<PAGE>
(ICON)
Prudential
Small-Cap
Quantum
Fund, Inc.
SEMI
ANNUAL
REPORT
Sept. 30, 1999
(LOGO)
<PAGE>
A Message from the Fund's President November 18, 1999
(PHOTO)
Dear Shareholder,
Prudential Small-Cap Quantum Fund had a very strong 10.5% gain for the six
months ended September 30, 1999, due to a turn in the market and improvements
in our strategy. In the first half of our reporting period, investors had a
dramatic change of heart about small-cap stocks. The Standard & Poor's 600
Small Capitalization Stock Index (S&P SmallCap 600 Index) surged 15% in the
second quarter of 1999, twice the gain of the large-cap Standard & Poor's 500
Composite Stock Price Index (S&P 500 Index). Although both indexes fell in
the second half of our reporting period, small-cap stocks held their prices
better, leaving a very respectable 9.8% gain for the S&P SmallCap 600 Index
over six months, while large-caps were essentially flat. Moreover, our Fund
beat both the Index return and the Lipper Small-Cap Value Fund Average.
Our superior performance was due in large part to changes in our investment
process that were approved by the Fund's Board of Directors in May 1999. We
enhanced our quantitative model's treatment of growth stocks, correcting a
weakness in our previous strategy. We also increased our capitalization
range so we could hold growing companies longer. These changes made a strong
contribution to our return in the current reporting period. In addition, we
removed the limit on the number of different stocks we hold, which helps us
stay close to the S&P SmallCap 600 Index in risk characteristics, and also
reduces our exposure to any single stock. On September 30, 1999, only one
of our 307 holdings exceeded 1.5% of our assets.
New benchmark peer group
Our benchmark in this report reflects the new categories for mutual funds
introduced by Lipper, Inc. in September 1999. Funds now are classified by
their actual holdings instead of by their objectives; small-cap funds are
in either a value, growth, or core peer group. Although we are broadly
diversified on many risk characteristics, our investment process tilts
toward value stocks, so we were placed in the small-cap value group. However,
our outperformance in this group was driven by the strong performance of our
growth stocks.
The following Fund Manager's report discusses in greater detail how the
changes in our investment process affected the performance of Prudential
Small-Cap Quantum Fund.
Sincerely,
John R. Strangfeld
President
Prudential Small-Cap Quantum Fund, Inc.
<PAGE>
Performance Review
(PHOTO)
John Leib
Fund Manager
Investment Goals and Style
Prudential Small-Cap Quantum Fund seeks long-term capital appreciation. We
use quantitative investment techniques to buy primarily the stocks of U.S.
companies with market capitalizations like those of the S&P SmallCap 600
Index. The Fund invests in a broadly diversified portfolio based on the
rankings of the Small-Cap Quantitative Valuation (QV) model developed at
Prudential Securities, among others. Computer-aided portfolio construction
helps improve the risk/reward profile of our holdings, but there can be no
assurance that the Fund will achieve its investment objective. Smaller-company
stocks historically have often performed very differently from stocks of large
companies, and so can help diversify a stock portfolio.
Adjusting to new conditions
As we described in our annual report dated March 31, 1999, we are in a very
unusual investment environment. The performance gap between large- and small-
cap stocks has been historically wide; among small-cap stocks, value stocks
trailed growth stocks last year by the widest margin since 1980. In these
unusual markets, our stock valuation model did not perform as well as we
had expected.
In response, we asked the Board of Directors to remove certain investment
policy limits on our investment processes to try to reduce the gap between
our return and our benchmark--the S&P SmallCap 600 Index. Our goal was to be
able to approximate the risk profile--the market cap and industry sector
composition--of the S&P SmallCap 600 Index, while holding stocks whose
likelihood of price appreciation is significantly greater. Our primary
tool still is the QV model, developed by Prudential Securities to pull
together, in a single formula, eight indicators that their research showed
to be effective in predicting stock performance. These include measures of
how expensive the stock is, how its profitability is changing, and whether
its earnings reports contain either positive or negative surprises for
analysts. The various indicators are weighted to compute a single score or
rank, ranging from 1 (strong buy) to 5 (strong sell). We use these rankings
to determine the relative attractiveness of small-cap stocks in our universe.
The QV model favors value--or inexpensive--stocks.
We developed a new quantitative model to rank rapidly growing companies
whose share prices may not be inexpensive on traditional value criteria,
but whose exceptional earnings growth provides a different rationale for
purchase. Over the six months ended September 30, 1999, our selection among
high price/earnings, high price-to-book value, and high
Liquidity
Recently, liquidity--the ease with which an investor can sell a stock--has
been a problem in the small-cap markets. Prudential Small-Cap Quantum Fund
is in a better position now that we hold a larger number of stocks, because
the average size of our holdings in any one company is less. Moreover, our
new procedures give us more flexibility, so we are more able to find a stock
that is readily marketable and also fits our sector and quality targets.
<PAGE>
earnings growth stocks accounted for our superior performance. Our growth-
stock revisions appear to have worked.
Other changes in tactics
Because we can now draw from a larger number of attractive stocks and can
hold more companies at the same time, we trade more frequently, correcting
drifts from sector and risk characteristics of the S&P SmallCap 600 Index
while moving the portfolio toward the most attractive stocks. Relative to
the S&P SmallCap 600 Index, our greatest emphasis at the end of our reporting
period was on finance and consumer cyclicals. To a smaller extent, we
invested in consumer staples and technology. We de-emphasized healthcare,
capital spending, and basic industry. Under our former limits, we would have
had difficulty finding attractive stocks in the high-performing small-cap
technology sector.
Strategies that are successful with value stocks often are not with growth
stocks and vice versa, but stocks that don't look particularly promising in
either discipline can be the worst choices. Although Prudential Small-Cap
Quantum Fund's investment process is predominantly a value style, you gain
some of the benefit of a growth strategy as well.
Performance at a Glance
<TABLE>
<CAPTION>
Cumulative Total Returns1 As of 9/30/99
Six One Since
Months Year Inception2
<S> <C> <C> <C>
Class A 10.48% 5.40% -16.44%
Class B 10.19 4.66 -17.62
Class C 10.19 4.66 -17.62
Class Z 10.72 5.78 -16.01
Lipper Small-Cap Value
Fund Avg.3 10.04 12.33 -7.82
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns1 As of 9/30/99
One Since
Year Inception2
<S> <C> <C>
Class A 0.13% -11.52%
Class B -0.34 -12.12
Class C 2.62 -10.25
Class Z 5.78 -8.84
</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 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 C shares bought before November 2, 1998,
have a 1% CDSC if sold within one year. Class Z shares are not subject to a
sales charge or distribution and service (12b-1) fees.
