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 811-4282
Name of Fund: Merrill Lynch Natural Resources Trust
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Terry K. Glenn, President, Merrill Lynch
Natural Resources Trust, 800 Scudders Mill Road, Plainsboro, NJ 08536.
Mailing address: P.O. Box 9011, Princeton, NJ 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 07/31/03
Date of reporting period: 08/01/02 - 1/31/03
Item 1 - Attach shareholder report
[LOGO] Merrill Lynch Investment Managers
Semi-Annual Report
January 31, 2003
Merrill Lynch
Natural
Resources
Trust
www.mlim.ml.com
MERRILL LYNCH NATURAL RESOURCES TRUST
DEAR SHAREHOLDER
For the six-month period ended January 31, 2003, Merrill Lynch Natural Resources
Trust's Class A, Class B, Class C and Class D Shares had total returns of
+5.07%, +4.59%, +4.53% and +4.99%, 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 3 and 4 of this report to
shareholders.) The Trust's unmanaged benchmarks, the Morgan Stanley Capital
International Natural Resources Index and the Standard & Poor's 500 Index, had
total returns of -6.75% and -5.26%, respectively for the six-month period.
The Trust's relative outperformance was a result of our focus on companies
exposed to North American natural gas production, as well as oil service
companies that are leveraged to natural gas drilling activity. For the past
three years, our commodity research indicated that increasingly rapid depletion
of natural gas would lead to reduced supplies of natural gas that we believed
would lead to a strong natural gas pricing environment. We believe that this
supply and demand imbalance point was reached in 2002, and that natural gas
prices most likely will trade at significantly higher levels than their historic
range for at least the next few years. U.S. production of natural gas appears to
have fallen by 5% in 2002, and there is the potential that production could fall
again in 2003 unless drilling activity increases significantly from current
levels. The number of rigs drilling for natural gas has gradually recovered to
the mid-700 level from a low of 612 reached in April 2002. However, even when
rig activity peaked at 1,058 in July 2001, gas production only increased by 1.5%
that year. Current activity with 300 fewer rigs drilling for gas implies that
production may continue to fall. In addition, Canadian exports of natural gas
that rose during the past decade to balance U.S. demand may also have peaked.
Canadian production is estimated to have fallen by 1% last year, and a
weather-shortened drilling season this winter may result in fewer well
completions than planned. In addition, increasing demand for Canadian gas needed
for Canada's heavy oil production could reduce imports into our markets.
Inventories of natural gas have the potential to reach record low levels this
year. While we started the winter heating season with 3.2 trillion cubic feet
(TCF) in storage, we now have 838 billion cubic feet (BCF), or 1,003 BCF below
last year's level and 500 BCF below the five-year average. Continued normal
winter weather could see storage decline below the record low level of 697 BCF
seen in 1996. Given current production rates, it is going to be difficult to
refill storage prior to the next heating season. If the industry refilled at the
average injection rate of the past five years, natural gas in storage would only
reach 2.5 TCF, a level that would not meet winter heating needs without
interrupting gas deliveries to industrial customers. We anticipate that there
will likely be significant closures of petrochemical, fertilizer and methanol
plants that are not going to be viable at current gas prices above $6.00 per
thousand cubic feet. Despite this demand loss, we believe that the need to
refill storage prior to the next heating season will see gas prices exceeding
the $5.00 per thousand cubic feet level into the spring of 2004.
As of January 31, 2003, the Trust had 87% of its assets invested in
energy-related sectors, up 7% from its energy exposure at the end of the prior
fiscal year. We have continued to seek natural gas investments in both the
United States and Canada. The Trust has reached its limit of 25% of assets in
U.S. exploration and production companies, but we are continuing to buy
gas-leveraged companies in Canada with 18% of our assets invested in that area.
Many of the management teams of Canadian companies that were acquired in 2001
have returned to found new companies, and they are having success in growing
production from Canada's less mature gas fields. In addition, they have been
able to acquire assets that some power companies have needed to sell to restore
eroded balance sheets. We believe that the better growth prospects for the small
Canadian producers will
1
Merrill Lynch Natural Resources Trust January 31, 2003
attract additional interest as the crisis in natural gas supply gains investor
attention. Oil service companies and drilling contractors combined are 27% of
the Trust's assets. These sectors should begin to benefit from increased
spending by the oil industry, although the recovery has been sluggish since many
of the power and trading companies have reduced exploration and development
spending because of their poor financial conditions following the decline in
power prices and trading volumes. We had below-benchmark exposure to the large
integrated oil companies, as depressed refining and petrochemical margins offset
the benefit received from high oil prices.
At January 31, 2002, the balance of Trust assets were invested in basic material
companies, including investments made in gold mining companies. Strong demand
from China has buoyed demand for many commodities, and basic material companies
have seen relative strength in the share prices as a result. The price of gold
has jumped to the highest price it has seen since 1996. Gold demand and supply
balance improved in the market during the past year as a result of the decline
in the dollar improving gold's affordability in local currency terms of other
countries, as well as falling interest rates reducing the incentive for
producers to hedge. In addition, gold production declined for the first time in
years as capital available to small gold miners has declined from the financial
markets. Given these improved fundamentals, the gold price has regained its
traditional safe-haven status in times of turmoil.
Market Outlook
We anticipate that investment in resources will continue to be volatile in 2003,
and may be subject to deterioration in global economic activity. Therefore, we
believe that our focus on investments in North America natural gas will continue
to offer the best prospects for total return. Natural gas prices recently spiked
to over $9 per thousand cubic feet, and we believe that they will remain high
given limited new supply sources for the next several years. While the restart
of some liquefied natural gas (LNG) terminals will provide a modest supply boost
in 2003, new LNG terminals face issues including permitting construction
problems and long construction lead times. Pipelines to carry gas from Alaska
and Canada's Northwest Territories will not be completed until 2007 or 2008 at
the earliest. Therefore, we believe that our natural gas investments have the
potential to offer continued attractive returns.
As of January 31, 2003, the Trust's portfolio had 99.4% of net assets invested
in equities and 0.6% in cash and cash equivalents. Approximately 87% of
investments were energy related, with the remaining major investments in metals,
gold mining and forest product companies. As a result of our focus on North
American natural gas, the Trust was primarily invested in U.S. and
Canadian-domiciled companies.
