**Exhibit 13.01**

 
| ** ** | ***ML SELECT  FUTURES I L.P.***                                |
|------------|----------------------------------------------------------------|
| ** ** | ***(A Delaware Limited  Partnership)***                        |
| ** ** | ** **                                                     |
| * *   | *Financial Statements for the years ended*                     |
| * *   | *December 31, 2005, 2004 and 2003*                             |
| * *   | *and Report of Independent Registered Public  Accounting Firm* |

 

 

 

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ML Select Futures I L.P.

(A Delaware LimitedPartnership)

 

TABLE OF CONTENTS

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

 

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REPORT OF INDEPENDENTREGISTERED PUBLIC ACCOUNTING FIRM

 

To the Partners of

  ML SelectFutures I L.P.:

 

We have audited the accompanying statements offinancial condition of ML Select Futures I L.P. (the “Partnership”) as ofDecember 31, 2005 and 2004, and the related statements of operations andchanges in partners’ capital for each of the three years in the period ended December31, 2005 and the financial data highlights for the year ended December 31, 2005.These financial statements and financial data highlights are the responsibilityof the Partnership’s management. Our responsibility is to express an opinion onthese financial statements and financial data highlights based on our audits.

 

We conducted our auditsin accordance with the standards of the Public Company Accounting OversightBoard (United States). Those standards require that we plan and perform theaudit to obtain reasonable assurance about whether the financial statements andfinancial data highlights are free of material misstatement. The Partnership isnot required to have, nor were we engaged to perform, an audit of its internalcontrol over financial reporting. Our audits included consideration of internalcontrol over financial reporting as a basis for designing audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Partnership’s internal control overfinancial reporting. Accordingly, we express no such opinion. An audit alsoincludes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements, assessing the accounting principlesused and significant estimates made by management, as well as evaluating theoverall financial statement presentation. We believe that our audits provide areasonable basis for our opinion.

 

In our opinion, the financialstatements and financial data highlights present fairly, in all materialrespects, the financial position of ML Select Futures I L.P. as of December 31,2005 and 2004, and the results of its operations, changes in its partners’capital and the financial data highlights for each of the periods presented inconformity with accounting principles generally accepted in the United Statesof America.

 
| /s/ Deloitte  & Touche LLP |   |
|--------------------------------|--------|

 

New York, New York

March31, 2006

 

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ML SELECT FUTURES I L.P.

(A Delaware LimitedPartnership)

 

STATEMENTS OF FINANCIALCONDITION

DECEMBER 31, 2005 AND 2004

 
| ** **                                              | ** ** | **2005**    | ** **  | **2004**    | ** ** |
|---------------------------------------------------------|------------|-------------|-------------|-------------|------------|
| **ASSETS:**                                             |       |        |        |        |       |
|                                                    |       |        |        |        |       |
| Equity in  commodity futures trading accounts:          |       |        |        |        |       |
| Cash                                                    |       | $           | 397,284,591 |        | $          | 584,353,849 |   |
| Net unrealized  profit on open contracts                |       | 14,499,360  |        | 11,458,435  |       |
| Subscriptions  receivable                               |       | —      |        | 269,811     |       |
| Accrued interest                                        |       | 1,363,422   |        | 1,089,901   |       |
|                                                    |       |        |        |        |       |
| **TOTAL  ASSETS**                                       |       | $           | 413,147,373 |        | $          | 597,171,996 |   |
|                                                    |       |        |        |        |       |
| **LIABILITIES  AND PARTNERS’ CAPITAL**             |       |        |        |        |       |
|                                                    |       |        |        |        |       |
| **LIABILITIES:**                                        |       |        |        |        |       |
|                                                    |       |        |        |        |       |
| Brokerage  commissions payable                          |       | $           | 1,893,591   |        | $          | 2,736,989 |   |
| Profit Shares  payable                                  |       | —      |        | 4,731,366   |       |
| Administrative  fees payable                            |       | 106,906     |        | 163,408     |       |
| Redemptions  payable                                    |       | 14,317,738  |        | 2,561,867   |       |
|                                                    |       |        |        |        |       |
| Total  liabilities                                      |       | 16,318,235  |        | 10,193,630  |       |
|                                                    |       |        |        |        |       |
| **PARTNERS’  CAPITAL:**                            |       |        |        |        |       |
|                                                    |       |        |        |        |       |
| General Partner  (26,449 Units and 26,449 Units)        |       | 5,928,997   |        | 6,199,855   |       |
| Limited Partners  (1,743,781 Units and 2,477,625 Units) |       | 390,900,141 |        | 580,778,511 |       |
|                                                    |       |        |        |        |       |
| Total partners’  capital                           |       | 396,829,138 |        | 586,978,366 |       |
|                                                    |       |        |        |        |       |
| **TOTAL  LIABILITIES AND PARTNERS’ CAPITAL**       |       | $           | 413,147,373 |        | $          | 597,171,996 |   |
|                                                    |       |        |        |        |       |
| **NET  ASSET VALUE PER UNIT**                           |       |        |        |        |       |
| (Based on  1,770,230 and 2,504,074 Units outstanding)   |       | $           | 224.17      |        | $          | 234.41 |   |

