<Page>

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


                          Consolidated Financial Statements for the years ended
                          December 31, 2001, 2000 and 1999 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, 2001 and 2000                                    2

  Consolidated Statements of Operations for the years ended December 31, 2001, 2000 and 1999                         3

  Consolidated Statements of Changes in Partners' Capital for the years ended December 31, 2001,
      2000 and 1999                                                                                                  4

  Financial Data Highlights for the year ended December 31, 2001                                                      5

  Notes to Consolidated Financial Statements                                                                       6-15
</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, 2001 and 2000 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, 2001 and the financial data highlights for the year ended
December 31, 2001. 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, 2001 and 2000, 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
February 5, 2002
<Page>

ML PRINCIPAL PROTECTION L.P.
 (A Delaware Limited Partnership)
  ------------------------------

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 2001 AND 2000
--------------------------------------------------------------------------------

<Table>
<Caption>
                                                                        2001         2000
                                                                   ------------- --------------
<S>                                                                <C>           <C>
ASSETS

Equity in commodity futures trading accounts:
    Cash and options premiums                                       $ 3,978,866   $  2,947,014
Investment in MM LLC (Note 9)                                        17,346,923     19,921,935
Commercial Paper (Note 1) (Cost: $4,310,371)                                  -      4,310,371
Receivable from Investment in MM LLC (Note 9)                           158,259        780,962
Accrued interest receivable (Note 3)                                      5,933         52,986
                                                                   ------------- --------------

                TOTAL                                               $21,489,981   $ 28,013,268
                                                                   ============= ==============

LIABILITIES AND PARTNERS' CAPITAL

LIABILITIES:
    Redemptions payable (Note 1)                                     $   184,701   $    438,622
                                                                   ------------- --------------

            Total liabilities                                           184,701        438,622
                                                                   ------------- --------------

Minority Interest (Note 1)                                                    -        875,795
                                                                   ------------- --------------

PARTNERS' CAPITAL:
 General Partners (2,105 and 2,712 Units)                               233,900        298,960
 Limited Partners (189,440 and 239,624 Units)                        21,071,380     26,399,891
                                                                   ------------- --------------

            Total partners' capital                                  21,305,280     26,698,851
                                                                   ------------- --------------

                TOTAL                                               $21,489,981   $ 28,013,268
                                                                   ============= ==============

NET ASSET VALUE PER UNIT (Note 6)
</Table>

See notes to consolidated financial statements.

                                       2
<Page>

ML PRINCIPAL PROTECTION L.P.
(A Delaware Limited Partnership)
 ------------------------------

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
--------------------------------------------------------------------------------

<Table>
<Caption>
                                                                   2001              2000               1999
                                                                -----------     -------------    --------------
<S>                                                             <C>             <C>              <C>
REVENUES

Trading profit (loss):
    Realized                                                     $       -       $  (610,248)      $ 1,318,041
    Change in unrealized                                                 -          (202,811)         (809,172)
                                                                -----------     -------------    --------------

        Total trading results                                            -          (813,059)          508,869

    Interest income (Note 3)                                       213,543         1,549,458         3,263,074
                                                                -----------     -------------    --------------

                Total revenues                                     213,543           736,399         3,771,943
                                                                -----------     -------------    --------------

EXPENSES

Brokerage commissions (Note 3)                                           -         1,398,269         3,969,972
Profit Shares (Note 5)                                                   -            19,158           265,734
Administrative fees (Note 3)                                             -            53,971           159,099
                                                                -----------     -------------    --------------

                Total expenses                                           -         1,471,398         4,394,805
                                                                -----------     -------------    --------------

INCOME FROM INVESTMENT IN MM LLC (Note 9)                          478,957         1,876,745                 -
                                                                -----------     -------------    --------------

INCOME (LOSS) BEFORE MINORITY INTEREST                             692,500         1,141,746          (622,862)

Minority interest (income) loss                                          -           (48,173)           14,666
                                                                -----------     -------------    --------------

NET INCOME (LOSS)                                                $ 692,500       $ 1,093,573       $  (608,196)
                                                                ===========     =============    ==============

NET INCOME (LOSS) PER UNIT:

     Weighted average number of General Partner
     and Limited Partner Units outstanding (Note 7)                214,642           312,054           578,758
                                                                ===========     =============    ==============

     Net income (loss) per weighted average General Partner      $    3.23       $      3.50       $     (1.05)
     and Limited Partner Unit
                                                                ===========     =============    ==============
</Table>