2 Inception date: Class A, B, C, and Z, 11/10/97.
3 Lipper average returns are for all funds in each share class for the six-
month, one-year, and since-inception period in the Small-Cap Value Fund
category. Small-Cap Value funds, by portfolio practice, invest at least
75% of their equity assets in companies with market capitalizations (on a
three-year weighted basis) of less than 250% of the dollar-weighted median
market capitalization of the S&P SmallCap 600 IndexR. Small-Cap Value funds
seek long-term growth of capital by investing in companies that are
considered undervalued relative to a major unmanaged stock index based
on price-to-current earnings, book value, asset value, or other factors.
These funds will normally have a below-average price/earnings ratio, price-to-
book ratio, and three-year earnings growth figure, compared to the U.S.
diversified small-cap funds universe average. The Lipper average is unmanaged.
R S&P is a registered trademark of the Standard & Poor's Corporation.
- -------------------------------------------------------------------------------
1
<PAGE>
Review Cont'd.
We have been in unusual times
(GRAPH)
The Russell 2000 Growth Index comprises securities in the Russell 2000 Index
with a greater-than- average growth orientation. Companies in this index tend
to exhibit higher price-to-book and price/earnings ratios.
The Russell 2000 Value Index comprises securities in the Russell 2000 Index
with a less-than-average growth orientation. Companies in this index
generally have low price-to-book and price/earnings ratios.
The S&P 500 Index, composed of stocks representing approximately 80% of the
total market value of all publicly traded U.S. common stocks, is widely
regarded as representative of the performance of U.S. large-cap stocks.
The performance cited does not represent the performance of Prudential Small-
Cap Quantum Fund. The total return values include reinvestment of all
dividends. Past performance is not indicative of future results. Investors
cannot invest directly in an index.
Source: Prudential Investments, Standard & Poor's, and Frank Russell Company.
Looking Ahead
We have been operating in a hostile investing environment: it is unfriendly
to small-cap stocks and also to the value style. As the chart above shows,
value stocks are trailing growth stocks by margins not seen in 20 years. Our
strong gains came in the second quarter of 1999, when investors had a flash
of confidence in the revival of global economic growth and looked to the
bargain-priced stocks of companies that would benefit from it. We believe
that as the growth of Asian and European economies continues to accelerate,
the investment climate will become more like it was last spring. We held our
own over a reporting period in which the QV model's value emphasis worked
against us. We are optimistic about our performance when it turns in our
favor again.
Five Largest Holdings
Expressed as a percentage of net assets
as of 9/30/99
US Freightways Corp. 1.6%
Trucking/Shipping
Cullen/Frost Bankers, Inc. 1.4
Regional Banks
Hudson United Bancorp. 1.3
Regional Banks
Canandaigua Brands, Inc. 1.2
Beverages
Jack In the Box, Inc. 1.2
Restaurants
Portfolio Composition
Expressed as a percentage of net assets
as of 9/30/99
Technology 21%
Finance 18
Consumer Services 15
Basic Industries 10
Consumer Cyclicals 8
Healthcare 7
Business Services 6
Energy 5
Consumer Staples 3
Utilities 3
Capital Spending 2
Cash & Equivalents 2
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2
<PAGE>
Portfolio of Investments as of September 30, 1999
(Unaudited) PRUDENTIAL SMALL-CAP QUANTUM FUND, INC.
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
LONG-TERM INVESTMENTS--97.5%
COMMON STOCKS
- ------------------------------------------------------------
Basic Industries--10.3%
600 AAR Corp. $ 10,800
21,600 Alaska Air Group, Inc. 878,850
400 Alliant Techsystems, Inc.(a) 27,725
79,900 AMCOL International Corp. 1,178,525
9,300 American Freightways Corp. 169,144
1,800 Armor Holdings, Inc. 19,575
59,300 Building Materials Holdings Corp. 593,000
7,700 Castle (A.M.) & Co. 97,213
28,100 Commercial Intertech Corp. 338,956
13,600 Commercial Metals Co. 391,000
2,800 Gibraltor Steel Corp. 58,975
200 Hughes Supply Inc. 4,350
80,200 JLG Industries, Inc. 1,218,037
21,100 Landstar Systems, Inc.(a) 733,225
8,900 Lilly Industries, Inc. 121,263
11,900 Mueller Industries, Inc.(a) 353,281
57,700 Oregon Steel Mills, Inc. 645,519
15,800 Paxar Corp. 152,075
20,500 Pentair, Inc. 822,562
18,600 Precision Castparts Corp. 567,300
7,050 Reliance Steel & Aluminum Co. 148,050
48,000 Republic Group, Inc. 669,000
4,900 Roanoke Electric Steel Corp. 85,750
5,700 Rock-Tenn Co. 82,294
21,400 Schulman (A.), Inc. 370,487
33,800 Skywest, Inc. 741,487
33,000 Texas Industries, Inc. 1,221,000
2,600 Universal Forest Products, Inc. 33,963
45,600 USFreightways Corp. 2,160,300
7,700 Werner Enterprises, Inc. 135,713
4,400 West Pharmaceutical Services, Inc. 166,925
3,700 Yellow Corp.(a) 61,281
------------
14,257,625
- ------------------------------------------------------------
Business Services--5.8%
600 ABM Industries, Inc. 15,225
3,600 CDI Corp.(a) 98,325
13,600 Henry Jack & Associates, Inc.(a) 502,350
23,100 Interim Services, Inc.(a) $ 378,262
18,300 Labor Ready, Inc.(a) 184,144
20,200 Lason, Inc.(a) 899,531
14,900 Lightbridge, Inc.(a) 293,344
1,300 MAXIMUS, Inc.(a) 38,919
10,400 NCO Group, Inc.(a) 488,800
11,700 Price Communications Corp.(a) 293,231
19,600 Profit Recovery Group
International, Inc.(a) 874,650
12,400 Right Management Consultants,
Inc.(a) 139,500
10,400 Sei Investments Co. 928,525
29,000 Staffmark, Inc.(a) 230,188
5,400 Standard Register Co. 126,900
4,700 UniFirst Corp. 64,625
27,600 Valassis Communications, Inc.(a) 1,212,675
14,700 Wackenhut Corrections Corp.(a) 196,613
6,700 Wallace Computer Services, Inc. 135,675
18,100 World Fuel Services Corp. 176,475
15,100 Zebra Technologies Corp.(a) 686,578
------------
7,964,535
- ------------------------------------------------------------
Capital Spending--2.0%
6,500 Cable Design Technologies Corp. 148,281
5,300 Graco, Inc. 173,906
600 LSI Industries, Inc. 13,725
23,200 Manitowoc Co., Inc. 791,700
3,500 New Horizons Worldwide, Inc.(a) 55,563
8,300 Ocular Sciences, Inc.(a) 160,813
3,300 RTI International Metals, Inc.(a) 33,000
28,700 SPS Technologies, Inc.(a) 1,088,806
15,000 Superior Telecom, Inc. 209,062
3,300 URS Corp. 80,850
5,400 Watsco, Inc. 61,425
------------
2,817,131
- ------------------------------------------------------------
Consumer Cyclical--7.8%
32,900 Arvin Industries, Inc. 1,017,844
200 Bassett Furniture Industries, Inc. 3,800
3,500 Carlisle Companies, Inc. 138,250
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 3
<PAGE>
Portfolio of Investments as of September 30, 1999
(Unaudited) PRUDENTIAL SMALL-CAP QUANTUM FUND, INC.
