<PAGE>
 
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C.  20549

                                   FORM 10-K

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

                 For the fiscal year ended:  December 31, 1997
                                       or
                 (  ) Transition Report Pursuant to Section 13
                or 15(d) of the Securities Exchange Act of 1934


                        Commission file number:  0-22448

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

           DELAWARE                                     13-3714541
    -------------------------------                 -------------------
    (State of other jurisdiction of                 (I.R.S. Employer
    incorporation or organization)                  Identification No.)

                  C/O MERRILL LYNCH INVESTMENT PARTNERS INC.
                       MERRILL LYNCH WORLD HEADQUARTERS
                            WORLD FINANCIAL CENTER
               SOUTH TOWER, 6TH FLOOR, NEW YORK, NY  10080-6106
               ------------------------------------------------
                   (Address of principal executive offices)

      Registrant's telephone number, including area code:  (212) 236-5662
                                                           --------------
<TABLE> 
<S>                                                          <C> 
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:  None

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:  Limited Partnership Units
                                                             -------------------------
                                                                (Title of Class)
</TABLE> 
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days
 .                                                          Yes   X    No _______
                                                               -----            

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

Aggregate market value of the voting and non-voting common stock held by non-
affiliates of the registrant:  the registrant is a limited partnership; as of
February 1, 1998, limited partnership units with an aggregate value of
$25,753,161 were outstanding and held by non-affiliates:

                      DOCUMENTS INCORPORATED BY REFERENCE

The registrant's "1997 Annual Report and Independent Auditors' Report," the
annual report to security holders for the fiscal year ended December 31, 1997,
is incorporated by reference into Part II, Item 8, and Part IV hereof and filed
as an Exhibit herewith.
<PAGE>
 
                       THE SECTOR STRATEGY FUND VI L.P.

                      ANNUAL REPORT FOR 1997 ON FORM 10-K


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


                                    PART I
                                    ------
<TABLE>
<CAPTION>

                                                                                                       PAGE
<S>        <C>                                                                                       <C>
Item 1     Business................................................................................     1

Item 2     Properties..............................................................................     7

Item 3     Legal Proceedings.......................................................................     7

Item 4     Submission of Matters to a Vote of Security Holders.....................................     8
</TABLE>
                                    PART II
                                    -------
<TABLE>
<CAPTION>
 
<S>         <C>                                                                                    <C>
Item 5      Market for Registrant's Common Equity and Related Stockholder Matters................       8
           
Item 6      Selected Financial Data..............................................................       9
           
Item 7      Management's Discussion and Analysis of Financial Condition and Results of Operations      12
           
Item 7      Quantitative and Qualitative Disclosures About Market Risk...........................      16
           
Item 8      Financial Statements and Supplementary Data..........................................      16
           
Item 9      Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.      16
</TABLE>
                                    PART III
                                    --------
<TABLE>
<CAPTION>
 
<S>         <C>                                                                                       <C>
Item 10      Directors and Executive Officers of the Registrant..................................      16

Item 11      Executive Compensation..............................................................      18

Item 12      Security Ownership of Certain Beneficial Owners and Management......................      19

Item 13      Certain Relationships and Related Transactions......................................      19

                                    PART IV
                                    -------

Item 14.     Exhibits, Financial Statement Schedules and Reports on Form 8-K.....................      20
</TABLE> 

                                      -i-
<PAGE>
 
                                    PART I

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

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

          The SECTOR Strategy Fund/SM/ VI L.P. (the "Partnership" or the "Fund")
was organized under the Delaware Revised Uniform Limited Partnership Act on
April 23, 1993 and began trading operations on September 10, 1993.  The Fund
made only the initial offering of its units of limited partnership interest
("Units"); Units may be redeemed as of the end of each calendar month.  The
Partnership engages in the speculative trading of a portfolio of futures and
forward contracts and related options in the currencies, interest rates, stock
index, metals, agricultural and energy sectors of the world commodity markets.
The Fund's objective is achieving substantial capital appreciation even while
assuring investors of at least a predetermined minimum Net Asset Value per Unit
as of the Principal Assurance Date.

          Merrill Lynch Investment Partners Inc. (the "General Partner" or
"MLIP") acts as the general partner of the Partnership and selects and allocates
the Fund's assets among professional advisors ("Trading Advisors" or
"Advisors"), each unaffiliated with MLIP and each of which trades independently
of the others.  MLIP also determines what percentage of the Fund's assets to
allocate to trading and what percentage to hold in reserve.  Merrill Lynch
Futures Inc. (the "Commodity Broker" or "MLF") is the Partnership's commodity
broker.  The General Partner is a wholly-owned subsidiary of Merrill Lynch
Group, Inc., which, in turn, is a wholly-owned subsidiary of Merrill Lynch &
Co., Inc. ("ML&Co.").  The Commodity Broker is an indirect wholly-owned
subsidiary of ML&Co.  (ML&Co. and its affiliates are herein sometimes referred
to as "Merrill Lynch.")

          In addition to its trading accounts, the Partnership maintains a cash
account.  From time to time, the General Partner allocates and reallocates
Partnership assets among its trading and cash accounts in an attempt to increase
profit potential while limiting the downside risks associated with futures and
forward trading (in order to prevent ML&Co. from incurring any obligations under
its guarantee of a minimum Net Asset Value per Unit, as described below).
Initially, the General Partner allocated approximately 30% of the Partnership's
assets to cash and approximately 70% to the trading accounts.  As of December
31, 1997, that ratio was approximately 19% to cash and 81% to trading.

          The total initial capitalization of the Partnership as of September
10, 1993 was $108,693,900.  Through December 31, 1997, Units with an aggregate
Net Asset Value of $86,903,925 have been redeemed (including December 31, 1997
redemptions which were actually paid in January 1998), the Partnership's
capitalization was $26,918,481, and the Net Asset Value of a Unit sold as of
September 10, 1993 for $100 was $117.64.

          The Fund is a "principal protected" commodity pool.  ML&Co. provides
the guarantee described below under Item 1(c), "Narrative Description of
Business -- ML&Co.'s 'Principal Protection' Undertaking to the Fund" -- that the
Net Asset Value per Unit will equal at least $100 (the initial subscription
price as of September 10, 1993) as of December 31, 1998 (the "Principal
Assurance Date").  This guarantee does not prevent substantial investor losses,
but rather serves only as a form of "stop loss," limiting the maximum loss which
investors who retain their Units until the Principal Assurance Date  can incur.
In order to protect ML&Co. from any liability under its guarantee at such time,
if any, as the Net Asset Value per Unit were to decline to 110% or less of the
present value of $100 discounted back from the Principal Assurance Date, MLIP
would terminate trading altogether in order to ensure that ML&Co. incurred no
financial obligation to the Fund under ML&Co.'s guarantee of the minimum Net
Asset Value per Unit.

