(ICON)
Prudential
Tax-Free
Money
Fund, Inc.
SEMI
ANNUAL
REPORT
June 30, 1996
(LOGO)
<PAGE>
Prudential Tax-Free Money Fund, Inc.
Performance At A Glance.
During the past six months, opinions swung wildly on where interest rates were
headed. As 1996 began, the prediction was that dramatically lower short-term
interest rates were on the way. By summer, it was equally as certain that
higher rates were coming. Throughout this period the Prudential Tax-Free Money
Fund offered competitive, tax-free yields, maintained a high credit quality and
a stable $1 net asset value. On June 30, 1996, the Prudential Tax-Free Money
Fund's 7-day current yield stood at 2.82%, which was equivalent to a 4.67%
taxable yield for persons in the 39.6% income tax bracket.
<TABLE>
<CAPTION>
Fund Facts
As of 6/30/96
7-Day Net Asset Taxable Equivalent Yield*
Weighted Avg. Total Net
Current Yld. Value @31% @36% @39.6% Avg.
Maturity Assets (mil.)
<S> <C> <C> <C> <C> <C> <C>
<C>
Tax-Free
Money Fund 2.82% $1.00 4.09% 4.41% 4.67% 80
Days $387
IBC/Financial Data
Tax-Free Money
Fund Avg.** 2.88 1.00 4.17 4.50 4.76 46
Days N/A
</TABLE>
Note: Yields will fluctuate from time to time and past performance is not
indicative of future results. 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.
*Some investors may be subject to the federal alternative minimum tax (AMT).
Income may be subject to state and local taxes.
**This is the average 7-day current yield, NAV and WAM of 137 funds in the IBC
Financial Data tax-free money fund category as of June 30, 1996.
Tracking Tax-Free Money Fund Yields.
Prudential Tax-Free Money Fund
IBC Financial Data Tax-Free Money Fund Avg.
(CHART)
Weekly 7-day current yields of Prudential Tax-Free Money Fund and the IBC
Financial Data tax-free money fund average.
How Investments Compared.
(As of 6/30/96)
(GRAPH)
Source: Lipper Analytical Services. Financial markets change, so a mutual
fund's past performance should never be used to predict future results. The
risks to each of the investments listed above are different -- we provide 12-
month total return averages for several Lipper mutual fund categories to show
you that reaching for higher yields means tolerating more risk. The greater
the risk, the larger the potential reward or loss. In addition, we've included
historical 20-year average annual returns. These returns assume the
reinvestment of dividends.
U.S. Growth Funds will fluctuate a great deal. Investors have received higher
historical total returns from stocks than from most other investments. Smaller
capitalization stocks offer greater potential for long-term growth but may be
more volatile than larger capitalization stocks.
General Bond Funds provide more income than stock funds, which can help smooth
out their total returns year by year. But their prices still fluctuate
(sometimes significantly) and their returns have been historically lower than
those of stock funds. Unlike bond funds, bonds, if held to maturity, generally
offer a fixed rate of return and fixed principal value.
General Municipal Debt Funds invest in bonds issued by state governments, state
agencies and/or municipalities. This investment provides income that is usually
exempt from federal and state income taxes.
Tax-Exempt Money Market Funds attempt to preserve a constant share value and
provide tax-free income; they don't fluctuate much in price but their returns
are generally among the lowest of the major investment categories.
* 18 years for Tax-Exempt Money Funds.
<PAGE>
Richard S. Lynes, Fund Manager
(PHOTO)
Portfolio
Manager's Report
The Prudential Tax-Free Money Fund seeks high current income that is exempt
from federal income taxes, consistent with the stability of capital and the
maintenance of liquidity. The Fund invests in a diversified portfolio of high
quality, short-term municipal securities issued by state and local governments,
territories and possessions of the United States and by the District of
Columbia. Maturities can range from one day to a maximum of 13 months. We
purchase only securities rated in one of the two highest ratings categories by
at least two major rating agencies or, if not rated, deemed to be of equivalent
quality by our credit research staff. There can be no assurance that the Fund
will achieve its investment objective.
A Word About Quality.
As of June 30, 1996, all of the portfolio's investments were rated at least
"Aa" or "Prime 2" by Moody's Investors Service or "AA" or "A-2" by Standard &
Poor's with the remainder deemed to be of equivalent quality. Although there
is never a guarantee that the share price of Prudential Tax-Free Money Fund
will remain at $1, we emphasize a conservative, quality-oriented investment
approach.
Strategy Session.
