UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-04282
Name of Fund: BlackRock Natural Resources Trust
Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809
Name and address of agent for service: Donald C. Burke, Chief Executive
Officer, BlackRock 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: (800) 441-7762
Date of fiscal year end: 07/31/2008
Date of reporting period: 08/01/2007 - 07/31/2008
Item 1 - Report to Stockholders
EQUITIES FIXED INCOME REAL ESTATE
LIQUIDITY ALTERNATIVES BLACKROCK SOLUTIONS
BlackRock BLACKROCK
Natural Resources Trust
ANNUAL REPORT | JULY 31, 2008
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
Table of Contents
================================================================================
Page
- --------------------------------------------------------------------------------
A Letter to Shareholders ................................................. 3
Annual Report:
Trust Summary ............................................................ 4
About Trust Performance .................................................. 6
Disclosure of Expenses ................................................... 6
Portfolio Information .................................................... 7
Financial Statements:
Schedule of Investments .............................................. 8
Statement of Assets and Liabilities .................................. 11
Statement of Operations .............................................. 12
Statements of Changes in Net Assets .................................. 13
Financial Highlights ..................................................... 14
Notes to Financial Statements ............................................ 16
Report of Independent Registered Public Accounting Firm .................. 21
Important Tax Information (Unaudited) .................................... 21
Disclosure of Investment Advisory Agreement and Subadvisory Agreement .... 22
Officers and Trustees .................................................... 25
Additional Information ................................................... 29
Mutual Fund Family ....................................................... 31
2 BLACKROCK NATURAL RESOURCES TRUST JULY 31, 2008
A Letter to Shareholders
Dear Shareholder
For more than a year, investors have been besieged by a weak housing market, the
bursting of the credit bubble that has troubled the financial sector, and
surging food and oil prices, which have stoked inflation concerns. Healthy
nonfinancial corporate profits and robust exporting activity remained among the
few bright spots, helping the economy to grow at a modest, but still positive,
pace.
The Federal Reserve Board (the "Fed") has been aggressive in its attempts to
stimulate economic growth and stabilize financial markets. In addition to
slashing the target federal funds rate 325 basis points (3.25%) between
September 2007 and April 2008, the central bank introduced the new Term
Securities Lending Facility, granted broker-dealers access to the discount
window and used its own balance sheet to help negotiate the sale of Bear
Stearns. However, the end of the period saw a pause in Fed action; the central
bank held the target rate steady at 2.0% as it attempted to balance weak growth
and inflationary pressures.
The Fed's bold response to the financial crisis helped mitigate credit stress
and investor anxiety, albeit temporarily. U.S. equity markets sank sharply over
the reporting period, notwithstanding a brief rally in the spring and another in
mid-summer, and international markets followed suit.
Treasury securities also traded in a volatile fashion, but generally rallied
(yields fell as prices correspondingly rose), as the broader flight-to-quality
theme persisted. The yield on 10-year Treasury issues, which fell to 3.34% in
March, climbed to the 4.20% range in mid-June as investors temporarily shifted
out of Treasury issues in favor of riskier assets (such as stocks and other
high-quality fixed income sectors), then reversed course and declined to 3.99%
by period-end when credit fears re-emerged. Meanwhile, tax-exempt issues
underperformed their taxable counterparts, as problems among municipal bond
insurers and the failure in the market for auction rate securities continued to
pressure the group.
Overall, the major benchmark indexes generated results that reflected heightened
risk aversion:
Total Returns as of July 31, 2008 6-month 12-month
===========================================================================================================
U.S. equities (S&P 500 Index) (7.08)% (11.09)%
- -----------------------------------------------------------------------------------------------------------
Small cap U.S. equities (Russell 2000 Index) 0.86 (6.71)
- -----------------------------------------------------------------------------------------------------------
International equities (MSCI Europe, Australasia, Far East Index) (5.04) (12.19)
- -----------------------------------------------------------------------------------------------------------
Fixed income (Lehman Brothers U.S. Aggregate Index) (0.63) 6.15
- -----------------------------------------------------------------------------------------------------------
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) (0.85) 2.83
- -----------------------------------------------------------------------------------------------------------
High yield bonds (Lehman Brothers U.S. Corporate High Yield 2% Issuer Capped Index) (0.80) 0.52
- -----------------------------------------------------------------------------------------------------------
Past performance is no guarantee of future results. Index performance shown for
illustrative purposes only.
You cannot invest directly in an index.
Shortly before this shareholder report mailing, the investment landscape was
dramatically altered as the ongoing credit crisis intensified, resulting in a
widespread breakdown in the financial services sector and unprecedented
government intervention. Through periods of market turbulence, as ever,
BlackRock's full resources are dedicated to the management of our clients'
assets. For our most current views on the economy and financial markets, we
invite you to visit www.blackrock.com/funds. As always, we thank you for
entrusting BlackRock with your investment assets, and we look forward to
continuing to serve you in the months and years ahead.
Sincerely,
/s/ Rob Kapito
Rob Kapito
President, BlackRock Advisors, LLC
3
THIS PAGE NOT PART OF YOUR FUND REPORT
Trust Summary
Portfolio Management Commentary
How did the Trust perform?
o Trust returns for the 12-month period significantly outpaced those of the
broad-market S&P 500 Index and the MSCI Natural Resources Index. Given its
focus on natural resources stocks, we deem the MSCI index a more
comparable means for measuring Trust performance.
What factors influenced performance?
o Solid security selection was the primary contributor to the Trust's
outperformance of the MSCI benchmark. Stock selection was particularly
strong within the exploration & production and integrated oil & gas
subsectors. Investments in coal also enhanced annual results. Among the
strongest-performing holdings within exploration & production were EOG
Resources, Inc. and Devon Energy Corp.
o Negative factors were limited and had minimal impact on the Trust's total
performance during the 12 months. However, a small exposure to both
refiners and metals & mining did detract modestly from absolute returns.
Individual holdings Valero Energy Corp. and HudBay Minerals, Inc. were the
weakest performers within these segments.
Describe recent portfolio activity.
o The Trust typically has low turnover, consistent with our philosophy and
process. As such, changes to the portfolio during the annual period were
minimal. Notable purchases included Nabors Industries Ltd., and
significant sales included CanArgo Energy Corp.
o More recently, we reduced our exposure to Baker Hughes, Inc. and Hercules
Offshore, Inc. We purchased Connacher Oil & Gas Ltd., Pioneer Natural
Resources Co. and Intrepid Potash, Inc., as we believe potash prices will
remain robust.
Describe Trust positioning at period-end.
o At period end, the Trust was most heavily invested in producers of oil and
natural gas, in addition to Canadian oil sand miners. Despite slowing
demand in U.S. and European markets, the supply and demand balance for
petroleum remains tight, and any disruption in supply could cause prices
to recover from their recent correction.
o The Trust held sizable positions in oil service providers and deep-water
drillers as well. While foreign national oil companies (NOCs) make terms
more difficult for the international oil companies (IOCs) as they move
from royalty regimes to increasingly more production sharing contracts, as
well as rising petroleum and mineral taxes, integrated oil and oil service
companies will see increased demand for their products and technology to
assist the foreign NOCs develop their resources. Further, we see continued
long-term demand for deep-water drillers. Maturing onshore oil basins have
pushed the industry to search in deeper waters in West Africa, the Gulf of
Mexico and recently, discoveries offshore Brazil. Should political efforts
win approval to opening up drilling off the U.S. outercontinental shelf,
additional demand for deep-water rigs can be expected.
o The Trust maintained a modest underweight in integrated oil companies,
given a more difficult environment for gaining access to prospective
basins and increasingly complex contractual terms.
The views expressed reflect the opinions of BlackRock as of the date of this
report and are subject to change based on changes in market, economic or other
conditions. These views are not intended to be a forecast of future events and
are no guarantee of future results.
Expense Example
Actual Hypothetical 2
------------------------------------------------------ ----------------------------------------------------
Beginning Ending Beginning Ending
Account Value Account Value Expenses Paid Account Value Account Value Expenses Paid
February 1, 2008 July 31, 2008 During the Period 1 February 1, 2008 July 31, 2008 During the Period 1
- ------------------------------------------------------------------------------------------------------------------------------------
Institutional ......... $1,000 $1,118.60 $4.32 $1,000 $1,020.82 $4.12
Investor A ............ $1,000 $1,117.20 $5.69 $1,000 $1,019.53 $5.42
Investor B ............ $1,000 $1,113.10 $9.56 $1,000 $1,015.85 $9.12
Investor C ............ $1,000 $1,113.00 $9.72 $1,000 $1,015.70 $9.27
- ------------------------------------------------------------------------------------------------------------------------------------
1 For each class of the Trust, expenses are equal to the annualized expense
ratio for the class (0.82% for Institutional, 1.08% for Investor A, 1.82%
for Investor B and 1.85% for Investor C), multiplied by the average
account value over the period, multiplied by 182/366 (to reflect the
one-half year period shown).
2 Hypothetical 5% annual return before expenses is calculated by pro-rating
the number of days in the most recent fiscal half year divided by 366.
See "Disclosure of Expenses" on page 6 for further information on how
expenses were calculated.
4 BLACKROCK NATURAL RESOURCES TRUST JULY 31, 2008
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Trust's Institutional
and Investor A Shares compared to growth of an investment in the S&P 500(R)
Index and the MSCI Natural Resources Index. Values are from July 1998 to July
2008:
MSCI Natural
Institutional Investor A S&P 500(R) Resources
Shares (1,2) Shares(1,2) Index(3) Index(4)
7/98 $10,000 $9,475 $10,000 $10,000
7/99 $12,291 $11,612 $12,020 $12,180
7/00 $13,518 $12,745 $13,099 $11,654
7/01 $15,424 $14,507 $11,222 $12,005
7/02 $14,567 $13,660 $8,571 $10,629
7/03 $16,878 $15,789 $9,483 $11,132
7/04 $23,208 $21,659 $10,732 $14,720
7/05 $35,686 $33,227 $12,240 $19,742
7/06 $44,643 $41,456 $12,898 $24,841
7/07 $54,011 $50,023 $14,979 $31,600
7/08 $63,115 $58,313 $13,317 $33,660
(1) Assuming maximum sales charge, if any, transaction costs and other
operating expenses, including advisory fees.
(2) The Trust invests primarily in equity securities of domestic and foreign
companies with substantial natural resource assets.
(3) 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.
(4) This unmanaged Index is comprised of all global securities classified as
natural-resource related securities.
Performance Summary for the Period Ended July 31, 2008
Average Annual Total Returns 1
-------------------------------------------------------------
1 Year 5 Years 10 Years
------------------ ------------------ ------------------
6-Month w/o sales w/sales w/o sales w/sales w/o sales w/sales
Total Returns charge charge charge charge charge charge
- -----------------------------------------------------------------------------------------------------------------------
Institutional ........................... 11.86% 16.86% -- 30.19% -- 20.23% --
Investor A .............................. 11.72 16.57 10.45% 29.86 28.47% 19.93 19.28%
Investor B .............................. 11.31 15.69 11.19 28.88 28.73 19.18 19.18
Investor C .............................. 11.30 15.67 14.67 28.87 28.87 19.00 19.00
S&P 500 Index ........................... (7.08) (11.09) -- 7.03 -- 2.91 --
MSCI Natural Resources Index ............ 6.17 6.52 -- 24.77 -- 12.90 --
- -----------------------------------------------------------------------------------------------------------------------
1 Assuming maximum sales charges. See "About Trust Performance" on page 6
for a detailed description of share classes, including any related sales
charges and fees.
Past performance is not indicative of future results.
BLACKROCK NATURAL RESOURCES TRUST JULY 31, 2008 5
About Trust Performance
o Institutional Shares are not subject to any sales charge. Institutional
Shares bear no ongoing distribution or service fees and are available only
to eligible investors.
o Investor A Shares incur a maximum initial sales charge (front-end load) of
5.25% and a service fee of 0.25% per year (but no distribution fee).
o Investor B Shares are subject to a maximum contingent deferred sales
charge of 4.50% declining to 0% after six years. In addition, Investor B
Shares are subject to a distribution fee of 0.75% per year and a service
fee of 0.25% per year. These shares automatically convert to Investor A
Shares after approximately eight years. (There is no initial sales charge
for automatic share conversions.) All returns for periods greater than
eight years reflect this conversion.
o Investor C Shares are subject to a distribution fee of 0.75% per year and
a service fee of 0.25% per year. In addition, Investor C Shares are
subject to a 1% contingent deferred sales charge if redeemed within one
year of purchase.
Performance information reflects past performance and does not guarantee
future results. Current performance may be lower or higher than the
performance data quoted. Refer to www.blackrock.com/funds 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 the
performance tables on page 5 assume reinvestment of all dividends and
capital gain distributions, if any, at net asset value on the ex-dividend
date. Investment return and principal value of shares will fluctuate so
that shares, when redeemed, may be worth more or less than their original
cost. Dividends paid to each class of shares will vary because of the
different levels of service, distribution and transfer agency fees
applicable to each class, which are deducted from the income available to
be paid to shareholders.
Disclosure of Expenses
Shareholders of the 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 expense example on page 4 (which is
based on a hypothetical investment of $1,000 invested on February 1, 2008 and
held through July 31, 2008) 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 table 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 corresponding to their share class under the
heading entitled "Expenses Paid During the Period."
