<PAGE>
ANNUAL REPORT MAY 31, 2000
Prudential
Natural Resources Fund, Inc.
FUND TYPE Global Stock
OBJECTIVE Long-term growth of capital
(GRAPHIC)
This report is not authorized for distribution to
prospective investors unless preceded or accompanied by a
current prospectus.
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.
(LOGO)
<PAGE>
Build on the Rock
Investment Goals and Style
The Prudential Natural Resources Fund seeks long-term
growth of capital by investing primarily 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
nonferrous metals; strategic metals; hydrocarbons such as
oil, gas, and coal; and timberland. 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.
Portfolio Composition
Sectors expressed as a percentage of
net assets as of 5/31/00
39.1% Oil & Gas Exploration/Production
21.3 Miscellaneous
16.1 Platinum
8.4 Oil & Gas Services
7.9 Gold
2.6 Metals-Nonferrous
2.3 Investment Companies
1.7 Forest Products & Paper
0.6 Cash & Equivalents
Ten Largest Holdings
Expressed as a percentage of
net assets as of 5/31/00
6.1% Stillwater Mining Co.
Metals-Nonferrous
5.9 Impala Platinum Holdings Ltd.
Platinum
5.2 Smith International, Inc.
Oil & Gas Services
5.2 BJ Services Co.
Oil & Gas Services
4.9 Dynegy, Inc.
Oil & Gas Exploration/Production
4.4 Newfield Exploration Co.
Oil & Gas Exploration/Production
4.1 Anglo American Platinum Corp. Ltd.
Platinum
3.9 Maverick Tube Corp.
Oil & Gas Production/Pipeline
3.5 Alberta Energy Co., Ltd.
Oil & Gas Exploration/Production
3.2 Western Gas Resources, Inc.
Oil & Gas Production/Pipeline
<PAGE>
www.prudential.com (800) 225-1852
Performance at a Glance
Cumulative Total Returns1 As of 5/31/00
One Five Ten Since
Year Years Years Inception2
Class A 37.25% 69.23% 135.01% 125.90%
Class B 36.14 62.93 117.82 136.39
Class C 36.14 62.93 N/A 74.42
Class Z 37.57 N/A N/A 29.85
Lipper Nat.
Res. Fund
Subset Avg.3 24.68 64.89 126.35 ***
Average Annual Total Returns1 As of 6/30/00
One Five Ten Since
Year Years Years Inception2
Class A 16.35% 9.36% 8.27% 7.32%
Class B 16.56 9.52 8.00 6.76
Class C 19.34 9.44 N/A 9.19
Class Z 22.85 N/A N/A 6.43
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 LLC and
Lipper Inc. The cumulative total returns do not take into
account sales charges. The average annual total returns
do take into account applicable sales charges. The Fund
charges a maximum front-end sales charge of 5% for Class
A shares.
Class B shares are subject to a declining contingent
deferred sales charge (CDSC) of 5%, 4%, 3%, 2%, 1%, and
1% for six years. Class B shares will automatically
convert to Class A shares, on a quarterly basis,
approximately seven years after purchase. Class C shares
are subject to a front-end sales charge of 1% and a CDSC
of 1% for 18 months. Class Z shares are not subject to a
sales charge or distribution and service (12b-1) fees.
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 Lipper average returns are for all funds in each share
class for the one-, five-, and ten-year periods in the
Natural Resources Fund Subset category, which includes
funds that invest more than 65% of their equity
commitment in natural resources stocks, and excludes
funds with a greater than 75% energy weighting. The
Lipper average is unmanaged. Funds in the Natural
Resources category invest more than 65% of their assets
in natural resources stocks.
***Lipper Since Inception returns are 119.35% for Class
A, 100.06% for Class B, 59.53% for
Class C, and 20.49% for Class Z, based on all funds in
each share class.
1
<PAGE>
(LOGO) July 17, 2000
Dear Shareholder,
The global demand for natural resources picked up when
Asian economies recovered and the growth of European
economies accelerated. The Prudential Natural Resources
Fund's Class A shares returned 37.25% over the 12 months
ended May 31, 2000-30.38% to those paying the maximum
one-time Class A share sales charge during the period.
The Class A share return was almost 13 percentage points
ahead of its Lipper benchmark of comparable funds.
The Fund's substantial outperformance came primarily from
having anticipated the significant increase in energy prices.
Its investments in oil service companies, energy
exploration and production, natural gas pipelines, and
related companies had high returns. Its palladium and
platinum investments also benefited from a tight
supply/demand balance. The Fund's gold holdings, which
have detracted from its performance in recent years, were
essentially neutral this period, as the Fund's position
was reduced substantially. The following report explains
why this change was made, and provides the Investment
Adviser's overall view of the natural resources markets.
Yours sincerely,
John R. Strangfeld, President
Prudential Natural Resources Fund, Inc.
2
<PAGE>
Prudential Natural Resources Fund, Inc.
Annual Report May 31, 2000
Investment Adviser's Report
Monitoring inventories
El Nino (the warming of the Pacific Ocean surface current
that passes the west coast of the Americas), the Asian
economic slowdown, and excess Organization of Petroleum
Exporting Countries (OPEC) production all
contributed to extremely weak energy prices in 1998 and
the start of 1999. Oil prices fell as low as $11 a
barrel, forcing significant cutbacks in spending on
exploration and production. As the growth of oil
production slowed, demand gradually picked up with the
recovery of Asian economies, and both oil and natural gas
inventories dropped dramatically. Responding to these
developments, energy prices rose steeply over our
reporting year: heating oil futures rose 194%, crude oil
futures were up 93%, and natural gas futures gained 33%.
We anticipated the surge in energy prices, adding
significant positions in industries we thought would
benefit from the rise. Our performance benefited
substantially.
Oil Inventories and Prices
(GRAPH)
-- U.S. Primary Inventory in Thousands (000) of Barrels
--- Price of Oil-Dollars per Barrel
// Source: American Petroleum Institute
// Source: Bridge Data Systems
The chart does not reflect performance of the Prudential
Natural Resources Fund. Past performance is not
indicative of future results.
3
<PAGE>
Prudential Natural Resources Fund, Inc.
Holdings expressed as a percentage of the Fund's net assets
Comments on Largest Holdings As of 5/31/00
6.1% Stillwater Mining Co./Metals-Nonferrous
Operates the only significant palladium and platinum mine
outside the Republic of South Africa and Russia.
Palladium is primarily used in automobile catalytic
converters, and new supplies have not kept up with the
world demand. Net sales for the first quarter of 2000
were 61% above a year earlier, and earnings were up 86%.
5.9% Impala Platinum Holdings Ltd./Platinum
Operates a platinum mine in South Africa that is the
world's second largest. Shares gained 45% over our
reporting period, as earnings more than doubled. We
expect earnings to double again this year.