When we last wrote to you six months ago, short-term interest rates (the
Federal Funds rate) stood at 5.25%. We believed the Federal Reserve wanted to
follow a "go slow" policy of gently lowering rates to help stimulate a sluggish
U.S. economy. Many, however, thought the central bank would lower rates faster
and more frequently. We were right, they were wrong.
In March, financial opinion swung dramatically in the opposite direction after
the federal government released its February jobs report, which revealed that
businesses were creating far more new jobs than anyone anticipated. This
implied the economy was growing faster than forecast and suggested that higher
levels of inflation might be around the corner. Inflation fears intensified
later that spring with reports of increased home and auto sales as well as by
steadily rising energy and commodity prices. Instead of lower interest rates,
money fund managers now faced the prospect that the Federal Reserve would raise
interest rates. As a result, taxable short-term yields were bid up in
anticipation of the central bank aggressively raising short-term interest
rates to slow economic growth and to keep inflation in check.
Anticipating moves by the Federal Reserve is one of the keys to preserving
competitive yields for a money fund. And we believe that the Federal Reserve
will probably raise rates later this year. But being a tax-free money fund,
our investment strategy is also driven by many technical and economic factors
including seasonal shareholder demands for cash as well as supply and demand
conditions. For example, your Fund was invested in relatively longer term
securities to help preserve yields while short-term, tax-free interest rates
dropped in early July 1996. Short-term municipal markets experienced large
cash infusions during this time temporarily depressing rates. This is a
seasonal occurrence resulting from maturity and call proceeds as well as coupon
payments. Rates usually recover by late July and early August.
<PAGE>
What Went Well.
AMT Paper Lifts Yield.
At the beginning of the year, your Fund began purchasing securities whose
income, for a few shareholders, may be subject to the federal alternative
minimum tax or AMT. Purchasing AMT securities was a good move for two reasons:
1) AMT paper carries higher coupons, sometimes yielding as much as 15 basis
points more than that of tax-exempt securities, which equates to an increase
of three basis points for the Fund on an annual basis (a basis point is 1/100th
of a percentage point); and 2) it brings your Fund's investments in-line with
other tax-free money funds, most of which actively purchase AMT securities.
And Not So Well.
Caught Off-Guard.
We were caught off-guard in March when the U.S. government released its
February jobs report, which showed that businesses nationwide had created far
more new positions than anticipated. While this was good news to many
(especially those who found work), signs of economic strength can raise fears
of inflation which always makes investors skittish. Looking back, we could have
been more prepared for this occurrence by buying shorter than average
securities for a couple of more weeks prior to the report's release. We then
would have been in a better position to take advantage of the rising yields
that accompanied this strong economic news.
Looking Ahead.
The Federal Reserve wants to promote steady, non-inflationary growth -- but
there are many signs pointing to an economy that may be growing too fast right
now and higher levels of inflation may follow. Under these circumstances we
would not be surprised to see the Federal Reserve raise short-term interest
rates (the Federal Funds rate) later this year. If this occurs, your Fund is
poised to take advantage of rising interest rates or to preserve a competitive
yield if rates remain unchanged. As taxable interest rates rise, so too will
tax-free interest rates.
Weighted Average Maturity Is Now Longer Than The Average Fund.
(CHART)
- -------------------------------------------------------------------------------
1
<PAGE>
President's Letter August 1, 1996
(PHOTO)
Dear Shareholder:
Last year, U.S. stocks and bonds generally posted extraordinary returns.
Investors celebrated this performance by putting record amounts of new money
into mutual funds in the first few months of 1996. According to figures
released by the Investment Company Institute, a mutual fund industry trade
group, new investments in mutual funds reached an all-time monthly high of $33
billion in January of 1996. An additional $66 billion was invested in the
following three months, although this rapid inflow subsided somewhat in late
spring.
While we are pleased that mutual funds are attracting new investors, we're
concerned that some of them may be "buying last year's returns." Few expect
1995's virtual non-stop returns from the stock and bond markets. In fact,
1996's markets have been volatile so far (stock and bond prices go down just
as they go up). There's no better time than now to be talking with your
Financial Advisor or Registered Representative. She or he can help you
determine reasonable expectations about both the potential performance and
risks associated with your investments.
Board of Directors Election.
In addition to this report, we are including a notice about a special
shareholder meeting to elect new Prudential mutual fund boards of directors.
Your Board of Directors has approved a proposal to place a common board of
experienced directors across many of Prudential's mutual funds to improve
business efficiency. The enclosed material contains more complete information
about this proposal.
Changes at Prudential.
