<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, 2000
                                       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, 2001, limited partnership units with an aggregate value of
$10,249,369 were outstanding and held by non-affiliates.

                       DOCUMENTS INCORPORATED BY REFERENCE
The registrant's "2000 Annual Report and Independent Auditors' Report," the
annual report to security holders for the fiscal year ended December 31, 2000,
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 2000 ON FORM 10-K


                                TABLE OF CONTENTS

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

<C>        <S>                                                                                              <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....................................    15

Item 8.    Financial Statements and Supplementary Data...................................................    15

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..........    16


                                 PART III

Item 10.   Directors and Executive Officers of the Registrant............................................    16

Item 11.   Executive Compensation........................................................................    17

Item 12.   Security Ownership of Certain Beneficial Owners and Management................................    18

Item 13.   Certain Relationships and Related Transactions................................................    18


                                     PART IV

Item 14.   Exhibits, Financial Statement Schedules and Reports on Form 8-K...............................    19
</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 "Partnership". MLIP also determines what percentage of
the Partnership's assets to allocate to trading and what percentage to hold
in reserve. Merrill Lynch Futures Inc. ("MLF") is the Partnership's commodity
broker. MLIP is a wholly-owned subsidiary of Merrill Lynch Group, Inc.,
which, in turn, is a wholly-owned subsidiary of Merrill Lynch & Co., Inc.
("Merrill Lynch"). MLF is an indirect wholly-owned subsidiary of Merrill
Lynch.

          MLIP became a member of Merrill Lynch Investment Managers ("MLIM") -
Alternative Investments Group during October 2000. MLIM's Alternative
Investments Group creates and manages a variety of alternative investment
products including managed futures funds, hedge funds, funds of funds, exchange
funds and private equity funds. MLIP is currently intending to convert to a
Delaware limited liability company to be named MLIM Alternative Strategies LLC.
This conversion is expected to occur during 2001.

          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
Partnership. 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.

          In addition to its investment in MM LLC, the Partnership maintains
a cash account. MLIP can allocate and reallocate 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 Merrill Lynch 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 December
31, 2000, 100% was invested in MM LLC.

                                      1
<PAGE>

          As of December 31, 2000, the Partnership's capitalization as
$10,521,796, and the Net Asset Value of a Unit sold as of July 16, 1990 for
$100 was $197.51.

          Merrill Lynch 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 Partnership restarted its trading program for a
new Time Horizon of two years' duration. A fourth 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 Merrill Lynch pursuant to the guarantee. As a result, the
assets allocated to trading may be reduced or eliminated if the present value of
the guarantee payments approaches the current value of the assets in the
Partnership. The determination of the percentage of assets allocated to trading
is affected by the performance of the Partnership, the level of interest rates
used in determining the present value and the time remaining to the Principal
Assurance Date.

          Through December 31, 2000, 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 Partnership trades (currently, through its investment in MM
LLC) 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 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.

          Although considered as a whole, the Partnership (currently, through
an investment in MM LLC) trades in a diversified range of international
markets. Certain 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 Partnership accounts as if they were managing more equity than the
actual capital allocated to them.

          One of the objectives of the Partnership 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 Partnership's returns have, in
fact, frequently been non-correlated with the United States stock and bond
markets.

                                      2
<PAGE>
          MERRILL LYNCH'S "PRINCIPAL PROTECTION" UNDERTAKING TO THE PARTNERSHIP

          Merrill Lynch, 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, and so 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 Merrill Lynch.

          OPERATION OF THE PARTNERSHIP AFTER THE FOURTH PRINCIPAL ASSURANCE DATE

          When the Partnership reached its first Principal Assurance Date,
MLIP "restarted" the Partnership's trading program and the Merrill Lynch
guarantee for a two-year period ending September 30, 1997. As of October 1,
1999, MLIP again "restarted" the Partnership's trading program and the Merrill
Lynch guarantee for a third 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 Merrill Lynch guarantee for a certain
period of time (again resetting the minimum Net Asset Value per Unit guaranteed
by Merrill Lynch) or to continue to operate the Partnership 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 Partnership (if any) will
be after the current Principal Assurance Date.

