UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-04282
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: Robert C. Doll, Jr., Chief Executive
Officer, 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: 07/31/06
Date of reporting period: 08/01/05 - 01/31/06
Item 1 - Report to Stockholders
Merrill Lynch
Natural Resources Trust
Semi-Annual Report
January 31, 2006
Merrill Lynch Natural Resources Trust
Announcement to Shareholders
On February 15, 2006, BlackRock, Inc. ("BlackRock") and Merrill Lynch & Co.,
Inc. ("Merrill Lynch") entered into an agreement to merge Merrill Lynch's
investment management business, Merrill Lynch Investment Managers, L.P. and
certain affiliates (including Fund Asset Management, L.P. and Merrill Lynch
Investment Managers International Limited), and BlackRock to create a new
independent company that will be one of the world's largest asset management
firms with nearly $1 trillion in assets under management (based on combined
assets under management as of December 31, 2005). The transaction is expected to
close in the third quarter of 2006, at which time the new company will operate
under the BlackRock name. As a result of the above transaction, the combined
company is expected to become the investment adviser of the Trust, contingent
upon the approval of the Trust's Board of Trustees and Trust shareholders.
Portfolio Information as of January 31, 2006
Percent of
Ten Largest Equity Holdings Net Assets
- --------------------------------------------------------------------------------
EnCana Corp. ........................................................ 4.1%
EOG Resources, Inc. ................................................. 4.1
Murphy Oil Corp. .................................................... 3.2
Devon Energy Corp. .................................................. 2.9
Apache Corp. ........................................................ 2.2
Talisman Energy, Inc. ............................................... 2.2
GlobalSantaFe Corp. ................................................. 2.0
Transocean, Inc. .................................................... 2.0
National Oilwell Varco, Inc. ........................................ 1.9
BJ Services Co. ..................................................... 1.9
- --------------------------------------------------------------------------------
Percent of
Geographic Allocation Total Investments
- --------------------------------------------------------------------------------
United States ........................................... 60.1%
Canada .................................................. 23.4
France .................................................. 2.4
China ................................................... 1.1
Italy ................................................... 1.0
Australia ............................................... 1.0
Hong Kong ............................................... 0.6
Brazil .................................................. 0.5
South Africa ............................................ 0.4
United Kingdom .......................................... 0.3
Norway .................................................. 0.2
Other* .................................................. 9.0
- --------------------------------------------------------------------------------
* Includes portfolio holdings in short-term investments.
2 MERRILL LYNCH NATURAL RESOURCES TRUST JANUARY 31, 2006
A Letter From the President
Dear Shareholder
After "muddling through" most of 2005, the financial markets saw increased
volatility in January that resulted in a roller coaster of highs and lows for
stocks and a similar ride for bonds. In the end, the major market indexes
managed to post positive returns for the current reporting period:
Total Returns as of January 31, 2006 6-month 12-month
=======================================================================================
U.S. equities (Standard & Poor's 500 Index) + 4.68% +10.38%
- ---------------------------------------------------------------------------------------
Small-cap U.S. equities (Russell 2000 Index) + 8.50 +18.89
- ---------------------------------------------------------------------------------------
International equities (MSCI Europe, Australasia, Far East Index) +18.31 +22.76
- ---------------------------------------------------------------------------------------
Fixed income (Lehman Brothers Aggregate Bond Index) + 0.84 + 1.80
- ---------------------------------------------------------------------------------------
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) + 1.33 + 2.83
- ---------------------------------------------------------------------------------------
High yield bonds (Credit Suisse High Yield Index) + 1.40 + 3.59
- ---------------------------------------------------------------------------------------
The Federal Reserve Board (the Fed) advanced its monetary tightening campaign
with eight quarter-point interest rate hikes in 2005 and another on January 31,
2006. This brought the federal funds rate to 4.5%. Notably, Ben Bernanke
replaced Alan Greenspan as Fed chairman in January, a month after the central
bank removed the critical word "measured" from the description of its interest
rate-hiking program. Still, most observers expect another rate increase in
March.
Stocks recorded their third straight year of positive performance in 2005
despite struggling amid rising interest rates, record-high oil prices and a
devastating hurricane season. U.S. equities found support in strong corporate
earnings, low core inflation and healthy company balance sheets. Strength in the
global economy and non-U.S. equity markets helped, as did robust
dividend-distribution, share-buyback and merger-and-acquisition activity.
International markets, in the meantime, continued to benefit from strong
economic statistics, trade surpluses and solid finances.
In the U.S. bond market, short-term interest rates continued to move higher as
longer-term rates advanced more moderately, resulting in a flattening yield
curve. We saw the curve invert temporarily at the end of December and again at
the end of January into early February, with the two-year Treasury note offering
a slightly higher yield than the 10-year note.
Looking ahead, the largest questions center on the Fed's future moves, the
consumer's ability (or inability) to continue spending, the direction of the
U.S. dollar following a year of appreciation and the potential for continued
strong economic and corporate earnings growth. As you consider how these factors
might impact your investments in 2006, we encourage you to review your goals
with your financial advisor and to make portfolio changes, as needed. For
additional insight and timely "food for thought" for investors, we also invite
you to visit Shareholder magazine at www.mlim.ml.com/shareholdermagazine. As
always, we thank you for trusting Merrill Lynch Investment Managers with your
investment assets, and we look forward to continuing to serve your investment
needs.
Sincerely,
/s/ Robert C. Doll, Jr.
Robert C. Doll, Jr.
President and Trustee
MERRILL LYNCH NATURAL RESOURCES TRUST JANUARY 31, 2006 3
A Discussion With Your Fund's Portfolio Manager
The Trust considerably outperformed the broad-market S&P 500 Index, as
energy-related stocks, where we are focusing our investments, continued to lead
the market.
How did the Trust perform during the period in light of the existing market
conditions?
For the six-month period ended January 31, 2006, Merrill Lynch Natural Resources
Trust's Class A, Class B, Class C and Class I Shares posted total returns of
+29.79%, +29.29%, +29.31% and +29.98%, respectively. (Fund results shown do not
reflect sales charges and would be lower if sales charges were included.
Complete performance information can be found on pages 6 and 7 of this report to
shareholders.) For the same period, the Trust's benchmark, the Standard & Poor's
500 (S&P 500) Index, returned +4.68%, and its comparable Lipper category of
Natural Resources Funds had an average return of +28.89%. (Funds in this Lipper
category invest their equity assets primarily in natural resources stocks.)
The Trust's outperformance of the S&P 500 Index resulted primarily from both
stock selection and an overweight position in oil and gas producers, including
EOG Resources, Inc., an oil and gas exploration and production company, and four
Canadian energy companies: Suncor Energy, Inc., Talisman Energy, Inc., EnCana
Corp. and Canadian Natural Resources Ltd. The Trust's investments in several oil
service and drilling contractors also enhanced relative performance, most
notably National Oilwell Varco, Inc., a supplier of equipment used on both
offshore and onshore drilling rigs. In addition, the share prices of two
deepwater drilling rig contractors, Transocean, Inc. and GlobalSantaFe Corp.,
appreciated as sharply rising drilling rates led to higher profit projections.
Our holdings in two shallow-water drilling companies, TODCO and Hercules
Offshore, Inc., also contributed positively to the Trust's relative performance
for the period.
In the metals and mining sector, the portfolio's relative results benefited from
the strong performance of Aluminum Corp. of China Ltd. The portfolio's holdings
in two gold mining companies, Glamis Gold Ltd. and Eldorado Gold Corp.,
performed well as their new mine developments progressed and as the price of
gold reached a multi-year high.