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Consumer Cyclical (cont'd.)
62,400 Champion Enterprises, Inc. $ 561,600
70,600 D.R. Horton, Inc. 913,388
67,400 Intermet Corp. 570,794
57,400 Kaufman & Broad Home Corp. 1,183,875
7,900 Kimball International, Inc.
(Class 'B' Stock) 152,075
6,500 La-Z-Boy, Inc. 123,906
58,000 Lennar Corp. 924,375
63,900 Lo Jack Corp.(a) 529,172
43,900 MascoTech, Inc. 710,631
48,900 Meritor Automotive, Inc. 1,020,787
1,100 Monaco Coach Corp. 26,813
8,600 Myers Industries, Inc. 152,650
200 Oneida Ltd. 4,763
33,000 Pulaski Furniture Corp. 499,125
49,650 Smith AO Corp. 1,501,912
4,400 Standard Motor Products, Inc. 85,525
22,500 Tower Automotive, Inc.(a) 445,781
8,900 Wabash National Corp. 180,781
------------
10,747,847
- ------------------------------------------------------------
Consumer Services--15.0%
4,600 Aaron Rents, Inc. 79,350
32,200 ADVO, Inc. 641,988
3,500 Anchor Gaming 208,250
8,800 AnnTaylor Stores Corp.(a) 359,700
86,400 Arctic Cat, Inc. 826,200
3,800 Ben & Jerry's Homemade, Inc.(a) 65,313
8,000 Buffets, Inc.(a) 93,000
44,400 Cato Corp. 625,763
33,860 CKE Restaurants, Inc. 245,485
24,800 Claire's Stores, Inc. 410,750
9,600 CPI Corp. 328,200
7,300 Department 56, Inc.(a) 174,744
22,400 Dress Barn, Inc.(a) 410,900
15,600 Ethan Allen Interiors, Inc. 496,275
3,800 Extended Stay America, Inc.(a) 34,200
63,800 Jack in the Box, Inc.(a) 1,591,012
6,600 Footstar, Inc.(a) 232,650
32,600 Genesco, Inc.(a) 407,500
900 Goody's Family Clothing, Inc.(a) 7,256
32,100 Group 1 Automotive, Inc. $ 587,831
15,400 Guilford Mills, Inc. 132,825
7,600 Hollywood Park, Inc.(a) 116,850
5,700 IHOP Corp.(a) 115,425
22,800 Insight Enterprises Inc.(a) 741,000
4,000 Insurance Auto Auctions, Inc.(a) 59,500
2,700 Jo-Ann Stores, Inc.(a) 33,581
3,600 K-Swiss Inc. 113,625
58,400 Kellwood Co. 1,284,800
91,300 Luby's Cafeterias, Inc. 1,049,950
3,100 Madden Steven Ltd.(a) 40,106
12,200 Men's Wearhouse, Inc.(a) 262,300
14,600 Michaels Stores, Inc.(a) 430,700
12,000 Mohawk Industries, Inc.(a) 239,250
41,700 Musicland Stores Corp.(a) 364,875
44,800 OshKosh B'Gosh, Inc. 715,400
29,100 Pier 1 Imports, Inc 196,425
20,200 Polaris Industries, Inc. 699,425
38,100 Pomeroy Computer Resources 421,481
26,000 Pre-Paid Legal Services, Inc.(a) 1,023,750
9,900 Prime Hospitality Corp.(a) 79,200
5,500 Quiksilver, Inc.(a) 100,375
5,000 Rent-A-Center, Inc.(a) 93,125
33,400 Russ Berrie & Co., Inc. 699,313
3,800 ShopKo Stores, Inc. 110,200
8,900 Shuffle Master, Inc. 73,425
43,000 Sonic Automatic, Inc.(a) 559,000
3,200 Stein Mart, Inc.(a) 22,800
3,800 Stride Rite Corp. 26,600
20,700 Tech Data Corp.(a) 481,922
27,600 Timberland Co. (Class 'A' Stock) 1,078,125
1,600 Trans World Entertainment Corp.(a) 20,300
4,100 Wet Seal, Inc. (Class 'A' Stock)(a) 67,906
37,000 Zale Corp. 1,417,562
------------
20,697,488
- ------------------------------------------------------------
Consumer Staples--3.2%
26,900 Canandaigua Brands, Inc.
(Class 'A' Stock) 1,607,275
47,500 Herbalife International, Inc.
(Class 'A' Stock) 724,375
3,800 International Multifoods Corp. 87,400
51,500 Schweitzer-Mauduit International,
Inc. 666,281
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 4
<PAGE>
Portfolio of Investments as of September 30, 1999
(Unaudited) PRUDENTIAL SMALL-CAP QUANTUM FUND, INC.
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Consumer Staples (cont'd.)
44,100(b) Smithfields Foods, Inc. $ 1,179,675
7,000 USA Detergents, Inc. 34,563
5,900 Worthington Foods, Inc. 84,812
------------
4,384,381
- ------------------------------------------------------------
Energy--4.9%
31,200 Barrett Resources Corp.(a) 1,152,450
25,200 Cabot Oil & Gas Corp. 434,700
8,100 Evergreen Resources, Inc.(a) 194,906
1,200 Giant Industries, Inc.(a) 13,950
10,800 Howell Corp. 63,450
5,000 Louis Dreyfus Natural Gas Corp.(a) 107,187
39,700 Newfield Exploration Co.(a) 1,307,619
3,000 Northwest Nat. Gas Co. 77,438
6,600 Patina Oil & Gas Corp. 58,575
19,700 Plains Resources Inc.(a) 352,137
1,100 Remington Oil & Gas Corp.(a) 6,256
28,400 Seitel, Inc.(a) 276,900
13,800 Stone Energy Corp.(a) 702,075
8,300 Swift Energy Co.(a) 104,788
23,800 Tesoro Petroleum Corp.(a) 392,700
68,100(b) UGI Corp. 1,583,325
------------
6,828,456
- ------------------------------------------------------------
Finance--17.6%
8,100 Affiliated Managers Group, Inc.(a) 220,725
66,100 Allied Capital Corp. 1,483,119
90,200 Americredit Corp. 1,347,362
57,500 Amerus Life Holdings, Inc.