In Conclusion
We thank you for your continued support and interest in Merrill Lynch Natural
Resources Trust, and we look forward to sharing our investment outlook and
strategies with you in our next report to shareholders.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Trustee
/s/ Robert M. Shearer
Robert M. Shearer
Senior Vice President and Portfolio Manager
March 12, 2003
2
Merrill Lynch Natural Resources Trust January 31, 2003
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Trust through the Merrill Lynch
Select Pricing(SM) System, which offers four pricing alternatives:
o Class A Shares incur a maximum initial sales charge (front-end load) of
5.25% and bear no ongoing distribution or account maintenance fees. Class
A Shares are available only to eligible investors.
o Effective June 1, 2001, Class B Shares are subject to a maximum contingent
deferred sales charge of 4% declining to 0% after six years. All Class B
Shares purchased prior to June 1, 2001 will maintain the four-year
schedule. In addition, Class B Shares are subject to a distribution fee of
0.75% and an account maintenance fee of 0.25%. These shares automatically
convert to Class D Shares after approximately eight years. (There is no
initial sales charge for automatic share conversions.)
o Class C Shares are subject to a distribution fee of 0.75% and an account
maintenance fee of 0.25%. In addition, Class C Shares are subject to a 1%
contingent deferred sales charge if redeemed within one year of purchase.
o Class D Shares incur a maximum initial sales charge of 5.25% and an
account maintenance fee of 0.25% (but no distribution fee).
None of the past results shown should be considered a representation of
future performance. 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 gains distributions at net asset
value on the ex-dividend date. Investment return and principal value of
shares will fluctuate so that shares, when redeemed, may be worth more or
less than their original cost. Dividends paid to each class of shares will
vary because of the different levels of account maintenance, distribution
and transfer agency fees applicable to each class, which are deducted from
the income available to be paid to shareholders.
Recent Performance Results
Ten-Year/
6-Month 12-Month Since Inception
As of January 31, 2003 Total Return Total Return Total Return
========================================================================================================
ML Natural Resources Trust Class A Shares* +5.07% + 3.38% + 81.14%
- --------------------------------------------------------------------------------------------------------
ML Natural Resources Trust Class B Shares* +4.59 + 2.35 + 63.33
- --------------------------------------------------------------------------------------------------------
ML Natural Resources Trust Class C Shares* +4.53 + 2.33 + 32.62
- --------------------------------------------------------------------------------------------------------
ML Natural Resources Trust Class D Shares* +4.99 + 3.18 + 41.66
- --------------------------------------------------------------------------------------------------------
Standard & Poor's 500 Index** -5.26 -23.02 +135.96/+108.61
- --------------------------------------------------------------------------------------------------------
MSCI Natural Resources Index*** -6.75 -10.92 +89.69/+32.81
========================================================================================================
* Investment results shown do not reflect sales charges; results would be
lower if a sales charge was included. 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 Trust's ten-year/since inception
periods are ten years for Class A & Class B Shares and from 10/21/94 for
Class C & Class D Shares.
** This unmanaged broad-based Index measures the performance of large cap
companies in the United States. Ten-year/since inception total returns are
for ten years and from 10/31/94, respectively.
*** This unmanaged Index is comprised of all global securities classified as
natural-resource related securities. Ten-year/since inception total
returns are for ten years and from 10/3/94, respectively.
3
Merrill Lynch Natural Resources Trust January 31, 2003
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
One Year Ended 1/31/03 +3.38% -2.05%
- --------------------------------------------------------------------------------
Five Years Ended 1/31/03 +6.61 +5.47
- --------------------------------------------------------------------------------
Ten Years Ended 1/31/03 +6.12 +5.55
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%. (Prior to October 21, 1994, Class A Shares
were offered at a higher sales charge. Thus, actual returns would have
been lower than shown for the ten-year period.)
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
One Year Ended 1/31/03 +2.35% -1.65%
- --------------------------------------------------------------------------------
Five Years Ended 1/31/03 +5.50 +5.18
- --------------------------------------------------------------------------------
Ten Years Ended 1/31/03 +5.03 +5.03
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 4% and is reduced to 0% after
six years.
** Assuming payment of applicable contingent deferred sales charge.
================================================================================
% Return % Return
Without CDSC With CDSC**
================================================================================
Class C Shares*
================================================================================
One Year Ended 1/31/03 +2.33% +1.33%
- --------------------------------------------------------------------------------
Five Years Ended 1/31/03 +5.51 +5.51
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 1/31/03 +3.47 +3.47
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 1% and is reduced to 0% after
one year.
** Assuming payment of applicable contingent deferred sales charge.
================================================================================
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class D Shares*
================================================================================
One Year Ended 1/31/03 +3.18% -2.23%
- --------------------------------------------------------------------------------
Five Years Ended 1/31/03 +6.34 +5.20
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 1/31/03 +4.30 +3.62
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
4
Merrill Lynch Natural Resources Trust January 31, 2003
SCHEDULE OF INVESTMENTS (in U.S. dollars)
Shares Percent of
Industry* Held Common Stocks Value Net Assets
=====================================================================================================================
Auto Components 98,900 +Westport Innovations Inc. $ 153,038 0.2%
=====================================================================================================================
Canadian 167,500 +Baytex Energy Ltd. 967,860 0.9
Independents 60,000 +Bonavista Petroleum Ltd. 1,222,251 1.2
21,200 Canadian Natural Resources Ltd. 657,482 0.6
175,000 +Canadian Superior Energy, Inc. 206,810 0.2
87,000 +Cequel Energy Inc. 303,898 0.3
121,500 +Compton Petroleum Corporation 381,572 0.4
334,000 +Crescent Point Energy Ltd. 'A' 1,092,544 1.1
173,661 EnCana Corp. 5,419,820 5.2
38,800 Husky Energy Inc. 416,728 0.4
382,000 +Impact Energy Inc. 461,413 0.4
21,000 Niko Resources Ltd. 348,949 0.3
167,000 +Olympia Energy Inc. 351,097 0.4
176,800 +PEYTO Exploration & Development Corp. 1,466,022 1.4
25,500 +Penn West Petroleum Ltd. 634,170 0.6
50,800 Petro-Canada 1,691,564 1.6
199,000 +Progress Energy Ltd. 1,039,436 1.0
262,000 +Rider Resources Inc. 314,756 0.3
113,000 Suncor Energy, Inc. 1,907,189 1.8
37,100 Talisman Energy Inc. 1,395,973 1.4
----------- ----
