PRUDENTIAL TAX FREE MONEY FUND INC, 485APOS, 1999-02-26

PRUDENTIAL TAX FREE MONEY FUND INC
485APOS, 1999-02-26

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As filed with the Securities and Exchange Commission on February 26, 1999

Securities Act Registration No. 2-64625
Investment Company Act Registration No. 811-2927
================================================================================

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. 23 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 24 [x]
(Check appropriate box or boxes)

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PRUDENTIAL TAX-FREE MONEY FUND, INC.
(Exact name of registrant as specified in charter)

GATEWAY CENTER THREE,
100 MULBERRY STREET
NEWARK, NEW JERSEY 07102-4077
(Address of Principal Executive Offices) (Zip Code)

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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (973) 367-3028
ROBERT C. ROSSELOT, ESQ.
GATEWAY CENTER THREE,
100 MULBERRY STREET
NEWARK, NEW JERSEY 07102-4077
(Name and Address of Agent for Service)

APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of this Registration Statement

It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[x] 60 days after filing pursuant to paragraph (a)(1)
[ ] 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.

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Title of Securities
Being Registered ............. Shares of Common Stock, Par Value $.01 per Share
================================================================================

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FUND TYPE:
- --------------------------
Money market

INVESTMENT OBJECTIVE:
- --------------------------

The highest level of current income that is exempt
from federal income taxes, consistent with
liquidity and the preservation of capital

PRUDENTIAL TAX-FREE MONEY FUND, INC.

- --------------------------------------------------

PROSPECTUS: APRIL ___, 1999

As with all mutual funds, the Securities and
Exchange Commission has not approved or
disapproved the Fund's shares, nor has the SEC
determined that this prospectus is complete or
accurate. It is a criminal offense to state
otherwise.

[PRUDENTIAL INVESTMENT LOGO]

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TABLE OF CONTENTS
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1 Risk/Return Summary

1 Investment Objective and Principal Strategies
1 Principal Risks
2 Evaluating Performance
4 Fees and Expenses

5 How the Fund Invests
5 Investment Objective and Policies
7 Other Investments
7 Additional Strategies
8 Investment Risks

9 How the Fund is Managed
9 Manager
9 Investment Adviser
9 Distributor
10 Year 2000 Readiness Disclosure

11 Fund Distributions and Tax Issues
11 Distributions
12 Tax Issues

13 How to Buy, Sell and Exchange Shares of the Fund
13 How to Buy Shares
18 How to Sell Your Shares
20 How to Exchange Your Shares

22 Financial Highlights

23 The Prudential Mutual Fund Family

For More Information (Back Cover)

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Prudential Tax-Free Money Fund, Inc. telephone (800) 225-1852
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RISK/RETURN SUMMARY
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This section highlights key information about PRUDENTIAL TAX-FREE MONEY FUND,
INC., which we refer to as "the Fund." Additional information follows this
summary.

INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES

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MONEY MARKET FUNDS

Money market funds--which hold high-quality short-term debt obligations--provide
investors with a lower risk, highly liquid investment option. These funds
attempt to maintain a net asset value of $1 per share, although there can be no
guarantee that they will always be able to do so.

- -------------------------------------------------------------------------------

Our 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. To achieve this objective we invest primarily in
short-term debt obligations of states, territories and possessions of the United
States and the District of Columbia, which we refer to as "MUNICIPAL BONDS." The
Funds invest in Municipal Bonds which are high-quality money market instruments
with remaining maturities of 13 months or less. The fund may invest up to 20% of
its net assets in Municipal Bonds that may be a preference item for purposes of
the federal alternative minimum tax. While we make every effort to achieve our
investment objective and maintain a net asset value of $1 per share, we can't
guarantee success. To date, the Fund's net asset value has never deviated from
$1 per share.

PRINCIPAL RISKS

Although we look to invest wisely, all investments involve risk. The Municipal
Bonds in which the Fund invests are generally subject to the risk that the
issuer may be unable to make principal and interest payments when they are due.
There is also the risk that the securities could lose value because interest
rates change. The Municipal Bonds that we purchase may be GENERAL OBLIGATION
BONDS, which are secured by the full faith, credit and taxing authority of the
issuer, or REVENUE BONDS, which pay income from the revenues of a particular
municipal project or the proceeds of a special excise tax. Although investments
in mutual funds involve risk, investing in money market portfolios like the Fund
is generally less risky than investments in other types of funds. This is
because the Fund invests only in high-quality securities with remaining
maturities of 13 months or less and limits the average maturity of the portfolio
to 90 days or less. To satisfy the average maturity and maximum maturity
requirements,

1
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RISK/RETURN SUMMARY
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securities with demand features are treated as maturing on the
date that the Fund can demand repayment of the security.

An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.

EVALUATING PERFORMANCE

A number of factors--including risk--can affect how the Fund performs. The
following bar chart and tables show the Fund's performance for each full
calendar year of operation for the last 10 years. They demonstrate the risk of
investing in the Fund and how returns can change. The Average Annual Returns
table also compares the Fund's performance to the performance of a tax free
money market index. Past performance does not mean that the Fund will achieve
similar results in the future. For current yield information, you can call us at
(800) 225-1852.

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PRUDENTIAL TAX-FREE MONEY FUND, INC. telephone (800) 225-1852
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2
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RISK/RETURN SUMMARY
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- -----------------------------
ANNUAL RETURNS(1)
- -----------------------------
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
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10%
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8% 5.74% 5.42%
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6% 4.22% 3.15%
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4% 2.63% 2.31% 2.84% 3.00%
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2% 1.86%
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0%
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Best Quarter: Worst Quarter:
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- --------------------------------------------
AVERAGE ANNUAL RETURNS(1) (AS OF 12/31/98)
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1 Year 5 Years 10 Years Since Inception
Fund shares ___ ___ ___ ___________
IBC Average(2) ___ ___ ___ ___________

- --------------------------------------------
YIELD(1) (AS OF 12/31/98)
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7-Day yield of the Fund --
7-Day tax equivalent --
yield of the Fund

1 The Fund's returns and yield are after deduction of expenses.

2 The IBC Average is based upon the average return of all mutual funds in the
International Business Communications Financial Data Tax-Free Money Fund
category.

3
<PAGE>

FEES AND EXPENSES

These tables show the fees and expenses that you may pay if you buy and hold
shares of the Fund.

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SHAREHOLDER FEES (PAID DIRECTLY FROM YOUR INVESTMENT)
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Maximum sales charge (load) None
imposed on purchases (as a
percentage of offering price)

Maximum deferred sales charge (load) None
(as a percentage of the lower of
original purchase price or sale
proceeds)

Maximum sales charge (load) None
imposed on reinvested dividends
and other distributions

Redemption fees None
Exchange fee None

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ANNUAL FUND OPERATING EXPENSES (DEDUCTED FROM FUND ASSETS)
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Class A SHARES

Management fees .500%
+ Distribution and service (12b-1) fees .125%
+ Other expenses .155%
= TOTAL ANNUAL FUND OPERATING EXPENSES .780%
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EXAMPLE

This example will help you compare the cost of investing in the Fund with the
cost of investing in other mutual funds.