The Trust's continued underweight positions in the chemical and paper and forest
products sectors proved beneficial to performance, although our holdings in
Praxair, Inc., an industrial gas supplier, and Sappi Ltd., a coated paper
manufacturer, had a modest positive effect on relative returns.
On the negative side, new inflows into the Trust resulted in higher cash
balances that detracted somewhat from relative results in an environment of
generally rising equity prices. Nevertheless, this certainly was not enough to
derail the Trust's positive absolute and relative performance.
The Trust's outperformance of its comparable Lipper category of Natural
Resources Funds is attributed primarily to our emphasis on stocks leveraged to
rising oil and gas prices, as well as oil service companies that are benefiting
from rising drilling day-rates.
What changes were made to the portfolio during the period?
Late in the period, we began to shift the portfolio's holdings into oil service
and offshore drilling companies and de-emphasized oil and gas production
companies, especially those leveraged to North American natural gas. While we
continue to be bullish on the long-term fundamentals of the natural gas sector,
an unseasonably warm start to the winter heating season and then a record warm
January left North American natural gas storage levels at historically high
levels. Consequently, natural gas prices fell sharply from the highs seen after
Hurricanes Katrina and Rita damaged production facilities in the Gulf of Mexico.
While some Gulf of Mexico production remains shut down, we believe the natural
gas markets will be volatile through the summer months due to the high levels of
gas remaining in storage. In addition, should the industry achieve full storage
well before the start of the 2006-2007 heating season, natural gas prices could
temporarily drop below $6 per thousand cubic feet. Given this potential price
weakness, we believe the portfolio's holdings in gas-leveraged production
companies will have a tough start to the year. Therefore, we shifted assets to
more oil- leveraged companies, such as Occidental Petroleum Corp., and to
offshore drilling companies where rigs are in a tight supply-and-demand balance.
We added to our existing positions in Transocean, Inc., GlobalSantaFe Corp. and
ENSCO International, Inc., and we initiated a new holding in Diamond Offshore
Drilling, Inc., a deepwater oil drilling company.
We continue to believe that earnings momentum will move significantly from the
oil and gas producers into oil service stocks during 2006. Barring another year
of record hurricane activity and high oil and gas prices, earnings comparisons
for the oil and gas producers may be difficult in the latter half of
4 MERRILL LYNCH NATURAL RESOURCES TRUST JANUARY 31, 2006
2006. In addition, higher oil service and drilling costs most likely will have a
negative effect on the oil producers' profit margins. However, given the strong
long-term fundamentals for natural gas, potential geopolitical events that could
result in rising oil prices, and the potential for increased
merger-and-acquisition activity, we maintain a significant exposure to oil and
natural gas producers. However, we anticipate a very challenging environment for
this sector early in 2006.
How would you characterize the Trust's position at the close of the period?
The Trust remains highly focused on energy investments, still led by oil and gas
producers, but with an increasing emphasis on oil service companies and those
producers more weighted to oil production. In addition, the introduction of
regulations for cleaner gasoline during the upcoming summer driving season
should have positive implications for the refining industry. Under these
circumstances, we anticipate increasing our holdings of independent refiners and
major integrated companies leveraged to the refining sector.
We continue to believe that oil prices should remain high as demand continues to
rise to a level that is close to the limits of available world production
capacity. Given the remaining damage from last summer's hurricanes, combined
with declining oil production in Iraq due to maintenance and security issues,
and disruptions from rioting in Nigeria, we believe that oil prices could be
subject to price spikes should additional supply disruptions occur.
As of January 31, 2006, roughly 91% of the Trust's total investments was
invested in stocks and 9% in cash equivalents. Approximately 85% of the
portfolio's net assets was in energy-related companies, with the remaining
equity holdings in metals and mining, utilities, paper and forest products, and
chemicals.
Robert M. Shearer
Vice President and Portfolio Manager
February 28, 2006
MERRILL LYNCH NATURAL RESOURCES TRUST JANUARY 31, 2006 5
Performance Data
About Fund Performance
Investors are able to purchase shares of the Trust through multiple pricing
alternatives:
o Class A Shares incur a maximum initial sales charge (front-end load) of
5.25% and an account maintenance fee of 0.25% per year (but no
distribution fee).
o Class B Shares are subject to a maximum contingent deferred sales charge
of 4% declining to 0% after six years. In addition, Class B Shares are
subject to a distribution fee of 0.75% per year and an account maintenance
fee of 0.25% per year. These shares automatically convert to Class A
Shares after approximately eight years. (There is no initial sales charge
for automatic share conversions.) All returns for periods greater than
eight years reflect this conversion.
o Class C Shares are subject to a distribution fee of 0.75% per year and an
account maintenance fee of 0.25% per year. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within one
year of purchase.
o Effective December 28, 2005, Class I Shares are no longer subject to any
front-end sales charge. Class I Shares bear no ongoing distribution or
account maintenance fees and are available only to eligible investors. Had
the sales charge been included, the Fund's Class I Shares' performance
would have been lower.
None of the past results shown should be considered a representation of future
performance. Current performance may be lower or higher than the performance
data quoted. Refer to www.mlim.ml.com to obtain performance data current to the
most recent month-end. Performance results do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. Figures shown in each of the following tables assume reinvestment of all
dividends and capital gain distributions, if any, at net asset value on the
ex-dividend date. Investment return and principal value of shares will fluctuate
so that shares, when redeemed, may be worth more or less than their original
cost. Dividends paid to each class of shares will vary because of the different
levels of account maintenance, distribution and transfer agency fees applicable
to each class, which are deducted from the income available to be paid to
shareholders.
Recent Performance Results
6-Month 12-Month 10-Year
As of January 31, 2006 Total Return Total Return Total Return
==========================================================================================
ML Natural Resources Trust Class A Shares* +29.79% +67.26% +297.29%
- ------------------------------------------------------------------------------------------
ML Natural Resources Trust Class B Shares* +29.29 +66.00 +273.07
- ------------------------------------------------------------------------------------------
ML Natural Resources Trust Class C Shares* +29.31 +66.02 +267.39
- ------------------------------------------------------------------------------------------
ML Natural Resources Trust Class I Shares* +29.98 +67.68 +307.43
- ------------------------------------------------------------------------------------------
S&P 500(R) Index** + 4.68 +10.38 +136.62
- ------------------------------------------------------------------------------------------
* Investment results shown do not reflect sales charges; results would be
lower if a sales charge was included. Cumulative total investment returns
are based on changes in net asset values for the periods shown, and assume
reinvestment of all dividends and capital gains distributions at net asset
value on the ex-dividend date.
** 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.
S&P 500 is a registered trademark of the McGraw-Hill Companies.
6 MERRILL LYNCH NATURAL RESOURCES TRUST JANUARY 31, 2006
Performance Data (concluded)
Average Annual Total Return
- --------------------------------------------------------------------------------
Return Without Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
One Year Ended 1/31/06 +67.26% +58.48%
- --------------------------------------------------------------------------------
Five Years Ended 1/31/06 +23.34 +22.02
- --------------------------------------------------------------------------------
Ten Years Ended 1/31/06 +14.79 +14.17
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
- --------------------------------------------------------------------------------
Return Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
One Year Ended 1/31/06 +66.00% +62.00%
- --------------------------------------------------------------------------------
Five Years Ended 1/31/06 +22.40 +22.22
- --------------------------------------------------------------------------------
Ten Years Ended 1/31/06 +14.07 +14.07
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 4% and is reduced to 0% after
six years.
