(ICON)
Prudential
Natural
Resources
Fund, Inc.
SEMI
ANNUAL
REPORT
Nov. 30, 1997
(LOGO)
<PAGE>
Prudential Natural Resources Fund, Inc.
Performance At A Glance.
It's been a disappointing time for natural resource stocks. Gold commodity
prices fell sharply last fall, hitting a 12-year low in December and dwarfing
our gains on oil service and paper stocks. The Prudential Natural Resources
Fund trailed the average natural resource company fund, as measured by Lipper
Analytical Services, by a significant margin because a substantial portion of
our portfolio was in gold-related stocks, which suffered from a widespread
fear that sales of central banks' gold reserves might force gold prices even
lower.
Cumulative Total Returns1 As of 11/30/97
<TABLE>
<CAPTION>
Six One Five Ten Since
Months Year Years Years Inception2
<S> <C> <C> <C> <C> <C>
Class A -11.86% -11.86% 83.06% N/A 65.52%
Class B -12.10 -12.48 76.43 124.96% 76.60
Class C -12.10 -12.48 N/A N/A 30.30
Class Z -11.72 -11.60 N/A N/A -5.39
Lipper Nat.
Resources Avg.3 -2.75 1.39 102.09 192.03 ***
</TABLE>
Average Annual Total Returns1 As of 12/31/97
<TABLE>
<CAPTION>
One Five Ten Since
Months Year Years Inception2
<S> <C> <C> <C> <C>
Class A -16.59% 10.93% N/A 5.76%
Class B -17.88 11.08 7.49% 5.60
Class C -13.88 N/A N/A 7.75
Class Z -11.95 N/A N/A -4.82
</TABLE>
Past performance is not indicative of future results. Principal and investment
return will fluctuate so that an investor's shares, when redeemed, may be worth
more or less than their original cost.
1 Source: Prudential Investments Fund Management and Lipper Analytical
Services. The cumulative total returns do not take into account sales charges.
The average annual returns do take into account applicable sales charges. The
Fund charges a maximum front-end sales load of 5% for Class A shares and a
declining contingent deferred sales charge (CDSC) of 5%, 4%, 3%, 2%, 1% and 1%
for six years, for Class B shares. Class C shares have a 1% CDSC for one year.
Class B shares will automatically convert to Class A shares on a quarterly
basis, approximately seven years after purchase. Class Z shares are not subject
to a sales charge or a distribution fee.
2 Inception dates: Class A, 1/22/90; Class B, 9/28/87; Class C, 8/1/94; and
Class Z, 9/16/96.
3 These are the average returns for the 35 funds in the Lipper Analytical
Services' Custom Natural Resources category for six months; 34 funds for one
year; 13 funds for five years; and eight funds for 10 years.
*** Lipper Since Inception returns are Class A, 79.67%; Class B, 76.25%; Class
C, 37.80%; and Class Z, 3.81% for all funds in each share class.
How Investments Compared.
(As of 11/30/97)
(CHART)
Source: Lipper Analytical Services. Financial markets change, so a mutual
fund's past performance should never be used to predict future results. The
risks to each of the investments listed above are different -- we provide
12-month total returns for several Lipper mutual fund categories to show you
that reaching for higher yields means tolerating more risk. The greater the
risk, the larger the potential reward or loss. In addition, we've included
historical 20-year average annual returns. These returns assume the
reinvestment of dividends.
U.S. Growth Funds will fluctuate a great deal. Investors have received higher
historical total returns from stocks than from most other investments. Smaller
capitalization stocks offer greater potential for long-term growth but may be
more volatile than larger capitalization stocks.
General Bond Funds provide more income than stock funds, which can help smooth
out their total returns year by year. But their prices still fluctuate
(sometimes significantly) and their returns have been historically lower than
those of stock funds.
General Municipal Debt Funds invest in bonds issued by state governments,
state agencies and/or municipalities. This investment provides income that is
usually exempt from federal and state income taxes.
Money Market Funds attempt to preserve a constant share value; they don't
fluctuate much in price but, historically, their returns have been generally
among the lowest of the major investment categories.
<PAGE>
Leigh R. Goehring, Fund Manager (PICTURE)
Portfolio
Manager's Report
The Prudential Natural Resources Fund seeks long-term growth of capital by
investing in foreign and domestic companies that own, explore, mine, process
or develop natural resources, or provide goods and services for those
industries. These resources include precious metals; ferrous and non-ferrous
metals; strategic metals; hydrocarbons, such as oil, gas and coal; and timber
land. The Fund may be affected to a greater extent by any single economic,
political or regulatory development than a mutual fund that does not focus its
investments on specific economic sectors. There can be no assurance that the
Fund will achieve its investment objective.
A Golden Opportunity.
Gold represents an excellent risk/reward profile in 1998 and remains one of
our central investment themes. Given the strength of demand, the uncertainty
of supply and low stock prices, we think that gold equity investments have
tremendous potential. And it is only a matter of time before prices rise.
Strategy Session.
- --------------------------------------------------------------------------
Supply of -- and demand for --commodities are the dominant factors in
determining the value of natural resource companies. Occasionally, stock
prices are distorted by temporary fears. We think these situations can create
great opportunities:
Precious metals. We are maintaining a large portion of the portfolio, 24% as
of November 30, 1997, in precious metals. Gold prices were depressed over the
last six months by threats of central bank sales of existing supplies. However,
other precious metals, such as palladium and silver, were under no such selling
pressure and prices for these metals actually rose during the reporting period.
We believe that current price of gold is based upon worst-case expectations of
future sales. Although there may be further weakness, we think that the upside
potential for precious metal stocks is greater than the downside.
Uranium. Uranium also offers a significant supply/demand imbalance. Demand for
power generation is about 150 million pounds a year and annual production is
about 70 million pounds. With the increasing focus on global warming, nuclear
power is likely to become more attractive -- it is a major source of electrical
power that doesn't release carbon dioxide into the atmosphere. Supplies of
uranium are limited. Because of low prices much of the U.S. uranium industry
has closed permanently. Uranium prices are restrained by fears that
weapons-grade material from Russia will be converted into nuclear
reactor-grade material and flood world markets. We believe this scenario is
unlikely, because of the U.S. government restrictions on the importation of
Russian uranium.
Portfolio Composition.
Sectors expressed as a percentage of
total net assets as of 11/30/97.
(CHART)
<PAGE>
What Went Well.
- -------------------------------------------------
Oil Services Rallied.
Our oil service companies appreciated considerably in price. In this six-month
period, our holdings of Stolt Comex Seaway (among our five largest positions
this summer) more than doubled, while Coflexip gained 75% and Weatherford 63%.
This theme performed very well for us, but we think it is over. In most cases,
the stocks rose beyond what we consider to be fair value. We also were
concerned that the Asian economic downturn is likely to reduce demand for oil.
