<PAGE>
ANNUAL REPORT SEPTEMBER 30, 2000
Prudential
Small Company Fund, Inc.
Fund Type Stock
Objective Capital growth
(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>
Our investment objective and style
The Prudential Small Company Fund, Inc. (as it is
called as of May 30, 2000) invests in stocks of
small companies located mostly in the United
States. We consider companies to be small if their
total market value is less than the largest total
market value of any company in Standard & Poor's
SmallCap 600 Index. The gap between the return on
small companies and that on large companies can be
substantial in either direction in any year. That
is why investors are often advised to own both for
diversification.
We focus on stocks that we believe have above-
average prospects for earnings growth, but that
also can be purchased at below-average multiples of
their earnings or at discounts to their intrinsic
values. This approach is often referred to as GARP,
or "growth at a reasonable price." There can be no
assurance that the Fund will achieve its investment
objective.
Portfolio Composition
Sectors expressed as a percentage of
net assets as of 9/30/00
29.9% Consumer Growth
21.0 Technology
14.9 Industrial
10.7 Finance
9.8 Consumer Cyclicals
6.4 Utility
4.8 Energy
2.5 Cash & Equivalents
Ten Largest Holdings
Expressed as a percentage of
net assets as of 9/30/00
2.3% Whole Foods Market, Inc.
Foods
1.9 Imax Corp.
Entertainment
1.8 Everest Group, Ltd.
Insurance
1.7 Western Wireless Corp.
Telecommunications
1.6 SUPERVALU, Inc.
Foods
1.6 AmeriSource Health Corp.
Health Services
1.5 Reinsurance Group of America, Inc.
Insurance
1.5 Rural Cellular Corp.
Telecommunications
1.4 Renal Care Group, Inc.
Health Services
1.4 Arch Chemicals, Inc.
Chemicals
Holdings are subject to change.
<PAGE>
www.prudential.com (800) 225-1852
Performance at a Glance
Cumulative Total Returns1 As of 9/30/00
<TABLE>
<CAPTION>
One Five Ten Since
Year Years Years Inception2
<S> <C> <C> <C> <C>
Class A 15.70% 57.53% 311.98% 257.91%
Class B 14.88 51.93 281.59 732.92
Class C 14.88 51.93 N/A 91.84
Class Z 15.97 N/A N/A 57.30
Lipper Small-Cap Value Fund Avg.3 20.66 85.08 345.46 ***
Russell 2000 Value Index4 15.36 72.35 380.95 ****
</TABLE>
Average Annual Total Returns1 As of 9/30/00
<TABLE>
<CAPTION>
One Five Ten Since
Year Years Years Inception2
<S> <C> <C> <C> <C>
Class A 9.91% 8.40% 14.62% 12.13%
Class B 9.88 8.58 14.33 11.25
Class C 12.73 8.51 N/A 10.96
Class Z 15.97 N/A N/A 10.39
</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 Z shares are not subject to a sales charge or
distribution and service (12b-1) fees.
2 Inception dates: Class A, 1/22/90; Class B,
11/13/80; Class C, 8/1/94; and Class Z, 3/1/96.
3 Lipper average returns are for all funds in each
share class for the one-, five-, and ten-year
periods in the Small-Cap Value Fund category. The
Lipper average is unmanaged. 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&PR SmallCap 600 Index.
Small-Cap Value funds seek long-term growth of
capital by investing in companies that are
considered to be 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-to-earnings ratio, price-to-book
ratio, and three-year earnings growth figure.
S&PR is a registered trademark of the Standard &
Poor's Corporation.
4 The Russell 2000 Value Index is an unmanaged
weighted index that comprises securities in the
Russell 2000 Index with a less-than-average growth
orientation. Investors cannot invest directly in an
index.
***Lipper Since Inception returns are 293.65% for
Class A, 878.03% for Class B, 123.67% for Class C,
and 74.64% for Class Z, based on all funds in each
share class.
****The Russell 2000 Value Index Since Inception
returns are 301.39% for Class A, 963.20% for Class
B, 132.78% for Class C, and 70.36% for Class Z.
1
<PAGE>
(LOGO) November 15, 2000
Dear Shareholder,
During its fiscal year ended September 30, 2000,
the Prudential Small Company Fund, Inc. broadened
its focus to a "core" style that includes both
value and growth stocks. Our intent was to reduce
swings in the Fund's return, as well as its deviations from
the performance of the overall small-cap market. (A
discussion follows in the Investment Adviser's
report.)
Looking forward, we expect that the Fund's more
balanced posture eventually will move it into the
Lipper Small-Cap "Core" category. However, for
purposes of this report, because the Fund has not
yet been reclassified by Lipper--the process
normally takes two semiannual reporting periods--the
Fund's performance will be compared to the Lipper
Small-Cap Value Fund Average. Over the full 12
months the 15.70% return on the Fund's Class A
shares--9.91% to those paying the one-time maximum
Class A share sales charge--trailed the 20.66%
performance of this Value Average.
Market favor may continue to swing between value
and growth investing styles as it has in the past,
but with a core style. We hope to own some stocks
that perform well, whichever way investor sentiment
shifts.
Sincerely,
David R. Odenath, Jr., President
Prudential Small Company Fund, Inc.
2
<PAGE>
Prudential Small Company Fund, Inc.
Annual Report September 30, 2000
A few words about our growth and value
Some rapidly growing technology company stocks
count as value stocks because they had been crowded
out of the S&P/Barra 600 Growth Index. The index
includes half the S&P SmallCap 600 by total
capitalization (not by number of names), so when a
few technology companies had extraordinarily rapid
expansions of their market capitalization during
the growth euphoria, they pushed out other growth-
style companies.
We believe that many of the funds in Lipper's
Small-Cap Value category may have owned such
stocks. These stocks tend to perform like growth
stocks, doing well in a growth market and poorly in
a value market. Consistent with this, the
Prudential Small Company Fund outperformed the
Lipper Average over the second half of its
reporting period, when value investing was
ascendant, even though the Fund's portfolio was in
transition at that time. Substantial contributions
to its return came from some of its long-term value
holdings.
Investment Adviser's Report
How to subtract by adding
Small-cap technology is a volatile sector, so it
may appear paradoxical that we intend to reduce the
Fund's volatility by increasing its growth
holdings, including technology. However,
diversification is the traditional precaution
against volatility. By adding to our portfolio in
sectors that have low or negative correlations with
our other holdings, we improve the likelihood of
smooth returns. The accompanying chart illustrates
this point by graphing the monthly returns of three
S&P SmallCap 600 sectors over our past fiscal year:
technology, financials, and utilities. Technology
is predominantly a growth sector, while financials
and utilities are predominantly value sectors.
Although technology was the most volatile of the
three sectors, with higher highs and lower lows, it
was positive or neutral in every month in which the
other two were negative, and they were positive or
neutral in each month technology was negative. The
benefit of diversification is not always this
3
<PAGE>
Prudential Small Company Fund, Inc.
Holdings expressed as a percentage of the Fund's net assets
Comments on Largest Holdings As of 9/30/00
------------------------------------------------------------
2.3% Whole Foods Market, Inc./Foods
Whole Foods, whose 110 stores already make it the
largest natural food retailer in the United States,
continues to gain market share. We think it can add
stores at a rate of 10% to 15% a year while
increasing sales by 8% a year in existing stores.
The natural foods market is growing approximately
five times faster than traditional food retailing,
but Whole Foods is currently valued only slightly
better than traditional food retailers.
1.9% Imax Corp./Entertainment
Imax is the world's leading provider of large-
screen theater systems, with more than 220 theaters
in 26 countries and over 70 additional systems on
backlog. It has also made substantial investments
in digital and 3D projection technologies. The
financial difficulties of several U.S.-based
exhibitors caused some delays in new system deliveries
this year, but we believe Imax's long-term growth
prospects are excellent. We added to our position
with recent price declines.
