<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to ___________________
Commission File Number 0-18702
THE S.E.C.T.O.R. STRATEGY FUNDSM L.P.
-------------------------------------
(Exact Name of Registrant as
specified in its charter)
Delaware 13-3568563
- -------------------------------- ----------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
c/o Merrill Lynch Investment Partners Inc.
(formerly ML Futures Investment Partners Inc.)
Merrill Lynch World Headquarters - South Tower, 6th Fl.
World Financial Center New York, New York 10080-6106
----------------------------------------------------
(Address of principal executive offices)
(Zip Code)
212-236-4161
----------------------------------------------------
(Registrant's telephone number, including area code)
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
--- ---
This document contains 11 pages.
There are no exhibits and no exhibit index filed with this document.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
THE S.E.C.T.O.R. STRATEGY FUNDSM L.P.
-------------------------------------
(a Delaware limited partnership)
--------------------------------
STATEMENTS OF FINANCIAL CONDITION
---------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
-------- --------
<S> <C> <C>
Accrued interest $ 112,437 $ 144,134
Equity in commodity futures trading accounts:
Cash and option premiums 29,812,596 34,432,565
Net unrealized gain on open contracts 912,178 882,382
--------------- ---------------
TOTAL $30,837,211 $35,459,081
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
LIABILITIES:
Redemptions payable $219,570 $ 303,823
Brokerage commissions payable (Note 2) 224,851 265,934
Profit shares payable 81,807 205,277
Administrative expense payable (Note 2) 6,424 -
--------------- ---------------
Total liabilities 532,652 775,034
--------------- ---------------
PARTNERS' CAPITAL:
General Partners (2,518 and 2,518 Units) 447,361 435,363
Limited Partners (167,933 and 197,942 Units) 29,857,198 34,248,684
--------------- ---------------
Total partners' capital 30,304,559 34,684,047
--------------- ---------------
TOTAL $30,837,211 $35,459,081
=============== ===============
NET ASSET VALUE PER UNIT
(Based on 170,451 and 200,460 Units outstanding) $177.79 $173.02
======= =======
</TABLE>
See notes to financial statements.
2
<PAGE>
THE S.E.C.T.O.R. STRATEGY FUNDSM L.P.
-------------------------------------
(a Delaware limited partnership)
--------------------------------
STATEMENTS OF OPERATIONS
------------------------
<TABLE>
<CAPTION>
For the three For the three For the nine For the nine
months ended months ended months ended months ended
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
------ ------ ------ -----
<S> <C> <C> <C> <C>
REVENUES:
Trading profits (loss):
Realized $273,646 $2,291,310 $2,201,775 $ 9,126,773
Change in unrealized 443,877 320,285 29,796 (1,543,000)
--------------- ---------------- --------------- ----------------
Total trading results 717,523 2,611,595 2,231,571 7,583,773
--------------- ---------------- --------------- ----------------
Interest income 347,961 469,527 1,108,016 1,547,032
--------------- ---------------- --------------- ----------------
Total revenues 1,065,484 3,081,122 3,339,587 9,130,805
--------------- ---------------- --------------- ----------------
EXPENSES:
Profit shares 81,807 308,803 252,673 878,893
Brokerage commissions (Note 2) 670,437 822,236 2,160,611 2,686,516
Administrative expense (Note 2) 19,156 - 61,732 -
--------------- ---------------- --------------- ----------------
Total expenses 771,400 1,131,039 2,475,016 3,565,409
--------------- ---------------- --------------- ----------------
NET INCOME $294,084 $1,950,083 $ 864,571 $5,565,396
=============== ================ =============== ================
NET INCOME PER UNIT
Weighted average number of units
outstanding 173,739 221,823 186,053 249,516
======= ======= ======= =======
Weighted average net income
per Limited Partner Unit and
General Partner Unit $1.69 $8.79 $4.65 $22.30
===== ===== ===== ======
</TABLE>
See notes to financial statements.
3
<PAGE>
THE S.E.C.T.O.R. STRATEGY FUND/SM/ L.P.