So, we reduced our holdings considerably, taking profits.
Restructuring Paid Off.
Our largest holding on November 30, 1997 was Champion International. This
paper company has been restructuring. Investors have been attracted by its
earnings prospects. It returned 9% over the past six months.
And Not So Well.
- -------------------------------------------------
Precious Metal
Prices Plummet.
Our precious metals holdings declined substantially in price over the reporting
period. The 12-month inflation rate was the lowest it's been in 11 years.
Investors who are accustomed to thinking of gold as a hedge against inflation
lost interest in these stocks.
Their concerns turned into panic selling when two central banks announced
significant gold sales and investors feared further government sales. Gold
eventually sank to a 12-year low. We view the big drop in gold prices as a
buying opportunity. Gold jewelry demand alone is likely to outstrip world mine
supplies in 1998, plus we do not believe that governments are likely to sell
reserves at these severely depressed price levels.
El Nino Strikes.
Many of our Canadian natural gas holdings, such as Crestar Energy (down 20%)
and Alberta energy (down 16%), suffered from investors' fear that El Nino
would cause a mild winter and reduce demand for gas. We will hold these stocks
because of our long-term view that Canadian supplies are limited and new
pipeline development will increase demand for their gas.
Five Largest Issuers.
4.2% Champion International
Forest Products
3.7 Western Gas Resource
Energy Sources
3.7 Stillwater Mining
Precious Metals
3.5 Pioneer Natural Resources
Energy Sources
3.5 Potash Corp.
Chemicals
Expressed as a percentage of net assets as of 11/30/97.
Looking Ahead.
- -------------------------------------------------
Uranium stocks are very inexpensive now. We believe these prices are based on
the assumption that uranium from decommissioned nuclear weapons will become
available for other purposes. At current prices uranium stocks are an
attractive value, and offer more upside potential than downside risk. We think
the chances are small that significant amounts of weapons-grade uranium will
be converted to peacetime uses. There is much more potential for uranium
stocks to move upward than down, in our opinion.
1
<PAGE>
Precious Metals: Supply & Demand Are Keys to Success.
- -------------------------------------------------------------------------------
Fund Manager Leigh Goehring explains the reasons why better days may await
investors in precious metals.
Q. Why are you holding gold stocks?
A. We believe there is a long-term imbalance between the supply and the demand
for gold. In 1997, for example, world consumption was estimated at 3,700 tons,
while production and scrap (recycled) gold together yielded less than 3,000
tons. The shortfall is 700 tons a year. Jewelry demand is also rising,
particularly in South Asia. Even after the exploration boom in 1993-1996,
which produced very few discoveries, there will be little growth in mined
supply over the next five years.
Q. So, why aren't gold prices rising?
A. Central banks made large sales of gold reserves during 1997, depressing
prices. Also, central banks loaned gold under contracts which require that the
banks receive the gold back at a future date. Speculators are the primary
borrowers. They're selling gold (selling short), expecting to be able to buy
gold at lower prices should the central banks decide to reduce their gold
reserves permanently. Gold producers, who are fearful that prices will drop
further, also are borrowing from central banks to sell at today's low prices.
The gold they borrow will be replaced by the companies' future production. In
all, we estimate that central banks have lent 6,000 to 8,000 tons out of their
total of 34,000 tons. The total from 1989 to 1996 of actual gold sales has
amounted to less than 6% of government holdings.
Q. Can the current situation continue?
A. Yes, but it is increasingly unlikely to do so. Central banks would be
foolish to sell one asset that has fallen 65% from its high to buy another --
such as U.S. Treasury bonds -- that has already risen substantially. Although
they can continue to earn a return by lending the gold, they will decide at
some point that lending a significant percentage of their reserves is
imprudent. Gold producers will also realize at some point that there is no
reason to commit their future production at such low prices. We don't know
when the turn will come, but the present situation is not stable.
Q. What can happen?
A. Most investors are now betting that central banks will sell large amounts
of gold. If the central banks don't, or if they sell less than expected,
speculators who have sold in anticipation of such sales will be forced to
cover, pushing gold prices significantly higher. Even in the worst-case
scenario (large, drawn out central bank sales), I believe gold stocks have an
excellent risk/reward profile. They incorporate today's gold price, which
assumes large, continuing supplies from central banks. Given the strength of
demand, the uncertainty of supply and the low stock prices, I think gold
equity investments have tremendous upside potential.
2
<PAGE>
President's Letter January 22, 1998
- -------------------------------------------------------------------------------
(PHOTO)
New Opportunities for You.
Dear Shareholder:
By many measures, 1997 was very good for investors. Thanks to a sixth-straight
year of moderate economic growth and subdued inflation, the stock market
enjoyed its third year of double-digit returns while bond values rose as
yields declined. But it's time to close the books on 1997 and look ahead to
the opportunities of 1998.
Perhaps the best thing you can do at this time of year is review your
investment strategy. Wise investors know that the only thing constant in life
is change, and now, more than ever before, it's important to review your
situation. Why?
The Federal Taxpayer Relief Act of 1997 is changing the way America invests
and creating exciting new opportunities for you to accumulate wealth, save for
college or build a nest egg for retirement. Consider --
- - Expanded IRAs. Rules governing traditional Individual Retirement Accounts
have been extensively revised. Deductibility and contribution limits have been
broadened as has the list for penalty-free early withdrawals, including
first-time home buyers.
- - New Roth IRAs. The Roth IRA features tax-free distributions and does not
require mandatory withdrawals, which should be of particular interest to
retirees seeking to shelter assets in a tax-free account.
- - New Education IRAs. Similar to a traditional IRA, but specifically designed
for higher education. The new law also creates credits and deductions to help
defray college costs.
- - Revised Capital Gains Tax Rates. The good news is long-term rates are down,
which may benefit certain mutual fund investors. The bad news is there are now
three separate tax rates covering short-, mid- and long-term capital gains,
and you'll probably need a professional tax preparer to sort things out in
1998.
To learn more about the Taxpayer Relief Act and how it may benefit you, please
contact your Prudential Securities Financial Advisor or Pruco Securities
Registered Representative.
Thank you for your continued confidence in Prudential Mutual Funds &
Annuities.
Sincerely,
Brian M. Storms
President, Prudential Mutual Funds & Annuities
3
<PAGE>
Portfolio of Investments as of PRUDENTIAL NATURAL
November 30, 1997 (Unaudited) RESOURCES FUND, INC.