** Assuming payment of applicable contingent deferred sales charge.
- --------------------------------------------------------------------------------
Return Return
Without CDSC With CDSC**
================================================================================
Class C Shares*
================================================================================
One Year Ended 1/31/06 +66.02% +65.02%
- --------------------------------------------------------------------------------
Five Years Ended 1/31/06 +22.40 +22.40
- --------------------------------------------------------------------------------
Ten Years Ended 1/31/06 +13.90 +13.90
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 1% and is reduced to 0% after
one year.
** Assuming payment of applicable contingent deferred sales charge.
- --------------------------------------------------------------------------------
Class I Shares Return
================================================================================
One Year Ended 1/31/06 +67.68%
- --------------------------------------------------------------------------------
Five Years Ended 1/31/06 +23.66
- --------------------------------------------------------------------------------
Ten Years Ended 1/31/06 +15.08
- --------------------------------------------------------------------------------
MERRILL LYNCH NATURAL RESOURCES TRUST JANUARY 31, 2006 7
Disclosure of Expenses
Shareholders of this Trust may incur the following charges: (a) expenses related
to transactions, including sales charges, redemption fees and exchange fees; and
(b) operating expenses including advisory fees, distribution fees including
12b-1 fees, and other Trust expenses. The following example (which is based on a
hypothetical investment of $1,000 invested on August 1, 2005 and held through
January 31, 2006) is intended to assist shareholders both in calculating
expenses based on an investment in the Trust and in comparing these expenses
with similar costs of investing in other mutual funds.
The first table below provides information about actual account values and
actual expenses. In order to estimate the expenses a shareholder paid during the
period covered by this report, shareholders can divide their account value by
$1,000 and then multiply the result by the number in the first line under the
heading entitled "Expenses Paid During the Period."
The second table below provides information about hypothetical account values
and hypothetical expenses based on the Trust's actual expense ratio and an
assumed rate of return of 5% per year before expenses. In order to assist
shareholders in comparing the ongoing expenses of investing in this Trust and
other funds, compare the 5% hypothetical example with the 5% hypothetical
examples that appear in other funds' shareholder reports.
The expenses shown in the table are intended to highlight shareholders' ongoing
costs only and do not reflect any transactional expenses, such as sales charges,
redemption fees or exchange fees. Therefore, the second table is useful in
comparing ongoing expenses only, and will not help shareholders determine the
relative total expenses of owning different funds. If these transactional
expenses were included, shareholder expenses would have been higher.
Expenses Paid
Beginning Ending During the Period*
Account Value Account Value August 1, 2005 to
August 1, 2005 January 31, 2006 January 31, 2006
===========================================================================================================
Actual
===========================================================================================================
Class A $1,000 $1,297.90 $ 6.21
- -----------------------------------------------------------------------------------------------------------
Class B $1,000 $1,292.90 $10.69
- -----------------------------------------------------------------------------------------------------------
Class C $1,000 $1,293.10 $10.69
- -----------------------------------------------------------------------------------------------------------
Class I $1,000 $1,299.80 $ 4.75
===========================================================================================================
Hypothetical (5% annual return before expenses)**
===========================================================================================================
Class A $1,000 $1,020.10 $ 5.46
- -----------------------------------------------------------------------------------------------------------
Class B $1,000 $1,016.17 $ 9.40
- -----------------------------------------------------------------------------------------------------------
Class C $1,000 $1,016.17 $ 9.40
- -----------------------------------------------------------------------------------------------------------
Class I $1,000 $1,021.37 $ 4.17
- -----------------------------------------------------------------------------------------------------------
* For each class of the Trust, expenses are equal to the annualized expense
ratio for the class (1.06% for Class A, 1.83% for Class B,1.83% for Class
C and .81% for Class I), multiplied by the average account value over the
period, multiplied by 186/365 (to reflect the one-half year period shown).
** Hypothetical 5% annual return before expenses is calculated by pro-rating
the number of days in the most recent fiscal half year divided by 365.
8 MERRILL LYNCH NATURAL RESOURCES TRUST JANUARY 31, 2006
Schedule of Investments (in U.S. dollars)
Shares
Country Industry Common Stocks Held Value
===============================================================================
Australia--1.0%
Metals & Mining--1.0%
Alumina Ltd. 153,800 $ 873,731
BHP Billiton Ltd. 60,500 1,180,747
Newcrest Mining Ltd. 120,000 2,378,287
-------------------------------------------------------------------
Total Common Stocks in Australia 4,432,765
===============================================================================
Brazil--0.5%
Metals & Mining--0.5%
Companhia Vale do Rio Doce (a) 43,500 2,230,245
-------------------------------------------------------------------
Total Common Stocks in Brazil 2,230,245
===============================================================================
Canada--24.0%
Canadian Independents--19.8%
Alberta Clipper Energy, Inc. (d) 74,288 231,967
Atlas Energy Ltd. (d) 254,000 1,188,577
Bear Ridge Resources Ltd. (d) 47,200 251,420
Canadian Natural Resources Ltd. 119,700 7,391,603
Chamaelo Exploration Ltd. (d) 165,100 1,111,930
Clear Energy, Inc. (d) 120,000 513,251
Compton Petroleum Corp. (d) 262,100 4,316,752
Crew Energy, Inc. (d) 249,700 3,712,849
Cyries Energy, Inc. (d) 88,928 1,190,062
Dual Exploration, Inc. (d) 54,750 107,747
Ember Resources, Inc. (d) 74,288 513,317
EnCana Corp. 359,822 17,860,490
Grand Petroleum, Inc. (d) 140,000 635,529
Husky Energy, Inc. 53,200 3,327,036
Kereco Energy Ltd. (d) 74,900 961,718
Mission Oil & Gas, Inc. (d) 236,661 1,809,164
Nexen, Inc. 59,300 3,381,755
Niko Resources Ltd. 21,800 1,014,588
Oilexco, Inc. (d) 82,000 272,544
Paramount Resources Ltd. (d) 75,000 2,358,305
Petro-Canada 126,000 6,007,400
ProEx Energy Ltd. (d) 92,653 1,197,771
Real Resources, Inc. (d) 90,100 2,179,801
Rider Resources Ltd. (d) 287,918 5,290,962
Suncor Energy, Inc. 101,300 8,067,318
TUSK Energy Corp. (d) 353,500 1,174,932
Talisman Energy, Inc. 157,600 9,552,768
Zenas Energy Corp. (d) 212,581 938,978
------------
86,560,534
-------------------------------------------------------------------
Gold--1.3%
Barrick Gold Corp. 51,800 1,617,476
Eldorado Gold Corp. (d) 404,500 2,034,352
Glamis Gold Ltd. (d) 67,800 2,159,780
------------
5,811,608
-------------------------------------------------------------------
Metals & Mining--1.1%
Alcan, Inc. 30,200 1,473,458
Northern Orion Resources, Inc. (d) 211,000 847,100
Teck Cominco Ltd. Class B 38,300 2,461,210
------------
4,781,768
-------------------------------------------------------------------
Oil & Gas Drilling--1.1%
Ensign Resource Service Group, Inc. 52,300 2,196,207
Western Lakota Energy Services,
Inc. (d) 138,800 2,330,937
------------
4,527,144
-------------------------------------------------------------------
