10-Q 1 a2136147z10-q.txt 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2004 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from________________to________________ Commission File Number 0-25000 ML PRINCIPAL PROTECTION L.P. ---------------------------- (Exact Name of Registrant as specified in its charter) DELAWARE 13-3750642 (REGISTRANT) ------------------------------- --------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) c/o Merrill Lynch Investment Managers LLC 222 Broadway 27th Floor New York, NY 10038-2510 ----------------------- (Address of principal executive offices) (Zip Code) 609-282-6996 ---------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / PART I - FINANCIAL INFORMATION Item 1. Financial Statements ML PRINCIPAL PROTECTION L.P. (A DELAWARE LIMITED PARTNERSHIP) STATEMENTS OF FINANCIAL CONDITION
MARCH 31, DECEMBER 31, 2004 2003 (UNAUDITED) ------------ ------------ ASSETS Equity in commodity futures trading accounts: Cash and option premiums $ 504,199 $ 503,091 Investment in MM LLC 14,786,726 15,441,696 Accrued interest receivable 407 389 ------------ ------------ TOTAL $ 15,291,332 $ 15,945,176 ============ ============ LIABILITIES AND PARTNERS' CAPITAL LIABILITIES: Redemptions payable $ 498,318 $ 392,038 Payable to MM LLC 6,288 111,442 ------------ ------------ Total liabilities 504,606 503,480 ------------ ------------ PARTNERS' CAPITAL: General Partners (146,547 and 123,681 Units) 166,510 159,703 Limited Partners (12,867,845 and 11,785,836 Units) 14,620,216 15,281,993 ------------ ------------ Total partners' capital 14,786,726 15,441,696 ------------ ------------ TOTAL $ 15,291,332 $ 15,945,176 ============ ============ NET ASSET VALUE PER UNIT (NOTE 3)
See notes to financial statements. 2 ML PRINCIPAL PROTECTION L.P. (A DELAWARE LIMITED PARTNERSHIP) STATEMENTS OF INCOME (unaudited)
FOR THE THREE FOR THE THREE MONTHS ENDED MONTHS ENDED MARCH 31, MARCH 31, 2004 2003 ------------- ------------- REVENUES: Trading profit (loss): Realized $ 1,351,816 $ 1,547,500 Change in unrealized (280,280) (856,627) ------------- ------------- Total trading results 1,071,536 690,873 ------------- ------------- Interest income 35,993 53,068 ------------- ------------- Total revenues 1,107,529 743,941 ------------- ------------- EXPENSES: Profit Shares 175,014 103,112 Brokerage commissions 271,299 301,152 Administrative fees 9,338 10,351 ------------- ------------- Total expenses 455,651 414,615 ------------- ------------- NET INCOME $ 651,878 $ 329,326 ============= ============= NET INCOME PER UNIT: Weighted average number of General Partner and Limited Partner Units outstanding 13,873,073 14,659,456 ============= ============= Net income per weighted average General Partner and Limited Partner Unit $ 0.0470 $ 0.0225 ============= =============
See notes to financial statements. 3 ML PRINCIPAL PROTECTION L.P. (A DELAWARE LIMITED PARTNERSHIP) STATEMENTS OF CHANGES IN PARTNERS' CAPITAL FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003 (unaudited)
GENERAL LIMITED UNITS PARTNER PARTNERS TOTAL ----------------- --------------- ----------------- ----------------- PARTNERS' CAPITAL, DECEMBER 31, 2002 149,307 $ 185,021 $ 17,255,541 $ 17,440,562 Conversion of Units (Note 3) 14,633,051 59 5,440 5,499 Net income - 3,426 325,900 329,326 Distributions - (266) (26,724) (26,990) Redemptions (505,641) - (577,186) (577,186) ----------------- --------------- ----------------- ----------------- PARTNERS' CAPITAL, MARCH 31, 2003 14,276,717 $ 188,240 $ 16,982,971 $ 17,171,211 ================= =============== ================= ================= PARTNERS' CAPITAL, DECEMBER 31, 2003 11,909,517 $ 159,703 $ 15,281,993 $ 15,441,696 Conversion of Units (Note 3) 2,266,687 - 314 314 Net income - 6,807 645,071 651,878 Redemptions (1,161,812) - (1,307,162) (1,307,162) ----------------- --------------- ----------------- ----------------- PARTNERS' CAPITAL, MARCH 31, 2004 13,014,392 $ 166,510 $ 14,620,216 $ 14,786,726 ================= =============== ================= =================