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
LONG-TERM INVESTMENTS--91.7%
COMMON STOCKS--90.2%
- ------------------------------------------------------------
Australia--1.6%
499,500 Acacia Resources(a) (Precious
Metals) $ 357,377
359,519 Capral Aluminum Ltd. (Metals-Non
Ferrous) 673,685
132,700 Comalco Ltd. (Metals-Non Ferrous) 509,074
154,100 Delta Gold NL (Precious Metals) 136,505
117,300 Plutonic Resources Ltd. (Precious
Metals) 170,247
------------
1,846,888
- ------------------------------------------------------------
Canada--31.4%
105,000 Agnico-Eagle Mines Ltd. (Precious
Metals) 497,665
136,000 Alberta Energy Co., Ltd. (Oil &
Natural Gas Production &
Refining) 2,721,623
120,100 Anderson Exploration Ltd.(a) (Oil &
Natural Gas Production) 1,113,169
320,500 Arakis Energy Corp.(a) (Oil &
Natural Gas Production) 941,469
192,700 Archer Resources Ltd.(a) (Oil &
Natural Gas Production) 811,853
159,800 Arizona Star Resource Ltd.(a) (Gold
Mines) 227,781
126,100 Atna Resources Ltd.(a) (Mineral
Resources) 119,534
70,800 Barrick Gold Corp. (Precious Metals) 1,165,790
278,800 Barrington Petroleum Ltd.(a)
(Exploration & Production) 828,090
472,100 Beau Canada Exploration Ltd.(a) (Oil
& Natural Gas Production) 991,173
199,300 Blue Range Resource Corp.(a) (Oil &
Natural Gas Production) 1,000,593
53,200 Cabre Exploration Ltd.(a) (Oil &
Natural Gas Production) 720,963
162,600 Cambior Inc. (Precious Metals) 822,048
71,900 Cameco Corp. (Misc. Materials &
Commodities) 2,574,799
42,500 Canadian Natural Resources Ltd.(a)
(Oil & Natural Gas Production) $ 941,527
156,400 Crestar Energy Inc.(a) (Oil &
Natural Gas Production) 2,372,110
93,700 Golden Knight Resources Inc.(a)
(Precious Metals) 200,671
124,200 Greenstone Resources Ltd.(a)
(Precious Metals) 549,422
80,000 International African Mining Gold
Corp.(a) (Precious Metals) 196,609
94,300 International Pursuit Corp.(a)
(Precious Metals) 69,526
279,000 Kap Resources Ltd.(a) (Chemicals) 538,742
224,000 MacMillan Bloedel Ltd. (Forest
Products & Paper) 2,406,488
163,100 Meridian Gold Inc.(a) (Precious
Metals) 366,478
149,000 Northrock Resources Ltd.(a) (Oil &
Natural Gas Production) 2,354,036
114,300 Northstar Energy Corp.(a)
(Exploration & Production) 754,429
120,300 Placer Dome Inc. (Precious Metals) 1,444,462
52,800 Potash Corp. (Chemicals) 4,154,700
173,181 Ranger Oil Ltd.(a) (Oil & Natural
Gas Production) 1,222,111
533,000 Rea Gold Corp.(a) (Precious Metals) 61,753
94,400 Repadre Capital Corp.(a) (Precious
Metals) 391,082
56,400 Rigel Energy Corp.(a) (Oil & Natural
Gas Production) 477,211
231,100 Rio Alto Exploration Ltd.(a)
(Exploration & Production) 1,841,790
145,000 Royal Oak Mines Inc. (Precious
Metals) 226,562
75,200 Samax Gold Inc.(a) (Precious Metals) 245,536
5,800 Sutton Resources Ltd.(a) (Mineral
Resources) 32,581
311,100 Tiomin Resources Inc.(a) (Metals-Non
Ferrous) 262,135
159,600 Triton Mining Corp.(a) (Precious
Metals) 62,757
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 4
<PAGE>
Portfolio of Investments as of PRUDENTIAL NATURAL
November 30, 1997 (Unaudited) RESOURCES FUND, INC.
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Canada (cont'd.)
165,500 TVX Gold, Inc.(a) (Precious Metals) $ 427,652
347,400 Westmin Resources Ltd.(a)
(Metals-Non Ferrous) 1,427,020
------------
37,563,940
- ------------------------------------------------------------
France--3.0%
34,600 Bouygues Offshore, S.A. (Engineering
& Construction) 1,534,784
7,300 Coflexip (ADR) (Energy Equipment &
Services) 363,175
16,217 Total Francaise Petroleum Ltd.
(Integrated Producers) 1,702,284
------------
3,600,243
- ------------------------------------------------------------
New Zealand--0.7%
892,188 Fletcher Challenge Forest, Ltd.
(Forest Products & Paper) 818,952
- ------------------------------------------------------------
South Africa--7.2%
600,000 Avgold Ltd.(a) (Precious Metals) 247,295
43,300 Durban Roodepoort Deep Ltd.(a)
(Precious Metals) 66,924
125,200 Harmony Gold Mining Co., Ltd.(a)
(Precious Metals) 307,034
293,600 Impala Platinum Holdings Ltd.
(Precious Metals) 2,698,518
68,000 Kloof Gold Mining Co., Ltd. (ADR)
(Precious Metals) 252,875
178,500 Randgold & Exploration Co.(a)
(Precious Metals) 228,068
220,600 Rustenburg Platnum Holdings(a)
(Precious Metals) 3,441,405
9,300 Vaal Reefs Exploration & Mining Co.,
Ltd. (Precious Metals) 321,978
86,000 Western Areas Gold Mining (a)
(Precious Metals) 423,576
42,200 Western Deep Levels Ltd. (Precious
Metals) 682,679
------------
8,670,352
United States--46.3%
155,100 Abacan Resources Corp.(a) (Oil &
Natural Gas Production) $ 358,669
15,200 Aluminum Company of America
(Metals-Non Ferrous) 1,022,200
25,600 Amerada Hess Corp. (Oil & Natural
Gas Production) 1,433,600
56,400 Apex Silver Mines Ltd.(a) (Precious
Metals) 623,925
107,283 Ashanti Goldfields Ltd. (GDR)
(Precious Metals) 771,097
63,000 Boise Cascade Corp. (Forest Products
& Paper) 2,122,312
32,000 Brigham Exploration Co.(a) (Oil &
Gas Exploration/Production) 502,000
92,100 Brush Wellman, Inc. (Metals-Non
Ferrous) 2,187,375
93,200 Champion International Corp. (Forest
Products & Paper) 4,992,025
49,900 Cross Timbers Oil Co. (Oil & Gas
Exploration/Production) 1,157,056
36,700 Dawson Production Services Inc.(a)
(Oil Services) 770,700
74,200 Freeport-McMoran Copper & Gold Inc.
