UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-21162
Name of Fund: Merrill Lynch Fundamental Growth Principal Protected Fund of
Merrill Lynch Principal Protected Trust
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Robert C. Doll, Jr., Chief Executive
Officer, Merrill Lynch Fundamental Growth Principal Protected Fund of
Merrill Lynch Principal Protected Trust, 800 Scudders Mill Road,
Plainsboro, NJ, 08536. Mailing address: P.O. Box 9011, Princeton,
NJ, 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 08/31/06
Date of reporting period: 09/01/05 - 02/28/06
Item 1 - Report to Stockholders
Semi-Annual Report
February 28, 2006
Merrill Lynch
Fundamental Growth
Principal Protected Fund
Of Merrill Lynch Principal Protected Trust
(BULL LOGO) Merrill Lynch Investment Managers
www.mlim.ml.com
Mercury Advisors
A Division of Merrill Lynch Investment Managers
www.mercury.ml.com
This report is not authorized for use as an offer of sale or a solicitation
of an offer to buy shares of the Fund unless accompanied or preceded by the
Fund's current prospectus. Past performance results shown in this report
should not be considered a representation of future performance. Investment
return and principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Statements and
other information herein are as dated and are subject to change.
A description of the policies and procedures that the Fund uses to determine
how to vote proxies relating to portfolio securities is available (1)
without charge, upon request, by calling toll-free 1-800-637-3863; (2) at
www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's
Web site at http://www.sec.gov. Information about how the Fund voted proxies
relating to securities held in the Fund's portfolio during the most recent
12-month period ended June 30 is available (1) at www.mutualfunds.ml.com and
(2) on the Securities and Exchange Commission's Web site at http://www.sec.gov.
Merrill Lynch Fundamental Growth
Principal Protected Fund of
Merrill Lynch Principal Protected Trust
Box 9011 Princeton, NJ 08543-9011
(GO PAPERLESS LOGO)
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Merrill Lynch Fundamental Growth Principal Protected Fund
Announcement to Shareholders
On February 15, 2006, BlackRock, Inc. ("BlackRock") and Merrill Lynch & Co.,
Inc. ("Merrill Lynch") entered into an agreement to contribute Merrill Lynch's
investment management business, Merrill Lynch Investment Managers, L.P. and
certain affiliates (including Fund Asset Management, L.P. and Merrill Lynch
Investment Managers International Limited), to BlackRock to create a new
independent company that will be one of the world's largest asset management
firms with nearly $1 trillion in assets under management (based on combined
assets under management as of December 31, 2005). The transaction is expected
to close in the third quarter of 2006, at which time the new company will
operate under the BlackRock name. If approved by the Fund's Board of Trustees
and Fund shareholders, the combined company that results from the transaction
is expected to become the investment adviser of the Fund.
Portfolio Information as of February 28, 2006
Ten Largest Holdings Percent of
(Equity Investments) Net Assets
Exxon Mobil Corp. 3.5%
Alcon, Inc. 2.7
General Electric Co. 2.6
Procter & Gamble Co. 2.1
Schlumberger Ltd. 2.1
Transocean, Inc. 2.1
3M Co. 2.0
WellPoint, Inc. 2.0
Halliburton Co. 1.8
Amgen, Inc. 1.7
Percent of
Total
Asset Mix Investments
Common Stock 65.0%
Fixed Income Securities 33.5
Other* 1.5
* Includes portfolio holdings in short-term investments.
Five Largest Industries Percent of
(Equity Investments) Net Assets
Energy Equipment & Services 8.7%
Chemicals 6.3
Health Care Providers & Services 5.2
Oil, Gas & Consumable Fuels 5.1
Industrial Conglomerates 4.6
For Fund compliance purposes, the Fund's industry classifications
refer to any one or more of the industry sub-classifications used
by one or more widely recognized market indexes or ratings group
indexes, and/or as defined by Fund management. This definition
may not apply for purposes of this report, which may combine
industry sub-classifications for reporting ease.
MERRILL LYNCH FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND FEBRUARY 28, 2006
A Letter From the President
Dear Shareholder
Financial markets began 2006 with a return to volatility following a fairly
uninspiring 2005. For the six- and 12-month periods ended February 28, 2006,
most major market indexes landed in positive territory:
Total Returns as of February 28, 2006 6-month 12-month
U.S. equities (Standard & Poor's 500 Index) + 5.93% + 8.40%
Small cap U.S. equities (Russell 2000 Index) +10.24 +16.59
International equities (MSCI Europe, Australasia, Far East Index) +15.14 +17.41
Fixed income (Lehman Brothers Aggregate Bond Index) - 0.11 + 2.74
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) + 0.99 + 3.87
High yield bonds (Credit Suisse High Yield Index) + 1.89 + 3.27
The Federal Reserve Board (the Fed) increased interest rates 200 basis points
(2.00%) over the past 12 months, bringing the target federal funds rate to
4.5%. Notably, Ben Bernanke replaced Alan Greenspan as Fed chairman in
January, a month after the central bank removed the critical word "measured"
from the description of its rate-hiking program. Still, most observers expect
at least one more interest rate hike before the Fed pauses in its tightening
campaign.
U.S. economic growth, which came in at 4.1% in the third quarter of 2005, fell
to 1.6% in the fourth quarter. Growth is expected to reaccelerate in the first
quarter of 2006, although the economy is likely to feel some pressure in the
quarters ahead as the consumer sector seems to be softening. Capital spending
by businesses, however, appears relatively strong. Overall corporate health,
including strong company balance sheets, helped prompt robust dividend-
distribution, share-buyback and merger-and-acquisition activity in 2005, a
trend that has continued in 2006. This, as well as reasonably good company
earnings and low core inflation, has been supportive of U.S. stocks despite
the headwinds of rising interest rates and high energy prices. Many
international equity markets have fared even better, thanks in part to higher
economic growth rates and low inflation.
In the U.S. bond market, short-term interest rates continued to move higher as
longer-term interest rates advanced more moderately. After flattening
dramatically in 2005, the Treasury curve recently has been toying with bouts
of inversion, whereby short-term yields have surpassed long-term yields. At
period-end, the six-month Treasury bill offered the highest yield on the curve
at 4.74%.
Amid the uncertainty inherent in the financial markets, we encourage you
to review your goals periodically with your financial advisor and to
make portfolio changes, as needed. For timely "food for thought" for
investors, we also invite you to visit Shareholder magazine at
www.mlim.ml.com/shareholdermagazine. As always, we thank you for trusting
Merrill Lynch Investment Managers with your investment assets, and we
look forward to continuing to serve your investment needs.
Sincerely,
(Robert C. Doll, Jr.)
Robert C. Doll, Jr.
President and Trustee
MERRILL LYNCH FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND FEBRUARY 28, 2006
A Discussion With Your Fund's Portfolio Manager
The Fund met its primary objective of preserving investor principal while also
outpacing the average return of the Lipper Balanced Target Maturity Funds
category.
How did the Fund perform during the period in light of the existing market
conditions?
For the six-month period ended February 28, 2006, Merrill Lynch Fundamental
Growth Principal Protected Fund's Class A, Class B, Class C and Class I Shares
had total returns of +2.63%, +2.21%, +2.17% and +2.78%, respectively. (Fund
results shown do not reflect sales charges and would be lower if sales charges
were included. Complete performance information can be found on pages 6 - 8 of
this report to shareholders.) For the same period, the Fund's all-equity
benchmarks, the Standard & Poor's (S&P) 500 Index and the S&P 500/Citigroup
Growth Index, returned +5.93% and +3.43%, respectively.
Because the Fund incorporates a fixed income component, its returns may be
greater or less than those provided by the equity markets alone. The fixed
income market, as measured by the Lehman Brothers Aggregate Bond Index,
returned -.11% for the six-month period. Thus, the Fund's fixed income
allocation produced a drag versus the all-equity benchmarks. Importantly,
however, the Fund met its objective of protecting investor principal while
also outpacing the +1.57% average return of the Lipper Balanced Target
Maturity Funds category for the six months ended February 28, 2006. (Funds in
this Lipper category invest to provide a guaranteed return of investment at
maturity. Some of the assets are invested in zero-coupon U.S. Treasury
securities, while the remainder is in equity securities for long-term growth
of capital and income.)
The equity, bond and commodity markets continued to follow a relatively
unpredictable and volatile pattern during the six months ended February 28,
2006. Total returns varied among regions and sectors, with the S&P Utilities
Index returning +1.83%, for example, and the Morgan Stanley Capital
International Emerging Markets Latin America Index returning +41.70%. The
returns of large capitalization U.S. growth stocks (as represented by the
+3.43% return of the S&P 500/Citigroup Growth Index) were less than half of
large cap value stock returns (as represented by the +8.48% return of the S&P
500/Citigroup Value Index) during the reporting period. Small cap and mid cap
indexes also provided significantly better investment returns than their large
cap counterparts. We are pleased with the performance of the actively managed
equity portfolio in what was a challenging period for large cap growth
investing.