The table also 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 hypothetical 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.
6 BLACKROCK NATURAL RESOURCES TRUST JULY 31, 2008
Portfolio Information
As of July 31, 2008
Percent of
Ten Largest Equity Holdings Net Assets
- --------------------------------------------------------------------------------
EOG Resources, Inc. ...................................................... 4%
Transocean, Inc. ......................................................... 4
Murphy Oil Corp. ......................................................... 3
National Oilwell Varco, Inc. ............................................. 3
Devon Energy Corp. ....................................................... 3
Apache Corp. ............................................................. 2
Weatherford International Ltd. ........................................... 2
Suncor Energy, Inc. ...................................................... 2
Chevron Corp. ............................................................ 2
Talisman Energy, Inc. .................................................... 2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Percent of
Five Largest Industries Net Assets
- --------------------------------------------------------------------------------
Oil & Gas Exploration & Production ...................................... 19%
Canadian Independents ................................................... 13
Integrated Oil & Gas .................................................... 13
Oil & Gas Equipment & Services .......................................... 12
Oil & Gas Drilling ...................................................... 10
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
Percent of
Long-Term
Geographic Allocation Investments
- --------------------------------------------------------------------------------
United States ........................................................... 65%
Canada .................................................................. 20
Cayman Islands .......................................................... 4
Brazil .................................................................. 3
France .................................................................. 2
Italy ................................................................... 1
Australia ............................................................... 1
China ................................................................... 1
Hong Kong ............................................................... 1
United Kingdom .......................................................... 1
Greece .................................................................. 1
- --------------------------------------------------------------------------------
BLACKROCK NATURAL RESOURCES TRUST JULY 31, 2008 7
Schedule of Investments July 31, 2008
(Percentages shown are based on Net Assets)
Common Stocks Shares Value
===============================================================================
Australia -- 1.3%
Metals & Mining -- 1.3%
Alumina Ltd. 153,800 $ 664,759
BHP Billiton Ltd. 60,500 2,257,611
Newcrest Mining Ltd. 162,000 4,481,794
- -------------------------------------------------------------------------------
Total Common Stocks in Australia 7,404,164
===============================================================================
Brazil -- 2.4%
Metals & Mining -- 0.9%
Companhia Vale do Rio Doce (Common Shares) (a) 174,000 5,225,220
- -------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels -- 1.1%
Petroleo Brasileiro SA (a) 107,400 6,004,734
- -------------------------------------------------------------------------------
Paper & Forest Products -- 0.4%
Votorantim Celulose e Papel SA (a) 100,000 2,422,000
- -------------------------------------------------------------------------------
Total Common Stocks in Brazil 13,651,954
===============================================================================
Canada -- 18.0%
Canadian Independents -- 13.3%
Camdemce Energy, Inc. (b) 81,068 530,451
Canadian Natural Resources Ltd. 85,600 6,688,663
Compton Petroleum Corp. (b) 192,800 1,978,933
Crew Energy, Inc. (b) 270,700 3,851,847
EnCana Corp. 123,622 8,921,984
Husky Energy, Inc. 106,400 4,711,339
Iteration Energy Ltd. (b) 144,063 997,516
MGM Energy Corp. (b) 3,000 1,699
Nexen, Inc. 118,600 3,730,754
Niko Resources Ltd. 21,800 1,800,078
Oilexco, Inc. (b) 82,000 1,307,740
Pan Orient Energy Corp. (b) 224,000 1,826,652
Paramount Resources Ltd. (b) 75,000 1,183,652
Petro-Canada Inc. 116,800 5,390,857
ProEx Energy Ltd. (b) 140,653 2,895,615
Suncor Energy, Inc. 228,400 12,415,395
TUSK Energy Corp. (b) 633,096 1,391,148
TUSK Energy Corp. (b)(c) 40,000 87,895
Talisman Energy, Inc. 601,800 10,761,227
TriStar Oil and Gas Ltd. (b) 222,959 4,017,377
UTS Energy Corp. (b) 282,500 1,407,051
------------
75,897,873
- -------------------------------------------------------------------------------
Energy Equipment & Services -- 0.2%
Enquest Energy Services Corp. (b) 47,666 153,619
Trican Well Service Ltd. 42,500 933,883
------------
1,087,502
- -------------------------------------------------------------------------------
Gold -- 1.0%
Barrick Gold Corp. 51,800 2,193,513
Eldorado Gold Corp. (b) 404,500 3,302,525
------------
5,496,038
- -------------------------------------------------------------------------------
Metals & Mining -- 2.2%
Franco-Nevada Corp. 75,000 1,560,867
Goldcorp, Inc. 124,682 4,645,362
HudBay Minerals, Inc. (b) 195,000 1,883,442
Inmet Mining Corp. 12,700 805,324
Teck Cominco Ltd. Class B 84,964 3,902,395
------------
12,797,390
- -------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels -- 1.3%
Addax Petroleum Corp. 44,300 1,730,121
Connacher Oil And Gas Ltd. (b) 436,000 1,843,723
Tesco Corp. (b) 106,300 3,302,741
Uranium One, Inc. (b) 120,000 428,927
------------
7,305,512
- -------------------------------------------------------------------------------
Total Common Stocks in Canada 102,584,315
===============================================================================
Cayman Islands -- 3.9%
Oil & Gas Drilling -- 3.6%
Transocean, Inc. 150,909 20,528,151
- -------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels -- 0.3%
Coastal Energy Co. (b)(c) 500,000 1,684,653
- -------------------------------------------------------------------------------
Total Common Stocks in the Cayman Islands 22,212,804
===============================================================================
China -- 0.8%
Metals & Mining -- 0.8%
Aluminum Corp. of China Ltd. (a) 188,500 4,789,785
- -------------------------------------------------------------------------------
Total Common Stocks in China 4,789,785
===============================================================================
France -- 2.2%
Integrated Oil & Gas -- 1.2%
Total SA (a) 90,800 6,946,200
- -------------------------------------------------------------------------------
Oil & Gas Equipment & Services -- 1.0%
Technip SA (a) 64,975 5,543,336
- -------------------------------------------------------------------------------
Total Common Stocks in France 12,489,536
===============================================================================
Greece -- 0.5%
Marine -- 0.5%
Aegean Marine Petroleum Network, Inc. 72,300 2,617,260
- -------------------------------------------------------------------------------
Total Common Stocks in Greece 2,617,260
===============================================================================
Hong Kong -- 0.8%
Oil & Gas Exploration & Production -- 0.8%
CNOOC Ltd. (a) 31,400 4,627,732
- -------------------------------------------------------------------------------
Total Common Stocks in Hong Kong 4,627,732
===============================================================================
Italy -- 1.3%
Integrated Oil & Gas -- 0.2%
Eni SpA (a) 19,250 1,297,450
- -------------------------------------------------------------------------------
Oil & Gas Drilling -- 1.1%
Saipem SpA 164,500 6,362,480
- -------------------------------------------------------------------------------
Total Common Stocks in Italy 7,659,930
===============================================================================
United Kingdom -- 0.7%
Energy Equipment & Services -- 0.3%
Acergy SA (a) 85,000 1,427,150
- -------------------------------------------------------------------------------
Integrated Oil & Gas -- 0.4%
BP Plc (a) 40,800 2,506,752
- -------------------------------------------------------------------------------
Total Common Stocks in the United Kingdom 3,933,902
===============================================================================
See Notes to Financial Statements.
8 BLACKROCK NATURAL RESOURCES TRUST JULY 31, 2008
Schedule of Investments (continued) (Percentages shown are based on Net Assets)
Common Stocks Shares Value
===============================================================================
United States -- 59.4%
Chemicals -- 0.5%
E.I. du Pont de Nemours & Co. 33,400 $ 1,463,254
Praxair, Inc. 18,000 1,687,140
Tronox, Inc. Class B 2,478 3,469
------------
3,153,863
- -------------------------------------------------------------------------------
Energy Equipment & Services -- 6.6%
Cameron International Corp. (b) 186,200 8,892,912
Dresser-Rand Group, Inc. (b) 179,800 6,850,380
Dril-Quip, Inc. (b) 56,000 3,031,840
National Oilwell Varco, Inc. (b) 239,601 18,839,827
------------
37,614,959
- -------------------------------------------------------------------------------
Independent Power Producers &
Energy Traders -- 0.0%
Dynegy, Inc. Class A (b) 2,656 17,875
- -------------------------------------------------------------------------------
Integrated Oil & Gas -- 11.3%
Chevron Corp. 139,591 11,803,815
ConocoPhillips 112,475 9,180,209
Exxon Mobil Corp. 129,328 10,401,851
Hess Corp. 64,800 6,570,720
Marathon Oil Corp. 142,400 7,044,528
Murphy Oil Corp. 247,400 19,725,202
------------
64,726,325
- -------------------------------------------------------------------------------
Metals & Mining -- 1.0%
Alcoa, Inc. 22,900 772,875
Intrepid Potash, Inc. (b) 18,400 1,017,520
Newmont Mining Corp. 9,100 436,436
Southern Copper Corp. 137,400 3,816,972
------------
6,043,803
- -------------------------------------------------------------------------------
Oil & Gas Drilling -- 5.4%
Diamond Offshore Drilling, Inc. 46,600 5,559,380
ENSCO International, Inc. 30,900 2,136,426
Helmerich & Payne, Inc. 95,200 5,629,176
Hercules Offshore, Inc. (b) 39,300 981,321
Nabors Industries Ltd. (b) 109,000 3,974,140
Noble Corp. 149,900 7,775,313
Pride International, Inc. (b) 70,700 2,740,332
Rowan Cos., Inc. 50,000 1,990,000
------------
30,786,088
- -------------------------------------------------------------------------------
Oil & Gas Equipment & Services -- 10.6%
BJ Services Co. 96,000 2,822,400
Baker Hughes, Inc. 89,300 7,403,863
Complete Production Services, Inc. (b) 39,100 1,244,944
Exterran Holdings, Inc. (b) 521 29,405
FMC Technologies, Inc. (b)(d) 142,600 8,809,828
Halliburton Co. 174,200 7,807,644
Oil States International, Inc. (b) 73,400 4,028,192
Schlumberger Ltd. 75,800 7,701,280
Smith International, Inc. 97,400 7,244,612
Weatherford International Ltd. (b) 349,452 13,184,824
------------
60,276,992
- -------------------------------------------------------------------------------
Oil & Gas Exploration & Production -- 18.4%
Anadarko Petroleum Corp. 52,200 3,022,902
Apache Corp. 126,760 14,218,669
Bill Barrett Corp. (b) 10,600 436,084
Cabot Oil & Gas Corp. Class A 88,200 3,881,682
Carrizo Oil & Gas, Inc. (b) 59,100 2,975,094
Cimarex Energy Co. 21,094 1,099,208
Devon Energy Corp. 196,898 18,683,651
EOG Resources, Inc. 210,900 21,201,784
Forest Oil Corp. (b) 45,800 2,611,974
Mariner Energy, Inc. (b) 37,065 980,740
Newfield Exploration Co. (b) 69,000 3,379,620
Noble Energy, Inc. 63,800 4,712,906
Occidental Petroleum Corp. 117,100 9,230,993
Pioneer Natural Resources Co. 36,600 2,175,870
Range Resources Corp. 156,900 7,619,064
SandRidge Energy, Inc. (b) 104,300 5,099,227
Southwestern Energy Co. (b) 62,000 2,251,220
XTO Energy, Inc. 25,125 1,186,654
------------
104,767,342
- -------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels -- 3.5%
Arch Coal, Inc. 36,000 2,027,160
Consol Energy, Inc. 68,200 5,073,398
Denbury Resources, Inc. (b) 58,113 1,635,300
Patriot Coal Corp. (b) 13,920 1,756,008
Peabody Energy Corp. 139,200 9,416,880
------------
19,908,746
- -------------------------------------------------------------------------------
Refining, Marketing & Transportation -- 0.8%
Holly Corp. 28,000 800,240
Sunoco, Inc. 13,400 544,174
Valero Energy Corp. 89,000 2,973,490
------------
4,317,904
- -------------------------------------------------------------------------------
Utilities -- 1.3%
Equitable Resources, Inc. 102,000 5,329,500
Williams Cos., Inc. 67,200 2,153,760
------------
7,483,260
- -------------------------------------------------------------------------------
Total Common Stocks in the United States 339,097,157
===============================================================================
Total Common Stocks -- 91.3% 521,068,539
===============================================================================
===============================================================================
Warrants (e)
===============================================================================
Canada -- 0.0%
Energy Equipment & Services -- 0.0%
Enquest Energy Services Corp. (expires 9/30/08) 715,000 0
- -------------------------------------------------------------------------------
Total Warrants -- 0.0% 0
===============================================================================
Total Long-Term Investments
(Cost -- $198,293,877) -- 91.3% 521,068,539
===============================================================================
Short-Term Securities Shares
===============================================================================
Merrill Lynch Premier Institutional
Fund, 2.56% (f)(g)(h) 6,031,600 6,031,600
Fidelity Institutional Money Market Funds
Prime Portfolio, 2.45% (g) 49,663,296 49,663,296
- -------------------------------------------------------------------------------
Total Short-Term Securities (Cost -- $55,694,896) -- 9.8% 55,694,896
===============================================================================
Total Investments (Cost -- $253,988,773*) -- 101.1% 576,763,435
Liabilities in Excess of Other Assets -- (1.1)% (6,300,163)
------------
Net Assets -- 100.0% $570,463,272
============
See Notes to Financial Statements.
