<PAGE>
ANNUAL REPORT MARCH 31, 2000
Prudential
Small-Cap Quantum Fund, Inc.
Fund Type Stock
Objective Long-term capital appreciation
(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
Prudential Small-Cap Quantum Fund seeks long-term
capital growth by using quantitative investment
techniques to buy primarily the stocks of U.S.
companies with market capitalizations (what it would
cost to buy all of a company's stock) like those of the
S&P SmallCap 600 Index. Beginning
May 30, 2000, the Fund also will try to minimize
taxable distributions. 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. Small-cap stocks
may have limited
marketability and may be subject to more abrupt or
erratic movements than large-cap stocks.
Portfolio Composition
Expressed as a percentage of
net assets as of 3/31/00
26.3% Technology
15.2 Consumer Services
11.7 Finance
11.5 Healthcare
9.6 Basic Industry
6.1 Business Services
5.7 Consumer Cyclicals
3.1 Cash & Equivalents
3.1 Consumer Staples
3.0 Energy
2.9 Capital Spending
1.6 Utilities
0.2 Conglomerates
Ten Largest Holdings
Expressed as a percentage of
net assets as of 3/31/00
1.4% International Rectifier Corp.
Technology
1.4 Nortel Networks Corp.
Technology
1.4 Informix Corp.
Technology
1.3 Cullen Frost Bankers, Inc.
Finance
1.3 QLogic Corp.
Technology
1.2 Technitrol, Inc.
Technology
1.2 Powerwave Technologies, Inc.
Technology
1.1 Canandaigua Brands, Inc.
Consumer Staples
1.1 Hudson United Bancorp
Finance
1.1 Radian Group, Inc.
Finance
<PAGE>
www.prudential.com (800) 225-1852
Performance at a Glance
Cumulative Total Returns1 As of 3/31/00
One Since
Year Inception2
Class A 24.73% -5.67%
Class B 23.91 -7.36
Class C 23.91 -7.36
Class Z 25.07 -5.14
Lipper Small-Cap
Value Fund Avg.3 24.01 -5.14
Average Annual Total Returns1 As of 3/31/00
One Since
Year Inception2
Class A 18.49% -4.49%
Class B 18.91 -4.48
Class C 21.67 -3.56
Class Z 25.07 -2.18
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 date: Class A, B, C, and Z, 11/10/97.
3 Lipper average returns are for all funds in each
share class for the one-year and since-inception
periods 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 Index(R).
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>
Prudential Small-Cap Quantum Fund, Inc.
Message From the Fund's President May 16, 2000
Dear Shareholder,
The improvements made by the managers of Prudential
Small-Cap Quantum Fund last May paid off over the 12
months ended March 31, 2000: the Fund's 24.73% Class A
share return beat the 24.01% Lipper Small-Cap Value
Average. For shareholders paying the initial Class A
share sales charge, the return was 18.49%.
The Fund outperformed the Lipper Average because we
believe it held more technology stocks than most value
funds and because its technology holdings outperformed
the Standard & Poor's SmallCap 600 Index (S&P SmallCap
600) technology sector. Market gains in the small-cap
arena over this period were predominantly in the
technology and healthcare sectors. The Fund's strength
in growth stocks was due in large part to extensions of
its investment parameters that were approved by its
Board of Directors in May 1999. Although we believe the
Fund owned more technology and healthcare stocks than
many value funds, these groups were underrepresented
compared to the S&P SmallCap 600 Index. The Fund still
had a strong value tilt in a market that was deeply
hostile to the value style.
The Board approved further enhancements to the Fund's
strategies, effective May 30, 2000. The Fund will no
longer base its investment process on Prudential
Securities' Small-Cap Quantitative Valuation (QV)
model. In addition, the Fund's objective will be supplemented to
include trying to minimize taxable distributions, and
its name will be changed to Prudential
Tax-Managed Small-Cap Fund, Inc. It will use a tax-
managed, enhanced-index strategy that extends to the
entire portfolio the quantitative methods introduced
last May.
Sincerely,
John R. Strangfeld, President
Prudential Small-Cap Quantum Fund, Inc.
2
<PAGE>
www.prudential.com (800) 225-1852
Investment Adviser's Report
Dear Shareholder,
Value-style investing in the small-cap market had an
excellent history through 1997. The quantitative models
initially used by Prudential Small-Cap Quantum Fund,
which were developed in that historical context, had a
value tilt. Although those strategies may still yield
superior performance over the long run, we have just
come through a period of extreme underperformance by
the value style of investing. Indeed, by far the best
returns in the S&P SmallCap 600 Index over our
reporting period came from stocks with no
price/earnings ratios because they had no positive
earnings to report. These included young technology and
biotechnology companies that investors favored because
of their perceived growth potential. Our comparative
performance also suffered because we didn't own certain
companies that received takeover offers, such as U.S.
Trust and Etec.
Our Fund has been classified as a value fund by Lipper
because the general cast of its holdings is value
style. We owned more growth stocks than a pure value
manager would have, but less than growth's share of the
overall market. Our stock selection in the growth universe was
good: both our "no-earnings" holdings and our high earnings-growth
holdings performed better than the averages of
comparable stocks. We were able to exploit these
growth-stock opportunities because of changes to the
investment process that the Fund's Board approved last
May.
The Fund's quantitative investment strategy involves
taking small positions in a large number of stocks,
trying to enhance the probabilities of superior
performance. Over this reporting period, we held some
excellent performers--stocks such as Advanced Digital
Information, QLogic, Clarify, and Network Solutions,
all of which quadrupled or more in price--offsetting
many stocks that had poorer performance. On average,
both our low price-to-earnings (value) stocks and our
rapid earnings-growth stocks performed well compared
with similar stocks in the S&P SmallCap 600 Index. Our
relative performance--beating the Lipper Small-Cap Value Average,
but underperforming the unmanaged S&P SmallCap 600
Index Fund--was largely
3
<PAGE>
Prudential Small-Cap Quantum Fund, Inc.
Investment Adviser's Report
explained by the fact that we owned more growth stocks
than a value fund, but more value stocks than the
overall market.
Looking ahead
We are making three substantial changes in our
investment strategy, with the approval of the Fund's
Board. First, we shall maintain a risk profile closer
to that of the S&P SmallCap 600 benchmark, departing
only modestly from its sector and industry weights. We
expect the portfolio to have a more evenly balanced
blend of growth and value stocks than it has had in the
past.
Portfolio construction will use proprietary
optimization techniques that attempt to limit
unintended deviations in various return-affecting
characteristics from the S&P SmallCap 600 universe of
companies. These characteristics include industry,
economic sector, company size, and relative value
(growth or value). By actively managing the Fund's
exposures to these
factors, we hope to increase the impact of our stock
selection on the Fund's performance.
Second, although we shall continue to use quantitative
models to help select stocks, the models we use will be
different. Instead of ratings supplied by Prudential
Securities' Small-Cap Quantitative Valuation (QV)
model, we shall rely on techniques we have used in
managing Prudential Tax-Managed Equity Fund. Different
quantitative factors will be emphasized, depending upon
a stock's growth characteristics. Among attractively
rated high-growth stocks, we shall prefer those with
positive earnings surprises and strong upward revisions
to Wall Street analysts' earnings estimates. Among
attractively rated but slower-growing stocks, we shall
prefer those that are inexpensive relative to their
peers in terms of price/earnings or price-to-book value
ratios.
4
<PAGE>
www.prudential.com (800) 225-1852
Third, we shall try to limit taxable distributions to
shareholders. One way we can do this is by allowing
stocks to appreciate, free from tax implications, for
as long as prudence allows. With the aid of state-of-
the-art market assessment techniques, we can further
increase tax efficiency by selling selected holdings
that have fallen in value. We will sometimes lock in a
loss by selling a stock, particularly if we can replace
it with another that has a similar profile (generally
in the same industry or with similar growth potential).