Within the equity portfolio, performance benefited most from favorable stock
selection in the underweighted consumer discretionary sector, where top
performers included Starbucks Corp., Wynn Resorts Ltd., Staples Inc., Walt
Disney Co., Nike, Inc. and Coach, Inc. A continuing positive for more than
three years has been our investment holdings in the overweighted energy
sector. The major contributors during this six-month period were repeat
winners such as Schlumberger Ltd., Transocean, Inc., Baker Hughes, Inc. and
Halliburton Co. Investments in the industrials sector also aided performance,
led by our positions in Caterpillar, Inc., Lockheed Martin Corp., 3M Co., MSC
Industrial Direct Co., General Electric Co., Fluor Corp. and Boeing Co. In the
materials sector, our positions in Air Products & Chemicals Inc., Praxair,
Inc. and E.I. DuPont de Nemours & Co. benefited performance. The leading
emerging economies in Asia have industrial development programs that require
enormous amounts of the products and services offered by these companies.
Detracting most from the performance of the equity portfolio was our avoidance
of a number of financial services companies, including American International
Group, Inc. (AIG), Freddie Mac and American Express Co., which performed well
during the period. We believe that the Federal Reserve Board (the Fed) is
prepared to increase short-term interest rates several more times, which may
not bode well for the profits of these financial services companies. In
addition, we believe increased regulatory scrutiny will heighten pressure on
pricing of AIG's products and impact the long-term investment return available
to AIG shareholders.
What changes were made to the portfolio during the period?
A mathematical formula is used to determine the allocation between the Fund's
equity and fixed income components. During the six-month period, the Fund's
equity component ranged from 59.1% of net assets to 66.2%, and the fixed
income allocation ranged from 33.8% of net assets to 40.9%. The Fund's fixed
income component was invested in U.S. Treasury zero-coupon bonds set to mature
close to the expiration of the Fund, which is seven years from its
commencement of operations (November 13, 2009).
MERRILL LYNCH FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND FEBRUARY 28, 2006
In the equity portfolio, we sold our position in Microsoft Corporation and
replaced it with investments in information technology companies in India,
where valuations appear reasonable and growth in revenue, earnings and rates
of return is much stronger than we are seeing among U.S. information
technology companies. Also during the period, we opted not to invest in Dell,
Inc. and Intel Corp., two of the leading technology companies in the United
States. This proved to be a positive in terms of relative performance.
Overall, we continue to significantly underweight the information technology
sector relative to our equity benchmarks. We believe that companies in China,
South Korea and Taiwan are gaining the upper-hand in supplying both computing
and communication equipment systems to the world's major customers, both
private and public. In the information technology software and services
sector, we look to the investment opportunities among the leading companies in
India. The Indian companies added to the portfolio during the period were
Cognizant Technology Solutions Corp., Satyam Computer Services Ltd., Tata
Consultancy Services Ltd. and Infosys Technologies Ltd.
The Fund's equity portfolio also is relatively underinvested in companies in
the consumer discretionary sector. In our view, the combination of higher
interest rates and more limited availability of residential real estate
financing is reducing the liquidity available to families to purchase or
update new or existing homes. Similarly, the higher cost of energy and public
services is reducing the discretionary income of households, further
supporting our underweight position in the consumer discretionary sector.
Our focus during the period continued to be on the energy sector, where
private companies and governments are increasing their spending in efforts to
find new reserves of oil and other energy resources. We were also attracted to
industrial companies providing new electric power generating equipment and
commercial aviation craft and other industrial and commercial equipment to the
rapidly growing economies in Asia, where China leads the capital investment
boom.
How would you characterize the Fund's position at the close of the period?
In seeking to meet its objective of principal protection and potential for
capital growth, the allocation between the Fund's fixed income and equity
components will continue to vary as market conditions change. As of February
28, 2006, the Fund was invested 65.6% in equities and 33.8% in fixed income
securities as a percent of net assets. This compared to an allocation of 59.8%
equities and 37.7% fixed income six months ago.
The equity portfolio ended the period overweight in the energy, industrials
and materials sectors, reflecting our view that global economic growth is
relatively strong. However, the strength in demand growth for both consumer
and industrial capital goods is lodged in the Asia-Pacific region,
particularly in China, where the nation's economic growth plans are resulting
in economic growth rates near 10%. The demand for products, materials, energy
and services over the next five years could be unprecedented in modern times.
Secondarily, the economic growth and development plans of the government of
India are a meaningful contributor to the demand for sophisticated industrial
and commercial products and systems, as many millions of people are drawn into
the middle-class sector of the society.
In the United States, we anticipate that demand for the services of HMOs
(health maintenance organizations) will remain strong over the intermediate-
term as these private organizations become major suppliers and administrators
of what traditionally have been public sector healthcare services. The
relative magnitude and growth in demand for healthcare services has
overwhelmed the federal and state governments, and the HMOs are being enlisted
as the providers of a rational delivery system for services. Also, we are
focused on biotechnology companies in the pharmaceutical area, where the
products are relatively moderate in price and efficacious at prolonging and
improving the quality of life. Against this backdrop, the health care sector
is an important part of our research efforts and our investments in this
sector are highly focused.
Lawrence R. Fuller
Vice President and Equity Portfolio Manager
March 15, 2006
After a distinguished 38-year career, Portfolio Manager Larry Fuller announced
his retirement from the investment management business, effective March 31,
2006. Mr. Fuller began his career in 1968. He joined Merrill Lynch Investment
Managers (MLIM) in October 1992 and was Equity Portfolio Manager of Merrill
Lynch Fundamental Growth Principal Protected Fund since its inception in 2002.
He also managed several other related portfolios. Mr. Fuller has been a
successful portfolio manager highly regarded for his experience, insights and
warmth. Thomas E. Burke, the Fund's associate portfolio manager who has worked
closely with Mr. Fuller for 13 years, has become Portfolio Manager of the
Fund, effective the same date. Mr. Fuller's colleagues at MLIM join the Fund's
Board of Trustees in wishing Mr. Fuller well in his retirement.
MERRILL LYNCH FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND FEBRUARY 28, 2006
Performance Data
About Fund Performance
Investors are able to purchase shares of the Fund through multiple pricing
alternatives:
* Class A Shares incur a maximum initial sales charge (front-end load) of 5.25%
and an account maintenance fee of 0.25% per year (but no distribution fee).
* Class B Shares are subject to a maximum contingent deferred sales charge
of 4% declining to 0% after six years. In addition, Class B Shares are subject
to a distribution fee of 0.75% per year and an account maintenance fee of
0.25% per year. These shares automatically convert to Class A Shares after
approximately eight years. (There is no initial sales charge for automatic
share conversions.) All returns for periods greater than eight years reflect
this conversion.
* Class C Shares are subject to a distribution fee of 0.75% per year and an
account maintenance fee of 0.25% per year. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within one year
of purchase.
* Effective December 28, 2005, Class I Shares are no longer subject to any
front-end sales charge. Class I Shares bear no ongoing distribution or account
maintenance fees and are available only to eligible investors. Had the sales
charge been included, the Fund's Class I Shares' performance would have been
lower.
None of the past results shown should be considered a representation of future
performance. Current performance may be lower or higher than the performance
data quoted. Refer to www.mlim.ml.com to obtain performance data current to
the most recent month-end. Performance results do not reflect the deduction of
taxes that a shareholder would pay on fund distributions or the redemption of
fund shares. Figures shown in each of the following tables assume reinvestment
of all dividends and capital gain distributions, if any, at net asset value on
the ex-dividend date. Investment return and principal value of shares will
fluctuate so that shares, when redeemed, may be worth more or less than their
original cost. Dividends paid to each class of shares will vary because of the
different levels of account maintenance, distribution and transfer agency fees
applicable to each class, which are deducted from the income available to be
paid to shareholders.
MERRILL LYNCH FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND FEBRUARY 28, 2006
Performance Data (continued)
Recent Performance Results
6-Month 12-Month Since Inception
As of February 28, 2006 Total Return Total Return Total Return
ML Fundamental Growth Principal Protected Fund Class A Shares* +2.63% +5.22% +15.63%
ML Fundamental Growth Principal Protected Fund Class B Shares* +2.21 +4.39 +12.75
ML Fundamental Growth Principal Protected Fund Class C Shares* +2.17 +4.36 +12.69
ML Fundamental Growth Principal Protected Fund Class I Shares* +2.78 +5.47 +16.56
S&P 500 (R) Index** +5.93 +8.40 +53.98
S&P 500/Citigroup Growth Index*** +3.43 +4.86 +37.05
Lehman Brothers Aggregate Bond Index**** -0.11 +2.74 +13.17
* Investment results shown do not reflect sales charges; results shown would be lower if a sales
charge was included. Cumulative total investment returns are based on changes in net asset values
for the periods shown, and assume reinvestment of all dividends and capital gains distributions
at net asset value on the ex-dividend date. The Fund's inception date is 11/13/02.
