<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, 1999
                                       or
                 (  ) Transition Report Pursuant to Section 13
                or 15(d) of the Securities Exchange Act of 1934

                        Commission file number:  0-18702

                    THE S.E.C.T.O.R. STRATEGY FUND (SM) L.P.
              (Safety of Equity Capital; Targeting Overall Return)
              ----------------------------------------------------
             (Exact name of registrant as specified in its charter)

          Delaware                                             13-3568563
      ---------------                                        ---------------
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                              Identification No.)

                   c/o Merrill Lynch Investment Partners Inc.
                           Princeton Corporate Campus
                      800 Scudders Mill Road - Section 2G
                         Plainsboro, New Jersey  08536
                         -----------------------------
                    (Address of principal executive offices)

      Registrant's telephone number, including area code:  (609) 282-6996

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:  Limited Partnership
Units

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 equity held by non-
affiliates of the registrant:  the registrant is a limited partnership: as of
February 1, 2000, limited partnership units with an aggregate value of
$13,453,930 were outstanding and held by non-affiliates.

                       Documents Incorporated by Reference

The registrant's "1999 Annual Report and Independent Auditors' Report," the
annual report to security holders for the fiscal year ended December 31, 1999,
is incorporated by reference into Part II, Item 8 and Part IV hereof and filed
as an Exhibit herewith.
<PAGE>

                    THE S.E.C.T.O.R. STRATEGY FUND (SM) L.P.

                       ANNUAL REPORT FOR 1999 ON FORM 10-K


                                 Table of Contents
                                 -----------------
<TABLE>
<CAPTION>


                                                   PART I                                          PAGE
                                                   ------                                          ----
<S>         <C>                                                                                    <C>

Item 1.     Business.............................................................................     1

Item 2.     Properties...........................................................................     6

Item 3.     Legal Proceedings....................................................................     6

Item 4.     Submission of Matters to a Vote of Security Holders..................................     6


                                                   PART II
                                                   -------

Item 5.     Market for Registrant's Common Equity and Related Stockholder Matters................     6

Item 6.     Selected Financial Data..............................................................     7

Item 7.     Management's Discussion and Analysis of Financial Condition and Results of Operations     9

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk...........................    13

Item 8.     Financial Statements and Supplementary Data..........................................    13

Item 9.     Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.    13


                                                  PART III
                                                  --------

Item 10.    Directors and Executive Officers of the Registrant...................................    13

Item 11.    Executive Compensation...............................................................    15

Item 12.    Security Ownership of Certain Beneficial Owners and Management.......................    16

Item 13.    Certain Relationships and Related Transactions.......................................    16


                                                  PART IV
                                                  -------

Item 14.    Exhibits, Financial Statement Schedules and Reports on Form 8-K......................    18
</TABLE>
<PAGE>

                                 PART I
Item 1:  Business
         --------

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

          The S.E.C.T.O.R. Strategy Fund (SM) L.P. (Safety of Equity Capital;
Targeting Overall Return) (the "Partnership") was organized under the Delaware
Revised Uniform Limited Partnership Act on April 30, 1990 and began trading
operations on July 16, 1990.  The Partnership made a single offering of its
units of limited partnership interest ("Units").  Units may be redeemed as of
the end of each calendar month.  The Partnership engages (currently, through an
investment in a limited liability company, see below) in the speculative trading
of a portfolio of futures, options on futures, forwards and options on forward
contracts and related options in the currencies, interest rates, stock index,
metals, agricultural and energy sectors of the world futures markets.  The
Partnership's objective is achieving, through speculative trading, substantial
capital appreciation, over time, while also assuring investors of at least a
predetermined minimum Net Asset Value per Unit as of the Principal Assurance
Date.

          Merrill Lynch Investment Partners Inc. ("MLIP") is the general
partner of the Partnership and selects and allocates the Partnership's assets
(through the Partnership's investment in ML Multi-Manager Portfolio LLC ("MM
LLC"), among professional advisors ("Advisors"), each unaffiliated with MLIP and
each of which trades independently of the others. The Partnership and MM LLC are
referred to throughout this document, either individually and/or collectively,
as the "Fund". 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. ("MLF") is the Partnership's commodity broker. A portion of the
Fund's assets is held by a commodity broker, other than MLF, to facilitate the
trading of a certain independent advisor. MLIP 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."). MLF is an indirect wholly-owned subsidiary
of ML&Co. (ML&Co. and its affiliates are herein sometimes referred to as
"Merrill Lynch.")

          Prior to October 1, 1996, the Partnership placed assets with the
Advisors by opening individual managed accounts with them.  For the
period from October 1, 1996 to May 31, 1998, the Partnership placed assets with
certain of the Advisors through investing in private funds ("Trading
LLCs") sponsored by MLIP, through which the trading accounts of different MLIP-
sponsored funds managed by the same Advisor pursuant to the same strategy were
consolidated. The only members of the Trading LLCs were commodity pools
sponsored by MLIP. Placing assets with an Advisor through investing in a Trading
LLC rather than a managed account had no economic effect on the Partnership,
except to the extent that the Partnership benefited from the Advisor not having
to allocate trades among a number of different accounts (rather than acquiring a
single position for the Trading LLC as a whole).  As of June 1, 1998, MLIP
consolidated the trading accounts of nine of its multi-advisor funds (the
"Multi-Advisor Funds"), including the Fund. The consolidation was achieved by
having these Multi-Advisor Funds invest in a single Delaware limited liability
company, MM LLC, which opened a single account with each Advisor selected. MM
LLC is managed by MLIP, has no investors other than the Multi-Advisor Funds and
serves solely as the vehicle through which the assets of such Multi-Advisor
Funds are combined in order to be managed through single rather than multiple
accounts. The placement of assets into MM LLC did not change the operations or
fee structure of the Partnership. The administrative authority over the
Partnership, as well as MM LLC, remains with MLIP. The following disclosures
relate to the operation of the Partnership through its investment in MM LLC.

          In addition to its investment in MM LLC, the Partnership maintains a
cash account. From time to time, MLIP allocates and reallocates Partnership
assets among its investment in MM LLC and its 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, MLIP allocated approximately 30% of the
Partnership's assets to cash and approximately 70% to trading. As of June 1,
1998, 100% was invested in MM LLC.

