<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K

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

                  For the fiscal year ended: December 31, 2000
                                       or
                  ( ) Transition Report Pursuant to Section 13
                 or 15(d) of the Securities Exchange Act of 1934

                         Commission file number: 0-25000

                          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, 2001, limited partnership units with an aggregate value of
$25,699,762 were outstanding and held by non-affiliates.

                       DOCUMENTS INCORPORATED BY REFERENCE

The registrant's "2000 Annual Report and Independent Auditors' Report," the
annual report to security holders for the fiscal year ended December 31, 2000,
is incorporated by reference into Part II, Item 8 and Part IV hereof and filed
as an Exhibit herewith.



<PAGE>

                          ML PRINCIPAL PROTECTION L.P.

                       ANNUAL REPORT FOR 2000 ON FORM 10-K


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                       PART I                                                  PAGE
                                                       ------                                                  ----
<S>           <C>                                                                                              <C>
Item 1.       Business......................................................................................     1

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

Item 3.       Legal Proceedings.............................................................................     8
 .
Item 4.       Submission of Matters to a Vote of Security Holders...........................................     8


                                                       PART II
                                                       -------

Item 5.       Market for Registrant's Common Equity and Related Stockholder Matters.........................     8

Item 6.       Selected Financial Data.......................................................................    10

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

Item 7A.      Quantitative and Qualitative Disclosures About Market Risk....................................    21

Item 8.       Financial Statements and Supplementary Data...................................................    26

Item 9.       Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..........    26


                                                       PART III
                                                       --------

Item 10.      Directors and Executive Officers of the Registrant............................................    27

Item 11.      Executive Compensation........................................................................    28

Item 12.      Security Ownership of Certain Beneficial Owners and Management................................    28

Item 13.      Certain Relationships and Related Transactions................................................    29


                                                       PART IV
                                                       -------

Item 14.      Exhibits, Financial Statement Schedules and Reports on Form 8-K...............................    30
</TABLE>


                                      -i-
<PAGE>

                                     PART I

ITEM 1:  BUSINESS

     (a)  GENERAL DEVELOPMENT OF BUSINESS:

          ML Principal Protection L.P. (the "Partnership") was organized under
the Delaware Revised Uniform Limited Partnership Act on January 3, 1994 and
commenced trading activities on October 12, 1994. The Partnership is a multi-
strategy, multi-market managed futures investment vehicle employing a range of
proprietary strategies diversified across major markets of the global economy --
financials, currencies, energy, metals and agriculture. Effective September 1,
2000, the Partnership consolidated its trading accounts with those of certain
other multi-advisor managed future funds sponsored by Merrill Lynch Investment
Partners, Inc. ("MLIP"). ML Principal Protection Trading L.P. (the "Trading
Partnership") is no longer trading directly through managed accounts with each
of its Advisors, but investing in, ML Multi-Manager Portfolio L.L.C. ("MM LLC"),
a Delaware limited liability company.

          MLIP acts as the general partner of the Partnership, and allocates the
Partnership's assets among the Advisors, each of which trades independently of
the others. MLIP also determines what percentage of the Partnership's assets to
allocate to trading through its investment in MM LLC and what percentage to hold
in reserve. Merrill Lynch Futures Inc. ("MLF") is the Partnership's commodity
broker. MLIP is a wholly-owned subsidiary of Merrill Lynch Group, Inc., which,
in turn, is a wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("Merrill
Lynch"). MLF is an indirect wholly-owned subsidiary of Merrill Lynch.

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

          Many of the multi-advisor funds (the "Multi-Advisor Funds") sponsored
by MLIP allocate their assets to a number of the same independent advisors (the
"Advisors"). MLIP consolidated the trading accounts of nine of its Multi-Advisor
Funds as of June 1, 1998. The consolidation was achieved by having these Multi-
Advisor Funds close their existing trading accounts and invest in a limited
liability company, MM LLC, a Delaware limited liability company, which opened a
single account with each Advisor selected. On September 1, 2000, the Partnership
joined MM LLC in a similar manner along with another Multi-Advisor Fund
sponsored by MLIP. MM LLC is managed by MLIP, has no investors other than the
Multi-Advisor Funds and serves solely as the vehicle through which the assets of
such Multi-Advisor Funds are combined in order to be managed through single
rather than multiple accounts. The placement of assets into MM LLC did not
change the operations or fee structure of the Partnership; therefore, the
following notes also relate to the operation of the Partnership through its
investment in MM LLC. The administrative authority over the Partnership remains
with MLIP. MLIP, on an ongoing basis, may change the number of Multi-Advisor
Funds investing in MM LLC.

          The Partnership 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 Partnership 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.


                                      1
<PAGE>

          The Units sold, generally, at the beginning of each calendar quarter,
are sold in separate Series, 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 through MM LLC.

          As of December 31, 2000, the Partnership's capitalization was
$26,698,851 and the Net Asset Value per Series A Unit (the initial Series of
Units), originally $100 as of October 12, 1994, had risen to $139.23 (adding
back $26.00 in Distributions).

          Through December 31, 2000, the highest month-end Net Asset Value of a
Series A Unit was $139.23 (adding back $26.00 in Distributions) (December
31, 2000) and the lowest was $101.04 (December 31, 1994).

          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 Partnership is a "principal protected" commodity pool. Merrill
Lynch provides the guarantee described below under 1(c), "Narrative  Description
of Business -- Merrill Lynch's 'Principal Protection' Undertaking to the
Partnership" 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 Merrill Lynch from any
liability under its guarantee, MLIP imposes substantial opportunity costs on the
Partnership by deleveraging its trading, retaining a substantial portion of the
Partnership's assets in the Partnership rather than investing such assets in the
Trading Partnership for allocation to trading. If the Net Asset Value per Unit
of a Series declines 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 Merrill Lynch incurred no financial
obligation to the Partnership under Merrill Lynch'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 Partnership'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 Partnership's business constitutes only one segment for financial
reporting purposes, i.e., a speculative "commodity pool." The Partnership does
not engage in sales of goods or services.


                                      2
<PAGE>

     (c)  NARRATIVE DESCRIPTION OF BUSINESS:

          GENERAL

          The Partnership trades, through MM LLC after September 1, 2000, 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 Partnership's investment in MM LLC is
allocated and reallocated by MLIP to the trading management of the Advisors
applying proprietary strategies in numerous markets. MLIP may, from time to
time, direct certain individual Advisors to manage their Partnership accounts
as if they were managing up to 50% more equity than the actual capital
allocated to them.