BLACKROCK NATURAL RESOURCES TRUST JULY 31, 2008 9
Schedule of Investments (concluded) (Percentages shown are based on Net Assets)
* The cost and unrealized appreciation (depreciation) of investments as of
July 31, 2008, as computed for federal income tax purposes, were as
follows:
Aggregate cost ......................................... $ 254,497,233
=============
Gross unrealized appreciation .......................... $ 326,854,310
Gross unrealized depreciation .......................... (4,588,108)
-------------
Net unrealized appreciation ............................ $ 322,266,202
=============
(a) Depositary receipts.
(b) Non-income producing security.
(c) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration to qualified, institutional investors. Unless otherwise
indicated, these securities are considered to be liquid.
(d) Security, or a portion of security, is on loan.
(e) Warrants entitle the Trust to purchase a predetermined number of shares of
common stock and are non-income producing. The purchase price and number
of shares are subject to adjustment under certain conditions until the
expiration date.
(f) 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
Affiliate Activity Income
--------------------------------------------------------------------------
BlackRock Liquidity Series, LLC
Cash Sweep Series $(13,479,613) $886,111
BlackRock Liquidity Series, LLC
Money Market Series $(10,412,500) $ 55,519
Merrill Lynch Premier
Institutional Fund 6,031,600 $ 76
--------------------------------------------------------------------------
(g) Represents the current yield as of report date.
(h) Security was purchased with the cash proceeds from securities loans.
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. These industry classifications are unaudited.
See Notes to Financial Statements.
10 BLACKROCK NATURAL RESOURCES TRUST JULY 31, 2008
Statement of Assets and Liabilities
July 31, 2008
========================================================================================================================
Assets
- ------------------------------------------------------------------------------------------------------------------------
Investments at value -- unaffiliated (including securities loaned of $5,479,886) (cost -- $247,957,173) $ 570,731,835
Investments at value -- affiliated (cost -- $6,031,600) ............................................... 6,031,600
Foreign currency at value (cost -- $1,259,068) ........................................................ 1,247,796
Capital shares sold receivable ........................................................................ 745,175
Dividends receivable .................................................................................. 230,068
Interest receivable (including $113,844 from affiliates) .............................................. 117,660
Investments sold receivable ........................................................................... 98,237
Prepaid expenses ...................................................................................... 27,440
Securities lending income receivable .................................................................. 3,414
-------------
Total assets .......................................................................................... 579,233,225
-------------
========================================================================================================================
Liabilities
- ------------------------------------------------------------------------------------------------------------------------
Collateral at value -- securities loaned .............................................................. 6,031,600
Bank overdraft ........................................................................................ 455,553
Capital shares redeemed payable ....................................................................... 1,547,807
Investment advisory fees payable ...................................................................... 309,790
Distribution fees payable ............................................................................. 218,681
Other affiliates payable .............................................................................. 63,613
Officer's and Trustees' fees payable .................................................................. 392
Other accrued expenses payable ........................................................................ 128,789
Other liabilities payable ............................................................................. 13,728
-------------
Total liabilities ..................................................................................... 8,769,953
-------------
========================================================================================================================
Net Assets
- ------------------------------------------------------------------------------------------------------------------------
Net assets ............................................................................................ $ 570,463,272
=============
========================================================================================================================
Net Assets Consist of
- ------------------------------------------------------------------------------------------------------------------------
Institutional Shares, $0.10 par value, unlimited number of shares authorized .......................... $ 121,985
Investor A Shares, $0.10 par value, unlimited number of shares authorized ............................. 451,958
Investor B Shares, $0.10 par value, unlimited number of shares authorized ............................. 70,755
Investor C Shares, $0.10 par value, unlimited number of shares authorized ............................. 183,867
Paid-in capital in excess of par ...................................................................... 241,849,984
Accumulated net investment loss ....................................................................... (729,337)
Accumulated net realized gain ......................................................................... 5,746,591
Net unrealized appreciation/depreciation .............................................................. 322,767,469
-------------
Net assets ............................................................................................ $ 570,463,272
=============
========================================================================================================================
Net Asset Value
- ------------------------------------------------------------------------------------------------------------------------
Institutional -- Based on net assets of $87,352,560 and 1,219,854 shares outstanding .................. $ 71.61
=============
Investor A -- Based on net assets of $317,892,140 and 4,519,579 shares outstanding .................... $ 70.34
=============
Investor B -- Based on net assets of $46,393,638 and 707,554 shares outstanding ....................... $ 65.57
=============
Investor C -- Based on net assets of $118,824,934 and 1,838,669 shares outstanding. ................... $ 64.63
=============
See Notes to Financial Statements.
BLACKROCK NATURAL RESOURCES TRUST JULY 31, 2008 11
Statement of Operations
Year Ended July 31, 2008
===============================================================================
Investment Income
- -------------------------------------------------------------------------------
Dividends (net of $239,848 foreign withholding tax) ........... $ 4,639,629
Income from affiliates ........................................ 889,371
Securities lending ............................................ 55,595
------------
Total income .................................................. 5,584,595
------------
===============================================================================
Expenses
- -------------------------------------------------------------------------------
Investment advisory ........................................... 3,235,523
Service -- Investor A ......................................... 734,476
Service and distribution -- Investor B ........................ 498,085
Service and distribution -- Investor C ........................ 1,144,611
Transfer agent -- Institutional ............................... 83,362
Transfer agent -- Investor A .................................. 336,763
Transfer agent -- Investor B .................................. 58,182
Transfer agent -- Investor C .................................. 164,427
Accounting services ........................................... 211,816
Registration .................................................. 96,140
Printing ...................................................... 69,748
Professional .................................................. 61,352
Custodian ..................................................... 38,476
Officer and Trustees .......................................... 35,586
Miscellaneous ................................................. 38,586
------------
Total expenses ................................................ 6,807,133
------------
Net investment loss ........................................... (1,222,538)
------------
===============================================================================
Realized and Unrealized Gain (Loss)
- -------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ............................................... 12,872,520
Foreign currency .......................................... (40,260)
------------
12,832,260
------------
Net change in unrealized appreciation/depreciation on:
Investments ............................................... 56,623,542
Foreign currency .......................................... (7,128)
------------
56,616,414
------------
Total realized and unrealized gain ............................ 69,448,674
------------
Net Increase in Net Assets Resulting from Operations .......... $ 68,226,136
============
See Notes to Financial Statements.
12 BLACKROCK NATURAL RESOURCES TRUST JULY 31, 2008
Statements of Changes in Net Assets
Year Ended July 31,
-------------------------------
Increase (Decrease) in Net Assets: 2008 2007
================================================================================================================
Operations
- ----------------------------------------------------------------------------------------------------------------
Net investment loss ......................................................... $ (1,222,538) $ (638,296)
Net realized gain ........................................................... 12,832,260 21,401,354
Net change in unrealized appreciation/depreciation .......................... 56,616,414 50,982,396
-------------------------------
Net increase in net assets resulting from operations ........................ 68,226,136 71,745,454
-------------------------------
================================================================================================================
Distributions to Shareholders From
- ----------------------------------------------------------------------------------------------------------------
Net realized gain:
Institutional ........................................................... (3,262,487) (3,514,828)
Investor A .............................................................. (10,719,439) (10,107,517)
Investor B .............................................................. (2,061,398) (2,529,507)
Investor C .............................................................. (4,552,267) (4,757,650)
-------------------------------
Decrease in net assets resulting from distributions to shareholders ......... (20,595,591) (20,909,502)
-------------------------------
================================================================================================================
Capital Share Transactions
- ----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets derived from capital share transactions 66,681,498 (33,722,734)
-------------------------------
================================================================================================================
Net Assets
- ----------------------------------------------------------------------------------------------------------------
Total increase in net assets ................................................ 114,312,043 17,113,218
Beginning of year ........................................................... 456,151,229 439,038,011
-------------------------------
End of year ................................................................. $ 570,463,272 $ 456,151,229
===============================
End of year accumulated net investment loss ................................. $ (729,337) $ (70,442)
===============================
See Notes to Financial Statements.
BLACKROCK NATURAL RESOURCES TRUST JULY 31, 2008 13
Financial Highlights
Institutional
---------------------------------------------------------------
Year Ended July 31,
---------------------------------------------------------------
2008 2007 2006 2005 2004
==========================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------
Net asset value, beginning of year .... $ 63.83 $ 55.85 $ 44.93 $ 29.22 $ 21.25
---------------------------------------------------------------
Net investment income (loss) 1 ........ 0.17 0.17 0.16 0.02 -- 2
Net realized and unrealized gain ...... 10.48 10.65 11.09 15.69 7.97
---------------------------------------------------------------
Net increase from investment operations 10.65 10.82 11.25 15.71 7.97
---------------------------------------------------------------
Distributions from net realized gain .. (2.87) (2.84) (0.33) -- --
---------------------------------------------------------------
Net asset value, end of year .......... $ 71.61 $ 63.83 $ 55.85 $ 44.93 $ 29.22
===============================================================
==========================================================================================================
Total Investment Return 3
- ----------------------------------------------------------------------------------------------------------
Based on net asset value .............. 16.86% 20.98% 25.10% 53.76% 37.51%
===============================================================
==========================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------
Total expenses ........................ 0.80% 0.83% 0.82% 0.91% 1.00%
===============================================================
Net investment income (loss) .......... 0.23% 0.32% 0.31% 0.05% 0.02%
===============================================================
==========================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------
Net assets, end of year (000) ......... $ 87,353 $ 69,739 $ 75,429 $ 52,148 $ 35,088
===============================================================
Portfolio turnover .................... 4% 6% 10% 11% 11%
===============================================================
Investor A
----------------------------------------------------------------
Year Ended July 31,
----------------------------------------------------------------
2008 2007 2006 2005 2004
===========================================================================================================
Per Share Operating Performance
- -----------------------------------------------------------------------------------------------------------
Net asset value, beginning of year .... $ 62.73 $ 54.94 $ 44.32 $ 28.89 $ 21.06
----------------------------------------------------------------
Net investment income (loss) 1 ........ (0.02) 0.03 0.03 (0.07) (0.06)
Net realized and unrealized gain ...... 10.32 10.48 10.92 15.50 7.89
----------------------------------------------------------------
Net increase from investment operations 10.30 10.51 10.95 15.43 7.83
----------------------------------------------------------------
Distributions from net realized gain .. (2.69) (2.72) (0.33) -- --
----------------------------------------------------------------
Net asset value, end of year .......... $ 70.34 $ 62.73 $ 54.94 $ 44.32 $ 28.89
================================================================
===========================================================================================================
Total Investment Return 3
- -----------------------------------------------------------------------------------------------------------
Based on net asset value .............. 16.57% 20.66% 24.77% 53.41% 37.18%
================================================================
===========================================================================================================
Ratios to Average Net Assets
- -----------------------------------------------------------------------------------------------------------
Total expenses ........................ 1.06% 1.08% 1.07% 1.16% 1.25%
================================================================
Net investment income (loss) .......... (0.03)% 0.05% 0.05% (0.20)% (0.23)%
================================================================
===========================================================================================================
Supplemental Data
- -----------------------------------------------------------------------------------------------------------
Net assets, end of year (000) ......... $317,892 $239,916 $208,789 $136,740 $ 77,035
================================================================
Portfolio turnover .................... 4% 6% 10% 11% 11%
================================================================
1 Based on average shares outstanding.
2 Amount is less than $0.01 per share.
3 Total investment returns exclude the effect of any sales charges.
See Notes to Financial Statements.