(Class 'A' Stock) 1,218,281
28,200 Arthur J. Gallagher & Co. 1,501,650
34,400 Astoria Financial Corp. 1,057,800
1,160 Bank United Corp. (Class 'A' Stock) 37,555
25,200 Colonial BancGroup, Inc. 281,925
23,900 Community First Bankshares, Inc. 403,312
77,400 Cullen/Frost Bankers, Inc. 1,935,000
3,200 Dain Rauscher Corp. 156,800
300 Delphi Financial Group, Inc.(a) 9,056
33,900 Delta Financial Corp.(a) 169,500
2,200 Doral Financial Corp. 29,425
35,400 Downey Financial Corp. 712,425
75,500 Enhance Financial Services Group,
Inc. $ 1,335,406
49,283 Fidelity National Financial, Inc. 748,486
93,000 First American Financial Corp. 1,243,875
3,800 First Midwest Bancorp, Inc. 145,113
55,500 Fremont General Corp. 527,250
7,200 GBC Bancorp 139,500
17,700 Hambrecht & Quist Group(a) 866,194
59,964 Hudson United Bancorp 1,847,641
17,300 IPC Holdings Ltd., ADR (Bermuda) 324,375
1,400 Metris Companies, Inc. 41,213
26,700 Morgan Keegan, Inc. 455,569
33,900 People's Bank 800,887
4,000 Protective Life Corp. 116,000
9,800 Provident Financial Group, Inc. 358,313
35,000 Radian Group, Inc. 1,502,812
10,000 Raymond James Financial, Inc. 199,375
18,600 Republic Bancorp, Inc. 215,063
64,700 Rollins Truck Leasing Corp. 655,087
31,100 Selective Insurance Group, Inc. 587,012
8,200 Silicon Valley Bancshares 197,825
10,600 TCF Financial Corp. 302,763
189,700 World Acceptance Corp. 1,019,637
1,800 XTRA Corp.(a) 71,550
------------
24,264,881
- ------------------------------------------------------------
Health Care--6.9%
19,400 Ameripath, Inc. 162,475
15,800 Barr Laboratories, Inc.(a) 501,650
18,666 Bindley Western Inds Inc. 267,157
5,300 Chattem, Inc.(a) 116,931
7,300 Cooper Cos., Inc. 225,388
18,700 Covance, Inc.(a) 181,156
4,200 Diagnostic Products Corp. 112,613
3,800 Hanger Orthopedic Group, Inc.(a) 55,100
8,600 IDEC Pharmaceuticals Corp.(a) 808,669
5,600 MedImmune, Inc.(a) 558,075
11,900 MedQuist, Inc.(a) 397,906
12,500 Mentor Corp. 356,250
1,600 Meridian Diagnostics, Inc. 12,800
63,500 Orthodontic Ctrs. of America,
Inc.(a) 1,111,250
200 Osteotech, Inc.(a) 2,725
15,400 Owens & Minor, Inc. 148,225
5,300 Pediatrix Medical Group, Inc.(a) 73,538
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 5
<PAGE>
Portfolio of Investments as of September 30, 1999
(Unaudited) PRUDENTIAL SMALL-CAP QUANTUM FUND, INC.
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Health Care (cont'd.)
2,600 Polymedica Corp.(a) $ 60,450
72,200 Prime Medical Services, Inc.(a) 685,900
20,100 Priority Healthcare Corp.(a) 620,587
27,900 RehabCare Corp. 495,225
3,600 ResMed, Inc.(a) 119,025
19,400 Serologicals Corp. 82,450
9,700 Sola International, Inc.(a) 150,350
21,000 Theragenics Corp.(a) 267,750
26,800 Universal Health Services, Inc.
(Class 'B' Stock)(a) 693,450
38,200 US Oncology, Inc.(a) 346,187
5,300 VISX, Inc.(a) 419,197
4,200 Vital Signs, Inc. 85,575
12,500 Wesley Jessen VisionCare, Inc.(a) 389,844
12,000 X-Rite, Inc. 78,000
------------
9,585,898
- ------------------------------------------------------------
Technology--21.3%
3,700 Actel Corp.(a) 70,300
30,800 Acxiom Corp.(a) 605,412
10,500 Advanced Digital Information Corp. 292,031
7,000 Advanced Energy Industries, Inc.(a) 216,125
19,200 Aeroflex, Inc.(a) 234,000
22,800 American Management Systems,
Inc.(a) 584,962
10,500 ANADIGICS, Inc.(a) 295,313
22,700 Analysts International Corp. 235,513
2,600 Anixter International, Inc.(a) 60,450
34,550(b) Apex, Inc.(a) 645,653
18,000 Applied Science & Technology,
Inc.(a) 371,250
11,500 Ardent Software, Inc.(a) 309,781
16,200 Artesyn Technologies, Inc.(a) 307,294
7,600 ATMI, Inc.(a) 283,575
7,300 Brady (W.H.) Co. 233,600
11,300 Citrix Systems, Inc.(a) 699,894
19,800 Clarify, Inc.(a) 996,187
21,300 Computer Horizons Corp. 247,613
20,300 Computer Task Group, Inc. 299,425
4,800 Comverse Technology, Inc.(a) 452,700
10,900 Concord Communications, Inc. 433,275
7,500 Consolidated Graphics, Inc.(a) 315,937
4,600 Credence Systems Corp.(a) 206,425
3,400 Davox Corp.(a) $ 44,413
13,400 DII Group, Inc.(a) 471,512
9,300 DuPont Photomasks, Inc.(a) 428,381
3,800 EMS Technologies, Inc.(a) 45,600
28,600 FileNET Corp.(a) 305,662
12,600 Galileo Technology Ltd.(a) 315,000
8,800 Hadco Corp.(a) 380,600
13,500 Harmon Industries, Inc. 169,594
8,400 Herman Miller, Inc. 200,813
9,200 Hypercom Corp.(a) 73,600
24,900 Inacom Corp.(a) 228,769
49,300 International Rectifier Corp.(a) 751,825
16,000 InterVoice-Brite, Inc.(a) 177,000
6,100 Kronos Inc. (a) 223,794
9,200 Lattice Semiconductor Corp.(a) 273,125
20,800 Legato Systems, Inc.(a) 906,750
59,100 Mail-Well, Inc. 820,012
39,700 Mapics, Inc. 344,894
8,500 MICROS Systems, Inc.(a) 344,250
2,100 MTS Systems Corp. 21,788
6,400 Network Solutions, Inc.(a) 588,000
30,400 Park Electrochemical Corp. 999,400
19,000 Peregrine Systems, Inc.(a) 774,250
38,900 Pioneer-Standard Electronics, Inc. 561,619
18,300 Polycom, Inc.(a) 872,109
13,200 Powerwave Technologies, Inc.(a) 636,487
9,300 Progress Software Corp.(a) 291,788
14,500 QLogic Corp.(a) 1,013,187
4,000 Rainbow Technologies, Inc.(a) 52,500
2,400 RWD Technologies, Inc.(a) 18,900
55,000 S3 Inc.(a) 574,062
14,000 Sawtek, Inc.(a) 490,000
25,600 SIPEX Corp.(a) 366,400
2,500 Sterling Software, Inc.(a) 50,000
4,000 Structural Dynamics Research
Corp.(a) 60,125
31,300 Symantec Corp.(a) 1,125,822
200 Systems & Computer Technology Corp. 2,513
42,200 Technitrol, Inc. 1,487,550
13,500 Three-Five Systems, Inc.(a) 298,687
5,100 Transaction Systems Architects,
Inc.(a) 137,381
10,250 TranSwitch Corp.(a) 584,250
10,100 Trimble Navigation Ltd.(a) 107,944
36,900 United Stationers, Inc.(a) 786,431
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 6
<PAGE>
Portfolio of Investments as of September 30, 1999
(Unaudited) PRUDENTIAL SMALL-CAP QUANTUM FUND, INC.
