<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K

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

                  For the fiscal year ended: December 31, 1999
                                       or
                  ( ) Transition Report Pursuant to Section 13
                 or 15(d) of the Securities Exchange Act of 1934

                         Commission file number: 0-25000

                          ML PRINCIPAL PROTECTION L.P.
             (Exact name of registrant as specified in its charter)

                      ML Principal Protection Trading L.P.
                            (Rule 140 Co-Registrant)

                                                     13-3750642 (Registrant)
                  Delaware                        13-3775509 (Co-Registrant)
       -------------------------------            --------------------------
       (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 registrants are limited partnerships; as of
February 1, 2000, limited partnership units with an aggregate value of
$38,661,411 were outstanding and held by non-affiliates.

                       Documents Incorporated by Reference

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

                          ML PRINCIPAL PROTECTION L.P.

                       ANNUAL REPORT FOR 1999 ON FORM 10-K


                                Table of Contents

<TABLE>
<CAPTION>

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


Item 1     Business                                                                                  1

Item 2     Properties                                                                                8

Item 3     Legal Proceedings                                                                         8

Item 4     Submission of Matters to a Vote of Security Holders                                       9


                                                   PART II
                                                   -------

Item 5     Market for Registrant's Common Equity and Related Stockholder Matters                    9

Item 6     Selected Financial Data                                                                 11

Item 7     Management's Discussion and Analysis of Financial Condition and Results of Operations   14

Item 7A    Quantitative and Qualitative Disclosures About Market Risk                              19

Item 8     Financial Statements and Supplementary Data                                             24

Item 9     Changes in and Disagreements with Accountants on Accounting and Financial Disclosure    24


                                                  PART III
                                                 ---------

Item 10.   Directors and Executive Officers of the Registrant                                      25

Item 11.   Executive Compensation                                                                  26

Item 12.   Security Ownership of Certain Beneficial Owners and Management                          27

Item 13.   Certain Relationships and Related Transactions                                          27


                                                   PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K                          29
</TABLE>

                                      -i-

<PAGE>

                                     PART I

Item 1:  Business
         --------

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

     ML Principal Protection L.P. (the "Fund") was organized under the Delaware
Revised Uniform Limited Partnership Act on January 3, 1994 and began trading
operations on October 12, 1994. The Fund is a multi-strategy, multi-market
managed futures investment employing a range of proprietary strategies
diversified across major markets of the global economy --financials, currencies,
energy, metals and agriculture. The Fund trades in the international futures and
forward markets under the direction of multiple independent professional
advisors (the "Advisors"). The Fund's objectives are achieving, through
speculative trading, long-term capital appreciation while controlling
performance volatility.

     Merrill Lynch Investment Partners Inc. ("MLIP") acts as the general partner
of the Fund, and allocates the Fund's assets among the Advisors, each of which
trades independently of the others. MLIP also determines what percentage of the
Fund's assets to allocate to trading and what percentage to hold in reserve.
Merrill Lynch Futures Inc. ("MLF") is the Fund's commodity broker. Merrill Lynch
Asset Management, L.P. ("MLAM") provides cash management services to the Fund,
pursuant to guidelines established by MLIP for which MLAM assumes no
responsibility, investing Fund assets in securities issued by the U.S.
Government and its agencies ("Government Securities"). MLIP is a wholly-owned
subsidiary of Merrill Lynch Group, Inc., which, in turn, is a wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML&Co."). MLF and MLAM are each an
indirect wholly-owned subsidiary of ML&Co. (ML&Co. and its affiliates are herein
sometimes referred to as "Merrill Lynch.")

     The Fund does not trade directly but rather through a subsidiary
limited partnership, ML Principal Protection Trading L.P. (the "Trading
Partnership"), of which MLIP is the general partner and the Fund the sole
limited partner. See Item 1(c), "Narrative Description of Business -- Two-Tier
Structure of the Fund."

     The Fund offers its units of limited partnership interest ("Units"), and
receives and processes subscriptions, on a continuous basis throughout each
calendar quarter. Investors whose subscriptions are accepted at any time during
a calendar quarter are admitted to the Fund as Limited Partners as of the
beginning of the immediately following quarter, acquiring Units at $100 per
Unit. Investors' customer securities accounts are debited in the amount of their
subscriptions on settlement dates throughout each quarter shortly after their
subscriptions are accepted by MLIP. Subscription proceeds received during a
quarter are held in escrow pending investment in Units as of the beginning of
the following quarter. All interest earned on subscriptions while held in escrow
is paid to the investors on or about the date that Units are issued to them or
their subscription is rejected.

     The Units are sold generally at the beginning of each calendar quarter, in
separate Series and each of which has its own Net Asset Value. All Series trade
pursuant to the same Advisor combination, but because they begin trading at
different times they have different Net Asset Values and may have different
percentages of their capital invested in the Trading Partnership.

     Only the assets attributable to each Series of Units allocated to the
Trading Partnership are allocated to the Advisors for management. All
outstanding Series of Units currently being issued initially allocate
approximately 85% of their total capital to the Trading Partnership, holding the
rest in reserve at the Fund level.

     As of December 31, 1999, the Fund's capitalization was $ 41,682,768, and
the Net Asset Value per Series A Unit (the initial Series of Units), originally
$100 as of October 12, 1994, had risen to $134.14 (adding back $22.50 in
Distributions).

     Through December 31, 1999, the highest month-end Net Asset Value of a
Series A Unit (the initial Series of Units) was $135.40 (adding back $19.00 in
Distributions) (October 31, 1998) and the lowest $101.04 (December 31, 1994).

                                       1
<PAGE>

     The outstanding Series of Units are entitled to fixed-rate annual
distributions (which cannot be reduced prior to the first Principal Assurance
Date, as defined below, for such Series) and may also receive certain
discretionary distributions. No distributions are made on any Series of Units
sold after May 1, 1997.

     The Fund is a "principal protected" commodity pool. ML&Co. provides the
guarantee described below under 1(c), "Narrative Description of Business --
ML&Co.'s 'Principal Protection' Undertaking to the Fund" that all Units of any
given Series will have a Net Asset Value -- after payment of all fixed-rate
annual as well as discretionary distributions on such Units, in the case of
Units sold on or prior to May 1, 1997 -- of at least their initial $100
subscription price as of a specified date after their issuance (the "Principal
Assurance Date" for such Series, seven years after issuance for all outstanding
Series sold before May 1, 1997 and five years after issuance for all Series sold
thereafter ). This guarantee does not prevent substantial losses, but rather
serves only as a form of "stop loss," limiting the maximum loss which investors
who retain their Units until such Units' Principal Assurance Date can incur. In
order to protect ML&Co. from any liability under its guarantee, MLIP imposes
substantial opportunity costs on the Fund by deleveraging its trading, retaining
a substantial portion of the Fund's assets in the Fund rather than investing
such assets in the Trading Partnership for allocation to trading. At such time,
if any, as the Net Asset Value per Unit of a Series declined to 110% or less of
the present value of $100, plus any fixed-rate annual distributions due on such
Series, discounted back from the Principal Assurance Date, MLIP would terminate
trading with respect to such Series altogether in order to ensure that ML&Co.
incurred no financial obligation to the Fund under ML&Co.'s guarantee of the
minimum Net Asset Value per Unit of such Series.

     In the case of Units sold after May 1, 1997, the potential opportunity
costs of the Fund's "principal protection" are significantly increased due to
the fact that in the event that MLIP deleverages any Series of such Units, it
must deleverage all Series to the same degree. A Series could be deleveraged as
a result of losses which accrued subsequent to such Series having recognized
profits more than sufficient to offset such losses, but which were earned before
a more recent Series was issued and, consequently, were not available to offset
the same losses incurred by such Series. Conversely, losses incurred before a
particular Series is issued could indirectly cause a further deleveraging of
such Series' trading due to the effect of such losses on the leverage which MLIP
believes it is appropriate to use for an earlier-issued Series.

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

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

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

         General

     The Fund trades in the international futures, options on futures, forwards
and options on forward markets, with the objectives of achieving long-term
capital appreciation while controlling performance volatility. The Fund's assets
are allocated and reallocated by MLIP to the trading management of independent
trading advisors applying proprietary strategies in numerous markets. MLIP may
from time to time direct certain individual Advisors to manage their Fund
accounts as if they were managing up to 50% more equity than the actual capital
allocated to them.

