(ICON)
Prudential
Tax-Free
Money
Fund, Inc.
ANNUAL
REPORT
Dec. 31, 1997
(LOGO)
<PAGE>
Prudential Tax-Free Money Fund, Inc.
Performance At A Glance.
Concern about potential inflationary pressures
in the United States, an
economic crisis in Asia and seasonal imbalances
in the supply and demand of
municipal money market securities caused short-
term, tax-exempt interest rates
to fluctuate over the past 12 months.
Nevertheless, the Prudential Tax-Free
Money Fund provided a steady stream of tax-
exempt income while maintaining its
high credit quality and stable $1 net asset
value. On December 31, 1997, the
FundOs seven-day current yield was 3.21%, which
was equivalent to a 5.31%
taxable yield for persons in the 39.6% federal
income tax bracket.
Fund Facts As of
12/31/97
<TABLE>
<CAPTION>
Fund Facts
As of 12/31/96
7-Day Net Asset
Taxable Equivalent Yield* Weighted Avg.
Total Net
Current Yld. Value @31%
@36% @39.6% Maturity
Assets (mil.)
<S> <C> <C> <C>
<C> <C> <C> <C>
Tax-Free
Money Fund 3.21% $1.00 4.65%
5.02% 5.31% 64 Days
$329.8
IBC Financial
DataTax-Free
Money Fund Avg.** 3.34 1.00 4.84
5.21 5.52 50 Days
N/A
</TABLE>
Note: Yields will fluctuate from time to time
and past performance is not
indicative of future results.
*Some investors may be subject to the federal
alternative minimum tax (AMT).
Income may be subject to state and local taxes.
**IBC Financial Data reports a seven-day
current yield, WAM and NAV on
Tuesdays. This is the average seven day current
yield, NAV and WAM of all funds
in the International Business Communications
Financial Data's tax-free money
fund category as of December 30, 1997 which was
the closest date to our
reporting period end. An investment in the Fund
is neither insured nor
guaranteed by the U.S. government and there can
be no assurance the Fund will
be able to maintain a stable net asset value of
$1 per share.
Tax-Free Yields Dipped And Then Recovered.
(CHART)
How Investments Compared.
(As of 12/31/97)
(CHART)
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.
U.S. Tax-Exempt Money Funds attempt to preserve
a constant share value and
provide tax-free income; they don't fluctuate
much in price but, historically,
their returns have been generally among the
lowest of the major investment
categories.
*19 years for Tax-Exempt Money Funds.
<PAGE>
Colleen Meehan, Fund Manager
(PHOTO)
Portfolio
Manager's Report
The Prudential Tax-Free Money Fund seeks the
highest level of current income
that is exempt from federal income taxes,
consistent with liquidity and the
preservation of capital. The Fund invests in a
diversified portfolio of high
quality, short-term municipal bonds issued by
state and local governments,
territories and possessions of the U.S. 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.
Ahead Of
The Game.
Long before an Asian economic crisis rocked
world financial markets in October,
our analysts warned that the Japanese banking
sector was overburdened with bad
loans.
So we sold all tax-exempt money market
securities backed by letters of credit
from Japanese banks, which eliminated your
Fund's only exposure to the
troubled Asian region.
Strategy Session.
- -----------------------------------------------
- --------------------------------
Economy On A Roll.
The U.S. economy expanded in 1997 at its
fastest pace in nine years, fueled by
increased consumer spending and greater demand
for U.S. exports. With the
economy growing rapidly, investors worried that
rising wages could push
inflation higher, eroding the value of a bond's
fixed interest and principal
payments. They expected the Federal Reserve to
increase the federal funds rate
(what banks charge each other for overnight
loans) to slow economic growth and
pre-emptively defuse inflationary pressures.
We shortened your Fund's weighted average
maturity (WAM) in early March by
purchasing adjustable-rate municipal securities
that allowed quick access to
cash to buy any higher yielding securities
issued after the change in monetary
policy. U.S. central bankers raised the federal
funds rate by a quarter
percentage point to 5.50% on March 25.
In the spring, inflation remained surprisingly
mild, indicating there was
little need for the Federal Reserve to move
again. So we took advantage of the
usual rise in yields during the April tax
season. This occurs when money
managers sell short-term municipal securities
to provide investors with cash
to pay their income taxes. Our tax-season
purchases left the WAM markedly
longer than that of its competition and it
remained longer throughout the
summer.