5.2% Smith International, Inc./Oil & Gas Services
Provider of "downhole" drilling services (drill bits,
drilling mud, tools). Usually the first to
see revenue and earnings grow when drilling activity
increases. Smith's earnings in the first quarter of 2000
were up 64% from a year earlier. The share price rose 83%
over our reporting period.
5.2% BJ Services Co./Oil & Gas Services
Although BJ provides different services than Smith, BJ's
services (pressure pumping and cementing) also are very
sensitive to increases in drilling activity. Sales in the
first half of BJ's fiscal year 2000 are up 32%, while
earnings soared 400%. Shares rose 160% over our reporting
period.
4.9% Dynegy, Inc./Oil & Gas Exploration/Production
Dynegy bought Illinova in February 2000, and now has more
than 14,000 megawatts of generating power. It has emerged
as one of the trading powerhouses in natural gas and
electricity. Earnings should grow substantially as
volatility in both these markets increases. First-quarter
earnings more than doubled in 2000 over 1999.
Holdings are subject to change.
4
<PAGE>
www.prudential.com (800) 225-1852
Annual Report May 31, 2000
The largest impact was on our oil service holdings-
including BJ Services, Smith International (see Comments
on Largest Holdings), and Bouygues. These companies saw
immediate revenue growth when drilling activity picked
up. On average, 15% of our invested assets were in oil
service companies, with an average return over the period
of 97%. We think drilling activity will continue strongly
over the next year or two, and oil service companies will
continue to benefit. Although these stocks have risen
significantly, we see substantial continued earnings and
stock price appreciation ahead.
One of our best performing oil service stocks was
Maverick Tube, which makes the specialized steel tubing
used to surround well bores during drilling. Its business
is strongly correlated with the pace of drilling
activity. We bought it in 1999 when its earnings were
significantly below the prior year's and its share price
was very depressed-it was our largest new position. We
benefited as the demand for tubing increased and earnings
rose.
Natural gas exploration and production companies-
including Alberta Energy, Devon Energy, Rio Alto
Exploration, and Newfield Exploration-also had
significant gains over our reporting period. Natural gas
pipeline stocks, such as Dynegy and Western Gas
Resources, also rose (see Comments on Largest Holdings).
Among gas pipeline companies, we had a particularly
substantial gain on our shares of KN Energy, which was
taken over by Kinder Morgan, Inc.
Metals-mostly precious
We reduced our gold holdings by about 50% over the last
year to 8% of net assets. We underestimated the
willingness of central banks to sell their gold reserves
even at the very low recent prices. Central bank gold
sales have prevented gold prices from rising, even though
gold demand far exceeds world mine supply. We remain
extremely bullish long term on gold;
however, until central bank sales end, gold prices will
remain constrained. In the meantime, we will pursue what
we believe are better investment opportunities in today's
markets.
5
<PAGE>
Prudential Natural Resources Fund, Inc.
Annual Report May 31, 2000
Even though gold prices were weak, our gold holdings had
a negligible impact on our return this period. Declining
stocks were largely offset by our gains on shares that
did do well. Acacia Resources, an Australian gold
producer, was taken over at a 22% premium. Over our
entire reporting period, Acacia's shares rose 66%.
Investors are beginning to differentiate between gold
companies that have sold forward large amounts of their
gold reserves-committing future production at today's
prices-and those that haven't. If the price of gold rises
significantly in the future, which we expect, companies
that have unhedged production will show significant
earnings growth, whereas companies that have sold forward
will not. Recognizing that today's gold price is probably
unsustainably low, investors have been pushing up the
share prices on the few companies that remain unhedged.
Newmont Mining, which has little hedging and which is by
far the Fund's largest gold holding, rose 30%.
We also remain bullish on the long-term prospects of
silver prices. We added to our holdings of Apex Silver
Mines, which we expect to become one of the world's
largest, lowest-cost silver producers.
About a fifth of our holdings (on average over the
period) were in platinum and palladium stocks, and these
continued to perform well-up about 10% as a group. Aside
from jewelry, the demand for palladium for automobile
catalytic converters continues to grow. Moreover, Russian
platinum inventories, which have supplied a significant
portion of world demand over the last five years, appear
to have run out. The price of platinum advanced 50% over
our reporting period. Although we took some profits in
Impala Platinum and Stillwater Mining, these are still
the largest positions in the Fund (see Comments on
Largest Holdings) and we continue to have high
expectations for them. The Russians seemed determined to
maximize the revenue from whatever stockpiles they have
left. (Although their platinum stockpile may be
exhausted, their palladium stockpile may still be
significant.) World demand for both metals should
increase substantially in the next several years.
Overall, the story of platinum group metals continues to
be very exciting.
6
<PAGE>
www.prudential.com (800) 225-1852
Among other metals, our returns were hurt by the poor
performance of Kaiser Aluminum and by Freeport-McMoRan
Copper & Gold-which declined sharply because of political
instability in Indonesia, where it operates the world's
largest gold mine. Our performance was helped by a gain
on the sale of Comalco, an Australian aluminum producer,
which was taken over.
Looking Ahead
Our expectations for both oil and natural gas over the
next few years are higher than the consensus view. Most
investors believe that $30 per barrel of oil and $3 per
million cubic feet of gas are unsustainable prices. We
disagree. Given the low level of capital spending in this
industry over the last several years, we think energy
prices will remain strong, and energy stocks will
be rewarding investments. About 61% of our holdings at
period end were energy-related.
Prudential Natural Resources Fund Management Team
7
<PAGE>
Prudential Natural Resources Fund, Inc.
Annual Report May 31, 2000
Financial
Statements
<PAGE>
Prudential Natural Resources Fund, Inc.
Portfolio of Investments as of May 31, 2000
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C> <C>
------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS 99.4%
Common Stocks 98.9%
-------------------------------------------------------------------------------------
Australia 1.0%
296,100 Anaconda Nickel Ltd.(a) $ 398,296
230,801 Capral Aluminium NL 294,606
94,300 Delta Gold Ltd. 77,188
19,480 Zimbabwe Platinum Mines Ltd.(a) 3,791
--------------
773,881
-------------------------------------------------------------------------------------
Canada 19.8%
63,500 Agnico-Eagle Mines Ltd. 334,813
73,400 Alberta Energy Co., Ltd. 2,843,803
65,800 Anderson Exploration Ltd.(a) 1,214,290
96,800 Arizona Star Resource Ltd.(a) 49,101
76,200 Atna Resources Ltd.(a) 30,006
9,786 Avid Oil & Gas Ltd.(a) 20,247
285,900 Beau Canada Exploration Ltd.(a) 324,388
99,700 Black Hawk Mining, Inc.(a) 5,323
32,000 Cabre Exploration Ltd.(a) 320,363
98,300 Cambior, Inc. 47,238
40,300 Cameco Corp. 551,392
37,900 Canadian Natural Resources Ltd.(a) 1,201,528
89,600 Crestar Energy, Inc.(a) 1,330,575
20,800 Francisco Gold Corp.(a) 76,353
105,400 Gabriel Resources Ltd.(a) 200,487
88,700 Greenstone Resources Ltd.(a) 1,774
162,300 IAMGOLD Corp.(a) 298,429
39,500 Inco Ltd. 641,875
298,300 Kinross Gold Corp.(a) 288,684
95,400 Meridian Gold, Inc.(a) 534,846
20,000 Potash Corp. of Saskatchewan, Inc. 1,157,500
102,481 Ranger Oil Ltd.(a) 519,826
379,675 Repadre Capital Corp.(a) 405,446
126,500 Rio Alto Exploration Ltd.(a) 2,528,649
10,620 Talisman Energy, Inc. 340,225
83,100 TimberWest Forest Ltd.(a) 568,494
</TABLE>
See Notes to Financial Statements 9
<PAGE>
Prudential Natural Resources Fund, Inc.
