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SIGNATURE SUSAN COTE'
TITLE TREASURER
For period ending (a) December 31, 1993
File number (c) 811-2927
Sub Item 77Q-1
PRUDENTIAL-BACHE TAX-FREE MONEY FUND, INC.
MANAGEMENT AGREEMENT
Agreement, made this 2nd day of May, 1988, as amended on
November 19, 1993, between Prudential-Bache Tax-Free Money Fund,
Inc., a Maryland corporation (the "Fund"), and Prudential Mutual
Fund Management, Inc., a Delaware corporation (the "Manager").
W I T N E S S E T H
WHEREAS, the Fund is a diversified, open-end management
investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, the Fund desires to retain the Manager to render or
contract to obtain as hereinafter provided investment advisory
services to the Fund and the Fund also desires to avail itself of
the facilities available to the Manager with respect to the
administration of its day to day corporate affairs, and the Manager
is willing to render such investment advisory and administrative
services;
NOW, THEREFORE, the parties agree as follows:
1. The Fund hereby appoints the Manager to act as manager of
the Fund and administrator of its corporate affairs for the period
and on the terms set forth in this Agreement. The Manager accepts
such appointment and agrees to render the services herein
described, for the compensation herein provided. The Manager will
enter into an agreement, dated the date hereof, with The
Prudential Investment Corporation ("PIC") pursuant to which PIC
shall furnish to the Fund the investment advisory services
specified therein in connection with the management of the Fund.
Such agreement in the form attached as Exhibit A is hereinafter
referred to as the "Subadvisory Agreement." The Manager will
continue to have responsibility for all investment advisory
services furnished pursuant to the Subadvisory Agreement.
2. Subject to the supervision of the Board of Directors of
the Fund, the Manager shall administer the Fund's corporate affairs
and, in connection therewith, shall furnish the Fund with office
facilities and with clerical, bookkeeping and recordkeeping
services at such office facilities and, subject to Section 1 hereof
and the Subadvisory Agreement, the Manager shall manage the
investment operations of the Fund and the composition of the Fund's
portfolio, including the purchase, retention and disposition
thereof, in accordance with the Fund's investment objectives,
policies and restrictions as stated in the Prospectus (hereinafter
defined) and subject to the following understandings:
(a) The Manager shall provide supervision of the Fund's
investments and determine from time to time what investments
or securities will be purchased, retained, sold or loaned by
the Fund, and what portion of the assets will be invested or
held uninvested as cash.
(b) The Manager, in the performance of its duties and
obligations under this Agreement, shall act in conformity
with the Articles of Incorporation, By-Laws and Prospectus
(hereinafter defined) of the Fund and with the instructions
and directions of the Board of Directors of the Fund and will
conform to and comply with the requirements of the 1940 Act
and all other applicable federal and state laws and
regulations.
(c) The Manager shall determine the securities and
futures contracts to be purchased or sold by the Fund and
will place orders pursuant to its determinations with or
through such persons, brokers, dealers or futures commission
merchants (including but not limited to Prudential Securities
Incorporated) in conformity with the policy with respect to
brokerage as set forth in the Fund's Registration Statement
and Prospectus (hereinafter defined) or as the Board of
Directors may direct from time to time. In providing the
Fund with investment supervision, it is recognized that the
Manager will give primary consideration to securing the most
favorable price and efficient execution. Consistent with
this policy, the Manager may consider the financial
responsibility, research and investment information and other
services provided by brokers, dealers or futures commission
merchants who may effect or be a party to any such
transaction or other transactions to which other clients of
the Manager may be a party. It is understood that Prudential
Securities Incorporated may be used as principal broker for
securities transactions but that no formula has been adopted
for allocation of the Fund's investment transaction business.
It is also understood that it is desirable for the Fund that
the Manager have access to supplemental investment and market
research and security and economic analysis provided by
brokers or futures commission merchants and that such brokers
may execute brokerage transactions at a higher cost to the
Fund than may result when allocating brokerage to other
brokers or futures commission merchants on the basis of
seeking the most favorable price and efficient execution.
Therefore, the Manager is authorized to pay higher brokerage
commissions for the purchase and sale of securities and
futures contracts for the Fund to brokers or futures
commission merchants who provide such research and analysis,
subject to review by the Fund's Board of Directors from time
to time with respect to the extent and continuation of this
practice. It is understood that the services provided by
such broker or futures commission merchant may be useful to
the Manager in connection with its services to other clients.