Autumn brought fresh concerns about higher
inflation. We thought the Federal
Reserve was poised to change monetary policy in
November so we shortened the
WAM. As it turned out, the federal funds rate
remained unchanged after an
Asian economic crisis shook global financial
markets in late October.
With the year rapidly drawing to a close, we
again lengthened the WAM by
purchasing attractively priced three- and six-
month, tax-exempt securities.
Yields usually rise during this time as
portfolio managers sell securities to
provide investors with money to pay for holiday
expenditures. Locking in
higher yields enabled your Fund to bridge over
the dramatic dip in yields that
usually happens as the new year begins.
<PAGE>
What Went Well.
- -----------------------------------------------
- --
Fortified Against
The "July Effect."
Every summer, an imbalance in the supply and
demand of tax-exempt money market
securities called the "July Effect" drives
prices sharply higher (and yields
lower). This occurs as a flood of municipal
money market securities mature
between late June and mid July, temporarily
pulling billions of dollars out of
the market. At the same time, many long-term
municipal bonds pay interest at
the beginning of July. Bondholders often invest
this cash briefly in the
tax-exempt money market, further exacerbating
the dearth of short-term
securities.
While the "July Effect" can undermine a
portfolio's performance, your Fund
suffered no setback. Locking in higher yields
available during the April tax
season left the WAM significantly longer than
its competition as the summer
began. Then as an extra measure of protection
against the coming drop in
yields, we purchased attractively priced nine-
month and one-year municipal
securities in late June, which extended the WAM
to more than 70 days. So your
Fund was well-fortified against the scourge of
sharply lower yields. As the
summer progressed, states and municipalities
issued new tax-exempt money market
securities to replace the ones that had
matured, causing yields to edge higher.
Weighted Average Maturity Is Now Longer Than
The Average Fund.
(CHART)
And Not So Well.
- -----------------------------------------------
- --
Long Was Better.
When inflation jitters resurfaced in early
October, we reduced the Fund's WAM
to be ready to buy any higher yielding
securities that would be issued if
interest rates rose in November. However, we
quickly extended the WAM again
since the federal funds rate remained unchanged
(short-term rates declined as
a result of the Asian conflict.) Your Fund's
performance would have improved
even more if we had not reduced its WAM in
October.
Looking Ahead.
- -----------------------------------------------
- --
Because we invested heavily in higher yielding,
tax-exempt money market
securities in December, we can ride out the
steep drop in yields that takes
place every January. We can also afford to wait
for clear signals on where
monetary policy is headed. Many investors
expect Asian problems will slow
U.S. economic growth enough to require a
federal funds rate cut to get the
economy moving again. But more than 350,000
jobs were created in January.
These mixed signals continue to keep the
Federal Reserve from changing
monetary policy. We will monitor the economy
for any signs that indicate the
central bank needs to intervene again.
1
<PAGE>
President's Letter
February 2, 1998
- -----------------------------------------------
- --------------------------------
(PHOTO)
Investing
Smart.
Dear Shareholder:
This is the season when many investors receive
income tax refunds or have a CD
or two maturing. What will you do with these
assets? Investing smart can be a
challenge especially given today's new
investment choices.
The Federal Taxpayer Relief Act of 1997 is
changing the way Americans invest
and accumulate wealth, save for college or
build a nest egg for retirement.
While the law offers opportunity, it is also
complex. You may need help to put
things in perspective.
Now may be an excellent time for you and your
Prudential Financial Professional
to update your investment strategy and
retirement plan. A wise investor does
so periodically. You could find the tax law
opening doors that may benefit you
now or over the long term, such as --
- - Revised Capital Gains Tax Rates & Exclusions.
Long-term rates are down. Is
your portfolio positioned to benefit? Also, new
rules allow you to keep more
of the profit from the sale of your home
(perhaps up to $500,000 more).
- - New Roth IRAs. The Roth IRA features tax-free
distributions and does not
require mandatory withdrawals, which should be
of particular interest to
retirees seeking to shelter assets in a tax-
free account.