          Through December 31, 1997, the net gain in the Net Asset Value per
Unit was 17.64%.  The highest month end Net Asset Value per Unit was $117.64
(December,1997) and the lowest $92.71 (April, 1994).

          (b) Financial Information about Industry Segments:
              ---------------------------------------------

          The Partnership's business constitutes only one segment for financial
reporting purposes, i.e., a speculative "commodity pool."

                                      -1-
<PAGE>
 
          (c) Narrative Description of Business:
              ---------------------------------

              GENERAL

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

              The General Partner is the Partnership's trading manager, with
responsibility for selecting Advisors to manage the Partnership's assets,
allocating and reallocating Fund assets among these Advisors and determining the
percentage of the Partnership's assets committed to trading from time to time.

              Although considered as a whole, the Partnership trades in a
diversified range of international markets, certain of the Trading Advisors,
considered individually, concentrate primarily on trading in a limited portfolio
of markets. The different "sectors" included in the Partnership's portfolio, and
the extent to which the portfolios traded by two or more Trading Advisors may
overlap, varies substantially over time.

              The Fund accesses certain of the Trading Advisors not by opening
individual managed accounts with them, but rather through investing in private
funds sponsored by MLIP through which the trading accounts of different MLIP-
sponsored funds managed by the same Advisor and pursuant to the same strategy
are consolidated.

              MLIP may from time to time direct certain individual Advisors to
manage their Fund accounts as if they were managing up to 50% more equity than
the actual capital allocated to them.  This additional leverage is subject to
the condition that the Fund as a whole will not trade as if it had in excess of
20% more equity than actual capital.

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

              ML&CO.'S "PRINCIPAL PROTECTION" UNDERTAKING TO THE FUND

              ML&Co., the parent company of the Merrill Lynch organization,
which includes the General Partner and the Commodity Broker, has agreed to
contribute sufficient capital to the Partnership so that it will have adequate
funds, after adjustment for all liabilities to third parties, that the Net Asset
Value per Unit will be no less than $100 as of the Principal Assurance Date.
This guarantee, which is effective only as of the Principal Assurance Date, is a
guarantee only of the return of a subscriber's initial investment, and not on a
present value basis, not of profit. This guarantee is a general, unsecured
obligation of ML&Co.

              OPERATION OF THE PARTNERSHIP AFTER PRINCIPAL ASSURANCE DATE

              MLIP may determine to dissolve the Partnership as of the Principal
Assurance Date, to extend the ML&Co. guarantee for a certain period of time
(resetting the minimum Net Asset Value per Unit guaranteed by ML&Co.) or to
continue to operate the Fund without a "principal protection" feature. All
investors will be given notice by no later than November 15, 1998 as to what the
operation of the Fund (if any) will be after the Principal Assurance Date.

              USE OF PROCEEDS AND INTEREST INCOME

              General. The Fund's assets are used as security for and to pay
              -------
the Fund's trading losses as well as any expenses and redemptions. The primary
use of the Fund's capital is to permit the Advisors to trade on a speculative
basis in a wide range of different futures, forwards and options on futures
markets, while allocating to the Partnership's cash account such amounts as MLIP
deems appropriate in order to protect ML&Co. from any liability under its
guarantee.

                                      -2-
<PAGE>
 
While being used for this purpose, the Fund's assets are also generally
available to earn interest, as more fully described below under "-- Available
Assets."

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

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

          Market Types.  The Fund trades on a variety of United States and
          ------------                                                    
foreign futures exchanges.  Applicable exchange rules differ significantly among
different countries and exchanges.  Substantially all of the Fund's off-exchange
trading takes place in the highly liquid, institutionally-based currency forward
markets.  The forward markets are generally unregulated, and in its forward
trading the Fund does not deposit margin with respect to its positions.  The
Partnership's forward currency trading is executed exclusively through the
Foreign Exchange Service Desk (the "F/X Desk") operated by MLIP and certain of
its affiliates, with MLF as the "back-to-back" intermediary to the ultimate
counterparties, which include Merrill Lynch International Bank  ("MLIB").

          As in the case of its market sector allocations, the Fund's
commitments to different types of markets -- U.S. and non-U.S., regulated and
unregulated -- differ substantially from time to time as well as over time.  The
Fund has no policy restricting its relative commitments to any of these
different types of markets.

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

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

          Available Assets.  The Fund earns interest, as described below, on its
          ----------------                                                      
"Available Assets,"  which can be generally described as the cash actually held
by the Fund or invested in short-term Treasury bills.  Available Assets are held
primarily in U.S. dollars, and to a lesser extent in foreign currencies, and are
comprised of the following:  (a) the Fund's cash balance in the offset accounts
(as described below) -- which includes "open trade equity" (unrealized gains and
losses on open positions) on United States futures contracts, which is paid into
or out of the Fund's account on a daily basis; (b) short-term Treasury bills
purchased by the Fund; and (c) the Fund's cash balance in foreign currencies
derived from its trading in non-U.S. dollar denominated futures and options
contracts, which includes open trade equity on those exchanges which settle
gains and losses on open positions in such contracts prior to the closing out of
such positions.  Available Assets do not include, and the Fund does not earn
interest on, the Fund's gains or losses on its open forward, commodity option
and certain foreign futures positions since such gains or losses are not
collected or paid until such positions are closed out.

          The Partnership's Available Assets may be greater than, less than or
equal to the Fund's Net Asset Value (on which the redemption value of the Units
is based) primarily because Net Asset Value reflects all gains and losses on
open positions as well as accrued but unpaid expenses.

          The interest income arrangements for the Partnership's U.S. dollar
Available Assets differ from those applicable to its non-U.S. dollar Available
Assets.  Interest income, once accrued by the Fund, is subject to the risk of
trading losses.

                                      -3-
<PAGE>
 
          Interest Earned on the Fund's U.S. Dollar Available Assets.  The
          ----------------------------------------------------------      
Fund's U.S. dollar Available Assets are held in cash in offset accounts.  Offset
accounts are non-interest bearing demand deposit accounts maintained with banks
unaffiliated with Merrill Lynch.  An integral feature of the offset arrangements
is that the participating banks specifically acknowledge that the offset
accounts are MLF customer accounts, not subject to any Merrill Lynch liability.

          MLF credits the Partnership, as of the end of each month, with
interest at the effective daily 91-day Treasury bill rate on the average daily
U.S. dollar Available Assets held in the offset accounts during such month.