On occasions when the Manager deems the purchase or sale
of a security or a futures contract to be in the best
interest of the Fund as well as other clients of the Manager
or the Subadviser, the Manager, to the extent permitted by
applicable laws and regulations, may, but shall be under no
obligation to, aggregate the securities or futures contracts
to be so sold or purchased in order to obtain the most
favorable price or lower brokerage commissions and efficient
execution. In such event, allocation of the securities or
futures contracts so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the
Manager in the manner it considers to be the most equitable
and consistent with its fiduciary obligations to the Fund and
to such other clients.
(d) The Manager shall maintain all books and records
with respect to the Fund's portfolio transactions and shall
render to the Fund's Board of Directors such periodic and
special reports as the Board may reasonably request.
(e) The Manager shall be responsible for the financial
and accounting records to be maintained by the Fund
(including those being maintained by the Fund's Custodian).
(f) The Manager shall provide the Fund's Custodian on
each business day with information relating to all
transactions concerning the Fund's assets.
(g) The investment management services of the Manager
to the Fund under this Agreement are not to be deemed
exclusive, and the Manager shall be free to render similar
services to others.
3. The Fund has delivered to the Manager copies of each
of the following documents and will deliver to it all future
amendments and supplements, if any:
(a) Articles of Incorporation of the Fund, as filed
with the Secretary of State of Maryland (such Articles of
Incorporation, as in effect on the date hereof and as amended
from time to time, are herein called the "Articles of
Incorporation");
(b) By-Laws of the Fund (such By-Laws, as in effect on
the date hereof and as amended from time to time, are herein
called the "By-Laws");
(c) Certified resolutions of the Board of Directors of
the Fund authorizing the appointment of the Manager and
approving the form of this agreement;
(d) Registration Statement under the 1940 Act and the
Securities Act of 1933, as amended, on Form N-1A (the
"Registration Statement"), as filed with the Securities and
Exchange Commission (the "Commission") relating to the Fund
and shares of the Fund's Common Stock and all amendments
thereto;
(e) Notification of Registration of the Fund under the
1940 Act on Form N-8A as filed with the Commission and all
amendments thereto; and
(f) Prospectus of the Fund (such Prospectus and
Statement of Additional Information, as currently in effect
and as amended or supplemented from time to time, being
herein called the "Prospectus").
4. The Manager shall authorize and permit any of its
directors, officers and employees who may be elected as directors
or officers of the Fund to serve in the capacities in which they
are elected. All services to be furnished by the Manager under this
Agreement may be furnished through the medium of any such
directors, officers or employees of the Manager.
5. The Manager shall keep the Fund's books and records
required to be maintained by it pursuant to paragraph 2 hereof.
The Manager agrees that all records which it maintains for the Fund
are the property of the Fund and it will surrender promptly to the
Fund any such records upon the Fund's request, provided however
that the Manager may retain a copy of such records. The Manager
further agrees to preserve for the periods prescribed by Rule 31a-2
under the 1940 Act any such records as are required to be
maintained by the Manager pursuant to Paragraph 2 hereof.
6. During the term of this Agreement, the Manager shall
pay the following expenses:
(i) the salaries and expenses of all personnel of the
Fund and the Manager except the fees and expenses of
directors who are not affiliated persons of the Manager or
the Fund's investment adviser,
(ii) all expenses incurred by the Manager or by the Fund
in connection with managing the ordinary course of the Fund's
business other than those assumed by the Fund herein, and
(iii) the costs and expenses payable to PIC pursuant to
the Subadvisory Agreement.
