Filed Pursuant to Rule 424(b)(3)
File No. 333-7593
ML PRINCIPAL PROTECTION L.P.
(FORMERLY, ML PRINCIPAL PROTECTION PLUS L.P.)
SERIES O UNITS
PROSPECTUS SUPPLEMENT DATED JANUARY 1, 1998
TO
PROSPECTUS DATED APRIL 4, 1997
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The Series O Units of ML Principal Protection L.P. (the "Fund") will be
sold on or about April 1, 1998 pursuant to acceptable subscriptions received on
or before March 20, 1998. The Principal Assurance Date for the Series O Units
will be March 31, 2003.
Series O Units are offered at $100 per Unit ($97 in the case of officers
and employees of Merrill Lynch & Co., Inc. and its affiliates). The minimum
initial investment is 50 Units ($5,000); the minimum investment for existing
Limited Partners is 10 Units ($1,000). Any greater number of whole Units may be
purchased.
75% of the capital attributable to Series O Units will initially be
committed to trading.
No distributions are presently intended to be made on the Series O Units.
The Series O Units may be redeemed as of the end of any calendar month at
Net Asset Value, subject to a 3% redemption charge payable to Merrill Lynch
Investment Partners Inc. ("MLIP") on redemptions made on or prior to March 31,
1999.
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Futures trading is highly leveraged, as is each Advisor's trading program.
See "Leverage Considerations -- The Guarantee and Trading Leverage" and "Risk
Factors" in the Prospectus.
In considering the leverage at which the different Advisors trade and the
volatility of their performance, prospective investors should recognize that due
to the limited percentage of the Fund's trading assets allocated to each of
them, none of the non-core Advisors, individually, is likely to have a material
effect, over the short-term, on either the overall return or the overall
performance volatility of the Fund. The non-core Advisors as a group can have a
significant effect on performance. However, the likely performance non-
correlation among at least certain of these Advisors reduces the likelihood of
any major short-term effect.
The current non-core Advisors each receive Consulting Fees of up to 2% per
annum of the Fund's assets managed by each of them, respectively, plus quarterly
or annual Profit Shares of between 15% and 20% of any cumulative New Trading
Profit achieved by each such Advisor.
MLIP believes that it is advantageous for its multiple advisor pools,
including the Fund, to have flexibility in the Fund's leverage policy.
Consequently, while the Fund's risk/reward objectives remain unchanged,
beginning in June 1997 MLIP has from time to time directed certain individual
Advisors to manage their Fund accounts as if they were managing up to 50% more
equity than the actual capital allocated to them. This additional leverage is
subject to the condition that the Fund as a whole will not trade as if it had in
excess of 20% more equity than actual capital.
It is not possible to predict the effect upleveraging may have,
particularly given the Advisors' ongoing leverage adjustments to their own
trading and the anticipated non-correlation of their strategies. Increasing
leverage can generally be expected to increase profit potential, risk of loss
and volatility of returns. The flat-rate fees charged to the Fund continue to
be based on only the actual capital allocated to trading.
Any change by MLIP in the leverage of the Fund's trading is noted in
the asset allocation tables included in the Fund's monthly reports.
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The reverse side of this Prospectus Supplement provides certain outline
information regarding the current Advisors used by the Fund.
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IN ADDITION TO THIS PROSPECTUS SUPPLEMENT, THE PROSPECTUS MUST BE ACCOMPANIED
BY SUMMARY FINANCIAL INFORMATION FOR THE FUND CURRENT WITHIN 60 CALENDAR DAYS
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THE COMMODITY FUTURES TRADING COMMISSION HAS NOT PASSED UPON THE MERITS
OF PARTICIPATING IN THIS POOL NOR HAS THE COMMISSION PASSED UPON
THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
Selling Agent
MERRILL LYNCH INVESTMENT PARTNERS INC.
General Partner
ML PRINCIPAL PROTECTION L.P.
(FORMERLY, ML PRINCIPAL PROTECTION PLUS L.P.)
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As of November 30, 1997, the Net Asset Value of a Series A Unit initially
issued for $100 as of October 12, 1994 had risen to $127.00 (adding back to Net
Asset Value aggregate distributions of $15.50 per Series A Unit).
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The allocation of the Fund's trading assets (75% of the capital initially
attributable to each series of Units sold pursuant to this Prospectus Supplement
and thereafter) among its core Advisors as of January 1, 1998 is set forth below
in the parentheses following each core Advisor's name. The accompanying
Prospectus includes more detailed information concerning the core Advisors. See
"The Advisors" and "The Core Advisors" in the Prospectus. Core Advisors are
Advisors allocated 10% or more of the Fund's trading assets for management. Non-
core Advisors are each allocated less than 10% of the Fund's assets for
management. The particular percentage allocations to the non-core Advisors are
not identified because, among other things,these allocations are subject to
frequent changes both due to the effects of differential performance and to
Merrill Lynch Investment Partners Inc. reallocating the Fund's traded assets
among such Advisors.