** This unmanaged Index covers 500 industrial, utility, transportation and financial companies of the
U.S. markets (mostly NYSE issues) representing about 75% of NYSE market capitalization and 30% of
NYSE issues. Since inception total return is from 11/13/02.
*** This unmanaged Index is designed to provide a comprehensive measure of large-cap U.S. equity "growth"
performance. It is an unmanaged float adjusted market capitalization weighted index comprised of stocks
representing approximately half the market capitalization of the S&P 500 Index that have been identified
as being on the growth end of the growth-value spectrum. Since inception total return is from 11/13/02.
**** This unmanaged market-weighted Index is comprised of investment grade corporate bonds (rated BBB or better),
mortgages and U.S. Treasury and government agency issues with at least one year to maturity. Since inception
total return is from 11/13/02.
S&P 500 is a registered trademark of the McGraw-Hill Companies.
MERRILL LYNCH FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND FEBRUARY 28, 2006
Performance Data (concluded)
Average Annual Total Return
Return Without Return With
Sales Charge Sales Charge**
Class A Shares*
One Year Ended 2/28/06 +5.22% -0.30%
Inception (11/13/02)
through 2/28/06 +4.51 +2.81
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
Return Without Return With
CDSC CDSC**
Class B Shares*
One Year Ended 2/28/06 +4.39% +0.39%
Inception (11/13/02)
through 2/28/06 +3.71 +2.86
* Maximum contingent deferred sales charge is 4% and is reduced
to 0% after six years.
** Assuming payment of applicable contingent deferred sales
charge.
Return Without Return With
CDSC CDSC**
Class C Shares*
One Year Ended 2/28/06 +4.36% +3.36%
Inception (11/13/02)
through 2/28/06 +3.69 +3.69
* Maximum contingent deferred sales charge is 1% and is reduced
to 0% after one year.
** Assuming payment of applicable contingent deferred sales
charge.
Class I Shares Return
One Year Ended 2/28/06 +5.47%
Inception (11/13/02)
through 2/28/06 +4.76
MERRILL LYNCH FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND FEBRUARY 28, 2006
Disclosure of Expenses
Shareholders of this Fund may incur the following charges: (a) expenses
related to transactions, including sales charges, redemption fees and exchange
fees; and (b) operating expenses including advisory fees, distribution fees
including 12b-1 fees, and other Fund expenses. The following example (which is
based on a hypothetical investment of $1,000 invested on September 1, 2005 and
held through February 28, 2006) is intended to assist shareholders both in
calculating expenses based on an investment in the Fund and in comparing these
expenses with similar costs of investing in other mutual funds.
The first table below provides information about actual account values and
actual expenses. In order to estimate the expenses a shareholder paid during
the period covered by this report, shareholders can divide their account value
by $1,000 and then multiply the result by the number in the first line under
the heading entitled "Expenses Paid During the Period."
The second table below provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses. In order to assist
shareholders in comparing the ongoing expenses of investing in this Fund and
other funds, compare the 5% hypothetical example with the 5% hypothetical
examples that appear in other funds' shareholder reports.
The expenses shown in the table are intended to highlight shareholders'
ongoing costs only and do not reflect any transactional expenses, such as
sales charges, redemption fees or exchange fees. Therefore, the second table
is useful in comparing ongoing expenses only, and will not help shareholders
determine the relative total expenses of owning different funds. If these
transactional expenses were included, shareholder expenses would have been
higher.
Expenses Paid
Beginning Ending During the Period*
Account Value Account Value September 1, 2005
September 1, February 28, to February 28,
2005 2006 2006
Actual
Class A $1,000 $1,026.30 $10.05
Class B $1,000 $1,022.10 $13.84
Class C $1,000 $1,021.70 $13.89
Class I $1,000 $1,027.80 $ 8.80
Hypothetical (5% annual return before expenses)**
Class A $1,000 $1,014.88 $ 9.99
Class B $1,000 $1,011.11 $13.76
Class C $1,000 $1,011.06 $13.81
Class I $1,000 $1,016.12 $ 8.75
* For each class of the Fund, expenses are equal to the annualized expense ratio for the class
(2.00% for Class A, 2.76% for Class B, 2.77% for Class C and 1.75% for Class I), multiplied by
the average account value over the period, multiplied by 181/365 (to reflect the one-half year
period shown).
** Hypothetical 5% annual return before expenses is calculated by pro-rating the number of days in
the most recent fiscal half year divided by 365.
MERRILL LYNCH FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND FEBRUARY 28, 2006
Schedule of Investments
Shares
Industry Common Stocks Held Value
Aerospace & Defense--3.3%
Boeing Co. 23,500 $ 1,708,215
Lockheed Martin Corp. 20,400 1,486,548
United Technologies Corp. 16,700 976,950
--------------
4,171,713
Beverages--0.8%
PepsiCo, Inc. 17,600 1,040,336
Biotechnology--3.0%
Amgen, Inc. (a) 29,600 2,234,504
Genzyme Corp. (a) 22,500 1,560,150
--------------
3,794,654
Capital Markets--1.2%
Franklin Resources, Inc. 14,400 1,478,592
Chemicals--6.3%
Air Products & Chemicals, Inc. 30,100 1,931,216
The Dow Chemical Co. 50,600 2,177,318
E.I. du Pont de Nemours & Co. 30,500 1,227,320
Nalco Holding Co. (a) 32,800 574,000
Praxair, Inc. 39,200 2,116,016
--------------
8,025,870
Commercial Banks--1.8%
Bank of America Corp. 29,000 1,329,650
Sumitomo Mitsui Financial Group, Inc. 85 927,757
--------------
2,257,407
Communications Equipment--1.0%
Telefonaktiebolaget LM Ericsson (b) 38,600 1,316,260
Construction & Engineering--0.4%
Fluor Corp. 3,600 310,680
Jacobs Engineering Group, Inc. (a) 2,800 240,072
--------------
550,752
Diversified Financial Services--0.8%
Citigroup, Inc. 23,200 1,075,784
Energy Equipment & Services--8.7%
Baker Hughes, Inc. 25,400 1,726,438
Grant Prideco, Inc. (a) 14,000 566,580
Halliburton Co. 33,700 2,291,600
National Oilwell Varco, Inc. (a) 20,500 1,248,040
Schlumberger Ltd. 22,800 2,622,000
Transocean, Inc. (a) 35,500 2,633,390
--------------
11,088,048
Health Care Equipment & Supplies--3.5%
Alcon, Inc. 30,000 3,454,800
Medtronic, Inc. 19,000 1,025,050
--------------
4,479,850
Health Care Providers & Services--5.2%
Caremark Rx, Inc. (a) 23,400 1,164,150
Covance, Inc. (a) 4,900 276,605
Sierra Health Services, Inc. (a) 14,200 591,998
UnitedHealth Group, Inc. 36,700 2,137,041
WellPoint, Inc. (a) 33,000 2,534,070
--------------
6,703,864
Shares
Industry Common Stocks Held Value
Hotels, Restaurants & Leisure--3.6%
Starbucks Corp. (a) 53,600 $ 1,946,752
Station Casinos, Inc. 4,100 280,645
Wynn Resorts Ltd. (a)(e) 19,900 1,322,355
Yum! Brands, Inc. 21,300 1,016,010
--------------
4,565,762
Household Products--2.1%
Procter & Gamble Co. 44,600 2,672,878
IT Services--2.9%
Cognizant Technology Solutions
Corp. (a) 17,300 996,653
Hewitt Associates, Inc. Class A (a) 17,200 464,228
Infosys Technologies Ltd. 13,400 850,014
Satyam Computer Services Ltd. 55,000 952,515
Tata Consultancy Services Ltd. 11,900 453,209
--------------
3,716,619
Industrial Conglomerates--4.6%
3M Co. 34,900 2,568,291
General Electric Co. 102,600 3,372,462
--------------
5,940,753
Internet & Catalog Retail--1.0%
eBay, Inc. (a) 31,300 1,253,878
Internet Software & Services--1.8%
Google, Inc. Class A (a) 1,900 688,978
Yahoo!, Inc. (a) 51,600 1,654,296
--------------
2,343,274
Machinery--2.8%
Caterpillar, Inc. 21,100 1,541,988
ITT Industries, Inc. 20,600 1,081,500
Pall Corp. 33,800 994,396
--------------
3,617,884
Media--0.8%
Walt Disney Co. 39,000 1,091,610
Oil, Gas & Consumable Fuels--5.1%
ConocoPhillips 14,700 896,112
Exxon Mobil Corp. 76,300 4,529,931
Sunoco, Inc. 14,700 1,089,270
--------------
6,515,313
Pharmaceuticals--0.2%
MGI Pharma, Inc. (a) 12,400 218,612
Specialty Retail--1.4%
Staples, Inc. 74,950 1,839,273
Textiles, Apparel & Luxury Goods--1.8%
Coach, Inc. (a) 35,000 1,250,200
Nike, Inc. Class B 11,800 1,024,004
--------------
2,274,204
MERRILL LYNCH FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND FEBRUARY 28, 2006
Schedule of Investments (concluded)
Shares
Industry Common Stocks Held Value
Tobacco--1.2%
Altria Group, Inc. 20,900 $ 1,502,710
Trading Companies & Distributors--0.3%
MSC Industrial Direct Co. Class A 7,800 369,486
Total Common Stocks
(Cost--$69,080,760)--65.6% 83,905,386
Face
Amount U.S. Government Obligations
U.S. Treasury STRIPS (f):
$ 29,154,000 3.198%** due 8/15/2009 24,880,548
21,855,000 3.858%** due 11/15/2009 18,432,114
Total U.S. Government Obligations
(Cost--$45,104,996)--33.8% 43,312,662
Face
Amount Short-Term Securities Value
Time--Deposit
$ 18,794 Brown Brothers Harriman, 3.88%
due 3/1/2006 $ 18,794
Beneficial
Interest
$ 650,450 Merrill Lynch Liquidity Series, LLC
Cash Sweep Series I, 4.42% (c)(g) 650,450
1,237,600 Merrill Lynch Liquidity Series, LLC
Money Market Series, 4.53% (c)(d)(g) 1,237,600
Total Short-Term Securities
(Cost--$1,906,844)--1.5% 1,906,844
Total Investments
(Cost--$116,092,600*)--100.9% 129,124,892
Liabilities in Excess of Other Assets--(0.9%) (1,188,058)
--------------
Net Assets--100.0% $ 127,936,834
==============
* The cost and unrealized appreciation (depreciation) of investments
as of February 28, 2006, as computed for federal income tax purposes,
were as follows:
Aggregate cost $ 116,797,651
================
Gross unrealized appreciation $ 15,804,266
Gross unrealized depreciation (3,477,025)
----------------
Net unrealized appreciation $ 12,327,241
================
** Represents a zero coupon bond; the interest rate shown reflects the
effective yield at the time of purchase.