Through this kind of exchange, we can maintain or
improve the quality of our portfolio with new stocks while reaping
tax benefits from the sale of the old ones. The result
is an inventory of stored, or "harvested,"
losses that can be used, when needed, to offset
potential taxes from gains.
Prudential Small-Cap Quantum Fund, Inc. Management Team
5
<PAGE>
Prudential Small-Cap Quantum Fund, Inc.
Financial
Statements
<PAGE>
Prudential Small-Cap Quantum Fund, Inc.
Portfolio of Investments as of March 31, 2000
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C> <C>
------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS 96.9%
Common Stocks
-------------------------------------------------------------------------------------
Basic Industries 9.6%
4,600 Alliant Techsystems, Inc.(a) $ 270,825
32,200 AMCOL International Corp. 495,075
9,300 American Freightways Corp. 138,919
600 Applied Industrial Technologies, Inc. 9,600
6,100 Aviation Sales Co.(a) 38,506
2,300 BE Aerospace, Inc.(a) 13,513
25,300 Building Materials Holdings Corp. 229,281
1,800 Caraustar Industries, Inc. 25,425
5,900 Clarcor, Inc. 104,725
8,900 Commercial Metals Co. 245,862
2,600 Fuller (H.B.), Co. 103,838
8,700 Geon Co. 187,050
2,800 Gibraltar Steel Corp. 46,025
1,700 Hughes Supply, Inc. 26,350
18,800 Innovex, Inc. 183,887
34,100 JLG Industries, Inc. 311,162
5,300 Kaman Corp. 51,675
13,100 Landstar Systems, Inc.(a) 717,225
4,100 Libbey, Inc. 112,238
8,900 Lilly Industries, Inc.(a) 110,138
9,200 Mesa Air Group, Inc. 57,500
7,400 Midwest Express Holdings, Inc.(a) 189,625
1,500 Mobile Mini, Inc.(a) 29,250
10,200 Mueller Industries, Inc.(a) 309,825
15,800 Paxar Corp. 152,075
20,500 Pentair, Inc. 759,781
6,700 Pope & Talbot, Inc. 123,112
18,600 Precision Castparts Corp. 678,900
7,150 Reliance Steel & Aluminum Co. 159,981
24,600 Republic Group, Inc. 264,450
5,700 Rock-Tenn Co. 55,575
</TABLE>
See Notes to Financial Statements 7
<PAGE>
Prudential Small-Cap Quantum Fund, Inc.
Portfolio of Investments as of March 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
21,400 Schulman (A.), Inc. $ 283,550
6,100 Scott Technologies, Inc. 115,138
3,800 Seacor Smit, Inc.(a) 229,425
25,200 Skywest, Inc. 985,950
300 Steel Technologies, Inc. 2,381
1,600 Swift Transportation Co., Inc.(a) 32,800
29,200 Texas Industries, Inc. 908,850
5,400 Tuscarora, Inc. 67,500
2,600 Universal Forest Products, Inc. 32,175
28,500 USFreightways Corp. 1,066,969
3,700 Yellow Corp.(a) 68,219
--------------
9,994,350
-------------------------------------------------------------------------------------
Business Services 6.1%
6,200 ABM Industries, Inc. 145,700
10,700 BARRA, Inc.(a) 362,462
1,000 CDI Corp.(a) 19,000
4,200 Diamond Technology Partner, Inc.(a) 276,150
5,300 Insituform Technologies, Inc. 162,312
18,300 Labor Ready, Inc.(a) 180,712
10,900 Lightbridge, Inc.(a) 254,787
21,300 Marchfirst, Inc.(a)(b) 760,144
10,900 MAXIMUS, Inc.(a) 332,450
7,200 Thomas Nelson, Inc. 57,150
17,700 Pegasystems, Inc.(a) 212,400
5,000 Precision Response Corp. 121,250
18,200 Price Communications Corp.(a) 418,600
26,700 Profit Recovery Group International, Inc.(a) 493,950
12,400 Right Management Consultants, Inc.(a) 113,925
2,900 Scholastic Corp.(a) 156,419
22,500 Staffmark, Inc.(a) 178,594
5,400 Standard Register Co. 69,525
4,700 UniFirst Corp. 52,875
24,300 Valassis Communications, Inc.(a) 809,494
14,700 Wackenhut Corrections Corp.(a) 141,488
</TABLE>
8 See Notes to Financial Statements
<PAGE>
Prudential Small-Cap Quantum Fund, Inc.
Portfolio of Investments as of March 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
6,700 Wallace Computer Services, Inc. $ 79,144
10,800 John Wiley & Sons, Inc. 194,400
15,100 Zebra Technologies Corp.(a) 755,000
--------------
6,347,931
-------------------------------------------------------------------------------------
Capital Spending 2.9%
13,200 Applied Power, Inc. 376,200
1,700 Belden, Inc. 46,750
4,000 C&D Technologies, Inc. 236,000
9,400 Cable Design Technologies Corp. 319,012
8,700 Generale Cable Corp. 67,969
6,900 Graco, Inc. 200,100
1,600 Hanover Compressor Co. 91,000
2,200 LSI Industries, Inc. 42,763
23,200 Manitowoc Co., Inc. 627,850
3,500 New Horizons Worldwide, Inc.(a) 62,125
8,300 Ocular Sciences, Inc.(a) 130,595
600 Shaw Group, Inc. 21,150
19,400 SPS Technologies, Inc.(a) 591,700
3,800 Teleflex, Inc. 134,900
6,100 URS Corp. 80,062
5,400 Watsco, Inc. 56,363
--------------
3,084,539
-------------------------------------------------------------------------------------
Conglomerates 0.2%
26,300 Griffon Corp. 205,469
-------------------------------------------------------------------------------------
Consumer Cyclical 5.7%
30,500 Arvin Industries, Inc. 690,062
200 Bassett Furniture Industries, Inc. 2,800
9,400 Carlisle Companies, Inc. 376,000
42,400 D.R. Horton, Inc. 553,850
34,600 Intermet Corp. 315,725
30,300 Kaufman & Broad Home Corp. 649,556
6,500 La-Z-Boy, Inc. 99,938
35,400 Lennar Corp. 767,737
39,300 Lo Jack Corp.(a) 304,575
34,900 MascoTech, Inc. 410,075
</TABLE>
See Notes to Financial Statements 9
<PAGE>
Prudential Small-Cap Quantum Fund, Inc.
Portfolio of Investments as of March 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
34,700 Meritor Automotive, Inc. $ 548,694
3,600 Monaco Coach Corp. 68,400
200 Oneida Ltd. 3,875
6,200 Pulaski Furniture Corp. 135,237
1,400 Simpson Manufacturing, Inc. 55,300
33,550 Smith AO Corp. 603,900
4,400 Standard Motor Products, Inc. 65,450
3,700 Toro Co. 110,769
8,900 Wabash National Corp. 124,044
8,700 Wynns International, Inc. 120,169
--------------
6,006,156
-------------------------------------------------------------------------------------
Consumer Services 15.2%
4,600 Aaron Rents, Inc. 69,288
27,200 ADVO, Inc. 680,000
11,400 Ames Department Stores, Inc.(a) 280,012
3,800 Anchor Gaming 144,163
8,600 Applebee's International, Inc. 241,875
55,200 Arctic Cat, Inc. 565,800
11,400 Aztar Corp. 108,300
26,800 Brightpoint, Inc.(a) 328,300
8,000 Buffets, Inc.(a) 72,250
28,000 Cato Corp. 329,000
12,200 Cec Entertainment, Inc.(a) 330,925
1,000 Chicos Fas, Inc.(a) 16,953
33,860 CKE Restaurants, Inc. 215,857
21,500 Claire's Stores, Inc. 431,344
7,300 Department 56, Inc.(a) 108,131
7,800 Dress Barn, Inc.(a) 150,150
15,600 Ethan Allen Interiors, Inc. 390,000
10,000 Fleming Co., Inc. 150,625
6,600 Footstar, Inc.(a) 186,450
10,400 Fossil Inc.(a) 243,750
20,800 Genesco, Inc.(a) 273,000
900 Goody's Family Clothing, Inc.(a) 5,456
24,100 Group 1 Automotive, Inc. 280,162
</TABLE>
10 See Notes to Financial Statements
<PAGE>
Prudential Small-Cap Quantum Fund, Inc.