1.8% Everest Re Group, Ltd./Insurance
Everest Re is a property and casualty reinsurer, an
industry that in recent years has not been able to
charge enough to compensate for its risks. As
some firms experience significant losses,
reinsurance prices should rise. We expect
Everest Re's strict pricing discipline and strong
balance sheet to result in strong earnings. Everest
Re is currently priced at only 10 times its 2001
earnings, despite its 15% growth potential.
1.7% Western Wireless Corp./Telecommunications
Western Wireless provides wireless communications
services to about one million subscribers in 19
western U.S. states, and holds licenses to offer
wireless services in nine foreign countries. It has
grown rapidly both internally and through
acquisitions. Because it operates in areas with low
population density, Western is less subject to
competition. Its shares are priced at a very
attractive multiple of its operating cash flow.
1.6% SUPERVALU, Inc./Foods
SUPERVALU is the nation's largest food distributor
and tenth largest food retailer, but is currently
valued at only six times its 2001 earnings. This
represents excellent value for a company that is
relatively insensitive to the economic cycle in a
potentially slowing economy. As the company
integrates recently acquired retail operations, we
expect it to be able to improve its operating
margins.
4
Holdings are subject to change.
<PAGE>
www.prudential.com (800) 225-1852
Annual Report September 30, 2000
obvious, but the chart does provide an excellent
illustration of how it can work. Overall, your
return would have been much smoother had you owned
all three sectors than if you held only the growth
sector or only the value sector. This is the
motivation underlying our move to a core style.
S&P SmallCap 600 Index Selected Sectors
(GRAPH)
Source: Bloomberg and Prudential Investments
The S&P SmallCap Technology, Financials, and
Utilities Indexes are unmanaged, capitalization-
weighted indexes that measure the performance of
the corresponding sectors of the Standard & Poor's
SmallCap 600 Index. The performance cited does not
represent the performance of the Prudential Small
Company Fund, Inc. Past performance is not
indicative of future results. Investors cannot
invest directly in an index.
Good companies often become targets
We bought, for the most part, what we thought were
good businesses that had relatively low stock
prices. Since most stock investors were slow to
appreciate these companies, they were attractive
acquisitions for other firms that recognized their
value. Our return benefited substantially when
companies in our portfolio became acquisition
targets. These included Hussman International,
Lilly Industries, Coinmach, Central Newspapers,
International Home Foods, Financial Security
Assurance, Cameron Ashley
<PAGE>
Prudential Small Company Fund, Inc.
Annual Report September 30, 2000
Building Products, and Shorewood Packaging.
Takeovers are one important trigger for realizing
the benefits of value stocks, and the number of
such targets we owned is a credit to our value-
stock selection.
Healthcare regains its health
The prices of our hospital management stocks were
depressed because of cutbacks in federal government
funding for Medicare and for rural hospitals. The
impact of these cutbacks on the hospitals was
greater than legislators had expected, and the
savings much less, so funding is expected to be
restored. In addition, HMOs had been under profit
pressure, so they had been squeezing hospitals. Now
that the pricing environment is improving for HMOs,
they are able to offer better terms to hospitals.
One beneficiary has been Universal Health Services,
the third largest for-profit hospital operator in
the United States, which had been among our largest
positions. Our return received a large boost from
its 231% rise over our reporting period. We also
gained substantially from our somewhat smaller
investments in Triad Hospitals and Quorum Health
Group. Amerisource Health also was a large
contributor to our return. It is a well-run
pharmaceuticals distributor whose shares had
suffered when investors lost confidence in the
entire group because of the difficulties its
competitors had been having. We have been taking
some of our profits on these stocks as the
healthcare value story matures.
Sierra Health Services is a Nevada-based health
management organization whose expansion into Texas
ran into difficulties. The stock fell sharply and
we took our losses.
Stabilizing interest rates helped financials
As economic growth appeared to slow, the
presumption spread that the Federal Reserve Board
had completed its series of interest rate
increases. This led to a rally by financial stocks,
which had been a Fund focus. Our largest holding
for a long time was Financial Security Assurance,
which insures the payments on municipal bonds and
asset-backed securities. The company was the
subject of an attractive acquisition offer,
resulting in the second largest contribution to our
return for the fiscal year. We also
6
<PAGE>
www.prudential.com (800) 225-1852
received a substantial contribution from Everest Re
Group, a reinsurance company that benefited from
the improved pricing environment for the property
and casualty insurers that are its customers.
Hot energy stocks
Our energy holdings, particularly Louis Dreyfus
Natural Gas, were the third sustaining theme
contributing to our return. Rising oil and gas
commodity prices, and stable production volumes,
have led to substantial increases in cash flow and
profitability for all of our energy holdings, which
have represented as much as 10% of the portfolio,
although this has declined since we've taken
profits in recent months.
Technology hurt, both rising and falling
In the first half of our reporting period when
investors favored growth,
our return suffered because we didn't own enough in
the hot "TMT" (technology, media, and telecommunications)
sectors. As we began adding technology and
biotechnology stocks to balance our risk profile,
they fell out of favor. Over the long run, this
should help our return, as we found many
opportunities to buy below the peak prices.
However, technology stocks continued to fall
through the end of our fiscal year, and some of our
holdings lost ground with the sector. We had
particularly large declines in Varian
Semiconductor, Carrier Access, and Commscope. These
are stocks with good prospects for growth; we
expect them to recover when investors recover their
appreciation for technology and communications.
The "MT" in "TMT" also fell
Our return was also hurt by our broadcasting and
media companies, particularly Young Broadcasting
and ICG Communications. Young was on
the losing end of the shifting network affiliations
in the San Francisco television market. We realized
substantial losses, but reinvested in other more
promising media companies. ICG Communications (an
emerging telecommunications provider) lost business
because of service problems, and faces significant
problems raising funds for needed capital
investment in today's much tougher environment.
7
<PAGE>
Prudential Small Company Fund, Inc.
Annual Report September 30, 2000
Looking Ahead
Large-cap stocks substantially outperformed small-
caps every year between 1994 and 1998. Last year
was essentially a tie, so there is still a lot of
catch-up room for small-cap outperformance. For
example, stocks in the S&P SmallCap 600 were
selling at an average of 16.2 times annual earnings
at the end of our reporting period, compared to
26.8 times for S&P 500 stocks. Their price-to-book
value ratio was about half that of large caps.
Clearly, only some of the valuation gap built up in
the late 1990s has been made up in 2000 so far.
This leaves exceptional values spread through many
economic sectors.
We have brought our exposure to various economic
sectors much closer to the composition of the
overall market. However, we continue to focus on
consumer stocks and on communications, where there
is relative stability of revenues. We believe
wireless telecommunications also has great growth
potential, and that the recent poor performance of
stocks in that industry has left excellent
investment opportunities. We are more cautious
about technology companies that are dependent upon
sales of personal computers or other technical
hardware, and also about financial companies that
are exposed to credit concerns as the economy
slows.
Prudential Small Company Fund Management Team
8
<PAGE>
<PAGE>
Prudential Small Company Fund, Inc.