     One of the objectives of the Fund is to provide diversification for a
limited portion of the risk segment of the Limited Partners' portfolios.
Commodity pool performance has historically often demonstrated a low degree of
performance correlation with traditional stock and bond holdings. Since it began
trading, the Fund's returns have, in fact, frequently been significantly non-
correlated with the United States stock and bond markets.

     ML&Co.'s "Principal Protection" Undertaking to the Fund

     ML&Co. has agreed to contribute sufficient capital to the Fund so that it
will have adequate funds, after adjusting for all liabilities to third parties,
that the Net Asset Value per Unit of each Series will be no less than $100 as of
the Principal Assurance Date for such Series (after the payment of all
distributions, if any, on Units of such Series). This guarantee, which is
effective with respect to any given Series as of the Principal Assurance Date
for such Series, is a guarantee only of a return of an investor's initial
investment (plus distributions, if any), not against the loss of the time value
of such investment or a guarantee of profit.

                                       2
<PAGE>

     Operation of a Series after its Principal Assurance Date

     MLIP may determine to dissolve a Series as of its Principal Assurance Date,
to extend the ML&Co. guarantee for a certain period of time (resetting the
minimum Net Asset Value per Unit of such Series guaranteed by ML&Co.) or to
continue to operate such Series without a "principal protection" feature.

     Two-Tier Structure of the Fund

     The Fund does not trade in the futures and forward markets directly, but
rather through the Trading Partnership, of which the Fund is the sole limited
partner, and MLIP the sole general partner. The Fund's liability for any trading
losses is limited to the Fund's investment in the Trading Partnership.

     Use of Proceeds and Cash Management Income

     Subscription Proceeds. MLIP pays from its own funds the selling commissions
     ---------------------
relating to the sale of the Units. Accordingly, 100% of the proceeds of Unit
sales are received in cash by the Fund and are available for use in its
speculative trading. In such trading, the Fund's assets are used as collateral
for and to pay the Fund's trading losses as well as any expenses and
redemptions. The primary use of the proceeds of the sale of the Units is to
permit the Advisors to trade on a speculative basis in a wide range of different
futures, options on futures, forwards and options on forward markets on behalf
of the Trading Partnership. While being used for this purpose, the Fund's assets
are also generally available for cash management and to earn interest, as more
fully described below under "-- Available Assets."

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

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

     Many of the Fund'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 a
particular currency and such spreads are built into the pricing of the spot or
forward contracts with the Fund.

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

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

                                       3
<PAGE>

     Custody of Assets. All of the Fund's assets are currently held either in
     -----------------
custodial or customer accounts at Merrill Lynch. Fund assets managed by MLAM are
generally held in custodial accounts at a major bank, separate from all other
Merrill Lynch or banking client assets. Assets held in customer accounts are
held at MLPF&S or MLF. These customer accounts are maintained in the Fund's
name, but the assets deposited by the Fund in such accounts are commingled with
those of other MLPF&S and MLF customers.

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

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

     The Fund's U.S. Dollar Available Assets Managed by MLAM. Approximately 90%
     -------------------------------------------------------
of the Fund's U.S. dollar Available Assets are managed directly by MLAM,
pursuant to guidelines established by MLIP for which MLAM assumes no
responsibility, in the Government Securities markets. MLIP's objective in
retaining MLAM to provide cash management services to the Fund is to enhance the
return earned on the Fund's U.S. dollar Available Assets managed by MLAM to
slightly above the 91-day Treasury bill rate. However, cash management returns
cannot be assured, and there may be losses of principal.

     The Government Securities acquired by MLAM on behalf of the Fund are
maintained in a custodial account at Merrill Lynch and are specifically
traceable to the Fund. All income earned on such Government Securities inures to
the benefit of the Fund. All fees due to MLAM are paid at no additional cost to
the Fund.

     Interest Earned on the Fund's U.S. Dollar Available Assets Not Managed by
     -------------------------------------------------------------------------
MLAM. The following description relates to the approximately 20% of the Fund's
----
U.S. dollar Available Assets not managed by MLAM.

Offset Accounts and Short-Term Treasury Bills

     The Fund's U.S. dollar Available Assets not managed by MLAM are held in
cash in offset accounts and in short-term Treasury bills purchased from dealers
unaffiliated with Merrill Lynch. Offset accounts are non-interest bearing demand
deposit accounts maintained with banks unaffiliated with Merrill Lynch. An
integral feature of the offset arrangements is that the participating banks
specifically acknowledge that the offset accounts are MLF customer accounts, not
subject to any Merrill Lynch liability.

     MLF credits the Fund, as of the end of each month, with interest at the
effective daily 91-day Treasury bill rate on the average daily U.S. dollar
Available Assets held in the offset accounts during such month. The Fund
receives all the interest paid on the short-term Treasury bills in which it
invests.

                                       4
<PAGE>

Possible Discontinuation of the Offset Accounts

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

Offset Account Benefit to Merrill Lynch

     The banks at which the offset accounts are maintained make available to
Merrill Lynch interest-free overnight credits, loans or overdrafts in the amount
of the Fund's U.S. dollar Available Assets held in the offset accounts, charging
Merrill Lynch a small fee for this service. The economic benefits derived by
Merrill Lynch net of the interest credits paid to the Fund and the fee (of
approximately 0.25% per annum) paid to the offset banks from the offset
accounts have not exceeded 0.75% per annum of the Fund's average daily U.S.
dollar Available Assets held in the offset accounts. These benefits to Merrill
Lynch are in addition to the Brokerage Commissions and Administrative Fees paid
by the Fund to MLF and MLIP, respectively.

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

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

                                       5
<PAGE>

     Charges

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

                                  1999                   1998                    1997
                                  ----                   ----                    ----
                                      % 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    $3,969,972     6.53%     $6,159,359     6.43%     $4,833,598     5.64%
Administrative Fee          159,099     0.26%        193,861     0.20%        138,103     0.16%
Reimbursement of
  Organizational and
  Initial Offering Costs          -     0.00%              -     0.00%         61,989     0.07%
Profit Shares               265,734     0.44%      1,658,306     1.73%        931,522     1.09%
                            -------     ----       ---------     ----         -------     ----
Total                    $4,394,805     7.23%     $8,011,526     8.36%     $5,965,212     6.96%
                         ==========     ====      ==========     ====      ==========     ====

</TABLE>


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

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

     The Fund's average month-end Net Assets during 1999, 1998 and 1997 equaled
$60,816,812, $95,777,172 and $85,646,152,
respectively.

     During 1999, 1998 and 1997, the Fund earned $3,263,074, $5,434,851 and
$4,873,872 in interest income, or approximately 5.37%, 5.67% and 5.69% of the
Fund's average month-end Net Assets.

     Effective January 1, 1997, MLIP reduced the Fund's annual Brokerage
Commissions from 9.25% to 8.75% of trading assets (i.e., assets committed to
trading).

     Effective October 1, 1998, MLIP reduced the Fund's annual Brokerage
Commission from 8.75% to 7.50% of trading assets.

     Effective October 1, 1998, the Administrative Fee, while it continues to be
calculated at the rate of 0.25% per annum, is based on the Fund's month-end
total assets (prior to reduction for accrued expenses), not the Fund's assets
allocated to trading.

                                       6
<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 0.625 of 1% (a 7.5% annual rate)
                                                     of the Fund's month-end assets committed to trading. The Fund
                                                     initially commits 85% of the capital attributable to each Series
                                                     of Units issued after May 1, 1998.

                                                     As of October 1, 1998, the 8.75% per annum Brokerage
                                                     Commissions were reduced to 7.50% per annum (0.625 of 1%
                                                     of the Fund's month-end traded assets).

                                                     During 1999, 1998 and 1997, the round-turn (each purchase
                                                     and sale or sale and purchase of a single futures contract)
                                                     equivalent rate of the Fund's flat-rate Brokerage
                                                     Commissions was approximately $127, $80 and $116,
                                                     respectively.

MLF                        Use of Fund assets        Merrill Lynch may derive an economic benefit from the
                                                     deposit of certain of the Fund's U.S. dollar Available
                                                     Assets not managed by MLAM in offset accounts.

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

                                                     As of October 1, 1998, the 0.25% per annum rate is
                                                     applied to the Fund's month-end total assets (prior to
                                                     reduction for accrued expenses), not the Fund's assets
                                                     allocated to trading.

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

Government                 Bid-ask spreads           The dealers with which MLAM executes Government
Securities Dealers                                   Securities trades include bid-ask spreads in the prices
                                                     they quote to the Fund.

