<PAGE>

                                    THE SECTOR STRATEGY FUND -SM- V L.P.
                                    (A DELAWARE LIMITED PARTNERSHIP)



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








[MERRILL LYNCH LOGO]

<PAGE>

THE SECTOR STRATEGY FUND -SM- V L.P.
(A DELAWARE LIMITED PARTNERSHIP)
 ------------------------------


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

                                                                            Page
                                                                            ----

INDEPENDENT AUDITORS' REPORT                                                   1

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

  Statements of Financial Condition                                            2

  Statements of Operations                                                     3

  Statements of Changes in Partners' Capital                                   4

  Notes to Financial Statements                                             5-11

<PAGE>

INDEPENDENT AUDITORS' REPORT
----------------------------



To the Partners of
 The SECTOR Strategy Fund -SM- V L.P.:

We have audited the accompanying statements of financial condition of The SECTOR
Strategy Fund -SM- V L.P. (the "Partnership") as of December 31, 2000 and 1999
and the related statements of operations and of changes in partners' capital
for each of the three years in the period ended December 31, 2000. These
financial statements are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of The SECTOR Strategy Fund -SM- V L.P. as of
December 31, 2000 and 1999, and the results of its operations and changes in its
partners' capital for each of the three years in the period ended December 31,
2000 in conformity with accounting principles generally accepted in the United
States of America.


DELOITTE & TOUCHE LLP


New York, New York
February 5, 2001

<PAGE>

THE SECTOR STRATEGY FUND -SM- V L.P.
(A DELAWARE LIMITED PARTNERSHIP)
 ------------------------------

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

<TABLE>
<CAPTION>
ASSETS                                                                             2000                   1999
                                                                             ----------------       ----------------
<S>                                                                          <C>                    <C>
Investment in MM LLC (Note 6)                                                 $    6,675,330         $    7,807,992
Receivable from investment in MM LLC (Note 6)                                         93,393                277,999
                                                                             ----------------       ----------------

                TOTAL                                                         $    6,768,723         $    8,085,991
                                                                             ================       ================


LIABILITIES AND PARTNERS' CAPITAL

LIABILITIES:
    Redemptions payable (Note 1)                                              $       93,393         $      277,999
                                                                             ----------------       ----------------

            Total liabilities                                                         93,393                277,999
                                                                             ----------------       ----------------

PARTNERS' CAPITAL:
    General Partner (516 Units and 1,176 Units)                                       72,238                155,891
    Limited Partners (47,159 Units and 57,722 Units)                               6,603,092              7,652,101
                                                                             ----------------       ----------------

            Total partners' capital                                                6,675,330              7,807,992
                                                                             ----------------       ----------------

                TOTAL                                                         $    6,768,723         $    8,085,991
                                                                             ================       ================

NET ASSET VALUE PER UNIT
  (Based on 47,675 and 58,898 Units outstanding)                              $       140.02         $       132.57
                                                                             ================       ================
</TABLE>

See notes to financial statements.


                                      -2-
<PAGE>

THE SECTOR STRATEGY FUND -SM- V L.P.
(A DELAWARE LIMITED PARTNERSHIP)
 ------------------------------

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

<TABLE>
<CAPTION>
                                                                            2000                1999                  1998
                                                                     -----------------    -----------------    -----------------
<S>                                                                  <C>                  <C>                  <C>
REVENUES:
    Trading loss:
        Realized (Note 1)                                             $      -             $      -             $      (70,297)
        Change in unrealized (Note 1)                                        -                    -                    (17,058)
                                                                     -----------------    -----------------    -----------------

            Total trading results                                            -                    -                    (87,355)

    Interest income (Note 2)                                                 -                    -                     69,400
                                                                     -----------------    -----------------    -----------------

            Total revenues                                                   -                    -                    (17,955)
                                                                     -----------------    -----------------    -----------------

EXPENSES:
    Brokerage commissions (Note 2)                                           -                    -                    115,706
    Profit Shares (Note 3)                                                   -                    -                         74
    Administrative fees (Note 2)                                             -                    -                      3,306
                                                                     -----------------    -----------------    -----------------

            Total expenses                                                   -                    -                    119,086
                                                                     -----------------    -----------------    -----------------

INCOME (LOSS) FROM INVESTMENTS (Note 6)                                      334,877             (109,067)             193,066
                                                                     -----------------    -----------------    -----------------

NET INCOME (LOSS)                                                     $      334,877       $     (109,067)      $       56,025
                                                                     =================    =================    =================

NET INCOME (LOSS) PER UNIT:

    Weighted average number of General Partner
     and Limited Partner Units outstanding (Note 4)                           52,554               67,051               82,499
                                                                     =================    =================    =================

    Net income (loss) per weighted average
        General Partner and Limited Partner Unit                      $         6.37       $        (1.63)      $         0.68
                                                                     =================    =================    =================
</TABLE>

See notes to financial statements.