Portfolio of Investments as of May 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
188,500 Tiomin Resources, Inc.(a) $ 69,195
100,200 TVX Gold, Inc.(a) 50,157
--------------
15,955,007
-------------------------------------------------------------------------------------
Cayman Islands 2.6%
186,200 Apex Silver Mines Ltd.(a) 2,141,300
-------------------------------------------------------------------------------------
France 1.3%
21,315 Bouygues Offshore S.A. 1,036,667
-------------------------------------------------------------------------------------
Ghana 0.0%
465 Ashanti Goldfields Ltd. (GDR) 785
-------------------------------------------------------------------------------------
Japan 2.3%
50,000 Globaly Corp. 556,199
47,000 Kobayashi Yoko Co., Ltd. 435,690
127,000 Nihon Unicom Corp. 833,520
--------------
1,825,409
-------------------------------------------------------------------------------------
New Zealand 0.3%
546,888 Fletcher Challenge Ltd. 205,569
-------------------------------------------------------------------------------------
South Africa 12.8%
120,400 Anglo American Platinum Corp. Ltd.(a) 3,340,958
17,276 AngloGold Ltd. 690,518
11,492 AngloGold Ltd. 437,439
363,400 Avgold Ltd.(a) 159,357
26,300 Durban Roodepoort Deep Ltd.(a) 26,091
30,976 Gold Fields Ltd. (ADR) 121,968
34,000 Harmony Gold Mining Co. Ltd. (ADR) 166,813
75,800 Harmony Gold Mining Co., Ltd. 370,540
143,800 Impala Platinum Holdings Ltd. 4,817,282
108,000 Randgold & Exploration Co., Ltd.(a) 111,801
52,500 Western Areas Ltd.(a) 111,714
--------------
10,354,481
-------------------------------------------------------------------------------------
United Kingdom 0.9%
52,000 Stolt Offshore S.A.(a) 767,000
</TABLE>
10 See Notes to Financial Statements
<PAGE>
Prudential Natural Resources Fund, Inc.
Portfolio of Investments as of May 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
United States 57.9%
58,500 BJ Services Co.(a) $ 4,190,062
21,300 Boise Cascade Corp. 620,363
19,200 Brigham Exploration Co.(a) 48,000
20,450 Burlington Resources, Inc. 935,588
43,050 Cross Timbers Oil Co. 874,453
31,800 Devon Energy Corp. 1,902,037
51,779 Dynegy, Inc. 3,993,455
95,000 Freeport-McMoRan Copper & Gold, Inc., Class A(a) 849,063
20,200 FX Energy, Inc.(a) 156,550
57,100 Golden Star Resources Ltd.(a) 46,394
49,400 Grant Prideco, Inc.(a) 1,148,550
191,400 Kaiser Aluminum Corp. 849,338
78,200 Kinder Morgan, Inc. 2,551,275
29,300 Marine Drilling Cos., Inc.(a) 842,375
89,000 Maverick Tube Corp.(a) 3,131,687
29,700 McMoRan Exploration Co.(a) 462,206
27,400 Miller Exploration Co.(a) 39,388
17,900 NATCO Group, Inc.(a) 170,050
84,100 Newfield Exploration Co.(a) 3,521,687
65,011 Newmont Mining Corp. 1,499,316
28,700 Noble Affiliates, Inc. 1,128,269
42,800 Nuevo Energy Co.(a) 826,575
20,000 Pennaco Energy, Inc.(a) 305,000
69,886 Pioneer Natural Resources Co. 1,043,922
25,000 Santa Fe Snyder Corp.(a) 315,625
53,500 Smith International, Inc.(a) 4,229,844
176,800 Stillwater Mining Co.(a) 4,961,450
29,200 Swift Energy Co.(a) 750,075
19,140 Talisman Energy, Inc. 620,854
94,200 TransCoastal Marine Services, Inc.(a) 47,100
49,400 Weatherford International, Inc.(a) 2,127,287
114,300 Western Gas Resources, Inc. 2,593,181
--------------
46,781,019
--------------
Total common stocks (cost US$59,853,451) 79,841,118
--------------
</TABLE>
See Notes to Financial Statements 11
<PAGE>
Prudential Natural Resources Fund, Inc.
Portfolio of Investments as of May 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Warrants(a) 0.2%
-------------------------------------------------------------------------------------
Canada
120,800 Kap Resources Ltd.,
Expiring 8/3/00 @ CAD2 $ 806
-------------------------------------------------------------------------------------
South Africa
19,342 Durban Roodepoort Deep Ltd.,
Expiring 6/30/02 @ ZAR6,000 4,172
-------------------------------------------------------------------------------------
Cayman Islands 0.2%
75,000 Apex Silver Mines Ltd.,
Expiring 11/02/04 @ US$18 150,000
--------------
Total warrants (cost US$81,640) 154,978
--------------
Covertible Bonds 0.3%
<CAPTION>
Principal
Amount
(000)
<C> <S> <C> <C>
-------------------------------------------------------------------------------------
South Africa
$ 300 Randgold Finance BVI Ltd.,
Sec'd Gtd., 7.50%, 9/30/01 (cost US$300,350) 226,500
--------------
Total long-term investments (cost US$60,235,441) 80,222,596
--------------
SHORT-TERM INVESTMENT 1.0%
-------------------------------------------------------------------------------------
Repurchase Agreement
$ 827 Joint Repurchase Agreement Account,
6.31%, 6/1/00 (cost US$827,000; Note 5) 827,000
--------------
Total Investments 100.4%
(cost US$61,062,441; Note 4) 81,049,596
Liabilities in excess of other assets (0.4%) (303,657)
--------------
Net Assets 100% $ 80,745,939
--------------
--------------
</TABLE>
--------------------------------------------------------------------------------
(a) Non-income producing security.
ADR--American Depository Receipt.
GDR--Global Depository Receipt.
12 See Notes to Financial Statements
<PAGE>
Prudential Natural Resources Fund, Inc.
Portfolio of Investments as of May 31, 2000 Cont'd.