Portfolio of Investments as of March 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
500 Haverty Furniture Co., Inc. $ 5,313
900 Hot Topic, Inc.(a) 31,500
21,100 Insight Enterprises, Inc.(a) 768,831
2,000 Interface, Inc. Class 'A' Stock 8,500
39,500 Jack In The Box, Inc.(a) 841,844
2,700 Jo-Ann Stores, Inc.(a) 22,613
27,500 Kellwood Co. 482,969
13,400 Linens 'N Things, Inc. 458,950
55,800 Luby's Cafeterias, Inc. 526,612
12,200 Men's Wearhouse, Inc.(a) 361,425
14,600 Michaels Stores, Inc.(a) 594,950
17,700 Midway Games, Inc.(a) 234,525
12,000 Mohawk Industries, Inc.(a) 268,500
25,400 Musicland Stores Corp.(a) 161,925
9,300 Nash Finch Co. 75,563
9,400 O'Reilly Automotive, Inc.(a) 133,363
9,300 OshKosh B'Gosh, Inc. 167,400
3,000 Oxford Industries, Inc. 54,375
29,100 Pier 1 Imports, Inc 298,275
20,200 Polaris Industries, Inc. 608,525
19,700 Pomeroy Computer Resources, Inc. 361,987
21,300 Pre-Paid Legal Services, Inc.(a) 632,344
9,900 Prime Hospitality Corp.(a) 71,775
6,400 Quiksilver, Inc.(a) 112,400
13,000 Regis Corp. 192,563
5,000 Rent-A-Center, Inc.(a) 75,000
3,900 Rex Stores Corp.(a) 99,694
6,700 Ruby Tuesday, Inc. 117,250
6,100 Ryan's Family Steak Houses, Inc.(a) 58,331
9,500 ShopKo Stores, Inc. 168,625
8,900 Shuffle Master, Inc. 105,131
23,000 Sonic Automatic, Inc.(a) 217,062
500 Sonic Corp. 13,625
3,800 Stride Rite Corp. 30,638
400 Taco Cabana, Inc.(a) 2,375
13,500 Tech Data Corp.(a) 443,812
</TABLE>
See Notes to Financial Statements 11
<PAGE>
Prudential Small-Cap Quantum Fund, Inc.
Portfolio of Investments as of March 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
11,700 Timberland Co. (Class 'A' Stock) $ 596,700
1,600 Trans World Entertainment Corp.(a) 16,000
1,400 Tuesday Morning Corp.(a) 20,125
4,100 Wet Seal, Inc. (Class 'A' Stock)(a) 64,575
200 Wild Oats Markets, Inc.(a) 4,100
100 WMS Industries, Inc. 988
17,400 Zale Corp. 821,062
--------------
15,933,911
-------------------------------------------------------------------------------------
Consumer Staples 3.1%
2,700 Agribrands International, Inc. 106,144
22,700 Canandaigua Brands, Inc. (Class 'A' Stock) 1,157,700
22,900 Herbalife International, Inc. (Class 'A' Stock) 323,462
9,900 International Multifoods Corp. 132,412
3,200 J & J Snack Foods Corp. 63,600
4,300 Natrol, Inc.(a) 22,038
31,600 Schweitzer-Mauduit International, Inc. 408,825
36,200 Smithfields Foods, Inc.(b) 724,000
10,500 Tupperware Corp. 166,031
6,400 Universal Foods Corp. 136,800
7,000 USA Detergents, Inc. 16,188
--------------
3,257,200
-------------------------------------------------------------------------------------
Energy 3.0%
14,200 Atwood Oceanics, Inc.(a) 941,637
13,700 Cross Timbers Oil Co. 178,956
9,300 Helmerich & Payne, Inc. 288,300
10,600 Howell Corp. 72,213
32,000 Seitel, Inc.(a) 254,000
18,800 Tesoro Petroleum Corp.(a) 216,200
25,200 UGI Corp. 544,950
30,500 Vintage Petroleum, Inc. 613,813
--------------
3,110,069
-------------------------------------------------------------------------------------
Finance 11.7%
8,100 Affiliated Managers Group, Inc.(a) 384,750
43,500 Allied Capital Corp.(b) 758,531
63,100 Americredit Corp. 1,029,319
</TABLE>
12 See Notes to Financial Statements
<PAGE>
Prudential Small-Cap Quantum Fund, Inc.
Portfolio of Investments as of March 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
20,200 Amerus Life Holdings, Inc. ( Class 'A' Stock) $ 366,125
21,400 Astoria Financial Corp. 607,225
1,160 Bank United Corp. (Class 'A' Stock) 36,613
15,400 Community First Bankshares, Inc. 246,400
53,200 Cullen/Frost Bankers, Inc. 1,406,475
306 Delphi Financial Group, Inc.(a) 9,295
26,500 Downey Financial Corp. 563,125
12,600 Eaton Vance Corp. 541,012
56,700 Enhance Financial Services Group, Inc. 800,887
28,183 Fidelity National Financial, Inc. 389,278
50,100 First American Financial Corp. 710,794
43,300 Fremont General Corp. 257,094
7,200 GBC Bancorp 166,950
53,007 Hudson United Bancorp 1,149,589
1,700 Metris Companies, Inc. 66,087
23,200 Radian Group, Inc. 1,104,900
10,000 Raymond James Financial, Inc. 207,500
64,700 Rollins Truck Leasing Corp. 545,906
8,200 Silicon Valley Bancshares 589,375
1,000 WFS Financial, Inc.(a) 19,438
48,500 World Acceptance Corp. 245,531
1,800 XTRA Corp.(a) 68,400
--------------
12,270,599
-------------------------------------------------------------------------------------
Health Care 11.5%
12,200 Alpharma, Inc. 448,350
15,800 Barr Laboratories, Inc.(a) 663,600
29,966 Bindley Western Industries, Inc. 406,414
2,000 Chattem, Inc.(a) 28,250
9,800 Cooper Cos., Inc.(a) 315,437
24,700 Covance, Inc.(a) 265,525
9,500 Coventry Health Care, Inc.(a) 80,750
4,200 Diagnostic Products Corp. 102,638
7,400 Fisher Scientific International, Inc. 329,300
3,800 Hanger Orthopedic Group, Inc.(a) 20,188
1,800 Health Management Systems, Inc.(a) 8,663
14,400 ICN Pharmaceuticals, Inc. 392,400
</TABLE>
See Notes to Financial Statements 13
<PAGE>
Prudential Small-Cap Quantum Fund, Inc.