20,279,534 19.5
=====================================================================================================================
Chemicals 29,700 +Celanese AG 573,804 0.5
9,000 Praxair, Inc. 490,860 0.5
----------- ----
1,064,664 1.0
=====================================================================================================================
Integrated Oil & Gas 9,400 Amerada Hess Corporation 443,680 0.4
13,000 BP Amoco PLC (ADR) (a) 507,130 0.5
51,187 ChevronTexaco Corporation 3,296,443 3.2
36,829 ConocoPhillips 1,774,790 1.7
7,400 ENI SpA (ADR) (a) 562,030 0.5
76,828 Exxon Mobil Corporation 2,623,676 2.5
34,700 Marathon Oil Corporation 725,230 0.7
119,400 Murphy Oil Corporation 5,038,680 4.9
----------- ----
14,971,659 14.4
=====================================================================================================================
Metals & Mining 49,800 Agnico-Eagle Mines Limited 725,586 0.7
26,100 Alcan Aluminium Ltd. 738,630 0.7
22,900 Alcoa Inc. 452,733 0.4
153,800 Alumina Limited 423,741 0.4
52,300 Aluminum Corporation of China Limited (ADR) (a) 845,168 0.8
17,400 Arch Coal, Inc. 300,324 0.3
33,000 Barrick Gold Corporation 540,807 0.5
32,900 CONSOL Energy Inc. 509,292 0.5
12,000 Companhia Vale do Rio Doce (ADR) (a) 331,800 0.3
255,000 +Eldorado Gold Corporation 374,608 0.4
56,300 +Glamis Gold Ltd. 675,629 0.6
2,299,909 M.I.M. Holdings Limited 2,076,238 2.0
18,100 Newmont Mining Corporation 523,995 0.5
47,800 Placer Dome Inc. 538,671 0.5
42,500 +Stillwater Mining Company 181,900 0.2
153,800 +WMC Resources Limited 358,827 0.4
----------- ----
9,597,949 9.2
=====================================================================================================================
5
Merrill Lynch Natural Resources Trust January 31, 2003
SCHEDULE OF INVESTMENTS (continued) (in U.S. dollars)
Shares Percent of
Industry* Held Common Stocks Value Net Assets
=====================================================================================================================
Oil & Gas Drilling 453,100 +Drillers Technology Corp. $ 431,918 0.4%
44,300 ENSCO International Incorporated 1,193,442 1.2
43,500 Ensign Resource Service Group, Inc. 510,946 0.5
43,622 GlobalSantaFe Corporation 947,906 0.9
45,900 Helmerich & Payne, Inc. 1,147,041 1.1
19,800 +Nabors Industries, Ltd. 729,630 0.7
60,000 +National-Oilwell, Inc. 1,225,800 1.2
43,700 +Noble Corporation 1,498,036 1.5
14,900 +Patterson-UTI Energy, Inc. 452,662 0.4
29,000 +Precision Drilling Corporation 976,071 0.9
7,300 +Precision Drilling Corporation 248,784 0.2
26,000 Rowan Companies, Inc. 536,380 0.5
158,800 Saipem SpA 924,639 0.9
43,950 Transocean Inc. 1,000,741 1.0
----------- ----
11,823,996 11.4
=====================================================================================================================
Oil & Gas 5,500 Anadarko Petroleum Corporation 253,605 0.2
Exploration & 53,600 Apache Corporation 3,345,176 3.2
Production 36,697 Burlington Resources Inc. 1,618,338 1.5
39,300 CNOOC Limited (ADR) (a) 1,018,263 1.0
24,394 +Cimarex Energy Co. 455,680 0.4
79,434 Devon Energy Corporation 3,598,360 3.4
94,200 EOG Resources, Inc. 3,651,192 3.5
49,200 Equitable Resources, Inc. 1,829,256 1.8
41,600 +Forest Oil Corporation 998,400 1.0
23,922 Kerr-McGee Corporation 999,222 1.0
34,300 Noble Energy, Inc. 1,224,510 1.2
66,100 Ocean Energy Inc. 1,238,053 1.2
75,700 +Pioneer Natural Resources Company 1,837,996 1.8
80,300 Pogo Producing Company 2,850,650 2.7
39,700 Unocal Corporation 1,105,645 1.1
----------- ----
26,024,346 25.0
=====================================================================================================================
Oil & Gas Services 88,300 +BJ Services Company 2,699,331 2.6
& Equipment 62,100 Baker Hughes Incorporated 1,879,146 1.8
27,600 +Cooper Cameron Corporation 1,337,772 1.3
91,000 +FMC Technologies, Inc. 1,766,310 1.7
27,000 Halliburton Company 506,520 0.5
25,700 +Hanover Compressor Company 239,781 0.2
23,700 +Lone Star Technology 351,945 0.3
69,700 +Oil States International, Inc. 836,400 0.8
15,600 Schlumberger Limited 588,120 0.6
47,000 +Smith International, Inc. 1,496,480 1.5
62,675 Technip-Coflexip SA (ADR) (a) 973,343 0.9
106,300 +Tesco Corporation 1,273,573 1.2
15,400 Tidewater Inc. 448,140 0.4
48,925 +Weatherford International Ltd. 1,818,053 1.8
----------- ----
16,214,914 15.6
=====================================================================================================================
6
Merrill Lynch Natural Resources Trust January 31, 2003
SCHEDULE OF INVESTMENTS (concluded) (in U.S. dollars)
Shares Percent of
Industry* Held Common Stocks Value Net Assets
=====================================================================================================================
Paper 51,400 Domtar, Inc. $ 536,284 0.5%
128,500 Sappi Limited (ADR) (a) 1,786,150 1.7
------------ -----
2,322,434 2.2
=====================================================================================================================
Refining Markets & 27,000 Valero Energy Corporation 928,530 0.9
Transportation
=====================================================================================================================
Total Common Stocks (Cost--$91,324,819) 103,381,064 99.4
=====================================================================================================================
Short-Term Securities
=====================================================================================================================
Common Stock 4,864,279 Merrill Lynch Premier Institutional Fund (b)(c) 4,864,279 4.7
=====================================================================================================================
Partnership
Interest
=====================================================================================================================
Partnership Interest $1,289,124 Merrill Lynch Liquidity Series, LLC Cash
Sweep Series I (b) 1,289,124 1.2
5,945,230 Merrill Lynch Liquidity Series, LLC Money
Market Series (b)(c) 5,945,230 5.7
------------ -----
7,234,354 6.9
=====================================================================================================================
Total Short-Term Securities (Cost--$12,098,633) 12,098,633 11.6
=====================================================================================================================
Total Investments (Cost--$103,423,452) 115,479,697 111.0
Liabilities in Excess of Other Assets (11,420,524) (11.0)
------------ -----
Net Assets $104,059,173 100.0%
============ =====
=====================================================================================================================
* For Trust compliance purposes, "Industry" means 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 Trust management.
This definition may not apply for purposes of this report, which may
combine such industry sub-classifications for reporting ease.
+ Non-income producing security.
(a) American Depositary Receipts (ADR).
(b) Investments in companies considered to be an affiliate of the Trust (such
companies are defined as "Affiliated Companies" in Section 2(a)(3) of the
Investment Company Act of 1940) are as follows:
--------------------------------------------------------------------------
Dividend/
Net Interest
Affiliate Activity Income
--------------------------------------------------------------------------
Merrill Lynch Liquidity Series,
LLC Cash Sweep Series I $1,289,124 $ 3,542
Merrill Lynch Liquidity Series,
LLC Money Market Series $5,945,230 3,084
Merrill Lynch Premier
Institutional Fund 4,864,279 2,106
Merrill Lynch
Institutional Fund -- 65
--------------------------------------------------------------------------
(c) Security was purchased with the cash proceeds from securities loans.
See Notes to Financial Statements.