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, 2001, 2000 AND 1999
--------------------------------------------------------------------------------

<Table>
<Caption>
                                                                      GENERAL             LIMITED
                                                 UNITS                PARTNER             PARTNERS             TOTAL
                                          --------------------    ---------------    ------------------  ------------------
<S>                                               <C>             <C>                <C>                 <C>
PARTNERS' CAPITAL,
  DECEMBER 31, 1998                                   724,439       $    735,280       $    78,371,558     $    79,106,838

Subscriptions                                          15,736            312,428             1,261,172           1,573,600

Net loss                                                    -             (6,322)             (601,874)           (608,196)

Distributions                                               -            (17,824)             (964,393)           (982,217)

Redemptions                                          (349,434)                 -           (37,407,257)        (37,407,257)
                                          --------------------    ---------------    ------------------  ------------------

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
                                          ====================    ===============    ==================  ==================
</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, 2001
-------------------------------------------------------------------------------
The following per unit data and ratios have been derived from information
provided in the financial statements.

<Table>
<Caption>
                                          SERIES A  SERIES B  SERIES C  SERIES D  SERIES E  SERIES F  SERIES G  SERIES H
                                          --------  --------  --------  --------  --------  --------  --------  --------
<S>                                       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
Increase (Decrease) in Net Asset Value

PER UNIT OPERATING PERFORMANCE:
------------------------------------
Net asset value, beginning of period       $113.23   $111.96   $107.87   $107.16   $108.67   $107.43   $106.12   $104.40

Realized trading profit                      12.22      8.11      6.68      7.64     10.29      7.46      7.80      8.02
Change in unrealized                         (5.88)    (3.65)    (2.97)    (3.46)    (4.61)    (3.36)    (3.47)   (3.55)
Interest income                               3.99      3.84      3.75      3.75      3.83      3.68      3.68      3.65
Expenses                                     (7.55)    (4.96)    (4.05)    (4.64)    (6.29)    (4.55)    (4.72)    (4.86)
                                          ------------------------------------------------------------------------------
Net increase in net assets from
 operations                                 116.01    115.30    111.28    110.45    111.89    110.66    109.41    107.66
Cash distribution                            (3.50)    (3.50)    (3.50)    (3.50)    (3.50)    (3.50)    (3.50)    (3.50)
                                          ------------------------------------------------------------------------------
Net asset value, end of the period         $112.51   $111.80   $107.78   $106.95   $108.39   $107.16   $105.91   $104.16
                                          ==============================================================================
Total investment return, compounded
 monthly                                      2.43%     3.09%     3.17%     3.10%     2.95%     3.11%     3.09%    3.16%
                                          ==============================================================================

RATIOS TO AVERAGE NET ASSETS:
------------------------------------
Expenses                                      6.57%     4.47%     3.77%     4.33%     5.75%     4.34%     4.50%     4.64%
                                          ==============================================================================
Net income                                    2.54%     3.03%     3.20%     3.11%     3.06%     3.21%     3.21%     3.13%
                                          ==============================================================================

<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>
Increase (Decrease) in Net Asset Value

PER UNIT OPERATING PERFORMANCE:
------------------------------------
Net asset value, beginning of period       $114.12   $111.23   $112.79   $108.74   $109.07   $111.28   $102.89   $103.93   $104.76

Realized trading profit                      17.27     16.83     17.07     16.45     16.50     16.83     15.56     15.72     15.84
Change in unrealized                         (7.77)    (7.58)    (7.68)    (7.41)    (7.43)    (7.58)    (7.01)    (7.08)    (7.13)
Interest income                               4.02      3.92      3.97      3.83      3.84      3.92      3.62      3.66      3.69
Expenses                                    (10.55)   (10.28)   (10.42)   (10.02)   (10.07)   (10.30)    (9.53)    (9.66)    (9.75)
                                          ----------------------------------------------------------------------------------------
Net asset value, end of the period         $117.09   $114.12   $115.73   $111.59   $111.91   $114.15   $105.53   $106.57   $107.41
                                          ========================================================================================
Total investment return, compounded
 monthly                                      2.60%     2.60%     2.60%     2.62%     2.60%     2.58%     2.56%     2.54%     2.54%
                                          ========================================================================================

RATIOS TO AVERAGE NET ASSETS:
------------------------------------
Expenses                                      9.04%     9.05%     9.02%     9.09%     9.71%     9.04%     9.17%     9.16%     9.65%
                                          ========================================================================================
Net income                                    2.55%     2.52%     2.55%     2.71%     4.83%     2.52%     2.96%     2.55%     4.09%
                                          ========================================================================================
</Table>

See notes 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"), formerly
     Merrill Lynch Investment Partners Inc. ("MLIP"), 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"), the
     successor to Merrill Lynch Futures Inc. ("MLF") by merger, 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.

