As filed with the Securities and Exchange Commission
on May 31, 1995
Securities Act Registration No. 2-64625
Investment Company Act Registration No. 811-2927
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 19 /X/
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 20 /X/
(Check appropriate box or boxes)
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PRUDENTIAL-BACHE TAX-FREE MONEY FUND, INC.
(Exact name of registrant as specified in charter)
(doing business as Prudential Tax-Free Money Fund)
ONE SEAPORT PLAZA,
NEW YORK, NEW YORK 10292
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 214-1250
S. Jane Rose, Esq.
One Seaport Plaza
New York, New York 10292
(Name and Address of Agent for Service of Process)
Approximate date of proposed public offering:
As soon as practicable after the effective
date of the Registration Statement.
It is proposed that this filing will become effective
(check appropriate box):
/ / immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/X/ on August 1, 1995 pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
Registrant has registered an indefinite number of shares under the Securities
Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act of 1940. The
Rule 24f-2 Notice for the Registrant's most recent fiscal year ended December
31, 1994 was filed on February 24, 1995.
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<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 495)
<TABLE>
<CAPTION>
N-1a Item No. Location
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Part A
<S> <C> <C> <C>
Item 1. Cover Page.................................................. Cover Page
Item 2. Synopsis.................................................... Fund Expenses
Item 3. Condensed Financial Information............................. Fund Expenses; Financial
Highlights; Calculation of
Yield
Item 4. General Description of Registrant........................... Cover Page; Fund Highlights;
How the Fund Invests; General
Information
Item 5. Management of the Fund...................................... Financial Highlights; How the
Fund is Managed
Item 6. Capital Stock and Other Securities.......................... Taxes, Dividends and
Distributions; General
Information
Item 7. Purchase of Securities Being Offered........................ Shareholder Guide; How the
Fund Values its Shares
Item 8. Redemption or Repurchase.................................... Shareholder Guide; How the
Fund Values its Shares;
General Information
Item 9. Pending Legal Proceedings................................... Not Applicable
Part B
Item 10. Cover Page.................................................. Cover Page
Item 11. Table of Contents........................................... Table of Contents
Item 12. General Information and History............................. General Information
Item 13. Investment Objectives and Policies.......................... Investment Objective and
Policies; Investment
Restrictions
Item 14. Management of the Fund...................................... Directors and Officers;
Manager; Distributor
Item 15. Control Persons and Principal Holders of Securities......... Not Applicable
Item 16. Investment Advisory and Other Services...................... Manager; Distributor;
Custodian and Transfer and
Dividend Disbursing Agent and
Independent Accountants
Item 17. Brokerage Allocation and Other Practices.................... Portfolio Transactions and
Brokerage
Item 18. Capital Stock and Other Securities.......................... Not Applicable
Item 19. Purchase, Redemption and Pricing of Securities Being Shareholder Investment
Offered..................................................... Account; Net Asset Value
Item 20. Tax Status.................................................. Taxes, Dividends and
Distributions
Item 21. Underwriters................................................ Distributor
Item 22. Calculation of Performance Data............................. Performance Information
Item 23. Financial Statements........................................ Financial Statements
Part C
Information required to be included in Part C is set forth under the appropriate Item, so
numbered, in Part C to this Post-Effective Amendment to the Registration Statement.
</TABLE>
<PAGE>
Prudential Tax-Free Money Fund, Inc.
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Prospectus dated August 1, 1995
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Prudential Tax-Free Money Fund, Inc. (the Fund), is an open-end diversified
management investment company whose investment objective is to attain for
investors the highest level of current income that is exempt from federal
income taxes, consistent with liquidity and the preservation of capital. The
Fund will invest in short-term tax-exempt debt securities of state and local
governments. There can be no assurance that the Fund's investment objective
will be achieved. See "How the Fund Invests--Investment Objective and
Policies." The Fund's address is One Seaport Plaza, New York, New York 10292,
and its telephone number is (800) 225-1852.
An investment in the Fund is neither insured nor guaranteed by the U.S.
Government and there can be no assurance that the Fund will be able to
maintain a stable net asset value of $1.00 per share. See "How the Fund Values
its Shares."
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This Prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing. Additional information
about the Fund has been filed with the Securities and Exchange Commission in a
Statement of Additional Information, dated August 1, 1995, which information
is incorporated herein by reference (is legally considered a part of this
Prospectus) and available without charge upon request to the Fund at the
address or telephone number noted above.
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Investors are advised to read this Prospectus and retain it for future
reference.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
FUND HIGHLIGHTS
The following summary is intended to highlight certain information
contained in this Prospectus and is qualified in its entirety by the more
detailed information appearing elsewhere herein.
What Is Prudential Tax-Free Money Fund?
Prudential Tax-Free Money Fund is a mutual fund. A mutual fund pools the
resources of investors by selling its shares to the public and investing the
proceeds of such sale in a portfolio of securities designed to achieve its
investment objective. Technically, the Fund is an open-end, diversified
management investment company.
What Is the Fund's Investment Objective?
The investment objective of the Fund is to attain for investors the
highest level of current income that is exempt from federal income taxes,
consistent with liquidity and the preservation of capital. The Fund will seek
to achieve its investment objective by investing in a diversified portfolio of
short-term debt obligations issued by states, territories and possessions of
the United States and by the District of Columbia, and their political
subdivisions, duly constituted authorities and corporations, the interest from
which is wholly exempt from federal income tax in the opinion of bond counsel
to the issuer. There can be no assurance that the Fund's investment objective
will be achieved. See "How the Fund Invests--Investment Objective and
Policies" at page 6.
Risk Factors and Special Characteristics
It is anticipated that the Fund's net asset value will remain constant at
$1.00 per share, although this cannot be assured. In order to maintain such
constant net asset value, the Fund will value its portfolio securities at
amortized cost. While this method provides certainty in valuation, it may
result in periods during which the value of a security in its portfolio, as
determined by amortized cost, is higher or lower than the price the Fund would
receive if it sold such securities. See "How the Fund Values its Shares"
at page 11.
Who Manages the Fund?
Prudential Mutual Fund Management, Inc. (PMF or the Manager) is the
Manager of the Fund and is compensated for its services at an annual rate of
.50 of 1% of the Fund's average daily net assets up to $750 million, .425 of
1% of the Fund's average daily net assets between $750 million and $1.5
billion and .375 of 1% in excess of $1.5 billion. As of June 30, 1995, PMF
served as manager or administrator to [69] investment companies, including
[39] mutual funds, with aggregate assets of approximately $[45] billion. The
Prudential Investment Corporation (PIC or the Subadviser) furnishes investment
advisory services in connection with the management of the Fund under a
Subadvisory Agreement with PMF. See "How the Fund is Managed--Manager" at
page 9.
2
<PAGE>
Who Distributes the Fund's Shares?
Prudential Mutual Fund Distributors, Inc. (PMFD or the Distributor) acts as
the Distributor of the Fund's shares and is paid an annual service fee at the
rate of .125 of 1% of the average daily net assets of the Fund's shares. See
"How the Fund is Managed--Distributor" at page 9.
What Is the Minimum Investment?
The minimum initial investment is $1,000. The minimum subsequent
investment is $100. There is no minimum investment requirement for certain
employee savings plans. For purchases made through the Automatic Savings
Accumulation Plan the minimum initial and subsequent investment is $50. See
"Shareholder Guide--How to Buy Shares of the Fund" at page 13 and "Shareholder
Guide--Shareholder Services" at page 19.
How Do I Purchase Shares?
You may purchase shares of the Fund through Prudential Securities
Incorporated (Prudential Securities or PSI), Pruco Securities Corporation
(Prusec) or directly from the Fund, through its transfer agent, Prudential
Mutual Fund Services, Inc. (PMFS or the Transfer Agent) at the net asset value
per share (NAV) next determined after receipt of your purchase order by the
Transfer Agent or Prudential Securities. See "How the Fund Values its Shares"
at page 10 and "Shareholder Guide--How to Buy Shares of the Fund" at page 13.
How Do I Sell My Shares?
You may redeem shares of the Fund at any time at the NAV next determined
after Prudential Securities or the Transfer Agent receives your sell order.
See "Shareholder Guide--How to Sell Your Shares" at page 16.
How Are Dividends and Distributions Paid?
The Fund expects to declare daily and pay monthly dividends of net
investment income and short-term capital gains, if any, and make distributions
annually of any net long-term capital gains. Dividends and distributions will
be automatically reinvested in additional shares of the Fund at NAV unless you
request that they be paid to you in cash. See "Taxes, Dividends and
Distributions" at page 12.
3
<PAGE>
FUND EXPENSES
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases ...................... None
Maximum Sales Load Imposed on Reinvested Dividends ........... None
Deferred Sales Load .......................................... None
Redemption Fees .............................................. None
Exchange Fee ................................................. None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees .............................................. .500%
12b-1 Fees ................................................... .125%
Other Expenses ............................................... .125%
------
Total Fund Operating Expenses ................................ .75%
======
Example 1 Year 3 Years 5 Years 10 Years
------- ------ ------- ------- --------
You would pay the following expenses
on a $1,000 investment, assuming
(1) 5% annual return and (2)
redemption at the end
of each time period: $8 $24 $42 $93
- ----------
The above example is based on data for the Fund's fiscal year ended
December 31, 1994. The example should not be considered a representation of
past or future expenses. Actual expenses may be greater or less than those
shown.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that an investor in the Fund will bear, whether
directly or indirectly. For more complete descriptions of the various costs
and expenses, see "How the Fund is Managed." "Other Expenses" include
operating expenses of the Fund, such as directors' and professional fees,
registration fees, reports to shareholders, transfer agency and custodian
fees.
4
<PAGE>
FINANCIAL HIGHLIGHTS
(for a share outstanding throughout each of the years indicated)
The following financial highlights with respect to each of the five years
in the period ended December 31, 1994, have been audited by Price Waterhouse
LLP, independent accountants, whose report thereon was unqualified. This
information should be read in conjunction with the financial statements and
notes thereto, which appear in the Statement of Additional Information. The
following financial highlights contain selected data for a share of beneficial
interest outstanding, total return, ratios to average net assets and other
supplemental data for each of the periods indicated. The information is based
on data contained in the financial statements.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988* 1987 1986 1985
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
PER SHARE OPERATING
PERFORMANCE:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of year ...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income and
realized gains ............... .023 .018 .026 .041 .053 .056 .047 .040 .044 .048
Dividends and distributions
to shareholders .............. (.023) (.018) (.026) (.041) (.053) (.056) (.047) (.040) (.044) (.048)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of year .. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
TOTAL RETURN:** ............... 2.31% 1.86% 2.63% 4.22% 5.42% 5.74% 4.83% 4.11% 4.50% 4.94%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000) ....................... $487,290 $601,622 $614,333 $616,867 $700,859 $653,268 $628,034 $630,822 $772,877 $363,186
Average net assets (000) ..... $644,481 $726,571 $669,588 $725,844 $701,869 $644,820 $705,161 $719,244 $671,626 $336,501
Ratios to average net assets:
Expenses, including
distribution fee ............ .75% .74% .74% .75% .74% .78% .77% .77% .68% .79%
Expenses, excluding
distribution fee ............ .63% .62% .62% .63% .61% .66% .64% .64% .56% .66%
Net investment income ........ 2.26% 1.84% 2.60% 4.15% 5.30% 5.65% 4.79% 4.08% 4.22% 4.88%
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<FN>
* On May 2, 1988, Prudential Mutual Fund Management, Inc. succeeded The
Prudential Insurance Company of America as investment adviser and since
then has acted as manager of the Fund. See "Manager" in the Statement
of Additional Information.
**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.
</FN>
</TABLE>
5
<PAGE>
CALCULATION OF YIELD
The Fund calculates its "current yield" based on the net change,
exclusive of realized and unrealized gains or losses, in the value of a
hypothetical account over a seven calendar day base period. The Fund also
calculates its "effective annual yield" assuming weekly compounding and its
"tax-equivalent yield." Tax-equivalent yield shows the taxable yield an
investor would have to earn from a fully taxable investment in order to equal
an after-tax equivalent to the Fund's tax-free yield and is calculated by
dividing the Fund's current or effective yield by the result of one minus the
maximum federal tax rate. The following are examples of the current yield,
effective annual yield and tax equivalent yield calculations as of December
31, 1994:
<TABLE>
<S> <C>
Value of hypothetical account at end of period ............................ $1.000712
Value of hypothetical account at beginning of period ...................... 1.000000
---------
Base period return ........................................................ $ .000712
=========
Current yield (.000712 * (365/7)) ......................................... 3.71%
Effective annual yield, assuming weekly compounding ....................... 3.78%
Tax equivalent yield (3.71% / (1-.396)) ................................... 6.14%
</TABLE>
The yield will fluctuate from time to time and is not necessarily
representative of future income or dividends.
The weighted average life to maturity of the Fund's portfolio on December
31, 1994 was 65 days.
Yield is computed in accordance with a standardized formula described in
the Statement of Additional Information. In addition, comparative performance
information may be used from time to time in advertising or marketing the
Fund's shares, including data from Lipper Analytical Services, Inc.,
Morningstar Publications, Inc., Donoghue's Money Fund Report, The Bank Rate
Monitor, other industry publications, business periodicals, rating services
and market indices.
HOW THE FUND INVESTS
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to attain for investors the
highest level of current income that is exempt from federal income taxes,
consistent with liquidity and the preservation of capital. The achievement of
the Fund's investment objective will depend on market conditions generally and
on the analytical and portfolio management skills of the Fund's investment
adviser. There is no assurance that the Fund's investment objective will be
achieved.
The Fund's investment objective is a fundamental policy and, therefore,
may not be changed without the approval of the holders of a majority of the
Fund's outstanding voting securities, as defined in the Investment Company Act
of 1940, as amended (the Investment Company Act). Policies that are not
fundamental may be modified by the Board of Directors.
The Fund will seek to achieve its investment objective by investing in a
diversified portfolio of short-term debt obligations issued by states,
territories and possessions of the United States and by the District of
Columbia, and their political subdivisions, duly constituted authorities and
corporations, the interest from which is wholly exempt from federal income tax
in the opinion of bond counsel to the issuer. Such securities are generally
known as "Municipal Bonds" or "Municipal Notes." Interest on certain Municipal
Bonds and Municipal Notes may be a preference item for purposes of the federal
alternative minimum tax. See "Taxes, Dividends and Distributions." The Fund
will maintain a dollar-weighted average maturity of its portfolio of 90 days
or less.
6
<PAGE>
The Fund will invest in high quality Municipal Bonds and Notes with
short-term maturities, as follows:
1. Municipal Bonds with remaining maturities of thirteen months or less
which have been rated, at the time of purchase, Aaa or Aa by Moody's Investors
Service, Inc. ("Moody's") or AAA or AA by Standard & Poor's Ratings Group
("S&P"), or, if not rated, are of comparable quality in the judgment of the
investment adviser under the direction of the Board of Directors; or
2. Municipal Notes with remaining maturities of thirteen months or less
which have been rated, at the time of purchase, MIG-1 or MIG-2 by Moody's; P-1
or P-2 by Moody's; SP-1 or SP-1 + by S&P; A-1 or A-2 by S&P; or, if not rated,
are of comparable quality in the judgment of the investment adviser under the
direction of the Board of Directors; or
3. Municipal Bonds or Notes with remaining maturities of thirteen months
or less which depend directly or indirectly on the credit of the United States
Government.
The Fund utilizes the amortized cost method of valuation in accordance
with regulations issued by the Securities and Exchange Commission (SEC). See
"How the Fund Values its Shares." Accordingly, the Fund will limit its
portfolio investments to those instruments which present minimal credit risks
and which are of "eligible quality" as determined by the Fund's investment
adviser under the supervision of the Board of Directors in accordance with
regulations of the SEC, as they may from time to time be amended. "Eligible
quality" for this purpose means a security (i) rated in one of the two highest
rating categories (a) by at least two nationally recognized statistical rating
organizations assigning a rating to the security or issuer or, (b) if only one
rating organization assigned a rating, by that rating organization or (ii) if
unrated, of comparable quality as determined by the investment adviser under
the supervision of the Board of Directors.
See Appendix A in the Statement of Additional Information for a
description of tax-exempt security ratings.
In addition to considering ratings assigned by the rating services in its
selection of portfolio securities for the Fund, the investment adviser will
consider, among other things, information concerning the financial history and
condition of the issuer, its revenue and expense prospects and, in the case of
revenue bonds, the financial history and condition of the source of revenue to
service the bonds. In the event that a Municipal Bond or Note held by the Fund
is assigned a lower rating or ceases to be rated, the investment adviser,
under the supervision of the Board of Directors, will promptly reassess
whether such security presents minimal credit risks and whether the Fund
should continue to hold the security in its portfolio. If a portfolio security
no longer presents minimal credit risks or is in default, the Fund will
dispose of the security as soon as reasonably practicable unless the Board of
Directors determines that to do so is not in the best interests of the Fund.
Variable Rate and Floating Rate Securities
The Fund may invest in Municipal Bonds and Notes which are "variable
rate" and "floating rate" obligations. The interest rates on such obligations
fluctuate generally with changes in market interest rates and the Fund is
typically able to demand repayment of the principal amount of such obligations
at par plus accrued interest either, in some cases, at specified intervals of
less than one year, or, in other cases, upon not less than seven days' notice.
For additional information concerning variable rate and floating rate
obligations, see "Investment Objective and Policies" in the Statement of
Additional Information.
Puts
The Fund may also purchase Municipal Bonds or Notes together with the
right to resell such Bonds or Notes at an agreed-upon price or yield within a
specified period prior to the maturity date of the Bonds or Notes. Such a
right to resell is commonly known as a "put" or a "tender option," and the
aggregate price which the Fund pays for Municipal Bonds or Notes with puts or
tender options is higher than the price which would otherwise be paid for the
Bonds or Notes. For a more detailed description of Municipal Bonds and Notes,
and puts thereon, see "Investment Objective and Policies" in the Statement of
Additional Information.
When-Issued and Delayed Delivery Securities
The Fund may purchase municipal obligations on a when-issued or delayed
delivery basis, in each case without limit. When municipal obligations are
offered on a when-issued or delayed delivery basis, the price and coupon rate
are fixed at the time the
7
<PAGE>
commitment to purchase is made, but delivery and payment for such securities
take place at a later date. During the period between purchase and settlement,
no interest accrues to the purchaser. In the case of purchases of such
securities by the Fund, the price that the Fund is required to pay on the
settlement date may be in excess of the market value of the municipal
obligations on that date. While securities may be sold prior to the settlement
date, the Fund intends to purchase these securities with the purpose of
actually acquiring them unless a sale would be desirable for investment
reasons. At the time the Fund makes the commitment to purchase a municipal
obligation on a when-issued or delayed delivery basis, it will record the
transaction and reflect the value of the obligation, each day, in determining
its net asset value. This value may fluctuate from day to day in the same
manner as values of municipal obligations otherwise held by the Fund. If the
seller defaults on the sale, the Fund could fail to realize the appreciation,
if any, that had occurred. The Fund will establish a segregated account with
its Custodian in which it will maintain cash and liquid, high-grade debt
obligations equal in value to its commitments for when-issued or delayed
delivery securities.
Repurchase Agreements
Up to 5% of the Fund's assets may be invested in repurchase agreements
whereby the seller of a security agrees to repurchase that security from the
Fund at a mutually agreed-upon time and price. The period of maturity is
usually quite short, possibly overnight or a few days, although it may extend
over a number of months. The resale price is in excess of the purchase price,
reflecting an agreed-upon rate of return effective for the period of time the
Fund's money is invested in the security. The Fund's repurchase agreements
will at all times be fully collateralized in an amount at least equal to the
purchase price, including accrued interest earned on the underlying
securities. The instruments held as collateral are valued daily, and if the
value of instruments declines, the Fund will require additional collateral. If
the seller defaults and the value of the collateral securing the repurchase
agreement declines, the Fund may incur a loss. The Fund participates in a
joint repurchase account with other investment companies managed by Prudential
Mutual Fund Management, Inc. pursuant to an order of the Securities and
Exchange Commission (SEC).
Illiquid Securities
The Fund may invest up to 10% of its net assets in illiquid securities,
including repurchase agreements which have a maturity of longer than seven
days, securities with legal or contractual restrictions on resale (restricted
securities) and securities that are not readily marketable. Restricted
securities eligible for resale pursuant to Rule 144A under the Securities Act
of 1933, as amended (the Securities Act), privately placed commercial paper
and municipal lease obligations if in each case such investments have a
readily available market are not considered illiquid for purposes of this
limitation. The investment adviser will monitor the liquidity of such
restricted securities under the supervision of the Board of Directors.
Repurchase agreements subject to demand are deemed to have a maturity equal to
the applicable notice period.
OTHER INVESTMENTS AND POLICIES
The Fund intends to hold portfolio securities to maturity; however, it
may sell any security at any time in order to meet redemption requests or if
such action, in the judgment of the investment adviser, is appropriate based
on the investment adviser's evaluation of the issuer or of market conditions.
The Fund anticipates being as fully invested as practicable in Municipal
Bonds and Notes; however, because the Fund does not intend to invest in
taxable obligations, there may be occasions when, as a result of maturities of
portfolio securities or sales of Fund shares or in order to meet anticipated
redemption requests, the Fund may hold cash which is not earning income. In
addition, there may be occasions when, in order to raise cash to meet
redemptions, the Fund might be required to sell securities at a loss.
The Fund does not presently intend to borrow money except to the extent
that the entry into reverse repurchase agreements may be considered borrowing.
From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on municipal bonds and notes and for providing state and local
governments with federal credit assistance. Reevaluation of the Fund's
investment objective and structure might be necessary in the future due to
market conditions which may result from future changes in the tax laws.
8
<PAGE>
INVESTMENT RESTRICTIONS
The Fund is subject to certain investment restrictions which, like its
investment objective, constitute fundamental policies. Fundamental policies
cannot be changed without the approval of the holders of a majority of the
Fund's outstanding voting securities, as defined in the Investment Company
Act. See "Investment Restrictions" in the Statement of Additional Information.
HOW THE FUND IS MANAGED
The Fund has a Board of Directors which, in addition to overseeing the
actions of the Fund's Manager, Subadviser and Distributor, as set forth below,
decides upon matters of general policy. The Fund's officers conduct and
supervise the daily business operations of the Fund. The Fund's Subadviser
furnishes daily investment advisory services.
For the year ended December 31, 1994, total expenses of the Fund as a
percentage of average net assets were .75%. See "Financial Highlights."
MANAGER
Prudential Mutual Fund Management, Inc. (PMF or the Manager), One Seaport
Plaza, New York, New York 10292, is the Manager of the Fund and is compensated
for its services at an annual rate of .50 of 1% of the Fund's average daily
net assets up to $750 million, .425 of 1% of the Fund's average daily net
assets between $750 million and $1.5 billion and .375 of 1% in excess of $1.5
billion. It was incorporated in May 1987 under the laws of the State of
Delaware. For the fiscal year ended December 31, 1994, the Fund paid
management fees to PMF of .50% of the average net assets of the Fund. See
"Manager" in the Statement of Additional Information.
As of June 30, 1995, PMF served as the manager to [39] open-end
investment companies, constituting all of the Prudential Mutual Funds, and as
manager or administrator to [30] closed-end investment companies with
aggregate assets of approximately $[45] billion.
Under the Management Agreement with the Fund, PMF manages the investment
operations of the Fund and also administers the Fund's corporate affairs. See
"Manager" in the Statement of Additional Information.
Under a Subadvisory Agreement between PMF and The Prudential Investment
Corporation (PIC or the Subadviser), a wholly-owned subsidiary of Prudential,
PIC furnishes investment advisory services in connection with the management
of the Fund and is reimbursed by PMF for its reasonable costs and expenses
incurred in providing such services. Under the Management Agreement, PMF
continues to have responsibility for all investment advisory services and
supervises PIC's performance of such services.
PMF and PIC are indirect, wholly-owned subsidiaries of The Prudential
Insurance Company of America (Prudential), a major diversified insurance and
financial services company.
DISTRIBUTOR
Prudential Mutual Fund Distributors, Inc. (PMFD or the Distributor), One
Seaport Plaza, New York, New York 10292, is a corporation organized under the
laws of the State of Delaware and serves as the Fund's Distributor. It is a
wholly-owned subsidiary of PMF.
Under a Distribution and Service Plan (the Plan) adopted by the Fund
under Rule 12b-1 under the Investment Company Act and a distribution and
service agreement (the Distribution Agreement), the Distributor incurs the
9
<PAGE>
expenses of distributing shares of the Fund. These expenses include account
servicing fees paid to, or on account of, financial advisers of Prudential
Securities Incorporated (Prudential Securities or PSI) and representatives of
Pruco Securities Corporation (Prusec), affiliated broker-dealers, account
servicing fees paid to, or on account of, other broker-dealers or financial
institutions (other than national banks) which have entered into agreements
with the Distributor, advertising expenses, the cost of printing and mailing
prospectuses to potential investors and indirect and overhead costs of
Prudential Securities and Prusec associated with the sale of the Fund's
shares, including lease, utility, communications and sales promotion expenses.
The State of Texas requires that shares of the Fund may be sold in that state
only by dealers or other financial institutions which are registered there as
broker-dealers.
Under the Plan, the Fund is obligated to pay a service fee to the
Distributor as compensation for its distribution and service activities, not
as reimbursement for specific expenses incurred. If the Distributor's expenses
exceed its distribution and service fees, the Fund will not be obligated to
pay any additional expenses. If the Distributor's expenses are less than such
distribution and service fees, it will retain its full fees and realize a
profit.
Under the Plan, the Fund pays the Distributor for its
distribution-related activities at an annual rate of .125 of 1% of the Fund's
average daily net assets. Account servicing fees are paid based on the average
balance of the Fund's shares held in the accounts of customers of financial
advisers. The entire distribution fee may be used to pay account servicing
fees.
For the fiscal year ended December 31, 1994, PMFD incurred distribution
expenses in the aggregate of $805,601, all of which were recovered through the
distribution fees paid by the Fund to PMFD. The Fund records all payments made
under the Plan as expenses in the calculation of its net investment income.
Prior to the date of this Prospectus, the Plan operated as a "reimbursement
type" plan. See "Distributor" in the Statement of Additional Information.
The Plan provides that it shall continue in effect from year to year,
provided that each such continuance is approved annually by a majority vote of
the Board of Directors of the Fund, including a majority of the directors who
are not interested persons of the Fund and who have no direct or indirect
financial interest in the operation of the Plan or any agreements related to
the Plan. The Board of Directors is provided with and reviews quarterly
reports of expenditures under the Plan. The Plan may be terminated at any time
by vote of a majority of the Rule 12b-1 Directors or of a majority of the
Fund's outstanding shares. The Fund will not be obligated to pay expenses
incurred under the Plan if it is terminated or not continued.
In addition to service fees paid by the Fund under the Plan, the Manager
(or one of its affiliates) may make payments out of its own resources to
dealers and other persons which distribute shares of the Fund. Such payments
may be calculated by reference to the net asset value of shares sold by such
persons or otherwise.
On October 21, 1993, PSI entered into an omnibus settlement with the SEC,
state securities regulators (with the exception of the Texas Securities
Commissioner who joined the settlement on January 18, 1994) and the National
Association of Securities Dealers, Inc. to resolve allegations that from 1980
through 1990 PSI sold certain limited partnership interests in violation of
securities laws to persons for whom such securities were not suitable and
misrepresented the safety, potential returns and liquidity of these
investments. Without admitting or denying the allegations asserted against it,
PSI consented to the entry of an SEC Administrative Order which stated that
PSI's conduct violated the federal securities laws, directed PSI to cease and
desist from violating the federal securities laws, pay civil penalties, and
adopt certain measures to address the violations.
Pursuant to the terms of the SEC settlement, PSI agreed to the imposition
of a $10,000,000 civil penalty, established a settlement fund in the amount of
$330,000,000 and procedures to resolve legitimate claims for compensatory
damages by purchasers of the partnership interests. PSI has agreed to provide
additional funds, if necessary, for the purpose of the settlement fund. PSI's
settlement with the state securities regulators included an agreement to pay a
penalty of $500,000 per jurisdiction. PSI consented to a censure and to the
payment of a $5,000,000 fine in settling the NASD action.
In October 1994, a criminal complaint was filed with the United States
Magistrate for the Southern District of New York alleging that PSI committed
fraud in connection with the sale of certain limited partnership interests in
violation of federal securities laws. An agreement was simultaneously filed to
defer prosecution of these charges for a period of three years from the
signing of the agreement,
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provided that PSI complies with the terms of the agreement. If, upon
completion of the three year period, PSI has complied with the terms of the
agreement, no prosecution will be instituted by the United States for the
offenses charged in the complaint. If on the other hand, during the course of
the three year period, PSI violates the terms of the agreement, the U.S.
Attorney can then elect to pursue these charges. Under the terms of the
agreement, PSI agreed, among other things, to pay an additional $330,000,000
into the fund established by the SEC to pay restitution to investors who
purchased certain PSI limited partnership interests.
For more detailed information concerning the foregoing matters, see
"Distributor" in the Statement of Additional Information, a copy of which may
be obtained at no cost by calling 1-800-225-1852.
The Fund is not affected by PSI's financial condition and is an entirely
separate legal entity from PSI, which has no beneficial ownership therein and
the Fund's assets which are held by State Street Bank and Trust Company, an
independent custodian, are separate and distinct from PSI.
PORTFOLIO TRANSACTIONS
Prudential Securities may act as broker for the Fund, provided that the
commissions, fees or other remuneration it receives are fair and reasonable.
See "Portfolio Transactions and Brokerage" in the Statement of Additional
Information.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company (State Street or the Custodian), One
Heritage Drive, North Quincy, Massachusetts 02171, serves as Custodian for the
Fund's portfolio securities and cash and, in that capacity, maintains certain
financial and accounting books and records pursuant to an agreement with the
Fund. Its mailing address is P.O. Box 1713, Boston, Massachusetts 02105.
Prudential Mutual Fund Services, Inc. (PMFS or the Transfer Agent),
Raritan Plaza One, Edison, New Jersey 08837, serves as Transfer and Dividend
Disbursing Agent, and in those capacities maintains certain books and records
for the Fund. PMFS is a wholly-owned subsidiary of PMF. Its mailing address is
P.O. Box 15005, New Brunswick, New Jersey 08906-5005.
