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 Basic Value 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 Basic Value 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: 06/30/07
Date of reporting period: 07/01/06 - 06/30/07
Item 1 - Report to Stockholders
EQUITIES FIXED INCOME REAL ESTATE
LIQUIDITY ALTERNATIVES BLACKROCK SOLUTIONS
BlackRock Basic Value Principal BLACKROCK
Protected Fund
OF BLACKROCK PRINCIPAL PROTECTED TRUST
ANNUAL REPORT | JUNE 30, 2007
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
BlackRock Basic Value Principal Protected Fund
Portfolio Information as of June 30, 2007
Percent of
Ten Largest Common Stock Holdings Net Assets
- --------------------------------------------------------------------------------
Exxon Mobil Corp. ............................................... 5.1%
JPMorgan Chase & Co. ............................................ 3.6
American International Group, Inc. .............................. 3.3
Citigroup, Inc. ................................................. 3.0
International Business Machines Corp. ........................... 2.8
Tyco International Ltd. ......................................... 2.8
Morgan Stanley .................................................. 2.6
Time Warner, Inc. ............................................... 2.4
The Bank of New York Co., Inc. .................................. 2.3
Unilever NV ..................................................... 2.2
- --------------------------------------------------------------------------------
Percent of
Five Largest Industries Net Assets
- --------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels ..................................... 9.4%
Pharmaceuticals ................................................. 8.9
Diversified Financial Services .................................. 8.4
Insurance ....................................................... 7.0
Semiconductors & Semiconductor Equipment ........................ 6.6
- --------------------------------------------------------------------------------
For Fund compliance purposes, the Fund's industry classifications refer to
any one or more of the industry sub-classifications used by one or more
widely recognized market indexes or ratings group indexes, and/or as
defined by Fund management. This definition may not apply for purposes of
this report, which may combine industry sub-classifications for reporting
ease.
Percent of
Investment Criteria Long-Term Investments
- --------------------------------------------------------------------------------
Above-Average Yield ............................................. 36.5%
Below-Average Price/Earnings Ratio .............................. 32.1
Low Price-to-Book Value ......................................... 23.7
Special Situations .............................................. 4.4
Price-to-Cash Flow .............................................. 3.3
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2 BLACKROCK BASIC VALUE PRINCIPAL PROTECTED FUND JUNE 30, 2007
A Letter to Shareholders
Dear Shareholder
At the mid-point of 2007, investor sentiment appeared quite buoyant,
notwithstanding some undertones of caution. For equity markets, positive
momentum as the year began was interrupted by a notable but transitory set-back
at the end of February. Markets resumed their ascent through May, but entered a
trading range in June as investors began to question the sustainability of the
rally. For the most part, equities found support in robust
merger-and-acquisition activity, healthy global economies, tame inflation,
relatively low interest rates, still-positive earnings growth and attractive
valuations. These tailwinds prevailed over such headwinds as a weakening U.S.
economy, slowing housing market, credit-related lending problems, escalating
geopolitical concerns and high energy prices, leading the Standard & Poor's
(S&P) 500 Index to a new record high in May.
Meanwhile, turmoil in the subprime mortgage market and generally mixed economic
signals weighed on bonds. In June, bond prices dropped precipitously as
long-term yields rose to their highest levels in five years. The 10-year
Treasury yield, which began 2007 at 4.68%, reached nearly 5.30% in mid-June
before retracing to 5.03% by month's end. Notably, this year has brought some
re-steepening of the yield curve, which had been flat to inverted throughout
2006. Still, at the end of June, yields along the curve remained below the
federal funds rate of 5.25%, the level at which the Federal Reserve Board (the
Fed) has left it since first pausing in August 2006. While first-quarter gross
domestic product growth of 0.7% represented the slowest rate of expansion since
2002, the Fed reiterated that inflation, not a slowing economy, remains its
primary concern. Many observers interpreted the Fed's reaction to mean that the
economy has hit its low and is bound for renewed strength, thereby reducing the
likelihood of an interest rate cut in the near future.
Against this backdrop, the major equity market indexes posted strong returns for
the annual and semi-annual periods ended June 30, 2007, while fixed income
assets were more mixed:
Total Returns as of June 30, 2007 6-month 12-month
===============================================================================================================
U.S. equities (S&P 500 Index) + 6.96% +20.59%
- ---------------------------------------------------------------------------------------------------------------
Small cap U.S. equities (Russell 2000 Index) + 6.45 +16.43
- ---------------------------------------------------------------------------------------------------------------
International equities (MSCI Europe, Australasia, Far East Index) +10.74 +27.00
- ---------------------------------------------------------------------------------------------------------------
Fixed income (Lehman Brothers U.S. Aggregate Bond Index) + 0.98 + 6.12
- ---------------------------------------------------------------------------------------------------------------
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) + 0.14 + 4.69
- ---------------------------------------------------------------------------------------------------------------
High yield bonds (Lehman Brothers U.S. Corporate High Yield 2% Issuer Cap Index) + 2.96 +11.22
- ---------------------------------------------------------------------------------------------------------------
We expect market volatility to linger throughout the second half of 2007. As you
navigate the uncertainties, 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 view "What's Ahead in 2007: The
Second-Quarter Update" and "Are You Prepared for Volatility?" at
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,
/s/ Robert C. Doll, Jr.
Robert C. Doll, Jr.
Fund President and Trustee
BLACKROCK BASIC VALUE PRINCIPAL PROTECTED FUND JUNE 30, 2007 3
A Discussion With Your Fund's Portfolio Manager
The Fund outperformed its benchmarks and comparable Lipper category
average for the fiscal year, remaining nearly 100% invested in equities
throughout the period.
How did the Fund perform during the fiscal year in light of the existing market
conditions?
For the 12-month period ended June 30, 2007, BlackRock Basic Value Principal
Protected Fund's Institutional, Investor A, Investor B and Investor C Shares had
total returns of +24.12%, +23.74%, +22.78% and +22.83%, respectively. (Fund
results shown do not reflect sales charges and would be lower if sales charges
were included. Complete performance information can be found on pages 6 and 7 of
this report to shareholders.) This compared to a return of +20.59% for the
Standard & Poor's 500 (S&P 500) Index, +21.77% for the S&P 500 Citigroup Value
Index and an average return of +15.86% for Lipper Mixed-Asset Target Allocation
Growth Funds category. (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.)
During the 12-month period, the Fund's equity allocation ranged from 100% of net
assets to 96.7%. The modest to negligible exposure to fixed income assets proved
advantageous, as bonds underperformed equities by a wide margin. For the
12-month period, the Lehman Brothers U.S. Aggregate Bond Index returned +6.12%.
As the fiscal year began, the equity market was recovering from a far-reaching
correction that sent the average U.S. stock 12% lower. In retrospect, the
retrenchment was fairly normal and long overdue, having been the first
double-digit correction for U.S. equity markets in nearly four years. In summer
2006, with the Federal Reserve Board (the Fed) having finally ended its two-year
streak of interest rate increases and with oil prices on the decline after
reaching an all-time high near $78 per barrel, stocks embarked on a one-way
journey upward.
The market's ascent generally continued until the end of February 2007, when
concern over rising delinquencies in the subprime mortgage market sparked fears
that contagion from the already weak housing market could spill over to the rest
of the economy. This, and a 10% correction in the Chinese stock market, prompted
a global sell-off that led U.S. stocks to register their most significant
one-week decline in four years. The correction ultimately proved short lived and
surging corporate merger-and-acquisition (M&A) activity, healthy global
economies and moderate inflation pressures, among other factors, led both the
S&P 500 Index and the Dow Jones Industrial Average to new record highs.
The biggest boon for the Fund during the 12 months came from an underweight
position and good stock selection in the financials sector. Given the flatness
of the yield curve, we chose to avoid many of the regional banks and lenders
whose profits depend on the net interest margin of the loans they issue.