ANNUALIZED ASSETS UNDER
WORST/BEST STANDARD MANAGEMENT GENERAL
CORE ADVISORS MONTHLY DEVIATION IN STRATEGY
RATE OF RETURN/1/ OF RETURN/2/ FUND PROGRAM/3/ CLASSIFICATION/4/
----------------- ------------ --------------- -----------------
Chesapeake Capital Corporation (10.98)%/15.99% 17.7% $879 million Technical;
Diversified Trading Program (12%) trend-following
John W. Henry & Company, Inc. (27.7)%/5//25.5% 25.6% $1.2 billion Technical;
Financial and Metals Portfolio (15%) trend-following
NON-CORE ADVISORS
AIS Futures Management, L.L.C. (18.71)%/25.07% 31.5% $107 million Systematic;
MAAP-6x Program trend-following
Allied Irish Capital Management Ltd. (2.11)%/2.80% 3.3% $155 million Discretionary;
Worldwide Financial Futures Program - 2x fundamental
ARA Portfolio Management Company, L.L.C. (13.28)%/5//14.75% 20.9% $137 million Technical;
Gamma Program trend-following
Bridgewater Associates, Inc. (4.49)%/13.61% 10.1% $ 21 million Fundamental;
Pure Alpha Program technical
Dominion Capital Management, Inc. (11.65)%/10.11% 13.0% $ 43 million Technical;
Global Financial Program systematic
Fundamental Futures, Inc. (10.96)%/11.23% 15.2% $ 69 million Discretionary;
Fundamental Futures Trading Program fundamental
Graham Capital Management, L.P./6/ (6.31)%/12.33% 13.2% $220 million Technical;
Diversified Program trend-following
Grinham Managed Futures Pty Ltd (9.66)%/17.55% 18.8% $ 44 million Technical;
Diversified Managed Accounts systematic
Hill Financial Group, Ltd./8/ (7.0)%/9.9% 11.6% $ 60 million Technical;
Multiple Strategy Program systematic
Millburn Ridgefield Corporation (10.54)%/19.38% 13.3% $191 million Technical;
Global Fund trend-following
Millennium Global Investments Ltd. (5.8)%/11.7% 13.9% $ 72 million Discretionary;
Global Currency Leverage fundamental
Northfield Trading L.P. (11.6)%/11.4% 16.3% $131 million Systematic;
Diversified Program trend-following
Quantitative Financial Strategies, Inc. (11.98)%/13.29% 16.5% $277 million/7/ Systematic;
The Currency Program fundamental
Range Wise, Inc. (8.0)%/5//12.91% 12.2% $ 60 million Discretionary;
Range Wise Trading Program fundamental
Telesis Management Inc. (9.6%)/30.3% 27.3% $166 million Discretionary;
Telesis Management Leveraged Program trend-following
Trendstat Capital Management, Inc. (5.83)%/10.28% 11.7% $181 million Technical;
World Currency Program trend-related
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
PERFORMANCE AND ASSETS UNDER MANAGEMENT INFORMATION IS CURRENT AS OF OCTOBER 31,
1997. PERFORMANCE FIGURES ARE NOT AUDITED.
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/1/ The lowest and the highest monthly rate of return for the program traded for
the Fund. Performance information is presented for the period from January
1, 1992 (or inception, if later) through October 31, 1997.
/2/ An annualized standard deviation of 2% and a mean return of 1% would mean
that approximately two-thirds of all monthly returns during a year have
historically fallen between (1)% and 3%, i.e., within a range (deviation) of
2% above or below the mean. Standard deviation is one widely-accepted
measure of risk, as standard deviation indicates the variability of returns.
In general, the more variable an Advisor's historical returns, the greater
the risk that substantial losses have been included within the historical
range of returns.
/3/ Assets under management in the program traded for the Fund ("notional" funds
excluded, except as described in Note (7) below).
/4/ See "The Core Advisors" in the Prospectus for a description of these
strategy classifications.
/5/ The worst Monthly Rate of Return of any individual account, not of the
program on a composite basis.
/6/ Graham Capital Management, L.P. ("Graham") is currently managing the Fund's
assets allocated to it as if Graham were managing 50% more capital than the
actual capital allocated to it.
/7/ "Notional" funds are included in assets under management for Quantitative
Financial Strategies, Inc.
/8/ The information presented is estimated as of October 31, 1997.