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Filed pursuant to Rule 424(B)(3)
Registration No. 333-7593
Merrill Lynch Investment Partners Inc.
[PICTURE APPEARS HERE]
ML Principal
Protection L.P.
Monthly Statement October 1997
==============================
[LOGO OF MERRILL LYNCH]
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ML Principal Protection L.P.
Dear Limited Partner,
The Net Asset Value ("NAV") of ML Principal Protection L.P. (the "Fund")
decreased during October. Please see the accompanying summary financial
information for the NAV of your series of Units.
A plunge in the Hong Kong stock market, touched off by an attack on the local
currency, shook financial markets around the world on October 23. The week of
unprecedented volatility in the global equity markets carried through to other
markets as well. For the month, losses in agriculture, stock index, energy and
metals markets offset profitable trading in currencies and interest rates.
Following the U.S. equity market's plummet, the U.S. dollar dropped sharply
during the last week of October, and while the dollar is often viewed as a haven
for investors during times of turmoil, investors turned to several European
currencies. On October 27, the dollar fell to a three-month low versus the
British pound after Britain reiterated that it would not join Europe's planned
common currency in 1999. The dollar also fell to five-month lows versus the
Swiss franc, as the U.S. Federal Reserve's chairman, Alan Greenspan, left
traders confident that the Fed would not raise interest rates soon. The downward
price trend throughout October for the Canadian dollar was made worse by the
drop in the U.S. dollar at month-end. Currency trading for the Fund recorded
gains overall for the month.
Metals trading resulted in losses for the month, despite gains in base metals.
Precious metals prices were volatile in October. Gold fell throughout most of
the month, dropped sharply to its lowest price in over twelve years on October
25 and immediately rebounded on uncertainty over the Asian financial crisis and
fears that tensions between the U.S. and Iraq would escalate. Silver prices
moved similarly to those of gold. In base metals, copper prices moved with
little direction before retreating amid perceptions that increased production
and slack demand would lead to a glut.
In October, the U.S. bond market was supported by a flight to safety from
plunging stocks around the world, as well as Greenspan's previously referenced
comments. Similarly, Japanese 10-year bonds also moved higher throughout the
month. French bond prices drifted lower for most of October, before a sharp
rally on October 28, and then immediately returned to lower levels. Trading in
U.S. Treasury bonds and Japanese 10-year bonds resulted in profits, which offset
losses in French bonds.
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In September 1997, ARA Portfolio Management Company, L.L.C. returned to trading
its Gamma Program on behalf of the Fund.
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Effective November 1, 1997, Merrill Lynch Investment Partners Inc., the general
partner of the Fund, has selected Dominion Capital Management, Inc.
("Dominion"), Grinham Managed Futures Pty Ltd. ("Grinham") and Millennium Global
Investments Ltd. ("Millennium") as additional non-core trading advisors for the
Fund. As of November 1, 1997, Dominion, Grinham and Millennium were allocated
approximately 4%, 4% and 5%, respectively, of the Fund's trading assets.
Dominion will be paid an annual Consulting Fee of 1% and an annual Profit Share
of 20% of New Trading Profits. As of August 31, 1997, Dominion's best monthly
rate of return was 10.11%, its worst monthly rate of return was (11.65)% and it
was managing approximately $25 million of customer funds ("notional" funds
excluded).
Grinham will be paid an annual Consulting Fee of 1% and an annual Profit Share
of 20% of New Trading Profits. As of August 31, 1997, Grinham's best monthly
rate of return was 17.55%, its worst monthly rate of return was (9.66%) and it
was managing approximately $32.4 million of customer funds ("notional" funds
excluded).
Millennium will be paid an annual monthly Consulting Fee of 1% and an annual
Profit Share of 20% of New Trading Profits. As of August 31, 1997, Millennium's
best monthly rate of return was 11.7%, its worst monthly rate of return was
(5.8%) and it was managing approximately $230 million of customer funds
("notional" funds excluded).
As of November 1, 1997, the Fund's assets were allocated as follows:
<TABLE>
<CAPTION>
Trading Advisor % Allocation
- --------------- ------------
<S> <C>
John W. Henry & Company, Inc. 7.44
Chesapeake Capital Corporation 7.13
AIS Futures Management LLC 5.58
Trendstat Capital Management, Inc. 5.48
ARA Portfolio Management Company, L.L.C. 5.42
Millburn Ridgefield Corporation 4.58
Graham Capital Management, L.P. 3.72*
Quantitative Financial Strategies, Inc. 3.66
Millennium Global Investments Ltd. 3.25
Range Wise, Inc. 3.18
Hill Financial Group, Ltd. 3.16
Allied Irish Capital Management Ltd. 2.80
Dominion Capital Management, Inc. 2.64
Grinham Managed Futures Pty Ltd. 2.60
Fundamental Futures, Inc. 1.62
Telesis Management, Inc. 1.61
Northfield Trading L.P. 1.29
Cash 34.84**
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100.00
</TABLE>
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*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.
<TABLE>
<CAPTION>
1997 Year-to-Date
Gross Total Trading Results*
Through October 31
<S> <C>
Agriculture $ 130,415
Currencies 2,013,887
Energy (1,494,574)
Financial Instruments 1,638,362
Metals 67,830
Stock Indices 627,558
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Total $ 2,983,478
</TABLE>
*Before deduction of any fees and charges
While extreme market volatility presents profit opportunities, of more
importance during these periods is the management of risk. We were heartened to
see that the Fund's diversified portfolio of advisors managed risk well and
preserved capital for more favorable market opportunities.
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.
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<TABLE>
<CAPTION>
ML Principal Protection L.P.
October 31, 1997
Statement of Changes
in Net Asset Value
<S> <C>
Net Asset Value (829,832.50 Units) at September 30, 1997 $ 88,378,647
Net Income/(Loss) for October 1997 (311,471)
Redemptions of 11,550.00 Units (1,214,209)
Distribution - Series A Units (566,174)
Distribution - Series E Units (396,074)
Addition of 138,469.06 Units 13,846,906
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Net Asset Value (956,751.56 Units) at October 31, 1997 $ 99,737,625
============
Net Asset Value at October 31, 1997
Series A Units $ 110.69*
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Series B Units $ 111.10*
============
Series C Units $ 105.26*
============
Series D Units $ 107.00*
============
Series E Units $ 106.46*
============
Series F Units $ 106.12*
============
Series G Units $ 103.67*
============
Series H Units $ 103.76*
============
Series K Units $ 101.23
============
Series L Units $ 98.50
============
Series M Units $ 100.40
============
</TABLE>
* The Net Asset Value per Unit does not include the annual distributions paid to
Unitholders.
<TABLE>
<CAPTION>
Statement of Income/(Loss)
October
-------
<S> <C>
Revenues:
Realized Profit/(Loss) $ (1,405,223)
Change in Unrealized Profit/(Loss) 1,067,072
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Total Trading Results (338,151)
Interest Income 449,275
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Total Revenues 111,124
Expenses:
Brokerage Commissions 425,222
Administrative Fees 12,149
Allocation of New Profit Share (14,440)
Organizational Expenses 6,642
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Total Expenses 429,573
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Net Income/(Loss) Before Minority Interest (318,449)
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Minority Interest 6,978
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Net Income/(Loss) $ (311,471)
============
</TABLE>
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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
1-800-765-0995