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Technology (cont'd.)
3,800 Vertex Communications Corp.(a) $ 42,513
2,400 ViaSat, Inc.(a) 42,900
28,700 Whittman-Hart Inc.(a) 1,113,022
40,300 Wolverine Tube, Inc.(a) 624,650
20,900 Xircom, Inc. (a) 892,169
------------
29,518,756
- ------------------------------------------------------------
Utilities--2.7%
50,900 Energen Corp. 1,030,725
4,000 Hawaiian Electric Industries, Inc. 140,750
4,600 IDACORP, Inc. 138,575
27,100 Madison Gas & Electric Co. 538,613
8,300 Otter Tail Power Co. 352,750
31,300 United Illuminating Co. 1,514,137
------------
3,715,550
Total long-term investments
(cost $149,828,151) 134,782,548
------------
- ------------------------------------------------------------
Principal
Amount
(000)
SHORT-TERM INVESTMENT--3.6%
Repurchase Agreement
$ 4,989 Joint Repurchase Agreement Account,
5.22%, 10/1/99
(cost $4,989,000; Note 5) 4,989,000
- ------------------------------------------------------------
Total Investments--101.1%
(cost $154,817,151; Note 4) 139,771,548
Liabilities in excess of
other assets--(1.1%) (1,489,043)
------------
Net Assets--100% $138,282,505
------------
------------
</TABLE>
- ---------------
(a) Non-income producing security.
(b) Security segregated as collateral for futures contracts.
ADR--American Depository Receipt.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 7
<PAGE>
Statement of Assets and Liabilities (Unaudited)
PRUDENTIAL SMALL-CAP QUANTUM FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets September 30, 1999
<S> <C>
Investments, at value (cost $154,817,151).............................................................. $ 139,771,548
Receivable for investments sold........................................................................ 409,176
Dividends and interest receivable...................................................................... 109,839
Deferred organization expenses and other assets........................................................ 98,867
Due from broker - variation margin..................................................................... 38,625
Receivable for Fund shares shold....................................................................... 25,009
------------------
Total assets........................................................................................ 140,453,064
------------------
Liabilities
Payable for Fund shares reacquired..................................................................... 1,062,765
Payable for investments purchased...................................................................... 626,089
Accrued expenses....................................................................................... 316,734
Distribution fees payable.............................................................................. 93,629
Management fee payable................................................................................. 71,342
------------------
Total liabilities................................................................................... 2,170,559
------------------
Net Assets............................................................................................. $ 138,282,505
------------------
------------------
Net assets were comprised of:
Common stock, at par................................................................................ $ 16,990
Paid-in capital in excess of par.................................................................... 197,865,989
------------------
197,882,979
Accumulated net investment loss..................................................................... (437,772)
Accumulated net realized loss on investments........................................................ (44,000,823)
Net unrealized depreciation on investments.......................................................... (15,161,879)
------------------
Net assets, September 30, 1999......................................................................... $ 138,282,505
------------------
------------------
Class A:
Net asset value and redemption price per share
($36,912,729 / 4,491,299 shares of common stock issued and outstanding).......................... $8.22
Maximum sales charge (5% of offering price)......................................................... 0.43
------------------
Maximum offering price to public.................................................................... $8.65
------------------
------------------
Class B:
Net asset value, offering price and redemption price per share
($88,385,599 / 10,900,546 shares of common stock issued and outstanding)......................... $8.11
------------------
------------------
Class C:
Net asset value and redemption price per share
($11,406,713 / 1,406,757 shares of common stock issued and outstanding).......................... $8.11
Sales charge (1% of offering price)................................................................. 0.08
------------------
Offering price to public............................................................................ $8.19
------------------
------------------
Class Z:
Net asset value, offering price and redemption price per share
($1,577,464 / 191,064 shares of common stock issued and outstanding)............................. $8.26
------------------
------------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 8
<PAGE>
PRUDENTIAL SMALL-CAP QUANTUM FUND, INC.
Statement of Operations (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Loss September 30, 1999
<S> <C>
Income
Dividends............................. $ 987,617
Interest.............................. 147,064
------------------
Total income.......................... 1,134,681
------------------
Expenses
Management fee........................ 485,341
Distribution fee--Class A............. 55,164
Distribution fee--Class B............. 504,174
Distribution fee--Class C............. 70,522
Transfer agent's fees and expenses.... 155,000
Reports to shareholders............... 100,000
Custodian's fees and expenses......... 60,000
Registration fees..................... 60,000
Legal fees and expenses............... 35,000
Amortization of deferred organization
expenses........................... 15,667
Audit fee and expenses................ 12,500
Directors' fees....................... 9,000
Miscellaneous......................... 10,085
------------------
Total expenses..................... 1,572,453
------------------
Net investment loss...................... (437,772)
------------------
Realized and Unrealized Gain
(Loss) on Investments
Net realized gain (loss) on:
Investment transactions............... (18,324,390)
Financial futures transactions........ 573,030
------------------
(17,751,360)
------------------
Net change in unrealized appreciation
(depreciation) on:
Investments........................... 35,260,153
Financial futures transactions........ (190,263)
------------------
35,069,890
------------------
Net gain on investments.................. 17,318,530
------------------
Net Increase in Net Assets
Resulting from Operations................ $ 16,880,758
------------------
------------------
</TABLE>
PRUDENTIAL SMALL-CAP QUANTUM FUND, INC.
Statement of Changes in Net Assets (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
Increase (Decrease) September 30, March 31,
in Net Assets 1999 1999
<S> <C> <C>
Operations
Net investment loss....... $ (437,772) $ (928,383)
Net realized loss on
investments............ (17,751,360) (26,249,463)
Net change in unrealized
appreciation
(depreciation)
on investments......... 35,069,890 (77,150,441)
------------- --------------------
Net increase (decrease) in
net assets resulting
from operations........ 16,880,758 (104,328,287)
------------- --------------------
Distributions from net
realized gains
Class A................... -- (1,145,659)
Class B................... -- (2,301,304)
Class C................... -- (390,070)
Class Z................... -- (87,222)
------------- --------------------
-- (3,924,255)
------------- --------------------
Fund share transactions (net
of share conversions)
(Note 6)
Net proceeds from shares
sold................... 10,295,891 70,366,132
Net asset value of shares
issued in reinvestment
of distributions....... -- 3,790,396
Cost of shares
reacquired............. (56,796,549) (150,960,828)
------------- --------------------
Net decrease in net assets
from Fund share
transactions........... (46,500,658) (76,804,300)
------------- --------------------
Total decrease............... (29,619,900) (185,056,842)
Net Assets
Beginning of period.......... 167,902,405 352,959,247
------------- --------------------
End of period................ $ 138,282,505 $ 167,902,405
------------- --------------------
------------- --------------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 9
<PAGE>
Notes to Financial Statements (Unaudited)
PRUDENTIAL SMALL-CAP QUANTUM FUND, INC.
