<PAGE>
 
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C.  20549

                                   FORM 10-K

               (x) Annual Report Pursuant to Section 13 or 15(d)
                    of the Securities Exchange Act of 1934


                 For the fiscal year ended:  December 31, 1998
                                      or
                 (  ) Transition Report Pursuant to Section 13
                or 15(d) of the Securities Exchange Act of 1934


                       Commission file number:  0-21112


                     THE SECTOR STRATEGY FUND (SM) V L.P.
                     ------------------------------------
            (Exact name of registrant as specified in its charter)

               DELAWARE                                    13-3674792
     -------------------------------                  -------------------
     (State or other jurisdiction of                   (I.R.S. Employer
     incorporation or organization)                   Identification No.)

                  C/O MERRILL LYNCH INVESTMENT PARTNERS INC.
                       MERRILL LYNCH WORLD HEADQUARTERS
                            WORLD FINANCIAL CENTER
                       SOUTH TOWER, NEW YORK, NY  10080
                       --------------------------------
                   (Address of principal executive offices)

      Registrant's telephone number, including area code:  (212) 236-5662

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:  None
                                                             ----
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:  Limited Partnership
                                                             -------------------
Units
-----

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
                                                      Yes   X          No ______
                                                          -----

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.   [ X ]

Aggregate market value of the voting and non-voting common equity held by non-
affiliates of the registrant:  the registrant is a limited partnership: as of
February 1, 1999, limited partnership units with an aggregate value of
$9,315,727 were outstanding and held by non-affiliates.

                      DOCUMENTS INCORPORATED BY REFERENCE

The registrant's "1998 Annual Report and Independent Auditors' Report," the
annual report to security holders for the fiscal year ended December 31, 1998,
is incorporated by reference into Part II, Item 8 and Part IV hereof and filed
as an Exhibit herewith.
<PAGE>
 
                     THE SECTOR STRATEGY FUND (SM) V L.P.

                      ANNUAL REPORT FOR 1998 ON FORM 10-K


                               Table of Contents
                               -----------------

<TABLE>
<CAPTION>
                                    PART I                                                        PAGE
                                    ------                                                        ----
<S>                                                                                               <C>
Item 1.   Business...............................................................................   1

Item 2.   Properties.............................................................................   6

Item 3.   Legal Proceedings......................................................................   6

Item 4.   Submission of Matters to a Vote of Security Holders....................................   7


                                    PART II

Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters..................   7

Item 6.   Selected Financial Data................................................................   8

Item 7.   Management's Discussion and Analysis of Financial Condition and Results of Operations..  10

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.............................  17

Item 8:   Financial Statements and Supplementary Data............................................  17

Item 9:   Changes in and Disagreements with Accountants on Accounting............................  17


                                   PART III

Item 10   Directors and Executive Officers of the Registrant.....................................  17

Item 11   Executive Compensation.................................................................  20

Item 12.  Security Ownership of Certain Beneficial Owners and Management.........................  20

Item 13.  Certain Relationships and Related Transactions.........................................  20


                                    PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K........................  22
</TABLE> 

                                      -i-
<PAGE>
 
                                    PART I

ITEM 1:   BUSINESS
          --------

          (a)  General Development of Business:
               -------------------------------

               The SECTOR Strategy Fund (SM) V L.P. (the "Partnership") was
organized under the Delaware Revised Uniform Limited Partnership Act on July 16,
1992 and began trading operations on January 4, 1993. The Partnership made a
single offering of its units of limited partnership interest ("Units"); Units
may be redeemed as of the end of each calendar month. The Partnership engages
(currently, through an investment in a limited liability company (see below)) in
the speculative trading of a portfolio of futures, options on futures, forwards
and options on forward contracts and related options in the currencies, interest
rates, stock index, metals, agricultural and energy sectors of the world
commodity markets. The Partnership's objective is achieving, through speculative
trading, substantial capital appreciation over time, while also assuring
investors of at least a predetermined minimum Net Asset Value per Unit as of the
Principal Assurance Date.

               Merrill Lynch Investment Partners Inc. (the "General Partner" or
"MLIP") is the general partner of the Partnership and selects and allocates the
Partnership's assets (through the Partnership's investment in ML Multi-Manager
Portfolio LLC ("MM LLC"), among professional advisors ("Trading
Advisors" or "Advisors"), each unaffiliated with MLIP and each of which trades
independently of the others. The Partnership and MM LLC are referred to
throughout this document, either individually and/or collectively, as the
"Fund". MLIP also determines what percentage of the Partnership's assets to
allocate to trading and what percentage to hold in reserve. Merrill Lynch
Futures Inc. (the "Commodity Broker" or "MLF") is the Partnership's commodity
broker. A portion of the Partnership's assets is held by a commodity broker,
other than MLF, to facilitate the trading of a certain independent advisor. The
General Partner is a wholly-owned subsidiary of Merrill Lynch Group, Inc.,
which, in turn, is a wholly-owned subsidiary of Merrill Lynch & Co., Inc.
("ML&Co."). The Commodity Broker is an indirect wholly-owned subsidiary of
ML&Co. (ML&Co. and its affiliates are herein sometimes referred to as "Merrill
Lynch.")

               Prior to October 1, 1996, the Partnership placed assets with the
Trading Advisors by opening individual managed accounts with them. For the
period from October 1, 1996 to May 31, 1998, the Partnership placed assets with
certain of the Trading Advisors through investing in private funds ("Trading
LLCs") sponsored by MLIP, through which the trading accounts of different MLIP-
sponsored funds managed by the same Advisor pursuant to the same strategy were
consolidated. The only members of the Trading LLCs were commodity pools
sponsored by MLIP. Placing assets with an Advisor through investing in a Trading
LLC rather than a managed account had no economic effect on the Partnership,
except to the extent that the Partnership benefited from the Advisor not having
to allocate trades among a number of different accounts (rather than acquiring a
single position for the Trading LLC as a whole). As of June 1, 1998, MLIP
consolidated the trading accounts of nine of its multi-advisor funds (the 
"Multi-Advisor Funds"), including the Partnership. The consolidation was
achieved by having these Multi-Advisor Funds invest in a single Delaware limited
liability company, MM LLC, which opened a single account with each Advisor
selected. MM LLC is managed by MLIP, 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. The administrative authority
over the Partnership, as well as MM LLC, remains with MLIP. The following
disclosures relate to the operation of the Partnership through its investment in
MM LLC.

               In addition to its investment in MM LLC, the Partnership
maintains a cash account. From time to time, the General Partner allocates and
reallocates Partnership assets among its investment in MM LLC and cash accounts
in an attempt to increase profit potential while limiting the downside risks
associated with futures and forward trading (in order to prevent ML&Co. from
incurring any obligations under its guarantee of a minimum Net Asset Value per
Unit, as described below). Initially, the General Partner allocated
approximately 30% of the Partnership's assets to cash and approximately 70% to
trading. As of December 31, 1998, 100% was invested in MM LLC.

                                      -1-
<PAGE>
 
               As of December 31, 1998, Units with an aggregate Net Asset Value
of $134,879,127 have been redeemed, the Partnership's capitalization is
$9,750,926, and the Net Asset Value of a Unit sold as of January 4, 1993 for
$100 was $134.13. As of December 31, 1998, the Fund had 666 Limited Partners.

               ML&Co. guarantees that the Net Asset Value per Unit will equal at
least $105.77 as of December 31, 1999 (the "Principal Assurance Date").
The initial Principal Assurance Date was set at approximately five years after
trading commenced. Effective January 1, 1998 the Fund restarted its trading
program for a new Time Horizon of two years' duration. This guarantee does not
prevent substantial investor losses, but rather serves only as a form of "stop
loss," limiting the maximum loss which investors who retain their Units until
the Principal Assurance Date can incur. In order to protect ML&Co. from any
liability under its guarantee at such time, if any, as the Net Asset Value per
Unit were to decline to 110% or less of the present value of the guaranteed
minimum Net Asset Value discounted back from the Principal Assurance Date, MLIP
would terminate trading altogether in order to ensure that ML&Co. incurred no
financial obligation to the Fund under ML&Co.'s guarantee of the minimum Net
Asset Value per Unit.

               Through December 31, 1998, the net gain in the Net Asset Value
per Unit was 34.13%. Through December 31, 1998, the highest month-end Net Asset
Value per Unit was $134.13 (December 31, 1998) and the lowest $98.60 (January
31, 1993).

          (b)  Financial Information about Segments:

               The Partnership's business constitutes only one segment for
financial reporting purposes, i.e., a speculative "commodity pool." The
Partnership does not engage in sales of goods or services.

          (c)  Narrative Description of Business:

               GENERAL

               The Fund trades (currently, through its investment in MM LLC) in
futures, options on futures, forwards and options on forward contracts in major
sectors of the world economy, with the objective of achieving capital
appreciation over time, while assuring investors of at least a predetermined
minimum Net Asset Value per Unit as of the Principal Assurance Date.

               The General Partner is the Partnership's trading manager, with
responsibility for selecting Advisors to manage MM LLC's assets, allocating and
reallocating MM LLC assets among different Advisors and determining the
percentage of the Partnership's assets to be invested in MM LLC from time to
time.

               Although considered as a whole, the Partnership (currently,
through an investment in MM LLC) trades in a diversified range of international
markets. Certain of the Trading Advisors, considered individually, concentrate
primarily on trading in a limited portfolio of markets. The composition of the
"sectors" included in the Partnership's portfolio varies substantially over
time.

