         Series D             07/1/2000             3.50               -
         Series E             10/1/2000             3.50               -
         Series F             01/1/2000             3.50               -
         Series G             04/1/2000             3.50               -
         Series H             07/1/2000             3.50               -
</Table>

5.   ADVISORY AGREEMENTS

     MM LLC, the Trading Partnership prior to September 1, 2000, and the
     Advisors have each entered into Advisory Agreements. These Advisory
     Agreements generally renew annually after they are entered into, subject to
     certain rights exercisable by the Partnership. The Advisors determine the
     commodity futures, options on futures, forwards and option on forward
     contract trades to be made on behalf of their respective MM LLC accounts,
     subject to certain rights reserved by MLIM AS LLC.

     Profit Shares, generally ranging from 20% to 25% of any New Trading Profit,
     as defined, recognized by each Advisor individually, irrespective of the
     overall performance of any series, either as of the end of each calendar
     quarter or year and upon the net reallocation of assets away from an
     Advisor, including unit redemptions, are paid by MM LLC (and prior to
     September 1, 2000, directly by the Partnership) to the appropriate Advisors
     to the extent of the applicable percentage of any New Trading Profit
     attributable to such Units.

                                       10
<Page>

6.   NET ASSET VALUE PER UNIT

     At December 31, 2002, the Net Asset Values of the different series of Units
     were as follows:

<Table>
<Caption>
                                                       NUMBER       NET ASSET VALUE
                                NET ASSET VALUE       OF UNITS          PER UNIT
                                ----------------------------------------------------
     <S>                        <C>                   <C>           <C>
     Series A Units             $      4,554,926       37,329.0000  $         122.02
     Series B Units                      361,036        3,079.0000            117.26
     Series C Units                      754,685        6,550.0000            115.22
     Series D Units                    2,324,762       20,741.0000            112.09
     Series E Units                    1,327,640       11,951.4800            111.09
     Series F Units                      829,625        7,711.3400            107.58
     Series G Units                      585,224        5,508.0300            106.25
     Series H Units                      547,940        5,390.6650            101.65
     Series K Units                    2,302,631       18,619.0000            123.67
     Series L Units                    1,390,508       11,536.2800            120.53
     Series M Units                      726,816        5,946.4607            122.23
     Series N Units                      207,135        1,757.6778            117.85
     Series O Units                      624,977        5,288.7419            118.17
     Series P Units                      228,921        1,899.0000            120.55
     Series Q Units                      185,883        1,667.9408            111.44
     Series R Units                      433,969        3,856.0000            112.54
     Series S Units                       53,884          475.0000            113.44
                                ----------------  ----------------
                                $     17,440,562      149,306.6162
                                ================  ================
</Table>

     At December 31, 2001, the Net Asset Values of the different series of Units
     were as follows:

<Table>
<Caption>
                                                       NUMBER       NET ASSET VALUE
                                NET ASSET VALUE       OF UNITS          PER UNIT
                                ----------------------------------------------------
     <S>                        <C>                   <C>           <C>
     Series A Units             $      5,306,952       47,168.0000  $         112.51
     Series B Units                      463,202        4,143.0000            111.80
     Series C Units                      824,171        7,647.0000            107.78
     Series D Units                    2,511,793       23,486.0000            106.95
     Series E Units                    1,596,682       14,730.6800            108.39
     Series F Units                      931,116        8,689.3400            107.16
     Series G Units                      718,712        6,786.0300            105.91
     Series H Units                      779,108        7,479.9150            104.16
     Series K Units                    2,909,351       24,847.0000            117.09
     Series L Units                    1,392,555       12,202.0300            114.12
     Series M Units                    1,975,029       17,065.9607            115.73
     Series N Units                      230,060        2,061.6778            111.59
     Series O Units                      610,319        5,453.7419            111.91
     Series P Units                      231,271        2,026.0000            114.15
     Series Q Units                      244,155        2,313.6908            105.53
     Series R Units                      512,598        4,810.0000            106.57
     Series S Units                       68,206          635.0000            107.41
                                ----------------  ----------------
                                $     21,305,280      191,545.0662
                                ================  ================
</Table>

                                       11
<Page>

7.   WEIGHTED AVERAGE UNITS

     Weighted average number of Units outstanding was computed for purposes of
     disclosing consolidated net income per weighted average Unit. The weighted
     average number of Units outstanding for the years ended December 31, 2002,
     2001 and 2000 equals the Units outstanding as of such date, adjusted
     proportionately for Units redeemed or issued based on the respective length
     of time each was outstanding during the year.