Instead, we focused on investment banks and brokerages, which we felt were
poised to benefit from the robust M&A activity and healthy calendar of initial
public offerings. Within financials, Morgan Stanley was our top performer,
followed by Bank of America Corp. and Sallie Mae, which appreciated
significantly upon news that it would be taken over by private equity interests.
Our avoidance of Wachovia Corp. and Washington Mutual, Inc. further benefited
performance, and our position in The Bank of New York Co., Inc. performed well
after the company's merger with Mellon Corp.
As in financials, our underweight position and good stock selection in the
industrials sector also contributed significantly to performance. Based on our
expectation for a slowdown in the U.S. economy, we began to rotate away from
more economically sensitive stocks. Within industrials, this meant less exposure
to heavy construction and more emphasis on niche markets. Our position in Deere
& Co., for example, appreciated as the tractor business benefited from the
increased production of corn associated with efforts to exploit ethanol as an
energy source.
Also contributing to Fund performance was our positioning in consumer
discretionary, led by McDonald's Corp., which has refreshed its business and
continues to be a strong performer. For the most part, our strategy in consumer
discretionary entails limited exposure to retailers and greater emphasis on
cable and media stocks. Among the key contributors then were Interpublic Group
of Cos., Inc., Sony Corp., Phillips Electronics NV and Comcast Corp.
The Fund's top two contributors for the year were health care names --
Schering-Plough Corp., a maker of prescription and over-the-counter drugs, and
Baxter International, Inc., manufacturer of medical equipment and supplies. We
also saw strong performance from select stocks in information technology (IT),
including International Business Machines Corp. and Unisys Corp.
Detracting modestly from the Fund's relative performance were underweight
positions in utilities and materials.
4 BLACKROCK BASIC VALUE PRINCIPAL PROTECTED FUND JUNE 30, 2007
What changes were made to the portfolio during the period?
The Fund seeks long-term capital growth while protecting the principal value of
investor shares. This is accomplished through investments in a core equity
component for growth and a fixed income component for an element of protection.
A mathematical formula is used to determine the allocation between these two
components. Throughout the period, the portfolio's allocation continued to favor
equities.
The equity portfolio has evolved along with the U.S. economy. As the economic
cycle matures, we believe the pace of growth inevitably will slow. As such, we
started to shy away from consumer cyclicality, materials and, more generally,
companies that are heavily dependent on the economy for success, instead
favoring large-cap, multinational companies that we believe can offer more
consistency of earnings.
Many of our new purchases during the period occurred in the IT sector, where we
initiated positions in Micron Technology, Inc., Intel Corp., Taiwan
Semiconductor Manufacturing Co., Ltd., Applied Materials, Inc. and Alcatel SA.
For the most part, we are not seeking technology companies that are trying to
create the next blockbuster product or application, but are focused on what we
believe to be well-run, shareholder-friendly companies that are making smart
moves with their capital allocations and, in some cases, are offering dividends
or buying back shares. In general, we believe IT companies will benefit from a
new cycle of capital spending on technology. IT sales during the period included
Motorola, which we sold on weakness, and Nokia Oyj, which was liquidated after
strong appreciation.
We maintained the Fund's overweight position in energy, and expect to maintain
our relatively heavy exposure as long as commodity prices remain elevated.
Within energy, we initiated positions in Peabody Energy Corp. and Consol Energy,
Inc. In the health care sector, we established an overweight position for the
first time in more than 10 years. In part, this reflects attractive valuations
but also our view that, after years of poor performance and a limited product
pipeline, the worst is passed. During the 12-month period, we initiated
positions in pharmaceutical giants Bristol-Myers Squibb Co. and Wyeth, while
eliminating Eli Lilly & Co. from the portfolio. Looking ahead, we are more
cautious on the sector given the potential for industry-related legislation
coming out of Washington as the political season approaches.
For the most part, changes to the portfolio were largely stock-specific rather
than thematic. As such, other notable additions included Quest Communications
International Inc. and Sprint Nextel Corp. in the telecommunications sector,
Wal-Mart Stores, Inc. in consumer staples, Honda Motor Co., Ltd in consumer
discretionary and Sallie Mae (bought and sold) and Fannie Mae in financials.
Conversely, we eliminated consumer discretionary names Gannett Co., Inc., The
Gap, Inc. and Interpublic Group of Cos., Inc., consumer staples names Altria
Group, Inc. and The Kroeger Co., and financials stocks Marsh & McLellan Cos.,
Inc. and The Allstate Corp. In utilities we sold Public Service Enterprise
Group, Inc. and in materials we eliminated International Paper Co. Generally
speaking, sales were made as stocks reached our price targets, based on a change
in our original assessment or to make room for more compelling opportunities.
Finally, we reduced exposure to defense contractor Raytheon Co., as we are
somewhat concerned about defense spending as political jockeying intensifies.
How would you characterize the Fund's position at the close of the period?
At June 30, 2007, the Fund was invested 98.6% in equities and 1.4% in fixed
income securities. The equity portfolio was overweight versus the S&P 500
Citigroup Value Index in energy, information technology, health care and
consumer staples. It had underweights in financials, utilities,
telecommunication services, consumer discretionary, industrials and materials.
We intend to maintain the approach that contributed to the Fund's outperformance
during the past year. This involves a focus on large-cap, multinational
companies with the ability to deliver shareholder value amid a slower economic
backdrop. We had argued that the U.S. equity market would be up in the high
single digits to low double digits this year and that, if wrong, the error would
be to the upside (that is, the market would be higher than we thought). At this
juncture, that view stands. In our opinion, the market has fared well despite
some substantial bumps in the road. More potholes are expected, particularly
given such formidable unknowns as global terrorism, geopolitical concerns and
the scope of the subprime collapse. Despite these worries, a great deal of cash
remains on company balance sheets, which can be deployed via continued M&A,
leveraged buyout and private equity activity. Importantly, stocks look quite
attractive compared to bonds and relative to expectations for growth,
underpinning our cautiously optimistic outlook.
Kevin M. Rendino
Equity Portfolio Manager
July 13, 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 BASIC VALUE PRINCIPAL PROTECTED FUND JUNE 30, 2007 5
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:
o 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.
o 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).
o 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.)
o 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 June 30, 2007 Total Return Total Return Total Return
======================================================================================================
Institutional Shares* +7.52% +24.12% + 60.36%
- ------------------------------------------------------------------------------------------------------
Investor A Shares* +7.35 +23.74 + 58.48
- ------------------------------------------------------------------------------------------------------
Investor B Shares* +6.93 +22.78 + 52.94
- ------------------------------------------------------------------------------------------------------
Investor C Shares* +7.01 +22.83 + 53.04
- ------------------------------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index** +0.98 + 6.12 + 18.83
- ------------------------------------------------------------------------------------------------------
S&P 500(R) Index*** +6.96 +20.59 + 85.29
- ------------------------------------------------------------------------------------------------------
S&P 500 Citigroup Value Index**** +7.37 +21.77 +116.23
- ------------------------------------------------------------------------------------------------------
* 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 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.
*** 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 "value" 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 value end of the
growth-value spectrum. Since inception total return is from 11/13/02.
S&P 500 is a registered trademark of the McGraw-Hill Companies.
6 BLACKROCK BASIC VALUE PRINCIPAL PROTECTED FUND JUNE 30, 2007
Performance Data (concluded)
Basic Value Principal Protected
BR Basic Value Principal Protected Fund -- Edgar
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund's Institutional,
Investor A, Investor B and Investor C Shares compared to growth of an investment
in the S&P 500 Index, the S&P 500/Citigroup Value Index and Lehman Brothers
Aggregate Bond Index. Values are from November 13, 2002 through December 2006:
S&P 500/ Lehman Brothers
Institutional Investor A Investor B Investor C S&P 500 Citigroup Value Aggregate
Shares*+ Shares*+ Shares*+ Shares*+ Index++ Index+++ Bond Index
11/13/02** $10,000 $ 9,475 $10,000 $10,000 $10,000 $10,000 $10,000
12/02 $10,053 $ 9,525 $10,043 $10,043 $ 9,994 $10,227 $10,138
12/03 $11,474 $10,842 $11,338 $11,344 $12,860 $13,332 $10,554
12/04 $12,101 $11,406 $11,842 $11,842 $14,260 $15,335 $11,012
12/05 $12,339 $11,600 $11,946 $11,950 $14,960 $16,671 $11,279
12/06 $14,915 $13,987 $14,103 $14,302 $17,323 $20,138 $11,768
* Assuming maximum sales charge, if any, transaction costs and other
operating expenses, including advisory fees.
