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 - 07/31/03
Item 1 - Attach shareholder report
[LOGO] Merrill Lynch Investment Managers www.mlim.ml.com
Merrill Lynch
Natural Resources Trust
Annual Report
July 31, 2003
[LOGO] Merrill Lynch Investment Managers
Merrill Lynch Natural Resources Trust
Portfolio Information as of July 31, 2003 (unaudited)
Percent of
Ten Largest Equity Holdings Net Assets
- --------------------------------------------------------------------------------
EnCana Corp. ........................................................ 5.2%
Murphy Oil Corporation .............................................. 5.1
EOG Resources, Inc. ................................................. 3.9
Devon Energy Corporation ............................................ 3.7
Apache Corporation .................................................. 3.0
Pogo Producing Company .............................................. 2.9
BJ Services Company ................................................. 2.6
Exxon Mobil Corporation ............................................. 2.4
ChevronTexaco Corporation ........................................... 1.9
Suncor Energy, Inc. ................................................. 1.8
- --------------------------------------------------------------------------------
Percent of
Geographic Allocation Net Assets+
- --------------------------------------------------------------------------------
United States ....................................................... 59.7%
Canada .............................................................. 26.2
France .............................................................. 2.4
Italy ............................................................... 1.5
South Africa ........................................................ 1.4
Australia ........................................................... 1.3
China ............................................................... 1.3
Hong Kong ........................................................... 1.2
Germany ............................................................. 0.7
United Kingdom ...................................................... 0.5
Brazil .............................................................. 0.4
- --------------------------------------------------------------------------------
+ Total may not equal 100%.
Electronic Delivery
The Fund is now offering electronic delivery of communications to its
shareholders. In order to receive this service, you must register your account
and provide us with e-mail information. To sign up for this service, simply
access this website http://www.icsdelivery.com/live and follow the instructions.
When you visit this site, you will obtain a personal identification number
(PIN). You will need this PIN should you wish to update your e-mail address,
choose to discontinue this service and/or make any other changes to the service.
This service is not available for certain retirement accounts at this time.
2 MERRILL LYNCH NATURAL RESOURCES TRUST JULY 31, 2003
A Letter From the President
Dear Shareholder
Now more than half behind us, 2003 has been a meaningful year in many respects.
After three agonizing years for equity markets, we finally saw hopeful signs for
a sustained economic recovery and an accompanying market upturn.
The most significant development through July 31 was the conclusion of all-out
war in Iraq. As combat gave way to restructuring, oil prices dropped. At the
same time, credit spreads tightened and the spring brought some of the most
promising months for equities since last October. Many companies began to show
improving earnings, and consumer confidence strengthened. Although oil prices
have since returned to higher levels, economic recovery remains a high priority
for the President, Congress and the Federal Reserve Board -- all of whom have
taken steps aimed at reviving the economy and drawing investors back to the
markets.
The events and efforts of the past several months appear to have made an
impression on investors and the markets. While both the S&P 500 Index and Nasdaq
were in negative territory for the six-month period ended January 31, 2003, both
indexes rebounded dramatically over the six months that followed. From January
31, 2003 to July 31, 2003, the S&P 500 Index and Nasdaq returned +16.79% and
+31.35%, respectively.
Against this backdrop, our portfolio managers continued to work diligently to
deliver on our commitment to provide superior performance within reasonable
expectations for risk and return. This included striving to outperform our peers
and the market indexes. With that said, remember also that the advice and
guidance of a skilled financial advisor can mean the difference between fruitful
and fruitless investing. A financial professional can help you choose those
investments that will best serve you as you plan for your financial future.
Finally, I am proud to premiere a new look to our shareholder communications.
Our portfolio manager commentaries have been trimmed and organized in such a way
that you can get the information you need at a glance, in plain language.
Today's markets are confusing enough. We want to help you put it all in
perspective. The report's new size also allows us certain mailing efficiencies.
The cost savings in both production and postage are passed on to the fund and,
ultimately, to fund shareholders.
We thank you for trusting Merrill Lynch Investment Managers with your investment
assets, and we look forward to serving you in the months and years ahead.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Trustee
MERRILL LYNCH NATURAL RESOURCES TRUST JULY 31, 2003 3
[LOGO] Merrill Lynch Investment Managers
A Discussion With Your Fund's Portfolio Manager
The Trust outperformed the benchmark S&P 500 Index during the fiscal year,
benefiting partially from heightened media and investor attention on natural gas
supply issues.
How did Merrill Lynch Natural Resources Trust perform during the fiscal year?
For the 12-month period ended July 31, 2003, Merrill Lynch Natural Resources
Trust's Class A, Class B, Class C and Class I Shares had total returns of
+15.59%, +14.66%, +14.62% and +15.87%, respectively. This compared to a return
of +10.64% for the unmanaged benchmark Standard & Poor's 500 (S&P 500) Index and
an average return of +10.05% for its peer group of Lipper Natural Resources
Funds. (Fund results shown do not reflect sales charges and would be lower if
sales charges were included. Complete performance information can be found on
pages 6 - 8 of this report to shareholders.)
What were the reasons for the Trust's outperformance?
Outperformance during the fiscal year stemmed from our focus on companies with
natural gas production in North America, with particularly strong returns from
EnCana Corporation, Murphy Oil Corporation and PEYTO Exploration & Development
Corp. Also contributing to Trust results were gains from MIM Holdings Limited
following a takeover bid from Xstrata PLC, and appreciation from the Aluminum
Corporation of China Limited, which benefited from strong aluminum demand in
China.
A significant catalyst for the Trust's performance during the period was the
increased media attention on the natural gas supply deficit. Gas stocks rallied
after Federal Reserve Board Chairman Alan Greenspan described diminished natural
gas supplies as a "serious" problem.
What changes did you make to the portfolio during the period?
We continued to focus on independent production companies leveraged to natural
gas, which received extraordinary investor attention following Mr. Greenspan's
testimony to the energy committees of both the U.S. House of Representatives and
the Senate. In his remarks, Mr. Greenspan highlighted the risks that inadequate
natural gas supplies could pose to economic recovery and employment growth.
Given the limited supply response from natural gas drilling, liquefied natural
gas from global markets appears to be the most likely solution to balancing the
North American market. However, once the four existing terminals are fully
utilized, it is unlikely that new terminals can be constructed and brought into
operation in less than two years. Frontier sources of gas from Canada's McKenzie
Delta and the gas cap on Alaska's Prudhoe Bay oil field are not likely to have
pipeline access available until 2008 and post-2010, respectively. As a result,
we believe the investment case for natural gas-leveraged equities remains intact
over our 18-month - 24-month investment time horizon.
We continued to invest in a number of new holdings in small-capitalization
Canadian production companies that were purchased to replace holdings that
recently converted to income trusts. Holdings that converted to this structure
included PEYTO Exploration, Baytex Energy, Bonavista Petroleum Ltd. and Cresent
Point Energy Ltd.
In the intermediate term, we expect both natural gas prices and equities to
remain highly volatile. As high prices caused industrial demand to decline,
storage was being rapidly refilled. In Midwest and Northeast markets, summer
demand for peak-electrical generation was subdued because of below-normal
temperatures early in the season. The risk of some profit-taking in our
investments is possible, as we believe gas prices may decline in the weak-demand
fall months. However, a pickup in manufacturing activity and/or normal winter
heating demand have the potential to send gas prices higher given the lack of
meaningful gas production from increased drilling. With most gas-leveraged
equities trading at the low end of their historic valuation ranges, we believe
there remains attractive return potential in our natural gas-leveraged stocks.