          As of December 31, 1999, the Partnership's capitalization was
$13,952,487, and the Net Asset Value of a Unit sold as of July 16, 1990 for $100
was $186.98.

          ML&Co. guarantees that the Net Asset Value per Unit will equal at
least $148.65 as of September 30, 2001 (the "Principal Assurance Date").  The
initial Principal Assurance Date was set at five years after trading commenced.
Effective October 1, 1995, the Fund restarted its trading program for a new Time
Horizon of two years' duration.  A fourth

                                       1
<PAGE>

Time Horizon, also two years in length, was begun as of October 1, 1999. 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. MLIP will manage the
percentage of assets allocated to trading so as to minimize the likelihood that
payments will be required to be made by ML&Co. pursuant to the guarantee. As a
result, the assets allocated to trading may be reduced or eliminated if the
present value of the guaranteed payments ($100 principal and all remaining
annual fixed-rate dividends) approaches the current value of the assets in the
Fund. If the spread between such present and current values widens, the assets
allocated to trading will increase. The determination of the percentage of
assets allocated to trading is affected by the performance of the Fund, the
level of interest rates used in determining the present value and the time
remaining to the Principal Assurance Date.

          Through December 31, 1999 the net gain in the net asset value per unit
was 86.98%. The highest month-end Net Asset Value per Unit was $199.62 (February
28, 1997) and the lowest was $102.26 (July 30, 1990).

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

          The Partnership's business constitutes only one segment for financial
reporting purposes, i.e., a speculative "commodity pool." The Partnership does
not engage in sales of goods or services.

     (c)  Narrative Description of Business:
          ---------------------------------

          General

          The Fund trades in futures, options on futures, forwards and options
on 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.

          MLIP is the Partnership's trading manager, with responsibility for
selecting Advisors to manage MM LLC's assets, allocating and reallocating MM LLC
assets among different Advisors and determining the percentage of the
Partnership's assets to be invested in MM LLC from time to time.

          Although considered as a whole, the Fund trades in a diversified range
of international markets. Certain of the Advisors, considered individually,
concentrate primarily on trading in a limited portfolio of markets. The
composition of the "sectors" included in the Partnership's portfolio varies
substantially over time.

          MLIP may, from time to time, direct certain individual Advisors to
manage their Fund accounts as if they were managing more equity than the actual
capital allocated to them.

          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 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 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 MLIP and MLF, 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 $148.65 as of the fourth Principal Assurance Date (September 30, 2001).
This guarantee, which is effective only as of the Principal Assurance Date, is a
guarantee only of the minimum assured Net Asset Value (plus distributions, if
any), not against the loss of the use of time value of such investment or a
guarantee of profit. This guarantee is a general, unsecured obligation of ML&Co.

                                       2
<PAGE>

          Operation of the Partnership after the Fourth Principal Assurance Date

          When the Fund reached its first Principal Assurance Date, MLIP
"restarted" the Fund's trading program and the ML&Co. guarantee for a two-year
period ending September 30, 1997.  As of October 1, 1999, MLIP again "restarted"
the Fund's trading program and the ML&Co. guarantee for an additional two-year
period ending September 30, 2001.  MLIP may determine to dissolve the
Partnership as of the current Principal Assurance Date (September 30, 2001), to
extend the ML&Co. guarantee for a certain period of time (again 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 August 15, 2001 as to what the operation of the Fund (if
any) will be after the current Principal Assurance Date.

          Use of Proceeds and Interest Income

          Market Sectors.  The Fund 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.

          Market Types.  The Fund trades on a variety of United States and
          ------------
foreign futures exchanges. Substantially all of the Fund's off-exchange trading
takes place in the highly liquid, institutionally-based currency forward
markets.

          Many of the Partnership's currency trades are executed in the spot and
forward foreign exchange markets (the "FX Markets") where there are no direct
execution costs. Instead, the participants, banks and dealers in the FX Markets
take a "spread" between the prices at which they are prepared to buy and sell
particular currencies and such spreads are built into the pricing of the spot or
forward contracts with the Partnership.

          In its exchange of futures for physical ("EFP") trading, the
Partnership acquires cash currency positions through banks and dealers,
including Merrill Lynch.  The Partnership pays a spread when it exchanges these
positions for futures.  This spread reflects, in part, the different settlement
dates of the cash and the futures contracts, as well as prevailing interest
rates, but also includes a pricing spread in favor of the banks and dealers,
which may include a Merrill Lynch entity.

          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.

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

                                       3
<PAGE>

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

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


          Charges

          The following table summarizes the charges incurred by the Fund during
1999, 1998 and 1997.


<TABLE>
<CAPTION>
                                   1999                                 1998                                  1997
                ---------------------------------------------------------------------------------------------------------------
    Charges            Dollar         % of Average             Dollar       % of Average             Dollar       % of Average
                       Amount           Month-End              Amount         Month-End              Amount         Month-End
                                       Net Assets                            Net Assets                            Net Assets
-------------------------------------------------------------------------------------------------------------------------------
<S>               <C>                <C>                   <C>             <C>                   <C>             <C>
Brokerage         $               -            0.00%             $662,247            3.05%           $1,936,603            6.75%
Commissions
Administrative                    -            0.00%               18,921            0.09%               55,331            0.19%
Fees
Profit Shares                     -            0.00%              147,262            0.68%              158,988            0.56%
                ---------------------------------------------------------------------------------------------------------------

Total             $               -            0.00%             $828,430            3.82%           $2,150,922            7.50%
                ===============================================================================================================

</TABLE>


                              ____________________

          Subsequent to October 1, 1996, Brokerage Commissions, Administrative
Fees and Profit Shares are not representative of the actual amounts paid by the
Fund, because the Fund paid the bulk of these fees as an investor in the Trading
LLCs or MM LLC. See "Description of Current Charges." During 1999, the Fund had
100% of its assets invested in MM LLC.

          The foregoing table does not reflect the bid-ask spreads paid by the
Fund on its forward trading, or the annual benefits which may be derived by
Merrill Lynch from the deposit of certain of the Fund's U.S. dollar assets in
offset accounts.