- - New Education IRAs. Similar to a traditional
IRA, but specifically designed
for higher education. The new law also creates
credits and deductions to help
defray college costs.
- - Expanded IRAs. Rules governing traditional
IRAs have been extensively
revised. Deductibility and contribution limits
have been broadened as has the
list for penalty-free early withdrawals,
including first-time home buyers.
As you can see, what you don't know may cost
you! That's why I recommend you
call your Prudential Financial Professional and
get a free investment plan
checkup. Let us give you the information and
tools to invest smart.
Sincerely,
Brian M. Storms
President, Prudential Mutual Funds & Annuities
2
<PAGE>
Portfolio of Investments as of
PRUDENTIAL TAX-FREE MONEY
December 31, 1997
FUND, INC.
- -----------------------------------------------
- ---------------------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating Interest Maturity Amount
Value
Description(a)
(Unaudited) Rate Date (000)
(Note 1)
<S>
<C> <C> <C> <C>
<C>
- -----------------------------------------------
- -----------------------------------------------
- --------------------------------
California--1.4%
California Higher Ed. Ln. Auth.,
Student Ln. Rev., A.N.N.M.T., Ser. 87A
VMIG1 4.00% 7/01/98 $
4,600 $ 4,600,000
- -----------------------------------------------
- -----------------------------------------------
- --------------------------------
Colorado--5.1%
Colorado Hlth. Facs. Auth. Rev., Frasier
Meadows Manor,
F.R.W.D.,
Ser. 94
NR 4.25 1/02/98
6,950 6,950,000
Colorado Hsg. Fin. Auth., Eagle Trust,
F.R.W.D.S., Ser.
94C(e)
A-1 4.27 1/02/98
10,000 10,000,000
- ------------
16,950,000
- -----------------------------------------------
- -----------------------------------------------
- --------------------------------
Connecticut--0.9%
Connecticut Spl. Assmt., Unemploy. Comp. Rev.,
A.N.N.M.T.,
Ser 93C
VMIG1 3.90 7/01/98
3,000 3,000,000
- -----------------------------------------------
- -----------------------------------------------
- --------------------------------
District Of Columbia--3.9%
Dist. of Columbia,
T.R.A.N., Ser. 98B
MIG1 4.50 9/30/98
6,100 6,127,532
T.R.A.N., Ser. 98C
MIG1 5.00 9/30/98
3,500 3,529,006
Dist. of Columbia G.O. Var. Rate,
F.R.D.D., Ser. 92A-3
VMIG1 5.15 1/02/98
500 500,000
F.R.D.D., Ser. 92A-4
VMIG1 5.15 1/02/98
600 600,000
F.R.D.D., Ser. 92A-5
VMIG1 5.15 1/02/98
2,000 2,000,000
- ------------
12,756,538
- -----------------------------------------------
- -----------------------------------------------
- --------------------------------
Florida--1.4%
Florida Hsg. Fin. Agy., Multifamily Hsg. Rev.,
Oaks at Mill
Creek, A.N.N.O.T
A-1* 3.85 11/01/98
1,750 1,750,000
Pinellas Cnty. Hsg. Fin. Auth., Single Family
Mtg. Rev., Ser.
97B
VMIG1 3.80 2/01/98
2,840 2,840,000
- ------------
4,590,000
- -----------------------------------------------
- -----------------------------------------------
- --------------------------------
Georgia--8.7%
Cobb Cnty. Dev. Auth., Inst. of Nuclear Pwr.,
F.R.W.D., Ser.
92
NR 4.20 1/07/98
12,805 12,805,000
Fulton Cnty. Dev. Auth.,
Atlanta Jewish Federation, Ser. 96
VMIG1 4.20 1/02/98
5,345 5,345,000
Siemen's Energy Inc., F.R.W.D., Ser. 94
VMIG1 4.25 1/02/98
7,750 7,750,000
Monroe Cnty. Dev. Auth. Poll., Oglethorpe Pwr.
Corp.,
S.E.M.O.T.,
Ser. 96
NR 3.90 5/01/98
2,670 2,670,000
- ------------
28,570,000
</TABLE>
- -----------------------------------------------
- ---------------------------------
See Notes to Financial Statements. 3
<PAGE>
Portfolio of Investments as of
PRUDENTIAL TAX-FREE MONEY
December 31, 1997
FUND, INC.