** Commencement of operations.
+ The Fund invests primarily in common stocks and in U.S. Treasury bonds,
including zero coupon bonds.
++ 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 Index is designed to provide a comprehensive measure of
large-cap U.S. equity "value" 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 value end of the
growth-value spectrum.
++++ 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 6/30/07 +24.12%
- --------------------------------------------------------------------------------
Inception (11/13/02)
through 6/30/07 +10.74
- --------------------------------------------------------------------------------
Return Without Return With
Sales Charge Sales Charge*
================================================================================
Investor A Shares
================================================================================
One Year Ended 6/30/07 +23.74% +17.24%
- --------------------------------------------------------------------------------
Inception (11/13/02)
through 6/30/07 +10.46 + 9.18
- --------------------------------------------------------------------------------
Return Return
Without CDSC With CDSC+++
================================================================================
Investor B Shares+
================================================================================
One Year Ended 6/30/07 +22.78% +18.28%
- --------------------------------------------------------------------------------
Inception (11/13/02)
through 6/30/07 + 9.62 + 9.31
- --------------------------------------------------------------------------------
* Assuming maximum sales charge of 5.25%.
+ Maximum contingent deferred sales charge is 4.50% and is reduced to 0%
after six years.
Return Return
Without CDSC With CDSC+++
================================================================================
Investor C Shares++
================================================================================
One Year Ended 6/30/07 +22.83% +21.83%
- --------------------------------------------------------------------------------
Inception (11/13/02)
through 6/30/07 + 9.63 + 9.63
- --------------------------------------------------------------------------------
++ Maximum contingent deferred sales charge is 1% and is reduced to 0% after
one year.
+++ Assuming payment of applicable contingent deferred sales charge.
BLACKROCK BASIC VALUE PRINCIPAL PROTECTED FUND JUNE 30, 2007 7
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 January 1, 2007 and held through
June 30, 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 January 1, 2007
January 1, 2007 June 30, 2007 to June 30, 2007
========================================================================================================================
Actual
========================================================================================================================
Institutional $1,000 $1,075.20 $ 8.85
- ------------------------------------------------------------------------------------------------------------------------
Investor A $1,000 $1,073.50 $10.18
- ------------------------------------------------------------------------------------------------------------------------
Investor B $1,000 $1,069.30 $14.08
- ------------------------------------------------------------------------------------------------------------------------
Investor C $1,000 $1,070.10 $14.09
========================================================================================================================
Hypothetical (5% annual return before expenses)**
========================================================================================================================
Institutional $1,000 $1,016.37 $ 8.60
- ------------------------------------------------------------------------------------------------------------------------
Investor A $1,000 $1,015.08 $ 9.90
- ------------------------------------------------------------------------------------------------------------------------
Investor B $1,000 $1,011.29 $13.69
- ------------------------------------------------------------------------------------------------------------------------
Investor C $1,000 $1,011.29 $13.69
- ------------------------------------------------------------------------------------------------------------------------
* For each class of the Fund, expenses are equal to the annualized expense
ratio for the class (1.71% for Institutional, 1.97% for Investor A, 2.73%
for Investor B and 2.73% for Investor C), multiplied by the average
account value over the period, multiplied by 182/365 (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.
8 BLACKROCK BASIC VALUE PRINCIPAL PROTECTED FUND JUNE 30, 2007
Schedule of Investments as of June 30, 2007
Industry Shares Held
====================================================================================
Above-Average Yield Diversified Telecommunication Services 78,040
Communications Equipment 115,800
Metals & Mining 70,899
Capital Markets 95,900
Pharmaceuticals 77,800
Oil, Gas & Consumable Fuels 33,500
Multi-Utilities 16,000
Chemicals 60,300
Oil, Gas & Consumable Fuels 104,800
Industrial Conglomerates 94,900
Food Products 59,400
Pharmaceuticals 54,600
Aerospace & Defense 40,000
Diversified Financial Services 129,432
Pharmaceuticals 32,500
Pharmaceuticals 135,400
Electric Utilities 44,400
Semiconductors & Semiconductor Equipment 147,333
Diversified Telecommunication Services 82,300
Pharmaceuticals 24,500
====================================================================================
Below-Average Price/ Insurance 80,100
Earnings Ratio Diversified Financial Services 65,156
Health Care Equipment & Supplies 37,200
Diversified Financial Services 101,300
Beverages 109,140
Oil, Gas & Consumable Fuels 17,000
Thrifts & Mortgage Finance 18,700
Computers & Peripherals 42,900
Semiconductors & Semiconductor Equipment 117,700
Household Durables 40,100
Food Products 22,700
Hotels, Restaurants & Leisure 33,900
Capital Markets 52,400
Aerospace & Defense 39,800
Pharmaceuticals 101,800
Insurance 59,434
Food Products 122,100
IT Services 255,600
Food & Staples Retailing 13,100
Insurance 20,900
Office Electronics 144,600
====================================================================================
Low Price-to- Oil, Gas & Consumable Fuels 35,900
Book Value Media 99,350
Machinery 20,200
Semiconductors & Semiconductor Equipment 110,700
Energy Equipment & Services 48,300
Energy Equipment & Services 49,000
Insurance 15,000
Household Products 44,900
Semiconductors & Semiconductor Equipment 287,600
Semiconductors & Semiconductor Equipment 129,600
Aerospace & Defense 61,500
Computers & Peripherals 321,500
Media 193,300
Industrial Conglomerates 142,100
Media 69,400
Commercial Banks 42,200
====================================================================================
Percent of
Common Stocks Value Net Assets
=================================================================================================================
Above-Average Yield AT&T Inc. $ 3,238,660 1.9%
Alcatel SA (b) 1,621,200 0.9
Alcoa, Inc. 2,873,537 1.7
The Bank of New York Co., Inc. (a) 3,974,096 2.3
Bristol-Myers Squibb Co. 2,455,368 1.4
Chevron Corp. 2,822,040 1.6
Dominion Resources, Inc. 1,380,960 0.8
E.I. du Pont de Nemours & Co. 3,065,652 1.8
Exxon Mobil Corp. 8,790,624 5.1
General Electric Co. 3,632,772 2.1
General Mills, Inc. 3,470,148 2.0
GlaxoSmithKline Plc (b) 2,859,402 1.7
Honeywell International, Inc. 2,251,200 1.3
JPMorgan Chase & Co. 6,270,980 3.6
Johnson & Johnson 2,002,650 1.2
Pfizer, Inc. 3,462,178 2.0
The Southern Co. 1,522,476 0.9
Taiwan Semiconductor Manufacturing Co., Ltd. (b) 1,639,815 1.0
Verizon Communications, Inc. 3,388,291 2.0
Wyeth 1,404,830 0.8
-----------------------
62,126,879 36.1
=================================================================================================================
Below-Average Price/ American International Group, Inc. 5,609,403 3.3
Earnings Ratio Bank of America Corp. 3,185,477 1.8
Baxter International, Inc. 2,095,848 1.2
Citigroup, Inc. 5,195,677 3.0
Coca-Cola Enterprises, Inc. 2,619,360 1.5
Consol Energy, Inc. 783,870 0.5
Fannie Mae 1,221,671 0.7
Hewlett-Packard Co. 1,914,198 1.1
Intel Corp. 2,796,552 1.6
Koninklijke Philips Electronics NV 1,697,032 1.0
Kraft Foods, Inc. 800,175 0.5
McDonald's Corp. 1,720,764 1.0
Morgan Stanley 4,395,312 2.6
Northrop Grumman Corp. 3,099,226 1.8
Schering-Plough Corp. 3,098,792 1.8
The Travelers Cos., Inc. 3,179,719 1.8
Unilever NV (b) 3,787,542 2.2
Unisys Corp. (a) 2,336,184 1.4
Wal-Mart Stores, Inc. 630,241 0.4
XL Capital Ltd. Class A 1,761,661 1.0
Xerox Corp. (a) 2,672,208 1.5
-----------------------
54,600,912 31.7
=================================================================================================================
Low Price-to- Anadarko Petroleum Corp. 1,866,441 1.1
Book Value Comcast Corp. Special Class A (a) 2,777,826 1.6
Deere & Co. 2,438,948 1.4
Fairchild Semiconductor International, Inc. (a) 2,138,724 1.2
GlobalSantaFe Corp. 3,489,675 2.0
Halliburton Co. 1,690,500 1.0
Hartford Financial Services Group, Inc. 1,477,650 0.9
Kimberly-Clark Corp. 3,003,361 1.7
LSI Logic Corp. (a) 2,159,876 1.3