(a) Non-income producing security.
(b) Depositary receipts.
(c) Investments in companies considered to be an affiliate of the Fund,
for purposes of Section 2(a)(3) of the Investment Company Act of 1940,
were as follows:
Net Interest
Affiliate Activity Income
Merrill Lynch Liquidity Series, LLC
Cash Sweep Series I, 4.42% $(1,725,097) $43,337
Merrill Lynch Liquidity Series, LLC
Money Market Series, 4.53% $ 1,237,600 $10,582
(d) Security was purchased with the cash proceeds from securities loans.
(e) Security, or a portion of security, is on loan.
(f) Separately Traded Registered Interest and Principal of Securities (STRIPS).
(g) Variable rate security.
o For Fund compliance purposes, the Fund's industry classifications refer
to any one or more of the industry subclassifications used by one or more
widely recognized market indexes or ratings group indexes, and/or as
defined by Fund management. This definition may not apply for purposes of
this report, which may combine industry sub-clasifications for reporting
ease. Industries are shown as a percentage of net assets.
See Notes to Financial Statements.
MERRILL LYNCH FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND FEBRUARY 28, 2006
Statement of Assets and Liabilities
As of February 28, 2006
Assets
Investments in unaffiliated securities, at value (including securities
loaned of $1,209,390) (identified cost--$114,204,550) $ 127,236,842
Investments in affiliated securities, at value (identified cost--$1,888,050) 1,888,050
Foreign cash (cost--$7,129) 7,228
Receivables:
Securities sold $ 732,356
Dividends 114,261
Securities lending 2,824 849,441
---------------
Prepaid expenses and other assets 2,050
---------------
Total assets 129,983,611
---------------
Liabilities
Collateral on securities loaned, at value 1,237,600
Deferred foreign capital gain tax 5,513
Payables:
Beneficial interest redeemed 508,248
Distributor 92,249
Financial warranty fee 80,866
Investment adviser 57,697
Other affiliates 41,685 780,745
---------------
Accrued expenses 22,919
---------------
Total liabilities 2,046,777
---------------
Net Assets
Net assets $ 127,936,834
===============
Net Assets Consist of
Paid-in capital, unlimited number of shares of beneficial interest authorized $ 114,865,820
Accumulated investment loss--net $ (353,199)
Undistributed realized capital gains--net 397,335
Unrealized appreciation--net 13,026,878
---------------
Total accumulated earnings--net 13,071,014
---------------
Net Assets $ 127,936,834
===============
Net Asset Value
Class A--Based on net assets of $4,088,303 and 391,932 shares of beneficial
interest outstanding $ 10.43
===============
Class B--Based on net assets of $70,771,866 and 6,824,520 shares of beneficial
interest outstanding $ 10.37
===============
Class C--Based on net assets of $46,563,933 and 4,479,700 shares of beneficial
interest outstanding $ 10.39
===============
Class I--Based on net assets of $6,512,732 and 624,876 shares of beneficial
interest outstanding $ 10.42
===============
See Notes to Financial Statements.
MERRILL LYNCH FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND FEBRUARY 28, 2006
Statement of Operations
For the Six Months Ended February 28, 2006
Investment Income
Interest (including $43,337 from affiliates) $ 913,634
Dividends 506,242
Securities lending--net 10,582
---------------
Total income 1,430,458
---------------
Expenses
Financial warranty fee $ 553,577
Investment advisory fees 443,620
Account maintenance and distribution fees--Class B 376,328
Account maintenance and distribution fees--Class C 249,928
Transfer agent fees--Class B 47,493
Accounting services 46,830
Transfer agent fees--Class C 32,479
Professional fees 25,466
Printing and shareholder reports 19,402
Trustees' fees and expenses 9,736
Custodian fees 9,367
Account maintenance fees--Class A 5,432
Transfer agent fees--Class I 3,760
Transfer agent fees--Class A 2,367
Pricing fees 650
Other 8,639
---------------
Total expenses 1,835,074
---------------
Investment loss--net (404,616)
---------------
Realized & Unrealized Gain (Loss)--Net
Realized gain (loss) on:
Investments--net 1,090,062
Foreign currency transactions--net (6,452)
Options written--net 18,793 1,102,403
---------------
Change in unrealized appreciation/depreciation on:
Investments (including $5,513 deferred foreign capital gain tax)--net 2,489,135
Foreign currency transactions--net 337 2,489,472
--------------- ---------------
Total realized and unrealized gain--net 3,591,875
---------------
Net Increase in Net Assets Resulting from Operations $ 3,187,259
===============
See Notes to Financial Statements.
MERRILL LYNCH FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND FEBRUARY 28, 2006
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
February 28, August 31,
Increase (Decrease) in Net Assets: 2006 2005
Operations
Investment income (loss)--net $ (404,616) $ 55,947
Realized gain--net 1,102,403 7,373,394
Change in unrealized appreciation/depreciation--net 2,489,472 2,801,411
--------------- ---------------
Net increase in net assets resulting from operations 3,187,259 10,230,752
--------------- ---------------
Distributions to Shareholders
Realized gain--net:
Class A (165,171) (427,659)
Class B (2,574,206) (4,486,776)
Class C (1,696,805) (3,048,456)
Class I (289,864) (636,382)
--------------- ---------------
Net decrease in net assets resulting from distributions to shareholders (4,726,046) (8,599,273)
--------------- ---------------
Beneficial Interest Transactions
Net decrease in net assets derived from beneficial interest transactions (16,037,981) (44,278,072)
--------------- ---------------
Net Assets
Total decrease in net assets (17,576,768) (42,646,593)
Beginning of period 145,513,602 188,160,195
--------------- ---------------
End of period* $ 127,936,834 $ 145,513,602
=============== ===============
* Undistributed investment income/accumulated investment loss--net $ (353,199) $ 51,417
=============== ===============
See Notes to Financial Statements.