8.   MERRILL LYNCH & CO., INC. GUARANTEE

     Merrill Lynch has guaranteed to the Partnership that it will have
     sufficient Net Assets, as of the Principal Assurance Date for each series
     of Units, that the Net Asset Value per Unit will equal, after reduction for
     all liabilities to third parties and all distributions paid in respect of
     such Units, not less than $100. The Principal Assurance Date for Series A
     Units was September 30, 2001. The Principal Assurance Dates for subsequent
     Series generally occur at each succeeding quarter thereafter.

     The Principal Assurance Dates for Series A through F and K through N came
     to term on or before December 31, 2002 and were not renewed. The above
     Series Units remain outstanding, with 100% of their assets allocated to
     trading, without any "principal protection" feature and no longer pay
     annual distributions.

9.   COPPER SETTLEMENT

     The Partnership, as a member of a class of plaintiffs, received a
     settlement payment in August 2002 relating to certain copper trades made by
     a number of investors, including the Partnership, during a period in the
     mid-1990s. Members of the class were those who purchased or sold Comex
     copper futures or options contracts between June 24, 1993 and June 15,
     1996. The effect of the settlement payment was included in the
     Partnership's performance in August 2002.

10.  FAIR VALUE AND OFF-BALANCE SHEET RISK

     The Partnership invests indirectly in derivative instruments as a result of
     its investment in MM LLC, but does not itself hold any derivative
     instrument positions. The nature of this Partnership has certain risks,
     which cannot be presented on the consolidated financial statements.

     MARKET RISK

     Derivative instruments involve varying degrees of off-balance sheet market
     risk. Changes in the level or volatility of interest rates, foreign
     currency exchange rates or the market values of the financial instruments
     or commodities underlying such derivative instruments frequently result in
     changes in the Partnership's net unrealized profit (loss) on such
     derivative instruments as reflected in the net unrealized profit (loss) as
     reflected in the Statements of Financial Condition of MM LLC. The
     Partnership's exposure to market risk is influenced by a number of factors,
     including the relationships among the derivative instruments held by MM
     LLC, as well as the volatility and liquidity of the markets in which the
     derivative instruments are traded.

12.  SUBSEQUENT EVENTS

     On January 2, 2003, distributions were announced for Series F. Series F
     Unitholders received a fixed-rate distribution of $3.50 per unit. Such
     distributions totaled $26,990.

                                       12
<Page>

     Immediately following the distribution announcement and prior to the
     opening of business on January 2, 2003, Series A through F and K through N,
     those series that had come to term on or before December 31, 2002, were
     consolidated into a new series, Series A 2003, with a $1.00 per Unit Net
     Asset Value. The aggregate Net Asset Value of each investor's new Units is
     equal to the aggregate Net Asset Value of their original Units at December
     31, 2002. The consolidation had no economic effect on the investors. MLIM
     AS LLC contribution $5,499 to the Partnership, the amount necessary due to
     the effects of rounding, to insure all investors received Units equal in
     value to their original holdings at December 31, 2002. The following is a
     listing of the number of new Units each investor received of Series A for
     each Unit of their original series holding.

<Table>
<Caption>
                 NUMBER
      SERIES    OF UNITS
     --------  ----------
     <S>       <C>
     A         122.021960
     B         117.269077
     C         115.242141
     D         112.085339
     E         111.088709
     F         104.084994
     K         123.799970
     L         120.674078
     M         122.310644
     N         117.973383
</Table>

     After the series consolidation, the brokerage commission rate for Series
     A 2003 was reduced to a monthly rate of 0.604 of 1% (a 7.25% annual rate).

     As of February 28, 2003, the general partner interest and the management
     authority of the of the Partnership was assigned from MLIM AS LLC to
     Merrill Lynch Investment Managers, LLC, a wholly-owned subsidiary of MLIM,
     as part of an internal Merrill Lynch reorganization. This change did not
     affect the personnel involved in the management of the Partnership. The
     change will have no impact on the Partnership's investors.