          USE OF PROCEEDS AND INTEREST INCOME
          MARKET SECTORS.

          The Partnership (currently, through its investment in MM LLC) trades
in a diversified group of markets under the direction of multiple independent
Advisors. These Advisors 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 Partnership trades (currently, through its investment in MM LLC)
on a variety of United States and foreign futures exchanges. Substantially all
of the Partnership's non-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. 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 Partnership's
commitments to different types of markets -- U.S. and non-U.S., regulated and
non-regulated -- differ substantially from time to time, as well as over time.

          CUSTODY OF ASSETS.

          The majority of the Partnership's assets are currently held in
customer accounts at Merrill Lynch.

          CASH MANAGEMENT.

          As of June 2000, the Partnership, through MM LLC, began an Income
Enhancement Program, whereas, a portion of its assets is invested in Commercial
Paper. This was done to improve the yield on the cash assets not required for
margin for trading purposes at MLF. These holdings generally have maturities of
30, 60 or 90 days and are held to maturity.


                                       3
<PAGE>
          INTEREST PAID BY MERRILL LYNCH ON THE PARTNERSHIP'S U.S. DOLLAR AND
NON U.S. DOLLAR ASSETS

          A portion of the Partnership's U.S. dollar assets are maintained at
MLF. On assets held in U.S. dollars, Merrill Lynch credits the Partnership
with interest at the prevailing 91-day U.S. Treasury bill rate. The
Partnership is credited with interest on any of its assets and 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 Partnership,
from possession of such assets.

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

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

          CHARGES

          The following table summarizes the charges incurred by the Partnership
during 2000, 1999 and 1998.

<TABLE>
<CAPTION>
                              2000                         1999                        1998
              ----------------------------------------------------------------------------------------

                                 % of Average                 % of Average                % of Average
                       Dollar     Month-End         Dollar      Month-End         Dollar    Month-End
    Charges            Amount     Net Assets        Amount      Net Assets        Amount    Net Assets
 -----------------------------------------------------------------------------------------------------
<S>                  <C>         <C>             <C>          <C>                 <C>     <C>
 Brokerage
 Commissions         $       -         0.00%      $       -          0.00%        $662,247       3.05%
 Administrative
 Fees                        -         0.00%              -          0.00%          18,921       0.09%
 Profit Shares               -         0.00%              -          0.00%         147,262       0.68%
                     ---------------------------------------------------------------------------------
 Total               $       -         0.00%      $       -          0.00%        $828,430       3.82%
                     =================================================================================
</TABLE>

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

          Subsequent to October 1, 1996, Brokerage Commissions, Administrative
Fees and Profit Shares are not representative of the actual amounts paid by the
Partnership, because the Partnership paid the bulk of these fees as an investor
in the Trading LLCs or MM LLC. See "Description of Current Charges." During 1999
and 2000, the Partnership had 100% of its assets invested in MM LLC.

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

          The Partnership's average month-end Net Assets during 2000, 1999 and
1998 equaled $11,497,946, $16,233,778, and $21,720,057, respectively.

          Subsequent to October 1, 1996, interest income is not representative
of the actual amounts received by the Partnership since a bulk of the interest
was received by the Partnership as an investor in the Trading LLCs or MM LLC.
During 1999 and 2000, the Partnership invested 100% of its assets in MM LLC.

          During 1998, the Partnership earned $396,925 in interest income, or
1.83% of the Partnership'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

<TABLE>
<CAPTION>
RECIPIENT            NATURE OF PAYMENT              AMOUNT OF PAYMENT

<S>                  <C>                            <C>
MLF                  Brokerage Commissions          A flat-rate monthly commission of 0.729 of 1% (an 8.75%
                                                    annual rate) of the Partnership's month-end assets
                                                    allocated to trading. As of December 31, 2000, 100% of
                                                    the Partnership's assets were allocated to trading in
                                                    MM LLC.