               MLIP may, from time to time, direct certain individual Advisors
to manage their Fund accounts as if they were managing more equity than the
actual capital allocated to them.

               One of the objectives of the Fund is to provide diversification
for a limited portion of the risk segment of the Limited Partners' portfolios.
Commodity pool performance has historically often demonstrated a low degree of
performance correlation with traditional stock and bond holdings. Since it began
trading, the Fund's returns have, in fact, frequently been significantly non-
correlated (not, however, negatively correlated) with the United States stock
and bond markets.

                                      -2-
<PAGE>
 
               ML&CO.'S "PRINCIPAL PROTECTION" UNDERTAKING TO THE FUND

          ML&Co., the parent company of the Merrill Lynch organization, which
includes the General Partner and the Commodity Broker, has agreed to contribute
sufficient capital to the Partnership so that it will have adequate funds, after
adjustment for all liabilities to third parties, that the Net Asset Value per
Unit will be no less than $105.77 as of the Principal Assurance Date (December
31, 1999). This guarantee, which is effective only as of the Principal Assurance
Date, is a guarantee only of the minimum assured Net Asset Value (plus
distributions, if any), not against the loss of the time value of such
investment or a guarantee of profit. This guarantee is a general, unsecured
obligation of ML&Co.

          OPERATION OF THE PARTNERSHIP AFTER THE SECOND PRINCIPAL ASSURANCE DATE

          When the Fund reached its first Principal Assurance Date, MLIP
"restarted" the Fund's trading program and the ML&Co. guarantee for a two-year
period ending December 31, 1999. MLIP may determine to dissolve the Partnership
as of the Principal Assurance Date, to extend the ML&Co. guarantee for a certain
period of time (resetting the minimum Net Asset Value per Unit guaranteed by
ML&Co.) or to continue to operate the Fund without a "principal protection"
feature. All investors will be given notice by no later than November 15, 1999
as to what the operation of the Fund (if any) will be after the Principal
Assurance Date.

               USE OF PROCEEDS AND INTEREST INCOME

               Market Sectors. The Partnership (currently, through an investment
               --------------
in MM LLC) trades in a diversified group of markets under the direction of
multiple independent Advisors. These Advisors can, and do, from time to time,
materially alter the allocation of their overall trading commitments among
different market sectors. Except in the case of certain trading programs which
are purposefully limited in the markets which they trade, there is essentially
no restriction on the commodity interests which may be traded by any Advisor or
the rapidity with which an Advisor may alter its market sector allocations.

               The Fund's financial statements contain information relating to
the market sectors traded by the Fund. There can, however, be no assurance as to
which markets may be included in the Fund's portfolio or in which market sectors
the Fund's trading may be concentrated at any one time or over time.

               Market Types. The Fund trades (currently through its investment
               ------------
 in MM LLC) on a variety of United States and foreign futures exchanges.
 Substantially all of the Fund's off-exchange trading takes place in the highly
 liquid, institutionally-based currency forward markets.

               Many of the Partnership's currency trades are executed in the
spot and forward foreign exchange markets (the "FX Markets") where there are no
direct execution costs. Instead, the participants, banks and dealers, including
Merrill Lynch International Bank ("MLIB"), in the FX Markets take a "spread"
between the prices at which they are prepared to buy and sell a particular
currency and such spreads are built into the pricing of the spot or forward
contracts with the Partnership. The General Partner anticipates that some of the
Partnership's foreign currency trades will be executed through MLIB, an
affiliate of the General Partner. MLIB has discontinued the operation of the
foreign exchange service desk, which included seeking multiple quotes from
counterparties unrelated to MLIB for a service fee and trade execution.

               In its exchange of futures for physical ("EFP") trading, the
Partnership acquires cash currency positions through banks and dealers,
including Merrill Lynch. The Partnership pays a spread when it exchanges these
positions for futures. This spread reflects, in part, the different settlement
dates of the cash and the futures contracts, as well as prevailing interest
rates, but also includes a pricing spread in favor of the banks and dealers,
which may include a Merrill Lynch entity.

               As in the case of its market sector allocations, the Fund's
commitments to different types of markets -- U.S. and non-U.S., regulated and
unregulated --differ substantially from time to time as well as over time.

                                      -3-
<PAGE>
 
               The Fund's financial statements contain information relating to
the types of markets traded by the Fund. There can, however, be no assurance as
to which markets the Fund may trade or as to how the Fund's trading may be
concentrated at any one time or over time.

               Custody of Assets. The majority of the Fund's assets are
               -----------------
currently held in customer accounts at Merrill Lynch.

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

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

                             ____________________ 

          CHARGES

          The following table summarizes the charges incurred by the Fund during
1998, 1997, and 1996.


<TABLE>
<CAPTION>
                                     1998                          1997                      1996       
                            ------------------------------------------------------------------------------------
                                           % of Average                 % of Average                % of Average 
                              Dollar         Month End       Dollar       Month End    Dollar         Month End   
                Cost          Amount        Net Assets       Amount      Net Assets    Amount         Net Assets  
          ------------------------------------------------------------------------------------------------------
          <S>                 <C>          <C>               <C>        <C>            <C>          <C>            
          Brokerage           $115,706           1.10%       $348,042         2.69%    $1,198,690          6.77%
          Commissions                                                                                      
          Administrative         3,306           0.03%          9,839         0.08%        30,735          0.17%
          Fees                                                                                             
          Profit Shares             74           0.00%          9,118         0.07%        50,339          0.28%
                              ------------------------       ----------------------    -------------------------
          Total               $119,086           1.13%       $366,999         2.84%    $1,279,764          7.22%
                              ========================       ======================    =========================
</TABLE>

                             ____________________ 

               Subsequent to October 1, 1996, Brokerage Commissions,
Administrative Fees and Profit Shares are not representative of the actual
amounts paid by the Fund, because the Fund paid the bulk of these fees as an
investor in the Trading LLCs or MM LLC. See "Description of Current Charges."

               The foregoing table does not reflect the bid-ask spreads paid by
the Fund on its forward trading, or the benefits which may be derived by Merrill
Lynch from the deposit of certain of the Fund's U.S. dollar assets in offset
accounts.

                                      -4-
<PAGE>
 
               The Fund's average month-end Net Assets during 1998, 1997 and
1996 equaled $10,524,883, $12,922,688, and $17,712,482; respectively.

               During 1998, 1997, and 1996, the Fund earned $69,400, $292,197;
$782,522; and in interest income, or approximately .66%, 2.26% and 4.42% of the
Fund's average month-end Net Assets.

               Effective January 1, 1996, the 10% per annum Brokerage
Commissions paid by the Fund to MLF were recharacterized as 9.75% per annum
Brokerage Commissions and a 0.25% per annum Administrative Fee paid by the Fund
to MLIP. This recharacterization had no economic effect on the Fund.

               As of February 1, 1997, the 9.75% per annum Brokerage Commissions
were reduced to 8.75% per annum (0.7291% of the Fund's month-end assets).


                        DESCRIPTION OF CURRENT CHARGES

RECIPIENT           NATURE OF PAYMENT          AMOUNT OF PAYMENT
---------           -----------------          -----------------
MLF                 Brokerage Commissions      A flat-rate monthly commission of
                                               0.7291 of 1% (an 8.75% annual
                                               rate) of the Fund's month-end
                                               assets committed to trading. As
                                               of December 31, 1998
                                               approximately 100% of the Fund's
                                               assets were allocated to trading.

                                               During 1998, 1997, and 1996, the
                                               round-turn (each purchase and
                                               sale or sale and purchase of a
                                               single futures contract)
                                               equivalent rate of the Fund's
                                               flat-rate Brokerage Commissions
                                               was approximately $126, $136, and
                                               $55, respectively.

MLF                 Use of Fund assets         Merrill Lynch may derive an
                                               economic benefit from the deposit
                                               of certain of the Fund's U.S.
                                               dollar assets in offset accounts.

MLIP                Administrative Fees        The Fund pays MLIP a monthly
                                               Administrative Fee equal to
                                               0.02083 of 1% of the Fund's 
                                               month-end assets committed to
                                               trading (0.25% annually). MLIP
                                               pays all of the Fund's routine
                                               administrative costs.

MLIB; Other         Bid-ask spreads            Bid-ask spreads on forward and 
Counterparties                                 related trades.

                                      -5-
<PAGE>
 
Trading Advisors    Profit Shares              Prior to January 1, 1997, all
                                               Advisors received quarterly
                                               Profit Shares ranging from 15% to
                                               25% (depending on the Trading
                                               Advisor) of any New Trading
                                               Profit achieved by their Fund
                                               account. As of January 1, 1997, a
                                               number of Advisors agreed to
                                               receive only annual Profit
                                               Shares. Profit Shares are also
                                               paid upon redemption of Units and
                                               upon the net reallocation of
                                               assets away from an Advisor. New
                                               Trading Profit is calculated
                                               separately in respect of each
                                               Advisor, irrespective of the
                                               overall performance of the Fund.
                                               The Fund may pay substantial
                                               Profit Shares during periods when
                                               it is incurring significant
                                               overall losses.

Trading Advisors    Consulting Fees            MLF 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.

MLF;                Extraordinary expenses     Actual costs incurred; none paid 
 Others                                        to date. 