---------------------------------------
(a Delaware limited partnership)
--------------------------------
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
------------------------------------------
For the nine months ended September 30, 1996 and 1995
-----------------------------------------------------
<TABLE>
<CAPTION>
Limited General
Units Partners Partner Total
----- -------- ------- -----
<S> <C> <C> <C> <C>
PARTNERS' CAPITAL,
DECEMBER 31, 1994 283,248 $40,564,659 $531,886 $41,096,545
Net income - 5,484,124 81,272 5,565,396
Redemptions (72,979) (11,495,047) - (11,495,047)
------------- ----------------- --------------- -------------------
PARTNERS' CAPITAL,
SEPTEMBER 30, 1995 210,269 $34,553,736 $613,158 $35,166,894
============= ================= =============== ===================
PARTNERS' CAPITAL,
DECEMBER 31, 1995 200,460 $34,248,684 $435,363 $34,684,047
Net income - 852,573 11,998 864,571
Redemptions (30,009) (5,244,059) - (5,244,059)
------------- ----------------- --------------- -------------------
PARTNERS' CAPITAL,
SEPTEMBER 30, 1996 170,451 $29,857,198 $447,361 $30,304,559
============= ================= =============== ===================
</TABLE>
See notes to financial statements.
4
<PAGE>
THE S.E.C.T.O.R. STRATEGY FUNDSM L.P.
-------------------------------------
(A Delaware Limited Partnership)
--------------------------------
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements have been prepared without audit. In the opinion
of management, the financial statements contain all adjustments (consisting
of only normal recurring adjustments) necessary to present fairly the
financial position of The SECTOR Strategy FundSM L.P. (the "Partnership" or
the "Fund") as of September 30, 1996 and the results of its operations for
the nine months ended September 30, 1996 and 1995. However, the operating
results for the interim periods may not be indicative of the results
expected for the full year.
Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with general accepted
accounting principles have been omitted. It is suggested that these
financial statements be read in conjunction with the financial statements
and notes thereto included in the Partnership's Annual Report on Form 10-K
filed with the Securities and Exchange Commission for the year ended
December 31, 1995 (the "Annual Report").
2. RELATED PARTY TRANSACTIONS
The Partnership pays brokerage commissions to MLF at a flat monthly rate
equal to 0.75 of 1% (a 9% annual rate) of the Partnership's month-end
assets allocated to trading. Assets allocated to trading are not reduced,
for purposes of calculating brokerage commissions, by any accrued but
unpaid brokerage commissions, profit shares or other fees or charges.
Effective January 1, 1996, the brokerage commission the Partnership pays to
the Commodity Broker was reduced to .729% of 1% (a 8.75% annual rate), and
the Partnership began to pay the General Partner an administrative fee of
.020833 of 1% (a .25% annual rate). The General Partner estimates that the
round-turn equivalent commission rate charged to the Partnership during the
nine months ended September 30, 1996 and 1995 was approximately $118 and
$18, respectively (not including, in calculating round-turn equivalents,
forward contracts on a futures-equivalent basis).
MLF pays the Advisors annual Consulting Fees ranging from 2% to 4% of the
Partnership's average month-end assets allocated to them for management,
after reduction for a portion of the brokerage commissions.
3. FAIR VALUE AND OFF-BALANCE SHEET RISK
The Partnership trades futures, options and forward contracts in interest
rates, stock indices, commodities, currencies, energy and metals. The
Partnership's revenues by reporting category for the nine months ended
September 30, 1996 were as follows:
<TABLE>
<CAPTION>
1996
----
<S> <C>
Interest rate and
stock indices $(110,843)
Commodities 691,307
Currencies 603,930
Energy 951,999
Metals 95,178
---------------
$2,231,571
===============
</TABLE>
Market Risk
-----------
Derivative instruments involve varying degrees of off-balance sheet market
risk, and changes in the level or volatility of interest rates, foreign
currency exchange rates or the market values of the financial instruments
or commodities underlying such derivative instruments frequently result in
changes in the Partnership's unrealized gain or loss on such derivative
instruments as reflected in the Statements of Financial Condition. 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 as well as the volatility and liquidity of the markets in which
the derivative instruments are traded.