     Effective May 31, 2001, MLIP converted to a Delaware limited liability
     company and changed its name. Effective August 14, 2001, Merrill Lynch
     Group, Inc. contributed all of the issued and outstanding shares of MLIM AS
     LLC to its affiliate MLIM in a tax-free reorganization. All of the officers
     of MLIP at the time continued with their former roles with MLIM AS LLC. The
     changes had no impact on the Partnership's investors. Effective November 2,
     2001, MLF merged into its affiliate, MLPF&S, a wholly owned subsidiary of
     Merrill Lynch. MLPF&S became the successor party to the agreements between
     MLF and the Partnership. The terms of the agreements remained unchanged and
     the merger had no effect on the terms on which the Partnership's
     transactions were executed.

     Many of the multi-advisor funds (the "Multi-Advisor Funds") sponsored by
     MLIM AS LLC allocate their assets to a number of the same independent
     advisors (the "Advisors"). MLIM AS LLC consolidated the trading accounts of
     nine of its Multi-Advisor Funds as of June 1, 1998. The consolidation was
     achieved by having these Multi-Advisor Funds close their existing trading
     accounts and invest in a limited liability company, ML Multi-Manager
     Portfolio LLC ("MM LLC"), a Delaware limited liability company, which
     opened a single account with each Advisor selected. On September 1, 2000,
     the Partnership joined MM LLC in a similar manner 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, 2001 and
     2000, the Partnership's percentage ownership share of MM LLC was 8.61%
     and 8.05%, respectively.

                                       6
<Page>

     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 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 on or
     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

                                       7
<Page>

     Statements of Financial Condition (of MM LLC subsequent to
     September 1, 2000) 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
     contracts and Government Securities, as defined below, 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 9 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.

     GOVERNMENT SECURITIES AND COMMERCIAL PAPER

     Prior to May 26, 2000, the Partnership invested a portion of its assets in
     obligations of the U.S. Treasury and certain other U.S. government agencies
     ("Government Securities") under the direction of MLIM within the parameters
     established by MLIM AS LLC for which MLIM accepted no responsibility. These
     investments were carried at fair value. On May 26, 2000 the Government
     Securities were liquidated and Commercial Paper was purchased. These
     holdings generally have maturities of 30, 60 or 90 days and are held to
     maturity. The investments in Commercial Paper are directed by MLIM AS
     LLC. As of December 31, 2001, the Partnership held no Commercial Paper.

     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, as of 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. Units redeemed on or prior to the end
     of the twelfth full month after such Units were issued are assessed an
     early redemption charge of 3% of their Net Asset Value as of the date of
     redemption. Units redeemed after the twelfth month but on or before the end
     of the eighteenth month after such Units were issued are subject to a
     redemption charge of 1.5%. Units redeemed after the eighteenth month but on
     or before the end of the twenty-fourth month after such Units were issued
     are subject to a 1% redemption charge. Redemption charges are deducted from
     redemption proceeds and paid to MLIM AS LLC.

                                       8
<Page>

     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.

2.   CONDENSED SCHEDULE OF INVESTMENTS

     In March 2001, the American Institute of Certified Public Accountants'
     Accounting Standards Executive Committee issued Statement of Position
     ("SOP") 01-1, "Amendment to Scope of Statement of Position 95-2,
     Financial Reporting by Nonpublic Investment Partnerships, to Include
     Commodity Pools" effective for fiscal years ending after December 15, 2001.
     Accordingly, commodity pools are now required to include a condensed
     schedule of investments identifying those investments, which constitute
     more than 5% of net assets, taking long and short positions into account
     separately.

     The Partnership's investments, through MM LLC, defined as Net unrealized
     profit on open contracts on the Statement of Financial Condition of MM
     LLC, as of December 31, 2001 are as follows.