The example assumes that you invest $10,000 in the Fund for the time periods
indicated and then sell all of your shares at the end of those periods. The
example also assumes that your investment has a 5 percent return each year and
that the Fund's operating expenses remain the same. Although your actual costs
may be higher or lower, based on these assumptions your costs would be:

- ---------------------------------------------------------------------
1 YR 3 YRS 5 YRS 10 Yrs
Fund shares $__ $__ $__ $__
- --------------------------------------------------------------------

4
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HOW THE FUND INVESTS
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INVESTMENT OBJECTIVE AND POLICIES

The Fund's 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. While we make every effort to achieve
our objective, we can't guarantee success.

The Fund invests in high-quality money market instruments to try to provide
investors with current tax-free income while maintaining a stable net asset
value of $1 per share. We manage the Fund to comply with specific rules designed
for money market mututal funds. We will purchase short-term debt obligations
issued by states, territories and possessions of the United States and by the
District of Columbia, which we refer to as "Municipal Bonds." The Fund may
invest up to 20% of its net assets in Municipal Bonds that pay interest that is
a preference item for purposes of the federal alternative minimum tax.

The Municipal Bonds that we purchase must be rated in one of the two highest
rating categories by at least two nationally recognized statistical rating
organizations (NRSROs), such as Moody's Investors Service, Inc. (rated at least
Aa, MIG-2 or Prime-2) or Standard & Poor's Rating Group (rated at least AA, SP-2
or A-2) or, if unrated, of comparable quality. The Municipal Bonds that we
purchase may be "GENERAL OBLIGATION BONDS" or "REVENUE BONDS." General
obligation bonds are Municipal Bonds backed by the full faith and credit of the
issuer, including its taxing authority and ability to borrow additional funds.
In contrast, revenue bonds are Municipal Bonds backed by the revenues from a
specific municipal project such as bridges, hospitals and public works or
proceeds from a special excise tax. The Fund can also purchase or hold Municipal
Bonds that are "pre-refunded" bonds. These obligations are fully secured by the
U.S. Government securities held in escrow for the benefit of holders of the
Municipal Bonds. Municipal bonds are usually "pre-refunded" when the issuer can
borrow money more cheaply from another source and, therefore, pay off its
original, more costly obligation. Under the rules that govern tax-free money
market funds, like the Fund, we treat pre-refunded bonds as U.S. Government
securities. This means that we can invest more of the Fund's assets in Municipal
Bonds that are pre-refunded than we could if the security were a general
obligation bond or a revenue bond. The Fund will not invest more than 25% of its
total assets in pre-refunded bonds of a single issuer.

5
<PAGE>
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HOW THE FUND INVESTS
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The Fund may invest in Municipal Bonds that are "VARIABLE RATE" or "FLOATING
RATE" obligations. These securities pay interest at rates that change
periodically to reflect changes in market interest rates. Because these
securities adjust the interest they pay, they may be beneficial when interest
rates are rising because of the additional return the Fund wil receive, and they
may be detrimental when interest rates are falling because of the reduction in
interest payments to the Fund.

DEBT OBLIGATIONS in general, including those listed above and any others
that we may purchase, are basically written promises to repay a debt. Among the
various types of debt securities we may purchase, the terms of repayment may
vary, as may the commitment of other parties to honor the obligations of the
issuer of the security. We may purchase securities that include DEMAND FEATURES,
which allow us to demand repayment of a debt obligation before the obligation is
due or "matures." This means that we can purchase longer-term securities because
of our expectation that we can demand repayment of the obligation at an
agreed-upon price within a relatively short period of time. This procedure
follows the rules applicable to money market funds.

Any of the money market instruments that the Fund may purchase may be
accompanied with the right to resell the instrument prior to the instrument's
maturity. In addition, we may separately purchase rights to resell these
instruments. These rights are referred to as "PUTS." The purchase of puts
standing alone or with an instrument allows the Fund to sell the security when
the investment adviser believes it is appropriate to do so to honor redemption
requests or to buy more attractive securities.

The securities that we may purchase may change over time as new types of
money market instruments are developed. We will purchase these new instruments,
however, only if their characteristics and features follow the rules governing
the operation of money market funds.

Our investment objective is a fundamental policy that cannot be changed
without shareholder approval. The Board of Directors of the Fund can change
investment policies that are not fundamental.

6
<PAGE>

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HOW THE FUND INVESTS
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OTHER INVESTMENTS

In addition to the principal strategies discussed above, we may also use the
following strategies to increase the Fund's returns or protect its assets if
market conditions warrant.

The Fund may invest up to 10% of its total assets in shares of OTHER
INVESTMENT COMPANIES. Such investment can result in the duplication of
management and advisory fees.

The Fund may also use REPURCHASE AGREEMENTS, where a party agrees to sell a
security to the Fund and then repurchase it at an agreed-upon price at a stated
time. These transactions constitute short-term cash loans by the Fund. This
creates a fixed return for the Fund. The Fund will not invest more than 5% of
its total assets in repurchase agreements.

ADDITIONAL STRATEGIES

The Fund may use REVERSE REPURCHASE AGREEMENTS, where we borrow money on a
temporary basis by selling a security with an obligation to repurchase it at an
agreed-upon price and time. The Fund's use of reverse repurchase agreements is
limited to 5% of the value of its total assets.

The Fund may also purchase money market obligations on a "WHEN-ISSUED" or
"DELAYED-DELIVERY" basis. When the Fund makes this type of purchase, the price
and interest rate are fixed at the time of purchase, but delivery and payment
for the obligations take place at a later time. The Fund does not earn interest
income until the date the obligations are delivered.

The Fund intends to purchase investment securities jointly with certain
other mutual funds. Our ability to engage in joint investment is subject to
conditions imposed by an order of the Securities and Exchange Commission. Joint
investment can allow the Fund to achieve better investment performance because
of reduced transaction costs and greater investment leverage.

The Fund also follows certain policies when it: BORROWS MONEY (the Fund may
borrow up to 5% of the value of its total assets) and HOLDS ILLIQUID SECURITIES
(the Fund may hold up to 10% of its net assets in illiquid securities, including
securities with legal or contractual restrictions, those without a readily
available market, and repurchase agreements with maturities longer than seven
days). The Fund is subject to certain investment restrictions that are
fundamental policies, which means they cannot be changed without shareholder
approval. For more information about these restrictions, see the SAI.

7
<PAGE>

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HOW THE FUND INVESTS
- -------------------------------------------------------------------------------

INVESTMENT RISKS

As noted, all investments involve risk, and investing in the Fund is no
exception.

The Fund's investments in Municipal Bonds involve both CREDIT RISK--the
possibility that the issuer of a particular security will default, and MARKET
RISK--the risk that an instrument will lose value because interest rates change.
To limit these risks, we invest only in high-quality securities with remaining
maturities of no more than 13 months.