7
Merrill Lynch Natural Resources Trust January 31, 2003
FINANCIAL INFORMATION
Statement of Assets and Liabilities as of January 31, 2003
Assets: Investments, at value (including securities loaned of $10,756,185)
(identified cost--$103,423,452) ....................................... $ 115,479,697
Receivables:
Securities sold .................................................... $ 496,245
Beneficial interest sold ........................................... 224,309
Dividends .......................................................... 19,079
Loaned securities income ........................................... 1,354
Interest ........................................................... 1,053 742,040
-----------
Prepaid registration fees ............................................. 14,497
-------------
Total assets .......................................................... 116,236,234
-------------
==========================================================================================================================
Liabilities: Collateral on securities loaned, at value ............................. 10,809,509
Payables:
Securities purchased ............................................... 1,026,893
Beneficial interest redeemed ....................................... 178,265
Investment adviser ................................................. 60,255
Distributor ........................................................ 37,254 1,302,667
-----------
Accrued expenses and other liabilities ................................ 64,885
-------------
Total liabilities ..................................................... 12,177,061
-------------
==========================================================================================================================
Net Assets: Net assets ............................................................ $ 104,059,173
=============
==========================================================================================================================
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited number
Consist of: of shares authorized .................................................. $ 104,069
Class B Shares of beneficial interest, $.10 par value, unlimited number
of shares authorized .................................................. 119,266
Class C Shares of beneficial interest, $.10 par value, unlimited number
of shares authorized .................................................. 42,650
Class D Shares of beneficial interest, $.10 par value, unlimited number
of shares authorized .................................................. 281,480
Paid-in capital in excess of par ...................................... 103,553,590
Accumulated investment loss--net ...................................... $ (308,928)
Accumulated realized capital losses on investments
and foreign currency transactions--net ................................ (11,787,441)
Unrealized appreciation on investments and foreign currency
transactions--net ..................................................... 12,054,487
-----------
Total accumulated losses--net ......................................... (41,882)
-------------
Net assets ............................................................ $ 104,059,173
=============
==========================================================================================================================
Net Asset Value: Class A--Based on net assets of $20,059,000 and 1,040,695 shares
of beneficial interest outstanding ........................... $ 19.27
=============
Class B--Based on net assets of $22,286,565 and 1,192,660 shares
of beneficial interest outstanding ........................... $ 18.69
=============
Class C--Based on net assets of $7,869,441 and 426,499 shares
of beneficial interest outstanding ........................... $ 18.45
=============
Class D--Based on net assets of $53,844,167 and 2,814,801 shares
of beneficial interest outstanding ........................... $ 19.13
=============
==========================================================================================================================
See Notes to Financial Statements.
8
Merrill Lynch Natural Resources Trust January 31, 2003
FINANCIAL INFORMATION (continued)
Statement of Operations for the Six Months Ended January 31, 2003
Investment Dividends (net of $11,323 foreign withholding tax) .. $ 527,676
Income: Interest ............................................ 13,079
Securities lending--net ............................. 5,255
------------
Total income ........................................ 546,010
------------
==========================================================================================================
Expenses: Investment advisory fees ............................ $ 312,044
Account maintenance & distribution fees--Class B .... 114,484
Account maintenance fees--Class D ................... 67,477
Transfer agent fees--Class D ........................ 60,094
Accounting services ................................. 43,541
Professional fees ................................... 43,155
Account maintenance & distribution fees--Class C .... 39,791
Transfer agent fees--Class B ........................ 29,700
Trustees' fees and expenses ......................... 24,341
Registration fees ................................... 23,604
Printing and shareholder reports .................... 22,505
Transfer agent fees--Class A ........................ 21,326
Custodian fees ...................................... 19,853
Transfer agent fees--Class C ........................ 10,631
Pricing fees ........................................ 1,492
Other ............................................... 9,983
-----------
Total expenses ...................................... 844,021
------------
Investment loss--net ................................ (298,011)
------------
==========================================================================================================
Realized & Realized loss on:
Unrealized Gain Investments--net ................................. (3,249,256)
(Loss) on Foreign currency transactions--net ............... (2,758) (3,252,014)
Investments & -----------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net: Investments--net ................................. 8,367,664
Foreign currency transactions--net ............... (1,618) 8,366,046
----------- ------------
Total realized and unrealized gain on investments and
foreign currency transactions--net .................. 5,114,032
------------
Net Increase in Net Assets Resulting from Operations $ 4,816,021
============
==========================================================================================================
See Notes to Financial Statements.
9
Merrill Lynch Natural Resources Trust January 31, 2003
FINANCIAL INFORMATION (continued)
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
January 31, July 31,
Increase (Decrease) in Net Assets: 2003 2002
===========================================================================================================================
Operations: Investment loss--net ............................................ $ (298,011) $ (417,202)
Realized gain (loss) on investments and foreign currency
transactions--net ............................................... (3,252,014) 2,470,046
Change in unrealized appreciation/depreciation on investments and
foreign currency transactions--net .............................. 8,366,046 (9,318,412)
------------- -------------
Net increase (decrease) in net assets resulting from operations . 4,816,021 (7,265,568)
------------- -------------
===========================================================================================================================
Beneficial Interest Net decrease in net assets derived from beneficial
Transactions: interest transactions ........................................... (4,704,584) (13,886,783)
------------- -------------
===========================================================================================================================
Net Assets: Total increase (decrease) in net assets ......................... 111,437 (21,152,351)
Beginning of period ............................................. 103,947,736 125,100,087
------------- -------------
End of period* .................................................. $ 104,059,173 $ 103,947,736
============= =============
===========================================================================================================================
* Accumulated investment loss--net ................................ $ (308,928) $ (10,917)
============= =============
===========================================================================================================================
See Notes to Financial Statements.
10
Merrill Lynch Natural Resources Trust January 31, 2003
FINANCIAL INFORMATION (continued)
Financial Highlights
Class A
-------------------------------------------------------------
For the
The following per share data and ratios have been derived Six Months
from information provided in the financial statements. Ended For the Year Ended July 31,
January 31, ---------------------------------------------
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999
=============================================================================================================================
Per Share Net asset value, beginning of period ... $ 18.34 $ 19.42 $ 17.02 $ 15.52 $ 12.93
Operating ------- ------- ------- ------- -------
Performance: Investment income (loss)--net+ ......... (.01) .02 .02 .03 .10
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net ...................... .94 (1.10) 2.38 1.51 2.75
------- ------- ------- ------- -------
Total from investment operations ....... .93 (1.08) 2.40 1.54 2.85
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net .............. -- -- -- -- (.17)
In excess of investment income--net . -- -- -- (.04) (.01)
In excess of realized gain on
investments--net .................... -- -- -- -- (.08)
------- ------- ------- ------- -------
Total dividends and distributions ...... -- -- -- (.04) (.26)
------- ------- ------- ------- -------
Net asset value, end of period ......... $ 19.27 $ 18.34 $ 19.42 $ 17.02 $ 15.52
======= ======= ======= ======= =======
=============================================================================================================================
Total Investment Based on net asset value per share ..... 5.07%++ (5.56%) 14.10% 9.98% 22.91%
Return:** ======= ======= ======= ======= =======
=============================================================================================================================
Ratios to Average Expenses ............................... 1.18%* 1.20% 1.13% 1.16% 1.28%
Net Assets: ======= ======= ======= ======= =======
Investment income (loss)--net .......... (.15%)* .12% .09% .20% .75%
======= ======= ======= ======= =======
=============================================================================================================================
Supplemental Net assets, end of period (in thousands) $20,059 $18,405 $21,305 $13,100 $ 9,138
Data: ======= ======= ======= ======= =======
Portfolio turnover ..................... 10.45% 49.77% 40.08% 51.36% 50.48%
======= ======= ======= ======= =======
=============================================================================================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Based on average shares outstanding.