 

See notes to financial statements.

 

2

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ML SELECT FUTURES I L.P.

(A Delaware LimitedPartnership)

 

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDEDDECEMBER 31, 2005, 2004 AND 2003

 
| ** **                                                                        | ** ** | **2005**    | ** **  | **2004**    | ** ** | **2003**    | ** ** |
|-----------------------------------------------------------------------------------|------------|-------------|-------------|-------------|------------|-------------|------------|
| **TRADING  PROFITS (LOSSES):**                                                    |       |        |        |        |       |        |       |
|                                                                              |       |        |        |        |       |        |       |   |   |   |
| Realized                                                                          |       | $           | (24,222,659 | )           | $          | 52,256,615  |       | $ | 27,402,575 |   |
| Change in  unrealized                                                             |       | 3,041,057   |        | (14,070,731 | )          | 16,373,295  |       |
|                                                                              |       |        |        |        |       |        |       |
| Total trading  profits (losses)                                                   |       | (21,181,602 | )           | 38,185,884  |       | 43,775,870  |       |
|                                                                              |       |        |        |        |       |        |       |
| **INVESTMENT  INCOME:**                                                           |       |        |        |        |       |        |       |
|                                                                              |       |        |        |        |       |        |       |
| Interest                                                                          |       | 15,719,664  |        | 6,875,902   |       | 1,831,533   |       |
|                                                                              |       |        |        |        |       |        |       |
| **EXPENSES:**                                                                     |       |        |        |        |       |        |       |
|                                                                              |       |        |        |        |       |        |       |
| Brokerage  commissions                                                            |       | 27,053,850  |        | 26,151,018  |       | 10,533,803  |       |
| Profit Shares                                                                     |       | —      |        | 4,731,366   |       | 8,416,558   |       |
| Administrative  fees                                                              |       | 1,479,720   |        | 1,641,858   |       | 622,464     |       |
|                                                                              |       |        |        |        |       |        |       |
| Total expenses                                                                    |       | 28,533,570  |        | 32,524,242  |       | 19,572,825  |       |
|                                                                              |       |        |        |        |       |        |       |
| **NET  INVESTMENT LOSS**                                                          |       | (12,813,906 | )           | (25,648,340 | )          | (17,741,292 | )          |
|                                                                              |       |        |        |        |       |        |       |
| **NET  INCOME (LOSS)**                                                            |       | $           | (33,995,508 | )           | $          | 12,537,544  |       | $ | 26,034,578 |   |
|                                                                              |       |        |        |        |       |        |       |
| **NET  INCOME (LOSS) PER UNIT:**                                                  |       |        |        |        |       |        |       |
| Weighted average  number of General Partner and Limited Partner Units outstanding |       | 2,285,957   |        | 2,055,550   |       | 889,795     |       |
|                                                                              |       |        |        |        |       |        |       |
| Net income  (loss) per weighted average General Partner and Limited Partner Unit  |       | $           | (14.87      | )           | $          | 6.10        |       | $ | 29.26 |   |

 

See notes to financial statements.

 

3

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ML SELECT FUTURES I L.P.