<Table>
<Caption>
                                     LONG POSTIONS                SHORT POSITIONS
                                     -------------                ---------------          NET UNREALIZED
                              UNREALIZED      PERCENT OF     UNREALIZED      PERCENT OF    PROFIT (LOSS) ON    PERCENT OF
COMMODITY INDUSTRY 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                        $ (1,012,795)         -0.50%   $  3,090,334            1.53%   $  2,077,539            1.03%
                             ============                   ============                    ============
</Table>

3.   RELATED PARTY TRANSACTIONS

     Prior to May 26, 2000, MLIM managed a substantial portion of the
     Partnership's available U.S. dollar assets, pursuant to guidelines
     established by MLIM AS LLC for which MLIM assumed no responsibility, in the
     Government Securities markets. MLPF&S paid MLIM annual management fees of
     .20 of 1% on the first $25 million of certain assets of MLIM AS LLC
     sponsored funds ("Capital"), including the Partnership's assets managed by
     MLIM, .15 of 1% on the next $25 million of Capital, .125 of 1% on the next
     $50 million, and .10 of 1% on Capital in excess of $100 million. Such fees
     were paid quarterly in arrears and were calculated on the basis of the
     average daily capital managed by MLIM. On May 26, 2000, the Government
     Securities were liquidated and the management agreement with MLIM was
     terminated. Commercial Paper was then purchased. MLPF&S acts as custodian
     for the cash assets utilized in the Commercial Paper Program.

     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 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

                                       9
<Page>

     administrative fee of .021 of 1% (a 0.25% annual rate) of such series'
     total month-end assets invested in MM LLC on the Trading Partnership
     prior to September 1, 2000. 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.

     MLIM AS LLC estimates that the round-turn equivalent commission rates
     charged to the Trading Partnership during the years ended December 31, 2000
     (prior to its investment in MM LLC) and 1999, are approximately $101 and
     $127, respectively (not including, in calculating round-turn equivalents,
     forward contracts on a futures-equivalent basis). The estimated aggregate
     round-turn commission rates for MM LLC for the years ended December 31,
     2001 and 2000 were $64 and $82.

     MLPF&S pays the Advisors annual Consulting Fees ranging up to 2% 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 on or
     prior to May 1, 1997. 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,
     2001, 2000 and 1999, the Partnership made the following distributions:

          SERIES         DISTRIBUTION       FIXED-RATE    DISCRETIONARY
                             DATE          DISTRIBUTION    DISTRIBUTION
       -------------- ---------------------------------------------------
  2001
-------
         Series A             10/1/2001           $ 3.50           $   -
         Series B              1/1/2001             3.50               -
         Series C              4/1/2001             3.50               -
         Series D              7/1/2001             3.50               -
         Series E             10/1/2001             3.50               -
         Series F              1/1/2001             3.50               -
         Series G              4/1/2001             3.50               -
         Series H              7/1/2001             3.50               -

                                       10
<Page>

          SERIES         DISTRIBUTION       FIXED-RATE    DISCRETIONARY
                             DATE          DISTRIBUTION    DISTRIBUTION
       -------------- ---------------------------------------------------
  2000
-------
          Series A            10/1/2000           $ 3.50           $   -
         Series B              1/1/2000             3.50               -
         Series C              4/1/2000             3.50               -
         Series D              7/1/2000             3.50               -
         Series E             10/1/2000             3.50               -
         Series F              1/1/2000             3.50               -
         Series G              4/1/2000             3.50               -
         Series H              7/1/2000             3.50               -

  1999
-------
          Series A            10/1/1999           $ 3.50           $   -
         Series B              1/1/1999             3.50               -
         Series C              4/1/1999             3.50               -
         Series D              7/1/1999             3.50            1.00
         Series E             10/1/1999             3.50               -
         Series F              1/1/1999             3.50               -
         Series G              4/1/1999             3.50               -
         Series H              7/1/1999             3.50            1.00

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 23% 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.