HOW THE FUND VALUES ITS SHARES
The Fund's net asset value per share or NAV is determined by subtracting
its liabilities from the value of its assets and dividing the remainder by the
number of outstanding shares. The Board of Directors has fixed the specific
time of day for the computation of the NAV to be as of 4:30 p.m., New York
time, immediately after the declaration of dividends.
The Fund will compute its NAV once daily on days that the New York Stock
Exchange is open for trading except on days on which no orders to purchase,
sell or redeem Fund shares have been received or days on which changes in the
value of the Fund's portfolio securities do not materially affect the NAV. The
New York Stock Exchange is closed on the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
The Fund determines the value of its portfolio securities by the
amortized cost method. This method involves valuing an instrument at its cost
and thereafter assuming a constant amortization to maturity of any discount or
premium regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Fund would receive if it sold the
instrument. During these periods, the yield to a shareholder may differ
somewhat from that which could be obtained from a similar fund which marks its
portfolio securities to the market each day. For example, during periods of
declining interest rates, if the use of the amortized cost method resulted in
lower value of the Fund's portfolio on a given day, a prospective investor in
the Fund would be able to obtain a somewhat higher yield and existing
shareholders would receive correspondingly less income. The converse would
apply during periods of rising
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interest rates. The Board of Directors has established procedures designed to
stabilize, to the extent reasonably possible, the Fund's NAV at $1.00 per
share. See "Net Asset Value" in the Statement of Additional Information.
TAXES, DIVIDENDS AND DISTRIBUTIONS
Taxation of the Fund
The Fund has elected to qualify and intends to remain qualified as a
regulated investment company under the Internal Revenue Code. Accordingly, the
Fund will not be subject to federal income taxes on its net investment income
and capital gains, if any, that it distributes to shareholders. In addition,
the Fund intends to invest its assets so that dividends payable from net
tax-exempt interest earned from Municipal Bonds and Notes will qualify as
exempt-interest dividends and thus be excluded from a shareholder's gross
income under the Internal Revenue Code. See "Taxes, Dividends and
Distributions" in the Statement of Additional Information.
Taxation of Shareholders
Distributions of net tax-exempt interest earned on Municipal Bonds and
Municipal Notes will be excluded from a shareholder's gross income under the
Internal Revenue Code. Distributions of net investment income (excluding such
exempt-interest dividends) and realized net short-term capital gains in excess
of net long-term capital losses of the Fund are taxable to shareholders of the
Fund as ordinary income, whether such distributions are received in cash or
reinvested in additional shares.
Interest on certain "private activity" tax-exempt obligations (as defined
in the Internal Revenue Code) issued on or after August 8, 1986 is a
preference item for purposes of the alternative minimum tax. The portion of an
exempt-interest dividend of the Fund that is allocable to such municipal
obligations will be treated as a preference item for purposes of the
alternative minimum tax. In addition, a portion of the tax-exempt dividend
interest received by corporate shareholders with respect to tax-exempt
obligations, whether or not private activity bonds, will be taken into account
in computing the alternative minimum tax. See "Taxes, Dividends and
Distributions" in the Statement of Additional Information.
Distributions of net long-term capital gains (i.e., the excess of net
long-term capital gains over net short-term capital losses) are taxable to
shareholders as long-term capital gains regardless of how long a shareholder
has held shares in the Fund. The Fund does not expect to realize long-term
capital gains or losses. In determining the amount of capital gains to be
distributed, any capital loss carryovers from prior years will be offset
against capital gains.
Neither distributions of net investment income nor distributions of
capital gains, if any, will be eligible for the 70% dividends received
deduction allowed to corporate shareholders. The maximum long-term capital
gains rate for individuals is currently 28%. The maximum long-term capital
gains rate for corporate shareholders is currently the same as the maximum tax
rate for ordinary income.
Distributions may be subject to state and local taxes. Shareholders are
advised to consult their own tax advisers regarding specific questions as to
federal, state or local taxes. See "Taxes, Dividends and Distributions" in the
Statement of Additional Information.
Withholding Taxes
Under the Internal Revenue Code, the Fund is generally required to
withhold and remit to the U.S. Treasury 31% of taxable dividends and capital
gain distributions payable to individuals and certain noncorporate
shareholders who fail to furnish correct tax identification numbers on IRS
Form W-9 (or IRS Form W-8 in the case of certain foreign shareholders).
Withholding at this rate is also required from dividends and capital gains
distributions [(but not redemption proceeds)] payable to shareholders who are
otherwise subject to backup withholding. Dividends from taxable net investment
income and short-term capital gains paid to a foreign shareholder will
generally be subject to U.S. withholding tax at the rate of 30% (or lower
treaty rate).
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Dividends and Distributions
The Fund expects to declare daily and pay monthly dividends of net
investment income and short-term capital gains, if any, and make distributions
annually of any net long-term capital gains. A shareholder begins to earn
dividends on the first business day after the settlement date of his or her
order and continues to earn dividends through the day on which his or her
shares are redeemed.
Dividends and distributions will be paid in additional shares of the Fund
based on the net asset value of the Fund's shares on the payment date, unless
the shareholder elects in writing not less than five business days prior to
the payment date to receive such dividends and distributions in cash. Such
election should be submitted to Prudential Mutual Fund Services, Inc.,
Attention: Account Maintenance, P.O. Box 15015, New Brunswick, New Jersey
08906-5015. If you hold your shares through Prudential Securities, you should
contact your financial adviser to elect to receive dividends and distributions
in cash. The Fund will notify each shareholder after the close of the Fund's
taxable year both of the dollar amount and taxable status of that year's
dividends and distributions on a per share basis.
GENERAL INFORMATION
DESCRIPTION OF COMMON STOCK
The Fund was incorporated in Maryland on March 22, 1979, and its
authorized capital stock consists of three billion shares of common stock of
$.01 par value. Shares of the Fund, when issued, are fully paid,
nonassessable, fully transferable and redeemable at the option of the
shareholder. Shares are also redeemable at the option of the Fund. See
"Shareholder Guide--How to Sell Your Shares." All shares are equal as to
earnings, assets and voting privileges. There are no conversion, pre-emptive
or other subscription rights. In the event of liquidation, each share of
common stock of the Fund is entitled to its portion of all of the Fund's
assets after all debts and expenses have been paid. The shares of the Fund do
not have cumulative voting rights for the election of directors.
The Fund does not intend to hold annual meetings of shareholders unless
otherwise required by law. The Fund will not be required to hold annual
meetings of shareholders unless, for example, the election of directors is
required to be acted on by shareholders under the Investment Company Act.
Shareholders have certain rights, including the right to call a meeting upon a
vote of 10% of the Fund's outstanding shares for the purpose of voting on the
removal of one or more Directors or to transact any other business.
ADDITIONAL INFORMATION
This Prospectus, including the Statement of Additional Information which
has been incorporated by reference herein, does not contain all the
information set forth in the Registration Statement filed by the Fund with the
SEC under the Securities Act of 1933. Copies of the Registration Statement may
be obtained at a reasonable charge from the SEC or may be examined, without
charge, at the office of the SEC in Washington, D.C.
SHAREHOLDER GUIDE
HOW TO BUY SHARES OF THE FUND
You may purchase shares of the Fund through Prudential Securities or
Prusec or directly from the Fund through its Transfer Agent, Prudential Mutual
Fund Services, Inc., Attention: Investment Services, P.O. Box 15020, New
Brunswick, New Jersey 08906-5020. The minimum initial investment is $1,000.
The minimum subsequent investment is $100.
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All minimum investment requirements are waived for certain employee savings
plans. For purchases made through the Automatic Savings Accumulation Plan, the
minimum initial and subsequent investment is $50. See "Shareholder Services"
below.
An investment in the Fund may not be appropriate for tax-exempt or
tax-deferred investors. Such investors should consult their own tax advisers.
Shares of the Fund are sold, without a sales charge, at the NAV next
determined after receipt and acceptance by PMFS of a purchase order and
payment in proper form [i.e., a check or Federal Funds wired to State Street
Bank & Trust Company (State Street)]. See "How the Fund Values its Shares."
When payment is received by PMFS prior to 4:30 P.M., New York time, in proper
form, a share purchase order will be entered at the price determined as of
4:30 P.M., New York time, on that day, and dividends on the shares purchased
will begin on the business day following such investment. See "Taxes,
Dividends and Distributions."
Application forms can be obtained from PMFS, Prudential Securities or
Prusec. If a stock certificate is desired, it must be requested in writing for
each transaction. Certificates are issued only for full shares. Shareholders
who hold their shares through Prudential Securities will not receive stock
certificates. Shareholders cannot utilize Expedited Redemption or Check
Redemption or have a Systematic Withdrawal Plan if they have been issued share
certificates.
The Fund reserves the right to reject any purchase order (including an
exchange into the Fund) or to suspend or modify the continuous offering of its
shares. See "How to Sell Your Shares" below.
Your dealer is responsible for forwarding payment promptly to the Fund.
The Distributor reserves the right to cancel any purchase order for which
payment has not been received by the fifth business day following the
investment.
Transactions in shares of the Fund may be subject to postage and other
charges imposed by your dealer.
Purchase through Prudential Securities
If you have an account with Prudential Securities (or open such an
account), you may ask Prudential Securities to purchase shares of the Fund on
your behalf. On the business day following confirmation that a free credit
balance (i.e., immediately available funds) exists in your account, Prudential
Securities, at your request, will effect a purchase order for shares of the
Fund in an amount up to the balance at the NAV determined on that day. Funds
held by Prudential Securities on behalf of its clients in the form of free
credit balances are delivered to State Street by Prudential Securities and
begin earning dividends the second business day after receipt of the order by
Prudential Securities. Accordingly, Prudential Securities will have the use of
such free credit balances during this period.
Shares of the Fund purchased by Prudential Securities on behalf of its
clients will be held by Prudential Securities as record holder. Prudential
Securities will therefore receive statements and dividends directly from the
Fund and will in turn provide investors with Prudential Securities account
statements reflecting purchases, redemptions and dividend payments. Although
Prudential Securities clients who purchase shares of the Fund through
Prudential Securities may not redeem shares of the Fund by check, Prudential
Securities may provide its clients with alternative forms of immediate access
to monies invested in shares of the Fund.
Prudential Securities clients wishing additional information concerning
investment in Fund shares made through Prudential Securities should call their
Prudential Securities financial adviser.
Automatic Investment. Prudential Securities has advised the Fund that it
has instituted procedures pursuant to which, upon enrollment by a Prudential
Securities client, Prudential Securities will make automatic investments of
free credit balances of $1,000 or more (Eligible Credit Balances) held in such
client's account in shares of the Fund (Autosweep). To effect the automatic
investment of Eligible Credit Balances representing the proceeds from the sale
of securities, Prudential Securities will enter orders for the purchase of
Fund shares at the opening of business on the day following the settlement of
such securities transactions; to effect the automatic investment of Eligible
Credit Balances representing non-trade related credits, Prudential Securities
will enter orders for the purchase of Fund shares at the opening of business
semi-monthly. All shares purchased pursuant to such procedures will be issued
at the net asset value of such shares determined on the date the order is
entered and will receive the next dividend declared after such shares are
issued.
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Self-directed Investment. Prudential Securities clients not electing
Autosweep may continue to place orders for the purchase of Fund shares through
Prudential Securities, subject to minimum initial and subsequent investment
requirements as described above.
A Prudential Securities client who has not elected Autosweep (see
"Automatic Investment" above) and who does not place a purchase order promptly
after funds are credited to his or her Prudential Securities account will have
a free credit balance with Prudential Securities and will not begin earning
dividends on shares of the Fund until the second business day after receipt of
the order by Prudential Securities from the client. Accordingly, Prudential
Securities will have the use of such free credit balances during this period.
Purchase through Prusec
You may purchase shares of the Fund by placing an order with your Prusec
registered representative accompanied by payment for the purchase price of
such shares and, in the case of a new account, a completed application form.
You should also submit an IRS Form W-9. The Prusec registered representative
will then forward these items to PMFS. See "Purchase by Mail" below.
Purchase by Wire
For an initial purchase of shares of the Fund by wire, you must first
telephone PMFS at (800) 225-1852 (toll-free) to receive an account number. The
following information will be requested: your name, address, tax
identification number, dividend distribution election, amount being wired and
wiring bank. Instructions should then be given by you to your bank to transfer
funds by wire to State Street Bank and Trust Company, Boston, Massachusetts,
Custody and Shareholder Services Division, Attention: Prudential Tax-Free
Money Fund, specifying on the wire the account number assigned by PMFS and
your name.
If you arrange for receipt by State Street of Federal Funds prior to 4:30
P.M., New York time, on a business day, you may purchase Fund shares as of
that day and earn dividends commencing on the next business day.
In making a subsequent purchase order by wire, you should wire State
Street directly, and should be sure that the wire specifies Prudential
Tax-Free Money Fund and your name and individual account number. It is not
necessary to call PMFS to make subsequent purchase orders by wire. The minimum
amount which may be invested by wire is $1,000.
Purchase by Mail
Purchase orders for which remittance is to be made by check or money
order may be submitted directly by mail to Prudential Mutual Fund Services,
Inc., Attention: Investment Services, P.O. Box 15020, New Brunswick, NJ
08906-5020, together with payment for the purchase price of such shares and,
in the case of a new account, a completed application form. You should also
submit an IRS Form W-9. If PMFS receives an order to purchase shares of the
Fund prior to 4:30 P.M., New York time, and payment by check, the purchase
order will be effective that day and you will be entitled to dividends the
following business day. See "Taxes, Dividends and Distributions." Checks
should be made payable to Prudential Tax-Free Money Fund. Certified checks are
not necessary, but checks must be drawn on a bank located in the United
States. There are restrictions on the redemption of shares purchased by check
while funds are being collected. See "How to Sell Your Shares."
Purchase by Holders of Prudential Securities Unit Trusts
Holders of Prudential sponsored Unit Trusts may elect to have monthly
distributions paid by such Unit Trusts reinvested in shares of the Fund
without compliance with the investment minimums described under "How to Buy
Shares of the Fund."
The Prudential Advantage Account Program
Shares of the Fund are offered to participants in the Prudential
Advantage Account Program (the Advantage Account Program), a financial
services program available to clients of Pruco Securities Corporation.
Investors participating in the Advantage Account Program may select the Fund
as their primary investment vehicle. Such investors will have the cash
balances of $1.00 or more in their
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<PAGE>
Securities Account (Available Cash) (a component of the Advantage Account
Program carried through Prudential Securities) automatically invested in
shares of the Fund. Specifically, an order to purchase shares of the Fund is
placed (i) in the case of Available Cash resulting from the proceeds of
securities sales, on the settlement date of the securities sale, and (ii) in
the case of Available Cash resulting from non-trade related credits (i.e.,
receipt of dividends and interest payments, or a cash payment by the
participant into his or her Securities Account), on the business day after
receipt by Prudential Securities of the non-trade related credit.
All shares purchased pursuant to these automatic purchase procedures will
begin earning dividends on the business day after the order is placed.
Prudential Securities will arrange for investment in shares of the Fund at
4:30 P.M. on the day the order is placed and cause payment to be made in
federal funds for the shares prior to 4:30 P.M. on the next business day.
Prudential Securities will have the use of free credit cash balances until
delivery to the Fund.
Redemptions will be automatically effected by Prudential Securities to
satisfy debit balances in a Securities Account created by activity therein or
existing under the Advantage Account Program, such as those incurred by use of
the Visa(R) Account, including Visa purchases, cash advances and Visa Account
checks. Each Advantage Account Program Securities Account will be
automatically scanned for debits each business day as of the close of business
on that day and after application of any free credit cash balances in the
account to such debits, a sufficient number of shares of the Fund (if selected
as the primary fund) and, if necessary, shares of other Advantage Account
funds owned by the Advantage Account Program participant which have not been
selected as his or her primary fund or shares of a participant's money market
funds managed by PMF which are not primary Advantage Account funds will be
redeemed as of that business day to satisfy any remaining debits in the
Securities Account. Shares may not be purchased until all debits, overdrafts
and other requirements in the Securities Account are satisfied.
Advantage Account Program charges and expenses are not reflected in the
Table of Fund Expenses. See "Fund Expenses."
For information on participation in the Advantage Account Program, you
should telephone (800) 235-7637 (toll-free).
HOW TO SELL YOUR SHARES
You can redeem your shares at any time for cash at the NAV next determined
after the redemption request is received in proper form by the Transfer Agent or
Prudential Securities. See "How the Fund Values its Shares."
Shares for which a redemption request is received by PMFS prior to 4:30
P.M., New York time, are entitled to a dividend on the day on which the
request is received. By pre-authorizing Expedited Redemption, you may arrange
to have payment for redeemed shares made in Federal Funds wired to your bank,
normally on the next bank business day following the date of receipt of the
redemption instructions. Should you redeem all of your shares, you will
receive the amount of all dividends declared for the month-to-date on those
shares. See "Taxes, Dividends and Distributions."
If redemption is requested by a corporation, partnership, trust or
fiduciary, written evidence of authority acceptable to the Transfer Agent must
be submitted before such request will be accepted. All correspondence and
documents concerning redemptions should be sent to the Fund in care of its
Transfer Agent, Prudential Mutual Fund Services, Inc., Attention: Redemption
Services, P.O. Box 15010, New Brunswick, New Jersey 08906-5010.
If the proceeds of the redemption (a) exceed $50,000, (b) are to be paid
to a person other than the record owner, (c) are to be sent to an address
other than the address on the Transfer Agent's records or (d) are to be paid
to a corporation, partnership, trust or fiduciary, the signature(s) on the
redemption request and on the certificates, if any, or stock power must be
guaranteed by an "eligible guarantor institution." An "eligible guarantor
institution" includes any bank, broker, dealer or credit union. The Transfer
Agent reserves the right to request additional information from, and make
reasonable inquiries of, any eligible guarantor institution. For clients of
Prusec a signature guarantee may be obtained from the agency or office manager
of most Prudential Insurance and Financial Services offices.
Normally, the Fund makes payment on the next business day for all shares
redeemed, but in any event, payment is made within seven days after receipt by
PMFS of stock certificates and/or of a redemption request in proper form.
However, the Fund may suspend the right of redemption or postpone the date of
payment (a) for any periods during which the New York
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<PAGE>
Stock Exchange is closed (other than for customary weekend or holiday
closings), (b) for any periods when trading in the markets which the Fund
normally utilizes is closed or restricted or an emergency exists as determined
by the SEC so that disposal of the Fund's investments or determination of its
NAV is not reasonably practicable or (c) for such other periods as the SEC may
permit for protection of the Fund's shareholders; provided that applicable
rules and regulations of the SEC shall govern as to whether the conditions in
(b) or (c) exist.
Payment for redemption of recently purchased shares will be delayed until
the Fund or its Transfer Agent has been advised that the purchase check has
been honored, up to 10 calendar days from the time of receipt of the purchase
check by the Transfer Agent. Such delay may be avoided by purchasing shares by
wire or by certified or official bank check.
Redemption of Shares Purchased Through Prudential Securities
Prudential Securities clients for whom Prudential Securities has
purchased shares of the Fund may have these shares redeemed only by
instructing their Prudential Securities financial adviser orally or in
writing.
Prudential Securities has advised the Fund that it has established
procedures pursuant to which shares of the Fund held by a Prudential
Securities client having a deficiency in his or her Prudential Securities
account will be redeemed automatically to the extent of that deficiency to the
nearest highest dollar, unless the client notifies Prudential Securities to
the contrary. The amount of the redemption will be the lesser of (a) the total
NAV of Fund shares held in the client's Prudential Securities account or (b)
the deficiency in the client's Prudential Securities account at the close of
business on the date such deficiency is due. Accordingly, a Prudential
Securities client utilizing this automatic redemption procedure and who wishes
to pay for a securities transaction or meet any market action related
deficiency in his or her account other than through such automatic redemption
procedure must do so not later than the day of settlement for such securities
transaction or the date such market action related deficiency is incurred.
Prudential Securities clients who have elected to utilize Autosweep will not
be entitled to dividends declared on the date of redemption.
Redemption of Shares Purchased Through PMFS
If you purchase shares of the Fund through PMFS, you may use Check
Redemption, Expedited Redemption or Regular Redemption. Prudential Securities
clients for whom Prudential Securities has purchased shares may not use such
services.
Regular Redemption. You may redeem your shares by sending a written
request, accompanied by duly endorsed share certificates, if issued, to PMFS,
Attention: Redemption Services, P.O. Box 15010, New Brunswick, NJ 08906-5010.
In this case, all share certificates must be endorsed by you with signature
guaranteed, as described above. PMFS may request further documentation from
corporations, executors, administrators, trustees or guardians. Regular
redemption is made by check sent to the shareholder's address.
Expedited Redemption. By pre-authorizing Expedited Redemption, you may
arrange to have payment for redeemed shares made in Federal Funds wired to the
shareholder's bank, normally on the next business day following redemption. In
order to use Expedited Redemption, you may so designate at the time the
initial application form is filed or at a later date. Once the Expedited
Redemption authorization form has been completed, the signature on the
authorization form guaranteed as set forth below and the form returned to
Prudential Mutual Fund Services, Inc., Attention: Redemption Services, P.O.
Box 15010, New Brunswick, NJ 08906-5010, requests for redemption may be made
by telegraph, letter or telephone. To request Expedited Redemption by
telephone, a shareholder should call PMFS at (800) 225-1852. Calls must be
received by PMFS before 4:30 P.M., New York time to permit redemption as of
such date. Requests by letter should be addressed to Prudential Mutual Fund
Services, Inc., at the address set forth above.
A signature guarantee is not required under Expedited Redemption once
the authorization form is properly completed and returned. The Expedited
Redemption privilege may be used only to redeem shares in an amount of $200 or
more, except that, if an account for which Expedited Redemption is requested
has a net asset value of less than $200, the entire account must be redeemed.
The proceeds of redeemed shares in the amount of $1,000 or more are
transmitted by wire to your account at a domestic commercial bank which is a
member of the Federal Reserve System. Proceeds of less than $1,000 are
forwarded by check to your designated bank account.
During periods of severe market or economic conditions, Expedited
Redemption may be difficult to implement, and you should redeem shares by mail
as described above.
17
<PAGE>
Check Redemption. At your request, State Street will establish a personal
checking account for you. Checks drawn on this account can be made payable to
the order of any person in any amount greater than $500. When such check is
presented to State Street for payment, State Street presents the check to the
Fund as authority to redeem a sufficient number of shares of the Fund in your
account to cover the amount of the check. If insufficient shares are in the
account, or if the purchase was made by check within 10 days, the check will
be returned marked "insufficient funds." Checks in an amount less than $500
will not be honored. Shares for which certificates have been issued cannot be
redeemed by check. PMFS reserves the right to impose a service charge to
establish a checking account and order checks.
Involuntary Redemption
Because of the relatively high cost of maintaining an account, the Fund
reserves the right to redeem, upon 60 days' written notice, an account which
is reduced by a shareholder to an NAV of $500 or less due to redemption. You
may avoid such redemption by increasing the NAV of your account to an amount
in excess of $500.
90-Day Repurchase Privilege
If you redeem your shares and have not previously exercised the
repurchase privilege, you may reinvest any portion or all of the proceeds of
such redemption in shares of the Fund at the NAV next determined after the
order is received, which must be within 90 days after the date of the
redemption. You will receive pro rata credit for any contingent deferred sales
charge paid in connection with the redemption. You must notify the Fund's
Transfer Agent, either directly or through Prudential Securities or Prusec, at
the time the repurchase privilege is exercised, that you are entitled to
credit for any contingent deferred sales charge previously paid. Exercise of
the repurchase privilege will not affect the federal income tax treatment of
any gain realized upon the redemption. If the redemption resulted in a loss,
some or all of the loss, depending on the amount reinvested, will generally
not be allowed for federal income tax purposes.
Class B and Class C Purchase Privilege
You may direct that the proceeds of a redemption of Fund shares be
invested in Class B or Class C shares of any Prudential Mutual Fund by calling
your Prudential Securities financial adviser or the Transfer Agent at (800)
225-1852. The transaction will be effected on the basis of the relative NAV.
HOW TO EXCHANGE YOUR SHARES
As a shareholder of the Fund, you may exchange your shares for shares of
certain other Prudential Mutual Funds, including money market funds and funds
sold with an initial sales charge, subject to the minimum investment
requirements of such funds on the basis of relative NAV. You may exchange your
shares for Class A shares of the Prudential Mutual Funds on the basis of the
relative NAV plus the applicable sales charge. No additional sales charge is
imposed in connection with subsequent exchanges. You may not exchange your
shares for Class B shares of the Prudential Mutual Funds, except that shares
acquired prior to January 22, 1990 subject to a contingent deferred sales
charge can be exchanged for Class B shares. You may not exchange your shares
for Class C shares of the Prudential Mutual Funds. See "How to Sell Your
Shares--Class B and Class C Purchase Privilege" above and "Shareholder
Investment Account--Exchange Privilege" in the Statement of Additional
Information. An exchange will be treated as a redemption and purchase for tax
purposes.
In order to exchange shares by telephone, you must authorize telephone
exchanges on your initial application form or by written consent to the
Transfer Agent and hold shares in non-certificate form. Thereafter, you may
call the Fund at (800) 225-1852 to execute a telephone exchange of shares,
weekdays, except holidays, between the hours of 8:00 A.M. and 6:00 P.M., New
York time. For your protection and to prevent fraudulent exchanges, your
telephone call will be recorded and you will be asked to provide your personal
identification number. A written confirmation of the exchange transaction will
be sent to you. Neither the Fund nor its agents will be liable for any loss,
liability or cost which results from acting upon instructions reasonably
believed to be genuine under the foregoing procedures. All exchanges will be
made on the basis of the relative NAV of the two
18
<PAGE>
funds next determined after the request is received in good order. The
Exchange Privilege is available only in states where the exchange may legally
be made.
If you hold shares of the Fund through Prudential Securities, you must
exchange your shares by contacting your Prudential Securities financial
adviser. If you hold certificates, the certificates, signed in the name(s)
shown on the face of the certificates, must be returned in order for the
shares to be exchanged. See "How to Sell Your Shares" above.
You may also exchange shares by mail by writing to Prudential Mutual Fund
Services, Inc., Attention: Exchange Processing, P.O. Box 15010, New Brunswick,
New Jersey 08906-5010.
In periods of severe market or economic conditions, the telephone
exchange of shares of the Fund may be difficult to implement and you should
make exchanges by mail by writing to Prudential Mutual Fund Services, Inc., at
the address noted above.
The Exchange Privilege may be modified or terminated at any time on 60
days' notice to shareholders.
SHAREHOLDER SERVICES
In addition to the exchange privilege, as a shareholder in the Fund, you
can take advantage of the following additional services and privileges:
-- Automatic Reinvestment of Dividends and/or Distributions. For your
convenience, all dividends and distributions are automatically reinvested in
full and fractional shares of the Fund at NAV. You may direct the Transfer
Agent in writing not less than 5 full business days prior to the record date
to have subsequent dividends and/or distributions sent in cash rather than
reinvested. If you hold shares through Prudential Securities, you should
contact your financial adviser.
-- Automatic Savings Accumulation Plan (ASAP). Under ASAP you may make
regular purchases of Fund shares in amounts as little as $50 via an automatic
charge to a bank account or Prudential Securities account (not including a
Command Account). For additional information about this service, you may
contact your Prudential Securities financial adviser, Prusec registered
representative or the Transfer Agent directly.
-- Systematic Withdrawal Plan. A systematic withdrawal plan is available for
shareholders having shares of the Fund which provides for monthly or quarterly
checks. For additional information about this service, you may contact your
Prudential Securities financial adviser, Prusec representative or the Transfer
Agent directly.
-- Multiple Accounts. Special procedures have been designed for banks and
other institutions that wish to open multiple accounts. An institution may
open a single master account by filing an Application Form with Prudential
Mutual Fund Services, Inc. (PMFS or the Transfer Agent), Attention: Customer
Service, P.O. Box 15005, New Brunswick, New Jersey 08906, signed by personnel
authorized to act for the institution. Individual sub-accounts may be opened
at the time the master account is opened by listing them, or they may be added
at a later date by written advice or by filing forms supplied by the Fund.
Procedures are available to identify sub-accounts by name and number within
the master account name. The investment minimums set forth above are
applicable to the aggregate amounts invested by a group and not to the amount
credited to each sub-account.
-- Reports to Shareholders. The Fund will send you annual and semi-annual
reports. The financial statements appearing in annual reports are audited by
independent accountants. In order to reduce duplicate mailing and printing
expenses the Fund will provide one annual report and semi-annual shareholder
report and annual prospectus per household. You may request additional copies
of such reports by calling (800) 225-1852 or by writing to the Fund at One
Seaport Plaza, New York, New York 10292.
-- Shareholder Inquiries. Inquiries should be addressed to the Fund at One
Seaport Plaza, New York, New York 10292, or by telephone at (800) 225-1852 (toll
free) or, from outside the U.S.A., at (908) 417-7555 (collect).
For additional information regarding the services and privileges
described above, see "Shareholder Investment Account" in the Statement of
Additional Information.
19
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
20
<PAGE>
THE PRUDENTIAL MUTUAL FUND FAMILY
Prudential Mutual Fund Management offers a broad range of mutual funds
designed to meet your individual needs. We welcome you to review the
investment options available through our family of funds. For more information
on the Prudential Mutual Funds, including charges and expenses, contact your
Prudential Securities financial adviser or Prusec registered representative or
telephone the Fund at (800) 225-1852 for a free prospectus. Read the
prospectus carefully before you invest or send money.
Taxable Bond Funds
Prudential Adjustable Rate Securities Fund, Inc.
Prudential Diversified Bond Fund, Inc.
Prudential GNMA Fund, Inc.
Prudential Government Income Fund, Inc.
Prudential Government Securities Trust
Short-Intermediate Term Series
Prudential High Yield Fund, Inc.
Prudential Structured Maturity Fund, Inc.
Income Portfolio
Prudential U.S. Government Fund
The BlackRock Government Income Trust
Tax-Exempt Bond Funds
Prudential California Municipal Fund
California Series
California Income Series
Prudential Municipal Bond Fund
High Yield Series
Insured Series
Modified Term Series
Prudential Municipal Series Fund
Arizona Series
Florida Series
Georgia Series
Hawaii Income Series
Maryland Series
Massachusetts Series
Michigan Series
Minnesota Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
Prudential National Municipals Fund, Inc.
Global Funds
Prudential Europe Growth Fund, Inc.
Prudential Global Fund, Inc.
Prudential Global Genesis Fund, Inc.
Prudential Global Natural Resources Fund, Inc.
