<PAGE>
 
                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-Q

(Mark One)

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended   March 31, 1997
                               ----------------

                    OR
 
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934
 
For the transition period from       to
                               -----    -----
 
Commission File Number 0-18944
 
                     THE SECTOR STRATEGY FUND/SM/ IV L.P.
                    --------------------------------------
                         (Exact Name of Registrant as
                           specified in its charter)
 
             Delaware                                      13-3648784
-------------------------------                --------------------------------
(State or other jurisdiction of                (IRS Employer Identification No.)
incorporation or organization)

                   c/o Merrill Lynch Investment Partners Inc.
            Merrill Lynch World Headquarters - South Tower, 6th Fl.
              World Financial Center New York, New York 10080-6106
              ----------------------------------------------------
                    (Address of principal executive offices)
                                   (Zip Code)

                                  212-236-4161
             ----------------------------------------------------
             (Registrant's telephone number, including area code)

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes  X    No
                                               ---      ---

                        This document contains 12 pages.

                                       1
<PAGE>
 
PART I - FINANCIAL INFORMATION
 
Item 1. Financial Statements

 
                     THE SECTOR STRATEGY FUND/SM/ IV L.P.
                   ----------------------------------------
                       (a Delaware limited partnership)
 
                       STATEMENTS OF FINANCIAL CONDITION
                       ---------------------------------

                                                   March 31,       December 31,
                                                     1997              1996    
                                                     ----              ----    
ASSETS                                                                        
------                                                                        
Accrued interest                                 $        -         $    8,703
Equity in commodity futures trading accounts:                                 
 Cash and option premiums                                 -          2,361,768
 Net unrealized profit on                                 -                  -
  open contracts                                                              
Investments                                       5,137,022          3,020,012
Receivable from investments                               -            113,486
                                                 ----------         ---------- 
                                                                              
      TOTAL                                      $5,137,022         $5,503,969
                                                 ==========         ========== 
                                                                              
LIABILITIES AND PARTNERS' CAPITAL                                             
---------------------------------                
                                                                              
LIABILITIES:                                                                  
 Redemptions payable                             $   36,758         $  195,968
 Brokerage commissions payable                            -             18,981
 Profit shares payable                                    -             34,583
 Administrative fees payable                              -                494
                                                 ----------         ----------
                                                                              
     Total liabilities                               36,758            250,026
                                                 ----------         ----------
                                                                              
PARTNERS' CAPITAL:                                                            
 General Partner:                                                             
   (671 and 671 Series A Units outstanding)          90,155             87,083
   (214 and 214 Series B Units outstanding)          31,193             30,069
 Limited Partners:                                                            
   (30,195 and 32,330 Series A Units 
    outstanding)                                  4,056,977          4,195,801
   (  6,325 and  6,697 Series B Units 
    outstanding)                                    921,939            940,990
                                                 ----------         ----------
                                                                              
     Total partners' capital                      5,100,264          5,253,943
                                                 ----------         ----------
                                                                              
      TOTAL                                      $5,137,022         $5,503,969
                                                 ==========         ==========
                                                                              
NET ASSET VALUE PER UNIT                                                      
  SERIES A                                         $ 134.36           $ 129.78
                                                   ========           ========
                                                                             
  SERIES B                                         $ 145.76           $ 140.51
                                                   ========           ========
See notes to financial statements.

                                       2
<PAGE>
 
                     THE SECTOR STRATEGY FUND/SM/ IV L.P.
                   ----------------------------------------
                       (a Delaware limited partnership)
 
                           STATEMENTS OF OPERATIONS
                           ------------------------
 
                                      For the three       For the three 
                                      months ended        months ended
                                        March 31,           March 31, 
                                          1997                 1996     
                                      -------------       -------------     
REVENUES:                                                               
 Trading (loss):                                                        
   Realized                           $           -       $   (157,126) 
   Change in unrealized                           -           (169,529) 
                                      -------------       -------------     
                                                                        
     Total trading results                        -           (326,655) 
                                      -------------       -------------     
                                                                        
 Interest income                                  -              80,751 
 Income from investments                    186,601                   - 
                                      -------------       -------------     
                                                                        
     Total revenues                         186,601           (245,904) 
                                      -------------       -------------     
                                                                        
EXPENSES:                                                               
 Profit shares                                    -               2,337 
 Brokerage commissions                            -             158,880 
 Administrative fees                              -               4,185 
                                      -------------       -------------     
                                                                        
     Total expenses                               -             165,402 
                                      -------------       -------------     
                                                                        
NET INCOME (LOSS)                     $     186,601       $   (411,306) 
                                      =============       =============      
                                                                        
NET INCOME (LOSS) PER UNIT:                                             
 Weighted average number of units                                       
   outstanding                               38,814              62,307 
                                             ======              ======      
 Weighted average net income                                            
    (loss) per General Partner                $4.81             $(6.60) 
    and Limited Partner Unit                  =====             ======= 
                                      
             
 
 
See notes to financial statements.