                                                    Prior to the investment in MM LLC, the round-turn (each
                                                    purchase and sale or sale and purchase of a single futures
                                                    contract) equivalent rate of the Partnership's flat-rate
                                                    Brokerage Commissions for the year ended December 31, 1998
                                                    was approximately $69. During 1999 and 2000, the Partnership
                                                    paid round-turn commissions through its investment in MM LLC.
                                                    The estimated aggregate round turn commission rate of MM LLC
                                                    for the years ended December 31, 2000 and 1999 are $82 and
                                                    $136, respectively.

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

MLIP                 Administrative Fees            The Partnership pays MLIP a monthly Administrative Fee equal
                                                    to 0.020833 of 1% (a 0.25% annual rate) of the Partnership's
                                                    month-end assets allocated to trading. As of December 31, 2000,
                                                    100% of the Partnerships assets were allocated to trading in
                                                    MM LLC. MLIP pays all of the Partnership's routine administrative
                                                    costs.

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

Advisors             Profit Shares                  All Advisors can receive quarterly or annual Profit Shares
                                                    ranging from 20% to 23% (depending on the Advisor)
                                                    of any New Trading Profit achieved by their Partnership
                                                    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 Partnership. The Partnership may pay
                                                    substantial Profit Shares during periods when it is
                                                    incurring significant overall losses.

Advisors             Consulting Fees                MLF pays the Advisors annual Consulting Fees up to 2% 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 date.
 Others
</TABLE>


                                       5
<PAGE>

          REGULATION

          MLIP, the Advisors and MLF are each subject to regulation by the
Commodity Futures Trading Commission (the "CFTC") and the National Futures
Association ("NFA"). 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 trades, through its investment in MM LLC, 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

          Merrill Lynch -- 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 or financial condition of
MLIP or the Partnership.

          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 established public trading market for the Units, nor will
one develop. 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 Merrill Lynch guarantee.

                                       6
<PAGE>

     (b)  HOLDERS:

          As of December 31, 2000, there were 573 holders of Units, including
MLIP.

     (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             2000             1999             1998              1997             1996
-------------------------------------------------------------------------------------------------------------------
<S>                            <C>                <C>              <C>               <C>              <C>
Revenues:

Trading (Loss) Profit:
     Realized                  $             -    $           -    $    (520,547)     $   (100,337)   $   3,756,114
     Change in Unrealized                    -                -         (703,331)          105,173         (284,224)
                               ------------------------------------------------------------------------------------
     Total Trading Results                   -                -       (1,223,878)            4,836        3,471,890
                               ------------------------------------------------------------------------------------

Interest Income                              -                -          396,925         1,118,910        1,364,326
                               ------------------------------------------------------------------------------------
     Total Revenues                          -                -         (826,953)        1,123,746        4,836,216
                               ------------------------------------------------------------------------------------
Expenses:
     Brokerage Commissions                   -                -          662,247         1,936,603        2,636,241
     Administrative Fees                     -                -           18,921            55,331           75,321
     Profit Shares                           -                -          147,262           158,988          457,989
                               ------------------------------------------------------------------------------------
     Total Expenses
                                             -                -          828,430         2,150,922        3,169,551
                               ------------------------------------------------------------------------------------
Income (Loss) from Investments
                                       478,914         (203,566)         675,414           968,354        2,032,587
                               ------------------------------------------------------------------------------------
Net Income (Loss)              $       478,914    $    (203,566)   $    (979,969)    $     (58,822)   $   3,699,252
                               ====================================================================================
</TABLE>

<TABLE>
<CAPTION>
                                DECEMBER 31,     DECEMBER 31,     DECEMBER 31,     DECEMBER 31,    DECEMBER 31,
BALANCE SHEET DATA                 2000             1999             1998             1997            1996
---------------------------------------------------------------------------------------------------------------
<S>                             <C>              <C>              <C>              <C>             <C>
Partnership Net Asset Value          $10,521,796      $13,952,487      $18,934,681      $26,576,283     $31,949,032
Net Asset Value per Unit             $197.51          $186.98          $189.19          $194.53         $194.47
                                -------------------------------------------------------------------------------
</TABLE>