Oil & Gas Equipment & Services--0.7%
Calfrac Well Services Ltd. 26,200 1,004,184
Tesco Corp. (d) 106,300 2,192,385
------------
3,196,569
-------------------------------------------------------------------
Total Common Stocks in Canada 104,877,623
===============================================================================
China--1.2%
Metals & Mining--1.2%
Aluminum Corp. of China Ltd. (a) 54,200 5,018,920
-------------------------------------------------------------------
Total Common Stocks in China 5,018,920
===============================================================================
France--2.4%
Integrated Oil & Gas--1.4%
Total SA (a) 45,400 6,280,182
-------------------------------------------------------------------
Oil & Gas Equipment & Services--1.0%
Technip SA (a) 64,975 4,429,346
-------------------------------------------------------------------
Total Common Stocks in France 10,709,528
===============================================================================
Hong Kong--0.6%
Oil & Gas Exploration &
Production--0.6%
CNOOC Ltd. (a) 31,400 2,703,226
-------------------------------------------------------------------
Total Common Stocks in Hong Kong 2,703,226
===============================================================================
Italy--1.0%
Integrated Oil & Gas--0.3%
ENI SpA (a) 19,250 1,167,512
-------------------------------------------------------------------
Oil & Gas Drilling--0.7%
Saipem SpA 164,500 3,279,533
-------------------------------------------------------------------
Total Common Stocks in Italy 4,447,045
===============================================================================
Norway--0.3%
Oil & Gas Equipment &
Services--0.3%
Stolt Offshore, SA (a)(d) 85,000 1,080,350
-------------------------------------------------------------------
Total Common Stocks in Norway 1,080,350
===============================================================================
South Africa--0.4%
Paper--0.4%
Sappi Ltd. (a) 128,500 1,680,780
-------------------------------------------------------------------
Total Common Stocks in South Africa 1,680,780
===============================================================================
United Kingdom--0.3%
Integrated Oil & Gas--0.3%
BP Plc (a) 18,600 1,344,966
-------------------------------------------------------------------
Total Common Stocks in the
United Kingdom 1,344,966
===============================================================================
United States--61.4%
Chemicals--0.2%
Praxair, Inc. 18,000 948,240
-------------------------------------------------------------------
Energy Equipment & Services--3.2%
Dresser-Rand Group, Inc. (d) 138,800 3,737,884
Dril-Quip, Inc. (d) 28,000 1,763,160
Hanover Compressor Co. (d) 1,605 26,579
National Oilwell Varco, Inc. (d) 109,433 8,324,568
------------
13,852,191
-------------------------------------------------------------------
Integrated Oil & Gas--8.4%
Alon USA Energy, Inc. (d) 30,200 651,716
Chevron Corp. 80,591 4,785,494
ConocoPhillips 93,958 6,079,083
MERRILL LYNCH NATURAL RESOURCES TRUST JANUARY 31, 2006 9
Schedule of Investments (continued) (in U.S. dollars)
Shares
Country Industry Common Stocks Held Value
===============================================================================
United States (continued)
Integrated Oil & Gas (concluded)
Exxon Mobil Corp. 93,028 $ 5,837,507
Marathon Oil Corp. 39,500 3,036,365
Murphy Oil Corp. 247,400 14,101,800
Williams Cos., Inc. 100,500 2,395,920
------------
36,887,885
-------------------------------------------------------------------
Metals & Mining--3.4%
Alcoa, Inc. 22,900 721,350
Arch Coal, Inc. 18,000 1,560,960
Consol Energy, Inc. 34,100 2,485,890
James River Coal Co. (d) 21,800 927,590
Newmont Mining Corp. 9,100 562,380
Peabody Energy Corp. 69,600 6,925,896
Southern Copper Corp. 22,900 1,994,590
------------
15,178,656
-------------------------------------------------------------------
Oil & Gas Drilling--12.5%
Diamond Offshore Drilling, Inc. 21,800 1,850,166
ENSCO International, Inc. 107,300 5,485,176
GlobalSantaFe Corp. 145,022 8,853,593
Helmerich & Payne, Inc. 47,600 3,729,936
Hercules Offshore, Inc. (d) 115,000 4,118,150
Nabors Industries Ltd. (d)(e) 48,500 3,940,625
Noble Corp. (e) 70,900 5,703,196
Patterson-UTI Energy, Inc. 49,500 1,862,190
Pride International, Inc. (d) 70,700 2,496,417
Rowan Cos., Inc. 50,000 2,241,500
TODCO Class A 113,000 5,039,800
Transocean, Inc. (d)(e) 107,100 8,691,165
Union Drilling, Inc. (d) 50,000 873,000
------------
54,884,914
-------------------------------------------------------------------
Oil & Gas Equipment & Services--11.8%
BJ Services Co. 201,600 8,162,784
Baker Hughes, Inc. 94,400 7,310,336
Cooper Cameron Corp. (d) 65,400 3,164,706
FMC Technologies, Inc. (d) 94,300 4,886,626
Grant Prideco, Inc. (d) 34,000 1,703,060
Halliburton Co. 64,700 5,146,885
Lone Star Technologies Inc. (d) 24,600 1,399,740
Oil States International, Inc. (d) 95,800 3,918,220
Schlumberger Ltd. 37,900 4,830,355
Smith International, Inc. 97,400 4,383,000
Superior Well Services, Inc. (d) 10,300 288,503
Weatherford International Ltd. (d)(e) 142,226 6,368,880
------------
51,563,095
-------------------------------------------------------------------
Oil & Gas Exploration &
Production--17.9%
Apache Corp. 126,760 9,574,183
Bill Barrett Corp. (d) 10,600 407,040
Burlington Resources, Inc. 81,394 7,428,016
Cabot Oil & Gas Corp. Class A 44,100 2,274,237
CanArgo Energy Corp. (d) 235,500 320,280
Carrizo Oil & Gas, Inc. (d) 59,100 1,705,626
Chesapeake Energy Corp. 69,400 2,431,776
Cimarex Energy Co. 21,094 961,043
Devon Energy Corp. 186,898 12,748,313
EOG Resources, Inc. 210,900 17,829,486
Energy Partners Ltd. (d) 87,000 2,442,090
Forest Oil Corp. (d) 45,800 2,358,700
Kerr-McGee Corp. 12,293 1,357,024
Newfield Exploration Co. (d) 69,000 3,615,600
Noble Energy, Inc. 63,800 2,952,664
Pioneer Natural Resources Co. 78,400 4,163,040
Range Resources Corp. 156,900 4,686,603
Southwestern Energy Co. (d) 31,000 1,337,340
------------
78,593,061
-------------------------------------------------------------------
Refining, Marketing &
Transportation--2.8%
Sunoco, Inc. 25,400 2,418,080
Valero Energy Corp. 121,000 7,554,030
Western Refining, Inc. (d) 114,100 2,139,375
------------
12,111,485
-------------------------------------------------------------------
Transportation--0.3%
PHI, Inc. (d) 34,200 1,214,442
-------------------------------------------------------------------
Utilities--0.9%
Equitable Resources, Inc. 102,000 3,763,800
-------------------------------------------------------------------
Total Common Stocks in the
United States 268,997,769
-------------------------------------------------------------------
Total Common Stocks
(Cost--$163,956,185)--93.1% 407,523,217
===============================================================================
===============================================================================
Short-Term Beneficial
Securities Interest
===============================================================================
Merrill Lynch Liquidity Series, LLC
Cash Sweep Series I (b) $27,355,026 27,355,026
Merrill Lynch Liquidity Series, LLC
Money Market Series (b)(c) 13,001,800 13,001,800
-------------------------------------------------------------------
Total Short-Term Securities
(Cost--$40,356,826)--9.2% 40,356,826
===============================================================================
Total Investments
(Cost--$204,313,011*)--102.3% 447,880,043
Liabilities in Excess of
Other Assets--(2.3%) (9,998,565)
------------
Net Assets--100.0% $437,881,478
============
10 MERRILL LYNCH NATURAL RESOURCES TRUST JANUARY 31, 2006
Schedule of Investments (concluded) (in U.S. dollars)
* The cost and unrealized appreciation (depreciation) of investments as of
January 31, 2006, as computed for federal income tax purposes, were as
follows:
Aggregate cost ................................. $ 204,428,785
=============
Gross unrealized appreciation .................. $ 243,487,479
Gross unrealized depreciation .................. (36,221)
-------------
Net unrealized appreciation .................... $ 243,451,258
=============
(a) Depositary Receipts.