MERRILL LYNCH FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND FEBRUARY 28, 2006
Financial Highlights
Class A
For the Period
For the Six November 13,
Months Ended For the Year Ended 2002++ to
The following per share data and ratios have been derived February 28, August 31, August 31,
from information provided in the financial statements. 2006 2005 2004 2003
Per Share Operating Performance
Net asset value, beginning of period $ 10.57 $ 10.49 $ 10.38 $ 10.00
------------ ------------ ------------ ------------
Investment income--net .01*** .08*** --***+++++ .04
Realized and unrealized gain--net .27 .63 .16 .35
------------ ------------ ------------ ------------
Total from investment operations .28 .71 .16 .39
------------ ------------ ------------ ------------
Less dividends and distributions from:
Investment income--net -- -- (.05) (.01)
Realized gain--net (.42) (.63) -- --
------------ ------------ ------------ ------------
Total dividends and distributions (.42) (.63) (.05) (.01)
------------ ------------ ------------ ------------
Net asset value, end of period $ 10.43 $ 10.57 $ 10.49 $ 10.38
============ ============ ============ ============
Total Investment Return**
Based on net asset value per share 2.63%+++ 6.82% 1.50% 3.90%+++
============ ============ ============ ============
Ratios to Average Net Assets
Expenses, net of waiver 2.00%* 1.98% 1.99% 2.11%*
============ ============ ============ ============
Expenses 2.00%* 1.98% 2.00% 2.11%*
============ ============ ============ ============
Investment income--net .10%* .75% .02% .41%*
============ ============ ============ ============
Supplemental Data
Net assets, end of period (in thousands) $ 4,088 $ 4,955 $ 8,309 $ 15,668
============ ============ ============ ============
Portfolio turnover 13.10% 58.17% 71.29% 106.91%
============ ============ ============ ============
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Based on average shares outstanding.
++ Commencement of operations.
+++ Aggregate total investment return.
+++++ Amount is less than $.01 per share.
See Notes to Financial Statements.
MERRILL LYNCH FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND FEBRUARY 28, 2006
Financial Highlights (continued)
Class B
For the Period
For the Six November 13,
Months Ended For the Year Ended 2002++ to
The following per share data and ratios have been derived February 28, August 31, August 31,
from information provided in the financial statements. 2006 2005 2004 2003
Per Share Operating Performance
Net asset value, beginning of period $ 10.50 $ 10.39 $ 10.31 $ 10.00
------------ ------------ ------------ ------------
Investment loss--net (.03)*** (.01)*** (.08)*** (.03)
Realized and unrealized gain--net .26 .63 .16 .35
------------ ------------ ------------ ------------
Total from investment operations .23 .62 .08 .32
------------ ------------ ------------ ------------
Less dividends and distributions from:
Investment income--net -- -- --+++++ (.01)
Realized gain--net (.36) (.51) -- --
------------ ------------ ------------ ------------
Total dividends and distributions (.36) (.51) --+++++ (.01)
------------ ------------ ------------ ------------
Net asset value, end of period $ 10.37 $ 10.50 $ 10.39 $ 10.31
============ ============ ============ ============
Total Investment Return**
Based on net asset value per share 2.21%+++ 6.04% .81% 3.20%+++
============ ============ ============ ============
Ratios to Average Net Assets
Expenses, net of waiver 2.76%* 2.75% 2.76% 2.88%*
============ ============ ============ ============
Expenses 2.76%* 2.75% 2.76% 2.88%*
============ ============ ============ ============
Investment loss--net (.67%)* (.06%) (.74%) (.36%)*
============ ============ ============ ============
Supplemental Data
Net assets, end of period (in thousands) $ 70,772 $ 79,793 $ 96,961 $ 117,426
============ ============ ============ ============
Portfolio turnover 13.10% 58.17% 71.29% 106.91%
============ ============ ============ ============
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Based on average shares outstanding.
++ Commencement of operations.
+++ Aggregate total investment return.
+++++ Amount is less than $(.01) per share.
See Notes to Financial Statements.
MERRILL LYNCH FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND FEBRUARY 28, 2006
Financial Highlights (continued)
Class C
For the Period
For the Six November 13,
Months Ended For the Year Ended 2002++ to
The following per share data and ratios have been derived February 28, August 31, August 31,
from information provided in the financial statements. 2006 2005 2004 2003
Per Share Operating Performance
Net asset value, beginning of period $ 10.52 $ 10.39 $ 10.31 $ 10.00
------------ ------------ ------------ ------------
Investment loss--net (.04)*** (.01)*** (.08)*** (.03)
Realized and unrealized gain--net .27 .63 .16 .35
------------ ------------ ------------ ------------
Total from investment operations .23 .62 .08 .32
------------ ------------ ------------ ------------
Less dividends and distributions from:
Investment income--net -- -- -- (.01)
Realized gain--net (.36) (.49) -- --
------------ ------------ ------------ ------------
Total dividends and distributions (.36) (.49) -- (.01)
------------ ------------ ------------ ------------
Net asset value, end of period $ 10.39 $ 10.52 $ 10.39 $ 10.31
============ ============ ============ ============
Total Investment Return**
Based on net asset value per share 2.17%+++ 6.05% .78% 3.20%+++
============ ============ ============ ============
Ratios to Average Net Assets
Expenses, net of waiver 2.77%* 2.75% 2.76% 2.88%*
============ ============ ============ ============
Expenses 2.77%* 2.75% 2.76% 2.88%*
============ ============ ============ ============
Investment loss--net (.67%)* (.06%) (.75%) (.36%)*
============ ============ ============ ============
Supplemental Data
Net assets, end of period (in thousands) $ 46,564 $ 53,459 $ 71,216 $ 101,111
============ ============ ============ ============
Portfolio turnover 13.10% 58.17% 71.29% 106.91%
============ ============ ============ ============
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Based on average shares outstanding.
++ Commencement of operations.
+++ Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND FEBRUARY 28, 2006
Financial Highlights (concluded)
Class I
For the Period
For the Six November 13,
Months Ended For the Year Ended 2002++ to
The following per share data and ratios have been derived February 28, August 31, August 31,
from information provided in the financial statements. 2006 2005 2004 2003
Per Share Operating Performance
Net asset value, beginning of period $ 10.57 $ 10.52 $ 10.40 $ 10.00
------------ ------------ ------------ ------------
Investment income--net .02*** .10*** .03*** .06
Realized and unrealized gain--net .28 .63 .16 .35
------------ ------------ ------------ ------------
Total from investment operations .30 .73 .19 .41
------------ ------------ ------------ ------------
Less dividends and distributions from:
Investment income--net -- -- (.07) (.01)
Realized gain--net (.45) (.68) -- --
------------ ------------ ------------ ------------
Total dividends and distributions (.45) (.68) (.07) (.01)
------------ ------------ ------------ ------------
Net asset value, end of period $ 10.42 $ 10.57 $ 10.52 $ 10.40
============ ============ ============ ============
Total Investment Return**
Based on net asset value per share 2.78%+++ 7.03% 1.79% 4.10%+++
============ ============ ============ ============
Ratios to Average Net Assets
Expenses, net of waiver 1.75%* 1.73% 1.74% 1.86%*
============ ============ ============ ============
Expenses 1.75%* 1.73% 1.75% 1.86%*
============ ============ ============ ============
Investment income--net .35%* .99% .27% .67%*
============ ============ ============ ============
Supplemental Data
Net assets, end of period (in thousands) $ 6,513 $ 7,306 $ 11,675 $ 17,503
============ ============ ============ ============
Portfolio turnover 13.10% 58.17% 71.29% 106.91%
============ ============ ============ ============
* Annualized.
** Total investment returns exclude the effects of sales charges. Effective December 28, 2005,
Class I Shares are no longer subject to any front-end sales charge.
*** Based on average shares outstanding.
++ Commencement of operations.
+++ Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND FEBRUARY 28, 2006
Notes to Financial Statements
1. Significant Accounting Policies:
Merrill Lynch Fundamental Growth Principal Protected Fund (the "Fund") is part
of Merrill Lynch Principal Protected Trust (the "Trust"). The Fund is a
separate diversified series of the Trust, which is registered as an open-end
management investment company under the Investment Company Act of 1940, as
amended. The Fund's financial statements are prepared in conformity with U.S.
generally accepted accounting principles, which may require the use of
management accruals and estimates. Actual results may differ from these
estimates. These unaudited financial statements reflect all adjustments, which
are, in the opinion of management, necessary to present a fair statement of
the results for the interim period. All such adjustments are of a normal,
recurring nature. The Fund offers multiple classes of shares. Shares of the
Fund were offered during the initial offering period but will not be offered
during the Guarantee Period from November 13, 2002 through November 13, 2009
(the "Guarantee Maturity Date"), except in connection with reinvestment of
dividends and distributions. The Fund will be offered on a continuous basis
after the Guarantee Maturity Date without the principal protection feature.
Effective December 28, 2005, Class I Shares are no longer subject to any front-
end sales charge. Class A Shares are sold with a front-end sales charge.
Shares of Class B and Class C may be subject to a contingent deferred sales
charge. Class I Shares are sold only to certain eligible investors. All
classes of shares have identical voting, dividend, liquidation and other
rights and the same terms and conditions, except that Class A, Class B and
Class C Shares bear certain expenses related to the account maintenance of
such shares, and Class B and Class C Shares also bear certain expenses related
to the distribution of such shares. Each class has exclusive voting rights
with respect to matters relating to its account maintenance and distribution
expenditures (except that Class B shareholders may vote on certain changes to
the Class A distribution plan). Income, expenses (other than expenses
attributable to a specific class) and realized and unrealized gains and losses
are allocated daily to each class based on its relative net assets. The
following is a summary of significant accounting policies followed by the
Fund.