++ Aggregate total investment return.
See Notes to Financial Statements.
11
Merrill Lynch Natural Resources Trust January 31, 2003
FINANCIAL INFORMATION (continued)
Financial Highlights (continued)
Class B
--------------------------------------------------------------
For the
The following per share data and ratios have been derived Six Months
from information provided in the financial statements. Ended For the Year Ended July 31,
January 31, ----------------------------------------------
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999
==============================================================================================================================
Per Share Net asset value, beginning of period ... $ 17.87 $ 19.12 $ 16.93 $ 15.56 $ 12.79
Operating ------- ------- ------- ------- -------
Performance: Investment loss--net+ .................. (.11) (.17) (.19) (.14) (.04)
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net ...................... .93 (1.08) 2.38 1.51 2.81
------- ------- ------- ------- -------
Total from investment operations ....... .82 (1.25) 2.19 1.37 2.77
------- ------- ------- ------- -------
Net asset value, end of period ......... $ 18.69 $ 17.87 $ 19.12 $ 16.93 $ 15.56
======= ======= ======= ======= =======
==============================================================================================================================
Total Investment Based on net asset value per share ..... 4.59%++ (6.54%) 12.94% 8.80% 21.66%
Return:** ======= ======= ======= ======= =======
==============================================================================================================================
Ratios to Average Expenses ............................... 2.22%* 2.23% 2.16% 2.21% 2.35%
Net Assets: ======= ======= ======= ======= =======
Investment loss--net ................... (1.16%)* (.91%) (.93%) (.85%) (.28%)
======= ======= ======= ======= =======
==============================================================================================================================
Supplemental Net assets, end of period (in thousands) $22,287 $24,468 $35,525 $19,223 $21,450
Data: ======= ======= ======= ======= =======
Portfolio turnover ..................... 10.45% 49.77% 40.08% 51.36% 50.48%
======= ======= ======= ======= =======
==============================================================================================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Based on average shares outstanding.
++ Aggregate total investment return.
See Notes to Financial Statements.
12
Merrill Lynch Natural Resources Trust January 31, 2003
FINANCIAL INFORMATION (continued)
Financial Highlights (continued)
Class C
--------------------------------------------------------------
For the
The following per share data and ratios have been derived Six Months
from information provided in the financial statements. Ended For the Year Ended July 31,
January 31, ----------------------------------------------
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999
==============================================================================================================================
Per Share Net asset value, beginning of period ... $ 17.65 $ 18.88 $ 16.72 $ 15.36 $ 12.67
Operating ------- ------- ------- ------- -------
Performance: Investment loss--net+ .................. (.11) (.17) (.19) (.14) (.04)
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net ...................... .91 (1.06) 2.35 1.50 2.77
------- ------- ------- ------- -------
Total from investment operations ....... .80 (1.23) 2.16 1.36 2.73
------- ------- ------- ------- -------
Less distributions in excess of realized
gain on investments--net ............ -- -- -- -- (.04)
------- ------- ------- ------- -------
Net asset value, end of period ......... $ 18.45 $ 17.65 $ 18.88 $ 16.72 $ 15.36
======= ======= ======= ======= =======
==============================================================================================================================
Total Investment Based on net asset value per share ..... 4.53%++ (6.51%) 12.92% 8.85% 21.68%
Return:** ======= ======= ======= ======= =======
==============================================================================================================================
Ratios to Average Expenses ............................... 2.23%* 2.24% 2.17% 2.21% 2.33%
Net Assets: ======= ======= ======= ======= =======
Investment loss--net ................... (1.18%)* (.93%) (.99%) (.86%) (.33%)
======= ======= ======= ======= =======
==============================================================================================================================
Supplemental Net assets, end of period (in thousands) $ 7,869 $ 8,129 $ 9,050 $ 1,782 $ 2,039
Data: ======= ======= ======= ======= =======
Portfolio turnover ..................... 10.45% 49.77% 40.08% 51.36% 50.48%
======= ======= ======= ======= =======
==============================================================================================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Based on average shares outstanding.
++ Aggregate total investment return.
See Notes to Financial Statements.
13
Merrill Lynch Natural Resources Trust January 31, 2003
FINANCIAL INFORMATION (concluded)
Financial Highlights (concluded)
Class D
--------------------------------------------------------------
For the
The following per share data and ratios have been derived Six Months
from information provided in the financial statements. Ended For the Year Ended July 31,
January 31, ----------------------------------------------
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999
==============================================================================================================================
Per Share Net asset value, beginning of period ... $ 18.22 $ 19.35 $ 17.00 $ 15.51 $ 12.89
Operating ------- ------- ------- ------- -------
Performance: Investment income (loss)--net+ ......... (.04) (.03) (.03) (.01) .06
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net ...................... .95 (1.10) 2.38 1.52 2.77
------- ------- ------- ------- -------
Total from investment operations ....... .91 (1.13) 2.35 1.51 2.83
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net .............. -- -- -- -- (.12)
In excess of investment income--net . -- -- -- (.02) (.01)
In excess of realized gain on
investments--net .................... -- -- -- -- (.08)
------- ------- ------- ------- -------
Total dividends and distributions ...... -- -- -- (.02) (.21)
------- ------- ------- ------- -------
Net asset value, end of period ......... $ 19.13 $ 18.22 $ 19.35 $ 17.00 $ 15.51
======= ======= ======= ======= =======
==============================================================================================================================
Total Investment Based on net asset value per share ..... 4.99%++ (5.84%) 13.82% 9.75% 22.56%
Return:** ======= ======= ======= ======= =======
==============================================================================================================================
Ratios to Average Expenses ............................... 1.43%* 1.45% 1.37% 1.42% 1.54%
Net Assets: ======= ======= ======= ======= =======
Investment income (loss)--net .......... (.39%)* (.14%) (.13%) (.05%) .50%
======= ======= ======= ======= =======
==============================================================================================================================
Supplemental Net assets, end of period (in thousands) $53,844 $52,946 $59,220 $52,366 $56,698
Data: ======= ======= ======= ======= =======
Portfolio turnover ..................... 10.45% 49.77% 40.08% 51.36% 50.48%
======= ======= ======= ======= =======
==============================================================================================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Based on average shares outstanding.
++ Aggregate total investment return.