<TABLE>
<S> <C> <C>
The industry classification of portfolio holdings and liabilities in excess of
other assets shown as a percentage of net assets as of May 31, 2000 was as
follows:
American Oil & Gas..................................................... 24.8%
Platinum............................................................... 16.1
Gas Pipelines.......................................................... 15.4
Canadian Oil & Gas..................................................... 14.3
Gold................................................................... 7.9
Oil Services........................................................... 8.4
Silver................................................................. 2.8
Nonferrous Metals...................................................... 2.6
Financial Services..................................................... 2.3
Forest Products........................................................ 1.7
Aluminum............................................................... 1.4
Chemicals.............................................................. 1.4
Joint Repurchase Agreement Account..................................... 1.0
Gold Mining Finance.................................................... 0.3
-----
100.4
Liabilities in excess of other assets (0.4)
-----
100.0%
-----
-----
</TABLE>
See Notes to Financial Statements 13
<PAGE>
Prudential Natural Resources Fund, Inc.
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
May 31, 2000
<S> <C> <C>
---------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $61,062,441) $81,049,596
Foreign currency, at value (cost $29,798) 29,843
Cash 21,480
Receivable for investments sold 301,190
Dividends and interest receivable 67,137
Receivable for Fund shares sold 21,292
Other assets 1,307
------------
Total assets 81,491,845
------------
LIABILITIES
Payable for investments purchased 299,938
Payable for Fund shares reacquired 195,960
Accrued expenses 147,567
Management fee payable 50,298
Distribution fee payable 46,240
Withholding taxes payable 5,903
------------
Total liabilities 745,906
------------
NET ASSETS $80,745,939
------------
------------
Net assets were comprised of:
Common stock, at par $ 54,757
Paid-in capital in excess of par 70,226,992
------------
70,281,749
Accumulated net realized loss on investments (9,521,591 )
Net unrealized appreciation on investments and foreign
currencies 19,985,781
------------
Net assets, May 31, 2000 $80,745,939
------------
------------
</TABLE>
14 See Notes to Financial Statements
<PAGE>
Prudential Natural Resources Fund, Inc.
Statement of Assets and Liabilities Cont'd.
<TABLE>
<CAPTION>
May 31, 2000
<S> <C> <C>
-----------------------------------------------------------------------------------------
Class A:
Net asset value and redemption price per share ($28,970,687 /
1,863,564 shares of common stock issued and outstanding) $15.55
Maximum sales charge (5% of offering price) .82
Maximum offering price to public $16.37
Class B:
Net asset value, offering price and redemption price per share
($46,229,891 / 3,245,565 shares of common stock issued and
outstanding) $14.24
Class C:
Net asset value and redemption price per share ($2,078,247 /
145,903 shares of common stock issued and outstanding) $14.24
Sales charge (1% of offering price) .14
Offering price to public $14.38
Class Z:
Net asset value, offering price and redemption price per share
($3,467,114 / 220,648 shares of common stock issued and
outstanding) $15.71
</TABLE>
See Notes to Financial Statements 15
<PAGE>
Prudential Natural Resources Fund, Inc.
Statement of Operations
<TABLE>
<CAPTION>
Year Ended
May 31, 2000
<S> <C> <C>
---------------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Dividends (net of foreign withholding taxes of $32,217) $ 916,206
Interest 38,553
------------
Total income 954,759
------------
Expenses
Management fee 575,291
Distribution fee--Class A 66,436
Distribution fee--Class B 457,281
Distribution fee--Class C 18,513
Transfer agent's fees and expenses 159,000
Custodian's fees and expenses 145,000
Reports to shareholders 38,000
Audit fee 32,000
Legal fees and expenses 15,000
Directors' fees and expenses 13,000
Miscellaneous 3,187
------------
Total expenses 1,522,708
------------
Net investment loss (567,949 )
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS
Net realized loss on:
Investment transactions (1,325,014 )
Foreign currency transactions (59,092 )
------------
(1,384,106 )
------------
Net change in unrealized appreciation on:
Investments 25,442,789
Foreign currencies 6,077
------------
25,448,866
------------
Net gain on investments and foreign currencies 24,064,760
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $23,496,811
------------
------------
</TABLE>
16 See Notes to Financial Statements
<PAGE>
Prudential Natural Resources Fund, Inc.
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended May 31,
----------------------------------
2000 1999
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment loss $ (567,949) $ (765,385)
Net realized loss on investment and foreign
currency transactions (1,384,106) (7,659,139)
Net change in unrealized appreciation on
investments and foreign currencies 25,448,866 6,024,270
-------------- ----------------
Net increase (decrease) in net assets
resulting from operations 23,496,811 (2,400,254)
-------------- ----------------
Distributions in excess of net realized gains
(Note 1)
Class A -- (1,117,960)
Class B -- (2,576,494)
Class C -- (80,678)
Class Z -- (59,197)
-------------- ----------------
-- (3,834,329)
-------------- ----------------
Fund share transactions (net of share
conversions)
(Note 6)
Net proceeds from shares sold 21,466,511 24,126,685
Net asset value of shares issued in
reinvestment of distributions -- 3,391,302
Cost of shares reacquired (35,878,299) (48,747,757)
-------------- ----------------
Net decrease in net assets from Fund share
transactions (14,411,788) (21,229,770)
-------------- ----------------
Total increase (decrease) 9,085,023 (27,464,353)
NET ASSETS
Beginning of year 71,660,916 99,125,269
-------------- ----------------
End of year $ 80,745,939 $ 71,660,916
-------------- ----------------
-------------- ----------------
</TABLE>
See Notes to Financial Statements 17
<PAGE>
Prudential Natural Resources Fund, Inc.
Notes to Financial Statements
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 securities of
foreign and domestic companies that own, explore, mine, process or otherwise
develop, or provide goods and services with respect to, natural resources and in
securities the terms of which are related to the market value of a natural
resource.
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 and NASDAQ
National Market System are valued at the last sale price on such exchange system
or, if there was no sale on such day, at the mean between the last bid and asked
prices, or at the bid price in the absence of an asked price. Corporate bonds
(other than convertible) and U.S. government securities are valued on the basis
of valuations provided by an independent pricing agent or principal market
maker. Convertible debt securities are valued at the mean between the last
reported bid and asked prices provided by principal market makers. Options are
valued at the mean between the most recently quoted bid and asked prices on the
exchange on which they are traded. Futures contracts and options thereon are
valued at their last sale prices as of the close of trading on the applicable
commodities exchange or, if there was no sale on such day at the mean between
the most recently quoted bid and asked prices. Securities for which reliable
market quotations are not readily available are valued by the Valuation
Committee or Board of Directors in consultation with the manager or subadvisor.
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.
Repurchase Agreements: 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.
18
<PAGE>
Prudential Natural Resources Fund, Inc.
Notes to Financial Statements Cont'd.
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 year, 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 year-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 year. Accordingly, these realized foreign
currency gains (losses) are included in the reported net realized gains (losses)
on investment transactions.
Net realized gains (losses) on foreign currency transactions represent 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 year end exchange rates are reflected as a component
of net unrealized appreciation on investments and 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
foreign 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.