5
<PAGE>
The General Partner has procedures in place intended to control market
risk, 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 for the Partnership, adjusting the
percentage of the Partnership's total assets allocated to trading,
calculating the Net Asset Value of the Advisors' respective Partnership
accounts as of the close of business on each day and reviewing outstanding
positions for over-concentration C both on an Advisor-by-Advisor and on an
overall Partnership basis. While the General Partner will not itself
intervene in the markets to hedge or diversify the Partnership's market
exposure (although the General Partner does adjust the percentage of the
Partnership's total assets allocated to trading), the General Partner 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, the General Partner'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.
Fair Value
----------
The derivative instruments used in the Partnership's trading activities are
marked to market daily with the resulting unrealized gains or losses
recorded in the Statements of Financial Condition and the related profit or
loss reflected in trading revenues in the Statements of Operations. The
contract/notional values of the Partnership's open derivative instrument
positions as of September 30, 1996 and December 31, 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------------------------------- -------------------------------------------------
Commitment to Commitment to Commitment to Commitment to
Purchase (Futures, Sell (Futures, Purchase (Futures, Sell (Futures,
Options & Forwards) Options & Forwards) Options & Forwards) Options & Forwards)
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Interest rate
and stock
indices $ 44,999,807 $ 7,217,689 $159,971,759 $ 6,823,540
Commodities 5,340,994 1,089,355 11,552,579 922,979
Currencies 47,683,333 47,926,774 14,228,028 37,399,355
Energy 2,620,941 194,358 2,132,766 7,133,421
Metals 2,043,654 17,544,190 5,062,196 8,370,684
------------------ ------------------- --------------------- -----------------
$102,688,729 $73,972,366 $192,947,328 $60,649,979
================== =================== ===================== =================
</TABLE>
Substantially all of the Partnerships derivative instruments outstanding as
of September 30, 1996 expire within one year.
The contract/notional value of the Trading Partnership's exchange-traded
and non-exchange-traded derivative instrument positions as of September 30,
1996 and December 31, 1995 was as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------------------------------ -----------------------------------------------
Commitment to Commitment to Commitment to Commitment to
Purchase (Futures, Sell (Futures, Purchase (Futures, Sell (Futures,
Options & Forwards) Options & Forwards) Options & Forwards) Options & Forwards)
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Exchange
traded $ 64,978,490 $33,484,741 $175,191,914 $26,840,562
Non-Exchange
traded 37,710,239 40,487,625 17,755,414 33,809,417
-------------------- -------------------- --------------------- --------------------
$102,688,729 $73,972,366 $192,947,328 $60,649,979
==================== ==================== ===================== ====================
</TABLE>
6
<PAGE>
The average fair value of the Partnership's derivative instrument positions
which were open as of the end of each calendar month during the nine months
ended September 30, 1996 and the year ended December 31, 1995 was as
follows:
<TABLE>
<CAPTION>
1996 1995
---------------------------------------------- -------------------------------------------------
Commitment to Commitment to Commitment to Commitment to
Purchase (Futures, Sell (Futures, Purchase (Futures, Sell (Futures,
Options & Forwards) Options & Forwards) Options & Forwards) Options & Forwards)
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Interest rate
and Stock
indices $ 78,415,754 $ 52,558,791 $110,354,738 $12,248,672
Commodities 9,105,193 2,043,192 12,185,481 2,455,052
Currencies 49,822,382 53,621,464 65,653,991 67,746,615
Energy 3,147,698 1,830,883 4,522,825 3,331,428
Metals 4,813,201 9,507,987 7,184,139 13,570,221
------------------ ------------------- ------------------- -------------------
$145,304,228 $119,562,317 $199,901,174 $99,351,988
================== =================== =================== ===================
</TABLE>
A portion of the amounts indicated as off-balance sheet risk reflects
offsetting commitments to purchase and sell the same derivative instrument
on the same date in the future. These commitments are economically
offsetting but are not, as a technical matter, offset in the forward market
until the settlement date.