(Metals-Non Ferrous) 1,479,363
33,500 FX Energy Inc.(a) (Oil & Natural Gas
Production) 221,938
54,411 Getchell Gold Corp.(a) (Precious
Metals) 1,428,289
94,500 Golden Star Resources Ltd.(a)
(Precious Metals) 295,313
140,600 Harcor Energy Inc.(a) (Oil & Natural
Gas Production & Refining) 421,800
87,000 J. Ray McDermott, S.A.(a) (Energy
Equipment & Services) 3,213,562
63,000 Louisiana-Pacific Corp. (Forest
Products & Paper) 1,271,813
135,600 Newfield Exploration Co.(a)
(Exploration & Production) 3,161,175
128,911 Newmont Mining Corp. (Precious
Metals) 3,875,387
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 5
<PAGE>
Portfolio of Investments as of PRUDENTIAL NATURAL
November 30, 1997 (Unaudited) RESOURCES FUND, INC.
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
United States (cont'd.)
148,822 NGC Corp. (Energy Sources) $ 2,455,563
87,300 Noble Affiliates, Inc. (Exploration
& Production) 3,241,012
130,586 Pioneer Natural Resources Co.
(Energy Sources) 4,170,590
33,300 Rayonier Inc. (Forest Products) 1,627,537
27,000 Reynolds Metals Co. (Aluminum) 1,537,313
240,000 Stillwater Mining Co.(a) (Precious
Metals) 4,380,000
46,000 Stolt Comex Seaway(a) (Energy
Equipment & Services) 2,288,500
195,100 Western Gas Resources, Inc. (Energy
Sources) 4,462,912
------------
55,473,026
------------
Total common stocks
(cost US$114,695,156) 107,973,401
------------
PREFERRED STOCKS--0.7%
- ------------------------------------------------------------
United States--0.7%
14,800 Freeport-McMoran Copper & Gold Inc.,
(Metals-Non Ferrous) 277,500
13,400 Hecla Mining Co., 7.00%, Conv., Ser.
B, (Precious Metals) 623,100
------------
Total preferred stocks
(cost US$977,193) 900,600
------------
WARRANTS(a)--0.1%
- ------------------------------------------------------------
Canada-->0.1%
120,800 Kap Resources Ltd.,
Expiring 8/3/00 @ CAD $2
(Chemicals) 67,858
- ------------------------------------------------------------
South Africa
21,650 Durban Roodepoort Deep Ltd. - Option
B
Expiring 6/30/02 @ ZAR 60
(Precious Metals) 4,462
------------
Total warrants
(cost US$81,640) 72,320
------------
CONVERTIBLE BONDS--0.7%
- ------------------------------------------------------------
South Africa--0.2%
ZAR 300 Randgold Finance BVI Ltd.,
Sec'd. Gtd., (Precious Metals)
7.00%, 9/30/01 $ 207,000
- ------------------------------------------------------------
United States--0.5%
US$ 811 Coeur D Alene Mines Corp.,
Sr. Sub. Deb., (Precious Metals)
6.375%, 1/31/04 608,250
------------
Total convertible bonds
(cost US$1,075,665) 815,250
------------
Total long-term investments
(cost US$116,829,654) 109,761,571
------------
SHORT-TERM INVESTMENTS--6.8%
REPURCHASE AGREEMENTS
- ------------------------------------------------------------
United States
Joint Repurchase Agreement Account,
8,148 5.70%, 12/1/97
(cost US$8,148,000; Note 5) 8,148,000
------------
- ------------------------------------------------------------
Total Investments--98.5%
(cost US$124,977,654; Note 4) 117,909,571
Other assets in excess of
liabilities--1.5% 1,800,955
------------
Net Assets--100% $119,710,526
------------
------------
</TALE>
- ---------------
(a) Non-income producing security.
ADR--American Depository Receipt.
GDR--Global Depository Receipt.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 6
<PAGE>
PRUDENTIAL NATURAL RESOURCES
Statement of Assets and Liabilities (Unaudited) FUND, INC.
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Assets November 30, 1997
<S> <C>
Investments, at value (cost $124,977,654)............................................................... $ 117,909,571
Cash.................................................................................................... 849
Foreign currency, at value (cost $2,765,646)............................................................ 2,722,005
Dividends and interest receivable....................................................................... 124,067
Receivable for investments sold......................................................................... 108,671
Receivable for Fund shares sold......................................................................... 65,321
Other assets............................................................................................ 3,036
-----------------
Total assets......................................................................................... 120,933,520
-----------------
Liabilities
Payable for investments purchased....................................................................... 653,185
Payable for Fund shares reacquired...................................................................... 293,839
Accrued expenses and other liabilities.................................................................. 113,238
Distribution fee payable................................................................................ 81,754
Management fee payable.................................................................................. 80,978
-----------------
Total liabilities.................................................................................... 1,222,994
-----------------
Net Assets.............................................................................................. $ 119,710,526
-----------------
-----------------
Net assets were comprised of:
Common stock, at par................................................................................. $ 86,650
Paid-in capital in excess of par..................................................................... 105,394,699
-----------------
105,481,349
Accumulated net investment loss...................................................................... (1,158,773)
Accumulated net realized gains on investments........................................................ 22,502,430
Net unrealized depreciation on investments and foreign currencies.................................... (7,114,480)
-----------------
Net assets, November 30, 1997........................................................................... $ 119,710,526
-----------------
-----------------
Class A:
Net asset value and redemption price per share
($34,757,641 / 2,423,074 shares of common stock issued and outstanding)........................... $14.34
Maximum sales charge (5% of offering price).......................................................... .75
-----------------
Maximum offering price to public..................................................................... $15.09
-----------------
-----------------
Class B:
Net asset value, offering price and redemption price per share
($80,286,942 / 5,909,820 shares of common stock issued and outstanding)........................... $13.59
-----------------
-----------------
Class C:
Net asset value, offering price and redemption price per share
($1,908,200 / 140,461 shares of common stock issued and outstanding).............................. $13.59
-----------------
-----------------
Class Z:
Net asset value, offering price and redemption price per share
($2,757,743 / 191,627 shares of common stock issued and outstanding).............................. $14.39
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 7
<PAGE>
PRUDENTIAL NATURAL
RESOURCES FUND, INC.
Statement of Operations (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Income (Loss) November 30, 1997
<S> <C>
Income
Dividends (net of foreign withholding
taxes of $36,727).................. $ 645,724
Interest.............................. 91,083
-----------------
Total income....................... 736,807
-----------------
Expenses
Management fee........................ 560,374
Distribution fee--Class A............. 54,870
Distribution fee--Class B............. 500,693
Distribution fee--Class C............. 11,471
Transfer agent's fees and expenses.... 132,000
Custodian's fees and expenses......... 99,000
Registration fees..................... 55,000
Reports to shareholders............... 27,000
Audit fee and expenses................ 16,000
Directors' fees and expenses.......... 14,000
Legal fees and expenses............... 11,000
Miscellaneous......................... 4,736
-----------------
Total expenses..................... 1,486,144
-----------------
Net investment loss...................... (749,337)
-----------------
Realized and Unrealized Gain (Loss)
on Investments and Foreign
Currency Transactions
Net realized gain (loss) on:
Investment transactions............... 14,954,142
Foreign currency transactions......... (161,917)
-----------------
14,792,225
-----------------
Net change in unrealized appreciation/depreciation on:
Investments........................... (30,335,879)
Foreign currencies.................... (48,586)
-----------------
(30,384,465)
-----------------
Net loss on investments and foreign
currencies............................ (15,592,240)
-----------------
Net Decrease in Net Assets
Resulting from Operations................ $ (16,341,577)
-----------------
-----------------
</TABLE>
PRUDENTIAL NATURAL
RESOURCES FUND, INC.