          The use of the offset account arrangements for the Partnership's U.S.
dollar Available Assets may be discontinued by Merrill Lynch whether or not
Merrill Lynch otherwise continues to maintain its offset arrangements. The
offset arrangements are dependent on the banks' continued willingness to make
overnight credits available to Merrill Lynch, which, in turn, is dependent on
the credit standing of ML&Co.  If Merrill Lynch were to determine that the
offset arrangements had ceased to be practicable (either because ML&Co. credit
lines at participating banks were exhausted or for any other reason), Merrill
Lynch would thereafter attempt to invest all of the Fund's U.S. dollar Available
Assets to the maximum practicable extent in short-term Treasury bills.  All
interest earned on the U.S. dollar Available Assets so invested would be paid to
the Fund, but MLIP would expect the amount of such interest to be less than that
available to the Fund under the offset account arrangements.  The remaining U.S.
dollar Available Assets of the Fund would be kept in cash to meet variation
margin payments and pay expenses, but would not earn interest for the Fund.

          The banks at which the offset accounts are maintained make available
to Merrill Lynch interest-free overnight credits, loans or overdrafts in the
amount of  the Fund's U.S. dollar Available Assets held in the offset accounts,
charging Merrill Lynch a small fee for this service.  The economic benefits
derived by Merrill Lynch -- net of the interest credits paid to the Fund and the
fee paid to the offset banks -- from the offset accounts have not exceeded  3/4
of 1% per annum of the Fund's average daily U.S. dollar Available Assets held in
the offset accounts.  These revenues to Merrill Lynch are in addition to the
Brokerage Commissions and Administrative Fees paid by the Fund to MLF and MLIP,
respectively.

          Interest Paid by Merrill Lynch on the Fund's Non-U.S. Dollar Available
          ----------------------------------------------------------------------
Assets.  Under the single currency margining system implemented for the
------                                                                 
Partnership, the Partnership itself does not deposit foreign currencies to
margin trading in non-U.S. dollar denominated futures contracts and options. MLF
provides the necessary margin, permitting the Fund to retain the monies which
would otherwise be required for such margin as part of the Fund's U.S. dollar
Available Assets.  The Fund does not earn interest on foreign margin deposits
provided by MLF.  The Fund does, however, earn interest on its non-U.S. dollar
Available Assets.  Specifically, the Fund is credited by Merrill Lynch with
interest at the local short-term rate on realized and unrealized gains on non-
U.S. dollar denominated positions for such gains actually held in cash by the
Fund.  Merrill Lynch charges the Fund Merrill Lynch's cost of financing realized
and unrealized losses on such positions.

          In order to avoid the expense of daily currency conversions, the Fund
holds foreign currency gains and finances foreign currency losses on an interim
basis until converted into U.S. dollars and either paid into or out of the
Fund's U.S. dollar Available Assets.  Foreign currency gains or losses on open
positions are not converted into U.S. dollars until the positions are closed.
Assets of the Fund while held in foreign currencies are subject to exchange rate
risk.

                        -------------------------------

          The General Partner has determined that there may have been a
miscalculation in the interest credited to the Fund for a period prior to
November 1996.  Accordingly, Merrill Lynch has credited certain amounts to the
Fund's investors (directly, not by crediting the Fund itself).  For current
Merrill Lynch clients, this credit, which includes compounded interest, appears
on the December 1997 account statements.  The total amount of the adjustment was
approximately $1,302,000.

                                      -4-
<PAGE>
 
    CHARGES

    The following table summarizes the charges incurred by the Fund during 1995,
1996 and 1997.

<TABLE>
<CAPTION>
                                     1995                              1996                                 1997
                         ------------------------------     ------------------------------         ------------------------
                                           % OF AVERAGE                    % OF AVERAGE                       % OF AVERAGE
                           DOLLAR           MONTH-END        DOLLAR           MONTH-END            DOLLAR       MONTH-END 
COST                       AMOUNT          NET ASSETS        AMOUNT          NET ASSETS            AMOUNT      NET ASSETS 
----                     ---------         ------------     --------         -------------         ------      ------------  
 
---------------------------------------------------------------------------------------------------------------------------
<S>                      <C>         <C>            <C>         <C>            <C>       <C>            <C>
Brokerage                $5,771,415          7.59%        $2,243,462          6.04%               $519,637        1.89%
 Commissions                                                                                                        
---------------------------------------------------------------------------------------------------------------------------
Administrative Fees               -             -             57,524          0.15                  14,688        0.06
---------------------------------------------------------------------------------------------------------------------------
Profit Shares             1,086,165          1.43            434,053          1.17                   2,914        0.01
                         ----------          ----         ----------          ----                --------        ----
---------------------------------------------------------------------------------------------------------------------------
       Total             $6,857,580          9.02%        $2,735,039          7.36%               $537,239        1.96%
                         ==========          ====         ==========          ====                ========        ====
---------------------------------------------------------------------------------------------------------------------------
</TABLE>


_______________
The Fund reimbursed MLIP for a total of $1,000,000 of organizational and 
offering costs over the first 36 months of operations.

                             ____________________

          The foregoing table does not reflect the bid-ask spreads paid by the
Fund on its forward trading, or the benefits which may be derived by Merrill
Lynch from the deposit of certain of the Fund's U.S. dollar Available Assets in
offset accounts.  See Item 1(c), "Narrative Description of Business -- Use of
Proceeds and Interest Income."

          The Fund's average month-end Net Assets during 1995, 1996 and 1997
equaled $76,006,447 $37,135,556 and $27,458,616 respectively.

          During 1995, 1996 and 1997, the Fund earned $4,001,380, $1,661,887 and
$790,813 in interest income, or approximately 5.26%, 4.48% and 2.88% of the
Fund's average month-end Net Assets.

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

          As of February 1, 1997, the 9.75% per annum Brokerage Commissions were
reduced to 8.75% per annum (0.7291% of the Fund's month-end assets allocated to
trading).
          The variations in charges is primarily due to placing assets in
Trading LLCs (See Item 7).
                        ______________________________

                        DESCRIPTION OF CURRENT CHARGES
<TABLE>
<CAPTION>
 
RECIPIENT            NATURE OF PAYMENT       AMOUNT OF PAYMENT 
---------            --------------------    -----------------

<S>                 <C>                     <C>
MLF                 Brokerage Commissions    A flat-rate monthly commission of
                                             .8125 of 1% (a 9.75% annual rate)
                                             of the Fund's month-end assets
                                             committed to trading. As of
                                             December 31, 1997 approximately
                                             100% of the Fund's assets were
                                             allocated to trading.
</TABLE> 

                                      -5-
<PAGE>
 
<TABLE> 
<S>                 <C>                     <C>
                                             During 1995, 1996 and 1997, the
                                             round-turn (each purchase and sale
                                             or sale and purchase of a single
                                             futures contract) equivalent rate
                                             of the Fund's flat-rate Brokerage
                                             Commissions was approximately $100,
                                             $86 and $56, respectively.
 