- --------------------------------------------------------------------------------
Prudential Small-Cap Quantum Fund, Inc. (the 'Fund') is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. The Fund was incorporated in Maryland on February 4, 1997. The Fund
issued 2,500 shares each of Class A, Class B, Class C and Class Z common stock
for $100,000 on August 1, 1997 to Prudential Investments Fund Management LLC
('PIFM'). Investment operations commenced on November 10, 1997. The investment
objective of the Fund is long-term capital appreciation which is sought by
investing primarily in equity securities of small-cap U.S. 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.
Securities Valuation: Securities listed on a securities exchange and Nasdaq
National Market System securities are valued at the last sales price on the day
of valuation, or, if there was no sale on such day, the mean between the last
bid and asked prices on such day, as provided by a pricing service. Corporate
bonds and U.S. Government securities are valued on the basis of valuations
provided by a pricing service or principle market makers. Options traded on an
exchange are valued at the mean between the most recently quoted bid and asked
prices on the respective exchange, and futures contracts and options thereon are
valued at their last sales prices as of the close of trading on the applicable
commodities exchange. Any security for which a reliable market quotation is
unavailable is valued at fair value as determined in good faith by or under the
direction of the Fund's Board of Directors.
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.
To the extent that any repurchase transaction exceeds one business day, the
value of the collateral is marked-to-market on a daily basis to ensure the
adequacy of the collateral. 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.
All securities are valued as of 4:15 p.m., New York time.
Securities Transactions and Net Investment Income: Securities transactions are
recorded on the trade date. Realized gains and losses on sales of investments
are calculated on the identified cost basis. Dividend income is recorded on the
ex-dividend date and interest income is recorded on the 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 based upon the
relative proportion of net assets of each class at the beginning of the day.
Financial Futures Contracts: A financial futures contract is an agreement to
purchase (long) or sell (short) an agreed amount of securities at a set price
for delivery on a future date. Upon entering into a financial futures contract,
the Fund is required to pledge to the broker an amount of cash and/or other
assets equal to a certain percentage of the contract amount. This amount is
known as the 'initial margin.' Subsequent payments, known as 'variation margin,'
are made or received by the Fund each day, depending on the daily fluctuations
in the value of the underlying security. Such variation margin is recorded for
financial statement purposes on a daily basis as unrealized gain or loss. When
the contract expires or is closed, the gain or loss is realized and is presented
in the statement of operations as net realized gain (loss) on financial futures
contracts.
The Fund invests in financial futures contracts in order to hedge its existing
portfolio securities, or securities the Fund intends to purchase, against
fluctuations in value caused by changes in prevailing interest rates. Should
interest rates move unexpectedly, the Fund may not achieve the anticipated
benefits of the financial futures contracts and may realize a loss. The use of
futures transactions involves the risk of imperfect correlation in movements in
the price of futures contracts, interest rates and the underlying hedged assets.
Dividends and Distributions: The Fund expects to pay dividends of net investment
income and distributions of net realized capital gains, if any, 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.
Taxes: It is the Fund's policy to meet the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable net income and net capital gains, if any, to its shareholders.
Therefore, no federal income tax provision is required.
- --------------------------------------------------------------------------------
10
<PAGE>
Notes to Financial Statements (Unaudited)
PRUDENTIAL SMALL-CAP QUANTUM FUND, INC.
- --------------------------------------------------------------------------------
Withholding taxes on foreign dividends have been provided for in accordance with
the Fund's understanding of the applicable country's tax rules and rates.
Deferred Organization Expenses: Approximately $154,000 of expenses were incurred
in connection with the organization of the Fund. These costs have been deferred
and are being amortized ratably over a period of 60 months from the date the
Fund commenced investment operations.
- ------------------------------------------------------------
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 cost of the
subadviser's services, 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 .60 of 1% of the average daily net assets of the Fund.
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. 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
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 C shares, respectively.
Such expenses under the Class A, Class B and Class C Plans were .25%, 1% and 1%,
respectively, of the average daily net assets of Class A, Class B and Class C
shares for the six months ended September 30, 1999.
PIMS has advised the Fund that they received approximately $14,100 and $2,500 in
front-end sales charges resulting from sales of Class A shares and Class C
shares, respectively, during the six months ended September 30, 1999. 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 six months ended September 30, 1999, it
received approximately $448,300 and $42,900 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.
As of March 11, 1999, 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 borrowings will be at market rates. The Funds pay a commitment
fee at an annual rate of .065 of 1% on the unused portion of the credit
facility, which is accrued and paid quarterly on a pro rata basis by the Funds.
The SCA expires on March 9, 2000. The Fund did not borrow any amounts pursuant
to either agreement during the six months ended September 30, 1999. The purpose
of the agreements are to serve as an alternative source of funding for capital
share redemptions.
- ------------------------------------------------------------
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. During the six months ended September 30,
1999, the Fund incurred fees of approximately $137,000 for the services of PMFS.
As of September 30, 1999, approximately $20,600 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 six months ended September 30, 1999, Prudential Securities Incorporated
('PSI') received approximately $8,200 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 September 30, 1999 were $53,894,198 and $94,727,317,
respectively.
The federal income tax basis of the Fund's investments at September 30, 1999 was
$155,345,336 and, accordingly, net unrealized depreciation for federal income
tax purposes was $15,573,788 (gross unrealized appreciation--$10,794,789; gross
unrealized depreciation--$26,368,577).
For federal income tax purposes, the Fund had a capital loss carryforward as of
March 31, 1999, of $3,890,973 which expires in 2007. Accordingly,
- --------------------------------------------------------------------------------
11
<PAGE>
Notes to Financial Statements (Unaudited)
PRUDENTIAL SMALL-CAP QUANTUM FUND, INC.
- --------------------------------------------------------------------------------
no capital gains distributions are expected to be paid to shareholders until
future net gains have been realized in excess of such carryforward.
During the six months ended September 30, 1999, the Fund entered into financial
futures contracts. Details of open contracts at September 30, 1999 are as
follows:
<TABLE>
<CAPTION>
Value at Value at
Number of Expiration September 30, Trade Unrealized
Contracts Type Date 1999 Date Depreciation
- -------------- ------------- ----------- ------------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Long Positions:
5 Russell 2000 Dec 1999 $ 1,073,750 $1,116,300 $ (42,550)
5 Russell 2000 Dec 1999 1,073,750 1,117,426 (43,676)
5 Russell 2000 Dec 1999 1,073,750 1,103,800 (30,050)
--------------
$ (116,276)
--------------
--------------
</TABLE>
- ------------------------------------------------------------
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. As of September 30, 1999, the
Fund has a 0.8% undivided interest in the repurchase agreements in the joint
account. The undivided interest for the Fund represents $4,989,000 principal
amount. As of such date, the repurchase agreements in the joint account and the
value of the collateral therefore were as follows:
Warburg Dillon Read LLC, 5.32%, in the principal amount of $190,000,000,
repurchase price $190,028,077, due 10/1/99. The value of the collateral
including accrued interest was $193,802,299.
