<PAGE>
Filed pursuant to Rule 424(b)(3)
Registration Number 333-7593
ML Principal Protection L.P.
Dear Limited Partner,
The Net Asset Value ("NAV") of ML Principal Protection L.P. (the "Fund")
increased during July. Please see the accompanying summary financial
information for the NAV of your series of Units.
July witnessed the return of several strong price trends to financial markets,
particularly interest rates. Profits resulted from interest rate, currency,
stock index and metals trading, while losses were incurred in agricultural
commodity and energy markets.
In July, the prices of U.S. Treasury securities rose throughout the month for
their best month since May 1995, as the U.S. government reported that economic
growth slowed in the second quarter while inflation remained subdued. On July
23, the U.S. bond market rallied in response to Federal Reserve Chairman
Greenspan's Humphrey-Hawkins testimony. Mr. Greenspan indicated that he saw no
need to raise rates in the near term, but that the Fed must continue to watch
for signs of emerging inflation. Non-U.S. bond markets, such as the Australian
and German, also moved higher in July, as they were helped by the rally in U.S.
Treasuries, in addition to positive economic forecasts. Trading in U.S. Treasury
bonds, notes and Eurodollars, as well as Australian and German bonds, produced
profits.
Currency trading recorded overall profits for the month. The U.S. dollar rose
dramatically during July, reflecting the dollar's role as a haven for currency
traders skeptical over the future of the "Euro", the new single European
currency that is supposed to start replacing several European national
denominations in 1999. On July 14, the U.S. dollar surged in value against most
major European currencies, reaching its highest level in six years against the
Deutsche mark. On July 24, the dollar touched a three-and-a-half-year high
against the Swiss franc. In contrast, the price movement of the British pound
remained range-bound for most of the month, before declining sharply on July
28.
Difficult trading conditions in agricultural commodity markets throughout July
resulted in unprofitable trading. Soybean and corn prices trended upward at the
beginning of the month, as hot, dry weather threatened to damage crops in
Illinois. On July 16, prices dropped on forecasts of rain, easing the heat wave.
By month-end, soybean and corn prices were once again on the rise as rain missed
the driest growing areas and more hot weather was forecast. Cocoa prices also
experienced a sudden drop at mid-month due to forces of supply and demand.
<PAGE>
Effective July 21, 1997, Merrill Lynch Investment Partners, Inc., the general
partner of the Fund, has selected Telesis Management, Inc. ("Telesis") and
Northfield Trading L.P. ("Northfield") as additional trading advisors for the
Fund. As of July 21, 1997, Northfield and Telesis were allocated approximately
2.0% and 2.5%, respectively, of the Fund's trading assets. Northfield will be
paid a monthly Consulting Fee at an annual rate of 1% and an annual Profit Share
of 20% of New Trading Profits. As of May 31, 1997, Northfield's best monthly
rate of return was 11.4%, its worst monthly rate of return was (11.6%), and it
was managing approximately $135 million of customer funds ("notional" funds
excluded). Telesis will be paid a monthly Consulting Fee at an annual rate of
1.5% and an annual Profit Share of 20% of New Trading Profits. As of May 31,
1997, Telesis' best monthly rate of return was 30.3%, its worst monthly rate of
return was (9.6)%, and it was managing approximately $150 million of customer
funds ("notional" funds excluded).
As of August 1, 1997, the Fund's assets were allocated as follows:
Trading Advisor % Allocation
- --------------- -------------
Chesapeake Capital Corporation 10.28
John W. Henry & Company, Inc. 9.34
AIS Futures Management, Inc. 5.24
Graham Capital Management, L.P. 5.09*
Trendstat Capital Management, Inc. 5.07
ARA Portfolio Management Company, L.L.C. 5.00
Millburn Ridgefield Corporation 4.43
Quantitative Financial Strategies, Inc. 3.32
Hill Financial Group, Ltd. 2.97
Range Wise, Inc. 2.94
Allied Irish Capital Management Ltd. 2.56
Fundamental Futures, Inc. 1.54
Telesis Management, Inc. 1.48
Northfield Trading L.P. 1.20
Cash 39.54**
-------------
100.00%
*Graham Capital Management, L.P. is currently managing the Fund's assets
allocated to it as if Graham were managing 50% more equity than the capital
allocation indicated above.