                                      -3-
<PAGE>

THE SECTOR STRATEGY FUND -SM- V L.P.
(A DELAWARE LIMITED PARTNERSHIP)
 ------------------------------

STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                    General             Limited
                                                  Units             Partner             Partners             Total
                                             ---------------    --------------     -----------------    ---------------
<S>                                          <C>                <C>                <C>                  <C>
PARTNERS' CAPITAL                                 92,357          $  395,313         $  11,815,401       $ 12,210,714
December 31, 1997

Redemptions                                      (19,659)           (261,967)           (2,253,846)        (2,515,813)

Net income (loss)                                -                   (15,858)               71,883             56,025
                                             ---------------    --------------     -----------------    ---------------
PARTNERS' CAPITAL
 DECEMBER 31, 1998                                72,698             117,488             9,633,438          9,750,926

Subscriptions                                    -                    38,440               -                   38,440

Redemptions                                      (13,800)            -                  (1,872,307)        (1,872,307)

Net loss                                         -                       (37)             (109,030)          (109,067)
                                             ---------------    --------------     -----------------    ---------------
PARTNERS' CAPITAL
 DECEMBER 31, 1999                                58,898             155,891             7,652,101          7,807,992

Redemptions                                      (11,223)            (87,153)           (1,380,386)        (1,467,539)

Net income                                       -                     3,500               331,377            334,877
                                             ---------------    --------------     -----------------    ---------------
PARTNERS' CAPITAL
 DECEMBER 31, 2000                                47,675           $  72,238          $  6,603,092       $  6,675,330
                                             ===============    ==============     =================    ===============
</TABLE>


See notes to financial statements.


                                      -4-
<PAGE>

THE SECTOR STRATEGY FUND -SM- V L.P.
(A DELAWARE LIMITED PARTNERSHIP)
 ------------------------------

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

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    ORGANIZATION

    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
    commenced trading activities on January 4, 1993. The Partnership engages
    (currently, through an investment in a limited liability company (see
    below)) in the speculative trading of futures, options on futures, forwards
    and options on forward contracts on a wide range of commodities. Merrill
    Lynch Investment Partners Inc. ("MLIP"), a wholly-owned subsidiary of
    Merrill Lynch Group, Inc., which, in turn, is a wholly-owned subsidiary of
    Merrill Lynch & Co., Inc. ("Merrill Lynch"), is the general partner of the
    Partnership. MLIP has agreed to maintain a general partner's interest of at
    least 1% of the total capital of the Partnership. MLIP and each Limited
    Partner share in the profits and losses of the Partnership in proportion to
    their respective interests in it.

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

    Many of the multi-advisor funds (the "Multi-Advisor Funds") sponsored by
    MLIP allocate their assets to a number of the same independent advisors (the
    "Advisors"). However, because different Multi-Advisor Funds had historically
    allocated assets to slightly different Advisor groups, the Multi-Advisor
    Funds often were required to open and maintain individual trading accounts
    with each Advisor. MLIP consolidated the trading accounts of nine of its
    Multi-Advisor Funds (including the Partnership) as of June 1, 1998. The
    consolidation was achieved by having these Multi-Advisor Funds close their
    existing trading accounts and invest in a limited liability company, ML
    Multi-Manager Portfolio L.L.C. ("MM LLC"), a Delaware limited liability
    company, 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 the Multi-Advisor
    Funds are combined in order to be managed through single rather than
    multiple accounts. As of September 2000, two additional Multi-Advisor Funds
    were added to MM LLC. The placement of assets into MM LLC did not change the
    operations or fee structure of the Partnership; therefore, the following
    notes relate to the operation of the Partnership through its investment in
    MM LLC. The administrative authority over the Partnership remains with MLIP.
    MLIP, on an ongoing basis, may change the number of Multi-Advisor Funds
    investing in MM LLC.