4 MERRILL LYNCH NATURAL RESOURCES TRUST JULY 31, 2003
How was the portfolio positioned at the close of the period?
As of July 31, 2003, the portfolio was invested 98% in stocks and 2% in cash
equivalents. Over 85% of the portfolio's investments were in energy-related
companies, with the remaining equity investments predominantly in metals, forest
products and precious metals companies.
Robert M. Shearer
Vice President and Portfolio Manager
August 26, 2003
- --------------------------------------------------------------------------------
Effective April 14, 2003, the share class names for the Merrill Lynch family of
mutual funds were changed to be consistent with the standard share classes of
most other mutual fund families. As of that date, all Class A Shares were
redesignated Class I Shares. At the same time, Class D Shares were redesignated
Class A Shares. There are no changes to the Class B or Class C share class
labels. Trading symbols have not changed nor have current eligibility rules or
pricing structures. This redesignation of share classes does not impact your
investment in any way.
- --------------------------------------------------------------------------------
MERRILL LYNCH NATURAL RESOURCES TRUST JULY 31, 2003 5
[LOGO] Merrill Lynch Investment Managers
Performance Data
About Fund Performance
Effective April 14, 2003, Class A Shares were redesignated Class I Shares and
Class D Shares were redesignated Class A Shares. Investors are able to purchase
shares of the Trust through multiple pricing alternatives:
o Class A Shares incur a maximum initial sales charge of 5.25% and an
account maintenance fee of 0.25% (but no distribution fee).
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 A 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 I Shares incur a maximum initial sales charge (front-end load) of
5.25% and bear no ongoing distribution or account maintenance fees. Class
I Shares are available only to eligible investors.
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 July 31, 2003 Total Return Total Return Total Return
===================================================================================================
ML Natural Resources Trust Class A Shares* +10.09% +15.59% +55.95%
- ---------------------------------------------------------------------------------------------------
ML Natural Resources Trust Class B Shares* + 9.63 +14.66 +66.29
- ---------------------------------------------------------------------------------------------------
ML Natural Resources Trust Class C Shares* + 9.65 +14.62 +45.41
- ---------------------------------------------------------------------------------------------------
ML Natural Resources Trust Fund Class I Shares* +10.27 +15.87 +84.56
- ---------------------------------------------------------------------------------------------------
Standard & Poor's 500 Index** +16.79 +10.64 +166.03/+147.68
- ---------------------------------------------------------------------------------------------------
* 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 B & Class I Shares and from 10/21/94 for
Class A & Class C Shares.
** This unmanaged Index covers the 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. Ten-year/since inception total returns are for ten years and from
10/21/94, respectively.
6 MERRILL LYNCH NATURAL RESOURCES TRUST JULY 31, 2003
Performance Data (continued)
ML Natural Resources Trust's Class A and Class C Shares--Total Return Based on a
$10,000 Investment
A line graph depicting the growth of an investment in the Portfolio's Class A
Shares and Class C Shares compared to growth of an investment in the S&P 500
Index. Values are from October 21, 1994 to July 2003:
10/21/94** 7/95 7/96 7/97 7/98 7/99
ML Natural Resources Trust+--
Class A Shares* $ 9,475 $ 9,942 $10,347 $12,172 $8,868 $10,868
ML Natural Resources Trust+--
Class C Shares* $10,000 $10,426 $10,760 $12,564 $9,073 $11,041
7/00 7/01 7/02 7/03
ML Natural Resources Trust+--
Class A Shares* $11,928 $13,577 $12,784 $14,776
ML Natural Resources Trust+--
Class C Shares* $12,018 $13,571 $12,687 $14,541
10/21/94 7/95 7/96 7/97 7/98 7/99
S&P 500 Index++ $10,000 $12,347 $14,393 $21,897 $26,120 $31,397
7/00 7/01 7/02 7/03
S&P 500 Index++ $34,215 $29,312 $22,386 $24,768
* Assuming maximum sales charge, transaction costs and other operating
expenses, including advisory fees.
** Commencement of operations.
+ The Trust invests primarily in equity securities of domestic and foreign
companies with substantial natural resource assets.
++ This unmanaged Index covers the 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.
Past performance is not predictive of future performance.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
One Year Ended 7/31/03 +15.59% +9.52%
- --------------------------------------------------------------------------------
Five Years Ended 7/31/03 +10.75 +9.56
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 7/31/03 + 5.19 +4.55
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class C Shares*
================================================================================
One Year Ended 7/31/03 .................. +14.62% +13.62%
- --------------------------------------------------------------------------------
Five Years Ended 7/31/03 ................ + 9.89 + 9.89
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 7/31/03 ......................... + 4.36 + 4.36
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 1% and is reduced to 0% after
one year.
** Assuming payment of applicable contingent deferred sales charge.
MERRILL LYNCH NATURAL RESOURCES TRUST JULY 31, 2003 7
[LOGO] Merrill Lynch Investment Managers
Performance Data (concluded)
ML Natural Resources Trust's Class B and Class I Shares--Total Return Based on a
$10,000 Investment
A line graph depicting the growth of an investment in the Portfolio's Class B
Shares and Class I Shares compared to growth of an investment in the S&P 500
Index. Values are from July 1993 to July 2003:
7/93 7/94 7/95 7/96 7/97
ML Natural Resources Trust+--
Class B Shares* $10,000 $11,252 $11,922 $12,311 $14,369
ML Natural Resources Trust+--
Class I Shares* $ 9,475 $10,773 $11,532 $12,033 $14,192
7/98 7/99 7/00 7/01 7/02 7/03
ML Natural Resources Trust+--
Class B Shares* $10,380 $12,628 $13,740 $15,517 $14,503 $16,629
ML Natural Resources Trust+--
Class I Shares* $10,361 $12,735 $14,006 $15,981 $15,092 $17,487
7/93 7/94 7/95 7/96 7/97
S&P 500 Index++ $10,000 $10,516 $13,262 $15,459 $23,519
7/98 7/99 7/00 7/01 7/02 7/03
S&P 500 Index++ $28,054 $33,722 $36,749 $31,483 $24,044 $26,603
* Assuming maximum sales charge, transaction costs and other operating
expenses, including advisory fees.
** Commencement of operations.
+ The Trust invests primarily in equity securities of domestic and foreign
companies with substantial natural resource assets.
++ This unmanaged Index covers the 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.
Past performance is not predictive of future performance.
Average Annual Total Return
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
One Year Ended 7/31/03 +14.66% +10.66%
- --------------------------------------------------------------------------------
Five Years Ended 7/31/03 + 9.88 + 9.61
- --------------------------------------------------------------------------------
Ten Years Ended 7/31/03 + 5.22 + 5.22
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 4% and is reduced to 0% after
six years.
** Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class I Shares*
================================================================================
One Year Ended 7/31/03 +15.87% +9.78%
- --------------------------------------------------------------------------------
Five Years Ended 7/31/03 +11.04 +9.84
- --------------------------------------------------------------------------------
Ten Years Ended 7/31/03 + 6.32 +5.75
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
8 MERRILL LYNCH NATURAL RESOURCES TRUST JULY 31, 2003
Schedule of Investments
Value Percent of
Country Industry* Shares Held Common Stocks (in U.S. dollars) Net Assets
====================================================================================================================================
Australia Metals & Mining 153,800 Alumina Limited $ 481,444 0.4%
120,000 Newcrest Mining Limited 685,171 0.6
153,800 + WMC Resources Limited 370,801 0.3
-------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Australia 1,537,416 1.3
====================================================================================================================================
Brazil Metals & Mining 12,000 Companhia Vale do Rio Doce
(ADR) (a) 417,960 0.4
-------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Brazil 417,960 0.4
====================================================================================================================================
Canada Canadian Independents 148,000 + Atlas Energy Ltd. 346,813 0.3
81,900 + Baytex Energy Ltd. 692,653 0.6
21,200 Canadian Natural Resources Ltd. 800,881 0.7
175,000 + Canadian Superior Energy, Inc. 233,623 0.2
169,000 + Cequel Energy Inc. 750,044 0.6
120,000 + Clear Energy Inc. 234,333 0.2
91,500 + Compton Petroleum Corporation 370,353 0.3
374,000 + Crescent Point Energy Ltd. 'A' 1,686,419 1.4
200,000 + Devlan Exploration Inc. 305,344 0.3
173,661 EnCana Corp. 5,994,434 5.2
38,800 Husky Energy Inc. 513,568 0.4
517,000 + Impact Energy Inc. 543,341 0.5
21,000 Niko Resources Ltd. 380,259 0.3
137,000 + Olympia Energy Inc. 350,222 0.3
23,600 + Penn West Petroleum Ltd. 695,473 0.6
50,800 Petro-Canada 1,947,228 1.7
217,000 + Progress Energy Ltd. 1,485,446 1.3
155,818 + Rider Resources Ltd. 365,134 0.3
113,000 Suncor Energy, Inc. 2,058,193 1.8
160,500 + TUSK Energy Inc. 431,951 0.4
37,100 Talisman Energy Inc. 1,591,223 1.4
146,300 + Thunder Energy Inc. 597,355 0.5
-----------------------
22,374,290 19.3
-------------------------------------------------------------------------------------------------------------------
Metals & Mining 49,800 Agnico-Eagle Mines Limited 598,098 0.5
26,100 Alcan Aluminium Ltd. 908,541 0.8
33,000 Barrick Gold Corporation 564,040 0.5
354,500 + Eldorado Gold Corporation 735,054 0.7
56,300 + Glamis Gold Ltd. 709,622 0.6
47,800 Placer Dome Inc. 585,514 0.5
-----------------------
4,100,869 3.6
-------------------------------------------------------------------------------------------------------------------
Oil & Gas Drilling 453,100 + Drillers Technology Corp. 482,620 0.4
43,500 Ensign Resource Service Group, Inc. 600,799 0.5
32,500 + Precision Drilling Corporation 1,178,839 1.0
-----------------------
2,262,258 1.9
-------------------------------------------------------------------------------------------------------------------
Oil & Gas Services & Equipment 106,300 + Tesco Corporation 1,043,940 0.9
-------------------------------------------------------------------------------------------------------------------
Paper 51,400 Domtar, Inc. 547,488 0.5
-------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Canada 30,328,845 26.2
====================================================================================================================================
China Metals & Mining 52,300 Aluminum Corporation of China
Limited (ADR) (a) 1,514,085 1.3
-------------------------------------------------------------------------------------------------------------------
Total Common Stocks in China 1,514,085 1.3
====================================================================================================================================
France Oil & Gas Exploration & Production 20,000 Total Fina SA (ADR) (a) 1,472,000 1.3
-------------------------------------------------------------------------------------------------------------------
Oil & Gas Services & Equipment 62,675 Technip-Coflexip SA (ADR) (a) 1,350,646 1.1
-------------------------------------------------------------------------------------------------------------------
Total Common Stocks in France 2,822,646 2.4
====================================================================================================================================
Germany Chemicals 29,700 Celanese AG 826,848 0.7
-------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Germany 826,848 0.7
====================================================================================================================================
MERRILL LYNCH NATURAL RESOURCES TRUST JULY 31, 2003 9
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (continued)
Value Percent of
Country Industry* Shares Held Common Stocks (in U.S. dollars) Net Assets
====================================================================================================================================
Hong Kong Oil & Gas Exploration & Production 39,300 CNOOC Limited (ADR) (a) $ 1,384,932 1.2%
-------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Hong Kong 1,384,932 1.2
====================================================================================================================================
Italy Integrated Oil & Gas 7,400 ENI SpA (ADR) (a) 543,604 0.4
-------------------------------------------------------------------------------------------------------------------
Oil & Gas Drilling 158,800 Saipem SpA 1,242,760 1.1
-------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Italy 1,786,364 1.5
====================================================================================================================================
South Africa Paper 128,500 Sappi Limited (ADR) (a) 1,575,410 1.4
-------------------------------------------------------------------------------------------------------------------
Total Common Stocks in South Africa 1,575,410 1.4
====================================================================================================================================
United Kingdom Integrated Oil & Gas 13,000 BP Amoco PLC (ADR) (a) 540,150 0.5
-------------------------------------------------------------------------------------------------------------------
Total Common Stocks in the United
Kingdom 540,150 0.5
====================================================================================================================================
United States Chemicals 9,000 Praxair, Inc. 581,940 0.5
-------------------------------------------------------------------------------------------------------------------
Integrated Oil & Gas 30,987 ChevronTexaco Corporation 2,234,473 1.9
36,829 ConocoPhillips 1,927,630 1.7
76,828 Exxon Mobil Corporation 2,733,540 2.4
22,700 Marathon Oil Corporation 584,298 0.5
119,400 Murphy Oil Corporation 5,895,972 5.1
-----------------------
13,375,913 11.6
-------------------------------------------------------------------------------------------------------------------
Metals & Mining 22,900 Alcoa Inc. 635,933 0.6
17,400 Arch Coal, Inc. 357,570 0.3
32,900 CONSOL Energy Inc. 613,585 0.5
18,100 Newmont Mining Corporation 653,410 0.6
-----------------------
2,260,498 2.0
-------------------------------------------------------------------------------------------------------------------
Oil & Gas Drilling 44,300 ENSCO International Incorporated 1,110,601 1.0
43,622 GlobalSantaFe Corporation 970,590 0.8
45,900 Helmerich & Payne, Inc. 1,227,825 1.1
16,300 + Nabors Industries, Ltd. 583,540 0.5
60,000 + National-Oilwell, Inc. 1,104,000 1.0
43,700 + Noble Corporation 1,436,419 1.2
14,900 + Patterson-UTI Energy, Inc. 411,240 0.3
7,300 + Precision Drilling Corporation 264,990 0.3
51,000 + Rowan Companies, Inc. 1,119,450 1.0
43,950 + Transocean Inc. 860,102 0.7
-----------------------
9,088,757 7.9
-------------------------------------------------------------------------------------------------------------------
Oil & Gas Exploration & Production 5,500 Anadarko Petroleum Corporation 240,900 0.2
56,280 Apache Corporation 3,487,109 3.0
36,697 Burlington Resources Inc. 1,694,301 1.5
24,394 + Cimarex Energy Co. 490,563 0.4
90,199 Devon Energy Corporation 4,272,727 3.7