                                       3
<PAGE>
 
                     THE SECTOR STRATEGY FUND/SM/ IV L.P.
                   ----------------------------------------
                       (a Delaware limited partnership)
 
                  STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
                  ------------------------------------------
 
              For the three months ended March 31, 1997 and 1996
              --------------------------------------------------

<TABLE> 
<CAPTION> 
                                        Units                 Limited Partners               General Partner
                                        -----                 ----------------               ---------------
                                Series A     Series B      Series A       Series B       Series A      Series B       Total
                                --------     --------      --------       --------       --------      --------       -----   
<S>                             <C>          <C>          <C>            <C>            <C>           <C>            <C>
PARTNERS' CAPITAL,                                                                                              
 DECEMBER 31, 1995                49,527       14,937     $5,762,501     $1,838,784     $  79,108     $  26,769     $7,707,162
                                                                                                                
 Net Loss                              -            -       (312,779)       (92,442)       (4,497)       (1,588)      (411,306)
                                                                                                                
 Redemptions                      (2,708)      (1,992)      (315,449)      (250,666)            -             -       (566,115)
                                ---------    ---------    -----------    -----------    ----------    ----------    ----------- 
                                                                                                                
PARTNERS' CAPITAL,                                                                                              
 March 31, 1996                   46,819       12,945     $5,134,273     $1,495,676     $  74,611     $  25,181     $6,729,741
                                =========    =========    ===========    ===========    ==========    ==========    ===========  
                                                                                                                
PARTNERS' CAPITAL,                                                                                              
 DECEMBER 31, 1996                33,001        6,911     $4,195,801     $  940,990     $  87,083     $  30,069     $5,253,943
                                                                                                                
Net Income                                                   147,570         34,835         3,072         1,124        186,601
                                                                                                                
Redemptions                       (2,135)        (372)      (286,394)       (53,886)            -             -       (340,280)
                                ---------    ---------    -----------    -----------    ----------    ----------    ----------- 
                                                                                                                
PARTNERS' CAPITAL,                                                                                              
 March 31, 1997                   30,866        6,539     $4,056,977     $  921,939     $  90,155     $  31,193     $5,100,264
                                =========    =========    ===========    ===========    ==========    ==========    ===========  
</TABLE> 
 
See notes to financial statements.

                                       4
<PAGE>
 
                      THE SECTOR STRATEGY FUND/SM/ IV L.P.
                      ------------------------------------
                        (A Delaware Limited Partnership)
                        --------------------------------

                         NOTES TO FINANCIAL STATEMENTS
                         -----------------------------


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


   These financial statements have been prepared without audit.  In the opinion
   of management, the financial statements contain all adjustments (consisting
   of only normal recurring adjustments) necessary to present fairly the
   financial position of  The SECTOR Strategy Fund/SM/ IV L.P. (the
   "Partnership" or the "Fund") as of March 31, 1997 and the results of its
   operations for the three months ended March 31, 1997 and 1996.  However, the
   operating results for the interim periods may not be indicative of the
   results expected for the full year.

   Certain information and footnote disclosures normally included in annual
   financial statements prepared in accordance with general accepted accounting
   principles have been omitted.  It is suggested that these financial
   statements be read in conjunction with the financial statements and notes
   thereto  included in the Partnership's Annual Report on Form 10-K filed with
   the Securities and Exchange Commission for the year ended December 31, 1996
   (the "Annual Report").


2.  INVESTMENT

    At March 31, 1997 the Partnership had investments in the ML JWH Financial
    and Metals Portfolio L.L.C. ("JWH LLC"), ML Chesapeake Diversified
    L.L.C.("Chesapeake LLC"), and effective January 1, 1997 , the Partnership
    has an additional investment in the SJO Prospect Global Diversified
    Portfolio L.L.C. ("SJO LLC").