Finally, there have been some important changes recently at Prudential that
were made with you in mind. Prudential Mutual Funds has moved under the
umbrella of Prudential's newly created "Money Management Group." This group
manages and administers nearly $190 billion in client assets and provides
mutual funds, annuities, defined benefit and defined contribution plans to our
individual and institutional investors. We plan to improve the range and
quality of investment products and services that we can provide you by better
leveraging Prudential's strengths. There will, however, be no change in the
service you receive from your Financial Advisor, Registered Representative or
our Customer Service unit.
We're excited about our future and hope that you are, too. Thank you for your
continued support and confidence in Prudential Mutual Funds.
Sincerely,
Richard A. Redeker
President
- -------------------------------------------------------------------------------
2
<PAGE>
Portfolio of Investments PRUDENTIAL TAX-FREE
as of June 30, 1996 (Unaudited) MONEY FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Moody's
Interest Maturity Amount Value
Description(a) Rating
Rate Date (000) (Note 1)
<S> <C>
<C> <C> <C> <C>
- -----------------------------------------------------------------------------
- -------------------------------------------------
Alabama--0.2%
Decatur Alabama Ind. Dev. Brd., Amoco Corp., F.R.D.D., Ser. 95 P1
3.80% 7/1/96 $ 800 $ 800,000
- -----------------------------------------------------------------------------
- -------------------------------------------------
Arizona--3.9%
Maricopa Cnty. Ind. Dev. Auth., Grand Canyon Univ., F.R.W.D. NR
3.40 7/4/96 9,700 9,700,000
Pima Cnty. Ind. Dev. Auth., F.R.W.D., Ser. 96A NR
3.65 7/5/96 5,445 5,445,000
------------
15,145,000
- -----------------------------------------------------------------------------
- -------------------------------------------------
California--1.3%
California Higher Ed. Ln. Auth., Student Ln. Rev., A.N.N.M.T.,
Ser. 87A VMIG1
3.95 7/1/97 5,000 5,000,000
- -----------------------------------------------------------------------------
- -------------------------------------------------
Colorado--6.8%
Arapahoe Cnty. Multifamily Rev., Var. Ref. Hsg., Stratford Sta.
Proj., F.R.D.D., Ser. 94 A-2*
4.10 7/1/96 1,055 1,055,000
Colorado Hlth. Facs. Auth. Rev., Frasier Meadows Manor, F.R.W.D.,
Ser. 94 NR
3.40 7/4/96 8,595 8,595,000
Colorado Hsg. Fin. Auth., Eagle Trust, F.R.W.D.S., Ser. 94C NR
3.49 7/5/96 12,000 12,000,000
Denver City & Cnty. of Airport Sys. Rev., F.R.W.D., Ser. 91B VMIG1
3.85 7/3/96 4,600 4,600,000
------------
26,250,000
- -----------------------------------------------------------------------------
- -------------------------------------------------
Connecticut--0.3%
Connecticut Hsg. Fin. Auth., Hsg. Mtg. Fin. Pgm., A.N.N.M.T.,
Ser. A-4 VMIG1
3.65 4/10/97 1,100 1,099,657
- -----------------------------------------------------------------------------
- -------------------------------------------------
Florida--1.8%
Broward Cnty. Airport AAA*
10.00 10/1/96 6,970 7,078,851
- -----------------------------------------------------------------------------
- -------------------------------------------------
Georgia--7.3%
Cobb Cnty. Dev. Auth., Inst. of Nuclear Pwr., F.R.W.D., Ser. 92 CSP1
3.35 7/3/96 6,830 6,830,000
Fulco Hosp. Auth., St. Joseph Hosp. of Atlanta, T.E.C.P., Ser. 89 VMIG1
3.60 8/13/96 5,200 5,200,000
Fulton Cnty. Dev. Auth., Siemen's Energy Inc., F.R.W.D., Ser. 94 VMIG1
3.45 7/4/96 7,750 7,750,000
Monroe Cnty. Dev. Auth., Ogletherpe Scherer Proj., Ser. 95 NR
3.85 12/26/96 8,600 8,600,000
------------
28,380,000
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 3 -----
<PAGE>
Portfolio of Investments PRUDENTIAL TAX-FREE
as of June 30, 1996 (Unaudited) MONEY FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Moody's
Interest Maturity Amount Value
Description(a) Rating
Rate Date (000) (Note 1)
<S> <C>
<C> <C> <C> <C>
- -----------------------------------------------------------------------------
- -------------------------------------------------
Illinois--15.5%
Chicago Illinois, Gen. Oblig., S.E.M.M.T., Ser. 95A VMIG1
3.65% 10/31/96 $ 8,100 $ 8,100,000
Illinois Dev. Fin. Auth., Orleans Multifamily Hsg. Proj.,
F.R.W.D.,
Ser. 92 A-1*
4.00 7/5/96 10,120 10,120,000
Illinois Hlth. Fac. Auth.,
Evanston Hsp., A.N.N.M.T., Ser. 95 VMIG1
3.75 5/15/97 7,000 7,000,000
Evanston Hsp., S.E.M.M.T., Ser. 92 VMIG1
3.35 12/2/96 8,000 8,000,000
Illinois Hsg. Dev. Agy., Homeowner Mtg., S.E.M.M.T., Ser. 95C1 VMIG1
3.35 9/3/96 7,000 7,000,000
Vlg. of Schaumburg, Multifamily Hsg. Rev., Windsong Apts. Proj.,
F.R.W.D., Ser. 95 A-2*
3.84 7/5/96 5,000 5,000,000
Wheeling Multifamily Hsg. Rev., Woodland Creek II, F.R.W.D., Ser.