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


                                       7
<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>
  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
----------------------------------------------------------------------------------------------------------------
  2000  $187.63  $186.21 $182.97  $183.20  $185.91  $183.63  $181.00 $181.59  $176.11  $176.42  $186.50 $197.51
----------------------------------------------------------------------------------------------------------------
</TABLE>

                    THE S.E.C.T.O.R. STRATEGY FUND (SM) L.P.
                                DECEMBER 31, 2000

    TYPE OF POOL: SELECTED-ADVISOR/PUBLICLY-OFFERED/"PRINCIPAL PROTECTED"(1)
                       INCEPTION OF TRADING: July 16, 1990
                      AGGREGATE SUBSCRIPTIONS: $125,853,001
                       CURRENT CAPITALIZATION: $10,521,796
                    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, 2000: $197.51

<TABLE>
<CAPTION>
--------------------------------------------------------------------------
                       MONTHLY RATES OF RETURN(4)
--------------------------------------------------------------------------
MONTH              2000       1999       1998       1997      1996
--------------------------------------------------------------------------
<S>                <C>       <C>        <C>        <C>        <C>
January             0.34%     (1.26)%    (1.88)%    2.29%      5.17%
--------------------------------------------------------------------------
February           (0.76)      1.20      (1.48)     0.35      (6.09)

--------------------------------------------------------------------------
March              (1.74)     (0.45)     (1.75)    (0.69)      1.33
--------------------------------------------------------------------------
April               0.13       1.09      (5.67)    (3.13)      1.53
--------------------------------------------------------------------------
May                 1.48      (0.79)      0.34     (4.19)     (1.11)
--------------------------------------------------------------------------
June               (1.23)      0.37       0.12      0.49       1.23
--------------------------------------------------------------------------
July               (1.44)      0.20       0.14      6.12      (2.65)
--------------------------------------------------------------------------
August              0.33      (0.69)      5.46     (6.13)      2.50
--------------------------------------------------------------------------
September          (3.01)     (1.46)      2.14      1.84       1.24
--------------------------------------------------------------------------
October             0.17      (2.73)     (0.31)    (0.80)      4.58
--------------------------------------------------------------------------
November            5.71       2.69       0.09      1.30       4.95
--------------------------------------------------------------------------
December            5.91       0.75       0.40      3.20      (0.35)
--------------------------------------------------------------------------
Compound Annual
Rate of Return      5.63%     (1.17)%    (2.74)%    0.03%     12.40%
--------------------------------------------------------------------------
</TABLE>

                                      8
<PAGE>
          (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
Merrill Lynch guarantee limit Limited Partners' losses on their Units at the
Principal Assurance Date to 20% of the Net Asset Value of their Units as of the
beginning of each new Time Horizon.

          (2) Worst monthly Drawdown represents the largest negative monthly
Rate of Return experienced since January 1, 1996 by the Partnership; 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 since January 1, 1996 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 Partnership
during the month of determination (including interest income and after all
expenses have been accrued or paid) divided by the total equity of the
Partnership as of the beginning of such month.

ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
     OF OPERATIONS

RESULTS OF OPERATIONS

ADVISOR SELECTIONS

          The Partnership'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 Partnership's results of operations is its actual performance
record to date. Because of the speculative nature of its trading, the
Partnership'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 Partnership'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 Partnership.

                                     9
<PAGE>

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 are
evaluated. Instead, the programs apply proprietary computer models to analyze
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 Partnership'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 who 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.

PERFORMANCE SUMMARY

          This performance summary is an outline description of how the
Partnership 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 Partnership.

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

                                      10

<PAGE>

2000

         During 2000, all of the Partnership's assets were invested in MM LLC.
The Partnership received trading profits as an investor in MM LLC. The following
commentary of 2000 describes the trading results for MM LLC during the year.

         The Partnership's overall trading strategy was profitable for 2000.
Gains were realized by trading in the interest rate, currency and energy
markets. Losses were sustained in the agricultural, metals and stock index
sectors. Trading was volatile and unprofitable through September, however, gains
realized in the interest rate and currency markets in November and December
eradicated those losses.