This chart outlines the key risks and potential rewards of the principal
strategies and certain other investments of the Fund. See,
too, "Description of the Fund, Its Investments and Risks" in the SAI.

- ---------------------------
INVESTMENT TYPE
- --------------------------------------------------------------------------------
% OF FUND'S TOTAL RISKS POTENTIAL REWARDS
ASSETS
- --------------------------------------------------------------------------------

HIGH-QUALITY MONEY o Credit risk--the risk o Regular interest income
MARKET OBLIGATIONS that the default
OF MUNICIPAL ISSUERS of an issuer o May be more secure than
would leave the stock and equity
Up to 100% Fund with unpaid securities because of
interest or identified sources from
principal which to pay interest and
principal
o Market risk--the risk
that the obligations
may lose value
because interest
rates change
- --------------------------------------------------------------------------------
PRE-REFUNDED BONDS o May be more o May be more secure than
expensive than other obligations of
obligations municipal issuers because
Up to 25% backed only by a of the escrow of U.S.
municipalities Government obligations
taxing or
borrowing
authority

- --------------------------------------------------------------------------------
SHARES OF OTHER o Could result o May provide additional
INVESTMENT COMPANIES in duplicate diversification
management or
Up to 10% advisory fees
- --------------------------------------------------------------------------------
o May be difficult o May offer a more attractive
ILLIQUID SECURITIES to value precisely yield than widely traded
securities

Up to 10% of net o May be
assets difficult to
sell at the time
or price desired
- --------------------------------------------------------------------------------

<PAGE>

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How the Fund is Managed
- --------------------------------------------------------------------------------

MANAGER

PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC (PIFM)
GATEWAY CENTER THREE, 100 MULBERRY STREET
NEWARK, NEW JERSEY 07102-4077

Under a management agreement with the Fund, PIFM manages the Fund's
investment operations and administers its business affairs. For the fiscal year
ended December 31, 1998, the Fund paid PIFM management fees of [__%] of the
Fund's average net assets.

As of January 31, 1999, PIFM served as the Manager to all __ of the
Prudential Mutual Funds, and as Manager or administrator to __ closed-end
investment companies, with aggregate assets of approximately $__ billion.

INVESTMENT ADVISER

The Prudential Investment Corporation, called Prudential Investments, is the
Fund's investment adviser. Its address is Prudential Plaza, 751 Broad Street,
Newark, NJ 07102. PIFM has responsibility for all investment advisory services,
supervises Prudential Investments and reimburses Prudential Investments for its
reasonable costs and expenses.

Prudential Investments fixed income group has organized into teams that
specialize by sector. The fixed Income Investment Policy Committee, which is
comprised of senior investment staff from each sector team, provides guidance to
the teams regarding duration risk, asset allocations and general risk
parameters. Portfolio managers contribute bottom up security selection within
those guidelines.

DISTRIBUTOR

Prudential Investment Management Services LLC (PIMS) distributes the Fund's
shares under a Distribution Agreement with the Fund. The Fund has a Distribution
and Service Plan under Rule 12b-1 of the Investment Company Act. Under the Plan
and the Distribution Agreement, PIMS pays the expenses of distributing the
Fund's shares and provides certain shareholder support services. The Fund pays
distribution and other fees from the assets of the Fund to PIMS as compensation
for its services. These fees--known as 12b-1 fees--are shown in the "Fees and
Expenses" table. Because these fees are paid from the Fund's assets on a
continuous basis, over time these fees will increase the cost of your investment
and may cost you more than paying other types of sales charges.

9
<PAGE>

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How the Fund is Managed
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YEAR 2000 READINESS DISCLOSURE

The services provided to the Fund and the shareholders by the Manager, the
Distributor, the Transfer Agent and the Custodian depend on the smooth
functioning of their computer systems and those of outside service providers.
Many computer software systems in use today cannot distinguish the year 2000
from the year 1900 because of the way dates are encoded and calculated. Such
event could have a negative impact on handling securities trades, payments of
interest and dividends, pricing and account services. Although, at this time,
there can be no assurance that there will be no adverse impact on the Fund, the
Manager, the Distributor, the Transfer Agent and the Custodian have advised the
Fund that they have been actively working on necessary changes to their computer
systems to prepare for the year 2000. The Fund and its Board receive and have
received since early 1998 satisfactory quarterly reports from the principal
service providers as to their preparations for year 2000 readiness, although
there can be no assurance that the service providers (or other securities market
participants) will successfully complete the necessary changes in a timely
manner. Moreover, the Fund at this time has not considered retaining alternative
service providers or directly undertaken efforts to achieve year 2000 readiness,
the latter of which would involve substantial expenses without an assurance of
success.

Additionally, issuers of securities generally, as well as those purchased by
the Fund, may confront year 2000 compliance issues which, if material and not
resolved, could have an adverse impact on securities markets and/or a specific
issuer's performance and result in a decline in the value of the securities held
by the Fund.

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PRUDENTIAL TAX-FREE MONEY FUND, INC. telephone (800) 225-1852
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<PAGE>

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Fund Distributions and Tax Issues
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Investors who buy shares of the Fund should be aware of some important tax
issues. For example, the Fund distributes DIVIDENDS of ordinary income and any
realized net CAPITAL GAINS to shareholders. These distributions are subject to
taxes, unless you hold your shares in a 401(k) plan, an Individual Retirement
Account (IRA), or some other qualified tax-deferred plan or account.

The following briefly discusses some of the important tax issues you should
be aware of, but is not meant to be tax advice. For tax advice, please speak
with your tax adviser.

DISTRIBUTIONS

The Fund distributes DIVIDENDS of any net investment income to shareholders
every month. The Fund intends to invest so that dividend distributions to you
will be exempt from federal taxation. The dividends you receive from the Fund
will be EXEMPT FROM FEDERAL INCOME TAXES (though not necessarily exempt from
state and local taxation) as long as 50% or more of the value of the Fund's
assets at the end of each quarter is invested in state, municipal and other
bonds that are excluded from gross income for federal income tax purposes and as
long as the Funds mails a notice to you that properly designates the dividend as
an exempt interest dividend.

However, if you are subject to the alternative minimum tax, you will have to
pay tax on the portion of dividend distributions from the Fund attributable to
the Fund's investments in certain "private activity" bonds. The Fund will not
invest more than 20% of its net assets in these bonds.

Although the Fund is not likely to realize capital gains because of the
types of securities we purchase, any realized net CAPITAL GAINS will be paid to
shareholders (typically once a year). Capital gains are generated when the Fund
sells assets for a profit.

For your convenience, Fund distributions of dividends and capital gains are
automatically reinvested in the Fund. If you ask us to pay the distributions in
cash, we will send you a check instead of purchasing more shares of the Fund.
For more information about automatic reinvestment and other shareholder
services, see "How to Buy, Sell and Exchange Shares of the Fund - How To Buy
Shares" at Step 4: Additional Shareholder Services.

