UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-21162
Name of Fund: BlackRock Fundamental Growth Principal Protected Fund of
BlackRock 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, BlackRock Fundamental Growth Principal Protected Fund of
BlackRock 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: (800) 441-7762
Date of fiscal year end: 08/31/07
Date of reporting period: 09/01/06 - 08/31/07
Item 1 - Report to Stockholders
EQUITIES FIXED INCOME REAL ESTATE LIQUIDITY ALTERNATIVES
BLACKROCK SOLUTIONS
BlackRock Fundamental Growth
Principal Protected Fund
OF BLACKROCK PRINCIPAL PROTECTED TRUST
ANNUAL REPORT AUGUST 31, 2007
(BLACKROCK logo)
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
This report is transmitted to shareholders only. It 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 returns 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.
BlackRock Fundamental Growth
Principal Protected Fund of
BlackRock Principal Protected Trust
P.O. Box 9011
Princeton, NJ 08543-9011
(GO PAPERLESS... logo)
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To sign up today, go to www.blackrock.com/edelivery.
BlackRock Fundamental Growth Principal Protected Fund
Portfolio Information as of August 31, 2007
Ten Largest Holdings Percent of
(Equity Investments) Net Assets
Cisco Systems, Inc. 2.8%
Google, Inc. Class A 2.5
The Proctor & Gamble Co. 2.4
General Electric Co. 1.9
CVS/Caremark Corp. 1.7
Microsoft Corp. 1.7
Comcast Corp. Class A 1.4
PepsiCo, Inc. 1.3
Abbott Laboratories 1.3
Schlumberger Ltd. 1.3
Percent of
Long-Term
Asset Mix Investments
Common Stocks 69.5%
U.S. Government Obligations 30.5
Five Largest Industries Percent of
(Equity Investments) Net Assets
Energy Equipment & Services 5.4%
Software 4.5
Capital Markets 3.9
Internet Software & Services 3.8
Aerospace & Defense 3.7
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. Industries are
shown as a percentage of net assets.
BLACKROCK FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND AUGUST 31, 2007
A Letter to Shareholders
Dear Shareholder
Financial markets embarked on a wild ride during the August reporting period.
Subprime mortgage troubles intensified in the final months of the period,
spawning a widespread credit and liquidity crisis that crept into other areas
of the market. The U.S. Federal Reserve Board (the Fed) and other countries'
central banks stepped in to inject liquidity into the markets and bolster
investor confidence. In August, the Fed cut the discount rate, the rate
charged to banks to borrow money directly from the Fed, from 6.25% to 5.75%.
Another .50% cut in the discount rate came on September 18, along with a .50%
cut in the more widely followed federal funds rate. This brought the target
short-term interest rate, which had remained unchanged at 5.25% for over a
year, to 4.75%.
Although heightened volatility has been a recurring theme throughout the past
year, the global economy (excluding the U.S. housing market) remained quite
healthy. In general, equity market fundamentals also held firm - second-
quarter corporate earnings exceeded expectations (although future earnings
could be at risk if the economy weakens), dividend payouts and share buybacks
continued to grow, and valuations remained attractive. These tailwinds
generally prevailed over such headwinds as a slowing U.S. economy and troubled
housing market, although the more recent credit crunch dampened corporate
merger-and-acquisition activity, a key source of strength for equity markets.
Stocks recorded their second-worst day of the year in August, yet remained
comfortably in the black year-to-date.
Meanwhile, mixed economic signals and the credit market debacle made for a
volatile backdrop for fixed income, with investors fleeing from bonds
associated with the housing and credit markets in favor of higher-quality
Treasury issues. As a result, the 10-year Treasury yield, which touched 5.30%
in June (its highest level in five years), fell to 4.54% by period-end, while
prices correspondingly rose.
Against this backdrop, financial markets posted mixed results for the six- and
12-month periods ended August 31, 2007:
Total Returns as of August 31, 2007 6-month 12-month
U.S. equities (S&P 500 Index) +5.70% +15.13%
Small cap U.S. equities (Russell 2000 Index) +0.54 +11.36
International equities (MSCI Europe, Australasia, Far East Index) +5.83 +18.71
Fixed income (Lehman Brothers U.S. Aggregate Bond Index) +1.54 + 5.26
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) -0.57 + 2.30
High yield bonds (Lehman Brothers U.S. Corporate High Yield 2% Issuer Cap Index) -1.71 + 6.46
Past performance is no guarantee of future results. Index performance shown
for illustrative purposes only. You cannot invest directly in an index.
As you navigate market volatility, we encourage you to review your
investment goals with your financial professional and to make portfolio
changes, as needed. For more market insight, we invite you to visit
www.blackrock.com/funds. We thank you for entrusting BlackRock with your
investment assets, and we look forward to continuing to serve you in the
months and years ahead.
Sincerely,
(Robert C. Doll, Jr.)
Robert C. Doll, Jr.
Fund President and Trustee
THIS PAGE NOT PART OF YOUR FUND REPORT
BLACKROCK FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND AUGUST 31, 2007
A Discussion With Your Fund's Portfolio Manager
The Fund met its primary objective of preserving investor principal in what
proved to be a volatile 12-month period for U.S. equities.
How did the Fund perform during the fiscal year in light of the existing
market conditions?
For the 12-month period ended August 31, 2007, BlackRock Fundamental Growth
Principal Protected Fund's Institutional, Investor A, Investor B and Investor
C Shares had total returns of +8.44%, +8.24%, +7.41% and +7.28%, respectively.
For the same period, the S&P 500 Citigroup Growth Index returned +14.65% and
the broader U.S. equity market, as measured by the S&P 500 Index, returned
+15.13%. (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 and 7 of this report to shareholders.) The Lipper category of Mixed-
Asset Target Allocation Growth Funds posted an average return of +12.09% for
the 12-month period. (By portfolio practice, funds in this Lipper category
maintain a mix of 60% - 80% equity securities, with the remainder invested in
bonds, cash and cash equivalents.)
The fiscal year was characterized by the persistent appreciation of equity
markets in spite of some marked challenges along the way. A slowing U.S.
economy, unrelenting inflation worries and questions surrounding the policy
intentions of the Federal Reserve Board were the center of investors'
attention.
After a mid-year 2006 correction of some 8% (as measured by the S&P 500
Index), markets rallied nearly 12% from the beginning of the fiscal year into
late February 2007. A subsequent, near 5% correction proved short-lived, and
markets appreciated another 12% into mid-July before entering a more severe
sell-off of some 9% into mid-August. While each of these episodes appeared to
represent, in hindsight, a temporary disruption to an otherwise favorable
longer-term price trend, the most recent period (coincident with the Fund's
fiscal year-end) warrants close and ongoing monitoring due to its underlying
causes as related to the U.S. housing market, financing conditions and
monetary policy. Equity market volatility spiked dramatically (as measured by
the Chicago Board Options Exchange SPX Volatility Index) at the end of the
fiscal period as investors "repriced" risk across all types of equity and debt
portfolios.
Such market price action is noteworthy, as it was punctuated by a multitude of
shifts from a sector, as well as style, leadership perspective. Investors
generally embraced larger-capitalization companies through the fiscal year,
with renewed investor interest in "mega caps" (that is, the largest companies
as measured by market cap) evident across most sectors. The acceptance of the
growth style of investing was more gradual as investor perceptions and
definitions of growth and value became increasingly ambiguous against this
shifting market backdrop.
What factors most influenced Fund performance?
The Fund incorporates a fixed income component and, therefore, its returns
will necessarily differ from those of the equity markets alone. The fixed
income market, as measured by the Lehman Brothers U.S. Aggregate Bond Index,
returned +5.26% for the 12-month period. Given the comparatively strong
performance of the equity markets, the fixed income component hindered the
Fund's results.
The performance of the equity portfolio was negatively influenced by our
conviction that growth stocks were attractive investments in late 2006, while
the market, in general, had become more defensively focused. Consequently,
performance versus the largely market-weighted benchmark (that is, the S&P 500
Citigroup Growth Index) reflected an underrepresentation in mega-cap stocks
early in the period, in addition to adverse security selection in the first
four months of the fiscal year. Performance of the equity portfolio improved
dramatically in the January to August period, largely as a result of strategic
repositioning undertaken in May of 2007.
Portfolio holdings in the information technology and consumer discretionary
sectors negatively impacted performance. Conversely, stock selection in the
materials and financials sectors was modestly favorable, as was the portfolio's
overweight position in the industrials sector. The Fund's relative performance
improved measurably by the end of the period (specifically, January through
August), as our "growth stock" positioning gained investor acceptance and we
implemented select strategic changes in the portfolio.
Individual Fund holdings that detracted from performance during the period
included Exxon Mobil Corp. (underweight relative to the benchmark), Medco
Health Solutions Inc., CVS/Caremark Corp., Akamai Technologies, Inc. and
Starbucks Corp. At the same time, several names were notably additive to
performance, including Intuitive Surgical, Inc., EMC Corp., Nvidia Corp.,
Amgen Inc. (underweight relative to the benchmark) and National Oilwell
Varco, Inc.
BLACKROCK FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND AUGUST 31, 2007
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 12-month period, the Fund's
equity component ranged from a high of 69.7% of net assets to a low of 55.6%,
while the fixed income allocation ranged from as much as 44.4% of net assets
to 30.3%. The Fund's fixed income component was invested in U.S. Treasury
zero-coupon bonds set to mature close to the expiration of the Guarantee
Period of the Fund, which is seven years from its commencement of operations
(November 13, 2009).
In the Fund's equity portfolio, we attempted to balance our enthusiasm for
growth stocks against the realities of a slowing U.S. economy and the shift
of market leadership to larger companies. This resulted in a number of sector
changes driven by individual stock selection criteria.