Advisors                   Profit Shares             All Advisors received quarterly or annual Profit Shares
                                                     ranging from 15% to 25% (depending on the Advisor)
                                                     of any New Trading Profit. Profit Shares are also paid
                                                     upon the net reallocation of assets away from an Advisor
                                                     and the redemption of Units. New Trading Profit is calculated
                                                     separately in respect of each Advisor, irrespective of the
                                                     overall performance of the Fund. The Fund may pay substantial
                                                     Profit Shares during periods when it is incurring significant
                                                     overall losses.
</TABLE>

                                       7
<PAGE>

<TABLE>
<S>                       <C>                      <C>
Advisors                   Consulting Fees           MLF pays the Advisors annual Consulting Fees ranging
                                                     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
                                                     accrued with respect to such assets.

MLF;                       Extraordinary expenses    Actual costs incurred; none paid to date.
 Others
</TABLE>

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


     Regulation

     MLIP, the Advisors and MLF are each subject to regulation by the Commodity
Futures Trading Commission (the "CFTC") and the National Futures Association.
Other than in respect of its periodic reporting requirements under the
Securities Exchange Act of 1934, and the registration of the Units for
continuous public distribution under the Securities Act of 1933, 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 Fund has no employees.


     (d) Financial Information about Geographic Areas:
         --------------------------------------------
     The Trading Partnership trades on a number of foreign commodity exchanges.
The Fund does not engage in the sales of goods or services.


Item 2:  Properties
         ----------
     Neither the Fund nor the Trading Partnership use any physical
properties in the conduct of its business.

     The Fund's and the Trading 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 Fund and the Trading
Partnership from MLIP's offices.

Item 3:  Legal Proceedings
         -----------------
     ML&Co. -- the sole stockholder of Merrill Lynch Group, Inc. (which is the
sole stockholder of MLIP) -- as well as certain of its subsidiaries and
affiliates have been named as defendants in civil actions, arbitration
proceedings and claims arising out of their respective business activities.
Although the ultimate outcome of these actions cannot be predicted at this time
and the results of legal proceedings cannot be predicted with certainty, it is
the opinion of management that the result of these matters will not be
materially adverse to the business operations of financial condition of MLIP or
the Fund.

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


                                       8
<PAGE>

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

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


                                     PART II

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

Item 5(a)
---------

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

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

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

     As of December 31, 1999, there were 2,196 holders of Units, including MLIP.

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

     For Series issued on or prior to May 1, 1997, the Fund makes annual
fixed-rate distributions, payable irrespective of profitability, of $3.50 per
Unit. MLIP may also make discretionary distributions of up to 50% of any
Distributable New Appreciation, as defined, recognized as of each twelve-month
anniversary of the issuance of each Series of Units, subject to an annual limit
of 4% of the Net Asset Value per Unit of each Series as of the beginning of the
preceding twelve-month period. Distributions, whether fixed-rate or
discretionary, do not reduce the $100 minimum Net Asset Value per Unit assured
to investors as of the Principal Assurance Date for their Series of Units.

                                       9
<PAGE>

     As of December 31, 1999, the Partnership had made the following
distributions:

                         Distribution      Fixed-Rate        Discretionary
          Series            Date          Distribution       Distribution
          ------            ----          ------------       ------------
1999
----
          Series A       10/01/1999          $3.50                 $    -
          Series B       01/01/1999           3.50                      -
          Series C       04/01/1999           3.50                      -
          Series D       07/01/1999           3.50                   1.00
          Series E       10/01/1999           3.50                      -
          Series F       01/01/1999           3.50                      -
          Series G       04/01/1999           3.50                      -
          Series H       07/01/1999           3.50                   1.00

1998
----
          Series A       10/01/1998          $3.50                  $   -
          Series B       01/01/1998           3.50                   1.50
          Series C       04/01/1998           3.50                      -
          Series D       07/01/1998           3.50                      -
          Series E       10/01/1998           3.50                      -
          Series F       01/01/1998           3.50                   1.25
          Series G       04/01/1998           3.50                      -
          Series H       07/01/1998           3.50                      -

1997
----
          Series A       10/01/1997          $3.50                  $   -
          Series B       01/01/1997           3.50                   3.00
          Series C       04/01/1997           3.50                   4.00
          Series D       07/01/1997           3.50                   1.00
          Series E       10/01/1997           3.50                   2.00
          Series F       01/01/1997           3.50                   2.50
          Series G       04/01/1997           3.50                   3.50
          Series H       07/01/1997           3.50                   2.50


     The Fund does not make any distributions on any Series of Units issued
subsequent to May 1, 1997.

     (d) Recent Sales of Unregistered Securities;
         ----------------------------------------
         Use of Proceeds from Registered Securities
         ------------------------------------------

     The Fund has units registered with an aggregate price of $462,114,000. The
Fund has sold units with an aggregate price of $164,506,495.

Item 5(b)
---------

     Not applicable.

                                       10
<PAGE>

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,
Income Statement Data                                  1999            1998            1997            1996            1995
------------------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>             <C>            <C>               <C>            <C>
Revenues:

Trading Profits (Loss)
  Realized Gain (Loss)                             $1,318,041      $ 8,746,563     $ 5,412,457      $ 9,038,064      $4,407,833
  Change in Unrealized
  (Loss) Gain                                        (809,172)      (2,053,193)      1,083,826         (396,221)      1,355,377
                                                   ----------------------------------------------------------------------------
  Total Trading Results                               508,869        6,693,370       6,496,283        8,641,843       5,763,210
                                                   ----------------------------------------------------------------------------

Interest Income                                     3,263,074        5,434,851       4,873,872        4,545,186       3,415,670
                                                   ----------------------------------------------------------------------------
  Total Revenues                                    3,771,943       12,128,221      11,370,155       13,187,029       9,178,880
                                                   ----------------------------------------------------------------------------

Expenses:
  Brokerage Commissions                             3,969,972        6,159,359       4,833,598        4,775,116       3,216,364
  Administrative Fees/1/                              265,734          193,861         138,103          129,057          86,928
  Profit Shares                                       159,099        1,658,306         931,522          978,264         652,366
                                                   ----------------------------------------------------------------------------
  Total Expenses                                    4,394,805        8,011,526       5,903,223        5,882,437       3,955,658
                                                   ----------------------------------------------------------------------------
Net Income Before
Minority Interest                                    (622,862)       4,116,695       5,466,932        7,304,592       5,223,222
Minority Interest in Income/2/                         14,666          (27,056)        (46,687)         (81,228)        (36,730)
                                                    ---------------------------------------------------------------------------
Net Income                                          $(608,196)     $ 4,089,639     $ 5,420,245       $7,223,364      $5,186,492
                                                    ===========================================================================
</TABLE>

<TABLE>
<CAPTION>
                                     December 31,        December 31,        December 31,        December 31,        December 31,
Balance Sheet Data/3/                   1999                 1998               1997                1996                 1995
---------------------------------------------------------------------------------------------------------------------------------
<S>                                <C>                  <C>                 <C>                <C>                <C>
Aggregate Net Asset Value
 (Series A-S)                       $41,682,768          $79,106,838         $101,226,685       $78,905,273         $74,846,544
                                    -----------          -----------         ------------       -----------         -----------
Net Asset Value per Unit

Series A                              $111.64  /4/          $115.74  /5/        $113.73  /6/      $110.71  /7/         $106.97  /8/
Series B                              $110.83  /4/          $113.98  /5/        $114.15  /6/      $114.25  /7/         $110.36
Series C                              $106.45  /4/          $108.92  /5/        $108.15  /6/      $109.34  /7/         $103.35
Series D                              $106.98  /4/          $111.45  /5/        $109.94  /6/      $108.20  /7/         $102.34
Series E                              $107.36  /4/          $111.14  /5/        $109.40  /6/      $108.59  /7/         $102.72
Series F                              $106.12  /4/          $108.95  /5/        $109.04  /6/      $108.92  /7/             N/A
Series G                              $104.77  /4/          $107.67  /5/        $106.52  /6/      $107.32                  N/A
Series H                              $103.60  /4/          $107.81  /5/        $106.62  /6/      $106.47                  N/A
Series K                              $107.85               $109.61             $104.77               N/A                  N/A
Series L                              $105.10               $106.81             $102.08               N/A                  N/A
Series M                              $106.61               $108.34             $103.70               N/A                  N/A
Series N                              $102.77               $104.43                 N/A               N/A                  N/A
Series O                              $103.09               $104.77                 N/A               N/A                  N/A
Series P                              $105.19               $106.92                 N/A               N/A                  N/A
Series Q                               $97.27                $98.86                 N/A               N/A                  N/A
Series R                               $98.33                   N/A                 N/A               N/A                  N/A
Series S                               $99.20                   N/A                 N/A               N/A                  N/A
</TABLE>

                                      11

<PAGE>

     (1) As of January 1, 1996, a portion of the Brokerage Commissions were
reclassified as Administrative Fees, at no additional cost to the Fund. Certain
amounts in prior periods have been reclassified to conform to the current period
presentation of the Administrative Fees.