See Notes to Financial Statements.
14
Merrill Lynch Natural Resources Trust January 31, 2003
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Natural Resources Trust (the "Trust") is registered under the
Investment Company Act of 1940 as a non-diversified, open-end management
investment company. The Trust's financial statements are prepared in conformity
with accounting principles generally accepted in the United States of America,
which may require the use of management accruals and estimates. These unaudited
financial statements reflect all adjustments, which are, in the opinion of
management, necessary to a fair statement of the results for the interim period
presented. All such adjustments are of a normal, recurring nature. The Trust
offers four classes of shares under the Merrill Lynch Select Pricing(SM) System.
Shares of Class A and Class D are sold with a front-end sales charge. Shares of
Class B and Class C may be subject to a contingent deferred sales charge. All
classes of shares have identical voting, dividend, liquidation and other rights
and the same terms and conditions, except that Class B, Class C and Class D
Shares bear certain expenses related to the account maintenance of such shares,
and Class B and Class C Shares also bear certain expenses related to the
distribution of such shares. Each class has exclusive voting rights with respect
to matters relating to its account maintenance and distribution expenditures.
Income, expenses (other than expenses attributable to a specific class) and
realized and unrealized gains and losses on investments and foreign currency
transactions are allocated daily to each class based on its relative net assets.
The following is a summary of significant accounting policies followed by the
Trust.
(a) Valuation of investments -- Portfolio securities that are traded on stock
exchanges are valued at the last sale price on the exchange on which such
securities are traded, as of the close of business on the day the securities are
being valued or, lacking any sales, at the last available bid price. Securities
traded in the over-the-counter market are valued at the last available bid price
prior to the time of valuation. In cases where securities are traded on more
than one exchange, the securities are valued on the exchange designated by or
under the authority of the Trustees of the Trust as the primary market.
Securities that are traded both in the over-the-counter market and on a stock
exchange are valued according to the broadest and most representative market.
Options written or purchased are valued at the last sale price in the case of
exchange-traded options. In the case of options traded in the over-the-counter
market, valuation is the last asked price (options written) or the last bid
price (options purchased). Short-term securities are valued at amortized cost,
which approximates market value. Other investments are stated at market value.
Securities and other assets for which market value quotations are not available
are valued at their fair value as determined in good faith by or under the
direction of the Trustees of the Trust.
(b) Repurchase agreements -- The Trust invests in U.S. Government securities
pursuant to repurchase agreements. Under such agreements, the counterparty
agrees to repurchase the security at a mutually agreed upon time and price. The
Trust takes possession of the underlying securities, marks to market such
securities and, if necessary, receives additional securities daily to ensure
that the contract is fully collateralized. If the counterparty defaults and the
fair value of the collateral declines, liquidation of the collateral by the
Trust may be delayed or limited.
(c) Derivative financial instruments -- The Trust may engage in various
portfolio investment strategies to increase or decrease the level of risk to
which the Trust is exposed more quickly and efficiently than transactions in
other types of instruments. Losses may arise due to changes in the value of the
contract or if the counterparty does not perform under the contract.
o Forward foreign exchange contracts -- The Trust is authorized to enter into
forward foreign exchange contracts as a hedge against either specific
transactions or portfolio positions. The contract is marked-to-market daily and
the change in market value is recorded by the Fund as an unrealized gain or
loss. When the contract is closed, the Trust records a realized gain or loss
equal to the difference between the value at the time it was opened and the
value at the time it was closed.
o Options -- The Trust can purchase and write covered call options and put
options. When the Trust writes an option, an amount equal to the premium
received by the Trust is reflected as an asset and an equivalent liability. The
amount of the liability is subsequently marked to market to reflect the current
market 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
15
Merrill Lynch Natural Resources Trust January 31, 2003
NOTES TO FINANCIAL STATEMENTS (continued)
or deducted from (or added to) the proceeds of the security sold. When an option
expires (or the Trust enters into a closing transaction), the Trust 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 is less than or
greater than the premiums paid or received).
Written and purchased options are non-income producing investments.
(d) Foreign currency transactions -- Transactions denominated in foreign
currencies are recorded at the exchange rate prevailing when recognized. Assets
and liabilities denominated in foreign currencies are valued at the exchange
rate at the end of the period. Foreign currency transactions are the result of
settling (realized) or valuing (unrealized) assets or liabilities expressed in
foreign currencies into U.S. dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on investments.
(e) Income taxes -- It is the Trust'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.
(f) 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 Trust has determined the ex-dividend dates.
Interest income is recognized on the accrual basis.
(g) Prepaid registration fees -- Prepaid registration fees are charged to
expense as the related shares are issued.
(h) Dividends and distributions -- Dividends and distributions paid by the Trust
are recorded on the ex-dividend dates.
(i) Securities lending -- The Trust 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 Trust and any additional required collateral is delivered to the Trust on
the next business day. Where the Trust receives securities as collateral for the
loaned securities, it collects a fee from the borrower. The Trust typically
receives the income on the loaned securities but does not receive the income on
the collateral. Where the Trust 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 Trust 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 Trust could experience delays
and costs in gaining access to the collateral. The Trust also could suffer a
loss where the value of the collateral falls below the market value of the
borrowed securities, in the event of borrower default or in the event of losses
on investments made with cash collateral.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Trust has entered into an Investment Advisory Agreement with Merrill Lynch
Investment Managers, L.P. ("MLIM"). The general partner of MLIM is Princeton
Services, Inc. ("PSI"), an indirect, wholly-owned subsidiary of Merrill Lynch &
Co., Inc. ("ML & Co."), which is the limited partner. The Trust has also entered
into a Distribution Agreement and Distribution Plans with FAM Distributors, Inc.
("FAMD" or the "Distributor"), which is a wholly-owned subsidiary of Merrill
Lynch Group, Inc.
MLIM is responsible for the management of the Trust's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Trust. For such services, the Trust pays a monthly fee
of .60%, on an annual basis, of the average daily value of the Trust's net
assets. MLIM has entered into a Sub-Advisory Agreement with Merrill Lynch Asset
Management U.K. Limited ("MLAM U.K."), an affiliate of MLIM, pursuant to which
MLAM U.K. provides investment advisory services to MLIM with respect to the
Trust. There is no increase in the aggregate fees paid by the Trust for these
services.
16
Merrill Lynch Natural Resources Trust January 31, 2003
Pursuant to the Distribution Plans adopted by the Trust in accordance with Rule
12b-1 under the Investment Company Act of 1940, the Trust pays the Distributor
ongoing account maintenance and distribution fees. The fees are accrued daily
and paid monthly at annual rates based upon the average daily net assets of the
shares as follows:
- --------------------------------------------------------------------------------
Account Distribution
Maintenance Fee Fee
- --------------------------------------------------------------------------------
Class B ................................ .25% .75%
Class C ................................ .25% .75%
Class D ................................ .25% --
- --------------------------------------------------------------------------------
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("MLPF&S"), a subsidiary of ML & Co., also provides account
maintenance and distribution services to the Trust. The ongoing account
maintenance fee compensates the Distributor and MLPF&S for providing account
maintenance services to Class B, Class C and Class D shareholders. The ongoing
distribution fee compensates the Distributor and MLPF&S for providing
shareholder and distribution-related services to Class B and Class C
shareholders.
