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Merrill Lynch Investment Partners Inc.
[PICTURE APPEARS HERE]
ML Principal
Protection L.P.
Monthly Statement December 1997
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[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")
increased during December. Please see the accompanying summary financial
information for the NAV of your series of Units.
In December, profitable trading in metals, energy, currencies, agriculture and
interest rates offset losses in stock index markets.
In December, copper prices continued to fall throughout the month as weak demand
from Asia and rising mine output pushed stockpiles close to 20-month highs. Gold
also continued to drop in price during the month, falling to an 18-year low, as
several central banks sold -- or threatened to sell -- their huge gold holdings,
which represent about 25 percent of the total supply already produced. However,
gold posted its biggest one-day gain in nearly two years on December 17, as
Japan proposed a large reduction in income taxes, along with other positive
economic announcements. Aluminum, the economic health of which depends on the
export business, also benefitted from the renewed confidence of the Japanese, as
prices were bolstered following a decline of several days. The Fund generated
profits in both base and precious metals trading during the month.
In energy trading, the Fund generated profits in December as prices continued to
trend generally downward, in the same fashion as they had since mid-November.
Crude oil prices began the month by dropping in reaction to the decision by OPEC
to raise its production ceiling and continued to drop throughout the month on
signs that oil exports from Iraq would resume sooner than expected. Unleaded
gasoline dropped in a similar fashion to crude, as the Secretary General of the
United Nations was reported to be close to approval of the sale of Iraqi oil.
Natural gas prices fell amid further expectations that the biggest heating
regions in the U.S. would have above-
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normal temperatures this winter, leaving ample supplies in the market.
In interest rates, European bonds generally trended upward throughout December
before falling off at month-end. U.S. Treasury bond prices also trended upward
for most of the month, but not as smoothly as German and French bonds. For
instance, U.S. Treasury prices fell on December 8, sending the long bond's
yield to its highest level in a month, as concerns over strong economic growth
were caused by November's employment report coupled with the possibility that
the Japanese government might consider selling some of its Treasury securities
to help troubled Japanese banks. The Fund generated profits in both dollar and
non-dollar interest rate trading during the month.
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Effective January 1, 1998, Merrill Lynch Investment Partners Inc., the general
partner, has selected Bridgewater Associates, Inc. ("Bridgewater") as an
additional trading advisor for the Fund. As of January 1, 1998, Bridgewater was
allocated approximately 5.8% of the Fund's trading assets. Bridgewater 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 October 31, 1997, Bridgewater's best
monthly rate of return was 13.61%, its worst monthly rate of return was (4.49)%,
and was managing approximately $21 million of customer funds ("notional" funds
excluded) in the program traded for the Fund.
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As planned, effective December 31, 1997, the Fund paid the annual fixed-rate
distribution to all Series B and F Unitholders in the amount of $3.50. In
addition, the Fund paid discretionary distributions to all Series B and F
Unitholders in the amounts of $1.50 and $1.25, respectively. The January 1, 1998
NAVs of the Series B and F Units are reduced by the amount of these
distributions.
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As of January 1, 1998, the Fund's assets were allocated as follows:
<TABLE>
<CAPTION>
Trading Advisor % Allocation
- --------------- ------------
<S> <C>
John W. Henry & Company, Inc. 6.60
Chesapeake Capital Corporation 6.60
AIS Futures Management LLC 5.28
ARA Portfolio Management Company, L.L.C. 5.28
Trendstat Capital Management, Inc. 5.28*
Millburn Ridgefield Corporation 3.96
Bridgewater Associates, Inc. 3.83
Quantitative Financial Strategies, Inc. 3.63
Graham Capital Management, L.P. 3.30*
Hill Financial Group, Ltd. 3.30
Millennium Global Investments Ltd. 3.30
Range Wise, Inc. 3.30
Allied Irish Capital Management Ltd. 2.64
Dominion Capital Management, Inc. 2.64
Grinham Managed Futures Pty Ltd. 2.64
Fundamental Futures, Inc. 1.45
Telesis Management, Inc. 1.65
Northfield Trading L.P. 1.32
Cash 34.00**
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100.00
</TABLE>
*Each of these advisors is currently managing the Fund's assets allocated to it
as if the advisor 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 December 31
<S> <C>
Agriculture $ 679,157
Currencies 3,911,109
Energy (1,278,003)
Financial Instruments 1,706,686
Metals 1,245,020
Stock Indices 232,314
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Total $ 6,496,283
</TABLE>
*Before deduction of any fees and charges
Commencing with the January customer statement we will be changing our format to
contain only financial information on a monthly basis and market commentary on a
quarterly basis.
We would like again to remind U.S. taxpayers that we expect to send 1997 K-1
information in mid-March. Our customer service representatives are available to
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assist you with any questions you may have, and may be reached at our toll-free
number in the U.S.: 1-800-765-0995.
During December, the Fund's Trading Advisors were able to identify and profit
from clear price trends in several markets. As we begin a new year, we feel the
Fund is well-positioned to profit and benefit investors as trading
opportunities develop, and we wish you the best in 1998.
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.
December 31, 1997
Statement of Changes
in Net Asset Value
<S> <C>
Net Asset Value (948,450.52 Units) at November 30, 1997 $ 99,650,874
Net Income/(Loss) for December 1997 2,211,966
Redemptions of 5,831.40 Units (636,155)
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Net Asset Value (942,619.12 Units) at December 31, 1997 $101,226,685
============
Net Asset Value at December 31, 1997
Series A Units $ 113.73*
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Series B Units $ 114.15*
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Series C Units $ 108.15*
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Series D Units $ 109.94*
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Series E Units $ 109.40*
============
Series F Units $ 109.04*
============
Series G Units $ 106.52*
============
Series H Units $ 106.62*
============
Series K Units $ 104.77
============
Series L Units $ 102.08
============
Series M Units $ 103.70
============
</TABLE>
* The Net Asset Value per Unit does not include the annual distributions paid
to Unitholders.
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<TABLE>
<CAPTION>
Statement of Income/(Loss)
December
--------
<S> <C>
Revenues:
Realized Profit/(Loss) $ 2,210,962
Change in Unrealized Profit/(Loss) 323,539
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Total Trading Results 2,534,501
Interest Income 492,892
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Total Revenues 3,027,393
Expenses:
Brokerage Commissions 501,551
Administrative Fees 14,330
Allocation of New Profit Share 275,554
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Total Expenses 791,435
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Net Income/(Loss) Before Minority Interest 2,235,958
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Minority Interest (23,992)
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Net Income/(Loss) $ 2,211,966
============
</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
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