                                       11
<Page>

6.   NET ASSET VALUE PER UNIT

     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>

     At December 31, 2000 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                     $ 6,185,441          54,627.0000                $ 113.23
Series B Units                         487,797           4,357.0000                  111.96
Series C Units                         863,478           8,005.0000                  107.87
Series D Units                       2,795,253          26,084.0000                  107.16
Series E Units                       2,369,509          21,803.9800                  108.67
Series F Units                       1,348,280          12,550.5400                  107.43
Series G Units                         931,995           8,782.2800                  106.12
Series H Units                         844,370           8,087.9150                  104.40
Series K Units                       3,205,898          28,092.0000                  114.12
Series L Units                       1,619,734          14,562.0300                  111.23
Series M Units                       2,045,146          18,131.9607                  112.79
Series N Units                         296,095           2,722.9278                  108.74
Series O Units                       2,253,875          20,663.7419                  109.07
Series P Units                         225,563           2,027.0000                  111.28
Series Q Units                         508,459           4,941.6908                  102.89
Series R Units                         573,917           5,522.0000                  103.93
Series S Units                         144,041           1,375.0000                  104.76
                              -----------------     ----------------
                                  $ 26,698,851         242,336.0662
                              =================     ================
</Table>

                                       12
<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, 2001,
     2000 and 1999 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 and Series B came to term on
     September 30, 2001 and December 31, 2001, respectively and were not
     renewed. The Series A and Series B Units remain outstanding, with 100% of
     its assets allocated to trading, without any "principal protection"
     feature.

9.   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 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.

                                       13
<Page>

     Total revenues and fees with respect to the Partnership's investment are
     set forth as follows:

<Table>
<Caption>
                                   FOR THE YEAR ENDED       FOR THE YEAR ENDED
                                    DECEMBER 31, 2001        DECEMBER 31, 2000
                                   ------------------       ------------------
<S>                                <C>                         <C>
Realized trading profit (loss)            $ 2,827,944              $   998,652
Unrealized trading profit (loss)           (1,336,518)               1,284,861
Interest income                               634,137                  386,922

Brokerage commissions                       1,351,049                  525,140
Administrative fees                            45,035                   17,505
Profit shares                                 250,522                  251,045
                                         -------------           --------------

Income from investment in MM LLC          $   478,957              $ 1,876,745
                                         =============          ===============
</Table>

     Condensed statements of financial condition and statements of operations
     for MM LLC are set forth as follows:

<Table>
<Caption>
                        DECEMBER 31, 2001        DECEMBER 31, 2000
                       ----------------------    ---------------------
<S>                    <C>                       <C>
Assets                  $        207,788,190      $       252,995,756
                       ======================    =====================

Liabilities             $          6,324,407      $         5,383,789
Members' Capital                 201,463,783              247,611,967
                       ----------------------    ---------------------

Total                   $        207,788,190      $       252,995,756
                       ======================    =====================

<Caption>
                       FOR THE YEAR ENDED        FOR THE YEAR ENDED
                       DECEMBER 31, 2001         DECEMBER 31, 2000
                       ----------------------    ---------------------
<S>                    <C>                       <C>
Revenues                $         22,936,034      $        28,324,323

Expenses                          17,756,465               13,557,899
                       ----------------------    ---------------------

Net Income              $          5,179,569      $        14,766,424
                       ======================    =====================
</Table>


10.  FAIR VALUE AND OFF-BALANCE SHEET RISK

     The nature of this Partnership 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

                                       14
<Page>

     volatility of interest rates, foreign currency exchange rates or the market
     values of the financial instruments or commodities underlying such
     derivative instruments frequently result in changes in the Partnership's
     net unrealized profit (loss) on such derivative instruments as reflected in
     the Consolidated Statements of Financial Condition or, with respect to
     Partnership assets invested in MM LLC, 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 the
     Partnership, and currently MM LLC, 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
     Partnership, or currently MM LLC, 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
     Partnership'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.

     One important aspect of MLIM AS LLC's risk controls is its adjustments
     to the leverage at which each series of Units trades. By controlling the
     percentage of each series' assets allocated to trading, MLIM AS LLC can
     directly affect the market exposure of the Partnership. Leverage control is
     the principal means by which MLIM AS LLC hopes to be able to ensure that
     Merrill Lynch is never required to make any payments under its guarantee
     that the Net Asset Value per Unit of each series will equal no less than
     $100 as of the Principal Assurance Date for such series.

     CREDIT RISK

     The risks associated with exchange-traded contracts are typically perceived
     to be less than those associated with over-the-counter
     (non-exchange-traded) transactions, because exchanges typically (but not
     universally) provide clearinghouse arrangements in which the collective
     credit (in some cases limited in amount, in some cases not) of the members
     of the exchange is pledged to support the financial integrity of the
     exchange. In over-the-counter transactions, on the other hand, traders must
     rely solely on the credit of their respective individual counterparties.
     Margins, which may be subject to loss in the event of a default, are
     generally required in exchange trading, and counterparties may also require
     margin in the over-the-counter markets.