    MLIP selects the Advisors to manage MM LLC's assets, and allocates and
    reallocates such trading assets among existing, replacement and additional
    Advisors. Merrill Lynch Futures Inc. ("MLF"), a Merrill Lynch affiliate, is
    MM LLC's commodity broker.

    MLIP determines what percentage of the Partnership's total capital to invest
    in MM LLC, attempting to maximize the percentage of the Fund's assets
    invested in MM LLC, while managing the Partnership's


                                      -5-
<PAGE>

    exposure to prevent Merrill Lynch from being required to make a payment to
    the Partnership pursuant to its guarantee under the Partnership's principal
    protection structure (See Note 5).

    ESTIMATES

    The preparation of financial statements in conformity with accounting
    principles generally accepted in the United States of America requires
    management to make estimates and assumptions that affect the reported
    amounts of assets and liabilities and disclosure of contingent assets and
    liabilities at the date of the financial statements and the reported amounts
    of revenues and expenses during the reporting period. Actual results could
    differ from those estimates.

    CASH MANAGEMENT

    As of June 2000, the Partnership, through MM LLC, began an Income
    Enhancement Program, whereas, a portion of its assets is invested in
    Commercial Paper. This was done to improve the yield on the cash assets
    not required for margin for trading purposes at MLF. These holdings
    generally have maturities of 30, 60 or 90 days and are held to maturity.

    REVENUE RECOGNITION

    Commodity futures, options on futures, forwards and options on forward
    contracts are recorded on the trade date and open contracts are reflected in
    net unrealized profit (loss) on open contracts in the Statements of
    Financial Condition of MM LLC at the difference between the original
    contract value and the market value (for those commodity interests for which
    market quotations are readily available) or at fair value. The change in
    unrealized profit (loss) on open contracts from one period to the next is
    reflected in Change in unrealized under Trading profit (loss) in the
    Statements of Operations (of MM LLC subsequent to June 1, 1998). As a result
    of the investment in MM LLC, there were no open contracts as of December 31,
    2000, 1999 or 1998. See Note 6 for discussion of revenue recognition for the
    Partnership's investment in Trading LLCs and MM LLC.

    FOREIGN CURRENCY TRANSACTIONS

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

    OPERATING EXPENSES

    MLIP pays for all routine operating costs (including all legal, accounting,
    printing, postage and similar administrative expenses) of the Partnership.
    MLIP receives an administrative fee as well as a portion of the brokerage
    commissions paid to MLF by the Partnership through MM LLC.

    INCOME TAXES

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

    DISTRIBUTIONS

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


                                      -6-
<PAGE>

    REDEMPTIONS

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

    DISSOLUTION OF THE PARTNERSHIP

    The Partnership will terminate on December 31, 2022 or at an earlier date if
    certain conditions occur, as well as under certain other circumstances as
    set forth in the Limited Partnership Agreement.

2.  RELATED PARTY TRANSACTIONS

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

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

    Through its investment in MM LLC, the Partnership pays brokerage commissions
    to MLF at a flat monthly rate of .729 of 1% (an 8.75% annual rate) and pays
    MLIP a monthly administrative fee of .021 of 1% (a 0.25% annual rate) of the
    Partnership's month-end assets allocated to trading. Month-end assets are
    not reduced for purposes of calculating brokerage commissions and
    administrative fees by any accrued brokerage commissions, administrative
    fees, Profit Shares or other fees or charges.

    Prior to the investment in MM LLC, MLIP estimates that the round-turn
    equivalent commission rate charged to the Partnership for the year ended
    December 31, 1998 was approximately $126 (not including, in calculating
    round-turn equivalents, forward contracts on a futures-equivalent basis).
    The estimated aggregate round-turn commission rate for MM LLC for the years
    ended December 31, 2000 and 1999 are $82 and $136, respectively.

    MLF currently pays the Advisors, through MM LLC, annual Consulting Fees up
    to 2.00% of the Partnership's average month-end assets allocated to them for
    management, after reduction for a portion of the brokerage commissions.