- -----------------------------------------------
- ---------------------------------
Illinois--11.6%
Chicago G.O., A.N.N.M.T., Ser. 97
VMIG1 3.65% 2/05/98
$11,000 $ 11,000,000
Illinois Dev. Fin. Auth. Rev., Adventist Hlth
Sys., F.R.W.D.,
Ser. 97A
VMIG1 4.00 1/02/98
9,200 9,200,000
Illinois Hlth. Fac. Auth.,
Evanston Hsp., S.E.M.M.T., Ser. 95
VMIG1 4.00 5/15/98
7,000 7,000,000
Evanston Hsp., S.E.M.M.T., Ser. 92
VMIG1 3.85 11/30/98
9,000 9,000,000
Southwestern Ill. Dev. Auth., Shell Oil Co.
Wood River Proj.,
F.R.D.D., Ser. 95
VMIG1 5.10 1/02/98
1,900 1,900,000
- ------------
38,100,000
- -----------------------------------------------
- -----------------------------------------------
- --------------------------------
Indiana--1.5%
Indiana St. Dev. Fin. Auth. Rev., Edl. Facs.,
Covenant High
Sch.,
Ser. 96
NR 4.20 1/02/98
5,000 5,000,000
- -----------------------------------------------
- -----------------------------------------------
- --------------------------------
Louisiana--3.4%
West Baton Rouge Parish Ind. Dev. Rev.,
Dow Chemical Co., F.R.D.D., Ser. 94B
P1 5.05 1/02/98
8,200 8,200,000
Dow Chemical Co., T.E.C.P., Ser. 91A
P1 3.80 1/08/98
3,000 3,000,000
- ------------
11,200,000
- -----------------------------------------------
- -----------------------------------------------
- --------------------------------
Maryland--1.4%
Maryland Econ. Dev. Corp., F.R.W.D., Ser. 95
A-1 4.20 1/02/98
4,600 4,600,000
- -----------------------------------------------
- -----------------------------------------------
- --------------------------------
Massachusetts--1.5%
Massachusetts Bay Trans. Auth., Ser. 97A
MIG2 4.25 2/27/98
5,000 5,001,674
- -----------------------------------------------
- -----------------------------------------------
- --------------------------------
Michigan--3.8%
Detroit City Sch. Dist., G.O., Ser. 97
SP1+* 4.50 5/01/98
5,000 5,009,553
Grand Rapids Econ. Dev. Corp., Ind. Dev. Rev.,
F.R.W.D., Ser.
92
Aa2 4.20 1/02/98
7,500 7,500,000
- ------------
12,509,553
- -----------------------------------------------
- -----------------------------------------------
- --------------------------------
Minnesota--3.1%
Bloomington Coml. Dev. Rev., 94th Street Assoc.
Proj.,
F.R.W.D.,
Ser. 85
A1+* 4.20 1/02/98
5,245 5,245,000
Bloomington Port Auth. Tax Rev., F.R.W.D., Ser.
95A VMIG1 4.20
1/02/98 5,000 5,000,000
- ------------
10,245,000
[/TABLE]
- -----------------------------------------------
- ---------------------------------
See Notes to Financial Statements. 4
<PAGE>
Portfolio of Investments as of
PRUDENTIAL TAX-FREE MONEY
December 31, 1997
FUND, INC.
- -----------------------------------------------
- ---------------------------------
New Hampshire--2.6%
New Hampshire Bus. Fin. Auth.,
New England Pwr. Co. Proj., T.E.C.P., Ser.
90B VMIG1 3.85%
3/16/98 $ 3,500 $ 3,500,000
Whellabrator, F.R.W.D., Ser. 97A
A1+* 3.70 1/07/98
5,000 5,000,000
- ------------
8,500,000
- -----------------------------------------------
- -----------------------------------------------
- --------------------------------
New Jersey--0.7%
New Jersey Econ. Dev. Auth. Rev., Nwk. Recl.
Fac.,
A.N.N.M.T.,
Ser. 97
A-1+ 3.95 12/15/98
2,300 2,300,000
- -----------------------------------------------
- -----------------------------------------------
- --------------------------------
New York--5.3%
New York City Wtr. Fin. Auth., T.E.C.P., Ser.