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

     The Partnership, through MM LLC, 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 and payables are offset and reported as a net receivable
     or payable and are included in the financial statements of MM LLC in the
     Statements of Financial Condition under Equity in commodity futures
     trading accounts.

                                       15
<Page>

9.   SUBSEQUENT EVENTS

     On January 2, 2002, distributions were announced for Series B and Series F.
     Both the Series B Unitholders and the Series F Unitholders received a
     fixed-rate distribution of $3.50 per Unit. Such distributions totaled
     $44,913.

                               * * * * * * * * * *

                 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
                               General Partner of
                          ML Principal Protection L.P.

                                       16
<Page>

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


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











[MERRILL LYNCH LOGO]
<Page>



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


TABLE OF CONTENTS

                                                  Page
                                                  ----

INDEPENDENT AUDITORS' REPORT                         1

FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 2001 AND 2000:

  Statements of Financial Condition                  2

  Statements of Income                               3

  Statements of Changes in Members' Capital          4

  Notes to Financial Statements                     5-9
<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, 2001 and 2000 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, 2001 and 2000, 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
February 5, 2002
<Page>

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

STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 2001 AND 2000
--------------------------------------------------------------------------------
<Table>
<Caption>

ASSETS
                                                                        2001            2000
                                                                  ---------------  ---------------
<S>                                                               <C>              <C>
Equity in commodity futures trading accounts:
    Cash and option premiums                                       $ 205,396,650    $ 139,346,615
    Net unrealized profit on open contracts (Note 2)                   2,077,539       13,995,141
Cash                                                                           -        2,835,198
Commercial Paper (Cost $95,200,766)                                            -       95,200,766
Accrued interest (Note 4)                                                314,001        1,618,036
                                                                  ---------------  ---------------

                TOTAL                                              $ 207,788,190    $ 252,995,756
                                                                  ===============  ===============

LIABILITIES AND MEMBERS' CAPITAL

LIABILITIES:

    Brokerage commissions payable (Note 4)                             $ 967,361      $ 1,265,023
    Profit Shares payable (Note 5)                                       685,683        3,036,430
    Administrative fees payable (Note 4)                                  32,650           41,341
    Due to Invested Funds                                              4,638,713        1,040,995
                                                                  ---------------  ---------------

            Total liabilities                                          6,324,407        5,383,789
                                                                  ---------------  ---------------

MEMBERS' CAPITAL:

    Voting Members                                                   201,463,783      247,611,967
                                                                  ---------------  ---------------

            Total Members' capital                                   201,463,783      247,611,967
                                                                  ---------------  ---------------

                TOTAL                                              $ 207,788,190    $ 252,995,756
                                                                  ===============  ===============
</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, 2001 AND 2000
--------------------------------------------------------------------------------

<Table>
<Caption>
                                                                2001              2000
                                                           --------------     -------------
<S>                                                        <C>                <C>
REVENUES
Trading profit:
    Realized                                                $ 26,679,581       $ 8,646,046
    Change in unrealized                                     (11,977,991)       11,538,356
                                                           --------------     -------------

        Total trading results                                 14,701,590        20,184,402

Interest income (Note 1 & Note 4)                              8,234,444         8,139,921
                                                           --------------     -------------

        Total revenues                                        22,936,034        28,324,323
                                                           --------------     -------------

EXPENSES

Brokerage commissions (Note 4)                                14,316,819        10,015,693
Profit Shares (Note 5)                                         2,968,452         3,201,454
Administrative fees (Note 4)                                     471,194           340,752
                                                           --------------     -------------

        Total expenses                                        17,756,465        13,557,899
                                                           --------------     -------------

NET INCOME                                                  $  5,179,569       $14,766,424
                                                           ==============     =============
</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, 2001 AND 2000
--------------------------------------------------------------------------------

<Table>
<Caption>
                                        VOTING MEMBERS
                                        --------------
<S>                                     <C>
MEMBERS' CAPITAL,
  DECEMBER 31, 1999                      $ 97,995,285

Additions                                 175,347,578

Net income                                 14,766,424

Withdrawals                               (40,497,320)
                                        --------------

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
                                        ==============
</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"), formerly Merrill Lynch Investment Partners Inc.
      ("MLIP"), 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"), the successor to Merrill Lynch
      Futures Inc. ("MLF") by merger, 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
      ("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 their
      respective capital accounts.