The portfolio's exposure to the consumer discretionary sector was reduced to a
significant underweight on concerns over consumer spending given the current
challenges facing the U.S. housing market. Investments in the financials
sector were trimmed to reflect growing credit and interest rate risks. At the
same time, we continued to favor companies in the industrials sector whose
businesses benefit from globalization and infrastructure investment worldwide.
We also reduced our overweight position in energy to a slight underweight,
while increasing our position in information technology from an underweight to
a modest overweight. The portfolio's overweight positions in industrials and
materials were reduced slightly by the end of the period, while positions in
consumer staples were increased marginally.
In terms of individual stocks, significant additions included Cisco Systems,
Inc., Microsoft Corp., Monsanto Co., Abbot Laboratories, Thermo-Fisher
Scientific, Inc., Comcast Corp., Zimmer Holdings Inc., Gilead Sciences, Inc.,
Boeing Co. and Google Inc. Significant sales or reductions included Exxon
Mobil Corp., Wellpoint Inc., Alcon Inc., Medco Health Solutions, Inc., Yahoo!
Inc., Staples Inc., Novartis AG, Starbucks Inc., JPMorgan Chase & Co. and
Valero Energy Corp.
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 August 31,
2007, the Fund was invested 68.6% in equities and 31.4% in fixed income
securities. This compared to 58.8% equities and 41.2% fixed income at August
31, 2006, and 57.8% equities and 42.2% fixed income at February 28, 2007.
The U.S. economy experienced a classic midcycle slowdown in economic growth
(that is, gross domestic product growth) from mid-2006 through the first
quarter of 2007. While growth has resumed from these low levels, we expect to
see a rather brief period of below-trend expansion over the next few quarters.
Events of early August 2007 (related to conditions in the credit and financing
markets) are certain to have an ongoing negative impact on the U.S. housing
market. This, in turn, may have an adverse effect on consumer spending,
resulting in an eventual drag on the economy. At the same time, most other
global economies, particularly those in Europe and Asia, continue to
experience strong rates of growth, which is providing some balance to the
overall global demand picture. Taken together, we are more cautious in our
outlook and continue to monitor credit market conditions to determine if they
may pose a more serious threat to economic growth in 2008.
Although this current environment may challenge broader market earnings growth
over time, we believe it should provide a relatively attractive investment
environment for select larger-company growth stocks going forward. At the end
of the period, the Fund's equity portfolio was modestly overweight relative to
its benchmark in the industrials, information technology and materials
sectors. We have a significant underweight in the consumer discretionary
sector and more modest underweights in consumer staples and energy.
Thomas E. Burke, CFA
Equity Portfolio Manager
September 25, 2007
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
1-800-441-7762.
BLACKROCK FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND AUGUST 31, 2007
Performance Data
About Fund Performance
Effective October 2, 2006, the Fund's Class A, Class B, Class C and Class I
Shares were redesignated Investor A, Investor B, Investor C and Institutional
Shares, respectively. As previously communicated to shareholders, new sales
charge schedules came into effect at the same time for certain of these
classes.
The Fund has multiple classes of shares:
* Institutional Shares are not subject to any sales charge. Institutional
Shares bear no ongoing distribution or service fees and are available only to
eligible investors.
* Investor A Shares incur a maximum initial sales charge (front-end load) of
5.25% and a service fee of 0.25% per year (but no distribution fee).
* Investor B Shares are subject to a maximum contingent deferred sales charge
of 4.50% declining to 0% after six years. In addition, Investor B Shares are
subject to a distribution fee of 0.75% per year and a service fee of 0.25% per
year. These shares automatically convert to Investor A Shares after
approximately eight years. (There is no initial sales charge for automatic
share conversions.)
* Investor C Shares are subject to a distribution fee of 0.75% per year and a
service fee of 0.25% per year. In addition, Investor C Shares are subject to a
1% contingent deferred sales charge if redeemed within one year of purchase.
Performance information reflects past performance and does not guarantee
future results. Current performance may be lower or higher than the
performance data quoted. Refer to www.blackrock.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 service, distribution and
transfer agency fees applicable to each class, which are deducted from the
income available to be paid to shareholders.
Recent Performance Results
6-Month 12-Month Since Inception
As of August 31, 2007 Total Return Total Return Total Return
Institutional Shares* +6.75% + 8.44% +25.84%
Investor A Shares* +6.56 + 8.24 +24.36
Investor B Shares* +6.14 + 7.41 +19.87
Investor C Shares* +6.13 + 7.28 +19.78
S&P 500 (R) Index** +5.70 +15.13 +82.23
S&P 500 Citigroup Growth Index*** +6.96 +14.65 +58.23
Lehman Brothers U.S. Aggregate Bond Index**** +1.54 + 5.26 +21.29
* 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.
BLACKROCK FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND AUGUST 31, 2007
Performance Data (concluded)
Total Return Based on a $10,000 Investment
A line graph illustrating the growth of a $10,000 investment in Institutional
Shares*++, Investor A Shares*+++, Investor B Shares, and Investor C Shares*++
compared to a similar investment in S&P 500 Citigroup Growth Index++++, S&P
500 Index++++++, and Lehman Brothers U.S. Aggregate Bond Index++++++++. Values
illustrated are as follows:
Institutional Shares*++
Date Value
11/13/2007 $10,000.00
August 2003 $10,410.00
August 2004 $10,596.00
August 2005 $11,341.00
August 2006 $11,605.00
August 2007 $12,584.00
Investor A Shares*++
Date Value
11/13/2007 $ 9,475.00
August 2003 $ 9,845.00
August 2004 $ 9,993.00
August 2005 $10,674.00
August 2006 $10,887.00
August 2007 $11,784.00
Investor B Shares*++
Date Value
11/13/2007 $10,000.00
August 2003 $10,320.00
August 2004 $10,403.00
August 2005 $11,031.00
August 2006 $11,160.00
August 2007 $11,787.00
Investor C Shares*++
Date Value
11/13/2007 $10,000.00
August 2003 $10,320.00
August 2004 $10,400.00
August 2005 $11,029.00
August 2006 $11,165.00
August 2007 $11,978.00
S&P 500 Citigroup Growth Index++++
Date Value
11/13/2007 $10,000.00
August 2003 $11,405.00
August 2004 $12,230.00
August 2005 $13,250.00
August 2006 $13,802.00
August 2007 $15,823.00
S&P 500 Index++++++
Date Value
11/13/2007 $10,000.00
August 2003 $11,587.00
August 2004 $12,915.00
August 2005 $14,537.00
August 2006 $15,828.00
August 2007 $18,223.00
Lehman Brothers U.S. Aggregate Bond Index++++++++
Date Value
11/13/2007 $10,000.00
August 2003 $10,249.00
August 2004 $10,878.00
August 2005 $11,329.00
August 2006 $11,523.00
August 2007 $12,129.00
* Assuming maximum sales charge, if any, transaction costs and other
operating expenses, including advisory fees.
** Commencement of operations.
++ The Fund consists primarily of common stocks and U.S. Treasury bonds,
including zero coupon bonds.
++++ 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.
++++++ 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.
++++++++ 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.
Past performance is not indicative of future results.
Average Annual Total Return
Return
Institutional Shares
One Year Ended 8/31/07 +8.44%
Inception (11/13/02)
through 8/31/07 +4.91
Return Without Return With
Sales Charge Sales Charge*
Investor A Shares
One Year Ended 8/31/07 +8.24% +2.56%
Inception (11/13/02)
through 8/31/07 +4.65 +3.48
Return Without Return With
CDSC CDSC++++++
Investor B Shares++
One Year Ended 8/31/07 +7.41% +2.91%
Inception (11/13/02)
through 8/31/07 +3.85 +3.49
Return Without Return With
CDSC CDSC++++++
Investor C Shares++++
One Year Ended 8/31/07 +7.28% +6.28%
Inception (11/13/02)
through 8/31/07 +3.83 +3.83
* Assuming maximum sales charge of 5.25%.
++ Maximum contingent deferred sales charge is 4.50% and is
reduced to 0% after six years.
++++ Maximum contingent deferred sales charge is 1% and is reduced
to 0% after one year.
++++++ Assuming payment of applicable contingent deferred sales
charge.
BLACKROCK FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND AUGUST 31, 2007
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 March 1, 2007 and
held through August 31, 2007) 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 March 1, 2007
March 1, August 31, to August 31,
2007 2007 2007
Actual
Institutional $1,000 $1,067.50 $ 9.59
Investor A $1,000 $1,065.60 $10.88
Investor B $1,000 $1,061.40 $14.86
Investor C $1,000 $1,061.30 $14.81
Hypothetical (5% annual return before expenses)**
Institutional $1,000 $1,015.92 $ 9.35
Investor A $1,000 $1,014.66 $10.61
Investor B $1,000 $1,010.78 $14.50
Investor C $1,000 $1,010.83 $14.44
* For each class of the Fund, expenses are equal to the annualized expense ratio for the
class (1.84% for Institutional, 2.09% for Investor A, 2.86% for Investor B and 2.85% for
Investor C), multiplied by the average account value over the period, multiplied
by 184/365 (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.
BLACKROCK FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND AUGUST 31, 2007
Schedule of Investments as of August 31, 2007
Shares
Industry Common Stocks Held Value
Aerospace & Defense--3.7%
Boeing Co. 9,600 $ 928,320
Lockheed Martin Corp. 8,700 862,518
Precision Castparts Corp. 1,300 169,403
Spirit Aerosystems Holdings, Inc.