19
<PAGE>
Prudential Natural Resources Fund, Inc.
Notes to Financial Statements Cont'd.
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.
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. 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 foreign investment
companies' transactions.
Taxes: It is the Fund's policy to continue to meet the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to shareholders. Therefore, no federal
income tax provision is required.
Withholding taxes on foreign interest, capital gains and dividends have
been provided for in accordance with the Fund's understanding of the applicable
country's tax rules and rates.
Reclassification of Capital Accounts: The Fund accounts for and reports
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 decrease accumulated net investment loss by $568,956,
increase accumulated net realized loss on investments by $11,657 and decrease
paid-in-capital by $580,613 for realized foreign currency losses and tax-basis
net operating losses during the fiscal year ended May 31, 2000. Net investment
loss, net realized losses 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
20
<PAGE>
Prudential Natural Resources Fund, Inc.
Notes to Financial Statements Cont'd.
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 Investment
Management Services LLC ('PIMS'), which acts as the distributor of the Class A,
Class B, Class C and Class Z shares of the Fund. The Fund compensates PIMS 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 PIMS as distributor
of the Class Z shares of the Fund.
Pursuant to the Class A, B and C Plans, the Fund compensates PIMS 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
year ended May 31, 2000.
PIMS has advised the Fund that it has received approximately $19,900 and
$3,700 in front-end sales charges resulting from sales of Class A and Class C
shares, respectively, during the year ended May 31, 2000. From these fees, PIMS
paid such sales charges to dealers which in turn paid commissions to
salespersons and incurred other distribution costs.
PIMS has advised the Fund that for the year ended May 31, 2000, it
received approximately $118,700 and $900 in contingent deferred sales charges
imposed upon certain redemptions by Class B and Class C shareholders,
respectively.
PIFM, PIC and PIMS are wholly owned subsidiaries of The Prudential
Insurance Company of America.
The Fund, along with other affiliated registered investment companies (the
'Funds'), entered into a syndicated credit agreement ('SCA') with an
unaffiliated lender. The maximum commitment under the SCA is $1 billion.
Interest on any such borrowings will be at market rates. The purpose of the
agreement is to serve as an alternative source of funding for capital share
redemptions. The Funds pay a commitment fee of .080 of 1% of the unused portion
of the credit facility. The commitment fee is accrued and paid quarterly on a
pro rata basis by the Funds. The expiration date of the SCA is March 9, 2001.
Prior to March 9, 2000, the commitment fee was .065 of 1% of the unused portion
of the credit facility. The Fund did not borrow any amounts pursuant to the SCA
during the year ended May 31, 2000.
21
<PAGE>
Prudential Natural Resources Fund, Inc.
Notes to Financial Statements Cont'd.
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 year ended May 31, 2000, the
Fund incurred fees of approximately $137,500 for the services of PMFS. As of May
31, 2000, approximately $11,300 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 nonaffiliates.
For the year ended May 31, 2000, Prudential Securities Incorporated
('PSI') earned approximately $1,800 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 year ended May 31, 2000 aggregated $16,932,246 and $32,045,547,
respectively.
The federal income tax basis of the Fund's investments at May 31, 2000 was
$61,761,773 and accordingly, net unrealized appreciation for federal income tax
purposes was $19,287,823 (gross unrealized appreciation--$34,568,096 gross
unrealized depreciation--$15,280,273).
For federal income tax purposes, the Fund has a capital loss carryforward
as of May 31, 2000 of approximately $8,456,000 of which $2,652,000 expires in
2007 and $5,804,000 expires in 2008. Accordingly, no capital gains distribution
is expected to be paid to shareholders until net gains have been realized in
excess of this amount. In addition, the Fund will elect to treat net capital
losses and net currency losses of approximately $381,700 and $47,400,
respectively, incurred in the seven month period ended May 31, 2000 as having
occured in the following 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 May 31, 2000, the Fund had a
.10% undivided interest in the repurchase agreements in the joint account. The
undivided interest for
22
<PAGE>
Prudential Natural Resources Fund, Inc.
Notes to Financial Statements Cont'd.
the Fund represented $827,000 in principal amount. As of such date, each
repurchase agreement in the joint account and the value of the collateral
therefor were as follows:
ABN AMRO Incorporated, 6.37%, in the principal amount of $110,000,000,
repurchase price $110,019,464, due 6/1/00. The value of the collateral including
accrued interest was $112,200,491.
Bear, Stearns & Co. Inc., 6.37%, in the principal amount of $130,000,000,
repurchase price $130,023,003, due 6/1/00. The value of the collateral including
accrued interest was $133,856,194.
Chase Securities Inc., 6.15%, in the principal amount of $114,985,000,
repurchase price $115,004,643, due 6/1/00. The value of the collateral including
accrued interest was $117,289,066.
Credit Suisse First Boston Corp., 6.40%, in the principal amount of
$90,000,000, repurchase price $90,016,000, due 6/1/00. The value of the
collateral including accrued interest was $93,252,694.
Salomon Smith Barney, Inc., 6.38%, in the principal amount of
$220,000,000, repurchase price $220,038,989, due 6/1/00. The value of the
collateral including accrued interest was $224,578,626.
Warburg Dillon Read LLC, 6.20%, in the principal amount of $200,000,000,
repurchase price $200,034,444, due 6/1/00. The value of the collateral including
accrued interest was $204,004,940.
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 front-end
sales charge of 1% and a contingent deferred sales charge of 1% during the first
18 months. Class B shares will automatically convert to Class A shares on a
quarterly basis approximately seven years after purchase. A special exchange
privilege is 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.
23
<PAGE>
Prudential Natural Resources Fund, Inc.
Notes to Financial Statements Cont'd.
Transactions in shares of common stock were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
---------------------------------------------------------- ---------- ------------
<S> <C> <C>
Year ended May 31, 2000:
Shares sold 662,396 $ 8,846,281
Shares reacquired (1,206,092) (15,855,008)
---------- ------------
Net decrease in shares outstanding before conversion (543,696) (7,008,727)
Shares issued upon conversion from Class B 294,709 3,858,586
---------- ------------
Net decrease in shares outstanding (248,987) $ (3,150,141)
---------- ------------
---------- ------------
Year ended May 31, 1999:
Shares sold 595,520 $ 6,039,951
Shares issued in reinvestment of distributions 117,039 1,054,518
Shares reacquired (1,206,598) (12,234,768)
---------- ------------
Net decrease in shares outstanding before conversion (494,039) (5,140,299)
Shares issued upon conversion from Class B 169,618 1,677,347
---------- ------------
Net decrease in shares outstanding (324,421) $ (3,462,952)
---------- ------------
---------- ------------
<CAPTION>
Class B
----------------------------------------------------------
<S> <C> <C>
Year ended May 31, 2000:
Shares sold 599,846 $ 7,325,874
Shares reacquired (1,292,774) (15,757,225)
---------- ------------
Net decrease in shares outstanding before conversion (692,928) (8,431,351)
Shares reacquired upon conversion into Class A (320,275) (3,858,586)
---------- ------------
Net decrease in shares outstanding (1,013,203) $(12,289,937)
---------- ------------
---------- ------------
Year ended May 31, 1999:
Shares sold 649,331 $ 6,053,519
Shares issued in reinvestment of distributions 264,592 2,209,341
Shares reacquired (2,613,295) (24,183,084)
---------- ------------
Net decrease in shares outstanding before conversion (1,699,372) (15,920,224)
Shares reacquired upon conversion into Class A (182,448) (1,677,347)
---------- ------------
Net decrease in shares outstanding (1,881,820) $(17,597,571)
---------- ------------
---------- ------------
</TABLE>
24
<PAGE>
Prudential Natural Resources Fund, Inc.