Micron Technology, Inc. (a) 1,623,888 0.9
Raytheon Co. 3,314,235 1.9
Sun Microsystems, Inc. (a) 1,691,090 1.0
Time Warner, Inc. 4,067,032 2.4
Tyco International Ltd. (a) 4,801,559 2.8
Walt Disney Co. 2,369,316 1.4
Wells Fargo & Co. 1,484,174 0.9
-----------------------
40,394,295 23.5
=================================================================================================================
BLACKROCK BASIC VALUE PRINCIPAL PROTECTED FUND JUNE 30, 2007 9
Schedule of Investments (concluded)
Industry Shares Held
====================================================================================
Price-to-Cash Flow Automobiles 10,300
Oil, Gas & Consumable Fuels 40,000
Diversified Telecommunication Services 152,600
Wireless Telecommunication Services 84,900
====================================================================================
Special Situations Semiconductors & Semiconductor Equipment 46,500
Energy Equipment & Services 59,800
Media 5,329
Computers & Peripherals 45,700
- ------------------------------------------------------------------------------------
Percent of
Common Stocks Value Net Assets
==============================================================================================================================
Price-to-Cash Flow Honda Motor Co., Ltd. (b) $ 373,787 0.2%
Peabody Energy Corp. 1,935,200 1.1
Qwest Communications International Inc. (a) 1,480,220 0.9
Sprint Nextel Corp. 1,758,279 1.0
-----------------------
5,547,486 3.2
==============================================================================================================================
Special Situations Applied Materials, Inc. 923,955 0.5
BJ Services Co. 1,700,712 1.0
Citadel Broadcasting Corp. 34,372 0.0
International Business Machines Corp. 4,809,924 2.8
-----------------------
7,468,963 4.3
- ------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost -- $118,166,052) 170,138,535 98.8
==============================================================================================================================
Beneficial
Interest Short-Term Securities
==============================================================================================================================
$2,000,120 BlackRock Liquidity Series, LLC Cash Sweep
Series, 5.33% (c)(d) 2,000,120 1.2
- ------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Securities
(Cost -- $2,000,120) 2,000,120 1.2
- ------------------------------------------------------------------------------------------------------------------------------
Total Investments (Cost -- $120,166,172) 172,138,655 100.0
==============================================================================================================================
==============================================================================================================================
Number of
Contracts Options Written
==============================================================================================================================
Call Options Written 100 Chevron Corp., expiring January 2008 at USD 90 (38,000) 0.0
342 Comcast Corp. Special Class A,
expiring July 2007 at USD 28.333 (20,520) 0.0
80 International Business Machines Corp.,
expiring July 2007 at USD 100 (46,400) (0.1)
- ------------------------------------------------------------------------------------------------------------------------------
Total Options Written
(Premiums Received -- $158,871) (104,920) (0.1)
- ------------------------------------------------------------------------------------------------------------------------------
Total Investments, Net of Options Written (Cost -- $120,007,301*) 172,033,735 99.9
Other Assets Less Liabilities 84,452 0.1
---------------------------
Net Assets $172,118,187 100.0%
===========================
* The cost and unrealized appreciation (depreciation) of investments, net of
options written, as of June 30, 2007, as computed for federal income tax
purposes, were as follows:
Aggregate cost ......................................... $ 122,368,816
=============
Gross unrealized appreciation .......................... $ 49,721,678
Gross unrealized depreciation .......................... (56,759)
-------------
Net unrealized appreciation ............................ $ 49,664,919
=============
(a) Non-income producing security.
(b) Depositary receipts.
(c) Investments in companies considered to be an affiliate of the Fund, for
purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as
follows:
--------------------------------------------------------------------------
Net Interest
Affiliate Activity Income
--------------------------------------------------------------------------
BlackRock Liquidity Series, LLC
Cash Sweep Series $784,490 $101,279
--------------------------------------------------------------------------
(d) Represents the current yield as of June 30, 2007.
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 percent of net assets. These industry
classifications and investment criteria are unaudited.
See Notes to Financial Statements.
10 BLACKROCK BASIC VALUE PRINCIPAL PROTECTED FUND JUNE 30, 2007
Statement of Assets and Liabilities
As of June 30, 2007
===================================================================================================================================
Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value
(identified cost -- $118,166,052) ................................................ $ 170,138,535
Investments in affiliated securities, at value
(identified cost -- $2,000,120) .................................................. 2,000,120
Receivables:
Securities sold ................................................................ $ 1,014,349
Dividends ...................................................................... 194,309 1,208,658
-------------
Prepaid expenses and other assets .................................................. 2,303
-------------
Total assets ....................................................................... 173,349,616
-------------
===================================================================================================================================
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
Options written, at value (premiums received -- $158,871) .......................... 104,920
Bank overdraft ..................................................................... 691
Payables:
Securities purchased ........................................................... 366,006
Beneficial interest redeemed ................................................... 306,814
Distributor .................................................................... 125,649
Financial warranty fee ......................................................... 112,659
Investment adviser ............................................................. 90,430
Other affiliates ............................................................... 26,430
Distributions to shareholders .................................................. 135 1,028,123
-------------
Accrued expenses ................................................................... 97,695
-------------
Total liabilities .................................................................. 1,231,429
-------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets ......................................................................... $ 172,118,187
=============
===================================================================================================================================
Net Assets Consist of
- -----------------------------------------------------------------------------------------------------------------------------------
Paid-in capital, unlimited shares of no par value authorized ....................... $ 110,229,473
Undistributed realized capital gains -- net ........................................ $ 9,862,280
Unrealized appreciation -- net ..................................................... 52,026,434
-------------
Total accumulated earnings -- net .................................................. 61,888,714
-------------
Net assets ......................................................................... $ 172,118,187
===================================================================================================================================
Net Asset Value
- -----------------------------------------------------------------------------------------------------------------------------------
Institutional -- Based on net assets of $7,393,117 and 574,484
beneficial interest outstanding .................................................. $ 12.87
=============
Investor A -- Based on net assets of $12,145,069 and 945,006
beneficial interest outstanding .................................................. $ 12.85
=============
Investor B -- Based on net assets of $90,267,938 and 7,044,133
beneficial interest outstanding .................................................. $ 12.81
=============
Investor C -- Based on net assets of $62,312,063 and 4,858,363
beneficial interest outstanding .................................................. $ 12.83
=============
See Notes to Financial Statements.