                                             As of February 1, 1997, the Fund's
                                             Brokerage Commissions were reduced
                                             to 8.75% per annum, or .7291% of
                                             the Fund's assets committed to
                                             trading as of the end of each
                                             month.

MLF                 Use of Fund assets       Merrill Lynch may derive an
                                             economic benefit from the deposit
                                             of certain of the Fund's U.S.
                                             dollar Available Assets in offset
                                             accounts; such benefit to date has
                                             not exceeded 3/4 of 1% of such
                                             average daily U.S. dollar Available
                                             Assets.

MLIP                Administrative Fees      The Fund pays MLIP a monthly
                                             Administrative Fee equal to
                                             0.020833 of 1% of the Fund's month-
                                             end assets committed to trading
                                             (0.25% annually). MLIP pays all of
                                             the Fund's routine administrative
                                             costs.

MLIB                Bid-ask spreads          Under MLIP's F/X Desk arrangements,
                                             MLIB receives bid-ask spreads on
                                             the forward trades it executes with
                                             the Fund.

Other               Bid-ask spreads          The counterparties other than MLIB
  Counterparties                             with which the F/X Desk deals also
                                             each receive bid-ask spreads on the
                                             forward trades executed with the
                                             Fund.
 
 
MLIP                F/X Desk service fees    Under the F/X Desk arrangements,
                                             MLIP or another Merrill Lynch
                                             entity receives a service fee
                                             equal, at current exchange rates,
                                             to approximately $5.00 to $12.50 on
                                             each purchase or sale of each
                                             futures contract-equivalent forward
                                             contract executed with
                                             counterparties other than MLIB.

MLIB                EFP differentials        MLIB or an affiliate receives a
                                             differential spread for exchanging
                                             the Fund's spot currency positions
                                             (which are acquired through the F/X
                                             Desk, as described above) for
                                             equivalent futures positions.

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

                                      -6-
<PAGE>
 
<TABLE> 
<CAPTION> 
                    DESCRIPTION OF CURRENT CHARGES (CONT'D)

RECIPIENT           NATURE OF PAYMENT       AMOUNT OF PAYMENT
---------           -----------------       -----------------
<S>                 <C>                     <C>
 
MLF;                Extraordinary expenses  Actual costs incurred; none paid to
   Others                                   date, and expected to be negligible.
</TABLE>


          REGULATION

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

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

          (xiii)  The Partnership has no employees.

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

         The Partnership does not engage in material operations in foreign
countries, nor is a material portion of the Partnership's revenues derived from
customers in foreign countries.  The Partnership does, however, trade, from the
United States, on a number of foreign commodity exchanges.

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

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

         The Partnership's only place of business is the place of business of
the General Partner (see Item 10 herein). The General Partner performs all
administrative services for the Partnership from the General Partner's offices.

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

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

         MLIP itself has never been the subject of any material litigation.

         On June 24, 1997, the CFTC accepted an Offer of Settlement from MLF and
others, in a matter captioned "In the Matter of Mitsubishi Corporation and
Merrill Lynch Futures Inc., et al.," CFTC Docket No. 97-10, pursuant to which
MLF, without admitting or denying the allegations against it, consented to a
finding by the Commission that MLF had violated Section 4c(a)(A) of the
Commodity Exchange Act, relating to wash sales (the CFTC alleged that the
customer entered nearly simultaneous orders without the intent to engage in a
bona fide trading transaction), and CFTC Regulation 1.37(a), relating to
recordkeeping requirements. MLF agreed to cease and desist from violating
Section 4c(a)(A) of the Act and Regulation 1.37(a), and to pay a civil monetary
penalty of $175,000.

                                      -7-
<PAGE>
 
ITEM 4:  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
         ---------------------------------------------------

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


                                    PART II

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

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

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

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

              As of December 31, 1997, there were 1,362 holders of Units,
including the General Partner.

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

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

                                      -8-
<PAGE>
 
ITEM 6:  SELECTED FINANCIAL DATA
         -----------------------

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

<TABLE>
<CAPTION>
                                                                                                      SEPTEMBER 10, 1993
                                           YEAR ENDED     YEAR ENDED     YEAR ENDED     YEAR ENDED     (COMMENCEMENT OF
                                          DECEMBER 31,   DECEMBER 31,   DECEMBER 31,   DECEMBER 31,      TRADING) TO
INCOME STATEMENT DATA                         1997           1996           1995           1994       DECEMBER 31, 1993
---------------------                     -------------  -------------  -------------  -------------  ------------------

Revenues:
<S>                                       <C>            <C>            <C>            <C>            <C>
   Trading Profits (Loss)
      Realized Gain (Loss)                  $   222,536   $ 4,174,847    $ 9,810,089    $    64,289        $ (1,677,777)
      Change in Unrealized Gain (Loss)           51,814    (2,454,976)    (2,396,610)     3,288,186           1,623,610
                                            -----------   -----------    -----------    -----------        ------------
         Total Trading Results                  274,350     1,719,871      7,413,479      3,352,475             (54,167)
 
      Interest Income                           790,813     1,661,887      4,001,380      3,643,283             827,989
                                            -----------   -----------    -----------    -----------        ------------
 
         Total Revenues                       1,065,163     3,381,758     11,414,859      6,995,758             773,822
                                            -----------   -----------    -----------    -----------        ------------

Expenses:
   Brokerage Commissions                        519,637     2,243,462      5,771,415      6,822,213           2,280,727
   Administrative Fees                           14,688        57,524              -              -                   -
   Profit Shares                                  2,914       434,053      1,086,165        721,999             215,596
                                            -----------   -----------    -----------    -----------        ------------
 
         Total Expenses                         537,239     2,735,039      6,857,580      7,544,212           2,496,323
                                            -----------   -----------    -----------    -----------        ------------
   Income from Investments                    1,679,221       984,327              -              -                   -
                                            -----------   -----------    -----------    -----------        ------------
   Net Income (Loss)                        $ 2,207,145   $ 1,631,046    $ 4,557,279    $  (548,454)       $ (1,722,501)
                                            ===========   ===========    ===========    ===========        ============
 
 
                                           DECEMBER 31,   DECEMBER 31,   DECEMBER 31,   DECEMBER 31,       DECEMBER 31,
BALANCE SHEET DATA*                                1997          1996           1995           1994                1993
-------------------                         -----------   -----------    -----------    -----------        ------------

Fund Net Asset Value                        $26,918,481   $30,946,907    $50,431,013    $93,187,212        $105,198,284
Net Asset Value per Unit                        $117.64       $108.85        $104.04         $97.49              $98.28
</TABLE>

____________________

* Balance Sheet Data is based on redemption values, which differ immaterially
from Net Asset Values as determined under Generally Accepted Accounting
Principles ("GAAP") due to the treatment of organizational and initial offering
cost reimbursements.