(a) Valuation of investments--Equity securities that are held by the Fund that
are traded on stock exchanges or the Nasdaq National Market are valued at the
last sale price or official close price on the exchange, as of the close of
business on the day the securities are being valued or, lacking any sales, at
the last available bid price for long positions, and at the last available
asked price for short positions. In cases where equity securities are traded
on more than one exchange, the securities are valued on the exchange
designated as the primary market by or under the authority of the Board of
Trustees of the Fund. Long positions traded in the over-the-counter ("OTC")
market, Nasdaq Small Cap or Bulletin Board are valued at the last available
bid price or yield equivalent obtained from one or more dealers or pricing
services approved by the Board of Trustees of the Fund. Short positions traded
in the OTC market are valued at the last available asked price. Portfolio
securities that are traded both in the OTC market and on a stock exchange are
valued according to the broadest and most representative market.
Options written are valued at the last sale price in the case of exchange-
traded options or, in the case of options traded in the OTC market, the last
asked price. Options purchased are valued at their last sale price in the case
of exchange-traded options or, in the case of options traded in the OTC
market, the last bid price. Swap agreements are valued based upon quoted fair
valuations received daily by the Fund from a pricing service or counterparty.
Financial futures contracts and options thereon, which are traded on
exchanges, are valued at their last sale price as of the close of such
exchanges. Obligations with remaining maturities of 60 days or less are valued
at amortized cost unless the Investment Adviser believes that this method no
longer produces fair valuations.
Repurchase agreements are valued at cost plus accrued interest. The Fund
employs pricing services to provide certain securities prices for the Fund.
Securities and assets for which market quotations are not readily available
are valued at fair value as determined in good faith by or under the direction
of the Board of Trustees of the Fund, including valuations furnished by the
pricing services retained by the Fund, which may use a matrix system for
valuations. The procedures of a pricing service and its valuations are
reviewed by the officers of the Fund under the general supervision of the
Fund's Board of Trustees. Such valuations and procedures will be reviewed
periodically by the Board of Trustees of the Fund.
MERRILL LYNCH FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND FEBRUARY 28, 2006
Notes to Financial Statements (continued)
Generally, trading in foreign securities, as well as U.S. government
securities, money market instruments and certain fixed income securities, is
substantially completed each day at various times prior to the close of
business on the New York Stock Exchange ("NYSE"). The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates also are
generally determined prior to the close of business on the NYSE. Occasionally,
events affecting the values of such securities and such exchange rates may
occur between the times at which they are determined and the close of business
on the NYSE that may not be reflected in the computation of the Fund's net
asset value. If events (for example, a company announcement, market volatility
or a natural disaster) occur during such periods that are expected to
materially affect the value of such securities, those securities may be valued
at their fair value as determined in good faith by the Fund's Board of
Trustees or by the Investment Adviser using a pricing service and/or
procedures approved by the Fund's Board of Trustees.
(b) Derivative financial instruments--The Fund may engage in various portfolio
strategies both to increase the return of the Fund and to hedge, or protect,
its exposure to interest rate movements and movements in the securities
markets. Losses may arise due to changes in the value of the contract or if
the counterparty does not perform under the contract.
* Financial futures contracts--The Fund may purchase or sell financial futures
contracts and options on such futures contracts. Futures contracts are
contracts for delayed delivery of securities at a specific future date and at
a specific price or yield. Upon entering into a contract, the Fund deposits
and maintains as collateral such initial margin as required by the exchange on
which the transaction is effected. Pursuant to the contract, the Fund agrees
to receive from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are known as
variation margin and are recorded by the Fund as unrealized gains or losses.
When the contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed.
* Options--The Fund may write and purchase call and put options. When the Fund
writes an option, an amount equal to the premium received by the Fund is
reflected as an asset and an equivalent liability. The amount of the liability
is subsequently marked-to-market to reflect the current value of the option
written. When a security is purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or deducted from)
the basis of the security acquired or deducted from (or added to) the proceeds
of the security sold. When an option expires (or the Fund enters into a
closing transaction), the Fund realizes a gain or loss on the option to the
extent of the premiums received or paid (or gain or loss to the extent the
cost of the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Foreign currency transactions--Transactions denominated in foreign
currencies are recorded at the exchange rate prevailing when recognized.
Assets and liabilities denominated in foreign currencies are valued at the
exchange rate at the end of the period. Foreign currency transactions are the
result of settling (realized) or valuing (unrealized) assets or liabilities
expressed in foreign currencies into U.S. dollars. Realized and unrealized
gains or losses from investments include the effects of foreign exchange rates
on investments. The Fund invests in foreign securities, which may involve a
number of risk factors and special considerations not present with investments
in securities of U.S. corporations.
(d) Income taxes--It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required. Under the applicable
foreign tax law, a withholding tax may be imposed on interest, dividends and
capital gains at various rates.
MERRILL LYNCH FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND FEBRUARY 28, 2006
Notes to Financial Statements (continued)
(e) Security transactions and investment income--Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Dividends from foreign securities where the ex-dividend date may have passed
are subsequently recorded when the Fund has determined the ex-dividend date.
Interest income is recognized on the accrual basis. The Fund amortizes all
premiums and discounts on debt securities.
(f) Dividends and distributions--Dividends and distributions paid by the Fund
are recorded on the ex-dividend dates.
(g) Securities lending--The Fund may lend securities to financial institutions
that provide cash or securities issued or guaranteed by the U.S. government as
collateral, which will be maintained at all times in an amount equal to at
least 100% of the current market value of the loaned securities. The market
value of the loaned securities is determined at the close of business of the
Fund and any additional required collateral is delivered to the Fund on the
next business day. Where the Fund receives securities as collateral for the
loaned securities, it collects a fee from the borrower. The Fund typically
receives the income on the loaned securities but does not receive the income
on the collateral. Where the Fund receives cash collateral, it may invest such
collateral and retain the amount earned on such investment, net of any amount
rebated to the borrower. Loans of securities are terminable at any time and
the borrower, after notice, is required to return borrowed securities within
five business days. The Fund may pay reasonable finder's, lending agent,
administrative and custodial fees in connection with its loans. In the event
that the borrower defaults on its obligation to return borrowed securities
because of insolvency or for any other reason, the Fund could experience
delays and costs in gaining access to the collateral. The Fund also could
suffer a loss where the value of the collateral falls below the market value
of the borrowed securities, in the event of borrower default or in the event
of losses on investments made with cash collateral.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Merrill Lynch
Investment Managers, L.P. ("MLIM"). The general partner of MLIM is Princeton
Services, Inc. ("PSI"), an indirect, wholly-owned subsidiary of Merrill Lynch
& Co., Inc. ("ML & Co."), which is the limited partner. The Fund has also
entered into a Distribution Agreement and Distribution Plan with FAM
Distributors, Inc. ("FAMD" or the "Distributor"), which is a wholly-owned
subsidiary of Merrill Lynch Group, Inc.
MLIM is responsible for the management of the Fund's portfolio and provides
the necessary personnel, facilities, equipment and certain other services
necessary to the operations of the Fund. For such services, the Fund pays a
monthly fee at the annual rate of .65% of the Fund's average daily net assets.
MLIM has entered into a contractual arrangement with the Fund under which the
expenses incurred by each class of shares of the Fund (excluding distribution
and/or account maintenance fees) will not exceed 1.99%. This arrangement has a
one-year term and is automatically renewable.
Pursuant to the Distribution Plan adopted by the Fund in accordance with Rule
12b-1 under the Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are accrued daily
and paid monthly at annual rates based upon the average daily net assets of
the shares as follows:
Account
Maintenance Distribution
Fee Fee
Class A .25% --
Class B .25% .75%
Class C .25% .75%
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MLPF&S"), an affiliate of MLIM, also provides
account maintenance and distribution services to the Fund. The ongoing account
maintenance fee compensates the Distributor and MLPF&S for providing account
maintenance services to Class A, Class B and Class C shareholders. The ongoing
distribution fee compensates the Distributor and MLPF&S for providing
shareholder and distribution-related services to Class B and Class C
shareholders.
For the six months ended February 28, 2006, MLPF&S received contingent
deferred sales charges of $194,047 relating to transactions in Class B Shares.
MERRILL LYNCH FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND FEBRUARY 28, 2006
Notes to Financial Statements (continued)
The Trust, on behalf of the Fund, has entered into a Financial Warranty
Agreement with Main Place Funding, LLC (the "Warranty Provider"). The
Financial Warranty Agreement is intended to make sure that on the Guarantee
Maturity Date, each shareholder of the Fund will be entitled to redeem his or
her shares for an amount no less than the initial value of that shareholder's
account (less expenses and sales charges not covered by the Financial Warranty
Agreement), provided that all dividends and distributions received from the
Fund have been reinvested and no shares have been redeemed (the "Guaranteed
Amount"). The Fund will pay to the Warranty Provider, under the Financial
Warranty Agreement, an annual fee equal to .80% of the Fund's average daily
net assets during the Guarantee Period. If the value of the Fund's assets on
the Guarantee Maturity Date is insufficient to result in the value of each
shareholder's account being at least equal to the shareholder's Guaranteed
Amount, the Warranty Provider will pay the Fund an amount sufficient to make
sure that each shareholder's account can be redeemed for an amount equal to
his or her Guaranteed Amount.