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

          MERRILL LYNCH'S "PRINCIPAL PROTECTION" UNDERTAKING TO THE PARTNERSHIP

          Merrill Lynch agreed to contribute sufficient capital to the
Partnership 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). It
is not a guarantee against the loss of the time value of such investment or a
guarantee of profit.

          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 Merrill Lynch guarantee for a certain period of time
(resetting the minimum Net Asset Value per Unit of such Series guaranteed by
Merrill Lynch) or to continue to operate such Series without a "principal
protection" feature.

          TWO-TIER STRUCTURE OF THE PARTNERSHIP

          Prior to September 1, 2000, the Partnership did not trade in the
futures and forwards markets directly, but rather through the Trading
Partnership. The Partnership's liability for any trading losses is still limited
to the Partnership's investment in the Trading Partnership. Effective
September 1, 2000, the Partnership consolidated its trading accounts with
those of certain other multi-advisor managed futures funds sponsored by MLIP.
The Trading Partnership is no longer trading directly through managed
accounts with each of its advisors, but investing in MM LLC.

          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 Partnership and are available for use in its speculative trading.
In such trading, the Partnership's assets are used as security for and to pay
the Partnership'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 Partnership's assets are
also generally available for cash management and to earn interest, as more fully
described below under "Available Assets."


                                      3
<PAGE>

          MARKET SECTORS.

          The Partnership trades, currently through MM LLC, 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 Partnership trades, currently through MM LLC, on a variety of
United States and foreign futures exchanges. Substantially all of the
Partnership's nonexchange trading takes places in the highly liquid,
institutionally-based currency forward markets.

          Many of the Partnership's currency trades are executed in the spot and
forward foreign exchange markets (the "FX Markets") where there are no direct
execution costs. Instead, the participants, banks and dealers in the FX Markets
take a "spread" between the prices at which they are prepared to buy and sell a
particular currency and such spreads are built into the pricing of the spot or
forward contracts with the Partnership. In its exchange of futures for physical
("EFP") trading, the Partnership acquires cash currency positions through banks
and dealers. The Partnership pays a spread when it exchanges these positions for
futures. This spread reflects, in part, the different settlement dates of the
cash and the futures contracts, as well as prevailing interest rates, but also
includes a pricing spread in favor of the banks and dealers, which may include a
Merrill Lynch entity.

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

          CUSTODY OF ASSETS.

          All of the Partnership's assets are currently held either in custodial
or customer accounts at Merrill Lynch. Assets held in customer accounts are held
at Merrill Lynch Pierce Fenner & Smith ("MLPF&S") or MLF. These customer
accounts are maintained in the Partnership's name, but the assets deposited by
the Partnership in such accounts are commingled with those of other MLPF&S and
MLF customers. Prior to May 26, 2000, the Partnership's assets managed by MLIM
were generally held in custodial accounts at a major bank, separate from all
other Merrill Lynch or banking client assets.

          AVAILABLE ASSETS.

          Prior to May 26, 2000, the Partnership earned income, as described
below, on its "Available Assets," which could be generally described as the
cash actually held by the Partnership or invested in Treasury bills or
Government Securities. Available Assets were held primarily in U.S. dollars or
in U.S. dollar denominated Government Securities, and to a lesser extent in
foreign currencies and were comprised of the following: (a) the Partnership's
assets managed by MLIM and the Partnership'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 Partnership's account on a daily basis; (b) short-term
Treasury bills purchased by the Partnership; and (c) the Partnership'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. On May 26, 2000, the Government
Securities and Treasury bills were liquidated and Commercial Paper was
purchased. Available Assets do not include, and the Partnership does not earn
interest on, the Partnership'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.


                                      4
<PAGE>

          The Partnership's Available Assets may be greater than, less than or
equal to the Partnership'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 PARTNERSHIP'S U.S. DOLLAR AVAILABLE ASSETS MANAGED BY MLIM AND COMMERCIAL
PAPER PROGRAM.

          Prior to May 26, 2000, a portion of the Partnership's U.S. dollar
Available Assets were managed directly by MLIM, pursuant to guidelines
established by MLIP, for which MLIM assumed no responsibility, in the Government
Securities markets. MLIP's objective in retaining MLIM was to provide cash
management services to the Partnership and to enhance the return earned on the
Partnership's U.S. dollar Available Assets managed by MLIM to slightly above
the 91-day Treasury bill rate. On May 26, 2000, the Government Securities were
liquidated and the management agreement with MLIM was terminated. Commercial
Paper was purchased. MLPF&S acts as custodian for the cash assets utilized in
the Commercial Paper Program. The Commercial Paper Program is managed by MLIP.

          The Commercial Paper holdings are acquired on behalf of the
Partnership and maintained in a custodial account at Merrill Lynch and are
specifically traceable to the Partnership. All income earned on such Commercial
Paper inures to the benefit of the Partnership.

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

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

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

          CHARGES

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

<TABLE>
<CAPTION>
                                 2000                           1999                              1998
                             ------------------------------------------------------------------------------------------------
          Charges                           % of Average                     % of Average                    % of Average
                                Dollar        Month-End        Dollar         Month-End          Dollar        Month-End
                                Amount       Net Assets        Amount         Net Assets         Amount       Net Assets
-----------------------------------------------------------------------------------------------------------------------------
<S>                            <C>          <C>               <C>            <C>                <C>          <C>
Brokerage                      $1,398,269     4.36%           $3,969,972       6.53%            $6,159,359     6.43%
Commissions
Administrative Fee                 53,971     0.17%              159,099       0.26%               193,861     0.20%
Profit Shares                      19,158     0.06%              265,734       0.44%             1,658,306     1.73%
                             ------------------------------------------------------------------------------------------------
Total                          $1,471,398     4.59%           $4,394,805       7.23%            $8,011,526     8.36%
                             ================================================================================================
</TABLE>

          Subsequent to September 1, 2000, Brokerage Commissions, Administrative
Fees and Profit Shares are not representative of the actual amounts paid by the
Partnership, because the Partnership paid the bulk of these fees as an investor
in MM LLC. See "Description of Current Charges".

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

          The Partnership's average month-end Net Assets during 2000, 1999, and
1998 equaled $32,066,319, $60,816,812 and $95,777,172, respectively.


                                      5
<PAGE>

          During 2000, 1999 and 1998, the Partnership earned $1,549,458,
$3,263,074 and $5,434,851 in interest income, or approximately 4.83%, 5.37% and
5.67% of the Partnership's average month-end Net Assets.

          Effective October 1, 1998, MLIP reduced the Partnership's annual
Brokerage Commissions 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 Partnership's
month-end total assets (prior to reduction for accrued expenses), not the
Partnership's assets allocated to trading.