     The variations in income statement line items is primarily due to placing 
assets in Trading LLCs (See Item 7).
                                      -9-
<PAGE>
 
<TABLE>
<CAPTION>
                                                MONTH-END NET ASSET VALUE PER UNIT
------------------------------------------------------------------------------------------------------------------
         JAN.     FEB.     MAR.     APR.      MAY     JUNE     JULY     AUG.     SEPT.    OCT.     NOV.     DEC.
------------------------------------------------------------------------------------------------------------------
<S>     <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>
1993    N/A      N/A      N/A      N/A      N/A      NA       N/A      N/A      $ 98.89  $ 97.86  $ 98.07  $ 98.28
------------------------------------------------------------------------------------------------------------------
1994    $ 95.94  $ 93.35  $ 93.26  $ 92.71  $ 95.30  $ 97.51  $ 96.01  $ 94.57  $ 96.20  $ 96.73  $ 97.05  $ 97.49
------------------------------------------------------------------------------------------------------------------
1995    $ 95.55  $ 96.06  $100.28  $101.28  $103.18  $101.04  $ 98.30  $ 99.31  $ 98.71  $ 97.79  $ 99.33  $104.04
------------------------------------------------------------------------------------------------------------------
1996    $107.43  $103.23  $105.23  $108.01  $104.83  $104.48  $ 98.33  $ 99.85  $101.79  $106.19  $110.86  $108.85
------------------------------------------------------------------------------------------------------------------
1997    $110.66  $112.34  $112.02  $110.16  $109.61  $110.30  $116.70  $112.09  $115.05  $113.71  $114.47  $117.64
------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      -10-
<PAGE>
 
                       THE SECTOR STRATEGY FUND/SM/ VI L.P.
                               DECEMBER 31, 1997

  Type of Pool:  Selected-Advisor/Publicly-Offered/"Principal Protected"/(1)/
                  Inception of Trading:   September 10, 1993
                   Aggregate Subscriptions:    $108,693,900
                     Current Capitalization:   $26,918,481
                 Worst Monthly Drawdown/(2)/:  (5.89)%  (7/96)
           Worst Peak-to-Valley Drawdown/(3)/:  (8.97)%  (5/96-7/96)
                                 _____________

             Net Asset Value per Unit, December 31, 1997:   $117.64

<TABLE>
<CAPTION>
                  MONTHLY RATES OF RETURN/(4)/
-----------------------------------------------------------
      MONTH         1997    1996    1995     1994     1993
-----------------------------------------------------------
<S>                <C>     <C>     <C>      <C>      <C>
January             1.66%   3.25%  (1.98)%  (2.38)%     N/A
-----------------------------------------------------------
February            1.52   (3.91)    0.53    (2.70)     N/A
-----------------------------------------------------------
March              (0.28)   1.94     4.40    (0.09)     N/A
-----------------------------------------------------------
April              (1.66)   2.64     1.00    (0.60)     N/A
-----------------------------------------------------------
May                (0.50)  (2.95)    1.88     2.80      N/A
-----------------------------------------------------------
June                0.63   (0.33)   (2.08)    2.32      N/A
-----------------------------------------------------------
July                5.80   (5.89)   (2.71)   (1.55)     N/A
-----------------------------------------------------------
August             (3.95)   1.55     1.03    (1.50)     N/A
-----------------------------------------------------------
September           2.64    1.95    (0.60)    1.73   (1.11)%
-----------------------------------------------------------
October            (1.16)   4.32    (0.93)    0.55    (1.04)
-----------------------------------------------------------
November            0.67    4.40     1.58     0.33     0.21
-----------------------------------------------------------
December            2.77   (1.82)    4.74     0.45     0.21
-----------------------------------------------------------
Compound Annual     8.08%   4.62%    6.75%  (0.80)%  (1.72)%
Rate of Return
-----------------------------------------------------------
</TABLE>

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

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

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

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

                                      -11-
<PAGE>
 
ITEM 7:   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          ---------------------------------------------------------------
          RESULTS OF OPERATIONS
          ---------------------

          OPERATIONAL OVERVIEW; ADVISOR SELECTIONS

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

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

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

          RESULTS OF OPERATIONS

          General. MLIP believes that multi-advisor futures funds should be
          -------  
regarded as medium- to long-term (i.e., three to five year) investments, but it
is difficult to identify trends in the Fund's operations and virtually
impossible to make any predictions regarding future results based on the results
to date. An investment in the Fund may be less successful over a longer than
over a shorter period.

          Markets with sustained price trends 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 price trends will occur
and (iii) different Advisors are affected differently by trending markets as
well as by particular types of trends.

          MLIP attempts to control credit risk in the Fund's futures, forward
and options trading (the Fund does not trade derivatives other than futures and
forward contracts and options thereon) by trading only through MLF. MLF acts
solely as a broker or counterparty to the Fund's trades; it does not advise with
respect to, or direct, any such trading.

          MLIP attempts to control the market risk inherent in the Fund's
trading by MLIP's multi-advisor strategy and Trading Advisor selections. MLIP
reviews the positions acquired by the Advisors on a daily basis in an effort to
determine whether the overall positions of the Fund may have become what MLIP
analyzes as being excessively concentrated in a limited number of markets -- in
which case MLIP may, as of the next month-end or quarter-end, adjust the Fund's
Advisor combination and/or allocations so as to attempt to reduce the risk of
such over-concentration occurring in the future. MLIP also adjusts the
percentage of each series' capital allocated to trading, with the principal
objective of protecting ML&Co. from any liability under its guarantee of a $100
minimum Net Asset Value per Unit as of the Principal Assurance Date. The market
risk to the Fund is limited by the combination of its "principal protection"
feature and multi-advisor strategy.

          The Units began trading with 70% of their capital committed to
trading. As of December 31, 1997 that percentage was 81%. MLIP determinations
as to what percentage of the Fund's assets to allocate to trading from time to
time --again, a determination primarily dictated by MLIP's objective of ensuring
that ML&Co. is never required to make any payments under its guarantee that the
Net Asset Value per Unit will be at least $100 as of the Principal Assurance
Date --has a material impact on the performance of the Fund.

                                      -12-
<PAGE>
 
        MLIP may consider making distributions to investors under certain
circumstances (for example, if substantial profits are recognized); however,
MLIP has not done so to date and does not presently intend to do so.