See notes to financial statements. 4 ML PRINCIPAL PROTECTION L.P. (A DELAWARE LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS (unaudited) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES In the opinion of management, the financial statements contain all adjustments (consisting of only recurring adjustments) necessary to present fairly the financial position of ML Principal Protection L.P. (the "Partnership") as of December 31, 2003, and the results of its operations for the three months ended March 31, 2004 and 2003. The operating results for the interim periods may not be indicative of the results for the full year. Certain information and footnote disclosures normally included in quarterly financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Partnership's Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2003. 2. INVESTMENT IN MM LLC As of March 31, 2004 and December 31, 2003, the Partnership had an investment in ML Multi-Manager Portfolio LLC ("MM LLC") of $14,786,726 and $15,441,696, respectively. As of March 31, 2004, and December 31, 2003, the Partnership's percentage ownership share of MM LLC was 12.20% and 11.02%, respectively. A condensed statements of financial condition and statements of operations for MM LLC are set forth as follows:
MARCH 31, DECEMBER 31, 2004 2003 (UNAUDITED) ------------- ------------- Assets $ 141,356,118 $ 148,476,219 ============= ============= Liabilities $ 20,113,554 $ 8,347,374 Members' Capital 121,242,564 140,128,845 ------------- ------------- Total $ 141,356,118 $ 148,476,219 ============= =============
FOR THE THREE MONTHS FOR THE THREE MONTHS ENDED MARCH 31, 2004 ENDED MARCH 31, 2003 (UNAUDITED) (UNAUDITED) -------------------- -------------------- Revenues $ 5,608,071 $ 4,572,299 Expenses 2,477,284 2,594,520 ------------- ------------ Net Income $ 3,130,787 $ 1,977,779 ============= ============
5 3. NET ASSET VALUE PER UNIT Prior to the opening of business on January 2, 2004, Series G, H, and O through R, those series that had come to term on or before December 31, 2003, but after December 31, 2002, were consolidated into a new series, Series 2004, with a $1.00 per Unit Net Asset Value. The aggregate Net Asset Value of each investor's new Units is equal to the aggregate Net Asset Value of their original Units at December 31, 2003. The consolidation had no adverse economic effect on the investors. The General Partner contributed $314 to the Partnership, the amount necessary due to the effects of rounding to ensure all investors received Units equal in value to their original holdings at December 31, 2003. The following is a list of the number of new Units each investor received of Series 2004 for each Unit of their original series holding.
NUMBER SERIES OF UNITS ------ ---------- G 110.859969 H 102.336331 O 129.904347 P 132.546751 Q 122.531124 R 123.779041
Prior to the Prior to the opening of business on January 2, 2003, Series A through F and K through N, those series whose guarantee had come to term on or before December 31, 2002, were consolidated into a new series, Series A 2003, with a $1.00 per Unit Net Asset Value. The aggregate Net Asset Value of each investor's new Units is equal to the aggregate Net Asset Value of their original Units at December 31, 2002. The consolidation had no economic effect on the investors. The General Partner contributed $5,499 to the Partnership, the amount necessary due to the effects of rounding, to ensure all investors received Units equal in value to their original holdings at December 31, 2002. The following is a listing of the number of new Units each investor received of Series A 2003 for each Unit of their original series holding.