Statement of Changes in Net Assets (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
Increase (Decrease) in November 30, May 31,
Net Assets 1997 1996
<S> <C> <C>
Operations
Net investment loss.......... $ (749,337) $ (1,466,500)
Net realized gain on
investment and foreign
currency transactions..... 14,792,225 20,092,637
Net change in unrealized
appreciation/depreciation
on investments and foreign
currencies................ (30,384,465) (12,087,497)
------------- -------------
Net increase (decrease) in
net assets resulting from
operations................ (16,341,577) 6,538,640
------------- -------------
Distributions from net realized
gains
(Note 1)
Class A...................... -- (4,657,286)
Class B...................... -- (12,161,558)
Class C...................... -- (234,109)
Class Z...................... -- (32,340)
------------- -------------
-- (17,085,293)
------------- -------------
Fund share transactions (net of
share conversions) (Note 5)
Proceeds from shares sold.... 87,999,046 157,545,157
Net asset value of shares
issued in reinvestment of
distributions............. -- 15,354,101
Cost of shares reacquired.... (116,147,474) (145,400,427)
------------- -------------
Net increase (decrease) in
net assets from Fund share
transactions.............. (28,148,428) 27,498,831
------------- -------------
Total increase (decrease)....... (44,490,005) 16,952,178
Net Assets
Beginning of period............. 164,200,531 147,248,353
------------- -------------
End of period................... $ 119,710,526 $ 164,200,531
------------- -------------
------------- -------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 8
<PAGE>
PRUDENTIAL NATURAL
Notes to Financial Statements (Unaudited) RESOURCES FUND, INC.
- -------------------------------------------------------------------------------
Prudential Natural Resources Fund, Inc., (the 'Fund'), is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. The Fund's investment objective is long-term growth of capital which it
seeks to achieve by investing primarily in equity securities of foreign and
domestic natural resource companies.
- ------------------------------------------------------------
Note 1. Accounting Policies
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
Security Valuation: Securities traded on an exchange are valued at the last
reported sales price on the primary exchange on which they are traded.
Securities traded in the over-the-counter market (including securities listed on
exchanges for which a last sales price is not available) are valued at the
average of the last reported bid and asked prices. Securities for which market
quotations are not available, other than private placements, shall each be
valued at a price supplied by an independent pricing agent, which is, in the
opinion of such pricing agent, representative of the market value of such
securities as of the time of determination of net asset value. Securities for
which market quotations are not readily available, and for which the pricing
agent or principal market maker does not provide a valuation, including
restricted securities, will be valued at fair value as determined in good faith
according to a pricing procedure developed by the Investment Adviser under
procedures established by and under the general supervision of the Fund's Board
of Directors. Options listed on exchanges are valued at their closing price on
the applicable exchange.
Short-term securities which mature in more than 60 days are valued at current
market quotations. Short-term securities which mature in 60 days or less are
valued at amortized cost which approximates market value.
In connection with transactions in repurchase agreements with U.S. financial
institutions, it is the Fund's policy that its custodian or designated
subcustodians, as the case may be under triparty repurchase agreements, take
possession of the underlying collateral securities, the value of which exceeds
the principal amount of the repurchase transaction including accrued interest.
If the seller defaults, and the value of the collateral declines or if
bankruptcy proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited.
Foreign Currency Translation: The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:
(i) market value of investment securities, other assets and liabilities--at the
daily closing rates of exchange.
(ii) purchases and sales of investment securities, income and expenses--at the
rate of exchange prevailing on the respective dates of such transactions.
Although the net assets of the Fund are presented using the foreign exchange
rates and market values at the close of the fiscal period, the Fund does not
isolate that portion of the results of operations arising as a result of changes
in the foreign exchange rates from the fluctuations arising from changes in the
market prices of securities held at the fiscal period end. Similarly, the Fund
does not isolate the effect of changes in foreign exchange rates from the
fluctuations arising from changes in the market prices of long-term portfolio
securities sold during the fiscal period.
Net realized gains (losses) on foreign currency transactions represents net
foreign exchange gains or losses from disposition of foreign currencies,
currency gains or losses realized between the trade and settlement dates on
security transactions, and the difference between the amounts of dividends,
interest and foreign taxes recorded on the Fund's books and the U.S. dollar
equivalent amounts actually received or paid. Net unrealized currency gains and
losses from valuing foreign currency denominated assets and liabilities (other
than investments) at fiscal period end exchange rates are reflected as a
component of net unrealized depreciation on foreign currencies.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of domestic origin as a result of,
among other factors, the possibility of political and economic instability and
the level of governmental supervision and the regulation of foreign securities
markets.
Securities Transactions and Investment Income: Securities transactions are
recorded on the trade date. Realized gains and losses from investment and
currency transactions are calculated on the identified cost basis. Dividend
income is recorded on the ex-dividend date and interest income is recorded on an
accrual basis. Expenses are recorded on the accrual basis which may require the
use of certain estimates by management.
Net investment income (other than distribution fees) and unrealized and realized
gains or losses are allocated daily to each class of shares of the Fund based
upon the relative proportion of net assets of each class at the beginning of the
day.
Taxes: It is the Fund's policy to continue to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies
- --------------------------------------------------------------------------------
9
<PAGE>
PRUDENTIAL NATURAL
Notes to Financial Statements (Unaudited) RESOURCES FUND, INC.
- -------------------------------------------------------------------------------
and to distribute all of its taxable income to shareholders. Therefore, no
federal income tax provision is required.
Withholding taxes on foreign interest and dividends have been provided for in
accordance with the Fund's understanding of the applicable country's tax rules
and rates.
Dividends and Distributions: The Fund expects to pay dividends out of net
investment income and make distributions of any net capital gains, at least
annually, if any. Dividends and distributions are recorded on the ex-dividend
date.
Income distributions and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments of wash
sales, foreign currencies and passive investment companies' transactions.
Reclassification of Capital Accounts: The Fund accounts and reports for
distributions to shareholders in accordance with the American Institute of
Certified Public Accountants' Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain, and
Return of Capital Distributions by Investment Companies. The effect of applying
this statement was to increase accumulated net investment loss and increase
accumulated net realized gain on investments and by $161,917 for realized
foreign currency losses during the six months ended November 30, 1997. Net
investment loss, net realized gains and net assets were not affected by this
change.