    Total revenues and fees with respect to such investments are set forth as
    follows:

<TABLE>
<CAPTION>
                       Total           Brokerage      Administrative        Profit          Income from
                      Revenue         Commissions          Fees             Shares          Investments
                 ----------------  ----------------  ----------------  ----------------  -----------------   
<S>              <C>               <C>               <C>               <C>               <C> 
SERIES A UNITS                                                                                
JWH LLC            $       47,863    $       28,919    $          796    $          299    $        17,849
Chesapeake LLC            104,826            26,011               716            15,865             62,234
SJO LLC                   125,589            43,271             1,190            10,642             70,486
                 ----------------  ----------------  ----------------  ----------------  -----------------   
                                                                                              
Total                     278,278    $       98,201    $        2,702    $       26,806    $       150,569
                 ----------------  ----------------  ----------------  ----------------  -----------------   
                                                                                              
SERIES B UNITS                                                                                
JWH LLC            $       12,568    $        6,709    $          208    $          171    $         5,480
Chesapeake LLC             26,696             5,990               185             4,018             16,503
SJO LLC                    23,524             7,270               225             1,980             14,049
                 ----------------  ----------------  ----------------  ----------------  -----------------   
                                                                                              
Total              $       62,788    $       19,969    $          618    $        6,169    $        36,032
                 ----------------  ----------------  ----------------  ----------------  -----------------
                                                                                              
TOTAL ALL UNITS                                                                               
JWH LLC            $       60,431    $       35,628    $        1,004    $          470    $        23,329
Chesapeake LLC            131,522            32,001               901            19,883             78,737
SJO LLC                   149,113            50,541             1,415            12,622             84,535
                 ----------------  ----------------  ----------------  ----------------  -----------------   
                                                                                              
Total              $      344,066    $      118,170    $        3,320    $       32,975    $       186,601
                 ================  ================  ================  ================  =================   
</TABLE>                                                         

                                       5
<PAGE>
 
3. FAIR VALUE AND OFF-BALANCE SHEET RISK

   The Partnership's revenues by reporting category for the three months ended
   March 31, 1996 were as follows (there were no trading revenues reported for
   the first quarter 1997):
 
                                            1996
                                            ----
 
         Interest rates and
          stock indices                $   (286,572)
         Commodities                        (65,877)
         Currencies                          89,226
         Energy                             (30,757)
         Metals                             (32,675)
                                      ---------------
 
                                       $   (326,655)
                                      ===============
 
 
   The average fair value of the Partnership's derivative instrument positions
   which were open as of year ended December 31, 1996 (there were no open
   contracts as for the first quarter of 1997):

 
        
                                    1996                     
                   ----------------------------------------  
                                                             
                      Commitment to         Commitment to    
                   Purchase (Futures,      Sell (Futures,    
                   Options & Forwards)  Options & Forwards)  
                   -------------------  -------------------   
                                                             
   Interest rates         $33,058,413         $18,792,013    
   Stock indices            1,231,238             372,559    
   Commodities              1,003,748             217,921    
   Currencies               5,481,707           6,889,270    
   Energy                     318,455             529,411    
   Metals                     657,983           1,358,960    
                   -------------------  -------------------   
                                                             
                          $41,751,544         $28,160,134    
                   ===================  ===================   


   As of March 31, 1997 and December 31, 1996, $0 and $ 2,361,684 of the
   Partnership's assets, respectively, were held in segregated accounts at MLF
   in accordance with Commodity Futures Trading Commission regulations.

                                       6
<PAGE>
 
3. NET INCOME PER SERIES

   The profit and loss of the Series A and Series B units for the three months
   ended March 31, 1997 and March 31, 1996 are as follows:
<TABLE>
<CAPTION>
                                                1997                               1996
                                    ---------------------------         --------------------------- 
                                     Sector A         Sector B           Sector A         Sector B
                                     --------         --------           --------         --------
<S>                                 <C>            <C>                  <C>           <C> 
REVENUES:                                        
Trading (loss):                                  
  Realized                          $         -    $          -         $ (123,041)   $     (34,085)
  Change in unrealized                        -               -           (130,983)         (38,546)
                                    ------------   ------------         -----------   -------------  
                                                                                      
    Total trading results                     -               -           (254,024)         (72,631)
                                                                                      