Notes to Financial Statements Cont'd.
<TABLE>
<CAPTION>
Class C Shares Amount
---------------------------------------------------------- ---------- ------------
Year ended May 31, 2000:
<S> <C> <C>
Shares sold 55,232 $ 679,122
Shares reacquired (59,300) (730,825)
---------- ------------
Net decrease in shares outstanding (4,068) $ (51,703)
---------- ------------
---------- ------------
Year ended May 31, 1999:
Shares sold 52,891 $ 495,995
Shares issued in reinvestment of distributions 8,206 68,521
Shares reacquired (80,079) (735,284)
---------- ------------
Net decrease in shares outstanding (18,982) $ (170,768)
---------- ------------
---------- ------------
<CAPTION>
Class Z
----------------------------------------------------------
<S> <C> <C>
Year ended May 31, 2000:
Shares sold 340,053 $ 4,615,234
Shares reacquired (262,094) (3,535,241)
---------- ------------
Net increase in shares outstanding 77,959 $ 1,079,993
---------- ------------
---------- ------------
Year ended May 31, 1999:
Shares sold 992,042 $ 11,537,220
Shares issued in reinvestment of distributions 6,482 58,922
Shares reacquired (1,005,635) (11,594,621)
---------- ------------
Net decrease in shares outstanding (7,111) $ 1,521
---------- ------------
---------- ------------
</TABLE>
25
<PAGE>
Prudential Natural Resources Fund, Inc.
Financial Highlights
<TABLE>
<CAPTION>
Class A
---------------
Year Ended
May 31, 2000(a)
----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $ 11.33
---------------
Income from investment operations
Net investment loss (.04)
Net realized and unrealized gain (loss) on investment and
foreign currency transactions 4.26
---------------
Total from investment operations 4.22
---------------
Less distributions
Distributions from net realized gains on investments --
Distributions in excess of net realized gains on investments --
---------------
Total distributions --
---------------
Net asset value, end of year $ 15.55
---------------
---------------
TOTAL RETURN(b): 37.25%
<CAPTION>
RATIOS/SUPPLEMENTAL DATA:
<S> <C> <C>
Net assets, end of year (000) $28,971
Average net assets (000) $26,574
Ratios to average net assets:
Expenses, including distribution and service (12b-1) fees 1.53%
Expenses, excluding distribution and service (12b-1) fees 1.28%
Net investment loss (.27)%
For Class A, B, C and Z shares:
Portfolio turnover 22%
</TABLE>
------------------------------
(a) Calculated based on 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 year reported and includes reinvestment of distributions.
26 See Notes to Financial Statements
<PAGE>
Prudential Natural Resources Fund, Inc.
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class A
-------------------------------------------------------------------------------------
Year Ended May 31,
-------------------------------------------------------------------------------------
1999(a) 1998(a) 1997(a) 1996
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 11.69 $ 16.27 $ 17.34 $ 13.73
-------- -------- -------- ----------------
(.05) (.08) (.07) (.01)
.20 (2.33) .94 4.42
-------- -------- -------- ----------------
.15 (2.41) .87 4.41
-------- -------- -------- ----------------
-- (2.17) (1.94) (.80)
(.51) -- -- --
-------- -------- -------- ----------------
(.51) (2.17) (1.94) (.80)
-------- -------- -------- ----------------
$ 11.33 $ 11.69 $ 16.27 $ 17.34
-------- -------- -------- ----------------
-------- -------- -------- ----------------
2.41% (14.41)% 5.37% 33.51%
$ 23,930 $ 28,491 $ 47,054 $ 32,608
$ 22,683 $ 37,933 $ 40,393 $ 23,106
1.79% 1.55% 1.48% 1.57%
1.54% 1.30% 1.23% 1.32%
(.53)% (.54)% (.43)% (.09)%
16% 25% 53% 41%
</TABLE>
See Notes to Financial Statements 27
<PAGE>
Prudential Natural Resources Fund, Inc.
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class B
---------------
Year Ended
May 31, 2000(a)
----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $ 10.46
---------------
Income from investment operations
Net investment loss (.13)
Net realized and unrealized gain (loss) on investment and
foreign currency transactions 3.91
---------------
Total from investment operations 3.78
---------------
Less distributions
Distributions from net realized gains on investments --
Distributions in excess of net realized gains on investments --
---------------
Total distributions --
---------------
Net asset value, end of year $ 14.24
---------------
---------------
TOTAL RETURN(b): 36.14%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) $46,230
Average net assets (000) $45,728
Ratios to average net assets:
Expenses, including distribution and service (12b-1) fees 2.28%
Expenses, excluding distribution and service (12b-1) fees 1.28%
Net investment loss (1.04)%
</TABLE>
------------------------------
(a) Calculated based on 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 year reported and includes reinvestment of distributions.
28 See Notes to Financial Statements
<PAGE>
Prudential Natural Resources Fund, Inc.
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class B
-------------------------------------------------------------------------------------
Year Ended May 31,
-------------------------------------------------------------------------------------
1999(a) 1998(a) 1997(a) 1996
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 10.92 $ 15.46 $ 16.70 $ 13.35
---------------- -------- ---------------- ----------------
(.12) (.17) (.19) (.10)
.17 (2.20) .89 4.25
---------------- -------- ---------------- ----------------
.05 (2.37) .70 4.15
---------------- -------- ---------------- ----------------
-- (2.17) (1.94) (.80)
(.51) -- -- --
---------------- -------- ---------------- ----------------
(.51) (2.17) (1.94) (.80)
---------------- -------- ---------------- ----------------
$ 10.46 $ 10.92 $ 15.46 $ 16.70
---------------- -------- ---------------- ----------------
---------------- -------- ---------------- ----------------
1.64% (14.96)% 4.51% 32.49%
$ 44,533 $ 67,029 $111,464 $113,090
$ 48,644 $ 86,864 $107,361 $ 84,396
2.54% 2.30% 2.23% 2.32%
1.54% 1.30% 1.23% 1.32%
(1.28)% (1.28)% (1.18)% (.84)%
</TABLE>
See Notes to Financial Statements 29
<PAGE>
Prudential Natural Resources Fund, Inc.