          The Fund's average month-end Net Assets during 1999, 1998 and 1997
equaled $16,233,778, $21,720,057, and  $28,696,419, respectively.

          Subsequent to October 1, 1996, interest income is not representative
of the actual amounts received by the Fund since the bulk of the interest was
received by the Fund as an investor in the Trading LLCs or MM LLC. During 1999,
the Fund had invested 100% of its assets in MM LLC.

          During 1998 and 1997, the Fund earned $396,925 and $1,118,910 in
interest income, or, approximately, 1.83% and 3.90% of the Fund's average month-
end Net Assets.

          The variations in charges are primarily due to placing assets in the
Trading LLCs and MM LLC (See Item 7).

                                       4
<PAGE>

                    Description of Current Charges

Recipient           Nature of Payment        Amount of Payment
-----------         -----------------        -----------------

MLF                 Brokerage Commissions    A flat-rate monthly commission of
                                             0.729 of 1% (a 8.75% annual rate)
                                             of the Fund's month-end assets
                                             allocated to trading. As of
                                             December 31, 1998, 100% of the
                                             Fund's assets were allocated to
                                             trading in MM LLC.

                                             During 1999, the Fund paid round-
                                             turn commissions through its
                                             investment in MM LLC.

                                             During 1998 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 $69,
                                             and $114, respectively.

MLF                 Use of Fund assets       Merrill Lynch may derive an
                                             economic benefit from the deposit
                                             of certain of the Fund's U.S.
                                             dollar assets in offset accounts.

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; Other         Bid-ask spreads          Bid-ask spreads on forward and
Counterparties                               related trades.

Advisors            Profit Shares            All Advisors can receive quarterly
                                             or annual Profit Shares ranging
                                             from 15% to 25% (depending on the
                                             Advisor) of any New Trading Profit
                                             achieved by their Fund account.
                                             Profit Shares are also paid upon
                                             redemption of Units and upon the
                                             net reallocation of assets away
                                             from an Advisor. New Trading Profit
                                             is calculated separately in respect
                                             of each Advisor, irrespective of
                                             the overall performance of the
                                             Fund. The Fund and MM LLC may pay
                                             substantial Profit Shares during
                                             periods when they are incurring
                                             significant overall losses.

Advisors            Consulting Fees          MLF currently pays the Advisors
                                             annual Consulting Fees up to 1.75%
                                             of the Partnership's average month-
                                             end assets allocated to them for
                                             management, after reduction for a
                                             portion of the brokerage
                                             commissions.

MLF;                Extraordinary expenses   Actual costs incurred; none paid to
  Others                                     date.

                                       5
<PAGE>

          Regulation

          MLIP, the Advisors and MLP 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 Geographic Areas:
          --------------------------------------------

          The Fund trades on a number of foreign commodity exchanges. The
Partnership does not engage in the sales of goods or services.

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
MLIP (Merrill Lynch Investment Partners Inc., Princeton Corporate Campus, 800
Scudders Mill Road - Section 2G, Plainsboro, New Jersey 08536). MLIP performs
all administrative services for the Partnership from MLIP'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 predicted 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.

Item 4:  Submission of Matters to a Vote of Security Holders
         ---------------------------------------------------

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

                                 PART II

Item 5:  Market for Registrant's Common Equity and Related Stockholder Matters
         ---------------------------------------------------------------------

Item 5(a)

     (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.  Units redeemed prior to the applicable Principal Assurance Date
are not entitled to any benefits under the ML&Co. guarantee.

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

          As of December 31, 1999, there were 778 holders of Units, including
MLIP.
                                       6
<PAGE>

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

          The Partnership has made no distributions, nor does MLIP presently
intend to make any distributions in the future.

Item 5(b)

          Not applicable.

Item 6:  Selected Financial Data
         -----------------------

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



<TABLE>
<CAPTION>
                                   For the Year   For the Year   For the Year   For the Year   For the Year
                                      Ended          Ended          Ended          Ended          Ended
                                   December 31,   December 31,   December 31,   December 31,   December 31,
Statement of Operations                1999           1998           1997           1996           1995
-----------------------------------------------------------------------------------------------------------

Revenues:

Trading (Loss) Profit:
<S>                                <C>            <C>            <C>            <C>            <C>
     Realized (Loss) Gain          $       -       $  (520,547)   $  (100,337)   $ 3,756,114    $10,514,336
     Change in Unrealized                     -       (703,331)       105,173       (284,224)    (1,160,384)
     (Loss) Gain
                               ----------------------------------------------------------------------------
     Total Trading Results                    -     (1,223,878)         4,836      3,471,890      9,353,952
                               ----------------------------------------------------------------------------

Interest Income                               -        396,925      1,118,910      1,364,326      1,954,622
                               ----------------------------------------------------------------------------
     Total Revenues                           -       (826,953)     1,123,746      4,836,216     11,308,574
                               ----------------------------------------------------------------------------

Expenses:
     Brokerage Commissions                    -        662,247      1,936,603      2,636,241      3,480,701
     Administrative Fees                      -         18,921         55,331         75,321              -
     Profit Shares                            -        147,262        158,988        457,989      1,084,170
                               ----------------------------------------------------------------------------
     Total Expenses                           -        828,430      2,150,922      3,169,551      4,564,871
                               ----------------------------------------------------------------------------
Income from Investments                (203,566)       675,414        968,354      2,032,587              -
                               ----------------------------------------------------------------------------
Net (Loss) Income                   $  (203,566)   $  (979,969)   $   (58,822)   $ 3,699,252    $ 6,743,703
                               ============================================================================



                                   December 31,   December 31,   December 31,   December 31,   December 31,
Balance Sheet Data                     1999           1998           1997           1996           1995
-----------------------------------------------------------------------------------------------------------

Fund Net Asset Value                $13,952,487    $18,934,681    $26,576,283    $31,949,032    $34,684,047
Net Asset Value per Unit            $    186.98        $189.19        $194.53        $194.47        $173.02
                               ----------------------------------------------------------------------------
</TABLE>



          The variations in income statement line items are primarily due to
investing in Trading LLCs and in MM LLC.