NUMBER SERIES OF UNITS ------ ---------- A 122.021960 B 117.269077 C 115.242141 D 112.085339 E 111.088709 F 104.084994 K 123.799970 L 120.674078 M 122.310644 N 117.973383
After the series consolidations, the brokerage commission rates for Series 2004 and Series A 2003 were reduced to a monthly rate of 0.604 of 1% (a 7.25% annual rate). 6 At March 31, 2004 and December 31, 2003, the Net Asset Values of the different series of Units were: March 31, 2004
NET ASSET VALUE NUMBER OF UNITS NET ASSET VALUE PER UNIT ------------------- ------------------- ---------------------------- Series A 2003 Units $ 12,548,188 10,924,711.0000 $ 1.1486 Series 2004 Units 2,176,785 2,089,206.0000 1.0419 Series S Units 61,753 475.0000 130.01 -------------- ------------------- $ 14,786,726 13,014,392.0000 ============== ===================
December 31, 2003
NET ASSET VALUE NUMBER OF UNITS NET ASSET VALUE PER UNIT ------------------- ------------------- ---------------------------- Series A 2003 Units $ 13,096,718 11,889,700.0000 $ 1.1015 Series G Units 415,800 3,752.0300 110.82 Series H Units 495,479 4,842.1050 102.33 Series O Units 599,734 4,616.7419 129.90 Series P Units 251,706 1,899.0000 132.55 Series Q Units 77,950 636.2408 122.52 Series R Units 445,046 3,596.0000 123.76 Series S Units 59,263 475.0000 124.76 ------------- ------------------- $ 15,441,696 11,909,517.1177 ============= ===================
4. ANNUAL DISTRIBUTIONS The Partnership makes annual fixed-rate distributions, payable irrespective of profitability, of $3.50 per Unit on Units issued prior to May 1, 1997. The Partnership may also pay discretionary distributions on such Series of Units of up to 50% of any Distributable New Appreciation, as defined on such Units. No distributions are payable on Units issued after May 1, 1997. The Principal Assurance Dates for Series A through R came to term on or before December 31, 2003 and were not renewed. The above Series Units remain outstanding, with 100% of their assets allocated to trading, without any "principal protection" feature and no longer pay quarterly distributions. The Partnership has made the following distributions for the fiscal year ended December 31, 2003, and for the three month period ended March 31, 2004:
DISTRIBUTION FIXED-RATE DISCRETIONARY SERIES DATE DISTRIBUTION DISTRIBUTION ---------- ---------------- -------------- --------------- 2004 ---- None 2003 ---- Series F 1/1/2003 $ 3.50 $ - Series G 4/1/2003 3.50 - Series H 7/1/2003 3.50 -
7 5. FAIR VALUE AND OFF-BALANCE SHEET RISK The Partnership invests indirectly in derivative instruments as a result of its investment in MM LLC, but does not itself hold any derivative instrument positions.The nature of this Partnership has certain risks, which cannot be presented on the financial statements. The following summarizes, resulting from its investment in MM LLC, some of those risks. MARKET RISK Derivative instruments involve varying degrees of off-balance sheet market risk. Changes in the level or volatility of interest rates, foreign currency exchange rates or the market values of the financial instruments or commodities underlying such derivative instruments frequently result in changes in the Partnership's allocation of net unrealized profit on such derivative instruments as reflected in the Statements of Financial Condition of MM LLC. The Partnership's exposure to market risk is influenced by a number of factors, including the relationships among the derivative instruments held by MM LLC as well as the volatility and liquidity of the markets in which such derivative instruments are traded. The General Partner, Merrill Lynch Investment Managers ("MLIM LLC") 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 by MM LLC, and include calculating the Net Asset Value of their respective Partnership accounts and MM LLC accounts as of the close of business on each day and reviewing outstanding positions for over-concentrations both on an Advisor-by-Advisor and on an overall Partnership basis. While MLIM LLC does not itself intervene in the markets to hedge or diversify the Partnership's market exposure, MLIM LLC may urge Advisors to reallocate positions, or itself reallocate Partnership assets through MM LLC among Advisors (although typically only as of the end of a month) in an attempt to avoid over-concentrations. However, such interventions are unusual. Except in cases in which it appears that an Advisor has begun to deviate from past practice or trading policies or to be trading erratically, MLIM LLC's basic risk control procedures consist simply of the ongoing process of advisor monitoring and selection with the market risk controls being applied by the Advisors themselves. CREDIT RISK The risks associated with exchange-traded contracts are typically perceived to be less than those associated with over-the-counter (non-exchange-traded) transactions, because exchanges typically (but not universally) provide clearinghouse arrangements in which the collective credit (in some cases limited in amount, in some cases not) of the members of the exchange is pledged to support the financial integrity of the exchange. In over-the-counter transactions, on the other hand, traders must rely solely on the credit of their respective individual counterparties. Margins, which may be subject to loss in the event of a default, are generally required in exchange trading, and counterparties may require margin in the over-the-counter markets. The Partnership, through MM LLC, has credit risk with respect to its counterparties and brokers, but attempts to mitigate this risk by dealing almost exclusively with Merrill Lynch entities as clearing brokers. The Partnership, through MM LLC, in its normal course of business, enters into various contracts, with Merrill Lynch Pierce Fenner & Smith ("MLPF&S") acting as its commodity broker. Pursuant to the brokerage agreement with MLPF&S (which includes a netting arrangement), to the extent that 8 such trading results in receivables from and payables to MLPF&S, these receivables and payables are offset and reported as a net receivable or payable in the financial statements of MM LLC in the Equity in commodity futures trading accounts in the Statements of Financial Condition. Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS MONTH-END NET ASSET VALUE PER SERIES A 2003 UNIT