                               * * * * * * * * * *

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


                                Michael Pungello
                             Chief Financial Officer
                         MLIM Alternative Strategies LLC
                               General Partner of
                          ML Principal Protection L.P.

                                       13
<Page>

                      ML MULTI-MANAGER PORTFOLIO LLC
                      (A DELAWARE LIMITED LIABILITY COMPANY)


                      Financial Statements for the years ended
                      December 31, 2002 and 2001
                      and Independent Auditors' Report

[MERRILL LYNCH LOGO]

<Page>

ML MULTI-MANAGER PORTFOLIO LLC
(A Delaware Limited Liability Company)

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

<Table>
<Caption>
                                                                            PAGE
                                                                            ----
<S>                                                                          <C>
INDEPENDENT AUDITORS' REPORT                                                   1

FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 2002 AND 2001:

  Statements of Financial Condition                                            2

  Statements of Income                                                         3

  Statements of Changes in Members' Capital                                    4

  Notes to Financial Statements                                              5-9
</Table>

<Page>

INDEPENDENT AUDITORS' REPORT


To the Members of
 ML Multi-Manager Portfolio LLC:

We have audited the accompanying statements of financial condition of ML
Multi-Manager Portfolio LLC (the "Company") as of December 31, 2002 and 2001,
and the related statements of income and of changes in members' capital for the
years then ended. These financial statements are the responsibility of the
Company'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 financial statements present fairly, in all material
respects, the financial position of ML Multi-Manager Portfolio LLC as of
December 31, 2002 and 2001, and the results of its operations and changes in its
members' capital for the years then ended in conformity with accounting
principles generally accepted in the United States of America.


DELOITTE & TOUCHE LLP


New York, New York
March 3, 2003

<Page>

ML MULTI-MANAGER PORTFOLIO LLC
(A Delaware Limited Liability Company)

STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 2002 AND 2001
--------------------------------------------------------------------------------

ASSETS

<Table>
<Caption>
                                                           2002             2001
                                                      ---------------  ---------------
<S>                                                   <C>              <C>
Equity in commodity futures trading accounts:
    Cash and option premiums                          $   172,773,081  $   205,396,650
    Net unrealized profit on open contracts (Note 2)        4,530,324        2,077,539
Accrued interest (Note 4)                                     182,180          314,001
                                                      ---------------  ---------------

                TOTAL                                 $   177,485,585  $   207,788,190
                                                      ===============  ===============

LIABILITIES AND MEMBERS' CAPITAL

LIABILITIES:

    Brokerage commissions payable (Note 4)            $       618,102  $       967,361
    Profit Shares payable (Note 5)                          1,400,129          685,683
    Administrative fees payable (Note 4)                       22,373           32,650
    Due to Members                                          1,990,503        4,638,713
                                                      ---------------  ---------------

            Total liabilities                               4,031,107        6,324,407
                                                      ---------------  ---------------

MEMBERS' CAPITAL:

    Voting Members                                        173,454,478      201,463,783
                                                      ---------------  ---------------

            Total Members' capital                        173,454,478      201,463,783
                                                      ---------------  ---------------

                TOTAL                                 $   177,485,585  $   207,788,190
                                                      ===============  ===============
</Table>

See notes to financial statements.

                                        2
<Page>

ML MULTI-MANAGER PORTFOLIO LLC
(A Delaware Limited Liability Company)

STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
--------------------------------------------------------------------------------

<Table>
<Caption>
REVENUES                                                   2002          2001
                                                       ------------  ------------
<S>                                                    <C>           <C>
Trading profit (loss):
    Realized (Note 6)                                  $  9,241,162  $ 26,679,581
    Change in unrealized                                  2,453,406   (11,977,991)
Proceeds from Copper Settlement                           1,176,518             -
                                                       ------------  ------------

        Total trading results                            12,871,086    14,701,590

Interest income (Note 4)                                  3,079,716     8,234,444
                                                       ------------  ------------

        Total revenues                                   15,950,802    22,936,034
                                                       ------------  ------------

EXPENSES

Brokerage commissions (Note 4)                            7,738,731    14,316,819
Profit Shares (Note 5)                                    2,301,983     2,968,452
Administrative fees (Note 4)                                279,753       471,194
                                                       ------------  ------------

        Total expenses                                   10,320,467    17,756,465
                                                       ------------  ------------

NET INCOME                                             $  5,630,335  $  5,179,569
                                                       ============  ============
</Table>

See notes to financial statements.