<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>
1995    $143.16  $151.75  $158.05  $161.56  $161.66  $158.32  $157.85  $163.55  $167.25  $167.26  $170.88  $173.02
------------------------------------------------------------------------------------------------------------------
1996    $181.96  $170.88  $173.16  $175.80  $173.86  $176.00  $171.33  $175.62  $177.79  $185.94  $195.14  $194.47
------------------------------------------------------------------------------------------------------------------
1997    $198.92  $199.62  $198.24  $192.04  $184.00  $184.90  $196.21  $184.18  $187.57  $186.07  $188.49  $194.53
------------------------------------------------------------------------------------------------------------------
1998    $190.87  $188.05  $184.76  $174.28  $174.87  $175.08  $175.33  $184.91  $188.86  $188.27  $188.44  $189.19
------------------------------------------------------------------------------------------------------------------
1999    $186.80  $189.04  $188.19  $190.25  $188.76  $189.46  $189.84  $188.56  $185.81  $180.73  $185.58  $186.98
------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       7
<PAGE>

          Pursuant to CFTC policy, monthly performance is presented only from
January 1, 1995 even though Units were outstanding prior to such date.

                    THE S.E.C.T.O.R. STRATEGY FUND (SM) L.P.
                               December 31, 1999

   Type of Pool:  Selected-Advisor/Publicly-Offered/"Principal Protected"(1)
                     Inception of Trading:   July 16, 1990
                    Aggregate Subscriptions:    $125,853,001
                     Current Capitalization:   $13,952,487
                   Worst Monthly Drawdown(2): (6.13)%  (8/97)
            Worst Peak-to-Valley Drawdown(3):  (12.70)% (3/97-4/98)
                                 _____________

             Net Asset Value per Unit, December 31, 1999:   $186.98


                            Monthly Rates of Return(4)
------------------------------------------------------------------------------
Month               1999         1998         1997         1996         1995
------------------------------------------------------------------------------
January              (1.26)%      (1.88)%       2.29%        5.17%       (1.33)%
------------------------------------------------------------------------------
February              1.20        (1.48)        0.35        (6.09)        6.00
------------------------------------------------------------------------------
March                (0.45)       (1.75)       (0.69)        1.33         4.15
------------------------------------------------------------------------------
April                 1.09        (5.67)       (3.13)        1.53         2.22
------------------------------------------------------------------------------
May                  (0.79)        0.34        (4.19)       (1.11)        0.06
------------------------------------------------------------------------------
June                  0.37         0.12         0.49         1.23        (2.07)
------------------------------------------------------------------------------
July                  0.20         0.14         6.12        (2.65)       (0.30)
------------------------------------------------------------------------------
August               (0.68)        5.46        (6.13)        2.50         3.61
------------------------------------------------------------------------------
September            (1.46)        2.14         1.84         1.24         2.26
------------------------------------------------------------------------------
October              (2.73)       (0.31)       (0.80)        4.58         0.01
------------------------------------------------------------------------------
November              2.69         0.09         1.30         4.95         2.16
------------------------------------------------------------------------------
December              0.75         0.40         3.20        (0.35)        1.25
------------------------------------------------------------------------------
Compound Annual      (1.17)%      (2.74)%        0.03%       12.40%       19.25%
Rate of Return
------------------------------------------------------------------------------




          (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 since January 1, 1995 by the Fund; a drawdown on 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 since January 1, 1995 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.

                                       8
<PAGE>

Item 7:  Management's Discussion and Analysis of Financial Condition and Results
         -----------------------------------------------------------------------
         of Operations
         -------------

Results of Operations

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 and trading leveraging analysis, 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.  Because of the speculative nature of its trading, the Fund's past
performance is not necessarily indicative of its future results.

          MLIP has made and expects to continue making frequent changes to both
trading asset allocations among Advisors and Advisor combinations as well as
from time to time adjusting the percentage of the Fund's assets committed to
trading.

          MLIP's decision to terminate or reallocate assets among 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 asset
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 of the
current Advisors will continue to manage assets for the Fund.

General
-------

          A number of the Advisors are trend-following traders, whose programs
do not attempt to predict price movements.  No fundamental economic supply or
demand analyses are used by these Advisors, and no macroeconomic assessments of
the relative strengths of different national economies or economic sectors.
Instead, the programs apply proprietary computer models to analyzing past market
data, and from this data alone attempt to determine whether market prices are
trending.  These technical traders base their strategies on the theory that
market prices reflect the collective judgment of numerous different traders and
are, accordingly, the best and most efficient indication of market movements.
However, there are frequent periods during which fundamental factors external to
the market dominate prices.

          If a trend-following Advisor's models identify a trend, they signal
positions which follow it.  When these models identify the trend as having ended
or reversed, these positions are either closed out or reversed.  Due to their
trend-following character, these Advisors' programs do not predict either the
commencement or the end of a price movement. Rather, their objective is to
identify a trend early enough to profit from it and detect its end or reversal
in time to close out the Fund's positions while retaining most of the profits
made from following the trend.

          In analyzing the performance of trend-following programs, economic
conditions, political events, weather factors, etc., are not directly relevant
because only market data has any input into trading results.  Furthermore, there
is no direct connection between particular market conditions and price trends.
There are so many influences on the markets that the same general type of
economic event may lead to a price trend in some cases but not in others.  The
analysis is further complicated by the fact that the programs are designed to
recognize only certain types of trends and to apply only certain criteria of
when a trend has begun.  Consequently, even though significant price trends may
occur, if these trends are not comprised of the type of intra-period price
movements which the programs are designed to identify, a trend-following Advisor
may miss the trend altogether.

          In the case of the Advisors which implement strategies which rely more
on discretion and market judgment, it is not possible to predict, from their
performance during past market cycles, how they will respond to future market
events.

                                      -9-
<PAGE>

Performance Summary
-------------------

          This performance summary is an outline description of how the Fund
performed in the past, not necessarily any indication of how it will perform in
the future.  In addition, the general causes to which certain price movements
are attributed may or may not in fact have caused such movements, but simply
occurred at or about the same time.

