PRUDENTIAL TAX FREE MONEY FUND, 485B24E, 1995-02-28

PRUDENTIAL TAX FREE MONEY FUND
485B24E, 1995-02-28

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As filed with the Securities and Exchange Commission
on February 28, 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. 18 /X/

and/or
REGISTRATION STATEMENT UNDER THE

INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 19 /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)
/X/ on March 1, 1995 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a), of Rule 485.
/ / on (date) 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.

CALCULATION OF REGISTRATION FEE
Proposed Maximum Proposed Maximum
Title of Securities Amount Being Offering Price Aggregate Amount of
Being Registered Registered Per Share* Offering Price** Registration Fee
<S> <C> <C> <C> <C>
Common Stock, par value
$.01 per share indefinite*** N/A N/A N/A
Common Stock, par value
$.01 per share 131,603,617 $1.00 $131,603,617 $100.00
* Computed under Rule 457(d) on the basis of the offering price per share on the close of business on
February 16, 1995.
** Registrant elects to calculate the maximum aggregate offering price pursuant to Rule 24e-2.
$2,115,603,220 of shares was redeemed during the fiscal year ended December 31, 1994.
$1,984,289,603 of shares was used for reductions pursuant to paragraph (c) of Rule 24f-2 during
the fiscal year ended December 31, 1994. $131,313,617 of shares is the amount of redeemed shares
used for reduction for this 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.

</TABLE>

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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.......................... Dividends, Distributions and
Taxes; 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

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Prospectus dated February 28, 1995
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Prudential-Bache Tax-Free Money Fund, Inc., doing business as Prudential
Tax-Free Money Fund (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 is 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 February 28, 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 is 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 10.

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 January 31, 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. The Fund reimburses PMFD for expenses
related to the distribution of the Fund's shares at an annual rate of up to .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 18.

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 15.

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 11.

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
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<S> <C> <C> <C> <C>
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

</TABLE>

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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,
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1994 1993 1992 1991 1990 1989 1988* 1987 1986 1985
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <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 $ 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:

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 x (365/7)) ............................... 3.71%
Effective annual yield, assuming weekly compounding ............. 3.78%
Tax equivalent yield (3.71%/(1-.396)) ........................... 6.14%

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. The investment adviser presently intends to avoid, to
the extent possible, purchasing Municipal Bonds

6
<PAGE>

and Municipal Notes for the Fund's portfolio the interest on which would 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.

The Fund will invest in high quality Municipal Bonds and Notes with
short-term maturities, as follows:

1. Municipal Bonds with remaining maturities of one year 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 one year 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, have been
issued by an issuer having outstanding debt securities rated not lower than Aa
by Moody's or AA by S&P or by an issuer 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 one year 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 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.

7
<PAGE>

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 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.

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.

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."

8
<PAGE>

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 January 31, 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 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. There are no carry forward
amounts under the Plan and interest expenses are not included under the Plan.
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 reimburses the Distributor for its
distribution-related expenses at an annual rate of up to .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.

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.

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.

9
<PAGE>

In addition to distribution and 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, 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

10
<PAGE>

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
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 a 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.

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<PAGE>

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).

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.

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<PAGE>

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. 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.

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<PAGE>

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.

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."

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<PAGE>

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 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 wil 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.

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<PAGE>

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 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

16
<PAGE>

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.

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.

17
<PAGE>

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 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:

o 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.

o 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.

o 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.

o 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.

18
<PAGE>

o 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.

o 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>

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
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 Bonds 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

o 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
o Tax-Free Money Market Funds
Prudential Tax-Free Money Fund
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
o Command Funds
Command Money Fund
Command Government Fund
Command Tax-Free Fund
o Institutional Money Market Funds
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series

<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 ...................................... 8
HOW THE FUND IS MANAGED ....................................... 8
Manager ...................................................... 9
Distributor .................................................. 9
Portfolio Transactions ....................................... 10
Custodian and Transfer and
Dividend Disbursing Agent ................................... 10
HOW THE FUND VALUES ITS SHARES ................................ 10
TAXES, DIVIDENDS AND DISTRIBUTIONS ............................ 11
GENERAL INFORMATION ........................................... 12
Description of Common Stock .................................. 12
Additional Information ....................................... 12
SHAREHOLDER GUIDE ............................................. 13
How to Buy Shares of the Fund ................................ 13
How to Sell Your Shares ...................................... 15
How to Exchange Your Shares .................................. 17
Shareholder Services ......................................... 18
THE PRUDENTIAL MUTUAL FUND FAMILY ............................. A-1