Prudential Intermediate Global Income Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Prudential Short-Term Global Income Fund, Inc.
Global Assets Portfolio
Short-Term Global Income Portfolio
Global Utility Fund, Inc.
Equity Funds
Prudential Allocation Fund
Conservatively Managed Portfolio
Strategy Portfolio
Prudential Equity Fund, Inc.
Prudential Equity Income Fund
Prudential Growth Opportunity Fund, Inc.
Prudential IncomeVertible(R) Fund, Inc.
Prudential Multi-Sector Fund, Inc.
[Prudential Strategist Fund, Inc.]
Prudential Utility Fund, Inc.
Nicholas-Applegate Fund, Inc.
Nicholas-Applegate Growth Equity Fund
Money Market Funds
. Taxable Money Market Funds
Prudential Government Securities Trust
Money Market Series
U.S. Treasury Money Market Series
Prudential Special Money Market Fund
Money Market Series
Prudential MoneyMart Assets
. Tax-Free Money Market Funds
Prudential Tax-Free Money Fund, Inc.
Prudential California Municipal Fund
California Money Market Series
Prudential Municipal Series Fund
Connecticut Money Market Series
Massachusetts Money Market Series
New Jersey Money Market Series
New York Money Market Series
. Command Funds
Command Money Fund
Command Government Fund
Command Tax-Free Fund
. Institutional Money Market Funds
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
A-1
<PAGE>
No dealer, sales representative or any other person has been authorized to
give any information or to make any representations, other than those
contained in this Prospectus, in connection with the offer contained herein,
and, if given or made, such other information or representations must not be
relied upon as having been authorized by the Fund or the Distributor. This
Prospectus does not constitute an offer by the Fund or by the Distributor to
sell or a solicitation of any offer to buy any of the securities offered
hereby in any jurisdiction to any person to whom it is unlawful to make such
offer in such jurisdiction.
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
FUND HIGHLIGHTS ................................ 2
Risk Factors and Special Characteristics ...... 2
FUND EXPENSES .................................. 4
FINANCIAL HIGHLIGHTS ........................... 5
CALCULATION OF YIELD ........................... 6
HOW THE FUND INVESTS ........................... 6
Investment Objective and Policies ............. 6
Other Investments and Policies ................ 8
Investment Restrictions ....................... 9
HOW THE FUND IS MANAGED ........................ 9
Manager ....................................... 9
Distributor ................................... 9
Portfolio Transactions ........................ 11
Custodian and Transfer and
Dividend Disbursing Agent .................... 11
HOW THE FUND VALUES ITS SHARES ................. 11
TAXES, DIVIDENDS AND DISTRIBUTIONS ............. 12
GENERAL INFORMATION ............................ 13
Description of Common Stock ................... 13
Additional Information ........................ 13
SHAREHOLDER GUIDE .............................. 13
How to Buy Shares of the Fund ................. 13
How to Sell Your Shares ....................... 16
How to Exchange Your Shares ................... 18
Shareholder Services .......................... 19
THE PRUDENTIAL MUTUAL FUND FAMILY .............. A-1
- -----------------------------------------------------
103A 444030H
CUSIP No. 74436P-10-3
Prudential
Tax-Free Money
Fund Inc.
-----------------------
PROSPECTUS
August 1, 1995
Prudential Mutual Funds
Building Your Future
On Our Strength(SM)
<PAGE>
PRUDENTIAL TAX-FREE MONEY FUND, INC.
Statement of Additional Information
dated August 1, 1995
Prudential Tax-Free Money Fund, Inc. (the Fund), is an open-end diversified
management investment company whose investment objective is to attain for
investors the highest level of current income that is exempt from federal income
taxes, consistent with liquidity and the preservation of capital. The Fund will
invest in short-term tax-exempt debt securities of state and local governments.
There can be no assurance that the Fund's investment objective will be achieved.
See "Investment Objective and Policies." The Fund's address is One Seaport
Plaza, New York, New York 10292, and its telephone number is (800) 225-1852.
This Statement of Additional Information is not a prospectus. It is
intended to be read in conjunction with the Fund's Prospectus, dated August 1,
1995. A copy of the Prospectus may be obtained from the Fund at the address or
telephone number noted above.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Cross-reference
to page in
Page Prospectus
---- ---------------
<S> <C> <C>
General Information.......................................................... B-2 13
Investment Objective and Policies............................................ B-2 6
Investment Restrictions...................................................... B-4 9
Directors and Officers....................................................... B-6 9
Manager...................................................................... B-8 9
Distributor.................................................................. B-9 9
Portfolio Transactions and Brokerage......................................... B-11 11
Purchase and Redemption of Fund Shares....................................... B-11 13
Shareholder Investment Account............................................... B-13 19
Net Asset Value.............................................................. B-15 11
Calculation of Yield......................................................... B-15 6
Taxes, Dividends and Distributions........................................... B-15 12
Custodian and Transfer and Dividend Disbursing Agent, and Independent
Accountants.................................................................. B-17 11
Financial Statements......................................................... B-18 --
Report of Independent Accountants............................................ B-26 --
Appendix A--Description of Tax-Exempt Security Ratings....................... A-1 --
</TABLE>
- --------------------------------------------------------------------------------
103B 4440076
<PAGE>
GENERAL INFORMATION
At a meeting of shareholders held on _________, 1995, shareholders approved
an amendment to the Fund's Articles of Incorporation to change the Fund's name
to Prudential Tax-Free Money Fund, Inc.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to attain for investors the highest
level of current income that is exempt from federal income taxes, consistent
with liquidity and the preservation of capital. The Fund will seek to achieve
its investment objective by investing in a diversified portfolio of short-term
debt obligations issued by states, territories and possessions of the United
States and by the District of Columbia, and their political subdivisions, duly
constituted authorities and corporations, the interest from which is
wholly-exempt from federal income tax in the opinion of bond counsel to the
issuer. Such securities are generally known as "Municipal Bonds" or
"Municipal Notes." Interest on certain Municipal Bonds and Municipal Notes may
be a preference item for purposes of the federal alternative minimum tax. See
"Taxes, Dividends & Distributions." There can be no assurance that the Fund's
investment objective will be achieved.
The investment policies of the Fund other than its investment objective and
those described under "Investment Restrictions" may be changed by the Board of
Directors of the Fund without shareholder approval.
Municipal Bonds and Notes
Municipal Bonds. Municipal Bonds are generally issued to obtain funds for
various public purposes, including construction of public facilities such as
airports, bridges, highways, housing, hospitals, mass transportation, schools,
streets and water and sewer works. They may also be issued to refund outstanding
obligations, to meet general operating expenses or to obtain funds to lend to
other public institutions and facilities. Municipal Bonds also include bonds
issued by or on behalf of public authorities in order to obtain funds with which
to provide privately operated housing facilities, sports facilities, pollution
control facilities, convention or trade show facilities, industrial, port or
parking facilities and facilities for water supply, gas, electricity or waste
disposal. These bonds typically are revenue bonds and generally do not carry the
pledge of the issuer's credit.
Municipal Bonds may be general obligation or revenue bonds. General
obligation bonds are secured by the issuer's pledge of its faith, credit and
taxing power for the payment of principal and interest. Revenue bonds are
payable from the revenues derived from a particular facility or class of
facilities or from the proceeds of a special excise tax or other specific
revenue source but not from the general taxing power.
Municipal Notes. Municipal Notes are short-term obligations generally with
a maturity, at the time of issuance, ranging from six months to three years. The
principal types of Municipal Notes include tax anticipation notes, bond
anticipation notes and revenue anticipation notes. Municipal Notes sold in
anticipation of collection of taxes, a bond sale, or receipt of other revenues,
are usually general obligations of the issuing municipality or agency.
Municipal Notes also include tax-exempt or municipal commercial paper,
which is likely to be issued to meet seasonal working capital needs of a
municipality or interim construction financing and to be paid from general
revenues of the municipality or refinanced with long-term debt. In most cases
municipal commercial paper is backed by letters of credit, lending agreements,
note repurchase agreements or other credit facility agreements offered by banks
or other institutions.
Variable Rate and Floating Rate Securities. The interest rates payable on
certain Municipal Bonds and Municipal Notes are not fixed and may fluctuate
based upon changes in market rates. Municipal Bonds and Notes of this type are
called "variable rate" or "floating rate" obligations. The interest rate
payable on a variable rate obligation is adjusted at predesignated intervals and
that payable on a floating rate obligation is adjusted whenever there is a
change in the market rate of interest on which the interest rate payable is
based. Other features of these obligations typically include the right of the
Fund to demand, in some cases, at specified intervals of less than one year or,
in other cases, upon not less than seven days' notice, prepayment of the
principal amount of the obligation prior to its stated maturity (a demand
feature). In addition, the issuer may have the right, at similar intervals or
upon similar notice, to prepay the principal amount prior to maturity. The
principal benefit of variable and floating rate obligations is that the interest
rate adjustment minimizes changes in the market value of the obligations. As a
result, the purchase of such obligations should enhance the ability of the Fund
to maintain a stable net asset value per share (see Net Asset Value) and to sell
an obligation prior to maturity at a price approximating the full principal
amount of the obligation. The payment of principal and interest by issuers of
certain Municipal Bonds and Notes purchased by the Fund may be guaranteed by
letters of credit or other credit facilities offered by banks or other financial
institutions. Such guarantees will be considered in determining whether a
Municipal Bond or Note meets the Fund's investment quality requirements.
Puts. The Fund may purchase Municipal Bonds or Notes together with the
right to resell the Municipal Bonds or Notes to the seller at an agreed-upon
price or yield within a specified period prior to the maturity date of the Bonds
or Notes. Such a right to resell is commonly known as a "put" or "tender
option," and the aggregate price which the Fund pays for Municipal Bonds or
Notes with puts or tender
B-2
<PAGE>
options is higher than the price which otherwise would be paid for the Bonds or
Notes. Consistent with the Fund's investment objective and subject to the
supervision of the Board of Directors, the primary purpose of this practice is
to permit the Fund to be fully invested in securities the interest on which is
exempt from federal income taxes while preserving the necessary liquidity to
purchase securities on a when-issued basis, to meet unusually large redemptions
and to purchase, at a later date, securities other than those subject to the
put. The Fund's policy is generally to exercise the puts or tender options on
their expiration date when the exercise price is higher than the current market
price for related Municipal Bonds or Notes. Puts or tender options may be
exercised prior to the expiration date in order to fund obligations to purchase
other securities or to meet redemption requests. These obligations may arise
during periods in which proceeds from sales of Fund shares and from recent sales
of portfolio securities are insufficient to meet such obligations or when the
funds available are otherwise allocated for investment. In addition, puts may be
exercised prior to the expiration date in the event the Fund's investment
adviser revises its evaluation of the creditworthiness of the issuer of the
underlying security. In determining whether to exercise puts or tender options
prior to their expiration date and in selecting which puts or tender options to
exercise in such circumstances, the investment adviser considers, among other
things, the amount of cash available to the Fund, the expiration dates of the
available puts or tender options, any future commitments for securities
purchases, the yield, quality and maturity dates of the underlying securities,
alternative investment opportunities and the desirability of retaining the
underlying securities in the Fund's portfolio.
The Fund values Municipal Bonds and Notes which are subject to puts or
tender options at amortized cost; no value is assigned to the put or tender
option. The cost of the put or tender option is carried as an unrealized loss
from the time of purchase until it is exercised or expires. The value of the put
or tender option is dependent on the ability of the put writer to meet its
obligation of repurchase, and it is the Fund's general policy to enter into put
or tender option transactions only with such brokers, dealers or other financial
institutions which present minimal credit risks. There is a credit risk
associated with the purchase of puts or tender options in that the broker,
dealer or financial institution might default on its obligation to repurchase an
underlying security. The Fund has received a ruling of the Internal Revenue
Service to the effect that the Fund will be considered the owner of the
Municipal Bonds or Notes subject to the puts or tender options so that the
interest on the Bonds or Notes will be tax-exempt income to the Fund.
When-Issued and Delayed Delivery Securities. Municipal Bonds and Notes are
frequently offered on a when-issued or delayed delivery basis. When so offered,
the price and coupon rate are fixed at the time the commitment to purchase is
made, but delivery and payment for the when-issued securities take place at a
later date. Normally, the settlement date occurs within one week of the purchase
of Municipal Notes and within one month of the purchase of Municipal Bonds. The
purchase price and the interest rate payable on the securities are fixed on the
transaction date. The securities so purchased are subject to market fluctuation
and, during the period between purchase and settlement, no interest accrues to
the purchaser. While securities may be sold prior to the settlement date, the
Fund intends to purchase such securities with the purpose of actually acquiring
them unless a sale would be desirable for investment reasons. At the time the
Fund makes the commitment to purchase a Municipal Bond or Note on a when-issued
or delayed delivery basis, it will record the transaction and reflect the value
of the Bond or Note in determining its net asset value. The Fund will also
establish a segregated account with its custodian bank in which it will maintain
cash and other Municipal Bonds or Notes equal in value to commitments for
when-issued or delayed delivery securities. Such Municipal Bonds or Notes will
either mature on or about the settlement date or will be Bonds or Notes as to
which the Fund has a put exercisable on or about the settlement date. If the
Fund chooses to dispose of the right to acquire a when-issued or delayed
delivery security prior to the settlement date, it could, as with the
disposition of any other portfolio obligation, incur a gain or loss due to
market fluctuation. The Fund does not believe that its net asset value or net
investment income will be adversely affected by its purchase of Municipal Bonds
or Notes on a when-issued or delayed delivery basis. The Fund may invest in
when-issued or delayed delivery securities without other limitation.
Illiquid Securities
The Fund may not invest more than 10% of its net assets in repurchase
agreements which have a maturity of longer than seven days or in other illiquid
securities, including securities that are illiquid by virtue of the absence of a
readily available market or legal or contractual restrictions on resale.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (Securities Act),
securities which are otherwise not readily marketable and repurchase agreements
having a maturity of longer than seven days. Securities which have not been
registered under the Securities Act are referred to as private placements or
restricted securities and are purchased directly from the issuer or in the
secondary market. Mutual funds do not typically hold a significant amount of
these restricted or other illiquid securities because of the potential for
delays on resale and uncertainty in valuation. Limitations on resale may have an
adverse effect on the marketability of portfolio securities and a mutual fund
might be unable to dispose of restricted or other illiquid securities promptly
or at reasonable prices and might thereby experience difficulty satisfying
redemptions within seven days. A mutual fund might also have to register such
restricted securities in order to dispose of them resulting in additional
expense and delay. Adverse market conditions could impede such a public offering
of securities.
B-3
<PAGE>
In recent years, however, a large institutional market has developed for
certain securities that are not registered under the Securities Act including
repurchase agreements, commercial paper, foreign securities, municipal
securities, convertible and corporate bonds and notes. Institutional investors
depend on an efficient institutional market in which the unregistered security
can be readily resold or an issuer's ability to honor a demand for repayment.
The fact that there are contractual or legal restrictions on resale to the
general public or to certain institutions may not be indicative of the liquidity
of such investments.
Rule 144A under the Securities Act allows for a broader institutional
trading market for securities otherwise subject to restriction on resale to the
general public. Rule 144A establishes a "safe harbor" from the registration
requirements of the Securities Act for resales of certain securities to
qualified institutional buyers. The investment adviser anticipates that the
market for certain restricted securities such as institutional commercial paper
and foreign securities will expand further as a result of this regulation and
the development of automated systems for the trading, clearance and settlement
of unregistered securities of domestic and foreign issuers, such as the PORTAL
System sponsored by the National Association of Securities Dealers, Inc. (NASD).
Restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act, commercial paper and municipal lease obligations for which there
is a readily available market will not be deemed to be illiquid. The investment
adviser will monitor the liquidity of such restricted securities subject to the
supervision of the Board of Directors. In reaching liquidity decisions, the
investment adviser will consider, inter alia, the following factors: (1) the
frequency of trades and quotes for the security; (2) the number of dealers
wishing to purchase or sell the security and the number of other potential
purchasers; (3) dealer undertakings to make a market in the security; and (4)
the nature of the security and the nature of the marketplace trades (e.g., the
time needed to dispose of the security, the method of soliciting offers and the
mechanics of the transfer). With respect to municipal lease obligations, the
investment adviser will also consider: (1) the willingness of the municipality
to continue, annually or biannually, to appropriate funds for payment of the
lease; (2) the general credit quality of the municipality and the essentiality
to the municipality of the property covered by the lease; (3) in the case of
unrated municipal lease obligations, an analysis of factors similar to that
performed by nationally recognized statistical rating organizations in
evaluating the credit quality of a municipal lease obligation, including (i)
whether the lease can be cancelled; (ii) if applicable, what assurance there is
that the assets represented by the lease can be sold; (iii) the strength of the
lessee's general credit (e.g., its debt, administrative, economic and financial
characteristics); (iv) the likelihood that the municipality will discontinue
appropriating funding for the leased property because the property is no longer
deemed essential to the operations of the municipality (e.g., the potential for
an event of nonappropriation); (v) the legal recourse in the event of failure to
appropriate; and (4) any other factors unique to municipal lease obligations as
determined by the investment adviser. In addition, in order for commercial paper
that is issued in reliance on Section 4(2) of the Securities Act to be
considered liquid, (1) it must be rated in one of the two highest rating
categories by at least two nationally recognized statistical rating
organizations (NRSRO), or if only one NRSRO rates the securities, by that NRSRO,
or, if unrated, be of comparable quality in the view of the investment adviser;
and (2) it must not be "traded flat" (i.e., without accrued interest) or in
default as to principal or interest. Repurchase agreements subject to demand are
deemed to have a maturity equal to the notice period.
Other Matters. For purposes of diversification under the Investment Company
Act of 1940, as amended (the Investment Company Act), the identification of the
issuer of Municipal Bonds or Notes depends on the terms and conditions of the
obligation. If the assets and revenues of an agency, authority, instrumentality
or other political subdivision are separate from those of the government
creating the subdivision, and the obligation is backed only by the assets and
revenues of the subdivision, such subdivision would be regarded as the sole
issuer. Similarly, in the case of a private activity revenue bond or pollution
control revenue bond, if the bond is backed only by the assets and revenues of
the nongovernmental user, the nongovernmental user would be regarded as the sole
issuer. If in either case the creating government or another entity guarantees
an obligation, the guarantee would be regarded as a separate security and
treated as an issue of such government or entity.
Portfolio Turnover
Portfolio turnover rate is defined as the lesser of the amount of the
securities purchased or securities sold, excluding all securities whose maturity
or expiration date at the time of acquisition was one year or less, divided by
the average monthly value of such securities owned during the year. Because the
Fund's portfolio will contain only securities maturing within one year, the Fund
does not expect to have a turnover rate as so defined. However, because of the
short-term nature of the Fund's portfolio, it expects to have substantial
amounts of portfolio transactions. The Fund does not expect to pay any material
amounts of brokerage commissions, but transaction costs exist in the form of
spreads between bid and asked price.
INVESTMENT RESTRICTIONS
The following investment restrictions are fundamental policies. Fundamental
policies are those which cannot be changed without the approval of the holders
of a majority of the Fund's outstanding voting securities. A "majority of the
Fund's outstanding voting securities," when used in this Statement of
Additional Information, means the lesser of (1) 67% of the Fund's voting shares
represented at a meeting at which more than 50% of the outstanding shares are
present in person or represented by proxy, or (2) more than 50% of the Fund's
outstanding voting shares.
B-4
<PAGE>
The Fund may not:
(1) Invest more than 5% of the market or other fair value of its total
assets in the securities of any one issuer (other than obligations of, or
guaranteed by, the United States Government, its agencies or instrumentalities
or secured by such obligations). See "Municipal Bonds and Notes" under
"Investment Objective and Policies" for definition of an issuer.
(2) Make short sales of securities.
(3) Purchase securities on margin, except for such short-term credits as
are necessary for the clearance of purchases and sales of portfolio securities.
(4) Borrow money, except that the Fund may borrow for temporary purposes in
amounts not exceeding 5% of the market or other fair value (taken at the lower
of cost or current value) of its total assets (not including the amount
borrowed). Any such borrowings will be made only from banks. Secured temporary
borrowings may take the form of reverse repurchase agreements, pursuant to which
the Fund would sell portfolio securities for cash and simultaneously agree to
repurchase them at a specified date for the same amount of cash plus an interest
component. The Fund would maintain, in a segregated account with its custodian,
liquid assets equal in value to the amount owed.
(5) Pledge its assets or assign or otherwise encumber them in excess of 10%
of its assets (taken at market or other fair value at the time of pledging) and
then only to secure borrowings effected within the limitations set forth in
restriction (4).
(6) Engage in the underwriting of securities.
(7) Purchase or sell real estate mortgage loans, although it may purchase
Municipal Bonds or Notes secured by interests in real estate.
(8) Make loans of money or securities. The purchase of a portion of an
issue of publicly distributed debt securities is not considered the making of a
loan.
(9) Purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of assets.
(10) Invest for the purpose of exercising control or management of another
company.
(11) Purchase industrial revenue bonds if, as a result of such purchase,
more than 5% of total Fund assets would be invested in industrial revenue bonds
where payment of principal and interest are the responsibility of companies with
less than three years of operating history.
Whenever any fundamental investment policy or investment restriction states
a maximum percentage of the Fund's assets, it is intended that if the percentage
limitation is met at the time the investment is made, a later change in
percentage resulting from changing total or net asset values will not be
considered a violation of such policy. However, in the event that the Fund's
asset coverage for borrowings falls below 300%, the Fund will take prompt action
to reduce its borrowings, as required by applicable law.
In order to comply with certain state "blue sky" restrictions, the Fund
will not as a matter of operating policy:
1. invest more than 10% of its total assets in repurchase agreements which
have a maturity of longer than seven days or in other illiquid securities,
including securities that are illiquid by virtue of the absence of a readily
available market or legal or contractual restrictions on resale. Securities
eligible for resale in accordance with Rule 144A under the Securities Act of
1933, privately placed commercial paper and Municipal Lease Obligations that
have legal or contractual restrictions on resale but have a readily available
market will not be considered illiquid for purposes of this limitation if
determined to be liquid by the Board of Directors. Repurchase agreements subject
to demand are deemed to have a maturity equal to the notice period.
2. invest in securities of companies having a record, together with
predecessors, of less than three years of continuous operation, or securities of
issuers which are restricted as to disposition, if more than 15% of its total
assets would be invested in such securities. This restriction shall not apply to
mortgage-backed securities, asset-backed securities or obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
3. Purchase the securities of any one issuer if any officer or director of
the Fund or the Manager or Subadviser owns more than 1/2 of 1% of the
outstanding securities of such issuer, and such officers and directors who own
more than 1/2 of 1% own in the aggregate more than 5% of the outstanding
securities of such issuer.
B-5
<PAGE>
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
Name, Address Position With Principal Occupations
and Age Fund During Past 5 Years
- ----------------------- -------------- --------------------------------------------------------
<S> <C> <C>
Delayne Dedrick Gold Director Marketing and Management Consultant.
(57)
c/o Prudential Mutual
Fund Management, Inc.
One Seaport Plaza
New York, NY
Arthur Hauspurg (69) Director Trustee and former President, Chief Executive Officer
c/o Prudential Mutual and Chairman of the Board of Consolidated Edison
Fund Management, Inc. Company of New York, Inc.; Director of COMSAT Corp.
One Seaport Plaza
New York, NY
Stephen P. Munn (53) Director Chairman (since January 1994), Director and President
101 So. Salina Street (since 1988) and Chief Executive Officer
Syracuse, NY (1988-December 1993) of Carlisle Companies
Incorporated.
*Richard A. Redeker Director President, Chief Executive Officer and Director (since
(51) October 1993); Prudential Mutual Fund Management, Inc.
One Seaport Plaza (PMF); Executive Vice President, Director and Member
New York, NY of the Operating Committee (since October 1993) of
Prudential Securities; Director (since October 1993)
of Prudential Securities Group, Inc. (PSG); Executive
Vice President, The Prudential Investment Corporation
(since July 1994); Director of Prudential Mutual Fund
Distributors, Inc. (PMFD) (since January 1994) and
Prudential Mutual Fund Services, Inc. (PMFS); Formerly
Senior Executive Vice President and Director of Kemper
Financial Services, Inc. (September 1978-September
1993); Director of The Global Government Plus Fund,
Inc., The Global Total Return Fund, Inc. and The High
Yield Income Fund, Inc.
Louis A. Weil, III (54) Director Publisher and Chief Executive Officer, Phoenix
120 E. Van Buren Newspapers, Inc. (since August 1991); Director of
Phoenix, AZ Central Newspapers, Inc. (since September 1991); prior
thereto, Publisher of Time Magazine (May 1989-March
1991); formerly, President, Publisher and Chief
Executive Officer of The Detroit News (February
1986-August 1989); formerly member of the Advisory
Board, Chase Manhattan Bank-Westchester; Director of
The Global Government Plus Fund, Inc.
David W. Drasnin (58) Vice President Vice President and Branch Manager of Prudential
39 Public Square Securities.
Suite 500
Wilkes-Barre, PA
Robert F. Gunia (48) Vice President Chief Administrative Officer (since July 1990), Director
One Seaport Plaza (since January 1989), Executive Vice President,
New York, NY Treasurer and Chief Financial Officer (since June
1987) of PMF; Senior Vice President (since March 1987)
of Prudential Securities; Executive Vice President,
Treasurer and Comptroller (since March 1991) of
Prudential Mutual Fund Distributors, Inc. and Director
(since June 1987) of Prudential Mutual Fund Services,
Inc.; Vice President and Director of The Asia Pacific
Fund, Inc. (since May 1989).
Grace Torres (35) Treasurer and First Vice President (since March 1994) of PMF; First
One Seaport Plaza Principal Vice President (since March 1994) of PSI. Prior
New York, NY Financial and thereto, Vice President, Bankers Trust Company.
Accounting
Officer
</TABLE>
B-6
<PAGE>
<TABLE>
<CAPTION>
Name, Address Position With Principal Occupations
and Age Fund During Past 5 Years
- ----------------------- -------------- --------------------------------------------------------
<S> <C> <C>
Stephen M. Ungerman Assistant First Vice President of Prudential Mutual Fund
(42) Treasurer Management, Inc. (since February 1993). Prior thereto,
One Seaport Plaza Senior Tax Manager at Price Waterhouse (since 1981).
New York, NY
S. Jane Rose (49) Secretary Senior Vice President (since January 1991), Senior
One Seaport Plaza Counsel (since June 1987) and First Vice President
New York, NY (June 1987-December 1990) of PMF; Senior Vice
President and Senior Counsel of Prudential Securities
(since July 1992); formerly Vice President and
Associate General Counsel of Prudential Securities.
Ronald Amblard (37) Assistant First Vice President (since January 1994), and Associate
One Seaport Plaza Secretary General Counsel (since January 1992) of PMF; Vice
New York, NY President and Associate General Counsel of Prudential
Securities (since January 1992); formerly, Assistant
General Counsel (August 1988-December 1991); Associate
Vice President (January 1989-December 1990) and Vice
President (January 1991-December 1993) of PMF.
- ---------------
* "Interested" director, as defined in the Investment Company Act by reason of their affiliation
with Prudential Securities or PMF.
</TABLE>
Directors and officers of the Fund are also trustees, directors and
officers of some or all of the other investment companies distributed by
Prudential Securities Incorporated (Prudential Securities or PSI) or Prudential
Mutual Fund Distributors, Inc.
The officers conduct and supervise the daily business operations of the
Fund, while the directors, in addition to their functions set forth under
"Manager" and "Distributor," review such actions and decide on general
policy.
The Fund pays each of its directors who is not an affiliated person of PMF
or The Prudential Investment Corporation (PIC) annual compensation of $6,000, in
addition to certain out-of-pocket expenses. The Chairman of the Audit Committee
receives an additional $200 per year.
Directors may receive their Director's fee pursuant to a deferred fee
agreement with the Fund. Under the terms of the agreement, the Fund accrues
daily the amount of such Director's fee in installments which accrue interest at
a rate equivalent to the prevailing rate applicable to 90-day U.S. Treasury
Bills at the beginning of each calendar quarter or, pursuant to an exemptive
order of the Securities and Exchange Commission (SEC), at the daily rate of
return of the Fund (the Fund rate). Payment of the interest so accrued is also
deferred and accruals become payable at the option of the Director. The Fund's
obligation to make payments of deferred Directors' fees, together with interest
thereon, is a general obligation of the Fund.
Pursuant to the Management Agreement with the Fund, the Manager pays all
compensation of officers and employees of the Fund as well as the fees and
expenses of all Directors of the Fund who are affiliated persons of the Manager.
The following table sets forth the aggregate compensation paid by the Fund
for the fiscal year ended December 31, 1994 to the Directors who are not
affiliated with the Manager and the aggregate compensation paid to such
Directors for service on the Fund's board and that of all other funds managed by
Prudential Mutual Fund Management, Inc. (Fund Complex) for the calendar year
ended December 31, 1994.
Compensation Table
<TABLE>
<CAPTION>
Total
Pension or Compensation
Retirement From Fund
Aggregate Benefits Accrued Estimated Annual and Fund
Compensation As Part of Fund Benefits Upon Complex Paid
Name and Position From Fund Expenses Retirement to Directors
- ------------------------------------------ ------------ ----------------- ----------------- -------------
<S> <C> <C> <C> <C>
Delayne Dedrick Gold--Director $6,200 None N/A $ 185,000(24)*
Arthur Hauspurg--Director $6,000 None N/A $ 37,500(5)*
Stephen P. Munn--Director $6,000 None N/A $ 40,000(6)*
Louis A. Weil, III--Director $6,000 None N/A $ 97,500(12)*
- ------------------
* Indicates number of funds in Fund Complex (including the Fund) to which aggregate compensation relates.
</TABLE>
B-7
<PAGE>
As of May 12, 1995, the Directors and officers of the Fund, as a group,
owned less than 1% of the outstanding common stock of the Fund.
As of May 12, 1995, Prudential Securities was the record holder for other
beneficial owners of 412,508,520 shares (or 94%) of the outstanding common stock
of the Fund. In the event of any meetings of shareholders, Prudential Securities
will forward, or cause the forwarding of, proxy materials to the beneficial
owners for which it is the record holder.