               REGULATION

               The General Partner, the Trading Advisors and the Commodity
Broker are each subject to regulation by the Commodity Futures Trading
Commission (the "CFTC") and the National Futures Association. Other than in
respect of its periodic reporting requirements under the Securities Exchange Act
of 1934, the Partnership itself is generally not subject to regulation by the
Securities and Exchange Commission. However, MLIP itself is registered as an
"investment adviser" under the Investment Advisers Act of 1940.

               (i) through (xii) -- not applicable.

               (xiii)  The Partnership has no employees.

          (d)  Financial Information about Foreign and Domestic Operations and
               ---------------------------------------------------------------
Export Sales:
------------

               The Partnership trades, (currently through its investment in MM
LLC), on a number of foreign commodity exchanges. The Partnership does not
engage in the sales of goods or services.

ITEM 2:   PROPERTIES
          ----------

               The Partnership does not use any physical properties in the
conduct of its business.

               The Partnership's only place of business is the place of business
of the General Partner, Merrill Lynch World Headquarters, World Financial
Center, South Tower, New York, New York, 10080. The General Partner performs all
administrative services for the Partnership from the General Partner's offices.

ITEM 3:   LEGAL PROCEEDINGS
          -----------------

               ML&Co. -- the sole stockholder of Merrill Lynch Group, Inc.
(which is the sole stockholder of MLIP) -- as well as certain of its
subsidiaries and affiliates have been named as defendants in civil actions,
arbitration proceedings and claims arising out of their respective business
activities. Although the ultimate outcome of these actions cannot be predicted
at this time and the results of legal proceedings cannot be predicted with
certainty, it is the opinion of management that the result of these matters will
not be materially adverse to the business operations of financial condition of
MLIP or the Fund.

                                      -6-
<PAGE>
 
               MLIP itself has never been the subject of any material
litigation.

ITEM 4:   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
          ---------------------------------------------------

               The Partnership has never submitted any matter to a vote of its
Limited Partners.

                                    PART II

ITEM 5:   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
          ---------------------------------------------------------------------

Item 5(a):

          (a)  Market Information:
               ------------------

               There is no public trading market for the Units, nor will one
develop. Rather, Limited Partners may redeem Units as of the end of each month
at Net Asset Value, subject to certain early redemption charges. Units redeemed
prior to the Principal Assurance Date are not entitled to any benefits of the
ML&Co. guarantee.

          (b)  Holders:
               -------

               As of December 31, 1998, there were 667 holders of Units,
including the General Partner.

          (c)  Dividends:
               ---------

               The Partnership has made no distributions, nor does the General
Partner presently intend to make any distributions in the future.

Item 5(b)

               Not applicable.

                                      -7-
<PAGE>
 
ITEM 6:   SELECTED FINANCIAL DATA

The following selected financial data has been derived from the audited
financial statements of the Partnership:

<TABLE>
<CAPTION>
                                  For the Year       For the Year       For the Year       For the Year      For the Year
                                     Ended               Ended              Ended             Ended             Ended
                                  December 31,       December 31,       December 31,       December 31,      December 31,
Statement of Operations Data          1998               1997               1996               1995              1994
----------------------------------------------------------------------------------------------------------------------------
<S>                               <C>                <C>                <C>                <C>               <C> 
Revenues:
 
Trading (Loss) Profit
   Realized (Loss) Gain           $  (70,297)        $   368,946        $  1,264,013       $  5,460,869      $ (1,405,309)        
   Change in Unrealized Loss         (17,058)            (39,093)         (1,945,383)          (152,635)         (410,982)        
                                  ------------------------------------------------------------------------------------------ 
   Total Trading Results             (87,355)            329,853            (681,370)         5,308,234        (1,816,291)         
                                  ------------------------------------------------------------------------------------------ 
 
Interest Income                       69,400             292,197             782,522          1,600,013         2,197,769
                                  ------------------------------------------------------------------------------------------
   Total Revenues                    (17,955)            622,050             101,152          6,908,247           381,478
                                  ------------------------------------------------------------------------------------------
 
Expenses:
   Brokerage Commissions             115,706             348,042           1,198,690          2,378,476         4,458,470
   Administrative Fees                 3,306               9,839              30,735                  -                 -
   Profit Shares                          74               9,118              50,339            524,877           249,343
                                  ------------------------------------------------------------------------------------------
   Total Expenses                    119,086             366,999           1,279,764          2,903,353         4,707,813
                                  ------------------------------------------------------------------------------------------ 
Income from Investments              193,066           1,114,196             708,715                  -                 -
                                  ------------------------------------------------------------------------------------------
Net Income (Loss)                 $   56,025         $ 1,369,247        $   (469,897)      $  4,004,894      $ (4,326,335)
                                  ==========================================================================================
 
 
           
                                December 31,        December 31,       December 31,      December 31,      December 31,
Balance Sheet Data                 1998                 1997              1996              1995              1994
-----------------------------------------------------------------------------------------------------------------------------
<S>                             <C>                 <C>                <C>               <C>               <C>   
Fund Net Asset Value            $ 9,750,926           $12,210,714        $14,034,296       $26,056,054       $38,533,142
Net Asset Value per Unit        $    134.13           $    132.21        $    119.09       $    115.50       $    101.12
                                ---------------------------------------------------------------------------------------------
</TABLE>

     The variations in income statement line items are primarily due to
investing in Trading LLCs and in MM LLC.


<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                      MONTH-END NET ASSET VALUE PER UNIT
-------------------------------------------------------------------------------------------------------------------
          Jan.     Feb.     Mar.     Apr.      May     June     July     Aug.     Sept.    Oct.     Nov.     Dec.
-------------------------------------------------------------------------------------------------------------------
<S>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C> 
1994     $101.89  $100.01  $101.05  $ 99.97  $102.92  $104.78  $104.26  $101.53  $101.84  $101.01  $102.90  $101.12
-------------------------------------------------------------------------------------------------------------------
1995     $ 99.58  $103.91  $107.84  $109.57  $113.00  $110.57  $106.99  $105.71  $104.67  $104.05  $107.30  $115.50
-------------------------------------------------------------------------------------------------------------------
1996     $115.53  $106.85  $105.04  $107.19  $104.38  $103.82  $104.12  $105.68  $109.65  $115.91  $122.45  $119.09
-------------------------------------------------------------------------------------------------------------------
1997     $122.53  $124.41  $124.03  $120.91  $119.51  $120.99  $132.18  $126.72  $129.82  $128.17  $129.08  $132.21
-------------------------------------------------------------------------------------------------------------------
1998     $130.73  $129.48  $128.35  $121.27  $124.04  $124.13  $124.30  $131.09  $133.89  $133.48  $133.60  $134.13
-------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      -8-
<PAGE>
 
                     THE SECTOR STRATEGY FUND (SM) V L.P.
                               December 31, 1998

   Type of Pool:  Selected-Advisor/Publicly-Offered/"Principal Protected"(1)
                    Inception of Trading:   January 4, 1993
                   Aggregate Subscriptions:    $137,500,000
                     Current Capitalization:   $9,750,926
                  Worst Monthly Drawdown(2):  (7.51)%  (2/96)
           Worst Peak-to-Valley Drawdown(3):  (10.14)%  (2/96-6/96)
                                 _____________


            Net Asset Value per Unit, December 31, 1998:   $134.13

<TABLE>
<CAPTION>
             ---------------------------------------------------------------------------------------
                                                    MONTHLY RATES OF RETURN/(4)/                           
             ---------------------------------------------------------------------------------------       
             MONTH                    1998         1997         1996         1995         1994             
             ---------------------------------------------------------------------------------------       
             <S>                      <C>          <C>          <C>          <C>          <C>                 
             January                   (1.12)%        2.89%        0.03%      (1.52)%      (2.95)%         
             ---------------------------------------------------------------------------------------       
             February                   (0.96)        1.53        (7.51)        4.35        (1.84)         
             ---------------------------------------------------------------------------------------       
             March                      (0.88)       (0.31)       (1.70)        3.79         1.04          
             ---------------------------------------------------------------------------------------       
             April                      (5.52)       (2.52)        2.05         1.61        (1.07)         
             ---------------------------------------------------------------------------------------       
             May                         2.28        (1.16)       (2.62)        3.12         2.95          
             ---------------------------------------------------------------------------------------       
             June                        0.07         1.24        (0.54)       (2.14)        1.80          
             ---------------------------------------------------------------------------------------       
             July                        0.14         9.25         0.28        (3.24)       (0.49)         
             ---------------------------------------------------------------------------------------       
             August                      5.46        (4.13)        1.50        (1.20)       (2.62)         
             ---------------------------------------------------------------------------------------       
             September                   2.14         2.45         3.76        (0.99)        0.31          
             ---------------------------------------------------------------------------------------       
             October                    (0.31)       (1.27)        5.71        (0.59)       (0.82)         
             ---------------------------------------------------------------------------------------       
             November                    0.09         0.71         5.64         3.12         1.87          
             ---------------------------------------------------------------------------------------       
             December                    0.40         2.42        (2.74)        7.64        (1.73)         
             ---------------------------------------------------------------------------------------       
             Compound Annual             
             Rate of Return              1.43%       11.00%        3.11%       14.22%       (3.68)%         
             ---------------------------------------------------------------------------------------        
</TABLE>

               (1)  Pursuant to applicable CFTC regulations, a "Multi-Advisor"
fund is defined as one that allocates no more than 25% of its trading assets
(i.e., assets committed to trading) to any single manager. As the Fund may
allocate more than 25% of its trading assets to one or more Advisors, it is
referred to as a "Selected-Advisor" fund. Applicable CFTC regulations define a
"Principal Protected" fund as one which is designed to limit the loss of
participants' initial investment. MLIP's trading leverage policies and the
ML&Co. guarantee limit Limited Partners' losses on their Units to the time value
of their investments over the Time Horizon from the beginning of trading to the
Principal Assurance Date.