        The significant variations in both the statement of financial condition 
and the income statement line items is primarily due to the Partnership 
placing assets under the management of certain of the Advisors not through
opening managed accounts with them but rather through investing in a private
limited liability company ("Trading LLC") sponsored by MLIP. The only members of
the Trading LLC are commodity pools sponsored by MLIP. The Trading LLC trades
under the management of a single Advisor pursuant to a single strategy and at a
uniform degree of leverage. Placing assets with an Advisor through investing in
a Trading LLC rather than a managed account has no economic effect on the
Partnership, except to the extent that the Partnership benefits 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 results of the Partnership's Trading LLC investments are reflected
in the Partnership's financial statements as "Income from Investments." These
investments are reflected in the financial statements at fair value based upon
the net asset value of the Partnership's interest in the Trading LLCs. Fair
value is equal to the market value of the net assets of the Trading LLC. The
resulting difference between cost and fair value is reflected on the Statement
of Operations as income or loss from investments.

        PERFORMANCE SUMMARY

        1995

        In 1995, prevailing price trends in several key markets enabled the
Advisors to trade profitably for the Fund. Although trading in many of the
traditional commodity markets may have been lackluster, the currency and
financial markets offered exceptional trading conditions.  After months
characterized by very difficult trading environments, solid price trends across
many markets (including U.S. Treasury and non-dollar bond markets) began to
emerge during the first quarter of 1995.  In the second quarter, market
volatility once again began to affect trading, as many previously strong price
trends began to weaken and, in some cases, reverse.  The U.S. dollar hit new
lows versus the Japanese yen and Deutschemark before rebounding sharply.  In
addition, there were strong indications that the U.S. economy was slowing which,
when coupled with a failure of the German Central Bank to lower interest rates,
stalled a rally in the German bond market.  During the third quarter, there was
a correction in U.S. bond prices after several months of a strong uptrend.
Despite exposure to the global interest-rate markets, the Fund's long positions
in Treasury bonds had a negative impact on the Fund.  Throughout August and into
September, the U.S. dollar rallied sharply against the Japanese yen and the
Deutschemark as a result of the coordinated intervention by major central banks
and widespread recognition of the growing banking crisis in Japan.  Despite
continued price volatility during the final quarter of 1995, the Trading
Advisors were able to identify several trends in key markets.  U.S. Treasury
bond prices continued their strong move upward throughout November, due both to
weak economic data and optimism on federal budget talks. As the year ended, the
yield on the 30-year Treasury bond was pushed to its lowest level in more than
two years.

        1996

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

                                      -13-
<PAGE>
 
gains in October and November, but the year ended with declining performance as
December witnessed the reversal of several strong upward trends and increased
volatility in key markets.

        1997

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

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

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

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


        PERFORMANCE OVERVIEW

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

        The Partnership's Brokerage Commissions and Administrative Fees are a
constant percentage of assets charge. The only Fund costs (other than the
insignificant F/X Desk service fees and EFP differentials as well as bid-ask
spreads on forward contracts) which are not based on a percentage of the Fund's
assets are the Profit Shares payable to the Trading Advisors on an Advisor-by-
Advisor basis.  During periods when Profit Shares are a high percentage of net
trading gains, it is likely that there has been substantial performance non-
correlation among the Advisors (so that the 

                                      -14-
<PAGE>
 
total Profit Shares paid to those Advisors which have traded profitably are a
high percentage, or perhaps even in excess, of the total profits recognized, as
other Advisors have incurred offsetting losses, reducing overall trading gains
but not the Profit Shares paid to the successful Advisors) -- suggesting the
likelihood of generally trendless, non-consensus markets.

     The events that primarily determine the Fund's profitability are those that
produce sustained and major price movements.  The Advisors are generally more
likely to be able to profit from sustained trends, irrespective of their
direction, than from static markets.  During the course of the Partnership's
performance to date, such events have ranged from Federal Reserve Board
reductions in interest rates, the apparent refusal of Iraq to arrive at a
settlement which would permit it to sell oil internationally, the inability of
the U.S. government to agree upon a federal budget and a combination of drought
and excessive rain negatively impacting U.S. agricultural harvesting as well as
planting. While these events are representative of the type of circumstances
which materially affect the Fund, the specific events which will do so in the
future cannot be predicted or identified.

     Unlike many investment fields, there is no meaningful distinction in the
operation of the Fund between realized and unrealized profits.  Most of the
contracts traded by the Fund are highly liquid and can be closed out at any
time.  Furthermore, the profits on many open positions are effectively realized
on a daily basis through the payment of variation margin.

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

     LIQUIDITY AND CAPITAL RESOURCES

     The Fund's costs are generally proportional to its asset base, and, within
broad ranges of capitalization, the Advisors' trading positions (and the
resulting gains and losses) should increase or decrease in approximate
proportion to the size of the Fund account managed by each of them,
respectively.

     Inflation per se is not a significant factor in the Fund's profitability,
although inflationary cycles can give rise to the type of major price movements
that can have a materially favorable or adverse impact on the Fund's
performance.

     Changes in the level of prevailing interest rates could have a material
effect on the Fund's trading leverage. Interest rates directly affect the
calculation of the discounted value (discounted back from the Principal
Assurance Date) of the guaranteed minimum Net Asset Value per Unit and,
accordingly, the assets which a given series of Units has available for trading.

     In its trading to date, the Fund has from time to time had substantial
unrealized gains and losses on its open positions.  These gains or losses are
received or paid on a periodic basis as part of the routine clearing cycle on
exchanges or in the over-the-counter markets (the only over-the-counter market
in which the Fund trades is the inter-bank forward market in currencies).  In
highly unusual circumstances, market illiquidity could make it difficult for
certain Advisors to close out open positions, and any such illiquidity could
expose the Fund to significant losses, or cause it to be unable to recognize
unrealized gains.  However, in general, there is no meaningful difference
between the Fund's realized and unrealized gains.

     THE YEAR 2000 COMPUTER ISSUE

     Merrill Lynch's modifications for Year 2000 systems compliance are
proceeding according to plan and are expected to be completed in early 1999.
Based on information currently available, the remaining expenditures are
estimated at $200 million and will cover hardware and software upgrades, systems
consulting, and computer maintenance.  These expenditures are not expected to
have a material adverse impact on Merrill Lynch's financial position, results of
operations, or cash flows in future periods.  However, the failure of Merrill
Lynch's securities exchanges, clearing organizations, vendors, clients, or
regulators to resolve their own processing issues in a timely 

                                      -15-
<PAGE>
 
manner could result in a material financial risk. Merrill Lynch is devoting
necessary resources to address all Year 2000 issues in a timely manner.

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

     Not applicable.


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

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

     The supplementary financial information ("selected quarterly financial
data" and "information about oil and gas producing activities") specified by
Item 302 of Regulation S-K is not applicable.

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

     There were no changes in or disagreements with accountants on accounting
and financial disclosure.


                                    PART III

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

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

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

     The directors and executive officers of MLIP as of February 1, 1998 and
their respective business backgrounds are as follows.