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 fair value amounts in the above tables represent the extent of the
Partnership's market exposure in the particular class of derivative
instrument listed, but not the credit risk associated with counterparty
nonperformance. The credit risk associated with these instruments from
counterparty nonperformance is the net unrealized gain, if any, included in
the Statements of Financial Condition. The Partnership also has credit risk
because the sole counterparty or broker with respect to most of the
Partnership's assets is MLF.
As of September 30, 1996 and December 31, 1995, $23,093,738 and $21,422,384
of the Partnership's assets, respectively, were held in segregated accounts
at MLF in accordance with Commodity Futures Trading Commission regulations.
The gross unrealized gain and the net unrealized gain on the Partnership's
open derivative instrument positions as of September 30, 1996 and December
31, 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
Gross Net Gross Net
Unrealized Unrealized Unrealized Unrealized
Gain Gain (Loss) Gain Gain (Loss)
---- ----------- ---- -----------
<S> <C> <C> <C> <C>
Exchange
traded $1,245,256 $849,126 $1,733,452 $1,035,168
Non-Exchange
traded 591,509 63,052 259,593 (152,786)
-------------------- -------------------- --------------------- --------------------
$1,836,765 $912,178 $1,993,045 $ 882,382
==================== ==================== ===================== ====================
</TABLE>
The Partnership controls credit risk by dealing almost exclusively with
Merrill Lynch entities as brokers and counterparties.
The Partnership through its normal course of business enters into various
contracts with MLF acting as its commodity broker. Pursuant to the
brokerage arrangement with MLF, such trading which results in receivables
from and payables to MLF will be offset and reported as a net receivable or
payable.
7
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Operational Overview: Advisor Selections
- ----------------------------------------
Due to the nature of the Fund's business, its results of
operations depend on MLIP's ability to select Advisors and determine the
appropriate percentage of assets to allocate to them for trading, as well as the
Advisors' ability to recognize and capitalize on trends and other profit
opportunities in different sectors of the world commodity markets. MLIP's
Advisor selection procedure and leveraging analysis, as well as the Advisors'
trading methods, are confidential, so that substantially the only information
that can be furnished regarding the Fund's results of operations is contained in
the performance record of its trading. Unlike operating businesses, general
economic or seasonal conditions do not directly affect the profit potential of
the Fund, and its past performance is not necessarily indicative of future
results. Because of the speculative nature of its trading, operational or
economic trends have little relevance to the Fund's results. MLIP believes,
however, that there are certain market conditions, for example, markets with
strong price trends, in which the Fund has a better likelihood of being
profitable than in others.
As of October 1, 1996, the Partnership's assets were allocated
as follows:
<TABLE>
<CAPTION>
Trading Advisor Markets Traded % Allocation
- --------------- -------------- ------------
<S> <C> <C>
John W. Henry & Co., Inc. Financial Instruments (including
currencies) and Metals 28.69
Graham Capital Management L.P. Diversified Program 15.25
AIS Futures Management, Inc. Diversified Program 15.38
Chescor Limited Currencies 10.78
Fundamental Futures Inc. Agriculture 11.65
AIB Investment Managers Limited Currencies 9.60
Blenhiem Investments, Inc. Diversified Program 8.65
-----
100.00%
</TABLE>
MLIP expects to continue to change both allocations and Advisor
selections from time to time without advance notice to existing investors.
MLIP expects to continue to change both allocations and Advisors
from time to time without advance notice to existing investors.
Results of Operations - General
- -------------------------------
MLIP believes that multi-Advisor futures funds should be
regarded as medium- to long-term investments but, unlike an operating business,
it is difficult to identify "trends" in the Fund's operations and virtually
impossible to make any predictions regarding future results based on results to
date.
Markets in which sustained price trends occur with some
frequency tend to be more favorable to managed futures investments than
"whipsaw," "choppy" markets, but (i) this is not always the case, (ii) it is
impossible to predict when trending markets will occur and (iii) different
Advisors are affected differently by trends in general as well as by particular
types of trends.
The Fund controls credit risk in its trading in the derivatives
markets by trading only through Merrill Lynch entities which MLIP believes to be
creditworthy. The Fund attempts to control the market risk inherent in its
derivatives trading by utilizing a multi-advisor, multi-strategy structure. This
structure purposefully attempts to diversify the Fund's Advisor group among
different strategy types and market sectors in an effort to reduce risk
(although the Fund's portfolio currently emphasizes technical and
trend-following approaches).