                         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 Partnership's month-end assets
                                                            committed to trading. The Partnership 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 Partnership's month-end traded assets).

                                                            During 2000 (prior to its investment in MM LLC), 1999
                                                            and 1998, the round-turn (each purchase and sale or
                                                            sale and purchase of a single futures contract)
                                                            equivalent rate of the Partnership's flat-rate Brokerage
                                                            Commissions was approximately $101, $127 and $80,
                                                            respectively (not including, in calculating round-turn
                                                            equivalents, forward contracts on a futures-equivalent
                                                            basis). The estimated aggregate round turn commission rate
                                                            for MM LLC for the year ended December 31, 2000 was $82.

MLF                        Use of Partnership assets        Merrill Lynch may derive an economic benefit from the
                                                            deposit of certain of the Partnership's U.S. dollar
                                                            Available Assets not held in Commercial Paper.

MLIP                       Administrative Fees              The Partnership pays MLIP a monthly Administrative
                                                            Fee equal to 0.021 of 1% (a 0.25 of 1% annual rate)
                                                            of the Partnership's month-end total assets. MLIP
                                                            pays the Partnership's routine administrative costs.

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

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

Government                 Bid-ask spreads                  Prior to May 26, 2000, the dealers with which MLIM
Securities Dealers                                          executed Government Securities trades included
                                                            bid-ask spreads in the prices they quoted to the
                                                            Partnership. On May 26, 2000, the management
                                                            agreement with MLIM was terminated.


                                        6
<PAGE>

Advisors                   Profit Shares                    Advisors receive 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
                                                            Partnership. The Partnership may pay substantial Profit
                                                            Shares during periods when it is incurring significant
                                                            overall losses.

Advisors                   Consulting Fees                  MLF pays the Advisors annual Consulting Fees 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 ("NFA"). 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 Partnership has no employees.

          (d)     FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS:
                  ---------------------------------------------
                  The Trading Partnership trades, through MM LLC, on a number of
foreign commodity exchanges. The Partnership does not engage in the sales of
goods or services.

ITEM 2:  PROPERTIES
         ----------
         Neither the Partnership nor the Trading Partnership use any physical
properties in the conduct of its business.

         The Partnership's and the Trading Partnership's only place of business
is the place of business of MLIP (Princeton Corporate Campus, 800 Scudders Mill
Road - Section 2G, Plainsboro, New Jersey 08536). MLIP performs all
administrative services for the Partnership and the Trading Partnership from
MLIP's offices.


                                       7
<PAGE>

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

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

ITEM 4:  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
         ---------------------------------------------------
                  The Partnership has never submitted any 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 guarantee.

         (b)      HOLDERS:
                  --------
                  As of December 31, 2000, there were 1,476 holders of Units,
including MLIP.

         (c)      DIVIDENDS:
                  ----------
                  For Series issued on or prior to May 1, 1997, the Partnership
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.


                                       8
<PAGE>

         As of December 31, 2000, 1999 and 1998, the Partnership had made the
following distributions:

<TABLE>
<CAPTION>
                                 DISTRIBUTION         FIXED-RATE      DISCRETIONARY
                    SERIES           DATE            DISTRIBUTION      DISTRIBUTION
                  ----------  ------------------   ----------------  ---------------
<S>               <C>         <C>                  <C>               <C>
   2000
--------
                   Series A        10/01/2000       $      3.50          $      --
                   Series B        01/01/2000              3.50                 --
                   Series C        04/01/2000              3.50                 --
                   Series D        07/01/2000              3.50                 --
                   Series E        10/01/2000              3.50                 --
                   Series F        01/01/2000              3.50                 --
                   Series G        04/01/2000              3.50                 --
                   Series H        07/01/2000              3.50                 --


   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                 --
</TABLE>

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


                                       9
<PAGE>

         (d)      RECENT SALES OF UNREGISTERED SECURITIES;
                  ----------------------------------------
                  USE OF PROCEEDS FROM REGISTERED SECURITIES
                  ------------------------------------------
                  The Partnership has units registered with an aggregate price
of $462,114,000. The Partnership has sold units with an aggregate price of
$164,506,495.

ITEM 5(b)

                  Not applicable.

ITEM 6:  SELECTED FINANCIAL DATA
         -----------------------
The following selected financial data has been derived from the audited
financial statements of the Partnership:

<TABLE>
<CAPTION>
                                                FOR THE YEAR    FOR THE YEAR     FOR THE YEAR     FOR THE YEAR     FOR THE YEAR
                                                   ENDED            ENDED           ENDED            ENDED            ENDED
                                                DECEMBER 31,    DECEMBER 31,     DECEMBER 31,     DECEMBER 31,     DECEMBER 31,
INCOME STATEMENT DATA                              2000            1999             1998             1997             1996
----------------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>              <C>               <C>              <C>             <C>
Revenues:

Trading Profits (Loss)
     Realized                                  $  (610,248)    $ 1,318,041       $ 8,746,563      $ 5,412,457     $ 9,038,064
     Change in Unrealized                         (202,811)       (809,172)       (2,053,193)       1,083,826        (396,221)
                                            --------------------------------------------------------------------------------------
     Total Trading Results                        (813,059)        508,869         6,693,370        6,496,283       8,641,843
                                            --------------------------------------------------------------------------------------

Interest Income                                  1,549,458       3,263,074         5,434,851        4,873,872       4,545,186
                                            --------------------------------------------------------------------------------------
     Total Revenues                                736,399       3,771,943        12,128,221       11,370,155      13,187,029
                                            --------------------------------------------------------------------------------------

Expenses:
     Brokerage Commissions                       1,398,269       3,969,972         6,159,359        4,833,598       4,775,116 /1/
     Administrative Fees/1/                         53,971         159,099           193,861          138,103         129,057 /1/
     Profit Shares                                  19,158         265,734         1,658,306          931,522         978,264
                                            --------------------------------------------------------------------------------------
     Total Expenses                              1,471,398       4,394,805         8,011,526        5,903,223       5,882,437
                                            --------------------------------------------------------------------------------------
Income from Investment in MM LLC                 1,876,745             --                --               --              --
                                            --------------------------------------------------------------------------------------
Net Income (Loss) Before Minority Interest       1,141,746        (622,862)        4,116,695        5,466,932       7,304,592
Minority Interest in (Income)Loss/2/               (48,173)         14,666           (27,056)         (46,687)        (81,228)
                                            --------------------------------------------------------------------------------------
Net Income (Loss)                              $ 1,093,573      $ (608,196)      $ 4,089,639      $ 5,420,245     $ 7,223,364
                                            ======================================================================================
</TABLE>