                                        3
<Page>

ML MULTI-MANAGER PORTFOLIO LLC
(A Delaware Limited Liability Company)

STATEMENTS OF CHANGES IN MEMBERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
--------------------------------------------------------------------------------

<Table>
<Caption>
                                     VOTING MEMBERS
                                     --------------
         <S>                         <C>
         MEMBERS' CAPITAL,
          DECEMBER  31, 2000         $ 247,611,967

                 Additions               1,788,034

                 Net income              5,179,569

                Withdrawals            (53,115,787)
                                     -------------

         MEMBERS' CAPITAL,
          DECEMBER  31, 2001         $ 201,463,783

                 Additions               2,491,994

                 Net income              5,630,335

                Withdrawals            (36,131,634)
                                     -------------

         MEMBERS' CAPITAL,
          DECEMBER  31, 2002         $ 173,454,478
                                     =============
</Table>

See notes to financial statements.

                                        4
<Page>

ML MULTI-MANAGER PORTFOLIO LLC
(A Delaware Limited Liability Company)

NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     ORGANIZATION

     ML Multi-Manager Portfolio LLC (the "Company") was organized under the
     Delaware Limited Liability Company Act on May 11, 1998 and commenced
     trading activities on June 1, 1998. The Company engages in the speculative
     trading of futures, options on futures, forwards and options on forward
     contracts on a wide range of commodities. MLIM Alternative Strategies LLC
     ("MLIM AS LLC"), a wholly-owned subsidiary of Merrill Lynch Investment
     Managers, LP ("MLIM"), which, in turn, is an indirect wholly-owned
     subsidiary of Merrill Lynch & Co., Inc. ("Merrill Lynch"), has been
     delegated administrative authority over the Company. Merrill Lynch, Pierce,
     Fenner & Smith Incorporated ("MLPF&S") is the Company's commodity broker.
     The Company has one class of Membership Interests, Voting Interests. Voting
     Interests are held by multi-advisor funds managed by MLIM AS LLC ("The
     Members"). The Members control all business activities and affairs of the
     Company by agreement of the majority interest of the Members, subject to
     the discretionary trading authority vested in and delegated to the
     independent trading advisors (the "Advisors") and the administrative
     authority vested in and delegated to MLIM AS LLC. Each Member is a
     "commodity pool" sponsored and controlled by MLIM AS LLC and shares in the
     trading results of the Company in proportion to its respective capital
     account.

     MLIM AS LLC selects independent advisors to manage the Company's assets,
     and allocates and reallocates the Company's assets among existing,
     replacement and additional Advisors.

     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, forwards and options on forward
     contracts are recorded on the trade date and open contracts are reflected
     in Net unrealized profit on open contracts in the Statements 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 unrealized profit on
     open contracts from one period to the next is reflected in Change in
     unrealized under Trading profit (loss) in the Statements of Income.

     FOREIGN CURRENCY TRANSACTIONS

     The Company'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 date 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.

                                        5
<Page>

     INCOME TAXES

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

     DISTRIBUTIONS

     The Members are entitled to receive any distributions which may be made by
     the Company in proportion to their respective capital accounts. No such
     distributions have been declared for the years ended December 31, 2002 or
     2001.

     WITHDRAWALS

     Each Member may withdraw some or all of such Member's capital at the Net
     Asset Value as of the close of business on any business day. There are no
     withdrawal fees or charges.

     DISSOLUTION OF THE COMPANY

     The Company will terminate on December 31, 2028 or at an earlier date if
     certain conditions occur, as well as under certain other circumstances as
     set forth in the Organization Agreement.

