<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, 1997
--------------------
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 0-22448
THE SECTOR STRATEGY FUND/SM/ VI L.P.
---------------------------------------------
(Exact Name of Registrant as
specified in its charter)
Delaware 13-3714541
- --------------------------------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
c/o Merrill Lynch 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)
212-236-5662
------------------------------
(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 14 pages.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
THE SECTOR STRATEGY FUND/SM/ VI L.P.
---------------------------------------------
(a Delaware limited partnership)
------------------------------
STATEMENTS OF FINANCIAL CONDITION
---------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------------ ------------------
ASSETS
- ------
<S> <C> <C>
Accrued interest $ 44,917 $ 93,352
Equity in commodity futures trading accounts:
Cash and option premiums 10,688,574 22,269,250
Net unrealized profit on open contracts 128,384 60,210
Investments 17,007,734 8,288,948
Receivable from outside investments 216,780 1,278,557
------------------ ------------------
TOTAL $28,086,389 $31,990,317
================== ==================
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
LIABILITIES:
Redemptions payable $ 352,973 $ 928,164
Profit shares payable 39,210 69,505
Brokerage commissions payable 792 43,959
Administrative fees payable 1,132 1,782
------------------ ------------------
Total liabilities 394,107 1,043,410
------------------ ------------------
PARTNERS' CAPITAL:
General Partners (6971 and 6971 Units) 801,989 758,780
Limited Partners (233735 and 277342 Units) 26,890,294 30,188,127
------------------ ------------------
Total partners' capital 27,692,283 30,946,907
------------------ ------------------
TOTAL $28,086,389 $31,990,317
================== ==================
NET ASSET VALUE PER UNIT
(Based on 240706 and 284313 Units outstanding) $115.05 $108.85
================== ==================
</TABLE>
See notes to financial statements.
2
<PAGE>
THE SECTOR STRATEGY FUND/SM/ VI 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,
1997 1996 1997 1996
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
REVENUES:
Trading profits (loss):
Realized $ (12,943) $(1,415,658) $ 158,788 $ 2,212,368
Change in unrealized 71,829 542,963 68,174 (1,736,586)
------------------ ------------------ ------------------ ------------------
Total trading results 58,886 (872,695) 226,962 475,782
------------------ ------------------ ------------------ ------------------
Interest income 161,575 387,494 654,414 1,364,045
Income from investments 1,093,094 - 1,152,043 -
------------------ ------------------ ------------------ ------------------
Total revenues 1,313,555 (485,201) 2,033,419 1,839,827
------------------ ------------------ ------------------ ------------------
EXPENSES:
Profit shares 510 - 2,914 370,985
Brokerage commissions 122,074 482,156 406,167 1,988,061
Administrative fees 3,488 12,363 11,446 50,976
------------------ ------------------ ------------------ ------------------
Total expenses 126,072 494,519 420,527 2,410,022
------------------ ------------------ ------------------ ------------------
NET INCOME (LOSS) $1,187,483 $ (979,720) $1,612,892 $ (570,195)
================== ================== ================== ==================
NET INCOME (LOSS) PER UNIT:
Weighted average number of units
outstanding 247,558 330,885 263,343 382,921
================== ================== ================== ==================
Weighted average net income (loss)
per Limited Partner
and General Partner Unit $4.80 $(2.96) $6.12 $(1.49)
================== ================== ================== ==================
</TABLE>
See notes to financial statements.
3
<PAGE>
THE SECTOR STRATEGY FUND/SM/ VI L.P.