Bear, Stearns & Co. Inc., 5.32%, in the principal amount of $190,000,000,
repurchase price $190,028,077, due 10/1/99. The value of the collateral
including accrued interest was $194,200,266.
Morgan (J.P.) Securities, Inc., 5.25%, in the principal amount of $190,000,000,
repurchase price $190,027,708, due 10/1/99. The value of the collateral
including accrued interest was $193,800,121.
Goldman, Sachs & Co., 4.75%, in the principal amount of $88,875,000, repurchase
price $88,886,726, due 10/1/99. The value of the collateral including accrued
interest was $90,653,200.
- ------------------------------------------------------------
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. Prior to November 2, 1998, Class C shares were 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. A special exchange privilege is also available for
shareholders who qualified to purchase Class A shares at net asset value. Class
Z shares are not subject to any sales charge and are offered exclusively for
sale to a limited group of investors.
There are 2 billion shares of common stock, $.001 par value per share, divided
into four classes, designated Class A, Class B, Class C and Class Z common
stock, each of which consists of 500 million authorized shares.
Transactions in shares of common stock were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ------------------------------------- ---------- ------------
<S> <C> <C>
Six months ended September 30, 1999:
Shares sold.......................... 855,627 $ 7,150,558
Shares issued in reinvestment of
distributions...................... -- --
Shares reacquired.................... (2,662,569) (21,935,778)
---------- ------------
Net decrease in shares outstanding
before conversion.................. (1,806,942) (14,785,220)
Shares issued upon conversion from
Class B............................ 16,778 141,285
---------- ------------
Net decrease in shares outstanding... (1,790,164) $(14,643,935)
---------- ------------
---------- ------------
Year ended March 31, 1999:
Shares sold.......................... 2,696,758 $ 25,459,881
Shares issued in reinvestment of
distributions...................... 133,662 1,122,758
Shares reacquired.................... (7,130,641) (63,483,930)
---------- ------------
Net decrease in shares outstanding
before conversion.................. (4,300,221) (36,901,291)
Shares issued upon conversion from
Class B............................ 25,488 213,899
---------- ------------
Net decrease in shares outstanding... (4,274,733) $(36,687,392)
---------- ------------
---------- ------------
<CAPTION>
Class B
- -------------------------------------
Six months ended September 30, 1999:
Shares sold.......................... 249,178 $ 2,022,657
Shares issued in reinvestment of
distributions...................... -- --
Shares reacquired.................... (3,186,788) (25,772,385)
---------- ------------
Net decrease in shares outstanding
before conversion.................. (2,937,610) (23,749,728)
Shares reacquired upon conversion
into Class A....................... (16,981) (141,285)
---------- ------------
Net decrease in shares outstanding... (2,954,591) $(23,891,013)
---------- ------------
---------- ------------
</TABLE>
- --------------------------------------------------------------------------------
12
<PAGE>
Notes to Financial Statements (Unaudited)
PRUDENTIAL SMALL-CAP QUANTUM FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B Shares Amount
- ------------------------------------- ---------- ------------
<S> <C> <C>
Year ended March 31, 1999:
Shares sold.......................... 3,544,591 $ 33,771,230
Shares issued in reinvestment of
distributions...................... 264,099 2,202,587
Shares reacquired.................... (7,920,628) (67,279,455)
---------- ------------
Net decrease in shares outstanding
before conversion.................. (4,111,938) (31,305,638)
Shares reacquired upon conversion
into Class A....................... (25,646) (213,899)
---------- ------------
Net decrease in shares outstanding... (4,137,584) $(31,519,537)
---------- ------------
---------- ------------
<CAPTION>
Class C
- -------------------------------------
Six months ended September 30, 1999:
Shares sold.......................... 44,744 $ 374,003
Shares issued in reinvestment of
distributions...................... -- --
Shares reacquired.................... (667,123) (5,349,997)
---------- ------------
Net decrease in shares outstanding... (622,379) $ (4,975,994)
---------- ------------
---------- ------------
Year ended March 31, 1999:
Shares sold.......................... 477,990 $ 4,468,986
Shares issued in reinvestment of
distributions...................... 45,585 380,178
Shares reacquired.................... (1,845,359) (15,689,617)
---------- ------------
Net decrease in shares outstanding... (1,321,784) $(10,840,453)
---------- ------------
---------- ------------
<CAPTION>
Class Z
- -------------------------------------
Six months ended September 30, 1999:
Shares sold.......................... 90,565 $ 748,673
Shares issued in reinvestment of
distributions...................... -- --
Shares reacquired.................... (451,616) (3,738,389)
---------- ------------
Net decrease in shares outstanding... (361,051) $ (2,989,716)
---------- ------------
---------- ------------
Year ended March 31, 1999:
Shares sold.......................... 703,945 $ 6,666,035
Shares issued in reinvestment of
distributions...................... 10,080 84,873
Shares reacquired.................... (530,522) (4,507,826)
---------- ------------
Net increase in shares outstanding... 183,503 $ 2,243,082
---------- ------------
---------- ------------
</TABLE>
- --------------------------------------------------------------------------------
13
<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL SMALL-CAP QUANTUM FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Class B
--------------------------------------------- -------------
November 10,
Six Months Year 1997(a) Six Months
Ended Ended Through Ended
September 30, March 31, March 31, September 30,
1999(d) 1999 1998 1999(d)
------------- ---------- ------------ -------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................... $ 7.44 $ 10.95 $ 10.00 $ 7.37
------ ---------- ------------ -------------
Income from investment operations
Net investment income (loss)........................... -- .03 .02 (.03)
Net realized and unrealized gain (loss) on investment
transactions........................................ .78 (3.41) .94 .77
------ ---------- ------------ -------------
Total from investment operations.................... .78 (3.38) .96 .74
------ ---------- ------------ -------------
Less distributions
Distributions in excess of net investment income....... -- -- (.01) --
Distributions from net realized gains.................. -- (.13) -- --
------ ---------- ------------ -------------
Net asset value, end of period......................... $ 8.22 $ 7.44 $ 10.95 $ 8.11
------ ---------- ------------ -------------
------ ---------- ------------ -------------
TOTAL RETURN(c):....................................... 10.48% (31.00)% 9.60% 10.19%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)........................ $36,913 $ 46,736 $115,621 $ 88,386
Average net assets (000)............................... $44,010 $ 82,332 $106,453 $ 100,559
Ratios to average net assets:
Expenses, including distribution fees............... 1.42%(b) 1.26% 1.22%(b) 2.17%(b)
Expenses, excluding distribution fees............... 1.17%(b) 1.01% 0.97%(b) 1.17%(b)
Net investment income (loss)........................ (.01)%(b) .16% .47%(b) (.76)%(b)
Portfolio turnover rate................................ 35% 106% 39% 35%
<CAPTION>
November 10,
Year 1997(a)
Ended Through
March 31, March 31,
1999 1998
---------- ------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................... $ 10.93 $ 10.00
---------- ------------
Income from investment operations
Net investment income (loss)........................... (.06) (.01)
Net realized and unrealized gain (loss) on investment
transactions........................................ (3.37) .94
---------- ------------
Total from investment operations.................... (3.43) .93
---------- ------------
Less distributions
Distributions in excess of net investment income....... -- --
Distributions from net realized gains.................. (.13) --
---------- ------------
Net asset value, end of period......................... $ 7.37 $ 10.93
---------- ------------
---------- ------------
TOTAL RETURN(c):....................................... (31.61)% 9.31%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)........................ $102,094 $196,671
Average net assets (000)............................... $158,085 $170,484
Ratios to average net assets:
Expenses, including distribution fees............... 2.01% 1.97%(b)
Expenses, excluding distribution fees............... 1.01% 0.97%(b)
Net investment income (loss)........................ (.58)% (.29)%(b)
Portfolio turnover rate................................ 106% 39%
</TABLE>
- ---------------
(a) Commencement of investment operations.