Portfolio of Investments as of September 30, 2000
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C> <C>
------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS 97.5%
Common Stocks 97.5%
-------------------------------------------------------------------------------------
Aerospace/Defense 0.6%
116,750 REMEC, Inc. $ 3,436,828
-------------------------------------------------------------------------------------
Apparel 3.5%
287,100 G & K Services, Inc., Class A 8,056,744
348,100 Pacific Sunwear of California, Inc.(a) 6,526,875
664,900 Phillips-Van Heusen Corp. 6,856,781
--------------
21,440,400
-------------------------------------------------------------------------------------
Appliances & Home Furnishings 1.8%
625,500 Applica, Inc.(a) 3,870,281
433,500 Furniture Brands International, Inc.(a) 7,206,938
--------------
11,077,219
-------------------------------------------------------------------------------------
Automotive 1.6%
140,100 Borg-Warner Automotive, Inc. 4,640,812
187,800 Dura Automotive Systems, Inc.(a) 1,734,216
357,100 Tower Automotive, Inc.(a) 3,347,813
--------------
9,722,841
-------------------------------------------------------------------------------------
Banking 2.8%
212,500 Astoria Financial Corp. 8,207,813
431,600 Banknorth Group, Inc. 7,714,850
65,500 Boston Private Financial, Inc. 1,080,750
--------------
17,003,413
-------------------------------------------------------------------------------------
Chemicals 2.7%
460,200 Arch Chemicals Inc. 8,398,650
579,700 Crompton Corp. 4,565,137
124,700 Lilly Industries, Inc., Class A 3,678,650
--------------
16,642,437
-------------------------------------------------------------------------------------
Commercial Services 1.7%
204,200 Bright Horizons Family Solutions, Inc.(a) 5,219,863
420,900 NCO Group, Inc.(a) 4,998,188
--------------
10,218,051
</TABLE>
See Notes to Financial Statements 9
<PAGE>
Prudential Small Company Fund, Inc.
Portfolio of Investments as of September 30, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Computer Software & Services 4.6%
184,700 Allscripts, Inc.(a) $ 2,608,888
120,000 Hyperion Software Corp.(a) 3,105,000
253,200 Networks Associates, Inc. 5,728,650
160,500 PC-Tel, Inc.(a) 3,731,625
139,100 Safeguard Scientifics, Inc.(a) 2,773,306
257,800 USinternetworking, Inc.(a) 1,720,009
661,000 Visual Networks, Inc.(a) 4,337,812
487,900 X-Rite, Inc. 4,269,125
--------------
28,274,415
-------------------------------------------------------------------------------------
Consulting 1.3%
179,500 Braun Consulting, Inc.(a) 3,556,344
218,300 Jupiter Media Metrix, Inc.(a) 3,479,156
258,200 U.S. Interactive, Inc.(a) 653,569
--------------
7,689,069
-------------------------------------------------------------------------------------
Containers & Packaging 0.4%
217,900 Pactiv Corp.(a) 2,437,756
-------------------------------------------------------------------------------------
Data Processing/Management 2.0%
150,800 Acxiom Corp.(a) 4,787,900
345,900 American Management Systems, Inc.(a) 5,945,156
45,800 CSG Systems International, Inc.(a) 1,328,200
--------------
12,061,256
-------------------------------------------------------------------------------------
Dental Supplies 1.7%
163,900 DENTSPLY International, Inc. 5,726,256
208,100 Sybron International Corp.(a) 4,994,400
--------------
10,720,656
-------------------------------------------------------------------------------------
Distribution/Wholesalers 1.6%
1,222,100 Brightpoint, Inc.(a) 6,148,691
92,500 Tech Data Corp.(a) 3,954,375
--------------
10,103,066
-------------------------------------------------------------------------------------
Electrical Utilities 1.7%
552,500 El Paso Electric Co.(a) 7,607,925
</TABLE>
10 See Notes to Financial Statements
<PAGE>
Prudential Small Company Fund, Inc.
Portfolio of Investments as of September 30, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
78,000 H Power Corp.(a) $ 2,608,125
--------------
10,216,050
-------------------------------------------------------------------------------------
Electrical Equipment 1.3%
339,500 Belden, Inc. 8,020,688
-------------------------------------------------------------------------------------
Electronics 8.6%
172,200 ANADIGICS, Inc.(a) 3,809,925
128,600 APW Ltd.(a) 6,269,250
113,300 Axcelis Technologies, Inc.(a) 1,345,438
104,000 Electro Scientific Industries, Inc.(a) 3,653,000
168,300 Integrated Silicon Solution, Inc.(a) 2,387,756
67,100 Intersil Holding Corp.(a) 3,346,612
62,600 Manufacturers Services Ltd.(a) 743,375
205,800 Oak Technology, Inc.(a) 5,633,775
299,300 Photronics, Inc.(a) 6,528,481
306,900 Power Integrations, Inc.(a) 4,277,419
70,500 SIPEX Corp.(a) 2,965,406
152,500 Three-Five Systems, Inc.(a) 4,460,625
64,100 TTM Technologies, Inc.(a) 1,506,350
157,100 Varian Semiconductor Associates, Inc.(a) 5,881,431
--------------
52,808,843
-------------------------------------------------------------------------------------
Entertainment 3.9%
182,400 Harrah's Entertainment, Inc.(a) 5,016,000
704,000 Imax Corp.(a) 11,924,000
344,500 Speedway Motorsports, Inc. 7,169,906
--------------
24,109,906
-------------------------------------------------------------------------------------
Financial Services 0.9%
276,900 Allied Capital Corp. 5,745,675
-------------------------------------------------------------------------------------
Foods 5.4%
669,333 SUPERVALU, Inc. 10,081,828
121,300 Suiza Foods Corp.(a) 6,148,394
207,200 United Natural Foods, Inc.(a) 2,564,100
265,400 Whole Foods Market, Inc.(a) 14,248,662
--------------
33,042,984
</TABLE>
See Notes to Financial Statements 11
<PAGE>
Prudential Small Company Fund, Inc.
Portfolio of Investments as of September 30, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Health Services 4.4%
207,700 AmeriSource Health Corp.(a) $ 9,761,900
487,000 Hooper Holmes, Inc. 4,631,370
244,300 Omnicare, Inc 3,939,337
459,600 Renal Care Group, Inc.(a) 8,560,050
--------------
26,892,657
-------------------------------------------------------------------------------------
Hospital Management 2.3%
570,000 Quorum Health Group, Inc.(a) 7,410,000
237,900 Triad Hospitals, Inc.(a) 6,988,312
--------------
14,398,312
-------------------------------------------------------------------------------------
Insurance 5.7%
224,027 Amerus Group Co. 5,768,695
221,600 Enhance Financial Services Group, Inc. 2,880,800
226,900 Everest Re Group, Ltd. 11,231,550
274,652 Reinsurance Group of America, Inc. 9,406,831
132,600 StanCorp Financial Group, Inc. 5,668,650
--------------
34,956,526
-------------------------------------------------------------------------------------
Leisure 1.5%
419,500 Aztar Corp.(a) 6,449,813
180,300 Cheap Tickets, Inc.(a) 1,870,613
52,800 Steiner Leisure Ltd.(a) 1,181,400
--------------
9,501,826
-------------------------------------------------------------------------------------
Media 3.0%
332,500 A. H. Belo Corp., Class A 6,130,469
209,200 Emmis Communications Corp. 5,177,700
188,600 Entravision Communications Corp., Class A(a) 3,276,925
369,600 Sinclair Broadcast Group, Inc., Class A(a) 4,042,500
--------------
18,627,594
-------------------------------------------------------------------------------------
Medical Products 1.6%
10,400 Cubist Pharmaceuticals, Inc.(a) 541,450
142,200 Genaissance Pharmaceuticals, Inc.(a) 2,941,763
82,900 Endocare, Inc.(a) 1,637,275
186,800 Mylan Laboratories, Inc. 5,031,925
--------------
10,152,413
</TABLE>
12 See Notes to Financial Statements
<PAGE>
Prudential Small Company Fund, Inc.