                                       10
<PAGE>

<TABLE>
<CAPTION>
                                              DECEMBER 31,    DECEMBER 31,      DECEMBER 31,      DECEMBER 31,       DECEMBER 31,
BALANCE SHEET DATA/3/                            2000            1999              1998              1997               1996
------------------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>              <C>              <C>             <C>               <C>
Aggregate Net Asset Value
   (Series A-S)                             $ 26,698,851     $ 41,682,768     $ 79,106,838      $101,226,685      $ 78,905,273
                                            ------------     -------------    ------------      ------------      ------------

Net Asset Value per Unit

   Series A                                     $113.23 /4/      $111.64 /5/      $115.74 /6/       $113.73 /7/       $110.71 /8/
   Series B                                     $111.96 /4/      $110.83 /5/      $113.98 /6/       $114.15 /7/       $114.25 /8/
   Series C                                     $107.87 /4/      $106.45 /5/      $108.92 /6/       $108.15 /7/       $109.34 /8/
   Series D                                     $107.16 /4/      $106.98 /5/      $111.45 /6/       $109.94 /7/       $108.20 /8/
   Series E                                     $108.67 /4/      $107.36 /5/      $111.14 /6/       $109.40 /7/       $108.59 /8/
   Series F                                     $107.43 /4/      $106.12 /5/      $108.95 /6/       $109.04 /7/       $108.92 /8/
   Series G                                     $106.12 /4/      $104.77 /5/      $107.67 /6/       $106.52 /7/       $107.32
   Series H                                     $104.40 /4/      $103.60 /5/      $107.81 /6/       $106.62 /7/       $106.47
   Series K                                     $114.12          $107.85          $109.61           $104.77               N/A
   Series L                                     $111.23          $105.10          $106.81           $102.08               N/A
   Series M                                     $112.79          $106.61          $108.34           $103.70               N/A
   Series N                                     $108.74          $102.77          $104.43               N/A               N/A
   Series O                                     $109.07          $103.09          $104.77               N/A               N/A
   Series P                                     $111.28          $105.19          $106.92               N/A               N/A
   Series Q                                     $102.89           $97.27           $98.86               N/A               N/A
   Series R                                     $103.93           $98.33              N/A               N/A               N/A
   Series S                                     $104.76           $99.20              N/A               N/A               N/A
</TABLE>

         (1) As of January 1, 1996, a portion of the Brokerage Commissions
were reclassified as Administrative Fees, at no additional cost to the
Partnership. 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
Partnership owns substantially all of the Trading Partnership, Trading
Partnership activities are referred to as Partnership 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 differ
immaterially from Net Asset Values as determined under generally accepted
accounting principles ("GAAP") due to the treatment of organizational and
initial offering cost reimbursements until September 1997.

         (4) Net of aggregate distribution of $26.00 per Unit on Series A
Units, $24.50 on the Series B Units, $21.50 on the Series C Units, $19.50 on
the Series D Units, $19.50 on the Series E Units, $17.75 on the Series F
Units, $17.50 on the Series G Units and $17.50 on the Series H Units.

         (5) 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.

         (6) 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.

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

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

                                       11
<PAGE>

                          ML PRINCIPAL PROTECTION L.P.
                                DECEMBER 31, 2000

                      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: $26,698,851
                    WORST MONTHLY DRAWDOWN:(2) (3.70)% (2/96)
            WORST PEAK-TO-VALLEY DRAWDOWN:(3) (6.20)% (11/98 - 12/00)

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
                                MONTHLY RATES OF RETURN(4)
---------------------------------------------------------------------------------
MONTH                       2000        1999       1998        1997       1996
---------------------------------------------------------------------------------
<S>                         <C>        <C>         <C>        <C>        <C>
January                     1.11%      (1.09)%     0.07%      2.06%      2.45%
---------------------------------------------------------------------------------
February                    (0.38)      0.84       (0.56)      1.44      (3.70)
---------------------------------------------------------------------------------
March                       (0.87)     (0.52)       0.10       0.05       1.06
---------------------------------------------------------------------------------
April                       (1.50)      1.17       (1.96)     (0.70)      3.10
---------------------------------------------------------------------------------
May                          0.72      (1.30)       0.95      (1.43)     (1.98)
---------------------------------------------------------------------------------
June                        (1.21)      1.19       (0.86)      0.70       1.36
---------------------------------------------------------------------------------
July                        (1.11)      0.20       (0.67)      3.14      (1.68)
---------------------------------------------------------------------------------
August                       0.76      (0.02)       4.83      (2.71)      0.49
---------------------------------------------------------------------------------
September                   (2.21)     (0.91)       3.55       0.86       1.62
---------------------------------------------------------------------------------
October                      0.39      (2.90)       0.06      (0.43)      4.25
---------------------------------------------------------------------------------
November                     4.75       1.60       (1.00)      0.80       2.50
---------------------------------------------------------------------------------
December                     4.74       1.00        0.20       2.22      (0.20)
---------------------------------------------------------------------------------
Compound Annual
Rate of Return               5.02%     (0.83)%      4.60%      6.01%      9.36%
---------------------------------------------------------------------------------
</TABLE>

          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
initially allocated 85% of their assets to trading.


                  (1) Pursuant to applicable CFTC regulations, a "Multi-Advisor"
Partnership is defined as one that allocates no more than 25% of its Trading
Assets to any single manager. The Partnership 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"
Partnership. 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 Merrill Lynch guarantee and MLIP- related deleveraging of the
Partnership's trading provides the "Principal Protection" feature of the
Partnership.

                  (2) Worst Monthly Drawdown represents the largest negative
monthly Rate of Return experienced by the Partnership since January 1, 1996;
a drawdown is measured on the basis of month-end Net Asset Value only, and
does not reflect intra-month figures.

                                       12
<PAGE>

                  (3) Worst Peak-to-Valley Drawdown represents the greatest
percentage decline from a month-end cumulative monthly Rate of Return since
January 1, 1996 without such cumulative monthly Rate of Return being equaled
or exceeded as of a subsequent month-end. For example, if the monthly Rate of
Return was (1)% in each of January and February, 1% in March and (2)% in
April, the Peak-to-Valley Drawdown would still be continuing at the end of
April in the amount of approximately (3)%, whereas if the monthly Rate of
Return had been approximately 3% in March, the Peak-to-Valley Drawdown would
have ended as of the end of February at approximately the (2)% level.