(b) Investments in companies considered to be an affiliate of the Trust, for
purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as
follows:
--------------------------------------------------------------------------
Net Interest
Affiliate Activity Income
--------------------------------------------------------------------------
Merrill Lynch Liquidity Series, LLC
Cash Sweep Series I $9,103,180 $ 449,858
Merrill Lynch Liquidity Series, LLC
Money Market Series $ 555,500 $ 8,684
--------------------------------------------------------------------------
(c) Security was purchased with the cash proceeds from securities loans.
(d) Non-income producing security.
(e) Security, or a portion of security, is on loan.
o For Trust compliance purposes, the Trust's industry classifications refer
to any one or more of the industry sub-classifications used by one or more
widely recognized market indexes or ratings group indexes, and/or as
defined by Trust management. This definition may not apply for purposes of
this report, which may combine industry sub-classifications for reporting
ease. Industries are shown as a percent of net assets.
See Notes to Financial Statements.
MERRILL LYNCH NATURAL RESOURCES TRUST JANUARY 31, 2006 11
Statement of Assets and Liabilities
As of January 31, 2006
====================================================================================================================================
Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value (including securities
loaned of $12,617,834) (identified cost--$163,956,185) .............................. $407,523,217
Investments in affiliated securities, at value (identified cost--$40,356,826) ........ 40,356,826
Cash ................................................................................. 6,498
Receivables:
Beneficial interest sold ........................................................... $ 3,569,408
Securities sold .................................................................... 500,208
Dividends .......................................................................... 58,824
Securities lending ................................................................. 775 4,129,215
------------
Prepaid expenses and other assets .................................................... 32,401
------------
Total assets ......................................................................... 452,048,157
------------
====================================================================================================================================
Liabilities
- ------------------------------------------------------------------------------------------------------------------------------------
Collateral on securities loaned, at value ............................................ 13,001,800
Payables:
Beneficial interest redeemed ....................................................... 722,823
Investment adviser ................................................................. 212,567
Distributor ........................................................................ 168,831
Other affiliates ................................................................... 60,658 1,164,879
-------------------------------
Total liabilities .................................................................... 14,166,679
------------
====================================================================================================================================
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets ........................................................................... $437,881,478
============
====================================================================================================================================
Net Assets Consist of
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Shares of beneficial interest, $.10 par value, unlimited number
of shares authorized ................................................................ $ 354,484
Class B Shares of beneficial interest, $.10 par value, unlimited number
of shares authorized ................................................................ 118,846
Class C Shares of beneficial interest, $.10 par value, unlimited number
of shares authorized ................................................................ 173,508
Class I Shares of beneficial interest, $.10 par value, unlimited number
of shares authorized ................................................................ 132,751
Paid-in capital in excess of par ..................................................... 190,229,361
Accumulated investment loss--net ..................................................... $ (759,877)
Accumulated realized capital gains--net .............................................. 4,062,364
Unrealized appreciation--net ......................................................... 243,570,041
------------
Total accumulated earnings--net ...................................................... 246,872,528
------------
Net Assets ........................................................................... $437,881,478
============
====================================================================================================================================
Net Asset Value
- ------------------------------------------------------------------------------------------------------------------------------------
Class A--Based on net assets of $202,603,521 and 3,544,843 shares of
beneficial interest outstanding ..................................................... $ 57.15
============
Class B--Based on net assets of $64,819,260 and 1,188,463 shares of
beneficial interest outstanding ..................................................... $ 54.54
============
Class C--Based on net assets of $93,427,253 and 1,735,076 shares of
beneficial interest outstanding ..................................................... $ 53.85
============
Class I--Based on net assets of $77,031,444 and 1,327,507 shares of
beneficial interest outstanding ..................................................... $ 58.03
============
See Notes to Financial Statements
12 MERRILL LYNCH NATURAL RESOURCES TRUST JANUARY 31, 2006
Statement of Operations
For the Six Months Ended January 31, 2006
===================================================================================================================================
Investment Income
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends (net of $51,418 foreign withholding tax) ........................ $ 1,218,206
Interest from affiliates .................................................. 449,858
Securities lending--net ................................................... 8,684
------------
Total income .............................................................. 1,676,748
------------
===================================================================================================================================
Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
Investment advisory fees .................................................. $ 1,090,478
Account maintenance and distribution fees--Class C ........................ 366,895
Account maintenance and distribution fees--Class B ........................ 290,578
Account maintenance fees--Class A ......................................... 210,422
Transfer agent fees--Class A .............................................. 78,602
Accounting services ....................................................... 77,946
Transfer agent fees--Class C .............................................. 40,335
Transfer agent fees--Class B .............................................. 31,645
Transfer agent fees--Class I .............................................. 29,739
Registration fees ......................................................... 28,413
Professional fees ......................................................... 27,183
Trustees' fees and expenses ............................................... 25,410
Printing and shareholder reports .......................................... 24,114
Custodian fees ............................................................ 21,071
Pricing fees .............................................................. 2,309
Other ..................................................................... 12,196
------------
Total expenses ............................................................ 2,357,336
------------
Investment loss--net ...................................................... (680,588)
------------
===================================================================================================================================
Realized & Unrealized Gain (Loss)--Net
- -----------------------------------------------------------------------------------------------------------------------------------
Realized gain on:
Investments--net ........................................................ 6,587,218
Foreign currency transactions--net ...................................... 80,926 6,668,144
------------
Change in unrealized appreciation/depreciation on:
Investments--net ........................................................ 88,381,582
Foreign currency transactions--net ...................................... (79,666) 88,301,916
-------------------------------------
Total realized and unrealized gain ........................................ 94,970,060
------------
Net Increase in Net Assets Resulting from Operations ...................... $ 94,289,472
============
See Notes to Financial Statements.