     (2) MLIP is general partner of the Trading Partnership. Because the Fund
owns substantially all of the Trading Partnership, Trading Partnership
activities are referred to as Fund activities in this Report. The minority
interest represents MLIP's share, as general partner of the Trading Partnership,
of the Trading Partnership's profit or loss.

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

     (4) Net of aggregate distribution of $22.50 per unit on Series A Units,
$21.00 on the Series B Units, $18.00 on the Series C Units, $16.00 on the Series
D Units, $16.00 on the Series E Units, $14.25 on the Series F Units, $14.00 on
the Series G Units and $14.00 on the Series H Units.

     (5) Net of aggregate distribution of $19.00 per unit on Series A Units,
$17.50 on the Series B Units, $14.50 on the Series C Units, $11.50 on the Series
D Units, $12.50 on the Series E Units, $10.75 on the Series F Units, $10.50 on
the Series G Units and $9.50 on the Series H Units.

     (6) Net of aggregate distributions of $15.50 per Unit on the Series A
Units, $12.50 on the B Units and $11.00 on the Series C, $8.00 on the Series D
Units, $9.00 on the Series E Units, $6.00 on the Series F Units, $7.00 on the
Series G Units and $6.00 on the Series H Units.

     (7) Net of aggregate distributions of $12.00 per Unit on the Series A
Units, $6.00 on the B Units and $3.50 on the Series C, D and E Units.

     (8) Net of the distribution of $6.00 per Unit on the Series A Units.

                                       12
<PAGE>

                          ML PRINCIPAL PROTECTION L.P.
                                December 31, 1999

        Type of Pool: Multi-Advisor; Selected Advisor/Publicly-Offered/
                           "Principal Protected"(1)
                    Inception of Trading: October 12, 1994
                     Aggregate Subscriptions: $164,976,175
                      Current Capitalization: $41,682,768
                   Worst Monthly Drawdown:(2) (3.70)% (2/96)
            Worst Peak-to-Valley Drawdown:(3) (3.80)% (8/99-10/99)

                               Monthly Rates of Return*
      -------------------------------------------------------------------
      Month                   1999     1998      1997     1996      1995
      -------------------------------------------------------------------
      January                (1.09)%   0.07%     2.06%    2.45%    (0.55)%
      -------------------------------------------------------------------
      February                0.84    (0.56)     1.44    (3.70)     2.24
      -------------------------------------------------------------------
      March                  (0.52)    0.10      0.05     1.06      4.17
      -------------------------------------------------------------------
      April                   1.17    (1.96)    (0.70)    3.10      0.91
      -------------------------------------------------------------------
      May                    (1.30)    0.95     (1.43)   (1.98)     1.20
      -------------------------------------------------------------------
      June                    1.19    (0.86)     0.70     1.36     (0.21)
      -------------------------------------------------------------------
      July                    0.20    (0.67)     3.14    (1.68)    (1.30)
      -------------------------------------------------------------------
      August                 (0.02)    4.83     (2.71)    0.49      0.95
      -------------------------------------------------------------------
      September              (0.91)    3.55      0.86     1.62     (0.32)
      -------------------------------------------------------------------
      October                (2.90)    0.06     (0.43)    4.25      0.29
      -------------------------------------------------------------------
      November                1.60    (1.00)     0.80     2.50      0.69
      -------------------------------------------------------------------
      December                1.00     0.20      2.22    (0.20)     2.12
      -------------------------------------------------------------------
      Compound Annual
      Rate of Return         (0.81)%   4.60%     6.01%    9.36%    10.55%
      -------------------------------------------------------------------


     Rates of Return are presented on a composite, not a Series-by-Series,
basis.

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

     All Units issued on or prior to May 1, 1997 commenced trading with 60%, and
Units issued after May 1, 1997 with 75%, of their assets allocated to trading.
Beginning May 1, 1998, all Units issued after May 1, 1997 have allocated 85% of
their assets to trading.

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

     (1) Pursuant to applicable CFTC regulations, a "Multi-Advisor" fund is
defined as one that allocates no more than 25% of its trading assets to any
single manager. The Fund does not currently allocate more than 25% of its
trading assets to any single Advisor but may do so in the future; consequently,
it is referred to as a"Multi-Advisor; Selected Advisor" fund. Certain funds,
including funds sponsored by MLIP, are structured so as to guarantee to
investors that their investment will be worth no less than a specified amount
(typically, the initial purchase price) as of a date certain after the date of
investment. The CFTC refers to such funds as "principal protected." The ML&Co.
Guarantee and MLIP- related deleveraging of the Fund's trading provides the
"principal protection" feature of the Fund.

     (2) Worst Monthly Drawdown represents the largest negative
Monthly Rate of Return experienced since January 1, 1995 by the Fund; a drawdown
is measured on the basis of month-end Net Asset Value only, and does not reflect
intra-month figures.

     (3)  Worst Peak-to-Valley Drawdown represents the greatest percentage
decline since January 1, 1995 from a month-end cumulative Monthly Rate of Return
without such cumulative Monthly Rate of Return being equaled or exceeded as of a
subsequent month-end. For example, if the Monthly Rate of Return was (1)% in
each of January and February, 1% in March and (2)% in April, the Peak-to-Valley
Drawdown would still be continuing at the end of April in the amount of
approximately (3)%, whereas if the Monthly Rate of Return had been approximately
3% in March, the Peak-to-Valley Drawdown would have ended as of the end of
February at approximately the (2)% level.

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

                                       13
<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                 MONTH-END NET ASSET VALUE PER SERIES A UNIT
------------------------------------------------------------------------------------------------------------------------------------
          Jan.            Feb.            Mar.            Apr.           May             June            July            Aug.
------------------------------------------------------------------------------------------------------------------------------------
<S>     <C>             <C>             <C>             <C>             <C>             <C>             <C>             <C>
1995    $101.36         $103.63         $107.94         $109.09         $110.40         $110.18         $108.94         $109.98
------------------------------------------------------------------------------------------------------------------------------------
1996    $109.65/a/      $105.56/a/      $106.69/a/      $110.05/a/      $107.82/a/      $109.33/a/      $107.51/a/      $108.04/a/
------------------------------------------------------------------------------------------------------------------------------------
1997    $113.00/b/      $114.63/b/      $114.69/b/      $113.89/b/      $112.28/b/      $113.05/b/      $116.48/b/      $113.59/b/
------------------------------------------------------------------------------------------------------------------------------------
1998    $113.84/c/      $113.25/c/      $113.37/c/      $111.46/c/      $112.48/c/      $111.69/c/      $111.09/c/      $116.00/c/
------------------------------------------------------------------------------------------------------------------------------------
1999    $114.49/d/      $115.36/d/      $114.86/d/      $116.14/d/      $114.75/d/      $116.00/d/      $116.26/d/      $116.28/d/
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------
                 MONTH-END NET ASSET VALUE PER SERIES A UNIT
----------------------------------------------------------------
          Sept.            Oct.            Nov            Dec.
-----------------------------------------------------------------
<S>     <C>             <C>             <C>             <C>

1995    $109.62         $103.91/a/      $104.63/a/      $106.96/a/
------------------------------------------------------------------
1996    $109.80/a/      $108.24/b/      $110.93/b/      $110.70/b/
------------------------------------------------------------------
1997    $114.53/b/      $110.69/c/      $111.50/c/      $113.73/c/
------------------------------------------------------------------
1998    $119.77/c/      $116.40/d/      $115.45/d/      $115.74/d/
------------------------------------------------------------------
1999    $115.41/d/      $109.03/e/      $110.61/e/      $111.64/e/
------------------------------------------------------------------
</TABLE>

/a/  After reduction for the $6.00 per Series A Unit distribution made as of
     October 1, 1995.