Class A (c) 9,700 346,775
United Technologies Corp. 10,300 768,689
------------
3,075,705
Beverages--2.0%
Diageo Plc 26,600 567,966
PepsiCo, Inc. 16,200 1,102,086
------------
1,670,052
Biotechnology--3.1%
Celgene Corp. (c) 15,100 969,571
Genentech, Inc. (c) 7,900 590,999
Gilead Sciences, Inc. (c) 26,800 974,716
------------
2,535,286
Capital Markets--3.9%
Affiliated Managers Group, Inc. (c) 2,300 260,475
The Charles Schwab Corp. 32,000 633,600
Franklin Resources, Inc. 5,500 724,735
Lehman Brothers Holdings, Inc. 12,200 668,926
State Street Corp. 14,800 908,128
------------
3,195,864
Chemicals--3.5%
Air Products & Chemicals, Inc. 4,900 441,049
Monsanto Co. 14,600 1,018,204
The Mosaic Co. (c) 7,400 310,948
Potash Corp. of Saskatchewan, Inc. 4,500 398,520
Praxair, Inc. 9,500 718,770
------------
2,887,491
Communications Equipment--2.8%
Cisco Systems, Inc. (c) 73,300 2,339,736
Computers & Peripherals--2.8%
Apple Computer, Inc. (c) 7,100 983,208
EMC Corp. (c) 37,300 733,318
Hewlett-Packard Co. 11,800 582,330
------------
2,298,856
Construction & Engineering--1.3%
Fluor Corp. 4,500 572,175
Jacobs Engineering Group, Inc. (c) 7,300 482,457
------------
1,054,632
Diversified Financial Services--2.1%
Bank of America Corp. 13,900 704,452
CME Group, Inc. 1,300 721,240
IntercontinentalExchange, Inc. (c) 1,900 277,153
------------
1,702,845
Electrical Equipment--1.1%
Emerson Electric Co. 16,600 817,218
General Cable Corp. (c) 1,900 110,542
------------
927,760
Shares
Industry Common Stocks Held Value
Energy Equipment & Services--5.4%
Baker Hughes, Inc. 7,000 $ 587,020
Grant Prideco, Inc. (c) 10,800 597,240
National Oilwell Varco, Inc. (c) 6,100 780,800
Schlumberger Ltd. 10,800 1,042,200
Transocean, Inc. (c) 8,600 903,774
Weatherford International Ltd. (c) 9,600 560,448
------------
4,471,482
Food & Staples Retailing--1.7%
CVS/Caremark Corp. 37,500 1,418,250
Health Care Equipment & Supplies--3.0%
Alcon, Inc. 3,900 527,514
Cytyc Corp. (c) 4,200 179,508
Hologic, Inc. (c) 2,100 111,615
Intuitive Surgical, Inc. (c) 2,800 619,584
Zimmer Holdings, Inc. (c) 12,600 986,958
------------
2,425,179
Health Care Providers & Services--0.7%
Aetna, Inc. 11,600 590,556
Hotels, Restaurants & Leisure--1.7%
McDonald's Corp. 17,900 881,575
Yum! Brands, Inc. 15,200 497,344
------------
1,378,919
Household Products--2.4%
The Procter & Gamble Co. 29,600 1,933,176
IT Services--2.5%
Cognizant Technology Solutions Corp. (c) 4,900 360,199
Infosys Technologies Ltd. 18,500 839,368
Satyam Computer Services Ltd. 30,500 334,064
Tata Consultancy Services Ltd. 20,800 541,614
------------
2,075,245
Industrial Conglomerates--2.6%
General Electric Co. 39,600 1,539,252
Textron, Inc. 10,000 583,400
------------
2,122,652
Insurance--0.9%
American International Group, Inc. 11,000 726,000
Internet Software & Services--3.8%
Akamai Technologies, Inc. (c) 8,600 277,092
eBay, Inc. (c) 23,900 814,990
Google, Inc. Class A (c) 4,000 2,061,000
------------
3,153,082
Life Sciences Tools & Services--2.1%
Covance, Inc. (c) 5,600 410,592
Thermo Fisher Scientific, Inc. (c) 18,800 1,019,524
Waters Corp. (c) 4,800 295,536
------------
1,725,652
Machinery--0.9%
Deere & Co. 2,500 340,150
Flowserve Corp. 2,000 142,820
Terex Corp. (c) 3,600 287,568
------------
770,538
Media--1.4%
Comcast Corp. Class A (c) 43,350 1,131,001
BLACKROCK FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND AUGUST 31, 2007
Schedule of Investments (concluded)
Shares
Industry Common Stocks Held Value
Metals & Mining--1.1%
Allegheny Technologies, Inc. 2,900 $ 288,231
Freeport-McMoRan Copper & Gold, Inc.
Class B 7,100 620,682
------------
908,913
Oil, Gas & Consumable Fuels--0.3%
Consol Energy, Inc. 6,100 243,268
Pharmaceuticals--3.0%
Abbott Laboratories 20,300 1,053,773
Merck & Co., Inc. 17,200 862,924
Teva Pharmaceutical Industries Ltd. (a) 13,300 571,900
------------
2,488,597
Semiconductors & Semiconductor
Equipment--2.5%
Applied Materials, Inc. 20,300 433,608
Intel Corp. 33,900 872,925
Nvidia Corp. (c) 14,300 731,588
------------
2,038,121
Software--4.5%
Adobe Systems, Inc. (c) 19,300 825,075
Electronic Arts, Inc. (c) 12,300 651,162
Microsoft Corp. 48,400 1,390,532
Oracle Corp. (c) 40,000 811,200
------------
3,677,969
Textiles, Apparel & Luxury
Goods--0.5%
Coach, Inc. (c) 9,800 436,394
Shares
Industry Common Stocks Held Value
Tobacco--0.9%
Altria Group, Inc. 11,000 $ 763,510
Wireless Telecommunication
Services--0.7%
China Mobile (Hong Kong) Ltd. (a) 9,000 610,110
Total Common Stocks
(Cost--$47,156,505)--68.9% 56,776,841
Face
Amount U.S. Government Obligations
U.S. Treasury STRIPS (e)(f):
$ 5,320,000 3.035% due 8/15/2009 4,910,504
21,855,000 3.858% due 11/15/2009 19,979,579
Total U.S. Government Obligations
(Cost--$25,111,105)--30.2% 24,890,083
Beneficial
Interest Short-Term Securities
$ 1,219,518 BlackRock Liquidity Series, LLC
Cash Sweep Series, 5.33% (b)(d) 1,219,518
Total Short-Term Securities
(Cost--$1,219,518)--1.5% 1,219,518
Total Investments (Cost--$73,487,128*)--100.6% 82,886,442
Liabilities in Excess of Other Assets--(0.6%) (488,548)
------------
Net Assets--100% $ 82,397,894
============
* The cost and unrealized appreciation (depreciation) of investments,
as of August 31, 2007, as computed for federal income tax purposes,
were as follows:
Aggregate cost $ 74,065,118
================
Gross unrealized appreciation $ 10,359,900
Gross unrealized depreciation (1,538,576)
----------------
Net unrealized appreciation $ 8,821,324
================
(a) Depositary receipts.
(b) 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
BlackRock Liquidity Series, LLC
Cash Sweep Series $617,377 $ 42,325
(c) Non-income producing security.
(d) Represents the current yield as of August 31, 2007.
(e) Separately Traded Registered Interest and Principal of Securities
(STRIPS).
(f) Represents a zero coupon bond; the rate shown is the effective yield
at the time of purchase.
o 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. Industries are shown as a percentage of net assets. These
industry classifications are unaudited.
See Notes to Financial Statements.
BLACKROCK FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND AUGUST 31, 2007
Statement of Assets and Liabilities
As of August 31, 2007
Assets
Investments in unaffiliated securities, at value (identified cost--$72,267,610) $ 81,666,924
Investments in affiliated securities, at value (identified cost--$1,219,518) 1,219,518
Foreign cash (cost--$2,042) 2,048
Receivables:
Dividends $ 46,179
Securities sold 9,875 56,054
---------------
Prepaid expenses 1,417
---------------
Total assets 82,945,961
---------------
Liabilities
Deferred foreign capital gain tax 31,487
Payables:
Beneficial interest redeemed 283,373
Distributor 63,538
Financial warranty fee 56,876
Investment adviser 45,579
Other affiliates 16,938 466,304
---------------
Accrued expenses and other liabilities 50,276
---------------
Total liabilities 548,067
---------------
Net Assets
Net assets $ 82,397,894
===============
Net Assets Consist of
Paid-in capital, unlimited number of shares of beneficial interest authorized $ 68,635,296
Accumulated investment loss--net $ (7,035)
Undistributed realized capital gains--net 4,401,721
Unrealized appreciation--net 9,367,912
---------------
Total accumulated earnings--net 13,762,598
---------------
Net Assets $ 82,397,894
===============
Net Asset Value
Institutional--Based on net assets of $4,039,820 and 381,578 shares of beneficial
interest outstanding $ 10.59
===============
Investor A--Based on net assets of $4,846,290 and 459,076 shares of beneficial
interest outstanding $ 10.56
===============
Investor B--Based on net assets of $42,613,559 and 4,111,006 shares of beneficial
interest outstanding $ 10.37
===============
Investor C--Based on net assets of $30,898,225 and 2,973,283 shares of beneficial
interest outstanding $ 10.39
===============
See Notes to Financial Statements.