(A Delaware LimitedPartnership)

 

STATEMENTS OF CHANGES INPARTNERS’ CAPITAL

FOR THE YEARS ENDEDDECEMBER 31, 2005, 2004 AND 2003

 
| ** **                                 | ** ** | **Units** | ** ** | **General  Partner** | ** ** | **Limited  Partners** | ** ** | **Total**    | ** ** |
|--------------------------------------------|------------|-----------|------------|----------------------|------------|-----------------------|------------|--------------|------------|
|                                       |       |      |       |                 |       |                  |       |         |       |
| PARTNERS’  CAPITAL, DECEMBER 31, 2002 |       | 538,887   |       | $                    | 829,064    |                  | $          | 104,915,075  |       | $ | 105,744,139 |   |
|                                       |       |      |       |                 |       |                  |       |         |       |
| Subscriptions                              |       | 704,171   |       | 1,460,317            |       | 145,571,636           |       | 147,031,953  |       |
|                                       |       |      |       |                 |       |                  |       |         |       |
| Net income                                 |       | —    |       | 248,906              |       | 25,785,672            |       | 26,034,578   |       |
|                                       |       |      |       |                 |       |                  |       |         |       |
| Redemptions                                |       | (38,902   | )          | —               |       | (8,322,079            | )          | (8,322,079   | )          |
|                                       |       |      |       |                 |       |                  |       |         |       |
| PARTNERS’  CAPITAL, DECEMBER 31, 2003 |       | 1,204,156 |       | 2,538,287            |       | 267,950,304           |       | 270,488,591  |       |
|                                       |       |      |       |                 |       |                  |       |         |       |
| Subscriptions                              |       | 1,372,076 |       | 3,577,366            |       | 316,837,351           |       | 320,414,717  |       |
|                                       |       |      |       |                 |       |                  |       |         |       |
| Net income                                 |       | —    |       | 149,055              |       | 12,388,489            |       | 12,537,544   |       |
|                                       |       |      |       |                 |       |                  |       |         |       |
| Redemptions                                |       | (72,158   | )          | (64,853              | )          | (16,397,633           | )          | (16,462,486  | )          |
|                                       |       |      |       |                 |       |                  |       |         |       |
| PARTNERS’  CAPITAL, DECEMBER 31, 2004 |       | 2,504,074 |       | 6,199,855            |       | 580,778,511           |       | 586,978,366  |       |
|                                       |       |      |       |                 |       |                  |       |         |       |
| Subscriptions                              |       | 5,494     |       | —               |       | 1,181,237             |       | 1,181,237    |       |
|                                       |       |      |       |                 |       |                  |       |         |       |
| Net loss                                   |       | —    |       | (270,858             | )          | (33,724,650           | )          | (33,995,508  | )          |
|                                       |       |      |       |                 |       |                  |       |         |       |
| Redemptions                                |       | (739,338  | )          | —               |       | (157,334,957          | )          | (157,334,957 | )          |
|                                       |       |      |       |                 |       |                  |       |         |       |
| PARTNERS’  CAPITAL, DECEMBER 31, 2005 |       | 1,770,230 |       | $                    | 5,928,997  |                  | $          | 390,900,141  |       | $ | 396,829,138 |   |

 

See notes to financial statements.

 

4

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ML SELECT FUTURES I L.P.

(A Delaware LimitedPartnership)

 

FINANCIAL DATA HIGHLIGHTS

FOR THE YEAR ENDEDDECEMBER 31, 2005

 

The following per Unitdata and ratios have been derived from information provided in the financialstatements.

 
| **Per  Unit Operating Performance:**       | ** ** | ** ** | ** ** |
|--------------------------------------------|------------|------------|------------|
|                                       |       |       |       |
| Net asset value, beginning of year         |       | $          | 234.41     |   |
|                                       |       |       |       |   |
| Realized trading loss                      |       | (6.31      | )          |
| Change in unrealized trading profit (loss) |       | 1.58       |       |
| Interest income                            |       | 6.98       |       |
| Expenses                                   |       | (12.49     | )          |
|                                       |       |       |       |
| Net asset value, end of year               |       | $          | 224.17     |   |
|                                       |       |       |       |
| **Total Return:**                          |       |       |       |
|                                       |       |       |       |
| Total return                               |       | -4.37      | %          |
|                                       |       |       |       |
| **Ratios to Average Net Assets:**          |       |       |       |
|                                       |       |       |       |
| Expenses                                   |       | 5.88       | %          |
| Net investment loss                        |       | -2.64      | %          |

 

See notes to financial statements.