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

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
                                       MONTH-END NET ASSET VALUE PER SERIES A UNIT
-----------------------------------------------------------------------------------------------------------------------
            Jan.        Feb.         Mar.         Apr.         May         June         July        Aug.        Sept.
-----------------------------------------------------------------------------------------------------------------------
<S>     <C>          <C>         <C>          <C>          <C>         <C>          <C>          <C>         <C>
   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/  $109.80/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/  $114.53/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/  $119.77/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/  $115.41/d/
-----------------------------------------------------------------------------------------------------------------------
   2000 $112.80/e/   $112.46/e/  $111.61/e/   $110.11/e/   $110.85/e/  $109.67/e/   $108.61/e/   $109.41/e/  $107.25/e/
-----------------------------------------------------------------------------------------------------------------------
<CAPTION>
--------------------------------------------------
    MONTH-END NET ASSET VALUE PER SERIES A UNIT
--------------------------------------------------
                 Oct.       Nov.         Dec.
--------------------------------------------------
<S>          <C>        <C>          <C>
   1996      $108.24/b/ $110.93/b/   $110.70/b/
--------------------------------------------------
   1997      $110.69/c/ $111.50/c/   $113.73/c/
--------------------------------------------------
   1998      $116.40/d/ $115.45/d/   $115.74/d/
--------------------------------------------------
   1999      $109.03/e/ $110.61/e/   $111.64/e/
--------------------------------------------------
   2000      $104.16/f/ $108.59/f/   $113.23/f/
--------------------------------------------------
</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.
/f/ After reduction for the first, second, third, fourth and fifth annual
distribution and the $3.50 per Series A Unit distribution made on October 1,
2000.

                  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.

                                         13
<PAGE>

ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        -----------------------------------------------------------------------
        OF OPERATIONS
        -------------
        THE TWO-TIER STRUCTURE OF THE PARTNERSHIP

                  Effective September 1, 2000, the Partnership consolidated
its trading accounts with those of certain other multi-advisor managed future
funds sponsored by MLIP. The Trading Partnership is no longer trading
directly through managed accounts with each of its Advisors, but investing in
MM LLC. Prior to September 1, 2000, the Partnership did not trade in the
futures and forwards markets directly, but rather through the Trading
Partnership. The Partnership's liability for any trading losses is still
limited to the Partnership's investment in the Trading Partnership, through
MM LLC.

                  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, through MM LLC. 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 Partnership has
no effect on the leverage at which the different Series of Units trade. The
Partnership 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 Partnership/Trading Partnership structure other than permitting the
Partnership to issue the Series of Units at different times, which Series,
may, over time, trade with different percentages of their capital allocated
to trading.

                  On January 1, 2001, the Trading Partnership was dissolved.
MLIP redeemed its entire investment and the Partnership immediately invested
its redemption proceeds directly into MM LLC, giving the Partnership a direct
investment in MM LLC rather than through the Trading Partnership. This action
did not effect the operation of the Partnership or MM LLC and was done at no
cost to the investors. Any costs have been absorbed by MLIP. MLIP continues
to maintain a 1% General Partner interest in the Partnership.

RESULTS OF OPERATIONS

         ADVISOR SELECTIONS

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

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

                                       14
<PAGE>

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

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

         GENERAL

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

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

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

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

         PERFORMANCE SUMMARY

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

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

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

                                       15
<PAGE>

               2000


<TABLE>
<CAPTION>
                                       Total Trading
                                           Results
<S>                                  <C>
 Interest Rates                                $ 197,180
 Stock Indices                                  (607,651)
 Agriculture                                    (153,523)
 Currencies                                      810,502
 Energy                                        1,715,535
 Metals                                         (491,589)
                                     --------------------
                                             $ 1,470,454
                                     ====================
</TABLE>

          Energy trading was successful for the year. Long crude oil and
unleaded gas positions realized gains early in the year despite the
possibility of OPEC increasing oil production. A hike would still leave oil
inventories at levels much below normal during the balance of the year.
Prices continued to rise throughout the year as the International Energy
Agency reported the need for additional oil to prevent a shortage in
inventory. During the fourth quarter, fears of supply shortages pushed prices
higher as average winter temperatures dropped from the previous year.

          Currency trading alternated from unprofitable to profitable
throughout the year. The Euro declined against the U.S. dollar early in the
year after officials from the Group of Seven met and failed to express
concern about the low levels of the European currency producing profits.
Other factors to the decline include the slow pace of microeconomic reform in
Europe, plans for a European withholding tax and the scale of direct
investment flows outside of Europe. During the second quarter, gains from
short Euro currency and long Swiss franc positions outweighed losses
sustained in other currencies. Despite the dramatic interest rate hikes by
the Swiss National Bank ("SNB") and the weakness of the Euro, the SNB said it
would not keep the Swiss franc from rising. The pound was particularly weak
in the wake of the Bank of England's references to "sterling overvaluation."
Gains realized on short Japanese yen positions were outweighed by losses
sustained in the Euro positions as it fell to a record low despite stronger
than expected European financial data and the success of the German tax
reform package. Currency trading finished off the year strong as gains in
Canadian dollar out weighed losses sustained from Euro position. Short
positions in the Canadian dollar were profitable as the currency weakened
during the month despite worsening U.S. dollar fundamentals, a large Canadian
budget surplus and plans for tax cuts in Canada.

          Slight profits were earned during the year in the interest rate
sector. Short Eurodollar trading was profitable as the currency continued to
decline in early in the year. The European Union ministers blamed the
currency's slide in January on rapid U.S. growth and fears that the Federal
Reserve will increase U.S. interest rates. These profits were far outweighed
by losses in the U.S. 10-year Treasury note positions and long U.S. Treasury
positions as the yield curve fluctuated widely. U.S. bond yields fell during
the year as investors shifted to Treasuries due to increased volatility in
the NASDAQ and other equity markets. Uncertainty surrounding the U.S.
Presidential election had investors favoring the bond markets resulting in
gains for the Partnership's long positions. Strong gains in both Euro and
three-month Euribor futures rallied the sector for the year eliminating
previous losses.

          Agricultural commodity trading produced losses for the year. Losses
were realized in short corn positions which were due to dry conditions in
Argentina, which led to high corn prices. During the second quarter, long
positions in soybean products were unprofitable as weather and soil
conditions appear favorable for an abundance of supply. The USDA grain crop
report projected a 12% rise in soybean inventories from the previous season.
Trading on sugar and live cattle positions was unprofitable during the third
quarter, erasing previous gains in other commodities. Brazil, the world's
largest sugar producer, reduced output and the Asian post crisis recovery
period has improved demand, resulting in a supply/demand imbalance. During
the fourth quarter gains in short coffee positions were not enough to offset
previous losses throughout the year. Prices of coffee faced a seven year low
as a result of excess world supply.