- ------------------------------------------------------------
Note 2. Agreements
The Fund has a management agreement with Prudential Investments Fund Management
LLC ('PIFM'). Pursuant to this agreement, PIFM has responsibility for all
investment advisory services and supervises the subadviser's performance of such
services. PIFM has entered into a subadvisory agreement with The Prudential
Investment Corporation ('PIC'); PIC furnishes investment advisory services in
connection with the management of the Fund. PIFM pays for the services of PIC,
the compensation of officers of the Fund, occupancy and certain clerical and
bookkeeping costs of the Fund. The Fund bears all other costs and expenses.
The management fee paid PIFM is computed daily and payable monthly, at an annual
rate of .75 of 1% of the Fund's average daily net assets.
The Fund has a distribution agreement with Prudential Securities Incorporated
('PSI'), which acts as the distributor of the Class A, Class B, Class C and
Class Z shares of the Fund. The Fund compensates PSI for distributing and
servicing the Fund's Class A, Class B and Class C shares, pursuant to plans of
distribution, (the 'Class A, B and C Plans') regardless of expenses actually
incurred by them. The distribution fees are accrued daily and payable monthly.
No distribution or service fees are paid to PSI as distributor of the Class Z
shares of the Fund.
Pursuant to the Class A, B and C Plans, the Fund compensates PSI for its
distribution-related activities at an annual rate of up to .30 of 1%, 1% and 1%
of the average daily net assets of the Class A, B and Class C shares,
respectively. Such expenses under the Plans were .25 of 1%, 1% and 1% of the
average daily net assets of the Class A, B and C shares, respectively, for the
six months ended November 30, 1997.
PSI has advised the Fund that it has received approximately $30,600 in front-end
sales charges resulting from sales of Class A shares during the six months ended
November 30, 1997. From these fees, PSI paid such sales charges to dealers which
in turn paid commissions to salespersons and incurred other distribution costs.
PSI has advised the Fund that for the six months ended November 30, 1997, it
received approximately $148,900 and $800 in contingent deferred sales charges
imposed upon redemptions by certain Class B and Class C shareholders,
respectively.
PSI, PIFM and PIC are indirect, wholly-owned subsidiaries of The Prudential
Insurance Company of America.
The Fund, along with other affiliated registered investment companies (the
'Funds'), entered into a credit agreement (the 'Agreement') on December 31, 1996
with an unaffiliated lender. The maximum commitment under the Agreement is
$200,000,000. The Agreement expired on December 30, 1997 and was subsequently
extended through December 29, 1998. Interest on any such borrowings outstanding
will be at market rates. The purpose of the Agreement is to serve as an
alternative source of funding for capital share redemptions. The Fund has not
borrowed any amounts pursuant to the Agreement as of November 30, 1997. The
Funds pay a commitment fee at an annual rate of .055 of 1% on the unused portion
of the credit facility. The commitment fee is accrued and paid quarterly on a
pro-rata basis by the Funds.
- ------------------------------------------------------------
Note 3. Other Transactions With Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), a wholly-owned subsidiary of PIFM,
serves as the Fund's transfer agent and during the six
- --------------------------------------------------------------------------------
10
<PAGE>
PRUDENTIAL NATURAL
Notes to Financial Statements (Unaudited) RESOURCES FUND, INC.
- -------------------------------------------------------------------------------
months ended November 30, 1997, the Fund incurred fees of approximately $105,700
for the services of PMFS. As of November 30, 1997, approximately $17,100 of such
fees were due to PMFS. Transfer agent fees and expenses in the Statement of
Operations include certain-out-of pocket expenses paid to non-affiliates.
For the six months ended November 30, 1997, PSI and/or its foreign affiliates
earned approximately $3,500 in brokerage commissions from portfolio transactions
executed on behalf of the Fund.
- ------------------------------------------------------------
Note 4. Portfolio Securities
Purchases and sales of investment securities, other than short-term investments
for the six months ended November 30, 1997 aggregated $20,776,633 and
$52,901,240, respectively.
The federal income tax basis of the Fund's investments at November 30, 1997 was
$125,291,729 and accordingly, net unrealized depreciation for federal income tax
purposes was $7,382,158 (gross unrealized appreciation--$16,925,571 gross
unrealized depreciation--$24,307,729).
For federal income tax purposes the Fund elected to treat net currency losses of
approximately $31,000 incurred in the seven month period ended May 31, 1997 as
having incurred in the current fiscal year.
- ------------------------------------------------------------
Note 5. Joint Repurchase Agreement Account
The Fund, along with other affiliated registered investment companies, transfers
uninvested cash balances into a single joint account, the daily aggregate
balance of which is invested in one or more repurchase agreements collateralized
by U.S. Treasury or federal agency obligations. At November 30, 1997, the Fund
had a 0.7% undivided interest in the repurchase agreements in the joint account.
The undivided interest for the Fund represented $8,148,000 in principal amount.
As of such date, each repurchase agreement in the joint account and the value of
the collateral therefor was as follows:
Bear, Stearns & Co. Inc., 5.74%, in the principal amount of $330,000,000,
repurchase price $330,157,850, due 12/1/97. The value of the collateral
including accrued interest was $337,310,022.
Credit Suisse First Boston Corp., 5.70%, in the principal amount of
$330,000,000, repurchase price $330,156,750, due 12/1/97. The value of the
collateral including accrued interest was $342,024,757.
Deutsche Morgan Grenfell, Inc., 5.70%, in the principal amount of $330,000,000,
repurchase price $330,156,750, due 12/1/97. The value of the collateral
including accrued interest was $336,600,387.
Morgan Stanley & Co. Inc., 5.625%, in the principal amount of $119,585,000,
repurchase price $119,641,055, due 12/1/97. The value of the collateral
including accrued interest was $121,976,916.
- ------------------------------------------------------------
Note 6. Capital
The Fund offers Class A, Class B, Class C and Class Z shares. Class A shares are
sold with a front-end sales charge of up to 5%. Class B shares are sold with a
contingent deferred sales charge which declines from 5% to zero depending on the
period of time the shares are held. Class C shares are sold with a contingent
deferred sales charge of 1% during the first year. Class B shares will
automatically convert to Class A shares on a quarterly basis approximately seven
years after purchase. Special exchange privileges are also available for
shareholders who qualify to purchase Class A shares at net asset value. Class Z
shares are not subject to any sales or redemption charge and are offered
exclusively for sale to a limited group of investors.
The Fund has authorized 500 million shares of common stock $.01 par value per
share equally divided into four classes, designated Class A, Class B, Class C
and Class Z common stock.