BLACKROCK BASIC VALUE PRINCIPAL PROTECTED FUND JUNE 30, 2007 11
Statement of Operations
For the Year Ended June 30, 2007
===================================================================================================================================
Investment Income
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends (net of $50,641 foreign withholding tax) ................................. $ 3,755,776
Interest from affiliates ........................................................... 101,279
-------------
Total income ....................................................................... 3,857,055
-------------
===================================================================================================================================
Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
Financial warranty fees ............................................................ $ 1,439,271
Investment advisory fees ........................................................... 1,153,389
Service and distribution fees -- Investor B ........................................ 945,621
Service and distribution fees -- Investor C ........................................ 638,875
Accounting services ................................................................ 93,795
Transfer agent fees -- Investor B .................................................. 86,924
Transfer agent fees -- Investor C .................................................. 58,077
Custodian fees ..................................................................... 56,261
Printing and shareholder reports ................................................... 49,447
Professional fees .................................................................. 46,717
Service fees -- Investor A ......................................................... 29,283
Trustees' fees and expenses ........................................................ 19,794
Transfer agent fees -- Investor A .................................................. 10,803
Transfer agent fees -- Institutional ............................................... 6,992
Pricing fees ....................................................................... 1,026
Other .............................................................................. 13,514
-------------
Total expenses ..................................................................... 4,649,789
-------------
Investment loss -- net ............................................................. (792,734)
-------------
===================================================================================================================================
Realized & Unrealized Gain (Loss) -- Net
- -----------------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on:
Investments -- net ............................................................. 17,366,358
Options written -- net ......................................................... (113,802) 17,252,556
-------------
Change in unrealized appreciation/depreciation on:
Investments -- net ............................................................. 20,322,309
Option written -- net .......................................................... 66,343 20,388,652
-------------------------------
Total realized and unrealized gain -- net .......................................... 37,641,208
-------------
Net Increase in Net Assets Resulting from Operations ............................... $ 36,848,474
=============
See Notes to Financial Statements.
12 BLACKROCK BASIC VALUE PRINCIPAL PROTECTED FUND JUNE 30, 2007
Statements of Changes in Net Assets
For the Year Ended
June 30,
Increase (Decrease) in Net Assets: 2007 2006
===================================================================================================================================
Operations
- -----------------------------------------------------------------------------------------------------------------------------------
Investment loss -- net ............................................................. $ (792,734) $ (829,393)
Realized gain -- net ............................................................... 17,252,556 11,901,266
Change in unrealized appreciation/depreciation -- net .............................. 20,388,652 5,264,446
-------------------------------
Net increase in net assets resulting from operations ............................... 36,848,474 16,336,319
-------------------------------
===================================================================================================================================
Distributions to Shareholders
- -----------------------------------------------------------------------------------------------------------------------------------
Realized gain -- net:
Institutional .................................................................. (670,861) (456,885)
Investor A ..................................................................... (1,149,543) (330,265)
Investor B ..................................................................... (6,788,916) (4,018,149)
Investor C ..................................................................... (4,676,490) (2,584,549)
-------------------------------
Net decrease in net assets resulting from distributions to shareholders ............ (13,285,810) (7,389,848)
-------------------------------
===================================================================================================================================
Beneficial Interest Transactions
- -----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets derived from beneficial interest transactions ........... (30,710,156) (44,168,092)
-------------------------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Total decrease in net assets ....................................................... (7,147,492) (35,221,621)
Beginning of year .................................................................. 179,265,679 214,487,300
-------------------------------
End of year ........................................................................ $ 172,118,187 $ 179,265,679
===============================
See Notes to Financial Statements.
BLACKROCK BASIC VALUE PRINCIPAL PROTECTED FUND JUNE 30, 2007 13
Financial Highlights
Institutional
--------------------------------------------------------------------------
For the
Period
The following per share data For the Year Ended Nov. 13,
and ratios have been derived June 30, 2002+ to
from information provided in ---------------------------------------------------------- June 30,
the financial statements. 2007 2006 2005 2004 2003
======================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ... $ 11.35 $ 10.90 $ 11.53 $ 10.55 $ 10.00
--------------------------------------------------------------------------
Investment income -- net ............... .06* .06* .09* .08* .08
Realized and unrealized gain -- net .... 2.58 .93 .06 1.03 .48
--------------------------------------------------------------------------
Total from investment operations ....... 2.64 .99 .15 1.11 .56
--------------------------------------------------------------------------
Less dividends and distributions:
Investment income -- net ........... -- -- -- (.13) (.01)
Realized gain -- net ............... (1.12) (.54) (.78) -- --
--------------------------------------------------------------------------
Total dividends and distributions ...... (1.12) (.54) (.78) (.13) (.01)
--------------------------------------------------------------------------
Net asset value, end of period ......... $ 12.87 $ 11.35 $ 10.90 $ 11.53 $ 10.55
==========================================================================
======================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 24.12% 9.22% 1.22% 10.64% 5.63%@@
==========================================================================
======================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------
Expenses ............................... 1.70% 1.69% 1.68% 1.75% 1.80%@
==========================================================================
Investment income -- net ............... .47% .52% .82% .73% 1.08%@
==========================================================================
======================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 7,393 $ 7,886 $ 10,503 $ 15,576 $ 21,877
==========================================================================
Portfolio turnover ..................... 33% 65% 65% 88% 108%
==========================================================================
Investor A
--------------------------------------------------------------------------
For the
Period
The following per share data For the Year Ended Nov. 13,
and ratios have been derived June 30, 2002+ to
from information provided in ---------------------------------------------------------- June 30,
the financial statements. 2007 2006 2005 2004 2003
======================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ... $ 11.34 $ 10.88 $ 11.52 $ 10.53 $ 10.00
--------------------------------------------------------------------------
Investment income -- net ............... .03* .03* .06* .06* .05
Realized and unrealized gain -- net .... 2.57 .93 .06 1.03 .49
--------------------------------------------------------------------------
Total from investment operations ....... 2.60 .96 .12 1.09 .54
--------------------------------------------------------------------------
Less dividends and distributions:
Investment income -- net ........... -- -- -- (.10) (.01)
Realized gain -- net ............... (1.09) (.50) (.76) -- --
--------------------------------------------------------------------------
Total dividends and distributions ...... (1.09) (.50) (.76) (.10) (.01)
--------------------------------------------------------------------------
Net asset value, end of period ......... $ 12.85 $ 11.34 $ 10.88 $ 11.52 $ 10.53
==========================================================================
======================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 23.74% 8.93% .96% 10.44% 5.43%@@
==========================================================================
======================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------
Expenses ............................... 1.95% 1.94% 1.93% 2.00% 2.05%@
==========================================================================
Investment income -- net ............... .21% .27% .57% .51% .83%@
==========================================================================
======================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 12,145 $ 6,637 $ 8,735 $ 13,022 $ 22,090
==========================================================================
Portfolio turnover ..................... 33% 65% 65% 88% 108%
==========================================================================
* Based on average shares outstanding.
** Total investment returns exclude the effect of any sales charges.
+ Commencement of operations.
@ Annualized.
@@ Aggregate total investment return.
See Notes to Financial Statements.