      Effective May 31, 2001, MLIP converted to a Delaware limited liability
      company and changed its name. Effective August 14, 2001, Merrill Lynch
      Group, Inc. contributed all of the issued and outstanding shares of MLIM
      AS LLC to its affiliate MLIM in a tax-free reorganization. All of the
      officers of MLIP at the time continued with their former roles with MLIM
      AS LLC. The changes had no impact on the Company's investors. Effective
      November 2, 2001, MLF merged into its affiliate, MLPF&S, a wholly owned
      subsidiary of Merrill Lynch. MLPF&S became the successor party to the
      agreements between MLF and the Company. The terms of the agreements
      remained unchanged and the merger had no effect on the terms on which the
      Company's transactions were executed.

      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.

      CASH MANAGEMENT

      As of June 2000, the Company began an Income Enhancement Program, whereas,
      a portion of its assets could be invested in Commercial Paper. This was
      done to improve the yield on the cash assets not required for margin for
      trading purposes. These holdings generally have maturities of 30, 60, or
      90 days and are held to maturity. As of December 31, 2001, the Income
      Enhancement Program is inactive.

                                       5
<Page>

      One Member may invest assets that are not allocated to any Advisor
      directly into the Income Enhancement Program. This member would receive a
      priority allocation of interest income earned on these assets before the
      allocation of interest income in proportion to those Members whose assets
      are allocated for trading purposes.

      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 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.

      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, 2001 or
      2000.

      WITHDRAWALS

      Each Member may withdraw some or all of such Members' 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.

                                       6
<Page>

2.    CONDENSED SCHEDULE OF INVESTMENTS

      In March 2001, the American Institute of Certified Public Accountants'
      Accounting Standards Executive Committee issued Statement of Position
      ("SOP") 01-1, "Amendment to Scope of Statement of Position 95-2, Financial
      Reporting by Nonpublic Investment Partnerships, to Include Commodity
      Pools" effective for fiscal years ending after December 15, 2001.
      Accordingly, commodity pools are now required to include a condensed
      schedule of investments identifying those investments, which constitute
      more than 5% of net assets, taking long and short positions into account
      separately.

      The Company's investments, defined as Net unrealized profit on open
      contracts on the Statement of Financial Condition, as of December 31,
      2001 is as follows.

<Table>
<Caption>

                                     LONG POSTIONS                SHORT POSITIONS
                                     -------------                ---------------          NET UNREALIZED
                              UNREALIZED      PERCENT OF     UNREALIZED      PERCENT OF    PROFIT (LOSS) ON    PERCENT OF
COMMODITY INDUSTRY 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                        $ (1,012,795)         -0.50%   $  3,090,334           1.53%   $  2,077,539             1.03%
                             ============                   ============                    ============
</Table>

3.    FINANCIAL DATA HIGHLIGHTS

      The following ratios have been derived from information provided in the
      financial statements for the year ended December 31, 2001.

      Total investment return, compounded monthly               2.12%
                                                          ===========

      RATIO TO AVERAGE NET ASSETS:
      ---------------------------
      Expenses                                                  7.91%
                                                          ===========

      Net income                                                2.31%
                                                          ===========

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.

      As of June 2000, the Company can invest in Commercial Paper. MLPF&S acts
      as custodian for these assets. As of December 31, 2001, no Commercial
      Paper was held.

      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, 2001 and 2000, 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

                                       7
<Page>

      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 of up to 2% 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 23% of any
      New Trading Profit, as defined, recognized by each Advisor, attributable
      to each Member's Capital Account, considered individually irrespective of
      the overall performance of 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.    FAIR VALUE AND OFF-BALANCE SHEET RISK

      The nature of this Company has certain risks, which cannot be presented
      in 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.

                                         8
<Page>

      CREDIT RISK

      The risks associated with exchange-traded contracts are typically
      perceived to be less than those associated with over-the-counter
      (non-exchange-traded) transactions, because exchanges typically (but not
      universally) provide clearinghouse arrangements in which the collective
      credit (in some cases limited in amount, in some cases not) of the members
      of the exchange is pledged to support the financial integrity of the
      exchange. In over-the-counter transactions, on the other hand, traders
      must rely solely on the credit of their respective individual
      counterparties. Margins, which may be subject to loss in the event of a
      default, are generally required in exchange trading, and counterparties
      may also require margin in the over-the-counter markets.

      The 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.








                                 * * * * * * * *

                 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


                                        9