BLACKROCK FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND AUGUST 31, 2007
Statement of Operations
For the Year Ended August 31, 2007
Investment Income
Interest (including $42,325 from affiliates) $ 1,410,068
Dividends (including $670 foreign withholding tax credit) 601,061
---------------
Total income 2,011,129
---------------
Expenses
Financial warranty fee $ 769,346
Investment advisory fees 616,531
Service and distribution fees--Investor B 493,546
Service and distribution fees--Investor C 349,560
Accounting services 73,484
Transfer agent fees--Investor B 62,230
Professional fees 49,237
Transfer agent fees--Investor C 44,120
Printing and shareholder reports 41,526
Custodian fees 41,503
Service fees--Investor A 15,418
Trustees' fees and expenses 14,527
Transfer agent fees--Investor A 6,684
Transfer agent fees--Institutional 5,245
Pricing fees 1,870
Other 17,468
---------------
Total expenses 2,602,295
---------------
Investment loss--net (591,166)
---------------
Realized & Unrealized Gain (Loss)--Net
Realized gain (loss) on:
Investments--net (including $1,198 in foreign capital gain tax) 6,426,075
Foreign currency transactions--net (8,840) 6,417,235
---------------
Change in unrealized appreciation/depreciation on:
Investments--net (including $8,501 deferred foreign capital gain credit) 901,004
Foreign currency transactions--net 1,528 902,532
--------------- ---------------
Total realized and unrealized gain--net 7,319,767
---------------
Net Increase in Net Assets Resulting from Operations $ 6,728,601
===============
See Notes to Financial Statements.
BLACKROCK FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND AUGUST 31, 2007
Statements of Changes in Net Assets
For the Year Ended
August 31,
Increase (Decrease) in Net Assets: 2007 2006
Operations
Investment loss--net $ (591,166) $ (709,039)
Realized gain--net 6,417,235 4,827,390
Change in unrealized appreciation/depreciation--net 902,532 (2,072,026)
--------------- ---------------
Net increase in net assets resulting from operations 6,728,601 2,046,325
--------------- ---------------
Dividends and Distributions to Shareholders
Investment income--net:
Institutional -- (2,545)
Investor A -- (1,577)
Investor B -- (28,563)
Investor C -- (18,733)
Realized gain--net:
Institutional (284,119) (289,864)
Investor A (414,278) (165,171)
Investor B (3,136,898) (2,574,206)
Investor C (2,207,878) (1,696,805)
--------------- ---------------
Net decrease in net assets resulting from dividends and distributions to shareholders (6,043,173) (4,777,464)
--------------- ---------------
Beneficial Interest Transactions
Net decrease in net assets derived from beneficial interest transactions (27,059,310) (34,010,687)
--------------- ---------------
Net Assets
Total decrease in net assets (26,373,882) (36,741,826)
Beginning of year 108,771,776 145,513,602
--------------- ---------------
End of year* $ 82,397,894 $ 108,771,776
=============== ===============
* Accumulated investment loss--net $ (7,035) $ (7,361)
=============== ===============
See Notes to Financial Statements.
BLACKROCK FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND AUGUST 31, 2007
Financial Highlights
The following
per share data Institutional Investor A
and ratios
have been For the For the
derived from Period Period
information Nov. 13, Nov. 13,
provided in For the Year 2002++ to For the Year 2002++ to
the financial Ended August 31, Aug. 31, Ended August 31, Aug. 31,
statements. 2007 2006 2005 2004 2003 2007 2006 2005 2004 2003
Per Share Operating Performance
Net asset value,
beginning of
period $ 10.37 $ 10.57 $ 10.52 $ 10.40 $ 10.00 $ 10.36 $ 10.57 $ 10.49 $ 10.38 $ 10.00
------------------------------------------------- ---------------------------------------------------------
Investment
income--net .03*** .04*** .10*** .03*** .06 --***+++++++ .01*** .08*** --***+++++++ .04
Realized and
unrealized
gain--net .81 .21 .63 .16 .35 .82 .20 .63 .16 .35
------------------------------------------------- ---------------------------------------------------------
Total from
investment
operations .84 .25 .73 .19 .41 .82 .21 .71 .16 .39
------------------------------------------------- ---------------------------------------------------------
Less dividends and
distributions:
Investment
income--net -- --+++++ -- (.07) (.01) -- --+++++ -- (.05) (.01)
Realized
gain--net (.62) (.45) (.68) -- -- (.62) (.42) (.63) -- --
------------------------------------------------- ---------------------------------------------------------
Total dividends
and distributions (.62) (.45) (.68) (.07) (.01) (.62) (.42) (.63) (.05) (.01)
------------------------------------------------- ---------------------------------------------------------
Net asset value,
end of period $ 10.59 $ 10.37 $ 10.57 $ 10.52 $ 10.40 $ 10.56 $ 10.36 $ 10.57 $ 10.49 $ 10.38
================================================= =========================================================
Total Investment Return**
Based on net
asset value
per share 8.44% 2.32% 7.03% 1.79% 4.10%+++ 8.24% 1.99% 6.82% 1.50% 3.90%+++
================================================= =========================================================
Ratios to Average Net Assets
Expenses, net
of waiver 1.83% 1.74% 1.73% 1.74% 1.86%* 2.08% 1.99% 1.98% 1.99% 2.11%*
================================================= =========================================================
Expenses 1.83% 1.74% 1.73% 1.75% 1.86%* 2.08% 1.99% 1.98% 2.00% 2.11%*
================================================= =========================================================
Investment
income--net .29% .39% .99% .27% .67%* .03% .14% .75% .02% .41%*
================================================= =========================================================
Supplemental Data
Net assets,
end of period
(in thousands) $ 4,040 $ 5,333 $ 7,306 $ 11,675 $ 17,503 $ 4,846 $ 3,265 $ 4,955 $ 8,309 $ 15,668
================================================= =========================================================
Portfolio turnover 81% 46% 58% 71% 107% 81% 46% 58% 71% 107%
================================================= =========================================================
* Annualized.
** Total investment returns exclude the effects of any sales charges.
*** Based on average shares outstanding.
++ Commencement of operations.
+++ Aggregate total investment return.
+++++ Amount is less than ($.01) per share.
+++++++ Amount is less than $.01 per share.
See Notes to Financial Statements.
BLACKROCK FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND AUGUST 31, 2007
Financial Highlights (concluded)
The following
per share data Investor B Investor C
and ratios
have been For the For the
derived from Period Period
information Nov. 13, Nov. 13,
provided in For the Year 2002++ to For the Year 2002++ to
the financial Ended August 31, Aug. 31, Ended August 31, Aug. 31,
statements. 2007 2006 2005 2004 2003 2007 2006 2005 2004 2003
Per Share Operating Performance
Net asset value,
beginning of period $ 10.26 $ 10.50 $ 10.39 $ 10.31 $ 10.00 $ 10.29 $ 10.52 $ 10.39 $ 10.31 $ 10.00
-------------------------------------------------- --------------------------------------------------
Investment loss--net (.07)*** (.07)*** (.01)*** (.08)*** (.03) (.07)*** (.07)*** (.01)*** (.08)*** (.03)
Realized and unrealized
gain--net .80 .19 .63 .16 .35 .79 .20 .63 .16 .35
-------------------------------------------------- --------------------------------------------------
Total from investment
operations .73 .12 .62 .08 .32 .72 .13 .62 .08 .32
-------------------------------------------------- --------------------------------------------------
Less dividends and
distributions:
Investment income--net -- --+++++ -- --+++++ (.01) -- --+++++ -- -- (.01)
Realized gain--net (.62) (.36) (.51) -- -- (.62) (.36) (.49) -- --
-------------------------------------------------- --------------------------------------------------
Total dividends and
distributions (.62) (.36) (.51) --+++++ (.01) (.62) (.36) (.49) -- (.01)
-------------------------------------------------- --------------------------------------------------
Net asset value,
end of period $ 10.37 $ 10.26 $ 10.50 $ 10.39 $ 10.31 $ 10.39 $ 10.29 $ 10.52 $ 10.39 $ 10.31
================================================== ==================================================
Total Investment Return**
Based on net asset
value per share 7.41% 1.16% 6.04% .81% 3.20%+++ 7.28% 1.23% 6.05% .78% 3.20%+++
================================================== ==================================================
Ratios to Average Net Assets
Expenses, net of waiver 2.84% 2.76% 2.75% 2.76% 2.88%* 2.84% 2.76% 2.75% 2.76% 2.88%*
================================================== ==================================================
Expenses 2.84% 2.76% 2.75% 2.76% 2.88%* 2.84% 2.76% 2.75% 2.76% 2.88%*
================================================== ==================================================
Investment loss--net (.72%) (.63%) (.06%) (.74%) (.36%)* (.72%) (.63%) (.06%) (.75%) (.36%)*
================================================== ==================================================
Supplemental Data
Net assets, end of
period (in thousands) $ 42,614 $ 60,613 $ 79,793 $ 96,961 $117,426 $ 30,898 $ 39,561 $ 53,459 $ 71,216 $101,111
================================================== ==================================================
Portfolio turnover 81% 46% 58% 71% 107% 81% 46% 58% 71% 107%
================================================== ==================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Based on average shares outstanding.
++ Commencement of operations.
+++ Aggregate total investment return.
+++++ Amount is less than ($.01) per share.
See Notes to Financial Statements.
BLACKROCK FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND AUGUST 31, 2007
Notes to Financial Statements
1. Significant Accounting Policies:
BlackRock Fundamental Growth Principal Protected Fund (the "Fund") is part of
BlackRock 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. The
Fund offers multiple classes of shares. Effective October 2, 2006, Class I,
Class A, Class B and Class C Shares were redesignated Institutional, Investor
A, Investor B and Investor C Shares, respectively. 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.