/b/  After reduction for the first annual distribution and the $6.00 per Series
     A Unit distribution made as of October 1, 1996.

/c/  After reduction for the first and second annual distributions and the $3.50
     per Series A Unit distribution made as of October 1, 1997.

/d/  After reduction for the first, second and third annual distribution and the
     $3.50 per Series A Unit distribution made on October 1, 1998.

/e/  After reduction for the first, second, third and fourth annual distribution
     and the $3.50 per Series A Unit distribution made on October 1, 1999.

The Net Asset Value per unit varies, until September 30, 1997, from how it would
be calculated for purposes of GAAP, due to the amortization of organizational
and initial offering costs.

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

     The Two-Tier Structure of the Fund

     The Fund does not trade directly through opening managed accounts with the
Advisors, but rather through investing in the Trading Partnership. The Trading
Partnership, in turn, allocates its capital to the Advisors. No series of Units
can lose more in its trading than the amount which such series has invested in
the Trading Partnership.

     Although different series of Units invest different percentages of their
overall capital in the Trading Partnership, all assets so invested are 100%
allocated to trading. All trading profits and losses are shared pro rata among
the different series based on their respective investments in the Trading
Partnership.

     The use of the Trading Partnership by the Fund has no effect on the
leverage at which the different series of Units trade. The Fund trades
through investing in the Trading Partnership rather than directly, solely in
order to eliminate the highly unlikely risk that one series of Units might be
subject to paying trading debts attributable to another.

     There is no benefit (or detriment) to investors from the two-tier
Fund/Trading Partnership structure other than permitting the Fund to issue the
series of Units at different times, which series, may, over time, trade with
different percentages of their capital allocated to trading.

Results of Operations

     Advisor Selections

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

     MLIP has made and expects to continue making frequent changes
to both trading asset allocations among Advisors and Advisor combinations as
well as from time to time adjusting the percentage of the Fund's assets
committed to trading. All series of Units trade under the direction of the same
Advisor allocation and combination, as the same may be changed from time to time
by MLIP.

     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

                                       14
<PAGE>

medium- to long-term commitment to all Advisors selected. There can be no
assurance as to the frequency or number of Advisor changes that may take place
in the future, or as to how long any of the current Advisors will continue to
manage assets for the Fund.

General

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

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

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

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

Performance Summary

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

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

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









                                       15
<PAGE>

1999
                                        Total Trading
                                           Results

                Interest Rates          $   (349,650)
                Stock Indices                450,778
                Agriculture                 (248,437)
                Currencies                (1,021,229)
                Energy                     1,492,483
                Metals                       184,924
                                        ------------
                                        $    508,869
                                        ============



ML Principal Protection L.P. finished 1999 with gains in energy, stock index and
metals trading and losses in currency, interest rate and agriculture trading.
Commodities spent 1999 in a transition phase, shifting from bearishness to a
more neutral position. Lack of demand, particularly in Asia, was the dominant
factor in the overall decline in commodity prices.

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

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

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

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

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

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.


                                       16
<PAGE>

1998                                    Total Trading
                                           Results

                Interest Rates          $  7,116,336
                Stock Indices                824,905
                Commodities                 (967,695)
                Agriculture                2,085,218
                Energy                      (882,409)
                Metals                    (1,482,985)
                                        ------------
                                        $  6,693,370
                                        ============



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

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

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

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

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


                                       17
<PAGE>

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


                1997


                                        Total Trading
                                           Results

                Interest Rates          $  1,706,686
                Stock Indices                232,314
                Commodities                  679,157
                Currencies                 3,911,109
                Energy                    (1,278,003)
                Metals                     1,245,020
                                        ------------
                                        $  6,496,283
                                        ============

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

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

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

                                       18
<PAGE>

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

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

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

     The Fund's Brokerage Commissions and Administrative Fees are a constant
percentage of the Fund's assets. The only Fund costs (other than the
insignificant currency trading costs) which are not based on a percentage of the
Fund's assets are the profit shares payable to the Advisors on an Advisor-by-
Advisor basis. During periods when Profit Shares are a high percentage of net
trading gains, it is likely that there has been substantial performance non-
correlation among the Advisors (so that the total Profit Shares paid to those
Advisors which have traded profitably are a high percentage, or perhaps even in
excess, of the total profits recognized, as other Advisors have incurred
offsetting losses, reducing overall trading gains but not the Profit Shares paid
to the successful Advisors)--suggesting the likelihood of generally trendless,
non-consensus markets.

     Unlike many investment fields, there is no meaningful distinction in the
operation of the Fund between realized and unrealized profits. Most of the
contracts traded by the Fund are highly liquid and can be closed out at any
time.

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

The Different Series of Units
-----------------------------

     All series of Units trade in a common trading account and are subject to
the same method of calculating their fees. Furthermore, any discretionary action
taken by MLIP -- e.g., adjusting trading leverage -- must be done in such a way
that all Units have the same percentage of capital allocated to trading after
the adjustment (this restructuring applies only to Units issued after May 1,
1997). Despite these fundamental similarities among the different series,
because the series begin trading at different times they are likely, as a result
of trading profits and losses, to pay different Profit Shares (although to the
same group of Advisors) and have different Net Asset Values. The series offered
since May 1, 1997 have begun trading at 85%-95% leverage. Series issued before
May 1, 1997 began trading at 60%-75% leverage.

Liquidity; Capital Resources
----------------------------

     The Fund sells no securities other than the Units. The Fund borrows only to
a limited extent and only on a strictly short-term basis in order to finance
losses on non-U.S. dollar denominated trading positions pending the conversion
of the Fund's dollar deposits. These borrowings are at a prevailing short-term
rate in the relevant currency.

     The Fund's assets are held primarily in short-term debt securities with
maturities under one year, and to a lesser extent in short- and mid-term debt
securities with maturities up to five years, as well as in cash. The Net Asset
Value of the Fund's cash and financial instruments is not materially affected by
inflation. Changes in interest rates, which are often associated with inflation,
could cause the value of certain of the Fund's debt securities to decline, but
only to a limited extent. More importantly, changes in interest rates could
cause periods of strong up or down price trends, during which the Fund's profit
potential generally increases. Inflation in commodity prices could also generate
price movements which the strategies might successfully follow.

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

Year 2000 Compliance Initiative

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

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

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

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



Item 7A: Quantitative and Qualitative Disclosures About Market Risk
         ----------------------------------------------------------

Introduction

     Past Results Not Necessarily Indicative of Future Performance
     -------------------------------------------------------------

     The Fund is a speculative commodity pool. Unlike an operating company, the
risk of market sensitive instruments traded by it is integral, not incidental,
to the Fund's main line of business.

     Market movements result in frequent changes in the fair market value of the
Fund's open positions and, consequently, in its earnings and cash flow. The
Fund's market risk is influenced by a wide variety of factors, including the
level and volatility of interest rates, exchange rates, equity price levels, the
market value of financial instruments and contracts, the diversification effects
among the Fund's open positions and the liquidity of the markets in which it
trades.

     The Fund, under the direction of the Advisors, rapidly acquires and
liquidates both long and short positions in a wide range of different markets.
Consequently, it is not possible to predict how a possible future market
scenario will affect performance, and the Fund's past performance is not
necessarily indicative of its future results.

     Value at Risk is a measure of the maximum amount which the Fund could
reasonably be expected to lose in a given market sector. However, the inherent
uncertainty of the Fund's speculative trading and the recurrence in the markets
traded by the Fund of market movements far exceeding expectations could result
in actual trading or non-trading losses far beyond the indicated Value at Risk
or the Fund's experience to date (i.e., "risk of ruin"). In light of the
foregoing

                                       19
<PAGE>

as well as the risks and uncertainties intrinsic to all future
projections, the inclusion of the quantification in this section should not be
considered to constitute any assurance or representation that the Fund's losses
in any market sector will be limited to Value at Risk or by the Fund's attempts
to manage its market risk.


Quantifying the Fund's Trading Value at Risk

     Quantitative Forward-Looking Statements
     ---------------------------------------

     The following quantitative disclosures regarding the Fund's market risk
exposures contain "forward-looking statements" within the meaning of the safe
harbor from civil liability provided for such statements by the Private
Securities Litigation Reform Act of 1995 (set forth in Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934).
All quantitative disclosures in this section are deemed to be forward-looking
statements for purposes of the safe harbor, except for statements of historical
fact.