               (2)  Worst Monthly Drawdown represents the largest negative
Monthly Rate of Return experienced by the Fund; a drawdown is measured on the
basis of month-end Net Asset Value only, and does not reflect intra-month
figures.

               (3)  Worst Peak-to-Valley Drawdown represents the greatest
percentage decline from a month-end cumulative Monthly Rate of Return without
such cumulative Monthly Rate of Return being equaled or exceeded as of a
subsequent month-end. For example, if the Monthly Rate of Return was (1)% in
each of January and February, 1% in March and (2)% in April, the Peak-to-Valley
Drawdown would still be continuing at the end of April in the amount of
approximately (3)%, whereas if the Monthly Rate of Return had been approximately
3% in March, the Peak-to-Valley Drawdown would have ended as of the end of
February at approximately the (2)% level.

               (4)  Monthly Rate of Return is the net performance of the Fund
during the month of determination (including interest income and after all
expenses have been accrued or paid) divided by the total equity of the Fund as
of the beginning of such month.

                                      -9-
<PAGE>
 
ITEM 7:   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
          ---------------------------------------------------------------
          RESULTS OF OPERATIONS
          ---------------------

RESULTS OF OPERATIONS

          Advisor Selections
          ------------------
        
               The Fund's results of operations depend on MLIP's ability to
select Advisors and the Advisors' ability to trade profitably. MLIP's selection
procedures and trading leveraging analysis, as well as the Advisors' trading
methods, are confidential, so that substantially the only available information
relevant to the Fund's results of operations is its actual performance record to
date. Because of the speculative nature of its trading, the Fund's past
performance is not necessarily indicative of its future results.

               MLIP has made and expects to continue making frequent changes to
both trading asset allocations among Advisors and Advisor combinations as well
as from time to time adjusting the percentage of the Fund's assets committed to
trading.

               MLIP's decision to terminate or reallocate assets among Advisors
is based on a combination of factors. Advisors are, in general, terminated
primarily for unsatisfactory performance, but other factors -- for example, a
change in MLIP's or an Advisor's market outlook, apparent deviation from
announced risk control policies, excessive turnover of positions, changes in
principals, commitment of resources to other business activities, etc. -- may
also have a role in the termination or reallocation decision. The market
judgment and experience of MLIP's principals is an important factor in its asset
allocation decisions.

               MLIP has no timetable or schedule for making Advisor changes or
reallocations, and generally makes a medium- to long-term commitment to all
Advisors selected. There can be no assurance as to the frequency or number of
Advisor changes that may take place in the future, or as to how long any of the
current Advisors will continue to manage assets for the Fund.

          General
          -------

               A number of the Advisors are trend-following traders, whose
programs do not attempt to predict price movements. No fundamental economic
supply or demand analyses are used by these Advisors, and no macroeconomic
assessments of the relative strengths of different national economies or
economic sectors. Instead, the programs apply proprietary computer models to
analyzing past market data, and from this data alone attempt to determine
whether market prices are trending. These technical traders base their
strategies on the theory that market prices reflect the collective judgment of
numerous different traders and are, accordingly, the best and most efficient
indication of market movements. However, there are frequent periods during which
fundamental factors external to the market dominate prices.

               If a trend-following Advisor's models identify a trend, they
signal positions which follow it. When these models identify the trend as having
ended or reversed, these positions are either closed out or reversed. Due to
their trend-following character, these Advisors' programs do not predict either
the commencement or the end of a price movement. Rather, their objective is to
identify a trend early enough to profit from it and detect its end or reversal
in time to close out the Fund's positions while retaining most of the profits
made from following the trend.

               In analyzing the performance of trend-following programs,
economic conditions, political events, weather factors, etc., are not directly
relevant because only market data has any input into trading results.
Furthermore, there is no direct connection between particular market conditions
and price trends. There are so many influences on the markets that the same
general type of economic event may lead to a price trend in some cases but not
in others. The analysis is further complicated by the fact that the programs are
designed to recognize only certain types of trends and to apply only certain
criteria of when a trend has begun. Consequently, even though significant price
trends may occur, if these trends are not comprised of the type of intra-period
price movements which the programs are designed to identify, a trend-following
Advisor may miss the trend altogether.

                                      -10-
<PAGE>
 
               In the case of the Advisors which implement strategies which rely
more on discretion and market judgment, it is not possible to predict, from
their performance during past market cycles, how they will respond to future
market events.

          Performance Summary
          -------------------

               This performance summary is an outline description of how the
Fund performed in the past, not necessarily any indication of how it will
perform in the future. In addition, the general causes to which certain price
movements are attributed may or may not in fact have caused such movements, but
simply occurred at or about the same time.

               The Advisors, as a group, are unlikely to be profitable in
markets in which such trends do not occur. Static or erratic prices are likely
to result in losses. Similarly, unexpected events (for example, a political
upheaval, natural disaster or governmental intervention) can lead to major 
short-term losses as well as gains.

               While there can be no assurance that any Advisor will be
profitable, under any given market condition, markets in which substantial and
sustained price movements occur typically offer the best profit potential for
the Fund.

               The performance of the Fund is also materially affected by the
percentage of its assets allocated to trading. The greater the percentage of the
Fund's assets allocated to trading, the greater its profit potential, risk and
performance volatility

<TABLE> 
<CAPTION> 
     1998

                                                                   Total Trading
                                                                      Results
           <S>                                                      <C>
          Interest Rates and Stock Indices                         $  162,415 
          Commodities                                                 (73,623)
          Currencies                                                  (75,241)
          Energy                                                      (48,558)
          Metals                                                      (52,348)
                                                                   -----------
                                                                   $  (87,355)
                                                                   ===========
</TABLE> 

               Global interest rate markets provided the Fund with its most
profitable positions for the first quarter, particularly in European bonds where
an extended bond market rally continued despite an environment of robust growth
in the United States, Canada and the United Kingdom, as well as a strong pick-up
in growth in continental Europe. In the second quarter, swings in the U.S.
dollar and developments in Japan affected bond markets, causing the Fund's
interest rate trading to result in losses. This was turned around in the third
quarter, as markets worldwide were turned upside down and the Fund's non-
correlation with general equity and debt markets was strongly exhibited, and
trading was particularly profitable in positions in Eurodollars, German and
Japanese bonds, and U.S. Treasury notes and bonds. Global investors staged a
major flight to quality, resulting in a significant widening of credit spreads
on a global basis. In October, investors pushed the yields on U.S. Treasury
bonds to a 31-year low. The long bond yield fell about 75 basis points in 1998
as the world economy slowed more than expected, inflation continued to fall, the
anticipated small U.S. budget deficit turned into substantial surplus, and the
Fed lowered interest rates.

               In currency markets, results early in the year were mixed, but
unprofitable. During the second quarter, strong gains were realized in positions
in the Japanese yen, which weakened during June to an eight-year low versus the
U.S. dollar. Significant gains from Japanese yen trading continued into the
third quarter, and Japan's problems spread to other sectors of the global
economy, causing commodities prices to decline as demand from the Asian
economies weakened. Japan's deepening recession and credit crunch continued
through the fourth quarter, and the Fund achieved gains from long yen positions.

                                      -11-
<PAGE>
 
               Trading results in stock index markets were also mixed in early
1998, despite a strong first-quarter performance by the U.S. equity market as
several consecutive weekly gains were recorded with most market averages setting
new highs. Second quarter results were profitable as the Asia-Pacific region's
equity markets weakened across the board. In particular, Hong Kong's Hang Seng
index trended downward during most of the second quarter and traded at a three-
year low. As U.S. equity markets declined in July and August, the Fund profited
from short positions in the S&P 500, most notably during August, when the index
dropped 14.5%. Volatility in September made for a difficult trading environment
in the stock index sector, and the Fund incurred modest losses, although results
remained profitable for the quarter and the year overall in these markets.

               Gold prices began the year drifting sideways, and continued to
weaken following news in the second quarter of a European Central Bank consensus
that ten to fifteen percent of reserves should be made up of gold bullion, which
was at the low end of expectations. Gold was unable to extend third quarter
rallies or to build any significant upside momentum, resulting in a trendless
environment. This was also the case in the fourth quarter, as gold's cost of
production declined. Also, silver markets remained range-bound, while also
experiencing a significant selloff in November, and aluminum traded at its
lowest levels since 1994, with many aluminum smelters operating at a loss.

               In agricultural commodity markets, 1998 began with strong gains
as live cattle and hog prices trended downward throughout the first quarter. In
the second quarter, although the U.S. soybean crop got off to a good start which
contributed to higher yield expectations and a more burdensome supply outlook,
soybean prices traded in a volatile pattern. Sugar futures maintained mostly a
downtrend, as no major buyers emerged to support the market. Similarly, coffee
prices trended downward, as good weather conditions in Central America and
Mexico increased the prospects of more output from these countries. The third
quarter resulted in losses as the U.S. soybean crop increased relative to the
USDA's production estimate as a result of timely rains, which contributed to
lower prices. These losses continued into the fourth quarter as the Fund was
caught on the short side of the soybean complex, as the soybean supply surplus
became more manageable following the November 10th USDA reports, causing prices
to gain upward momentum.