          The Advisors, as a group, are unlikely to be profitable in markets in
which such trends do not occur.  Static or erratic prices are likely to result
in losses.  Similarly, unexpected events (for example, a political upheaval,
natural disaster or governmental intervention) can lead to major short-term
losses as well as gains.

          While there can be no assurance that any Advisor will be profitable,
under any given market condition, markets in which substantial and sustained
price movements occur typically offer the best profit potential for the Fund.

          The performance of the Fund is also materially affected by the
percentage of its assets allocated to trading.  The greater the percentage of
the Fund's assets allocated to trading, the greater its profit potential, risk
and performance volatility


1999

          During 1999, all of the Fund's assets were invested in MM LLC. The
Fund received trading profits as an investor in MM LLC. The following commentary
for 1999 describes the trading results for MM LLC during the year.

          The Fund finished 1999 with gains in energy, stock index and
agricultural trading and losses in currency, interest rate and metal trading.
Commodities spent 1999 in a transition phase, shifting from bearishness to a
more neutral position. Lack of demand, particularly in Asia, was the dominant
factor in the overall decline in commodity prices.

          Overall, the Fund profited from trading in crude oil, heating oil, and
unleaded gas in 1999. Positions in crude oil offset losses from short positions
in natural gas and gas oil trading. In March, OPEC ratified new production cuts
totaling 1.716 million barrels per day at its conference, which resulted in
higher prices for crude. In the natural gas markets, prices rallied sharply
resulting from a decline in U.S. natural gas production, along with high levels
of energy consumption and weather scares throughout the country. Near the end of
the year, there was a continued upward momentum in crude oil reflecting the
tightening between supply and demand and a new, higher OPEC-indicated target
price.

          Stock index trading was profitable for the first half of 1999. Also of
note, the Dow Jones Industrial Average closed above the 10,000 mark for the
first time ever at the end of March, setting a record for the index, and equity
markets rallied worldwide in April and June. In the second half of the year, the
Fund suffered losses in stock index positions as trading was mixed due to
significant volatility globally. However, there was profitable trading in Hang
Seng, Nikkei 225 and Topix Indices which resulted in gains during November and
December. Such activity depicted evidence of Japan's stronger-than-expected
recovery coupled with a sudden decline in its unemployment rate.

          In agricultural trading, gains in live hogs and live cattle offset
losses in corn positions. Initially, the corn market continued to struggle due
to supply/demand imbalances and ongoing favorable weather in South America.
These factors also led to an increase in prices as there was a sharp decline in
crop ratings during the second half of the year. There was also a sharp upturn
in soy prices, and losses in coffee trading became evident due to cold
temperature and lack of rainfall in Brazil.

          Currency trading produced losses for the Fund throughout the year.
Long Japanese yen positions resulted in losses despite the yen trading higher
against the dollar. The Bank of Japan lowered rates to keep their economy
sufficiently liquid to allow fiscal spending to restore some growth to the
economy and to drive down the surging yen. The European Central Bank raised the
repo rate in November due to inflation pressures. On a trade-weighted basis, the
Swiss franc ended the first quarter to close at a seven-month low, mostly as a
result of the stronger U.S. dollar. The Canadian dollar also underwent similar
fluctuations throughout the year.

          Interest rate trading was also volatile as the flight to quality in
the bond market reversed during the first half of 1999 and the Federal Reserve
raised interest rates three times during the year. Early in the year, interest
rate trading proved unprofitable for the fund, which was triggered by the
Japanese Trust Fund Bureau's decision to absorb a smaller share of futures
issues, leaving the burden of financing future budget deficits to the private
sector. Interest rate trading did gain strength at mid-year as the flight to
quality in the bond market reversed and concerns about higher interest rates in
the U.S. continued to rattle the financial markets. During the third quarter,
Eurodollar trading generated losses amidst speculation of the probability of a
tightening by the U.S. Federal Reserve, which became evident with the higher
interest rates in their November 16 meeting due to concerns of inflation. In
December, the yield on the 30-year Treasury bond recently surpassed its October
high propelled by inflation worries and fears the Federal Reserve might tighten
further in 2000.

          Metals trading was mixed for the year as gold played a major part in
the volatility of the metals market. Gold had failed to maintain its status as a
safety vehicle and a monetary asset during the first half of 1999. In early
June, gold had reached its lowest level in over 20 years. A major statement from
the president of the European Central Bank stated that the member banks had
agreed not to expand their gold lending. This sent gold prices sharply higher in
late September. Unfortunately, the Fund held short positions in gold futures at
that time. Gold prices had stabilized in the fourth quarter following the price
surge. Early in the year, burdensome warehouse stocks and questionable demand
prospects weighed on base metals as aluminum fell to a five-year low and copper
fell to nearly an 11-year low. The economic scenario for Asia, Brazil, Europe
and emerging market nations helped to keep copper and other base metals on the
defensive as demand receded with virtually no supply side response in the second
quarter. A substantial increase in Chinese imports combined with the recovery in
the rest of Asia and Europe had significantly improved demand for aluminum
pushing prices higher during December.

1998

                                                       Total Trading
                                                          Results

Interest Rates and Stock Indexes                       $    46,962
Commodities                                                262,150
Currencies                                                  65,904
Energy                                                  (1,390,575)
Metals                                                    (208,319)
                                                       -----------
                                                       $(1,223,878)
                                                       ===========


          Global interest rate markets provided the Fund with its most
profitable positions for the first quarter, particularly in European bonds where
an extended bond market rally continued despite an environment of robust growth
in the United States, Canada and the United Kingdom, as well as a strong pick-up
in growth in continental Europe.  In the second quarter, swings in the U.S.
dollar and developments in Japan affected bond markets, causing the Fund's
interest rate trading to result in losses.  This was turned around in the third
quarter, as markets worldwide were turned upside down and the Fund's non-
correlation with general equity and debt markets was strongly exhibited, and
trading was particularly profitable in positions in Eurodollars, German and
Japanese bonds, and U.S. Treasury notes and bonds. Global investors staged a
major flight to quality, resulting in a significant widening of credit spreads
on a global basis. In October, investors pushed the yields on U.S. Treasury
bonds to a 31-year low.  The long bond yield fell about 75 basis points in 1998
as the world economy slowed more than expected, inflation continued to fall, the
anticipated small U.S. budget deficit turned into substantial surplus, and the
Fed lowered interest rates.