Performance Summary
- -------------------
During the first nine months of 1995, the Fund's average
month-end Net Assets equalled $38,383,806, and the Fund recognized gross trading
gains $7,583,773 or 19.76% of such average month-end Net Assets. Brokerage
commissions of $2,686,516 or 7.0% and Profit Shares of $878,893 or 2.29% of
average month-end Net Assets were paid. Interest income of $1,547,032 or 4.03%
of average month-end Net Assets resulted in a net income of $5,565,396 or 14.50%
of average month-end Net Assets, which resulted in a 15.27% increase in the Net
Asset Value per Unit since December 31, 1994.
During the first nine months of 1996, the Fund's average
month-end Net Assets equalled $32,251,253, and the Fund recognized gross trading
gains of $2,231,571 or 6.91% of such average month-end Net Assets. Brokerage
commissions of $2,160,611 or 6.70% and Administrative expenses of $61,732 or
.19% and Profit Shares of $252,673 or .78% of average month-end Net Assets were
paid. Interest income of $1,108,016 or 3.44% of average month-end Net Assets
resulted in net
8
<PAGE>
income of $864,571 or 2.68% of average month-end Net Assets which resulted in a
2.76% increase in the Net Asset Value per Unit since December 31, 1995.
During the first nine months of 1996 and 1995, the Fund
experienced 12 profitable months and 6 unprofitable months.
<TABLE>
<CAPTION>
MONTH-END NET ASSET VALUE PER UNIT
- ---------------------------------------------------------------------------------------
Jan. Feb. Mar. April May June July Aug. Sept.
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 $143.16 $151.75 $158.05 $161.56 $161.66 $158.32 $157.85 $163.55 $167.25
- ---------------------------------------------------------------------------------------
1996 $181.96 $170.88 $173.16 $175.80 $173.86 $176.00 $171.33 $175.62 $177.79
- ---------------------------------------------------------------------------------------
</TABLE>
Importance of Market Factors
- ----------------------------
Comparisons between the Fund's performance in a given period in
one fiscal year to the same period in a prior year are unlikely to be
meaningful, given the uncertainty of price movements in the markets traded by
the Fund. In general, MLIP expects that the Fund is most likely to trade
successfully in markets which exhibit strong and sustained price trends. The
current Advisor group emphasizes technical and trend-following methods.
Consequently, one would expect that in trendless, "choppy" markets the Fund
would likely be unprofitable, while in markets in which major price movements
occur, the Fund would have its best profit potential (although there could be no
assurance that the Fund would, in fact, trade profitably). However,
trend-followers not infrequently will miss major price movements, and market
corrections can result in rapid and material losses (sometimes as much as 5% in
a single day). Although MLIP monitors market conditions and Advisor performance
on an ongoing basis in overseeing the Fund's trading, MLIP does not attempt to
"market forecast" or to "match" trading styles with predicted market conditions.
Rather, MLIP concentrates on quantitative and qualitative analysis of
prospective Advisors, as well as on statistical studies of the historical
performance parameters of different Advisor combinations in selecting Advisors
and allocating and reallocating Fund assets among them.
Because managed futures advisors' strategies are proprietary and
confidential and market movements unpredictable, selecting advisors to implement
speculative trading strategies involves considerable uncertainty. Furthermore,
the concentration of the Fund's current Advisor portfolio, both in terms of the
number of managers retained and the common emphasis of their strategies on
technical and trend-following methods, increases the risk that unexpectedly bad
performance, turbulent market conditions or a combination of the two will result
in significant losses.
MLIP's Advisor Selections
- -------------------------
MLIP has no timetable or schedule for making Advisor changes or
reallocations, and generally intends to make a medium- to long-term commitment
to all Advisors selected. However, there can be no assurance as to the frequency
or number of the Advisor changes which may take place in the future, or as to
how long any of the current Advisors will continue to manage assets for the
Fund.