               In energy markets, demand for crude oil in the Middle East was
affected by low oil prices early in the year, and trading resulted in losses.
Initially buoyed on concerns about a U.S.-led military strike against Iraq,
crude oil fell to a nine-year low, as the globally warm winter, the return of
Iraq as a producer and the Asian economic crisis added to OPEC's supply glut
problems.  Despite production cuts initiated by OPEC at the end of March, world
oil supplies remained excessive and oil prices stood at relatively low levels
throughout the first half of 1998.  Short heating oil positions in the third
quarter proved profitable for the Fund as the market for heating oil prices
dropped to its lowest level in more than a decade.  In early December, oil and
natural gas prices dropped sharply, causing continued problems for many emerging
market countries that depend on commodity exports for economic growth and
government financing. These price pressures were mainly due to excessive supply
availability and near-term weather indications that inventories would remain at
more than adequate levels even in the event of a cold Northern Hemisphere
winter.  Also, the December U.S. air attack on Iraq failed to cause any damage
to oil pumping and shipping operations, and oil prices fell over 10%.

                                      -12-
<PAGE>
 
<TABLE> 
<CAPTION> 
          1997                                                                               
                                                                            Total Trading    
                                                                               Results       
          <S>                                                               <C> 
          Interest Rates and Stock Indices                                  $  (92,197)
          Commodities                                                          164,054 
          Currencies                                                           342,016 
          Energy                                                               (64,047)
          Metals                                                               (19,973)
                                                                            ----------
                                                                            $  329,853 
                                                                            ==========
</TABLE> 

               Trend reversals and extreme market volatility, affected by such
factors as the Asian flu and El Nino, were characteristic of most of 1997.
However, the year proved to be a profitable one overall for the Fund as trends
in several key markets enabled the Trading Advisors to profit despite the
significant obstacles. Although trading results in several sectors may have been
lackluster, the global currency and bond markets offered noteworthy trading
opportunities, which resulted in significant profits in these markets during the
year. Additionally, the currency and interest rate sectors of the Fund's
portfolio represented its largest percentage of market commitments.

               In currency markets, the U.S. dollar rallied and started 1997 on
a strong note, rising to a four-year high versus the Japanese yen and two-and-a-
half year highs versus the Deutsche mark and the Swiss franc. However, the
dollar underwent two significant corrections during the year. The first
correction occurred in the Spring against the Japanese yen, due to the G7
finance ministers' determination that a further dollar advance would be counter-
productive to their current goals. From August through mid-November, the dollar
corrected against the Eurocurrencies in advance of a well-advertised tightening
by the Bundesbank. By mid-December the dollar had bounced back to new highs
against the yen and was rallying against the mark.

               Global interest rate markets began the year on a volatile note,
as investors evaluated economic data for signs of inflation. By the middle of
the year, economic data in key countries was positive indicating lower inflation
and igniting a worldwide rally in the bond markets. Specifically, investor
sentiment was particularly strong in the U.S., where prices on the 30-year
Treasury bond and 10-year Treasury note rose to their highest levels in over two
years. This followed a largely positive economic report delivered by Federal
Reserve Chairman Greenspan in testimony before Congress. Effects of the plunge
in the Hong Kong stock market in late October spread rapidly throughout the
world's financial markets, including global bond markets. After continued
volatility in subsequent months made trading difficult, 1997 interest rate
trading ended on a positive note when U.S. and Japanese bond markets rallied as
a flight to safety from plunging stock markets around the world occurred in
December.

               In energy markets, a slump in crude oil prices was characteristic
of its lackluster performance from the beginning of the year. Early in 1997,
volatility returned in the energy markets, reflecting the impact of a winter
significantly warmer than normal. By mid-year, the decline in prices reversed
sharply as Saudi Arabia and Iran, together representing about 45% of OPEC's oil
production, joined forces to pressure oil-producing nations to stay within OPEC
production quotas. In December, financial and economic problems in Asia reduced
demand for oil, and, in combination with ample supplies, resulted in crude oil
prices declining once again.

                                      -13-
<PAGE>
 
<TABLE> 
<CAPTION> 
          1996    
                                                                           Total Trading     
                                                                              Results        
          <S>                                                              <C> 
          Interest Rates and Stock Indices                                 $  (11,377) 
          Commodities                                                        (174,780) 
          Currencies                                                          269,134  
          Energy                                                             (603,378) 
          Metals                                                             (160,969) 
                                                                           ----------
                                                                           $ (681,370) 
                                                                           ==========
</TABLE>


               1996 began with the East Coast blizzard, continuing difficulties
in federal budget talks and an economic slowdown having a negative impact on
many markets. The Fund was profitable in January due to strong profits in
currency trading as the U.S. dollar reached a 23-month high against the Japanese
yen. In February, however, the Fund incurred its worst monthly loss due to the
sudden reversals in several strong price trends and considerable volatility in
the currency and financial markets. During March, large profits were taken in
the crude oil and gasoline markets as strong demand continued and talks between
the United Nations and Iraq were suspended. This trend continued into the second
quarter, during which strong gains were also recognized in the agricultural
markets as a combination of drought and excessive rain drove wheat and grain
prices to historic highs. In the late summer and early fall months, the Fund
continued to trade profitably as trending prices in a number of key markets
favorably impacted the Fund's performance. In September heating oil hit a five-
year high on soaring prices in Europe, and the Fund was also able to capitalize
on downward trends in the metals markets. Strong trends in the currency and
global bond markets produced significant gains in October and November, but the
year ended with declining performance as December witnessed the reversal of
several strong upward trends and increased volatility in key markets.

Variables Affecting Performance
-------------------------------

               The principal variables which determine the net performance of
the Fund are gross profitability and interest income. Gross profitability is, in
turn, affected by the percentage of the Fund's assets allocated to trading.

               During all periods set forth under "Selected Financial Data," the
interest rates in many countries were at unusually low levels.  The low interest
rates in the United States (although higher than in many other countries)
negatively impacted revenues because interest income is typically a major
component of the Fund's profitability.  In addition, low interest rates are
frequently associated with reduced fixed income market volatility, and in static
markets the Fund's profit potential generally tends to be diminished.  On the
other hand, during periods of higher interest rates, the relative attractiveness
of a high risk investment such as the Fund may be reduced as compared to high
yielding and much lower risk fixed-income investments.

               The Fund's Brokerage Commissions and Administrative Fees are a
constant percentage of the Fund's assets allocated to trading.  The only Fund
costs (other than the insignificant currency trading costs) which are not based
on a percentage of the Fund's assets (allocated to trading or total) are the
Profit Shares payable to the Advisors on an Advisor-by-Advisor basis.  Gross
profitability is in turn, affected by the percentage of the Fund's assets
allocated to trading.  During periods when Profit Shares are a high percentage
of net trading gains, it is likely that there has been substantial performance
non-correlation among the Advisors (so that the total Profit Shares paid to
those Advisors which have traded profitably are a high percentage, or perhaps
even in excess, of the total profits recognized, as other Advisors have incurred
offsetting losses, reducing overall trading gains but not the Profit Shares paid
to the successful Advisors) -- suggesting the likelihood of generally trendless,
non-consensus markets.

                                      -14-
<PAGE>
 
               Unlike many investment fields, there is no meaningful distinction
in the operation of the Fund between realized and unrealized profits. Most of
the contracts traded by the Fund are highly liquid and can be closed out at any
time.

               Except in unusual circumstances, factors -- regulatory approvals,
cost of goods sold, employee relations and the like -- which often materially
affect an operating business have virtually no impact on the Fund.

LIQUIDITY; CAPITAL RESOURCES

               The Fund borrows only to a limited extent and only on a strictly
short-term basis in order to finance losses on non-U.S. dollar denominated
trading positions pending the conversion of the Fund's dollar deposits.  These
borrowings are at a prevailing short-term rate in the relevant currency.  They
have been immaterial to the Fund's operation to date and are expected to
continue to be so.

               Substantially all of the Fund's assets are held in cash. The Net
Asset Value of the Fund's cash is not affected by inflation. However, changes in
interest rates could cause periods of strong up or down price trends, during
which the Fund's profit potential generally increases. Inflation in commodity
prices could also generate price movements which the strategies might
successfully follow.

               Substantially all of the Fund's assets are held in cash.
Accordingly, except in very unusual circumstances, the Fund should be able to
close out any or all of its open trading positions and liquidate any or all of
its securities holdings quickly and at market prices. This permits an Advisor to
limit losses as well as reduce market exposure on short notice should its
strategies indicate doing so. In addition, because there is a readily available
market value for the Fund's positions and assets, the Fund's monthly Net Asset
Value calculations are precise, and investors need only wait ten business days
to receive the full redemption proceeds of their Units.