          In currency markets, results early in the year were unprofitable.
During the second quarter, strong gains were realized in positions in the
Japanese yen, which weakened during June to an eight-year low versus the U.S.
dollar.  Significant gains from Japanese yen trading continued into the third
quarter, and Japan's problems spread to other sectors of the global economy,
causing commodities prices to decline as demand from the Asian economies
weakened. Japan's deepening recession and credit crunch continued through the
fourth quarter, and the Fund achieved gains from long yen positions.

                                      -10-
<PAGE>

          Trading results in stock index markets were also mixed in early 1998,
despite a strong first-quarter performance by the U.S. equity market as several
consecutive weekly gains were recorded with most market averages setting new
highs.  Second quarter results were profitable as the Asia-Pacific region's
equity markets weakened across the board.  In particular, Hong Kong's Hang Seng
index trended downward during most of the second quarter and traded at a three-
year low.  As U.S. equity markets declined in July and August, the Fund profited
from short positions in the S&P 500, most notably during August, when the index
dropped 14.5%.  Volatility in September made for a difficult trading environment
in the stock index sector, and the Fund incurred modest losses, although results
remained profitable for the quarter and the year overall in these markets

          In agricultural commodity markets, 1998 began with strong gains as
live cattle and hog prices trended downward throughout the first quarter.  In
the second quarter, although the U.S. soybean crop got off to a good start which
contributed to higher yield expectations and a more burdensome supply outlook,
soybean prices traded in a volatile pattern.  Sugar futures maintained mostly a
downtrend, as no major buyers emerged to support the market.  Similarly, coffee
prices trended downward, as good weather conditions in Central America and
Mexico increased the prospects of more output from these countries.  The third
quarter resulted in losses as the U.S. soybean crop increased relative to the
USDA's production estimate as a result of timely rains, which contributed to
lower prices.  These losses continued into the fourth quarter as the Fund was
caught on the short side of the soybean complex, as the soybean supply surplus
became more manageable following the November 10th USDA reports, causing prices
to gain upward momentum.

          Gold prices began the year drifting sideways, and continued to weaken
following news in the second quarter of a European Central Bank consensus that
ten to fifteen percent of reserves should be made up of gold bullion, which was
at the low end of expectations.  Gold was unable to extend third quarter rallies
or to build any significant upside momentum, resulting in a trendless
environment.  This was also the case in the fourth quarter, as gold's cost of
production declined.  Also, silver markets remained range-bound, while also
experiencing a significant selloff in November, and aluminum traded at its
lowest levels since 1994, with many aluminum smelters operating at a loss.

          In energy markets, demand for crude oil in the Middle East was
affected by low oil prices early in the year, and trading resulted in losses.
Initially buoyed on concerns about a U.S.-led military strike against Iraq,
crude oil fell to a nine-year low, as the globally warm winter, the return of
Iraq as a producer and the Asian economic crisis added to OPEC's supply glut
problems.  Despite production cuts initiated by OPEC at the end of March, world
oil supplies remained excessive and oil prices stood at relatively low levels
throughout the first half of 1998.  Short heating oil positions in the third
quarter proved profitable for the Fund as the market for heating oil prices
dropped to its lowest level in more than a decade.  In early December, oil and
natural gas prices dropped sharply, causing continued problems for many emerging
market countries that depend on commodity exports for economic growth and
government financing. These price pressures were mainly due to excessive supply
availability and near-term weather indications that inventories would remain at
more than adequate levels even in the event of a cold Northern Hemisphere
winter.  Also, the December U.S. air attack on Iraq failed to cause any damage
to oil pumping and shipping operations, and oil prices fell over 10%.

     1997

                                                       Total Trading
                                                          Results

Interest Rates and Stock Indexes                       $   (30,260)
Commodities                                               (265,231)
Currencies                                               1,301,214
Energy                                                    (950,072)
Metals                                                     (50,815)
                                                       -----------
                                                       $     4,836
                                                       ===========



          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 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.

                                      -11-
<PAGE>

          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.

Variables Affecting Performance
-------------------------------

          The principal variables which determine the net performance of the
Fund are gross profitability and interest income.  Gross profitability is, in
turn, affected by the percentage of the Fund's assets allocated to trading.

          During all periods set forth under "Selected Financial Data," the
interest rates in many countries were at unusually low levels.  The low interest
rates in the United States (although higher than in many other countries)
negatively impacted revenues because interest income is typically a major
component of the Fund's 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 Fund may be reduced as compared to high
yielding and much lower risk fixed-income investments.

          The Fund's Brokerage Commissions and Administrative Fees are a
constant percentage of the Fund's assets allocated to trading.  The only Fund
costs (other than the insignificant currency trading costs) which are not based
on a percentage of the Fund's assets (allocated to trading or total) are the
Profit Shares payable to the Advisors on an Advisor-by-Advisor basis.  Gross
profitability is in turn, affected by the percentages of the Fund's assets
allocated to trading.  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 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.

          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.

          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.

                                      -12-
<PAGE>

Liquidity; Capital Resources

          The Fund borrows only to a limited extent and only on a strictly
short-term basis in order to finance losses on non-U.S. dollar denominated
trading positions pending the conversion of the Fund's dollar deposits.  These
borrowings are at a prevailing short-term rate in the relevant currency.  They
have been immaterial to the Fund's operation to date and are expected to
continue to be so.

          Substantially all of the Fund's assets are held in cash.  The Net
Asset Value of the Fund's cash is not affected by inflation.  However, changes
in interest rates could cause periods of strong up or down price trends, during
which the Fund's profit potential generally increases.  Inflation in commodity
prices could also generate price movements which the strategies might
successfully follow.

          Except in very unusual circumstances, the Fund should be able to close
out any or all of its open trading positions and liquidate any or all of its
contract holdings quickly and at market prices. This permits an Advisor to limit
losses as well as reduce market exposure on short notice should its strategies
indicate doing so. In addition, because there is a readily available market
value for the Fund's positions and assets, the Fund's monthly Net Asset Value
calculations are precise, and investors need only wait 10 business days to
receive the full redemption proceeds of their Units.