3.  ADVISORY AGREEMENTS

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

    Profit Shares, currently ranging from 20% to 23% of any New Trading Profit,
    as defined, recognized by each Advisor considered individually irrespective
    of the overall performance of the Partnership, either as of the end of each
    calendar quarter or year and upon the net reallocation of assets away from
    an Advisor, are paid by MM LLC (Trading LLCs prior to June 1, 1998) to each
    of the Advisors. Profit Shares are


                                      -7-
<PAGE>

    also paid out in respect of Units redeemed as of the end of interim months,
    to the extent of the applicable percentage of any New Trading Profit
    attributable to such Units.

4.  WEIGHTED AVERAGE UNITS

    The weighted average number of Units outstanding was computed for purposes
    of calculating net income (loss) per weighted average Unit. The weighted
    average number of Units outstanding for the years ended December 31, 2000,
    1999 and 1998 equals the Units outstanding as of such date, adjusted
    proportionately for Units redeemed based on the respective length of time
    each was outstanding during the year.

5.  MERRILL LYNCH & CO., INC. GUARANTEE

    Merrill Lynch has guaranteed to the Partnership that it will have sufficient
    Net Assets as of the Principal Assurance Date that the Net Asset Value per
    Unit as of such Principal Assurance Date will equal, after adjustment for
    all liabilities to third parties, not less than the minimum assured Net
    Asset Value per Unit. On January 1, 2000, the Partnership restarted its
    trading program for a third Time Horizon of two years' duration with a new
    Principal Assurance Date of December 31, 2001, with a minimum assured Net
    Asset Value per Unit of $106.06.

6.  INVESTMENTS

    Prior to investing in MM LLC, the Partnership placed assets under the
    management of certain of the Advisors by investing in private limited
    liability companies ("Trading LLCs") formed by MLIP. The only members of the
    Trading LLCs were commodity pools sponsored by MLIP. Each Trading LLC traded
    under the management of a single Advisor pursuant to a single strategy and
    at a uniform degree of leverage. Assets placed with an Advisor through 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).

    The investments in MM LLC, and previously certain Trading LLCs, are
    reflected in the financial statements at fair value based upon the
    Partnership's interest in MM LLC or certain Trading LLCs, respectively. Fair
    value of the investment in MM LLC is equal to the market value of the net
    assets of MM LLC allocable to the Partnership as an investor. The resulting
    difference between cost and fair value is reflected on the Statements of
    Operations as Income (loss) from investments.



                                      -8-
<PAGE>

    Total revenues and fees with respect to such investments were as follows:

<TABLE>
<CAPTION>
   For the year ended            Total          Brokerage        Administrative        Profit         Income from
   December 31, 2000           Revenues        Commissions            Fees             Shares          Investment
-------------------------   ---------------  ---------------    ----------------   --------------   ------------------
<S>                         <C>              <C>                <C>                <C>              <C>
MM LLC                       $   1,075,739    $     579,669      $       16,562     $    144,631     $       334,877
                            ===============  ===============    ================   ==============   ==================

<CAPTION>

   For the year ended            Total          Brokerage        Administrative        Profit          Loss from
   December 31, 1999           Revenues        Commissions            Fees             Shares          Investment
-------------------------   ---------------  ---------------    ----------------   --------------   ------------------
<S>                         <C>              <C>                <C>                <C>              <C>
MM LLC                       $     741,104    $     786,236      $       22,464     $     41,471     $      (109,067)
                            ===============  ===============    ================   ==============   ==================

<CAPTION>

   For the year ended            Total          Brokerage        Administrative        Profit       Income (Loss) from
   December 31, 1998           Revenues        Commissions            Fees             Shares          Investments
-------------------------   ---------------  ---------------    ----------------   --------------   ------------------
<S>                         <C>              <C>                <C>                <C>              <C>
JWH LLC                      $    (545,697)   $     173,032      $        4,944     $    -           $      (723,673)
SJO LLC                            264,161          126,221               3,606           14,901             119,433
MM LLC                           1,581,241          527,567              15,073          241,295             797,306
                            ---------------  ---------------    ----------------   --------------   ------------------
Total                        $   1,299,705    $     826,820      $       23,623     $    256,196     $       193,066
                            ===============  ===============    ================   ==============   ==================
</TABLE>