14 BLACKROCK NATURAL RESOURCES TRUST JULY 31, 2008
Financial Highlights (concluded)
Investor B
----------------------------------------------------------------
Year Ended July 31,
----------------------------------------------------------------
2008 2007 2006 2005 2004
===========================================================================================================
Per Share Operating Performance
- -----------------------------------------------------------------------------------------------------------
Net asset value, beginning of year .... $ 59.05 $ 52.23 $ 42.47 $ 27.90 $ 20.49
----------------------------------------------------------------
Net investment loss 1 ................. (0.51) (0.35) (0.35) (0.32) (0.25)
Net realized and unrealized gain ...... 9.70 9.85 10.44 14.89 7.66
----------------------------------------------------------------
Net increase from investment operations 9.19 9.50 10.09 14.57 7.41
----------------------------------------------------------------
Distributions from net realized gain .. (2.67) (2.68) (0.33) -- --
----------------------------------------------------------------
Net asset value, end of year .......... $ 65.57 $ 59.05 $ 52.23 $ 42.47 $ 27.90
================================================================
===========================================================================================================
Total Investment Return 2
- -----------------------------------------------------------------------------------------------------------
Based on net asset value .............. 15.69% 19.74% 23.82% 52.22% 36.16%
================================================================
===========================================================================================================
Ratios to Average Net Assets
- -----------------------------------------------------------------------------------------------------------
Total expenses ........................ 1.81% 1.85% 1.84% 1.93% 2.02%
================================================================
Net investment loss ................... (0.77)% (0.70)% (0.71)% (0.97)% (1.00)%
================================================================
===========================================================================================================
Supplemental Data
- -----------------------------------------------------------------------------------------------------------
Net assets, end of year (000) ......... $ 46,394 $ 47,381 $ 57,926 $ 52,595 $ 35,399
================================================================
Portfolio turnover .................... 4% 6% 10% 11% 11%
================================================================
Investor C
----------------------------------------------------------------
Year Ended July 31,
----------------------------------------------------------------
2008 2007 2006 2005 2004
===========================================================================================================
Per Share Operating Performance
- -----------------------------------------------------------------------------------------------------------
Net asset value, beginning of year .... $ 58.25 $ 51.57 $ 41.93 $ 27.55 $ 20.23
----------------------------------------------------------------
Net investment loss 1 ................. (0.53) (0.36) (0.35) (0.32) (0.25)
Net realized and unrealized gain ...... 9.58 9.72 10.32 14.70 7.57
----------------------------------------------------------------
Net increase from investment operations 9.05 9.36 9.97 14.38 7.32
----------------------------------------------------------------
Distributions from net realized gain .. (2.67) (2.68) (0.33) -- --
----------------------------------------------------------------
Net asset value, end of year .......... $ 64.63 $ 58.25 $ 51.57 $ 41.93 $ 27.55
================================================================
===========================================================================================================
Total Investment Return 2
- -----------------------------------------------------------------------------------------------------------
Based on net asset value .............. 15.67% 19.72% 23.84% 52.20% 36.18%
================================================================
===========================================================================================================
Ratios to Average Net Assets
- -----------------------------------------------------------------------------------------------------------
Total expenses ........................ 1.84% 1.86% 1.84% 1.93% 2.02%
================================================================
Net investment loss ................... (0.81)% (0.71)% (0.71)% (0.97)% (1.01)%
================================================================
===========================================================================================================
Supplemental Data
- -----------------------------------------------------------------------------------------------------------
Net assets, end of year (000) ......... $118,825 $ 99,115 $ 96,895 $ 56,131 $ 29,695
================================================================
Portfolio turnover .................... 4% 6% 10% 11% 11%
================================================================
1 Based on average shares outstanding.
2 Total investment returns exclude the effect of sales charges.
See Notes to Financial Statements.
BLACKROCK NATURAL RESOURCES TRUST JULY 31, 2008 15
Notes to Financial Statements
1. Significant Accounting Policies:
BlackRock Natural Resources Trust (the "Trust") is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as a
non-diversified, open-end management investment company. The Trust's financial
statements are prepared in conformity with accounting principles generally
accepted in the United States of America, which may require the use of
management accruals and estimates. Actual results may differ from these
estimates. The Trust offers multiple classes of shares. Institutional Shares are
sold only to certain eligible investors. Investor A Shares are generally sold
with a front-end sales charge. Investor B and Investor C Shares may be subject
to a contingent deferred sales charge. All classes of shares have identical
voting, dividend, liquidation and other rights and the same terms and
conditions, except that Investor A, Investor B and Investor C Shares bear
certain expenses related to the shareholder servicing of such shares, and
Investor B and Investor C Shares also bear certain expenses related to the
distribution of such shares. Each class has exclusive voting rights with respect
to matters relating to its shareholder servicing and distribution expenditures
(except that Investor B shareholders may vote on material changes to the
Investor A distribution plan).
The following is a summary of significant accounting policies followed by the
Trust:
Valuation of Investments: Equity investments traded on a recognized securities
exchange or the NASDAQ Global Market System are valued at the last reported sale
price that day or the NASDAQ official closing price, if applicable. For equity
investments traded on more than one exchange, the last reported sale price on
the exchange where the stock is primarily traded is used. Equity investments
traded on a recognized exchange for which there were no sales on that day are
valued at the last available bid price. If no bid price is available, the prior
day's price will be used, unless it is determined that such prior day's price no
longer reflects the fair value of the security. Investments in open-end
investment companies are valued at net asset value each business day. Short-term
securities are valued at amortized cost.
In the event that application of these methods of valuation results in a price
for an investment which is deemed not to be representative of the market value
of such investment, the investment will be valued by a method approved by the
Board of Trustees (the "Board") as reflecting fair value ("Fair Value Assets").
When determining the price for Fair Value Assets, the investment advisor and/or
sub-advisor seeks to determine the price that the Trust might reasonably expect
to receive from the current sale of that asset in an arm's-length transaction.
Fair value determinations shall be based upon all available factors that the
investment advisor and/or sub-advisor deems relevant. The pricing of all Fair
Value Assets is subsequently reported to the Board or a committee thereof.
Generally, trading in foreign 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 assets of the
Trust are determined as of such times. Foreign currency exchange rates will be
determined as of the close of business on the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of business on the
NYSE that may not be reflected in the computation of the Trust's net assets. 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 Board or by the investment advisor using a
pricing service and/or procedures approved by the Board.
Foreign Currency Transactions: Foreign currency amounts are translated into
United States dollars on the following basis: (i) market value of investment
securities, assets and liabilities at the current rate of exchange; and (ii)
purchases and sales of investment securities, income and expenses at the rates
of exchange prevailing on the respective dates of such transactions.
The Trust reports foreign currency related transactions as components of
realized gains for financial reporting purposes, whereas such components are
treated as ordinary income for federal income tax purposes.
Investment Transactions and Investment Income: Investment trans-actions 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 date.
Interest income is recognized on the accrual basis. Income and realized and
unrealized gains and losses are allocated daily to each class based on its
relative net assets.
Dividends and Distributions: Dividends and distributions paid by the Trust are
recorded on the ex-dividend dates.
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. 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. The Trust may receive a
flat fee for its loans. Loans of securities are terminable at any time and the
borrower,
16 BLACKROCK NATURAL RESOURCES TRUST JULY 31, 2008
Notes to Financial Statements (continued)
after notice, is required to return borrowed securities within the standard time
period for settlement of securities transactions. The Trust may pay reasonable
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.
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 laws, withholding taxes may be imposed on interest, dividends and
capital gains at various rates.
Effective January 31, 2008, the Trust implemented Financial Accounting Standards
Board ("FASB") Interpretation No. 48, "Accounting for Uncertainty in Income
Taxes -- an interpretation of FASB Statement No. 109" ("FIN 48"). FIN 48
prescribes the minimum recognition threshold a tax position must meet in
connection with accounting for uncertainties in income tax positions taken or
expected to be taken by an entity, including investment companies, before being
measured and recognized in the financial statements. The investment advisor has
evaluated the application of FIN 48 to the Trust, and has determined that the
adoption of FIN 48 does not have a material impact on the Trust's financial
statements. The Trust files U.S. federal and various state and local tax
returns. No income tax returns are currently under examination. The statute of
limitations on the Trust's U.S. federal tax returns remain open for the years
ended July 31, 2005 through July 31, 2007. The statutes of limitations on the
Trust's state and local tax returns may remain open for an additional year
depending upon the jurisdiction.
Recent Accounting Pronouncements: In September 2006, Statement of Financial
Accounting Standards No. 157, "Fair Value Measurements" ("FAS 157"), was issued
and is effective for fiscal years beginning after November 15, 2007. FAS 157
defines fair value, establishes a framework for measuring fair value and expands
disclosures about fair value measurements. The impact on the Trust's financial
statement disclosures, if any, is currently being assessed.
In addition, in February 2007, Statement of Financial Accounting Standards No.
159, "The Fair Value Option for Financial Assets and Financial Liabilities"
("FAS 159"), was issued and is effective for fiscal years beginning after
November 15, 2007. FAS 159 permits entities to choose to measure many financial
instruments and certain other items at fair value that are not currently
required to be measured at fair value. FAS 159 also establishes presentation and
disclosure requirements designed to facilitate comparisons between entities that
choose different measurement attributes for similar types of assets and
liabilities. The impact on the Trust's financial statement disclosures, if any,
is currently being assessed.
In March 2008, Statement of Financial Accounting Standards No. 161, "Disclosures
about Derivative Instruments and Hedging Activities -- an amendment of FASB
Statement No. 133" ("FAS 161"), was issued and is effective for fiscal years
beginning after November 15, 2008. FAS 161 is intended to improve financial
reporting for derivative instruments by requiring enhanced disclosure that
enables investors to understand how and why an entity uses derivatives, how
derivatives are accounted for, and how derivative instruments affect an entity's
results of operations and financial position. The impact on the Trust's
financial statement disclosures, if any, is currently being assessed.
Bank Overdraft: The Trust recorded a bank overdraft which resulted from
estimates of available cash.
Other: Expenses directly related to the Trust or its classes are charged to that
Trust or class. Other operating expenses shared by several funds are pro-rated
among those funds on the basis of relative net assets or other appropriate
methods. Other expenses of the Trust are allocated daily to each class based on
its relative net assets.
2. Investment Advisory Agreement and Other Transactions with Affiliates:
The Trust has entered into an Investment Advisory Agreement with BlackRock
Advisors, LLC (the "Advisor"), an indirect, wholly owned subsidiary of
BlackRock, Inc., to provide investment advisory and administration services.
Merrill Lynch & Co., Inc. ("Merrill Lynch") and The PNC Financial Services
Group, Inc. ("PNC") are principal owners of BlackRock, Inc.
The Advisor is responsible for the management of the Trust's portfolio and
provides the necessary personnel, facilities, equipment and certain other
services necessary to the operation of the Trust. For such services, the Trust
pays the Advisor a monthly fee at an annual rate of 0.60% of the average daily
value of the Trust's net assets.
The Advisor has entered into a separate sub-advisory agreement with BlackRock
Investment Management, LLC ("BIM"), an affiliate of the Advisor, under which the
Advisor pays BIM for services it provides, a monthly fee that is a percentage of
the investment advisory fee paid by the Trust to the Advisor.
For the year ended July 31, 2008, the Trust reimbursed the Advisor $9,164, for
certain accounting services, which is included in accounting services in the
Statement of Operations.
The Trust has also entered into separate Distribution Agreements with FAM
Distributors, Inc. ("FAMD") and BlackRock Distributors, Inc. and its affiliates
("BDI") (collectively, the "Distributor") and has adopted separate Distribution
Plans with respect to Investor A, Investor B and Investor C Shares.
BLACKROCK NATURAL RESOURCES TRUST JULY 31, 2008 17
Notes to Financial Statements (continued)
FAMD is a wholly owned subsidiary of Merrill Lynch Group, Inc., and BDI is an
affiliate of BlackRock, Inc.
Pursuant to the Distribution Plans adopted by the Trust in accordance with Rule
12b-1 under the 1940 Act, the Trust pays the Distributor ongoing service and
distribution fees. The fees are accrued daily and paid monthly at annual rates
based upon the average daily net assets of the shares as follows:
- --------------------------------------------------------------------------------
Service Distribution
Fee Fee
- --------------------------------------------------------------------------------
Investor A ...................................... 0.25% --
Investor B ...................................... 0.25% 0.75%
Investor C ...................................... 0.25% 0.75%
- --------------------------------------------------------------------------------
Pursuant to sub-agreements with the Distributor, broker-dealers, including
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), a wholly owned
subsidiary of Merrill Lynch, and the Distributor provide shareholder servicing
and distribution services to the Trust. The ongoing service fee and/or
distribution fee compensates the Distributor and each broker-dealer for
providing shareholder servicing and/or distribution related services to Investor
A, Investor B and Investor C shareholders.
For the year ended July 31, 2008, the Distributor earned underwriting discounts
and direct commissions and its affiliates earned dealer concessions on the sales
of the Trust's Investor A Shares, which totaled $148,613 and affiliates received
contingent deferred sales charges of $53,847 and $22,890 relating to
transactions in Investor B and Investor C Shares, respectively. Furthermore,
affiliates received contingent deferred sales charges of $16,372 relating to
transactions subject to front-end sales charge waivers in Investor A Shares.
These amounts include payments to Hilliard Lyons, which was considered an
affiliate for a portion of the year.
Pursuant to written agreements, certain affiliates provide the Trust with
sub-accounting, recordkeeping, sub-transfer agency and other administrative
services with respect to sub-accounts they service. For these services, these
affiliates receive an annual fee per shareholder account which will vary
depending on share class. For the year ended July 31, 2008, the Trust paid
$351,865 in return for these services, which are a component of the transfer
agent fees in the accompanying Statement of Operations.
PNC Global Investment Servicing (U.S.) Inc., formerly PFPC Inc., an indirect,
wholly owned subsidiary of PNC and an affiliate of the Advisor, serves as
transfer agent. Each class of the Trust bears the costs of transfer agent fees
associated with such respective classes. Transfer agency fees borne by each
class of the Trust are comprised of those fees charged for all shareholder
communications including mailing of shareholder reports, dividend and
distribution notices, and proxy materials for shareholders meetings, as well as
per account and per transaction fees related to servicing and maintenance of
shareholder accounts, including the issuing, redeeming and transferring of
shares of each class of the Trust, 12b-1 fee calculation, check writing,
anti-money laundering services, and customer identification services.
The Trust may earn income on positive cash balances in demand deposit accounts
that are maintained by the transfer agent on behalf of the Trust. For the year
ended July 31, 2008, the Trust earned $3,260, which is included in income from
affiliates in the Statement of Operations.
The Advisor maintains a call center, which is responsible for providing certain
shareholder services to the Trust, such as responding to shareholder inquiries
and processing transactions based upon instructions from shareholders with
respect to the subscription and redemption of Trust shares. For the year ended
July 31, 2008 the following amounts have been accrued by the Trust to reimburse
the Advisor for costs incurred in running the call center, which are a component
of the transfer agent fees in the accompanying Statement of Operations.