(a Delaware limited partnership)
------------------------------
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
------------------------------------------
For the nine months ended September 30, 1997 and 1996
-----------------------------------------------------
<TABLE>
<CAPTION>
Units Limited Partners General Partner Total
----------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
PARTNERS' CAPITAL,
December 31, 1995 484,717 $ 49,707,772 $723,241 $ 50,431,013
Net loss - (554,569) (15,626) (570,195)
Redemptions (172,192) (18,047,580) - (18,047,580)
----------------- ------------------ ------------------ ------------------
PARTNERS' CAPITAL,
September 30, 1996 312,525 $ 31,105,623 $707,615 $ 31,813,238
================= ================== ================== ==================
PARTNERS' CAPITAL,
December 31, 1996 284,313 $ 30,188,127 $758,780 $ 30,946,907
Net income - 1,569,683 43,209 1,612,892
Redemptions (43,607) (4,867,516) - (4,867,516)
----------------- ------------------ ------------------ ------------------
PARTNERS' CAPITAL,
September 30, 1997 240,706 $ 26,890,294 $801,989 $ 27,692,283
================= ================== ================== ==================
</TABLE>
See notes to financial statements.
4
<PAGE>
THE SECTOR STRATEGY FUND/SM/ VI 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 Fund/SM/ VI L.P. (the
"Partnership" or the "Fund") as of September 30, 1997 and the results of its
operations for the nine months ended September 30, 1997 and 1996. 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, 1996
(the "Annual Report").
2. INVESTMENT
At September 30, 1997 the Partnership had an investment in the ML JWH
Financial and Metals Portfolio L.L.C. ("JWH LLC"), ML Chesapeake Diversified
L.L.C. ("Chesapeake LLC"), and ML Sjo Prospect L.L.C. ("SJO LLC").
Total revenues and fees with respect to such investments are set
forth as follows:
<TABLE>
<CAPTION>
For the three months Total Brokerage Administrative Profit Income from
ended September 30, 1997 Revenue Commissions Fees Shares Investments
-------------- -------------- ----------------- ----------------- ----------------------
<S> <C> <C> <C> <C> <C>
JWH LLC $ 920,417 $137,449 $ 3,927 $ 65,456 $ 713,585
Chesapeake LLC 264,411 123,774 3,536 27,659 109,442
SJO LLC 439,414 124,805 3,566 40,976 270,067
-------------- -------------- ----------------- ----------------- ----------------------
Total $1,624,242 $386,028 $11,029 $134,091 $1,093,094
============== ============== ================= ================= ======================
For the nine months Total Brokerage Administrative Profit Income from
ended September 30, 1997 Revenue Commissions Fees Shares Investments
-------------- -------------- ----------------- ----------------- ----------------------
<S> <C> <C> <C> <C> <C>
JWH LLC $ 893,481 $286,784 $ 8,109 $ 66,095 $ 532,493
Chesapeake LLC 605,843 335,005 9,409 53,512 207,917
SJO LLC 727,633 248,820 7,041 60,139 411,633
-------------- -------------- ----------------- ----------------- ----------------------
Total $2,226,957 $870,609 $24,559 $179,746 $1,152,043
============== ============== ================= ================= ======================
</TABLE>
5
<PAGE>
As significant investees, income statement information for JWH LLC,
Chesapeake LLC and SJO LLC is set forth as follows:
<TABLE>
<CAPTION>
ML JWH FINANCIAL AND METALS PORTFOLIO LLC
-----------------------------------------
(a Delaware limited partnership)
------------------------------
STATEMENTS OF INCOME
--------------------
For the three For the nine
months ended months ended
September 30, September 30,
1997 1997
------------------------- --------------------
<S> <C> <C>
REVENUES:
Trading profits (loss):
Realized $6,666,871 $3,199,095
Change in unrealized 1,824,620 3,394,200
------------------------- --------------------
Total trading results 8,491,491 6,593,295
------------------------- --------------------
Interest income 788,805 2,312,273
------------------------- --------------------
Total revenues 9,280,296 8,905,568
------------------------- --------------------
EXPENSES:
Profit shares 389,699 406,321
Brokerage commissions 1,446,028 4,088,876
Administrative fees 39,632 110,113
------------------------- --------------------
Total expenses 1,875,359 4,605,310
------------------------- --------------------
NET INCOME $7,404,937 $4,300,258
========================= ====================
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
ML CHESAPEAKE DIVERSIFIED L.L.C
-------------------------------
(a Delaware limited partnership)
--------------------------------
STATEMENTS OF INCOME
--------------------
For the three For the nine
months ended months ended
September 30, September 30,
1997 1997
-------------------- --------------------
<S> <C> <C>
REVENUES:
Trading profits (loss):
Realized $422,790 $1,341,688
Change in unrealized 167,989 277,212
-------------------- --------------------