          YEAR 2000 COMPLIANCE INITIATIVE

               As the millennium approaches, Merrill Lynch has undertaken
initiatives to address the Year 2000 problem (the "Y2K problem"). The Y2K
problem is the result of a widespread programming technique that causes computer
systems to identify a date based on the last two numbers of a year, with the
assumption that the first two numbers of the year are "19". As a result, the
year 2000 would be stored as "00," causing computers to incorrectly interpret
the year as 1900. Left uncorrected, the Y2K problem may cause information
technology systems (e.g., computer databases) and non-information technology
systems (e.g., elevators) to produce incorrect data or cease operating
completely.

               Merrill Lynch believes that it has identified and evaluated its
internal Y2K problem and that it is devoting sufficient resources to renovating
technology systems that are not already Year 2000 compliant. The resource-
intensive renovation phase (as further discussed) of Merrill Lynch's Year 2000
efforts was approximately 95% completed as of January 31, 1999. Merrill Lynch
will focus primarily on completing its renovation and testing and on integration
of the Year 2000 programs of recent acquisitions during the remainder of 1999.
In order to focus attention on the Y2K problem, management has deferred certain
other technology projects: however, this deferral is not expected to have a
material adverse effect on the company's business, results of operations, or
financial condition.

               The failure of Merrill Lynch's technology systems relating to a
Y2K problem would likely have a material adverse effect on the company's
business, results of operations, and financial condition. This effect could
include disruption of normal business transactions, such as the settlement,
execution, processing, and recording of trades in securities, commodities,
currencies, and other assets. The Y2K problem could also increase Merrill
Lynch's exposure to risk and its need for liquidity.

               In 1995, Merrill Lynch established the Year 2000 Compliance
Initiative, which is an enterprisewide 

                                      -15-
<PAGE>
 
effort to address the risks associated with the Y2K problem, both internal and
external. The Year 2000 Compliance Initiative's efforts to address the risks
associated with the Y2K problem have been organized into six phases: planning,
pre-renovation, renovation, production testing, certification, and integration
testing.

               The planning phase involved defining the scope of the Year 2000
Compliance Initiative, including its annual budget and strategy, and determining
the level of expert knowledge available within Merrill Lynch regarding
particular systems or applications. The pre-renovation phase involved developing
a detailed enterprisewide inventory of applications and systems, identifying the
scope of necessary renovations to each application system, and establishing a
conversion schedule. During the renovation phase, source code is actually
converted, date fields are expanded or windowed (windowing is used on an
exception basis only), test data is prepared, and each system or application is
tested using a variety of Year 2000 scenarios. The production testing phase
validates that a renovated system is functionally the same as the existing
production version, that renovation has not introduced defects, and that
expanded or windowed date fields continue to handle current dates properly. The
certification phase validates that a system can run successfully in a Year 2000
environment. The integration testing phase, which will occur throughout 1999,
validates that a system can successfully interface with both internal and
external systems. Finally, as Merrill Lynch continues to implement new systems,
they are also being tested for Year 2000 readiness.

               In 1996 and 1997, as part of the planning and pre-renovation
phases, both plans and funding of plans for inventory, preparation, renovation,
and testing of computer systems for the Y2K problem were approved. All plans for
both mission-critical and non-mission-critical systems are tracked and
monitored. The work associated with the Year 2000 Compliance Initiative has been
accomplished by Merrill Lynch employees, with the assistance of consultants
where necessary.

               As part of the production testing and certification phases,
Merrill Lynch has performed, and will continue to perform, both internal and
external Year 2000 testing intended to address the risks from the Y2K problem.
As of January 31, 1999, production testing was approximately 93% completed. In
July 1998, Merrill Lynch participated in an industrywide Year 2000 systems test
sponsored by the Securities Industry Association ("SIA"), in which selected
firms tested their computer systems in mock stock trades that simulated dates in
December 1999 and January 2000. Merrill Lynch will participate in further
industrywide testing sponsored by the SIA, currently scheduled for March and
April 1999, which will involve an expanded number of firms, transactions, and
conditions. Merrill Lynch also participated in various other domestic and
international industry tests during 1998.

               Merrill Lynch continues to survey and communicate with third
parties whose Year 2000 readiness is important to the company. Information
technology and non-information technology vendors and service providers are
contacted in order to obtain their Year 2000 compliance plans. Based on the
nature of the response and the importance of the product or service involved,
Merrill Lynch determines if additional testing is needed. The results of these
efforts are maintained in a database that is accessible throughout the firm.
Third parties that have been contacted include transactional counterparties,
exchanges, and clearinghouses; a process to access and rate their responses has
been developed. This information as well as other Year 2000 readiness
information on particular countries and their political subdivisions will be
used by Merrill Lynch to manage risk resulting from the Y2K problem. Management
is unable at this point to ascertain whether all significant third parties will
successfully address the Y2K problem. Merrill Lynch will continue to monitor
third parties' Year 2000 readiness to determine if additional or alternative
measures are necessary. In connection with information technology and non-
information technology products and services, contingency plans, which are
developed at the business unit level, may include selection of alternative
vendors or service providers and changing business practices so that a
particular system is not needed. In the case of securities exchanges and
clearinghouses, risk mitigation could include the re-routing of business. In
light of the interdependency of the parties in or serving the financial markets,
however, there can be no assurance that all Y2K problems will be identified and
remediated on a timely basis or that all remediation will be successful. The
failure of exchanges, clearing organizations, vendors, service providers,
counterparties, regulators, or others to resolve their own processing issues in
a timely manner could have a material adverse effect on Merrill Lynch's
business, results of operations, and financial condition.

               At year-end 1998, the total estimated expenditures for the entire
Year 2000 Compliance Initiative were approximately $425 million, of which
approximately $125 million was remaining. The majority of these remaining
expenditures are expected to cover testing, risk management, and contingency
planning. There can be no assurance that the costs associated with such
remediation efforts will not exceed those currently anticipated by Merrill
Lynch, or that the costs associated with the remediation efforts or the possible
failure of such remediation efforts would not have a 

                                      -16-
<PAGE>
 
material adverse effect on Merrill Lynch's business, results of operations, or
financial condition.


          EUROPEAN ECONOMIC AND MONETARY UNION ("EMU") INITIATIVE

               As of January 1, 1999, the "euro" was adopted as the common legal
currency of participating member states of the EMU. As a consequence of the
introduction of and conversion to the euro, Merrill Lynch was required to make
significant changes to nearly 200 global business systems in order to reflect
the substitution of the euro for the 11 member national currencies and the
European currency unit. The introduction of the euro brings about fundamental
changes in the structure and nature of European financial markets, including the
creation of a unified, more liquid capital market in Europe. As financial
markets in EMU member states converge and local barriers are removed,
competition is expected to increase.

               The introduction of the euro affects all Merrill Lynch facilities
that transact, distribute, or provide custody or recordkeeping for securities or
cash denominated in the currency of a participating member state. Merrill
Lynch's systems or procedures that handle such securities or cash were modified
in order to implement the conversion to the euro. The implementation phase is
continuing into the first quarter of 1999 to resolve any post-conversion issues.
The success of Merrill Lynch's euro conversion efforts was dependent on the 
euro-compliance of third parties, such as trading counterparties, financial
intermediaries (e.g., securities and commodities exchanges, depositories,
clearing organizations, and commercial banks), and vendors.

               As of the end of the 1998 fiscal year, the total estimated
expenditures associated with the introduction of and conversion to the euro were
approximately $79 million, of which $1 million is remaining to be spent during
the first quarter of 1999 on compliance efforts and project administration.
Management believes that it has identified and evaluated all of the systems and
operational modifications necessary for the conversion to the euro.  On January
4, 1999 and since then, Merrill Lynch has conducted normal business operations,
having successfully completed its conversion program.  Management does not
expect the introduction of the euro to have a negative effect on its future
business, currency risk, or competitive positioning in the European markets.

ITEM 7A:  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
          ----------------------------------------------------------

          Not Applicable.

ITEM 8:   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
          -------------------------------------------

               The financial statements required by this Item are included in
Exhibit 13.01.

               The supplementary financial information ("selected quarterly
financial data" and "information about oil and gas producing activities")
specified by Item 302 of Regulation S-K is not applicable. The General Partner
promoted the Fund and is its controlling person.

ITEM 9:   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          ---------------------------------------------------------------
          FINANCIAL DISCLOSURE
          --------------------

               There were no changes in or disagreements with independent
auditors on accounting or financial disclosure.

                                   PART III

ITEM 10:  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
          --------------------------------------------------

          (10a and 10b)  Identification of Directors and Executive Officers:
                         --------------------------------------------------

               As a limited partnership, the Partnership itself has no officers
or directors and is managed by the General Partner. Trading decisions are made
by the Trading Advisors on behalf of the Partnership.

                                      -17-
<PAGE>
 
               The directors and executive officers of MLIP and their respective
business backgrounds are as follows.