MERRILL LYNCH NATURAL RESOURCES TRUST JANUARY 31, 2006 13
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
January 31, July 31,
Increase (Decrease) in Net Assets: 2006 2005
===================================================================================================================================
Operations
- -----------------------------------------------------------------------------------------------------------------------------------
Investment loss--net ............................................................. $ (680,588) $ (966,508)
Realized gain--net ............................................................... 6,668,144 7,834,309
Change in unrealized appreciation/depreciation--net .............................. 88,301,916 90,243,170
----------------------------------
Net increase in net assets resulting from operations ............................. 94,289,472 97,110,971
----------------------------------
===================================================================================================================================
Distributions to Shareholders
- -----------------------------------------------------------------------------------------------------------------------------------
Realized gain--net:
Class A ........................................................................ (1,128,384) --
Class B ........................................................................ (386,717) --
Class C ........................................................................ (529,184) --
Class I ........................................................................ (415,609) --
----------------------------------
Net decrease in net assets derived from distributions to shareholders ............ (2,459,894) --
----------------------------------
===================================================================================================================================
Beneficial Interest Transactions
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets derived from beneficial interest transactions ......... 48,436,953 23,287,190
----------------------------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets ..................................................... 140,266,531 120,398,161
Beginning of period .............................................................. 297,614,947 177,216,786
----------------------------------
End of period* ................................................................... $ 437,881,478 $ 297,614,947
==================================
* Accumulated investment loss--net ............................................. $ (759,877) $ (79,289)
==================================
See Notes to Financial Statements.
14 MERRILL LYNCH NATURAL RESOURCES TRUST JANUARY 31, 2006
Financial Highlights
Class A
----------------------------------------------------------------------
For the Six
Months Ended For the Year Ended July 31,
The following per share data and ratios have been derived January 31, -----------------------------------------------------
from information provided in the financial statements. 2006 2005 2004 2003 2002
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .............. $ 44.32 $ 28.89 $ 21.06 $ 18.22 $ 19.35
---------------------------------------------------------------------
Investment loss--net*** ........................... (.04) (.07) (.06) (.03) (.03)
Realized and unrealized gain (loss)--net .......... 13.20 15.50 7.89 2.87 (1.10)
---------------------------------------------------------------------
Total from investment operations .................. 13.16 15.43 7.83 2.84 (1.13)
---------------------------------------------------------------------
Less distributions from realized gain--net ........ (.33) -- -- -- --
---------------------------------------------------------------------
Net asset value, end of period .................... $ 57.15 $ 44.32 $ 28.89 $ 21.06 $ 18.22
=====================================================================
==================================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ................ 29.79%+ 53.41% 37.18% 15.59% (5.84%)
=====================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses .......................................... 1.06%* 1.16% 1.25% 1.38% 1.45%
=====================================================================
Investment loss--net .............................. (.14%)* (.20%) (.23%) (.17%) (.14%)
=====================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) .......... $ 202,604 $ 136,740 $ 77,035 $ 56,094 $ 52,946
=====================================================================
Portfolio turnover ................................ 5.20% 11.14% 10.96% 18.26% 49.77%
=====================================================================
* Annualized.
** Total investment returns exclude the effect of sales charges.
*** Based on average shares outstanding.
+ Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH NATURAL RESOURCES TRUST JANUARY 31, 2006 15
Financial Highlights (continued)
Class B
--------------------------------------------------------------------
For the Six
Months Ended For the Year Ended July 31,
The following per share data and ratios have been derived January 31, ----------------------------------------------------
from information provided in the financial statements. 2006 2005 2004 2003 2002
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ................ $ 42.47 $ 27.90 $ 20.49 $ 17.87 $ 19.12
-------------------------------------------------------------------
Investment loss--net*** ............................. (.21) (.32) (.25) (.18) (.17)
Realized and unrealized gain (loss)--net ............ 12.61 14.89 7.66 2.80 (1.08)
-------------------------------------------------------------------
Total from investment operations .................... 12.40 14.57 7.41 2.62 (1.25)
-------------------------------------------------------------------
Less distributions from realized gain--net .......... (.33) -- -- -- --
-------------------------------------------------------------------
Net asset value, end of period ...................... $ 54.54 $ 42.47 $ 27.90 $ 20.49 $ 17.87
===================================================================
==================================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .................. 29.29%+ 52.22% 36.16% 14.66% (6.54%)
===================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses ............................................ 1.83%* 1.93% 2.02% 2.16% 2.23%
===================================================================
Investment loss--net ................................ (.89%)* (.97%) (1.00%) (.96%) (.91%)
===================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) ............ $ 64,819 $ 52,595 $ 35,399 $ 23,829 $ 24,468
===================================================================
Portfolio turnover .................................. 5.20% 11.14% 10.96% 18.26% 49.77%
===================================================================
* Annualized.
** Total investment returns exclude the effect of sales charges.
*** Based on average shares outstanding.
+ Aggregate total investment return.
See Notes to Financial Statements.
16 MERRILL LYNCH NATURAL RESOURCES TRUST JANUARY 31, 2006
Financial Highlights (continued)
Class C
-----------------------------------------------------------------------
For the Six
Months Ended For the Year Ended July 31,
The following per share data and ratios have been derived January 31, -------------------------------------------------------
from information provided in the financial statements. 2006 2005 2004 2003 2002
----------------------------------------------------------------------
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ............ $ 41.93 $ 27.55 $ 20.23 $ 17.65 $ 18.88
----------------------------------------------------------------------
Investment loss--net*** ......................... (.22) (.32) (.25) (.18) (.17)
Realized and unrealized gain (loss)--net ........ 12.47 14.70 7.57 2.76 (1.06)
----------------------------------------------------------------------
Total from investment operations ................ 12.25 14.38 7.32 2.58 (1.23)
----------------------------------------------------------------------
Less distributions from realized gain--net ...... (.33) -- -- -- --
----------------------------------------------------------------------
Net asset value, end of period .................. $ 53.85 $ 41.93 $ 27.55 $ 20.23 $ 17.65
======================================================================
==================================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .............. 29.31%+ 52.20% 36.18% 14.62% (6.51%)
======================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses ........................................ 1.83%* 1.93% 2.02% 2.16% 2.24%
======================================================================
Investment loss--net ............................ (.92%)* (.97%) (1.01%) (.96%) (.93%)
======================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) ........ $ 93,427 $ 56,131 $ 29,695 $ 11,789 $ 8,129
======================================================================
Portfolio turnover .............................. 5.20% 11.14% 10.96% 18.26% 49.77%
======================================================================
* Annualized.
** Total investment returns exclude the effect of sales charges.
*** Based on average shares outstanding.
+ Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH NATURAL RESOURCES TRUST JANUARY 31, 2006 17
Financial Highlights (concluded)
Class I
----------------------------------------------------------------------
For the Six
Months Ended For the Year Ended July 31,
The following per share data and ratios have been derived January 31, ----------------------------------------------------
from information provided in the financial statements. 2006 2005 2004 2003 2002
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ............. $ 44.93 $ 29.22 $ 21.25 $ 18.34 $ 19.42
---------------------------------------------------------------------
Investment income--net*** ........................ .03 .02 --+ .01 .02
Realized and unrealized gain (loss)--net ......... 13.40 15.69 7.97 2.90 (1.10)
---------------------------------------------------------------------
Total from investment operations ................. 13.43 15.71 7.97 2.91 (1.08)
---------------------------------------------------------------------
Less distributions from realized gain--net ....... (.33) -- -- -- --
---------------------------------------------------------------------
Net asset value, end of period ................... $ 58.03 $ 44.93 $ 29.22 $ 21.25 $ 18.34
=====================================================================
==================================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ............... 29.98%++ 53.76% 37.51% 15.87% (5.56%)
=====================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses ......................................... .81%* .91% 1.00% 1.12% 1.20%
=====================================================================
Investment income--net ........................... .11%* .05% .02% .07% .12%
=====================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) ......... $ 77,031 $ 52,148 $ 35,088 $ 23,981 $ 18,405
=====================================================================
Portfolio turnover ............................... 5.20% 11.14% 10.96% 18.26% 49.77%
=====================================================================
* Annualized.