97 P-1 3.80
3/11/98 12,000 12,000,000
New York St., General Obligation, T.E.C.P.,
Ser. 5 P-1 3.80
2/19/98 5,500 5,500,000
- ------------
17,500,000
- -----------------------------------------------
- -----------------------------------------------
- --------------------------------
North Carolina--2.2%
Rockingham Cnty. Ind. Facs., Poll. Ctl. Rev.,
Phillip Morris
Proj., F.R.W.D.
P1 4.00 1/07/98
7,200 7,200,000
- -----------------------------------------------
- -----------------------------------------------
- --------------------------------
Ohio--5.4%
EastLake Indl. Dev. Rev., Astro Model Dev.
Corp., F.R.W.D.,
Ser. 96
NR 4.25 1/02/98
6,500 6,500,000
Medina Cnty. Hsg. Rev., Oaks At Medina Proj.,
F.R.W.D. NR 4.15
1/02/98 4,100 4,100,000
Ohio Wtr. Dev. Auth., Ohio Edison Co. Proj.,
A.N.N.O.T., Ser.
88A
VMIG 4.10 5/01/98
7,280 7,280,000
- ------------
17,880,000
- -----------------------------------------------
- -----------------------------------------------
- --------------------------------
Oklahoma--2.5%
Tulsa Pkg. Auth. Rev., Williams Ctr. Proj.,
S.E.M.M.T., Ser.
87A
VMIG1 3.80 5/15/98
8,210 8,210,000
- -----------------------------------------------
- -----------------------------------------------
- --------------------------------
Oregon--3.8%
Oregon St Hsg. Comm. Serv. Dept., Single Family
Mtg. Rev.,
Ser. K
MIG1 3.875 12/03/98
5,000 5,000,000
Oregon St. Econ. Dev. Rev., KRC Western Inc.
Proj., Ser. 178 Aa2 4.30
1/02/98 7,650 7,650,000
- ------------
12,650,000
- -----------------------------------------------
- -----------------------------------------------
- --------------------------------
Pennsylvania--2.7%
Dauphin Cnty. Gen. Auth. Rev., Ed + Hlth.
Prog., F.R.W.D.,
Ser. 97
VMIG1 4.20 1/02/98
4,300 4,300,000
Montgomery Cnty. Higher Ed. & Hlth. Auth. Rev.,
F.R.W.D.,
Ser. 96A
A-1 4.00 1/07/98
4,600 4,600,000
- ------------
8,900,000
[/TABLE]
- -----------------------------------------------
- ---------------------------------
See Notes to Financial Statements. 5
<PAGE>
Portfolio of Investments as of
PRUDENTIAL TAX-FREE MONEY
December 31, 1997
FUND, INC.
- -----------------------------------------------
- ---------------------------------
South Dakota--4.5%
Brookings SD,
Cert. of Part., Q.T.R.M.T., Ser. 97
NR 4.00% 4/09/98 $
985 $ 985,000
Cert. of Part., Q.T.R.M.T., Ser. 97
NR 4.00 4/09/98
1,140 1,140,000
Cert. of Part., Q.T.R.M.T., Ser. 97
NR 4.00 4/09/98
1,530 1,530,000
South Dakota Ed. Lns. Inc. Corp., Student Ln.
Rev.,
Q.T.R.M.T.,
Ser. 97A
NR 3.85 2/04/98
3,500 3,500,000
South Dakota Hsg. Dev. Auth.,
Home Ownership Mtg., Ser. 97D
VMIG1 3.85 3/26/98
4,810 4,810,000
Home Ownership Mtg., Ser. H
MIG1 3.95 8/13/98
3,000 3,000,000
- ------------
14,965,000
- -----------------------------------------------
- -----------------------------------------------
- --------------------------------
Tennessee--1.5%
Metro Govt Nashville & Davidson Cnty., Ind.