Portfolio of Investments as of March 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
3,800 ICU Medical, Inc.(a) $ 68,400
18,400 IDEXX Laboratories, Inc.(a) 428,950
17,600 Invacare Corp. 482,900
17,700 Jones Pharma, Inc. 537,637
5,400 Lincare Holdings, Inc.(a) 153,225
11,700 Magellan Health Services, Inc.(a) 56,306
19,000 MedQuist, Inc.(a) 516,562
17,600 Mentor Corp. 475,200
9,600 Meridian Diagnostics, Inc. 82,800
6,800 Minntech Corp. 51,000
15,300 Noven Pharmaceuticals, Inc.(a) 167,344
43,400 Orthodontic Centers of America, Inc.(a) 813,750
22,300 Owens & Minor, Inc. 236,938
8,000 Parexel International Corp. 75,500
5,300 Pediatrix Medical Group, Inc.(a) 38,425
9,400 Pharmaceutical Product Development, Inc.(a) 159,213
2,900 Polymedica Corp.(a) 170,375
37,100 Prime Medical Services, Inc.(a) 329,262
15,000 Priority Healthcare Corp.(a) 753,750
15,800 RehabCare Corp. 390,062
3,600 ResMed, Inc.(a) 256,950
21,500 Rexall Sundown, Inc.(a) 303,687
15,000 Sola International, Inc.(a) 91,875
8,200 Syncor International Corp.(a) 270,600
26,000 Theragenics Corp.(a) 347,750
14,300 Twinlab Corp. 101,888
19,100 Universal Health Services, Inc. (Class 'B' Stock)(a) 935,900
38,200 US Oncology, Inc.(a) 171,900
8,300 Vital Signs, Inc. 190,381
6,100 Wesley Jessen VisionCare, Inc.(a) 219,219
12,000 X-Rite, Inc. 121,500
--------------
12,060,764
-------------------------------------------------------------------------------------
Technology 26.3%
1,500 Act Manufacturing, Inc. 83,906
15,900 Actel Corp.(a) 567,431
17,200 Advanced Digital Information Corp. 589,100
</TABLE>
14 See Notes to Financial Statements
<PAGE>
Prudential Small-Cap Quantum Fund, Inc.
Portfolio of Investments as of March 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
8,800 Advanced Energy Industries, Inc.(a) $ 448,800
9,600 Alpha Industries, Inc.(a) 912,000
22,800 American Management Systems, Inc.(a) 998,925
11,250 ANADIGICS, Inc.(a) 742,500
2,600 Anixter International, Inc.(a) 72,475
14,000 ANSYS, Inc.(a) 150,500
14,950 Apex, Inc.(a) 555,019
14,400 Applied Science & Technology, Inc.(a) 435,600
22,800 Artesyn Technologies, Inc.(a) 431,775
1,100 ATMI, Inc.(a) 52,525
7,300 Brady (W.H.) Co. 227,669
4,600 CACI, Inc.(a) 137,713
4,500 Centigram Communications Corp.(a) 85,500
11,200 Citrix Systems, Inc.(a) 742,000
3,000 Comverse Technology, Inc.(a) 567,000
7,500 Consolidated Graphics, Inc.(a) 96,094
4,600 Credence Systems Corp.(a) 575,575
3,400 Davox Corp.(a) 90,950
11,900 DBT Online, Inc.(a) 220,894
1,100 Electro Scientific Industries, Inc.(a) 63,800
8,800 Electroglas, Inc.(a) 301,400
15,000 Esterline Technologies Corp.(a) 195,000
12,200 FileNET Corp.(a) 362,950
14,400 GenRad, Inc. 178,200
5,800 Gerber Scientific, Inc. 112,013
8,400 Herman Miller, Inc. 235,200
4,200 In Focus Systems, Inc.(a) 150,412
15,700 Indus International, Inc.(a) 131,488
83,550 Informix Corp.(a) 1,415,128
7,700 Integrated Device Technology, Inc.(a) 305,112
39,200 International Rectifier Corp.(a) 1,494,500
6,100 Kronos, Inc.(a) 180,712
9,400 Kulicke & Soffa Industries, Inc. 602,187
</TABLE>
See Notes to Financial Statements 15
<PAGE>
Prudential Small-Cap Quantum Fund, Inc.
Portfolio of Investments as of March 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
38,100 Mail-Well, Inc. $ 330,994
27,000 Mapics, Inc.(a) 430,312
8,500 Micros Systems, Inc.(a) 534,969
4,800 Network Solutions, Inc.(a) 737,775
11,310 Nortel Networks Corp. 1,425,060
4,500 Ontrack Data International, Inc.(a) 46,406
13,300 Park Electrochemical Corp. 325,850
209 Perkinelmer, Inc. 13,899
33,100 Pioneer-Standard Electronics, Inc. 521,325
12,400 Policy Management Systems Corp.(a) 148,800
9,800 Powerwave Technologies, Inc.(a) 1,225,000
6,800 Pri Automation, Inc. 415,650
1,700 Printronix, Inc.(a) 33,788
9,900 QLogic Corp.(a) 1,341,450
2,600 Radisys Corp.(a) 156,325
14,900 Remedy Corp. 627,662
11,900 Robotic Vision Systems, Inc. 190,400
10,700 RWD Technologies, Inc.(a) 89,613
1,900 SBS Technologies, Inc.(a) 54,625
21,500 Technitrol, Inc. 1,252,375
7,700 Three-Five Systems, Inc.(a) 462,000
8,600 Trimble Navigation Ltd.(a) 221,450
28,200 United Stationers, Inc.(a) 1,006,387
31,900 Wolverine Tube, Inc.(a) 408,719
17,000 Xircom, Inc.(a) 629,000
7,400 Zoran Corp.(a) 416,712
--------------
27,558,599
-------------------------------------------------------------------------------------
Utilities 1.6%
40,900 Energen Corp. 651,844
7,600 Hawaiian Electric Industries, Inc. 241,775
27,100 Madison Gas & Electric Co. 484,412
14,800 Minnesota Power & Light Co. 246,050
200 Northwestern Corp. 4,125
--------------
1,628,206
--------------
Total long-term investments (cost $101,122,949) 101,457,793
--------------
</TABLE>
16 See Notes to Financial Statements
<PAGE>
Prudential Small-Cap Quantum Fund, Inc.
Portfolio of Investments as of March 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C> <C>
------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 3.1%
Repurchase Agreement
$ 3,211 Joint Repurchase Agreement Account,
6.15%, 4/3/00
(cost $3,211,000; Note 5) $ 3,211,000
--------------
Total Investments 100.0%
(cost $104,333,949; Note 4) 104,668,793
Other assets in excess of liabilities 22,057
--------------
Net Assets 100% $ 104,690,850
--------------
--------------
</TABLE>
--------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Security segregated as collateral for futures contracts.
See Notes to Financial Statements 17
<PAGE>
Prudential Small-Cap Quantum Fund, Inc.
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
March 31, 2000
<S> <C> <C>
---------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $104,333,949) $104,668,793
Cash 21,007
Receivable for investments sold 1,122,517
Deferred organization expenses and other assets 83,325
Due from broker - variation margin 52,750
Dividends and interest receivable 49,460
Receivable for Fund shares sold 49,046
--------------
Total assets 106,046,898
--------------
LIABILITIES
Payable for Fund shares reacquired 843,085
Accrued expenses 382,819
Distribution fees payable 74,160
Management fee payable 55,984
--------------
Total liabilities 1,356,048
--------------
NET ASSETS $104,690,850
--------------
--------------
Net assets were comprised of:
Common stock, at par $ 11,432
Paid-in capital in excess of par 149,365,106
--------------
149,376,538
Accumulated net realized loss on investments (44,730,781)
Net unrealized appreciation on investments 45,093
--------------
Net assets, March 31, 2000 $104,690,850
--------------
--------------
</TABLE>
18 See Notes to Financial Statements
<PAGE>
Prudential Small-Cap Quantum Fund, Inc.