Transactions in shares of common stock were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ----------------------------------- ---------- ------------
<S> <C> <C>
Six months ended November 30, 1997:
Shares sold........................ 4,025,155 $ 65,395,188
Shares reacquired.................. (4,677,168) (76,181,673)
---------- ------------
Net decrease in shares outstanding
before conversion................ (652,013) (10,786,485)
Shares issued upon conversion from
Class B.......................... 183,175 3,039,772
---------- ------------
Net decrease in shares
outstanding...................... (468,838) $ (7,746,713)
---------- ------------
---------- ------------
Year ended May 31, 1997:
Shares sold........................ 5,780,788 $ 95,719,238
Shares issued in reinvestment of
distributions.................... 275,315 4,341,728
Shares reacquired.................. (5,504,443) (91,242,896)
---------- ------------
Net increase in shares outstanding
before conversion................ 551,660 8,818,070
Shares issued upon conversion from
Class B.......................... 460,102 7,810,060
---------- ------------
Net increase in shares
outstanding...................... 1,011,762 $ 16,628,130
---------- ------------
---------- ------------
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE>
PRUDENTIAL NATURAL
Notes to Financial Statements (Unaudited) RESOURCES FUND, INC.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B Shares Amount
- ----------------------------------- ---------- ------------
Six months ended November 30, 1997:
<S> <C> <C>
Shares sold........................ 492,900 $ 7,788,012
Shares reacquired.................. (1,597,239) (24,789,044)
---------- ------------
Net decrease in shares outstanding
before conversion................ (1,104,339) (17,001,032)
Shares reacquired upon conversion
into Class A..................... (192,938) (3,039,772)
---------- ------------
Net decrease in shares
outstanding...................... (1,297,277) $(20,040,804)
---------- ------------
---------- ------------
Year ended May 31, 1997:
Shares sold........................ 3,305,711 $ 53,154,461
Shares issued in reinvestment of
distributions.................... 715,252 10,764,540
Shares reacquired.................. (3,104,475) (49,520,723)
---------- ------------
Net increase in shares outstanding
before conversion................ 916,488 14,398,278
Shares reacquired upon conversion
into Class A..................... (480,006) (7,810,060)
---------- ------------
Net increase in shares
outstanding...................... 436,482 $ 6,588,218
---------- ------------
---------- ------------
<CAPTION>
Class C
- -----------------------------------
<S> <C> <C>
Six months ended November 30, 1997:
Shares sold........................ 24,799 $ 404,225
Shares reacquired.................. (48,747) (760,615)
---------- ------------
Net decrease in shares
outstanding...................... (23,948) $ (356,390)
---------- ------------
---------- ------------
Year ended May 31, 1997:
Shares sold........................ 243,854 $ 4,042,826
Shares issued in reinvestment of
distributions.................... 14,319 215,504
Shares reacquired.................. (186,625) (3,110,098)
---------- ------------
Net increase in shares
outstanding...................... 71,548 $ 1,148,232
---------- ------------
---------- ------------
<CAPTION>
Class Z Shares Amount
- ----------------------------------- ---------- ------------
<S> <C> <C>
Six months ended November 30, 1997:
Shares sold........................ 861,317 $ 14,411,621
Shares reacquired.................. (862,334) (14,416,142)
---------- ------------
Net decrease in shares
outstanding...................... (1,017) $ (4,521)
---------- ------------
---------- ------------
September 16, 1996* through
May 31, 1997:
Shares sold........................ 285,159 $ 4,628,632
Shares issued in reinvestment of
distributions.................... 2,049 32,329
Shares reacquired.................. (94,564) (1,526,710)
---------- ------------
Net increase in shares
outstanding...................... 192,644 $ 3,134,251
---------- ------------
---------- ------------
</TABLE>
- ---------------
* Commencement of offering of Class Z shares.
- ------------------------------------------------------------
Note 7. Distributions
On December 10, 1997, the Board of Directors of the Fund declared a short-term
capital gain distribution of $.37 per share and a long-term capital gain
distribution of $1.80 per share for Class A, B, C and Z shares, respectively,
payable on December 18, 1997 to shareholders of record on December 15, 1997.
- --------------------------------------------------------------------------------
12
<PAGE>
PRUDENTIAL NATURAL
Financial Highlights (Unaudited) RESOURCES FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
------------------------------------------------------------------------
Six Months
Ended Year Ended May 31,
November 30, -------------------------------------------------------
1997(a) 1997(a) 1996 1995(a) 1994(a) 1993(a)
------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................. $ 16.27 $ 17.34 $ 13.73 $ 12.55 $11.84 $10.02
------ ------- ------- ------- ------- -------
Income from investment operations
Net investment income (loss).......................... (.04) (.07) (.01) (.03) .01 .02
Net realized and unrealized gain (loss) on investment
and foreign currency transactions.................. (1.89) .94 4.42 1.21 .70 1.80
------ ------- ------- ------- ------- -------
Total from investment operations................... (1.93) .87 4.41 1.18 .71 1.82
------ ------- ------- ------- ------- -------
Less distributions
Distributions from net realized gains................. -- (1.94) (.80) -- -- --
------ ------- ------- ------- ------- -------
Net asset value, end of period........................ $ 14.34 $ 16.27 $ 17.34 $ 13.73 $12.55 $11.84
------ ------- ------- ------- ------- -------
------ ------- ------- ------- ------- -------
TOTAL RETURN(b):...................................... (11.86)% 5.37% 33.51% 9.40% 6.00 % 18.16%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)....................... $ 34,758 $47,054 $32,608 $19,682 $6,505 $1,898
Average net assets (000).............................. $ 43,776 $40,393 $23,106 $10,791 $4,106 $ 758
Ratios to average net assets:
Expenses, including distribution fees.............. 1.48%(c) 1.48% 1.57% 1.73% 1.89 % 2.38%
Expenses, excluding distribution fees.............. 1.23%(c) 1.23% 1.32% 1.48% 1.65 % 2.18%
Net investment income (loss)....................... (.49)%(c) (.43)% (.09)% (.25)% .11 % .13%
For Class A, B, C and Z shares:
Portfolio turnover.................................... 15% 53% 41% 36% 19 % 50%
Average commission rate per share..................... $ .0369 $ .0371 $ .0290 N/A N/A N/A
</TABLE>
- ---------------
(a) Calculated based upon average shares outstanding by class.