MANAGER
The manager of the Fund is Prudential Mutual Fund Management, Inc., One
Seaport Plaza, New York, New York 10292 (PMF or the Manager). PMF serves as
manager of the other investment companies that, together with the Fund, comprise
the "Prudential Mutual Funds." See "How the Fund is Managed" in the
Prospectus. As of June 30, 1995, PMF managed and/or administered open-end and
closed-end management investment companies with assets of approximately $[45]
billion. [According to the Investment Company Institute, as of April 30, 1994,
the Prudential Mutual Funds were the 12th largest family of mutual funds in the
United States.]
Pursuant to the Management Agreement with the Fund (the Management
Agreement), PMF, subject to the supervision of the Fund's Board of Directors and
in conformity with the stated policies of the Fund, manages both the investment
operations of the Fund and the composition of the Fund's portfolio, including
the purchase, retention, disposition and loan of securities. In connection
therewith, PMF is obligated to keep certain books and records of the Fund. PMF
also administers the Fund's corporate affairs and, in connection therewith,
furnishes the Fund with office facilities, together with those ordinary clerical
and bookkeeping services which are not being furnished by State Street Bank and
Trust Company, the Fund's custodian, and Prudential Mutual Fund Services, Inc.
(PMFS or the Transfer Agent), the Fund's transfer and dividend disbursing agent.
The management services of PMF for the Fund are not exclusive under the terms of
the Management Agreement and PMF is free to, and does, render management
services to others.
For its services, PMF receives, pursuant to the Management Agreement, 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% of the Fund's average daily net assets between $750 million
and a $1.5 billion and .375 of 1% in excess of $1.5 billion. The fee is computed
daily and payable monthly. The Management Agreement provides that, in the event
the expenses of the Fund (including the fees payable to PMF, 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) for any fiscal year exceed the lowest
applicable annual expense limitation established and enforced pursuant to the
statutes or regulations of any jurisdiction in which shares of the Fund are then
qualified for offer and sale, the compensation due to PMF will be reduced by the
amount of such excess. Reductions in excess of the total compensation payable to
PMF will be paid by PMF to the Fund. No such reductions were required during the
fiscal year ended December 31, 1994. Currently, the Fund believes that the most
restrictive expense limitation of state securities commissions is 2 1/2% of the
Fund's average daily net assets up to $30 million, 2% of the Fund's average
daily net assets from $30 million to $100 million and 1 1/2% of the excess over
$100 million.
In connection with its management of the corporate affairs of the Fund, PMF
bears the following expenses:
(a) the salaries and expenses of its and the Fund's personnel except the
fees and expenses of Directors who are not affiliated persons of PMF or the
Fund's investment adviser;
(b) all expenses incurred by PMF or by the Fund in connection with managing
the ordinary course of the Fund's business, other than those assumed by the
Fund, as described below; and
(c) the costs and expenses payable to The Prudential Investment Corporation
(PIC) pursuant to a subadvisory agreement between PMF and PIC (the Subadvisory
Agreement).
Under the terms of the Management Agreement, the Fund is responsible for
the payment of the following expenses: (a) the fees payable to the Manager, (b)
the fees and expenses of Directors who are not affiliated with the Manager or
the Fund's investment adviser, (c) the fees and certain expenses of the Fund's
Custodian and Transfer and Dividend Disbursing Agent, including the cost of
providing records to the Manager in connection with its obligation of
maintaining required records of the Fund and of pricing the Fund's shares, (d)
the charges and expenses of the Fund's legal counsel and independent
accountants, (e) brokerage commissions and any issue or transfer taxes
chargeable to the Fund in connection with its securities and futures
transactions, (f) all taxes and corporate fees payable by the Fund to
governmental agencies, (g) the fees of any trade association of which the Fund
is a member, (h) the cost of stock certificates representing and/or
non-negotiable share deposit receipts evidencing shares of the Fund, (i) the
cost of fidelity and liability insurance, (j) the fees and expenses involved in
registering and maintaining registration of the Fund and of its shares with the
SEC and registering the Fund and qualifying its shares under state securities
laws, including the preparation and printing of the Fund's registration
statements and prospectuses for such purposes, (k) allocable communications
expenses with respect to investor services and all expenses of shareholders' and
Directors' meetings and of preparing, printing and mailing reports, proxy
statements and prospectuses to shareholders, (l) litigation and indemnification
expenses and other extraordinary expenses not incurred in the ordinary course of
the Fund's business, and (m) distribution fees.
B-8
<PAGE>
The Management Agreement provides that PMF will not be liable for any error
of judgment or any loss suffered by the Fund in connection with the matters to
which the Management Agreement relates, except a loss resulting from willful
misfeasance, bad faith, gross negligence or reckless disregard of duty. The
Management Agreement provides that it will terminate automatically if assigned,
and that it may be terminated without penalty by either party upon not more than
60 days' nor less than 30 days' written notice. The Management Agreement
provides that it will continue in effect for a period of more than two years
from its execution only so long as such continuance is specifically approved at
least annually in accordance with the requirements of the Investment Company
Act. The Management Agreement was last approved by the Board of Directors of the
Fund, including a majority of the Directors who are not parties to the agreement
or interested persons of such parties as defined in the Investment Company Act,
on May 2, 1995, and was approved by the shareholders of the Fund on April 28,
1988.
For the fiscal years ended December 31, 1994, 1993 and 1992, the Fund paid
management fees to PMF of $3,222,405, $3,632,856 and $3,347,940, respectively.
PMF has entered into the Subadvisory Agreement with PIC (the Subadviser), a
wholly-owned subsidiary of Prudential. The Subadvisory Agreement provides that
PIC 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. PMF continues to have responsibility for all investment
advisory services pursuant to the Management Agreement and supervises PIC's
performance of such services. PIC is reimbursed by PMF for the reasonable costs
and expenses incurred by the PIC in furnishing services to PMF.
PIC maintains a credit unit which provides credit analysis and research on
tax-exempt fixed-income securities. The portfolio manager consults routinely
with the credit unit in managing the Fund's portfolio. The credit unit reviews
on an ongoing basis issuers of tax-exempt fixed-income obligations, including
prospective purchases and portfolio holdings of the Fund. Credit analysts have
broad access to research and financial reports, data retrieval services and
industry analysts. They review financial and operating statements supplied by
state and local governments and other issuers of municipal securities to
evaluate revenue projections and the financial soundness of municipal issuers.
They study the impact of economic and political developments on state and local
governments, evaluate industry sectors and meet periodically with public
officials and other representatives of state and local governments and other
tax-exempt issuers to discuss such matters as budget projections, debt policy,
the strength of the regional economy and, in the case of revenue bonds, the
demand for facilities. They also make site inspections to review specific
projects and to evaluate the progress of construction or the operation of a
facility.
The Subadvisory Agreement was last approved by the Board of Directors,
including a majority of the directors who are not parties to such contract or
interested persons of such parties as defined in the Investment Company Act, on
May 2, 1995, and was approved by the shareholders of the Fund on April 28, 1988.
The Subadvisory Agreement provides that it will terminate in the event of
its assignment (as defined in the Investment Company Act) or upon the
termination of the Management Agreement. The Subadvisory Agreement may be
terminated by the Fund, PMF or PIC upon not more than 60 days' nor less than 30
days' written notice. The Subadvisory Agreement provides that it will continue
in effect for a period of more than two years from its execution only so long as
such continuance is specifically approved at least annually in accordance with
the requirements of the Investment Company Act.
The Manager and the Subadviser are subsidiaries of The Prudential Insurance
Company of America (The Prudential) which, [as of December 31, 1993, was one of
the largest financial institutions in the world and the largest insurance
company in North America.] The Prudential has been engaged in the insurance
business since 1875. [In July 1994, Institutional Investor ranked The Prudential
the second largest institutional money manager of the 300 largest money
management organizations in the United States as of December 31, 1993.]
DISTRIBUTOR
Prudential Mutual Fund Distributors, Inc. (PMFD), One Seaport Plaza, New
York, New York 10292, acts as the distributor of the Fund. It is a corporation
organized under the laws of the State of Delaware and a wholly-owned subsidiary
of PMF.
Distribution and Service Plan
Under the Fund's Distribution and Service Plan (the Plan) and the
Distribution Agreement with PMFD, the Fund pays PMFD, as distributor, a
distribution fee of .125 of 1% of the average daily net assets of the Fund,
computed daily and payable monthly. See "How the Fund is Managed--Distributor"
in the Prospectus.
For the fiscal year ended December 31, 1994, PMFD incurred distribution
expenses in the aggregate of $805,601, all of which was recovered through the
distribution fee paid by the Fund to PMFD. It is estimated that all this amount
was spent on commission credits to Prudential Securities and Prusec for payments
of account servicing fees to financial advisers and an allocation of overhead
and other branch office distribution-related expenses. The term "overhead and
other branch office distribution-related expenses" represents (a)
B-9
<PAGE>
the expenses of operating Prudential Securities' and Prusec's branch offices in
connection with the sale of Fund shares including lease costs, the salaries and
employee benefits of operations and sales support personnel, utility costs,
communications costs and the costs of stationery and supplies, (b) the costs of
client sales seminars, (c) travel expenses of mutual fund sales coordinators to
promote the sale of Fund shares, and (d) other incidental expenses relating to
branch promotion of Fund sales.
The Plan continues in effect from year to year, provided that each such
continuance is approved at least annually by a vote of the Board of Directors,
including a majority vote of the directors who are not interested persons of the
Fund and who have no direct or indirect financial interest in the operation of
the Plan (as defined in the Investment Company Act), cast in person at a meeting
called for the purpose of voting on such continuance. The Plan may be terminated
at any time, without penalty, by the vote of a majority of the Directors who are
not interested persons or by the vote of the holders of a majority of the
outstanding voting securities of the Fund on not more than 60 days' written
notice to any other party to the Plan. The Plan may not be amended to increase
materially the amounts to be spent by the Fund thereunder without shareholder
approval, and all material amendments are required to be approved by the Board
of Directors in the manner described above. The Plan will automatically
terminate in the event of its assignment.
Pursuant to the Plan, the Directors will be provided with, and will review,
at least quarterly, a written report of the distribution expenses incurred on
behalf of the Fund by PMFD. The report will include an itemization of the
distribution expenses and the purpose of such expenditures. In addition, as long
as the Plan remains in effect, the selection and nomination of directors who are
not interested persons of the Fund shall be committed to the Directors who are
not interested persons of the Fund or a committee thereof.
On May 2, 1995, the Board of Directors, including a majority of Directors
who are not interested persons of the Fund and who have no direct or indirect
financial interest in the operation of the Plan (the Rule 12b-1 Directors), at
a meeting called for the purpose of voting on the Plan, approved amendments to
the Plan changing it from a reimbursement type plan to a compensation type
plan. Pursuant to Rule 12b-1, the Plan was last approved by the Board of
Directors, including a majority of the Rule 12b-1 Directors, in person at a
meeting called for such purpose on May 2, 1995, and, as amended, was approved
by the shareholders of the Fund on ____________, 1995.
On October 21, 1993, PSI entered into an omnibus settlement with the SEC,
state securities regulators in 51 jurisdictions and the NASD to resolve
allegations that PSI sold interests in more than 700 limited partnerships (and a
limited number of other types of securities) from January 1, 1980 through
December 31, 1990, in violation of securities laws to persons for whom such
securities were not suitable in light of the individuals' financial condition or
investment objectives. It was also alleged that the safety, potential returns
and liquidity of the investments had been misrepresented. The limited
partnerships principally involved real estate, oil and gas producing properties
and aircraft leasing ventures. The SEC Order (i) included findings that PSI's
conduct violated the federal securities laws and that an order issued by the SEC
in 1986 requiring PSI to adopt, implement and maintain certain supervisory
procedures had not been complied with; (ii) directed PSI to cease and desist
from violating the federal securities laws and imposed a $10 million civil
penalty; and (iii) required PSI to adopt certain remedial measures including the
establishment of a Compliance Committee of its Board of Directors. Pursuant to
the terms of the SEC settlement, PSI established a settlement fund in the amount
of $330,000,000 and procedures, overseen by a court approved Claims
Administrator, to resolve legitimate claims for compensatory damages by
purchasers of the partnership interests. PSI has agreed to provide additional
funds, if necessary, for that purpose. PSI's settlement with the state
securities regulators included an agreement to pay a penalty of $500,000 per
jurisdiction. PSI consented to a censure and to the payment of a $5,000,000 fine
in settling the NASD action. In settling the above referenced matters, PSI
neither admitted nor denied the allegations asserted against it.
On January 18, 1994, PSI agreed to the entry of a Final Consent Order and a
Parallel Consent Order by the Texas Securities Commissioner. The firm also
entered into a related agreement with the Texas Securities Commissioner. The
allegations were that the firm had engaged in improper sales practices and other
improper conduct resulting in pecuniary losses and other harm to investors
residing in Texas with respect to purchases and sales of limited partnership
interests during the period of January 1, 1980 through December 31, 1990.
Without admitting or denying the allegations, PSI consented to a reprimand,
agreed to cease and desist from future violations, and to provide voluntary
donations to the State of Texas in the aggregate amount of $1,500,000. The firm
agreed to suspend the creation of new customer accounts, the general
solicitation of new accounts, and the offer for sale of securities in or from
PSI's North Dallas office to new customers during a period of twenty consecutive
business days, and agreed that its other Texas offices would be subject to the
same restrictions for a period of five consecutive business days. PSI also
agreed to institute training programs for its securities salesmen in Texas.
On October 27, 1994, Prudential Securities Group, Inc. and PSI entered into
agreements with the United States Attorney deferring prosecution (provided PSI
complies with the terms of the agreement for three years) for any alleged
criminal activity related to the sale of certain limited partnership programs
from 1983 to 1990. In connection with these agreements, PSI agreed to add the
sum of $330,000,000 to the fund established by the SEC and executed a
stipulation providing for a reversion of such funds to the United States Postal
Inspection Service. PSI further agreed to obtain a mutually acceptable outside
director to sit on the Board of Directors of PSG and the Compliance Committee of
PSI. The new director will also serve as an independent "ombudsman" whom PSI
employees can call anonymously with complaints about ethics and compliance. PSI
shall report any allegations or instances of criminal conduct and
B-10
<PAGE>
material improprieties to the new director. The new director will submit
compliance reports which shall identify all such allegations or instances of
criminal conduct and material improprieties every three months for a three-year
period.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Manager is responsible for decisions to buy and sell securities for the
Fund, the selection of brokers and dealers to effect transactions and the
negotiation of brokerage commissions, if any. The term "Manager" as used in
this section includes the "Subadviser." Fixed-income securities are generally
traded on a "net" basis with dealers acting as principal for their own
accounts without a stated commission, although the price of the security usually
includes a profit to the dealer. In underwritten offerings, securities are
purchased at a fixed price which includes an amount of compensation to the
underwriter, generally referred to as the underwriter's concession or discount.
The Fund will not deal with Prudential Securities in any transaction in which
Prudential Securities acts as principal. Purchases and sales of securities on a
securities exchange, while infrequent, will be effected through brokers who
charge a commission for their services. Orders may be directed to any broker
including, to the extent and in the manner permitted by applicable law,
Prudential Securities.
In placing orders for portfolio securities of the Fund, the Manager is
required to give primary consideration to obtaining the most favorable price and
efficient execution. This means that the Manager will seek to execute each
transaction at a price and commission, if any, which provides the most favorable
total cost or proceeds reasonably attainable in the circumstances. While the
Manager generally seeks reasonably competitive spreads or commissions, the Fund
will not necessarily be paying the lowest spread or commission available. Within
the framework of the policy of obtaining most favorable price and efficient
execution, the Manager will consider research and investment services provided
by brokers or dealers who effect or are parties to portfolio transactions of the
Fund, the Manager or the Manager's other clients. Such research and investment
services are those which brokerage houses customarily provide to institutional
investors and include statistical and economic data and research reports on
particular municipalities and industries. Such services are used by the Manager
in connection with all of its investment activities, and some of such services
obtained in connection with the execution of transactions for the Fund may be
used in managing other investment accounts. Conversely, brokers furnishing such
services may be selected for the execution of transactions of such other
accounts, whose aggregate assets are far larger than the Fund, and the services
furnished by such brokers may be used by the Manager in providing investment
management for the Fund. Commission rates are established pursuant to
negotiations with the broker based on the quality and quantity of execution
services provided by the broker in light of generally prevailing rates. The
Manager is authorized to pay higher commissions on brokerage transactions for
the Fund to brokers other than Prudential Securities in order to secure the
research and investment services described above, subject to the primary
consideration of obtaining the most favorable price and efficient execution in
the circumstances and subject to review by the Fund's Board of Directors from
time to time as to the extent and continuation of this practice. The allocation
of orders among brokers and the commission rates paid are reviewed periodically.
Subject to the above considerations, the Manager may use Prudential
Securities as a broker for the Fund. In order for Prudential Securities to
effect any portfolio transactions for the Fund, the commissions, fees or other
remuneration received by Prudential Securities must be reasonable and fair
compared to the commissions, fees or other remuneration paid to other brokers in
connection with comparable transactions involving similar securities being
purchased or sold on a securities exchange during a comparable period of time.
This standard would allow Prudential Securities to receive no more than the
remuneration which would be expected to be received by an unaffiliated broker in
a commensurate arm's-length transaction. Furthermore, the Board of Directors of
the Fund, including a majority of the Directors who are not "interested"
directors, has adopted procedures which are reasonably designed to provide that
any commissions, fees or other remuneration paid to Prudential Securities are
consistent with the foregoing standard. Brokerage transactions with Prudential
Securities are also subject to such fiduciary standards as may be imposed upon
Prudential Securities by applicable law.
The Fund paid no brokerage commissions for the years ended December 31,
1994, 1993 and 1992.
PURCHASE AND REDEMPTION OF FUND SHARES
How To Purchase Shares
The Fund's shares are sold, without a sales charge, on a continuing basis
on each business day at their net asset value next determined (see "How the
Fund Values its Shares" in the Prospectus) after a purchase order becomes
effective. Shares of the Fund may be purchased by investors directly through
Prudential Mutual Fund Services, Inc. (PMFS), or by Prudential Securities
clients through an account at Prudential Securities. Shares may also be
purchased through Pruco Securities Corporation (Prusec). Prudential Securities
clients who hold Fund shares through Prudential Securities may benefit through
administrative conveniences afforded them as Prudential Securities clients, but
may be subject to certain additional restrictions imposed by Prudential
Securities. See "Shareholder Guide--How to Buy Shares of the Fund" in the
Prospectus.
B-11
<PAGE>
How To Redeem Shares
The Fund effects redemption orders received by PMFS by 4:30 P.M., New York
time, on each business day at the net asset value determined as of 4:30 P.M.,
New York time. General information concerning redemption of shares is found in
the Prospectus under "Shareholder Guide--How to Sell Your Shares."
Investors who purchase shares directly from PMFS may use the following
procedures:
Check Redemption. At a shareholder's request, State Street Bank and Trust
Company (State Street) will establish a personal checking account for the
shareholder. Checks drawn on this account can be made payable to the order of
any person in any amount greater than $500. The payee of the check may cash or
deposit it like any other check drawn on a bank. When such check is presented to
State Street for payment, State Street presents the check to the Fund as
authority to redeem a sufficient number of shares in the shareholder's account
to cover the amount of the check. This enables the shareholder to continue
earning daily dividends until the check is cleared. Canceled checks are returned
to the shareholder by State Street.
Shareholders are subject to State Street's rules and regulations governing
such checking accounts, including the right of State Street not to honor checks
in amounts exceeding the value of the shareholder's account at the time the
check is presented for payment.
Shares for which certificates have been issued are not available for
redemption to cover checks. A shareholder should be certain that adequate shares
for which certificates have not been issued are in his or her account to cover
the amount of the check. Also, shares purchased by check are not available to
cover checks until 15 calendar days after receipt of the purchase check by PMFS.
See "Shareholder Guide--How to Buy Shares of the Fund" in the Prospectus. If
insufficient shares are in the account, or if the purchase was made by check
within 10 calendar days, the check will be returned marked "insufficient
funds." Since the dollar value of an account is constantly changing, it is not
possible for a shareholder to determine in advance the total value of his or her
account so as to write a check for the redemption of the entire account.
PMFS reserves the right to impose a service charge to establish a checking
account and to order checks. State Street, the Fund and PMFS have reserved the
right to modify this checking account privilege or to place a charge for each
check presented for payment for any individual account or for all accounts in
the future.
The Fund, PMFS or State Street may terminate Check Redemption at any time
upon 30 days' notice to participating shareholders. To receive further
information, contact Prudential Mutual Fund Services, Inc., Attention:
Redemption Services, P.O. Box 15010, New Brunswick, NJ 08906-5010.
Expedited Redemption. In order to use Expedited Redemption, a shareholder
may so designate at the time the initial application form is filed, or at a
later date. Once the Expedited Redemption authorization form has been completed,
the signature(s) on the authorization form guaranteed as set forth below and the
Form returned to PMFS, requests for redemption may be made by telegraph, letter
or telephone. The proceeds of redeemed shares in the amount of $1,000 or more
are transmitted by wire to the shareholder's account at a domestic commercial
bank which is a member of the Federal Reserve System. Proceeds of less than
$1,000 are forwarded by check to the shareholder's designated bank account. The
minimum amount that may be redeemed by Expedited Redemption is $200, except
that, if an account for which Expedited Redemption is requested has a net asset
value of less than $200, the entire account may be redeemed. The Fund does not
forward redemption proceeds with respect to shares purchased by check until 15
calendar days after receipt of the purchase check by PMFS.
To request Expedited Redemption by telephone, a shareholder should call
PMFS at 800-225-1852. Calls must be received by PMFS before 4:30 P.M., New York
time in order for the redemption to be effective on that day. Requests by letter
should be addressed to Prudential Mutual Funds Services, Inc., at the address
set forth above.
Each shareholder's signature on the authorization form must be guaranteed
by: (a) a commercial bank which is a member of the Federal Deposit Insurance
Corporation; (b) a trust company; or (c) a member firm of a domestic securities
exchange. Guarantees must be signed by an authorized signatory of the bank,
trust company or member firm, and "Signature Guaranteed" should appear with
the signature. Signature guarantees by savings banks, savings and loan
associations and notaries will not be accepted. PMFS may request further
documentation from corporations, executors, administrators, trustees or
guardians. In order to change the name of the commercial bank or account
designated to receive redemption proceeds, it is necessary to execute a new
Expedited Redemption authorization form and submit it to PMFS at the address set
forth above. See "Shareholder Guide--How to Sell Your Shares" in the
Prospectus for additional information on Expedited Redemption.
Regular Redemption. Shareholders may redeem their shares by sending to
PMFS, at the address set forth above, a written request, accompanied by duly
endorsed share certificates, if issued. All written requests for redemption, and
any share certificates, must be endorsed by the shareholder with signature
guaranteed, as described above under "Expedited Redemption." PMFS may request
further documentation from corporations, executors, administrators, trustees or
guardians. Redemption proceeds are sent to a shareholder's address by check.
B-12
<PAGE>
SHAREHOLDER INVESTMENT ACCOUNT
Upon the initial purchase of shares of the Fund, a Shareholder Investment
Account is established for each investor under which a record of the share held
is maintained by the Transfer Agent. If a share certificate is desired, it must
be requested in writing for each transaction. Certificates are issued only for
full shares and may be redeposited in the account at any time. There is no
charge to the investor for issuance of a certificate. Whenever a transaction
takes place in the Shareholder Investment Account, the shareholder will be
mailed a statement showing the transaction and the status of such account.
Procedure for Multiple Accounts
Special procedures have been designed for banks and other institutions that
wish to open multiple accounts. An institution may open a single master account
by filing an Application and Order Form with PMFS, signed by personnel
authorized to act for the institution. Individual sub-accounts may be opened at
the time the master account is opened by listing them, or they may be added at a
later date by written advice or by filing forms supplied by PMFS. Procedures are
available to identify sub-accounts by name and number within the master account
name. The investment minimums described in the Prospectus under "Shareholder
Guide--How to Buy Shares of the Fund" are applicable to the aggregate amounts
invested by a group, and not to the amount credited to each sub-account.
PMFS provides each institution with a written confirmation for each
transaction in a sub-account and, to each institution on a monthly basis, a
statement which sets forth for each master account its share balance and income
earned for the month. In addition, each institution receives a statement for
each individual account setting forth transactions in the sub-account for the
year-to-date, the total number of shares owned as of the dividend payment date
and the dividends paid for the current month, as well as for the year-to-date.
For further information on the sub-accounting system and procedures, contact
PMFS.
Automatic Reinvestment of Dividends and Distributions
For the convenience of investors, all dividends and distributions are
automatically invested in full and fractional shares of the Fund at net asset
value. An investor may direct the Transfer Agent in writing not less than 5 full
business days prior to the payable date to have subsequent dividends and/or
distributions sent in cash rather than invested. In the case of recently
purchased shares for which registration instructions have not been received on
the record date, cash payment will be made directly to the dealer. Any
shareholder who receives a cash payment representing a dividend or distribution
may reinvest such dividend or distribution at net asset value by returning the
check or the proceeds to the Transfer Agent within 30 days after the payment
date. Such investment will be made at the net asset value per share next
determined after receipt of the check or proceeds by the Transfer Agent.
Exchange Privilege
The Fund makes available to its shareholders the privilege of exchanging
their shares for shares of certain other Prudential Mutual Funds, including one
or more specified money market funds, subject in each case to the minimum
investment requirements of such funds. Class A shares of such other Prudential
Mutual Funds may also be exchanged for shares of the Fund. All exchanges are
made on the basis of relative net asset value next determined after receipt of
an order in proper form plus the applicable sales charge. An exchange will be
treated as a redemption and purchase for tax purposes. Shares may be exchanged
for shares of another fund only if shares of such fund may legally be sold under
applicable state laws.
It is contemplated that the exchange privilege may be applicable to new
mutual funds whose shares may be distributed by the Distributor.
Shareholders of the Fund may exchange their shares for Class A shares of
the Prudential Mutual Funds and shares of the money market funds specified
below.
B-13
<PAGE>
The following money market funds participate in the Class A Exchange
Privilege:
Prudential California Municipal Fund
(California Money Market Series)
Prudential Government Securities Trust
(Money Market Series)
(U.S. Treasury 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 MoneyMart Assets
Prudential Tax-Free Money Fund, Inc.
Shareholders of the Fund may not exchange their shares for Class B or Class
C shares of the Prudential Mutual Funds or shares of Prudential Special Money
Market Fund a money market fund, except that shares acquired prior to January
22, 1990 subject to a contingent deferred sales charge may be exchanged for
Class B shares.
Additional details about the Exchange Privilege and prospectuses for each
of the Prudential Mutual Funds are available from the Fund's Transfer Agent,
Prudential Securities or Prusec. The Exchange Privilege may be modified,
terminated or suspended on sixty days' notice, and any fund, including the Fund,
or the Distributor, has the right to reject any exchange application relating to
such fund's shares.
Automatic Savings Accumulation Plan (ASAP)
Under ASAP, an investor may arrange to have a fixed amount automatically
invested in Fund shares each month by authorizing his or her bank account or
Prudential Securities Account (not including a Command Account) to be debited to
invest specified dollar amounts in shares of the Fund. The investor's bank must
be a member of the Automatic Clearing House System. Share certificates are not
issued to ASAP participants.
Further information about this program and an application form can be
obtained from the Transfer Agent, Prudential Securities or Prusec.
In addition, an investor may direct the Transfer Agent to redeem on a
monthly or other periodic basis specified amounts (minimum of $100) of shares of
the Fund and invest the proceeds of such redemptions in shares of any Prudential
Mutual Fund pursuant to the "Exchange Privilege" or the "Class B and Class C
Purchase Privilege."
Systematic Withdrawal Plan
A withdrawal plan is available for shareholders having shares of the Fund
held through Prudential Securities or the Transfer Agent. Such withdrawal plan
provides for monthly or quarterly checks in any amount, except as provided
below, up to the value of the shares in the shareholder's account.
In the case of shares held through the Transfer Agent, (i) a $10,000
minimum account value applies, (ii) withdrawals may not be for less than $100
and (iii) the shareholder must elect to have all dividends and/or distributions
automatically reinvested in additional full and fractional shares at net asset
value on shares held under this plan. See "Shareholder Investment
Account--Automatic Reinvestment of Dividends and Distributions" above.
Prudential Securities and the Transfer Agent act as agents for the
shareholder in redeeming sufficient full and fractional shares to provide the
amount of the periodic withdrawal payment. The plan may be terminated at any
time, and the Distributor reserves the right to initiate a fee of up to $5 per
withdrawal, upon 30 days' written notice to the shareholder.
Withdrawal payments should not be considered as dividends, yield or income.
If periodic withdrawals continuously exceed reinvested dividends and
distributions, the shareholder's original investment will be correspondingly
reduced and ultimately exhausted. Furthermore, each withdrawal constitutes a
redemption of shares, and any gain or loss realized must be recognized for
federal income tax purposes. Each shareholder should consult his or her own tax
adviser with regard to the tax consequences of the plan, particularly if used in
connection with a retirement plan.
B-14
<PAGE>
NET ASSET VALUE
The net asset value per share is the net worth of the Fund (assets,
including securities at value, minus liabilities) divided by the number of
shares outstanding.
The Fund uses the amortized cost method to determine the value of its
portfolio securities. The amortized cost method involves valuing a security at
its cost and amortizing any discount or premium over the period until maturity.
The method does not take into account unrealized capital gains and losses which
may result from the effect of fluctuating interest rates on the market value of
the security.
The Fund maintains a dollar-weighted average portfolio maturity of 90 days
or less, purchases instruments having remaining maturities of thirteen months or
less and invests only in securities determined by the investment adviser under
the supervision of the Board of Directors to present minimal credit risks and to
be of "eligible quality" in accordance with regulations of the SEC. The Board
has established procedures designed to stabilize, to the extent reasonably
possible, the Fund's price per share as computed for the purpose of sales and
redemptions at $1.00. Such procedures include review of the Fund's portfolio
holdings by the Board of Directors, at such intervals as it may deem
appropriate, to determine whether the Fund's net asset value calculated by using
available market quotations deviates from $1.00 per share based on amortized
cost. The extent of any deviation will be examined by the Board of Directors. If
such deviation exceeds 1/2 of 1%, the Board will promptly consider what action,
if any, will be initiated. In the event the Board determines that a deviation
exists which may result in material dilution or other unfair results to
investors or existing shareholders, the Board will take such corrective action
which it regards as necessary and appropriate, including the sale of portfolio
instruments prior to maturity to realize capital gains or losses or to shorten
average portfolio maturity, the withholding of dividends, redemptions of shares
in kind, or the use of available market quotations to establish a net asset
value per share.