** Total investment returns exclude the effect of sales charges. Effective
December 28, 2005, Class I Shares are no longer subject to any front-end
sales charge.
*** Based on average shares outstanding.
+ Amount is less than $.01 per share.
++ Aggregate total investment return.
See Notes to Financial Statements.
18 MERRILL LYNCH NATURAL RESOURCES TRUST JANUARY 31, 2006
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 U.S. generally accepted accounting principles, which may require
the use of management accruals and estimates. Actual results may differ from
these estimates. These unaudited financial statements reflect all adjustments,
which are, in the opinion of management, necessary to present a fair statement
of the results for the interim period. All such adjustments are of a normal,
recurring nature. The Trust offers multiple classes of shares. Effective
December 28, 2005, Class I Shares are no longer subject to any front-end sales
charge. Class A Shares are sold with a front-end sales charge. Shares of Class B
and Class C may be subject to a contingent deferred sales charge. Class I Shares
are sold only to certain eligible investors. All classes of shares have
identical voting, dividend, liquidation and other rights and the same terms and
conditions, except that Class A, Class B and Class C Shares bear certain
expenses related to the account maintenance of such shares, and Class B and
Class C Shares also bear certain expenses related to the distribution of such
shares. Each class has exclusive voting rights with respect to matters relating
to its account maintenance and distribution expenditures (except that Class B
shareholders may vote on certain changes to the Class A distribution plan).
Income, expenses (other than expenses attributable to a specific class) and
realized and unrealized gains and losses are allocated daily to each class based
on its relative net assets. The following is a summary of significant accounting
policies followed by the Trust.
(a) Valuation of investments -- Equity securities that are held by the Trust
that are traded on stock exchanges or the Nasdaq National Market are valued at
the last sale price or official close price on the exchange, as of the close of
business on the day the securities are being valued or, lacking any sales, at
the last available bid price for long positions, and at the last available asked
price for short positions. In cases where equity securities are traded on more
than one exchange, the securities are valued on the exchange designated as the
primary market by or under the authority of the Board of Trustees of the Trust.
Long positions traded in the over-the-counter ("OTC") market, Nasdaq Small Cap
or Bulletin Board are valued at the last available bid price or yield equivalent
obtained from one or more dealers or pricing services approved by the Board of
Trustees of the Trust. Short positions traded in the OTC market are valued at
the last available asked price. Portfolio securities that are traded both in the
OTC market and on a stock exchange are valued according to the broadest and most
representative market.
Options written are valued at the last sale price in the case of exchange-traded
options or, in the case of options traded in the OTC market, the last asked
price. Options purchased are valued at their last sale price in the case of
exchange-traded options or, in the case of options traded in the OTC market, the
last bid price. Swap agreements are valued based upon quoted fair valuations
received daily by the Trust from a pricing service or counterparty. Financial
futures contracts and options thereon, which are traded on exchanges, are valued
at their last sale price as of the close of such exchanges. Obligations with
remaining maturities of 60 days or less are valued at amortized cost unless the
Investment Adviser believes that this method no longer produces fair valuations.
Repurchase agreements are valued at cost plus accrued interest. The Trust
employs pricing services to provide certain securities prices for the Trust.
Securities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the direction of
the Board of Trustees of the Trust, including valuations furnished by the
pricing services retained by the Trust, which may use a matrix system for
valuations. The procedures of a pricing service and its valuations are reviewed
by the officers of the Trust under the general supervision of the Trust's Board
of Trustees. Such valuations and procedures will be reviewed periodically by the
Board of Trustees of the Trust.
Generally, trading in foreign securities, as well as U.S. government securities,
money market instruments and certain fixed income securities, is substantially
completed each day at various times prior to the close of business on the New
York Stock Exchange ("NYSE"). The values of such securities used in computing
the net asset value of the Trust's shares are determined as of such times.
Foreign currency exchange rates also are generally determined prior to the close
of business on the NYSE. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which they are
determined and the close of business on the NYSE that may not be reflected in
the computation of the Trust's net asset value. If events (for example, a
company announcement, market volatility or a natural disaster) occur during such
periods that are expected to materially affect the value of such securities,
those securities may be valued at their fair value as determined in good faith
by the Trust's Board of Trustees or by the Investment Adviser using a pricing
service and/or procedures approved by the Trust's Board of Trustees.
MERRILL LYNCH NATURAL RESOURCES TRUST JANUARY 31, 2006 19
Notes to Financial Statements (continued)
(b) 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 movements and movements in the
securities markets. Losses may arise due to changes in the value of the contract
or if the counterparty does not perform under the contract.
o Forward foreign exchange contracts -- The Trust may 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 Trust 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 may 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.
(c) Foreign currency transactions -- Transactions denominated in foreign
currencies are recorded at the exchange rate prevailing when recognized. Assets
and liabilities denominated in foreign currencies are valued at the exchange
rate at the end of the period. Foreign currency transactions are the result of
settling (realized) or valuing (unrealized) assets or liabilities expressed in
foreign currencies into U.S. dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on investments.
The Trust invests in foreign securities, which may involve a number of risk
factors and special considerations not present with investments in securities of
U.S. corporations.
(d) Income taxes -- It is the 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.
(e) Security transactions and investment income -- Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Dividends from foreign securities where the ex-dividend date may have passed are
subsequently recorded when the Trust has determined the ex-dividend dates.
Interest income is recognized on the accrual basis.
(f) Prepaid registration fees -- Prepaid registration fees are charged to
expense as the related shares are issued.
(g) Dividends and distributions -- Dividends and distributions paid by the Trust
are recorded on the ex-dividend dates.
(h) 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.
20 MERRILL LYNCH NATURAL RESOURCES TRUST JANUARY 31, 2006
Notes to Financial Statements (continued)
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 of MLIM. 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 was 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"), an affiliate of MLIM, 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.
For the six months ended January 31, 2006, 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 ............................ $ 17,857 $238,139
Class I ............................ $ 174 $ 2,666
- --------------------------------------------------------------------------------
For the six months ended January 31, 2006, MLPF&S received contingent deferred
sales charges of $60,945 and $17,007 relating to transactions in Class B and
Class 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, LLC or in registered money market funds
advised by MLIM or its affiliates. For the six months ended January 31, 2006,
MLIM, LLC received $3,697 in securities lending agent fees.
In addition, MLPF&S received $2,148 in commissions on the execution of portfolio
security transactions for the Trust for the six months ended January 31, 2006.
For the six months ended January 31, 2006, the Trust reimbursed MLIM $3,840 for
certain accounting services.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML & Co., is
the Trust's transfer agent.
Certain officers and/or trustees of the Trust are officers and/or directors of
MLIM, PSI, MLAM U.K., FDS, FAMD, ML & Co., and/or MLIM, LLC.
In February 2006, ML & Co. and BlackRock, Inc. entered into an agreement to
merge ML & Co.'s investment management business, including MLIM, with the
investment management business of BlackRock, Inc. The transaction is expected to
close in the third quarter of 2006.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended January 31, 2006 were $50,692,926 and $17,476,683, respectively.
MERRILL LYNCH NATURAL RESOURCES TRUST JANUARY 31, 2006 21
Notes to Financial Statements (concluded)
4. Beneficial Interest Transactions:
Net increase in net assets derived from beneficial interest transactions was
$48,436,953 and $23,287,190 for the six months ended January 31, 2006 and the
year ended July 31, 2005, respectively.