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

<TABLE>
<CAPTION>
                                         MM LLC                          MM LLC
                                   December 31, 2000               December 31, 1999
                              ---------------------------     ---------------------------
 <S>                          <C>                             <C>
 Assets                        $            252,995,756        $            100,901,677
                              ===========================     ===========================

 Liabilities                                  5,383,789                       2,906,392
 Members' Capital                           247,611,967                      97,995,285
                              ---------------------------     ---------------------------

 Total                         $            252,995,756        $            100,901,677
                              ===========================     ===========================
</TABLE>

<TABLE>
<CAPTION>
                                  For the year ended              For the year ended
                                  December 31, 2000               December 31, 1999
                              ---------------------------     ---------------------------
 <S>                          <C>                             <C>
 Revenues                      $             28,324,323        $              9,090,190

 Expenses                                    13,557,899                      10,152,017
                              ---------------------------     ---------------------------
 Net Income (loss)             $             14,766,424        $             (1,061,827)
                              ===========================     ===========================
</TABLE>


                                      -9-
<PAGE>

<TABLE>
<CAPTION>
                                     MM LLC                    JWH LLC                    SJO LLC
                               For the period from       For the period from        For the period from
                                 June 1, 1998 to         January 1, 1998 to          January 1, 1998 to
                               December 31, 1998            May 31, 1998               May 31, 1998
                              ----------------------    ----------------------     ----------------------
 <S>                          <C>                       <C>                        <C>
 Revenues                      $         19,255,343      $         1,391,001        $         1,472,242

 Expenses                                 9,491,842                4,069,362                    802,878
                              ----------------------    ----------------------     ----------------------
 Net Income (loss)             $          9,763,501      $        (2,678,361)       $           669,364
                              ======================    ======================     ======================
</TABLE>

7.  FAIR VALUE AND OFF-BALANCE SHEET RISK

    As of June 1, 1998, the Partnership invested all of its assets in MM LLC.
    Accordingly, the Partnership is invested indirectly in derivative
    instruments, but does not itself hold any derivative instrument positions.
    The application of the provisions of Statement of Financial Accounting
    Standards No. 133, as amended by SFAS No. 137, and further amended by
    SFAS No. 138, did not have a significant effect on the financial statements
    of the Partnership. Consequently, no such positions subsequent to May 31,
    1998 are reflected in these financial statements.

    MARKET RISK

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

    MLIP has procedures in place intended to control market risk exposure,
    although there can be no assurance that they will, in fact, succeed in doing
    so. These procedures focus primarily on monitoring the trading of the
    Advisors selected from time to time by the Partnership or MM LLC, and
    include calculating the Net Asset Value of their respective Partnership
    accounts and Trading LLC accounts, or currently MM LLC accounts, as of the
    close of business on each day and reviewing outstanding positions for
    over-concentrations both on an Advisor-by-Advisor and on an overall
    Partnership basis. While MLIP does not itself intervene in the markets to
    hedge or diversify the Partnership's market exposure, MLIP may urge Advisors
    to reallocate positions, or itself reallocate Partnership assets among
    Advisors (although typically only as of the end of a month) in an attempt to
    avoid over-concentrations. However, such interventions are unusual. Except
    in cases in which it appears that an Advisor has begun to deviate from past
    practice or trading policies or to be trading erratically, MLIP's basic risk
    control procedures consist simply of the ongoing process of advisor
    monitoring and selection with the market risk controls being applied by the
    Advisors themselves.



                                      -10-
<PAGE>

    One important aspect of MLIP's risk controls is its adjustments to the
    leverage at which the Partnership trades. By controlling the percentage of
    the Partnership's assets allocated to trading, MLIP can directly effect the
    market exposure of the Partnership. Leverage control is the principal means
    by which MLIP hopes to be able to ensure that Merrill Lynch is never
    required to make any payments under its guarantee that the Net Asset Value
    per Unit will equal no less than a specified minimum as of the Principal
    Assurance Date (See Note 5).

    CREDIT RISK

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

    The Partnership, through MM LLC, has credit risk in respect of its
    counterparties and brokers, but attempts to mitigate this risk by dealing
    almost exclusively with Merrill Lynch entities as clearing brokers.