The Fund assumes and will pay the expenses described below:
(a) the fees and expenses incurred by the Fund in
connection with the management of the investment and
reinvestment of the Fund's assets,
(b) the fees and expenses of directors who are not
affiliated persons of the Manager or the Fund's investment
adviser,
(c) the fees and expenses of the Custodian that relate
to (i) the custodial function and the recordkeeping connected
therewith, (ii) preparing and maintaining the general
accounting records of the Fund and the providing of any such
records to the Manager useful to the Manager in connection
with the Manager's responsibility for the accounting records
of the Fund pursuant to Section 31 of the 1940 Act and the
rules promulgated thereunder, (iii) the pricing of the shares
of the Fund, including the cost of any pricing service or
services which may be retained pursuant to the authorization
of the Board of Directors of the Fund, and (iv) for both mail
and wire orders, the cashiering function in connection with
the issuance and redemption of the Fund's securities,
(d) the fees and expenses of the Fund's Transfer and
Dividend Disbursing Agent, which may be the Custodian, that
relate to the maintenance of each shareholder account,
(e) the charges and expenses of legal counsel and
independent accountants for the Fund,
(f) brokers' commissions and any issue or transfer
taxes chargeable to the Fund in connection with its
securities and futures transactions,
(g) all taxes and corporate fees payable by the Fund
to federal, state or other governmental agencies,
(h) the fees of any trade associations of which the
Fund may be a member,
(i) the cost of stock certificates representing, and/or
non-negotiable share deposit receipts evidencing, shares of
the Fund,
(j) the cost of fidelity, directors and officers and
errors and omissions insurance,
(k) the fees and expenses involved in registering and
maintaining registration of the Fund and of its shares with
the Securities and Exchange Commission, registering the Fund
as a broker or dealer and qualifying its shares under state
securities laws, including the preparation and printing of
the Fund's registration statements, prospectuses and
statements of additional information for filing under federal
and state securities laws for such purposes,
(l) allocable communications expenses with respect to
investor services and all expenses of shareholders' and
directors' meetings and of preparing, printing and mailing
reports to shareholders in the amount necessary for
distribution to the shareholders,
(m) litigation and indemnification expenses and other
extraordinary expenses not incurred in the ordinary course
of the Fund's business, and
(n) any expenses assumed by the Fund pursuant to a Plan
of Distribution adopted in conformity with Rule 12b-1 under
the 1940 Act.
7. In the event the expenses of the Fund for any fiscal
year (including the fees payable to the Manager but excluding
interest, taxes, brokerage commissions, distribution fees and
litigation and indemnification expenses and other extraordinary
expenses not incurred in the ordinary course of the Fund's
business) exceed the lowest applicable annual expense limitation
established and enforced pursuant to the statute or regulations of
any jurisdictions in which shares of the Fund are then qualified
for offer and sale, the compensation due the Manager will be
reduced by the amount of such excess, or, if such reduction exceeds
the compensation payable to the Manager, the Manager will pay to
the Fund the amount of such reduction which exceeds the amount of
such compensation.
8. For the services provided and the expenses assumed
pursuant to this Agreement, the fund will pay to the Manager as
full compensation therefor a fee at an annual rate of .50 of 1% of
the Fund's average daily net assets up to $750 million, .425 of 1%
on assets between $750 million and $1.5 billion and .375 of 1% on
assets in excess of $1.5 billion of the Fund's average daily net
assets. This fee will be computed daily and will be paid to the
Manager monthly. Any reduction in the fee payable and any payment
by the Manager to the Fund pursuant to paragraph 7 shall be made
monthly. Any such reductions or payments are subject to
readjustment during the year.
9. The Manager shall not be liable for any error of
judgment or for any loss suffered by the Fund in connection with
the matters to which this Agreement relates, except a loss
resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services (in which case any award of
damages shall be limited to the period and the amount set forth in
Section 36(b)(3) of the 1940 Act) or loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement.
10. This Agreement shall continue in effect for a
period of more than two years from the date hereof only so long as
such continuance is specifically approved at least annually in
conformity with the requirements of the 1940 Act; provided,
however, that this Agreement may be terminated by the Fund at any
time, without the payment of any penalty, by the Board of Directors
of the Fund or by vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Fund, or by the
Manager at any time, without the payment of any penalty, on not
more than 60 days' nor less than 30 days' written notice to the
other party. This Agreement shall terminate automatically in the
event of its assignment (as defined in the 1940 Act).
11. Nothing in this Agreement shall limit or restrict
the right of any director, officer or employee of the Manager who
may also be a director, officer or employee of the Fund to engage
in any other business or to devote his or her time and attention in
part to the management or other aspects of any business, whether of
a similar or dissimilar nature, nor limit or restrict the right of
the Manager to engage in any other business or to render services
of any kind to any other corporation, firm, individual or
association.
12. Except as otherwise provided herein or authorized
by the Board of Directors of the Fund from time to time, the
Manager shall for all purposes herein be deemed to be an
independent contractor and shall have no authority to act for or
represent the Fund in any way or otherwise be deemed an agent of
the Fund.