     The Fund's risk exposure in the various market sectors traded by the
Advisors is quantified below in terms of Value at Risk. Due to the Fund's
mark-to-market accounting, any loss in the fair value of the Fund's open
positions is directly reflected in the Fund's earnings (realized or unrealized)
and cash flow (at least in the case of exchange-traded contracts in which
profits and losses on open positions are paid daily through variation margin).

     Exchange maintenance margin requirements have been used by the Fund as the
measure of its Value at Risk. Maintenance margin requirements are set by
exchanges to equal or exceed the maximum loss in the fair value of any given
contract incurred in 95% - 99% of the one-day time periods included in the
historical sample (generally approximately one year) researched for purposes of
establishing margin levels. Maintenance margin levels are established by dealers
and exchanges using historical price studies as well as an assessment of current
market volatility and economic fundamentals to provide a probabilistic estimate
of the maximum expected near-term one-day price fluctuation.

     In the case of market sensitive instruments which are not exchange-traded
(almost exclusively currencies in the case of the Fund), the margin requirements
for the equivalent futures positions have been used as Value at Risk. In those
rare cases in which a futures-equivalent margin is not available, dealers'
margins have been used.

     The fair value of the Fund's futures and forward positions does not have
any optionality component. However, certain of the Advisors trade commodity
options. The Value at Risk associated with options is reflected in the following
table as the margin requirement attributable to the instrument underlying each
option.

     100% positive correlation in the different positions held in each market
risk category has been assumed. Consequently, the margin requirements applicable
to the open contracts have been aggregated to determine each trading category's
aggregate Value at Risk. The diversification effects resulting from the fact
that the Fund's positions are rarely, if ever, 100% positively correlated have
not been reflected.

The Fund's Trading Value at Risk in Different Market Sectors

     The following table indicates the average, highest and lowest trading Value
at Risk associated with the Fund's open positions by market category for the
fiscal year 1999. During the fiscal year 1999, the Fund's average capitalization
was approximately $60,816,812. As of December 31, 1998, the Fund's total
capitalization was approximately $79,106,838.


                                       20
<PAGE>
<TABLE>
<CAPTION>

                         December 31, 1999

                    Average       % of Average    % of Average Assets       Highest          Lowest
Market Sector    Value at Risk   Capitalization   Allocated to Trading   Value at Risk   Value at Risk
-------------    -------------   --------------   -------------------- -------------   -------------
<S>                <C>             <C>              <C>                  <C>             <C>
Interest Rates       2,896,942           4.76%               5.82%         1,587,693         627,792
Currencies           1,002,365           1.65%               2.01%         1,140,967         571,036
Stock Indices          681,289           1.12%               1.37%         1,831,362         417,460
Metals                 437,162           0.72%               0.88%           418,368         252,583
Commodities            279,062           0.46%               0.56%           319,837         126,564
Energy                 343,966           0.57%               0.69%           353,200         136,900
                 -------------   --------------   ------------------      ----------     -----------
TOTAL                5,640,786           9.28%              11.33%         5,651,427       2,132,335
                 =============   ==============   ==================      ==========     ==========-

</TABLE>

     Average, highest and lowest Value at Risk amounts relate to the quarter-end
amounts for each calendar quarter-end during the fiscal year. Average
Capitalization is the average of the Fund's capitalization at the end of the
calendar quarter of fiscal year 1999.


                         December 31, 1998

                                           % of Total
Market Sector    Value at Risk           Capitalization
-------------    -------------           --------------

Interest Rates         567,386                    0.71%
Currencies           1,050,731                    1.33%
Stock Indices          283,117                    0.36%
Metals                 315,100                    0.40%
Commodities            280,302                    0.35%
Energy                 226,400                    0.29%
                 -------------           --------------
TOTAL                2,723,036                    3.44%
                 =============           ==============


Material Limitations on Value at Risk as an Assessment of Market Risk

     The face value of the market sector instruments held by the Fund is
typically many times the applicable maintenance margin requirement (maintenance
margin requirements generally ranging between approximately 1% and 10% of
contract face value) as well as many times the capitalization of the Fund. The
magnitude of the Fund's open positions creates a "risk of ruin" not typically
found in most other investment vehicles. Because of the size of its positions,
certain market conditions " unusual, but historically recurring from time to
time " could cause the Fund to incur severe losses over a short period of time.
Even comparatively minor losses could cause MLIP to further deleverage or
terminate the Fund's trading. The foregoing Value at Risk table " as well as the
past performance of the Fund " gives no indication of this "risk of ruin."


Non-Trading Risk

     Foreign Currency Balances; Cash on Deposit with MLF

     The Fund has non-trading market risk on its foreign cash balances not
needed for margin. However, these balances (as well as the market risk they
represent) are immaterial.

     The Fund also has non-trading market risk on the approximately 20% of its
assets which are held in cash at MLF. The value of this cash is not interest
rate sensitive, but there is cash flow risk in that if interest rates decline so
will the cash flow generated on these monies. This cash flow risk is immaterial.


     MLAM's Cash Management

     MLAM invests approximately 80% of the Fund's assets in Government
Securities. As of December 31, 1999, the Fund's MLAM account totaled
approximately $40,000,000.

     As of December 31, 1999, the Fund's MLAM account held the following
Government Securities:


                                       21
<PAGE>

<TABLE>
<CAPTION>
                                                                                                                 Total
Par Value               Description                       Rate              Maturity Date                      Fair Value
---------               -----------                       ----              -------------                      ----------
             Long-Term
             ---------
<S>          <C>                                          <C>               <C>                               <C>
5,000,000    Federal National Mortgage Association        5.720%            January 9, 2001                      4,969,250
4,000,000    Federal National Mortgage Association        5.625%            March 15, 2001                       3,965,000
3,000,000    Federal National Mortgage Association        5.375%            March 15, 2002                       2,930,640
2,000,000    U.S. Treasury Note                           4.500%            January 31, 2001                     1,967,031
1,000,000    U.S. Treasury Note                           5.750%            June 30, 2001                          993,906
9,000,000    U.S. Treasury Note                           5.375%            February 15, 2001                    8,925,469
1,000,000    U.S. Treasury Note                           5.750%            April 30, 2003                         982,031
2,500,000    U.S. Treasury Note                           5.875%            November 15, 2004                    2,451,367
                                                                                                               -----------
                                                                                                  Subtotal     $27,184,694
                                                                                                               -----------

             Short-Term
             ----------
8,710,000    Federal Home Loan Discount Note              0.000%            January 14, 2000                   $ 8,692,580
  112,000    Federal Home Loan Mortgage Corporation       0.000%            January 14, 2000                       111,776
1,000,000    U.S. Treasury Note                           6.000%            August 15, 2000                      1,000,469
1,500,000    U.S. Treasury Note                           4.625%            November 30, 2000                    1,472,687
2,000,000    U.S. Treasury Note                           4.500%            September 30, 2000                   1,977,500
                                                                                                               -----------
                                                                                                  Subtotal     $13,255,012
                                                                                                               -----------
                                                                                                  Total Debt   $40,439,706
                                                                                                               ===========
</TABLE>

     Certain unusual market conditions could cause greater interest rate related
losses on the Fund's non-trading instruments in excess of those suggested by the
foregoing quantification, but given the fact that virtually none of the Fund's
Government Securities have any optionality or derivative multiplier feature,
MLIP believes that this would be highly unlikely.

Qualitative Disclosures Regarding Primary Trading Risk Exposures

     The following qualitative disclosures regarding the Fund's market risk
exposures " except for (i) those disclosures that are statements of historical
fact and (ii) the descriptions of how the Fund manages its primary market risk
exposures " constitute forward-looking statements within the meaning of Section
27A of the Securities Act and Section 21E of the Securities Exchange Act. The
Fund's primary market risk exposures as well as the strategies used and to be
used by MLIP and the Advisors for managing such exposures are subject to
numerous uncertainties, contingencies and risks, any one of which could cause
the actual results of the Fund's risk controls to differ materially from the
objectives of such strategies. Government interventions, defaults and
expropriations, illiquid markets, the emergence of dominant fundamental factors,
political upheavals, changes in historical price relationships, an influx of new
market participants, increased regulation and many other factors could result in
material losses as well as in material changes to the risk exposures and the
risk management strategies of the Fund. There can be no assurance that the
Fund's current market exposure and/or risk management strategies will not change
materially or that any such strategies will be effective in either the short- or
long-term. Investors must be prepared to lose all or substantially all of the
time value of their investment in the Fund.