The Fund will calculate its net asset value at 4:30 P.M., New York time, on
each day the New York Stock Exchange is open for trading except on days on which
no orders to purchase, sell or redeem series shares have been received or days
on which changes in the value of the Fund's securities do not affect net asset
value.
CALCULATION OF YIELD
The Fund will prepare a current quotation of yield from time to time. The
yield quoted will be the simple annualized yield for an identified seven
calendar day period. The yield calculation will be based on a hypothetical
account having a balance of exactly one share at the beginning of the seven-day
period. The base period return will be the change in the value of the
hypothetical account during the seven-day period, including dividends declared
on any shares purchased with dividends on the share but excluding any capital
changes. The yield will vary as interest rates and other conditions affecting
money market instruments change. Yield also depends on the quality, length of
maturity and type of instruments in the Fund's portfolio, and its operating
expenses. The Fund may also prepare an effective annual yield computed by
compounding the unannualized seven-day period return as follows: by adding 1 to
the unannualized 7-day period return, raising the sum to a power equal to 365
divided by 7, and subtracting 1 from the result.
Effective yield = [(base period return + 1)365/7]-1
The Fund may also calculate the tax equivalent yield over a 7-day period.
The tax equivalent yield will be determined by first computing the current yield
as discussed above. The Fund will then determine what portion of the yield is
attributable to securities, the income of which is exempt for federal income tax
purposes. This portion of the yield will then be divided by one minus 39.6% (the
assumed maximum tax rate for individual taxpayers not subject to Alternative
Minimum Tax) and then added to the portion of the yield that is attributable to
other securities.
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from Lipper
Analytical Services, Inc., Donoghue's Money Fund Report, The Bank Rate Monitor,
other industry publications, business periodicals, rating services and market
indices.
The Fund's yield fluctuates, and an annualized yield quotation is not a
representation by the Fund as to what an investment in the Fund will actually
yield for any given period. Yield for the Fund will vary based on a number of
factors including changes in market conditions, the level of interest rates and
the level of Fund income and expenses.
TAXES, DIVIDENDS AND DISTRIBUTIONS
The Fund has elected to qualify and intends to remain qualified as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended ("Internal Revenue Code"). Qualification as a regulated
investment company under the Internal Revenue Code requires, among other things,
that the Fund (a) derive at least 90% of its annual gross income (without offset
for losses from the sale or other disposition of securities or foreign
currencies) from interest, payments with respect to securities loans, dividends
and gains from the sale or other disposition of securities or foreign currencies
and certain financial futures, options and forward contracts thereon; (b) derive
less than 30% of its annual gross income from gains from the sale or other
disposition of securities
B-15
<PAGE>
or options thereon held for less than three months; and (c) diversify its
holdings so that, at the end of each quarter of the taxable year, (i) at least
50% of the market value of the Fund's assets is represented by cash, U.S.
Government securities and other securities limited in respect of any one issuer
to an amount not greater than 5% of the Fund's assets and 10% of the outstanding
voting securities of such issuer, and (ii) not more than 25% of the value of its
assets is invested in the securities of any one issuer (other than U.S.
Government securities). In addition, in order not to be subject to federal
income tax on amounts distributed to shareholders, the Fund must distribute to
its shareholders as ordinary dividends at least 90% of its net investment income
and net short-term capital gains in excess of its net long-term capital losses
earned in each year.
The Fund generally will be subject to a nondeductible excise tax of 4% to
the extent that it does not meet certain minimum distribution requirements as of
the end of each calendar year. The Fund intends to make timely distributions of
the Fund's income in compliance with these requirements. As a result, it is
anticipated that the Fund will not be subject to the excise tax.
The Fund intends to invest its assets so that dividends payable from net
tax-exempt interest income will qualify as exempt-interest dividends and be
excluded from a shareholder's gross income under the Internal Revenue Code. In
order for its dividends to qualify as tax-exempt income, (i) at least 50 percent
of the value of the total assets of the Fund at the close of each quarter of its
taxable year must consist of certain tax-exempt government obligations and (ii)
the Fund must designate the dividend as an exempt-interest dividend in a written
notice mailed to shareholders not later than sixty days after the end of its
taxable year.
Exempt-interest dividends attributable to interest on certain "private
activity" tax-exempt obligations are a preference item for purposes of
computing the alternative minimum tax for both individuals and corporations.
Moreover, interest on tax-exempt obligations, whether or not private activity
bonds, that are held by corporations will be taken into account (i) in
determining the alternative minimum tax imposed on 75% of the excess of adjusted
current earnings over alternative minimum taxable income, (ii) in calculating
the environmental tax equal to 0.12 percent of a corporation's modified
alternative minimum taxable income in excess of $2 million, and (iii) in
determining the foreign branch profits tax imposed on the effectively connected
earnings and profits (with adjustments) of United States branches of foreign
corporations. The Fund plans to avoid to the extent possible investing in
private activity obligations.
Interest on indebtedness incurred or continued by a shareholder, whether a
corporation or an individual, to purchase or carry shares of the Fund is not
deductible. Shareholders who have held their shares for six months or less may
be subject to a disallowance of losses from the sale or exchange of those shares
to the extent of any exempt-interest dividends received by the shareholder with
respect to the shares and if such losses are not disallowed, they will be
treated as long-term capital losses to the extent of any distribution of
long-term capital gains received by the shareholder with respect to such shares.
Moreover, any loss realized on a sale or exchange will be disallowed to the
extent the shares disposed of are replaced within a period of 61 days beginning
30 days before and ending 30 days after the disposition, such as pursuant to a
dividend reinvestment in shares. In such a case, the basis of the shares
acquired will be adjusted to reflect the disallowed loss. Entities or persons
who are "substantial users" (or related persons) of facilities financed by
private activity bonds should consult their tax advisers before purchasing
shares of the Fund.
The Fund does not expect to realize long-term capital gains or losses.
The Fund may be subject to state or local tax in certain other states where
it is deemed to be doing business. Further, in those states which have income
tax laws, the tax treatment of the Fund and of shareholders of the Fund with
respect to distributions by the Fund may differ from federal tax treatment. The
exemption of interest income for federal income tax purposes may not result in
similar exemption under the laws of a particular state or local taxing
authority. The Fund will report annually to its shareholders the percentage and
source, on a state-by-state basis, of interest income on Municipal Bonds
received by the Fund during the preceding year and on other aspects of the
federal income tax status of distributions made by the Fund.
Pennsylvania Personal Property Tax. The Fund has obtained a written letter
of determination from the Pennsylvania Department of Revenue that the Fund is
subject to the Pennsylvania foreign franchise tax upon initiating its intended
business activities in Pennsylvania. Accordingly, Fund shares are believed to be
exempt from Pennsylvania personal property taxes. The Fund anticipates that it
will continue such business activities but reserves the right to suspend them at
any time, resulting in the termination of the exemption.
B-16
<PAGE>
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT,
AND INDEPENDENT ACCOUNTANTS
State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts 02171, serves as Custodian for the Fund's portfolio securities and
cash and, in that capacity, maintains certain financial and accounting books and
records pursuant to agreements with the Fund.
Prudential Mutual Fund Services, Inc., Raritan Plaza One, Edison, New
Jersey 08837 (PMFS), serves as the Transfer and Dividend Disbursing Agent of the
Fund. It is a wholly-owned subsidiary of PMF. PMFS provides customary transfer
agency services to the Fund, including the handling of shareholder
communications, the processing of shareholder transactions, the maintenance of
shareholder account records, payment of dividends and distributions, and related
functions. For these services, PMFS receives an annual fee per shareholder
account, a new account set-up fee for each manually-established account and a
monthly inactive zero balance account fee per shareholder account. PMFS is also
reimbursed for its out-of-pocket expenses, including but not limited to postage,
stationery, printing, allocable communications expenses and other costs. For the
fiscal year ended December 31, 1994, the Fund incurred fees of $369,953 for the
services of PMFS.
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York,
serves as the Fund's independent accountants and in that capacity audits the
Fund's annual financial statements.
B-17
<PAGE>
PRUDENTIAL TAX-FREE MONEY FUND Portfolio of Investments
December 31, 1994
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (a) (Note 1)
<C> <C> <S> <C>
ALASKA--2.7%
Valdez Alaska Marine
Term. Rev. Arco
Trans. Proj.,
T.E.C.P.,
3.65%, 1/17/95, Ser.
A-1* $ 13,000 94A.................. $ 13,000,000
------------
ARIZONA--2.1%
Maricopa Cnty. Ind.
Dev. Auth., Grand
Canyon
University, F.R.W.D.,
SP1+* 10,000 5.55%, 1/5/95.......... 10,000,000
------------
CALIFORNIA--5.4%
California Higher Ed.
Ln . Auth. Inc.,
Student
Ln. Rev., A.N.N.M.T.
3.60%, 5/1/95, Ser.
VMIG1 15,750 87A.................. 15,750,000
California St. R.A.W.,
F.R.W.D.S.,
5.78%, 1/5/95, Ser.
VMIG1 2,200 94A.................. 2,200,000
5.73%, 1/5/95, Ser.
SP1* 8,126 94C-10............... 8,125,941
------------
26,075,941
------------
COLORADO--5.6%
Colorado Hlth. Facs.
Auth. Rev.
Frasier Meadows Manor,
F.R.W.D.,
5.55%, 1/5/95, Ser.
NR 10,000 94................... 10,000,000
Colorado Hsg. Fin.
Auth.,
Eagle Trust,
F.R.W.D.S.,
5.73%, 1/5/95, Ser.
A-1* 17,335 94C.................. 17,335,000
------------
27,335,000
------------
CONNECTICUT--5.8%
Connecticut St. Hsg.
Fin. Auth.,
Hsg. Mtg. Fin. Auth.
Prog., A.N.N.M.T.,
4.40%, 11/15/95, Ser.
VMIG1 $ 7,100 93E-1................ $ 7,096,907
4.40%, 11/15/95, Ser.
VMIG1 10,000 94E-1................ 10,000,000
Connecticut St. Spec.
Assmt.,
Unemployment
Compensation Rev.,
A.N.N.M.T.,
3.85%, 7/1/95, Ser.
VMIG1 11,000 93C.................. 11,000,000
------------
28,096,907
------------
DISTRICT OF COLUMBIA--1.8%
Dist. of Columbia Hsg.
Fin. Agcy.,
Carmel Plaza, F.R.W.D.,
5.50%, 1/5/95, Ser.
VMIG1 $ 8,830 91................... 8,830,000
------------
FLORIDA--2.6%
Putnam Cnty. Dev. Auth.
Seminole Electric
Proj., S.E.M.O.T.,
Ser. 84H-4
A-1* 12,500 3.75%, 3/15/95......... 12,500,000
------------
GEORGIA--5.3%
Cobb Cnty. Dev. Auth.
Rev.,
Inst. of Nuclear Pwr.,
F.R.W.D.,
5.65%, 1/4/95, Ser.
NR 7,255 92................... 7,255,000
Fulton Cnty. Dev. Auth.
Ind.
Rev., Siemen's Energy
Inc.,
F.R.W.D.,
5.75%, 1/5/95, Ser.
VMIG1 7,750 94................... 7,750,000
Fulton Cnty. Dev. Auth.
Rev.,
Robert W. Woodruff Art
Ctr. Inc., F.R.W.D.,
5.70%, 1/5/95, Ser.
NR 10,700 93................... 10,700,000
------------
25,705,000
------------
</TABLE>
B-18 See Notes to Financial Statements.
<PAGE>
PRUDENTIAL TAX-FREE MONEY FUND
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (a) (Note 1)
<C> <C> <S> <C>
IDAHO--2.1%
Idaho St., T.A.N.,
4.50%, 6/29/95, Ser.
MIG1 $ 10,000 94................... $ 10,032,110
------------
ILLINOIS--10.5%
Hazel Crest Vlg. Rev.,
Waterford Estates
Proj., F.R.W.D.,
5.65%, 1/6/95, Ser.
VMIG1 7,500 92A.................. 7,500,000
Illinois Dev. Fin.
Auth.,
Orleans Multifamily
Hsg. Rev., F.R.W.D.,
5.65%, 1/6/95, Ser.
A-1* 14,020 92................... 14,020,000
Illinois St. Gen.
Oblig. Cert.,
4.75%, 4/17/95, Ser.
MIG1 10,000 94................... 10,015,100
Wheeling Multifamily
Hsg.
Rev., Woodland Creek
II, F.R.W.D.,
5.55%, 1/6/95, Ser.
SP-1* 9,655 90................... 9,655,000
Woodridge Dupage
Cntys.,
Multifamily Hsg. Rev.
Rfdg., Hinsdale Terr.
Apts., F.R.W.D.,
5.65%, 1/6/95, Ser.
A-1+* 10,000 90................... 10,000,000
------------
51,190,100
------------
KANSAS--0.9%
Kansas City Poll. Ctrl.
Rev.,
General Motors Corp.
Proj., F.R.W.D.,
6.00%, 1/4/95, Ser.
VMIG2 4,350 85................... 4,350,000
------------
KENTUCKY--3.0%
Clark Cnty. Poll. Ctrl.
Rev.,
Eastern Kentucky Pwr.,
S.E.M.O.T.,
3.75%, 4/17/95, Ser.
A-1* 14,740 J2................... 14,737,854
------------
LOUISIANA--2.2%
East Baton Rouge Parish
Louisiana Poll. Ctrl.
Rev., Exxon Proj.,
T.E.C.P.,
3.70%, 1/30/95, Ser.
P1 10,900 89................... 10,900,000
------------
MAINE--4.3%
Biddeford Res. Rec.
Rev.,
Energy Rec. Co. Proj.,
F.R.M.D.,
3.70%, 1/3/95, Ser.
VMIG1 $ 21,000 85................... $ 21,000,000
------------
MICHIGAN--7.2%
Grand Rapids Econ. Dev.
Corp., Ind. Dev. Rev.
Rfdg., F.R.W.D.,
5.70%, 1/5/95, Ser.
NR 7,500 92................... 7,500,000
Michigan Mun. Bond
Auth.
Rev., R.A.N.,
4.25%, 5/5/95, Ser.
SP-1* 7,000 94A.................. 7,017,217
4.75%, 7/20/95, Ser.
SP-1* 20,700 94B.................. 20,781,777
------------
35,298,994
------------
MINNESOTA--5.7%
Minnesota Gen. Oblig.,
F.R.W.D.S.,
5.85%, 1/5/95, Ser.
NR 5,778 6.................... 5,778,316
Minnetonka Multifamily
Hsg.
Rev., Cliffs
Ridgedale Proj.,
F.R.W.D.,
5.55%, 1/6/95, Ser.
A-1* 6,900 85A.................. 6,900,000
St Louis Hlth. Care
Facs.
Trust Cert.,
F.R.W.D.S.,
5.65%, 1/6/95, Ser.
NR 15,000 93................... 15,000,000
------------
27,678,316
------------
MISSOURI--1.6%
St. Louis Land
Clearance Auth.
Redev. Auth. Pkg.
Facs., Rev.,
S.E.M.M.T.,
3.75%, 3/15/95, Ser.
VMIG1 8,000 89................... 8,000,000
------------
NEBRASKA--1.8%
Nebraska Invest. Fin.
Auth.,
Briarhurst Candletree
Proj.,
S.E.M.M.T.,
4.10%, 4/1/95, Ser.
A-1* 8,995 85................... 8,995,000
------------
</TABLE>
B-19 See Notes to Financial Statements.
<PAGE>
PRUDENTIAL TAX-FREE MONEY FUND
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (a) (Note 1)
<C> <C> <S> <C>
NEW YORK--0.5%
New York St. Gen.
Oblig., T.E.C.P.,
3.85%, 2/16/95, Ser.
P-1 $ 2,500 P.................... $ 2,500,000
------------
NORTH CAROLINA--1.5%
Rockingham Cnty. Ind.
Facs.,
Poll. Ctrl. Rev.,
Phillip
Morris Proj.,
F.R.W.D.,
P1 7,200 5.65%, 1/4/95.......... 7,200,000
------------
OHIO--2.6%
Ohio St. Wtr. Dev.
Auth. Rev.,
Gen. Motors Corp.
Proj., F.R.W.D.,
5.95%, 1/4/95, Ser.
VMIG2 4,160 85................... 4,160,000
Toledo-Lucas Cnty.,
Convntn. & Visitors
Bureau, M.T.H.O.T.,
3.90%, 1/1/95, Ser.
VMIG1 8,300 88................... 8,300,000
------------
12,460,000
------------
OKLAHOMA--6.8%
Oklahoma Cnty. Ind.
Auth. Rev., Baptist
Gen. Conv.,
S.E.M.M.T.,
VMIG1 15,000 4.00%, 3/1/95.......... 15,000,000
Oklahoma Sch. Dist.
Cash Mgmt.,
5.30%, 6/30/95, Ser.
NR 9,000 94................... 9,042,756
Tulsa Pkg. Auth. Rev.,
Williams Ctr. Proj.,
S.E.M.M.T.,
4.35%, 5/15/95, Ser.
VMIG1 9,265 87A.................. 9,265,000
------------
33,307,756
------------
OREGON--1.8%
Klamath Falls Elec.
Rev.,
Salt Caves
Hydroelectric,
A.N.N.M.T.,
3.75%, 5/2/95, Ser.
SP-1+* 8,800 86C.................. 8,800,000
------------
PENNSYLVANIA--2.7%
Philadelphia T.R.A.N.,
4.75%, 6/15/95, Ser.
MIG1 $ 7,000 94-95B............... $ 7,025,928
Southeastern
Pennsylvania Trans.
Auth. Rev.,
4.60%, 6/1/95, Ser.
Aa3 6,000 94................... 6,000,000
------------
13,025,928
------------
TENNESSEE--1.9%
Memphis Hlth. Edl. &
Hsg. Fac. Brd.,
Multifamily Hsg. Rev.,
F.R.W.D.,
5.65%, 1/6/95, Ser.
VMIG2 9,320 89................... 9,320,000
------------
TEXAS--6.9%
Gulf Coast Wst. Disp.
Auth.
Poll. Ctrl. Rev., Exxon
Corp. Proj.,
T.E.C.P.,
3.55%, 1/23/95, Ser.
P1 14,700 89................... 14,700,000
San Antonio Elec. & Gas
Rev., T.E.C.P.,
3.55%, 1/18/95, Ser.
P-1 6,000 A.................... 6,000,000
3.65%, 3/6/95, Ser.
P-1 5,600 A.................... 5,600,000
Southeast Texas Hsg.
Fin. Corp., Banc One,
Tax Exempt
Trust, F.R.W.D.S.,
5.65%, 1/5/95, Ser.
Aaa 7,395 91D.................. 7,395,000
------------
33,695,000
------------
VIRGINIA--1.3%
Chesterfield Cnty. Ind.
Dev. Auth., Phillip
Morris Proj.,
F.R.W.D.,
P-1 6,500 5.65%, 1/4/95.......... 6,500,000
------------
WASHINGTON--2.6%
Washington Public Pwr.
Supply,
F.R.W.D.S.,
5.85%, 1/5/95, Ser.
NR 12,631 5.................... 12,631,332
------------
</TABLE>
B-20 See Notes to Financial Statements.
<PAGE>
PRUDENTIAL TAX-FREE MONEY FUND
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (a) (Note 1)
<C> <C> <S> <C>
WISCONSIN--1.6%
Wisconsin Hsg. & Econ.
Dev.
Auth., Home Ownership
Rev., Q.T.R.O.T.,
3.95%, 3/1/95, Ser.
Aaa $ 7,970 87B.................. $ 7,970,000
------------
Total Investments--100.8%
(amortized cost
$491,135,238; Note
1)................... 491,135,238
Liabilities in excess
of other
assets--(0.8%)....... (3,844,788)
------------
Net Assets--100%....... $487,290,450
------------
------------
</TABLE>
(a) The following abbreviations are used in portfolio descriptions:
A.N.N.M.T.--Annual Mandatory Tender
F.R.M.D.--Floating Rate (Monthly) Demand Note**
F.R.W.D.--Floating Rate (Weekly) Demand Note**
F.R.W.D.S.--Floating Rate (Weekly) Demand Note Synthetic
M.T.H.O.T.--Monthly Optional Tender
R.A.N.--Revenue Anticipation Note
R.A.W.--Revenue Anticipation Warrant
S.E.M.M.T.--Semi-Annual Mandatory Tender
S.E.M.O.T.--Semi-Monthly Tender Offer
T.A.N.--Tax Anticipation Note
T.E.C.P.--Tax-Exempt Commercial Paper
T.R.A.N.--Tax & Revenue Anticipation Note
Q.T.R.O.T.--Quarterly Tax & Reserve Optional Tender
* Standard & Poor's Rating.
** For purposes of amortized cost valuation, the maturity date of these
instruments is considered to be the later of the next date on which the
security can be redeemed at par, or the next date on which the rate of
interest is adjusted.
NR--Not Rated by Moody's or Standard & Poor's.
The Fund's current Statement of Additional Information contains a description
of Moody's and Standard and Poor's ratings.
B-21 See Notes to Financial Statements.
<PAGE>
PRUDENTIAL TAX-FREE MONEY FUND
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Assets December 31, 1994
-----------------
<S> <C>
Investments, at value................................................................. $ 491,135,238
Receivable for investments sold....................................................... 13,695,199
Receivable for Fund shares sold....................................................... 8,308,888
Interest receivable................................................................... 4,274,530
Prepaid expenses...................................................................... 12,191
-----------------
Total assets...................................................................... 517,426,046
-----------------
Liabilities
Payable for investments purchased..................................................... 16,215,208
Payable for Fund shares reacquired.................................................... 13,117,717
Dividends payable..................................................................... 250,617
Due to Manager........................................................................ 236,591
Accrued expenses...................................................................... 181,439
Bank overdraft........................................................................ 102,923
Due to Distributor.................................................................... 31,101
-----------------
Total liabilities................................................................. 30,135,596
-----------------
Net Assets............................................................................ $ 487,290,450
-----------------
-----------------
Net assets were comprised of:
Common stock, $.01 par value........................................................ $ 4,873,717
Paid-in capital in excess of par.................................................... 482,416,733
-----------------
Net assets, December 31, 1994....................................................... $ 487,290,450
-----------------
-----------------
Net asset value, offering price and redemption price per share ($487,290,450 /
487,384,729 shares of common stock issued and outstanding;
3 billion shares authorized)....................................................... $1.00
-----------------
-----------------
</TABLE>
See Notes to Financial Statements.
B-22
<PAGE>
PRUDENTIAL TAX-FREE MONEY FUND
Statement of Operations
<TABLE>
<CAPTION>
Year Ended
December 31,
Net Investment Income 1994
-----------
<S> <C>
Income
Interest............................. $19,409,932
-----------
Expenses
Management fee....................... 3,222,405
Distribution fee..................... 805,601
Transfer agent's fees and expenses... 405,000
Custodian's fees and expenses........ 100,000
Registration fees.................... 75,000
Franchise taxes...................... 70,000
Audit fee............................ 48,000
Reports to shareholders.............. 45,000
Directors' fees...................... 30,200
Insurance............................ 21,000
Legal fees........................... 20,000
Miscellaneous........................ 2,355
-----------
Total expenses..................... 4,844,561
-----------
Net investment income.................. 14,565,371
-----------
Net Increase in Net Assets
Resulting from Operations.............. $14,565,371
-----------
-----------
</TABLE>
PRUDENTIAL TAX-FREE MONEY FUND
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended December 31,
Increase (Decrease) ----------------------------------
in Net Assets 1994 1993
--------------- ---------------
<S> <C> <C>
Operations
Net investment
income............. $ 14,565,371 $ 13,369,060
Net realized gain
on securities
transactions..... -- 237
--------------- ---------------
Net increase in net
assets resulting
from
operations....... 14,565,371 13,369,297
--------------- ---------------
Dividends to
shareholders....... (14,565,371) (13,369,297)
--------------- ---------------
Fund share
transactions (at
$1.00 per share)
Net proceeds from
shares
subscribed....... 1,984,509,938 2,398,092,847
Net asset value of
shares issued to
shareholders in
reinvestment of
dividends........ 13,746,715 12,745,371
Cost of shares
reacquired....... (2,112,588,085) (2,423,549,007)
--------------- ---------------
Net decrease in net
assets from Fund
share
transactions....... (114,331,432) (12,710,789)
--------------- ---------------
Total decrease....... (114,331,432) (12,710,789)
Net Assets
Beginning of year.... 601,621,882 614,332,671
--------------- ---------------
End of year.......... $ 487,290,450 $ 601,621,882
--------------- ---------------
--------------- ---------------
</TABLE>
See Notes to Financial Statements. See Notes to Financial Statements.
B-23
<PAGE>
PRUDENTIAL TAX-FREE MONEY FUND
Notes to Financial Statements
Prudential-Bache Tax-Free Money Fund, Inc., doing business as Prudential
Tax-Free Money Fund (the "Fund"), 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 attain the highest level of current
income that is exempt from federal income taxes, consistent with liquidity and
preservation of capital. The Fund will invest in short-term tax-exempt debt
securities of state and local governments. The ability of the issuers of the
securities held by the Fund to meet their obligations may be affected by
economic or political developments in a specific state, industry or region.
Note 1. Accounting The following is a summary
Policies of significant accounting poli-
cies followed by the Fund in
the preparation of its financial statements.
Securities Valuation: Portfolio securities are valued at amortized cost, which
approximates market value. The amortized cost method of valuation involves
valuing a security at its cost on the date of purchase and thereafter assuming a
constant amortization to maturity of any discount or premium.
Securities Transactions and Investment Income: Securities transactions are
recorded on the trade date. Realized gains and losses on sales of investments
are calculated on an identified cost basis. Interest income is recorded on an
accrual basis. The cost of portfolio securities for federal income tax purposes
is substantially the same as for financial reporting purposes.
Federal Income 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 net income to its shareholders. For this
reason and because substantially all the Fund's gross income consists of
tax-exempt interest, no federal income tax provision is required.
Dividends: The Fund declares dividends daily from net investment income. Payment
of dividends is made monthly.
Note 2. Agreements The Fund has a management
agreement with Prudential Mutual Fund Management,
Inc. ("PMF"). Pursuant to this agreement PMF has responsibility for all
investment advisory services and supervises the subadviser's performance of such
services. PMF has entered into a subadvisory agreement with Prudential
Investment Corporation ("PIC"); PIC furnishes investment advisory services in
connection with the management of the Fund. PMF pays for the cost of the
subadviser's services, the compensation of officers of the Fund, occupancy and
certain clerical and bookkeeping costs of the Fund. The Fund bears all other
costs and expenses.
The management fee paid PMF is computed daily and payable monthly, at an
annual rate of .50 of 1% of the Fund's average daily net assets up to $750
million, .425 of 1% of the next $750 million of average daily net assets and
.375 of 1% of average daily net assets in excess of $1.5 billion.
The Fund has a distribution agreement with Prudential Mutual Fund
Distributors, Inc. ("PMFD"). To reimburse PMFD for its expenses incurred
pursuant to a plan of distribution, the Fund pays PMFD a reimbursement, accrued
daily and payable monthly, at an annual rate of .125 of 1% of the Fund's average
daily net assets. PMFD pays various broker-dealers, including Prudential
Securities Incorporated ("PSI") and Pruco Securities Corporation, affiliated
broker-dealers, for account servicing fees and other expenses incurred by such
broker-dealers. PMFD is a wholly-owned subsidiary of PMF; PSI, PMF and PIC are
(indirect) wholly-owned subsidiaries of The Prudential Insurance Company of
America.
Note 3. Other Prudential Mutual Fund Ser-
Transactions With vices, Inc. ("PMFS"), a
Affiliates wholly-owned subsidiary of
PMF, serves as the Fund's transfer agent and
during the year ended December 31, 1994, the Fund incurred fees of $369,953 for
the services of PMFS. As of December 31, 1994, approximately $59,600 of such
fees were due to PMFS. Transfer agent fees and expenses in the Statement of
Operations include certain out-of-pocket expenses paid to non-affiliates.
B-24
<PAGE>
PRUDENTIAL TAX-FREE MONEY FUND
Financial Highlights
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------
1994 1993 1992 1991 1990
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income and realized gains................... .023 .018 .026 .041 .053
Dividends and distributions to shareholders................ (.023) (.018) (.026) (.041) (.053)
---------- -------- -------- -------- --------
Net asset value, end of year............................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- -------- -------- -------- --------
---------- -------- -------- -------- --------
TOTAL RETURN:#............................................. 2.31% 1.86% 2.63% 4.22% 5.42%
Ratios/Supplemental Data:
Net assets, end of year (000).............................. $ 487,290 $601,622 $614,333 $616,867 $700,859
Average net assets (000)................................... $ 644,481 $726,571 $669,588 $725,844 $701,869
Ratios to average net assets:
Expenses, including distribution fee..................... .75% .74% .74% .75% .74%
Expenses, excluding distribution fee..................... .63% .62% .62% .63% .61%
Net investment income.................................... 2.26% 1.84% 2.60% 4.15% 5.30%
</TABLE>
- ---------------
# 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.
See Notes to Financial Statements.
B-25
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Prudential Tax-Free Money Fund
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 Tax-Free Money Fund
("the Fund") at December 31, 1994, 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 five years in the
period then ended, in conformity with generally accepted accounting principles.
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 generally accepted auditing standards 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
December 31, 1994 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
February 21, 1995
B-26
<PAGE>
APPENDIX A
DESCRIPTION OF TAX-EXEMPT SECURITY RATINGS
Corporate and Tax-Exempt Bond Ratings
The four highest ratings of Moody's Investors Service, Inc. ("Moody's")
for tax-exempt and corporate bonds are Aaa, Aa, A and Baa. Bonds rated Aaa are
judged to be of the "best quality." The rating of Aa is assigned to bonds
which are of "high quality by all standards," but as to which margins of
protection or other elements make long-term risks appear somewhat larger than
Aaa rated bonds. The Aaa and Aa rated bonds comprise what are generally known as
"high grade bonds." Bonds which are rated A by Moody's possess many favorable
investment attributes and are considered "upper medium grade obligations."
Factors giving security to principal and interest of A rated bonds are
considered adequate, but elements may be present which suggest a susceptibility
to impairment sometime in the future. Bonds rated Baa are considered as "medium
grade" obligations. They are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well. Moody's
applies numerical modifiers "1", "2", and "3" in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier "1" indicates that the security ranks in the higher end of its
generic rating category; the modifier "2" indicates a mid-range ranking; and
the modifier "3" indicates that the issue ranks in the lower end of its
generic rating category. The foregoing ratings for tax-exempt bonds are
sometimes presented in parentheses preceded with a "con" indicating the bonds
are rated conditionally. Bonds for which the security depends upon the
completion of some act or the fulfillment of some condition are rated
conditionally. These are bonds secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operation experience, (c)
rentals which begin when facilities are completed or (d) payments to which some
other limiting condition attaches. Such parenthetical rating denotes the
probable credit stature upon completion of construction or elimination of the
basis of the condition.