Dev. Brd. Rev.,
Multifamily Hsg., F.R.W.D. Ser. 89
A-1+ 4.30 1/02/98
5,000 5,000,000
- -----------------------------------------------
- -----------------------------------------------
- --------------------------------
Texas--9.8%
Boatmen's St. Louis Grantor Trust, Port Arthur
TX IDC, CTF
Part., F.R.W.D., Ser. 96A
A-1 4.15 1/07/98
3,415 3,415,000
Brazos Rvr. Auth. Tx., Poll. Ctrl. Rev.,
F.R.D.D, Ser. 96C VMIG1 5.10
1/02/98 2,900 2,900,000
Greater East Texas Higher Ed. Auth., Student
Ln. Rev.,
A.N.N.O.T., Ser. 95A
VMIG1 4.10 5/01/98
3,500 3,500,000
Houston General Obligation, T.E.C.P., Ser. B
P-1 3.80 2/26/98
5,000 5,000,000
San Antonio Elec. & Gas, T.E.C.P.,
Ser. A
P-1 3.70 1/14/98
7,000 7,000,000
Ser. A
P-1 3.80 3/13/98
8,000 8,000,000
Southeast Texas Hsg. Fin. Corp., Banc One Tax
Ex. Trust,
F.R.W.D.S., Ser. 91D(e)
AAA 4.33 1/02/98
2,550 2,550,000
- ------------
32,365,000
- -----------------------------------------------
- -----------------------------------------------
- --------------------------------
Utah--3.2%
Intermountain Pwr. Agy., T.E.C.P.
A-1 3.80 2/03/98
10,000 10,000,000
Salt Lake Cnty., Poll. Ctrl. Rev., F.R.D.D.,
Ser. 94 P1 5.00
1/02/98 400 400,000
- ------------
10,400,000
- -----------------------------------------------
- -----------------------------------------------
- --------------------------------
Washington--1.5%
Washington Hsg. Fin. Comm., Panorama Cty.
Proj., F.R.D.D.,
Ser. 97
VMIG1 4.75 1/02/98
5,100 5,100,000
[/TABLE]
- -----------------------------------------------
- ---------------------------------
See Notes to Financial Statements. 6
<PAGE>
Portfolio of Investments as of
PRUDENTIAL TAX-FREE MONEY
December 31, 1997
FUND, INC.
- -----------------------------------------------
- ---------------------------------
Wisconsin--2.9%
Whitewater Ind. Dev. Rev., Trek Bicycle Proj.,
F.R.W.D., Ser.
95
NR 4.35% 1/02/98 $
4,235 $ 4,235,000
Wisconsin Hsg. & Econ. Dev. Auth., Eagle Tax
Ex. Trust,
Q.T.R.O.T, Ser. 4901(d)(e)
A-1+ 3.80 3/01/98
5,300 5,300,000
- ------------
9,535,000
- -----------------------------------------------
- -----------------------------------------------
- --------------------------------
Wyoming--1.3%
Green River Poll. Ctrl. Rev., Rhone Poulene,
Inc. Proj.,
F.R.D.D.,
Ser. 92
VMIG1 5.20 1/02/98
4,200 4,200,000
- ------------
Total Investments--97.6%
(cost $321,827,765(c))
321,827,765
Other assets in excess of liabilities--2.4%
7,984,355
- ------------
Net Assets--100%
$329,812,120
- ------------
- ------------
[/TABLE]
- ---------------
(a) The following abbreviations are used in
portfolio descriptions:
A.N.N.M.T.--Annual Mandatory Tender(b)
A.N.N.O.T.--Annual Optional Tender(b)
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)
G.O.--General Obligation
Q.T.R.M.T.--Quarterly Tax & Reserve
Mandatory 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.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 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.
(c) The cost of securities for federal income
tax purposes is substantially the
same as for financial reporting purposes.
(d) Indicates illiquid security.
(e) Indicates a security restricted as to
resale.
* 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
PRUDENTIAL TAX-FREE MONEY FUND, INC.
- -----------------------------------------------
- ---------------------------------
<TABLE>
<CAPTION>
Assets
December 31, 1997
- -----------------
<S>
<C>
Investments, at amortized cost which
approximates market
value..........................................
$ 321,827,765
Cash...........................................
...............................................
.......... 2,438,714
Receivable for Fund shares
sold...........................................
..............................
7,083,847
Interest
receivable.....................................
...............................................
. 2,450,064
Other
assets.........................................
...............................................
.... 8,872
- -----------------
Total
assets.........................................
...............................................
. 333,809,262
- -----------------
Liabilities
Payable for Fund shares
reacquired.....................................
.................................