**Reflects blended allocations of the different series.
<PAGE>
1997 Year-to-Date
Gross Total Trading Results*
Thru July 31
Agriculture $ 845,282
Currencies 2,274,657
Energy (1,060,659)
Financial Instruments 1,410,543
Metals 745,020
Stock Indices 1,227,909
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Total $ 5,442,752
*Before deduction of any fees and charges
After a difficult period of trading in the second quarter of this year, the
Fund's performance improved during July, as the Trading Advisors were able to
take advantage of a more favorable market environment with clear price trends.
We look forward to continued opportunities for profitability as favorable market
conditions arise.
Sincerely,
John R. Frawley, Jr.
President & Chief Executive Officer
Merrill Lynch Investment Partners Inc.
(General Partner)
FOR THE EXCLUSIVE USE OF INVESTORS IN ML PRINCIPAL PROTECTION L.P. THIS MONTHLY
REPORT IS NOT AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES. AN OFFER CAN ONLY BE MADE BY A CURRENT PROSPECTUS, AS SUPPLEMENTED,
TOGETHER WITH SUMMARY FINANCIAL INFORMATION FOR THE FUND CURRENT WITHIN 60 DAYS.
THESE MATERIALS CONTAIN IMPORTANT INFORMATION ABOUT RISK FACTORS, PERFORMANCE
AND OTHER ASPECTS OF THE FUND AND MUST BE READ CAREFULLY BEFORE INVESTING.
FUTURES TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. PAST
PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
THIS MONTHLY REPORT MUST NOT BE REPRODUCED OR DISTRIBUTED IN ANY MANNER.
<PAGE>
ML Principal Protection L.P.
July 31, 1997
Statement of Changes
in Net Asset Value
Net Asset Value (744,462.58 Units)
at June 30, 1997 $ 80,359,706
Additions of 147,480.00 Units 14,748,000
Net Income/(Loss) for July 1997 2,714,763
Less Redemptions of 16,968.00 Units (1,860,405)
Distribution - Series D Units (474,251)
Distribution - Series H Units (508,522)
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Net Asset Value (874,974.58 Units)
at July 31, 1997 $ 94,979,291
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Net Asset Value at July 31, 1997
Series A Units $ 116.48*
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Series B Units $ 113.33*
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Series C Units $ 107.38*
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Series D Units $ 109.15*
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Series E Units $ 114.21*
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Series F Units $ 108.26*
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Series G Units $ 105.76*
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Series H Units $ 105.86*
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Series K Units $ 104.26
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Series L Units $ 101.68
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* The Net Asset Value per Unit does not include the annual distributions paid
to Unitholders.
Statement of Income/(Loss)
July
----
Revenues:
Realized Profit/(Loss) $ (199,633)
Change in Unrealized Profit/(Loss) 3,323,605
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Total Trading Results 3,123,972
Interest Income 415,789
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Total Revenues 3,539,761
Expenses:
Brokerage Commissions 413,342
Administrative Fees 11,810
Allocation of New Profit Share 357,223
Organizational Expenses 6,642
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Total Expenses 789,017
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Net Income/(Loss) Before
Minority Interest 2,750,744
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Minority Interest (35,981)
-------------
Net Income/(Loss) $ 2,714,763
=============
<PAGE>
To the best of the knowledge and belief of the undersigned the information
contained in this report is accurate and complete.
/s/ Michael A. Karmelin
---------------------------------
Michael A. Karmelin
Chief Financial Officer
Merrill Lynch Investment Partners Inc.
Please notify the following of any address changes:
Merrill Lynch Investment Partners Inc.
Merrill Lynch World Headquarters
South Tower
World Financial Center
New York, New York 10080-6106
1-800-765-0095