The four highest ratings of Standard & Poor's Ratings Group ("Standard &
Poor's") for tax-exempt and corporate bonds are AAA, AA, A and BBB. Bonds rated
AAA bear the highest rating assigned by Standard & Poor's to a debt obligation
and indicate an extremely strong capacity to pay principal and interest. Bonds
rated AA also qualify as high-quality debt obligations. Capacity to pay
principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree. Bonds rated A have a strong
capacity to pay principal and interest, although they are somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions. The BBB rating, which is the lowest "investment grade" security
rating by Standard & Poor's, indicates an adequate capacity to pay principal and
interest. Whereas they normally exhibit adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay principal and interest for bonds in this category than
for bonds in the A category. The foregoing ratings are sometimes followed by a
"p" indicating that the rating is provisional. A provisional rating assumes
the successful completion of the project being financed by the bonds being rated
and indicates that payment of debt service requirements is largely and entirely
dependent upon the successful and timely completion of the project. This rating,
however, while addressing credit quality subsequent to completion of the
project, makes no comment on the likelihood of, or the risk of default upon
failure of, such completion.
Tax-Exempt Note Ratings
The ratings of Moody's for tax-exempt notes are MIG 1, MIG 2, MIG 3 and MIG
4. Notes bearing the designation MIG 1 are judged to be of the best quality,
enjoying strong protection from established cash flows of funds for their
servicing or from established and broad-based access to the market for
refinancing, or both. Notes bearing the designation MIG 2 are judged to be of
high quality, with margins of protection ample although not so large as in the
preceding group. Notes bearing the designation MIG 3 are judged to be of
favorable quality, with all security elements accounted for but lacking the
undeniable strength of the preceding grades. Market access for refinancing, in
particular, is likely to be less well established. Notes bearing the designation
MIG 4 are judged to be of adequate quality, carrying specific risk but having
protection commonly regarded as required of an investment security and not
distinctly or predominantly speculative.
The ratings of Standard & Poor's for municipal notes issued on or after
July 29, 1984 are "SP-1", "SP-2" and "SP-3." Prior to July 29, 1984,
municipal notes carried the same symbols as municipal bonds. The designation
"SP-1" indicates a very strong capacity to pay principal and interest. A "+"
is added for those issues determined to possess overwhelming safety
characteristics. An "SP-2" designation indicates a satisfactory capacity to
pay principal and interest while an "SP-3" designation indicates speculative
capacity to pay principal and interest.
Corporate and Tax-Exempt Commercial Paper Ratings
Moody's and Standard & Poor's rating grades for commercial paper, set forth
below, are applied to Municipal Commercial Paper as well as taxable commercial
paper.
A-1
<PAGE>
Moody's Commercial Paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months. Moody's employs the following three designations, all
judged to be investment grade, to indicate the relative repayment capacity of
rated issuers: Prime-1, superior capacity; Prime-2, strong capacity; and
Prime-3, acceptable capacity.
Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. Ratings are graded into four categories, ranging from "A" for the
highest quality obligations to "D" for the lowest. Issues assigned A ratings
are regarded as having the greatest capacity for timely payment. Issues in this
category are further refined with the designation 1, 2 and 3 to indicate the
relative degree of safety. The "A-1" designation indicates the degree of
safety regarding timely payment is very strong. A "+" designation is applied
to those issues rated "A-1" which possess an overwhelming degree of safety.
The "A-2" designation indicates that capacity for timely payment is strong.
However, the relative degree of safety is not as overwhelming as for issues
designated "A-1." The "A-3" designation indicates that the capacity for
timely payment is satisfactory. Such issues, however, are somewhat more
vulnerable to the adverse effects of changes in circumstances than obligations
carrying the higher designations. Issues rated "B" are regarded as having only
an adequate capacity for timely payment and such capacity may be impaired by
changing conditions or short-term adversities.
A-2
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
(1) Financial statements included in the Prospectus constituting Part A
of this Registration Statement:
Financial Highlights for each of the ten years in the period ended
December 31, 1994.
(2) Financial statements included in the Statement of Additional
Information constituting Part B of this Registration Statement:
Portfolio of Investments at December 31, 1994.
Statement of Assets and Liabilities at December 31, 1994.
Statement of Operations for the year ended December 31, 1994.
Statement of Changes in Net Assets for the years ended December 31,
1993 and December 31, 1994.
Financial Highlights with respect to each of the five years in the
period ended December 31, 1994.
Notes to Financial Statements.
Report of Independent Accountants.
(b) Exhibits:
1. (a) Articles of Incorporation of Registrant, as amended, incorporated
by reference to Exhibit (b) to Post-Effective Amendment No. 10 to
Registration Statement on Form N-1A (File No. 2-64625).
(b) Amendment to Articles of Incorporation dated April 28, 1988,
incorporated by reference to Exhibit 9(b) to Post-Effective Amendment
No. 12 to Registration Statement on Form N-1A (File No. 2-64625).
(c) Form of amended and restated Articles of Incorporation.*
2. (a) By-Laws of the Registrant, incorporated by reference to Exhibit
No. 2 to Pre-Effective Amendment No. 1 to Registration Statement on
Form N-1 (File No. 2-64625).
(b) Amendment to By-Laws, incorporated by reference to Exhibit
No. 2(b) to Post-Effective Amendment No. 11 to Registration Statement
on Form N-1A (File No. 2-64625).
(c) Amendment to By-Laws, incorporated by reference to Exhibit 3(c)
to Post-Effective Amendment No. 13 to Registration Statement on Form
N-1A (File No. 2-64625).
4. Instruments defining rights of holders of the securities being
offered, incorporated by reference to Exhibit Nos. 1 and 2 above.
5. (a) Management Agreement between the Registrant and Prudential Mutual
Fund Management, Inc., as amended on November 19, 1993, incorporated by
reference to Exhibit 5(a) to Post-Effective Amendment No.17 to
Registration Statement filed on Form N-1A via EDGAR on March 2, 1994
(File No. 2-64625).
(b) Subadvisory Agreement between Prudential Mutual Fund Management,
Inc. and The Prudential Investment Corporation, incorporated by
reference to Exhibit No. 5(b) to Post-Effective Amendment No. 12 to
Registration Statement on Form N-1A (File No. 2-64625).
6. (a) Distribution and Service Agreement between the Registrant and
Prudential Mutual Fund Distributors, Inc., as amended on July 1, 1993,
incorporated by reference to Exhibit 6 to Post-Effective Amendment
No.17 to Registration Statement filed on Form N-1A via EDGAR on March
2, 1994 (File No. 2-64625).
(b) Amended Distribution and Service Agreement between the Registrant
and Prudential Mutual Fund Distributors, Inc.*
(c) Form of Amended Distribution and Service Agreement between the
Registrant and Prudential Mutual Fund Distributors, Inc.*
C-1
<PAGE>
8. Custodian Agreement between the Registrant and State Street Bank and
Trust Company, incorporated by reference to Exhibit No. 8(b) to
Post-Effective Amendment No. 14 to Registration Statement on Form
N-1A (File No. 2-64625).
9. Transfer Agency and Service Agreement, dated January 1, 1988, between
the Registrant and Prudential Mutual Fund Services, Inc.,
incorporated by reference to Exhibit No. 9(b) to Post-Effective
Amendment No. 11 to Registration Statement on Form N-1A
(File No. 2-64625).
11. Consent of Independent Accountants.*
15. (a) Distribution and Service Plan between the Registrant and
Prudential Mutual Fund Distributors Inc., as amended on July 1,
1993, incorporated by reference to Exhibit 15 to Post-Effective
Amendment No.17 to Registration Statement filed on Form N-1A via
EDGAR on March 2, 1994 (File No. 2-64625).
(b) Form of Amended Distribution and Service Plan between Registrant
and Prudential Mutual Fund Distributors, Inc.*
16. Calculation of Yield and Total Return, incorporated by reference to
Exhibit 16 to Post-Effective Amendment No. 12 to Registration
Statement on Form N-1A (File No. 2-64625).
27. Financial Data Schedule. Incorporated by reference to Exhibit 27 to
Post-Effective Amendment No. 18 to the Registration Statement filed
on Form N-1A via EDGAR on February 28, 1995.
- ------------------
*Filed herewith.
Item 25. Persons Controlled by or under Common Control with Registrant.
None.
Item 26. Number of Holders of Securities.
As of May 12, 1995, there were 22,306 record holders of common stock, $.01
par value per share, of the Registrant.
Item 27. Indemnification.
As permitted by Section 17(h) and (i) of the Investment Company Act of 1940
(the 1940 Act) and pursuant to Article VII of the Fund's Articles of
Incorporation (Exhibit 1 to the Registration Statement), officers, directors,
employees and agents of the Registrant will not be liable to the Registrant, any
stockholder, officer, director, employee, agent or other person for any action
or failure to act, except for bad faith, willful misfeasance, gross negligence
or reckless disregard of duties, and those individuals may be indemnified
against liabilities in connection with the Registrant, subject to the same
exceptions, as provided by Article VII of the By-Laws (Exhibit 2 to the
Registration Statement). Section 2-418 of Maryland General Corporation Law
permits indemnification of directors who acted in good faith and reasonably
believed that the conduct was in the best interests of the Registrant. As
permitted by Section 17(i) of the 1940 Act, pursuant to Section 10 of each
Distribution Agreement (Exhibit 6 to the Registration Statement), each
Distributor of the Registrant may be indemnified against liabilities which it
may incur, except liabilities arising from bad faith, gross negligence, willful
misfeasance or reckless disregard of duties.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (Securities Act) may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
1940 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in connection with the successful defense of any
action, suit or proceeding) is asserted against the Registrant by such director,
officer or controlling person in connection with the shares being registered,
the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the 1940 Act and will be governed by the final adjudication of such
issue.
The Registrant maintains an insurance policy insuring its officers and
directors against liabilities, and certain costs of defending claims against
such officers and directors, to the extent such officers and directors are not
found to have committed conduct constituting willful misfeasance, bad faith,
gross negligence or reckless disregard in the performance of their duties. The
insurance policy also insures the Registrant against the cost of indemnification
payments to officers and directors under certain circumstances.
Section 9 of the Management Agreement (Exhibit 5(a) to the Registration
Statement) and Section 4 of the Subadvisory Agreement (Exhibit 5(b) to the
Registration Statement) limit the liability of Prudential Mutual Fund
Management, Inc. (PMF) and The Prudential Investment Corporation (PIC),
respectively, to liabilities arising from willful misfeasance, bad faith or
gross negligence in the
C-2
<PAGE>
performance of their respective duties or from reckless disregard by them of
their respective obligations and duties under the agreements.
The Registrant hereby undertakes that it will apply the indemnification
provisions of its By-Laws and each Distribution Agreement in a manner consistent
with Release No. 11330 of the Securities and Exchange Commission under the 1940
Act so long as the interpretation of Section 17(h) and 17(i) of such Act remain
in effect and are consistently applied.
Item 28. Business and other Connections of Investment Adviser
See "How the Fund is Managed-Manager" in the Prospectus constituting Part
A of this Registration Statement and "Manager" in the Statement of Additional
Information constituting Part B of this Registration Statement.
The business and other connections of the officers of PMF are listed in
Schedules A and D of Form ADV of PMF as currently on file with the Securities
and Exchange Commission, the text of which is hereby incorporated by reference
(File No. 801-31104, filed on March 30, 1994).
The business and other connections of PMF's directors and principal
executive officers are set forth below. Except as otherwise indicated, the
address of each person is One Seaport Plaza, New York, NY 10292.
<TABLE>
<CAPTION>
Name and Address Position with PMF Principal Occupations
- -------------------------- ---------------------- --------------------------------------------------------
<S> <C> <C>
Brendan D. Boyle Executive Vice Executive Vice President, Director of Marketing and
President, Director of Director, PMF; Senior Vice President, Prudential
Marketing and Director Securities Incorporated (Prudential Securities);
Chairman and Director of Prudential Mutual Fund
Distributors, Inc. (PMFD)
Stephen P. Fisher Senior Vice President Senior Vice President, PMF; Senior Vice President,
Prudential Securities; Vice President, PMFD
Frank W. Giordano Executive Vice Executive Vice President, General Counsel, Secretary and
President, General Director, PMF and PMFD; Senior Vice President,
Counsel, Secretary and Prudential Securities; Director, Prudential Mutual
Director Fund Services, Inc. (PMFS)
Robert F. Gunia Executive Vice Executive Vice President, Chief Financial and
President, Chief Administrative Officer, Treasurer and Director, PMF;
Financial and Senior Vice President, Prudential Securities;
Administrative Executive Vice President, Treasurer, Comptroller and
Officer, Treasurer and Director, PMFD; Director, PMFS
Director
Timothy J. O'Brien Director President, Chief Executive Officer, Chief Operating
Officer and Director, PMFD; Chief Executive Officer
and Director, PMFS; Director, PMF
Richard A. Redeker President, Chief President, Chief Executive Officer and Director, PMF;
Executive Officer and Executive Vice President, Director and Member of
Director Operating Committee, Prudential Securities; Director,
PSG; Executive Vice President, PIC; Director, PMFD;
Director, PMFS
S. Jane Rose Senior Vice President, Senior Vice President, Senior Counsel and Assistant
Senior Counsel and Secretary, PMF; Senior Vice President and Senior
Assistant Secretary Counsel, Prudential Securities
</TABLE>
The business and other connections of PIC's directors and executive
officers are as set forth below. Except as otherwise indicated, the address of
each person is Prudential Plaza, Newark, NJ 07101.
<TABLE>
<CAPTION>
Name and Address Position with PIC Principal Occupations
- -------------------------- ---------------------- --------------------------------------------------------
<S> <C> <C>
William M. Bethke Senior Vice President Senior Vice President, Prudential; Senior Vice
Two Gateway Center President, PIC
Newark, NJ 07102
</TABLE>
C-3
<PAGE>
<TABLE>
<CAPTION>
Name and Address Position with PIC Principal Occupations
- -------------------------- ---------------------- --------------------------------------------------------
<S> <C> <C>
John D. Brookmeyer, Jr. Senior Vice President Senior Vice President, Prudential; Senior Vice President
51 JFK Parkway and Director and Director, PIC
Short Hills, NJ 07078
Theresa A. Hamacher Vice President Vice President, Prudential; Vice President, PIC
Harry E. Knapp, Jr. President, Director President, Director and Chief Executive Officer, PIC;
and Chief Executive Vice President, Prudential
Officer
William P. Link Senior Vice President Executive Vice President, Prudential; Senior Vice
Four Gateway Center President, PIC
Newark, NJ 07102
Richard A. Redeker Executive Vice President, Chief Executive Officer and Director, PMF;
President Executive Vice President, Director and Member of
Operating Committee, Prudential Securities; Director,
PSG; Executive Vice President, PIC; Director, PMFD;
Director, PMFS
Arthur F. Ryan Director Chairman of the Board, President and Chief Executive
Officer, Prudential; Director, PIC; Chairman of the
Board and Director, PSG
Eric A. Simonson Vice President and Vice President and Director, PIC; Executive Vice
Director President, Prudential
Claude J. Zinngrabe, Jr. Executive Vice Vice President, Prudential; Executive Vice President,
President PIC
</TABLE>
Item 29. Principal Underwriters
(a) Prudential Mutual Fund Distributors
Prudential Mutual Fund Distributors, Incorporated is distributor for
Command Government Fund, Command Money Fund, Command Tax-Free Fund, Prudential
California Municipal Fund (California Money Market Series), Prudential
Government Securities Trust (Money Market Series and U.S. Treasury Money Market
Series), Prudential-Bache MoneyMart Assets (d/b/a Prudential MoneyMart Assets),
Prudential Municipal Series Fund (Connecticut Money Market Series, Massachusetts
Money Market Series, New York Money Market Series and New Jersey Money Market
Series), Prudential Institutional Liquidity Portfolio, Inc., Prudential-Bache
Special Money Market Fund, Inc. (d/b/a Prudential Special Money Market Fund),
Prudential-Bache Tax-Free Money Fund, Inc. (d/b/a Prudential Tax-Free Money
Fund), and for Class A shares of Prudential Adjustable Rate Securities Fund,
Inc., Prudential Allocation Fund, Prudential California Municipal Fund
(California Income Series and California Series), Prudential Diversified Bond
Fund, Inc., Prudential Equity Fund, Inc., Prudential Equity Income Fund,
Prudential Europe Growth Fund, Inc., Prudential Global Fund, Inc., Prudential
Global Genesis Fund, Inc., Prudential Global Natural Resources Fund, Inc.,
Prudential GNMA Fund, Inc., Prudential Government Income Fund, Inc., Prudential
Growth Opportunity Fund, Inc., Prudential High Yield Fund, Inc., Prudential
IncomeVertible(R) Fund, Inc., Prudential Intermediate Global Income Fund, Inc.,
Prudential Multi-Sector Fund, Inc., Prudential Municipal Bond Fund, Prudential
Municipal Series Fund (Arizona Series, Florida Series, Georgia Series, Hawaii
Income Series, Maryland Series, Massachusetts Series, Michigan Series, Minnesota
Series, New Jersey Series, North Carolina Series, Ohio Series and Pennsylvania
Series), Prudential National Municipals Fund, Inc., Prudential Pacific Growth
Fund, Inc., Prudential Short-Term Global Income Fund, Inc., Prudential
Strategist Fund, Inc., Prudential Structured Maturity Fund, Inc., Prudential
U.S. Government Fund, Prudential Utility Fund, Inc., Global Utility Fund, Inc.,
Nicholas-Applegate Fund, Inc. (Nicholas-Applegate Growth Equity Fund) and The
BlackRock Government Income Trust.
(b) Information concerning the officers and directors of
Prudential Mutual Fund Distributors, Inc. is set forth below.
<TABLE>
<CAPTION>
Positions and Positions and
Offices with Offices with
Name(1) Underwriter Registrant
- --------------------------------- -------------------------------------- -------------------------
<S> <C> <C>
Joanne Accurso-Soto.............. Vice President None
Dennis Annarumma................. Vice President, Assistant Treasurer None
and Assistant Comptroller
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
Positions and Positions and
Offices with Offices with
Name(1) Underwriter Registrant
- --------------------------------- -------------------------------------- -------------------------
<S> <C> <C>
Phyllis J. Berman................ Vice President None
Brendan D. Boyle................. Chairman and Director None
Stephen P. Fisher................ Vice President None
Frank W. Giordano................ Executive Vice President, General None
Counsel, Secretary and Director
Robert F. Gunia.................. Executive Vice President, Director, Vice President
Treasurer and Comptroller
Timothy J. O'Brien............... President, Chief Executive Officer, None
Chief Operating Officer and Director
Richard A. Redeker............... Director Director
Andrew J. Varley................. Vice President None
Raritan Plaza One
Edison, NJ 08847
Anita Whelan..................... Vice President and Assistant Secretary None
- ------------------
(1)The address of each person named is One Seaport Plaza, New York, NY 10292 unless otherwise
indicated.
</TABLE>
(c) Registrant has no principal underwriter who is not an affiliated person
of the Registrant.
Item 30. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the Rules thereunder are maintained at the
offices of State Street Bank and Trust Company, One Heritage Drive, North
Quincy, Massachusetts 02171, the Registrant, One Seaport Plaza, New York, New
York 10292, and Prudential Mutual Fund Services, Inc., Raritan Plaza One,
Edison, New Jersey 08837. Documents required by Rules 31a-1(b)(5), (6), (7),
(9), (10) and (11) and 31a-1(f) will be kept at 2 Gateway Center, Newark, New
Jersey, documents required by Rules 31a-1(b)(4) and (11) and 31a-1(d) at One
Seaport Plaza and the remaining accounts, books and other documents required
by such other pertinent provisions of Section 31(a) and the Rules promulgated
thereunder will be kept by State Street Bank and Trust Company and Prudential
Mutual Fund Services, Inc.
Item 31. Management Services
Other than as set forth under the captions "How the Fund is
Managed-Manager" and "How the Fund is Managed-Distributor" in the Prospectus
and the captions "Manager" and "Distributor" in the Statement of Additional
Information, constituting Parts A and B, respectively, of this Registration
Statement, Registrant is not a party to any management-related service contract.
Item 32. Undertakings
The Registrant hereby undertakes to furnish each person to whom a
Prospectus is delivered with a copy of Registrant's latest annual report to
shareholders upon request and without charge.
C-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
and State of New York, on the __th day of May, 1995.
PRUDENTIAL-BACHE TAX-FREE MONEY
FUND, INC.
(doing business as Prudential Tax-Free Money Fund)
/s/ Richard A. Redeker
- --------------------------------------------------------------------------------
(Richard A. Redeker, President)
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- -------------------------------------- -------------------------------------- ------------------
<S> <C> <C>
/s/ Richard A. Redeker President May 26, 1995
- --------------------------------------
Richard A. Redeker
/s/ Delayne Dedrick Gold Director May 26, 1995
- --------------------------------------
Delayne Dedrick Gold
/s/ Arthur Hauspurg Director May 26, 1995
- --------------------------------------
Arthur Hauspurg
/s/ Stephen P. Munn Director May 26, 1995
- --------------------------------------
Stephen P. Munn
/s/ Louis A. Weil, III Director May 26, 1995
- --------------------------------------
Louis A. Weil, III
/s/ Grace Torres Treasurer and Principal Financial and May 26, 1995
- -------------------------------------- Accounting Officer
Grace Torres
</TABLE>
<PAGE>
EXHIBIT INDEX
1. (a) Articles of Incorporation of Registrant, as amended, incorporated by
reference to Exhibit (b) to Post-Effective Amendment No. 10 to Registration
Statement on Form N-1A (File No. 2-64625).
(b) Amendment to Articles of incorporation dated April 28, 1988,
incorporated by reference to Exhibit 9(b) to Post-Effective Amendment No. 12
to Registration Statement on Form N-1A (File No. 2-64625).
(c) Form of amended and restated Articles of Incorporation.*
2. (a) By-Laws of the Registrant, incorporated by reference to Exhibit No. 2 to
Pre-Effective Amendment No. 1 to Registration Statement on Form N-1 (File
No. 2-64625).
(b) Amendment to By-Laws, incorporated by reference to Exhibit No. 2(b) to
Post-Effective Amendment No. 11 to Registration Statement on Form N-1A (File
No. 2-64625).
(c) Amendment to By-Laws, incorporated by reference to Exhibit 3(c) to
Post-Effective Amendment No. 13 to Registration Statement on Form N-1A (File
No. 2-64625).
4. Instruments defining rights of holders of the securities being offered,
incorporated by reference to Exhibit Nos. 1 and 2 above.
5. (a) Management Agreement between the Registrant and Prudential Mutual Fund
Management, Inc., as amended on November 19, 1993, incorporated by reference
to Exhibit 5(a) to Post-Effective Amendment No. 17 to Registration Statement
filed on Form N-1A via EDGAR on March 2, 1994 (File No. 2-64625).
(b) Subadvisory Agreement between Prudential Mutual Fund Management, Inc.
and The Prudential Investment Corporation, incorporated by reference to
Exhibit No. 5(b) to Post-Effective Amendment No. 12 to Registration
Statement on Form N-1A (File No. 2-64625).
6. (a) Distribution and Service Agreement between the Registrant and Prudential
Mutual Fund Distributors, Inc., as amended on July 1, 1993, incorporated by
reference to Exhibit 6 to Post-Effective Amendment No. 17 to Registration
Statement filed on Form N-1A via EDGAR on March 2, 1994 (File No. 2-64625).
(b) Amended Distribution and Service Agreement between the Registrant and
Prudential Mutual Fund Distributors, Inc.*
(c) Form of Amended Distribution and Service Agreement between the
Registrant and Prudential Mutual Fund Distributors, Inc.*
8. Custodian Agreement between the Registrant and State Street Bank and Trust
Company, incorporated by reference to Exhibit No. 8(b) to Post-Effective
Amendment No. 14 to Registration Statement on Form N-1A (File No. 2-64625).
9. Transfer Agency and Service Agreement, dated January 1, 1988, between the
Registrant and Prudential Mutual Fund Services, Inc., incorporated by
reference to Exhibit No. 9(b) to Post-Effective Amendment No. 11 to
Registration Statement on Form N-1A (File No. 2-64625).
11. Consent of Independent Accountants.*
15. (a) Distribution and Service Plan between the Registrant and Prudential
Mutual Fund Distributors Inc., as amended on July 1, 1993, incorporated by
reference to Exhibit 15 to Post-Effective Amendment No. 17 to Registration
Statement filed on Form N-1A via EDGAR on March 2, 1994 (File No. 2-64625).
(b) Form of Amended Distribution and Service Plan between Registrant and
Prudential Mutual Fund Distributors, Inc.*
16. Calculation of Yield and Total Return, incorporated by reference to Exhibit
16 to Post-Effective Amendment No. 12 to Registration Statement on Form N-1A
(File No. 2-64625).
27. Financial Data Schedule. Incorporated by reference to Exhibit 27 to
Post-Effective Amendment No. 18 to the Registration Statement filed on Form
N-1A via EDGAR on February 28, 1995.
- ------------------
*Filed herewith.
Exhibit 1(c)
FORM OF
RESTATED
ARTICLES OF INCORPORATION
OF
PRUDENTIAL TAX-FREE MONEY FUND, INC.
Article I
The name of the corporation (hereinafter called the "Corporation") is
Prudential Tax-Free Money Fund, Inc.
Article II
PURPOSES
The purpose for which the Corporation is formed is to act as an open-end
investment company of the management type registered as such with the Securities
and Exchange Commission pursuant to the Investment Company Act of 1940 and to
exercise and generally to enjoy all of the powers, rights and privileges granted
to, or conferred upon, corporations by the General Laws of the State of Maryland
now or hereafter in force.
Article III
ADDRESS IN MARYLAND
The post office address of the place at which the principal office of the
Corporation in the State of Maryland is located is c/o The Corporation Trust
Incorporated, 32 South Street, Baltimore, Maryland 21201-3242.
The name of the Corporation's resident agent is The Corporation Trust
Incorporated, and its post office address
<PAGE>
is 32 South Street, Baltimore, Maryland 21201-3242. Said resident agent is
a corporation of the State of Maryland.
Article IV
COMMON STOCK
Section 1. The total number of shares of capital stock which the
Corporation shall have authority to issue is 3,000,000,000 shares of Common
Stock of the par value of $.01 per share, all of one class, having an aggregate
par value of $30,000,000.
Section 2. The Board of Directors may, in its discretion, classify and
reclassify any unissued shares of the capital stock of the Corporation into one
or more additional or other classes or series by setting or changing in any one
or more respects the designations, conversion or other rights, restrictions,
limitations as to dividends, qualifications or terms or conditions of redemption
of such shares and pursuant to such classification or reclassification to
increase or decrease the number of authorized shares of any existing class or
series. If designated by the Board of Directors, particular classes or series of
capital stock may relate to separate portfolios of investments.
Section 3. Unless otherwise expressly provided in the charter of the
Corporation, including any Articles Supplementary creating any class or series
of capital stock, the holders of each class and series of capital stock of the
-2-
<PAGE>
Corporation shall be entitled to dividends and distributions in such amounts and
at such times as may be determined by the Board of Directors, and the dividends
and distributions paid with respect to the various classes or series of capital
stock may vary among such classes or series. Expenses related to the
distribution of, and other identified expenses that should properly be allocated
to, the shares of a particular class or series of capital stock may be charged
to and borne solely by such class or series and the bearing of expenses solely
by a class or series may be appropriately reflected (in a manner determined by
the Board of Directors) and cause differences in the net asset value
attributable to, and the dividend, redemption and liquidation rights of, the
shares of each such class or series of capital stock.
Section 4. Unless otherwise expressly provided in the charter of the
Corporation, including any Articles Supplementary creating any class or series
of capital stock, on each matter submitted to a vote of stockholders, each
holder of a share of capital stock of the Corporation shall be entitled to one
vote for each share outstanding in such holder's name on the books of the
Corporation, irrespective of the class or series thereof, and all shares of all
classes and series shall vote together as a single class; provided, however,
that (a) as to any matter with respect to which a separate vote of any class or
series is required by
-3-
<PAGE>
the Investment Company Act of 1940, as amended (the *Investment Company
Act*) and in effect from time to time, or any rules, regulations or orders
issued thereunder, or by the Maryland General Corporation Law, such requirement
as to a separate vote by that class or series shall apply in lieu of a general
vote of all classes and series as described above; (b) in the event that the
separate vote requirements referred to in (a) above apply with respect to one or
more classes or series, then subject to paragraph (c) below, the shares of all
other classes and series not entitled to a separate vote shall vote together as
a single class; and (c) as to any matter which in the judgment of the Board of
Directors (which shall be conclusive) does not affect the interest of a
particular class or series, such class or series shall not be entitled to any
vote and only the holders of shares of the one or more affected classes or
series shall be entitled to vote.
Section 5. Unless otherwise expressly provided in the charter of the
Corporation, including any Articles Supplementary creating any class or series
of capital stock, in the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, holders of shares of capital
stock of the Corporation shall be entitled, after payment or provision for
payment of the debts and other liabilities of the Corporation (as such
liabilities may affect one or more of the classes of shares
-4-
<PAGE>
of capital stock of the Corporation), to share ratably in the remaining net
assets of the Corporation; provided, however, that in the event the capital
stock of the Corporation shall be classified or reclassified into series,
holders of any shares of capital stock within such series shall be entitled to
share ratably out of assets belonging to such series pursuant to the provisions
of Section 7(c) of this Article IV.