3,463,899
Dividends
payable........................................
...............................................
234,041
Management fee
payable........................................
..........................................
147,360
Accrued
expenses.......................................
...............................................
.. 131,880
Distribution fee
payable........................................
........................................
19,962
- -----------------
Total
liabilities....................................
...............................................
. 3,997,142
- -----------------
Net
Assets.........................................
...............................................
...... $ 329,812,120
- -----------------
- -----------------
Net assets were comprised of:
Common Stock, $.01 par
value..........................................
............................... $
3,298,933
Paid-in capital in excess of
par............................................
......................... 326,513,187
- -----------------
Net assets, December 31,
1997...........................................
................................ $
329,812,120
- -----------------
- -----------------
Net asset value, offering price and redemption
price
per share ($329,812,120 / 329,906,399
shares)........................................
................ $1.00
- -----------------
- -----------------
</TABLE>
- -----------------------------------------------
- ---------------------------------
See Notes to Financial Statements. 8
<PAGE>
PRUDENTIAL TAX-FREE MONEY FUND, INC.
Statement of Operations
- -----------------------------------------------
- -------------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income
December 31, 1997
<S> <C>
Income
Interest..............................
$12,750,064
---
- --------------
Expenses
Management fee........................
1,699,125
Distribution fee......................
424,781
Transfer agent's fees and expenses....
279,000
Custodian's fees and expenses.........
73,000
Registration fees.....................
56,000
Reports to shareholders...............
53,000
Audit fee and expenses................
26,000
Legal fees and expenses...............
26,000
Directors' fees and expenses..........
16,000
Insurance.............................
3,600
Miscellaneous.........................
2,633
---
- --------------
Total expenses.....................
2,659,139
Less: custodian fee credit............
(6,349)
---
- --------------
Net expenses.......................
2,652,790
---
- --------------
Net investment income....................
10,097,274
---
- --------------
Net Increase in Net Assets
Resulting from Operations................
$10,097,274
---
- --------------
---
- --------------
</TABLE>
PRUDENTIAL TAX-FREE MONEY FUND, INC.
Statement of Changes in Net Assets
- -----------------------------------------------
- -------------
<TABLE>
<CAPTION>
Increase (Decrease) Year Ended
December 31,
in Net Assets 1997
1996
<S> <C>
<C>
Operations
Net investment income..... $ 10,097,274
$ 11,419,707
Net realized gain on
investment
transactions........... --
2,446
---------------
- ---------------
Net increase in net assets
resulting from
operations............. 10,097,274
11,422,153
---------------
- ---------------
Dividends and distributions
to shareholders........... (10,097,274)
(11,422,153)
---------------
- ---------------
Fund share transactions
(at $1 per share)
Proceeds from shares
subscribed............. 1,046,969,468
1,087,199,969
Net asset value of shares
issued to shareholders
in reinvestment of
dividends and
distributions.......... 9,663,288
10,887,534
Cost of shares
reacquired............. (1,060,629,324)
(1,151,929,658)
---------------
- ---------------
Net decrease in net assets
from Fund share
transactions........... (3,996,568)
(53,842,155)
---------------
- ---------------
Total decrease............... (3,996,568)
(53,842,155)
Net Assets
Beginning of year............ 333,808,688
387,650,843
---------------
- ---------------
End of year.................. $ 329,812,120
$ 333,808,688
---------------
- ---------------
---------------
- ---------------
</TABLE>
- -----------------------------------------------
- ---------------------------------
See Notes to Financial Statements. 9
<PAGE>
Notes to Financial Statements
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 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 Net 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. Expenses are
recorded on the accrual basis which may require
the use of certain estimates by
management.
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
investment income to its
shareholders. For this reason, no federal
income tax provision is required.
Dividends: The Fund declares dividends daily
from net investment income and net
realized gains, if any. 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 Investments Fund Management
LLC ('PIFM'). Pursuant to this agreement, PIFM
has responsibility for all
investment advisory services and supervises the
subadviser's performance of such
services. PIFM has entered into a subadvisory
agreement with Prudential
Investment Corporation ('PIC'); PIC furnishes
investment advisory services in
connection with the management of the Fund.
PIFM 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 PIFM 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 Securities Incorporated
('PSI'). The Fund compensated PSI 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.