Statement of Assets and Liabilities Cont'd.
<TABLE>
<CAPTION>
March 31, 2000
<S> <C> <C>
---------------------------------------------------------------------------------------
Class A:
Net asset value and redemption price per share
($26,740,873 / 2,883,068 shares of common stock issued and
outstanding) $9.28
Sales charge (5% of offering price) .49
--------------
Maximum offering price to public $9.77
--------------
--------------
Class B:
Net asset value, offering price and redemption price per
share ($69,022,716 / 7,571,512 shares of common stock
issued and outstanding) $9.12
--------------
--------------
Class C:
Net asset value and redemption price per share
($8,055,759 / 883,670 shares of common stock issued and
outstanding) $9.12
Sales charge (1% of offering price) .09
--------------
Offering price to public $9.21
--------------
--------------
Class Z:
Net asset value, offering price and redemption price per
share
($871,502 / 93,442 shares of common stock issued and
outstanding) $9.33
--------------
--------------
</TABLE>
See Notes to Financial Statements 19
<PAGE>
Prudential Small-Cap Quantum Fund, Inc.
Statement of Operations
<TABLE>
<CAPTION>
Year
Ended
March 31, 2000
<S> <C> <C>
---------------------------------------------------------------------------------------
NET INVESTMENT LOSS
Income
Dividends $ 1,571,148
Interest 369,784
--------------
Total income 1,940,932
--------------
Expenses
Management fee 847,276
Distribution fee--Class A 95,117
Distribution fee--Class B 894,738
Distribution fee--Class C 118,446
Transfer agent's fees and expenses 282,000
Reports to shareholders 180,000
Custodian's fees and expenses 115,000
Registration fees 85,000
Legal fees and expenses 60,000
Amortization of deferred organization expenses 31,333
Audit fee and expenses 25,000
Directors' fees 16,000
Miscellaneous 47,594
--------------
Total expenses 2,797,504
--------------
Net investment loss (856,572)
--------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on:
Investment transactions (21,273,280)
Financial futures transactions 2,791,962
--------------
(18,481,318)
--------------
Net change in unrealized appreciation/depreciation on:
Investments 50,640,600
Financial futures transactions (363,738)
--------------
50,276,862
--------------
Net gain on investments 31,795,544
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 30,938,972
--------------
--------------
</TABLE>
20 See Notes to Financial Statements
<PAGE>
Prudential Small-Cap Quantum Fund, Inc.
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended March 31,
------------------------------------
2000 1999
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment loss $ (856,572 ) $ (928,383)
Net realized loss on investments (18,481,318 ) (26,249,463)
Net change in unrealized
appreciation/depreciation on
investments 50,276,862 (77,150,441)
-------------- ------------------
Net increase (decrease) in net assets
resulting from operations 30,938,972 (104,328,287)
-------------- ------------------
Distributions from net realized gains (Note
1)
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 20,450,947 70,366,132
Net asset value of shares issued to
shareholders in reinvestment of
distributions -- 3,790,396
Cost of shares reacquired (114,601,474 ) (150,960,828)
-------------- ------------------
Net decrease in net assets from Fund
share transactions (94,150,527 ) (76,804,300)
-------------- ------------------
Total decrease (63,211,555 ) (185,056,842)
NET ASSETS
Beginning of year 167,902,405 352,959,247
-------------- ------------------
End of year $ 104,690,850 $ 167,902,405
-------------- ------------------
-------------- ------------------
</TABLE>
See Notes to Financial Statements 21
<PAGE>
Prudential Small-Cap Quantum Fund, Inc.
Notes to Financial Statements
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.
22
<PAGE>
Prudential Small-Cap Quantum Fund, Inc.
Notes to Financial Statements Cont'd.
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
23
<PAGE>
Prudential Small-Cap Quantum Fund, Inc.
Notes to Financial Statements Cont'd.
taxable net income and net capital gains, if any, to its shareholders.
Therefore, no federal income tax provision is required.
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.
Reclassification of Capital Accounts: The Fund accounts for and reports
distributions to shareholders in accordance with '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 $856,572 and decrease paid in capital in excess of par by $856,572 for
certain non-deductible expenses and net operating loss for the year ended March
31, 2000. Net investment loss, net realized gains and net assets were not
affected by this change.
Note 2. Agreements
The Fund has a management agreement with 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 cost of 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 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 compensated 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
24
<PAGE>
Prudential Small-Cap Quantum Fund, Inc.
Notes to Financial Statements Cont'd.
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
year ended March 31, 2000.
PIMS has advised the Fund that it has received approximately $20,700 and
$3,300 in front-end sales charges resulting from sales of Class A shares and
Class C shares, respectively, during the year ended March 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 March 31, 2000, they
received approximately $876,600 and $4,900 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 ('Prudential').
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 March 31, 2000.
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 year ended March 31, 2000, the
Fund incurred fees of approximately $251,500 for the services of PMFS. As of
March 31, 2000, approximately $17,800 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 March 31, 2000, PSI earned approximately $10,600 in
brokerage commissions from portfolio transactions executed on behalf of the
Fund.
25
<PAGE>
Prudential Small-Cap Quantum Fund, Inc.
Notes to Financial Statements Cont'd.
Note 4. Portfolio Securities
Purchases and sales of investment securities, other than short-term investments,
for the year ended March 31, 2000 were $87,808,557 and $174,397,989,
respectively.
The federal income tax basis of the Fund's investments at March 31, 2000
was $104,503,800 and, accordingly, net unrealized appreciation of investments
for federal income tax purposes was $164,993 (gross unrealized
appreciation--$18,516,995; gross unrealized depreciation--$18,352,002).
For federal income tax purposes, the Fund has a capital loss carryforward
as of March 31, 2000, of approximately, $44,056,981 of which $3,890,973 expires
in 2007 and $40,166,008 expires in 2008. Accordingly, no capital gains
distributions are expected to be paid to shareholders until future net gains
have been realized in excess of such carryforward.
The Fund will elect, for United States Federal income tax purposes, to
treat net long-term capital losses of $793,699 incurred in the five months ended
March 31, 2000 as having been incurred in the following fiscal year.
During the year ended March 31, 2000, the Fund entered into financial
futures contracts. Details of open contracts at March 31, 2000 are as follows:
<TABLE>
<CAPTION>
Value at Value at
Number of Expiration Trade March 31, Unrealized
Contracts Type Date Date 2000 (Depreciation)
--------- --------------- ------------ ---------- ---------- ---------------
<C> <S> <C> <C> <C> <C>
Long Positions:
7 Russell 2000 June 2000 $2,111,971 $1,908,725 $(203,246)
3 Russell 2000 June 2000 904,530 818,025 (86,505)
---------------
$(289,751)
---------------
---------------
</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 March 31, 2000, the Fund
has a .5% undivided interest in the repurchase agreements in the joint account.
The undivided interest for the Fund represents $3,211,000 principal amount. As
of such date, the
26
<PAGE>
Prudential Small-Cap Quantum Fund, Inc.
Notes to Financial Statements Cont'd.
repurchase agreements in the joint account and the value of the collateral
therefore were as follows:
Bear Stearns & Co. Inc., 6.10%, in the principal amount of $120,000,000,
repurchase price $120,061,000, due 4/3/00. The value of the collateral including
accrued interest was $123,642,827.
Credit Suisse First Boston Corp., 6.10%, in the principal amount of
$130,000,000, repurchase price $130,066,083, due 4/3/00. The value of the
collateral including accrued interest was $134,450,258.