Section 6. Each share of any class of the capital stock of the Corporation,
and in the event the capital stock of the Corporation shall be classified or
reclassified into series, each share of any class of capital stock of the
Corporation within such series shall be subject to the following provisions:
(a) The net asset value of each outstanding share of capital stock of
the Corporation (or of a class or series, in the event the capital stock of
the Corporation shall be so classified or reclassified into series),
subject to subsection (b) of this Section 6, shall be the quotient obtained
by dividing the value of the net assets of the Corporation (or the net
assets of the Corporation attributable or belonging to that class or series
as designated by the Board of Directors pursuant to Articles Supplementary)
by the total number of outstanding shares of capital stock of the
Corporation (or of such class or series, in the event
-5-
<PAGE>
the capital stock of the Corporation shall be classified or
reclassified into series). Subject to subsection (b) of this Section
6, the value of the net assets of the Corporation (or of such class
or series, in the event the capital stock of the Corporation shall
be classified or reclassified into series) shall be determined
pursuant to the procedures or methods (which procedures or methods,
in the event the capital stock of the Corporation shall be
classified or reclassified into series, may differ from class to
class or from series to series) prescribed or approved by the Board
of Directors in its discretion, and shall be determined at the time
or times (which time or times may, in the event the capital stock of
the Corporation shall be classified into classes or series, differ
from series to series) prescribed or approved by the Board of
Directors in its discretion. In addition, subject to subsection (b)
of this Section 6, the Board of Directors, in its discretion, may
suspend the daily determination of net asset value of any share of
any series or class of capital stock of the Corporation.
(b) The net asset value of each share of the capital stock of the
Corporation or any class or series thereof shall be determined in
accordance with any applicable provision of the Investment Company Act, any
applicable rule, regulation or order of the Securities
-6-
<PAGE>
and Exchange Commission thereunder, and any applicable rule or
regulation made or adopted by any securities association registered under
the Securities Exchange Act of 1934.
(c) All shares now or hereafter authorized shall be subject to
redemption and redeemable at the option of the stockholder pursuant to the
applicable provisions of the Investment Company Act and laws of the State
of Maryland, including any applicable rules and regulations thereunder.
Each holder of a share of any class or series, upon request to the
Corporation (if such holder's shares are certificated, such request being
accompanied by surrender of the appropriate stock certificate or
certificates in proper form for transfer), shall be entitled to require the
Corporation to redeem all or any part of such shares outstanding in the
name of such holder on the books of the Corporation (or as represented by
share certificates surrendered to the Corporation by such redeeming holder)
at a redemption price per share determined in accordance with subsection
(a) of this Section 6.
(d) Notwithstanding subsection (c) of this Section 6, the Board of
Directors of the Corporation may suspend the right of the holders of shares
of any or all classes or series of capital stock to require
-7-
<PAGE>
the Corporation to redeem such shares or may suspend any purchase of
such shares:
(i) for any period (A) during which the New York Stock Exchange
is closed, other than customary weekend and holiday closings, or (B)
during which trading on the New York Stock Exchange is restricted;
(ii) for any period during which an emergency, as defined by
the rules of the Securities and Exchange Commission or any successor
thereto, exists as a result of which (A) disposal by the Corporation
of securities owned by it and belonging to the affected series of
capital stock (or the Corporation, if the shares of capital stock of
the Corporation have not been classified or reclassified into
series) is not reasonably practicable, or (B) it is not reasonably
practicable for the Corporation fairly to determine the value of the
net assets of the affected series of capital stock, or
(iii) for such other periods as the Securities and Exchange
Commission or any successor thereto may by order permit for the
protection of the holders of shares of capital stock of the
Corporation.
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<PAGE>
(e) All shares of the capital stock of the Corporation now or
hereafter authorized shall be subject to redemption and redeemable at the
option of the Corporation. The Board of Directors may by resolution from
time to time authorize the Corporation to require the redemption of all or
any part of the outstanding shares of any classes or series upon the
sending of written notice thereof to each holder whose shares are to be
redeemed and upon such terms and conditions as the Board of Directors, in
its discretion, shall deem advisable, out of funds legally available
therefor, at the net asset value per share of that class or series
determined in accordance with subsections (a) and (b) of this Section 6 and
take all other steps deemed necessary or advisable in connection therewith.
(f) The Board of Directors may by resolution from time to time
authorize the purchase by the Corporation, either directly or through an
agent, of shares of any class or series of the capital stock of the
Corporation upon such terms and conditions and for such consideration as
the Board of Directors, in its discretion, shall deem advisable out of
funds legally available therefor at prices per share not in excess of the
net asset value per share of that class or series determined in accordance
with subsections (a) and (b)
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<PAGE>
of this Section 6 and to take all other steps deemed necessary or advisable
in connection therewith.
(g) Except as otherwise permitted by the Investment Company Act,
payment of the redemption price for shares of any class or series of the
capital stock of the Corporation surrendered to the Corporation for
redemption pursuant to the provisions of subsection (c) of this Section 6
or for purchase by the Corporation pursuant to the provisions of subsection
(e) or (f) of this Section 6 shall be made by the Corporation within seven
days after surrender of such shares to the Corporation for such purpose.
Any such payment may be made in whole or in part in portfolio securities or
in cash, as the Board of Directors, in its discretion, shall deem
advisable, and no stockholder shall have the right, other than as
determined by the Board of Directors, to have his or her shares redeemed in
portfolio securities.
(h) In the absence of any specification as to the purposes for which
shares are redeemed or repurchased by the Corporation, all shares so
redeemed or repurchased shall be deemed to be acquired for retirement in
the sense contemplated by the laws of the State of Maryland. Shares of any
class or series retired by repurchase or redemption shall thereafter
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<PAGE>
have the status of authorized but unissued shares of such class or series.
Section 7. In the event the Board of Directors shall authorize the
classification or reclassification of shares into classes or series, the Board
of Directors may (but shall not be obligated to) provide that each class or
series shall have the following powers, preferences and voting or other special
rights, and the qualifications, restrictions and limitations thereof shall be as
follows:
(a) All consideration received by the Corporation for the issue or
sale of shares of capital stock of each series, together with all income,
earnings, profits, and proceeds received thereon, including any proceeds
derived from the sale, exchange or liquidation thereof, and any funds or
payments derived from any reinvestment of such proceeds in whatever form
the same may be, shall irrevocably belong to the series with respect to
which such assets, payments or funds were received by the Corporation for
all purposes, subject only to the rights of creditors, and shall be so
handled upon the books of account of the Corporation. Such assets, payments
and funds, including any proceeds derived from the sale, exchange or
liquidation thereof, and any assets derived from any reinvestment of such
proceeds in whatever form the same may be, are herein referred to as
*assets belonging to* such series.
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<PAGE>
(b) The Board of Directors may from time to time declare and pay
dividends or distributions, in additional shares of capital stock of such
series or in cash, on any or all series of capital stock, the amount of
such dividends and the means of payment being wholly in the discretion of
the Board of Directors.
(i) Dividends or distributions on shares of any series shall be
paid only out of earned surplus or other lawfully available assets
belonging to such series.
(ii) Inasmuch as one goal of the Corporation is to qualify as a
*regulated investment company* under the Internal Revenue Code of
1986, as amended, or any successor or comparable statute thereto,
and Regulations promulgated thereunder, and inasmuch as the
computation of net income and gains for federal income tax purposes
may vary from the computation thereof on the books of the
Corporation, the Board of Directors shall have the power, in its
discretion, to distribute in any fiscal year as dividends, including
dividends designated in whole or in part as capital gains
distributions, amounts sufficient, in the opinion of the Board of
Directors, to enable the Corporation to qualify as a regulated
investment company and to avoid liability for the Corporation
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<PAGE>
for federal income tax in respect of that year. In furtherance, and
not in limitation of the foregoing, in the event that a series has a
net capital loss for a fiscal year, and to the extent that the net
capital loss offsets net capital gains from such series, the amount
to be deemed available for distribution to that series with the net
capital gain may be reduced by the amount offset.
(c) In the event of the liquidation or dissolution of the Corporation,
holders of shares of capital stock of each series shall be entitled to
receive, as a series, out of the assets of the Corporation available for
distribution to such holders, but other than general assets not belonging
to any particular series, the assets belonging to such series; and the
assets so distributable to the holders of shares of capital stock of any
series shall be distributed, subject to the provisions of subsection (d) of
this Section 7, among such stockholders in proportion to the number of
shares of such series held by them and recorded on the books of the
Corporation. In the event that there are any general assets not belonging
to any particular series and available for distribution, such distribution
shall be made to the holders of all series in proportion to
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<PAGE>
the net asset value of the respective series determined in accordance with
the charter of the Corporation.
(d) The assets belonging to any series shall be charged with the
liabilities in respect of such series, and shall also be charged with their
share of the general liabilities of the Corporation, in proportion to the
asset value of the respective series determined in accordance with the
charter of the Corporation. The determination of the Board of Directors
shall be conclusive as to the amount of liabilities, including accrued
expenses and reserves, as to the allocation of the same as to a given
series, and as to whether the same or general assets of the Corporation are
allocable to one or more classes.
Section 8. Any fractional share shall carry proportionately all the rights
of a whole share, excepting any right to receive a certificate evidencing such
fractional share, but including, without limitation, the right to vote and the
right to receive dividends.
Section 9. No holder of shares of Common Stock of the Corporation shall, as
such holder, have any preemptive right to purchase or subscribe for any shares
of the Common Stock of the Corporation of any class or series which it may issue
or sell (whether out of the number of shares authorized by the Articles of
Incorporation, or out of any shares of the
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<PAGE>
Common Stock of the Corporation acquired by it after the issue thereof, or
otherwise).
Section 10. All persons who shall acquire any shares of capital stock of
the Corporation shall acquire the same subject to the provisions of the charter
and By-Laws of the Corporation.
Section 11. Notwithstanding any provision of law requiring action to be
taken or authorized by the affirmative vote of the holders of a designated
proportion greater than a majority of the shares of any class or series of
Common Stock, such action shall be valid and effective if taken or authorized by
the affirmative vote of the holders of a majority of the total number of shares
of such class or series of Common Stock outstanding and entitled to vote
thereupon pursuant to the provisions of these Articles of Incorporation.
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<PAGE>
Article V
DIRECTORS
The number of directors of the Corporation shall be five, and the names of
those who shall act as such until their successors are duly elected and
qualified are as follows:
Delayne Dedrick Gold
Arthur Hauspurg
Stephen P. Munn
Richard A. Redeker
Louis A. Weil, III
However, the By-Laws of the Corporation may fix the number of directors at a
number of other than five and may authorize the Board of Directors, by the vote
of a majority of the entire Board of Directors, to increase or decrease the
number of directors within a limit specified in the By-Laws, provided that in no
case shall the number of directors be less than three, and to fill the vacancies
created by any such increase in the number of directors. Unless otherwise
provided by the By-Laws of the Corporation, the directors of the Corporation
need not be stockholders.
The By-Laws of the Corporation may divide the Directors of the Corporation
into classes and prescribe the tenure of office of the several classes; but no
class shall be elected for a period shorter than that from the time of the
election of such class until the next annual meeting and thereafter for a period
shorter than the interval between annual
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<PAGE>
meetings or for a longer period than five years, and the term of office of
at least one class shall expire each year.
Article VI
INDEMNIFICATION OF DIRECTORS AND OFFICERS
A director or officer of the Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director or officer, except to the extent such exemption from
liability or limitation thereof is not permitted by law (including the
Investment Company Act of 1940) as currently in effect or as the same may
hereafter be amended.
No amendment, modification or repeal of this Article VI shall adversely
affect any right or protection of a director or officer that exists at the time
of such amendment, modification or repeal.
Article VII
MISCELLANEOUS
The following provisions are inserted for the management of the business
and for the conduct of the affairs of the Corporation, and for creating,
defining, limiting and regulating the powers of the Corporation, the directors
and the stockholders.
Section 1. The Board of Directors shall have the management and control of
the property, business and affairs of the Corporation and is hereby vested with
all the powers
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possessed by the Corporation itself so far as is not inconsistent with law
or these Articles of Incorporation. In furtherance and without limitation of the
foregoing provisions, it is expressly declared that, subject to these Articles
of Incorporation, the Board of Directors shall have power:
(a) To make, alter, amend or repeal from time to time the By-Laws of
the Corporation except as such power may otherwise be limited in the
By-Laws.
(b) To issue shares of any class or series of the capital stock of the
Corporation.
(c) To authorize the purchase of shares of any class or series in the
open market or otherwise, at prices not in excess of their net asset value
for shares of that class, series or class within such series determined in
accordance with subsections (a) and (b) of Section 6 of Article IV hereof,
provided that the Corporation has assets legally available for such
purpose, and to pay for such shares in cash, securities or other assets
then held or owned by the Corporation.
(d) To declare and pay dividends and distributions from funds legally
available therefor on shares of such class or series, in such amounts, if
any, and in such manner (including declaration by means of a formula or
other similar method of determination whether or not
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<PAGE>
the amount of the dividend or distribution so declared can be calculated at
the time of such declaration) and to the holders of record as of such date,
as the Board of Directors may determine.
(e) To take any and all action necessary or appropriate to maintain a
constant net asset value per share for shares of any class, series or class
within such series.
Section 2. The directors of the Corporation may receive compensation for
their services, subject, however, to such limitations with respect thereto as
may be determined from time to time by the holders of shares of capital stock of
the Corporation.
Section 3. Except as required by law, the holders of shares of capital
stock of the Corporation shall have only such right to inspect the records,
documents, accounts and books of the Corporation as may be granted by the Board
of Directors of the Corporation.
Section 4. (a) The Corporation shall have as custodian or custodians one or
more trust companies or banks of good standing, each having a capital, surplus
and undivided profits aggregating not less than fifty million dollars
($50,000,000), and, to the extent required by the Investment Company Act of
1940, the funds and securities held by the Corporation shall be kept in the
custody of one or more such custodians, provided such custodian or custodians
can be
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<PAGE>
found ready and willing to act, and further provided that the Corporation
may use as subcustodians, for the purpose of holding any foreign securities and
related funds of the Corporation, such foreign banks as the Board of Directors
may approve and as shall be permitted by law.
(b) The Corporation shall upon the resignation or inability to serve
of its custodian or upon change of the custodian:
(i) in case of such resignation or inability to serve, use its
best efforts to obtain a successor custodian;
(ii) require that the cash and securities owned by the
Corporation be delivered directly to the successor custodian; and
(iii) in the event that no successor custodian can be found,
submit to the stockholders before permitting delivery of the cash
and securities owned by the Corporation otherwise than to a
successor custodian, the question whether or not this Corporation
shall be liquidated or shall function without a custodian.
Section 5. Any vote of the holders of shares of capital stock of the
Corporation authorizing liquidation of the Corporation or proceedings for its
dissolution may authorize the Board of Directors to determine, as provided
herein, or if provision is not made herein, in accordance
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<PAGE>
with generally accepted accounting principles, which assets are the assets
belonging to the Corporation or any series thereof available for distribution to
the holders of shares of capital stock of the Corporation or any series thereof
(pursuant to the provisions of Section 7 of Article IV hereof) and may divide,
or authorize the Board of Directors to divide, such assets among the
stockholders of the shares of capital stock of the Corporation or any series
thereof in such manner as to ensure that each such holder receives an amount
from the proceeds of such liquidation or dissolution that such holder is
entitled to, as determined pursuant to the provisions of Sections 3 and 7 of
Article IV hereof.
Article VIII
DEFINITIONS
SECTION 1. As used in these Articles of Incorporation and in the By-Laws of
the Corporation, the following terms shall have the meanings indicated:
"Gross Assets" shall mean the total value of the assets of the
Corporation determined as provided in Section 3 below.
"Person" shall mean a natural person, corporation, joint stock
company, firm, association, partnership, trust, syndicate, combination,
organization, government or agency or subdivision thereof.
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<PAGE>
"Securities" shall mean any stock, shares, bonds, debentures, notes,
mortgages or other obligations, and any certificates, receipts, warrants
or other instruments representing rights to receive, purchase or
subscribe for the same, or evidencing or representing any other rights or
interests therein, or in any property or assets created or issued by any
Person.
SECTION 2. Net Asset Value shall be determined by dividing:
(a) The total value of the assets of the Corporation determined as
provided in Section 3 below less, to the extent determined by or pursuant
to the direction of the Board of Directors in accordance with generally
accepted accounting principles, all debts, obligations and liabilities of
the Corporation (which debts, obligations and liabilities shall include,
without limitation of the generality of the foregoing, any and all debts,
obligations, liabilities or claims, of any and every kind and nature,
fixed, accrued or unmatured, including the estimated accrued expense of
investment advisory and administrative services, and any reserves or
charges for any or all of the foregoing, whether for taxes, expenses,
contingencies, or otherwise, and the price of common stock redeemed but not
paid for) but excluding the Corporation's liability upon its shares and its
surplus, by
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(b) the total number of shares of the Corporation outstanding (shares
sold by the Corporation whether or not paid for being treated as
outstanding and shares purchased or redeemed by the Corporation whether or
not paid for and treasury shares being treated as not outstanding).
Section 3. In determining for the purposes of these Articles of
Incorporation the total value of the assets of the Corporation at any time,
securities shall be taken at their market value or, in the absence of readily
available market quotations, at fair value, both as determined pursuant to
methods approved by the Board of Directors and in accordance with applicable
statutes and regulations, and all other assets at fair value determined in such
manner as may be approved from time to time by or pursuant to the direction of
the Board of Directors.
Section 4. Any determination made in good faith and, so far as accounting
matters are involved, in accordance with generally accepted accounting
principles by or pursuant to the direction of the Board of Directors, shall be
final and conclusive, and shall be binding upon the Corporation and all holders
of its shares, past, present and future, and shares of the Corporation are
issued and sold on the condition and undertaking, evidenced by acceptance of
certificates for such shares by, or confirmation of such shares being held for
the account of any stockholder, that
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any and all such determinations shall be binding as aforesaid.
Nothing in this Section 4 shall be construed to protect any director or
officer of the Corporation against any liability to the Corporation or its
stockholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
Article IX
AMENDMENTS
From time to time any of the provisions of these Articles of Incorporation
may be amended, altered or repealed (including any amendment that changes the
terms of any of the outstanding stock by classification, reclassification or
otherwise), and other provisions that may, under the statutes of the State of
Maryland at the time in force, be lawfully contained in articles of
incorporation may be added or inserted, upon the vote of the holders of a
majority of the shares of common stock of the Corporation at the time
outstanding and entitled to vote, and all rights at any time conferred upon the
stockholders of the Corporation by these Articles of Incorporation are subject
to the provisions of this Article IX.
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--------------------------------
The term "Articles of Incorporation" as used herein and in the By-Laws of
the Corporation shall be deemed to mean these Articles of Incorporation as from
time to time amended and restated.
--------------------------------
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Exhibit 6(b)
PRUDENTIAL-BACHE TAX-FREE MONEY FUND, INC.
Distribution Agreement
Agreement made as of May 2, 1988, as amended and restated on July 1, 1993
and May 2, 1995, between Prudential-Bache Tax-Free Money Fund, Inc., a Maryland
Corporation (the Fund) and Prudential Mutual Fund Distributors, Inc., a Delaware
Corporation (the Distributor).
WITNESSETH
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the Investment Company Act), as a diversified, open-end, management
investment company and it is in the interest of the Fund to offer its shares for
sale continuously;
WHEREAS, the Distributor is a broker-dealer registered under the Securities
Exchange Act of 1934, as amended, and is engaged in the business of selling
shares of registered investment companies either directly or through other
broker-dealers;
WHEREAS, the Fund and the Distributor wish to enter into an agreement with
each other, with respect to the continuous offering of the Fund's shares from
and after the date hereof in order to promote the growth of the Fund and
facilitate the distribution of its shares; and
WHEREAS, the Fund has adopted a distribution and service plan pursuant to
Rule 12b-1 under the Investment Company Act (the Plan) authorizing payments by
the Fund to the Distributor with respect to the distribution of the shares of
the Fund and the maintenance of shareholder accounts.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor
The Fund hereby appoints the Distributor as the principal underwriter and
distributor of the Fund to sell shares to the public on behalf of the Fund and
the Distributor hereby accepts such appointment and agrees to act hereunder. The
Fund hereby agrees during the term of this Agreement to sell shares of the Fund
through the Distributor on the terms and conditions set forth below.
<PAGE>
Section 2. Exclusive Nature of Duties
The Distributor shall be the exclusive representative of the Fund to act as
principal underwriter and distributor of the Fund's shares, except that:
2.1 The exclusive rights granted to the Distributor to sell shares of the
Fund shall not apply to shares of the Fund issued in connection with the merger
or consolidation of any other investment company or personal holding company
with the Fund or the acquisition by purchase or otherwise of all (or
substantially all) the assets or the outstanding shares of any such company by
the Fund.
2.2 Such exclusive rights shall not apply to shares issued by the Fund
pursuant to reinvestment of dividends or capital gains distributions.
2.3 Such exclusive rights shall not apply to shares issued by the Fund
pursuant to the reinstatement privilege afforded redeeming shareholders.
2.4 Such exclusive rights shall not apply to purchases made through the
Fund's transfer and dividend disbursing agent in the manner set forth in the
currently effective Prospectus of the Fund. The term "Prospectus" shall mean the
Prospectus and Statement of Additional Information included as part of the
Fund's Registration Statement, as such Prospectus and Statement of Additional
Information may be amended or supplemented from time to time, and the term
"Registration Statement" shall mean the Registration Statement filed by the Fund
with the Securities and Exchange Commission and effective under the Securities
Act of 1933, as amended (Securities Act), and the Investment Company Act, as
such Registration Statement is amended from time to time.
Section 3. Purchase of Shares from the Fund
3.1 The Distributor shall have the right to buy from the Fund on behalf of
investors the shares needed, but not more than the shares needed (except for
clerical errors in transmission) to fill unconditional orders for shares placed
with the Distributor by investors or registered and qualified securities dealers
and other financial institutions (selected dealers).
3.2 The shares shall be sold by the Distributor on behalf of the Fund and
delivered by the Distributor or selected dealers, as described in Section 6.4
hereof, to investors at the offering price as set forth in the Prospectus.
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3.3 The Fund shall have the right to suspend the sale of its shares at
times when redemption is suspended pursuant to the conditions in Section 4.3
hereof or at such other times as may be determined by the Directors/Trustees.
The Fund shall also have the right to suspend the sale of its shares if a
banking moratorium shall have been declared by federal or New York authorities.
3.4 The Fund, or any agent of the Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for shares received by the
Distributor. Any order may be rejected by the Fund; provided, however, that the
Fund will not arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of shares. The Fund (or its agent) will confirm
orders upon their receipt, will make appropriate book entries and upon receipt
by the Fund (or its agent) of payment therefor, will deliver deposit receipts
for such shares pursuant to the instructions of the Distributor. Payment shall
be made to the Fund in New York Clearing House funds or federal funds. The
Distributor agrees to cause such payment and such instructions to be delivered
promptly to the Fund (or its agent).
Section 4. Repurchase or Redemption of Shares by the Fund
4.1 Any of the outstanding shares may be tendered for redemption at any
time, and the Fund agrees to repurchase or redeem the shares so tendered in
accordance with its Declaration of Trust as amended from time to time, and in
accordance with the applicable provisions of the Prospectus. The price to be
paid to redeem or repurchase the shares shall be equal to the net asset value
determined as set forth in the Prospectus. All payments by the Fund hereunder
shall be made in the manner set forth in Section 4.2 below.
4.2 The Fund shall pay the total amount of the redemption price as defined
in the above paragraph pursuant to the instructions of the Distributor on or
before the seventh calendar day subsequent to its having received the notice of
redemption in proper form. The proceeds of any redemption of shares shall be
paid by the Fund to or for the account of the redeeming shareholder, in each
case in accordance with applicable provisions of the Prospectus.
4.3 Redemption of shares or payment may be suspended at times when the New
York Stock Exchange is closed for other than customary weekends and holidays,
when trading on said Exchange is restricted, when an emergency exists as a
result of which disposal by the Fund of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Fund fairly to
3
<PAGE>
determine the value of its net assets, or during any other period when the
Securities and Exchange Commission, by order, so permits.
Section 5. Duties of the Fund
5.1 Subject to the possible suspension of the sale of shares as provided
herein, the Fund agrees to sell its shares so long as it has shares available.
5.2 The Fund shall furnish the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of shares, and this shall
include one certified copy, upon request by the Distributor, of all financial
statements prepared for the Fund by independent public accountants. The Fund
shall make available to the Distributor such number of copies of its Prospectus
and annual and interim reports as the Distributor shall reasonably request.
5.3 The Fund shall take, from time to time, but subject to the necessary
approval of the Directors/Trustees and the shareholders, all necessary action to
fix the number of authorized shares and such steps as may be necessary to
register the same under the Securities Act, to the end that there will be
available for sale such number of shares as the Distributor reasonably may
expect to sell. The Fund agrees to file from time to time such amendments,
reports and other documents as may be necessary in order that there will be no
untrue statement of a material fact in the Registration Statement, or necessary
in order that there will be no omission to state a material fact in the
Registration Statement which omission would make the statements therein
misleading.
5.4 The Fund shall use its best efforts to qualify and maintain the
qualification of any appropriate number of its shares for sales under the
securities laws of such states as the Distributor and the Fund may approve;
provided that the Fund shall not be required to amend its Declaration of Trust
or By-Laws to comply with the laws of any state, to maintain an office in any
state, to change the terms of the offering of its shares in any state from the
terms set forth in its Registration Statement, to qualify as a foreign
corporation in any state or to consent to service of process in any state other
than with respect to claims arising out of the offering of its shares. Any such
qualification may be withheld, terminated or withdrawn by the Fund at any time
in its discretion. As provided in Section 8.1 hereof, the expense of
qualification and maintenance of qualification shall be borne by the Fund. The
Distributor shall furnish such information and other
4
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material relating to its affairs and activities as may be required by the
Fund in connection with such qualifications.
Section 6. Duties of the Distributor
6.1 The Distributor shall devote reasonable time and effort to effect sales
of shares of the Fund, but shall not be obligated to sell any specific number of
shares. Sales of the shares shall be on the terms described in the Prospectus.
The Distributor may enter into like arrangements with other investment
companies. The Distributor shall compensate the selected dealers as set forth in
the Prospectus.
6.2 In selling the shares, the Distributor shall use its best efforts in
all respects duly to conform with the requirements of all federal and state laws
relating to the sale of such securities. Neither the Distributor nor any
selected dealer nor any other person is authorized by the Fund to give any
information or to make any representations, other than those contained in the
Registration Statement or Prospectus and any sales literature approved by
appropriate officers of the Fund.
6.3 The Distributor shall adopt and follow procedures for the confirmation
of sales to investors and selected dealers, the collection of amounts payable by
investors and selected dealers on such sales and the cancellation of unsettled
transactions, as may be necessary to comply with the requirements of the
National Association of Securities Dealers, Inc. (NASD).
6.4 The Distributor shall have the right to enter into selected dealer
agreements with registered and qualified securities dealers and other financial
institutions of its choice for the sale of shares, provided that the Fund shall
approve the forms of such agreements. Within the United States, the Distributor
shall offer and sell shares only to such selected dealers as are members in good
standing of the NASD. Shares sold to selected dealers shall be for resale by
such dealers only at the offering price determined as set forth in the
Prospectus.
Section 7. Reimbursement of the Distributor under the Plan
7.1 The Fund shall reimburse the Distributor for costs incurred by it in
performing its duties under the Distribution and Service Plan and this Agreement
including amounts paid on a reimbursement basis to Prudential Securities
Incorporated (Prudential Securities) and Pruco Securities Corporation (Prusec),
affiliates of the Distributor, under the selected dealer agreements between the
Distributor and Prudential Securities and Prusec,
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respectively, amounts paid to other securities dealers or financial
institutions under selected dealer agreements between the Distributor and such
dealers and institutions and amounts paid for personal service and/or the
maintenance of shareholder accounts. Amounts reimbursable under the Plan shall
be accrued daily and paid monthly or at such other intervals as the
Directors/Trustees may determine but shall not be paid at a rate that exceeds
.125 of 1% per annum of the assets of the shares of the Fund. Payment of the
distribution and service fee shall be subject to the limitations of Article III,
Section 26 of the NASD Rules of Fair Practice.
7.2 So long as the Plan or any amendment thereto is in effect, the
Distributor shall inform the Directors/Trustees of the commissions and account
servicing fees to be paid by the Distributor to account executives of the
Distributor and to broker-dealers and financial institutions which have dealer
agreements with the Distributor. So long as the Plan (or any amendment thereto)
is in effect, at the request of the Directors/Trustees or any agent or
representative of the Fund, the Distributor shall provide such additional
information as may reasonably be requested concerning the activities of the
Distributor hereunder and the costs incurred in performing such activities.
7.3 Costs of the Distributor subject to reimbursement hereunder are costs
of performing distribution activities and may include, among others:
(a) Amounts paid to Prudential Securities in reimbursement of costs
incurred by Prudential Securities in performing services under a selected
dealer agreement between Prudential Securities and the Distributor for sale
of shares of the Fund, including sales commissions and account servicing
fees paid to, or on account of, account executives and indirect and
overhead costs associated with the performance of distribution activities,
including central office and branch expenses;
(b) amounts paid to Prusec in reimbursement of costs incurred by
Prusec in performing services under a selected dealer agreement between
Prusec and the Distributor for sale of shares of the Fund, including sales
commissions and account servicing fees paid to, or on account of, agents
and indirect and overhead costs associated with distribution activities;
(c) sales commissions and account servicing fees paid to, or on
account of, broker-dealers and financial
6
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institutions (other than Prudential Securities and Prusec) which have
entered into selected dealer agreements with the Distributor with respect
to shares of the Fund;
(d) amounts paid to, or on account of, account executives of
Prudential Securities, Prusec, or other broker-dealers or financial
institutions for personal services and/or the maintenance of shareholder
accounts; and
(e) advertising for the Fund in various forms through any available
medium, including the cost of printing and mailing Fund Prospectuses, and
periodic financial reports and sales literature to persons other than
current shareholders of the Fund.
Indirect and overhead costs referred to in clause (b) of the foregoing sentence
include (i) lease expenses, (ii) salaries and benefits of personnel including
operations and sales support personnel, (iii) utility expenses, (iv)
communications expenses, (v) sales promotion expenses, (vi) expenses of postage,
stationery and supplies and (vii) general overhead.
Section 8. Allocation of Expenses
8.1 The Fund shall bear all costs and expenses of the continuous offering
of its shares, including fees and disbursements of its counsel and auditors, in
connection with the preparation and filing of any required Registration
Statements and/or Prospectuses under the Investment Company Act or the
Securities Act, and all amendments and supplements thereto, and preparing and
mailing annual and periodic reports and proxy materials to shareholders
(including but not limited to the expense of setting in type any such
Registration Statements, Prospectuses, annual or periodic reports or proxy
materials). The Fund shall also bear the cost of expenses of qualification of
the shares for sale, and, if necessary or advisable in connection therewith, of
qualifying the Fund as a broker or dealer, in such states of the United States
or other jurisdictions as shall be selected by the Fund and the Distributor
pursuant to Section 5.4 hereof and the cost and expense payable to each such
state for continuing qualification therein until the Fund decides to discontinue
such qualification pursuant to Section 5.4 hereof. As set forth in Section 7
above, the Fund shall also bear the expenses it assumes pursuant to the Plan
with respect to the shares of the Fund, so long as the Plan is in effect.