Institutional Shares are sold only to certain eligible investors. Investor A
Shares are sold with a front-end sales charge. Shares of Investor B and
Investor C may be subject to a contingent deferred sales charge. All classes
of shares have identical voting, dividend, liquidation and other rights and
the same terms and conditions, except that Investor A, Investor B and Investor
C Shares bear certain expenses related to the shareholder servicing of such
shares, and Investor B and Investor 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 shareholder servicing and
distribution expenditures (except that Investor B shareholders may vote on
certain changes to the Investor 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 held by the Fund that are
traded on stock exchanges or the NASDAQ Global 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 Trust. Long positions traded in the over-the-counter ("OTC")
market, NASDAQ Capital Market 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. 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 or purchased are valued at the last sale price in the case of
exchange-traded options. Options traded in the OTC market are valued at the
last asked price (options written) or the last bid price (options purchased).
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. Valuation of short-term
investment vehicles is generally based on the net asset value of the
underlying investment vehicle or amortized cost.
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, 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 Board of Trustees.
Such valuations and procedures will be reviewed periodically by the Board of
Trustees.
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 will generally be
determined as of 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 will be valued at their
fair value as determined in good faith by the Board of Trustees or by
BlackRock Advisors, LLC (the "Manager"), an indirect, wholly owned subsidiary
of BlackRock, Inc., using a pricing service and/or procedures approved by the
Board of Trustees.
BLACKROCK FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND AUGUST 31, 2007
Notes to Financial Statements (continued)
(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 due
to an unfavorable change in the underlying security or index, or if the
counterparty does not perform under the contract. The counterparty for
certain instruments may pledge cash or securities as collateral.
* Financial futures contracts--The Fund may purchase or sell financial futures
contracts and options on such financial futures contracts. Financial 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.
(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.
BLACKROCK FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND AUGUST 31, 2007
Notes to Financial Statements (continued)
(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.
(h) Recent accounting pronouncements--In July 2006, the Financial Accounting
Standards Board ("FASB") issued Interpretation No. 48 ("FIN 48"), "Accounting
for Uncertainty in Income Taxes--an interpretation of FASB Statement No. 109."
FIN 48 prescribes the minimum recognition threshold a tax position must meet
in connection with accounting for uncertainties in income tax positions taken
or expected to be taken by an entity, including mutual funds, before being
measured and recognized in the financial statements. Adoption of FIN 48 is
required for the last net asset value calculation in the first required
financial statement reporting period for fiscal years beginning after December
15, 2006. The impact on the Fund's financial statements, if any, is currently
being assessed.
In September 2006, Statement of Financial Accounting Standards No. 157, "Fair
Value Measurements" ("FAS 157"), was issued and is effective for fiscal years
beginning after November 15, 2007. FAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements. Management is currently evaluating the implication of FAS 157.
At this time its impact on the Fund's financial statements, if any, has not
been determined.
In addition, in February 2007, Statement of Financial Accounting Standards
No. 159, "The Fair Value Option for Financial Assets and Financial
Liabilities" ("FAS 159"), was issued and is effective for fiscal years
beginning after November 15, 2007. Early adoption is permitted as of the
beginning of a fiscal year that begins on or before November 15, 2007,
provided the entity also elects to apply the provisions of FAS 157. FAS 159
permits entities to choose to measure many financial instruments and certain
other items at fair value that are not currently required to be measured at
fair value. FAS 159 also establishes presentation and disclosure requirements
designed to facilitate comparisons between entities that choose different
measurement attributes for similar types of assets and liabilities. At this
time, management is evaluating the implications of FAS 159 and its impact on
the Fund's financial statements, if any, has not been determined.
(i) Reclassifications--U.S. generally accepted accounting principles require
that certain components of net assets be adjusted to reflect permanent
differences between financial and tax reporting. Accordingly, during the
current year, $489,469 has been reclassified between paid-in capital and
accumulated net investment loss and $102,023 has been reclassified between
undistributed net realized capital gains and accumulated net investment loss
as a result of permanent differences attributable to net operating losses,
characterization of expenses and foreign currency transactions. These
reclassifications have no effect on net assets or net asset values per share.
2. Investment Advisory Agreement and Transactions with Affiliates:
On September 29, 2006, BlackRock, Inc. and Merrill Lynch & Co., Inc. ("Merrill
Lynch") combined Merrill Lynch's investment management business, Merrill Lynch
Investment Managers, L.P. ("MLIM"), and its affiliates, with BlackRock, Inc.
to create a new independent company. Merrill Lynch has a 49.8% economic
interest and a 45% voting interest in the combined company and The PNC
Financial Services Group, Inc. ("PNC"), has approximately a 34% economic and
voting interest. The new company operates under the BlackRock name and is
governed by a board of directors with a majority of independent members.
On August 15, 2006, shareholders of the Fund approved a new Investment
Advisory Agreement with BlackRock Advisors, Inc. BlackRock Advisors, Inc. was
reorganized into a limited liability company and renamed BlackRock Advisors,
LLC. The new Investment Advisory Agreement between the Trust, on behalf of the
Fund, and the Manager became effective on September 29, 2006. Prior to
September 29, 2006, MLIM was the Fund's manager. The general partner of MLIM
is an indirect, wholly owned subsidiary of Merrill Lynch, which is the limited
partner.
BLACKROCK FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND AUGUST 31, 2007
Notes to Financial Statements (continued)
The Manager 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. The Manager 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 service fees) will not exceed 1.99%. This
arrangement has a one-year term and is automatically renewable.
In addition, the Manager has entered into a sub-advisory agreement with
BlackRock Investment Management, LLC ("BIM"), an affiliate of the Manager,
under which the Manager pays BIM for services it provides a monthly fee at an
annual rate that is a percentage of the management fee paid by the Fund to the
Manager.
The Fund has also entered into separate Distribution Agreements and
Distribution Plans with FAM Distributors, Inc. ("FAMD") and BlackRock
Distributors, Inc. and its affiliates ("BDI") (collectively, the
"Distributor"). FAMD is a wholly owned subsidiary of Merrill Lynch Group,
Inc., and BDI is an affiliate of BlackRock, Inc.
Pursuant to the Distribution Plans adopted by the Fund in accordance with Rule
12b-1 under the Investment Company Act of 1940, the Fund pays each Distributor
ongoing service 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:
Service Distribution
Fee Fee
Investor A .25% --
Investor B .25% .75%
Investor C .25% .75%
Pursuant to sub-agreements with each Distributor, broker-dealers, including
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), a wholly owned
subsidiary of Merrill Lynch, and each Distributor provide shareholder
servicing and distribution services to the Fund. The ongoing service fee
compensates the Distributor and each broker-dealer (including MLPF&S) for
providing shareholder services to Investor A, Investor B and Investor C
shareholders. The ongoing distribution fee compensates each Distributor and
the broker-dealers for providing shareholder servicing and distribution-
related services to Investor B and Investor C shareholders.
For the year ended August 31, 2007, affiliates received contingent deferred
sales charges of $208,706 relating to transactions in Investor B Shares.
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 ensure 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 share-holder's Guaranteed
Amount, the Warranty Provider will pay the Fund an amount sufficient to ensure
that each shareholder's account can be redeemed for an amount equal to his or
her Guaranteed Amount.
The Manager maintains a call center, which is responsible for providing
certain shareholder services to the Fund, such as responding to shareholder
inquiries and processing transactions based upon instructions from
shareholders with respect to the subscription and redemption of Fund shares.
During the period September 29, 2006 to August 31, 2007, the following amounts
have been accrued by the Fund to reimburse the Manager for costs incurred
running the call center, which are a component of the transfer agent fees in
the accompanying Statement of Operations.
Call Center
Fees
Institutional $ 44
Investor A $ 87
Investor B $1,286
Investor C $ 536
BLACKROCK FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND AUGUST 31, 2007
Notes to Financial Statements (continued)
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 has retained BIM as the
securities lending agent for a fee based on a share of the returns on
investment of cash collateral. Prior to September 29, 2006, BIM was organized
as Merrill Lynch Investment Managers, LLC ("MLIM, LLC"), an affiliate of MLIM,
and MLIM, LLC was the securities lending agent. BIM 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 the Manager or its
affiliates.
In addition, MLPF&S received $20,290 in commissions on the execution of
portfolio security transactions for the Fund for the year ended August 31,
2007.
For the year ended August 31, 2007, the Fund reimbursed MLIM and the Manager
$212 and $1,633, respectively, for certain accounting services.
Effective September 29, 2006, PFPC Inc., an indirect, wholly owned subsidiary
of PNC and an affiliate of the Manager, became the Fund's transfer agent.
Prior to September 29, 2006, the Fund's transfer agent was Financial Data
Services, Inc. ("FDS"), a wholly owned subsidiary of Merrill Lynch.
Prior to September 29, 2006, certain officers and/or trustees of the Fund were
officers and/or directors of MLIM, FDS, FAMD, Merrill Lynch, and/or MLIM, LLC.
Commencing September 29, 2006, certain officers and/or trustees of the Fund
are officers and/or directors of BlackRock, Inc. or its affiliates.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended August 31, 2007 were $76,177,191 and $111,234,465, respectively.
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest transactions was
$27,059,310 and $34,010,687 for years ended August 31, 2007 and August 31,
2006, respectively.