117,400 EOG Resources, Inc. 4,552,772 3.9
41,000 + Energy Partners, Ltd. 441,160 0.4
45,800 + Forest Oil Corporation 1,045,614 0.9
23,922 Kerr-McGee Corporation 1,052,568 0.9
15,500 + Newfield Exploration Company 560,015 0.5
25,800 Noble Energy, Inc. 941,700 0.8
75,700 + Pioneer Natural Resources Company 1,816,800 1.6
80,300 Pogo Producing Company 3,396,690 2.9
39,700 Unocal Corporation 1,162,813 1.0
-----------------------
25,155,732 21.7
- ------------------------------------------------------------------------------------------------------------------------------------
10 MERRILL LYNCH NATURAL RESOURCES TRUST JULY 31, 2003
Schedule of Investments (concluded)
Value Percent of
Country Industry* Shares Held Common Stocks (in U.S. dollars) Net Assets
====================================================================================================================================
United States Oil & Gas Services & Equipment 88,300 + BJ Services Company $ 3,024,275 2.6%
(concluded) 62,100 Baker Hughes Incorporated 1,950,561 1.7
27,600 + Cooper Cameron Corporation 1,319,556 1.1
91,000 + FMC Technologies, Inc. 2,043,860 1.8
32,800 + Grant Prideco, Inc. 352,600 0.3
27,000 Halliburton Company 598,590 0.5
23,700 + Lone Star Technology 392,472 0.3
82,500 + Oil States International, Inc. 928,125 0.8
24,600 Schlumberger Limited 1,108,722 1.0
47,000 + Smith International, Inc. 1,684,480 1.5
15,400 Tidewater Inc. 411,180 0.4
48,925 + Weatherford International Ltd. 1,774,510 1.5
-----------------------
15,588,931 13.5
-------------------------------------------------------------------------------------------------------------------
Refining, Marketing & Transportation 29,200 Valero Energy Corporation 1,062,880 0.9
-------------------------------------------------------------------------------------------------------------------
Utilities 49,200 Equitable Resources, Inc. 1,900,596 1.6
-------------------------------------------------------------------------------------------------------------------
Total Common Stocks in the United
States 69,015,247 59.7
===================================================================================================================
Total Investments in Common Stocks
(Cost--$88,663,914) 111,749,903 96.6
===================================================================================================================
====================================================================================================================================
Beneficial Interest/
Shares Held Short-Term Securities
====================================================================================================================================
$4,241,595 Merrill Lynch Liquidity Series, LLC
Cash Sweep Series I (b) 4,241,595 3.6
$6,585,283 Merrill Lynch Liquidity Series, LLC
Money Market Series (b)(c) 6,585,283 5.7
4,390,189 Merrill Lynch Premier Institutional
Fund (b)(c) 4,390,189 3.8
-------------------------------------------------------------------------------------------------------------------
Total Investments in Short-Term
Securities (Cost--$15,217,067) 15,217,067 13.1
====================================================================================================================================
Total Investments (Cost--$103,880,981) 126,966,970 109.7
Liabilities in Excess of Other Assets (11,274,173) (9.7)
------------------------
Net Assets $115,692,797 100.0%
========================
* 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. These
industry classifications are unaudited.
+ Non-income producing security.
(a) American Depositary Receipts (ADR).
(b) Investments in companies considered to be an affiliate of the Fund (such
companies are defined as "Affiliated Companies" in Section 2(a)(3) of the
Investment Company Act of 1940) are as follows:
--------------------------------------------------------------------------
Interest/
Net Dividend
Affiliate Activity Income
--------------------------------------------------------------------------
Merrill Lynch Institutional Fund -- $ 2
Merrill Lynch Liquidity Series, LLC
Cash Sweep Series I $ 4,241,595 $ 27,152
Merrill Lynch Liquidity Series, LLC
Money Market Series $ 4,039,064 $ 6,910
Merrill Lynch Premier Institutional Fund (2,143,792) $ 3,501
--------------------------------------------------------------------------
(c) Security was purchased with the cash proceeds from securities loans.
See Notes to Financial Statements.
MERRILL LYNCH NATURAL RESOURCES TRUST JULY 31, 2003 11
[LOGO] Merrill Lynch Investment Managers
Statement of Assets and Liabilities
As of July 31, 2003
=================================================================================================================
Assets
- -----------------------------------------------------------------------------------------------------------------
Investments, at value (including securities loaned
of $10,778,394) (identified cost -- $103,880,981) ......... $126,966,970
Cash ...................................................... 7,285
Foreign cash (cost -- $3,069) ............................. 3,048
Receivables:
Beneficial interest sold ............................... $ 138,055
Securities sold ........................................ 124,420
Dividends .............................................. 73,159
Interest ............................................... 3,762
Securities lending -- net .............................. 882 340,278
-----------
Prepaid registration fees ................................. 14,497
------------
Total assets .............................................. 127,332,078
------------
=================================================================================================================
Liabilities
- -----------------------------------------------------------------------------------------------------------------
Collateral on securities loaned, at value ................. 10,975,472
Payables:
Beneficial interest redeemed ........................... 488,345
Investment adviser ..................................... 66,198
Distributor ............................................ 42,898
Other affiliates ....................................... 38,376 635,817
-----------
Accrued expenses .......................................... 27,992
------------
Total liabilities ......................................... 11,639,281
------------
=================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------
Net assets ................................................ $115,692,797
============
=================================================================================================================
Net Assets Consist of
- -----------------------------------------------------------------------------------------------------------------
Class A Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized ..................... $ 266,356
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized ..................... 116,280
Class C Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized ..................... 58,260
Class I Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized ..................... 112,870
Paid-in capital in excess of par .......................... 104,545,205
Accumulated investment loss -- net ........................ $ (20,922)
Accumulated realized capital losses on investments
and foreign currency transactions -- net .................. (12,469,590)
Unrealized appreciation on investments and foreign
currency transactions -- net .............................. 23,084,338
-----------
Total accumulated earnings -- net ......................... 10,593,826
------------
Net assets ................................................ $115,692,797
============
=================================================================================================================
Net Asset Value
- -----------------------------------------------------------------------------------------------------------------
Class A -- Based on net assets of $56,094,212 and 2,663,563
shares of beneficial interest outstanding ................. $ 21.06
============
Class B -- Based on net assets of $23,829,320 and 1,162,799
shares of beneficial interest outstanding ................. $ 20.49
============
Class C -- Based on net assets of $11,788,544 and 582,596
shares of beneficial interest outstanding ................. $ 20.23
============
Class I -- Based on net assets of $23,980,721 and 1,128,704
shares of beneficial interest outstanding ................. $ 21.25
============
See Notes to Financial Statements.