Interest income                                                             61,932           18,819
Income from investments                 150,641          35,960                  -                -
                                                                                      
                                                                                      
Total revenues                          150,641          35,960           (192,092)         (53,812)
                                    ------------   ------------         -----------   -------------  
                                                                                      
EXPENSES:                                                                             
Profit shares                                 -               -              1,008            1,329
Brokerage commissions                         -               -            121,071           37,809
Administrative fees                           -               -              3,105            1,080
                                                                                      
                                                                                      
Total expenses                                -               -            125,184           40,218
                                    ------------   ------------         -----------   -------------  
                                                                                      
NET INCOME (LOSS)                   $   150,641    $     35,960         $ (317,276)   $     (94,030)
                                    ============   ============         ===========   =============   
                                                                                      
NET INCOME (LOSS) PER UNIT:                                                           
Weighted average number                                                               
  of  units outstanding                  32,044           6,770             48,373           13,934
                                         ======           =====             ======           ======
                                                                                      
Weighted average net                                                                  
  income (loss) per GeneralPartner                                                    
  and Limited Partner Unit               $ 4.70          $ 5.31            $ (6.56)         $ (6.75) 
                                         ======          ======            =======          =======
</TABLE>

                                       7
<PAGE>
 
Item 2:   Management's Discussion and Analysis of Financial Condition and
          ---------------------------------------------------------------
          Results of Operations 
          ---------------------

Operational Overview: Advisor Selections
----------------------------------------

         Due to the nature of the Fund's business, its results of operations
depend on Merrill Lynch Investment Partners Inc. ("MLIP")'s ability to select
Advisors and determine the appropriate percentage of each series' assets to
allocate to them for trading, as well as the Advisors' ability to recognize and
capitalize on trends and other profit opportunities in different sectors of the
world commodity markets.  MLIP's Advisor selection procedure and leveraging
analysis, as well as the Advisors' trading methods, are confidential, so that
substantially the only information that can be furnished regarding the Fund's
results of operations is contained in the performance record of its trading.
Unlike operating businesses, general economic or seasonal conditions do not
directly affect the profit potential of the Fund, and its past performance is
not necessarily indicative of future results.  Because of the speculative nature
of its trading, operational or economic trends have little relevance to the
Fund's results.  MLIP believes, however, that there are certain market
conditions, for example, markets with strong price trends, in which the Fund has
a better likelihood of being profitable than in others.

         As of April 1, 1997, the Partnership's assets were allocated as
follows:

                                SERIES A UNITS:
                                ---------------
                                                                    %
       TRADING ADVISOR                     SECTOR               ALLOCATION
       ---------------                     ------               ----------
 
       John W. Henry & Co., Inc.         Financial/
                                         Metals                    36.37
       Chesapeake Capital Corporation    Diversified Program        9.55
       Sjo, Inc.                         Financials                54.08
                                                                  ------
                                                                  100.00%

                                SERIES B UNITS:
                                ---------------
                                                                    %
       TRADING ADVISOR                     SECTOR               ALLOCATION
       ---------------                     ------               ----------
 
       John W. Henry & Co., Inc.         Financial/
                                         Metals                    33.87
       Chesapeake Capital Corporation    Diversified Program       29.78
       Sjo, Inc.                         Financials                36.35
                                                                  ------
                                                                  100.00%

         MLIP expects to continue to change both allocations and Advisor
selections from time to time without advance notice to existing investors.

         MLIP has no timetable or schedule for making Advisor changes or
reallocations, and generally intends to make a medium- to long-term commitment
to all Advisors selected.  However, there can be no assurance as to the
frequency or number of the Advisor changes which may take place in the future,
or as to how long any of the current Advisors will continue to manage assets for
the Fund.

Results of Operations - General
-------------------------------

         MLIP believes that multi-Advisor futures funds should be regarded as
medium- to long-term investments but, unlike an operating business, it is
difficult to identify "trends" in the Fund's operations and virtually impossible
to make any predictions regarding future results based on results to date.

         Markets in which sustained price trends occur with some frequency tend
to be more favorable to managed futures investments than "whipsaw," "choppy"
markets, but (i) this is not always the case, (ii) it is impossible to predict
when trending markets will occur and (iii) different Advisors are affected
differently by trends in general as well as by particular types of trends.