         Interest rate trading was profitable for the Partnership. Short
eurodollar trading was profitable early in the year as the European Union
ministers blamed the Euro's decline on rapid U.S. growth and fears that the
Federal Reserve would continue to increase interest rates. By mid year, losses
were incurred from U.S. Treasury bond and Euro 10- year bond trading as
investors shifted to Treasuries due to increased volatility in the NASDAQ and
other equity markets. Short Eurodollar turned unprofitable as the Euro improved
after the European Central Bank's 50 basis point repo rate hike. Uncertainty
surrounding the U.S. Presidential election caused investors to favor the bond
markets over equities, resulting in significant gains for the Partnership's
various long positions.

         Trading in the currency markets was also successful. Short Euro
positions were profitable after officials from the Group of Seven met in January
and failed to express concern about the low levels of the currency. Despite
steep interest rate hikes by the Swiss National Bank ("SNB") and the general
weakness of the Euro, the SNB said it will not keep the Swiss franc from rising.
Short British pound positions were profitable as the pound was weak in the wake
of the Bank of England's references to "sterling overvaluation". Short Japanese
yen trading yielded gains in July as the yen finished weaker against the U.S.
dollar in anticipation that the U.S. Federal Reserve would continue to raise
interest rates. Short positions in the Canadian dollar resulted in gains as
the currency weakened during November despite worsening U.S. dollar
fundamentals, a large Canadian budget surplus and plans for tax cuts in Canada.

         Energy trading was profitable throughout the year as prices continued
to surge. Despite the possibility of OPEC increasing oil production, crude oil
prices continued to rise as such a hike would still leave oil inventories much
below normal. Light crude oil prices continued to rise in June even though OPEC
agreed to increase production on July 1. The market was looking for a larger
production hike. By November, oil prices were pushed higher as a result of
significantly lower temperatures than the previous year, combined with a large
inventory deficit.

         Agriculture trading sustained modest losses for the year. Corn prices
fluctuated early on numerous changes in weather forecasts. A USDA grain crop
report projected a 12% rise in soybean inventories from the previous season.
This led to fears of an abundance of supply, lowering prices. Short wheat
trading was beneficial in July as drought warnings issued in early spring
proved inaccurate. As a result of good global grain and oilseed crops, supply
exceeded demand, resulting in profits in short soyoil positions at year-end.

         Metals trading alternated between profitability to unprofitability
during the year. Copper trading resulted in losses after a Freeport, Indonesia
mine announced output cuts would not be as severe, damaging the Partnership's
long positions. Gold prices declined for most of 2000 as investors were
discouraged from the drop in the Euro, severe weakness in the Australian dollar
along with sharp decreases in the South African rand and Indian rupee. Nickel
prices declined from slowing demand for stainless steel in Europe and Asia.

         Stock index markets trading was unprofitable during a volatile year.
Signs of rising inflation fueled fears that the Federal Reserve would continue
to raise interest rates aggressively to slow the economy. S&P 500 positions
sustained losses as buyers retreated due to fears of a U.S. economic slowdown.
Long positions were generally unprofitable throughout the year, with minimal
gains realized from the Partnership's short positions.

                                      11

<PAGE>

1999

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

          The Partnership 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 Partership 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 Partnership 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 Partnership throughout the
year. Long Japanese yen positions resulted in losses despite the yen trading
higher against the U.S. dollar. The Bank of Japan lowered rates to keep its
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 Partnership, 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.

                                      12

<PAGE>

          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 Partnership  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

<TABLE>
<CAPTION>
                                                 Total Trading
                                                   Results
<S>                                              <C>
 Interest Rates and Stock Indices                $    46,962
 Commodities                                         262,150
 Currencies                                           65,904
 Energy                                           (1,390,575)
 Metals                                             (208,319)
                                                 -------------
                                                 $(1,223,878)
                                                 =============
</TABLE>

          Global interest rate markets provided the Partnership 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
Partnership'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
Partnership'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 Partnership achieved gains from long yen positions.

                                       13

<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
Partnership 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 Partnership
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 Partnership 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 Partnership 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%.