 

5

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ML SELECT FUTURES I L.P.

(A Delaware LimitedPartnership)

 

NOTES TO FINANCIALSTATEMENTS

 

1.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Organization

 

ML Select Futures I L.P.(the “Partnership”) was organized under the Delaware Revised UniformPartnership Act in August 1995 and commenced trading activities on April 16,1996. The Partnership issues new units of limited partner interest (“Units”) atNet Asset Value as of the beginning of each calendar month. The Partnershipengages in the speculative trading of futures, options on futures and forwardcontracts on a wide range of commodities. Sunrise Capital Partners, LLC (“Sunrise”)is the trading advisor of the Partnership. Merrill Lynch AlternativeInvestments LLC (“MLAI”), is the general partner of the Partnership. MLAI is awholly-owned subsidiary of Merrill Lynch Investment Managers  LP (“MLIM”) which in turn, is an indirectwholly-owned subsidiary of Merrill Lynch & Co., Inc. (“Merrill Lynch”).Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”), a wholly-ownedsubsidiary of Merrill Lynch, is the Partnership’s commodity broker. MLAI hasagreed to maintain a general partner’s interest of at least 1% of the totalcapital in the Partnership. MLAI and each Limited Partner share in the profitsand losses of the Partnership in proportion to their respective interests init.

 

Estimates

 

The preparation offinancial statements in conformity with accounting principles generallyaccepted in the United States of America requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the financialstatements and the reported amounts of revenues and expenses during thereporting period. Actual results could differ from those estimates.

 

RevenueRecognition

 

Commodity futures,options on futures and forward contract transactions are recorded on the tradedate and open contracts are reflected in Net unrealized profit on opencontracts in the Statements of Financial Condition as the difference betweenthe original contract value and the market value (for those commodity interestsfor which market quotations are readily available) or at fair value. The changein unrealized profit (loss) on open contracts from one period to the next isreflected in Change in unrealized in the Statements of Operations.

 

Foreign CurrencyTransactions

 

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 aretranslated into U.S. dollars at the rates in effect at the dates of theStatements of Financial Condition. Income and expense items denominated incurrencies other than the U.S. dollar are translated into U.S. dollars at therates in effect during the period. Gains and losses resulting from thetranslation to U.S. dollars are reported in Realized in the Statements of Operations.

 

6

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Operating Expensesand Selling Commissions

 

MLAI pays all routine operating expenses excluding theState of New Jersey filing fee (which is borne by the Partnership) butincluding legal, accounting, printing, postage and similar administrativeexpenses of the Partnership. MLAI receives an administrative fee as well as aportion of the brokerage commissions paid to MLPF&S by the Partnership (seeNote 3).

 

No selling commissionshave been or are paid directly by the Limited Partners. All selling commissionsare paid by MLAI.

 

Cash at Broker

 

A portion of the assetsmaintained at MLPF&S is restricted cash required to meet maintenance marginrequirements. Typically, margin requirements range from 1% to 10% of the facevalue of the derivatives traded.

 

Income Taxes

 

No provision for incometaxes has been made in the accompanying financial statements as each Partner isindividually responsible for reporting income or loss based on such Partner’sshare of the Partnership’s income and expenses as reported for income taxpurposes.

 

Distributions

 

The Limited Partners areentitled to receive, equally per Unit, any distributions which may be made bythe Partnership. No such distributions have been declared for the years endedDecember 31, 2005, 2004 or 2003.

 

Subscriptions

 

Units are offered as ofthe close of business at the end of each month. Shares are purchased as of thefirst business day of any month at Net Asset Value, but the subscriptionrequest must be submitted at least three calendar days before the end of thepreceding month. Subscriptions submitted less than three days before the end ofa month will be applied to Unit subscriptions as of the beginning of the secondmonth after receipt, unless revoked by MLAI.