JOHN R. FRAWLEY, JR.     Chairman, Chief Executive Officer,
                         President and Director

JEFFREY F. CHANDOR       Senior Vice President, Director of
                         Sales, Marketing and Research and Director

JO ANN DI DARIO          Vice President, Chief Financial Officer and Treasurer,
                         through April 30, 1999

MICHAEL L. PUNGELLO      Vice President, Chief Financial Officer and Treasurer,
                         effective May 1, 1999

JOSEPH H. MOGLIA         Director

ALLEN N. JONES           Director

STEPHEN G. BODURTHA      Director

STEVEN B. OLGIN          Vice President, Secretary and
                         Director of Administration

               John R. Frawley, Jr. was born in 1943. Mr. Frawley is Chairman,
Chief Executive Officer, President and a Director of MLIP and Co-Chairman of
MLF. He joined Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S") in
1966 and has served in various positions, including Retail and Institutional
Sales, Manager of New York Institutional Sales, Director of Institutional
Marketing, Senior Vice President of Merrill Lynch Capital Markets and Director
of International Institutional Sales. Mr. Frawley holds a Bachelor of Science
degree from Canisius College. Mr. Frawley served on the CFTC's Regulatory
Coordination Advisory Committee from its formation in 1990 through its
dissolution in 1994. Mr. Frawley has served four consecutive one-year terms as
Chairman of the Managed Funds Association (formerly, the Managed Futures
Association), a national trade association that represents the managed futures,
hedge funds and fund of funds industry. Mr. Frawley currently serves as a member
of the CFTC's Global Markets Advisory Committee.

               Jeffrey F. Chandor was born in 1942. Mr. Chandor is Senior Vice
President, Director of Sales, Marketing and Research and a Director of MLIP. He
joined MLPF&S in 1971 and has served as the Product Manager of International
Institutional Equities, Equity Derivatives and Mortgage-Backed Securities as
well as Managing Director of International Sales in the United States, and
Managing Director of Sales in Europe. Mr. Chandor holds a Bachelor of Arts
degree from Trinity College, Hartford, Connecticut. Mr. Chandor is serving a 
two-year term as a director of the Managed Funds Association.

               Jo Ann Di Dario was born in 1946. Ms. Di Dario is, through April
30, 1999, Vice President, Chief Financial Officer and Treasurer of MLIP. Before
joining MLIP in May 1998, she was self-employed for one year. From February 1996
to May 1997, she worked as a consultant for Global Asset Management, an
international mutual fund organizer and operator headquartered in London, where
she offered advice on restructuring their back-office operations. From May 1992
to January 1996, she served as a Vice President of Meridian Bank Corporation, a
regional bank holding company. She was responsible for managing the treasury
operations of Meridian Bank Corporation including its wholly-owned subsidiary,
Meridian Investment Company Inc. From September 1991 to May 1992, Ms. Di Dario
managed the Domestic Treasury Operations of First Fidelity Bank, a regional
bank. From January 1991 to September 1991, Ms. Di Dario was self-employed. For
the previous five years, Ms. Di Dario was Vice President, Secretary and
Controller of Caxton Corporation, a Commodity Pool Operator and Commodity
Trading Advisor. Her background includes seven years of public accounting
experience, and she graduated with high honors from Stockton State College with
a Bachelor of Science degree in Accounting.
 
               Michael L. Pungello was born in 1957. Effective May 1, 1999, Mr.
Pungello will become Vice President, Chief Financial Officer and Treasurer of
MLIP. He was First Vice President and Senior Director of Finance for Merrill
Lynch's Operations, Services and Technology Group from January 1998 to March
1999. Prior to that, Mr. Pungello spent over 18 years with Deloitte & Touche
LLP, and was a partner in their Financial Services practice from June 1990 to
December 1997. He graduated from Fordham University in 1979 with a Bachelor of
Science degree in accounting and received his Master of Business Administration
degree in Finance from New York University in 1987.

               Joseph H. Moglia was born in 1949. Mr. Moglia is a Director of
MLIP. In 1971, he graduated from Fordham University with a Bachelor of Arts
degree in Economics. He later received his Master of Science degree from the
University of Delaware. He taught at the high school and college level for
sixteen years. Mr. Moglia joined MLPF&S in 1984, and has served in a number of
senior roles, including Director of New York Fixed Income 

                                      -18-
<PAGE>
 
Institutional Sales, Director of Global Fixed Income Institutional Sales, and
Director of the Municipal Division. He is currently Senior Vice President and
Director of the Investment Strategy and Product Group in Merrill Lynch Private
Client, and Director of Middle Markets.

               Allen N. Jones was born in 1942. Mr. Jones is a Director of MLIP
and, from July 1995 until January 1998, Mr. Jones was also Chairman of the Board
of Directors of MLIP. Mr. Jones graduated from the University of Arkansas with a
Bachelor of Science, Business Administration degree in 1964. Since June 1992,
Mr. Jones has held the position of Senior Vice President of MLPF&S. From June
1992 through February 1994, Mr. Jones was the President and Chief Executive
Officer of Merrill Lynch Insurance Group, Inc. ("MLIG") and remains on the Board
of Directors of MLIG and its subsidiary companies. From February 1994 to April
1997, Mr. Jones was the Director of Individual Financial Services of the Merrill
Lynch Private Client Group. In April 1997, Mr. Jones became the Director of
Private Client marketing.

               Stephen G. Bodurtha was born in 1958. Mr. Bodurtha is a Director
of MLIP. In 1980, Mr. Bodurtha graduated magna cum laude from Wesleyan
University, Middletown, Connecticut with a Bachelor of Arts degree in
Government. From 1980 to 1983, Mr. Bodurtha worked in the Investment Banking
Division of Merrill Lynch. In 1985, he was awarded his Master of Business
Administration degree from Harvard University, where he also served as
Associates Fellow (1985 to 1986). From 1986 to 1989, Mr. Bodurtha held the
positions of Associate and Vice President with Kidder, Peabody & Co.,
Incorporated where he worked in their Financial Futures & Options Group. Mr.
Bodurtha joined MLPF&S in 1989 and has held the position of First Vice President
since 1995. He has been the Director in charge of the Structured Investments
Group of MLPF&S since 1995.

               Steven B. Olgin was born in 1960. Mr. Olgin is Vice President,
Secretary and the Director of Administration of MLIP. He joined MLIP in July
1994 and became a Vice President in July 1995. From 1986 until July 1994, Mr.
Olgin was an associate of the law firm of Sidley & Austin. In 1982, Mr. Olgin
graduated from The American University with a Bachelor of Science degree in
Business Administration and a Bachelor of Arts degree in Economics. In 1986, he
received his Juris Doctor degree from The John Marshall Law School. Mr. Olgin is
a member of the Managed Funds Association's Government Relations Committee and
has served as an arbitrator for the NFA. Mr. Olgin is also a member of the
Committee on Futures Regulation of the Association of the Bar of the City of New
York.

               As of December 31, 1998, the principals of MLIP had no investment
in the Fund, and MLIP's general partner interest in the Fund was valued at
$117,488.

               MLIP acts as general partner to twelve public futures funds whose
units of limited partnership interest are registered under the Securities
Exchange Act of 1934: The Futures Expansion Fund Limited Partnership, The Growth
and Guarantee Fund L.P., ML Futures Investments II L.P., ML Futures Investments
L.P., John W. Henry & Co./Millburn L.P., The S.E.C.T.O.R. Strategy Fund (SM)
L.P., The SECTOR Strategy Fund (SM) II L.P., The SECTOR Strategy Fund (SM) VI
L.P., ML Global Horizons L.P., ML Principal Protection L.P, ML JWH Strategic
Allocation Fund L.P. and the Fund. Because MLIP serves as the sole general
partner of each of these funds, the officers and directors of MLIP effectively
manage them as officers and directors of such funds.

          (c)  Identification of Certain Significant Employees:
               -----------------------------------------------

               None.

          (d)  Family Relationships:
               --------------------

               None.

          (e)  Business Experience:
               -------------------

               See Item 10(a)(b) above.

          (f)  Involvement in Certain Legal Proceedings:
               ----------------------------------------

               None.

                                      -19-
<PAGE>
 
          (g)  Promoters and Control Persons:
               -----------------------------

               Not applicable.

ITEM 11:  EXECUTIVE COMPENSATION
          ----------------------

               The directors and officers of the General Partner are remunerated
by the General Partner. The Partnership does not itself have any officers,
directors or employees. The Partnership pays Brokerage Commissions to an
affiliate of the General Partner and Administrative Fees to the General Partner.
The General Partner or its affiliates may also receive certain economic benefits
from holding the Fund's dollar assets. The directors and officers receive no
"other compensation" from the Partnership, and the directors receive no
compensation for serving as directors of the General Partner. There are no
compensation plans or arrangements relating to a change in control of either the
Partnership or the General Partner.

ITEM 12:  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
          --------------------------------------------------------------

          (a)  Security Ownership of Certain Beneficial Owners:
               -----------------------------------------------
                                                
                                                  Amount of
 Title                 Name of                    nature of 
  of                beneficial                    beneficial        Percent
 class                 owner                      ownership         of class 
---------        ---------------                 ------------     -----------
 Limited          City of Milford                  10,000           13.76%
Partnership     Municipal Employee Pension Fund
 Units           70 West River Road
                Milford, CT 06460

          (b)  Security Ownership of Management:
               --------------------------------

               As of December 31, 1998, the General Partner owned 876 Units
(unit-equivalent general partnership interests), which was less than 1.3% of the
total Units outstanding.

          (c)  Changes in Control:
               ------------------

               None.

ITEM 13:  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
          ----------------------------------------------

          (a)  Transactions Between Merrill Lynch and the Fund
               -----------------------------------------------

               All of the service providers to the Fund, other than the
Advisors, are affiliates of Merrill Lynch. Merrill Lynch negotiated with the
Advisors over the level of its advisory fees and Profit Share. However, none of
the fees paid by the Fund to any Merrill Lynch party were negotiated, and they
are higher than would have been obtained in arm's-length bargaining.