Portfolio of Investments as of September 30, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Miscellaneous Industrial 6.0%
225,100 Advanced Lighting Technologies, Inc.(a) $ 2,785,613
245,850 Clarcor, Inc. 4,794,075
164,800 Graco, Inc. 5,314,800
305,600 Pentair, Inc. 8,174,800
241,935 Robbins & Myers, Inc. 5,715,714
193,200 Roper Industries, Inc. 6,411,825
148,200 Valspar Corp. 3,407,118
--------------
36,603,945
-------------------------------------------------------------------------------------
Oil & Gas Exploration/Production 4.4%
76,200 Bellwether Exploration Co.(a) 585,788
130,600 Cabot Oil & Gas Corp., Class A 2,660,975
100,595 Devon Energy Corp. 6,050,771
167,800 Louis Dreyfus Natural Gas Corp.(a) 6,649,075
140,000 Marine Drilling Companies, Inc.(a) 3,998,750
6,900 Newfield Exploration Co.(a) 322,144
291,300 St. Mary Land & Exploration Co. 6,718,106
--------------
26,985,609
-------------------------------------------------------------------------------------
Photography 0.3%
80,800 Concord Camera Corp.(a) 2,070,500
-------------------------------------------------------------------------------------
Printing 0.2%
328,900 Mail-Well, Inc.(a) 1,459,494
-------------------------------------------------------------------------------------
Real Estate Investment Trust 1.3%
172,700 Kilroy Realty Corp.(a) 4,608,931
123,400 Liberty Property Trust 3,393,500
--------------
8,002,431
-------------------------------------------------------------------------------------
Restaurants 2.1%
311,900 CBRL Group, Inc. 4,483,562
285,500 Consolidated Products, Inc.(a) 2,284,000
208,500 Jack in the Box, Inc.(a) 4,469,719
168,400 Ruby Tuesday, Inc. 1,894,500
--------------
13,131,781
</TABLE>
See Notes to Financial Statements 13
<PAGE>
Prudential Small Company Fund, Inc.
Portfolio of Investments as of September 30, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Retail 5.4%
271,900 Casey's General Stores, Inc. $ 3,534,700
174,100 Claire's Stores, Inc. 3,133,800
336,000 Consolidated Stores Corp.(a) 4,536,000
649,000 Hollywood Entertainment Corp.(a) 4,826,938
389,800 Pier 1 Imports, Inc. 5,286,662
395,800 Ross Stores, Inc. 5,689,625
592,300 Stein Mart, Inc.(a) 6,404,244
--------------
33,411,969
-------------------------------------------------------------------------------------
Steel 1.3%
304,100 Maverick Tube Corp.(a) 8,191,694
-------------------------------------------------------------------------------------
Telecommunications 8.1%
55,800 AirGate Pcs, Inc.(a) 2,504,025
115,900 Carrier Access Corp.(a) 2,296,269
28,900 Clarent Corp.(a) 1,137,938
70,200 Clearnet Communications Inc.(a) 3,110,737
260,200 CommScope, Inc.(a) 6,374,900
180,400 DMC Stratex Networks, Inc.(a) 2,897,675
31,000 Glenayre Technologies, Inc.(a) 337,125
447,000 NorthPoint Communications Group, Inc.(a) 3,967,125
133,800 Rural Cellular Corp.(a) 9,115,125
290,200 UbiquiTel, Inc.(a) 2,611,800
171,600 US Unwired, Inc.(a) 1,635,562
115,700 Vyyo, Inc.(a) 3,471,000
291,000 Western Wireless Corp.(a) 10,366,875
--------------
49,826,156
-------------------------------------------------------------------------------------
Waste Management 1.8%
582,700 Republic Services, Inc., Class A(a) 7,647,937
139,000 Waste Connections, Inc.(a) 3,561,875
--------------
11,209,812
--------------
Total long-term investments (cost $559,285,118) 600,194,272
</TABLE>
14 See Notes to Financial Statements
<PAGE>
Prudential Small Company Fund, Inc.
Portfolio of Investments as of September 30, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
SHORT-TERM INVESTMENTS 3.2%
Principal Amount
(000)
$ 19,916 Joint Repurchase Agreement Account,
6.50%, 10/2/00 (cost $19,916,000; Note 5) 19,916,000
--------------
Total Investments 100.7%
(cost $579,201,118; Note 4) 620,110,272
Liabilities in excess of other assets (0.7%) (4,199,582)
--------------
Net Assets 100% $ 615,910,690
--------------
--------------
</TABLE>
------------------------------
(a) Non-income producing security.
See Notes to Financial Statements 15
<PAGE>
Prudential Small Company Fund, Inc.
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
September 30, 2000
<S> <C> <C>
----------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $579,201,118) $620,110,272
Receivable for investments sold 17,144,416
Receivable for Fund shares sold 973,161
Dividends and interest receivable 260,984
Prepaid expenses 12,759
------------------
Total assets 638,501,592
------------------
LIABILITIES
Bank overdraft 36,647
Payable for investments purchased 14,671,474
Payable for Fund shares reacquired 6,489,859
Accrued expenses 773,681
Management fee payable 368,465
Distribution fee payable 250,776
------------------
Total liabilities 22,590,902
------------------
NET ASSETS $615,910,690
------------------
------------------
Net assets were comprised of:
Common stock, at par $ 441,000
Paid-in capital in excess of par 615,065,591
------------------
615,506,591
Accumulated net realized loss on investments (40,505,055)
Net unrealized appreciation/depreciation on investments 40,909,154
------------------
Net assets, September 30, 2000 $615,910,690
------------------
------------------
</TABLE>
16 See Notes to Financial Statements
<PAGE>
Prudential Small Company Fund, Inc.
Statement of Assets and Liabilities Cont'd.
<TABLE>
<CAPTION>
September 30, 2000
----------------------------------------------------------------------------------------
<S> <C> <C>
Class A:
Net asset value and redemption price per share
($291,869,026 / 20,096,572 shares of common stock
issued and outstanding) $14.52
Maximum sales charge (5% of offering price) .76
------------------
Maximum offering price to public $15.28
------------------
------------------
Class B:
Net asset value, offering price and redemption price per
share
($199,149,269 / 15,354,526 shares of common stock
issued and outstanding) $12.97
------------------
------------------
Class C:
Net asset value and redemption price per share
($19,236,242 / 1,483,143 shares of common stock
issued and outstanding) $12.97
Sales charge (1% of offering price) .13
------------------
Offering price to public $13.10
------------------
------------------
Class Z:
Net asset value, offering price and redemption price per
share
($105,656,153 / 7,165,794 shares of common stock
issued and outstanding) $14.74
------------------
------------------
</TABLE>
See Notes to Financial Statements 17
<PAGE>
Prudential Small Company Fund, Inc.
Statement of Operations
<TABLE>
<CAPTION>
Year
Ended
September 30, 2000
<S> <C> <C>
----------------------------------------------------------------------------------------
NET INVESTMENT LOSS
Income
Dividends (net of foreign withholding taxes of $11,096) $ 6,654,757
Interest 2,614,035
------------------
Total income 9,268,792
------------------
Expenses
Management fee 4,574,665
Distribution fee--Class A 711,702
Distribution fee--Class B 2,500,608
Distribution fee--Class C 201,593
Transfer agent's fees and expenses 2,145,000
Reports to shareholders 275,000
Custodian's fees and expenses 130,000
Registration fees 85,000
Legal fees and expenses 47,000
Audit fees 25,000
Directors' fees and expenses 20,400
Miscellaneous 19,234
------------------
Total expenses 10,735,202
------------------
Net investment loss (1,466,410)
------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investment transactions (30,404,991)
Net change in unrealized appreciation/depreciation on
investments 114,018,267
------------------
Net gain on investments 83,613,276
------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 82,146,866
------------------
------------------
</TABLE>
18 See Notes to Financial Statements
<PAGE>
Prudential Small Company Fund, Inc.