11
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Fund Distributions and Tax Issues
- --------------------------------------------------------------------------------

TAX ISSUES
FORM 1099

Every year, you will receive a FORM 1099, which reports the amount of dividends
and capital gains we distributed to you during the prior year. If you own shares
of the Fund as part of a qualified tax-deferred plan or account, your taxes are
deferred, so you will not receive a Form 1099. However, you will receive a Form
1099 when you take any distributions from your qualified tax-deferred plan or
account.

Fund distributions are generally taxable in the year they are received,
except where we declare certain dividends in December of a calendar year but
actually pay them in January of the following year. In such cases, the dividends
are treated as if they were paid on December 31 of the prior year. As noted
above, however, the Fund intends to pay dividends that are exempt from federal
income taxes.

WITHHOLDING TAXES

If federal law requires you to provide the Fund with your tax identification
number and certifications as to your tax status, and you fail to do this, or if
you are otherwise subject to back-up withholding, we will withhold and pay to
the U.S. Treasury 31% of your distributions. Dividends of net investment income
and short-term capital gains paid to a NONRESIDENT FOREIGN SHAREHOLDER generally
will be subject to a U.S. withholding tax of 30%. This rate may be lower,
depending on any tax treaty the U.S. may have with the shareholder's country.

<PAGE>

How to Buy, Sell and
- --------------------------------------------------------------------------------
Exchange Shares of the Fund
- --------------------------------------------------------------------------------

HOW TO BUY SHARES

STEP 1: OPEN AN ACCOUNT

If you don't have an account with us or a securities firm that is permitted to
buy or sell shares of the Fund for you, call Prudential Mutual Fund Services LLC
(PMFS) at (800) 225-1852 or contact:

PRUDENTIAL MUTUAL FUND SERVICES LLC
ATTN: INVESTMENT SERVICES
P.O. BOX 15020
NEW BRUNSWICK, NJ 08906-5020

To purchase by wire, call the number above to obtain an application. After
PMFS receives your completed application, you will receive an account number.
For additional information about purchasing shares of the Fund, see the back
cover page of this prospectus. We have the right to reject any purchase order
(including an exchange into the Fund) or suspend or modify the Fund's sale of
its shares.

Except as noted below, the minimum initial investment for Fund shares is
$1,000 and the minimum subsequent investment is $100. All minimum investment
requirements are waived for certain retirement and employee savings plans and
custodial accounts for the benefit of minors.

PURCHASES THROUGH PRUDENTIAL SECURITIES

Automatic Investment (Autosweep). If you purchase shares of the Fund through
Prudential Securities, you may be able to invest through automatic investment
procedures (the Autosweep program). For automatic purchases through Prudential
Securities, the minimum initial investment requirement is $1,000 and there is no
minimum subsequent investment requirement.

The Autosweep program allows you to designate a money market fund as your
primary money sweep fund. If you do not designate a primary money sweep fund,
Prudential MoneyMart Assets, Inc. will automatically be your primary money sweep
fund. You have the option to change your primary money sweep fund at any time by
notifying your Prudential Securities Financial Advisor. The following discussion
assumes you have designated the Fund as your primary money sweep fund.

When your Prudential Securities account has a credit balance (that is,
immediately available funds), Prudential Securities will purchase shares of the
Fund equal to that amount .Credit balances of $1000 or more in your account
resulting from the proceeds of a securities sale, or credit balances of a
dividend or interest payment, maturity of bond or call or a payment into the
securities account), will automatically be invested in shares of the Fund. Where
your credit balance results from a sale of securities, the available cash will
be

13
<PAGE>

reinvested in the fund on settlement date. Where your credit balance results
from a non-trade related credit, the available cash will be invested in the Fund
on the first business day after it is received by Prudential Securities. For
eligible credit balances of $1 or more not otherwise described above, shares of
the Fund will be purchased automatically on the last business day of each month.

The following chart shows the frequency and amount of the sweep:
- --------------------------------------------------------------------------------
Daily Monthly

Credit Balances resulting from the $1,000 or more
proceeds of a securities sale

Credit Balances resulting from a $10,000 or more
non-trade-related credit, including
the maturity of a bond or call

Remaining Credit Balances $1.00 or more
- --------------------------------------------------------------------------------

You will begin earning dividends on your shares purchased through Autosweep
on the day the order is placed. Prudential Securities will purchase shares of
the Fund at 4:30 p.m. New York Time on the business day following the existence
of a credit balance, which is the second business day after the availability of
the credit balance. Prudential Securities may use and retain the benefit of
credit balances in your account until Fund shares are purchased.

Your investment in the Fund will be held in the name of Prudential
Securities. Prudential Securities will receive all statements and dividends from
the Fund and will, in turn, send you account statements showing your purchases,
sales and dividends.

Manual Investment. If you have an account with Prudential Securities, you may
manually purchase shares of the Fund from Prudential Securities if the Fund is
not designated as your primary money sweep fund or if you do not have a money
sweep feature in your account. Manual purchases are subject to the minimum
initial and subsequent investment requirements described at Step 1: Open an
Account.

Prudential Securities will purchase shares of the Fund at 4:30 p.m. New York
Time on the business day after your purchase request is received. You will begin
earning dividends on your shares on the second business day after your purchase
request was received by Prudential Securities. Prudential Securities may use and
retain the benefits of credit balances in your account until Fund shares are
purchased.

PURCHASES THROUGH THE PRUDENTIAL ADVANTAGE ACCOUNT PROGRAM

The Prudential Advantage Account Program (the Advantage Account Program) is
a financial services program available to clients of Pruco Securities
Corporation (Prusec) and provides for an automatic investment procedure similar
to the Autosweep program. The Advantage Account Program consists of two types of
accounts: the Investor Account, which is a brokerage account available to Prusec
clients, and the Advantage Account, which is an inclusive cash management
program offering brokerage services, as well as a debit card. checkwriting, and
other services. For automatic purchases through the Prudential Advantage Account
Program, the minimum initial investment requirement is $1,000 and there is no
minimum subsequent investment requirement.

The Advantage Account Program allows you to designate a market money fund as
your primary money sweep fund. If you do not designate a primary money sweep
fund, Prudential MoneyMart Assets, Inc. will automatically be your primary money
sweep fund. You have the option to change your primary money sweep fund at any
time by notifying your Prusec financial adviser. The following discussion
assumes you have designated the Fund as your primary money sweep fund.