Transactions in beneficial interest for each class were as follows:
Institutional Shares for the Dollar
Year Ended August 31, 2007 Shares Amount
Shares issued to shareholders in
reinvestment of distributions 26,309 $ 264,144
Shares redeemed (159,103) (1,635,465)
-------------- ---------------
Net decrease (132,794) $ (1,371,321)
============== ===============
Institutional Shares for the Dollar
Year Ended August 31, 2006 Shares Amount
Shares issued to shareholders in
reinvestment of dividends and
distributions 25,624 $ 268,304
Shares redeemed (202,234) (2,113,929)
-------------- ---------------
Net decrease (176,610) $ (1,845,625)
============== ===============
Investor A Shares for the Dollar
Year Ended August 31, 2007 Shares Amount
Shares converted* 456,908 $ 4,738,138
Shares issued to shareholders in
reinvestment of distributions 38,340 384,554
-------------- ---------------
Total issued 495,248 5,122,692
Shares redeemed (351,226) (3,610,282)
-------------- ---------------
Net increase 144,022 $ 1,512,410
============== ===============
Investor A Shares for the Dollar
Year Ended August 31, 2006 Shares Amount
Shares issued to shareholders in
reinvestment of dividends and
distributions 15,274 $ 160,236
Shares redeemed (169,014) (1,777,713)
-------------- ---------------
Net decrease (153,740) $ (1,617,477)
============== ===============
Investor B Shares for the Dollar
Year Ended August 31, 2007 Shares Amount
Shares issued to shareholders in
reinvestment of distributions 289,333 $ 2,864,401
Shares redeemed or converted* (2,084,282) (21,168,467)
-------------- ---------------
Net decrease (1,794,949) $ (18,304,066)
============== ===============
BLACKROCK FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND AUGUST 31, 2007
Notes to Financial Statements (concluded)
Investor B Shares for the Dollar
Year Ended August 31, 2006 Shares Amount
Shares issued to shareholders in
reinvestment of dividends and
distributions 231,229 $ 2,414,202
Shares redeemed (1,927,923) (20,074,084)
-------------- ---------------
Net decrease (1,696,694) $ (17,659,882)
============== ===============
Investor C Shares for the Dollar
Year Ended August 31, 2007 Shares Amount
Shares issued to shareholders in
reinvestment of distributions 208,109 $ 2,066,527
Shares redeemed (1,080,561) (10,962,860)
-------------- ---------------
Net decrease (872,452) $ (8,896,333)
============== ===============
Investor C Shares for the Dollar
Year Ended August 31, 2006 Shares Amount
Shares issued to shareholders in
reinvestment of dividends and
distributions 154,053 $ 1,613,048
Shares redeemed (1,391,597) (14,500,751)
-------------- ---------------
Net decrease (1,237,544) $ (12,887,703)
============== ===============
* In September 2006, certain brokerages, including a wholly owned
subsidiary of Merrill Lynch, entered into a remediation agreement
with a regulatory organization, which among other things, permitted
certain shareholders of Investor B Shares to convert their
shares into the Fund's Investor A Shares.
5. Short-Term Borrowings:
The Trust, on behalf of the Fund, along with certain other funds managed by
the Manager and its affiliates, is a party to a $500,000,000 credit agreement
with a group of lenders, which expires November 2007. 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 .06% 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 .35% or a base rate as
defined in the credit agreement. The Fund did not borrow under the credit
agreement during the year ended August 31, 2007.
6. Distributions to Shareholders:
The tax character of distributions paid during the fiscal years ended
August 31, 2007 and August 31, 2006 was as follows:
8/31/2007 8/31/2006
Distributions paid from:
Ordinary income -- $ 259,422
Net long-term capital gains $ 6,043,173 4,518,042
-------------- ---------------
Total taxable distributions $ 6,043,173 $ 4,777,464
============== ===============
As of August 31, 2007, the components of accumulated earnings on a tax
basis were as follows:
Undistributed ordinary income--net --
Undistributed long-term capital gains--net $ 4,979,711
---------------
Total undistributed earnings--net 4,979,711
Capital loss carryforward --
Unrealized gains--net 8,782,887*
---------------
Total accumulated earnings--net $ 13,762,598
===============
* The difference between book-basis and tax-basis net unrealized
gains is attributable primarily to the tax deferral of losses on wash
sales and the deferral of post-October currency losses for tax purposes.
BLACKROCK FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND AUGUST 31, 2007
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees
of BlackRock Principal Protected Trust:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of BlackRock Fundamental Growth
Principal Protected Fund (the "Fund"), one of the series constituting
BlackRock Principal Protected Trust (the "Trust") as of August 31, 2007, and
the related statement of operations for the year then ended, and the statement
of changes in net assets and the financial highlights for each of the two
years in the period then ended. These financial statements and financial
highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The financial highlights of the Fund
for each of the two years in the period ended August 31, 2005 and for the
period November 13, 2002 through August 31, 2003, were audited by other
auditors whose report, dated October 14, 2005, expressed an unqualified
opinion on those financial highlights.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. The Trust is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Trust's internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements and
financial highlights, assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. Our procedures included confirmation of securities
owned as of August 31, 2007, by correspondence with the custodian. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
BlackRock Fundamental Growth Principal Protected Fund of BlackRock Principal
Protected Trust as of August 31, 2007, the results of its operations for the
year then ended, and the changes in its net assets and its financial
highlights for each of the two years in the period then ended, in conformity
with accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
October 26, 2007
Important Tax Information (unaudited)
During the fiscal year ended August 31, 2007, BlackRock Fundamental Growth
Principal Protected Fund of BlackRock Principal Protected Trust distributed
long-term capital gains of $.620786 per share to shareholders of record on
December 8, 2006.
BLACKROCK FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND AUGUST 31, 2007
Officers and Trustees
Number of
Funds and
Portfolios in Other Public
Position(s) Length of Fund Complex Directorships
Name, Address Held with Time Overseen by Held by
and Year of Birth Fund Served Principal Occupation(s) During Past 5 Years Trustee Trustee
Interested Trustee
Robert C. Doll, Jr.* Fund 2005 to Vice Chairman and Director of BlackRock, Inc., 120 Funds None
P.O. Box 9011 President present Global Chief Investment Officer for Equities, 161 Portfolios
Princeton, NJ and Chairman of the BlackRock Retail Operating
08543-9011 Trustee Committee, and member of the BlackRock Executive
1954 Committee since 2006; President of the funds
advised by Merrill Lynch Investment Managers, L.P.
("MLIM") and its affiliates ("MLIM/FAM-advised
funds") from 2005 to 2006 and Chief Investment
Officer thereof from 2001 to 2006; President of
MLIM and Fund Asset Management, L.P. ("FAM")
from 2001 to 2006; Co-Head (Americas Region)
thereof from 2000 to 2001 and Senior Vice
President from 1999 to 2001; President and
Director of Princeton Services, Inc.
("Princeton Services") and President of
Princeton Administrators, L.P. ("Princeton
Administrators") from 2001 to 2006; Chief
Investment Officer of OppenheimerFunds, Inc.
in 1999 and Executive Vice President thereof
from 1991 to 1999.
* Mr. Doll is a director, trustee or member of an advisory board of certain other
investment companies for which BlackRock Advisors, LLC and its affiliates act
as investment adviser. Mr. Doll is an "interested person," as defined in the
Investment Company Act, of the Fund based on his current and former positions
with BlackRock, Inc. and its affiliates. Trustees serve until their resignation,
removal or death, or until December 31 of the year in which they turn 72. As Fund
President, Mr. Doll serves at the pleasure of the Board of Trustees.
Independent Trustees*
David O. Beim** Trustee 2002 to Professor of Finance and Economics at the 17 Funds None
P.O. Box 9095 present Columbia University Graduate School of Business 24 Portfolios
Princeton, NJ since 1991; Chairman of Outward Bound USA from
08543-9011 1997 to 2001; Chairman of Wave Hill Inc., from
1940 1990 to 2006; Trustee of Phillips Exeter Academy
from 2002 to present.
James T. Flynn Trustee 2002 to Chief Financial Officer of JP Morgan & Co., 17 Funds None
P.O. Box 9095 present Inc. from 1990 to 1995 and an employee of 24 Portfolios
Princeton, NJ JP Morgan in various capacities from 1967
08543-9011 to 1995.
1939
W. Carl Kester Trustee 2002 to Deputy Dean for Academic Affairs, Harvard 17 Funds None
P.O. Box 9095 present Business School since 2006; Mizuho Financial 24 Portfolios
Princeton, NJ Group, Professor of Finance, Harvard
08543-9011 Business School; Unit Head, Finance from 2005
1951 to 2006; Senior Associate Dean and Chairman of
the MBA Program of Harvard Business School,
1999 to 2005, Member of the faculty of Harvard
Business School since 1981.Independent Consultant
since 1978.
Karen P. Robards*** Trustee 2002 to Partner of Robards & Company, LLC., a financial 17 Funds AtriCure, Inc.
P.O. Box 9095 present advisory firm since 1987; formerly an investment 24 Portfolios (medical devices)
Princeton, NJ banker with Morgan Stanley for more than ten
08543-9011 years; Director of Enable Medical Corp. from
1950 1996 to 2005; Director of AtriCure, Inc.,
since 2000; Director of Care Investment Trust,
Inc. a healthcare REIT, since 2007; Co-founder
and Director of the Cooke Center for Learning
and Development, a not-for-profit organization,
since 1987.
* Trustees serve until their resignation, removal or death, or until December 31
of the year in which they turn 72.
** Chairman of the Audit Committee.
*** Chair of the Board of Trustees.
BLACKROCK FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND AUGUST 31, 2007
Officers and Trustees (concluded)
Position(s) Length of
Name, Address Held with Time
and Year of Birth Fund Served Principal Occupation(s) During Past 5 Years
Fund Officers*
Donald C. Burke Treasurer 2002 to Managing Director of BlackRock, Inc. since 2006; Managing Director of Merrill
P.O. Box 9011 present Lynch Investment Managers, L.P. ("MLIM") and Fund Asset Management, L.P.