 

Redemptions

 

A Limited Partner mayredeem some or all of such Partner’s Units at Net Asset Value as of the closeof business on the last business day of any calendar month upon ten days’notice. Units redeemed on or prior to the end of the twelfth full month afterpurchase are assessed an early redemption charge of 3% of their Net Asset Valueas of the date of redemption and, at or after the thirteenth full month throughthe twenty-fourth full month after the purchase, are assessed an earlyredemption charge of 1.5% of their Net Asset Value as of the date ofredemption. Effective February 1, 2004 all new subscriptions are subject to anew redemption charge structure. Units redeemed on or before the end of thetwelfth full month after purchase will be assessed an early redemption chargeof 4% of their Net Asset Value as of the date of redemption. If an investormakes multiple investments in the Partnership, investments are treated on afirst-in, first-out basis in determining whether a redemption charge isapplicable. Redemption charges are subtracted from redemption proceeds and paidto MLAI.

 

7

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Dissolution of thePartnership 

 

The Partnership willterminate on December 31, 2020 or at an earlier date if certain conditionsoccur, as well as under certain other circumstances as set forth in the LimitedPartnership Agreement.

 

Indemnifications

 

In the normal course ofbusiness, the Partnership enters into contracts and agreements that contain avariety of representations and warranties and which provide general indemnifications.The Partnership’s maximum exposure under these arrangements is unknown, as thiswould involve future claims that may be made against the Partnership that havenot yet occurred. The Partnership expects the risk of any future obligation underthese indemnifications to be remote.

 

8

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2.               CONDENSED SCHEDULEOF INVESTMENTS

 

The Partnership’s investments, defined as Netunrealized profit on open contracts on the Statements of Financial Condition,as of December 31, 2005 and 2004, are as follows:

 

 
| **2005**                       |   | **Long  Positions**       |       | **Short  Positions**          |       | **Net  Unrealized**         |       |                      |       |                          |       |
|--------------------------------|--------|---------------------------|------------|-------------------------------|------------|-----------------------------|------------|---------------------------|------------|-------------------------------|------------|
| **Commodity Industry  Sector** |   | **Number  of  Contracts** | ** ** | **Unrealized  Profit (Loss)** | ** ** | **Percent  of  Net Assets** | ** ** | **Number  of  Contracts** | ** ** | **Unrealized  Profit (Loss)** | ** ** | **Percent  of  Net Assets** | ** ** | **Profit  (Loss)  on Open Positions** | ** ** | **Percent  of  Net Assets** | ** ** | **Maturity  Dates** |   |
|                           |   |                      |       |                          |       |                        |       |                      |       |                          |       |   |   |   |   |   |   |   |   |   |   |   |
| Agriculture                    |   | 1,712                     |       | $                             | 5,684,493  |                        | 1.43       | %                         | —     |                          | $          | — |   | — |   | $ | 5,684,493 |   | 1.43 | % | March 06 |   |
| Currencies                     |   | 10,306,813                |       | (5,811,555                    | )          | -1.46                       | %          | (22,870,518               | )          | 7,441,896                     |       | 1.88 | % | 1,630,341 |   | 0.42 | % | March 06 |   |
| Interest rates                 |   | 1,181                     |       | 62,354                        |       | 0.02                        | %          | (11,316                   | )          | 1,024,272                     |       | 0.26 | % | 1,086,626 |   | 0.27 | % | March 06 - March 07 |   |
| Metals                         |   | 2,011                     |       | 9,050,135                     |       | 2.28                        | %          | (711                      | )          | (2,803,692                    | )          | -0.71 | % | 6,246,443 |   | 1.57 | % | January 06 - March 06 |   |
| Stock indices                  |   | 918                       |       | (148,543                      | )          | -0.04                       | %          | —                    |       | —                        |       | — |   | (148,543 | ) | -0.04 | % | March 06 |   |
|                           |   |                      |       |                          |       |                        |       |                      |       |                          |       |   |   |   |   |   |   |   |   |
| Total                          |   |                      |       | $                             | 8,836,884  |                        | 2.23       | %                         |       |                          | $          | 5,662,476 |   | 1.43 | % | $ | 14,499,360 |   | 3.65 | % |   |   |

