<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 March 31, 1998
--------------
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)
212-236-9757
--------------------------------------------------
(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
-- --
<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>
March 31, December 31,
1998 1997
----------------- -----------------
ASSETS
- ------
<S> <C> <C>
Accrued interest $41,859 $46,180
Equity in commodity futures trading accounts:
Cash and options premiums 9,416,975 10,274,262
Net unrealized profit on open contracts 74,938 112,024
Investments 15,315,909 16,692,504
Receivable from investments 423,014 273,940
----------------- -----------------
TOTAL $25,272,695 $27,398,910
================= =================
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
LIABILITIES:
Redemptions payable $677,726 $441,150
Brokerage commissions payable 33,944 38,199
Administrative fees payable 959 1,080
----------------- -----------------
Total liabilities 712,629 480,429
----------------- -----------------
PARTNERS' CAPITAL:
General Partner (6971 and 6971 Units) 815,144 820,070
Limited Partners (203064 and 221850 Units) 23,744,922 26,098,411
----------------- -----------------
Total partners' capital 24,560,066 26,918,481
----------------- -----------------
TOTAL $25,272,695 $27,398,910
================= =================
NET ASSET VALUE PER UNIT
(Based on 210035 and 228821 Units outstanding) $116.93 $117.64
================= =================
</TABLE>
See notes to financial statements.
2
<PAGE>
THE SECTOR STRATEGY FUND(SM) VI L.P.
------------------------------------
(a Delaware limited partnership)
------------------------------
STATEMENTS OF OPERATIONS
------------------------
For the three For the three
months ended months ended
March 31, March 31,
1998 1997
------------------ -----------------
REVENUES:
Trading (loss) profits:
Realized $(132,187) $247,346
Change in unrealized (37,086) 180,694
------------------ -----------------
Total trading results (169,273) 428,040
------------------ -----------------
Interest income 127,361 249,293
Loss (income) from investments (7,672) 419,176
------------------ -----------------
Total revenues (49,584) 1,096,509
------------------ -----------------
EXPENSES:
Profit shares - 48,023
Brokerage commissions 106,138 151,557
Administrative fees 3,033 4,171
------------------ -----------------
Total expenses 109,171 203,751
------------------ -----------------
NET (LOSS) INCOME $(158,755) $892,758
================== =================
NET (LOSS) INCOME PER UNIT:
Weighted average number of units
outstanding 223,513 278,794
================== =================
Weighted average net (loss) income
per Limited Partner
and General Partner Unit $(0.71) $3.20
================== =================
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 three months ended March 31, 1998 and 1997
--------------------------------------------------
<TABLE>
<CAPTION>
Units Limited Partners General Partner Total
---------------- ------------------ ----------------- ----------------
<S> <C> <C> <C> <C>
PARTNERS' CAPITAL,
December 31, 1996 284,313 $30,188,127 $758,780 $30,946,907
Net income - 870,667 22,091 $892,758
Redemptions (14,843) (1,654,437) - (1,654,437)
---------------- ----------------- ----------------- ----------------
PARTNERS' CAPITAL,
March 31, 1997 269,470 $29,404,357 $780,871 $30,185,228
================ ================= ================= ================
PARTNERS' CAPITAL,
December 31, 1997 228,821 $26,098,411 $820,070 $26,918,481
Net income (loss) - (153,829) (4,926) (158,755)
Redemptions (18,786) (2,199,660) - (2,199,660)
---------------- ----------------- ----------------- ----------------
PARTNERS' CAPITAL,
March 31, 1998 210,035 $23,744,922 $815,144 $24,560,066
================ ================= ================= ================
</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 March 31, 1998 and the results of its
operations for the three months ended March 31, 1998 and 1997. 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, 1997 (the "Annual Report").