Greenwich Capital Markets, Inc., 6.15%, in the principal amount of
$100,000,000, repurchase price $100,051,250, due 4/3/00. The value of the
collateral including accrued interest was $102,005,200.
Goldman, Sachs & Co., 6.09%, in the principal amount of $100,000,000,
repurchase price $100,050,750, due 4/3/00. The value of the collateral including
accrued interest was $102,000,425.
Merrill Lynch, Pierce, Fenner & Smith, Inc., 6.25%, in the principal
amount of $207,289,000, repurchase price $207,396,963, due 4/3/00. The value of
the collateral including accrued interest was $211,435,308.
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 qualified to purchase Class A
shares at net asset value. Class Z shares are not
27
<PAGE>
Prudential Small-Cap Quantum Fund, Inc.
Notes to Financial Statements Cont'd.
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>
Year ended March 31, 2000:
Shares sold 1,766,896 $ 15,129,661
Shares reacquired (5,195,169) (43,996,626)
----------- -------------
Net decrease in shares outstanding before conversion (3,428,273) (28,866,965)
Shares issued upon conversion from Class B 29,878 257,051
----------- -------------
Net decrease in shares outstanding (3,398,395) $ (28,609,914)
----------- -------------
----------- -------------
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
----------------------------------------------------------
<S> <C> <C>
Year ended March 31, 2000:
Shares sold 454,770 $ 3,782,849
Shares reacquired (6,708,108) (55,819,897)
----------- -------------
Net decrease in shares outstanding before conversion (6,253,338) (52,037,048)
Shares issued upon conversion into Class A (30,287) (257,051)
----------- -------------
Net decrease in shares outstanding (6,283,625) $ (52,294,099)
----------- -------------
----------- -------------
</TABLE>
28
<PAGE>
Prudential Small-Cap Quantum Fund, Inc.
Notes to Financial Statements Cont'd.
<TABLE>
<CAPTION>
Class B Shares Amount
---------------------------------------------------------- ----------- -------------
Year ended March 31, 1999:
<S> <C> <C>
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
----------------------------------------------------------
<S> <C> <C>
Year ended March 31, 2000:
Shares sold 64,274 $ 542,300
Shares reacquired (1,209,740) (9,983,869)
----------- -------------
Net decrease in shares outstanding (1,145,466) $ (9,441,569)
----------- -------------
----------- -------------
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
----------------------------------------------------------
<S> <C> <C>
Year ended March 31, 2000:
Shares sold 118,464 $ 996,137
Shares reacquired (577,137) (4,801,082)
----------- -------------
Net decrease in shares outstanding (458,673) $ (3,804,945)
----------- -------------
----------- -------------
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>
29
<PAGE>
Prudential Small-Cap Quantum Fund, Inc.
Financial Highlights
<TABLE>
<CAPTION>
Class A
---------------------------------------------------
Year Ended March 31, November 10, 1997(a)
-------------------------- through
2000(d) 1999 March 31, 1998
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period $ 7.44 $ 10.95 $ 10.00
-------------- ------- ----------
Income from investment operations
Net investment income (loss) (0.01) .03 .02
Net realized and unrealized gain
(loss) on investment
transactions 1.85 (3.41) .94
-------------- ------- ----------
Total from investment
operations 1.84 (3.38) .96
-------------- ------- ----------
Less distributions
Distributions in excess of net
investment income -- -- (.01)
Distributions from net realized
gains -- (.13) --
-------------- ------- ----------
Net asset value, end of period $ 9.28 $ 7.44 $ 10.95
-------------- ------- ----------
-------------- ------- ----------
TOTAL RETURN(c): 24.73% (31.00)% 9.60%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 26,741 $46,736 $115,621
Average net assets (000) $ 38,047 $82,332 $106,453
Ratios to average net assets:
Expenses, including
distribution fees 1.45% 1.26% 1.22%(b)
Expenses, excluding
distribution fees 1.20% 1.01% 0.97%(b)
Net investment income (loss) (0.07)% .16% .47%(b)
Portfolio turnover rate 66% 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 on weighted average shares outstanding during the year.
30 See Notes to Financial Statements
<PAGE>
Prudential Small-Cap Quantum Fund, Inc.
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class B
----------------------------------------------------
Year Ended March 31, November 10, 1997(a)
--------------------------- through
2000(d) 1999 March 31, 1998
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period $ 7.37 $ 10.93 $ 10.00
-------------- -------- ----------
Income from investment operations
Net investment loss (0.07) (.06) (.01)
Net realized and unrealized gain
(loss) on investment
transactions 1.82 (3.37) .94
-------------- -------- ----------
Total from investment
operations 1.75 (3.43) .93
-------------- -------- ----------
Less distributions
Distributions from net realized
gains -- (.13) --
-------------- -------- ----------
Net asset value, end of period $ 9.12 $ 7.37 $ 10.93
-------------- -------- ----------
-------------- -------- ----------
TOTAL RETURN(c): 23.91% (31.61)% 9.31%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 69,023 $102,094 $196,671
Average net assets (000) $ 89,474 $158,085 $170,484
Ratios to average net assets:
Expenses, including
distribution fees 2.20% 2.01% 1.97%(b)
Expenses, excluding
distribution fees 1.20% 1.01% 0.97%(b)
Net investment income (loss) (0.82)% (.58)% (.29)%(b)
Portfolio turnover rate 66% 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 on weighted average shares outstanding during the year.
See Notes to Financial Statements 31
<PAGE>
Prudential Small-Cap Quantum Fund, Inc.
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class C
---------------------------------------------------
Year Ended March 31, November 10, 1997(a)
-------------------------- through
2000(d) 1999 March 31, 1998
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period $ 7.37 $ 10.93 $ 10.00
-------------- ------- --------
Income from investment operations
Net investment loss (0.07) (.08) (.01)
Net realized and unrealized gain
(loss) on investment
transactions 1.82 (3.35) .94
-------------- ------- --------
Total from investment
operations 1.75 (3.43) .93
-------------- ------- --------
Less distributions
Distributions from net realized
gains -- (.13) --
-------------- ------- --------
Net asset value, end of period $ 9.12 $ 7.37 $ 10.93
-------------- ------- --------
-------------- ------- --------
TOTAL RETURN(c): 23.91% (31.61)% 9.31%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 8,056 $14,951 $ 36,628
Average net assets (000) $ 11,845 $27,182 $ 34,000
Ratios to average net assets:
Expenses, including
distribution fees 2.20% 2.01% 1.97%(b)
Expenses, excluding
distribution fees 1.20% 1.01% 0.97%(b)
Net investment income (loss) (0.82)% (.59)% (.29)%(b)
Portfolio turnover rate 66% 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 on weighted average shares outstanding during the year.
32 See Notes to Financial Statements
<PAGE>
Prudential Small-Cap Quantum Fund, Inc.
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class Z
---------------------------------------------------
Year Ended March 31, November 10, 1997(a)
-------------------------- through
2000(d) 1999 March 31, 1998
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period $ 7.46 $10.96 $10.00
------- ------- -------
Income from investment operations
Net investment income (loss) (0.02) .05 .02
Net realized and unrealized gain
(loss) on investment transactions 1.89 (3.42 ) .95
------- ------- -------
Total from investment
operations 1.87 (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 $ 9.33 $ 7.46 $10.96
------- ------- -------
------- ------- -------
TOTAL RETURN(c): 25.07% (30.88 )% 9.74%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 872 $4,121 $4,039
Average net assets (000) $1,847 $5,315 $2,709
Ratios to average net assets:
Expenses, including
distribution fees 1.20% 1.01 % 0.97%(b)
Expenses, excluding
distribution fees 1.20% 1.01 % 0.97%(b)
Net investment income (loss) 0.22% .43 % .51%(b)
Portfolio turnover rate 66% 106 % 39%
</TABLE>
------------------------------
(a) Commencement of investment operations.