    The Partnership, through MM LLC, in its normal course of business, enters
    into various contracts, with MLF acting as its commodity broker. Pursuant to
    the brokerage agreement with MLF (which includes a netting arrangement), to
    the extent that such trading results in receivables from and payables to
    MLF, these receivables and payables are offset as a net receivable or
    payable in the financial statements of MM LLC in the Equity in commodity
    future trading accounts in the Statements of Financial Condition.



                               * * * * * * * * * *

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



                               Michael L. Pungello
                             Chief Financial Officer
                     Merrill Lynch Investment Partners Inc.
                               General Partner of
                        The SECTOR Strategy Fund -SM- V L.P.




                                      -11-
<PAGE>




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

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



[MERRILL LYNCH LOGO]
<PAGE>

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

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

<TABLE>
<CAPTION>
                                                                        Page
                                                                        ----

<S>                                                                     <C>
INDEPENDENT AUDITORS' REPORT                                             1

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

  Statements of Financial Condition                                      2

  Statements of Operations                                               3

  Statements of Changes in Members' Capital                              4

  Notes to Financial Statements                                         5-9
</TABLE>
<PAGE>

INDEPENDENT AUDITORS' REPORT
----------------------------


To the Members of
 ML Multi-Manager Portfolio LLC:

We have audited the accompanying statements of financial condition of ML
Multi-Manager Portfolio LLC (the "Company") as of December 31, 2000 and 1999,
and the related statements of operations and of changes in members' capital for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of ML Multi-Manager Portfolio LLC as of
December 31, 2000 and 1999, and the results of its operations and changes in its
members' capital for the years then ended in conformity with accounting
principles generally accepted in the United States of America.

DELOITTE & TOUCHE LLP


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

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

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

<TABLE>
<CAPTION>
ASSETS

                                                                            2000                      1999
                                                                   ------------------------  -----------------------

<S>                                                                <C>                       <C>
Equity in commodity futures trading accounts:
    Cash and option premiums                                        $          139,346,615    $          97,949,902
    Net unrealized profit on open contracts                                     13,995,141                2,517,003
Cash                                                                             2,835,198                        -
Commercial Paper (Cost $95,200,766)                                             95,200,766                        -
Accrued interest (Note 2)                                                        1,618,036                  434,772
                                                                   ------------------------  -----------------------
                TOTAL                                               $          252,995,756    $         100,901,677
                                                                   ========================  =======================

LIABILITIES AND MEMBERS' CAPITAL

<CAPTION>
LIABILITIES:

<S>                                                                <C>                       <C>
    Brokerage commissions payable (Note 2)                          $            1,265,023    $             708,081
    Profit Shares payable (Note 3)                                               3,036,430                  420,906
    Administrative fees payable (Note 2)                                            41,341                   24,744
    Due to Invested Funds                                                        1,040,995                1,752,661
                                                                   ------------------------  -----------------------
            Total liabilities                                                    5,383,789                2,906,392
                                                                   ------------------------  -----------------------
MEMBERS' CAPITAL:

    Voting Members                                                             247,611,967               97,995,285
                                                                   ------------------------  -----------------------
            Total Members' capital                                             247,611,967               97,995,285
                                                                   ------------------------  -----------------------
                TOTAL                                               $          252,995,756    $         100,901,677
                                                                   ========================  =======================
</TABLE>


See notes to financial statements.


                                      -2-
<PAGE>

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

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

<TABLE>
<CAPTION>
REVENUES:                                                        2000                   1999
                                                           ------------------     ------------------

<S>                                                        <C>                    <C>
Trading profit:
    Realized                                                $      8,646,046       $      3,344,876
    Change in unrealized                                          11,538,356                546,402
                                                           ------------------     ------------------
        Total trading results                                     20,184,402              3,891,278

Interest income (Note 1 & Note 2)                                  8,139,921              5,198,912
                                                           ------------------     ------------------
        Total revenues                                            28,324,323              9,090,190
                                                           ------------------     ------------------

<CAPTION>
EXPENSES:

<S>                                                        <C>                    <C>
    Brokerage commissions (Note 2)                                10,015,693              9,316,187
    Profit Shares (Note 3)                                         3,201,454                515,566
    Administrative fees (Note 2)                                     340,752                320,264
                                                           ------------------     ------------------
        Total expenses                                            13,557,899             10,152,017
                                                           ------------------     ------------------
NET INCOME (LOSS)                                           $     14,766,424       $     (1,061,827)
                                                           ==================     ==================
</TABLE>

See notes to financial statements.