Princeton, NJ ("FAM") in 2006; First Vice President of MLIM and FAM from 1997 to 2005 and
08543-9011 Treasurer thereof from 1999 to 2006); Vice President of MLIM and FAM from
1960 1990 to 1997.
Karen Clark Fund Chief 2007 to Managing Director of BlackRock, Inc. and Chief Compliance Officer of certain
P.O. Box 9011 Compliance present BlackRock-advised funds since 2007; Director of BlackRock, Inc. from 2005 to
Princeton, NJ Officer 2007; Principal and Senior Compliance Officer, State Street Global Advisors,
08543-9011 from 2001 to 2005; Principal Consultant, PricewaterhouseCoopers, LLP from
1965 1998 to 2001; and Branch Chief, Division of Investment Management and Office
of Compliance Inspections and Examinations, U.S. Securities and Exchange
Commission, from 1993 to 1998.
Alice A. Pellegrino Fund 2004 to Director of BlackRock, Inc. from 2006 to 2007; Director (Legal Advisory) of
P.O. Box 9011 Secretary 2007 MLIM from 2002 to 2006; Vice President of MLIM from 1999 to 2002; Attorney
Princeton, NJ associated with MLIM from 1997 to 1999; Secretary of MLIM, FAM,
08543-9011 FAM Distributors, Inc. and Princeton Services from 2004 to 2006.
1960
Howard Surloff Fund 2007 to Managing Director of BlackRock, Inc. and General Counsel of U.S. Funds at
P.O. Box 9011 Secretary present BlackRock, Inc. since 2006; General Counsel (U.S.), Goldman Sachs Asset
Princeton, NJ Management from 1993 to 2006.
08543-9011
1965
* Officers of the Fund serve at the pleasure of the Board of Trustees.
Further information about the Fund's Officers and Trustees is available in
the Fund's Statement of Additional Information, which can be obtained without
charge by calling 1-800-441-7762.
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109-3661
Transfer Agent
PFPC Inc.
Wilmington, DE 19809
BLACKROCK FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND AUGUST 31, 2007
BlackRock Funds
BlackRock Privacy Principles
BlackRock is committed to maintaining the privacy of its current and former
fund investors and individual clients (collectively, "Clients") and to
safeguarding their nonpublic personal information. The following information
is provided to help you understand what personal information BlackRock
collects, how we protect that information and why in certain cases we share
such information with select parties.
If you are located in a jurisdiction where specific laws, rules or regulations
require BlackRock to provide you with additional or different privacy-related
rights beyond what is set forth below, then BlackRock will comply with those
specific laws, rules or regulations.
BlackRock obtains or verifies personal nonpublic information from and about
you from different sources, including the following: (i) information we
receive from you or, if applicable, your financial intermediary, on
applications, forms or other documents; (ii) information about your
transactions with us, our affiliates, or others; (iii) information we receive
from a consumer reporting agency; and (iv) from visits to our Web sites.
BlackRock does not sell or disclose to nonaffiliated third parties any
nonpublic personal information about its Clients, except as permitted by law
or as is necessary to service Client accounts. These nonaffiliated third
parties are required to protect the confidentiality and security of this
information and to use it only for its intended purpose.
We may share information with our affiliates to service your account or to
provide you with information about other BlackRock products or services that
may be of interest to you. In addition, BlackRock restricts access to
nonpublic personal information about its Clients to those BlackRock employees
with a legitimate business need for the information. BlackRock maintains
physical, electronic and procedural safeguards that are designed to protect
the nonpublic personal information of its Clients, including procedures
relating to the proper storage and disposal of such information.
Availability of Additional Information
Electronic copies of most financial reports and prospectuses are available on
the Fund's Web site or shareholders can sign up for e-mail notifications of
quarterly statements, annual and semi-annual reports and prospectuses by
enrolling in the Fund's electronic delivery program.
To enroll:
Shareholders Who Hold Accounts with Investment Advisers, Banks or Brokerages:
Please contact your financial advisor. Please note that not all investment
advisers, banks or brokerages may offer this service.
Shareholders Who Hold Accounts Directly with BlackRock:
1) Access the BlackRock Web site at
http://www.blackrock.com/edelivery
2) Select eDelivery under the More Information section
3) Log into your account
The Fund will mail only one copy of shareholder documents, including
prospectuses, annual and semi-annual reports and proxy statements, to
shareholders with multiple accounts at the same address. This practice is
commonly called "householding" and it is intended to reduce expenses and
eliminate duplicate mailings of shareholder documents. Mailings of your
shareholder documents may be householded indefinitely unless you instruct us
otherwise. If you do not want the mailing of these documents to be combined
with those for other members of your household, please contact the Fund at
(800) 441-7762.
BLACKROCK FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND AUGUST 31, 2007
BlackRock Funds (concluded)
Availability of Additional Information (concluded)
Availability of Proxy Voting Policies and Procedures
The Fund has delegated proxy voting responsibilities to BlackRock and its
affiliates, subject to the general oversight of the Fund's Board of Trustees.
A description of the policies and procedures that BlackRock and its affiliates
use to determine how to vote proxies relating to portfolio securities is
available without charge, upon request, on our Web site at www.blackrock.com,
by calling (800) 441-7762, or on the Web site of the Securities and Exchange
Commission (the "Commission") at http://www.sec.gov.
Availability of Proxy Voting Record
Information on how proxies relating to the Fund's voting securities were voted
(if any) by the Fund's previous manager during the most recent 12-month period
ended June 30 is available, upon request and without charge, on our Web site
at www.blackrock.com, by calling (800) 441-7762 or on the Web site of the
Commission at http://www.sec.gov.
Availability of Quarterly Portfolio Schedule
The Fund files its complete schedule of portfolio holdings for the first and
third quarters of its fiscal year with the Commission on Form N-Q. The Fund's
Forms N-Q are available on the Commission's Web site at http://www.sec.gov and
may be reviewed and copied at the Commission's Public Reference Room in
Washington, D.C. Information regarding the operation of the Public Reference
Room may be obtained by calling (800) SEC-0330. The Fund's Forms N-Q may also
be obtained upon request, without charge, by calling (800) 441-7762.
Shareholder Privileges
Account Information
Call us at (800) 441-7762 8:00 AM - 6:00 PM EST to get information about your
account balances, recent transactions and share prices. You can also reach us
on the Web at www.blackrock.com.
Automatic Investment Plans
Investor Class shareholders who want to invest regularly can arrange to have
$50 or more automatically deducted from their checking or savings account and
invested in any of the BlackRock funds.
Systematic Withdrawal Plans
Investor Class shareholders can establish a systematic withdrawal plan and
receive periodic payments of $50 or more from their BlackRock funds, as long
as their account is at least $10,000.
Retirement Plans
Shareholders may make investments in conjunction with Traditional, Rollover,
Roth, Coverdell, Simple IRAs, SEP IRAs and 403(b) Plans.
BLACKROCK FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND AUGUST 31, 2007
A World-Class Mutual Fund Family
BlackRock offers a diverse lineup of open-end mutual funds crossing all
investment styles and managed by experts in equity, fixed income and
tax-exempt investing.
Equity Funds
BlackRock All-Cap Global Resources Portfolio
BlackRock Aurora Portfolio
BlackRock Asset Allocation Portfolio++
BlackRock Balanced Capital Fund++
BlackRock Basic Value Fund
BlackRock Capital Appreciation Portfolio
BlackRock Developing Capital Markets Fund
BlackRock Equity Dividend Fund
BlackRock EuroFund
BlackRock Focus Twenty Fund
BlackRock Focus Value Fund
BlackRock Fundamental Growth Fund
BlackRock Global Allocation Fund++
BlackRock Global Dynamic Equity Fund
BlackRock Global Financial Services Fund
BlackRock Global Growth Fund
BlackRock Global Opportunities Portfolio
BlackRock Global Resources Portfolio*
BlackRock Global Science & Technology
Opportunities Portfolio
BlackRock Global SmallCap Fund
BlackRock Healthcare Fund
BlackRock Health Sciences Opportunities Portfolio
BlackRock Index Equity Portfolio*
BlackRock International Fund
BlackRock International Index Fund
BlackRock International Opportunities Portfolio*
BlackRock International Value Fund
BlackRock Large Cap Core Fund
BlackRock Large Cap Growth Fund
BlackRock Large Cap Value Fund
BlackRock Latin America Fund
BlackRock Mid-Cap Growth Equity Portfolio
BlackRock Mid-Cap Value Equity Portfolio
BlackRock Mid Cap Value Opportunities Fund
BlackRock Natural Resources Trust
BlackRock Pacific Fund
BlackRock Small Cap Core Equity Portfolio
BlackRock Small Cap Growth Equity Portfolio
BlackRock Small Cap Growth Fund II
BlackRock Small Cap Index Fund
BlackRock Small Cap Value Equity Portfolio*
BlackRock Small/Mid-Cap Growth Portfolio
BlackRock S&P 500 Index Fund
BlackRock Technology Fund
BlackRock U.S. Opportunities Portfolio
BlackRock Utilities and Telecommunications Fund
BlackRock Value Opportunities Fund
Fixed Income Funds
BlackRock Commodity Strategies Fund
BlackRock Enhanced Income Portfolio
BlackRock GNMA Portfolio
BlackRock Government Income Portfolio
BlackRock High Income Fund
BlackRock High Yield Bond Portfolio
BlackRock Inflation Protected Bond Portfolio
BlackRock Intermediate Bond Portfolio II
BlackRock Intermediate Government
Bond Portfolio
BlackRock International Bond Portfolio
BlackRock Low Duration Bond Portfolio
BlackRock Managed Income Portfolio
BlackRock Short-Term Bond Fund
BlackRock Total Return Fund
BlackRock Total Return Portfolio II
BlackRock World Income Fund
Municipal Bond Funds
BlackRock AMT-Free Municipal Bond Portfolio
BlackRock California Insured Municipal Bond Fund
BlackRock Delaware Municipal Bond Portfolio
BlackRock Florida Municipal Bond Fund
BlackRock High Yield Municipal Fund
BlackRock Intermediate Municipal Fund
BlackRock Kentucky Municipal Bond Portfolio
BlackRock Municipal Insured Fund
BlackRock National Municipal Fund
BlackRock New Jersey Municipal Bond Fund
BlackRock New York Municipal Bond Fund
BlackRock Ohio Municipal Bond Portfolio
BlackRock Pennsylvania Municipal Bond Fund
BlackRock Short-Term Municipal Fund
Target Risk & Target Date Funds
BlackRock Prepared Portfolios
Conservative Prepared Portfolio
Moderate Prepared Portfolio
Growth Prepared Portfolio
Aggressive Growth Prepared Portfolio
BlackRock Lifecycle Prepared Portfolios
Prepared Portfolio 2010
Prepared Portfolio 2015
Prepared Portfolio 2020
Prepared Portfolio 2025
Prepared Portfolio 2030
Prepared Portfolio 2035
Prepared Portfolio 2040
Prepared Portfolio 2045
Prepared Portfolio 2050
* See the prospectus for information on specific limitations on investments
in the fund.