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class C
---------------
Year Ended
May 31, 2000(a)
----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $ 10.46
-------
Income from investment operations
Net investment loss (.13)
Net realized and unrealized gain (loss) on investment and
foreign currency transactions 3.91
-------
Total from investment operations 3.78
-------
Less distributions
Distributions from net realized gains on investments --
Distributions in excess of net realized gains on investments --
-------
Total distributions --
-------
Net asset value, end of year $ 14.24
-------
-------
TOTAL RETURN(b): 36.14%
<CAPTION>
RATIOS/SUPPLEMENTAL DATA:
<S> <C> <C>
Net assets, end of year (000) $ 2,078
Average net assets (000) $ 1,851
Ratios to average net assets:
Expenses, including distribution fees and service (12b-1)
fees 2.28%
Expenses, excluding distribution fees and service (12b-1)
fees 1.28%
Net investment loss (1.04)%
</TABLE>
------------------------------
(a) Calculated based on 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 year reported and includes reinvestment of distributions.
30 See Notes to Financial Statements
<PAGE>
Prudential Natural Resources Fund, Inc.
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class C
-------------------------------------------------------------------------------------
Year Ended May,
-------------------------------------------------------------------------------------
1999(a) 1998(a) 1997(a) 1996
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$10.92 $15.46 $16.70 $13.35
------- ------- ------- -------
(.12) (.18) (.19) (.10)
.17 (2.19) .89 4.25
------- ------- ------- -------
.05 (2.37) .70 4.15
------- ------- ------- -------
-- (2.17) (1.94) (.80)
(.51) -- -- --
------- ------- ------- -------
(.51) (2.17) (1.94) (.80)
------- ------- ------- -------
$10.46 $10.92 $15.46 $16.70
------- ------- ------- -------
------- ------- ------- -------
1.64% (14.96)% 4.51% 32.49%
$1,568 $1,844 $2,542 $1,551
$1,490 $2,060 $2,041 $ 734
2.54% 2.30% 2.23% 2.32%
1.54% 1.30% 1.23% 1.32%
(1.28)% (1.35)% (1.18)% (.84)%
</TABLE>
See Notes to Financial Statements 31
<PAGE>
Prudential Natural Resources Fund, Inc.
Financial Highlights
<TABLE>
<CAPTION>
Class Z
----------------------------------------------------
September 16,
1996(d)
Year Ended May 31, Through
---------------------------------- May 31,
2000(a) 1999(a) 1998(a) 1997(a)
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $11.42 $11.76 $16.30 $ 17.08
Income from investment operations
Net investment income (loss) --(e) (.03 ) (.05 ) (.03)
Net realized and unrealized gain
(loss) on investment and foreign
currency transactions 4.29 .20 (2.32 ) 1.19
---------- ------- ------- -------------
Total from investment operations 4.29 .17 (2.37 ) 1.16
---------- ------- ------- -------------
Less distributions
Distributions from net realized gains
on investments -- -- (2.17 ) (1.94)
Distributions in excess of net
realized gains on investments -- (.51 ) -- --
---------- ------- ------- -------------
Total distributions -- (.51 ) (2.17 ) (1.94)
---------- ------- ------- -------------
Net asset value, end of period $15.71 $11.42 $11.76 $ 16.30
---------- ------- ------- -------------
---------- ------- ------- -------------
TOTAL RETURN(b): 37.57% 2.56 % (14.12 )% 7.17%
<CAPTION>
RATIOS/SUPPLEMENTAL DATA:
<S> <C> <C> <C> <C> <C>
Net assets, end of period (000) $3,467 $1,630 $1,761 $ 3,140
Average net assets (000) $2,552 $1,381 $2,581 $ 994
Ratios to average net assets:
Expenses, including distribution
and service (12b-1) fees 1.28% 1.54 % 1.30 % 1.23%(c)
Expenses, excluding distribution
and service (12b-1) fees 1.28% 1.54 % 1.30 % 1.23%(c)
Net investment loss 0% (.30 )% (.33 )% (.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 distributions.
Total returns for periods of less than a full year are not annualized.
(c) Annualized.
(d) Commencement of offering of Class Z shares.
(e) Less than $.005 per share.
32 See Notes to Financial Statements
<PAGE>
Prudential Natural Resources Fund, Inc.
Report of Independent Accountants
To the Board of Directors and Shareholders of
Prudential Natural Resources Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Prudential Natural Resources Fund,
Inc. (the 'Fund') at May 31, 2000, 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 periods
presented, in conformity with accounting principles generally accepted in the
United States. These financial statements and financial highlights (hereafter
referred to as 'financial statements') are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit 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, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at May 31, 2000 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
July 20, 2000
33
<PAGE>
Prudential Natural Resources Fund, Inc.
Class A Growth of a $10,000 Investment
(GRAPH)
Average Annual Total Returns as of 5/31/00
One Year Five Years Ten Years Since Inception
With Sales Charge 30.38% 9.96% 8.36% 7.65%
Without Sales Charge 37.25% 11.10% 8.92% 8.19%
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. The graph
compares a $10,000 investment in the Prudential Natural
Resources Fund, Inc. (Class A shares) with a similar
investment in the Morgan Stanley Capital International
World Index (MSCI World Index) by portraying the initial
account value at the beginning of the ten-year period for
Class A shares, and the account value at the end of the
current fiscal year (May 31, 2000), as measured on a
quarterly basis, beginning in May 1990 for Class A
shares. For purposes of the graph, and unless otherwise
indicated, it has been assumed that (a) the maximum
applicable front-end sales charge was deducted from the
initial $10,000 investment in Class A shares; (b) all
recurring fees (including management fees) were deducted;
and (c) all dividends and distributions were reinvested.
The best and worst year information within the graph is
designed to give you an idea of how much the Fund's
returns can fluctuate from year to year by measuring the
best and worst calendar years for the past ten years in
terms of total annual return.
The MSCI World Index is a weighted index comprising
approximately 1,500 companies listed on the stock
exchanges of the United States, Europe, Canada,
Australia, New Zealand, and the Far East. The combined
market capitalization of these companies represents
approximately 60% of the aggregate market value of the
stock exchanges in the countries comprising the MSCI
World Index. The Index is unmanaged, and the total return
includes the reinvestment of all dividends, but does not
include the effect of sales charges or operating expenses
of a mutual fund. The securities in the Index may be very
different from those in the Fund. The total returns of
the Index would be lower if they included the effect of
any sales charges.
The Index is not the only one that may be used to
characterize performance of Global Stock funds.
Other indexes may portray different comparative
performance. Investors cannot invest directly in an
index.
This graph is furnished to you in accordance with SEC
regulations.