12 MERRILL LYNCH NATURAL RESOURCES TRUST JULY 31, 2003
Statement of Operations
For the Year Ended July 31, 2003
============================================================================================================
Investment Income
- ------------------------------------------------------------------------------------------------------------
Dividends (net of $55,823 foreign withholding tax) . $ 1,264,069
Interest ........................................... 26,655
Securities lending -- net .......................... 10,413
------------
Total income ....................................... 1,301,137
------------
============================================================================================================
Expenses
- ------------------------------------------------------------------------------------------------------------
Investment advisory fees ........................... $ 647,970
Account maintenance & distribution fees -- Class B . 230,862
Account maintenance fees -- Class A ................ 136,933
Transfer agent fees -- Class A ..................... 113,613
Account maintenance & distribution fees -- Class C . 90,866
Accounting services ................................ 85,447
Professional fees .................................. 79,546
Transfer agent fees -- Class B ..................... 55,852
Trustees' fees and expenses ........................ 46,909
Transfer agent fees -- Class I ..................... 43,274
Registration fees .................................. 41,686
Printing and shareholder reports ................... 41,538
Custodian fees ..................................... 30,072
Transfer agent fees -- Class C ..................... 22,187
Pricing fees ....................................... 3,153
Other .............................................. 18,511
------------
Total expenses ..................................... 1,688,419
------------
Investment loss -- net ............................. (387,282)
------------
============================================================================================================
Realized & Unrealized Gain (Loss) on Investments and Foreign Currency Transactions -- Net
- ------------------------------------------------------------------------------------------------------------
Realized loss on:
Investments -- net .............................. (3,934,163)
Foreign currency transactions -- net ............ (23,439) (3,957,602)
------------
Change in unrealized appreciation/depreciation on:
Investments -- net .............................. 19,397,408
Foreign currency transactions -- net ............ (1,511) 19,395,897
-----------------------------
Total realized and unrealized gain on investments
and foreign currency transactions -- net ........... 15,438,295
------------
Net Increase in Net Assets Resulting from Operations $ 15,051,013
============
See Notes to Financial Statements.
MERRILL LYNCH NATURAL RESOURCES TRUST JULY 31, 2003 13
[LOGO] Merrill Lynch Investment Managers
Statements of Changes in Net Assets
For the Year Ended
July 31,
-------------------------------
Increase (Decrease) in Net Assets: 2003 2002
=========================================================================================================================
Operations
- -------------------------------------------------------------------------------------------------------------------------
Investment loss -- net ........................................ $ (387,282) $ (417,202)
Realized gain (loss) on investments and foreign
currency transactions -- net .................................. (3,957,602) 2,470,046
Change in unrealized appreciation/depreciation on
investments and foreign currency transactions -- net .......... 19,395,897 (9,318,412)
-------------------------------
Net increase (decrease) in net assets resulting from operations 15,051,013 (7,265,568)
-------------------------------
=========================================================================================================================
Beneficial Interest Transactions
- -------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets derived from beneficial
interest transactions ......................................... (3,305,952) (13,886,783)
-------------------------------
=========================================================================================================================
Net Assets
- -------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets ....................... 11,745,061 (21,152,351)
Beginning of year ............................................. 103,947,736 125,100,087
-------------------------------
End of year* .................................................. $ 115,692,797 $ 103,947,736
===============================
* Accumulated investment loss -- net ....................... $ (20,922) $ (10,917)
===============================
See Notes to Financial Statements.
14 MERRILL LYNCH NATURAL RESOURCES TRUST JULY 31, 2003
Financial Highlights
Class A@
The following per share data and ratios have been derived -----------------------------------------------------------------
from information provided in the financial statements. For the Year Ended July 31,
-----------------------------------------------------------------
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999
===================================================================================================================================
Per Share Operating Performance
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ..... $ 18.22 $ 19.35 $ 17.00 $ 15.51 $ 12.89
-----------------------------------------------------------------
Investment income (loss) -- net+ ....... (.03) (.03) (.03) (.01) .06
Realized and unrealized gain (loss) on
investments and foreign currency
transactions -- net ................... 2.87 (1.10) 2.38 1.52 2.77
-----------------------------------------------------------------
Total from investment operations ....... 2.84 (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 year ........... $ 21.06 $ 18.22 $ 19.35 $ 17.00 $ 15.51
=================================================================
===================================================================================================================================
Total Investment Return*
- -----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 15.59% (5.84%) 13.82% 9.75% 22.56%
=================================================================
===================================================================================================================================
Ratios to Average Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses ............................... 1.38% 1.45% 1.37% 1.42% 1.54%
=================================================================
Investment income (loss) -- net ........ (.17%) (.14%) (.13%) (.05%) .50%
=================================================================
===================================================================================================================================
Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) . $ 56,094 $ 52,946 $ 59,220 $ 52,366 $ 56,698
=================================================================
Portfolio turnover ..................... 18.26% 49.77% 40.08% 51.36% 50.48%
=================================================================
* Total investment returns exclude the effects of sales charges.
+ Based on average shares outstanding.
@ Effective April 14, 2003, Class D Shares were redesignated Class A Shares.
See Notes to Financial Statements.
MERRILL LYNCH NATURAL RESOURCES TRUST JULY 31, 2003 15
[LOGO] Merrill Lynch Investment Managers
Financial Highlights (continued)
Class B
The following per share data and ratios have been derived -----------------------------------------------------------------
from information provided in the financial statements. For the Year Ended July 31,
-----------------------------------------------------------------
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999
===================================================================================================================================
Per Share Operating Performance
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ... $ 17.87 $ 19.12 $ 16.93 $ 15.56 $ 12.79
-----------------------------------------------------------------
Investment loss -- net+ .............. (.18) (.17) (.19) (.14) (.04)
Realized and unrealized gain (loss) on
investments and foreign currency
transactions -- net ................. 2.80 (1.08) 2.38 1.51 2.81
-----------------------------------------------------------------
Total from investment operations ..... 2.62 (1.25) 2.19 1.37 2.77
-----------------------------------------------------------------
Net asset value, end of year ......... $ 20.49 $ 17.87 $ 19.12 $ 16.93 $ 15.56
=================================================================
===================================================================================================================================
Total Investment Return*
- -----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ... 14.66% (6.54%) 12.94% 8.80% 21.66%
=================================================================
===================================================================================================================================
Ratios to Average Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses ............................. 2.16% 2.23% 2.16% 2.21% 2.35%
=================================================================
Investment loss -- net ............... (.96%) (.91%) (.93%) (.85%) (.28%)
=================================================================
===================================================================================================================================
Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) $ 23,829 $ 24,468 $ 35,525 $ 19,223 $ 21,450
=================================================================
Portfolio turnover ................... 18.26% 49.77% 40.08% 51.36% 50.48%
=================================================================
* Total investment returns exclude the effects of sales charges.
+ Based on average shares outstanding.
See Notes to Financial Statements.
16 MERRILL LYNCH NATURAL RESOURCES TRUST JULY 31, 2003
Financial Highlights (continued)
Class C
The following per share data and ratios have been derived -----------------------------------------------------------------
from information provided in the financial statements. For the Year Ended July 31,
-----------------------------------------------------------------
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999
===================================================================================================================================
Per Share Operating Performance
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ..... $ 17.65 $ 18.88 $ 16.72 $ 15.36 $ 12.67
-----------------------------------------------------------------
Investment loss -- net+ ................ (.18) (.17) (.19) (.14) (.04)
Realized and unrealized gain (loss) on
investments and foreign currency
transactions -- net ................... 2.76 (1.06) 2.35 1.50 2.77
-----------------------------------------------------------------
Total from investment operations ....... 2.58 (1.23) 2.16 1.36 2.73
-----------------------------------------------------------------
Less distributions in excess of realized
gain on investments -- net ............ -- -- -- -- (.04)
-----------------------------------------------------------------
Net asset value, end of year ........... $ 20.23 $ 17.65 $ 18.88 $ 16.72 $ 15.36
=================================================================
===================================================================================================================================
Total Investment Return*
- -----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 14.62% (6.51%) 12.92% 8.85% 21.68%
=================================================================
===================================================================================================================================
Ratios to Average Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses ............................... 2.16% 2.24% 2.17% 2.21% 2.33%
=================================================================
Investment loss -- net ................. (.96%) (.93%) (.99%) (.86%) (.33%)
=================================================================
===================================================================================================================================
Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) . $ 11,789 $ 8,129 $ 9,050 $ 1,782 $ 2,039
=================================================================
Portfolio turnover ..................... 18.26% 49.77% 40.08% 51.36% 50.48%
=================================================================
* Total investment returns exclude the effects of sales charges.