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended September 30,
------------------------------------
2000 1999
<S> <C> <C> <C>
-----------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment loss $ (1,466,410 ) $ (3,984,439)
Net realized gain (loss) on investment
transactions (30,404,991 ) 6,018,074
Net change in unrealized
appreciation/depreciation on
investments 114,018,267 13,126,457
-------------- ------------------
Net increase in net assets resulting from
operations 82,146,866 15,160,092
-------------- ------------------
Distributions from net realized gains on
investment transactions (Note 1)
Class A -- (41,109,661)
Class B -- (62,450,536)
Class C -- (3,389,932)
Class Z -- (14,727,094)
-------------- ------------------
-- (121,677,223)
-------------- ------------------
Fund share transactions (Note 6)
(net of share conversions)
Net proceeds from shares sold 465,954,260 556,701,257
Net asset value of shares issued to
shareholders in reinvestment of
distributions -- 117,928,503
Cost of shares reacquired (717,545,426 ) (814,921,695)
-------------- ------------------
Net decrease in net assets from Fund
share transactions (251,591,166 ) (140,291,935)
-------------- ------------------
Total decrease (169,444,300 ) (246,809,066)
NET ASSETS
Beginning of year 785,354,990 1,032,164,056
-------------- ------------------
End of year $ 615,910,690 $ 785,354,990
-------------- ------------------
-------------- ------------------
</TABLE>
See Notes to Financial Statements 19
<PAGE>
Prudential Small Company Fund, Inc.
Notes to Financial Statements
Prudential Small Company Fund, Inc. (formerly known as Prudential Small
Company Value, Inc.) is registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company. The investment objective of
the Fund is to achieve capital growth by investing in a carefully selected
portfolio of common stocks. Investment income is of incidental importance, and
the Fund may invest in securities which do not produce any income.
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 Valuations: Investments traded on a national securities
exchange are valued at the last reported sales price on the primary exchange on
which they are traded. Securities traded in the over-the-counter market
(including securities listed on exchanges whose primary market is believed to be
over-the-counter) and listed securities for which no sale was reported on that
date are valued at the mean between the last reported bid and asked prices. 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
based upon current market quotations. Short-term securities which mature in 60
days or less are valued at amortized cost.
Repurchase Agreements: In connection with transactions in repurchase
agreements with U.S. financial institutions, it is the Fund's policy that its
custodian or designated subcustodians, as the case may be under triparty
repurchase agreements, take possession of the underlying collateral securities,
the value of which exceeds the principal amount of the repurchase transaction,
including accrued interest. To the extent that any repurchase transaction
exceeds one business day, the value of the collateral is market-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; 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.
20
<PAGE>
Prudential Small Company Fund, Inc.
Notes to Financial Statements
Net investment income (loss), other than distribution fees, and unrealized
and realized gains or losses are allocated daily to each class of shares of the
Fund based upon the relative proportion of net assets of each class at the
beginning of the day.
Taxes: It is the Fund's policy to continue to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable net income 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.
Dividends and Distributions: The Fund expects to pay dividends of net
investment income, if any, semi-annually and make distributions at least
annually of any net capital gains. 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.
Reclassification of Capital Accounts: The Fund accounts and reports for
distributions to shareholders in accordance with the American Institute of
Certified Public Accountants Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain, and
Return of Capital Distributions by Investment Companies. The effect of applying
this statement was to increase undistributed net income by $1,466,410 and
decrease paid-in capital by $1,466,410 due to the Fund experiencing net
operating losses. Net investment income, net realized gains and net assets were
not affected by this change.
Note 2. Agreements
The Fund has a management agreement with Prudential Investments Fund Management
LLC ('PIFM'). Pursuant to this agreement, PIFM has responsibility for all
investment advisory services and supervises the subadviser's performance of such
services. PIFM has entered into a Subadvisory Agreement with The Prudential
Investment Corporation ('PIC'). The subadvisory agreement provides that PIC will
furnish investment advisory services in connection with the management of the
Fund. In connection therewith, PIC is obligated to keep certain books and
records of the Fund. PIFM continues to have responsibility for all investment
advisory services pursuant to the management agreement and supervises PIC's
performance of such services. 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 to PIFM is computed daily and payable monthly, at
an annual rate of .70 of 1% of the Fund's average daily net assets.
21
<PAGE>
Prudential Small Company Fund, Inc.
Notes to Financial Statements Cont'd.
Effective January 1, 2000, the subadvisory fee paid to PIC by PIFM is
computed daily and payable monthly at an annual rate of .455 of 1% of the
average daily net assets of the Fund. Prior to January 1, 2000, PIC was
reimbursed by PIFM for reasonable costs and expenses incurred in furnishing
investment advisory services. The change in the subadvisory fee structure has no
impact on the management fee charged to the Fund or its shareholders.
The Fund has a distribution agreement with Prudential Investment
Management Services LLC ('PIMS'), which acts as the distributor of the Class A,
Class B, Class C and Class Z shares of the Fund. The Fund compensates PIMS for
distributing and servicing the Fund's Class A, Class B and Class C shares,
pursuant to plans of distribution, (the 'Class A, B and C Plans'), regardless of
expenses actually incurred by them. The distribution fees are accrued daily and
payable monthly. No distribution or service fees are paid to PIMS as distributor
of the Class Z shares of the Fund.
Pursuant to the Class A, B and C Plans, the Fund compensates PIMS for
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 were .25 of 1%, 1% and 1% of the average daily net assets of the
Class A, Class B and Class C shares, respectively, for the year ended September
30, 2000.
PIMS has advised the Fund that it received approximately $94,600 and
$15,600 in front-end sales charges resulting from sales of Class A and Class C
shares during the year ended September 30, 2000. From these fees, PIMS paid such
sales charges to affiliated broker-dealers, which in turn paid commissions to
salespersons and incurred other distribution costs.
PIMS has advised the Fund that for the year ended September 30, 2000, it
received approximately $919,700 and $19,100 in contingent deferred sales charges
imposed upon certain redemptions by Class B and Class C shareholders,
respectively.
PIFM, PIMS and PIC are indirect, 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 at an annual rate 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
22
<PAGE>
Prudential Small Company Fund, Inc.
Notes to Financial Statements
1% of the unused portion of the credit facility. The Fund did not borrow any
amounts pursuant to the SCA during the year ended September 30, 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 September 30, 2000,
the Fund incurred fees of approximately $1,561,400 for the services of PMFS. As
of September 30, 2000, approximately $59,500 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 nonaffliates.
For the year ended September 30, 2000, PSI earned approximately $12,515 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 fiscal year ended September 30, 2000 were $570,923,472 and $781,404,201,
respectively.
The cost basis of investments for federal income tax purposes as of
September 30, 2000 was $580,244,959 and, accordingly, net unrealized
appreciation for federal income tax purposes was $39,865,313 (gross unrealized
appreciation--$106,459,109 gross unrealized depreciation--$66,593,796).
The Fund had a capital loss carryforward as of September 30, 2000, of
$28,204,000 which 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 amounts.
The Fund will elect, for United States federal income tax purposes, to
treat net short-term capital losses of $11,258,000 incurred in the eleven months
ended September 30, 2000 as having been incurred in the following fiscal year.
Note 5. Joint Repurchase Agreement Account
The Fund, along with other affiliated registered investment companies, transfers
uninvested cash balances into a single joint account, the daily aggregate
balance of which is invested in one or more repurchase agreements collateralized
by U.S. Treasury or federal agency obligations. As of September 30, 2000, the
Fund had a 1.7% undivided interest in the joint account. The undivided interest
for the Fund represents $19,916,000 in principal amount. As of such date, each
repurchase agreement in the joint account and the collateral therefore were as
follows:
23
<PAGE>
Prudential Small Company Fund, Inc.
Notes to Financial Statements Cont'd.
Bear, Stearns & Co., Inc., 6.51%, in the principal amount of $300,000,000,
repurchase price $300,162,750, due 10/2/00. The value of the collateral
including accrued interest was $307,686,775.