When your Prusec securities account has a credit balance (that is,
immediately available funds), your financial advisor will purchase shares of the
Fund equal to that amount. Prudential Securities arranges for the investment of
the credit balance in shares of the Fund. Credit Balances of $1,000 or more in
your account resulting from the proceeds of a securities sale, or credit
balances of $10,000 or more resulting from a non-trade related credit (e.g.,
receipt of a dividend or interest payment, maturity of a bond or call or a
payment into the securities account), will automatically be invested in shares
of the Fund. Where your credit balance results from a sale of securities, the
available cash will be invested in the Fund on the settlement date. Where your
credit balance results from a non-trade related credit, the available cash will
be invested in the Fund on the first business day after it is received by
Prudential Securities. For eligible credit balances of $1 or more not otherwise
described above, shares of the Fund will be purchased automatically on a
semi-monthly basis on the fifteenth

15
<PAGE>

day (or, if that day is a weekend or holiday, the next business day) and the
last business day of each month.

The following chart shows the frequency and amount of the sweep:

- --------------------------------------------------------------------------------
Daily Semi-Monthly

Credit Balances resulting from the $1,000 or more
proceeds of a securities sale

Credit Balances resulting from a $10,000 or more
non-trade-related credit, including
the maturity of a bond or call

Remaining Credit Balances $1.00 or more
- --------------------------------------------------------------------------------

You will begin earning dividends on your shares purchased through the
Advantage Account Program on the day the order is placed. Prudential Securities
will purchase shares of the Fund at 4:30 p.m. New York Time on the business day
following the existence of a credit balance, which is the second business day
after the availability of the credit balance. Prudential Securities will retain
the benefit of credit balances in your account until Fund shares are purchased.

The charges and expenses of the Advantage Account Program are not reflected
in the Shareholder Fees and Expenses table. For information about participating
in the Advantage Account Program, you shaould call (800) 235-7637.

STEP 2: UNDERSTANDING THE PRICE YOU'LL PAY

When you invest in a mutual fund, you buy shares of the Fund. Shares of a money
market mutual fund, like the Fund, are priced differently than shares of common
stock and other securities.

The price you pay for each share of the Fund is based on the share value.
The share value of a mutual fund--known as the NET ASSET VALUE or NAV--is
determined by a simple calculation: it's the total value of the Fund (assets

minus liabilities) divided by the total number of shares outstanding. In
determining NAV, the Fund values its securities using the amortized cost method.
The Fund seeks to maintain an NAV of $1 per share at all times. Your broker may
charge you a separate or additional fee for purchases of shares.

We determine the NAV of our shares once each business day at 4:30 p.m. New
York Time on days that the New York Stock Exchange is open for trading. We do
not determine NAV on days when we have not received any orders to purchase,
sell, or exchange or when changes in the value of the Fund's portfolio do not
affect the NAV.

STEP 3: ADDITIONAL SHAREHOLDER SERVICES

As a Fund shareholder, you can take advantage of the following services and
privileges:

Automatic Reinvestment. As we explained in the "Fund Distributions and Tax
Issues" section, the Fund pays out--or distributes--its net investment income
and capital gains to all shareholders. For your convenience, we will
automatically reinvest your distributions in the Fund at NAV. If you want your
distributions paid in cash, you can indicate this preference on your
application, notify your broker or notify the Transfer Agent in writing (at the
address below) at least five business days before the date we determine who
receives dividends.

PRUDENTIAL MUTUAL FUND SERVICES LLC
ATTENTION: ACCOUNT MAINTENANCE
P.O. BOX 15015
NEW BRUNSWICK, NJ 08906-5015

Reports to Shareholders. Every year we will send you an annual report (along
with an updated prospectus) and a semi-annual report, which contain important
financial information about the Fund. To reduce Fund expenses, we will send one
annual shareholder report, one semi-annual shareholder report and one annual
prospectus per household, unless you instruct us or your broker otherwise.

17
<PAGE>

HOW TO SELL YOUR SHARES

You can sell your shares of the Fund for cash (in the form of a check) at any
time, subject to certain restrictions.

When you sell shares of the Fund--also known as redeeming
shares--the price you will receive will be the NAV next determined after the
Transfer Agent, the Distributor or your broker receives your order to sell. If
your broker holds your shares, he must receive your order to sell by 4:30 p.m.
New York Time to process the sale on that day. Otherwise contact:

PRUDENTIAL MUTUAL FUND SERVICES LLC
ATTENTION: REDEMPTION SERVICES
P.O. BOX 15010
NEW BRUNSWICK, NJ 08906-5010

Generally, we will pay you for the shares that you sell within seven days
after the Transfer Agent, the Distributor or your broker receives your sell
order. If you hold shares through a broker, payment will be credited to your
account. If you are selling shares you recently purchased with a check, we may
delay payment of your proceeds until your check clears, which can take up to 10
days from the purchase date. You can avoid delay if you purchase shares by wire,
certified check or cashier's check. Your broker may charge you a separate or
additional fee for sales of shares.

Restrictions on Sales. There are certain times when you may not be able to sell
shares of the Fund or when we may delay paying you the proceeds from a sale.
This may happen during unusual market conditions or emergencies when the Fund
can't determine the value of its assets or sell its holdings. For more
information, see the SAI, "Purchase and Redemption of Fund Shares--Restrictions
on Sale."

If you are selling more than $50,000 of shares, you want the check sent to
someone or someplace that is not in our records, or you are a business or trust,
and if you hold your shares directly with the Transfer Agent, you may have to
have the signature on your sell order guaranteed by a financial institution.

Redemption in Kind. If the sales of Fund shares you make during any 90-day
period reach the lesser of $250,000 or 1% of the value of the Fund's net
assets, we can then give you securities from the Fund's portfolio instead of
cash. If you want to sell the securities for cash, you would have to pay the
costs charged by a broker.

18
<PAGE>

Automatic Redemption for Autosweep. If you participate in the Autosweep program,
your Fund shares may be automatically redeemed to cover any deficit in your
Prudential Securities account. The amount redeemed will be the nearest dollar
amount necessary to cover the deficit.

The amount of the redemption will be the lesser of the total value of Fund
shares held in your Prudential Securities account or the deficit in your
Prudential Securities account. If you use this automatic redemption procedure
and want to pay for a securities transaction in your account other than through
this procedure, you must deposit cash in your securities account before the
settlement date. If you use this automatic redemption procedure and want to pay
any other deficit in your securities account other than through this procedure,
you must deposit cash in your securities account before you incur the deficit.

Redemptions are automatically made by Prudential Securities, to the nearest
dollar, on each day to satisfy deficits from securities transactions or to honor
your redemption requests. Your account will be automatically scanned for
deficits each day and, if there is insufficient cash in your account, we will
redeem an appropriate number of shares of the Fund at the next determined NAV to
satisfy any remaining deficit. You are entitled to any dividends declared on the
redeemed shares through the day before the redemption is made. Dividends
declared on the redemption date will be retained by Prudential Securities, which
has advanced monies to satisfy deficits in your account.

Automatic Redemption for the Advantage Account. If you participate in the
Advantage Account Program, your Fund shares may be automatically redeemed to
cover any deficit in your securities account. The amount redeemed will be the
nearest dollar amount necessary to cover the deficit.