 
| **2004**                       | ** ** | **Long  Positions**       | ** ** | **Short  Positions**          | ** ** | **Net  Unrealized**         | ** ** | ** **                | ** ** | ** **                    |       |
|--------------------------------|------------|---------------------------|------------|-------------------------------|------------|-----------------------------|------------|---------------------------|------------|-------------------------------|------------|
| **Commodity Industry  Sector** | ** ** | **Number  of  Contracts** | ** ** | **Unrealized  Profit (Loss)** | ** ** | **Percent  of  Net Assets** | ** ** | **Number  of  Contracts** | ** ** | **Unrealized  Profit (Loss)** | ** ** | **Percent  of  Net Assets** | ** ** | **Profit  (Loss)  on Open Positions** | ** ** | **Percent  of  Net Assets** | ** ** | **Maturity  Dates** |   |
|                           |       |                      |       |                          |       |                        |       |                      |       |                          |       |   |   |   |   |   |   |   |   |
| Agriculture                    |       | 1,546                     |       | $                             | 2,987,006  |                        | 0.51       | %                         | (1,467     | )                             | $          | 510,440 |   | 0.09 | % | $ | 3,497,446 |   | 0.60 | % | March 05 |   |
| Currencies                     |       | 13,823,840                |       | 14,653,772                    |       | 2.50                        | %          | (61,490,908               | )          | (14,882,532                   | )          | -2.53 | % | (228,760 | ) | -0.03 | % | March 05 |   |
| Interest rates                 |       | 7,759                     |       | 1,944,101                     |       | 0.33                        | %          | (3,341                    | )          | 1,415,825                     |       | 0.24 | % | 3,359,926 |   | 0.57 | % | March 05 - December 05 |   |
| Metals                         |       | 4,159                     |       | 5,486,884                     |       | 0.93                        | %          | (664                      | )          | (3,319,781                    | )          | -0.57 | % | 2,167,103 |   | 0.36 | % | January 05 - March 05 |   |
| Stock indices                  |       | 1,077                     |       | 2,662,720                     |       | 0.45                        | %          | —                    |       | —                        |       | — |   | 2,662,720 |   | 0.45 | % | March 05 |   |
|                           |       |                      |       |                          |       |                        |       |                      |       |                          |       |   |   |   |   |   |   |   |   |
| Total                          |       |                      |       | $                             | 27,734,483 |                        | 4.72       | %                         |       |                          | $          | (16,276,048 | ) | -2.77 | % | $ | 11,458,435 |   | 1.95 | % |   |   |

 

No individual contract’sunrealized profit or loss comprised greater than 5% of the Partners’ Capital asof December 31, 2005 or 2004.

 

9

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3.               RELATED PARTYTRANSACTIONS

 

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-dayU.S. Treasury bill rate. The Partnership is credited with interest on any ofits assets and net gains actually held by MLPF&S in non-U.S. dollarcurrencies at a prevailing local rate received by Merrill Lynch. Merrill Lynchmay derive certain economic benefit, in excess of the interest, which MerrillLynch pays to the Partnership, from possession of such assets.

 

Merrill Lynch charges thePartnership, at prevailing local rates, for financing realized and unrealizedlosses on the Partnership’s non-U.S. dollar-denominated positions. Such amountsare netted against interest income due to the insignificance of such amounts.

 

The Partnership paysbrokerage commissions to MLPF&S at a flat monthly rate equal to .458 of 1%(a 5.50% annual rate) of the Partnership’s month-end assets. The Partnershippays administrative fees to MLAI at a flat monthly rate equal to .021 of 1% (a0.25% annual rate) of the Partnership’s month-end assets. Beginning in 2003,the Partnership reimburses MLAI for payment of the actual State of New Jerseyannual filing fee assessed on a per partner basis with a maximum of $250,000per year which is paid on its behalf. Month-end trading assets are not reduced,for purposes of calculating brokerage commissions and administrative fees, byany accrued brokerage commissions, administrative fees, Profit Shares or otherfees or charges.

 

MLAI estimates that theround-turn equivalent commission rate charged to the Partnership during theyears ended December 31, 2005, 2004 and 2003 was approximately $370, $318 and $265,respectively (not including, in calculating round-turn equivalents, forwardcontracts on a futures-equivalent basis).

 

MLPF&S pays Sunrise amonthly consulting fee of .083 of 1% (a 1% annual rate) of the month-end assets,after reduction for a portion of the brokerage commissions.