13. During the term of this Agreement, the Fund agrees
to furnish the Manager at its principal office all prospectuses,
proxy statements, reports to shareholders, sales literature, or
other material prepared for distribution to shareholders of the
Fund or the public, which refer in any way to the Manager, prior to
use thereof and not to use such material if the Manager reasonably
objects in writing within five business days (or such other time as
may be mutually agreed) after receipt thereof. In the event of
termination of this Agreement, the Fund will continue to furnish to
the Manager copies of any of the above mentioned materials which
refer in any way to the Manager. Sales literature may be furnished
to the Manager hereunder by first-class or overnight mail,
facsimile transmission equipment or hand delivery. The Fund shall
furnish or otherwise make available to the Manager such other
information relating to the business affairs of the Fund as the
Manager at any time, or from time to time, reasonably requests in
order to discharge its obligations hereunder.
14. This Agreement may be amended by mutual consent,
but the consent of the Fund must be obtained in conformity with the
requirements of the 1940 Act.
15. Any notice or other communication required to be
given pursuant to this Agreement shall be deemed duly given if
delivered or mailed by registered mail, postage prepaid, (1) to the
Manager at One Seaport Plaza, New York, N.Y. 10292, Attention:
Secretary; or (2) to the Fund at One Seaport Plaza, New York, N.Y.
10292, Attention: President.
16. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
17. The Fund may use the name "Prudential-Bache Tax-
Free Money Fund, Inc." or any name including the words "Prudential"
or "Bache" only for so long as this Agreement or any extension,
renewal or amendment hereof remains in effect, including any
similar agreement with any organization which shall have succeeded
to the Manager's business as Manager or any extension, renewal or
amendment thereof remain in effect. At such time as such an
agreement shall no longer be in effect, the Fund will (to the
extent that it lawfully can) cease to use such a name or any other
name indicating that it is advised by, managed by or otherwise
connected with the Manager, or any organization which shall have so
succeeded to such businesses. In no event shall the Fund use the
name "Prudential-Bache Tax-Free Money Fund, Inc." or any name
including the word "Prudential" or "Bache" if the Manager's
function is transferred or assigned to a company of which The
Prudential Insurance Company of America does not have control.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as of
the day and year first above written.
PRUDENTIAL-BACHE TAX-FREE MONEY FUND, INC.
By:
Lawrence C. McQuade
President
PRUDENTIAL MUTUAL FUND MANAGEMENT, INC.
By:
Robert F. Gunia
Executive Vice President
[agr2]tfm-mgmt.agr
February 16, 1994
To the Board of Directors of
Prudential Tax-Free Money Fund
In planning and performing our audit of the financial statements of
Prudential Tax-Free Money Fund (the "Fund") for the year ended
December 31, 1993, we considered its internal control structure,
including procedures for safeguarding securities, in order to
determine our auditing procedures for the purposes of expressing our
opinion on the financial statements and to comply with the
requirements of Form N-SAR, and not to provide assurance on the
internal control structure.
The management of the Fund is responsible for establishing and
maintaining an internal control structure. In fulfilling this
responsibility, estimates and judgments by management are required to
assess the expected benefits and related costs of internal control
structure policies and procedures. Two of the objectives of an
internal control structure are to provide management with reasonable,
but not absolute, assurance that assets are appropriately safeguarded
against loss from unauthorized use or disposition and that
transactions are executed in accordance with management's
authorization and recorded properly to permit preparation of financial
statements in conformity with generally accepted accounting
principles.
Because of inherent limitations in any internal control structure,
errors or irregularities may occur and not be detected. Also,
projection of any evaluation of the structure to future periods is
subject to the risk that it may become inadequate because of changes
in conditions or that the effectiveness of the design and operation
may deteriorate.
Our consideration of the internal control structure would not
necessarily disclose all matters in the internal control structure
that might be material weaknesses under standards established by the
American Institute of Certified Public Accountants. A material
weakness is a condition in which the design or operation of the
specific internal control structure elements does not reduce to a
relatively low level the risk that errors or irregularities in amounts
that would be material in relation to the financial statements being
audited may occur and not be detected within a timely period by
employees in the normal course of performing their assigned functions.
However, we noted no matters involving the internal control structure,
including procedures for safeguarding securities, that we consider to
be material weaknesses as defined above as of December 31, 1993.
This report is intended solely for the information and use of
management and the Securities and Exchange Commission.
PRICE WATERHOUSE
1177 Avenue of the Americas
New York, NY 10036