VARIABLES AFFECTING PERFORMANCE

          The principal variables which determine the net performance of the
Partnership are gross profitability and interest income. Gross profitability
is, in turn, effected by the percentage of the Partnership'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 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 Partnership's profitability. In addition, low interest rates

                                       14

<PAGE>

are frequently associated with reduced fixed income market volatility, and in
static markets the Partnership'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 the Partnership's assets allocated to trading. The
only Partnership costs (other than the insignificant currency trading costs)
which are not based on a percentage of the Partnership'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 effected by the
percentages of the Partnership'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 Partnership between realized and unrealized profits.
Most of the contracts traded by the Partnership are highly liquid and can be
closed out at any time.

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

LIQUIDITY; CAPITAL RESOURCES

          The Partnership 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 Partnership's
U.S. dollar deposits. These borrowings are at a prevailing short-term rate
in the relevant currency. They have been immaterial to the Partnership's
operation to date and are expected to continue to be so.

          Substantially all of the Partnership's assets are held in cash. The
Net Asset Value of the Partnership'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 Partnership'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 Partnership 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 Partnership's positions and assets,
the Partnership'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.

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.


                                       15

<PAGE>

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 Partnership and is its controlling
person.

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

RONALD S. ROSENBERG        Chairman and Director

FABIO P. SAVOLDELLI        President and Director

FRANK M. MACIOCE           Vice President and Director

STEVEN B. OLGIN            Vice President, Chief Administrative Officer
                           and Director

MICHAEL L. PUNGELLO        Vice President, Chief Financial Officer and Treasurer

          Ronald S. Rosenberg was born in 1962. Mr. Rosenberg is Chairman and
a Director of MLIP and head of the Alternative Investments Group for MLIM
Americas, which creates alternative investment products and strategies for
Merrill Lynch's large institutional and high net worth private clients. These
products include funds of funds investing in hedge funds, private equity
funds, exchange funds, as well as other specialized investment products. Most
recently, Mr. Rosenberg ran the Global Hedge Fund Sales Group and
International Fixed Income Groups which sold investment products to hedge
funds worldwide. He joined Merrill Lynch in 1995 from JP Morgan, where he was
also responsible for sales groups that sold investment products to hedge
funds. Mr. Rosenberg was educated at the Wharton Business School, where he
received a Master of Business Administration in Finance. He graduated Phi
Beta Kappa from Rutgers University with a Bachelor of Arts in Computer
Science and Economics.

          Fabio P. Savoldelli was born in 1961. Mr. Savoldelli is President and
a Director of MLIP. He  will oversee the Partnership's investments. Most
recently, Mr. Savoldelli was Chief Investment Officer for the Americas at the
Chase Manhattan Private Bank, responsible for managers investing assets in
international and domestic institutional, private client and ERISA funds.
Previously, he was Deputy Chief Investment Officer and Head of Fixed Income and
Foreign Exchange at Swiss Bank Corp. London Portfolio Management International.
Mr. Savoldelli was educated at the University of Windsor, Canada, and the London
School of Economics.

          Frank M. Macioce was born in 1945. Mr. Macioce is a Vice President
and a Director of MLIP and the senior legal counsel responsible for
Alternative Investments. He joined MLIM in February 2000. From 1995 to 2000,
Mr. Macioce was General Counsel of Operations, Services and Technology for
Merrill Lynch, and from 1993 to 1995 served as Merrill Lynch Investment
Banking General Counsel. From 1980 to 1993 he served as Assistant General
Counsel of Merrill Lynch responsible for Corporate Law. During his 28 years
with Merrill Lynch, he has served as a director and officer of a number of
its affiliates. Mr. Macioce graduated from Purdue University with a Bachelor
of Science in Economics and Psychology in 1967 and from Vanderbilt Law School
with a Juris Doctor in 1972. Mr. Macioce is a member of the New York Bar.


                                       16

<PAGE>

          Steven B. Olgin was born in 1960. Mr. Olgin is Vice President,
Chief Administrative Officer and Director 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 in Business
Administration and a Bachelor of Arts in Economics. In 1986, he received his
Juris Doctor 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 National Futures Association. Mr. Olgin is a member of
the Illinois Bar.