14 BLACKROCK BASIC VALUE PRINCIPAL PROTECTED FUND JUNE 30, 2007
Financial Highlights (concluded)
Investor B
-------------------------------------------------------------------------------
For the
Period
The following per share data For the Year Ended Nov. 13,
and ratios have been derived June 30, 2002+ to
from information provided in -------------------------------------------------------------- June 30,
the financial statements. 2007 2006 2005 2004 2003
===========================================================================================================================
Per Share Operating Performance
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ... $ 11.23 $ 10.77 $ 11.45 $ 10.48 $ 10.00
-------------------------------------------------------------------------------
Investment income (loss) -- net ........ (.06)* (.05)* (.02)* (.03)* --++
Realized and unrealized gain -- net .... 2.54 .91 .05 1.03 .49
-------------------------------------------------------------------------------
Total from investment operations ....... 2.48 .86 .03 1.00 .49
-------------------------------------------------------------------------------
Less dividends and distributions:
Investment income -- net ........... -- -- -- (.03) (.01)
Realized gain -- net ............... (.90) (.40) (.71) -- --
-------------------------------------------------------------------------------
Total dividends and distributions ...... (.90) (.40) (.71) (.03) (.01)
-------------------------------------------------------------------------------
Net asset value, end of period ......... $ 12.81 $ 11.23 $ 10.77 $ 11.45 $ 10.48
===============================================================================
===========================================================================================================================
Total Investment Return**
- ---------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 22.78% 8.12% .19% 9.58% 4.93%@@
===============================================================================
===========================================================================================================================
Ratios to Average Net Assets
- ---------------------------------------------------------------------------------------------------------------------------
Expenses ............................... 2.71% 2.70% 2.70% 2.76% 2.82%@
===============================================================================
Investment income (loss) -- net ........ (.54%) (.49%) (.20%) (.30%) .07%@
===============================================================================
===========================================================================================================================
Supplemental Data
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 90,268 $ 100,584 $ 117,140 $ 144,787 $ 159,057
===============================================================================
Portfolio turnover ..................... 33% 65% 65% 88% 108%
===============================================================================
Investor C
-------------------------------------------------------------------------------
For the
Period
The following per share data For the Year Ended Nov. 13,
and ratios have been derived June 30, 2002+ to
from information provided in -------------------------------------------------------------- June 30,
the financial statements. 2007 2006 2005 2004 2003
===========================================================================================================================
Per Share Operating Performance
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ... $ 11.25 $ 10.78 $ 11.45 $ 10.48 $ 10.00
-------------------------------------------------------------------------------
Investment income (loss) -- net ........ (.07)* (.05)* (.02)* (.03)* --++
Realized and unrealized gain -- net .... 2.56 .92 .06 1.03 .49
-------------------------------------------------------------------------------
Total from investment operations ....... 2.49 .87 .04 1.00 .49
-------------------------------------------------------------------------------
Less dividends and distributions:
Investment income -- net ........... -- -- -- (.03) (.01)
Realized gain -- net ............... (.91) (.40) (.71) -- --
-------------------------------------------------------------------------------
Total dividends and distributions ...... (.91) (.40) (.71) (.03) (.01)
-------------------------------------------------------------------------------
Net asset value, end of period ......... $ 12.83 $ 11.25 $ 10.78 $ 11.45 $ 10.48
===============================================================================
===========================================================================================================================
Total Investment Return**
- ---------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 22.83% 8.15% .23% 9.54% 4.93%@@
===============================================================================
===========================================================================================================================
Ratios to Average Net Assets
- ---------------------------------------------------------------------------------------------------------------------------
Expenses ............................... 2.71% 2.70% 2.70% 2.76% 2.82%@
===============================================================================
Investment income (loss) -- net ........ (.54%) (.49%) (.20%) (.29%) .06%@
===============================================================================
===========================================================================================================================
Supplemental Data
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 62,312 $ 64,159 $ 78,110 $ 104,840 $ 129,392
===============================================================================
Portfolio turnover ..................... 33% 65% 65% 88% 108%
===============================================================================
* Based on average shares outstanding.
** Total investment returns exclude the effect of sales charges.
+ Commencement of operations.
++ Amount is less than $.01 per share.
@ Annualized.
@@ Aggregate total investment return.
See Notes to Financial Statements.
BLACKROCK BASIC VALUE PRINCIPAL PROTECTED FUND JUNE 30, 2007 15
Notes to Financial Statements
1. Significant Accounting Policies:
Effective September 29, 2006, Merrill Lynch Basic Value Principal Protected Fund
(the "ML Fund") and Merrill Lynch Principal Protected Trust, of which the ML
Fund is part, were renamed BlackRock Basic Value Principal Protected Fund (the
"Fund") and BlackRock Principal Protected Trust (the "Trust"), respectively.
Under the Investment Company Act of 1940, as amended, the Fund is diversified
and the Trust is registered as an open-end management investment company. 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 and are not 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 this date. During the Guarantee
Period, the Fund will seek long-term growth of capital to the extent permitted
by a strategy that seeks to use investments in common stocks, U.S. Treasury
bonds, including zero coupon bonds, and other fixed income instruments, to
protect the original principal value of the Fund (less redemptions, cash
distributions and dividends and extraordinary expenses) at the Guarantee
Maturity Date.
The Trust, on behalf of the Fund, has entered into a Financial Warranty
Agreement with Main Place Funding, LLC (the "Warranty Provider"). The Financial
Warranty Agreement is intended to make sure that on the Guarantee Maturity Date,
each shareholder of the Fund will be entitled to redeem his or her shares for an
amount no less than the initial value of that shareholder's account (less
expenses and sales charges not covered by the Financial Warranty Agreement),
provided that all dividends and distributions received from the Fund have been
reinvested and no shares have been redeemed (the "Guaranteed Amount"). The Fund
will pay to the Warranty Provider, under the Financial Warranty Agreement, an
annual fee equal to .80% of the Fund's average daily net assets during the
Guarantee Period. If the value of the Fund's assets on the Guarantee Maturity
Date is insufficient to result in the value of each shareholder's account being
at least equal to the shareholder's Guaranteed Amount, the Warranty Provider
will pay the Fund an amount sufficient to make sure that each shareholder's
account can be redeemed for an amount equal to his or her Guaranteed Amount.
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 account maintenance 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 account maintenance 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 that are 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 of the Trust. 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.
Debt securities are traded primarily in the OTC markets and are valued at the
last available bid price in the OTC market or on the basis of values obtained by
a pricing service. Pricing services use valuation matrixes that incorporate both
dealer-supplied valuations and valuation models. The procedures of the pricing
service and its valuations are reviewed by the officers of the Fund under the
general direction of the Board of Trustees. Such valuations and procedures will
be reviewed periodically by the Board of Trustees.
16 BLACKROCK BASIC VALUE PRINCIPAL PROTECTED FUND JUNE 30, 2007
Notes to Financial Statements (continued)
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 Trust
employs pricing services to provide certain securities prices for the Fund.
Securities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the direction of
the Board of Trustees of the Trust, including valuations furnished by the
pricing services retained by the Trust, which may use a matrix system for
valuations. The procedures of a pricing service and its valuations are reviewed
by the officers of the Trust under the general supervision of the Trust's Board
of Trustees. Such valuations and procedures will be reviewed periodically by the
Board of Trustees of the Trust.
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
Trust's 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 Trust's Board of Trustees.
(b) Derivative financial instruments -- The Fund may engage in various portfolio
investment 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 price of 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.
o 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.
o 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
BLACKROCK BASIC VALUE PRINCIPAL PROTECTED FUND JUNE 30, 2007 17
Notes to Financial Statements (continued)
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.
(f) Dividends and distributions -- Dividends and distributions paid by the Fund
are recorded on the ex-dividend dates.
(g) Securities lending -- The Fund may lend securities to financial institutions
that provide cash or securities issued or guaranteed by the U.S. government as
collateral, which will be maintained at all times in an amount equal to at least
100% of the current market value of the loaned securities. The market value of
the loaned securities is determined at the close of business of the Fund and any
additional required collateral is delivered to the Fund on the next business
day. Where the Fund receives securities as collateral for the loaned securities,
it collects a fee from the borrower. The Fund typically receives the income on
the loaned securities but does not receive the income on the collateral. Where
the Fund receives cash collateral, it may invest such collateral and retain the
amount earned on such investment, net of any amount rebated to the borrower.
Loans of securities are terminable at any time and the borrower, after notice,
is required to return borrowed securities within five business days. The Fund
may pay reasonable finder's, lending agent, administrative and custodial fees in
connection with its loans. In the event that the borrower defaults on its
obligation to return borrowed securities because of insolvency or for any other
reason, the Fund could experience delays and costs in gaining access to the
collateral. The Fund also could suffer a loss where the value of the collateral
falls below the market value of the borrowed securities, in the event of
borrower default or in the event of losses on investments made with cash
collateral.
(h) Bank overdraft -- The Fund recorded a bank overdraft, which resulted from
management estimates of available cash.
(i) 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 each of 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. At this time, management is evaluating the implications of FAS 157
and 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 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.