- --------------------------------------------------------------------------------
Call
Center Fees
- --------------------------------------------------------------------------------
Institutional ...................................................... $ 1,208
Investor A ......................................................... $12,293
Investor B ......................................................... $ 2,099
Investor C ......................................................... $ 3,431
- --------------------------------------------------------------------------------
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 has retained BIM as the securities
lending agent for a fee based on a share of the returns on investment of cash
collateral. BIM 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 the Advisor or in registered money market funds advised by the
Advisor or its affiliates. For the year ended July 31, 2008, BIM received
$15,570 in securities lending agent fees.
In addition, MLPF&S received $7,554 in commissions on the execution of portfolio
security transactions for the Trust for the year ended July 31, 2008.
Certain officers and/or trustees of the Trust are officers and/or directors of
BlackRock, Inc. or its affiliates. The Trust reimburses the Advisor for
compensation paid to the Trust's Chief Compliance Officer.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended July 31, 2008 were $31,865,404 and $21,529,196, respectively.
18 BLACKROCK NATURAL RESOURCES TRUST JULY 31, 2008
Notes to Financial Statements (continued)
4. Short-Term Borrowings:
The Trust, along with certain other funds managed by the Advisor and its
affiliates, is 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. On November 21, 2007, the credit agreement was renewed
for one year under substantially the same terms. The Trust pays a commitment fee
of 0.06% per annum based on the Trust's pro rata share of the unused portion of
the credit agreement, which is included in miscellaneous in the Statement of
Operations. Amounts borrowed under the credit agreement bear interest at a rate
equal to, at each fund's election, the federal funds rate plus 0.35% or a base
rate as defined in the credit agreement. The Trust did not borrow under the
credit agreement during the year ended July 31, 2008.
5. Commitments:
At July 31, 2008, the Trust had entered into foreign exchange contracts under
which it had agreed to sell foreign currencies with an approximate value of
$98,000.
6. Income Tax Information:
Reclassifications: Accounting principles generally accepted in the United States
of America require that certain components of net assets be adjusted to reflect
permanent differences between financial and tax reporting. Accordingly, during
the current year, $313,984 has been reclassified between accumulated net
realized gain and accumulated net investment loss and $249,659 has been
reclassified between paid-in capital in excess of par and accumulated net
investment loss as a result of permanent differences attributable to net
operating losses and foreign currency transactions. These reclassifications have
no effect on net assets or net asset values per share.
The tax character of distributions paid during the fiscal years ended July 31,
2008 and July 31, 2007 was as follows:
- --------------------------------------------------------------------------------
7/31/2008 7/31/2007
- --------------------------------------------------------------------------------
Distributions paid from:
Ordinary income ................................ $ 127,197 $ 340,666
Long-term capital gain ......................... 20,468,394 20,568,836
---------------------------
Total taxable distributions ...................... $20,595,591 $20,909,502
===========================
As of July 31, 2008, the components of accumulated earnings on a tax basis were
as follows:
- -------------------------------------------------------------------------------
Undistributed ordinary net income ............................. --
Undistributed long-term net capital gains ..................... $ 5,834,640
------------
Total undistributed net earnings .............................. 5,834,640
Capital loss carryforward ..................................... --
Net unrealized gains .......................................... 321,950,083*
------------
Total accumulated net earnings ................................ $327,784,723
============
* The difference between book-basis and tax-basis net unrealized gains is
attributable primarily to the tax deferral of losses on wash sales, the
realization for tax purposes of unrealized gains on investments in passive
foreign investment companies, the realization for tax purposes of
unrealized gains on certain foreign currency contracts, the deferral of
post-October PFIC losses for tax purposes and the deferral of post-October
currency losses for tax purposes.
BLACKROCK NATURAL RESOURCES TRUST JULY 31, 2008 19
Notes to Financial Statements (concluded)
7. Capital Share Transactions:
Transactions in shares of capital for each class were as follows:
Year Ended Year Ended
July 31, 2008 July 31, 2007
------------------------------- -------------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------------
Institutional
- -----------------------------------------------------------------------------------------------------------------------------------
Shares sold .................................................. 455,588 $ 33,979,339 148,081 $ 8,243,582
Shares issued to shareholders in reinvestment of distributions 43,296 3,017,542 66,965 3,287,168
------------------------------- -------------------------------
Total issued ................................................. 498,884 36,996,881 215,046 11,530,750
Shares redeemed .............................................. (371,684) (26,221,322) (472,908) (25,103,761)
------------------------------- -------------------------------
Net increase (decrease) ...................................... 127,200 $ 10,775,559 (257,862) $ (13,573,011)
=============================== ===============================
- -----------------------------------------------------------------------------------------------------------------------------------
Investor A
- -----------------------------------------------------------------------------------------------------------------------------------
Shares sold and automatic conversion of shares ............... 1,500,327 $ 108,134,899 892,217 $ 49,272,718
Shares issued to shareholders in reinvestment of distributions 132,467 9,080,524 173,458 8,409,158
------------------------------- -------------------------------
Total issued ................................................. 1,632,794 117,215,423 1,065,675 57,681,876
Shares redeemed .............................................. (937,569) (65,666,264) (1,041,360) (54,569,195)
------------------------------- -------------------------------
Net increase ................................................. 695,225 $ 51,549,159 24,315 $ 3,112,681
=============================== ===============================
- -----------------------------------------------------------------------------------------------------------------------------------
Investor B
- -----------------------------------------------------------------------------------------------------------------------------------
Shares sold .................................................. 120,456 $ 8,151,564 117,289 $ 6,096,933
Shares issued to shareholders in reinvestment of distributions 27,561 1,772,057 47,679 2,187,861
------------------------------- -------------------------------
Total issued ................................................. 148,017 9,923,621 164,968 8,284,794
Shares redeemed and automatic conversion of shares ........... (242,812) (15,852,040) (471,622) (23,409,394)
------------------------------- -------------------------------
Net decrease ................................................. (94,795) $ (5,928,419) (306,654) $ (15,124,600)
=============================== ===============================
- -----------------------------------------------------------------------------------------------------------------------------------
Investor C
- -----------------------------------------------------------------------------------------------------------------------------------
Shares sold .................................................. 554,703 $ 37,046,240 359,983 $ 18,332,102
Shares issued to shareholders in reinvestment of distributions 64,719 4,102,221 95,618 4,334,128
------------------------------- -------------------------------
Total issued ................................................. 619,422 41,148,461 455,601 22,666,230
Shares redeemed .............................................. (482,248) (30,863,262) (633,132) (30,804,034)
------------------------------- -------------------------------
Net increase (decrease) ...................................... 137,174 $ 10,285,199 (177,531) $ (8,137,804)
=============================== ===============================
8. Subsequent Event:
On September 15, 2008, Bank of America Corporation announced that it has agreed
to acquire Merrill Lynch, one of the principal owners of BlackRock, Inc. The
purchase has been approved by the directors of both companies. Subject to
shareholder and regulatory approvals, the transaction is expected to close in
the first quarter of 2009.
20 BLACKROCK NATURAL RESOURCES TRUST JULY 31, 2008
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees of
BlackRock Natural Resources Trust:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of BlackRock Natural Resources Trust as of July 31,
2008, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The Trust
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Trust's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of July 31, 2008, by correspondence with the custodian.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
BlackRock Natural Resources Trust as of July 31, 2008, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
September 24, 2008
Important Tax Information (Unaudited)
The following information is provided with respect to the ordinary income
distributions paid by the BlackRock Natural Resources Trust during the fiscal
year ended July 31, 2008:
- ----------------------------------------------------------------------------------------------
Record Date October 22, 2007
Payable Date October 24, 2007
- ----------------------------------------------------------------------------------------------
Qualified Dividend Income for Individuals ................................ 100.00%
Dividends Qualifying for the Dividends Received Deduction for Corporations 100.00%
Short-Term Capital Gain Dividends for Non-U.S. Residents ................. 100.00% 1
- ----------------------------------------------------------------------------------------------
1 Represents the portion of the taxable ordinary dividends eligible for
exemption from US withholding tax for non-resident aliens and foreign
corporations.
Additionally, the Fund distributed long-term capital gains of $13,784,771 to
shareholders of record on October 22, 2007 and $6,683,623 to shareholders of
record on December 5, 2007.
BLACKROCK NATURAL RESOURCES TRUST JULY 31, 2008 21
Disclosure of Investment Advisory Agreement and Subadvisory Agreement
The Board of Trustees (the "Board," the members of which are referred to as
"Trustees") of BlackRock Natural Resources Trust (the "Fund") met in April and
June 2008 to consider the approval of the Fund's investment advisory agreement
(the "Advisory Agreement") with BlackRock Advisors, LLC (the "Adviser"), the
Fund's investment adviser. The Board also considered the approval of the Fund's
subadvisory agreement (the "Subadvisory Agreement") between the Adviser and
BlackRock Investment Management, LLC (the "Subadviser"). The Adviser and the
Subadviser are referred to herein as "BlackRock." The Advisory Agreement and the
Subadvisory Agreement are referred to herein as the "Agreements."
Activities and Composition of the Board
The Board of the Fund consists of fifteen individuals, twelve of whom are not
"interested persons" of the Fund as defined in the Investment Company Act of
1940, as amended (the "1940 Act") (the "Independent Trustees"). The Trustees are
responsible for the oversight of the operations of the Fund and perform the
various duties imposed on the directors of investment companies by the 1940 Act.
The Independent Trustees have retained independent legal counsel to assist them
in connection with their duties. The Chairman of the Board is an Independent
Trustee. The Board established four standing committees: an Audit Committee, a
Governance and Nominating Committee, a Compliance Committee and a Performance
Oversight Committee, each of which is composed of, and chaired by Independent
Trustees.
The Agreements
Upon the consummation of the combination of BlackRock's investment management
business with Merrill Lynch & Co., Inc.'s investment management business,
including Merrill Lynch Investment Managers, L.P., and certain affiliates (the
"Transaction"), the Fund entered into the Advisory Agreement with an initial
two-year term and the Adviser entered into the Subadvisory Agreement with the
Subadviser with an initial two-year term. Consistent with the 1940 Act, prior to
the expiration of the Agreements' respective initial two-year term, the Board is
required to consider the continuation of the Fund's Agreements on an annual
basis. In connection with this process, the Board assessed, among other things,
the nature, scope and quality of the services provided to the Fund by the
personnel of BlackRock and its affiliates, including investment management,
administrative services, shareholder services, oversight of fund accounting and
custody, marketing services and assistance in meeting legal and regulatory
requirements. The Board also received and assessed information regarding the
services provided to the Fund by certain unaffiliated service providers.
Throughout the year, the Board, acting directly and through its committees,
considers at each of its meetings factors that are relevant to its annual
consideration of the renewal of the Fund's Agreements, including the services
and support provided to the Fund and its shareholders. Among the matters the
Board considered were: (a) investment performance for one, three and five years,
as applicable, against peer funds, as well as senior management and portfolio
managers' analysis of the reasons for underperformance, if applicable; (b) fees,
including advisory, administration, if applicable, and other fees paid to
BlackRock and its affiliates by the Fund, such as transfer agency fees and fees
for marketing and distribution; (c) Fund operating expenses; (d) the resources
devoted to and compliance reports relating to the Fund's investment objective,
policies and restrictions, (e) the Fund's compliance with its Code of Ethics and
compliance policies and procedures; (f) the nature, cost and character of
non-investment management services provided by BlackRock and its affiliates; (g)
BlackRock's and other service providers' internal controls; (h) BlackRock's
implementation of the proxy voting guidelines approved by the Board; (i) the use
of brokerage commissions and spread and execution quality; (j) valuation and
liquidity procedures; and (k) periodic overview of BlackRock's business,
including BlackRock's response to the increasing scale of its business.
Board Considerations in Approving the Agreements
The Approval Process: At an in-person meeting held on April 10, 2008, the Board
reviewed materials relating to its consideration of the Agreements. At an
in-person meeting held on June 5 - 6, 2008, the Fund's Board, including the
Independent Trustees, unanimously approved the continuation of the Advisory
Agreement between the Adviser and the Fund for a one-year term ending June 30,
2009 and the Subadvisory Agreement between the Adviser and the Subadviser for a
one-year term ending June 30, 2009. In considering the approval of the
Agreements, the Board received and discussed various materials provided to it in
advance of the April 10, 2008 meeting. As a result of the discussions that
occurred during the April 10, 2008 meeting, the Board requested and BlackRock
provided additional information, as detailed below, in advance of the June 5 -
6, 2008 Board meeting. The Board considered all factors it believed relevant
with respect to the Fund, including, among other factors: (a) the nature, extent
and quality of the services provided by BlackRock; (b) the investment
performance of the Fund and BlackRock portfolio management; (c) the advisory fee
and the cost of the services and profits to be realized by BlackRock and certain
affiliates from the relationship with the Fund; (d) economies of scale; and (e)
other factors.
22 BLACKROCK NATURAL RESOURCES TRUST JULY 31, 2008
Disclosure of Investment Advisory Agreement and Subadvisory Agreement
(continued)
Prior to the April 10, 2008 meeting, the Board requested and received materials
specifically relating to the Agreements. The Board is engaged in an ongoing
process with BlackRock to continuously review the nature and scope of the
information provided to better assist its deliberations. These materials
included (a) information independently compiled and prepared by Lipper, Inc.