Total trading results 590,779 1,618,900
-------------------- --------------------
Interest income 215,193 718,860
-------------------- --------------------
Total revenues 805,972 2,337,760
-------------------- --------------------
EXPENSES:
Profit shares 83,811 208,198
Brokerage commissions 379,319 1,281,244
Administrative fees 10,837 36,163
-------------------- --------------------
Total expenses 473,967 1,525,605
-------------------- --------------------
NET INCOME $332,005 $ 812,155
==================== ====================
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
ML SJO PROSPECT L.L.C
- -------------------------------------------------------------------
(a Delaware limited partnership)
- -------------------------------------------------------------------
STATEMENTS OF INCOME
- -------------------------------------------------------------------
For the three For the nine
months ended months ended
September 30, September 30,
1997 1997
-------------------- --------------------
<S> <C> <C>
REVENUES:
Trading profits (loss):
Realized $ 908,298 $1,597,045
Change in unrealized 510,217 1,466,171
-------------------- --------------------
Total trading results 1,418,515 3,063,216
-------------------- --------------------
Interest income 286,126 816,260
-------------------- --------------------
Total revenues 1,704,641 3,879,476
-------------------- --------------------
EXPENSES:
Profit shares 158,538 303,774
Brokerage commissions 486,759 1,416,616
Administrative fees 13,908 40,011
-------------------- --------------------
Total expenses 659,205 1,760,401
-------------------- --------------------
NET INCOME $1,045,436 $2,119,075
==================== ====================
</TABLE>
8
<PAGE>
3. FAIR VALUE AND OFF-BALANCE SHEET RISK
The Partnership's revenues by reporting category for the respective periods
are as follows:
<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,
1997 1996 1997 1996
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Interest rates $ 92,479 $ 1,134,326 $ 4,077 $ 391,106
Stock indices (71,112) (1,095,934) 36,355 (426,843)
Commodities (79,699) (323,040) (4,792) (581,963)
Currencies 72,815 (638,123) 211,681 830,480
Energy 20,821 308,371 (47,561) 1,212,507
Metals 23,582 (258,295) 27,202 (949,505)
------------------- ------------------- ------------------- -------------------
$ 58,886 $ (872,695) $226,962 $ 475,782
=================== =================== =================== ===================
</TABLE>
Fair Value
- ----------
The contract/notional values of the Partnership's open derivative instrument
positions as of September 30, 1997 and December 31, 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
-------------------------------------------- -------------------------------------------
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 $19,042,681 $1,854,200 $19,868,322 $1,564,238
Stock Indices 896,129 295,353 - 250,367
Commodities 124,531 230,891 120,648 324,279
Currencies 2,647,563 - 1,050,027 3,065,985
Energy 840,891 92,460 82,109 -
Metals 624,660 169,750 639,127 1,085,360
------------------- ------------------- ------------------- -------------------
$24,176,455 $2,642,654 $21,760,233 $6,290,229
=================== =================== =================== ===================
</TABLE>
The contract/notional value of the Partnership's exchange-traded and non-
exchange-traded open derivative instrument positions as of September 30, 1997
and December 31, 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------------------------- ---------------------------------------------
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 $24,176,455 $2,642,654 $21,171,231 $5,598,019
Non-Exchange
traded - - 589,002 692,210
------------------ ------------------ ------------------ ------------------
$24,176,455 $2,642,654 $21,760,233 $6,290,229
================== ================== ================== ==================
</TABLE>
9
<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, 1997 and the year ended December 31, 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------------------------- ---------------------------------------------
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 $17,217,471 $10,470,193 $ 99,859,109 $61,662,340
Stock Indices 1,007,916 736,021 9,556,040 2,455,672
Commodities 1,066,515 479,360 8,046,443 1,227,924
Currencies 1,481,036 3,517,029 21,644,329 27,211,306
Energy 548,074 395,609 3,186,493 101,599
Metals 891,067 812,407 12,593,308 6,776,261
------------------ ------------------ ------------------ ------------------
$22,212,079 $16,410,619 $154,885,722 $99,435,102
================== ================== ================== ==================
</TABLE>
As of September 30, 1997 and December 31, 1996, $10,570,738 and $19,264,937 of
the Partnership's assets, respectively, were held in segregated accounts at MLF
in accordance with Commodity Futures Trading Commission regulations.