18 BLACKROCK BASIC VALUE PRINCIPAL PROTECTED FUND JUNE 30, 2007
Notes to Financial Statements (continued)
(j) 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, $792,734 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. These reclassifications have no effect on
net assets or net asset value 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, including Fund Asset
Management, L.P. ("FAM"), 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 the BlackRock Advisors, Inc., an indirect, wholly owned
subsidiary of BlackRock, Inc. BlackRock Advisors, Inc. was reorganized into a
limited liability company and renamed BlackRock Advisors, LLC (the "Manager").
The new Investment Advisory Agreement between the Fund and the Manager became
effective on September 29, 2006. Prior to September 29, 2006, FAM was the Fund's
manager. The general partner of FAM is an indirect, wholly owned subsidiary of
Merrill Lynch, which is the limited partner. 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.
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 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.
Pursuant to the Distribution Plans adopted by the Fund in accordance with Rule
12b-1 under the Investment Company Act of 1940, as amended, the Fund pays the
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, provide account maintenance and distribution
services to the Fund. The ongoing service fee compensates the Distributor and
each broker-dealer (including MLPF&S) for providing account maintenance services
to Investor A, Investor B and Investor C shareholders. The ongoing distribution
fee compensates the Distributor and the broker-dealers for providing shareholder
servicing and distribution-related services to Investor B and Investor C
shareholders.
For the year ended June 30, 2007, MLPF&S received contingent deferred sales
charges of $217,488 and $1,261 relating to transactions in Investor B and
Investor C Shares, respectively. In addition, BDI received contingent deferred
sales charges of $1,258 relating to transactions in Investor C Shares.
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 FAM, and MLIM, LLC was
the securities lending agent. BIM, may, on behalf of the Fund, invest cash
BLACKROCK BASIC VALUE PRINCIPAL PROTECTED FUND JUNE 30, 2007 19
Notes to Financial Statements (continued)
collateral received by the Fund for such loans, among other things, in a private
investment company managed by the Manager or in registered money market funds
advised by the Manager or its affiliates.
In addition, MLPF&S received $28,604 in commissions on the execution of
portfolio security transactions for the Fund for the year ended June 30, 2007.
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.
For the year ended June 30, 2007, the Fund reimbursed FAM and the Manager $987
and $2,514, respectively, for certain accounting services.
Prior to September 29, 2006, certain officers and/or trustees of the Trust were
officers and/or directors of MLIM, FAM, FDS, PSI, FAMD, Merrill Lynch, and/or
MLIM, LLC.
Commencing September 29, 2006, certain officers and/or trustees of the Trust 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 June 30, 2007 were $56,815,259 and $100,516,112, respectively.
Transactions in call options written for the year ended June 30, 2007 were as
follows:
- -------------------------------------------------------------------------------
Number of Premiums
Contracts Received
- -------------------------------------------------------------------------------
Outstanding call options written,
beginning of year ............................ 1,000 $ 122,008
Options written ................................ 8,286 1,358,989
Options closed ................................. (6,513) (877,317)
Options exercised .............................. (2,251) (444,809)
----------------------
Outstanding call options written,
end of year .................................. 522 $ 158,871
======================
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest transactions were
$30,710,156 and $44,168,092 for the years ended June 30, 2007 and June 30, 2006,
respectively.
Transactions in beneficial interest for each class were as follows:
- -------------------------------------------------------------------------------
Institutional Shares for the Year Dollar
Ended June 30, 2007 Shares Amount
- -------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions ................ 51,343 $ 607,387
Shares redeemed ................................ (171,369) (2,071,214)
---------------------------
Net decrease ................................... (120,026) $ (1,463,827)
===========================
- -------------------------------------------------------------------------------
Institutional Shares for the Year Dollar
Ended June 30, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions ................ 37,577 $ 412,219
Shares redeemed ................................ (306,492) (3,458,931)
---------------------------
Net decrease ................................... (268,915) $ (3,046,712)
===========================
- -------------------------------------------------------------------------------
Investor A Shares for the Year Dollar
Ended June 30, 2007 Shares Amount
- -------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions ................ 90,723 $ 1,073,378
Shares converted* .............................. 663,179 7,911,721
---------------------------
Total issued ................................... 753,902 8,985,099
Shares redeemed ................................ (394,164) (4,817,911)
---------------------------
Net increase ................................... 359,738 $ 4,167,188
===========================
- -------------------------------------------------------------------------------
Investor A Shares for the Year Dollar
Ended June 30, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions ................ 28,638 $ 314,157
Shares redeemed ................................ (246,507) (2,777,666)
---------------------------
Net decrease ................................... (217,869) $ (2,463,509)
===========================
- -------------------------------------------------------------------------------
Investor B Shares for the Year Dollar
Ended June 30, 2007 Shares Amount
- -------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions ................ 521,839 $ 6,178,577
Shares redeemed or converted* .................. (2,434,140) (29,282,378)
---------------------------
Net decrease ................................... (1,912,301) $ (23,103,801)
===========================
- -------------------------------------------------------------------------------
Investor B Shares for the Year Dollar
Ended June 30, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions ................ 341,017 $ 3,720,491
---------------------------
Shares redeemed ................................ (2,263,012) (25,163,001)
Net decrease ................................... (1,921,995) $ (21,442,510)
===========================
* 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.
20 BLACKROCK BASIC VALUE PRINCIPAL PROTECTED FUND JUNE 30, 2007
Notes to Financial Statements (concluded)
- -------------------------------------------------------------------------------
Investor C Shares for the Year Dollar
Ended June 30, 2007 Shares Amount
- -------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions ................ 368,117 $ 4,362,187
Shares redeemed ................................ (1,214,511) (14,671,903)
----------------------------
Net decrease ................................... (846,394) $ (10,309,716)
============================
- -------------------------------------------------------------------------------
Investor C Shares for the Year Dollar
Ended June 30, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions ................ 224,208 $ 2,448,351
Shares redeemed ................................ (1,767,243) (19,663,712)
----------------------------
Net decrease ................................... (1,543,035) $ (17,215,361)
============================
5. Distributions to Shareholders:
The tax character of distributions paid during the fiscal years ended June 30,
2007 and June 30, 2006 was as follows:
- -------------------------------------------------------------------------------
6/30/2007 6/30/2006
- -------------------------------------------------------------------------------
Distributions paid from:
Ordinary income .............................. $ 2,500,016 $ 337,890
Net long-term capital gains .................. 10,785,794 7,051,958
----------------------------
Total taxable distributions .................... $13,285,810 $ 7,389,848
============================
As of June 30, 2007, the components of accumulated earnings on a tax basis were
as follows:
- -------------------------------------------------------------------------------
Undistributed ordinary income -- net ..................... $ 1,459,585
Undistributed long-term capital gains -- net ............. 11,003,854
-------------
Total undistributed earnings -- net ...................... 12,463,439
Capital loss carryforward ................................ --
Unrealized gains -- net .................................. 49,425,275*
-------------
Total accumulated earnings -- net ........................ $ 61,888,714
=============
* 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
tax deferral of losses on straddles.
6. Short-Term Borrowings:
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 June 30, 2007.
BLACKROCK BASIC VALUE PRINCIPAL PROTECTED FUND JUNE 30, 2007 21
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 Basic Value Principal Protected Fund
(formerly Merrill Lynch Basic Value Principal Protected Fund), one of the funds
constituting BlackRock Principal Protected Trust (formerly Merrill Lynch
Principal Protected Trust) (the "Trust"), as of June 30, 2007, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the respective periods 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.
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 audits 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, 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 June 30, 2007, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. 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 Basic Value Principal Protected Fund of BlackRock Principal Protected
Trust as of June 30, 2007, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and its financial highlights for each of the respective periods then
ended, in conformity with accounting principles generally accepted in the United
States of America.
Deloitte & Touche LLP
Princeton, New Jersey
August 23, 2007
Important Tax Information (Unaudited)
The following information is provided with respect to the ordinary income
distribution paid by BlackRock Basic Value Principal Protected Fund of BlackRock
Principal Protected Trust to shareholders of record on December 8, 2006:
- --------------------------------------------------------------------------------
Qualified Dividend Income for Individuals ........................ 100.00%
Dividends Qualifying for the Dividends Received
Deduction for Corporations ....................................... 100.00%
Federal Obligation Interest ...................................... 4.70%
Short-Term Capital Gain Dividends
for Non-U.S. Residents* .......................................... 100.00%
- --------------------------------------------------------------------------------
* Represents the portion of the taxable ordinary income dividend eligible
for exemption from U.S. withholding tax for nonresident aliens and foreign
corporations.