          Michael L. Pungello was born in 1957. Mr. Pungello is 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 in
Accounting and received his Master of Business Administration in Finance from
New York University in 1987.

          As of December 31, 2000, the principals of MLIP had no investment in
the Partnership, and MLIP's general partner interest in the Partnership was
valued at $113,763.

          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 Partnership. 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 Partnership's U.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.

                                       17

<PAGE>

ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     (a)  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS:

          As of December 31, 2000, 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, 2000, MLIP owned 576 Units (unit-equivalent
general partnership interests), which was less than 1.1% of the total Units
outstanding.

     (c)  CHANGES IN CONTROL:

          None.

ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     (a)  TRANSACTIONS BETWEEN MERRILL LYNCH AND THE PARTNERSHIP

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

          The Partnership pays Merrill Lynch substantial Brokerage
Commissions and Administrative Fees, as well as bid-ask spreads on forward
currency trades. The Partnership 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 Partnership. MLIP controls the management of the Partnership and serves
as its promoter. Although MLIP has not sold any assets, directly or
indirectly, to the Partnership, MLIP makes substantial profits from the
Partnership due to the foregoing revenues.

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

          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 Partnership.

     (b)  CERTAIN BUSINESS RELATIONSHIPS:

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

          In 2000, the Partnership expensed, through MM LLC, the following
fees: (i) Brokerage Commissions of $987,593 to MLF, which included
approximately $135,428 in consulting fees earned by the Advisors; and (ii)
Administrative Fees of $28,217 to MLIP. In addition, MLIP and its affiliates
may have derived certain economic benefits from possession of the Partnership'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.

     (c)  INDEBTEDNESS OF MANAGEMENT:

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

     (d)  TRANSACTIONS WITH PROMOTERS:

          Not applicable.


                                       18

<PAGE>

                                     PART IV

ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

<TABLE>
<CAPTION>
     (a)1. FINANCIAL STATEMENTS:                                                 PAGE
           --------------------                                                  ----
<S>                                                                              <C>
           Independent Auditors' Report                                             1

           Statements of Financial Condition as of December 31, 2000 and 1999       2

           For the years ended December 31, 2000, 1999 and 1998
                   Statements of Operations                                         3
                   Statements of Changes in Partners' Capital                       4

           Notes to Financial Statements                                          5-11
</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:

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 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.


                                       19

<PAGE>

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

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 Partnership 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                      2000 Annual Report and Independent Auditor's Report

EXHIBIT 13.01:             Is filed herewith.

13.01(a)                   2000 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 2000.


                                       20

<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/ Ronald S. Rosenberg
                                 -----------------------
                                    Ronald S. Rosenberg
                              Chairman 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, 2001 by the
following persons on behalf of the Registrant and in the capacities indicated.

<TABLE>
<CAPTION>
SIGNATURE                      TITLE                                                            DATE
---------                      -----                                                            ----
<S>                                 <C>                                                         <C>
/s/Ronald S. Rosenberg              Chairman and Director                                        March 30, 2001
----------------------              (Principal Executive Officer)
Ronald S. Rosenberg

/s/Fabio P. Savodelli               President and Director                                       March 30, 2001
---------------------
Fabio P. Savodelli

/s/Steven B. Olgin                  Vice President, Chief Administrative Officer                 March 30, 2001
------------------                  and Director
Steven B. Olgin

/s/Michael L. Pungello              Vice President, Chief Financial Officer and Treasurer        March 30, 2001
----------------------              (Principal Financial and Accounting Officer)
Michael L. Pungello

(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, 2001
   PARTNERS INC.

by/s/ Ronald S. Rosenberg
  -----------------------
   Ronald S. Rosenberg
</TABLE>

                                       21
<PAGE>

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

                                 2000 FORM 10-K

                                INDEX TO EXHIBITS


                                     EXHIBIT


Exhibit 13.01        2000 Annual Report and Independent Auditors' Report

Exhibit 13.01(a)     2000 Annual Report and Independent Auditor's Report for the
                     following Trading Limited Liability Company sponsored by
                     Merrill Lynch Investment Partners, Inc.:
                     ML Multi-Manager Portfolio LLC

                                       22