90 SP-1*
3.45 7/5/96 9,655 9,655,000
Winnebago & Boone Cntys., Rockford School Dist. #205, T.A.N.,
Ser. 96 MIG1
4.35 10/30/96 5,000 5,019,494
------------
59,894,494
- -----------------------------------------------------------------------------
- -------------------------------------------------
Indiana--1.8%
Gary Indiana, Miller Partnership LP, F.R.W.D., Ser. 96A VMIG1
3.65 7/4/96 7,000 7,000,000
- -----------------------------------------------------------------------------
- -------------------------------------------------
Kansas--1.0%
Butler Cnty., Texaco Refining & Mktg., F.R.D.D., Ser. 95B A-1*
3.85 7/1/96 3,900 3,900,000
- -----------------------------------------------------------------------------
- -------------------------------------------------
Kentucky--2.3%
Louisville & Jefferson Cnty., Swr. & Drainage Proj., F.R.W.D.,
Ser. 96A A-1*
3.65 7/5/96 9,000 9,000,000
- -----------------------------------------------------------------------------
- -------------------------------------------------
Maryland--3.3%
Maryland Dept. of Ecom. & Com., Sngl. Fam. Prog., S.E.M.O.T.,
Ser. 87-6 Aa
3.60 10/1/96 5,180 5,180,000
Maryland Econ. Dev. Corp., F.R.W.D., Ser. 95 A-1*
3.35 7/4/96 7,500 7,500,000
------------
12,680,000
- -----------------------------------------------------------------------------
- -------------------------------------------------
Massachusetts--1.2%
Massachusetts Bay Transit. Auth., Ser. A MIG2
3.75 2/28/97 4,700 4,698,459
- -----------------------------------------------------------------------------
- -------------------------------------------------
Michigan--1.9%
Grand Rapids Econ. Dev. Corp., Ind. Dev. Rev. Rfdg., F.R.W.D.,
Ser. 92 CPS1
3.40 7/4/96 7,500 7,500,000
</TABLE>
- --------------------------------------------------------------------------------
- -----4 See Notes to Financial Statements.
<PAGE>
Portfolio of Investments PRUDENTIAL TAX-FREE
as of June 30, 1996 (Unaudited) MONEY FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Moody's
Interest Maturity Amount Value
Description(a) Rating
Rate Date (000) (Note 1)
<S> <C>
<C> <C> <C> <C>
- -----------------------------------------------------------------------------
- -------------------------------------------------
Missouri--1.4%
Missouri St. Hlth. & Ed. Facs. Auth., Sisters of Saint Marys,
Hlth. Care, T.E.C.P., Ser. 88C VMIG1
3.60% 8/7/96 $ 5,200 $ 5,200,000
- -----------------------------------------------------------------------------
- -------------------------------------------------
Nebraska--1.3%
Nebraska Pub. Pwr. Dist. Rev., T.E.C.P., Ser. B P-1
3.70 8/29/96 5,000 5,000,000
- -----------------------------------------------------------------------------
- -------------------------------------------------
New Jersey--1.5%
Jersey City, School Promissory Notes SP-1*
3.75 % 3/7/97 5,600 5,616,626
- -----------------------------------------------------------------------------
- -------------------------------------------------
New York--1.6%
New York City, Gen. Oblig., T.E.C.P., Ser. 94H-2 VMIG1
3.40 8/14/96 6,300 6,300,000
- -----------------------------------------------------------------------------
- -------------------------------------------------
North Carolina--3.7%
North Carolina Eastern Mun. Pwr. Agy., Pwr. Sys. Rev., T.E.C.P. P1
3.70 7/15/96 7,000 7,000,000
Rockingham Cnty. Ind. Facs., Philip Morris Rev. P1
3.35 7/3/96 7,200 7,200,000
------------
14,200,000
- -----------------------------------------------------------------------------
- -------------------------------------------------
Ohio--6.1%
Ohio Hsg. Fin. Agcy., Res. Mtg. Rev., A.N.N.M.T., Ser. 96A-3 A1-+*
3.40 3/3/97 8,000 8,000,000
Ohio Wtr. Dev. Auth., Ohio Edison Co., A.N.N.O.T., Ser. 88A VMIG1
3.80 5/1/97 7,280 7,280,000
Toledo-Lucas Cnty., Convntn. & Visitors Bureau, M.T.H.O.T., Ser.