For the six months ended January 31, 2003, FAMD earned underwriting discounts
and MLPF&S earned dealer concessions on sales of the Trust's Class A and Class D
Shares as follows:
- --------------------------------------------------------------------------------
FAMD MLPF&S
- --------------------------------------------------------------------------------
Class A .............................. $ 19 $ 353
Class D .............................. $ 303 $4,497
- --------------------------------------------------------------------------------
For the six months ended January 31, 2003, MLPF&S received contingent deferred
sales charges of $28,634 and $874 relating to transactions in Class B and C
Shares, respectively.
The Trust has received an exemptive order from the Securities and Exchange
Commission permitting it to lend portfolio securities to MLPF&S or its
affiliates. As of January 31, 2003, the Trust lent securities with a value of
$2,139,900 to MLPF&S or its affiliates. Pursuant to that order, the Trust also
has retained Merrill Lynch Investment Managers, LLC ("MLIM, LLC"), an affiliate
of MLIM, as the securities lending agent for a fee based on a share of the
returns on investment of cash collateral. MLIM, LLC may, on behalf of the Trust,
invest cash collateral received by the Trust for such loans, among other things,
in a private investment company managed by MLIM, LLC or in registered money
market funds advised by MLIM or its affiliates. For the six months ended January
31, 2003, MLIM, LLC received $2,234 in securities lending agent fees.
In addition, MLPF&S received $4,781 in commissions on the execution of portfolio
security transactions for the Trust for the six months ended January 31, 2003.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML & Co., is
the Trust's transfer agent.
For the six months ended January 31, 2003, the Trust reimbursed MLIM $1,160 for
certain accounting services.
Certain officers and/or trustees of the Trust are officers and/or directors of
MLIM, PSI, MLAM U.K., FDS, FAMD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended January 31, 2003 were $10,639,117 and $13,854,662, respectively.
Net realized losses for the six months ended January 31, 2003 and net unrealized
gains (losses) as of January 31, 2003 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Losses Gains (Losses)
- --------------------------------------------------------------------------------
Long-term investments .............. $ (3,249,256) $ 12,056,245
Foreign currency
transactions ....................... (2,758) (1,758)
------------ ------------
Total .............................. $ (3,252,014) $ 12,054,487
============ ============
- --------------------------------------------------------------------------------
As of January 31, 2003, net unrealized appreciation for Federal income tax
purposes aggregated $11,831,049 of which $19,543,037 related to appreciated
securities and $7,711,988 related to depreciated securities. At January 31,
2003, the aggregate cost of investments for Federal income tax purposes was
$103,648,648.
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest transactions was
$4,704,584 and $13,886,783 for the six months ended January 31, 2003 and for the
year ended July 31, 2002.
Transactions in shares of beneficial interest for each class were as follows:
- --------------------------------------------------------------------------------
Class A Shares for the Six Months Dollar
Ended January 31, 2003 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ...................... 308,712 $ 5,856,336
Shares redeemed .................. (271,577) (5,125,158)
-------- -----------
Net increase ..................... 37,135 $ 731,178
======== ===========
- --------------------------------------------------------------------------------
17
Merrill Lynch Natural Resources Trust January 31, 2003
NOTES TO FINANCIAL STATEMENTS (concluded)
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended July 31, 2002 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ...................... 943,025 $ 18,604,597
Shares redeemed .................. (1,036,514) (20,138,360)
---------- ------------
Net decrease ..................... (93,489) $ (1,533,763)
========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares for the Six Months Dollar
Ended January 31, 2003 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ........................ 83,002 $ 1,541,790
Automatic conversion
of shares .......................... (110,348) (1,978,371)
Shares redeemed .................... (149,026) (2,694,026)
----------- -----------
Net decrease ....................... (176,372) $(3,130,607)
=========== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended July 31, 2002 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ........................ 294,466 $ 5,643,826
Automatic conversion
of shares .......................... (222,815) (4,287,459)
Shares redeemed .................... (560,322) (10,500,681)
------------ ------------
Net decrease ....................... (488,671) $ (9,144,314)
============ ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares for the Six Months Dollar
Ended January 31, 2003 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ...................... 41,524 $ 758,075
Shares redeemed .................. (75,606) (1,358,460)
----------- -----------
Net decrease ..................... (34,082) $ (600,385)
=========== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended July 31, 2002 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ...................... 138,119 $ 2,627,837
Shares redeemed .................. (156,740) (2,928,627)
----------- -----------
Net decrease ..................... (18,621) $ (300,790)
=========== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Six Months Dollar
Ended January 31, 2003 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ........................ 34,287 $ 648,762
Automatic conversion
of shares .......................... 108,056 1,978,371
----------- -----------
Total issued ....................... 142,343 2,627,133
Shares redeemed .................... (232,886) (4,331,903)
----------- -----------
Net decrease ....................... (90,543) $(1,704,770)
=========== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Year Dollar
Ended July 31, 2002 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ........................ 118,561 $ 2,381,950
Automatic conversion
of shares .......................... 219,345 4,287,459
----------- -----------
Total issued ....................... 337,906 6,669,409
Shares redeemed .................... (493,570) (9,577,325)
----------- -----------
Net decrease ....................... (155,664) $(2,907,916)
=========== ===========
- --------------------------------------------------------------------------------
5. Short-Term Borrowings:
The Trust, along with certain other funds managed by MLIM and its affiliates, is
a party to a $500,000,000 credit agreement with Bank One, N.A. and certain other
lenders. The Trust may borrow under the credit agreement to fund shareholder
redemptions and for other lawful purposes other than for leverage. The Trust may
borrow up to the maximum amount allowable under the Trust's current prospectus
and statement of additional information, subject to various other legal,
regulatory or contractual limits. The Trust pays a commitment fee of .09% per
annum based on the Trust's pro rata share of the unused portion of the credit
agreement. Amounts borrowed under the credit agreement bear interest at a rate
equal to, at each fund's election, the Federal Funds rate plus .50% or a base
rate as determined by Bank One, N.A. On November 29, 2002, the credit agreement
was renewed for one year under the same terms, except that the total commitment
was reduced from $1,000,000,000 to $500,000,000. The Trust did not borrow under
the credit agreement during the six months ended January 31, 2003.
6. Commitments:
At January 31, 2003, the Trust had entered into foreign exchange contracts,
under which it had agreed to purchase foreign currency with an approximate value
of $528,000.
7. Capital Loss Carryforward:
On July 31, 2002, the Fund had a net capital loss carryforward of $7,085,359,
all of which expires in 2008. This amount will be available to offset like
amounts of any future taxable gains.