         The Fund controls credit risk in its trading in the derivatives markets
by trading only through Merrill Lynch entities which MLIP believes to be
creditworthy.  The Fund attempts to control the market risk inherent in its
derivatives trading by utilizing a multi-advisor, multi-strategy structure.
This structure purposefully attempts to diversify the Fund's Advisor group among
different strategy types and market sectors in an effort to reduce risk
(although the Fund's portfolio currently emphasizes technical and trend-
following approaches).

Performance Summary
-------------------
                                SERIES A UNITS:
                                ---------------

         During the first three months of 1996, the Fund's average month-end Net
Assets equalled $5,598,857, and the Fund recognized gross trading losses of
$254,024 or 4.54% of such average month-end Net Assets.  Brokerage commissions
of $121,071 or 2.16%, Administrative fees of 

                                       8
<PAGE>
 
3,105 or 0.06%, and Profit Shares of $1,008 or 0.02% of average month-end Net
Assets were paid. Interest income of $61,932 or 1.11% of average month-end Net
Assets resulted in a net loss of $317,276 or 5.67% of average month-end Net
Assets, which resulted in a 5.68% decrease in the Net Asset Value per Unit since
December 31, 1995.

         During the first three months of 1997, the Fund's average month-end Net
Assets equalled $4,223,267. Earnings from investments of $150,641 or 3.57% of
average month-end Net Assets resulted in a net gain of $150,641 or 3.57% of
average month-end Net Assets, which resulted in a 3.53% increase in the Net
Asset Value per Unit since December 31, 1996.

         During the first three months of  1997 and 1996, the Fund experienced 3
profitable months and 3 unprofitable months.

                  MONTH-END NET ASSET VALUE PER SERIES A UNIT
 
                        Jan.        Feb.        Mar.
                        -------     -------     ------- 
          1996          $121.53     $113.75     $111.26
          1997           132.87      135.01      134.36


                                SERIES B UNITS:
                                ---------------

         During the first three months of 1996, the Fund's average month-end Net
Assets equalled $1,684,083, and the Fund recognized gross trading losses of $
72,631 or 4.31% of such average month-end Net Assets.  Brokerage commissions of
$37,809 or 2.25%, Administrative fees of $1,080 or .06% and Profit Shares of
$1,329 or .08% of average month-end Net Assets were paid.  Interest income of
$18,819 or 1.12 % of average month-end Net Assets resulted in net loss of
$94,030 or 5.58% of average month-end Net Assets, which resulted in a 5.93 %
increase in the Net Asset Value per Unit since December 31, 1995.

         During the first three months of 1997, the Fund's average month-end Net
Assets equalled $969,665, Earnings from investments of $35,960 or 3.71% of
average month-end Net Assets resulted in a net gain of $35,960 or 3.71% of
average month-end Net Assets, which resulted in a 3.74% increase in the Net
Asset Value per Unit since December 31, 1996.

         During the first three months of 1997 and 1996, the Fund experienced 3
profitable months and 3 unprofitable months.
 
                  MONTH-END NET ASSET VALUE PER SERIES B UNIT
 
                         Jan.        Feb.        Mar.
                         -------     -------     -------
           1996          $129.52     $120.41     $117.49
           1997          $144.17     $146.33     $145.76


Importance of Market Factors
----------------------------

         Comparisons between the Fund's performance in a given period in one
fiscal year to the same period in a prior year are unlikely to be meaningful,
given the uncertainty of price movements in the markets traded by the Fund.  In
general, MLIP expects that the Fund is most likely to trade successfully in
markets which exhibit strong and sustained price trends.  The current Advisor
group emphasizes technical and trend-following methods.  Consequently, one would
expect that in trendless, "choppy" markets the Fund would likely be
unprofitable, while in markets in which major price movements occur, the Fund
would have its best profit potential (although there could be no assurance that
the Fund would, in fact, trade profitably).  However, trend-followers not
infrequently will miss major price movements, and market corrections can result
in rapid and material losses (sometimes as much as 5% in a single day).
Although MLIP monitors market conditions and Advisor performance on an ongoing
basis in overseeing the Fund's trading, MLIP does not attempt to "market
forecast" or to "match" trading styles with predicted market conditions.
Rather, MLIP concentrates on quantitative and qualitative analysis of
prospective Advisors, as well as on statistical studies of the historical
performance parameters of different Advisor combinations in selecting Advisors
and allocating and reallocating Fund assets among them.