88 VMIG1
3.55 8/1/96 8,140 8,140,000
------------
23,420,000
- -----------------------------------------------------------------------------
- -------------------------------------------------
Oklahoma--2.2%
Tulsa Pkg. Auth. Rev., Williams Ctr. Proj., S.E.M.M.T., Ser. 87A VMIG1
3.75 11/15/96 8,625 8,625,000
- -----------------------------------------------------------------------------
- -------------------------------------------------
South Carolina--3.7%
York Cnty. Natl. Rural Coop. Fin. Corp., S.E.M.O.T.,
North Carolina Electric, Ser. 84N-3 MIG1
3.25 9/15/96 3,465 3,465,000
North Carolina Electric, Ser. 84N-4 A-1+*
3.25 9/15/96 3,620 3,620,000
North Carolina Electric, Ser. 84N-5 VMIG1
3.25 9/15/96 7,110 7,110,000
------------
14,195,000
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 5 -----
<PAGE>
Portfolio of Investments PRUDENTIAL TAX-FREE
as of June 30, 1996 (Unaudited) MONEY FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Moody's
Interest Maturity Amount Value
Description(a) Rating
Rate Date (000) (Note 1)
<S> <C>
<C> <C> <C> <C>
- -----------------------------------------------------------------------------
- -------------------------------------------------
Tennessee--3.2%
Memphis Hlth. Edl. & Hsg., Wesley Hsg. Corp., F.R.W.D.,
Ser. 89 VMIG1
4.00% 7/5/96 $ 9,320 $ 9,320,000
Nashville & Davidson Cnty., Gen. Accident Ins. Co. Proj.,
S.E.M.O.T.,
Ser. 86 A1+*
3.80 11/1/96 3,200 3,200,000
------------
12,520,000
- -----------------------------------------------------------------------------
- -------------------------------------------------
Texas--9.2%
Brazos River Harbor Nav., Dow Chemical, F.R.D.D., Ser 92A P1
3.80 7/1/96 1,600 1,600,000
Greater Texas Student Ln. Rev., A.N.N.M.T., Ser. 96A VMIG1
3.35 3/1/97 5,000 5,000,000
Houston, Gen. Oblig., T.E.C.P., Ser. A P1
3.60 10/10/96 8,900 8,900,000
San Antonio Elec. & Gas Rev., T.E.C.P., Ser. A P1
3.75 7/22/96 15,000 15,000,000
Southeast Texas Hsg. Fin. Corp., Banc One Tax Exempt Trust,
F.R.W.D.S., Ser. 91D AAA
3.50 7/4/96 5,160 5,160,000
------------
35,660,000
- -----------------------------------------------------------------------------
- -------------------------------------------------
Utah--4.5%
Intermountain Pwr. Agy., Utah Pwr. Supply Rev.,
A.N.N.O.T., Ser. 85E VMIG1
3.93 6/16/97 4,000 4,000,000
S.E.M.O.T., Ser. 85E VMIG1
3.35 9/16/96 6,000 6,000,000
Salt Lake Cnty., T.R.A.N., Ser. 96 NR
4.50 12/31/96 7,250 7,276,677
------------
17,276,677
- -----------------------------------------------------------------------------
- -------------------------------------------------
Virginia--3.1%
Chesterfield Cnty. Ind. Dev. Auth., Philip Morris Proj., F.R.W.D. P1
3.35 7/3/96 6,500 6,500,000
Culpeper Ind. Dev. Auth., Resident Baptist Homes, F.R.W.D., Ser.