+ Based on average shares outstanding.
See Notes to Financial Statements.
MERRILL LYNCH NATURAL RESOURCES TRUST JULY 31, 2003 17
[LOGO] Merrill Lynch Investment Managers
Financial Highlights (concluded)
Class I@
The following per share data and ratios have been derived -----------------------------------------------------------------
from information provided in the financial statements. For the Year Ended July 31,
-----------------------------------------------------------------
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999
===================================================================================================================================
Per Share Operating Performance
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ..... $ 18.34 $ 19.42 $ 17.02 $ 15.52 $ 12.93
-----------------------------------------------------------------
Investment income -- net+ .............. .01 .02 .02 .03 .10
Realized and unrealized gain (loss) on
investments and foreign currency
transactions -- net ................... 2.90 (1.10) 2.38 1.51 2.75
-----------------------------------------------------------------
Total from investment operations ....... 2.91 (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 year ........... $ 21.25 $ 18.34 $ 19.42 $ 17.02 $ 15.52
=================================================================
===================================================================================================================================
Total Investment Return*
- -----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 15.87% (5.56%) 14.10% 9.98% 22.91%
=================================================================
===================================================================================================================================
Ratios to Average Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses ............................... 1.12% 1.20% 1.13% 1.16% 1.28%
=================================================================
Investment income -- net ............... .07% .12% .09% .20% .75%
=================================================================
===================================================================================================================================
Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) . $ 23,981 $ 18,405 $ 21,305 $ 13,100 $ 9,138
=================================================================
Portfolio turnover ..................... 18.26% 49.77% 40.08% 51.36% 50.48%
=================================================================
* Total investment returns exclude the effects of sales charges.
+ Based on average shares outstanding.
@ Effective April 14, 2003, Class A Shares were redesignated Class I Shares.
See Notes to Financial Statements.
18 MERRILL LYNCH NATURAL RESOURCES TRUST JULY 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 amended, 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. The
Trust offers multiple classes of shares. Effective April 14, 2003, Class A
Shares were redesignated Class I Shares and Class D Shares were redesignated
Class A Shares. The Fund's financial statements and financial highlights
contained within this report reflect the new share redesignation. Shares of
Class A and Class I 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 A, Class B and Class C Shares bear
certain expenses related to the account maintenance of such shares, and Class B
and Class C Shares also bear certain expenses related to the distribution of
such shares. Each class has exclusive voting rights with respect to matters
relating to its account maintenance and distribution expenditures. 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 or the Nasdaq National Market are valued at the last sale price or
official closing 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 for long positions and at the last
available ask price for short positions. 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. Portfolio
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,
and it is expected that for debt securities this ordinarily will be the
over-the-counter 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). Futures contracts are valued
at the settlement price at the close of the applicable exchange. Short-term
securities are valued at amortized cost, which approximates market value.
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 Trustees of the Trust. Occasionally, events affecting the values of
securities and other assets may occur between the times at which valuations of
such securities are determined (that is, close of the market on which such
securities trade) and the close of business on the NYSE. If events (for example,
company announcement, natural disasters, market volatility) occur during such
periods that are expected to materially affect the value for such securities,
those securities may be valued at their fair market value as determined in good
faith by the Trustees of the Trust or by the investment adviser using a pricing
service and/or procedures approved by the Board of Trustees of the Company.
(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.
MERRILL LYNCH NATURAL RESOURCES TRUST JULY 31, 2003 19
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements (continued)
(c) Derivative financial instruments -- The Trust may engage in various
portfolio investment strategies both to increase the return of the Trust and to
hedge, or protect, its exposure to interest rate movement and movements in the
securities markets. Losses may arise due to changes in the value of the contract
or if the counterparty does not perform under the contract.
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 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.
20 MERRILL LYNCH NATURAL RESOURCES TRUST JULY 31, 2003
Notes to Financial Statements (continued)
(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.
(j) Reclassification -- Accounting principles generally accepted in the United
States of America require that certain components of net assets be adjusted to
reflect permanent differences between financial and tax reporting. Accordingly,
the current year's permanent book/tax differences of $400,716 has been
reclassified between paid-in capital in excess of par and accumulated net
investment loss and $23,439 has been reclassified between accumulated net
investment loss and accumulated net realized capital losses. These
reclassifications have no effect on net assets or net asset values per share.
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.
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 A ............................. .25% --
Class B ............................. .25% .75%
Class C ............................. .25% .75%
- --------------------------------------------------------------------------------
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith Incorporated. ("MLPF&S"), 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 A, Class B and Class C shareholders. The ongoing
distribution fee compensates the Distributor and MLPF&S for providing
shareholder and distribution-related services to Class B and Class C
shareholders.
MERRILL LYNCH NATURAL RESOURCES TRUST JULY 31, 2003 21
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements (continued)
For the year ended July 31, 2003, FAMD earned underwriting discounts and MLPF&S
earned dealer concessions on sales of the Trust's Class A and Class I Shares as
follows:
- --------------------------------------------------------------------------------
FAMD MLPF&S
- --------------------------------------------------------------------------------
Class A ............................ $ 1,715 $24,431
Class I ............................ $ 41 $ 545
- --------------------------------------------------------------------------------
For the year ended July 31, 2003, MLPF&S received contingent deferred sales
charges of $49,121 and $2,796 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. 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 or in registered money market funds advised
by MLIM or its affiliates. For the year ended July 31, 2003, MLIM received
$4,464 in securities lending agent fees.
In addition, MLPF&S received $6,752 in commissions on the execution of portfolio
security transactions for the Trust for the year ended July 31, 2003.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML & Co., is
the Trust's transfer agent.
For the year ended July 31, 2003, the Trust reimbursed MLIM $2,352 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
year ended July 31, 2003 were $19,372,722 and $24,564,265, respectively.
Net realized losses for the year ended July 31, 2003 and net unrealized gains
(losses) as of July 31, 2003 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Losses Gains (Losses)
- --------------------------------------------------------------------------------
Long-term investments .................. $ (3,934,163) $ 23,085,989
Foreign currency transactions .......... (23,439) (1,651)
--------------------------------
Total .................................. $ (3,957,602) $ 23,084,338
================================
As of July 31, 2003, net unrealized appreciation for Federal income tax purposes
aggregated $22,942,104 of which $26,627,169 related to appreciated securities
and $3,685,065 related to depreciated securities. At July 31, 2003, the
aggregate cost of investments for Federal income tax purposes was $104,024,866.
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest transactions was
$3,305,952 and $13,886,783 for the years ended July 31, 2003 and July 31, 2002,
respectively.