2.   CONDENSED SCHEDULE OF INVESTMENTS

     The Company's investments, defined as Net unrealized profit on open
     contracts on the Statements of Financial Condition, as of December 31, 2002
     and 2001, are as follows:

<Table>
<Caption>
                                LONG POSITIONS                        SHORT POSITIONS
         2002                   --------------                        ----------------                NET UNREALIZED
COMMODITY INDUSTRY    NUMBER      UNREALIZED   PERCENT OF     NUMBER      UNREALIZED   PERCENT OF    PROFIT (LOSS) ON  PERCENT OF
SECTOR             OF CONTRACTS PROFIT (LOSS)  NET ASSETS  OF CONTRACTS  PROFIT (LOSS) NET ASSETS     OPEN POSITIONS   NET ASSETS
------------------ ------------ -------------  ----------  ------------  ------------  ----------    ----------------  ----------
<S>                   <C>         <C>               <C>      <C>         <C>                <C>      <C>                     <C>
Agriculture               1,263   $   258,170        0.15%       (1,361) $    348,188        0.20%   $        606,358        0.35%
Currencies            2,193,248     2,945,181        1.70%   (3,207,564)   (1,592,929)      -0.92%          1,352,252        0.78%
Energy                      346        60,714        0.04%           (4)         (160)       0.00%             60,554        0.03%
Interest rates            3,621     2,599,914        1.50%         (370)     (226,998)      -0.13%          2,372,916        1.37%
Metals                      566        97,101        0.06%         (260)       34,845        0.02%            131,946        0.08%
Stock indices                57       (51,080)      -0.03%         (176)       57,378        0.03%              6,298        0.00%
                                  -----------                            ------------                ----------------

Total  2002                       $ 5,910,000        3.41%               $ (1,379,676)      -0.80%   $      4,530,324        2.61%
                                  ===========                            ============                ================
</Table>

<Table>
<Caption>
                                       LONG POSITIONS                         SHORT POSITIONS
         2001                          --------------                         ---------------      NET UNREALIZED
COMMODITY INDUSTRY    UNREALIZED         PERCENT OF          UNREALIZED          PERCENT OF       PROFIT (LOSS) ON     PERCENT OF
SECTOR              PROFIT (LOSS)        NET ASSETS         PROFIT (LOSS)        NET ASSETS        OPEN POSITIONS      NET ASSETS
------------------  -------------        ----------         ------------         ----------       ----------------     ----------
<S>                  <C>                   <C>              <C>                     <C>           <C>                        <C>
Agriculture          $   (98,523)          -0.05%           $    278,886             0.14%        $        180,363           0.09%
Currencies              (518,547)          -0.26%              3,164,842             1.57%               2,646,295           1.31%
Energy                    (8,555)           0.00%               (109,665)           -0.05%                (118,220)         -0.06%
Interest rates          (310,862)          -0.15%                159,725             0.08%                (151,137)         -0.08%
Metals                  (227,476)          -0.11%               (421,110)           -0.21%                (648,586)         -0.32%
Stock indices            151,168            0.08%                 17,656             0.01%                 168,824           0.08%
                     -----------                            ------------                          ----------------

Total  2001          $(1,012,795)          -0.50%           $  3,090,334             1.53%        $      2,077,539           1.03%
                     ===========                            ============                          ================
</Table>

     No individual contract comprises greater than 5% of the Company's net
     assets.

                                        6
<Page>

3.   FINANCIAL DATA HIGHLIGHTS

     The following ratios have been derived from information provided in the
     financial statements for the year ended December 31, 2002.

<Table>
     <S>                                                <C>
     Total investment return, compounded monthly        3.30%
                                                     =======

     RATIO TO AVERAGE NET ASSETS:

     Expenses                                           5.51%
                                                     =======

     Net income                                         3.00%
                                                     =======
</Table>

4.   RELATED PARTY TRANSACTIONS

     Currently, all of the Company's U.S. dollar assets are maintained at
     MLPF&S. On assets held in U.S. dollars, Merrill Lynch credits the Company
     with interest at the prevailing 91-day U.S. Treasury bill rate. The Company
     is credited with interest on any of its assets and 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 Company
     from the possession of such assets.

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

     Following the allocation of the Company's trading profit and interest
     income among the Members' Capital Accounts, MLIM AS LLC calculates the
     brokerage commissions, Profit Shares, administrative fees and other
     expenses due from the Company to third parties, relating to the Company's
     trading on behalf of the Members. Such brokerage commissions, fees and
     expenses are specifically allocated to each member as of the end of each
     accounting period (not pro rata based on the Members' respective capital
     accounts) to, and deducted from, the Members' capital accounts and paid out
     by the Company. The Company pays brokerage commissions to MLPF&S at a flat
     monthly rate reflecting the fee arrangement between each Member and MLPF&S.
     For the years ended December 31, 2002 and 2001, the monthly rates for
     Members ranged from .291 of 1% (a 3.50% annual rate) to .729 of 1% (an
     8.75% annual rate) of each Member's month-end assets invested in the
     Company.