                                       16
<PAGE>

          Metals trading was unprofitable for the year. Prices rose during
the period in base metals as concerns over higher interest rates and the
decline in stock prices globally created defensive tones in the market. High
aluminum inventories caused prices to decline on the London Metals Exchange.
Copper prices rose over rumors of increased demand from China, having an
adverse effect on the short positions held. During the second quarter, copper
trading continued to result in losses for the sector. A Freeport Indonesia
mine announced output cuts would not be as large as the Indonesian government
had forecast, resulting in losses for the Partnership's long positions.
Losses continued through the quarter as trading in both base and precious
metals was unprofitable as losses were sustained in gold and aluminum
positions. The sector sustained losses during the year as nickel prices
declined from slowing demand for stainless steel in Europe and Asia. The year
closed with continued losses as gains in silver could not out weigh losses in
aluminum and gold.

          Stock index trading was unprofitable despite gains realized in IBEX
35(Milan), DAX German Stock Index and CAC 40 Euro futures early in the year.
Losses were sustained in Nikkei 225 and S&P 500 positions. Signs of rising
inflation fueled fears that the Federal Reserve will continue to raise
interest rates aggressively to slow the robust economy.

                1999


<TABLE>
<CAPTION>
                                        Total Trading
                                           Results
<S>                                  <C>
 Interest Rates                               $ (349,650)
 Stock Indices                                   450,778
 Agriculture                                    (248,437)
 Currencies                                   (1,021,229)
 Energy                                        1,492,483
 Metals                                          184,924
                                     --------------------
                                               $ 508,869
                                     ====================
</TABLE>


                  ML Principal Protection L.P. finished 1999 with gains in
energy, stock index and metals trading and losses in currency, interest rates
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 Partnership 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 Partnership suffered losses in stock index positions as trading was
mixed due to significant volatility globally. However, there was profitable
trading in Hang Seng, Nikkei 225 and Topix Indices which resulted in gains
during November and


                                       17
<PAGE>

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
Partnership held short positions in gold futures at that time. Gold prices
had stabilized in the fourth quarter following the price surge. Early in the
year, burdensome warehouse stocks and questionable demand prospects weighed
on base metals as aluminum fell to a five-year low and copper fell to nearly
an 11-year low. The economic scenario for Asia, Brazil, Europe and emerging
market nations helped to keep copper and other base metals on the defensive
as demand receded with virtually no supply side response in the second
quarter. A substantial increase in Chinese imports combined with the recovery
in the rest of Asia and Europe had significantly improved demand for aluminum
pushing prices higher during December.

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

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

                  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.

               1998
<TABLE>
<CAPTION>
                                        Total Trading
                                           Results
<S>                                  <C>
 Interest Rates                              $ 7,116,336
 Stock Indices                                   824,905
 Commodities                                    (967,695)
 Currencies                                    2,085,218
 Energy                                         (882,409)
 Metals                                       (1,482,985)
                                     --------------------
                                             $ 6,693,370
                                     ====================
</TABLE>

                                       18
<PAGE>

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

          In currency markets, results early in the year were 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 commodity prices to decline as demand
from the Asian economies weakened. Japan's deepening recession and credit
crunch continued through the fourth quarter, and the Partnership achieved
gains from long yen positions.

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

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

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

                                       19
<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 Partnership as the market for heating oil
prices dropped to its lowest level in more than a decade. In early December, oil
and natural gas prices dropped sharply, causing continued problems for many
emerging market countries that depend on commodity exports for economic growth
and government financing. These price pressures were mainly due to excessive
supply availability and near-term weather indications that inventories would
remain at more than adequate levels even in the event of a cold Northern
Hemisphere winter. Also, the December U.S. air attack on Iraq failed to cause
any damage to oil pumping and shipping operations, and oil prices fell over 10%.

VARIABLES AFFECTING PERFORMANCE
-------------------------------

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

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

          The Partnership's Brokerage Commissions and Administrative Fees are a
constant percentage of the Partnership's assets. The only Partnership costs
(other than the insignificant currency trading costs) which are not based on a
percentage of the Partnership'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 Partnership between realized and unrealized profits.
Most of the contracts traded by the Partnership are highly liquid and can be
closed out at any time.

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

                                       20
<PAGE>
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% of total assets available. Series issued before May 1, 1997 began
trading at 60%-75% of total assets available.

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

          The Partnership's assets are held primarily in short-term debt
securities with maturities under one year, as well as in cash. The Net Asset
Value of the Partnership'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 Partnership'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 Partnership's profit potential generally increases. Inflation in
commodity prices could also generate price movements which the strategies might
successfully follow.

          The Partnership's assets are held in cash and Commercial Paper of
major U.S. corporations. Accordingly, except in very unusual circumstances, the
Partnership should be able to close out any or all of its open trading positions
and liquidate any or all of its 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 Partnership's
positions and assets, the Partnership'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.

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

     PAST PERFORMANCE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
     -------------------------------------------------------------
          The Partnership is a speculative commodity pool. Unlike an operating
company, the risk of market sensitive instruments traded by it is integral, not
incidental, to the Partnership's main line of business. As of September 1, 2000,
the Partnership invested all of its trading assets in MM LLC. Therefore, the
representations in this section refer to the time period prior to September 1,
2000.

          Market movements result in frequent changes in the fair market
value of the Partnership's open positions and, consequently, in its earnings
and cash flow. The Partnership'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 Partnership's open positions
and the liquidity of the markets in which it trades.

          The Partnership, 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 Partnership's past
performance is not necessarily indicative of its future results.

          Value at Risk is a measure of the maximum amount which the
Partnership could reasonably be expected to lose in a given market sector.
However, the inherent uncertainty of the Partnership's speculative trading

                                       21
<PAGE>

and the recurrence in the markets traded by the Partnership of market movements
far exceeding expectations could result in actual trading or non-trading losses
far beyond the indicated Value at Risk or the Partnership's experience to date
(i.e., "risk of ruin"). In light of the foregoing 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 Partnership's losses in any market sector
will be limited to Value at Risk or by the Partnership's attempts to manage its
market risk.

QUANTIFYING THE PARTNERSHIP'S TRADING VALUE AT RISK

       QUANTITATIVE FORWARD-LOOKING STATEMENTS
       ---------------------------------------
          The following quantitative disclosures regarding the Partnership'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 Partnership's risk exposure in the various market sectors traded
by the Advisors is quantified below in terms of Value at Risk. Due to the
Partnership's mark-to-market accounting, any loss in the fair value of the
Partnership's open positions is directly reflected in the Partnership'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
Partnership 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 Partnership),
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 Partnership'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 Partnership's positions are rarely, if ever,
100% positively correlated have not been reflected.