22 MERRILL LYNCH NATURAL RESOURCES TRUST JULY 31, 2003
Notes to Financial Statements (continued)
Transactions in shares of beneficial interest for each class were as follows:
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended July 31, 2003+ Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 138,975 $ 2,830,429
Automatic conversion of shares ......... 143,849 2,707,556
----------------------------
Total issued ........................... 282,824 5,537,985
Shares redeemed ........................ (524,605) (10,249,796)
----------------------------
Net decrease ........................... (241,781) $ (4,711,811)
============================
+ Effective April 14, 2003, Class D Shares were redesignated Class A Shares.
- --------------------------------------------------------------------------------
Class A 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)
============================
+ Effective April 14, 2003, Class D Shares were redesignated Class A Shares.
- --------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended July 31, 2003 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 236,318 $ 4,638,243
Automatic conversion of shares ......... (147,051) (2,707,556)
Shares redeemed ........................ (295,500) (5,621,269)
----------------------------
Net decrease ........................... (206,233) $(3,690,582)
============================
- --------------------------------------------------------------------------------
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 Year Dollar
Ended July 31, 2003 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ...................... 271,682 $ 5,328,467
Shares redeemed .................. (149,667) (2,818,647)
-------------------------------
Net increase ..................... 122,015 $ 2,509,820
===============================
- --------------------------------------------------------------------------------
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 I Shares for the Year Dollar
Ended July 31, 2003+ Shares Amount
- --------------------------------------------------------------------------------
Shares sold ...................... 827,251 $ 16,611,867
Shares redeemed .................. (702,107) (14,025,246)
-------------------------------
Net increase ..................... 125,144 $ 2,586,621
===============================
+ Effective April 14, 2003, Class A Shares were redesignated Class I Shares.
- --------------------------------------------------------------------------------
Class I 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)
=================================
+ Effective April 14, 2003, Class A Shares were redesignated Class I Shares.
MERRILL LYNCH NATURAL RESOURCES TRUST JULY 31, 2003 23
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements (concluded)
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 commitment was
reduced from $1,000,000,000 to $500,000,000. The Trust did not borrow under the
credit agreement during the year ended July 31, 2003.
6. Distributions to Shareholders:
As of July 31, 2003, the components of accumulated earnings on a tax basis were
as follows:
- --------------------------------------------------------------------------------
Undistributed ordinary income -- net .................... $ --
Undistributed long-term capital gains -- net ............ --
------------
Total undistributed earnings -- net ..................... --
Capital loss carryforward ............................... (11,963,613)*
Unrealized gains -- net ................................. 22,557,439**
------------
Total accumulated earnings -- net ....................... $ 10,593,826
============
* On July 31, 2003, the Fund had a net capital loss carryforward of
$11,963,613, of which $7,085,359 expires in 2008 and $4,878,254 expires in
2011. This amount will be available to offset like amounts of any future
taxable gains.
** The difference between book-basis and tax-basis net unrealized gains is
attributable primarily to the tax deferral of losses on wash sales and the
deferral of post-October currency and capital losses for tax purposes.
24 MERRILL LYNCH NATURAL RESOURCES TRUST JULY 31, 2003
Independent Auditors' Report
To the Shareholders and Board of Trustees of
Merrill Lynch Natural Resources Trust:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Merrill Lynch Natural Resources Trust as of July
31, 2003, 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 five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of July 31, 2003, by correspondence with the custodian. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. 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
Merrill Lynch Natural Resources Trust as of July 31, 2003, 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 five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
September 19, 2003
MERRILL LYNCH NATURAL RESOURCES TRUST JULY 31, 2003 25
[LOGO] Merrill Lynch Investment Managers
Officers and Trustees (unaudited)
Number of
Portfolios in Other Public
Position(s) Length Fund Complex Directorships
Held of Time Overseen by Held by
Name Address & Age with Fund Served Principal Occupation(s) During Past 5 Years Trustee Trustee
====================================================================================================================================
Interested Trustee
- ------------------------------------------------------------------------------------------------------------------------------------
Terry K. Glenn* P.O. Box 9011 President 1999 to President and Chairman of Merrill Lynch 118 Funds None
Princeton, NJ and present Investment Managers, L.P. ("MLIM")/Fund Asset 163 Portfolios
08543-9011 Trustee and Management, L.P. ("FAM")--Advised Funds since
Age: 62 1985 to 1999; Chairman (Americas Region) of MLIM from
present 2000 to 2002; Executive Vice President of FAM
and MLIM (which terms as used herein include
their corporate predecessors) from 1983 to 2002;
President of FAM Distributors, Inc. ("FAMD") from
1986 to 2002 and Director thereof from 1991 to
2002; Executive Vice President and Director of
Princeton Services, Inc. ("Princeton Services")
from 1993 to 2002; President of Princeton
Administrators, L.P. from 1989 to 2002; Director
of Financial Data Services, Inc. from 1985 to
2002.
-------------------------------------------------------------------------------------------------------------------
* Mr. Glenn is a director, trustee or member of an advisory board of certain other investment companies for which
FAM or MLIM acts as investment adviser. Mr. Glenn is an "interested person," as described in the Investment
Company Act, of the Trust based on his former positions with FAM, MLIM, FAMD, Princeton Services and Princeton
Administrators, L.P. The Trustee's term is unlimited. Trustees serve until their resignation, removal, or death,
or until December 31 of the year in which they turn 72. As Trust President, Mr. Glenn serves at the pleasure of
the Board of Trustees.
====================================================================================================================================
Independent Trustees*
- ------------------------------------------------------------------------------------------------------------------------------------
Donald W. P.O. Box 9095 Trustee 2002 to Manager of The Burton Partnership, Limited 23 Funds ITC Delta-
Burton Princeton, NJ present Partnership since 1979; Managing General Partner 37 Portfolios Com, Inc.;
08543-9095 of the South Atlantic Venture Funds, Limited ITC Holding
Age: 59 Partnerships and Chairman of South Atlantic Company,
Private Equity Fund IV, Limited Partnership since Inc.;
1983; Member of the Investment Advisory Council Knology,
of the Florida State Board of Administration Inc.; Main-
since 2001. Bancorp,
N.A.; Pri-
Care, Inc.;
Sumbion,
Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
M. Colyer Crum P.O. Box 9095 Trustee 1985 to James R. Williston Professor of Investment 24 Funds Cambridge
Princeton, NJ present Management Emeritus, Harvard Business 37 Portfolios Bancorp
08543-9095 School since 1996; Chairman and Director,
Age: 71 Phaeton International, Ltd. since 1985;
Director, Cambridge Bancorp since 1969.
- ------------------------------------------------------------------------------------------------------------------------------------
Laurie Simon P.O. Box 9095 Trustee 1999 to Professor of Finance and Economics, Graduate 23 Funds None
Hodrick Princeton, NJ present School of Business, Columbia University since 37 Portfolios
08543-9095 1998; Associate Professor of Finance and
Age: 40 Economics, Graduate School of Business,
Columbia University from 1996 to 1998.
- ------------------------------------------------------------------------------------------------------------------------------------
David H. Walsh P.O. Box 9095 Trustee 2003 to Consultant with Putnam Investments since 1998; 23 Funds None
Princeton, NJ present employed in various capacities therewith from 37 Portfolios
08543-9095 1971 to 1992; Director, the National Audubon
Age: 61 Society since 1980; Director, the American
Museum of Fly Fishing since 1998.