PSI, PIFM and PIC are indirect, wholly owned
subsidiaries of The Prudential
Insurance Company of America.
- -----------------------------------------------
- -------------
Note 3. Other Transactions With Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), a
wholly owned subsidiary of PIFM,
serves as the Fund's transfer agent and during
the year ended December 31, 1997,
the Fund incurred fees of approximately
$248,000 for the services of PMFS. As of
December 31, 1997, approximately $19,000 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 nonaffiliates.
- -----------------------------------------------
- ---------------------------------
10
<PAGE>
Financial Highlights
PRUDENTIAL TAX-FREE MONEY FUND, INC.
- -----------------------------------------------
- ---------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
- -----------------------------------------------
1997 1996 1995 1994
- -------- -------- -------- --------
<S>
<C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
year.................................... $
1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income and realized
gains.............................. .030
.028 .031 .023
Dividends and distributions to
shareholders...........................
(.030) (.028) (.031) (.023)
- -------- -------- -------- --------
Net asset value, end of
year..........................................
$ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------- -------- -------- --------
- -------- -------- -------- --------
TOTAL
RETURN(a):.....................................
................. 3.00% 2.84%
3.15% 2.31%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000).........................................
$329,812 $333,808 $387,651 $487,290
Average net assets
(000)..........................................
.... $339,825 $403,230 $470,370
$644,481
Ratios to average net assets:
Expenses, including distribution
fee............................... .78%
.80% .85% .75%
Expenses, excluding distribution
fee............................... .66%
.67% .72% .63%
Net investment
income.........................................
..... 2.97% 2.83% 3.14%
2.26%
<CAPTION>
1993
<S>
<C>
- --------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
year.................................... $
1.00
Net investment income and realized
gains.............................. .018
Dividends and distributions to
shareholders...........................
(.018)
- --------
Net asset value, end of
year..........................................
$ 1.00
- --------
- --------
TOTAL
RETURN(a):.....................................
................. 1.86%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000).........................................
$601,622
Average net assets
(000)..........................................
.... $726,571
Ratios to average net assets:
Expenses, including distribution
fee............................... .74%
Expenses, excluding distribution
fee............................... .62%
Net investment
income.........................................
..... 1.84%
</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.
- -----------------------------------------------
- ---------------------------------
See Notes to Financial Statements. 11
<PAGE>
Report of Independent Accountants
PRUDENTIAL TAX-FREE MONEY FUND, INC.
- -----------------------------------------------
- ---------------------------------
To the Board of Directors and Shareholders of
Prudential Tax-Free Money Fund, Inc.
In our opinion, the accompanying statement of
assets and liabilities, including
the portfolio of investments, and the related
statements of operations and of
changes in net assets and the financial
highlights present fairly, in all
material respects, the financial position of
Prudential Tax-Free Money Fund,
Inc. ('the Fund') at December 31, 1997, 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, 1997 by correspondence with the
custodian, provide a reasonable
basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
February 6, 1998
Tax Information (Unaudited)
PRUDENTIAL TAX-FREE MONEY FUND, INC.
- -----------------------------------------------
- ---------------------------------
We are required by the Internal Revenue Code to
advise you within 60 days of the
Fund's fiscal year end (December 31, 1997) as
to the federal tax status of
dividends paid by the Fund during such fiscal
year. Accordingly, we are advising
you that in the fiscal year ended December 31,
1997, dividends paid from net
investment income of $.03 were federally tax-
exempt interest dividends.
Information with respect to the state
taxability of your investment in the Fund
was sent to you under separate cover.
- -----------------------------------------------
- ---------------------------------
12
<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
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
http://www.prudential.com
(LOGO)
Directors
Edward D. Beach
Stephen C. Eyre
Delayne Dedrick Gold
Robert F. Gunia
Don G. Hoff
Robert E. LaBlanc
Mendel A. Melzer, CFA
Richard A. Redeker
Robin B. Smith
Stephen Stoneburn
Nancy H. Teeters
Officers
Richard A. Redeker, President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, Secretary
Robert C. Rosselot, Assistant Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
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 LLC
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.
This report is not authorized for distribution
to prospective investors unless
preceded or accompanied by a current
prospectus.
74436P103 MF103E
Cat. #444003E