Chase Securities, Inc., 6.45%, in the principal amount of $264,084,000,
repurchase price $264,225,945, due 10/2/00. The value of the collateral
including accrued interest was $269,373,200.
Credit Suisse First Boston Corp., 6.54%, in the principal amount of
$200,000,000, repurchase price $200,109,000, due 10/2/00. The value of the
collateral including accrued interest was $206,853,792.
Salomon Smith Barney, Inc., 6.45%, in the principal amount of $97,990,000,
repurchase price $98,042,670, due 10/2/00. The value of the collateral including
accrued interest was $102,042,316.
UBS Warburg, Inc., 6.52%, in the principal amount of $300,000,000,
repurchase price $300,163,000, due 10/2/00. The value of the collateral
including accrued interest was $306,002,065.
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 to 5%. Class B shares are sold with
a contingent deferred sales charge which declines from 5% to zero depending on
the period of time the shares are held. Class C shares are sold with a front-end
sales charge of 1% and a contingent deferred sales charge of 1% during the first
18 months. Class B shares will automatically convert to Class A shares on a
quarterly basis approximately seven years after purchase. A special exchange
privilege is also available for shareholders who qualify to purchase Class A
shares at net asset value. Class Z shares are not subject to any sales or
redemption charge and are offered exclusively for sale to a limited group of
investors.
There are 1 billion shares of common stock authorized $.01 par value per
share, divided into four classes, designated Class A, Class B, Class C and Class
Z common stock. Class A, Class B, Class C and Class Z shares each consist of 250
million authorized shares.
Transactions in shares of common stock for the years ended September 30,
2000 and September 30, 1999 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
---------------------------------------------------------- ----------- -------------
<S> <C> <C>
Year ended September 30, 2000:
Shares sold 22,953,145 $ 301,249,492
Shares reacquired (32,082,541) (416,908,818)
----------- -------------
Net decrease in shares outstanding before conversion (9,129,396) (115,659,326)
Shares issued upon conversion from Class B 3,732,291 50,187,179
----------- -------------
Net increase (decrease) in shares outstanding (5,397,105) $ (65,472,147)
----------- -------------
----------- -------------
</TABLE>
24
<PAGE>
Prudential Small Company Fund, Inc.
Notes to Financial Statements
<TABLE>
<CAPTION>
Class A Shares Amount
---------------------------------------------------------- ----------- -------------
Year ended September 30, 1999:
<S> <C> <C>
Shares sold 21,652,787 $ 283,748,336
Shares issued in reinvestment of distributions 2,977,458 39,600,186
Shares reacquired (28,149,832) (366,651,014
----------- -------------
Net increase (decrease) in shares outstanding before
conversion (3,519,587) (43,302,492)
Shares issued upon conversion from Class B 2,514,601 32,509,648
----------- -------------
Net increase (decrease) in shares outstanding (1,004,986) $ (10,792,844)
----------- -------------
----------- -------------
<CAPTION>
Class B
----------------------------------------------------------
<S> <C> <C>
Year ended September 30, 2000:
Shares sold 6,431,353 $ 75,343,368
Shares reacquired (16,597,815) (189,752,213)
----------- -------------
Net increase (decrease) in shares outstanding before
conversion (10,166,462) (114,408,845)
Shares reacquired upon conversion into Class A (4,167,176) (50,187,179)
----------- -------------
Net increase (decrease) in shares outstanding (14,333,638) $(164,596,024)
----------- -------------
----------- -------------
Year ended September 30, 1999:
Shares sold 12,427,779 $ 148,785,336
Shares issued in reinvestment of distributions 5,000,512 60,256,172
Shares reacquired (25,651,226 (300,425,348)
----------- -------------
Net decrease in shares outstanding before conversion (8,222,935) (91,383,840)
Shares reacquired upon conversion into Class A (2,785,771) (32,509,648)
----------- -------------
Net increase (decrease) in shares outstanding (11,008,706) $(123,893,488)
----------- -------------
----------- -------------
<CAPTION>
Class C
----------------------------------------------------------
<S> <C> <C>
Year ended September 30, 2000:
Shares sold 2,565,702 $ 31,632,503
Shares reacquired (3,316,355) (39,899,580)
----------- -------------
Net increase (decrease) in shares outstanding (750,653) $ (8,267,077)
----------- -------------
----------- -------------
Year ended September 30, 1999:
Shares sold 1,537,225 $ 18,451,563
Shares issued in reinvestment of distributions 278,300 3,353,512
Shares reacquired (1,703,303) (19,969,646)
----------- -------------
Net increase (decrease) in shares outstanding 112,222 $ 1,835,429
----------- -------------
----------- -------------
<CAPTION>
Class Z
----------------------------------------------------------
<S> <C> <C>
Year ended September 30, 2000:
Shares sold 4,253,732 $ 57,728,897
Shares reacquired (5,382,396) (70,984,815)
----------- -------------
Net increase (decrease) in shares outstanding (1,128,664) $ (13,255,918)
----------- -------------
----------- -------------
Year ended September 30, 1999:
Shares sold 7,908,673 $ 105,716,022
Shares issued in reinvestment of distributions 1,095,136 14,718,633
Shares reacquired (9,747,471) (127,875,687)
----------- -------------
Net increase (decrease) in shares outstanding (743,662) $ (7,441,032)
----------- -------------
----------- -------------
</TABLE>
25
<PAGE>
Prudential Small Company Fund, Inc.
Financial Highlights
<TABLE>
<CAPTION>
Class A
------------------
Year Ended
September 30, 2000
----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE(a):
Net asset value, beginning of year $ 12.54
----------
Income from investment operations
Net investment income (loss) .01
Net realized and unrealized gain (loss) on investment
transactions 1.97
----------
Total from investment operations 1.98
----------
Less distributions
Distributions from net realized gains --
----------
Net asset value, end of year $ 14.52
----------
----------
TOTAL RETURN(b): 15.70%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) $291,869
Average net assets (000) $284,681
Ratios to average net assets:
Expenses, including distribution fees and service
(12b-1) fees 1.37%
Expenses, excluding distribution fees and service
(12b-1) fees 1.12%
Net investment income (loss) .04%
For Class A, B, C and Z shares:
Portfolio turnover rate 92%
</TABLE>
------------------------------
(a) Calculated based upon average shares outstanding during the year.
(b) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each year reported and includes reinvestment of dividends and
distributions.
26 See Notes to Financial Statements
<PAGE>
Prudential Small Company Fund, Inc.
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class A
-------------------------------------------------------------------------------------
Year Ended September 30,
-------------------------------------------------------------------------------------
1999 1998 1997 1996
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 13.79 $ 18.95 $ 15.30 $ 14.18
---------------- ---------------- ---------------- ----------------
(.01) -- .02 .04
.29 (3.31) 6.06 1.75
---------------- ---------------- ---------------- ----------------
.28 (3.31) 6.08 1.79
---------------- ---------------- ---------------- ----------------
(1.53) (1.85) (2.43) (.67)
---------------- ---------------- ---------------- ----------------
$ 12.54 $ 13.79 $ 18.95 $ 15.30
---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ----------------
1.48% (18.90)% 45.92% 13.38%
$319,779 $365,431 $412,980 $237,306
$360,707 $443,189 $287,894 $223,091
1.27% 1.17% 1.21% 1.24%
1.02% .92% .96% .99%
(.09)% -- .15% .33%
39% 36% 58% 53%
</TABLE>
See Notes to Financial Statements 27
<PAGE>
Prudential Small Company Fund, Inc.