The gross unrealized profit and the net unrealized profit (loss) on the
Partnership's open derivative instrument positions as of September 30, 1997 and
December 31, 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
----------------------------------------- -----------------------------------------
Gross Net Gross Net
Unrealized Unrealized Unrealized Unrealized
Profit Profit (Loss) Profit Profit (Loss)
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Exchange
traded $200,988 $148,680 $ 80,876 $64,542
Non-Exchange
traded 2,492 (20,296) 34,397 (4,332)
------------------ ------------------ ------------------ ------------------
$203,480 $128,384 $115,273 $60,210
================== ================== ================== ==================
</TABLE>
4. RELATED PARTY TRANSACTIONS
MLIP is currently reviewing certain aspects of the interest
arrangements between the Partnership and certain affiliates of MLIP. The
purposes of the review is to confirm that the Partnership received interest
credits as described in its Prospectus. The results of this review have not been
determined.
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 Merrill Lynch Investment Partners Inc., ("MLIP")'s ability to select
Advisors and determine the appropriate percentage of each series' 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.
10
<PAGE>
As of October 1, 1997, the Partnership's assets were allocated as
follows:
%
TRADING ADVISOR SECTOR ALLOCATION
--------------- ------ -----------
Chesapeake Capital Corp. Diversified 19.59
John W. Henry & Co., Inc. Financial/
Metals 21.67
Sjo, Inc. Financial 20.16
Northfield Trading Diversified 19.22
Cash 19.36
------
100.00%
MLIP expects to continue to change both allocations and Advisor
selections from time to time without advance notice to existing investors.
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.
Results of Operations - General
- -------------------------------
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 1996, the Fund's average month-end Net
Assets equaled $38,840,897, and the Fund recognized gross trading gains of
$475,782 or 1.22% of such average month-end Net Assets. Brokerage commissions of
$1,988,061 or 5.12%, Administrative fees of $50,976 or .13%, and Profit Shares
of $370,985 or .96% of average month-end Net Assets were paid. Interest income
of $1,364,045 or 3.52% of average month-end Net Assets resulted in net loss of
$570,195 or 1.47% of average month-end Net Assets, which resulted in a 2.16%
decrease in the Net Asset Value per Unit since December 31, 1995.
During the first nine months of 1997, the Fund's average month-end Net
Assets equaled $29,145,382 and the Fund recognized gross trading gain of
$226,962 or .77% and Earnings from Investments of $1,152,043 or 3.95% of such
average month-end Net Assets. Brokerage commissions of $406,167 or 1.39%,
Administrative fees of $11,446 or .04% and Profit Shares of $2,914 or .01% of
average month-end Net Assets were paid. Interest income of $654,414 or 2.25% of
average month-end Net Assets resulted in a net gain of $1,612,892 or 5.53% of
average month-end Net Assets, which resulted in a 5.69% gain in the Net Asset
Value per Unit since December 31, 1996.
During the first nine months of 1997 and 1996, the Fund experienced 10
profitable months and 8 unprofitable months.