JAN. FEB. MAR. -------- -------- -------- 2003 $ 1.0331 $ 1.0654 $ 1.0196 2004 $ 1.1075 $ 1.1504 $ 1.1486
Performance Summary All of the Partnership's trading assets are invested in MM LLC. The Partnership recognizes trading profits or losses as an investor in MM LLC. The following commentary describes the trading results of MM LLC. January 1, 2004 to March 31, 2004 MM LLC experienced gains in the interest rate, metals, agricultural commodities, energy, and currency sectors and losses in stock indices. Overall, for the quarter, MM LLC experienced gains. The interest sector posted the largest gains for the quarter despite choppy trading conditions early in the quarter. In January, profits were generated from various positions at the short end of the curve in Canada and Europe, while losses were posted at longer points in the curve in both the U.S. and Europe. In February, fixed income markets resumed their slow upward trend. In March, long exposure to most of the major global yield curves proved to generate positive results. The metals sector posted gains for the quarter as well. In January, both precious and industrial metals generated positive returns from the long side. Base metals continued to move higher with the exception of nickel. Copper rose to its highest price in more than six years due to supply disruptions and heavy demand from new home construction. In February, base metals continued their upward move as the sector experienced strong demand, shrinking supply and U.S. dollar weakness, helping to drive prices higher. Strong industrial demand for copper and continued speculative interest pushed the market to a seven year high. In March, industrial metals generated minor losses for MM LLC, while precious metals contributed significantly, particularly, gold and silver. The agricultural commodities sector posted gains early in the quarter as the USDA cut its forecast of the crop supply for both soybeans and corn, which sent prices surging. In February, grain markets extended their long-term rally, with corn and soybeans being pushed to highs on strong demand and low stockpiles. Grain markets continued to extend their long-term rally in March, with corn, soybeans and soymeal being pushed higher on strong demand from Asia and lower estimates of supply from South America. The energy sector posted gains for the quarter. In crude oil and more broad energy markets, weather and OPEC were the dominant factors behind price moves during January. Weather was extremely cold in the Northeast and Midwest U.S., which caused a sharp rally in natural gas and heating oil. Crude oil had a sharp rally in early February and gradually sold-off as the markets became complacent about the OPEC meeting. The market continued this trend, as weather-related demand and tight U.S. inventories continued. In March, the energy sectors posted a small loss under extremely volatile market conditions. The crude oil market had very choppy performance during the month, as did the heating oil market. 9 The currency sector posted slight gains for the quarter. The currency sector began the quarter with gains as it continued its long trend of a weakening U.S. dollar. However, trading was very choppy and gains generated in the early part of January were lost. In February and March, the trend continued as currency trading was very difficult due to the heightened volatility in the markets. Stock indices posted losses despite gains early in the quarter. Stock indices posted a profit for January as long exposure to global equities from momentum based and fundamental models performed well. In February, long exposure to global equities produced positive performance. In March, stock indices posted a loss that exceeded the gains from earlier in the quarter. Long Nikkei profits were overcome by losses in long exposure to European equities, which later flipped to short positions, by month-end. January 1, 2003 to March 31, 2003 MM LLC experienced gains in the currency, energy, interest rate and stock index sectors and losses in the agricultural commodity and metals sectors. Overall, for the quarter, MM LLC experienced gains. The currency forward and futures trading had the most significant gains for the quarter. The weakening U.S. dollar was continuing to decline as it has for over a year and MM LLC was well positioned to capitalize on its U.S. dollar positions against other currencies. The largest gains versus the U.S. dollar during January and February were with the Australian dollar and Canadian dollar. In March, the U.S. dollar strengthened, on hopes that the war with Iraq would be short, and returned some of the profits earned early in the year. Energy was a profitable sector for the quarter. With the continuation of the strike in Venezuela, the tensions with Iraq and the cold winter, long positions in oil and natural gas were profitable in the beginning of the year. In February, the best performing month, natural gas prices rose nearly 40% in a single day citing expected severely cold weather and supply shortages. MM LLC profited from this event but such volatility caused many of the Advisors to reduce their long positions. This helped MM LLC retain profits as prices declined in crude oil and natural gas in March. Interest rate futures were also profitable for the