The amount of the redemption will be the lesser of the total value of Fund
shares held in your securities account or the deficit in your securities
account. A deficit in your Advantage Account may result from activity arising
under the program, such as debit balances incurred by the use of the Visa(R)
Account, including Visa purchases, cash advances and Visa Account checks. Your
account will be automatically scanned for deficits each day and, if there is
insufficient cash in your account, we will redeem an appropriate number of
shares of the Fund to satisfy any remaining deficit. You are entitled to any
dividends declared on the redeemed shares through the day before the redemption
is made. Dividends declared on the redemption date will be

19
<PAGE>

retained by Prudential Securities, which has advanced monies to satisfy deficits
in your account.

Redemptions are automatically made by Prudential Securities, to the nearest
dollar, on each day to satisfy deficits from securities transactions or to honor
your redemption requests.

HOW TO EXCHANGE YOUR SHARES

You can exchange your shares of the Fund for shares in certain other Prudential
Mutual Funds--including certain money market funds--if you satisfy the minimum
investment requirements of such other Prudential Mutual Fund. You can exchange
shares of the Fund for Class A shares of another Prudential Mutual Fund, but you
can't exchange Fund shares for Class B, Class C or Class Z shares, except that
shares purchased prior to January 22, 1990 that are subject to a contingent
deferred sales charge can be exchanged for Class B shares.

If you hold shares through a broker, you must exchange shares through your
broker. Otherwise, contact:

PRUDENTIAL MUTUAL FUND SERVICES LLC
ATTN: EXCHANGE PROCESSING
P.O. BOX: 15010
NEW BRUNSWICK, NJ 08906-5010

When you exchange shares of the Fund for Class A shares of any other
Prudential Mutual Fund, you will be subject to any sales charge that may be
imposed by such other Prudential Mutual Fund. The sales charge is imposed at the
time of your exchange.

Frequent Trading

Frequent trading of Fund shares in response to short-term fluctuations in the
market--also known as "market timing"--may make it very difficult to manage the
Fund's investments. When market timing occurs, the Fund may have to sell
portfolio securities to have the cash necessary to redeem the market timer's
shares. This can happen at a time when it is not advantageous to sell any
securities, so the Fund's performance may be hurt. When large dollar amounts are
involved, market timing can also make it difficult to use long-term

20
<PAGE>

investment strategies because we cannot predict how much cash the Fund will have
to invest. When in our opinion such activity would have a disruptive effect on
portfolio management, the Fund reserves the right to refuse purchase orders and
exchanges into the Fund by any person, group or commonly controlled accounts.
The Fund may notify a market timer of rejection of an exchange purchase order
after the day the order is placed. If the Fund allows a market timer to trade
Fund shares, it may require the market timer to enter into a written agreement
to follow certain procedures and limitations.

<PAGE>

- -------------------------------------------------------------------------------
Financial Highlights
- -------------------------------------------------------------------------------

The financial highlights will help you evaluate the Fund's financial
performance. The TOTAL RETURN in the chart represents the rate that a
shareholder earned on an investment in the Fund, assuming reinvestment of all
dividends and other distributions. The information is for shares of the Fund for
the periods indicated.

Review this chart with the financial statements which appear in the SAI.
Additional performance information is contained in the annual report, which you
can receive at no charge.

The financial highlights for the five fiscal years ended December 31, 1998
were audited by PricewaterhouseCoopers LLP, independent accountants, whose
reports were unqualified.

[financial highlights to be inserted]

- -------------------------------------------------------------------------------
PRUDENTIAL WORLD FUND, INC. telephone (800) 225-1852
- -------------------------------------------------------------------------------

<PAGE>

- --------------------------------------------------------------------------------
The Prudential Mutual Fund Family
- --------------------------------------------------------------------------------

Prudential offers a broad range of mutual funds designed to meet your individual
needs. For information about these funds, contact your financial adviser or
call us at (800) 225-1852. Read the prospectus carefully before you invest or
send money.

STOCK FUNDS

PRUDENTIAL DISTRESSED SECURITIES FUND, INC.
PRUDENTIAL EMERGING GROWTH FUND, INC.
PRUDENTIAL EQUITY FUND, INC.
PRUDENTIAL EQUITY INCOME FUND
PRUDENTIAL INDEX SERIES FUND
Prudential Small-Cap Index Fund
Prudential Stock Index Fund
THE PRUDENTIAL INVESTMENT PORTFOLIOS, INC.
Prudential Jennison Growth Fund
Prudential Jennison Growth
& Income Fund
PRUDENTIAL MID-CAP VALUE FUND
PRUDENTIAL REAL ESTATE SECURITIES FUND
PRUDENTIAL SMALL-CAP QUANTUM FUND, INC.
PRUDENTIAL SMALL COMPANY VALUE
FUND, INC.
PRUDENTIAL TAX-MANAGED EQUITY FUND
PRUDENTIAL 20/20 FOCUS FUND
PRUDENTIAL UTILITY FUND, INC.
NICHOLAS-APPLEGATE FUND, INC.
Nicholas-Applegate Growth Equity Fund
ASSET ALLOCATION/BALANCED FUND
PRUDENTIAL BALANCED FUND
PRUDENTIAL DIVERSIFIED FUNDS
Conservative Growth Fund
Moderate Growth Fund
High Growth Fund
THE PRUDENTIAL INVESTMENT PORTFOLIOS, INC.
Prudential Active Balanced Fund

GLOBAL FUNDS

GLOBAL STOCK FUNDS
PRUDENTIAL DEVELOPING MARKETS FUND
Prudential Developing Markets
Equity Fund
Prudential Latin America Equity Fund
PRUDENTIAL EUROPE GROWTH FUND, INC.
PRUDENTIAL GLOBAL GENESIS FUND, INC.
PRUDENTIAL INDEX SERIES FUND
Prudential Europe Index Fund
Prudential Pacific Index Fund
PRUDENTIAL NATURAL RESOURCES
FUND, INC.
PRUDENTIAL PACIFIC GROWTH FUND, INC.
PRUDENTIAL WORLD FUND, INC.
Global Series
International Stock Series
GLOBAL UTILITY FUND, INC.
GLOBAL BOND FUNDS
PRUDENTIAL GLOBAL LIMITED MATURITY FUND, INC.
Limited Maturity Portfolio
PRUDENTIAL INTERMEDIATE GLOBAL INCOME FUND, INC.
PRUDENTIAL INTERNATIONAL BOND
FUND, INC.
THE GLOBAL TOTAL RETURN FUND, INC.