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class B
------------------
Year Ended
September 30, 2000
----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE(a):
Net asset value, beginning of year $ 11.28
----------
Income from investment operations
Net investment income (loss) (.08)
Net realized and unrealized gain (loss) on investment
transactions 1.77
----------
Total from investment operations 1.69
----------
Less distributions
Distributions from net realized gains --
----------
Net asset value, end of year $ 12.97
----------
----------
TOTAL RETURN(b): 14.88%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) $199,149
Average net assets (000) $250,061
Ratios to average net assets:
Expenses, including distribution fees and service
(12b-1) fees 2.12%
Expenses, excluding distribution fees and service
(12b-1) fees 1.12%
Net investment income (loss) (0.69)%
</TABLE>
------------------------------
(a) Calculated based upon average shares outstanding during the year.
(b) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each year reported and includes reinvestment of dividends and
distributions.
28 See Notes to Financial Statements
<PAGE>
Prudential Small Company Fund, Inc.
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class B
-------------------------------------------------------------------------------------
Year Ended September 30,
-------------------------------------------------------------------------------------
1999 1998 1997 1996
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 12.63 $ 17.64 $ 14.49 $ 13.56
---------------- ---------------- ---------------- ----------------
(.10) (.12) (.09) (.06)
.28 (3.04) 5.67 1.66
---------------- ---------------- ---------------- ----------------
.18 (3.16) 5.58 1.60
---------------- ---------------- ---------------- ----------------
(1.53) (1.85) (2.43) (.67)
---------------- ---------------- ---------------- ----------------
$ 11.28 $ 12.63 $ 17.64 $ 14.49
---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ----------------
.74% (19.52)% 44.91% 12.56%
$335,013 $514,159 $645,579 $378,861
$444,747 $678,462 $443,761 $355,636
2.02% 1.92% 1.96% 1.99%
1.02% .92% .96% .99%
(.82)% (.75)% (.60)% (.42)%
</TABLE>
See Notes to Financial Statements 29
<PAGE>
Prudential Small Company Fund, Inc.
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class C
------------------
Year Ended
September 30, 2000
----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE(a):
Net asset value, beginning of year $ 11.28
--------
Income from investment operations
Net investment income (loss) (.08)
Net realized and unrealized gain (loss) on investment
transactions 1.77
--------
Total from investment operations 1.69
--------
Less distributions
Distributions from net realized gains --
--------
Net asset value, end of year $ 12.97
--------
--------
TOTAL RETURN(b): 14.88%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) $ 19,236
Average net assets (000) $ 20,159
Ratios to average net assets:
Expenses, including distribution fees and service
(12b-1) fees 2.12%
Expenses, excluding distribution fees and service
(12b-1) fees 1.12%
Net investment loss (.70)%
</TABLE>
------------------------------
(a) Calculated based upon average shares outstanding during the year.
(b) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each year reported and includes reinvestment of dividends and
distributions.
30 See Notes to Financial Statements
<PAGE>
Prudential Small Company Fund, Inc.
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class C
-------------------------------------------------------------------------------------
Year Ended September 30,
-------------------------------------------------------------------------------------
1999 1998 1997 1996
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 12.63 $ 17.64 $ 14.49 $ 13.56
-------- -------- -------- --------
(.10) (.12) (.09) (.06)
.28 (3.04) 5.67 1.66
-------- -------- -------- --------
.18 (3.16) 5.58 1.60
-------- -------- -------- --------
(1.53) (1.85) (2.43) (.67)
-------- -------- -------- --------
$ 11.28 $ 12.63 $ 17.64 $ 14.49
-------- -------- -------- --------
-------- -------- -------- --------
0.74% (19.52)% 44.91% 12.56%
$ 25,207 $ 26,804 $ 22,049 $ 4,323
$ 27,813 $ 29,259 $ 8,762 $ 2,786
2.02% 1.92% 1.96% 1.99%
1.02% .92% .96% .99%
(.83)% (.75)% (.60)% (.42)%
</TABLE>
See Notes to Financial Statements 31
<PAGE>
Prudential Small Company Fund, Inc.
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class Z
------------------
Year Ended
September 30, 2000
----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE(a):
Net asset value, beginning of period $ 12.70
----------
Income from investment operations
Net investment income .04
Net realized and unrealized gain (loss) on investment
transactions 2.00
----------
Total from investment operations 2.04
----------
Less distributions
Distributions from net realized gains --
----------
Net asset value, end of period $ 14.74
----------
----------
TOTAL RETURN(b): 15.97%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $105,656
Average net assets (000) $ 98,623
Ratios to average net assets:
Expenses, including distribution fees and service
(12b-1) fees 1.12%
Expenses, excluding distribution fees and service
(12b-1) fees 1.12%
Net investment income .29%
</TABLE>
------------------------------
(a) Calculated based upon average shares outstanding during the period.
(b) 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 less than a full
year are not annualized.
(c) Annualized.
(d) Commencement of offering of Class Z shares.
32 See Notes to Financial Statements
<PAGE>
Prudential Small Company Fund, Inc.
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class Z
------------------------------------------------------------------------------------------
Year Ended September 30, March 1, 1996(d)
---------------------------------------------------------- Through
1999 1998 1997 September 30, 1996
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 13.92 $ 19.04 $ 15.32 $ 13.69
---------------- ---------------- ---------------- ----------
.02 .04 .06 .05
.29 (3.31) 6.09 1.58
---------------- ---------------- ---------------- ----------
.31 (3.27) 6.15 1.63
---------------- ---------------- ---------------- ----------
(1.53) (1.85) (2.43) --
---------------- ---------------- ---------------- ----------
$ 12.70 $ 13.92 $ 19.04 $ 15.32
---------------- ---------------- ---------------- ----------
---------------- ---------------- ---------------- ----------
1.70% (18.58)% 46.38% 11.91%
$105,355 $125,770 $151,215 $ 68,516
$131,013 $154,623 $ 97,310 $ 66,228
1.02% .92% .96% .99%(c)
1.02% .92% .96% .99%(c)
.16% .25% .40% .58%(c)
</TABLE>
See Notes to Financial Statements 33
<PAGE>
Prudential Small Company Fund, Inc.
Report of Independent Accountants
The Shareholders and Board of Directors of
Prudential Small Company 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 Company Fund, Inc.
(the 'Fund') (formerly Prudential Small Company Value Fund, Inc.) at September
30, 2000, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended and the
financial highlights for each of the periods presented, in conformity with
accounting principles generally accepted in the United States of America. 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 of America,
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 September 30, 2000 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
November 22, 2000
34
<PAGE>
Prudential Small Company 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--sometimes even the simplest investments bear
surprising risks. The educated investor knows that
markets seldom move in just one direction. There
are times when a market sector or asset class will
lose value or provide little in the way of total
return. Managing your own expectations is easier
with help from someone who understands the markets
and who knows you!
Keeping Up With the Joneses
A financial advisor or registered representative
can help you wade through the numerous 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 Company Fund, Inc.
Prudential Mutual Funds
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
Large Capitalization Stock Funds
Prudential 20/20 Focus Fund
Prudential Equity Fund, Inc.
Prudential Stock Index Fund
Prudential Tax-Managed Funds
Prudential Tax-Managed Equity Fund
Strategic Partners Focused Growth Fund
Target Funds
Large Capitalization Growth Fund
Large Capitalization Value Fund
The Prudential Investment Portfolios, Inc.
Prudential Jennison Growth Fund
Prudential Value Fund
Small- to Mid-Capitalization Stock Funds
Nicholas-Applegate Fund, Inc.
Nicholas-Applegate Growth Equity Fund
Prudential Small Company Fund, Inc.
Prudential Tax-Managed Small-Cap Fund, Inc.
Prudential U.S. Emerging Growth Fund, Inc.
Target Funds
Small Capitalization Growth Fund
Small Capitalization Value Fund
The Prudential Investment Portfolios, Inc.
Prudential Jennison Equity Opportunity Fund
Sector Stock Funds
Prudential Natural Resources Fund, Inc.
Prudential Real Estate Securities Fund
Prudential Sector Funds, Inc.