               The Fund pays Merrill Lynch substantial Brokerage Commissions and
Administrative Fees as well as bid-ask spreads on forward currency trades. The
Fund also pays MLF interest on short-term loans extended by MLF to cover losses
on foreign currency positions.

               Within the Merrill Lynch organization, MLIP is the direct
beneficiary of the revenues received by different Merrill Lynch entities from
the Fund. MLIP controls the management of the Fund and serves as its promoter.
Although MLIP has not sold any assets, directly or indirectly, to the Fund, MLIP
makes substantial profits from the Fund due to the foregoing revenues.

               No loans have been, are or will be outstanding between MLIP or
any of its principals and the Fund.

               MLIP pays substantial selling commissions and trailing
commissions to MLPF&S for distributing the Units. MLIP is ultimately paid back
for these expenditures from the revenues it receives from the Fund.

          (b)  Certain Business Relationships:
               ------------------------------

                                      -20-
<PAGE>
 
               MLF, an affiliate of the General Partner, acts as the principal
commodity broker for the Partnership.

               In 1998 the Partnership expensed: (i) Brokerage Commissions of
$115,706 to the Commodity Broker, which included $19,710 in consulting fees
earned by the Trading Advisors; and (ii) Administrative Fees of $3,306 to MLIP.
Through its investments in Trading LLCs and MM LLC, the following fees were
expensed: (i) Brokerage Commissions of $826,820 to the Commodity Broker, which
included $171,503 in consulting fees earned by the Trading Advisors; and (ii)
Administrative Fees of $23,623 to MLIP. In addition, MLIP and its affiliates may
have derived certain economic benefits from possession of the Fund's assets, as
well as from foreign exchange and EFP trading.

               See Item 1(c), "Narrative Description of Business -- Charges" and
"-- Description of Current Charges" for a discussion of other business dealings
between MLIP affiliates and the Partnership.

          (c)  Indebtedness of Management:
               --------------------------

               The Partnership is prohibited from making any loans, to
management or otherwise.

          (d)  Transactions with Promoters:
               ---------------------------

               Not applicable.

                                      -21-
<PAGE>
 
                                    PART IV

ITEM 14:  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
          ---------------------------------------------------------------

<TABLE>
<CAPTION>
          (a)1.  Financial Statements (found in Exhibit 13.01):                                   Page
                 --------------------------------------------                                     ----
          <S>                                                                                     <C> 
                 Independent Auditors' Report                                                       1
                                                                                                    
                 Statements of Financial Condition as of December 31, 1998 and 1997                 2            
                                                                                                    
                 For the years ended December 31, 1998, 1997 and 1996:                              
                           Statements of Operations                                                 3
                           Statements of Changes in Partners' Capital                               4
                                                                                                    
                 Notes to Financial Statements                                                   5-15 
</TABLE>

          (a)2.  Financial Statement Schedules:
                 -----------------------------

                 Financial statement schedules not included in this Form 10-K
have been omitted for the reason that they are not required or are not
applicable or that equivalent information has been included in the financial
statements or notes thereto.

          (a)3.  Exhibits:
                 --------

                 The following exhibits are incorporated by reference or are
                 filed herewith to this Annual Report on Form 10-K:

Designation         Description
-----------         -----------
3.01(i)             Amended and Restated Certificate of Limited Partnership of
                    the Registrant, dated July 27, 1995.

Exhibit 3.01(i):    Is incorporated herein by reference from Exhibit 3.02(a)
---------------     contained in the Registrant's report on Form 10-Q for the
                    Quarter ended June 30, 1995.

3.01(ii)            Amended and Restated Limited Partnership Agreement of the
                    Partnership dated October 19, 1992.

Exhibit 3.01(ii):   Is incorporated herein by reference from Exhibit 3.01
----------------    contained in Amendment No. 1 to the Registration Statement
                    (File No. 33-49852) filed on October 16, 1992, on Form S-1
                    under the Securities Act of 1933 (the "Registrant's
                    Registration Statement").

10.01               Form of Advisory Agreement between the Partnership, Merrill
                    Lynch Investment Partners Inc., Merrill Lynch Futures Inc.
                    and each Trading Advisor.

Exhibit 10.01:      Is incorporated by reference from Exhibit 10.01(o) contained
-------------       in the Registrant's report on Form 10-Q for the Quarter
                    Ended June 30, 1995.

10.02               Form of Consulting Agreement between each Trading Advisor of
                    the Partnership and Merrill Lynch Futures Inc.

Exhibit 10.02:      Is incorporated herein by reference from Exhibit 10.02(a)
-------------       contained in the Registrant's Registration Statement.

10.03               Form of Customer Agreement between the Partnership and
                    Merrill Lynch Futures Inc.

                                      -22-
<PAGE>
 
Exhibit 10.03:      Is incorporated herein by reference from Exhibit 10.03
-------------       contained in the Registrant's Registration Statement.

10.05               ML&Co., Inc. Guarantee.

Exhibit 10.05:      Is incorporated herein by reference from Exhibit 10.05
-------------       contained in the Registrant's Registration Statement.

10.07(i)            Foreign Exchange Desk Service Agreement among Merrill Lynch
                    Investment Bank, Merrill Lynch Investment Partners Inc.,
                    Merrill Lynch Futures Inc. and the Fund.

Exhibit 10.07(i):   Is incorporated herein by reference from Exhibit 10.07(i)
----------------    contained in the Registrant's report on Form 10-K for the
                    year ended December 31, 1996.

10.07(ii)           Form of Advisory and Consulting Agreement Amendment among
                    Merrill Lynch Investment Partners Inc., each Advisor, the
                    Fund and Merrill Lynch Futures Inc.

Exhibit 10.07(ii):  Is incorporated herein by reference from Exhibit 10.07(ii)
-----------------   contained in the Registrant's report on Form 10-K for the
                    year ended December 31, 1996.

10.07(iii)          Form of Amendment to the Customer Agreement among the
                    Partnership and MLF.

Exhibit 10.07(iii): Is incorporated herein by reference from Exhibit 10.07(iii)
------------------  contained in the Registrant's report on Form 10-K for the
                    year ended December 31, 1996.

13.01               1998 Annual Report and Independent Auditors' Report.

Exhibit 13.01:      Is filed herewith.
-------------

13.01(a)            1998 Annual Reports and Independent Auditors' Reports for
                    the following Trading Limited Liability Companies sponsored
                    by Merrill Lynch Investment Partners Inc.:
                    ML Sjo Prospect L.L.C.                      
                    ML JWH Financial and Metals Portfolio L.L.C.
                    ML Multi-Manager Portfolio LLC               

Exhibit 13.01(a):   Is incorporated herein by reference from Form 10-K (fiscal
----------------    year ended December 31, 1998) Commission File number 0-18702
                    for The S.E.C.T.O.R. Fund (SM) L.P. (Registration Statement
                    File No. 33-34432 filed on May 25, 1990 under the Securities
                    Act of 1933).

28.01               Prospectus of the Partnership dated October 19, 1992.

Exhibit 28.01:      Is incorporated by reference as filed with the Securities
-------------       and Exchange Commission pursuant to Rule 424 under the
                    Securities Act of 1933 on October 19, 1992.


          (b)  Report on Form 8-K:
               ------------------

               No reports on Form 8-K were filed during the fourth quarter of
1998.

                                      -23-
<PAGE>
 
                                  SIGNATURES


     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                   THE SECTOR STRATEGY FUND(SM) V L.P.

                                   By:  MERRILL LYNCH INVESTMENT PARTNERS
                                         INC.
                                        General Partner

                                   By: /s/ John R. Frawley, Jr.
                                       ------------------------
                                       John R. Frawley, Jr.
                                       Chairman, Chief Executive Officer, 
                                       President and Director
                                         (Principal Executive Officer)


     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed on March 25, 1999 by the
following persons on behalf of the Registrant and in the capacities indicated.

<TABLE>
<CAPTION>
Signature                     Title                                                         Date
---------                     -----                                                         ----
<S>                           <C>                                                           <C>
/s/ John R. Frawley, Jr.      Chairman, Chief Executive Officer, President and Director     March 25, 1999
--------------------------    (Principal Executive Officer) 
John R. Frawley, Jr.          
 
/s/ Jo Ann Di Dario           Vice President, Chief Financial Officer and Treasurer         March 25, 1999
--------------------------    (Principal Financial and Accounting Officer) 
Jo Ann Di Dario               
 
/s/ Jeffrey F. Chandor        Senior Vice President, Director of Sales,                     March 25, 1999
--------------------------    Marketing and Research and Director 
 Jeffrey F. Chandor           
 
/s/ Allen N. Jones            Director                                                      March 25, 1999
--------------------------
Allen N. Jones
</TABLE>


(Being the principal executive officer, the principal financial and accounting
officer and a majority of the directors of Merrill Lynch Investment Partners
Inc.)

MERRILL LYNCH INVESTMENT        General Partner of Registrant     March 25, 1999
 PARTNERS INC.

By: /s/ John R. Frawley, Jr.
    -------------------------
    John R. Frawley, Jr.

                                      -24-
<PAGE>
 
                      THE SECTOR STRATEGY FUND(SM) V L.P.

                                1998 FORM 10-K

                               INDEX TO EXHIBITS
                               -----------------


                    Exhibit
                    -------

Exhibit 13.01       1998 Annual Report and Independent Auditors' Report


                                      -25-