2. INVESTMENTS
As of March 31, 1998 and December 31, 1997 the Partnership had investments
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") as follows:
1998 1997
----------------- ----------------
JWH LLC $ 5,123,079 $ 6,115,739
Chesapeake LLC 5,284,137 5,354,159
SJO LLC 4,908,693 5,222,606
----------------- ----------------
Total $ 15,315,909 $ 16,692,504
================= ================
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 (Loss)
ended March 31, 1998 Revenue Commissions Fees Shares from Investments
-------------------- ---------------- ------------------ --------------- --------------------
<S> <C> <C> <C> <C> <C>
JWH LLC $(399,625) $123,215 $3,521 $0 $(526,361)
Chesapeake LLC 609,731 120,249 3,435 97,315 388,732
SJO LLC 266,798 116,705 3,335 16,801 129,957
-------------------- ---------------- ------------------ --------------- --------------------
Total $476,904 $360,169 $10,291 $114,116 $(7,672)
==================== ================ ================== =============== ====================
<CAPTION>
For the three months Total Brokerage Administrative Profit Income from
ended March 31, 1997 Revenue Commissions Fees Shares Investments
-------------------- ---------------- ------------------ --------------- --------------------
<S> <C> <C> <C> <C> <C>
JWH LLC $132,898 $80,324 $2,211 $639 $49,724
Chesapeake LLC 447,479 112,290 3,046 67,474 264,669
SJO LLC 187,219 64,861 1,785 15,790 104,783
-------------------- ---------------- ------------------ --------------- --------------------
Total $767,596 $257,475 $7,042 $83,903 $419,176
==================== ================ ================== =============== ====================
</TABLE>
5
<PAGE>
Condensed statements of financial condition as of March 31, 1998 and
December 31, 1997 and statements of operations for the three months ended
March 31, 1998 and 1997 for JWH LLC, Chesapeake LLC and SJO LLC are set
forth as follows:
<TABLE>
<CAPTION>
1998 1997
------------------------------------------------- ---------------------------------------------------
JWH Chesapeake SJO JWH Chesapeake SJO
LLC LLC LLC LLC LLC LLC
-------------- ---------------- ---------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Assets $54,294,178 $17,505,551 $19,174,586 $62,481,438 $17,195,182 $21,240,207
============== ================ ================ ================ ================= ================
Liabilities $431,357 $764,584 $568,783 $1,122,533 $704,681 $2,058,617
Members' Capital 53,862,821 16,740,967 18,605,803 61,358,905 16,490,501 19,181,590
-------------- ---------------- ---------------- ---------------- ----------------- ----------------
Total $54,294,178 $17,505,551 $19,174,586 $62,481,438 $17,195,182 $21,240,207
============== ================ ================ ================ ================= ================
Revenues ($4,026,600) $1,890,020 $972,284 $2,281,696 $1,979,886 $1,409,347
Expenses 1,342,197 685,055 503,557 1,487,835 800,919 619,328
-------------- ---------------- ---------------- ---------------- ----------------- ----------------
Net (Loss) Income ($5,368,797) $1,204,965 $468,727 $793,861 $1,178,967 $790,019
============== ================ ================ ================ ================= ================
</TABLE>
3. FAIR VALUE AND OFF-BALANCE SHEET RISK
The Partnership's total trading results by reporting category for the
respective periods are as follows:
For the three For the three
months ended months ended
March 31, March 31,
1998 1997
-------------------- --------------------
Interest rates $109,701 $2,179
Stock indices (162,191) 86,988
Commodities (33,791) 146,916
Currencies (81,813) 163,296
Energy 16,214 22,100
Metals (17,393) 6,561
-------------------- --------------------
$(169,273) $428,040
==================== ====================
6
<PAGE>
Fair Value
- ----------
The contract/notional values of the Partnership's open derivative instrument
positions as of March 31, 1998 and December 31, 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
--------------------------------------------- --------------------------------------------
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 Rates $3,418,901 $3,249,949 $8,526,872 $1,289,262
Stock Indices 3,490,293 1,046,297 1,833,153 58,102
Commodities - 186,025 53,000 484,698
Currencies 1,534,075 5,568,298 723,600 5,212,058
Energy 25,220 - - 895,458
Metals 99,813 - - 117,150
-------------------- -------------------- ------------------- --------------------
$8,568,302 $10,050,569 $11,136,625 $8,056,728
==================== ==================== =================== ====================
</TABLE>
The contract/notional values of the Partnership's exchange-traded and
non-exchange-traded open derivative instrument positions as of March 31, 1998
and December 31, 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
-------------------------------------------- -------------------------------------------
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 $8,568,302 $10,050,569 $11,136,625 $8,056,728
Non-Exchange
traded - - - -
------------------- ------------------- ------------------ -------------------
$8,568,302 $10,050,569 $11,136,625 $8,056,728
=================== =================== ================== ===================
</TABLE>
7
<PAGE>
The average fair values, based on contract/notional values, of the Partnership's
derivative instrument positions which were open as of the end of each calendar
month during the three months ended March 31, 1998 and the year ended December
31, 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
-------------------------------------------- -------------------------------------------
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 $9,849,805 $2,525,836 $16,385,163 $9,028,153
Stock Indices 1,538,088 762,789 1,038,952 657,344
Commodities 142,778 127,789 847,261 467,905
Currencies 915,444 2,148,478 1,708,711 3,329,939
Energy 59,030 - 485,906 483,373
Metals 186,264 - 817,854 704,123
------------------- ------------------- ------------------ -------------------
$12,691,409 $5,564,892 $21,283,847 $14,670,837
=================== =================== ================== ===================
</TABLE>
The gross unrealized profit and the net unrealized profit (loss) on the
Partnership's open derivative instrument positions as of March 31, 1998 and
December 31, 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
---------------------------------------------- ----------------------------------------------
Gross Net Gross Net
Unrealized Unrealized Unrealized Unrealized
Profit Profit Profit Profit (Loss)
-------------------- ------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Exchange
traded $100,167 $74,709 $135,522 $112,280
Non-Exchange
traded 229 229 87 (256)
-------------------- ------------------- ------------------- --------------------
$100,396 $74,938 $135,609 $112,024
==================== =================== =================== ====================
</TABLE>
Item 2: Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
MONTH-END NET ASSET VALUE PER UNIT
----------------------------------
Jan. Feb. Mar.