THE PARTNERSHIP'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 Partnership's open positions
by market category for the fiscal year 2000. During the fiscal year 2000, the
Partnership's average capitalization was approximately $32,066,319. For the
period January 1, 2000 through August 31, 2000, the average capitalization
was $34,849,632. During the fiscal year 1999, the Partnerships average
capitalization was approximately $60,816,812.

                                       22
<PAGE>
                                 AUGUST 31, 2000
<TABLE>
<CAPTION>
                                            % 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            $ 502,430           1.33%                             1.78%                691,000               11,953
 Currencies                  502,748           1.33%                             1.78%                637,246               15,471
 Stock Indices               224,940           0.59%                             0.80%                376,268                    -
 Metals                      223,376           0.59%                             0.79%                294,546               25,203
 Agriculture                 159,414           0.42%                             0.56%                218,843                9,400
 Energy                      219,278           0.58%                             0.78%                330,920               26,880
                   ------------------    ----------------------  ----------------------     ------------------   ------------------

 TOTAL                   $ 1,832,186           4.84%                             6.48%              2,548,823               88,907
                   ==================    ======================  ======================     ==================   ==================
</TABLE>

                                DECEMBER 31, 1999
<TABLE>
<CAPTION>
                                              % 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
 Agriculture                 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>

MATERIAL LIMITATIONS ON VALUE AT RISK AS AN ASSESSMENT OF MARKET RISK

                  The contract face value of the market sector instruments
held by the Partnership 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 Partnership. The magnitude of the Partnership'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 Partnership to incur severe losses over a short period of time.
Even comparatively minor losses could cause MLIP to further deleverage or
terminate the Partnership's trading. The foregoing Value at Risk table as
well as the past performance of the Partnership gives no indication of this
"risk of ruin."

NON-TRADING RISK

         FOREIGN CURRENCY BALANCES; CASH ON DEPOSIT WITH MLF

                  The Partnership 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 Partnership also has non-trading market risk on the
approximately 27% 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.

CASH MANAGEMENT

                  Prior to June 2000, the Partnership invested a portion of
its assets in Government Securities. Effective June 2000, the Partnership
liquidated the Government Securities held and now invests a portion of its
assets in Commercial Paper. These holdings generally have maturities of 30,
60 or 90 days and are held to maturity. The investments in Commercial Paper
are directed by MLIP.

                                      23
<PAGE>

QUALITATIVE DISCLOSURES REGARDING PRIMARY TRADING RISK EXPOSURES

                  The following qualitative disclosures regarding the
Partnership's market risk exposures " except for (i) those disclosures that
are statements of historical fact and (ii) the descriptions of how the
Partnership 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
Partnership'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 Partnership'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
Partnership. There can be no assurance that the Partnership'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 Partnership.

                  The following were the primary trading risk exposures of the
Partnership as of December 31, 2000, by market sector.

                  INTEREST RATES.

                  Interest rate risk is the principal market exposure of the
Partnership. Interest rate movements directly affect the price of derivative
sovereign bond positions held by the Partnership 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
Partnership's profitability. The Partnership's primary interest rate exposure is
to interest rate fluctuations in the United States and the other G-7 countries.
However, the Partnership also takes positions in the government  debt of smaller
nations e.g., New Zealand and Australia. MLIP anticipates that G-7 interest
rates will remain the primary market exposure of the Partnership for the
foreseeable future.

                  CURRENCIES.

                  The Partnership trades in a large number of currencies.
However, the Partnership's major exposures have typically been in the
dollar/yen, dollar/Euro and dollar/pound positions. MLIP does not anticipate
that the risk profile of the Partnership'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 Partnership's primary equity exposure is to G-7 equity
index price movements. As of December 31, 2000, the Partnership'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 Partnership is primarily exposed to
the risk of adverse price trends or static markets in the major U.S., European
and Asian indices.

                  METALS.

                  The Partnership'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 Partnership have consistently been in the
precious metals, gold and silver (and, to a much lesser extent, platinum).
However, gold 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 Partnership.

                                       24
<PAGE>

                  AGRICULTURE.

                  The Partnership's primary agriculture exposure is to price
movements which are often directly affected by severe or unexpected weather
conditions. Soybeans, grains and orange juice accounted for the substantial bulk
of the Partnership's commodities exposure as of December 31, 2000. In the past,
the Partnership 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 orange juice, in which the
Partnership has historically taken its largest positions.

                  ENERGY.

                  The Partnership'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 Partnership. 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
Partnership as of December 31, 2000.

         FOREIGN CURRENCY BALANCES.

                  The Partnership's primary foreign currency balances are in
Japanese yen, British pounds and Euros. The Partnership has minimal exchange
rate exposure on these balances.

         SECURITIES POSITIONS.

                  The Partnership holds only cash or commercial paper. The
Partnership's market exposure in instruments held other than for trading is in
the interest rate risk exposure of the Partnership's commercial paper portfolio,
managed by MLIP.

QUALITATIVE DISCLOSURES REGARDING MEANS OF MANAGING RISK EXPOSURE

         TRADING RISK

                  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 Partnership, adjusting the
percentage of the Partnership'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 Partnership basis. While MLIP does not itself intervene in the markets
to hedge or diversify the Partnership'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 Partnership.
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.


                                      25
<PAGE>

                  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 Partnership 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 Partnership 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 Partnership controls the non-trading exchange rate risk of
these balances by regularly converting its foreign currency balances back into
dollars, no less frequently than twice a month.

                  MLIP controls the interest-rate risk of the Partnership's
non-trading instruments (commercial paper) by limiting the overall duration
of such instruments to no more than 90 days. These risk control policies have
been successful in the Partnership'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 Partnership's commercial paper portfolio.

                  The Partnership 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 Partnership 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 27% 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
Partnership 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.


                                      26
<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 MLIP. Trading decisions are made by
the Advisors on behalf of the Partnership.