     The following were the primary trading risk exposures of the Fund as of
December 31, 1999, by market sector.

     Interest Rates. Interest rate risk is the principal market exposure of the
     --------------
Fund. Interest rate movements directly affect the price of derivative sovereign
bond positions held by the Fund and indirectly the value of its stock index and
currency positions. Interest rate movements in one country as well as relative
interest rate movements between countries materially impact the Fund's
profitability. The Fund's primary interest rate exposure is to interest rate
fluctuations in the United States and the other G-7 countries. However, the Fund
also takes positions in the government debt of smaller nations

                                       22
<PAGE>

e.g., New Zealand and Australia. MLIP anticipates that G-7 interest rates will
remain the primary market exposure of the Fund for the foreseeable future.

     Currencies. The Fund trades in a large number of currencies. However, the
     ----------
Fund's major exposures have typically been in the dollar/yen, dollar/pound,
and dollar/Euro positions. MLIP does not anticipate that the risk profile of the
Fund's currency sector will change significantly in the future. The currency
trading Value at Risk figure includes foreign margin amounts converted into U.S.
dollars with an incremental adjustment to reflect the exchange rate risk of
maintaining Value at Risk in a functional currency other than dollars.

     Stock Indices. The Fund's primary equity exposure is to G-7 equity index
     -------------
price movements. As of December 31, 1999, the Fund's primary exposures were in
the S&P 500, Financial Times (England), Nikkei (Japan), Hang Seng (Hong Kong)
and DAX (Germany) stock indices. MLIP anticipates little, if any, trading in
non-G-7 stock indices. The Fund is primarily exposed to the risk of adverse
price trends or static markets in the major U.S., European and Asian indices.

     Metals. The Fund's primary metals market exposure is to fluctuations in the
     ------
price of gold and silver. Although certain of the Advisors will, from time to
time, trade base metals such as aluminum, copper and tin, the principal market
exposures of the Fund have consistently been in the precious metals, gold and
silver (and, to a much lesser extent, platinum). However, silver prices have
remained volatile over this period, and the Advisors have, from time to time,
taken substantial positions as they have perceived market opportunities to
develop. MLIP anticipates that gold and silver will remain the primary metals
market exposure for the Fund.

     Agriculture. The Fund's primary commodities exposure is to agricultural
     -----------
price movements which are often directly affected by severe or unexpected
weather conditions. Soybeans, grains and coffee accounted for the substantial
bulk of the Fund's agriculture exposure as of December 31, 1999. In the past,
the Fund has had material market exposure to live cattle and hogbellies and may
do so again in the future. However, MLIP anticipates that the Advisors will
maintain an emphasis on soybeans, grains and coffee, in which the Fund has
historically taken its largest positions.

     Energy. The Fund's primary energy market exposure is to gas and oil price
     ------
movements, often resulting from political developments in the Middle East.
Although the Advisors trade natural gas to a limited extent, oil is by far the
dominant energy market exposure of the Fund. Oil prices can be volatile and
substantial profits and losses have been and are expected to continue to be
experienced in this market.

Qualitative Disclosures Regarding Non-Trading Risk Exposure

     The following were the only non-trading risk exposures of the Fund as of
December 31, 1999.

     Foreign Currency Balances. The Fund's primary foreign currency balances are
     -------------------------
in Japanese yen, British pound and Euros. The Fund has de minimis exchange rate
exposure on these balances.

     Securities Positions. The Fund holds only cash or interest-bearing
     --------------------
Government Securities. The Fund's market exposure in instruments held other than
for trading is in the interest rate risk exposure of the Fund's Government
Securities portfolio, managed by MLAM pursuant to policies established by MLIP
for which MLAM assumes no responsibility. MLIP manages the risk of the Fund's
MLAM account by imposing limitations both on the overall duration of the
portfolio (two years) and on the maximum duration of any Government Securities
held by MLAM (no later than the Principal Assurance Date for the most recently
issued Series of Units). MLIP has applied essentially the same risk control
policies to the Fund's MLAM account since inception, and the Fund has never
experienced a material loss on this account. In a period of rapidly rising
interest rates (since the Fund's inception in 1994, interest rates have
generally declined until quite recently), the Fund could incur marked-to-market
losses on its MLAM account, but MLIP would attempt to prevent or control these
losses by further reducing the permissible durations of the Fund's Government
Securities in order to reduce the interest rate sensitivity of these
instruments.

Qualitative Disclosures Regarding Means of Managing Risk Exposure

     Trading Risk

                                       23
<PAGE>

     MLIP has procedures in place intended to control market risk exposure,
although there can be no assurance that they will, in fact, succeed in doing so.
These procedures focus primarily on monitoring the trading of the Advisors
selected from time to time for the Fund, adjusting the percentage of the Fund's
total assets investing in the Trading Partnership with respect to each series of
Units and reviewing outstanding positions for over-concentrations " both on an
Advisor-by-Advisor and on an overall Fund basis. While MLIP does not itself
intervene in the markets to hedge or diversify the Fund's market exposure, MLIP
may urge Advisors to reallocate positions, or itself reallocate Partnership
assets among Advisors (although typically only as of the end of a month), in an
attempt to avoid over-concentrations. However, such interventions are unusual.

     One important aspect of MLIP's risk controls is its adjustments to the
leverage at which each Series of Units trades. By controlling the percentage of
each Series" assets investing in the Trading Partnership, MLIP can directly
affect the market exposure of the Fund. Leverage control is the principal means
by which MLIP hopes to be able to ensure that Merrill Lynch is never required to
make any payments under its guarantee that the Net Asset Value per Unit of each
series will equal no less than $100 as of the Principal Assurance Date for such
series, subject to the limitation that all Series of Units issued after May 1997
must be adjusted, if any such Series is adjusted, so that they all trade at the
same degree of leverage.

     At the Advisor level, each Advisor applies its own risk management policies
to its trading. These policies generally limit the total exposure that may be
taken per "risk unit" of assets under management. In addition, many Advisors
follow diversification guidelines (often formulated in terms of the maximum
margin which they will commit to positions in any one contract or group of
related contracts), as well as imposing "stop-loss" points at which open
positions must be closed out. Occasionally, Advisors will limit the market
exposure of their Fund account through acquiring put or call options which
"collar" the risk of open positions. However, because of the typically high
degree of liquidity in the markets traded by the Fund and the expense of
acquiring options, most Advisors rely simply on stop-loss policies, requiring
the liquidation of positions once losses of a certain magnitude have been
incurred.

     Certain Advisors treat their risk control policies as strict
rules; others only as general guidelines for controlling risk.

     Non-Trading Risk

     The Fund controls the non-trading exchange rate risk of these balances by
regularly converting its foreign currency balances back into dollars (usually
weekly but no less frequently than twice a month, and more frequently if a
particular foreign currency balance becomes unusually high).

     MLIP controls the interest-rate risk of the Fund's non-trading instruments
(Government Securities invested by MLAM for cash management purposes) by
limiting the overall duration of such instruments to no more than two years and
the maximum duration of any Government Securities held by the Fund to no later
than the Principal Assurance Date for the most recently issued Series of Units.
These risk control policies have been successful in the Fund's operations to
date, and MLIP does not anticipate any change in these policies. However, where
the interest rate environment changes materially, MLIP might shorten the
permissible duration of the Fund's Government Securities portfolio.

     The Fund has cash flow interest rate risk on its cash on deposit with MLF
in that declining interest rates would cause the income from such cash to
decline. However, a certain amount of cash or cash equivalents must be held by
the Fund in order to facilitate margin payments and pay expenses and
redemptions. MLIP does not take any steps to limit the cash flow risk on the
approximately 20% of its cash held on deposit at MLF.

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. MLIP promoted the Fund and is its
controlling person.

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 and financial disclosure.

                                       24
<PAGE>

                                    PART III

Item 10: Directors and Executive Officers of the Registrant
         --------------------------------------------------

     10(a) and 10(b) Identification of Directors and Executive Officers:
                     --------------------------------------------------

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

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

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

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

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

Allen N. Jones               Director

Stephen G. Bodurtha          Director

Michael J. Perini            Director

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

     John R. Frawley, Jr. was born in 1943. Mr. Frawley is Chairman, Chief
Executive Officer, President and a Director of MLIP and Co-Chairman of MLF. He
joined Merrill Lynch Pierce Fenner & Smith Incorporated ("MLPF&S") in 1966 and
has served in various positions, including Retail and Institutional Sales,
Manager of New York Institutional Sales, Director of Institutional Marketing,
Senior Vice President of Merrill Lynch Capital Markets and Director of
International Institutional Sales. Mr. Frawley holds a Bachelor of Science
degree from Canisius College. Mr. Frawley served on the CFTC's Regulatory
Coordination Advisory Committee from its formation in 1990 through its
dissolution in 1994. Mr. Frawley has served four consecutive one-year terms as
Chairman of the Managed Funds Association (formerly, the Managed Futures
Association), a national trade association that represents the managed futures,
hedge funds and fund of funds industry. Mr. Frawley currently serves as a member
of the CFTC's Global Markets Advisory Committee.