     The Company pays MLIM AS LLC a monthly administrative fee ranging from .021
     of 1% (a 0.25% annual rate) to .083 of 1% (a 1.00% annual rate) of each
     Member's month-end assets. 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.

     MLPF&S pays the Advisors annual Consulting Fees up to 2.5% of the Company's
     average month-end assets allocated to them for management after reduction
     for a portion of the brokerage commissions.

5.   ADVISORY AGREEMENTS

     Pursuant to the Advisory Agreements among the Advisors, the Company and
     MLIM AS LLC, the Advisors determine the commodity futures, options on
     futures, forwards and options on forward contracts traded on behalf of the
     Company, subject to certain rights reserved by MLIM AS LLC. The Advisory
     Agreements generally renew one year after they are entered into, subject to
     certain renewal rights exercisable by the Company.

     The Company pays, from the Capital Account of each Member, to the Advisors
     quarterly or annual Profit Shares generally ranging from 20% to 25% of any
     New Trading Profit, as defined, recognized by each Advisor, attributable to
     each Member's Capital Account, considered individually irrespective of

                                        7
<Page>

     the overall performance of the such Member's Capital Account. Profit
     Shares, which are calculated separately in respect of each Member's Capital
     Account, are determined as of the end of each calendar quarter or year and
     are also paid to each Advisor upon the withdrawal of capital from the
     Company by a Member for whatever purpose, other than to pay expenses and
     upon the reallocation of assets away from an Advisor.

6.   COPPER SETTLEMENT

     The Members, as parties of a class of plaintiffs, received a settlement
     payment in August 2002 relating to certain copper trades made by a number
     of investors, including the Members, during a period in the mid-1990's.
     Parties of the class were those who purchased or sold Comex copper futures
     or options contracts between June 24, 1993 and June 15, 1996. The amount of
     the settlement was paid to MM LLC on behalf of each member, based upon each
     Member's individual investment activity related to Comex copper futures or
     options. The effect of the settlement was included in the Company's
     performance in August 2002.

7.   FAIR VALUE AND OFF-BALANCE SHEET RISK

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

     MARKET RISK

     Derivative instruments involve varying degrees of off-balance sheet market
     risk. Changes in the level or volatility of interest rates, foreign
     currency exchange rates or the market values of the financial instruments
     or commodities underlying such derivative instruments frequently result in
     changes in the Company's Net unrealized profit on such derivative
     instruments as reflected in the Statements of Financial Condition. The
     Company's exposure to market risk is influenced by a number of factors,
     including the relationships among the derivative instruments held by the
     Company as well as the volatility and liquidity of the markets in which the
     derivative instruments are traded.

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

     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 on open contracts, if any,
     included in the Statements of Financial Condition. The Company attempts to
     mitigate this risk by dealing almost exclusively with Merrill Lynch
     entities as clearing brokers.

     The Company, in its normal course of business, enters into various
     contracts, with MLPF&S acting as its commodity broker. Pursuant to the
     brokerage agreement with MLPF&S (which includes a netting arrangement), to
     the extent that such trading results in receivables from and payables to
     MLPF&S, these receivables and payables are offset and reported as a net
     receivable or payable and included in the Equity in commodity futures
     trading accounts in the Statements of Financial Condition.

8.   SUBSEQUENT EVENTS

     As of February 28, 2003, the administrative authority of the Company and
     the management authority of the Members was assigned from MLIM AS LLC to
     Merrill Lynch Investment Managers, LLC, a wholly-owned subsidiary of MLIM,
     as part of an internal Merrill Lynch reorganization. This change will not
     affect the personnel involved in the management of the Company. The change
     will not have an impact on the Company's investors.

                                 * * * * * * * *

                 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
                         MLIM Alternative Strategies LLC
                           Commodity Pool Operator of
                         ML Multi-Manager Portfolio LLC

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