(b) Annualized.
(c) 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 on weighted average shares outstanding during the year.
See Notes to Financial Statements 33
<PAGE>
Prudential Small-Cap Quantum Fund, Inc.
Report of Independent Accountants
To the Board of Directors and Shareholders of
Prudential Small-Cap Quantum 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 Small-Cap Quantum Fund,
Inc. (the 'Fund,') at March 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 two years in the
period then ended and for the period November 10, 1997 (commencement of
investment operations) through March 31, 1998, 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 March 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
May 23, 2000
34 See Notes to Financial Statements
<PAGE>
<PAGE>
Prudential Small-Cap Quantum Fund, Inc.
Getting the Most From Your Prudential Mutual Fund
When you invest through Prudential Mutual Funds, you
receive financial advice from a Prudential Securities
Financial Advisor or Pruco Securities registered
representative. Your advisor or representative can
provide you with the following services:
There's No Reward Without Risk; but Is This Risk Worth
It?
Your financial advisor or registered representative can
help you match the reward you seek with the risk you
can tolerate. Risk can be difficult to gauge--some_times
even the simplest investments bear surprising risks.
The educated investor knows that markets seldom move in
just one direction. There are times when a market
sector or asset class will lose value or provide little
in the way of total return. Managing your own
expectations is easier with help from someone who
understands the markets and who knows you!
Keeping Up With the Joneses
A financial advisor or registered representative can
help you wade through the numerous available mutual
funds to find the ones that fit your individual
investment profile and risk tolerance. While the
newspapers and popular magazines are full of advice
about investing, they are aimed at generic groups of
people or representative individuals--not at you
personally. Your financial advisor or registered
representative will review your investment objectives
with you. This means you can make financial decisions
based on the assets and liabilities in your current
portfolio and your risk tolerance--not just based on the
current investment fad.
Buy Low, Sell High
Buying at the top of a market cycle and selling at the
bottom are among the most common investor mistakes. But
sometimes it's difficult to hold on to an investment
when it's losing value every month. Your financial
advisor or registered representative can answer
questions when you're confused or worried about your
investment, and should remind you that you're investing
for the long haul.
<PAGE>
Prudential Small-Cap Quantum Fund, Inc.
Prudential Mutual Fund Family
Prudential offers a broad range of mutual funds
designed to meet your individual needs. For information
about these funds, contact your financial adviser or
call us at (800) 225-1852. Read the prospectus
carefully before you invest or send money.
STOCK FUNDS
Prudential Emerging Growth Fund, Inc.
Prudential Equity Fund, Inc.
Prudential Equity Income Fund
The Prudential Investment Portfolios, Inc.
Prudential Jennison Growth Fund
Prudential Jennison Growth & Income Fund
Prudential Real Estate Securities Fund
Prudential Sector Funds, Inc.
Prudential Financial Services Fund
Prudential Health Sciences Fund
Prudential Technology Fund
Prudential Utility Fund
Prudential Small-Cap Quantum Fund, Inc.
Prudential Small Company Value Fund, Inc.
Prudential Stock Index Fund
Prudential Tax-Managed Funds
Prudential Tax-Managed Equity Fund
Prudential 20/20 Focus Fund
Nicholas-Applegate Fund, Inc.
Nicholas-Applegate Growth Equity Fund
Target Funds
Large Capitalization Growth Fund
Large Capitalization Value Fund
Small Capitalization Growth Fund
Small Capitalization Value Fund
Asset Allocation/Balanced Funds
Prudential Balanced Fund
Prudential Diversified Funds
Conservative Growth Fund
Moderate Growth Fund
High Growth Fund
The Prudential Investment Portfolios, Inc.
Prudential Active Balanced Fund
GLOBAL FUNDS
Global Stock Funds
Prudential Developing Markets Fund
Prudential Developing Markets Equity Fund
Prudential Latin America Equity Fund
Prudential Europe Growth Fund, Inc.
Prudential Global Genesis Fund, Inc.
Prudential Natural Resources Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Prudential World Fund, Inc.
Prudential Global Growth Fund
Prudential International Value Fund
_Prudential Jennison International Growth Fund
Global Utility Fund, Inc.
Target Funds
International Equity Fund
Global Bond Funds
Prudential Global Total Return Fund, Inc.
Prudential International Bond Fund, Inc.
<PAGE>
www.prudential.com (800) 225-1852
BOND FUNDS
Taxable Bond Funds
Prudential Diversified Bond Fund, Inc.
Prudential Government Income Fund, Inc.
Prudential Government Securities Trust
Short-Intermediate Term Series
Prudential High Yield Fund, Inc.
Prudential High Yield Total Return Fund, Inc.
Prudential Structured Maturity Fund, Inc.
Income Portfolio
Target Funds
Total Return Bond Fund
Tax-Exempt Bond Funds
Prudential California Municipal Fund
California Series
California Income Series
Prudential Municipal Bond Fund
High Income Series
Insured Series
Prudential Municipal Series Fund
Florida Series
Massachusetts Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
Prudential National Municipals Fund, Inc.
MONEY MARKET FUNDS
Taxable Money Market Funds
Cash Accumulation Trust
Liquid Assets Fund
National Money Market Fund
Prudential Government Securities Trust
Money Market Series
U.S. Treasury Money Market Series
Prudential Special Money Market Fund, Inc.
Money Market Series
Prudential MoneyMart Assets, Inc.
Tax-Free Money Market Funds
Prudential Tax-Free Money Fund, Inc.
Prudential California Municipal Fund
California Money Market Series
Prudential Municipal Series Fund
Connecticut Money Market Series
Massachusetts Money Market Series
New Jersey Money Market Series
New York Money Market Series
Command Funds
Command Money Fund
Command Government Fund
Command Tax-Free Fund
Institutional Money Market Funds
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
<PAGE>
Prudential Small-Cap Quantum Fund, Inc.
Getting the Most From Your Prudential Mutual Fund
Some mutual fund shareholders won't ever read this--they
don't read annual and semiannual reports. It's quite
understandable. These annual and semiannual reports are
prepared to comply with federal regulations, and are
often written in language that is difficult to
understand. So when most people run into those
particularly daunting sections of these reports, they
don't read them.
We think that's a mistake
At Prudential Mutual Funds, we've made some changes to
our report to make it easier to understand and more
pleasant to read. We hope you'll find it profitable to
spend a few minutes familiarizing yourself with your
investment. Here's what you'll find in the report:
Performance at a Glance
Since an investment's performance is often a
shareholder's primary concern, we present performance
information in two different formats. You'll find it
first on the "Performance at a Glance" page where we
compare the Fund and the comparable average calculated
by Lipper, Inc., a nationally recognized mutual fund
rating agency. We report both the cumulative total
returns and the average annual total returns. The
cumulative total return is the total amount of income
and appreciation the Fund has achieved in various time
periods. The average annual total return is an
annualized representation of the Fund's performance. It
gives you an idea of how much the Fund has earned in an
average year for a given time period. Under the
per_formance box, you'll see legends that explain the
performance information, whether fees and sales charges
have been included in returns, and the inception dates
for the Fund's share classes.
See the performance comparison charts at the back of
the report for more performance information. Please
keep in mind that past performance is not indicative of
future results.
<PAGE>
www.prudential.com (800) 225-1852
Performance review
The portfolio manager, who invests your money for you,
reports on successful--and not-so-successful--strategies in this
section of your report. Look for recent purchases and
sales here, as well as information about the sectors
the portfolio manager favors, and any changes that are
on the drawing board.