- --------------------------------------------------------------------------------
103A 444030H

CUSIP No. 74436P-10-3

Prudential
Tax-Free Money
Fund

----------

Prudential Mutual Funds
BUILDING YOUR FUTURE
ON OUR STRENGTH SM

PROSPECTUS

February 28,1995

<PAGE>

PRUDENTIAL TAX-FREE MONEY FUND

Statement of Additional Information
dated February 28, 1995

Prudential-Bache Tax-Free Money Fund, Inc., doing business as Prudential
Tax-Free Money Fund (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 February
28, 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 12
Investment Objective and Policies............................................ B-2 6
Investment Restrictions...................................................... B-4 8
Directors and Officers....................................................... B-5 8
Manager...................................................................... B-7 9
Distributor.................................................................. B-9 9
Portfolio Transactions and Brokerage......................................... B-10 10
Purchase and Redemption of Fund Shares....................................... B-11 13
Shareholder Investment Account............................................... B-12 18
Net Asset Value.............................................................. B-14 10
Calculation of Yield......................................................... B-14 6
Taxes, Dividends and Distributions........................................... B-14 11
Custodian and Transfer and Dividend Disbursing Agent, and Independent
Accountants.................................................................. B-16 10
Financial Statements......................................................... B-17 --
Report of Independent Accountants............................................ B-25 --
Appendix A--Description of Tax-Exempt Security Ratings....................... A-1 --
</TABLE>

- --------------------------------------------------------------------------------
103B 4440076

<PAGE>

GENERAL INFORMATION

On February 28, 1991, the Board of Directors approved an amendment to the
Fund's Articles of Incorporation to change the Fund's name to Prudential
Tax-Free Money Fund, Inc. and authorized the Fund to do business under the name
Prudential Tax-Free Money Fund until the next annual or special meeting of
shareholders at which time the amendment will be submitted to shareholders for
their approval.

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 objective and policies of the Fund other than those
described under "Investment Restrictions" may be changed by the Board of
Directors of the Fund without shareholder approval. Such changes may result in
the Fund having investment objectives different from the objectives which the
shareholders considered appropriate at the time of investment in the Fund.

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.

B-2

<PAGE>

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 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.

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
B-3

<PAGE>
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 investment restrictions listed below have been adopted by the Fund as
fundamental policies. Under the Investment Company Act, a fundamental policy
cannot be changed without the approval of the holders of a majority of the
Fund's outstanding voting securities which means the lesser of (1) 67% of the
Fund's 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 shares. Any investment restrictions which involve a
maximum percentage of securities or assets shall not be considered to be
violated unless an excess over the percentage occurs immediately after, and is
caused by an acquisition or encumbrance of securities or assets of, or
borrowings by, the Fund.

The Fund may not:

(1) Invest in securities other than Municipal Bonds and Notes as described
under "Investment Objective and Policies."

(2) 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.

(3) Make short sales of securities.

(4) Purchase securities on margin, except for such short-term credits as
are necessary for the clearance of purchases and sales of portfolio securities.

(5) 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.

(6) 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 (5).

(7) Engage in the underwriting of securities.

(8) Purchase or sell real estate mortgage loans, although it may purchase
Municipal Bonds or Notes secured by interests in real estate.

(9) 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.

(10) Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets.

(11) Invest for the purpose of exercising control or management of another
company.

(12) Write, purchase or sell puts, calls, or combinations thereof, except
that it may obtain rights to resell Municipal Bonds and Notes as set forth under
"Investment Objective and Policies."

(13) 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.

(14) Purchase or retain the securities of any issuer if officers or
directors of the Fund or officers or directors of the Manager responsible for
investment decisions concerning the Fund beneficially owning individually more
than 1/2 of 1% of securities of such issuer together beneficially own more than
5% of the securities of such issuer.

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.

B-4

<PAGE>

In order to comply with certain state "blue sky" restrictions, the Fund
will not as a matter of operating policy:

(i) 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 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.

(ii) 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.

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.
(56)
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

*Lawrence C. McQuade President and Vice Chairman of PMF (since 1988); Managing Director,
(67) Director Investment Banking, Prudential Securities Incorporated
One Seaport Plaza (Prudential Securities) (1988-1991); Director of Czech
New York, NY and Slovak American Enterprise Fund (since October
1994), Quixote Corporation (since February 1992) and
BUNZL, PLC (since June 1991); formerly, Director of
Crazy Eddie Inc. (1987-1990) and Kaiser Tech, Ltd.,
Kaiser Aluminum and Chemical Corp. (March
1987-November 1988); formerly Executive Vice President
and Director of WR Grace & Company; President and
Director of The Global Government Plus Fund Inc., The
Global Total Return Fund, Inc. and The High Yield
Income Fund, Inc.