          John R. Frawley, Jr.         Chairman, Chief Executive Officer,
                                          President and Director

          Jeffrey F. Chandor           Senior Vice President, Director of Sales,
                                       Marketing and Research and Director

          Joseph H. Moglia             Director

          Allen N. Jones               Director

          Stephen G. Bodurtha          Director

          Michael A. Karmelin          Chief Financial Officer, Vice President
                                         and Treasurer

          Steven B. Olgin              Vice President, Secretary and Director of
                                         Administration

     John R. Frawley, Jr. was born in 1943. Mr. Frawley is Chairman, Chief
Executive Officer, President and a Director of MLIP and Co-Chairman of MLF. He
joined Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S") in 1966 and
has served in various positions, including Retail and Institutional Sales,
Manager of New York Institutional Sales, Director of Institutional Marketing,
Senior Vice President of Merrill Lynch Capital Markets and Director of
International Institutional Sales. Mr. Frawley holds a Bachelor of Science
degree from Canisius College. Mr. Frawley served on the CFTC's Regulatory
Coordination Advisory Committee from its formation in 1990 through

                                      -16-
<PAGE>
 
 its dissolution in 1994. Mr. Frawley is currently serving his fourth
consecutive one-year term as Chairman of the Managed Funds Association
(formerly, the Managed Futures Association), a national trade association that
represents the managed futures, hedge funds and fund of funds industry. Mr.
Frawley is also a Director of that organization. Mr. Frawley currently serves on
a panel created by the Chicago Mercantile Exchange and The Board of Trade of the
City of Chicago to study cooperative efforts related to electronic trading,
common clearing and the issues regarding a potential merger.

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

          Joseph H. Moglia was born in 1949.  He is a director of MLIP.  In
1971, he graduated from Fordham University with a Bachelor of Arts degree in
Economics.  He later received his Master of Science degree from the University
of Delaware.  He taught at the high school and college level for sixteen years.
Mr. Moglia joined MLPF&S in 1984, and has served in a number of senior roles,
including Director of New York Fixed Income Institutional Sales, Director of
Global Fixed Institutional Sales, and Director of the Municipal Division.  He is
currently Senior Vice President and Director of the Investment Strategy and
Product Group in Merrill Lynch Private Client, and Director of Middle Markets.

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

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

          Michael A. Karmelin was born in 1947.  Mr. Karmelin is Chief Financial
Officer, Vice President and Treasurer of MLIP.  Prior to joining MLIP in April
1997, Mr. Karmelin was Chief Financial Officer of Merrill Lynch, Hubbard Inc.
("ML Hubbard"), a sponsor of real estate limited partnerships.  Mr. Karmelin
joined ML Hubbard in January 1994 and was a Vice President of ML Hubbard.  From
May 1994 to April 1997, he was the Chief Financial Officer of ML Hubbard,
responsible for its accounting, treasury and tax functions.  Prior to joining ML
Hubbard, Mr. Karmelin held several senior financial positions with ML&Co and
MLPF&S from December 1985 to December 1993, including Vice President/Senior
Financial Officer Corporate Real Estate and Purchasing, Manager Commitment
Control/Capital Budgeting, and Senior Project Manager/Project Analysis.  Prior
to joining ML&Co., Mr. Karmelin was employed at Avco Corporation for 17 years,
where he held a variety of financial positions.  Mr. Karmelin holds a B.B.A.
degree in Accounting from Baruch College, C.U.N.Y. and a Master of Business
Administration degree in Corporate Strategy and Finance from New York
University.  Mr. Karmelin passed the Certified Public Accounting examination in
1974 and is a member of the Treasury Management Association, the Institute of
Management Accountants and The Strategic Leadership Forum.

                                      -17-
<PAGE>
 
          Steven B. Olgin was born in 1960.  Mr. Olgin is Vice President,
Secretary and the Director of Administration of MLIP.  He joined MLIP in July
1994 and became a Vice President in July 1995.  From 1986 until July 1994, Mr.
Olgin was an associate of the law firm of Sidley & Austin.  In 1982, Mr. Olgin
graduated from The American University with a Bachelor of Science degree in
Business Administration and a Bachelor of Arts degree in Economics. In 1986, he
received his Juris Doctor degree from The John Marshall Law School.  Mr. Olgin
is a member of the Managed Funds Association's Government Relations Committee
and has served as an arbitrator for the NFA.  Mr. Olgin is also a member of the
Committee on Futures Regulation of the Association of the Bar of the City of New
York.

          Messrs. Moglia and Bodurtha became Directors in January 1998.

          As of December 31, 1997, the principals of MLIP had no investment in
the Fund, and MLIP's general partner interest in the Fund was valued at
$820,070.

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

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

              None.

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

              None.

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

              See Item 10(a)(b) above.

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

              None.

         (g)  Promoters and Control Persons:
              ----------------------------- 

              Not applicable.

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

         The directors and officers of the General Partner are remunerated in
their respective positions. The Partnership does not itself have any officers,
directors or employees. The Partnership pays Brokerage Commissions to an
affiliate of the General Partner and Administrative Fees to the General Partner.
The General Partner or its affiliates may also receive certain economic benefits
from holding the Fund's dollar Available Assets in offset accounts, as described
in Item 1(c) above. The directors and officers receive no "other compensation"
from the Partnership, and the directors receive no compensation for serving as
directors of the General Partner. There are no compensation plans or
arrangements relating to a change in control of either the Partnership or the
General Partner.

                                      -18-
<PAGE>
 
ITEM 12:  SECURITY OWNERSHIP OF CERTAIN OWNERS AND MANAGEMENT
          ---------------------------------------------------

     (a) Security Ownership of Certain Beneficial Owners:
         ----------------------------------------------- 

         As of December 31, 1997, no person or "group" is known to be or have
been the beneficial owner of more than five percent of the Units.


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

         As of December 31, 1997, the General Partner owned 6,971 Units (unit-
equivalent general partnership interests), which was less than 4 % of the total
Units outstanding.
 
     (c) Changes in Control:
         ------------------ 

         None.

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

     (a) Transactions with Management and Others:
         --------------------------------------- 

         The General Partner acts as administrative and trading manager of the
Fund.  The General Partner provides all  normal ongoing administrative functions
of the Partnership, such as accounting, legal and printing services.  The
General Partner, which receives the Administrative Fees, pays all expenses
relating to such services.

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

         MLF, an affiliate of the General Partner, acts as the principal
commodity broker for the Partnership.