(b) Annualized.
(c) 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.
(d) Calculated based upon weighted average shares outstanding during the period.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 14
<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL SMALL-CAP QUANTUM FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C Class Z
--------------------------------------------- -------------
November 10,
Six Months Year 1997(a) Six Months
Ended Ended Through Ended
September 30, March 31, March 31, September 30,
1999(d) 1999 1998 1999(d)
------------- ---------- ------------ -------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................... $ 7.37 $ 10.93 $ 10.00 $ 7.46
------ ---------- ------ -----
Income from investment operations
Net investment income (loss)........................... (.03) (.08) (.01) .01
Net realized and unrealized gain (loss) on investment
transactions........................................ .77 (3.35) .94 .79
------ ---------- ------ -----
Total from investment operations.................... .74 (3.43) .93 .80
------ ---------- ------ -----
Less distributions
Distributions in excess of net investment income....... -- -- -- --
Distributions from net realized gains.................. -- (.13) -- --
------ ---------- ------ -----
Net asset value, end of period......................... $ 8.11 $ 7.37 $ 10.93 $ 8.26
------ ---------- ------ -----
------ ---------- ------ -----
TOTAL RETURN(c):....................................... 10.19% (31.61)% 9.31% 10.72%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)........................ $11,407 $ 14,951 $ 36,628 $ 1,577
Average net assets (000)............................... $14,066 $ 27,182 $ 34,000 $ 2,703
Ratios to average net assets:
Expenses, including distribution fees............... 2.17%(b) 2.01% 1.97%(b) 1.17%(b)
Expenses, excluding distribution fees............... 1.17%(b) 1.01% 0.97%(b) 1.17%(b)
Net investment income (loss)........................ (.76)%(b) (.59)% (.29)%(b) .27%(b)
Portfolio turnover rate................................ 35% 106% 39% 35%
<CAPTION>
November 10,
Year 1997(a)
Ended Through
March 31, March 31,
1999 1998
---------- ------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................... $10.96 $10.00
----- -----
Income from investment operations
Net investment income (loss)........................... .05 .02
Net realized and unrealized gain (loss) on investment
transactions........................................ (3.42) .95
----- -----
Total from investment operations.................... (3.37) .97
----- -----
Less distributions
Distributions in excess of net investment income....... -- (.01)
Distributions from net realized gains.................. (.13) --
----- -----
Net asset value, end of period......................... $ 7.46 $10.96
----- -----
----- -----
TOTAL RETURN(c):....................................... (30.88)% 9.74%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)........................ $4,121 $4,039
Average net assets (000)............................... $5,315 $2,709
Ratios to average net assets:
Expenses, including distribution fees............... 1.01% 0.97%(b)
Expenses, excluding distribution fees............... 1.01% 0.97%(b)
Net investment income (loss)........................ .43% .51%(b)
Portfolio turnover rate................................ 106% 39%
</TABLE>
- ---------------
(a) Commencement of investment operations.
(b) Annualized.
(c) 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.
(d) Calculated based upon weighted average shares outstanding during the period.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 15
<PAGE>
Getting the Most from Your Prudential Mutual Fund
How many times have you read these reports--or other financial materials--
and stumbled across a word that you don't understand?
Many shareholders have run into the same problem. We'd like to help. So we'll
use this space from time to time to explain some of the words you might have
read, but not understood. And if you have a favorite word that no one can
explain to your satisfaction, please write to us.
Basis Point: 1/100th of 1%. For example, one-half of one percent is 50 basis
points.
Collateralized Mortgage Obligations (CMOs): Mortgage-backed bonds that
separate mortgage pools into different maturity classes, called tranches.
These instruments are sensitive to changes in interest rates and homeowner
refinancing activity. They are subject to prepayment and maturity extension
risk.
Derivatives: Securities that derive their value from other securities. The
rate of return of these financial instruments rises and falls--sometimes
very suddenly--in response to changes in some specific interest rate,
currency, stock, or other variable.
Discount Rate: The interest rate charged by the Federal Reserve on loans to
member banks.
Federal Funds Rate: The interest rate charged by one bank to another on
overnight loans.
Futures Contract: An agreement to purchase or sell a specific amount of a
commodity or financial instrument at a set price at a specified date in the
future.
Leverage: The use of borrowed assets to enhance return. The expectation is
that the interest rate charged on borrowed funds will be lower than the return
on the investment. While leverage can increase profits, it can also magnify
losses.
Liquidity: The ease with which a financial instrument (or product) can be
bought or sold (converted into cash) in the financial markets.
Price/Earnings Ratio: The price of a share of stock divided by the earnings
per share for a 12-month period.
Option: An agreement to purchase or sell something, such as shares of stock,
by a certain time for a specified price. An option need not be exercised.
Spread: The difference between two values; often used to describe the
difference between "bid" and "asked" prices of a security, or between the
yields of two similar maturity bonds.
Yankee Bond: A bond sold by a foreign company or government in the U.S.
market and denominated in U.S. dollars.
<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
Delayne Dedrick Gold
Robert F. Gunia
Douglas H. McCorkindale
Thomas T. Mooney
Stephen P. Munn
David R. Odenath, Jr.
Richard A. Redeker
Robin B. Smith
John R. Strangfeld
Louis A. Weil, III
Clay T. Whitehead
Officers
John R. Strangfeld, President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Marguerite E.H. Morrison, Secretary
Stephen M. Ungerman, Assistant Treasurer
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
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street
Chicago, IL 60610-4795
Prudential Investments is a unit of The Prudential Insurance Company of
America, 751 Broad Street, Newark, NJ 07102.
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 September 30, 1999, 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>
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
BULK RATE
U.S. POSTAGE
PAID
Permit 6807
New York, NY
Class NASDAQ Cusip
A PQVAX 74436N108
B PQVBX 74436N207
C PQVCX 74436N306
Z -- 74436N405 MF176E2