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8.2 If the Plan is terminated or discontinued, the costs previously
incurred by the Distributor in performing the duties set forth in Section 6
hereof shall be borne by the Distributor and will not be subject to
reimbursement by the Fund.
Section 9. Indemnification
9.1 The Fund agrees to indemnify, defend and hold the Distributor, its
officers and directors and any person who controls the Distributor within the
meaning of Section 15 of the Securities Act, free and harmless from and against
any and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which the Distributor, its officers,
directors or any such controlling person may incur under the Securities Act, or
under common law or otherwise, arising out of or based upon any untrue statement
of a material fact contained in the Registration Statement or Prospectus or
arising out of or based upon any alleged omission to state a material fact
required to be stated in either thereof or necessary to make the statements in
either thereof not misleading, except insofar as such claims, demands,
liabilities or expenses arise out of or are based upon any such untrue statement
or omission or alleged untrue statement or omission made in reliance upon and in
conformity with information furnished in writing by the Distributor to the Fund
for use in the Registration Statement or Prospectus; provided, however, that
this indemnity agreement shall not inure to the benefit of any such officer,
director, trustee or controlling person unless a court of competent jurisdiction
shall determine in a final decision on the merits, that the person to be
indemnified was not liable by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of its reckless
disregard of its obligations under this Agreement (disabling conduct), or, in
the absence of such a decision, a reasonable determination, based upon a review
of the facts, that the indemnified person was not liable by reason of disabling
conduct, by (a) a vote of a majority of a quorum of directors or trustees who
are neither "interested persons" of the Fund as defined in Section 2(a)(19) of
the Investment Company Act nor parties to the proceeding, or (b) an independent
legal counsel in a written opinion. The Fund's agreement to indemnify the
Distributor, its officers and directors or trustees and any such controlling
person as aforesaid is expressly conditioned upon the Fund's being promptly
notified of any action brought against the Distributor, its officers or
directors or trustees, or any such controlling person, such notification to be
given by letter or telegram addressed to the Fund at its principal business
office. The Fund agrees promptly to notify the Distributor of the
8
<PAGE>
commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issue and sale of any shares.
9.2 The Distributor agrees to indemnify, defend and hold the Fund, its
officers and Directors/Trustees and any person who controls the Fund, if any,
within the meaning of Section 15 of the Securities Act, free and harmless from
and against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending against such claims, demands or liabilities
and any counsel fees incurred in connection therewith) which the Fund, its
officers and Directors/Trustees or any such controlling person may incur under
the Securities Act or under common law or otherwise, but only to the extent that
such liability or expense incurred by the Fund, its Directors/Trustees or
officers or such controlling person resulting from such claims or demands shall
arise out of or be based upon any alleged untrue statement of a material fact
contained in information furnished in writing by the Distributor to the Fund for
use in the Registration Statement or Prospectus or shall arise out of or be
based upon any alleged omission to state a material fact in connection with such
information required to be stated in the Registration Statement or Prospectus or
necessary to make such information not misleading. The Distributor's agreement
to indemnify the Fund, its officers and Directors/Trustees and any such
controlling person as aforesaid, is expressly conditioned upon the Distributor's
being promptly notified of any action brought against the Fund, its officers and
Directors/Trustees or any such controlling person, such notification being given
to the Distributor at its principal business office.
Section 10. Duration and Termination of this Agreement
10.1 This Agreement shall become effective as of the date first above
written and shall remain in force for two years from the date hereof and
thereafter, but only so long as such continuance is specifically approved at
least annually by (a) the Directors/Trustees of the Fund, or by the vote of a
majority of the outstanding voting securities of the shares of the Fund, and (b)
by the vote of a majority of those Directors/Trustees who are not parties to
this Agreement or interested persons of any such parties and who have no direct
or indirect financial interest in this Agreement or in the operation of the
Fund's Plan or in any agreement related thereto (Rule 12b-1 Directors/Trustees),
cast in person at a meeting called for the purpose of voting upon such approval.
9
<PAGE>
10.2 This Agreement may be terminated at any time, without the payment of
any penalty, by a majority of the Rule 12b-1 Directors/Trustees or by vote of a
majority of the outstanding voting securities of the shares of the Fund, or by
the Distributor, on sixty (60) days' written notice to the other party. This
Agreement shall automatically terminate in the event of its assignment.
10.3 The terms "affiliated person," "assignment," "interested person" and
"vote of a majority of the outstanding voting securities", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
Section 11. Amendments to this Agreement
This Agreement may be amended by the parties only if such amendment is
specifically approved by (a) the Directors/Trustees of the Fund, or by the vote
of a majority of the outstanding voting securities of the shares of the Fund,
and (b) by the vote of a majority of the Rule 12b-1 Directors/Trustees cast in
person at a meeting called for the purpose of voting on such amendment.
Section 12. Governing Law
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of New York as at the time in effect and
the applicable provisions of the Investment Company Act. To the extent that the
applicable law of the State of New York, or any of the provisions herein,
conflict with the applicable provisions of the Investment Company Act, the
latter shall control.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year above written.
Prudential Mutual Fund
Distributors, Inc.
By: /s/ ROBERT F. GUNIA
--------------------------------
Name: Robert F. Gunia
Title: Executive Vice President
Prudential-Bache
Tax-Free Money Fund, Inc.
By: /s/ RICHARD A. REDEKER
--------------------------------
Name: Richard A. Redeker
Title: President
11
Exhibit 6(c)
PRUDENTIAL TAX-FREE MONEY FUND, INC.
Form of
Distribution Agreement
Agreement made as of May 2, 1988, as amended and restated on July 1, 1993,
May 2, 1995 and _______, 1995, between Prudential Tax-Free Money Fund, Inc., a
Maryland Corporation (the Fund) and Prudential Mutual Fund Distributors, Inc., a
Delaware Corporation (the Distributor).
WITNESSETH
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the Investment Company Act), as a diversified, open-end, management
investment company and it is in the interest of the Fund to offer its shares for
sale continuously;
WHEREAS, the Distributor is a broker-dealer registered under the Securities
Exchange Act of 1934, as amended, and is engaged in the business of selling
shares of registered investment companies either directly or through other
broker-dealers;
WHEREAS, the Fund and the Distributor wish to enter into and agreement with
each other, with respect to the continuous offering of the Fund's shares from
and after the date hereof in order to promote the growth of the Fund and
facilitate the distribution of its shares; and
WHEREAS, the Fund has adopted a distribution and service plan pursuant to
Rule 12b-1 under the Investment Company Act (the Plan) authorizing payments by
the Fund to the Distributor with respect to the distribution of the shares of
the Fund and the maintenance at shareholder accounts.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor
The Fund hereby appoints the Distributor as the principal underwriter and
distributor of the Fund to sell shares to the public on behalf of the Fund and
the Distributor hereby accepts such appointment and agrees to act hereunder. The
Fund hereby agrees during the term of this Agreement to sell shares of the Fund
through the Distributor on the terms and conditions set forth below.
<PAGE>
Section 2. Exclusive Nature of Duties
The Distributor shall be the exclusive representative of the Fund to act as
principal underwriter and distributor of the Fund's shares, except that:
2.1 The exclusive rights granted to the Distributor to sell shares of the
Fund shall not apply to shares of the Fund issued in connection with the merger
or consolidation of any other investment company or personal holding company
with the Fund or the acquisition by purchase or otherwise of all (or
substantially all) the assets or the outstanding shares of any such company by
the Fund.
2.2 Such exclusive rights shall not apply to shares issued by the Fund
pursuant to reinvestment of dividends or capital gains distributions.
2.3 Such exclusive rights shall not apply to shares issued by the Fund
pursuant to the reinstatement privilege afforded redeeming shareholders.
2.4 Such exclusive rights shall not apply to purchases made through the
Fund's transfer and dividend disbursing agent in the manner set forth in the
currently effective Prospectus of the Fund. The term "Prospectus" shall mean the
Prospectus and Statement of Additional Information included as part of the
Fund's Registration Statement, as such Prospectus and Statement of Additional
Information may be amended or supplemented from time to time, and the term
"Registration Statement" shall mean the Registration Statement filed by the Fund
with the Securities and Exchange Commission and effective under the Securities
Act of 1933, as amended (Securities Act), and the Investment Company Act, as
such Registration Statement is amended from time to time.
Section 3. Purchase of Shares from the Fund
3.1 The Distributor shall have the right to buy from the Fund on behalf of
investors the shares needed, but not more than the shares needed (except for
clerical errors in transmission) to fill unconditional orders for shares placed
with the Distributor by investors or registered and qualified securities dealers
and other financial institutions (selected dealers).
3.2 The shares shall be sold by the Distributor on behalf of the Fund and
delivered by the Distributor or selected dealers, as described in Section 6.4
hereof, to investors at the offering price as set forth in the Prospectus.
2
<PAGE>
3.3 The Fund shall have the right to suspend the sale of its shares at
times when redemption is suspended pursuant to the conditions in Section 4.3
hereof or at such other times as may be determined by the Directors/Trustees.
The Fund shall also have the right to suspend the sale of its shares if a
banking moratorium shall have been declared by federal or New York authorities.
3.4 The Fund, or any agent of the Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for shares received by the
Distributor. Any order may be rejected by the Fund; provided, however, that the
Fund will not arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of shares. The Fund (or its agent) will confirm
orders upon their receipt, will make appropriate book entries and upon receipt
by the Fund (or its agent) of payment therefor, will deliver deposit receipts
for such shares pursuant to the instructions of the Distributor. Payment shall
be made to the Fund in New York Clearing House funds or federal funds. The
Distributor agrees to cause such payment and such instructions to be delivered
promptly to the Fund (or its agent).
Section 4. Repurchase or Redemption of Shares by the Fund
4.1 Any of the outstanding shares may be tendered for redemption at any
time, and the Fund agrees to repurchase or redeem the shares so tendered in
accordance with its Declaration of Trust as amended from time to time, and in
accordance with the applicable provisions of the Prospectus. The price to be
paid to redeem or repurchase the shares shall be equal to the net asset value
determined as set forth in the Prospectus. All payments by the Fund hereunder
shall be made in the manner set forth in Section 4.2 below.
4.2 The Fund shall pay the total amount of the redemption price as defined
in the above paragraph pursuant to the instructions of the Distributor on or
before the seventh calendar day subsequent to its having received the notice of
redemption in proper form. The proceeds of any redemption of shares shall be
paid by the Fund to or for the account of the redeeming shareholder, in each
case in accordance with applicable provisions of the Prospectus.
4.3 Redemption of shares or payment may be suspended at times when the New
York Stock Exchange is closed for other than customary weekends and holidays,
when trading on said Exchange is restricted, when an emergency exists as a
result of which disposal by the Fund of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Fund fairly to
3
<PAGE>
determine the value of its net assets, or during any other period when the
Securities and Exchange Commission, by order, so permits.
Section 5. Duties of the Fund
5.1 Subject to the possible suspension of the sale of shares as provided
herein, the Fund agrees to sell its shares so long as it has shares available.
5.2 The Fund shall furnish the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of shares, and this shall
include one certified copy, upon request by the Distributor, of all financial
statements prepared for the Fund by independent public accountants. The Fund
shall make available to the Distributor such number of copies of its Prospectus
and annual and interim reports as the Distributor shall reasonably request.
5.3 The Fund shall take, from time to time, but subject to the necessary
approval of the Directors/Trustees and the shareholders, all necessary action to
fix the number of authorized shares and such steps as may be necessary to
register the same under the Securities Act, to the end that there will be
available for sale such number of shares as the Distributor reasonably may
expect to sell. The Fund agrees to file from time to time such amendments,
reports and other documents as may be necessary in order that there will be no
untrue statement of a material fact in the Registration Statement, or necessary
in order that there will be no omission to state a material fact in the
Registration Statement which omission would make the statements therein
misleading.
5.4 The Fund shall use its best efforts to qualify and maintain the
qualification of any appropriate number of its shares for sales under the
securities laws of such states as the Distributor and the Fund may approve;
provided that the Fund shall not be required to amend its Declaration of Trust
or By-Laws to comply with the laws of any state, to maintain an office in any
state, to change the terms of the offering of its shares in any state from the
terms set forth in its Registration Statement, to qualify as a foreign
corporation in any state or to consent to service of process in any state other
than with respect to claims arising out of the offering of its shares. Any such
qualification may be withheld, terminated or withdrawn by the Fund at any time
in its discretion. As provided in Section 8.1 hereof, the expense of
qualification and maintenance of qualification shall be borne by the Fund. The
Distributor shall furnish such information and other
4
<PAGE>
material relating to its affairs and activities as may be required by the
Fund in connection with such qualifications.
Section 6. Duties of the Distributor
6.1 The Distributor shall devote reasonable time and effort to effect sales
of shares of the Fund, but shall not be obligated to sell any specific number of
shares. Sales of the shares shall be on the terms described in the Prospectus.
The Distributor may enter into like arrangements with other investment
companies. The Distributor shall compensate the selected dealers as set forth in
the Prospectus.
6.2 In selling the shares, the Distributor shall use its best efforts in
all respects duly to conform with the requirements of all federal and state laws
relating to the sale of such securities. Neither the Distributor nor any
selected dealer nor any other person is authorized by the Fund to give any
information or to make any representations, other than those contained in the
Registration Statement or Prospectus and any sales literature approved by
appropriate officers of the Fund.
6.3 The Distributor shall adopt and follow procedures for the confirmation
of sales to investors and selected dealers, the collection of amounts payable by
investors and selected dealers on such sales and the cancellation of unsettled
transactions, as may be necessary to comply with the requirements of the
National Association of Securities Dealers, Inc. (NASD).
6.4 The Distributor shall have the right to enter into selected dealer
agreements with registered and qualified securities dealers and other financial
institutions of its choice for the sale of shares, provided that the Fund shall
approve the forms of such agreements. Within the United States, the Distributor
shall offer and sell shares only to such selected dealers as are members in good
standing of the NASD. Shares sold to selected dealers shall be for resale by
such dealers only at the offering price determined as set forth in the
Prospectus.
Section 7. Payment of the Distributor under the Plan
7.1 The Fund shall pay to the Distributor as compensation for services
under the Distribution and Service Plan and this Agreement a fee of .125 of 1%
per annum of the assets of the shares of the Fund. Payment of the distribution
and service fee shall be subject to the limitations of Article III, Section 26
of the NASD Rules of Fair Practice.
5
<PAGE>
7.2 So long as the Plan or any amendment thereto is in effect, the
Distributor shall inform the Directors/Trustees of the commissions and account
servicing fees to be paid by the Distributor to account executives of the
Distributor and to broker-dealers and financial institutions which have dealer
agreements with the Distributor. So long as the Plan (or any amendment thereto)
is in effect, at the request of the Directors/Trustees or any agent or
representative of the Fund, the Distributor shall provide such additional
information as may reasonably be requested concerning the activities of the
Distributor hereunder and the costs incurred in performing such activities.
7.3 Expenses of distribution with respect to shares of the Fund include,
among others:
(a) Amounts paid to Prudential Securities for performing services
under a selected dealer agreement between Prudential Securities and the
Distributor for sale of shares of the Fund, including sales commissions and
account servicing fees paid to, or on account of, account executives and
indirect and overhead costs associated with the performance of distribution
activities, including central office and branch expenses;
(b) amounts paid to Prusec for performing services under a selected
dealer agreement between Prusec and the Distributor for sale of shares of
the Fund, including sales commissions and account servicing fees paid to,
or on account of, agents and indirect and overhead costs associated with
distribution activities;
(c) sales commissions and account servicing fees paid to, or on
account of, broker-dealers and financial institutions (other than
Prudential Securities and Prusec) which have entered into selected dealer
agreements with the Distributor with respect to shares of the Fund;
(d) amounts paid to, or on account of, account executives of
Prudential Securities, Prusec, or other broker-dealers or financial
institutions for personal services and/or the maintenance of shareholder
accounts; and
(e) advertising for the Fund in various forms through any available
medium, including the cost of printing and mailing Fund Prospectuses, and
periodic financial
6
<PAGE>
reports and sales literature to persons other than current shareholders
of the Fund.
Indirect and overhead costs referred to in clauses (a) and (b) of the foregoing
sentence include (i) lease expenses, (ii) salaries and benefits of personnel
including operations and sales support personnel, (iii) utility expenses, (iv)
communications expenses, (v) sales promotion expenses, (vi) expenses of postage,
stationery and supplies and (vii) general overhead.
Section 8. Allocation of Expenses
8.1 The Fund shall bear all costs and expenses of the continuous offering
of its shares, including fees and disbursements of its counsel and auditors, in
connection with the preparation and filing of any required Registration
Statements and/or Prospectuses under the Investment Company Act or the
Securities Act, and all amendments and supplements thereto, and preparing and
mailing annual and periodic reports and proxy materials to shareholders
(including but not limited to the expense of setting in type any such
Registration Statements, Prospectuses, annual or periodic reports or proxy
materials). The Fund shall also bear the cost of expenses of qualification of
the shares for sale, and, if necessary or advisable in connection therewith, of
qualifying the Fund as a broker or dealer, in such states of the United States
or other jurisdictions as shall be selected by the Fund and the Distributor
pursuant to Section 5.4 hereof and the cost and expense payable to each such
state for continuing qualification therein until the Fund decides to discontinue
such qualification pursuant to Section 5.4 hereof. As set forth in Section 7
above, the Fund shall also bear the expenses it assumes pursuant to the Plan
with respect to the shares of the Fund, so long as the Plan is in effect.
Section 9. Indemnification
9.1 The Fund agrees to indemnify, defend and hold the Distributor, its
officers and directors and any person who controls the Distributor within the
meaning of Section 15 of the Securities Act, free and harmless from and against
any and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which the Distributor, its officers,
directors or any such controlling person may incur under the Securities Act, or
under common law or otherwise, arising out of or based upon any untrue statement
of a material fact contained in the Registration Statement or Prospectus or
arising out of or based upon any alleged omission to state a material fact
required to be stated in either thereof or necessary
7
<PAGE>
to make the statements in either thereof not misleading, except insofar as
such claims, demands, liabilities or expenses arise out of or are based upon any
such untrue statement or omission or alleged untrue statement or omission made
in reliance upon and in conformity with information furnished in writing by the
Distributor to the Fund for use in the Registration Statement or Prospectus;
provided, however, that this indemnity agreement shall not inure to the benefit
of any such officer, director, trustee or controlling person unless a court of
competent jurisdiction shall determine in a final decision on the merits, that
the person to be indemnified was not liable by reason of willful misfeasance,
bad faith or gross negligence in the performance of its duties, or by reason of
its reckless disregard of its obligations under this Agreement (disabling
conduct), or, in the absence of such a decision, a reasonable determination,
based upon a review of the facts, that the indemnified person was not liable by
reason of disabling conduct, by (a) a vote of a majority of a quorum of
directors or trustees who are neither "interested persons" of the Fund as
defined in Section 2(a)(19) of the Investment Company Act nor parties to the
proceeding, or (b) an independent legal counsel in a written opinion. The Fund's
agreement to indemnify the Distributor, its officers and directors or trustees
and any such controlling person as aforesaid is expressly conditioned upon the
Fund's being promptly notified of any action brought against the Distributor,
its officers or directors or trustees, or any such controlling person, such
notification to be given by letter or telegram addressed to the Fund at its
principal business office. The Fund agrees promptly to notify the Distributor of
the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issue and sale of any shares.
9.2 The Distributor agrees to indemnify, defend and hold the Fund, its
officers and Directors/Trustees and any person who controls the Fund, if any,
within the meaning of Section 15 of the Securities Act, free and harmless from
and against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending against such claims, demands or liabilities
and any counsel fees incurred in connection therewith) which the Fund, its
officers and Directors/Trustees or any such controlling person may incur under
the Securities Act or under common law or otherwise, but only to the extent that
such liability or expense incurred by the Fund, its Directors/Trustees or
officers or such controlling person resulting from such claims or demands shall
arise out of or be based upon any alleged untrue statement of a material fact
contained in information furnished in writing by the Distributor to the Fund for
use in the Registration Statement or Prospectus or shall arise out of or be
based upon any alleged
8
<PAGE>
omission to state a material fact in connection with such information
required to be stated in the Registration Statement or Prospectus or necessary
to make such information not misleading. The Distributor's agreement to
indemnify the Fund, its officers and Directors/Trustees and any such controlling
person as aforesaid, is expressly conditioned upon the Distributor's being
promptly notified of any action brought against the Fund, its officers and
Directors/Trustees or any such controlling person, such notification being given
to the Distributor at its principal business office.
Section 10. Duration and Termination of this Agreement
10.1 This Agreement shall become effective as of the date first above
written and shall remain in force for two years from the date hereof and
thereafter, but only so long as such continuance is specifically approved at
least annually by (a) the Directors/Trustees of the Fund, or by the vote of a
majority of the outstanding voting securities of the shares of the Fund, and (b)
by the vote of a majority of those Directors/Trustees who are not parties to
this Agreement or interested persons of any such parties and who have no direct
or indirect financial interest in this Agreement or in the operation of the
Fund's Plan or in any agreement related thereto (Rule 12b-1 Directors/Trustees),
cast in person at a meeting called for the purpose of voting upon such approval.
10.2 This Agreement may be terminated at any time, without the payment of
any penalty, by a majority of the Rule 12b-1 Directors/Trustees or by vote of a
majority of the outstanding voting securities of the shares of the Fund, or by
the Distributor, on sixty (60) days' written notice to the other party. This
Agreement shall automatically terminate in the event of its assignment.
10.3 The terms "affiliated person," "assignment," "interested person" and
"vote of a majority of the outstanding voting securities," when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
Section 11. Amendments to this Agreement
This Agreement may be amended by the parties only if such amendment is
specifically approved by (a) the Directors/Trustees of the Fund, or by the vote
of a majority of the outstanding voting securities of the shares of the Fund,
and (b) by the vote of a
9
<PAGE>
majority of the Rule 12b-1 Directors/Trustees cast in person at a meeting
called for the purpose of voting on such amendment.
Section 12. Governing Law
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of New York as at the time in effect and
the applicable provisions of the Investment Company Act. To the extent that the
applicable law of the State of New York, or any of the provisions herein,
conflict with the applicable provisions of the Investment Company Act, the
latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year above written.
Prudential Mutual Fund
Distributors, Inc.
By:
---------------------------------
Name: Robert F. Gunia
Title: Executive Vice President
Prudential Tax-Free Money Fund, Inc.
By:
---------------------------------
Name: Richard A. Redeker
Title: President
10
Exhibit 11
Consent of Independent Accountants
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 19 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
February 21, 1995, relating to the financial statements and financial highlights
of Prudential Tax-Free Money Fund, which appears in such Statement of Additional
Information, and to the incorporation by reference of our report into the
Prospectus which constitutes part of this Registration Statement. We also
consent to the reference to us under the heading "Custodian, Transfer and
Dividend Disbursing Agent and Independent Accountants" in such Statement of
Additional Information and to the reference to us under the heading "Financial
Highlights" in the Prospectus.
PRICE WATERHOUSE LLP
New York, New York
May 25, 1995
EXHIBIT 15(b)
PRUDENTIAL TAX-FREE MONEY FUND
Form of
Distribution and Service Plan
Introduction
The Distribution and Service Plan (the Plan) set forth below which is
designed to conform to the requirements of Rule 12b-1 under the Investment
Company Act of 1940 (the Investment Company Act) and Article III, Section 26 of
the Rules of Fair Practice of the National Association of Securities Dealers,
Inc. (NASD) has been adopted by Prudential Tax-Free Money Fund, Inc. (the Fund),
and by Prudential Mutual Fund Distributors, Inc., the Fund's distributor (the
Distributor).
The Fund has entered into a distribution agreement (the Distribution
Agreement) pursuant to which the Fund will employ the Distributor to distribute
shares issued by the Fund. Under the Plan, the Fund intends to pay to the
Distributor as compensation for its services, a distribution and service fee.
A majority of the Board of Directors or Trustees of the Fund, including a
majority of those Directors or Trustees who are not "interested persons" of the
Fund (as defined in the Investment Company Act) and who have no direct or
indirect financial interest in the operation of this Plan or any agreements
related to it (the Rule 12b-1 Directors or Trustees), have determined by votes
cast in person at a meeting called for the purpose of voting on this Plan that
there is a reasonable likelihood that adoption of this Plan will benefit the
Fund and its shareholders. Expenditures under this Plan by the Fund for
Distribution Activities (defined below) are primarily intended to result in the
sale of shares of the Fund within the meaning of paragraph (a)(2) of Rule 12b-1
promulgated under the Investment Company Act.
The purpose of the Plan is to create incentives to the Distributor and/or
other qualified broker-dealers and their account executives to provide
distribution assistance to their customers who are investors in the Series, to
defray the costs and expenses associated with the preparation, printing and
distribution of prospectuses and sales literature and other promotional and
distribution activities and to provide for the servicing and maintenance of
shareholder accounts.
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The Plan
The material aspects of the Plan are as follows:
1. Distribution Activities
The Fund shall engage the Distributor to distribute shares of the Fund and
to service shareholder accounts using all of the facilities of the distribution
networks of Prudential Securities Incorporated (Prudential Securities) and Pruco
Securities Corporation (Prusec), including sales personnel and branch office and
central support systems, and also using such other qualified broker-dealers and
financial institutions as the Distributor may select. Services provided and
activities undertaken to distribute shares of the Fund are referred to herein as
"Distribution Activities."
2. Payment of Service Fee
The Fund shall pay to the Distributor as compensation for providing
personal service and/or maintaining shareholder accounts a service fee of .125
of 1% per annum of the average daily net assets of the shares of the Fund
(service fee). The Fund shall calculate and accrue daily amounts payable by the
shares of the Fund hereunder and shall pay such amounts monthly or at such other
intervals as the Board of Directors or Trustees may determine.
3. Payment for Distribution Activities
The Fund shall pay to the Distributor as compensation for its services a
distribution fee, together with the service fee (described in Section 2 hereof),
of .125 of 1% per annum of the average daily net assets of the shares of the
Fund. The Fund shall calculate and accrue daily amounts payable by the shares of
the Fund hereunder and shall pay such amounts monthly or at such other intervals
as the Board of Directors or Trustees may determine.
The Distributor shall spend such amounts as it deems appropriate on
Distribution Activities which include, among others:
(a) amounts paid to Prudential Securities for performing services under a
selected dealer agreement between Prudential Securities and the
Distributor for sale of shares of the Fund, including sales
commissions and account servicing fees paid to, or on account of,
account executives and indirect and overhead costs associated with
Distribution Activities, including central office and branch expenses;
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(b) amounts paid to Prusec for performing services under a selected dealer
agreement between Prusec and the Distributor for sale of shares of the
Fund, including sales commissions and account servicing fees paid to,
or on account of, agents and indirect and overhead costs associated
with Distribution Activities;
(c) advertising for the Fund in various forms through any available
medium, including the cost of printing and mailing Fund prospectuses,
statements of additional information and periodic financial reports
and sales literature to persons other than current shareholders of the
Fund; and
(d) sales commissions (including account servicing fees) paid to, or on
account of, broker-dealers and financial institutions (other than
Prudential Securities and Prusec) which have entered into selected
dealer agreements with the Distributor with respect to shares of the
Fund.
4. Quarterly Reports; Additional Information
An appropriate officer of the Fund will provide to the Board of Directors
or Trustees of the Fund for review, at least quarterly, a written report
specifying in reasonable detail the amounts expended for Distribution Activities
(including payment of the service fee) and the purposes for which such
expenditures were made in compliance with the requirements of Rule 12b-1. The
Distributor will provide to the Board of Directors or Trustees of the Fund such
additional information as the Board or Trustees shall from time to time
reasonably request, including information about Distribution Activities
undertaken or to be undertaken by the Distributor.
The Distributor will inform the Board of Directors or Trustees of the Fund
of the commissions and account servicing fees to be paid by the Distributor to
broker-dealers and financial institutions which have selected dealer agreements
with the Distributor.
5. Effectiveness; Continuation
The Plan shall not take effect until it has been approved by a vote of a
majority of the outstanding voting
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securities (as defined in the Investment Company Act) of the Fund.
If approved by a vote of a majority of the outstanding voting securities of
the Fund, the Plan shall, unless earlier terminated in accordance with its
terms, continue in full force and effect thereafter for so long as such
continuance is specifically approved at least annually by a majority of the
Board of Directors or Trustees of the Fund and a majority of the Rule 12b-1
Directors or Trustees by votes cast in person at a meeting called for the
purpose of voting on the continuation of the Plan.
6. Termination
This Plan may be terminated at any time by vote of a majority of the Rule
12b-1 Directors or Trustees, or by vote of a majority of the outstanding voting
securities (as defined in the Investment Company Act) of the Fund.
7. Amendments
The Plan may not be amended to change the service and distribution fee to
be paid as provided for in Sections 2 and 3 hereof so as to increase
materially the amounts payable under this Plan unless such amendment shall be
approved by the vote of a majority of the outstanding voting securities (as
defined in the Investment Company Act) of the Fund. All material amendments of
the Plan shall be approved by a majority of the Board of Directors or the
Trustees of the Fund and a majority of the Rule 12b-1 Directors or Trustees by
votes cast in person at a meeting called for the purpose of voting on the
Plan.
8. Rule 12b-1 Directors or Trustees
While the Plan is in effect, the selection and nomination of the Rule 12b-1
Directors or Trustees who are not "interested persons" of the Fund
(non-interested Directors or Trustees) shall be committed to the discretion of
the Rule 12b-1 Directors or Trustees.
9. Records
The Fund shall preserve copies of the Plan and any related agreements and
all reports made pursuant to Section 4 hereof, for a period of not less than six
years from the date of effectiveness of the Plan, such agreements or reports,
and for at least the first two years in an easily accessible place.
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[10. Liabilities of the Fund
The name Prudential Government Securities Trust is the designation of the
Trustees under a Declaration of Trust, dated September 22, 1981, as thereafter
amended, and all persons dealing with the Fund must look solely to the property
of the Fund for the enforcement of any claims against the Fund as neither the
Trustees, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Fund.]
Dated: _________, 19__
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