++ Mixed asset fund.
BlackRock mutual funds are distributed by BlackRock Distributors, Inc. and
certain funds are also distributed by FAM Distributors, Inc. You should
consider the investment objectives, risks, charges and expenses of the funds
under consideration carefully before investing. Each fund's prospectus
contains this and other information and is available at www.blackrock.com or
by calling 800-882-0052 or from your financial advisor. The prospectus should
be read carefully before investing.
BLACKROCK FUNDAMENTAL GROWTH PRINCIPAL PROTECTED FUND AUGUST 31, 2007
Item 2 - Code of Ethics - The registrant has adopted a code of ethics, as of
the end of the period covered by this report, applicable to the
registrant's principal executive officer, principal financial
officer and principal accounting officer, or persons performing
similar functions. During the period covered by this report, there
have been no amendments to or waivers granted under the code of
ethics. A copy of the code of ethics is available without charge at
www.blackrock.com.
Item 3 - Audit Committee Financial Expert - The registrant's board of
directors or trustees, as applicable (the "board of directors") has
determined that (i) the registrant has the following audit committee
financial experts serving on its audit committee and (ii) each audit
committee financial expert is independent: (1) David O. Beim,
(2) W. Carl Kester, (3) James T. Flynn and (4) Karen P. Robards.
The registrant's board of directors has determined that David O.
Beim, W. Carl Kester and Karen P. Robards qualify as financial
experts pursuant to Item 3(c)(4) of Form N-CSR.
Mr. Beim has a thorough understanding of generally accepted
accounting principles, financial statements and internal control
over financial reporting as well as audit committee functions. For
25 years, Mr. Beim was an investment banker actively engaged in
financial analysis for securities transactions and mergers. These
transactions presented a breadth and level of complexity of
accounting issues that are generally comparable to the breadth and
complexity of issues that can reasonably be expected to be raised by
the Registrant's financial statements. Mr. Beim has also been a
professor of finance and economics at the Columbia University
Graduate School of Business since 1991.
Prof. Kester has a thorough understanding of generally accepted
accounting principles, financial statements and internal control
over financial reporting as well as audit committee functions.
Prof. Kester has been involved in providing valuation and other
financial consulting services to corporate clients since 1978.
Prof. Kester's financial consulting services present a breadth and
level of complexity of accounting issues that are generally
comparable to the breadth and complexity of issues that can
reasonably be expected to be raised by the Registrant's financial
statements.
Ms. Robards has a thorough understanding of generally accepted
accounting principles, financial statements and internal control
over financial reporting as well as audit committee functions.
Ms. Robards has been President of Robards & Company, a financial
advisory firm, since 1987. Ms. Robards was formerly an investment
banker for more than 10 years where she was responsible for
evaluating and assessing the performance of companies based on their
financial results. Ms. Robards has over 30 years of experience
analyzing financial statements. She also is the member of the Audit
Committees of one publicly held company and a non-profit
organization.
Under applicable securities laws, a person determined to be an audit
committee financial expert will not be deemed an "expert" for any
purpose, including without limitation for the purposes of Section 11
of the Securities Act of 1933, as a result of being designated or
identified as an audit committee financial expert. The designation
or identification as an audit committee financial expert does not
impose on such person any duties, obligations, or liabilities
greater than the duties, obligations, and liabilities imposed on
such person as a member of the audit committee and board of
directors in the absence of such designation or identification.
Item 4 - Principal Accountant Fees and Services
Note: The Fund changed auditors effective August, 28, 2006. Prior
to that date, Ernst & Young LLP provided services as the Fund's
independent registered public accountant.
(a) Audit Fees (b) Audit-Related Fees (1) (c) Tax Fees (2) (d) All Other Fees (3)
Current Previous Current Previous Current Previous Current Previous
Entity Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year
Name End End End End End End End End
BlackRock
Fundamental
Growth Principal
Protected Fund $26,900 $26,900 $0 $0 $6,100 $6,954 $1,042 $0
of BlackRock
Principal
Protected Trust
(1) The nature of the services include assurance and related services
reasonablyrelated to the performance of the audit of financial statements
not included in Audit Fees.
(2) The nature of the services include tax compliance, tax advice and tax
planning.
(3) The nature of the services include a review of compliance procedures and
attestation thereto.
(e)(1) Audit Committee Pre-Approval Policies and Procedures:
The registrant's audit committee (the "Committee") has
adopted policies and procedures with regard to the pre-approval of
services. Audit, audit-related and tax compliance services provided
to the registrant on an annual basis require specific pre-approval
by the Committee. The Committee also must approve other non-audit
services provided to the registrant and those non-audit services
provided to the registrant's affiliated service providers that
relate directly to the operations and the financial reporting of the
registrant. Certain of these non-audit services that the Committee
believes are a) consistent with the SEC's auditor independence rules
and b) routine and recurring services that will not impair the
independence of the independent accountants may be approved by the
Committee without consideration on a specific case-by-case basis
("general pre-approval"). However, such services will only be
deemed pre-approved provided that any individual project does not
exceed $5,000 attributable to the registrant or $50,000 for all of
the registrants the Committee oversees. Any proposed services
exceeding the pre-approved cost levels will require specific pre-
approval by the Committee, as will any other services not subject to
general pre-approval (e.g., unanticipated but permissible services).
The Committee is informed of each service approved subject to
general pre-approval at the next regularly scheduled in-person board
meeting.
(e)(2) None of the services described in each of Items 4(b) through
(d) were approved by the audit committee pursuant to paragraph
(c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not Applicable
(g) Affiliates' Aggregate Non-Audit Fees:
Current Previous
Fiscal Year Fiscal Year
Entity Name End End
BlackRock Fundamental
Growth Principal Protected
Fund of BlackRock Principal
Protected Trust $291,642 $3,105,454
(h) The registrant's audit committee has considered and determined
that the provision of non-audit services that were rendered to the
registrant's investment adviser (not including any non-affiliated
sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by the registrant's investment
adviser), and any entity controlling, controlled by, or under common
control with the investment adviser that provides ongoing services
to the registrant that were not pre-approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with
maintaining the principal accountant's independence.
Regulation S-X Rule 2-01(c)(7)(ii) - $284,500, 0%
Item 5 - Audit Committee of Listed Registrants - Not Applicable
Item 6 - Schedule of Investments - The registrant's Schedule of Investments
is included as part of the Report to Stockholders filed under Item 1
of this form.
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 - The
registrant's Nominating Committee will consider nominees to the
Board recommended by shareholders when a vacancy becomes available.
Shareholders who wish to recommend a nominee should send nominations
which include biographical information and set forth the
qualifications of the proposed nominee to the registrant's
Secretary. There have been no material changes to these procedures.
Item 11 - Controls and Procedures
11(a) - The registrant's principal executive and principal financial
officers or persons performing similar functions have concluded that
the registrant's disclosure controls and procedures (as defined in
Rule 30a-3(c) under the Investment Company Act of 1940, as amended
(the "1940 Act")) are effective as of a date within 90 days of the
filing of this report based on the evaluation of these controls and
procedures required by Rule 30a-3(b) under the 1940 Act and Rule
15d-15(b) under the Securities and Exchange Act of 1934, as amended.
11(b) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act)
that occurred during the second fiscal quarter of the period covered
by this report that have materially affected, or are reasonably
likely to materially affect, the registrant's internal control over
financial reporting.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - See Item 2
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.
BlackRock Fundamental Growth Principal Protected Fund of
BlackRock Principal Protected Trust
By: /s/ Robert C. Doll, Jr.
-----------------------
Robert C. Doll, Jr.,
Chief Executive Officer (principal executive officer) of
BlackRock Fundamental Growth Principal Protected Fund of
BlackRock Principal Protected Trust
Date: October 22, 2007
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 (principal executive officer) of
BlackRock Fundamental Growth Principal Protected Fund of
BlackRock Principal Protected Trust
Date: October 22, 2007
By: /s/ Donald C. Burke
-------------------
Donald C. Burke,
Chief Financial Officer (principal financial officer) of
BlackRock Fundamental Growth Principal Protected Fund of
BlackRock Principal Protected Trust
Date: October 22, 2007