Stephen P. Munn (52) 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.

Louis A. Weil, III (53) 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

</TABLE>

B-5

<PAGE>

Name, Address Position With Principal Occupations
and Age Fund During Past 5 Years
- ----------------------- -------------- --------------------------------------------------------
<S> <C> <C>
Robert F. Gunia (40) 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 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

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 (36) 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.

B-6

<PAGE>

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>

As of February 3,1995, the Directors and officers of the Fund, as a group,
owned less than 1% of the outstanding common stock of the Fund.

As of February 3, 1995, Prudential Securities was the record holder for
other beneficial owners of 507,337,481 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 January 31, 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 PIC pursuant to a subadvisory
agreement between PMF and PIC (the Subadvisory Agreement).

B-7

<PAGE>

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.

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, 1994, 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.

[The Prudential Investment Corporation (PIC or the Subadviser) maintains a
municipal 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 municipal credit unit, whose
staff currently includes 10 credit analysts, reviews on an ongoing basis issuers
of tax-exempt fixed-income obligations, including prospective purchases and
portfolio holdings of the Series. 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, 1994, 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.

B-8

<PAGE>

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 and the Distribution
Agreement with PMFD, the Fund pays PMFD, as distributor, a distribution fee of
up to 0.125 of 1% of the average daily net assets of the Fund, computed daily
and payable monthly.

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) 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. No interest or carrying charges are included as
part of the Fund's distribution expenses.

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.

Pursuant to Rule 12b-1, the Plan was last approved by the Board of
Directors, 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, in person at a meeting called for such purpose on May 2,
1994, and was approved by the shareholders of the Fund on April 28, 1988.

On October 21, 1993,PSI entered into an omnibus settlement with the SEC,
state securities regulators in 51 jurisdictions and the National Association of
Securities Dealers, Inc. (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

B-9

<PAGE>

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 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.

B-10

<PAGE>

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.

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
B-11

<PAGE>
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.

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.

B-12

<PAGE>

Shareholders of the Fund may exchange their shares for Class A shares of
the Prudential Mutual Funds, shares of Prudential Structured Maturity Fund, and
shares of the money market funds specified below.

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

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-13

<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 one year 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. In the event the New York Stock Exchange closes early on any business
day, the net asset value of the Fund's shares shall be determined at a time
between such closing and 4:30 P.M., New York time.

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

B-14

<PAGE>
forward contracts, thereon; (b) derive less than 30% of its gross annual income
from gains from the sale or other disposition of securities 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-15

<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-16

<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-17 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-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>
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-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>
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-20 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-21

<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-22

<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-23

<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-24

<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-25

<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).

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.(a) Specimen Stock Certificate issued by the Registrant, incorporated
by reference to Exhibit No. 4 to Post-Effective Amendment No. 11 to
Registration Statement on Form N-1A (File No. 2-64625).

(b) 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.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).

8.(a) Custodian Agreement between the Registrant and State Street Bank
and Trust Company, dated July 13, 1984, incorporated by reference to
Exhibit No. 8 to Post-Effective Amendment No. 1 to Registration
Statement on Form N-1 (File No. 2-64625).

C-1

<PAGE>

(b) Revised 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).

10.Opinion of Sullivan & Cromwell.*

11.Consent of Independent Accountants.*

15.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).

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.*

Other Exhibits
Power of Attorney for:

Lawrence C. McQuade**
Delayne Dedrick Gold**
Arthur Hauspurg**

- ------------------
*Filed herewith.
**Executed copies filed under other Exhibits to Post-Effective Amendment No. 12
to the Registration statement on Form N-1A (File No. 2-64625).

Item 25. Persons Controlled by or under Common Control with Registrant.

None.

Item 26. Number of Holders of Securities.

As of February 3, 1995, there were 23,713 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 VI of the Fund's By-Laws (Exhibit 2 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.
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 intends to purchase 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
C-2

<PAGE>
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 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.

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

Lawrence C. McQuade Vice Chairman Vice Chairman, PMF

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>

C-3

<PAGE>

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.

Name and Address Position with PIC Principal Occupations
- -------------------------- ---------------------- --------------------------------------------------------
<S> <C> <C>
Martin A. Berkowitz Senior Vice President Senior Vice President and Chief Financial and Compliance
and Chief Financial Officer, PIC; Vice President, Prudential
and Compliance Officer

William M. Bethke Senior Vice President Senior Vice President, Prudential
Two Gateway Center
Newark, NJ 07102

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 Director Vice President and Director, PIC; Executive Vice
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.