(b) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
(c) Annualized.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 13
<PAGE>
PRUDENTIAL NATURAL
Financial Highlights (Unaudited) RESOURCES FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B
------------------------------------------------------------------------
Six Months
Ended Year Ended May 31,
November 30, -------------------------------------------------------
1997(a) 1997(a) 1996 1995(a) 1994(a) 1993(a)
------------ -------- -------- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................. $ 15.46 $ 16.70 $ 13.35 $ 12.29 $ 11.69 $ 9.97
------ -------- -------- ------- ------- -------
Income from investment operations
Net investment loss................................... (.10) (.19) (.10) (.13) (.08) (.07)
Net realized and unrealized gain (loss) on investment
and foreign currency transactions.................. (1.77) .89 4.25 1.19 .68 1.79
------ -------- -------- ------- ------- -------
Total from investment operations................... (1.87) .70 4.15 1.06 .60 1.72
------ -------- -------- ------- ------- -------
Less distributions
Distributions from net realized gains................. -- (1.94) (.80) -- -- --
------ -------- -------- ------- ------- -------
Net asset value, end of period........................ $ 13.59 $ 15.46 $ 16.70 $ 13.35 $ 12.29 $ 11.69
------ -------- -------- ------- ------- -------
------ -------- -------- ------- ------- -------
TOTAL RETURN(b):...................................... (12.10)% 4.51% 32.49% 8.62% 5.13% 17.25%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)....................... $ 80,287 $111,464 $113,090 $80,774 $64,235 $36,150
Average net assets (000).............................. $ 99,865 $107,361 $ 84,396 $74,681 $48,772 $23,464
Ratios to average net assets:
Expenses, including distribution fees.............. 2.23%(c) 2.23% 2.32% 2.48% 2.65% 3.18%
Expenses, excluding distribution fees.............. 1.23%(c) 1.23% 1.32% 1.48% 1.65% 2.18%
Net investment loss................................ (1.24)%(c) (1.18)% (.84)% (1.05)% (.67)% (.67)%
</TABLE>
- ---------------
(a) Calculated based upon average shares outstanding by class.
(b) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
(c) Annualized.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 14
<PAGE>
PRUDENTIAL NATURAL
Financial Highlights (Unaudited) RESOURCES FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C Class Z
-------------------------------------------------- ------------
August 1,
Six Months 1994(d) Six Months
Ended Year Ended May 31, through Ended
November 30, ------------------ May 31, November 30,
1997(a) 1997(a) 1996 1995(a) 1997(a)
------------ ------- ------ ---------- ------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................. $15.46 $16.70 $13.35 $12.47 $16.30
----- ------- ------ ----- -----
Income from investment operations
Net investment loss................................... (.11) (.19 ) (.10) (.13) (.03)
Net realized and unrealized gain (loss) on investment
and foreign currency transactions.................. (1.76) .89 4.25 1.01 (1.88)
----- ------- ------ ----- -----
Total from investment operations................... (1.87) .70 4.15 .88 (1.91)
----- ------- ------ ----- -----
Less distributions
Distributions from net realized gains................. -- (1.94 ) (.80) -- --
----- ------- ------ ----- -----
Net asset value, end of period........................ $13.59 $15.46 $16.70 $13.35 $14.39
----- ------- ------ ----- -----
----- ------- ------ ----- -----
TOTAL RETURN(b):...................................... (12.10)% 4.51 % 32.49% 7.06% (11.72)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)....................... $1,908 $2,542 $1,551 $ 606 $2,758
Average net assets (000).............................. $2,288 $2,041 $ 734 $294 $3,096
Ratios to average net assets:
Expenses, including distribution fees.............. 2.23%(c) 2.23 % 2.32% 2.56%(c) 1.23%(c)
Expenses, excluding distribution fees.............. 1.23%(c) 1.23 % 1.32% 1.56%(c) 1.23%(c)
Net investment loss................................ (1.24)%(c) (1.18 )% (.84)% (1.08)%(c) (.24)%(c)
<CAPTION>
September 16,
1996(e)
through
May 31,
1997(a)
-------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................. $ 17.08
-----
Income from investment operations
Net investment loss................................... (.03)
Net realized and unrealized gain (loss) on investment
and foreign currency transactions.................. 1.19
-----
Total from investment operations................... 1.16
-----
Less distributions
Distributions from net realized gains................. (1.94)
-----
Net asset value, end of period........................ $ 16.30
-----
-----
TOTAL RETURN(b):...................................... 7.17%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)....................... $ 3,140
Average net assets (000).............................. $ 994
Ratios to average net assets:
Expenses, including distribution fees.............. 1.23%(c)
Expenses, excluding distribution fees.............. 1.23%(c)
Net investment loss................................ (.18)%(c)
</TABLE>
- ---------------
(a) Calculated based upon average shares outstanding by class.
(b) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
(c) Annualized.
(d) Commencement of offering of Class C shares.
(e) Commencement of offering of Class Z shares.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 15
<PAGE>
Getting
The Most
From Your
Prudential
Mutual
Fund.
When you invest through Prudential Mutual Funds, you receive financial advice
through a Prudential Securities financial advisor or Prudential/Pruco
Securities registered representative. Your advisor or representative can
provide you with the following services:
- -------------------------------------------------------------------------------
There's No Reward Without Risk; But Is This Risk Worth It?
Your financial advisor or registered representative can help you match the
reward you seek with the risk you can tolerate. And risk can be difficult to
gauge -- sometimes even the simplest investments bear surprising risks. The
educated investor knows that markets seldom move in just one direction --
there are times when a market sector or asset class will lose value or provide
little in the way of total return. Managing your own expectations is easier
with help from someone who understands the markets and who knows you!
- -------------------------------------------------------------------------------
Keeping Up With The Joneses.
A financial advisor or registered representative can help you wade through the
numerous mutual funds available to find the ones that fit your own individual
investment profile and risk tolerance. While the newspapers and popular
magazines are full of advice about investing, they are aimed at generic groups
of people or representative individuals, not at you personally. Your financial
advisor or registered representative will review your investment objectives
with you. This means you can make financial decisions based on the assets and
liabilities in your current portfolio and your risk tolerance -- not just
based on the current investment fad.
- -------------------------------------------------------------------------------
Buy Low, Sell High.
Buying at the top of a market cycle and selling at the bottom are among the
most common investor mistakes. But sometimes it's difficult to hold on to an
investment when it's losing value every month. Your financial advisor or
registered representative can answer questions when you're confused or worried
about your investment, and remind you that you're investing for the long haul.
<PAGE>
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
http://www.prudential.com
Directors
Edward D. Beach
Stephen C. Eyre
Delayne Dedrick Gold
Robert F. GuniaDon G. Hoff
Robert E. LaBlanc
Mendel A. Melzer
Richard A. Redeker
Robin B. Smith
Stephen Stoneburn
Nancy H. Teeters
Officers
Richard A. Redeker, President
Thomas A. Early, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, Secretary
Robert C. Rosselot, Assistant Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07101
Distributor
Prudential Securities Incorporated
One Seaport Plaza
New York, NY 10292
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
The views expressed in this report and information about the Fund's portfolio
holdings are for the period covered by this report and are subject to change
thereafter.
The accompanying financial statements as of November 30, 1997 were not audited
and, accordingly, no opinion is expressed on them.
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
<PAGE>
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Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
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