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

RONALD S. ROSENBERG        Chairman and Director

FABIO P. SAVOLDELLI        President and Director

FRANK M. MACIOCE           Vice President and Director

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

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


                  Ronald S. Rosenberg was born in 1961. Mr. Rosenberg is
Chairman and a Director of MLIP and head of the Alternative Investments Group
for MLIM Americas, which creates alternative investment products and
strategies for Merrill Lynch's large institutional and high net worth private
clients. These products include funds of funds investing in hedge funds,
private equity funds, exchange funds, as well as other specialized investment
products. Most recently, Mr. Rosenberg ran the Global Hedge Fund Sales Group
and International Fixed Income Groups which sold investment products to hedge
funds worldwide. He joined Merrill Lynch in 1995 from JP Morgan, where he was
also responsible for sales groups that sold investment products to hedge
funds. Mr. Rosenberg was educated at the Wharton Business School, where he
received a Master of Business Administration in Finance. He graduated Phi
Beta Kappa from Rutgers University with a Bachelor of Arts in Computer
Science and Economics.

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

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

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


                                      27
<PAGE>

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

          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 Partnership. Because MLIP serves as the sole
general partner of each of these funds, the officers and directors of MLIP
effectively manage them as officers and directors of such funds.

         (c)      IDENTIFICATION OF CERTAIN SIGNIFICANT EMPLOYEES:
                  ------------------------------------------------
                           None.

         (d)      FAMILY RELATIONSHIPS:
                  ---------------------
                           None.

         (e)      BUSINESS EXPERIENCE:
                  --------------------
                           See Item 10(a)(b) above.

         (f)      INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS:
                  -----------------------------------------

                           None.

         (g)      PROMOTERS AND CONTROL PERSONS:
                  ------------------------------
                           Not applicable.

ITEM 11:  EXECUTIVE COMPENSATION
          ----------------------
                  The directors and officers of MLIP are remunerated by MLIP
in their respective positions. The Partnership does not itself have any
officers, directors or employees. The Partnership pays Brokerage Commissions to
an affiliate of MLIP and Administrative Fees to MLIP. MLIP or its affiliates may
also receive certain economic benefits from holding certain of the Partnership's
dollar Assets in offset accounts, as described in Item 1(c) above. The directors
and officers receive no "other compensation" from the Partnership, and the
directors receive no compensation for serving as directors of MLIP. There are no
compensation plans or arrangements relating to a change in control of either the
Partnership or MLIP.

ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
         --------------------------------------------------------------
         (a)      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS:
                  ------------------------------------------------
                  As of December 31, 2000, no person or "group" is known to be
or have been the beneficial owner of more than 5% of the Units.

         (b)      SECURITY OWNERSHIP OF MANAGEMENT:
                  ---------------------------------
                  As of December 31, 2000, MLIP owned 2,711.94 Units
(Unit-equivalent general partnership interests), which was approximately 1% of
the total Units outstanding.


                                      28
<PAGE>

         (c)      CHANGES IN CONTROL:
                  -------------------
                  None.

ITEM 13: CERTAIN RELATIONSHIPS AND RELATED EXCHANGE OF FUTURES TRANSACTIONS
         ------------------------------------------------------------------
         (a)      TRANSACTIONS BETWEEN MERRILL LYNCH AND THE PARTNERSHIP
                  ------------------------------------------------------
                  All of the service providers to the Partnership, other than
the Advisors, are affiliates of Merrill Lynch. Merrill Lynch negotiated with
the Advisors over the level of their advisory fees and Profit Shares. However,
none of the fees paid by the Partnership to any Merrill Lynch party were
negotiated, and they are higher than would have been obtained in arm's-length
bargaining.

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

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

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

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

         (b)      CERTAIN BUSINESS RELATIONSHIPS:
                  -------------------------------
                  MLF, an affiliate of MLIP, acts as the principal commodity
broker for the Partnership.

                  In 2000, the Partnership expensed directly and indirectly
through MM LLC: (i) Brokerage Commissions of $1,923,409 to MLF, which
included approximately $345,638 in consulting fees earned by the Advisors;
and (ii) Administrative Fees of $71,475 to MLIP. In addition, MLIP and its
affiliates may have derived certain economic benefit from possession of the
Partnership's assets, as well as from foreign exchange and EFP trading.

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

         (c)      INDEBTEDNESS OF MANAGEMENT:
                  ---------------------------
                  The Partnership is prohibited from making any loans, to
management or otherwise.

         (d)      TRANSACTIONS WITH PROMOTERS:
                  ----------------------------
                  Not applicable.


                                       29
<PAGE>

                                     PART IV

ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
         ---------------------------------------------------------------
         (a)1.    FINANCIAL STATEMENTS (FOUND IN EXHIBIT 13.01):            PAGE
                  ----------------------------------------------
                  Independent Auditors' Report                                 1

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

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

                  Notes to Consolidated Financial Statements                5-14

         (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 Partnership, MLIP,
                           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 (File No. 33-73914) 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
                           Partnership, MLIP, 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, 2000.

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

EXHIBIT 3.01(i):           Is incorporated herein by reference from Exhibit
----------------           3.01(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 the Registrant's Registration
                           Statement.

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


                                      30
<PAGE>

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 Partnership,
                           MLIP, 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.

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 Partnership.

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 Partnership, the Trading Partnership and
                           MLIM.

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 Partnership and
                           Merrill Lynch Futures Inc.


                                      31
<PAGE>

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
                           Partnership 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                      2000 Annual Report and Independent Auditors' Report.

EXHIBIT 13.01:             Is filed herewith.
--------------

13.01(a)                   2000 Annual Report and Independent Auditor --
                           Reports for the following Trading Limited Liability
                           Company sponsored by MLIP:

                           ML Multi-Manager Portfolio LLC

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


28.01                      Prospectus of the Partnership 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
2000.


                                       32
<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/ Ronald S. Rosenberg
                                     -----------------------
                                         Ronald S. Rosenberg
                                         Chairman and Director

                                         (Principal Executive Officer)


         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed on March 30, 2001 by the
following persons on behalf of the Registrant and in the capacities indicated.

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

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

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

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


(Being the principal executive officer, the principal financial and accounting
officer and a majority of the directors of Merrill Lynch Investment Partners
Inc.)
<TABLE>
<S>                                 <C>                                                          <C>
MERRILL LYNCH INVESTMENT            General Partner of Registrant                                March 30, 2001
   PARTNERS INC.

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

                                       33
<PAGE>

                          ML PRINCIPAL PROTECTION L.P.

                       ANNUAL REPORT FOR 2000 ON FORM 10-K

                                INDEX TO EXHIBITS


                           EXHIBIT


Exhibit 13.01              2000 Annual Report and Independent Auditors' Report

Exhibit 13.01(a)           2000 Annual Report and Independent Auditors' Report
                           for the following Trading Limited Liability Company
                           sponsored by Merrill Lynch Investment Partners, Inc.:

                           ML Multi-Manager Portfolio LLC


                                      34