92 A-1*
3.35 7/4/96 5,640 5,640,000
------------
12,140,000
- -----------------------------------------------------------------------------
- -------------------------------------------------
Wisconsin--5.5%
Middleton Cross Plains Area Sch., T.R.A.N., Ser. 95 NR
4.25 8/28/96 5,000 5,000,763
Sheboygan Area School District, B.A.N. NR
3.50 12/2/96 6,000 6,000,000
</TABLE>
- --------------------------------------------------------------------------------
- -----6 See Notes to Financial Statements.
<PAGE>
Portfolio of Investments PRUDENTIAL TAX-FREE
as of June 30, 1996 (Unaudited) MONEY FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Moody's
Interest Maturity Amount Value
Description(a) Rating
Rate Date (000) (Note 1)
<S> <C>
<C> <C> <C> <C>
- -----------------------------------------------------------------------------
- -------------------------------------------------
Wisconsin (cont'd.)
Whitewater Ind. Dev. Rev., Trek Bicycle, F.R.W.D., Ser. 95 NR
3.55% 7/4/96 $ 3,845 $ 3,845,000
Wisconsin Hsg. & Econ. Dev. Auth., Home Ownership Rev.,
Q.T.R.O.T., Ser. 87B AAA
3.60 9/1/96 6,550 6,550,000
------------
21,395,763
Total Investments--95.6%
(amortized cost $ 369,975,527(c))
369,975,527
Other assets in excess of liabilities--4.4%
17,045,564
------------
Net Assets--100%
$387,021,091
------------
------------
</TABLE>
- ---------------
(a) The following abbreviations are used in portfolio descriptions:
A.N.N.M.T.--Annual Mandatory Tender
A.N.N.O.T.--Annual Optional Tender
B.A.N.--Bond Anticipation Note
F.R.D.D.--Floating Rate (Daily) Demand Note(b)
F.R.W.D.--Floating Rate (Weekly) Demand Note(b)
F.R.W.D.S.--Floating Rate (Weekly) Demand Note Synthetic(b)
M.T.H.O.T.--Monthly Optional Tender(b)
Q.T.R.O.T.--Quarterly Tax & Reserve Optional Tender(b)
S.E.M.M.T.--Semi-Annual Mandatory Tender(b)
S.E.M.O.T.--Semi-Monthly Optional Tender Offer(b)
T.A.N.--Tax Anticipation Note
T.E.C.P.--Tax-Exempt Commercial Paper
T.R.A.N.--Tax & Revenue Anticipation Note
(b) For purposes of amortized cost valuation, the maturity date of these
instruments is considered to be the latter 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.
(c) The cost of securities for federal income tax purposes is substantially the
same as for financial reporting purposes.
* Standard & Poor's Rating.
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.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 7 -----
<PAGE>
Statement of Assets and Liabilities (Unaudited) PRUDENTIAL TAX-FREE MONEY
FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Assets
June 30, 1996
-------------
Investments, at amortized cost which approximates market
value.............................................. $369,975,527
Cash.........................................................................
............................... 2,032,421
Receivable for investments
sold.........................................................................
.... 18,800,000
Interest
receivable...................................................................
...................... 2,553,725
Receivable for Fund shares
sold.........................................................................
.... 2,395,047
Prepaid
expenses.....................................................................
....................... 14,327
-------------
Total
assets.......................................................................
...................... 395,771,047
-------------
Liabilities
Payable for investments
purchased....................................................................
....... 5,000,000
Payable for Fund shares
reacquired...................................................................
....... 3,074,333
Accrued
expenses.....................................................................
....................... 275,086
Dividends
payable......................................................................
..................... 217,783
Due to
Manager......................................................................
........................ 161,293
Due to
Distributor..................................................................
........................ 21,461
-------------
Total
liabilities..................................................................
...................... 8,749,956
-------------
Net
Assets.......................................................................
........................... $387,021,091
-------------
-------------
Net assets were comprised of:
Common stock, $.01 par
value........................................................................
..... $ 3,871,155
Paid-in capital in excess of
par.........................................................................
383,149,936
-------------
Net assets, June 30,
1996.........................................................................
.......... $387,021,091
-------------
-------------
Net asset value, offering price and redemption price
per share ($387,021,091 /
387,515,369)...................................................................
$1.00
-------------
-------------
</TABLE>
[/CAPTION]
- --------------------------------------------------------------------------------
- -----8 See Notes to Financial Statements.
<PAGE>
PRUDENTIAL TAX-FREE MONEY FUND, INC.
TAX-FREE MONEY FUND, INC.