Portfolio of Investments
This is where the report begins to appear technical,
but it's really just a
listing of each security held at the end of the
reporting period, along with valuations and other
information. Please note that sometimes we discuss a
security in the Performance Review that doesn't appear
in this listing because it was sold before the close of
the reporting period.
Statement of Assets and Liabilities
The balance sheet shows the assets (the value of the
Fund's holdings), liabilities (how much the Fund owes), and net assets
(the Fund's equity, or holdings after the Fund pays its debts) as
of the end of the reporting period. It also shows how
we calculate the net asset value per share for each
class of shares. The net asset value is reduced by
payment of your dividend, capital gain, or other distribution, but
remem_ber that the money or new shares are being paid
or issued to you. The net asset value fluctuates daily,
along with the value of every security in the
portfolio.
Statement of Operations
This is the income statement, which details income
(mostly interest and dividends earned) and expenses (including what you pay
us to manage your money). You'll also see capital gains
here--both realized and unrealized.
<PAGE>
Prudential Small-Cap Quantum Fund, Inc.
Getting the Most From Your Prudential Mutual Fund
Statement of Changes in Net Assets
This schedule shows how income and expenses translate
into changes in net assets. The Fund is required to pay out the bulk
of its income to shareholders every year, and this
statement shows you how we do it (through
dividends and distributions) and how that affects the
net assets. This statement also shows how money from
investors flowed into and out of the Fund.
Notes to Financial Statements
This is the kind of technical material that can
intimidate readers, but it does contain useful
information. The Notes provide a brief history and
explanation of your Fund's objectives. In addition,
they outline how Prudential Mutual Funds prices
securities. The Notes also explain who manages and
distributes the Fund's shares and, more importantly,
how much they are paid for doing so. Finally, the Notes
explain how many shares are outstanding and the number
issued and redeemed over the period.
Financial Highlights
This information contains many elements from prior
pages, but on a per-share basis. It is designed to help you understand
how the Fund performed, and to compare this year's performance and
expenses to those of prior years.
Independent Auditor's Report
Once a year, an outside auditor looks over our books
and certifies that the information is fairly presented
and complies with generally accepted accounting
principles.
Tax Information
This is information that we report annually about how
much of your total return is taxable. Should you have
any questions, you may want to consult a tax adviser.
<PAGE>
www.prudential.com (800) 225-1852
Performance Comparison
These charts are included in the annual report and are
required by the Securities Exchange Commission.
Performance is presented here as a hypothetical $10,000
investment in the Fund since its inception or for 10
years (whichever is shorter). To help you put that
return in context, we are required to include the performance of an
unmanaged, broad-based securities index as well. The
index does not reflect the cost of buying the
securities it contains or the cost of managing a mutual
fund. Of course, the index holdings do not mirror those
of the Fund--the index is a broad-based reference point
commonly used by investors to meas_ure how well they
are doing. A definition of the selected index is also
provided. Investors cannot invest directly in an index.
<PAGE>
Prudential Small-Cap Quantum Fund, Inc.
Class A Growth of a $10,000 Investment
(GRAPH)
Average Annual Total Returns as of 3/31/00
One Year Five Years Ten Years Since Inception
With Sales Charge 18.49% N/A N/A -4.49%
Without Sales Charge 24.73% N/A N/A -2.42%
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 Prudential Small-Cap
Quantum Fund, Inc. (Class A shares) with a similar
investment in the Standard & Poor's SmallCap 600 Stock
Price Index (S&P SmallCap 600 Index) by portraying the
initial account values at the commencement of
operations of Class A shares, and at the end of the
current fiscal year (March 31), as measured on a
quarterly basis, beginning in November 1997 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 S&P SmallCap 600 Index is a market capitalization-
weighted index comprised of 600 domestic stocks chosen
for market size, liquidity, and industry group
representation. 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
that comprise the Index may differ substantially from
the securities in the Fund's portfolio. The Index is
not the only one that may be used to characterize
performance of stock funds, and other indexes may
portray different comparative performance. Investors
cannot invest directly in an index.
These graphs are 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 3/31/00
One Year Five Years Ten Years Since Inception
With Sales Charge 18.91% N/A N/A -4.48%
Without Sales Charge 23.91% N/A N/A -3.15%
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 Prudential Small-Cap
Quantum Fund, Inc. (Class B shares) with a similar
investment in the Standard & Poor's SmallCap 600 Stock
Price Index (S&P SmallCap 600 Index) by portraying the
initial account values at the commencement of
operations of Class B shares, and at the end of the
current fiscal year (March 31), as measured on a
quarterly basis, beginning in November 1997 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 March 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 S&P SmallCap 600 Index is a market capitalization-
weighted index comprised of 600 domestic stocks chosen
for market size, liquidity, and industry group
representation. 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
that comprise the Index may differ substantially from
the securities in the Fund's portfolio. The Index is
not the only one that may be used to characterize
performance of stock funds, and other indexes may
portray different comparative performance. Investors
cannot invest directly in an index.
These graphs are furnished to you in accordance with
SEC regulations.
<PAGE>
Prudential Small-Cap Quantum Fund, Inc.
Class C Growth of a $10,000 Investment
(GRAPH)
Average Annual Total Returns as of 3/31/00
One Year Five Years Ten Years Since Inception
With Sales Charge 21.67% N/A N/A -3.56%
Without Sales Charge 23.91% N/A N/A -3.15%
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 Prudential Small-Cap
Quantum Fund, Inc. (Class C shares) with a
similar investment in the Standard & Poor's SmallCap
600 Stock Price Index (S&P SmallCap 600 Index) by
portraying the initial account values at the
commencement of operations of Class C shares, and at
the end of the current fiscal year (March 31), as
measured on a quarterly basis, beginning in November
1997 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 March 31, 2000; (c) all recurring fees (including
management fees) were deducted; and (d) all dividends
and distributions were reinvested.
The S&P SmallCap 600 Index is a market capitalization-
weighted index comprised of 600 domestic stocks chosen
for market size, liquidity, and industry group
representation. 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
that comprise the Index may differ substantially from
the securities in the Fund's portfolio. The Index is
not the only one that may be used to characterize
performance of stock funds, and other indexes may
portray different comparative performance. Investors
cannot invest directly in an index.
These graphs are 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 3/31/00
One Year Five Years Ten Years Since Inception
With Sales Charge 25.07% N/A N/A -2.18%
Without Sales Charge 25.07% N/A N/A -2.18%
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 Prudential Small-Cap
Quantum Fund, Inc. (Class Z shares) with a
similar investment in the Standard & Poor's SmallCap
600 Stock Price Index (S&P SmallCap 600 Index) by
portraying the initial account values at the
commencement of operations of Class Z shares, and at
the end of the current fiscal year (March 31), as
measured on a quarterly basis, beginning in November
1997 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 S&P SmallCap 600 Index is a market capitalization-
weighted index comprised of 600 domestic stocks chosen
for market size, liquidity, and industry group
representation. 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
that comprise the Index may differ substantially from
the securities in the Fund's portfolio. The Index is
not the only one that may be used to characterize
performance of stock funds, and other indexes may
portray different comparative performance. Investors
cannot invest directly in an index.
These graphs are 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
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
David R. Odenath, Jr., Vice President
Grace C. Torres, Treasurer
Marguerite E.H. Morrison, Secretary
Stephen M. Ungerman, Assistant Treasurer
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
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street
Chicago, IL 60610-4795
Fund Symbols NASDAQ CUSIP
Class A PQVAX 74436N108
Class B PQVBX 74436N207
Class C PQVCX 74436N306
Class Z PSQZX 74436N405
MF 176E
(LOGO) Printed on Recycled Paper