("Lipper") on Fund fees and expenses, and the investment performance of the Fund
as compared with a peer group of funds as determined by Lipper ("Peers"); (b)
information on the profitability of the Agreements to BlackRock and certain
affiliates, including their other relationships with the Fund, and a discussion
of fall-out benefits; (c) a general analysis provided by BlackRock concerning
investment advisory fees charged to other clients, such as institutional and
closed-end funds, under similar investment mandates, as well as the performance
of such other clients; (d) a report on economies of scale; (e) sales and
redemption data regarding the Fund's shares; and (f) an internal comparison of
management fees classified by Lipper, if applicable. At the April 10, 2008
meeting, the Board requested and subsequently received from BlackRock (i) a
comprehensive analysis of total expenses on a fund-by-fund basis; (ii) further
analysis of investment performance; (iii) further data regarding Fund
profitability, Fund size and Fund fee levels; and (iv) additional information on
sales and redemptions.
The Board also considered other matters it deemed important to the approval
process, such as payments made to BlackRock or its affiliates relating to the
distribution of Fund shares, services related to the valuation and pricing of
Fund portfolio holdings, and direct and indirect benefits to BlackRock and its
affiliates from their relationship with the Fund. The Board did not identify any
particular information as controlling, and each Trustee may have attributed
different weights to the various items considered.
A. Nature, Extent and Quality of the Services: The Board, including the
Independent Trustees, reviewed the nature, extent and quality of services
provided by BlackRock, including the investment advisory services and the
resulting performance of the Fund. Throughout the year, the Board compared Fund
performance to the performance of a comparable group of mutual funds as
classified by Lipper and the performance of at least one relevant index or
combination of indices. The Board met with BlackRock's senior management
personnel responsible for investment operations, including the senior investment
officers. The Board also reviewed the materials provided by the Fund's portfolio
management team discussing Fund performance and the Fund's investment objective,
strategies and outlook.
The Board considered, among other factors, the number, education and experience
of BlackRock's investment personnel generally and the Fund's portfolio
management team, BlackRock's portfolio trading capabilities, BlackRock's use of
technology, BlackRock's commitment to compliance and BlackRock's approach to
training and retaining portfolio managers and other research, advisory and
management personnel. The Board also reviewed BlackRock's compensation structure
with respect to the Fund's portfolio management team and BlackRock's ability to
attract and retain high-quality talent.
In addition to advisory services, the Board considered the quality of the
administrative and non-investment advisory services provided to the Fund.
BlackRock and its affiliates provide the Fund with certain administrative,
transfer agency, shareholder and other services (in addition to any such
services provided to the Fund by third parties) and officers and other personnel
as are necessary for the operations of the Fund. In addition to investment
advisory services, BlackRock and its affiliates provide the Fund with other
services, including (i) preparing disclosure documents, such as the prospectus,
the statement of additional information and shareholder reports; (ii) assisting
with daily accounting and pricing; (iii) overseeing and coordinating the
activities of other service providers; (iv) organizing Board meetings and
preparing the materials for such Board meetings; (v) providing legal and
compliance support; and (vi) performing other administrative functions necessary
for the operation of the Fund, such as tax reporting and fulfilling regulatory
filing requirements. The Board reviewed the structure and duties of BlackRock's
fund administration, accounting, legal and compliance departments.
B. The Investment Performance of the Fund and BlackRock: The Board, including
the Independent Trustees, also reviewed and considered the performance history
of the Fund. In preparation for the April 10, 2008 meeting, the Board was
provided with reports, independently prepared by Lipper, which included a
comprehensive analysis of the Fund's performance. The Board also reviewed a
narrative and statistical analysis of the Lipper data that was prepared by
BlackRock, which analyzed various factors that affect Lipper's rankings. In
connection with its review, the Board received and reviewed information
regarding the investment performance of the Fund as compared to a representative
group of similar funds as determined by Lipper and to all funds in the Fund's
applicable Lipper category. The Board was provided with a description of the
methodology used by Lipper to select peer funds. The Board regularly reviews the
performance of the Fund throughout the year. The Board attaches more importance
to performance over relatively long periods of time, typically three to five
years.
BLACKROCK NATURAL RESOURCES TRUST JULY 31, 2008 23
Disclosure of Investment Advisory Agreement and Subadvisory Agreement
(concluded)
The Fund ranked in the second quartile on a net basis against its Lipper peer
universe for each of the one-, three- and five-year periods ended December 31,
2007, respectively.
C. Consideration of the Advisory Fees and the Cost of the Services and Profits
to be Realized by BlackRock and its Affiliates from the Relationship with the
Fund: The Board, including the Independent Trustees, reviewed the Fund's
contractual advisory fee rates compared with the other funds in its Lipper
category. It also compared the Fund's total expenses to those of other
comparable funds. The Board considered the services provided and the fees
charged by BlackRock to other types of clients with similar investment mandates,
including separately managed institutional accounts.
The Board received and reviewed statements relating to BlackRock's financial
condition and profitability with respect to the services it provided the Fund.
The Board was also provided with a profitability analysis that detailed the
revenues earned and the expenses incurred by BlackRock and certain affiliates
that provide services to the Fund. The Board reviewed BlackRock's profitability
with respect to the Fund and each fund the Board currently oversees for the year
ended December 31, 2007 compared to aggregated profitability data provided for
the year ended December 31, 2005.
In addition, the Board considered the cost of the services provided to the Fund
by BlackRock, and BlackRock's and its affiliates' profits relating to the
management and distribution of the Fund and the other funds advised by BlackRock
and its affiliates. As part of its analysis, the Board reviewed BlackRock's
methodology in allocating its costs to the management of the Fund and concluded
that there was a reasonable basis for the allocation. The Board also considered
whether BlackRock has the financial resources necessary to attract and retain
high-quality investment management personnel to perform its obligations under
the Agreements and to continue to provide the high quality of services that are
expected by the Board.
The Board concluded that the Fund's advisory fee structure was reasonable and
that it would continue to review fees in connection with future renewals of the
Agreements.
D. Economies of Scale: The Board, including the Independent Trustees, considered
the extent to which economies of scale might be realized as the assets of the
Fund increase and whether there should be changes in the advisory fee rate or
structure in order to enable the Fund to participate in these economies of
scale. The Board, including the Independent Trustees, considered whether the
shareholders would benefit from economies of scale and whether there was
potential for future realization of economies with respect to the Fund. The
Board considered that the funds in the BlackRock fund complex share common
resources and, as a result, an increase in the overall size of the complex could
permit each fund to incur lower expenses than it would otherwise as stand-alone
entities. The Board also considered the anticipated efficiencies in the
processes of BlackRock's overall operations as it continues to add personnel and
commit capital to expand the scale of operations. The Board found, based on its
review of comparable funds, that the Fund's management fee is appropriate in
light of the scale of the Fund.
E. Other Factors: The Board also took into account other ancillary or "fall-out"
benefits that BlackRock may derive from its relationship with the Fund, both
tangible and intangible, such as BlackRock's ability to leverage its investment
professionals that manage other portfolios, an increase in BlackRock's profile
in the investment advisory community, and the engagement of BlackRock's
affiliates as service providers to the Fund, including for administrative,
transfer agency and distribution services. The Board also noted that BlackRock
may use third-party research obtained by soft dollars generated by transactions
in the Fund to assist itself in managing all or a number of its other client
accounts.
In connection with its consideration of the Agreements, the Board also received
information regarding BlackRock's brokerage and soft dollar practices. The Board
received reports from BlackRock which included information on brokerage
commissions and trade execution practices throughout the year.
Conclusion
The Board approved the continuation of the Advisory Agreement between the
Adviser and the Fund for a one-year term ending June 30, 2009 and the
Subadvisory Agreement between the Adviser and the Subadviser for a one-year term
ending June 30, 2009. Based upon their evaluation of all these factors in their
totality, the Board, including the Independent Trustees, was satisfied that the
terms of the Agreements were fair and reasonable and in the best interest of the
Fund and the Fund's shareholders. In arriving at a decision to approve the
Agreements, the Board did not identify any single factor or group of factors as
all-important or controlling, but considered all factors together. The
Independent Trustees were also assisted by the advice of independent legal
counsel in making this determination. The contractual fee arrangements for the
Fund reflect the result of several years of review by the Trustees and
predecessor Trustees, and discussions between the Trustees (and predecessor
Trustees) and BlackRock. Certain aspects of the arrangements may be the subject
of more attention in some years than in others, and the Trustees' conclusions
may be based in part on their consideration of these arrangements in prior
years.
24 BLACKROCK NATURAL RESOURCES TRUST JULY 31, 2008
Officers and Trustees
Number of
BlackRock-
Position(s) Length of Advised Funds
Name, Address Held with Time Served Principal Occupation(s) and Portfolios
and Year of Birth Trust as a Trustee(2) During Past Five Years Overseen Public Directorships
====================================================================================================================================
Non-Interested Trustees(1)
- ------------------------------------------------------------------------------------------------------------------------------------
Robert M. Hernandez Chairman of Since 2007 Formerly Director, Vice Chairman 37 Funds ACE Limited (insur-
40 East 52nd Street the Board, and Chief Financial Officer of USX 104 Portfolios ance company);
New York, NY 10022 Trustee and Corporation (energy and steel Eastman Chemical
1944 Member of business) from 1991 to 2001. Company (chemical);
the Audit RTI International
Committee Metals, Inc. (metals);
TYCO Electronics
(electronics)
- ------------------------------------------------------------------------------------------------------------------------------------
Fred G. Weiss Vice Chairman Since 2007 Managing Director, FGW Associates 37 Funds Watson
40 East 52nd Street of the Board, (consulting and investment 104 Portfolios Pharmaceutical Inc.
New York, NY 10022 Chairman of company) since 1997; Director,
1941 the Audit Michael J. Fox Foundation for
Committee Parkinson's Research since 2000;
and Trustee Formerly Director of BTG
International Plc (a global
technology commercialization
company) from 2001 to 2007.
- ------------------------------------------------------------------------------------------------------------------------------------
James H. Bodurtha Trustee Since 2007 Director, The China Business 37 Funds None
40 East 52nd Street Group, Inc. (consulting firm) 104 Portfolios
New York, NY 10022 since 1996 and formerly Executive
1944 Vice President thereof from 1996
to 2003; Chairman of the Board,
Berkshire Holding Corporation
since 1980.
- ------------------------------------------------------------------------------------------------------------------------------------
Bruce R. Bond Trustee Since 2007 Formerly Trustee and Member of the 37 Funds None
40 East 52nd Street Governance Committee, State Street 104 Portfolios
New York, NY 10022 Research Mutual Funds from 1997 to
1946 2005; Formerly Board Member of
Governance, Audit and Finance
Committee, Avaya Inc. (computer
equipment) from 2003 to 2007.
- ------------------------------------------------------------------------------------------------------------------------------------
Donald W. Burton Trustee Since 2007 Managing General Partner, The 37 Funds Knology, Inc.
40 East 52nd Street Burton Partnership, LP (an 104 Portfolios (telecommunica-
New York, NY 10022 investment partnership) since tions); Capital
1944 1979; Managing General Partner, Southwest (financial)
The South Atlantic Venture Funds
since 1983; Member of the
Investment Advisory Council of the
Florida State Board of
Administration from 2001 to 2007.
- ------------------------------------------------------------------------------------------------------------------------------------
Honorable Trustee Since 2007 Partner and Head of International 37 Funds UPS Corporation
Stuart E. Eizenstat Practice, Covington and Burling 104 Portfolios (delivery service)
40 East 52nd Street (law firm) since 2001;
New York, NY 10022 International Advisory Board
1943 Member, The Coca-Cola Company
since 2002; Advisory Board Member,
BT Americas (telecommunications)
since 2004; Member of the Board of
Directors, Chicago Climate
Exchange (environmental) since
2006; Member of the International
Advisory Board, GML (energy) since
2003.
- ------------------------------------------------------------------------------------------------------------------------------------
Kenneth A. Froot Trustee Since 2007 Professor, Harvard University 37 Funds None
40 East 52nd Street since 1992. 104 Portfolios
New York, NY 10022
1957
- ------------------------------------------------------------------------------------------------------------------------------------
John F. O'Brien Trustee Since 2007 Trustee, Woods Hole Oceanographic 37 Funds Cabot Corporation
40 East 52nd Street Institute since 2003; Formerly 104 Portfolios (chemicals); LKQ
New York, NY 10022 Director, Allmerica Financial Corporation (auto
1943 Corporation from 1995 to 2003; parts manufactur-
Formerly Director, ABIOMED from ing); TJX Companies,
1989 to 2006; Formerly Director, Inc. (retailer)
Ameresco, Inc. (energy solutions
company) from 2006 to 2007.