                                      -3-
<PAGE>

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

STATEMENTS OF CHANGES IN MEMBERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                           Voting Members
                                        --------------------

<S>                                     <C>
MEMBERS' CAPITAL,
  DECEMBER 31, 1998                             120,383,476

Withdrawals                                     (21,326,364)

Net loss                                         (1,061,827)
                                        --------------------
MEMBERS' CAPITAL,
  DECEMBER 31, 1999                              97,995,285

Additions                                       175,347,578

Withdrawals                                     (40,497,320)

Net income                                       14,766,424
                                        --------------------
MEMBERS' CAPITAL,
  DECEMBER 31, 2000                             247,611,967
                                        ====================
</TABLE>

See notes to financial statements.


                                      -4-
<PAGE>

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

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

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     ORGANIZATION

     ML Multi-Manager Portfolio LLC (the "Company") was organized under the
     Delaware Limited Liability Company Act on May 11, 1998 and commenced
     trading activities on June 1, 1998. The Company engages in the speculative
     trading of futures, options on futures, forwards and options on forward
     contracts on a wide range of commodities. Merrill Lynch Investment Partners
     Inc. ("MLIP"), a wholly-owned subsidiary of Merrill Lynch Group, Inc.,
     which, in turn, is a wholly-owned subsidiary of Merrill Lynch & Co., Inc.
     ("Merrill Lynch"), has been delegated administrative authority over the
     Company. Merrill Lynch Futures Inc. ("MLF"), an affiliate of Merrill Lynch,
     is the Company's commodity broker. A portion of the Company's assets were
     held by a commodity broker, other than MLF, to facilitate the trading of a
     certain independent advisor, subject to an arrangement recognized by MLIP.
     This advisor was terminated during 2000. The Company has one class of
     Membership Interests, Voting Interests. Voting Interests are held by
     United States limited partnerships ("Members"). The Members control all
     business activities and affairs of the Company by agreement of the majority
     interest of the Members, subject to the discretionary trading authority
     vested in and delegated to the independent trading advisors (the
     "Advisors") and the administrative authority vested in and delegated to
     MLIP. Each Member is a "commodity pool" sponsored and controlled by MLIP
     and shares in the Trading results and Interest income of the Company in
     proportion to their respective capital accounts.

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

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

     ESTIMATES

     The preparation of financial statements in conformity with accounting
     principles generally accepted in the United States of America requires
     management to make estimates and assumptions that affect the reported
     amounts of assets and liabilities and disclosure of contingent assets and
     liabilities at the date of the financial statements and the reported
     amounts of revenues and expenses during the reporting period. Actual
     results could differ from those estimates.

     CASH MANAGEMENT

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

     One Member invests assets that are not allocated to any Advisors
     directly into the Income Enhancement Program. This Member receives a
     priority allocation of interest income earned in these assets before
     the allocation of interest income in proportion to those Members whose
     assets are allocated for trading purposes.

                                      -5-
<PAGE>

     REVENUE RECOGNITION

     Commodity futures, options on futures, forwards and options on forward
     contracts are recorded on the trade date and open contracts are reflected
     in Net unrealized profit on open contracts in the Statements of Financial
     Condition at the difference between the original contract value and the
     market value (for those commodity interests for which market quotations are
     readily available) or at fair value. The change in unrealized profit on
     open contracts from one period to the next is reflected in Change in
     unrealized under Trading profit in the Statements of Operations.

     FOREIGN CURRENCY TRANSACTIONS

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

     ORGANIZATIONAL COSTS

     MLIP paid all organizational costs relating to the Company without direct
     reimbursement from the Company or any Member.

     INCOME TAXES

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

     DISTRIBUTIONS

     The Members are entitled to receive any distributions which may be made by
     the Company in proportion to their respective capital accounts. No such
     distributions have been declared for the years ended December 31, 2000 or
     1999.