- ------------------------------------------------------------------------------------------------------------------------------------
26 MERRILL LYNCH NATURAL RESOURCES TRUST JULY 31, 2003
Officers and Trustees (concluded)
Number of
Portfolios in Other Public
Position(s) Length Fund Complex Directorships
Held of Time Overseen by Held by
Name Address & Age with Fund Served Principal Occupation(s) During Past 5 Years Trustee Trustee
====================================================================================================================================
Independent Trustees* (concluded)
- ------------------------------------------------------------------------------------------------------------------------------------
Fred G. Weiss P.O. Box 9095 Trustee 1998 to Managing Director of FGW Associates since 1997; 23 Funds Watson
Princeton, NJ present Vice President, Planning, Investment and Devel- 37 Portfolios Pharma-
08543-9095 opment of Warner Lambert Co. from 1979 to 1997; ceuticals,
Age: 61 Director, BTG International, PLC since 2001; Inc.
Director, Watson Pharmaceuticals, Inc. since
2000.
-------------------------------------------------------------------------------------------------------------------
* The Trustee's term is unlimited. Trustees serve until their resignation, removal or death, or until December 31
of the year in which they turn 72.
- ------------------------------------------------------------------------------------------------------------------------------------
Position(s) Length
Held of Time
Name Address & Age with Fund Served* Principal Occupation(s) During Past 5 Years
====================================================================================================================================
Trust Officers
- ------------------------------------------------------------------------------------------------------------------------------------
Donald C. Burke P.O. Box 9011 Vice 1993 to First Vice President of FAM and MLIM since 1997 and Treasurer thereof since
Princeton, NJ President present 1999; Senior Vice President and Treasurer of Princeton Services since 1999;
08543-9011 and and 1999 Vice President of FAMD since 1999; Director of Taxation of MLIM since 1990.
Age: 43 Treasurer to present
- ------------------------------------------------------------------------------------------------------------------------------------
Robert C. P.O. Box 9011 Senior Vice 1999 to President of MLIM and member of the Executive Management Committee of ML &
Doll, Jr. Princeton, NJ President present Co., Inc. since 2001; Global Chief Investment Officer and Senior Portfolio
08543-9011 Manager of MLIM since 1999; Chief Investment Officer of Equities at
Age: 48 Oppenheimer Funds, Inc. from 1990 to 1999 and Chief Investment Officer
thereof from 1998 to 1999; Executive Vice President of Oppenheimer Funds,
Inc. from 1991 to 1999.
- ------------------------------------------------------------------------------------------------------------------------------------
Robert M. P.O. Box 9011 Vice 1997 to Managing Director of MLIM since 2000; Director (Equities) of MLIM from 1997
Shearer Princeton, NJ President present to 2000.
08543-9011
Age: 48
- ------------------------------------------------------------------------------------------------------------------------------------
Phillip S. P.O. Box 9011 Acting 2003 to First Vice President of MLIM since 2001; Director (Legal Advisory) of MLIM
Gillespie Princeton, NJ Secretary present from 2000 to 2001; Vice President of MLIM from 1999 to 2000; Attorney
08543-9011 associated with MLIM since 1998; Assistant General Counsel of Chancellor
Age: 39 LGT Asset Management, Inc. from 1997 to 1998.
-------------------------------------------------------------------------------------------------------------------
* Officers of the Trust serve at the pleasure of the Board of Trustees.
- ------------------------------------------------------------------------------------------------------------------------------------
Further information about the Trust's Officers and Trustees is available in the Trust's Statement of Additional
Information, which can be obtained without charge by calling 1-800-MER-FUND.
- ------------------------------------------------------------------------------------------------------------------------------------
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
MERRILL LYNCH NATURAL RESOURCES TRUST JULY 31, 2003 27
[LOGO] Merrill Lynch Investment Managers www.mlim.ml.com
This report is not authorized for use as an offer of sale or a solicitation of
an offer to buy shares of the 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.
A description of the policies and procedures that the Trust uses to determine
how to vote proxies relating to portfolio securities is available (1) without
charge, upon request, by calling toll-free 1-800-MER-FUND (1-800-637-3863); (2)
on www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's
website at http://www.sec.gov.
Merrill Lynch Natural Resources Trust
Box 9011
Princeton, NJ
08543-9011
#10303 -- 7/03
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--
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 upon request by calling
toll-free 1-800-MER-FUND (1-800-637-3863).
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. -
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) Donald W. Burton, (2) M. Colyer Crum, (3) Laurie
Simon Hodrick, (4) David H. Walsh and (5) Fred G. Weiss.
The Board of Directors/Trustees of the Cluster A Merrill Lynch Funds
determined that Laurie Simon Hodrick and M. Colyer Crum qualify as
financial experts pursuant to Item 3(c)(4) of Form N-CSR.
Ms. Hodrick has a thorough understanding of generally accepted
accounting principals, financial statements, and internal controls and
procedures for financial reporting. Ms. Hodrick earned a Ph.D. in
economics and has taught courses in finance and economics for over 15
years. She has also worked with several prominent corporations in
connection with the analysis of financial forecasts and projections and
analysis of the financial statements of those companies. Ms. Hodrick
currently serves on the Financial Advisory Council of a major
corporation and has also served as the Treasurer and Finance Chair of a
501(c)(3) organization. She has published a number of articles in
leading economic and financial journals.
M. Colyer Crum also possesses a thorough understanding of generally
accepted accounting principals, financial statements, and internal
controls and procedures for financial reporting through a combination
of education and experience. Professor Crum was a professor of
investment management at the Harvard Business School for 25 years. The
courses taught by Professor Crum place a heavy emphasis on the analysis
of underlying company financial statements with respect to stock
selection and the analysis of credit risk in making loans. Professor
Crum has also served on a number of boards of directors and has served
on the audit committees, and in some cases chaired the audit committee,
for several major corporations and financial institutions. For two such
organizations, Professor Crum has performed extensive investment
analysis of financial statements in connection with investment
management decisions. From these experiences, he has gained significant
experience with the establishment of reserves and accounting policies,
differences between U.S. GAAP and Canadian GAAP and executive
compensation issues.
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.
Item 5 - If the registrant is a listed issuer as defined in Rule 10A-3 under the
Exchange Act, state whether or not the registrant has a
separately-designated standing audit committee established in
accordance with Section 3(a)(58)(A) of the Exchange Act. If the
registrant has such a committee, however designated, identify each
committee member. If the entire board of directors is acting as the
registrant's audit committee in Section 3(a)(58)(B) of the Exchange
Act, so state.
If applicable, provide the disclosure required by Rule 10A-3(d) under
the Exchange Act regarding an exemption from the listing standards for
audit committees. N/A
(Listed issuers must be in compliance with the new listing rules by the
earlier of their first annual shareholders meeting after January 2004,
or October 31, 2004 (annual requirement))
Item 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) - The registrant's certifying officers have reasonably designed such
disclosure controls and procedures to ensure material information
relating to the registrant is made known to us by others
particularly during the period in which this report is being
prepared. The registrant's certifying officers have determined that
the registrant's disclosure controls and procedures are effective
based on our evaluation of these controls and procedures as of a
date within 90 days prior to the filing date of this report.
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 pursuant to Section 302 of the Sarbanes-Oxley Act.
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: September 23, 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: September 23, 2003
By: /s/ Donald C. Burke
--------------------------
Donald C. Burke,
Chief Financial Officer of
Merrill Lynch Natural Resources Trust
Date: September 23, 2003
Attached hereto as a furnished exhibit are the certifications
pursuant to Section 906 of the Sarbanes-Oxley Act.