quarter. February had significant gains offsetting losses in both January and March. U.S. and European bonds rallied amid concerns of a global economic slowdown benefiting MM LLC's long exposures. Selective long/short rate exposure globally was the main driver to gains generated in the sector. The global fixed income markets continued their upward climb until mid-March when expectations of a short conflict triggered the liquidation of many fixed income investments, hurting long exposures. Trading in stock indices posted slight gains for the quarter. The market was choppy throughout the quarter making trading difficult. MM LLC was able to realize some gains in January on short positions as most indices recorded three-month lows. During the rest of the quarter, choppy markets caused short positions to be covered to protect against the risk of significant losses. The metals sector had losses for the quarter. Gold drove profits in January as it continued its run up. The general perception of risks in the financial markets and the geopolitical situation unfolding was the main driver for the gold market in January. MM LLC sustained losses in February and March as the long bias in precious metals hurt the portfolio when gold reversed its rising trend in February and continued to decline. Gold's appeal as a safe investment diminished. Trading in agricultural commodities posted losses for the quarter. MM LLC held positions in sugar, livestock and the soybean complex. Livestock markets were off in February as Russia imposed an import limit to help its domestic production. Sugar was to blame for losses in March as prices reversed and hit a two-month low. 10 Item 3. Quantitative and Qualitative Disclosures About Market Risk Not applicable Item 4. Controls and Procedures Merrill Lynch Investment Managers LLC, the General Partner of ML Principal Protection L.P., with the participation of the General Partner's Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures with respect to the Partnership within 90 days of the filing date of this quarterly report, and, based on this evaluation, has concluded that these disclosure controls and procedures are effective. Additionally, there were no significant changes in the Partnership's internal controls or in other factors that could significantly affect these controls subsequent to the date of this evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. 11 PART II - OTHER INFORMATION Item 1. Legal Proceedings There are no pending legal proceedings to which the Partnership, MM LLC, or MLIM LLC is a party. Item 2. Changes in Securities and Use of Proceeds (a) None (b) None (c) None (d) None Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits There are no exhibits required to be filed with this report. (b) Reports on Form 8-K There were no reports on Form 8-K filed during the first three months of fiscal 2004. 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ML PRINCIPAL PROTECTION L.P. By: MERRILL LYNCH INVESTMENT MANAGERS LLC General Partner Date: May 14, 2004 By /s/ VINAY MENDIRATTA -------------------- Vinay Mendiratta Managing Director and Chief Operating Officer - Alternative Strategies and Quantitative Advisers Divisions (Principal Executive Officer) Date: May 14, 2004 By /s/ PATRICK HAYWARD ------------------- Patrick Hayward Chief Financial Officer (Principal Financial and Accounting Officer) 13 EXHIBIT 31.01 RULE 13a-14(a)/15d-14(a) CERTIFICATIONS I, Vinay Mendiratta, certify that: 1. I have reviewed this report on Form 10-Q of ML Principal Protection L.P.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 14, 2004 ------------------ By /s/ VINAY MENDIRATTA ----------------------- Vinay Mendiratta Managing Director and Chief Operating Officer - Alternative Strategies and Quantitative Advisers Divisions (Principal Executive Officer) 14 EXHIBIT 31.02 RULE 13a-14(a)/15d-14(a) CERTIFICATIONS I, Patrick Hayward, certify that: 1. I have reviewed this report on Form 10-Q of ML Principal Protection L.P.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 14, 2004 ------------------ By /s/ PATRICK HAYWARD ---------------------- Patrick Hayward Chief Financial Officer (Principal Financial and Accounting Officer) 15 EXHIBIT 32.01 SECTION 1350 CERTIFICATIONS In connection with this quarterly report of ML Principal Protection L.P. on Form 10-Q for the period ended March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof, I, Vinay Mendiratta certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant of the Sarbanes-Oxley Act of 2002, that: 1. This quarterly report containing the financial statements fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in this quarterly report fairly presents, in all material respects, the financial condition and results of operations of ML Principal Protection L.P. Date: May 14, 2004 ----------------------- By /s/ VINAY MENDIRATTA ----------------------- Vinay Mendiratta Managing Director and Chief Operating Officer - Alternative Strategies and Quantitative Advisers Divisions (Principal Executive Officer) 16 EXHIBIT 32.02 SECTION 1350 CERTIFICATIONS In connection with this quarterly report of ML Principal Protection L.P. on Form 10-Q for the period ended March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof, I, Patrick Hayward certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant of the Sarbanes-Oxley Act of 2002, that: 1. This quarterly report containing the financial statements fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in this quarterly report fairly presents, in all material respects, the financial condition and results of operations of ML Principal Protection L.P. Date: May 14, 2004 ------------------ By /s/ PATRICK HAYWARD ---------------------- Patrick Hayward Chief Financial Officer (Principal Financial and Accounting Officer) 17