23
<PAGE>

- --------------------------------------------------------------------------------
The Prudential Mutual Fund Family
- --------------------------------------------------------------------------------

BOND FUNDS

TAXABLE BOND FUNDS

PRUDENTIAL DIVERSIFIED BOND FUND, INC.
PRUDENTIAL GOVERNMENT INCOME FUND, INC.
PRUDENTIAL GOVERNMENT SECURITIES TRUST
Short-Intermediate Term Series
PRUDENTIAL HIGH YIELD FUND, INC.
PRUDENTIAL HIGH YIELD TOTAL RETURN
FUND, INC.
PRUDENTIAL INDEX SERIES FUND
Prudential Bond Market Index Fund
PRUDENTIAL STRUCTURED MATURITY FUND, INC.
Income Portfolio

TAX-EXEMPT BOND FUNDS

PRUDENTIAL CALIFORNIA MUNICIPAL FUND
California Series
California Income Series
PRUDENTIAL MUNICIPAL BOND FUND
High Income Series
Insured Series
PRUDENTIAL MUNICIPAL SERIES FUND
Florida Series
Massachusetts Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
PRUDENTIAL NATIONAL MUNICIPALS
FUND, INC.

MONEY MARKET FUNDS

TAXABLE MONEY MARKET FUNDS
CASH ACCUMULATION TRUST
Liquid Assets Fund
National Money Market Fund
PRUDENTIAL GOVERNMENT SECURITIES TRUST
Money Market Series
U.S. Treasury Money Market Series
PRUDENTIAL SPECIAL MONEY MARKET
FUND, INC.
Money Market Series
PRUDENTIAL MONEYMART ASSETS, INC.
TAX-FREE MONEY MARKET FUNDS
PRUDENTIAL TAX-FREE MONEY FUND, INC.
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
California Money Market Series
PRUDENTIAL MUNICIPAL SERIES FUND
Connecticut Money Market Series
Massachusetts Money Market Series
New Jersey Money Market Series
New York Money Market Series
COMMAND FUNDS
COMMAND MONEY FUND
COMMAND GOVERNMENT FUND
COMMAND TAX-FREE FUND

INSTITUTIONAL MONEY MARKET FUNDS

PRUDENTIAL INSTITUTIONAL LIQUIDITY PORTFOLIO, INC.
Institutional Money Market Series

<PAGE>

For More Information

Please read this prospectus before
you invest in the Fund and keep it
for future reference. For information
or shareholder questions contact:

PRUDENTIAL MUTUAL FUND SERVICES LLC
P.O. BOX 15005
NEW BRUNSWICK, NJ 08906-5005
(800) 225-1852
(732) 417-7555
(if calling from outside the U.S.)
- --------------------------------------------

Outside Brokers Should Contact:

PRUDENTIAL INVESTMENT MANAGEMENT
SERVICES LLC
P.O. BOX 15035
NEW BRUNSWICK, NJ 08906-5035
(800) 778-8769

- --------------------------------------------
Visit Prudential's Web Site At:
http://www.prudential.com
- --------------------------------------------

Additional information about the Fund can be obtained without charge and can be
found in the following documents:

STATEMENT OF ADDITIONAL
INFORMATION (SAI)
(incorporated by reference into
this prospectus)

ANNUAL REPORT

SEMI-ANNUAL REPORT

MF103A

You can also obtain copies of Fund documents from the Securities and Exchange
Commission as follows:

By Mail:

Securities and Exchange Commission
Public Reference Section
Washington, DC 20549-6009
(The SEC charges a fee to copy documents.)

In Person:
Public Reference Room in
Washington, DC
(For hours of operation, call
1(800) SEC-0330)

Via the Internet:
http://www.sec.gov
- -------------------------------------------

CUSIP Number: 74436P-10-3
Investment Company Act File No:

811-2927

[logo] Printed on Recycled Paper

<PAGE>

PRUDENTIAL TAX-FREE MONEY FUND, INC.

Statement of Additional Information

Dated April ___, 1999

Prudential Tax-Free Money Fund, Inc. (the Fund) is an open-end, diversified,
management investment company whose investment objective is to attain for
investors the highest level of current income that is exempt from federal income
taxes, consistent with liquidity and the preservation of capital. The Fund
pursues this objective by investing primarily in a portfolio of short-term debt
obligations issued by states, territories and possessions of the United States,
the District of Columbia, and their political subdivisions, duly constituted
authorities and corporations, the interest from which is wholly-exempt from
federal income tax in the opinion of bond counsel to the issuer. There can be no
assurance that the Fund's investment objective will be achieved. See "How the
Fund Invests" in the Fund's Prospectus and "Description of the Fund, its
Investments and Risks."

The Fund's address is Gateway Center Three, 100 Mulberry Street, Newark, New
Jersey 07102-4077, and its telephone number is (800) 225-1852.

This Statement of Additional Information sets forth information about the
Fund. This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Fund's Prospectus, dated April ___, 1999, a copy of
which may be obtained from the Fund upon request at the address or telephone
number noted above.

TABLE OF CONTENTS
PAGE
----

Fund History B-2

Description of the Fund, its Investments and Risks B-2

Investment Restrictions B-5

Management of the Fund B-6

Control Persons and Principal Holders of Securities B-9

Investment Advisory and Other Services B-9

Brokerage Allocation and Other Practices B-12

Securities and Organization B-13

Purchase and Redemption of Fund Shares B-13

Net Asset Value B-15

Taxes, Dividends and Distributions B-15

Calculation of Yield B-16

Financial Statements B-17

Reports of Independent Accountants --

Appendix I--Description of Ratings I-1

Appendix II--Information Relating to Prudential II-1

================================================================================

MF103B

<PAGE>

FUND HISTORY

The Fund was organized as a corporation under the laws of Maryland on March
22, 1979.

DESCRIPTION OF THE FUND, ITS INVESTMENTS AND RISKS

(a) CLASSIFICATION. The Fund is a diversified open-end management
investment company.

(b) INVESTMENT STRATEGIES AND RISKS.

The Fund's 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. Additional information relating
to the Fund's principal investment policies and strategies discussed in the
Fund's Prospectus, and information about other securities, instruments, policies
and strategies which the Fund may use from time to time in seeking to achieve
its investment objective, are described below. The Fund may not be successful in
achieving its investment objective and you can lose money.

MUNICIPAL BONDS

The Fund may invest in municipal bonds and municipal notes, which are
collectively referred to as Municipal Bonds in the Fund's Prospectus and this
Statement of Additional Information.

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 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.

The Fund will treat an investment in a municipal security refunded with
escrowed U.S. Government securities as U.S. Government securities for purposes
of the Investment Company Act's diversification requirements provided: (i) the
escrowed securities are "government securities" as defined in the Investment
Company Act, (ii) the escrowed securities are irrevocably pledged only to
payment of debt service on the refunded securities, except to the extent there
are amounts in excess of funds necessary for such debt service, (iii) principal
and interest on the escrowed securities will be sufficient to satisfy all
scheduled principal, interest and any premiums on the refunded securities and a
verification report prepared by a party acceptable to a nationally recognized
statistical rating agency, or counsel to the holders of the refunded securities,
so verifies, (iv) the escrow agreement provides that the issuer of the refunded
securities grants and assigns to the escrow agent, for the equal and ratable
benefit of the holders of the refunded securities, an express first lien on,
pledge of and perfected security interest in the escrowed securities and the
interest income thereon, (v) the escrow agent had no lien of any type with
respect to the escrowed securities for payment of its fees or expenses except to
the extent there are excess securities, as described in (ii) above. The Fund
will not, however, invest more than 25% of its total assets in pre-refunded
bonds of the same municipal issuer.