     WITHDRAWALS

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

     DISSOLUTION OF THE COMPANY

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

2.   RELATED PARTY TRANSACTIONS

     A portion of the Company's U.S. dollar assets are maintained at MLF. On
     assets held in U.S. dollars, Merrill Lynch credits the Company with
     interest at the prevailing 91-day U.S. Treasury bill rate. The Company is
     credited with interest on any of its assets and net gains actually held by
     Merrill Lynch in


                                      -6-
<PAGE>

     non-U.S. dollar currencies at a prevailing local rate received by Merrill
     Lynch. Merrill Lynch may derive certain economic benefit, in excess of the
     interest which Merrill Lynch pays to the Company from the possession of
     such assets.

     As of June 2000, the Company began investing in Commercial Paper.
     Merrill Lynch Pierce Fenner & Smith acts as custodian for these assets.

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

     Following the allocation of the Company's trading profit and interest
     income among the Members' Capital Accounts, MLIP calculates the brokerage
     commissions, Profit Shares, administrative fees and other expenses due from
     the Company to third parties, relating to the Company's trading on behalf
     of the Members. Such brokerage commissions, fees and expenses are
     specifically allocated as of the end of each accounting period (not pro
     rata based on the Members' respective capital accounts) to, and deducted
     from, the Members' capital accounts and paid out by the Company. The
     Company pays brokerage commissions to MLF, at a flat monthly rate
     reflecting the fee arrangement between each Member and MLF. For the years
     ended December 31, 2000 and 1999, the monthly rates for Members ranged from
     .291 of 1% (a 3.50% annual rate) to .729 of 1% (an 8.75% annual rate) of
     each Member's month-end assets invested in the Company.

     The Company pays MLIP a monthly administrative fee ranging from .021 of 1%
     (a 0.25% annual rate) to .083 of 1% (a 1.00% annual rate) of each Member's
     month-end assets. Month-end assets are not reduced for purposes of
     calculating brokerage commissions and administrative fees by any accrued
     brokerage commissions, administrative fees, Profit Shares or other fees or
     charges.

     MLF pays the Advisors annual Consulting Fees up to 2% of the Company's
     average month-end assets allocated to them for management after reduction
     for a portion of the brokerage commissions.

3.   ADVISORY AGREEMENTS

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

     The Company pays, from the Capital Account of each Member, to the Advisors
     quarterly or annual Profit Shares generally ranging from 15% to 23% of any
     New Trading Profit, as defined, recognized by each Advisor, attributable to
     each Member's Capital Account, considered individually irrespective of the
     overall performance of the such Member's Capital Account. Profit Shares,
     which are calculated separately in respect of each Member's Capital
     Account, are determined as of the end of each calendar quarter or year and
     are also paid to each Advisor upon the withdrawal of capital from the
     Company by a Member for whatever purpose, other than to pay expenses and
     upon the reallocation of assets away from an Advisor.

4.   FAIR VALUE AND OFF-BALANCE SHEET RISK

     In June 1998, the Financial Accounting Standards Board issued Statement of
     Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative
     Instruments and Hedging Activities" (the "Statement"), effective for fiscal
     years beginning after June 15, 2000, as amended by SFAS No. 137. SFAS No.
     133 is further amended by SFAS No. 138, which clarifies issues surrounding
     interest risk, foreign currency denominated items, normal purchases and
     sales and net hedging. This Statement supercedes SFAS No. 119 ("Disclosure
     about Derivative Financial Instruments and Fair Value of

                                          -7-

<PAGE>

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

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

     MARKET RISK

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

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

     CREDIT RISK

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

     The credit risk associated with these instruments from counterparty
     nonperformance is the net unrealized profit on open contracts, if any,
     included in the Statements of Financial Condition. The


                                      -8-
<PAGE>

     Company attempts to mitigate this risk by dealing almost exclusively with
     Merrill Lynch entities as clearing brokers.The Company, in its normal
     course of business, enters into various contracts, with MLF acting as its
     commodity broker. Pursuant to the brokerage agreement with MLF (which
     includes a netting arrangement), to the extent that such trading results in
     receivables from and payables to MLF, these receivables and payables are
     offset and reported as a net receivable or payable and included in the
     Equity in commodity futures trading accounts in the Statements of Financial
     Condition.




                                 * * * * * * * *

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



                               Michael L. Pungello
                             Chief Financial Officer
                     Merrill Lynch Investment Partners Inc.
                           Commodity Pool Operator of
                         ML Multi-Manager Portfolio LLC


                                      -9-