C-4

<PAGE>

(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
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>

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 certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and 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 24th day of February, 1995.

PRUDENTIAL-BACHE TAX-FREE MONEY
FUND, INC.
(doing business as Prudential Tax-Free Money Fund)

/s/ Lawrence C. McQuade
-------------------------------
(Lawrence C. McQuade, 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/ Lawrence C. McQuade President and Director February 24, 1995
- --------------------------------------
Lawrence C. McQuade
/s/ Delayne Dedrick Gold Director February 24, 1995
- --------------------------------------
Delayne Dedrick Gold
/s/ Arthur Hauspurg Director February 24, 1995
- --------------------------------------
Arthur Hauspurg
/s/ Stephen P. Munn Director February 24, 1995
- --------------------------------------
Stephen P. Munn
/s/ Louis A. Weil, III Director February 24, 1995
- --------------------------------------
Louis A. Weil, III
/s/ Grace Torres Treasurer and Principal Financial and February 24, 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).

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. (a) Specimen Stock Certificate issued by the Registrant, incorporated by
reference to Exhibit No. 4 to Post-Effective Amendment No. 11 to
Registration Statement on Form N-1A (File No. 2-64625).

(b) Instruments Investments 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. 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).

8. (a) Custodian Agreement between the Registrant and State Street Bank and
Trust Company, dated July 13, 1984, incorporated by reference to Exhibit No.
8 to Post-Effective Amendment No. 1 to Registration Statement on Form N-1
(File No. 2-64625).

(b) Revised 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).

10. Opinion of Counsel.*

11. Consent of Independent Accountants.*

15. 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).

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.*

Other Exhibits
Power of Attorney for:

Lawrence C. McQuade**
Delayne Dedrick Gold**
Arthur Hauspurg**

- ------------------
*Filed herewith.
**Executed copies filed under other Exhibits to Post-Effective Amendment No. 12
to the Registration statement on Form N-1A (File No. 2-64625).

Exhibit 10

SULLIVAN & CROMWELL
125 Broad Street
New York, NY 10004

Prudential-Bache Tax-Free Money Fund, Inc.
February 24, 1995

Prudential-Bache Tax-Free Money Fund, Inc.,
One Seaport Plaza,

New York, New York 10292.

Dear Sirs:

You have requested our opinion in connection with your filing of
Post-Effective Amendment No.18 to the Registration Statement on Form N-1A under
the Securities Act of 1933 and your registration in connection therewith of
131,603,617 shares of your Common Stock, $.01 par value (the "Shares") pursuant
to Rule 24e-2 under the Investment Company Act of 1940.

As your counsel, we are familiar with your organization and corporate
status and the validity of your Common Stock.

We advise you that, in our opinion, the Shares, when duly issued and sold,
for not less than the par value thereof, will be duly authorized and validly
issued, fully paid and nonassessable.

The foregoing opinion is limited to the Federal laws of the United States
and the General Corporation Laws of the State of Maryland, and we are expressing
no opinion as to the effect by the laws of any other jurisdiction.

We have relied as to certain matters on information obtained from public
officials, your officers and other sources believed by us to be responsible.

We consent to the filing of this opinion with the Securities and Exchange
Commission in connection with the notice referred to above. In giving such
consent, we do not thereby admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933.

Very truly yours,

/s/ Sullivan & Cromwell

Sullivan & Cromwell

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. 18 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 such Prospectus.

PRICE WATERHOUSE LLP
New York, NY
February 23, 1995

<ARTICLE> 6
<CIK> 0000311561
<NAME> PRUDENTIAL TAX-FREE MONEY FUND

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 491,135,238
<INVESTMENTS-AT-VALUE> 491,135,238
<RECEIVABLES> 26,278,617
<ASSETS-OTHER> 12,191
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 517,426,046
<PAYABLE-FOR-SECURITIES> 16,215,208
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 13,920,388
<TOTAL-LIABILITIES> 30,135,596
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 487,290,450
<SHARES-COMMON-STOCK> 487,384,729
<SHARES-COMMON-PRIOR> 601,716,161
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 487,290,450
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 19,409,932
<OTHER-INCOME> 0
<EXPENSES-NET> 4,844,561
<NET-INVESTMENT-INCOME> 14,565,371
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 14,565,371
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (14,565,371)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,984,509,938
<NUMBER-OF-SHARES-REDEEMED> (2,112,588,085)
<SHARES-REINVESTED> 13,746,715
<NET-CHANGE-IN-ASSETS> (114,331,432)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,222,405
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,844,561
<AVERAGE-NET-ASSETS> 644,481,000
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.02)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00

</TABLE>