BLACKROCK NATURAL RESOURCES TRUST JULY 31, 2008 25
Officers and Trustees (continued)
Number of
BlackRock-
Position(s) Length of Advised Funds
Name, Address Held with Time Served Principal Occupation(s) and Portfolios
and Year of Birth Trust as a Trustee(2) During Past Five Years Overseen Public Directorships
====================================================================================================================================
Non-Interested Trustees(1) (concluded)
- ------------------------------------------------------------------------------------------------------------------------------------
Roberta Cooper Ramo Trustee Since 2007 Shareholder, Modrall, Sperling, 37 Funds None
40 East 52nd Street Roehl, Harris & Sisk, P.A. (law 104 Portfolios
New York, NY 10022 firm) since 1993; Chairman of the
1942 Board, Cooper's Inc. (retail)
since 2000; Director of ECMC Group
(service provider to students,
schools and lenders) since 2001;
President Elect, The American Law
Institute (non-profit), 2007;
Formerly President, American Bar
Association from 1995 to 1996.
- ------------------------------------------------------------------------------------------------------------------------------------
Jean Margo Reid Trustee Since 2004 Self-employed consultant since 37 Funds None
40 East 52nd Street 2001; Director and Secretary, SCB, 104 Portfolios
New York, NY 10022 Inc. (holding company) since 1998;
1945 Director and Secretary, SCB
Partners, Inc. (holding company)
since 2000; Formerly Director,
Covenant House (non-profit) from
2001 to 2004.
- ------------------------------------------------------------------------------------------------------------------------------------
David H. Walsh Trustee Since 2007 Director, National Museum of 37 Funds None
40 East 52nd Street Wildlife Art since 2007; Director, 104 Portfolios
New York, NY 10022 Ruckleshaus Institute and Haub
1941 School of Natural Resources at the
University of Wyoming since 2006;
Director, The American Museum of
Fly Fishing since 1997; Formerly
Consultant with Putnam Investments
from 1993 to 2003; Formerly
Director, The National Audubon
Society from 1998 to 2005.
- ------------------------------------------------------------------------------------------------------------------------------------
Richard R. West Trustee and Since 1988 Dean Emeritus, New York 37 Funds Bowne & Co., Inc.
40 East 52nd Street Member of University's Leonard N. Stern 104 Portfolios (financial printers);
New York, NY 10022 the Audit School of Business Administration Vornado Realty Trust
1938 Committee since 1995. (real estate com-
pany); Alexander's
Inc. (real estate
company)
------------------------------------------------------------------------------------------------------------
(1) Trustees serve until their resignation, removal or death, or until December 31 of the year in which
they turn 72.
(2) Following the combination of Merrill Lynch Investment Managers, L.P. ("MLIM") and BlackRock, Inc.
("BlackRock") in September 2006, the various legacy MLIM and legacy BlackRock Fund boards were
realigned and consolidated into three new Fund boards in 2007. As a result, although the chart shows
certain trustees as joining the Fund's board in 2007, each trustee first became a member of the board
of trustees of other legacy MLIM or legacy BlackRock Funds as follows: James H. Bodurtha since 1995;
Bruce R. Bond since 2005; Donald W. Burton since 2002; Stuart E. Eizenstat since 2001; Kenneth A.
Froot since 2005; Robert M. Hernandez since 1996; John F. O'Brien since 2004; Roberta Cooper Ramo
since 2000; Jean Margo Reid since 2004; David H. Walsh since 2003; Fred G. Weiss since 1998; and
Richard R. West since 1978.
26 BLACKROCK NATURAL RESOURCES TRUST JULY 31, 2008
Officers and Trustees (continued)
Number of
BlackRock-
Position(s) Length of Advised Funds
Name, Address Held with Time Served Principal Occupation(s) and Portfolios
and Year of Birth Trust as a Trustee During Past Five Years Overseen Public Directorships
====================================================================================================================================
Interested Trustees(1)
- ------------------------------------------------------------------------------------------------------------------------------------
Richard S. Davis Trust President Since 2007 Managing Director, BlackRock, Inc. 185 Funds None
40 East 52nd Street and Trustee since 2005; Formerly Chief 295 Portfolios
New York, NY 10022 Executive Officer, State Street
1945 Research & Management Company from
2000 to 2005; Formerly Chairman of
the Board of Trustees, State
Street Research Mutual Funds from
2000 to 2005; Formerly Chairman,
SSR Realty from 2000 to 2004.
- ------------------------------------------------------------------------------------------------------------------------------------
Laurence D. Fink Trustee Since 2007 Chairman and Chief Executive 37 Funds None
40 East 52nd Street Officer of BlackRock, Inc. since 104 Portfolios
New York, NY 10022 its formation in 1998 and of
1952 BlackRock, Inc.'s predecessor
entities since 1988 and Chairman
of the Executive and Management
Committees; Formerly Managing
Director, The First Boston
Corporation, Member of its
Management Committee, Co-head of
its Taxable Fixed Income Division
and Head of its Mortgage and Real
Estate Products Group; Chairman of
the Board of several of
BlackRock's alternative investment
vehicles; Director of several of
BlackRock's offshore funds; Member
of the Board of Trustees of New
York University, Chair of the
Financial Affairs Committee and a
member of the Executive Committee,
the Ad Hoc Committee on Board
Governance, and the Committee on
Trustees; Co-Chairman of the NYU
Hospitals Center Board of
Trustees, Chairman of the
Development/Trustee Stewardship
Committee and Chairman of the
Finance Committee; Trustee, The
Boys' Club of New York.
- ------------------------------------------------------------------------------------------------------------------------------------
Henry Gabbay Trustee Since 2007 Consultant, BlackRock, Inc. since 184 Funds None
40 East 52nd Street 2007; Formerly Managing Director, 294 Portfolios
New York, NY 10022 BlackRock, Inc. from 1989 to 2007;
1947 Formerly Chief Administrative
Officer, BlackRock Advisors, LLC
from 1998 to 2007; Formerly
President of BlackRock Funds and
BlackRock Bond Allocation Target
Shares from 2005 to 2007 and
Treasurer of certain closed-end
Funds in the BlackRock fund
complex from 1989 to 2006.
------------------------------------------------------------------------------------------------------------
(1) Messrs. Davis, Fink and Gabbay are all "interested persons," as defined in the Investment Company Act
of 1940, of the Trust based on their positions with BlackRock, Inc. and its affiliates. Trustees serve
until their resignation, removal or death, or until December 31 of the year in which they turn 72.
BLACKROCK NATURAL RESOURCES TRUST JULY 31, 2008 27
Officers and Trustees (concluded)
Position(s) Length of
Name, Address Held with Time
and Year of Birth Trust Served Principal Occupation(s) During Past Five Years
====================================================================================================================================
Trust Officers(1)
- ------------------------------------------------------------------------------------------------------------------------------------
Donald C. Burke Chief Executive Since 2007 Managing Director of BlackRock, Inc. since 2006; Formerly Managing
40 East 52nd Street Officer Director of Merrill Lynch Investment Managers, L.P. ("MLIM") and Fund
New York, NY 10022 Asset Management, L.P. ("FAM") in 2006; First Vice President thereof from
1960 1997 to 2005; Treasurer thereof from 1999 to 2006 and Vice President
thereof from 1990 to 1997.
- ------------------------------------------------------------------------------------------------------------------------------------
Anne F. Ackerley Vice President Since 2007 Managing Director of BlackRock, Inc. since 2000; Chief Operating Officer
40 East 52nd Street of BlackRock's U.S. Retail Group since 2006; Head of BlackRock's Mutual
New York, NY 10022 Fund Group from 2000 to 2006; Merrill Lynch & Co., Inc. from 1984 to 1986
1962 and from 1988 to 2000, most recently as First Vice President and Operating
Officer of the Mergers and Acquisitions Group.
- ------------------------------------------------------------------------------------------------------------------------------------
Neal J. Andrews Chief Financial Since 2007 Managing Director of BlackRock, Inc. since 2006; Formerly Senior Vice
40 East 52nd Street Officer President and Line of Business Head of Fund Accounting and Administration
New York, NY 10022 at PNC Global Investment Servicing (U.S.) Inc. (formerly PFPC Inc.) from
1966 1992 to 2006.
- ------------------------------------------------------------------------------------------------------------------------------------
Jay M. Fife Treasurer Since 2007 Managing Director of BlackRock, Inc. since 2007 and Director in 2006;
40 East 52nd Street Formerly Assistant Treasurer of the MLIM/FAM-advised Funds from 2005 to
New York, NY 10022 2006; Director of MLIM Fund Services Group from 2001 to 2006.
1970
- ------------------------------------------------------------------------------------------------------------------------------------
Brian P. Kindelan Chief Since 2007 Chief Compliance Officer of the BlackRock-advised Funds since 2007;
40 East 52nd Street Compliance Anti-Money Laundering Officer of the BlackRock-advised Funds since 2007;
New York, NY 10022 Officer of Managing Director and Senior Counsel of BlackRock, Inc. since 2005;
1959 the Trust Director and Senior Counsel of BlackRock Advisors, Inc. from 2001 to 2004
and Vice President and Senior Counsel thereof from 1998 to 2000; Formerly
Senior Counsel of The PNC Bank Corp. from 1995 to 1998.
- ------------------------------------------------------------------------------------------------------------------------------------
Howard Surloff Secretary Since 2007 Managing Director of BlackRock, Inc. and General Counsel of U.S. Funds at
40 East 52nd Street BlackRock, Inc. since 2006; Formerly General Counsel (U.S.) of Goldman
New York, NY 10022 Sachs Asset Management, L.P. from 1993 to 2006.
1965
------------------------------------------------------------------------------------------------------------
(1) Officers of the Trust serve at the pleasure of the Board of Trustees.
------------------------------------------------------------------------------------------------------------
Further information about the Trust's Officers and Trustees is available in the Fund's Statement of
Additional Information, which can be obtained without charge by calling (800) 441-7762.
- ------------------------------------------------------------------------------------------------------------------------------------
Custodian
The Bank of New York
New York, NY 10286
Transfer Agent
PNC Global Investment
Servicing (U.S.) Inc.
Wilmington, DE 19809
Accounting Agent
State Street Bank and
Trust Company
Princeton, NJ 08540
Independent Registered Public Accounting Firm
Deloitte & Touche LLP
Princeton, NJ 08540
Legal Counsel
Willkie Farr & Gallagher LLP
New York, NY 10019
28 BLACKROCK NATURAL RESOURCES TRUST JULY 31, 2008
Additional Information
BlackRock Privacy Principles
BlackRock is committed to maintaining the privacy of its current and former fund
investors and individual clients (collectively, "Clients") and to safeguarding
their non-public personal information. The following information is provided to
help you understand what personal information BlackRock collects, how we protect
that information and why in certain cases we share such information with select
parties.
If you are located in a jurisdiction where specific laws, rules or regulations
require BlackRock to provide you with additional or different privacy-related
rights beyond what is set forth below, then BlackRock will comply with those
specific laws, rules or regulations.
BlackRock obtains or verifies personal non-public information from and about you
from different sources, including the following: (i) information we receive from
you or, if applicable, your financial intermediary, on applications, forms or
other documents; (ii) information about your transactions with us, our
affiliates, or others; (iii) information we receive from a consumer reporting
agency; and (iv) from visits to our websites.
BlackRock does not sell or disclose to non-affiliated third parties any
non-public personal information about its Clients, except as permitted by law or
as is necessary to respond to regulatory requests or to service Client accounts.
These non-affiliated third parties are required to protect the confidentiality
and security of this information and to use it only for its intended purpose.
We may share information with our affiliates to service your account or to
provide you with information about other BlackRock products or services that may
be of interest to you. In addition, BlackRock restricts access to non-public
personal information about its Clients to those BlackRock employees with a
legitimate business need for the information. BlackRock maintains physical,
electronic and procedural safeguards that are designed to protect the non-public
personal information of its Clients, including procedures relating to the proper
storage and disposal of such information.
Availability of Additional Information
Electronic copies of most financial reports and prospectuses are available on
the Trust's website or shareholders can sign up for e-mail notifications of
quarterly statements, annual and semi-annual reports and prospectuses by
enrolling in the Trust's electronic delivery program.
To enroll:
Shareholders Who Hold Accounts with Investment Advisers, Banks or Brokerages:
Please contact your financial advisor. Please note that not all investment
advisers, banks or brokerages may offer this service.
Shareholders Who Hold Accounts Directly with BlackRock:
1) Access the BlackRock website at http://www.blackrock.com/edelivery
2) Click on the applicable link and follow the steps to sign up
3) Log into your account
Householding
The Trust will mail only one copy of shareholder documents, including
prospectuses, annual and semi-annual reports and proxy statements, to
shareholders with multiple accounts at the same address. This practice is
commonly called "householding" and it is intended to reduce expenses and
eliminate duplicate mailings of shareholder documents. Mailings of your
shareholder documents may be householded indefinitely unless you instruct us
otherwise. If you do not want the mailing of these documents to be combined with
those for other members of your household, please contact the Trust at (800)
441-7762.
BLACKROCK NATURAL RESOURCES TRUST JULY 31, 2008 29
Additional Information (concluded)
Availability of Additional Information (concluded)
Availability of Proxy Voting Policies and Procedures
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 (800) 441-7762; (2) at
www.blackrock.com; and (3) on the Securities and Exchange Commission's (the
"SEC") website at http://www.sec.gov.
Availability of Proxy Voting Record
Information about how the Trust votes proxies relating to securities held in the
Trust's portfolio during the most recent 12-month period ended June 30 is
available upon request and without charge (1) at www.blackrock.com or by calling
(800) 441-7762 and (2) on the SEC's website at http://www.sec.gov.