Statement of Operations (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Six Months
Ended
Net Investment Income June 30, 1996
Income
Interest................................... $ 7,567,199
-------------
Expenses
Management fee............................. 1,039,706
Distribution fee........................... 259,926
Transfer agent's fees and expenses......... 180,000
Registration fees.......................... 53,000
Reports to shareholders.................... 52,000
Custodian's fees and expenses.............. 44,000
Audit fees and expenses.................... 24,000
Franchise taxes............................ 20,000
Legal fees and expenses.................... 15,000
Director's fees and expenses............... 12,000
Insurance.................................. 5,000
Miscellaneous.............................. 2,724
-------------
Total expenses.......................... 1,707,356
Less: custodian fee credit.............. (10,359)
-------------
Net expenses............................ 1,696,997
-------------
Net investment income......................... 5,870,202
-------------
Realized Gain (Loss) on Investments
Net realized loss on investment
transactions............................... (132)
-------------
Net Increase in Net Assets.................... $ 5,870,070
-------------
-------------
</TABLE>
PRUDENTIAL TAX-FREE MONEY FUND, INC.
TAX-FREE MONEY FUND, INC.
Statement of Changes in Net Assets (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
Increase (Decrease) June 30, December 31,
in Net Assets 1996 1995
<S> <C> <C>
Operations
Net investment income... $ 5,870,202 $ 14,779,107
---------------- ----------------
Net realized loss on
investment
transactions............ (132) --
---------------- ----------------
Dividends and distributions
to shareholders......... (5,870,070) (14,779,107)
---------------- ----------------
Fund share transactions
(at $1.00 per share)
Net proceeds from shares
subscribed........... 599,042,052 1,402,761,535
Net asset value of
shares
issued to
shareholders in
reinvestment of
dividends
and distributions.... 5,618,401 14,035,315
Cost of shares
reacquired........... (605,290,205) (1,516,436,457)
---------------- ----------------
Net decrease in net assets
from Fund share
transactions............ (629,752) (99,639,607)
---------------- ----------------
Total decrease............. (629,752) (99,639,607)
Net Assets
Beginning of period........ 387,650,843 487,290,450
---------------- ----------------
End of period.............. $ 387,021,091 $ 387,650,843
---------------- ----------------
---------------- ----------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 9 -----
<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL TAX-FREE MONEY FUND, INC.
- --------------------------------------------------------------------------------
Prudential Tax-Free Money Fund, Inc. (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 Policies
The following is a summary of significant accounting policies 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. Expenses are recorded on the accrual basis which may require the
use of certain estimates by management. 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, no federal income tax provision is required.
Dividends: The Fund declares dividends daily from net investment income. Payment
of dividends is made monthly.
Custody Fee Credits: The Fund has an arrangement with its custodian bank,
whereby uninvested monies earn credits which reduce the fees charged by the
custodian.
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 had a distribution agreement with Prudential Mutual Fund Distributors,
Inc. (``PMFD''). Effective January 2, 1996, Prudential Securities Incorporated
(``PSI'') became the distributor of the Fund. PSI is serving the Fund under the
same terms and conditions as under the distribution agreement with PMFD. The
Fund compensated PSI and PMFD for distributing and servicing the Fund's shares
pursuant to the plan of distribution at an annual rate of .125% of 1% of the
Fund's average daily net assets. The distribution fee is accrued daily and
payable monthly.
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 Transactions With Affiliates
Prudential Mutual Fund Services, Inc. (``PMFS''), a wholly-owned subsidiary of
PMF, serves as the Fund's transfer agent and during the six months ended June
30, 1996, the Fund incurred fees of $170,800 for the services of PMFS. As of
June 30, 1996, approximately $28,000 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.