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

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

                                     25
<PAGE>

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

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

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

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

     As of December 31, 1999, the principals of MLIP had no investment in the
Fund, and MLIP's general partner interest in the Fund was valued at
approximately $1,023,562.

     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
S.E.C.T.O.R. Strategy Fund (SM) L.P., The SECTOR Strategy Fund (SM) II L.P., The
SECTOR Strategy Fund (SM) V L.P., The SECTOR Strategy Fund (SM) VI L.P., ML
Global Horizons L.P., ML JWH Strategic Allocation Fund L.P. and the Fund.
Because MLIP serves as the sole general partner of each of these funds, the
officers and directors of MLIP effectively manage them as officers and directors
of such funds.

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

          None.

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

          None.

     (e) Business Experience:
         -------------------
          See Item 10(a)(b) above.

     (f) Involvement in Certain Legal Proceedings:
         ----------------------------------------
          None.

     (g) Promoters and Control Persons:
         -----------------------------
          Not applicable.


Item 11: Executive Compensation
         ----------------------

                                       26
<PAGE>

     The directors and officers of MLIP are remunerated by Merrill Lynch in
their respective positions. The Fund does not itself have any officers,
directors or employees. The Fund 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 certain of the Fund's dollar Assets in
offset accounts, as described in Item 1(c) above. The directors and officers
receive no "other compensation" from the Fund, 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 the Fund or MLIP.

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

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

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

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

     As of December 31, 1999, MLIP owned 9,627.94 Units (Unit-equivalent general
partnership interests), which was approximately 2.46% of the total Units
outstanding.

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

          None.

Item 13: Certain Relationships and Related Exchange of Futures Transactions
         ------------------------------------------------------------------

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

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

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

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

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

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

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

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

     In 1999, the Partnership expensed: (i) Brokerage Commissions of $3,969,972
to MLF, which included $718,757 in consulting fees earned by the Advisors; and
(ii) Administrative Fees of $159,099 to MLIP. In addition, MLIP and its
affiliates may have derived certain economic benefit from possession of the
Fund's assets, as well as from foreign exchange and EFP trading.

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

                                       27
<PAGE>

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

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

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

          Not applicable.

                                       28
<PAGE>

                                     PART IV

Item 14: Exhibits, Financial Statement Schedules and Reports on Form 8-K
         ----------------------------------------------------------------
<TABLE>
<CAPTION>

     (a)1. Financial Statements (found in Exhibit 13.01):                                      Page
           ---------------------------------------------                                       ----
   <S>    <C>                                                                                 C>

           Independent Auditors' Report                                                           1

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

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

           Notes to Consolidated Financial Statements                                          5-12
</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
-----------                -----------

1.01                Selling Agreement among the Fund, Merrill Lynch Investment
                    Partners, Inc., Merrill Lynch Futures Inc., the Selling
                    Agent and the Advisors.

Exhibit 1.01:       Is incorporated herein by reference from Exhibit 1.01
------------        contained in Amendment No. 1 to the Registration Statement
                    (Fil33-73914) filed on July 14, 1994, on Form S-1 under the
                    Securities Act of 1933 (the "Registrant's Registration
                    Statement.")

1.01(a)             Form of Selling Agreement Amendment among the Fund, Merrill
                    Lynch Investment Partners, Inc., Merrill Lynch Futures Inc.,
                    the Selling Agent and the Advisors.

Exhibit 1.01(a):    Is incorporated herein by reference from Exhibit 1.01(a)
---------------     contained in the Registrant's report on Form 10-K for the
                    year ended December 31, 1999.

3.01(i)             Amended and Restated Limited Partnership Agreement of the
                    Fund.

Exhibit 3.01(i):    Is incorporated herein by reference from Exhibit 3.01(ii)
---------------     contained in the Registrant's Registration Statement (as
                    Exhibit A).

3.01(ii)            Amended and Restated Limited Partnership Agreement of the
                    Trading Partnership.

Exhibit 3.01(ii):   Is incorporated herein by reference from Exhibit 3.01(ii)
----------------    contained in Registrant's the Registration Statement.

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

Exhibit 3.05(ii):   Is incorporated herein by reference from Exhibit 3.05(ii)
----------------    contained in the Registrant's report on Form 10-Q for the
                    Quarter Ended June 30, 1995.

10.01(h)            Form of Advisory Agreement among the Fund, Merrill Lynch
                    Investment Partners, Inc., Merrill Lynch Futures Inc. and
                    each Advisor.

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

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

                                       29
<PAGE>

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

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

Exhibit 10.03       Is incorporated herein by reference from Exhibit 10.03
-------------       contained in the Registrant's Registration Statement (as
                    Exhibit B).

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 (as
                    Exhibit B).

10.06               Form of Subscription Agreement and Power of Attorney.

Exhibit 10.06:      Is incorporated herein by reference from Exhibit 10.06
-------------       contained in the Registrant's Registration Statement (as
                    Exhibit D).

10.07(a)            Foreign Exchange Desk Service Agreement, dated July 1, 1993
                    among Merrill Lynch International Bank, Merrill Lynch
                    Investment Partners Inc., Merrill Lynch Futures Inc. and
                    various MLIP funds.

Exhibit 10.07(a):   Is incorporated herein by reference from Exhibit 10.07
---------------     contained in the Registrant's Registration Statement (as
                    Exhibit D).

10.07(b)            Amendment to Foreign Exchange Desk Service Agreement, dated
                    July 14, 1994, among Merrill Lynch Investment Bank, Merrill
                    Lynch Investment Partners Inc., Merrill Lynch Futures Inc.
                    and the Fund.

Exhibit 10.07(b):   Is incorporated herein by reference from Exhibit 10.07
----------------    contained in the Registrant's Registration Statement.

10.08               Investment Advisory Contract between Merrill Lynch Futures,
                    the Fund, the Trading Partnership and MLAM.

Exhibit 10.08:      Is incorporated herein by reference from Exhibit 10.08
-------------       contained in the Registrant's Registration Statement.

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

Exhibit 10.09(a):   Is incorporated herein by reference from Exhibit 10.09(a)
----------------    contained in the Registrant's report on Form 10-K for the
                    year ended December 31, 1996.

10.09(b)            Form of Amendment to the Customer Agreement among the
                    Fund and MLF.

Exhibit 10.09(b):   Is incorporated herein by reference from Exhibit 10.09(b)
----------------    contained in the Registrant's report on Form 10-K for the
                    year ended December 31, 1996.

13.01               1999 Annual Report and Independent Auditors' Report.

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

28.01               Prospectus of the Fund dated January 25, 1996.

Exhibit 28.01:      Is incorporated by reference as filed with the Securities
-------------       and Exchange Commission pursuant to Rule 424 under the
                    Securities Act of 1933, Registration Statement (File No.
                    33-73914) on Form S-1 (effective January 25, 1996).

     (b) Report on Form 8-K:

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

                                       30
<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.

                                    ML PRINCIPAL PROTECTION TRADING L.P.

                                    By:  MERRILL LYNCH INVESTMENT PARTNERS INC.
                                         General Partner

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


     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed on March 30, 2000 by the
following persons on behalf of the Registrant and in the capacities indicated.
<TABLE>
<CAPTION>

Signature                    Title                                                        Date
---------                    -----                                                        ----
<S>                         <C>                                                         <C>

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


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


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


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


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

MERRILL LYNCH INVESTMENT     General Partner of Registrant                                March 30, 2000
   PARTNERS INC.

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

</TABLE>

                                       31
<PAGE>

                          ML PRINCIPAL PROTECTION L.P.

                       ANNUAL REPORT FOR 1999 ON FORM 10-K

                                INDEX TO EXHIBITS


                         Exhibit
                         -------

Exhibit 13.01            1999 Annual Report and Independent Auditors' Report


                                       32