18
Merrill Lynch Natural Resources Trust January 31, 2003
PORTFOLIO INFORMATION
As of January 31, 2003
Percent of
Ten Largest Equity Holdings Net Assets
EnCana Corp. ...................................................... 5.2%
Murphy Oil Corporation ............................................ 4.9
EOG Resources, Inc. ............................................... 3.5
Devon Energy Corporation .......................................... 3.4
Apache Corporation ................................................ 3.2
ChevronTexaco Corporation ......................................... 3.2
Pogo Producing Company ............................................ 2.7
BJ Services Company ............................................... 2.6
Exxon Mobil Corporation ........................................... 2.5
M.I.M. Holdings Limited ........................................... 2.0
Percent of
Geographic Allocation Net Assets+
United States ..................................................... 63.9%
Canada ............................................................ 26.7
Australia ......................................................... 2.8
South Africa ...................................................... 1.7
Italy ............................................................. 1.4
Hong Kong ......................................................... 1.0
France ............................................................ 0.9
China ............................................................. 0.8
Germany ........................................................... 0.6
United Kingdom .................................................... 0.5
Brazil ............................................................ 0.3
+ Total may not equal 100%.
OFFICERS AND TRUSTEES
Terry K. Glenn, President and Trustee
Donald W. Burton, Trustee
M. Colyer Crum, Trustee
Laurie Simon Hodrick, Trustee
Fred G. Weiss, Trustee
Robert C. Doll, Jr., Senior Vice President
Robert M. Shearer, Senior Vice President and Portfolio Manager
Donald C. Burke, Vice President and Treasurer
Susan B. Baker, Secretary
Custodian
The Bank of New York
100 Church Street
New York, NY 10286
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
800-637-3863
- --------------------------------------------------------------------------------
J. Thomas Touchton, Trustee of Merrill Lynch Natural Resources Trust, has
recently retired. The Fund's Board of Trustees wishes Mr. Touchton well in his
retirement.
- --------------------------------------------------------------------------------
19
[LOGO] Merrill Lynch Investment Managers
[GRAPHICS OMITTED]
This report is not authorized for use as an offer of sale or a solicitation of
an offer to buy shares of the Trust unless accompanied or preceded by the
Trust's current prospectus. Past performance results shown in this report should
not be considered a representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Statements and other information
herein are as dated and are subject to change.
Merrill Lynch Natural Resources Trust
Box 9011
Princeton, NJ
08543-9011
- --------------------------------------------------------------------------------
[RECYCLED LOGO] Printed on post-consumer recycled paper #10303--1/03
Item 2 - Did registrant adopt 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, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant
or a third party? If not, why not? Briefly describe any amendments or
waivers that occurred during the period. State here if code of
ethics/amendments/waivers are on website and give website address-.
State here if fund will send code of ethics to shareholders without
charge upon request-- N/A (not answered until July 15, 2003 and only
annually for funds)
Item 3 - Did the registrant's board of directors determine that the registrant
either: (i) has at least one audit committee financial expert serving
on its audit committee; or (ii) does not have an audit committee
financial expert serving on its audit committee? If yes, disclose name
of financial expert and whether he/she is "independent," (fund may, but
is not required, to disclose name/independence of more than one
financial expert) If no, explain why not. -N/A (not answered until July
15, 2003 and only annually for funds)
Item 4 - Disclose annually only (not answered until December 15, 2003)
(a) Audit Fees - Disclose aggregate fees billed for each of the last two
fiscal years for professional services rendered by the
principal accountant for the audit of the registrant's
annual financial statements or services that are normally
provided by the accountant in connection with statutory
and regulatory filings or engagements for those fiscal
years. N/A.
(b) Audit-Related Fees - Disclose aggregate fees billed in each of the
last two fiscal years for assurance and related
services by the principal accountant that are
reasonably related to the performance of the
audit of the registrant's financial statements
and are not reported under paragraph (a) of this
Item. Registrants shall describe the nature of
the services comprising the fees disclosed under
this category. N/A.
(c) Tax Fees - Disclose aggregate fees billed in each of the last two
fiscal years for professional services rendered by the
principal accountant for tax compliance, tax advice, and
tax planning. Registrants shall describe the nature of the
services comprising the fees disclosed under this category.
N/A.
(d) All Other Fees - Disclose aggregate fees billed in each of the last
two fiscal years for products and services provided
by the principal accountant, other than the services
reported in paragraphs (a) through (c) of this Item.
Registrants shall describe the nature of the services
comprising the fees disclosed under this category.
N/A.
(e)(1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. N/A.
(e)(2) Disclose the percentage of services described in each of paragraphs
(b) through (d) of this Item that were approved by the audit
committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X. N/A.
(f) If greater than 50%, disclose the percentage of hours expended on
the principal accountant's engagement to audit the registrant's
financial statements for the most recent fiscal year that were
attributed to work performed by persons other than the principal
accountant's full-time, permanent employees. N/A.
(g) Disclose the aggregate non-audit fees billed by the registrant's
accountant for services rendered to the registrant, and rendered to
the registrant's investment adviser (not including any sub-adviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the adviser
that provides ongoing services to the registrant for each of the
last two fiscal years of the registrant. N/A.
(h) Disclose whether the registrant's audit committee has considered
whether the provision of non-audit services that were rendered to
the registrant's investment adviser (not including any subadviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another 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. N/A.
Items 5-6 - Reserved
Item 7 - For closed-end funds that contain voting securities in their portfolio,
describe the policies and procedures that it uses to determine how to
vote proxies relating to those portfolio securities. N/A.
Item 8 -- Reserved
Item 9(a) - Disclose the conclusions of the registrant's principal executive
officer or officers and principal financial officer or officers, or
persons performing similar functions, about the effectiveness of the
registrant's disclosure controls and procedures (as defined in Rule
30a-2(c) under the Act (17 CFR 270.30a-2(c))) based on their
evaluation of these controls and procedures as of a date within 90
days of the filing date of the report that includes the disclosure
required by this paragraph. N/A.
Item 9(b) -- There were no significant changes in the registrant's internal
controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and
material weaknesses.
Item 10 - Exhibits
10(a) - Attach code of ethics or amendments/waivers, unless code of ethics or
amendments/waivers is on website or offered to shareholders upon request
without charge. N/A.
10(b) - Attach certifications (4 in total pursuant to Sections 302 and 906 for
CEO/CFO). Attached hereto.
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Merrill Lynch Natural Resources Trust
By: /s/ Terry K. Glenn
------------------
Terry K. Glenn,
President of
Merrill Lynch Natural Resources Trust
Date: March 17, 2003
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/ Terry K. Glenn
------------------
Terry K. Glenn,
President of
Merrill Lynch Natural Resources Trust
Date: March 17, 2003
By: /s/ Donald C. Burke
-------------------
Donald C. Burke,
Chief Financial Officer of
Merrill Lynch Natural Resources Trust
Date: March 17, 2003