The Fund has received an exemptive order from the Securities and Exchange
Commission permitting it to lend portfolio securities to MLPF&S or its
affiliates. Pursuant to that order, the Fund also has retained Merrill Lynch
Investment Managers, LLC ("MLIM, LLC"), an affiliate of MLIM, as the
securities lending agent for a fee based on a share of the returns on
investment of cash collateral. MLIM, LLC may, on behalf of the Fund, invest
cash collateral received by the Fund for such loans, among other things, in a
private investment company managed by MLIM, LLC or in registered money market
funds advised by MLIM or its affiliates. For the six months ended February 28,
2006, MLIM, LLC received $4,583 in securities lending agent fees.
In addition, MLPF&S received $4,666 in commissions on the execution of
portfolio security transactions for the Fund for the six months ended February
28, 2006.
For the six months ended February 28, 2006, the Fund reimbursed MLIM $1,520
for certain accounting services.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML & Co.,
is the Fund's transfer agent.
Certain officers and/or trustees of the Fund are officers and/or directors of
MLIM, FDS, PSI, FAMD, ML & Co., and/or MLIM, LLC.
In February 2006, ML & Co. and BlackRock, Inc. entered into an agreement to
merge ML & Co.'s investment management business, including MLIM, with the
investment management business of BlackRock, Inc. The transaction is expected
to close in the third quarter of 2006.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
six months ended February 28, 2006, were $17,750,811 and $36,872,049
respectively.
Transactions in call options written for the six months ended February 28,
2006 were as follows:
Number of Premiums
Contracts Received
Options written 39 $ 18,793
Options expired (39) (18,793)
--------------- ---------------
Outstanding call options written,
end of period -- --
=============== ===============
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest transactions was
$16,037,981 and $44,278,072 for the six months ended February 28, 2006 and the
year ended August 31, 2005, respectively.
Transactions in beneficial interest for each class were as follows:
Class A Shares for the
Six Months Ended Dollar
February 28, 2006 Shares Amount
Shares issued to shareholders in
reinvestment of distributions 15,131 $ 158,731
Shares redeemed (91,993) (973,650)
--------------- ---------------
Net decrease (76,862) $ (814,919)
=============== ===============
Class A Shares for the Year Dollar
Ended August 31, 2005 Shares Amount
Shares issued to shareholders in
reinvestment of distributions 38,340 $ 398,731
Shares redeemed (361,735) (3,783,704)
--------------- ---------------
Net decrease (323,395) $ (3,384,973)
=============== ===============
MERRILL LYNCH FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND FEBRUARY 28, 2006
Notes to Financial Statements (concluded)
Class B Shares for the
Six Months Ended Dollar
February 28, 2006 Shares Amount
Shares issued to shareholders in
reinvestment of distributions 228,740 $ 2,388,049
Shares redeemed (1,006,869) (10,570,060)
--------------- ---------------
Net decrease (778,129) $ (8,182,011)
=============== ===============
Class B Shares for the Year Dollar
Ended August 31, 2005 Shares Amount
Shares issued to shareholders in
reinvestment of distributions 407,336 $ 4,228,151
Shares redeemed (2,139,405) (22,253,217)
--------------- ---------------
Net decrease (1,732,069) $ (18,025,066)
=============== ===============
Class C Shares for the
Six Months Ended Dollar
February 28, 2006 Shares Amount
Shares issued to shareholders in
reinvestment of distributions 152,390 $ 1,595,522
Shares redeemed (755,969) (7,940,183)
--------------- ---------------
Net decrease (603,579) $ (6,344,661)
=============== ===============
Class C Shares for the Year Dollar
Ended August 31, 2005 Shares Amount
Shares issued to shareholders in
reinvestment of distributions 280,613 $ 2,918,381
Shares redeemed (2,051,749) (21,374,920)
--------------- ---------------
Net decrease (1,771,136) $ (18,456,539)
=============== ===============
Class I Shares for the
Six Months Ended Dollar
February 28, 2006 Shares Amount
Shares issued to shareholders in
reinvestment of distributions 25,405 $ 265,984
Shares redeemed (91,511) (962,374)
--------------- ---------------
Net decrease (66,106) $ (696,390)
=============== ===============
Class I Shares for the Year Dollar
Ended August 31, 2005 Shares Amount
Shares issued to shareholders in
reinvestment of distributions 57,454 $ 596,380
Shares redeemed (476,633) (5,007,874)
--------------- ---------------
Net decrease (419,179) $ (4,411,494)
=============== ===============
5. Short-Term Borrowings:
The Fund, along with certain other funds managed by MLIM and its affiliates,
is a party to a $500,000,000 credit agreement with a group of lenders. The
Fund may borrow under the credit agreement to fund shareholder redemptions and
for other lawful purposes other than for leverage. The Fund may borrow up to
the maximum amount allowable under the Fund's current prospectus and statement
of additional information, subject to various other legal, regulatory or
contractual limits. The Fund pays a commitment fee of .07% per annum based on
the Fund's pro rata share of the unused portion of the credit agreement.
Amounts borrowed under the credit agreement bear interest at a rate equal to,
at each Fund's election, the federal funds rate plus .50% or a base rate as
defined in the credit agreement. On November 23, 2005 the credit agreement was
renewed for one year under substantially the same terms. The Fund did not
borrow under the credit agreement during the six months ended February 28,
2006.
If you would like a copy, free of charge, of the most recent annual or
quarterly report of Main Place Funding, LLC, the Warranty Provider, or
its parent corporation, Bank of America Corporation, please contact the
Fund at 1-800-637-3863.
MERRILL LYNCH FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND FEBRUARY 28, 2006
Disclosure of Investment Advisory Agreement
Activities and Composition of the Board of Trustees
All but one member of the Board of Trustees is an independent trustee whose
only affiliation with Fund Asset Management, L.P. (the "Investment Adviser")
or other Merrill Lynch affiliates is as a trustee of the Trust and certain
other funds advised by the Investment Adviser or its affiliates. The Chair of
the Board is an independent trustee. New trustee nominees are chosen by a
Nominating Committee comprised entirely of independent trustees. All
independent trustees also are members of the Board's Audit Committee and the
independent trustees meet in executive session at each in-person Board
meeting. The Board and the Audit Committee meet in person for at least two
days each quarter and conduct other in-person and telephone meetings
throughout the year, some of which are formal Board meetings, and some of
which are informational meetings. Independent counsel to the independent
trustees attends all in-person Board and Audit Committee meetings and other
meetings at the independent trustees' request.
Investment Advisory Agreement--Matters Considered by the Board
Every year, the Board considers approval of the Trust's investment advisory
agreement (the "Investment Advisory Agreement"). The Board assesses the
nature, scope and quality of the services provided to the Trust by the
personnel of the Investment Adviser and their affiliates, including
administrative services, shareholder services, oversight of fund accounting,
marketing services and assistance in meeting legal and regulatory
requirements. The Board also receives and assesses information regarding the
services provided to the Trust by certain unaffiliated service providers.
At various times throughout the year, the Board also considers a range of
information in connection with its oversight of the services provided by the
Investment Adviser and its affiliates. Among the matters considered are: (a)
fees (in addition to management fees) paid to the Investment Adviser and its
affiliates by the Trust, such as transfer agency fees and fees for marketing
and distribution; (b) Trust operating expenses paid to third parties; (c) the
resources devoted to and compliance reports relating to the Trust's investment
objective, policies and restrictions, and its compliance with its Code of
Ethics and the Investment Adviser's compliance policies and procedures; and
(d) the nature, cost and character of non-investment management services
provided by the Investment Adviser and its affiliates.
The Board believes that the Investment Adviser is one of the most experienced
global asset management firms and considers the overall services provided by
the Investment Adviser to be of high quality. The Board also believes that the
Investment Adviser is financially sound and well managed and notes that the
Investment Adviser is affiliated with one of America's largest financial
firms. The Board works closely with the Investment Adviser in overseeing the
Investment Adviser's efforts to achieve good performance. As part of this
effort, the Board discusses portfolio manager effectiveness and, when
performance is not satisfactory, discusses with the Investment Adviser taking
steps such as changing investment personnel.