----------------------------------
1997 $110.66 $112.34 $112.02
----------------------------------
1998 $117.10 $117.18 $116.93
----------------------------------
Performance Summary
January 1, 1997 to March 31, 1997
In currency markets, the U.S. dollar rallied and started 1997 on a strong
note, rising to a four-year high versus the Japanese yen and two-and-a-half year
highs versus the Deutsche mark and the Swiss franc. January and February were
profitable trading months for currencies.
Global interest rate markets began the year on a volatile note, as investors
evaluated economic data for signs of inflation. Interest rate trading was
profitable in January; losses, however, were incurred in February and March.
8
<PAGE>
In energy markets, a slump in crude oil prices was characteristic of its
lackluster performance from the beginning of the year. Early in 1997, volatility
returned in the energy markets, reflecting the impact of a winter significantly
warmer than normal. Energy trading was profitable in February; January and March
were unprofitable.
Agricultural commodity trading proved profitable in February and March.
Soybean prices reached their highest level in over eight years, on continued
demand and fears that inventories could fall to critically low levels before the
next harvest.
January 1, 1998 to March 31, 1998
The Fund's most profitable positions during the quarter were in the global
interest rate markets. In Europe, an extended bond market rally continued
despite an environment of robust growth in the United States, Canada and the
United Kingdom, as well as a strong pick-up in growth in continental Europe.
Gold prices drifted sideways and lower as Asian demand continued to slow and
demand in the Middle East was affected by low oil prices. Initially buoyed on
concerns about a U.S.-led military strike against Iraq, crude oil fell to a nine
year low, as the globally warm winter, the return of Iraq as a producer and the
Asian economic crisis added to OPEC's supply glut problems.
Trading results in stock index markets were mixed, but marginally
unprofitable, despite a strong first-quarter performance by the U.S. equity
market as several consecutive weekly gains were recorded with most market
averages setting new highs. Results in currency trading were also mixed, but
unprofitable. In particular, the Swiss franc weakened versus the U.S. dollar.
Agricultural commodity markets provided profitable trading results overall.
Live cattle and hog prices trended downward throughout the quarter. Cotton
prices moved mostly upward during the quarter, but prices dropped off sharply at
the end of March.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable
9
<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.
Item 2. Changes in Securities and Use of Proceeds
(a) None.
(b) None.
(c) None.
(d) None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
Mr. Michael A. Karmelin, Chief Financial Officer, Vice President and
Treasurer of Merrill Lynch Investment Partners Inc. ("MLIP"), has announced that
he will resign from MLIP effective April 15, 1998 to pursue other business
opportunities. MLIP expects to announce his successor in the near future.
The Fund will consolidate its trading accounts with those of certain
other MLIP sponsored multi-advisor funds effective June 1, 1998.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
--------
There are no exhibits required to be filed as part of this report.
(b) Reports on Form 8-K
-------------------
There were no reports on Form 8-K filed during the first three months
of fiscal 1998.
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 SECTOR STRATEGY FUND(SM) VI L.P.
By: MERRILL LYNCH INVESTMENT PARTNERS INC.
(General Partner)
Date: May 11, 1998 By /s/JOHN R. FRAWLEY, JR.
-----------------------
John R. Frawley, Jr.
Chairman, Chief Executive Officer,
President and Director
Date: May 11, 1998 By /s/ SERGIO M. PAVONE
--------------------
Sergio M. Pavone
Vice President and Controller
(Chief Accounting Officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> BD
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> MAR-31-1998 MAR-31-1997
<CASH> 0 0
<RECEIVABLES> 25,272,695 30,849,982
<SECURITIES-RESALE> 0 0
<SECURITIES-BORROWED> 0 0
<INSTRUMENTS-OWNED> 0 0
<PP&E> 0 0
<TOTAL-ASSETS> 25,272,695 30,849,982
<SHORT-TERM> 0 0
<PAYABLES> 712,629 664,754
<REPOS-SOLD> 0 0
<SECURITIES-LOANED> 0 0
<INSTRUMENTS-SOLD> 0 0
<LONG-TERM> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 24,560,066 30,185,228
<TOTAL-LIABILITY-AND-EQUITY> 25,272,695 30,849,982
<TRADING-REVENUE> (169,273) 428,040
<INTEREST-DIVIDENDS> 127,361 249,293
<COMMISSIONS> 109,171 203,751
<INVESTMENT-BANKING-REVENUES> (7,672) 419,176
<FEE-REVENUE> 0 0
<INTEREST-EXPENSE> 0 0
<COMPENSATION> 0 0
<INCOME-PRETAX> (158,755) 892,758
<INCOME-PRE-EXTRAORDINARY> (158,755) 892,758
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (158,755) 892,758
<EPS-PRIMARY> (.71) 3.20
<EPS-DILUTED> (.71) 3.20
</TABLE>