- --------------------------------------------------------------------------------
- -----10
<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL TAX-FREE MONEY FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
Year Ended December 31,
June 30,
- -----------------------------------------------
1996
1995 1994 1993 1992
----------
- -------- -------- -------- --------
<S> <C> <C>
<C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period...................... $ 1.00 $
1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income and realized gains.................. .014
.031 .023 .018 .026
Dividends and distributions to shareholders............... (.014)
(.031) (.023) (.018) (.026)
----------
- -------- -------- -------- --------
Net asset value, end of period............................ $ 1.00 $
1.00 $ 1.00 $ 1.00 $ 1.00
----------
- -------- -------- -------- --------
----------
- -------- -------- -------- --------
TOTAL RETURN(a):.......................................... 1.40%
3.15% 2.31% 1.86% 2.63%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)........................... $387,021
$387,651 $487,290 $601,622 $614,333
Average net assets (000).................................. $418,167
$470,370 $644,481 $726,571 $669,588
Ratios to average net assets:
Expenses, including distribution fee................... .82%(b)
.85% .75% .74% .74%
Expenses, excluding distribution fee................... .69%(b)
.72% .63% .62% .62%
Net investment income.................................. 2.82%(b)
3.14% 2.26% 1.84% 2.60%
<CAPTION>
1991
--------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period...................... $ 1.00
Net investment income and realized gains.................. .041
Dividends and distributions to shareholders............... (.041)
--------
Net asset value, end of period............................ $ 1.00
--------
--------
TOTAL RETURN(a):.......................................... 4.22%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)........................... $616,867
Average net assets (000).................................. $725,844
Ratios to average net assets:
Expenses, including distribution fee................... .75%
Expenses, excluding distribution fee................... .63%
Net investment income.................................. 4.15%
</TABLE>
- ---------------
(a) Total return is calculated assuming a purchase of shares on the first day
and a sale on the last day of each period reported and includes
reinvestment of dividends and distributions. Total returns for periods
less than a full year are not annualized.
(b) Annualized.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 11 -----
<PAGE>
Getting The Most From Your Prudential Mutual Fund.
How many times have you read these letters -- or other financial materials --
and stumbled across a word that you don't understand?
Many shareholders have run into the same problem. We'd like to help. So we'll
use this space from time to time to explain some of the words you might have
read, but not understood. And if you have a favorite word that no one can
explain to your satisfaction, please write to us.
Basis Point: One 1/100th of 1%. For example, one half of one percentage point
is 50 basis points.
Call Option: A contract giving the holder a right to buy stocks or bonds at a
predetermined price (called the strike price) before a predetermined
expiration date. A buyer of a call option generally expects to benefit from a
rise in the price of the stock or bond.
Capital Gain/Capital Loss: The difference between the cost of a capital asset
(for example, a stock, bond or mutual fund share) and its selling price. Under
current law the federal income tax rate for individuals on a long-term capital
gain is up to 28%.
Collateralized Mortgage Obligations (CMOs): Pools of mortgage-backed securities
sliced in maturity ranges that bear differing interest rates. These instruments
are sensitive to changes in interest rates and homeowner refinancing activity.
They are subject to prepayment and maturity extension risk.
Derivatives: Securities that derive their value from another security. The rate
of return of these financial products rises and falls -- sometimes very
suddenly -- in response to changes in some specific interest rate, currency,
stock or other variable.
Discount Rate: The interest rate charged by the Federal Reserve on loans to
banks and other depository institutions.
Federal Funds Rate: The interest rate charged by one bank to another on
overnight loans.
Futures Contract: An agreement to deliver a specific amount of a commodity or
financial instrument at a set price at a stipulated time in the future.
Leverage: The use of borrowed assets to enhance return on equity. The
expectation is that the interest rate charged will be lower than the return on
the investment. While leverage can increase profits, it can also magnify
losses.
Liquidity: The ease with which a financial instrument (or mutual fund) can be
bought or sold (converted into cash) in the financial markets.
Price/Earnings Ratio: The price of a share of stock divided by the earnings
per share for a 12-month period.
Option: An agreement to sell something, such as shares of stock, by a certain
time for a specified price. An option need not be exercised.
Spread: The difference between two values; most often used to describe the
difference between prices bid and asked for a security.
Yankee Bond: A bond denominated in U.S. dollars but sold by a foreign company
or government in the U.S. market.
<PAGE>
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
(800) 225-1852
http:\\www.prudential.com
Directors
Delayne Dedrick Gold
Arthur Hauspurg
Stephen P. Munn
Richard A. Redeker
Louis A. Weil, III
Officers
Richard A. Redeker, President
David W. Drasnin, Vice President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, Secretary
Manager
Prudential Mutual Fund Management, Inc.
One Seaport Plaza
New York, NY 10292
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07101
Distributor
Prudential Securities Incorporated
One Seaport Plaza
New York, NY 10292
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services, Inc.
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
The views expressed in this report and information about the Fund's portfolio
holdings are for the period covered by this report and are subject to change
thereafter.
The accompanying financial statements as of June 30, 1996 were not audited
and, accordingly, no opinion is expressed on them.
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
<PAGE>
(LOGO)
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
(800) 225-1852
BULK RATE
U.S. POSTAGE
PAID
Permit 6807
New York, NY
MF103E2
74436P103 Cat. # 444004C
<PAGE>