Annual Consideration of Approval by the Board of Trustees
In the period prior to the Board meeting to consider renewal of the Investment
Advisory Agreement, the Board requests and receives materials specifically
relating to the Trust's Investment Advisory Agreement. These materials include
(a) information compiled by Lipper Inc. ("Lipper") on the fees and expenses
and the investment performance of the Trust as compared to a comparable group
of funds as classified by Lipper; (b) sales and redemption data for the Trust;
(c) a discussion by the Trust's portfolio management team of investment
strategies used by the Trust during its most recent fiscal year; (d)
information on the profitability to the Investment Adviser and its affiliates
of the Investment Advisory Agreement and other relationships with the Trust;
and (e) information provided by the Investment Adviser concerning investment
advisory fees charged to other clients, such as other mutual funds and
offshore funds under similar investment mandates. The Board also considers
other matters it deems important to the approval process such as payments made
to the Investment Adviser or its affiliates relating to the distribution of
Trust shares, services related to the valuation and pricing of Trust portfolio
holdings, the Trust's portfolio turnover statistics, and direct and indirect
benefits to the Investment Adviser and its affiliates from their relationship
with the Trust. The Board did not identify any particular information as
controlling, and each member of the Board attributed different weights to the
various items considered.
MERRILL LYNCH FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND FEBRUARY 28, 2006
Disclosure of Investment Advisory Agreement (continued)
Certain Specific Renewal Data
In connection with the most recent renewal of the Trust's Investment Advisory
Agreement in February, 2006, the independent trustees' and Board's review
included the following:
Services Provided by the Investment Adviser--The Board reviewed the nature,
extent and quality of services provided by the Investment Adviser, including
the investment advisory services and the resulting performance of the Trust.
The Board focused primarily on the Investment Adviser's investment advisory
services and the Trust's investment performance. The Board compared Trust
performance - both including and excluding the effects of the Trust's fees and
expenses - to the performance of a comparable group of mutual funds, and the
performance of a relevant index or combination of indexes. While the Board
reviews performance data at least quarterly, consistent with the Investment
Adviser's investment goals, the Board attaches more importance to performance
over relatively long periods of time, typically three to five years, or a
shorter period in the case of a fund that has been in existence less than five
years. For the periods ended November 30, 2005, the Fund's performance after
fees and expenses ranked in the first quintile for the one-year period and in
the second quintile for the three-year period. The Board concluded that the
nature and quality of the services supported the continuation of the
Investment Advisory Agreement.
The Investment Adviser's Personnel and Investment Process--The Board reviews
at least annually the Trust's investment objectives and strategies. The Board
discusses with senior management of the Investment Adviser responsible for
investment operations and the senior management of the Investment Adviser's
equity investing group the strategies being used to achieve the stated
objectives. Among other things, the Board considers the size, education and
experience of the Investment Adviser's investment staff, its use of
technology, and the Investment Adviser's approach to training and retaining
portfolio managers and other research, advisory and management personnel. The
Board also reviews the Investment Adviser's compensation policies and
practices with respect to the Trust's portfolio managers. The Board also
considered the experience of the Fund's portfolio managers and noted that
Lawrence Fuller is the Fund's portfolio manager and is primarily responsible
for the day-to-day management of the Fund's portfolio and the selection of its
investments. The Board also noted that Thomas Burke is the associate portfolio
manager of the Fund. Mr. Fuller has more than 38 years' experience in
portfolio management and Mr. Burke has more than 25 years' experience in
portfolio management. Moreover, the Investment Adviser and its investment
staff have extensive experience in analyzing and managing the types of
investments used by the Fund. The Board concluded that the Fund benefits from
that expertise.
Management Fees and Other Expenses--The Board reviews the Trust's contractual
management fee rate and actual management fee rate as a percentage of total
assets at common asset levels - the actual rate includes advisory and
administrative service fees and the effects of any fee waivers - compared to
the other funds considered comparable by Lipper. It also compares the Trust's
total expenses to those of other comparable funds. The Board was advised by
the Investment Adviser that there were no comparable clients or accounts with
similar investment mandates. The Board noted that the Fund's contractual and
actual management fee rates were lower than the median of management fees
charged by comparable funds, as determined by Lipper, while the Fund's total
expenses were above the median expenses charged by such comparable funds. The
Board noted that the higher than median expenses primarily related to the
expenses associated with a warranty agreement between the Fund and an
unaffiliated third party. The Board also noted that if all the Fund's assets
are irreversibly allocated to the Fund's Protection Component under the terms
of the Warranty Agreement, the management fee will be reduced to 0.25%. The
Board concluded that the Trust's management fee rate and overall expense ratio
are reasonable when compared to those of other comparable funds.
Profitability--The Board considers the cost of the services provided to the
Trust by the Investment Adviser, and the Investment Adviser's and its
affiliates' profits relating to the management and distribution of the Trust
and the MLIM/FAM-advised funds. As part of its analysis, the Board reviewed
the Investment Adviser's methodology in allocating its costs to the management
of the Trust and concluded that there was a reasonable basis for the
allocation. The Board also considered federal court decisions discussing an
investment adviser's profitability and profitability levels considered to be
reasonable in those decisions. The Board concluded that the profits of the
Investment Adviser and its affiliates are acceptable in relation to the nature
and quality of services provided and given the level of fees and expenses
overall.
MERRILL LYNCH FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND FEBRUARY 28, 2006
Disclosure of Investment Advisory Agreement (concluded)
Economies of Scale--The Board considered the extent to which economies of
scale might be realized as the assets of the Trust increase and whether there
should be changes in the management fee rate or structure in order to enable
the Trust to participate in these economies of scale. While there was no
evidence to date that the Trust's assets have reached a level where such
economies are effectively available, the Board will continue to seek
information relating to economies of scale. The Board determined that the
management fee structure was reasonable and that no changes were currently
necessary.
Conclusion
After the independent trustees deliberated in executive session, the entire
Board, including all of the independent trustees, approved the renewal of the
existing Investment Advisory Agreement, concluding that the advisory fee was
reasonable in relation to the services provided and that a contract renewal
was in the best interests of the shareholders.
Officers and Trustees
Robert C. Doll, Jr., President and Trustee
David O. Beim, Trustee
James T. Flynn, Trustee
W. Carl Kester, Trustee
Karen P. Robards, Trustee
Donald C. Burke, Vice President and Treasurer
Jeffrey Hiller, Chief Compliance Officer
Alice A. Pellegrino, Secretary
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109-3661
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
800-637-3863
MERRILL LYNCH FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND FEBRUARY 28, 2006
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Fund's Forms N-Q are available on the SEC's Web site at
http://www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the
SEC's Public Reference Room in Washington, DC. Information on the operation of
the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Electronic Delivery
The Fund offers electronic delivery of communications to its shareholders. In
order to receive this service, you must register your account and provide us
with e-mail information. To sign up for this service, simply access this Web
site at http://www.icsdelivery.com/live and follow the instructions. When you
visit this site, you will obtain a personal identification number (PIN). You
will need this PIN should you wish to update your e-mail address, choose to
discontinue this service and/or make any other changes to the service. This
service is not available for certain retirement accounts at this time.
MERRILL LYNCH FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND FEBRUARY 28, 2006
Item 2 - Code of Ethics - Not Applicable to this semi-annual report
Item 3 - Audit Committee Financial Expert - Not Applicable to this semi-
annual report
Item 4 - Principal Accountant Fees and Services - Not Applicable to this
semi-annual report
Item 5 - Audit Committee of Listed Registrants - Not Applicable
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Not Applicable
Item 8 - Portfolio Managers of Closed-End Management Investment Companies -
Not Applicable
Item 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable
Item 10 - Submission of Matters to a Vote of Security Holders - Not Applicable
Item 11 - Controls and Procedures
11(a) - The registrant's certifying officers have reasonably designed such
disclosure controls and procedures to ensure material information
relating to the registrant is made known to us by others
particularly during the period in which this report is being
prepared. The registrant's certifying officers have determined
that the registrant's disclosure controls and procedures are
effective based on our evaluation of these controls and procedures
as of a date within 90 days prior to the filing date of this
report.
11(b) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Act
(17 CFR 270.30a-3(d)) that occurred during the last fiscal half-
year of the period covered by this report that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - Not Applicable to this semi-annual report
12(a)(2) - Certifications - Attached hereto
12(a)(3) - Not Applicable
12(b) - Certifications - Attached hereto
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
Merrill Lynch Fundamental Growth Principal Protected Fund of
Merrill Lynch Principal Protected Trust
By: /s/ Robert C. Doll, Jr.
---------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
Merrill Lynch Fundamental Growth Principal Protected Fund of
Merrill Lynch Principal Protected Trust
Date: April 20, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By: /s/ Robert C. Doll, Jr.
---------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
Merrill Lynch Fundamental Growth Principal Protected Fund of
Merrill Lynch Principal Protected Trust
Date: April 20, 2006
By: /s/ Donald C. Burke
---------------------------
Donald C. Burke,
Chief Financial Officer of
Merrill Lynch Fundamental Growth Principal Protected Fund of
Merrill Lynch Principal Protected Trust
Date: April 20, 2006