Prudential Financial Services Fund
Prudential Health Sciences Fund
Prudential Technology Fund
Prudential Utility Fund
Global/International Stock Funds
Global Utility Fund, Inc.
Prudential Europe Growth Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Prudential World Fund, Inc.
Prudential Global Growth Fund
Prudential International Value Fund
Prudential Jennison International Growth Fund
Target Funds
International Equity Fund
BALANCE/ALLOCATION FUNDS
Prudential Diversified Funds
Conservative Growth Fund
Moderate Growth Fund
High Growth Fund
The Prudential Investment Portfolios, Inc.
Prudential Active Balanced Fund
<PAGE>
www.prudential.com (800) 225-1852
BOND FUNDS
Taxable Bond Funds
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 Short-Term Corporate Bond Fund, Inc.
Income Portfolio
Prudential Total Return Bond Fund, Inc.
Target Funds
Total Return Bond Fund
Tax-Free 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.
Global/International Bond Funds
Prudential Global Total Return Fund, Inc.
Prudential International Bond 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 Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Prudential MoneyMart Assets, Inc.
Prudential Special Money Market Fund, Inc.
Money Market Series
Tax-Free Money Market Funds
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
Prudential Tax-Free Money Fund, Inc.
Other Money Market Funds
COMMAND Government Fund
COMMAND Money Fund
COMMAND Tax-Free Fund
<PAGE>
Prudential Small Company 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 performance 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
investment adviser's report
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 "Investment Adviser's Report"
section 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 remember 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 Company 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 accountant's Report
Once a year, an outside auditor looks over our
books and certifies that the financial statements
are fairly presented and comply 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
measure how well they are doing. A definition of
the selected index is also provided. Investors
cannot invest directly in an index.
<PAGE>
Prudential Small Company Fund, Inc.
Class A Growth of a $10,000 Investment
(GRAPH)
Average Annual Total Returns as of 9/30/00
Since Inception
One Year Five Years Ten Years (1/22/90)
With Sales Charge 9.91% 8.40% 14.62% 12.13%
Without Sales Charge 15.70% 9.52% 15.21% 12.67%
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 best- and worst-year information
within the graph is designed to give you an idea of
how much the Fund's returns can fluctuate from year
to year by measuring the best and worst calendar
years in terms of total annual return for the ten-
year period. The graph compares a $10,000
investment in Prudential Small Company Fund, Inc.
(Class A shares) with a similar investment in the
Russell 2000 Index (the Index) by portraying the
initial account value at the beginning of the ten-
year period of Class A shares, and the account
value at the end of the current fiscal year
(September 30, 2000), as measured on a quarterly
basis. 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 Index is a weighted index representing the
smallest 2,000 stocks among the largest 3,000
equity-capitalized U.S. corporations, and
represents approximately 10% of their aggregate
market value. 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. The Index is not
the only one that may be used to characterize
performance of equity funds. Other indexes may
portray different comparative performance.
Investors cannot invest directly in an index.
This graph is furnished to you in accordance with
SEC regulations.
<PAGE>
www.prudential.com (800) 225-1852
Class B Growth of a $10,000 Investment
Average Annual Total Returns as of 9/30/00
Since Inception
One Year Five Years Ten Years (11/13/80)
With Sales Charge 9.88% 8.58% 14.33% 11.25%
Without Sales Charge 14.88% 8.72% 14.33% 11.25%
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 best- and worst-year information
within the graph is designed to give you an idea of
how much the Fund's returns can fluctuate from year
to year by measuring the best and worst calendar
years in terms of total annual return for the ten-
year period. The graph compares a $10,000
investment in the Prudential Small Company Fund,
Inc. (Class B shares) with a similar investment in
the Russell 2000 Index (the Index) by portraying
the initial account value at the beginning of the
ten-year period of Class B shares, and the account
value at the end of the current fiscal year
(September 30, 2000), as measured on a quarterly
basis. 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
September 30, 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 Index is a weighted index representing the
smallest 2,000 stocks among the largest 3,000
equity-capitalized U.S. corporations, and
represents approximately 10% of their aggregate
market value. 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. The Index is not
the only one that may be used to characterize
performance of equity funds. Other indexes may
portray different comparative performance.
Investors cannot invest directly in an index.
This graph is furnished to you in accordance with
SEC regulations.
<PAGE>
Prudential Small Company Fund, Inc.
Class C Growth of a $10,000 Investment
Average Annual Total Returns as of 9/30/00
One Year Five Years Ten Years Since Inception
With Sales Charge 12.73% 8.51% N/A 10.96%
Without Sales Charge 14.88% 8.72% N/A 11.15%
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 best- and worst-year information
within the graph is designed to give you an idea of
how much the Fund's returns can fluctuate from year
to year by measuring the best and worst calendar
years in terms of total annual return since
inception of the share class.The graph compares a
$10,000 investment in the Prudential Small Company
Fund, Inc. (Class C shares) with a similar
investment in the Russell 2000 Index (the Index) by
portraying the initial account value at the
commencement of operations of Class C shares, and
the account values at the end of the current fiscal
year (September 30, 2000), as measured on a
quarterly basis. 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 September 30,
2000; (c) all recurring fees (including management
fees) were deducted; and (d) all dividends and
distributions were reinvested.
The Index is a weighted index representing the
smallest 2,000 stocks among the largest 3,000
equity-capitalized U.S. corporations, and
represents approximately 10% of their aggregate
market value. 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. The Index is not
the only one that may be used to characterize
performance of equity funds. Other indexes may
portray different comparative performance.
Investors cannot invest directly in an index.
This graph is furnished to you in accordance with
SEC regulations.
<PAGE>
www.prudential.com (800) 225-1852
Class Z Growth of a $10,000 Investment
Average Annual Total Returns as of 9/30/00
One Year Five Years Ten Years Since Inception
With Sales Charge 15.97% N/A N/A 10.39%
Without Sales Charge 15.97% N/A N/A 10.39%
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 best- and worst-year information
within the graph is designed to give you an idea of
how much the Fund's returns can fluctuate from year
to year by measuring the best and worst calendar
years in terms of total annual return since
inception of the share class.The graph compares a
$10,000 investment in the Prudential Small Company
Fund, Inc. (Class Z shares) with a similar
investment in the Russell 2000 Index (the Index) by
portraying the initial account value at the
commencement of operations of Class Z shares, and
the account value at the end of the current fiscal
year (September 30, 2000), as measured on a
quarterly basis. 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 Index is a weighted index representing the
smallest 2,000 stocks among the largest 3,000
equity-capitalized U.S. corporations, and
represents approximately 10% of their aggregate
market value. 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. The Index is not
the only one that may be used to characterize
performance of equity funds. Other indexes may
portray different comparative performance.
Investors cannot invest directly in an index.
This graph is furnished to you in accordance with
SEC regulations.
<PAGE>
FOR MORE INFORMATION
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
Visit Prudential's website at:
http://www.prudential.com
Directors
Saul K. Fenster, Ph.D.
Delayne Dedrick Gold
Robert F. Gunia
Douglas H. McCorkindale
W. Scott McDonald, Jr.
Thomas T. Mooney
Stephen P. Munn
David R. Odenath, Jr.
Richard A. Redeker
Judy A. Rice
Robin B. Smith
Louis A. Weil, III
Clay T. Whitehead
Officers
David R. Odenath, Jr., President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Marguerite E. H. Morrison, Secretary
William V. Healey, Assistant Secretary
Jonathan D. Shain, Assistant Secretary
Manager
Prudential Investments
Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
Jennison Associates LLC
466 Lexington Avenue
New York, NY 10017
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 8098
Philadelphia, PA 19101
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 PGOAX 743968109
Class B CHNDX 743968208
Class C PSCCX 743968307
Class Z PSCZX 743968406
MF109E
Printed on Recycled Paper