Year 2000 Compliance Initiative

        In 1999, Merrill Lynch completed its efforts to address the Year 2000
issue (the "Y2K issue"). The Y2K issue was the result of a widespread
programming technique that caused computer systems to identify a date based on
the last two numbers of a year, with the assumption that the first two numbers
of the year are "19". As a result, the year 2000 would be stored as "00",
causing computers to incorrectly interpret the year as 1900. Left uncorrected,
the Y2K issue may have caused serious failures in information technology systems
and other systems.

          In 1995, Merrill Lynch established the Year 2000 Compliance Initiative
to address the internal and external risks associated with the Y2K issue. The
initiative consisted of six phases, completed by the millennium: planning, pre-
renovation, renovation, production testing, certification, and integration
testing. Contingency plans were established in the event of any failure or
disruptions.

          Through the date of this filing, there have been no material failures
or disruptions of systems or services at Merrill Lynch attributable to the Y2K
issue. Similarly we have not been notified of any material failure or
disruption of systems or services affecting third parties in their capacity to
transact business with Merrill Lynch or in Merrill Lynch's capacity to transact
business with others. Merrill Lynch continues to monitor the performance of its
systems for any possible future failures or disruptions attributable to the Y2K
issue.

          As of December 31, 1999, the total estimated expenditures of existing
and incremental resources for the entire Year 2000 Compliance Initiative was
approximately $510 million, including $102 million of occupancy, communications,
and other related overhead expenditures, as Merrill Lynch is applying a fully
costed pricing methodology for this project. At December 31, 1999, of the total
estimated expenditures, approximately $12 million, related to continued testing,
contingency planning, risk management, and the wind down of the efforts, had not
yet been spent.



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 independent auditors on
accounting or 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 MLIP. Trading decisions are made by the Advisors
on behalf of the Partnership. MLIP promotes the Fund and its controlling person.

          The directors and executive officers of MLIP and their respective
business backgrounds are as follows:

                                      -13-
<PAGE>

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

Michael L. Pungello   Vice President, Chief Financial Officer and Treasurer

Allen N. Jones        Director

Stephen G. Bodurtha   Director

Michael J. Perini     Director

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 its
dissolution in 1994.  Mr. Frawley has served four consecutive one-year terms 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 currently serves as a
member of the CFTC's Global Markets Advisory Committee.

          Jeffrey F. Chandor was born in 1942.  Mr. Chandor is Senior Vice
President, 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.  Mr. Chandor is serving a
two-year term as a director of the Managed Funds Association.

          Michael L. Pungello was born in 1957.  Effective May 1, 1999, Mr.
Pungello became Vice President, Chief Financial Officer and Treasurer of
MLIP.  He was First Vice President and Senior Director of Finance for Merrill
Lynch's Operations, Services and Technology Group from January 1998 to March
1999.  Prior to that, Mr. Pungello spent over 18 years with Deloitte & Touche
LLP, and was a partner in their Financial Services practice from June 1990 to
December 1997.  He graduated from Fordham University in 1979 with a Bachelor of
Science degree in accounting and received his Master of Business Administration
degree in Finance from New York University in 1987.


          Allen N. Jones was born in 1942.  Mr. Jones is a Director of MLIP and,
from July 1995 until January 1998, Mr. Jones was also 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.

                                      -14-
<PAGE>

          Stephen G. Bodurtha was born in 1958.  Mr. Bodurtha is a Director of
MLIP.  In 1980, Mr. Bodurtha graduated magna cum laude from Wesleyan University,
Middletown, Connecticut with a Bachelor of Arts degree in Government.  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 to
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 the Structured Investments Group of MLPF&S since 1995.

          Michael J. Perini was born in 1947. Effective May 11, 1999, Mr. Perini
became a Director of MLIP. Since February 1998, Mr. Perini has been First Vice
President and Senior Director of the Defined and Managed Funds Group, which
includes Defined Asset Funds, Special Investments and MLIP. This is part of the
Investment Strategy Product Group of Merrill Lynch Private Client. Previously
Michael Perini was Director of Defined Asset Funds and has held various
management positions since he joined Merrill Lynch in 1970. Mr. Perini attended
St. John's University and New York University as well as The Stanford University
Marketing Management Program. He was elected to the Board of Governors of the
Investment Company Institute in Washington, D.C. and is Chairman of the Unit
Investment Trust Committee of the Institute.

          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.

          As of December 31, 1999, the principals of MLIP had no investment in
the Fund, and MLIP's general partner interest in the Fund was valued at
$201,377.

          MLIP acts as general partner to eleven public futures funds whose
units of limited partnership interest are registered under the Securities
Exchange Act of 1934:  The Futures Expansion Fund Limited Partnership, ML
Futures Investments II L.P., ML Futures Investments L.P., John W. Henry &
Co./Millburn L.P., The SECTOR Strategy Fund (SM) II L.P., The SECTOR Strategy
Fund (SM) V L.P., The SECTOR Strategy Fund (SM) VI L.P., ML Global Horizons
L.P., ML Principal Protection 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 MLIP are remunerated by MLIP. The
Partnership does not itself have any officers, directors or employees. The
Partnership pays Brokerage Commissions to an affiliate of MLIP and
Administrative Fees to MLIP. MLIP or its affiliates may also receive certain
economic benefits from holding the Fund's dollar assets. The directors and
officers receive no "other compensation" from the Partnership, and the directors
receive no compensation for serving as directors of MLIP. There are no
compensation plans or arrangements relating to a change in control of either
MLIP or the Partnership

                                      -15-
<PAGE>


Item 12:  Security Ownership of Certain Beneficial Owners and Management
          --------------------------------------------------------------

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

          As of December 31, 1999, no person or "group" is known to be or have
been the beneficial owner of more than 5% of the Units.

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

          As of December 31, 1999, MLIP owned 1,077 Units (unit-equivalent
general partnership interests), which was less than 1.4% of the total Units
outstanding.

     (c)  Changes in Control:
          ------------------

          None.