<TABLE>
<CAPTION>
MONTH-END NET ASSET VALUE PER UNIT
Jan. Feb. Mar. Apr May Jun Jul Aug Sep
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 $107.43 $103.23 $105.23 $108.01 $104.83 $104.48 $ 98.33 $ 99.85 $101.79
- ----------------------------------------------------------------------------------------------------------
1997 $110.66 $112.34 $112.02 $110.16 $109.61 $110.30 $116.70 $112.09 $115.05
- ----------------------------------------------------------------------------------------------------------
</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
11
<PAGE>
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.
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.
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.
12
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no pending proceedings to which the Partnership or the General
Partner is a party.
John w. Henry & Company, Inc. ("JWH") is one of the Advisors retained by
the Fund, managing approximately 21.67% of the Fund's assets committed to
trading October 1, 1997. In September 1996, JWH was named as a co-defendant in
a class action lawsuit brought in the California Superior Court, Los Angeles
County and in the New York Supreme Court, New York County. In November 1996, JWH
was named as a co-defendant in a class action complaint filed in Superior Court
of the State of Delaware for Newcastle County that contained the same
allegations as the New York and California complaints. The actions, which seek
unspecified damages, purport to be brought on behalf of investors in certain
Dean Witter, Discover & Co. ("Dean Witter") commodity pools, some of which are
advised by JWH, and are primarily directed at Dean Witter's alleged fraudulent
selling practices in connection with the marketing of those pools. JWH is
essentially alleged to have aided and abetted or directly participated with Dean
Witter in those practice. JWH believes the allegations against it are without
merit; it intends to contest these allegations vigorously, and is convinced that
it will be shown to have acted properly and in the best interest of the
investors.
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
Ms. Eilene Nicoll is the vice president of trading administration and a
member of the Investment Policy Committee of John W. Henry & Company, Inc.
("JWH"). Prior to joining JWH in July 1997, Ms. Nicoll was a vice president
beginning in January 1997 at Commercial Materials, L.L.C., a newly organized
corporation which has not yet begun operations. She was a vice president and
director at West Course Capital, Inc., a CTA, from January 1994 until it
dissolved in December 1996. At West Course Capital, Inc., Ms. Nicoll was
responsible for operations and administration. Prior to joining West Course
Capital, Inc., she was a vice president at REFCO, Inc. from May 1991 to December
1993. While at REFCO, Inc., she was also a principal of Nikkhah & Nicoll Asset
Management, Inc., a CPO. Ms. Nicoll was at Shearson Lehman Brothers from January
1987 to December 1990 as vice president-futures, and subsequently, from January
1991 to May 1991, at Moore Capital Management, Inc. where she was involved in
all aspects of the commodity trading advisor business, including administration,
marketing, and allocation of proprietary capital. From 1984 through 1986, she
was an independent discretionary trader. Ms. Nicoll was employed at Commodities
Corporation (USA) N.V. from 1978 to 1984 where she was an assistant vice
president. Ms. Nicoll received her B.A. in psychology from Brooklyn College.
Ms. Glenda G. Twist and Mr. John A. Ford are no longer principals of JWH
effective August 1, 1997 and August 31, 1997, respectively.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
--------
There are no exhibits required to be filed as part of this document.
(b) Reports on Form 8-K
-------------------
There were no reports on Form 8-K filed during the first nine months of
fiscal 1997.
13
<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 SECTOR STRATEGY FUND/SM/ VI L.P.
By: MERRILL LYNCH INVESTMENT PARTNERS INC.
(General Partner)
Date: November 14, 1997 By /s/JOHN R. FRAWLEY, JR.
-----------------------
John R. Frawley, Jr.
President, Chief Executive Officer
and Director
Date: November 14, 1997 By /s/MICHAEL A. KARMELIN
----------------------
Michael A. Karmelin
Chief Financial Officer, Vice President
and Treasurer
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