         In 1997 the Partnership accrued:  (i) Brokerage Commissions of
$519,637 to the Commodity Broker, which included $63,337 in consulting fees
accrued by the Commodity Broker to the Trading Advisors;  and (ii)
Administrative Fees of $14,688 to MLIP.  Through its investments in Trading 
LLCs, the following fees were paid: (i) Brokerage Commissions of $1,242,339 to 
the Commodity Broker, which included $304,993 in consulting fees accrued by the 
Commodity Broker to the Trading Advisors; and (ii) Administrative Fees of 
$35,224 to MLIP.  In addition, MLIP and its affiliates
may have derived certain economic benefits from maintaining a portion of the
Fund's assets in "offset accounts," as described under Item 1(c),  "Narrative
Description of Business -- Use of Proceeds and Interest Income -- Interest
Earned on the Fund's U.S. Dollar Available Assets" and Item 11, "Executive
Compensation" herein, as well as from the Fund's F/X Desk and "exchange of
futures for physical" ("EFP") trading.

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

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

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

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

         Not applicable.

                                      -19-
<PAGE>
 
                                    PART IV

ITEM 14:  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
          ---------------------------------------------------------------
<TABLE>
<CAPTION>
 
     (a)1.    Financial Statements (found in Exhibit 13.01):                                      Page
              ----------------------------------------------                                      ----
<S>      <C>                                                                                    <C>
 
         Independent Auditors' Report                                                                1
 
         Statements of Financial Condition as of December 31, 1997 and 1996                          2
 
         For the years ended December 31, 1997, 1996 and 1995
                    Statements of Income                                                             3
                    Statements of Changes in Partners' Capital                                       4
 
         Notes to Financial Statements                                                               5-13
</TABLE>
     (a)2. Financial Statement Schedules:
           ----------------------------- 

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

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

           The following exhibits are incorporated by reference or are filed
           herewith to this Annual Report on Form 10-K:
<TABLE> 
<CAPTION> 
Designation         Description
-----------         -----------
<S>                 <C> 
3.01(i)             Amended and Restated Limited Partnership Agreement of the
                    Partnership.

Exhibit 3.01(i):    Is incorporated herein by reference from Exhibit 3.01(i)
---------------     contained in Amendment No. 1 (as Exhibit A) to the 
                    Registration Statement (File No. 33-62474) filed on June 28,
                    1993, on Form S-1 under the Securities Act of 1933 (the
                    "Registrant's Registration Statement").

3.02(ii)            Amended and Restated Certificate of Limited Partnership of
                    the Registrant, dated July 27, 1995.

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

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

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

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

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

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

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

                                      -20-
<PAGE>
 
<TABLE> 
<S>                 <C> 
10.05               Merrill Lynch & Co., Inc. Guarantee.

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

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

Exhibit 10.07:      Is incorporated herein by reference from Exhibit 10.07
-------------       contained in the Registrant's Registration Statement.
          
10.08(a)            Form of Advisory and Consulting Agreement Amendment among
                    Merrill Lynch Investment Partners Inc., each Advisor, the
                    Fund and Merrill Lynch Futures Inc.

Exhibit 10.08(a):   Is incorporated herein by reference from Exhibit
----------------    10.08(a) contained in the Registrant's report on Form 10-K
                    for the year ended December 31, 1996.

10.08(b)            Form of Amendment to the Customer Agreement among the
                    Partnership.

Exhibit 10.08(b):   Is incorporated herein by reference from Exhibit 10.08(b)
----------------    contained in the Registrant's report on Form 10-K for the
                    year ended December 31, 1996.

13.01               1997 Annual Report and Independent Auditors' Report.

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

13.01(a)            1997 Annual Reports and Independent Auditors' Reports for 
                    the following Trading Limited Liability Companies sponsored 
                    by Merrill Lynch Investment Partners' Inc.:
                    ML Millburn Global L.L.C.
                    ML Sjo Prospect L.L.C.
                    ML Chesapeake Diversified L.L.C.
                    ML JWH Financial and Metals Portfolio L.L.C.

Exhibit 13.01(a):   Is incorporated herein by reference from Form 10-K (fiscal 
                    year ended December 31, 1997) Commission File number 0-18702
                    for The S.E.C.T.O.R. Fund (SM) L.P. (Registration Statement 
                    File No. 33-34432 filed on May 25, 1990 under the Securities
                    Act of 1933).
                     
28.01               Prospectus of the Partnership dated June 29, 1993.

Exhibit 28.01:      Is incorporated by reference as filed with the Securities
-------------       and Exchange Commission pursuant to Rule 424 under the
                    Securities Act of 1933, Registration Statement (File No. 33-
                    62474) on Form S-1.
</TABLE> 
     (b)  Report on Form 8-K:
          ------------------ 

          No reports on Form 8-K were filed during the fourth quarter of 1997.

                                      -21-
<PAGE>
 
                                   SIGNATURES


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

                         THE SECTOR STRATEGY FUND/SM/ VI L.P.
                         By:  MERRILL LYNCH INVESTMENT
                         PARTNERS INC.
                         General Partner

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


     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed on March 14, 1998 by the
following persons on behalf of the Registrant and in the capacities indicated.
<TABLE>
<CAPTION>
 
Signature                         Title                                                         Date
---------                         -----                                                        -----         
<S>                               <C>                                                          <C>
                                                                                           
/s/ John R. Frawley, Jr.          Chairman, and Chief Executive Officer President and          March 25, 1998
--------------------------        Director (Principal Executive Officer)                           
John R. Frawley, Jr.                                                                 
                                                                                           
/s/ Michael A. Karmelin           Vice President, Chief Financial Officer, and                 March 25, 1998
--------------------------        Treasurer (Principal Financial and Accounting Officer) 
Michael A. Karmelin                                  
                                                                                           
/s/ Jeffrey F. Chandor            Senior Vice President, Director of Sales,                    March 25, 1998
--------------------------        Marketing and Research, and Director                                                         
Jeffrey F. Chandor                                       
                                                                                           
/s/ Allen N. Jones                Director                                                     March 25, 1998
--------------------------                                                                 
Allen N. Jones
</TABLE>


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

MERRILL LYNCH INVESTMENT      General Partner of Registrant    March 25, 1998
  PARTNERS INC.

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

                                      -22-
<PAGE>
 
                       THE SECTOR STRATEGY FUND/SM/ VI L.P.

                                 1997 FORM 10-K

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


                    Exhibit
                    -------

Exhibit 13.01       1997 Annual Report and Independent Auditors' Report

Exhibit 13.01(a)    1997 Annual Reports and Independent Auditors' Reports for 
                    the following Trading Limited Liability Companies sponsored 
                    by Merrill Lynch Investment Partners' Inc.:
                    ML Millburn Global L.L.C.
                    ML Sjo Prospect L.L.C.
                    ML Chesapeake Diversified L.L.C.
                    ML JWH Financial and Metals Portfolio L.L.C.








                                      -23-