Item 13:  Certain Relationships and Related Transactions
          ----------------------------------------------

     (a)  Transactions Between Merrill Lynch and the Fund
          -----------------------------------------------

          All of the service providers to the Fund, other than the Advisors, are
affiliates of Merrill Lynch.  Merrill Lynch negotiated with the Advisors over
the level of its advisory fees and Profit Share.  However, none of the fees paid
by the Fund to any Merrill Lynch party were negotiated, and they are higher than
would have been obtained in arm-length bargaining.

          The Fund pays Merrill Lynch substantial Brokerage Commissions and
Administrative Fees as well as bid-ask spreads on forward currency trades. The
Fund also pays MLF interest on short-term loans extended by MLF to cover losses
on foreign currency positions.

          Within the Merrill Lynch organization, MLIP is the direct beneficiary
of the revenues received by different Merrill Lynch entities from the Fund. MLIP
controls the management of the Fund and serves as its promoter. Although MLIP
has not sold any assets, directly or indirectly, to the Fund, MLIP makes
substantial profits from the Fund due to the foregoing revenues.

          No loans have been, are or will be outstanding between MLIP or any of
its principals and the Fund.

          MLIP pays substantial selling commissions and trailing commissions to
MLPF&S for distributing the Units. MLIP is ultimately paid back for these
expenditures from the revenues it receives from the Fund.

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

          MLF, an affiliate of MLIP, acts as the principal commodity broker for
the Fund.

          In 1999, the Fund expensed the following fees: (i) Brokerage
Commissions of $1,448,194 to MLF, which included $175,900 in consulting fees
earned by the Advisors; and (ii) Administrative Fees of $41,377 to MLIP. In
addition, MLIP and its affiliates may have derived certain economic benefits
from possession of the Fund's assets, as well as from foreign exchange and 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.

                                      -16-
<PAGE>

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

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

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

          Not applicable.

                                      -17-
<PAGE>

                                 PART IV

Item 14:  Exhibits, Financial Statement Schedules and Reports on Form 8-K
          ---------------------------------------------------------------


    (a)1. Financial Statements:                                           Page
          ---------------------                                           ----


          Independent Auditors' Report                                      1

          Statements of Financial Condition as of December 31,
               1999 and 1998                                                2

          For the years ended December 31, 1999, 1998 and 1997
               Statements of Operations                                     3
               Statements of Changes in Partners' Capital                   4

          Notes to Financial Statements                                  5-11

    (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:

Designation          Description
-----------          -----------

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

Exhibit 3.01(i):     Is incorporated herein by reference from Exhibit 3.01(d)
---------------      contained in the Registrant's report on Form 10-Q for the
                     Quarter Ended June 30, 1995.


3.01(ii)             Limited Partnership Agreement of the Partnership.

Exhibit 3.01(ii):    Is incorporated herein by reference from Exhibit 3.01(a)
----------------     contained in Amendment No. 1 (as Exhibit A) to the
                     Registration Statement (File No. 33-34432) filed on May 25,

                     1990 on Form S-1 under the Securities Act of 1933 (the
                     "Registrant's Registration Statement").

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

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


10.02(a)             Form of Consulting Agreement between each Advisor
                     of the Partnership and Merrill Lynch Futures Inc.

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


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

Exhibit 10.03(a):    Is incorporated herein by reference from Exhibit 10.03(a)
----------------     contained in the Registrant's


                                      -18-

<PAGE>

                     Registration Statement.

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.


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

Exhibit 10.06:       Is incorporated herein by reference from Exhibit 10.06
-------------        contained in the Registrant's report on Form 10-K for the
                     year ended December 31, 1996.


10.07(a)             Form of Advisory and Consulting Agreement Amendment among
                     Merrill Lynch Investment Partners Inc., each Advisor, the
                     Fund and Merrill Lynch Futures Inc.

Exhibit 10.07(a):    Is incorporated herein by reference from Exhibit 10.07(a)
----------------     contained in the Registrant's report on Form 10-K for the
                     year ended December 31, 1996.


10.07(b)             Form of Amendment to the Customer Agreement among the
                     Partnership and MLF.

Exhibit 10.07(b):    Is incorporated herein by reference from Exhibit 10.07(b)
-----------------    contained in the Registrant's report on Form 10-K for the
                     year ended December 31, 1996.


13.01                1999 Annual Report and Independent Auditors' Report.

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

13.01(a)             1999 Annual Report and Independent Auditors' Report for
                     the following Trading Limited Liability Company sponsored
                     by Merrill Lynch Investment Partners Inc.
                     ML Multi-Manager Portfolio LLC

Exhibit 13.01(a):    Is filed herewith.
-----------------

28.01                Prospectus of the Partnership dated June 1, 1990.

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 (File No. 33-34432) filed on June 7,
                     1990.



     (b)  Report on Form 8-K:
          ------------------

          No reports on Form 8-K were filed during the fourth quarter of 1999.

                                      -19-
<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 S.E.C.T.O.R. STRATEGY FUND (SM) L.P.
                              (Safety of Equity Capital; Targeting Overall
Return)

                              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 30, 2000 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, Chief Executive Officer,       March 30, 2000
--------------------------  President and Director
John R. Frawley, Jr.        (Principal Executive Officer)

/s/ Michael L Pungello      Vice President, Chief Financial          March 30, 2000
--------------------------  Officer, and Treasurer (Principal
Michael L. Pungello         Financial and Accounting Officer)

/s/ Jeffrey F. Chandor      Senior Vice President, Director          March 30, 2000
--------------------------  of Sales, Marketing and Research,
Jeffrey F. Chandor          and Director

/s/ Michael J. Perini       Director                                 March 30, 2000
--------------------------
Michael J. Perini

(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 30, 2000
 PARTNERS INC.

By: /s/ John R. Frawley, Jr.
    ----------------------------
    John R. Frawley, Jr.
</TABLE>

                                      -20-
<PAGE>

                    THE S.E.C.T.O.R. STRATEGY FUND (SM) L.P.

                                 1999 FORM 10-K

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


                                         Exhibit
                                         -------


Exhibit 13.01            1999 Annual Report and Independent Auditors' Report

Exhibit 13.01(a)         1999 Annual Report and Independent Auditors' Report
                         for ML Multi-Manager Portfolio LLC


                                      -21-