 

4.               ADVISORY AGREEMENT

 

The Partnership enteredinto an Advisory Agreement with Sunrise. The Advisory Agreement between thePartnership and Sunrise continues to be in effect, subject to certain renewalrights exercisable by the Partnership. Sunrise determines the commodityfutures, options on futures and forward contracts traded by the Partnership,subject to certain trading policies and to certain rights reserved by MLAI.

 

Profit Shares equal to23% of any New Trading Profit, as defined, as of the end of each calendar yearare paid to Sunrise. Profit Shares are also paid out in respect of Unitsredeemed (to the extent they exceed the number of Units purchased) as of theend of interim months during a calendar year, to the extent of the applicablepercentage of any New Trading Profit attributable to such Units.

 

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5.               WEIGHTED AVERAGEUNITS

 

The weighted averagenumber of Units outstanding is computed for purposes of calculating net income(loss) per weighted average Unit. The weighted average number of Unitsoutstanding for the years ended December 31, 2005, 2004 and 2003 equaledthe Units outstanding as of such date, adjusted proportionately for Units soldor redeemed based on the respective length of time each was outstanding duringsuch year.

 

6.               FAIR VALUE ANDOFF-BALANCE SHEET RISK

 

The nature of thisPartnership has certain risks, which cannot all be presented on the financialstatements. The following summarizes some of those risks.

 

Market Risk

 

Derivative instrumentsinvolve varying degrees of off-balance sheet market risk. Changes in the levelor volatility of interest rates, foreign currency exchange rates or the marketvalues of the financial instruments or commodities underlying such derivativeinstruments frequently result in changes in the Partnership’s net unrealizedprofit (loss) on such derivative instruments as reflected in the Statements ofFinancial Condition. The Partnership’s exposure to market risk is influenced bya number of factors, including the relationships among the derivativeinstruments held by the Partnership as well as the volatility and liquidity ofthe markets in which the derivative instruments are traded.

 

MLAI has procedures in place intended to controlmarket risk exposure, although there can be no assurance that they will, infact, succeed in doing so. These procedures focus primarily on monitoring thetrading of Sunrise, calculating the Net Asset Value of the Partnership as ofthe close of business on each day and reviewing outstanding positions forover-concentrations. While MLAI does not itself intervene in the markets tohedge or diversify the Partnership’s market exposure, MLAI may urge Sunrise toreallocate positions in an attempt to avoid over-concentrations. However, suchinterventions are unusual and unless it appears that Sunrise has begun todeviate from past practice or trading policies or to be trading erratically, MLAI’sbasic risk control procedures consist simply of the ongoing process of advisormonitoring, with the market risk controls being applied by Sunrise.

 

Credit Risk

 

The risks associated withexchange-traded contracts are typically perceived to be less than thoseassociated with over-the-counter (non-exchange-traded) transactions, becauseexchanges typically (but not universally) provide clearinghouse arrangements inwhich the collective credit (in some cases limited in amount, in some casesnot) of the members of the exchange is pledged to support the financialintegrity of the exchange. In over-the-counter transactions, on the other hand,traders must rely solely on the credit of their respective individualcounterparties. Margins, which may be subject to loss in the event of adefault, are generally required in exchange trading, and counterparties mayalso require margin in the over-the-counter markets.

 

The credit riskassociated with these instruments from counterparty nonperformance is the netunrealized profit on open contracts, if any, included in the Statements ofFinancial Condition. The Partnership attempts to mitigate this risk by dealingexclusively with Merrill Lynch entities as clearing brokers.

 

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The Partnership, in itsnormal course of business, enters into various contracts, with MLPF&Sacting as its commodity broker. Pursuant to the brokerage agreement withMLPF&S (which includes a netting arrangement), to the extent that suchtrading results in receivables from and payables to MLPF&S, thesereceivables and payables are offset and reported as a net receivable or payableand included in Net unrealized profit (loss) on open contracts on theStatements of Financial Condition.

 

*     *    *     *     *    *     *     *    *     *     *

 

To the best of theknowledge and belief of the

undersigned, theinformation contained in this

reportis accurate and complete.

 

Michael Pungello

Chief FinancialOfficer

Merrill LynchAlternative Investments LLC

General Partner of

ML Select FuturesI L.P.

 

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