The law varies in each state as to whether and what percentage of dividend
income attributable to federal obligations is exempt from state income tax. We
recommend that you consult your tax advisor to determine if any portion of the
dividends you received is exempt from state income tax.
Additionally, the Fund paid a long-term capital gain distribution of $.754675
per share to shareholders of record on December 8, 2006.
22 BLACKROCK BASIC VALUE PRINCIPAL PROTECTED FUND JUNE 30, 2007
Officers and Trustees
Number of
Funds and
Portfolios in Other Public
Position(s) Length of Fund Complex Directorships
Held with Time Overseen by Held by
Name Address & Age Fund Served Principal Occupation(s) During Past 5 Years Trustee Trustee
====================================================================================================================================
Interested Trustee
- ------------------------------------------------------------------------------------------------------------------------------------
Robert C. P.O. Box 9011 Fund 2005 to Vice Chairman and Director of BlackRock, Inc., 121 Funds None
Doll, Jr.* Princeton, NJ President present Global Chief Investment Officer for Equities, 161 Portfolios
08543-9011 and Chairman of the BlackRock Retail Operating
Age: 52 Trustee Committee, and member of the BlackRock Executive
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 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. P.O. Box 9095 Trustee 2002 to Professor of Finance and Economics at the Columbia 17 Funds None
Beim** Princeton, NJ present University Graduate School of Business since 1991; 24 Portfolios
08543-9095 Chairman of Outward Bound USA from 1997 to
Age: 67 2001; Chairman of Wave Hill Inc. from 1990 to 2006;
Trustee of Phillips Exeter Academy from 2002 to
present.
- ------------------------------------------------------------------------------------------------------------------------------------
James T. P.O. Box 9095 Trustee 2002 to Chief Financial Officer of JPMorgan & Co., Inc. 17 Funds None
Flynn Princeton, NJ present from 1990 to 1995 and an employee of JPMorgan in 24 Portfolios
08543-9095 various capacities from 1967 to 1995.
Age: 67
- ------------------------------------------------------------------------------------------------------------------------------------
W. Carl P.O. Box 9095 Trustee 2002 to Deputy Dean for Academic Affairs, Harvard Business 17 Funds None
Kester Princeton, NJ present School since 2006; Mizuho Financial Group, 24 Portfolios
08543-9095 Professor of Finance, Harvard Business School;
Age: 55 Unit Head, Finance in 2005 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. P.O. Box 9095 Trustee 2002 to Director of Care Investment Trust Inc., a health 17 Funds AtriCure, Inc.
Robards*** Princeton, NJ present care REIT, since 2007; Partner of Robards & 24 Portfolios (medical
08543-9095 Company, LLC, a financial advisory firm since 1987; devices)
Age: 57 formerly an investment banker with Morgan Stanley
for more than ten years; Director of Enable
Medical Corp. from 1996 to 2005; Director of
AtriCure, Inc. since 2000; 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 BASIC VALUE PRINCIPAL PROTECTED FUND JUNE 30, 2007 23
Officers and Trustees (concluded)
Position(s) Length of
Held with Time
Name Address & Age Fund Served Principal Occupation(s) During Past 5 Years
====================================================================================================================================
Fund Officers*
- ------------------------------------------------------------------------------------------------------------------------------------
Donald C. P.O. Box 9011 Vice 2002 to Managing Director of BlackRock, Inc. since 2006; Managing Director of Merrill Lynch
Burke Princeton, NJ President present Investment Managers, L.P. ("MLIM") and Fund Asset Management, L.P. ("FAM") in 2006;
08543-9011 and First Vice President of MLIM and FAM from 1997 to 2005 and Treasurer thereof from
Age: 47 Treasurer 1999 to 2006; Vice President of MLIM and FAM from 1990 to 1997.
- ------------------------------------------------------------------------------------------------------------------------------------
Karen P.O. Box 9011 Fund Chief 2007 to Managing Director of BlackRock, Inc. and Chief Compliance Officer of certain
Clark Princeton, NJ Compliance present BlackRock-advised funds since 2007; Director of BlackRock, Inc. from 2005 to 2007;
08543-9011 Officer Principal and Senior Compliance Officer, State Street Global Advisors, from 2001 to
Age: 42 2005; Principal Consultant, PricewaterhouseCoopers, LLP from 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. P.O. Box 9011 Secretary 2004 to Director of BlackRock, Inc. since 2006; Director (Legal Advisory) of MLIM from 2002
Pellegrino Princeton, NJ present to 2006; Vice President of MLIM from 1999 to 2002; Attorney associated with MLIM
08543-9011 from 1997 to 1999; Secretary of MLIM, FAM, FAM Distributors, Inc. and Princeton
Age: 47 Services from 2004 to 2006.
------------------------------------------------------------------------------------------------------------------------
* 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
24 BLACKROCK BASIC VALUE PRINCIPAL PROTECTED FUND JUNE 30, 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 non-public 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 non-public 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 non-affiliated third parties any
non-public personal information about its Clients, except as permitted by law or
as is necessary to respond to regulatory requests or to service Client accounts.
These non-affiliated 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 non-public
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 non-public
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 BASIC VALUE PRINCIPAL PROTECTED FUND JUNE 30, 2007 25
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 BlackRock 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 (202) 551-8090. 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.
26 BLACKROCK BASIC VALUE PRINCIPAL PROTECTED FUND JUNE 30, 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 Investment Trust
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 Bond Fund
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 Portfolio
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 BASIC VALUE PRINCIPAL PROTECTED FUND JUNE 30, 2007 27
This report is for shareholders of BlackRock Basic Value Principal Protected
Fund. 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 Basic Value Principal Protected Fund of
BlackRock Principal Protected Trust
P.O. Box 9011
Princeton, NJ 08543-9011
BLACKROCK
#BVPP-6/07
Item 2 - Code of Ethics - The registrant has adopted a code of ethics, as of
the end of the period covered by this report, that applies to the
registrant's principal executive officer, principal financial
officer and principal accounting officer, or persons performing
similar functions. 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 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 for the past 13 years.
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.
Item 4 - Principal Accountant Fees and Services
(a) Audit Fees - Fiscal Year Ended June 30, 2007 - $27,400
Fiscal Year Ended June 30, 2006 - $27,400
(b) Audit-Related Fees - Fiscal Year Ended June 30, 2007 - $0
Fiscal Year Ended June 30, 2006 - $0
(c) Tax Fees - Fiscal Year Ended June 30, 2007 - $6,100
Fiscal Year Ended June 30, 2006 - $6,000
The nature of the services include tax compliance, tax advice and
tax planning.
(d) All Other Fees - Fiscal Year Ended June 30, 2007 - $0
Fiscal Year Ended June 30, 2006 - $0
(e)(1) 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) 0%
(f) Not Applicable
(g) Fiscal Year Ended June 30, 2007 - $2,967,000
Fiscal Year Ended June 30, 2006 - $2,815,800
(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 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) - $1,735,000, 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
(17 CFR 270.30a-3(d)) 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 Basic Value Principal Protected Fund of BlackRock Principal Protected
Trust
By: /s/ Robert C. Doll, Jr.
-------------------------------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
BlackRock Basic Value Principal Protected Fund of
BlackRock Principal Protected Trust
Date: August 20, 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 of
BlackRock Basic Value Principal Protected Fund of
BlackRock Principal Protected Trust
Date: August 20, 2007
By: /s/ Donald C. Burke
-------------------------------------------------
Donald C. Burke,
Chief Financial Officer of
BlackRock Basic Value Principal Protected Fund of
BlackRock Principal Protected Trust
Date: August 20, 2007