<PAGE>
www.prudential.com (800) 225-1852
Class B Growth of a $10,000 Investment
<GRAPH>
Average Annual Total Returns as of 5/31/00
One Year Five Years Ten Years Since Inception
With Sales Charge 31.14% 10.12% 8.10% 7.02%
Without Sales Charge 36.14% 10.25% 8.10% 7.02%
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. The graph
compares a $10,000 investment in the Prudential Natural
Resources Fund, Inc. (Class B shares) with a similar
investment in the Morgan Stanley Capital International
World Index (MSCI World Index) by portraying the initial
account value at the beginning of the ten-year period for
Class B shares, and the account value at the end of the
current fiscal year (May 31, 2000), as measured on a
quarterly basis, beginning in May 1990 for Class B
shares. For purposes of the graph, and unless otherwise
indicated, it has been assumed that (a) the maximum
applicable contingent deferred sales charge was deducted
from the value of the investment in Class B shares,
assuming full redemption on May 31, 2000; (b) all
recurring fees (including
management fees) were deducted; and (c) all dividends and
distributions were reinvested. Class B shares will
automatically convert to Class A shares, on a quarterly
basis, beginning approximately seven years after
purchase. This conversion feature is not reflected in the
graph. The best and worst year information within the
graph is designed to give you an idea of how much the
Fund's returns can fluctuate from year to year by
measuring the best and worst calendar years for the past
ten years in terms of total annual return.
The MSCI World Index is a weighted index comprising
approximately 1,500 companies listed on the stock
exchanges of the United States, Europe, Canada,
Australia, New Zealand, and the Far East. The combined
market capitalization of these companies represents
approximately 60% of the aggregate market value of the
stock exchanges in the countries comprising the MSCI
World Index. The Index is unmanaged, and the total return
includes the reinvestment of all dividends, but does not
include the effect of sales charges or operating expenses
of a mutual fund. The securities in the Index may be very
different from those in the Fund. The total returns of
the Index would be lower if they included the effect of
any sales charges. The Index is not the only one that may
be used to characterize performance of Global Stock
funds. Other indexes may portray different comparative
performance. Investors cannot invest directly in an
index.
This graph is furnished to you in accordance with SEC
regulations.
<PAGE>
Prudential Natural Resources Fund, Inc.
Class C Growth of a $10,000 Investment
(GRAPH)
Average Annual Total Returns as of 5/31/00
One Year Five Years Ten Years Since Inception
With Sales Charge 33.78% 10.03% N/A 9.82%
Without Sales Charge 36.14% 10.25% N/A 10.01%
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. The graph
compares a $10,000 investment in the Prudential Natural
Resources Fund, Inc. (Class C shares) with a similar
investment in the Morgan Stanley Capital International
World Index (MSCI World Index) by portraying the initial
account value at the commencement of operations of Class
C shares, and the account value at the end of the current
fiscal year (May 31, 2000), as measured on a quarterly
basis, beginning in August 1994 for Class C shares. For
purposes of the graph, and unless otherwise indicated, it
has been assumed that (a) the maximum applicable front-
end sales charge was deducted from the initial $10,000
investment in Class C shares; (b) the maximum applicable
contingent deferred sales charge was
deducted from the value of the investment in Class C
shares, assuming full redemption on May 31, 2000; (c) all
recurring fees (including management fees) were deducted;
and (d) all dividends and distributions were reinvested.
The best and worst year information within the graph is
designed to give you an idea of how much the Fund's
returns can fluctuate from year to year by measuring the
best and worst calendar years in terms of total annual
return.
The MSCI World Index is a weighted index comprising
approximately 1,500 companies listed on the stock
exchanges of the United States, Europe, Canada,
Australia, New Zealand, and the Far East. The combined
market capitalization of these companies represents
approximately 60% of the aggregate market value of the
stock exchanges in the countries comprising the MSCI
World Index. The Index is unmanaged, and the total return
includes the reinvestment of all dividends, but does not
include the effect of sales charges or operating expenses
of a mutual fund. The securities in the Index may be very
different from those in the Fund. The total returns of
the Index would be lower if they included the effect of
any sales charges.
The Index is not the only one that may be used to
characterize performance of Global Stock funds. Other
indexes may portray different comparative performance.
Investors cannot invest directly in an index.
This graph is furnished to you in accordance with SEC
regulations.
<PAGE>
www.prudential.com (800) 225-1852
Class Z Growth of a $10,000 Investment
(GRAPH)
Average Annual Total Returns as of 5/31/00
One Year Five Years Ten Years Since Inception
With Sales Charge 37.57% N/A N/A 7.31%
Without Sales Charge 37.57% N/A N/A 7.31%
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. The graph
compares a $10,000 investment in the Prudential Natural
Resources Fund, Inc. (Class Z shares) with a similar
investment in the Morgan Stanley Capital International
World Index (MSCI World Index) by
portraying the initial account value at the commencement
of operations of Class Z shares, and the account value at
the end of the current fiscal year (May 31, 2000), as
measured on a quarterly basis, beginning in September
1996 for Class Z shares. For purposes of the graph, and
unless otherwise indicated, it has been assumed that (a)
all recurring fees (including management fees) were
deducted, and (b) all dividends and distributions were
reinvested. Class Z shares are not subject to a sales
charge or distribution and
service (12b-1) fees. The best and worst year information
within the graph is designed to give you an idea of how
much the Fund's returns can fluctuate from year to year
by measuring the best and worst calendar years in terms
of total annual return.
The MSCI World Index is a weighted index comprising
approximately 1,500 companies listed on the stock
exchanges of the United States, Europe, Canada,
Australia, New Zealand, and the Far East. The combined
market capitalization of these companies represents
approximately 60% of the aggregate market value of the
stock exchanges in the countries comprising the MSCI
World Index. The Index is unmanaged, and the total return
includes the reinvestment of all dividends, but does not
include the effect of sales charges or operating expenses
of a mutual fund. The securities in the Index may be very
different from those in the Fund. The total returns of
the Index would be lower if they included the effect of
any sales charges.
The Index is not the only one that may be used to
characterize performance of Global Stock funds. Other
indexes may portray different comparative performance.
Investors cannot invest directly in an index.
This graph is furnished to you in accordance with SEC
regulations.
<PAGE>
For More Information
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
Visit Prudential's web site at:
http://www.prudential.com
Directors
Delayne Dedrick Gold
Robert F. Gunia
Robert E. LaBlanc
David R. Odenath, Jr.
Robin B. Smith
Stephen Stoneburn
John R. Strangfeld
Nancy H. Teeters
Clay T. Whitehead
Officers
John R. Strangfeld, President
Robert F. Gunia, Vice President
David R. Odenath, Jr., Vice President
Grace C. Torres, Treasurer
Robert C. Rosselot, Secretary
William V. Healey, 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 07102-3777
Distributor
Prudential Investment Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
194 Wood Avenue South
Iselin, NJ 08830
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Fund Symbols NASDAQ CUSIP
Class A PGNAX 743970105
Class B PRGNX 743970204
Class C PNRCX 743970303
Class Z PNRZX 743970402
MF135E
(LOGO) Printed on Recycled Paper