Availability of Quarterly Portfolio Schedule
The Trust files its complete schedule of portfolio holdings with the 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 website at http://www.sec.gov and may also be
reviewed and copied at the SEC's Public Reference Room in Washington, D.C.
Information on the operation of the Public Reference Room may be obtained by
calling (800) SEC-0330. The Trust's Forms N-Q may also be obtained upon request
and without charge by calling (800) 441-7762.
Shareholder Privileges
Account Information
Call us at (800) 441-7762 from 8:00 AM to 6:00 PM EST to get information about
your account balances, recent transactions and share prices. You can also reach
us on the Web at www.blackrock.com/funds.
Automatic Investment Plans
Investor Class shareholders who want to invest regularly can arrange to have $50
or more automatically deducted from their checking or savings account and
invested in any of the BlackRock funds.
Systematic Withdrawal Plans
Investor Class shareholders can establish a systematic withdrawal plan and
receive periodic payments of $50 or more from their BlackRock funds, as long as
their account is at least $10,000.
Retirement Plans
Shareholders may make investments in conjunction with Traditional, Rollover,
Roth, Coverdell, Simple IRAs, SEP IRAs and 403(b) Plans.
30 BLACKROCK NATURAL RESOURCES TRUST JULY 31, 2008
A World-Class Mutual Fund Family
BlackRock offers a diverse lineup of open-end mutual funds crossing all
investment styles and managed by experts in equity, fixed income and tax-exempt
investing.
Equity Funds
BlackRock All-Cap Global Resources Portfolio
BlackRock Asset Allocation Portfolio+
BlackRock Aurora Portfolio
BlackRock Balanced Capital Fund+
BlackRock Basic Value Fund
BlackRock Capital Appreciation Portfolio
BlackRock Equity Dividend Fund
BlackRock EuroFund
BlackRock Focus Growth Fund
BlackRock Focus Value Fund
BlackRock Fundamental Growth Fund
BlackRock Global Allocation Fund+
BlackRock Global Dynamic Equity Fund
BlackRock Global Emerging Markets Fund
BlackRock Global Financial Services Fund
BlackRock Global Growth Fund
BlackRock Global Opportunities Portfolio
BlackRock Global Resources Portfolio
BlackRock Global SmallCap Fund
BlackRock Health Sciences Opportunities Portfolio*
BlackRock Healthcare Fund
BlackRock Index Equity Portfolio*
BlackRock International Fund
BlackRock International Index Fund
BlackRock International Opportunities Portfolio
BlackRock International Value Fund
BlackRock Large Cap Core Fund
BlackRock Large Cap Growth Fund
BlackRock Large Cap Value Fund
BlackRock Latin America Fund
BlackRock Mid-Cap Growth Equity Portfolio
BlackRock Mid-Cap Value Equity Portfolio
BlackRock Mid Cap Value Opportunities Fund
BlackRock Natural Resources Trust
BlackRock Pacific Fund
BlackRock Science & Technology Opportunities Portfolio
BlackRock Small Cap Core Equity Portfolio
BlackRock Small Cap Growth Equity Portfolio
BlackRock Small Cap Growth Fund II
BlackRock Small Cap Index Fund
BlackRock Small Cap Value Equity Portfolio*
BlackRock Small/Mid-Cap Growth Portfolio
BlackRock S&P 500 Index Fund
BlackRock U.S. Opportunities Portfolio
BlackRock Utilities and Telecommunications Fund
BlackRock Value Opportunities Fund
Fixed Income Funds
BlackRock Emerging Market Debt Portfolio
BlackRock Enhanced Income Portfolio
BlackRock GNMA Portfolio
BlackRock Government Income Portfolio
BlackRock High Income Fund
BlackRock High Yield Bond Portfolio
BlackRock Income Portfolio
BlackRock Income Builder Portfolio
BlackRock Inflation Protected Bond Portfolio
BlackRock Intermediate Bond Portfolio II
BlackRock Intermediate Government Bond Portfolio
BlackRock International Bond Portfolio
BlackRock Long Duration Bond Portfolio
BlackRock Low Duration Bond Portfolio
BlackRock Managed Income Portfolio
BlackRock Short-Term Bond Fund
BlackRock Strategic Income Portfolio
BlackRock Total Return Fund
BlackRock Total Return Portfolio II
BlackRock World Income Fund
Municipal Bond Funds
BlackRock AMT-Free Municipal Bond Portfolio
BlackRock California Insured Municipal Bond Fund
BlackRock Delaware Municipal Bond Portfolio
BlackRock Florida Municipal Bond Fund
BlackRock High Yield Municipal Fund
BlackRock Intermediate Municipal Fund
BlackRock Kentucky Municipal Bond Portfolio
BlackRock Municipal Insured Fund
BlackRock National Municipal Fund
BlackRock New Jersey Municipal Bond Fund
BlackRock New York Municipal Bond Fund
BlackRock Ohio Municipal Bond Portfolio
BlackRock Pennsylvania Municipal Bond Fund
BlackRock Short-Term Municipal Fund
Target Risk & Target Date Funds
BlackRock Prepared Portfolios
Conservative Prepared Portfolio
Moderate Prepared Portfolio
Growth Prepared Portfolio
Aggressive Growth Prepared Portfolio
BlackRock Lifecycle Prepared Portfolios
Prepared Portfolio 2010
Prepared Portfolio 2015
Prepared Portfolio 2020
Prepared Portfolio 2025
Prepared Portfolio 2030
Prepared Portfolio 2035
Prepared Portfolio 2040
Prepared Portfolio 2045
Prepared Portfolio 2050
* See the prospectus for information on specific limitations on investments
in the fund.
+ Mixed asset fund.
BlackRock mutual funds are distributed by BlackRock Distributors, Inc. and
certain funds are also distributed by FAM Distributors, Inc. You should consider
the investment objectives, risks, charges and expenses of the funds under
consideration carefully before investing. Each fund's prospectus contains this
and other information and is available at www.blackrock.com or by calling (800)
882-0052 or from your financial advisor. The prospectus should be read carefully
before investing.
BLACKROCK NATURAL RESOURCES TRUST JULY 31, 2008 31
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 returns and
principal value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Statements and other information
herein are as dated and are subject to change.
BlackRock Natural Resources Trust
100 Bellevue Parkway
Wilmington, DE 19809
BLACKROCK
#10303-7/08
Item 2 - Code of Ethics - The registrant (or the "Fund") has adopted a code
of ethics, as of the end of the period covered by this report,
applicable to the registrant's principal executive officer,
principal financial officer and principal accounting officer, or
persons performing similar functions. During the period covered by
this report, there have been no amendments to or waivers granted
under the code of ethics. A copy of the code of ethics is available
without charge at www.blackrock.com.
Item 3 - Audit Committee Financial Expert - The registrant's board of
directors or trustees, as applicable (the "board of directors") has
determined that (i) the registrant has the following audit committee
financial experts serving on its audit committee and (ii) each audit
committee financial expert is independent:
Donald W. Burton (not reappointed to the Audit Committee, effective
November 1, 2007)
Robert M. Hernandez (term began, effective November 1, 2007)
John F. O'Brien (not reappointed to the Audit Committee, effective
November 1, 2007)
David H. Walsh (not reappointed to the Audit Committee, effective
November 1, 2007)
Fred G. Weiss
Richard R. West (term began, effective November 1, 2007)
Under applicable securities laws, a person determined to be an audit
committee financial expert will not be deemed an "expert" for any
purpose, including without limitation for the purposes of Section 11
of the Securities Act of 1933, as a result of being designated or
identified as an audit committee financial expert. The designation
or identification as an audit committee financial expert does not
impose on such person any duties, obligations, or liabilities
greater than the duties, obligations, and liabilities imposed on
such person as a member of the audit committee and board of
directors in the absence of such designation or identification.
Item 4 - Principal Accountant Fees and Services
- -----------------------------------------------------------------------------------------------------------------------------------
(a) Audit Fees (b) Audit-Related Fees(1) (c) Tax Fees(2) (d) All Other Fees(3)
- -----------------------------------------------------------------------------------------------------------------------------------
Current Previous Current Previous Current Previous Current Previous
Fiscal Year Fiscal Fiscal Year Fiscal Fiscal Year Fiscal Fiscal Year Fiscal
Entity Name End Year End End Year End End Year End End Year End
- -----------------------------------------------------------------------------------------------------------------------------------
BlackRock Natural
Resources Trust $27,300 $29,000 $0 $0 $6,100 $6,100 $1,049 $1,042
- -----------------------------------------------------------------------------------------------------------------------------------
(1) The nature of the services include assurance and related services
reasonably related to the performance of the audit of financial statements
not included in Audit Fees.
(2) The nature of the services include tax compliance, tax advice and tax
planning.
(3) The nature of the services include a review of compliance procedures and
attestation thereto.
(e)(1) Audit Committee Pre-Approval Policies and Procedures:
The registrant's audit committee (the "Committee") has adopted
policies and procedures with regard to the pre-approval of services.
Audit, audit-related and tax compliance services provided to the
registrant on an annual basis require specific pre-approval by the
Committee. The Committee also must approve other non-audit services
provided to the registrant and those non-audit services provided to
the registrant's affiliated service providers that relate directly
to the operations and the financial reporting of the registrant.
Certain of these non-audit services that the Committee believes are
a) consistent with the SEC's auditor independence rules and b)
routine and recurring services that will not impair the independence
of the independent accountants may be approved by the Committee
without consideration on a specific case-by-case basis ("general
pre-approval"). The term of any general pre-approval is 12 months
from the date of the pre-approval, unless the Committee provides for
a different period. Tax or other non-audit services provided to the
registrant which have a direct impact on the operation or financial
reporting of the registrant will only be deemed pre-approved
provided that any individual project does not exceed $10,000
attributable to the registrant or $50,000 for all of the registrants
the Committee oversees. For this purpose, multiple projects will be
aggregated to determine if they exceed the previously mentioned cost
levels.
Any proposed services exceeding the pre-approved cost levels
will require specific pre-approval by the Committee, as will any
other services not subject to general pre-approval (e.g.,
unanticipated but permissible services). The Committee is informed
of each service approved subject to general pre-approval at the next
regularly scheduled in-person board meeting. At this meeting, an
analysis of such services is presented to the Committee for
ratification. The Committee may delegate to one or more of its
members the authority to approve the provision of and fees for any
specific engagement of permitted non-audit services, including
services exceeding pre-approved cost levels.
(e)(2) None of the services described in each of Items 4(b) through
(d) were approved by the audit committee pursuant to paragraph
(c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not Applicable
(g) Affiliates' Aggregate Non-Audit Fees:
--------------------------------------------------------------------
Current Fiscal Previous Fiscal
Entity Name Year End Year End
--------------------------------------------------------------------
BlackRock Natural Resources Trust $294,649 $713,975
--------------------------------------------------------------------
(h) The registrant's audit committee has considered and determined
that the provision of non-audit services that were rendered to the
registrant's investment adviser (not including any non-affiliated
sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by the registrant's investment
adviser), and any entity controlling, controlled by, or under common
control with the investment adviser that provides ongoing services
to the registrant that were not pre-approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with
maintaining the principal accountant's independence.
Regulation S-X Rule 2-01(c)(7)(ii) - $287,500, 0%
Item 5 - Audit Committee of Listed Registrants - Not Applicable
Item 6 - Investments
(a) The registrant's Schedule of Investments is included as part of
the Report to Stockholders filed under Item 1 of this form.
(b) Not Applicable due to no such divestments during the semi-annual
period covered since the previous Form N-CSR filing.
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Not Applicable
Item 8 - Portfolio Managers of Closed-End Management Investment Companies -
Not Applicable
Item 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable
Item 10 - Submission of Matters to a Vote of Security Holders - The
registrant's Nominating and Governance Committee will consider
nominees to the board of directors recommended by shareholders when
a vacancy becomes available. Shareholders who wish to recommend a
nominee should send nominations that include biographical
information and set forth the qualifications of the proposed nominee
to the registrant's Secretary. There have been no material changes
to these procedures.
Item 11 - Controls and Procedures
11(a) - The registrant's principal executive and principal financial
officers or persons performing similar functions have concluded that
the registrant's disclosure controls and procedures (as defined in
Rule 30a-3(c) under the Investment Company Act of 1940, as amended
(the "1940 Act")) are effective as of a date within 90 days of the
filing of this report based on the evaluation of these controls and
procedures required by Rule 30a-3(b) under the 1940 Act and Rule
15d-15(b) under the Securities Exchange Act of 1934, as amended.
11(b) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act)
that occurred during the second fiscal quarter of the period covered
by this report that have materially affected, or are reasonably
likely to materially affect, the registrant's internal control over
financial reporting.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - See Item 2
12(a)(2) - Certifications - Attached hereto
12(a)(3) - Not Applicable
12(b) - Certifications - Attached hereto
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
BlackRock Natural Resources Trust
By: /s/ Donald C. Burke
-----------------------------------
Donald C. Burke
Chief Executive Officer of
BlackRock Natural Resources Trust
Date: September 19, 2008
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/ Donald C. Burke
-----------------------------------
Donald C. Burke
Chief Executive Officer (principal executive officer) of
BlackRock Natural Resources Trust
Date: September 19, 2008
By: /s/ Neal J. Andrews
-----------------------------------
Neal J. Andrews
Chief Financial Officer (principal financial officer) of
BlackRock Natural Resources Trust
Date: September 19, 2008