Liquidity
- ---------
Most of the Partnership's assets are held as cash which, in
turn, is used to margin its futures positions and earns interest income and is
withdrawn, as necessary, to pay redemptions and fees.
The futures contracts in which the Partnership trades may become
illiquid under certain market conditions. Commodity exchanges limit fluctuations
in futures prices during a single day by regulations referred to as "daily
limits." During a single day no trades may be executed at prices beyond the
daily limit. Once the price of a futures contract for a particular commodity has
increased or decreased by an amount equal to the daily limit, positions in the
commodity can generally neither be taken nor liquidated unless traders are
willing to effect trades at or within the limit. Futures contracts have
occasionally moved to the daily limit for several consecutive days with little
or no trading. Such market conditions could prevent the Partnership from
promptly liquidating its futures (including its options) positions. There are no
limitations on the daily price moves in trading foreign currency forward
contracts through banks, although illiquidity may develop in the forward markets
due to large spreads between "bid" and "ask" prices quoted. (Forward contracts
are the bank version of currency futures contracts and are not traded on
exchanges.)
Capital Resources
- -----------------
The Partnership does not have, nor does it expect to have, any
capital assets and has no material commitments for capital expenditures. The
Partnership uses its assets to supply the necessary margin or premiums for, and
to pay any losses incurred in connection with, its trading activity and to pay
redemptions and fees.
Inflation is not a significant factor in the Fund's
profitability, although inflationary cycles can give rise to the type of major
price movements which can have a materially favorable or adverse impact on the
Fund's performance.
9
<PAGE>
Changes in the level of prevailing interest rates (a factor
generally associated with inflation) could have a material effect on the
percentage of the total capital which is committed to trading, as interest rates
affect the calculation of the discounted minimum Net Asset Value per Unit which
Merrill Lynch & Co., Inc. has guaranteed to investors.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
There are no exhibits required to be filed with this document.
(b) Reports on Form 8-K
-------------------
There were no reports on Form 8-K filed during the first nine
months of fiscal 1996.
10
<PAGE>
SIGNATURES
Pursuant to the requirements 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 S.E.C.T.O.R STRATEGY FUNDSM L.P.
By: MERRILL LYNCH INVESTMENT PARTNERS INC.
(General Partner)
Date: November 11, 1996 By /s/JOHN R. FRAWLEY, JR.
-----------------------
John R. Frawley, Jr.
President, Chief Executive Officer
and Director
Date: November 11, 1996 By /s/JAMES M. BERNARD
-------------------
James M. Bernard
Chief Financial Officer,
Treasurer and Senior Vice President
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> BD
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
STATEMENTS OF FINANCIAL CONDITION, CONSOLIDATED STATEMENTS OF
OPERATIONS,CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000862525
<NAME> SECTOR STRATEGY FUND L.P.
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> SEP-30-1996 SEP-30-1995
<CASH> 0 0
<RECEIVABLES> 30,837,211 36,701,486
<SECURITIES-RESALE> 0 0
<SECURITIES-BORROWED> 0 0
<INSTRUMENTS-OWNED> 0 0
<PP&E> 0 0
<TOTAL-ASSETS> 30,837,211 36,701,486
<SHORT-TERM> 0 0
<PAYABLES> 532,652 1,534,592
<REPOS-SOLD> 0 00
<SECURITIES-LOANED> 00 0
<INSTRUMENTS-SOLD> 0 0
<LONG-TERM> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 30,304,559 35,166,894
<TOTAL-LIABILITY-AND-EQUITY> 30,837,211 36,701,486
<TRADING-REVENUE> 2,231,571 7,583,773
<INTEREST-DIVIDENDS> 1,108,016 1,547,032
<COMMISSIONS> 2,475,016 3,565,409
<INVESTMENT-BANKING-REVENUES> 0 0
<FEE-REVENUE> 0 0
<INTEREST-EXPENSE> 0 0
<COMPENSATION> 0 0
<INCOME-PRETAX> 864,571 5,565,396
<INCOME-PRE-EXTRAORDINARY> 864,571 5,565,396
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 864,571 5,565,396
<EPS-PRIMARY> 4.65 22.30
<EPS-DILUTED> 4.65 22.30
</TABLE>