         Because managed futures advisors' strategies are proprietary and
confidential and market movements unpredictable, selecting advisors to implement
speculative trading strategies involves considerable uncertainty.  Furthermore,
the concentration of the Fund's current Advisor portfolio, both in terms of the
number of managers retained and the common emphasis of their strategies on
technical and trend-following methods, increases the risk that unexpectedly bad
performance, turbulent market conditions or a combination of the two will result
in significant losses.

                                       9
<PAGE>
 
Liquidity
---------

         Most of the Partnership's assets are held as cash which, in turn, is
used to margin its futures positions and earns interest income and is withdrawn,
as necessary, to pay redemptions and fees.

     The futures contracts in which the Partnership trades may become illiquid
under certain market conditions.  Commodity exchanges limit fluctuations in
futures prices during a single day by regulations referred to as "daily limits."
During a single day no trades may be executed at prices beyond the daily limit.
Once the price of a futures contract for a particular commodity has increased or
decreased by an amount equal to the daily limit, positions in the commodity can
generally neither be taken nor liquidated unless traders are willing to effect
trades at or within the limit.  Futures contracts have occasionally moved to the
daily limit for several consecutive days with little or no trading.  Such market
conditions could prevent the Partnership from promptly liquidating its futures
(including its options) positions.  There are no limitations on the daily price
moves in trading foreign currency forward contracts through banks, although
illiquidity may develop in the forward markets due to large spreads between
"bid" and "ask" prices quoted.  (Forward contracts are the bank version of
currency futures contracts and are not traded on exchanges.)

Capital Resources
-----------------

         The Partnership does not have, nor does it expect to have, any capital
assets and has no material commitments for capital expenditures.  The
Partnership uses its assets to supply the necessary margin or premiums for, and
to pay any losses incurred in connection with, its trading activity and to pay
redemptions and fees.

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

         Changes in the level of prevailing interest rates (a factor generally
associated with inflation) could have a material effect on the percentage of the
total capital which is committed to trading, as interest rates affect the
calculation of the discounted minimum Net Asset Value per Unit which Merrill
Lynch & Co., Inc. has guaranteed to investors.

                                 PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

     There are no pending legal proceedings to which the Partnership or the
     General Partner is a party.

     John W. Henry & Company, Inc. ("JWH") is one of the Advisors retained by
the Fund, managing approximately 37% with respect A and 34% with respect to
Series B of the Fund's assets committed to trading as of April 1, 1997.  In
September 1996, JWH was named as a co-defendant in a class action lawsuits
brought in the California Superior Court, Los Angeles County and in the New York
Supreme Court, New York County.  In November, JWH was named as a co-defendant in
a class action complaint filed in Superior Court of the State of Delaware for
Newcastle County that contained the same allegations as the New York and
California complaints.  The actions, which seek unspecified damages, purport to
be brought on behalf of investors in certain Dean Witter, Discover & Co. ("Dean
Witter") commodity pools, some of which are advised by JWH, and are primarily
directed at Dean Witter's alleged fraudulent selling practices in connection
with the marketing of those pools.  JWH is essentially alleged to have aided and
abetted or directly participated with Dean Witter in those practices.  JWH
believes the allegations against it are without merit; it intends to contest
these allegations vigorously, and is convinced that it will be shown to have
acted properly and in the best interest of the investors.

Item 2.  Changes in Securities

         None.

Item 3.  Defaults Upon Senior Securities

         None.

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

         None.

Item 5.  Other Information

         None.

                                       10
<PAGE>
 
Item 6.  Exhibits and Reports on Form 8-K.

         (a)  Exhibits
              --------

         There are no exhibits required to be filed as part of this document.

         (b)  Reports on Form 8-K
              -------------------

         There were no reports on Form 8-K filed during the first three months
         of fiscal 1997.

                                       11
<PAGE>
 
                                 SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



                            THE SECTOR STRATEGY FUND/SM/ IV L.P.



                            By:  MERRILL LYNCH INVESTMENT PARTNERS INC.
                                    (General Partner)



Date:  May 13, 1997         By /s/JOHN R. FRAWLEY, JR.
                               -----------------------
                              John R. Frawley, Jr.
                              President, Chief Executive Officer
                              and Director



Date:  May 13, 1997         By /s/MICHAEL A. KARMELIN
                               ----------------------
                              Michael A. Karmelin
                              Chief Financial Officer,
                              and Director