Transactions in shares of beneficial interest for each class were as follows:
- -------------------------------------------------------------------------------
Class A Shares for the Six Months Dollar
Ended January 31, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 899,269 $ 44,377,098
Automatic conversion of shares ........... 56,715 2,693,166
Shares issued to shareholders in
reinvestment of distributions .......... 17,894 907,755
--------------------------------
Total issued ............................. 973,878 47,978,019
Shares redeemed .......................... (514,468) (25,087,342)
--------------------------------
Net increase ............................. 459,410 $ 22,890,677
================================
- -------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended July 31, 2005 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 925,625 $ 33,818,955
Automatic conversion of shares ........... 82,089 2,927,622
--------------------------------
Total issued ............................. 1,007,714 36,746,577
Shares redeemed .......................... (588,367) (20,666,239)
--------------------------------
Net increase ............................. 419,347 $ 16,080,338
================================
- -------------------------------------------------------------------------------
Class B Shares for the Six Months Dollar
Ended January 31, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 250,597 $ 11,755,442
Shares issued to shareholders in
reinvestment of distributions .......... 6,962 337,481
--------------------------------
Total issued ............................. 257,559 12,092,923
--------------------------------
Shares redeemed .......................... (248,277) (11,376,770)
Automatic conversion of shares ........... (59,302) (2,693,166)
--------------------------------
Total redeemed ........................... (307,579) (14,069,936)
--------------------------------
Net decrease ............................. (50,020) $ (1,977,013)
================================
- -------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended July 31, 2005 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 448,297 $ 15,295,260
--------------------------------
Shares redeemed .......................... (393,176) (13,224,923)
Automatic conversion of shares ........... (85,373) (2,927,622)
--------------------------------
Total redeemed ........................... (478,549) (16,152,545)
--------------------------------
Net decrease ............................. (30,252) $ (857,285)
================================
- -------------------------------------------------------------------------------
Class C Shares for the Six Months Dollar
Ended January 31, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 603,521 $ 28,379,949
Shares issued to shareholders in
reinvestment of distributions .......... 10,006 478,792
--------------------------------
Total issued ............................. 613,527 28,858,741
Shares redeemed .......................... (217,078) (9,982,926)
--------------------------------
Net increase ............................. 396,449 $ 18,875,815
================================
- -------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended July 31, 2005 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 675,082 $ 23,177,778
Shares redeemed .......................... (414,335) (14,289,502)
--------------------------------
Net increase ............................. 260,747 $ 8,888,276
================================
- -------------------------------------------------------------------------------
Class I Shares for the Six Months Dollar
Ended January 31, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 376,223 $ 19,087,719
Shares issued to shareholders in
reinvestment of distributions .......... 7,457 383,897
--------------------------------
Total issued ............................. 383,680 19,471,616
Shares redeemed .......................... (216,749) (10,824,142)
--------------------------------
Net increase ............................. 166,931 $ 8,647,474
================================
- -------------------------------------------------------------------------------
Class I Shares for the Year Dollar
Ended July 31, 2005 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 367,722 $ 13,764,449
Shares redeemed .......................... (407,861) (14,588,588)
--------------------------------
Net decrease ............................. (40,139) $ (824,139)
================================
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 a group of 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 .07% 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 Trust's election, the federal funds rate plus .50% or a base rate as
defined in the credit agreement. The Trust did not borrow under the credit
agreement during the six months ended January 31, 2006. On November 23, 2005 the
credit agreement was renewed for one year under substantially the same terms.
6. Capital Loss Carryforward:
On July 31, 2005, the Trust had a net capital loss carryforward of $36,268, all
of which expires in 2011. This amount will be available to offset like amounts
of any future taxable gains.
22 MERRILL LYNCH NATURAL RESOURCES TRUST JANUARY 31, 2006
Officers and Trustees
Robert C. Doll, Jr., President and Trustee
Donald W. Burton, Trustee
Laurie Simon Hodrick, Trustee
John Francis O'Brien, Trustee
David H. Walsh, Trustee
Fred G. Weiss, Trustee
Donald C. Burke, Vice President and Treasurer
Robert M. Shearer, Vice President and Portfolio Manager
Jeffrey Hiller, Chief Compliance Officer
Alice A. Pellegrino, Secretary
Custodian
The Bank of New York
100 Church Street
New York, NY 10286
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
800-637-3863
Availability of Quarterly Schedule of Investments
The Trust files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Trust's Forms N-Q are available on the SEC's Web site at
http://www.sec.gov. The Trust's Forms N-Q may also be reviewed and copied at the
SEC's Public Reference Room in Washington, DC. Information on the operation of
the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Electronic Delivery
The Trust offers electronic delivery of communications to its shareholders. In
order to receive this service, you must register your account and provide us
with e-mail information. To sign up for this service, simply access this Web
site at http://www.icsdelivery.com/live and follow the instructions. When you
visit this site, you will obtain a personal identification number (PIN). You
will need this PIN should you wish to update your e-mail address, choose to
discontinue this service and/or make any other changes to the service. This
service is not available for certain retirement accounts at this time.
MERRILL LYNCH NATURAL RESOURCES TRUST JANUARY 31, 2006 23
[LOGO] Merrill Lynch Investment Managers
www.mlim.ml.com
- --------------------------------------------------------------------------------
Mercury Advisors
A Division of Merrill Lynch Investment Managers
www.mercury.ml.com
This report is not authorized for use as an offer of sale or a solicitation of
an offer to buy shares of the 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 1-800-637-3863; (2) at
www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's Web
site at http://www.sec.gov. Information about how the Trust voted proxies
relating to securities held in the Trust's portfolio during the most recent
12-month period ended June 30 is available (1) at www.mutualfunds.ml.com and (2)
on the Securities and Exchange Commission's Web site at http://www.sec.gov.
Merrill Lynch Natural Resources Trust
Box 9011
Princeton, NJ
08543-9011
#10303 -- 1/06
Item 2 - Code of Ethics - Not Applicable to this semi-annual report
Item 3 - Audit Committee Financial Expert - Not Applicable to this semi-annual
report
Item 4 - Principal Accountant Fees and Services - Not Applicable to this
semi-annual report
Item 5 - Audit Committee of Listed Registrants - Not Applicable
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Not Applicable
Item 8 - Portfolio Managers of Closed-End Management Investment Companies - Not
Applicable
Item 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable
Item 10 - Submission of Matters to a Vote of Security Holders - Not Applicable
Item 11 - Controls and Procedures
11(a) - The registrant's certifying officers have reasonably designed such
disclosure controls and procedures to ensure material information
relating to the registrant is made known to us by others particularly
during the period in which this report is being prepared. The
registrant's certifying officers have determined that the registrant's
disclosure controls and procedures are effective based on our evaluation
of these controls and procedures as of a date within 90 days prior to
the filing date of this report.
11(b) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR
270.30a-3(d)) that occurred during the last fiscal half-year of the
period covered by this report that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - Not Applicable to this semi-annual report
12(a)(2) - Certifications - Attached hereto
12(a)(3) - Not Applicable
12(b) - Certifications - Attached hereto
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Merrill Lynch Natural Resources Trust
By: /s/ Robert C. Doll, Jr.
---------------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
Merrill Lynch Natural Resources Trust
Date: March 20, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Robert C. Doll, Jr.
---------------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
Merrill Lynch Natural Resources Trust
Date: March 20, 2006
By: /s/ Donald C. Burke
---------------------------------
Donald C. Burke,
Chief Financial Officer of
Merrill Lynch Natural Resources Trust
Date: March 20, 2006