VARIABLE RATE AND FLOATING RATE SECURITIES. The interest rates payable on
certain Municipal Bonds are not fixed and may fluctuate based upon changes in
market rates. Municipal Bonds of this type are called "variable rate" or
"floating rate" obligations.

B-2

<PAGE>

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 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 meets the Fund's investment quality
requirements.

PUTS. The Fund may purchase Municipal Bonds together with the right to
resell the Municipal Bonds to the seller at an agreed-upon price or yield within
a specified period prior to the maturity date of the bonds. 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 with puts or tender options is higher
than the price which otherwise would be paid for the Bonds. 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. 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 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 subject to the puts or tender options so that the interest on
the bonds will be tax-exempt income to the Fund.

BORROWING

The Fund may borrow from banks (including through entering into reverse
repurchase agreements) up to and including 5% of the value of its total assets
taken at cost for temporary or emergency purposes. The Fund may pledge up to and
including 5% of its net assets to secure such borrowings.

REPURCHASE AGREEMENTS

The Fund may invest up to 5% of its assets in repurchase agreements whereby
the seller of a security agrees to repurchase that security from the Fund at a
mutually agreed-upon time and price. The period of maturity is usually quite
short, possibly overnight or a few days, although it may extend over a number of
months. The resale price is in excess of the purchase price, reflecting an
agreed-upon rate of return effective for the period of time the Fund's money is
invested in the security. The Fund's repurchase agreements will at all times be
fully collateralized in an amount at least equal to the resale price. The
instruments held as collateral are valued daily, and if the value of instruments
declines, the Fund will require additional collateral. If the seller defaults
and the value of the collateral securing the repurchase agreement declines, the
Fund may incur a loss. The Fund participates in a joint repurchase account with
other investment companies managed by PIFM pursuant to an order of the SEC.

B-3

<PAGE>

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. Municipal Bonds 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.
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 on a when-issued
or delayed delivery basis, it will record the transaction and reflect the value
of the bond in determining its net asset value. The Fund will also establish a
segregated account with its custodian bank in which it will maintain cash or
other liquid assets equal in value to commitments for when-issued or delayed
delivery securities. 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 on a when-issued or delayed delivery basis. The Fund may invest in
when-issued or delayed delivery securities without other limitation.

ILLIQUID SECURITIES

The Fund may not hold more than 10% of its net assets in repurchase
agreements which have a maturity of longer than seven days or in other illiquid
securities, including securities that are illiquid by virtue of the absence of a
readily available market or legal or contractual restrictions on resale.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (Securities Act),
securities which are otherwise not readily marketable and repurchase agreements
having a maturity of longer than seven days. Securities which have not been
registered under the Securities Act are referred to as private placements or
restricted securities and are purchased directly from the issuer or in the
secondary market. Mutual funds do not typically hold a significant amount of
these restricted or other illiquid securities because of the potential for
delays on resale and uncertainty in valuation. Limitations on resale may have an
adverse effect on the marketability of portfolio securities and a mutual fund
might be unable to dispose of restricted or other illiquid securities promptly
or at reasonable prices and might thereby experience difficulty satisfying
redemptions within seven days. A mutual fund might also have to register such
restricted securities in order to dispose of them resulting in additional
expense and delay. Adverse market conditions could impede such a public offering
of securities.

In recent years, however, a large institutional market has developed for
certain securities that are not registered under the Securities Act including
repurchase agreements, commercial paper, foreign securities, municipal
securities, convertible and corporate bonds and notes. Institutional investors
depend on an efficient institutional market in which the unregistered security
can be readily resold or an issuer's ability to honor a demand for repayment.
The fact that there are contractual or legal restrictions on resale to the
general public or to certain institutions may not be indicative of the liquidity
of such investments.

Rule 144A under the Securities Act allows for a broader institutional
trading market for securities otherwise subject to restriction on resale to the
general public. Rule 144A establishes a "safe harbor" from the registration
requirements of the Securities Act for resales of certain securities to
qualified institutional buyers. The investment adviser anticipates that the
market for certain restricted securities such as institutional commercial paper
and foreign securities will expand further as a result of this regulation and
the development of automated systems for the trading, clearance and settlement
of unregistered securities of domestic and foreign issuers, such as the PORTAL
System sponsored by the National Association of Securities Dealers, Inc. (NASD).

Restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act, commercial paper and municipal lease obligations for which there
is a readily available market will not be deemed to be illiquid under procedures
established by the Board of Directors. The investment adviser will monitor the
liquidity of such restricted securities subject to the supervision of the Board
of Directors. In reaching liquidity decisions, the investment adviser will
consider, inter alia, the following factors: (1) the frequency of trades and
quotes for the security; (2) the number of dealers wishing to purchase or sell
the security and the number of other potential purchasers; (3) dealer
undertakings to make a market in the security; and (4) the nature of the
security and the nature of the marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
the transfer). With respect to municipal lease obligations, the investment
adviser will also consider: (1) the willingness of the municipality to continue,
annually or biannually, to appropriate funds for payment of the lease; (2) the
general credit quality of the municipality and the essentiality to the
municipality of the property covered by the lease; (3) in the case of unrated
municipal lease obligations, an analysis of factors similar to that performed by
nationally recognized statistical rating organizations in evaluating the credit
quality of a municipal lease obligation, including (i) whether the lease can be
cancelled; (ii) if applicable, what assurance there is that the assets
represented by the lease can be sold; (iii) the strength of the lessee's general
credit (e.g., its debt, administrative, economic and financial characteristics);
(iv) the likelihood that the municipality will discontinue appropriating funding
for the leased property because the property is no longer deemed essential to
the operations of

B-4

<PAGE>

the municipality (e.g., the potential for an event of nonappropriation); (v) the
legal recourse in the event of failure to appropriate; and (4) any other factors
unique to municipal lease obligations as determined by the investment adviser.
With respect to commercial paper that is issued in reliance on Section 4(2) of
the Securities Act (1) it must be rated in one of the two highest rating
categories by at least two nationally recognized statistical rating
organizations (NRSRO), or if only one NRSRO rates the securities, by that NRSRO,
or, if unrated, be of comparable quality in the view of the investment adviser;
and (2) it must not be "traded flat" (i.e., without accrued interest) or in
default as to principal or interest. Repurchase agreements subject to demand are
deemed to have a maturity equal to the notice period.

OTHER MATTERS. For purposes of diversification under the Investment Company
Act of 1940, as amended (the Investment Company Act), the identification of the
issuer of Municipal Bonds 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.

INVESTMENT RESTRICTIONS

The following restrictions are fundamental policies. Fundamental policies
are those which cannot be changed without the approval of the holders of a
majority of the outstanding voting securities of the Fund. A "majority of the
outstanding voting securities," when used in this Statement of Additional
Information, means the lesser of (i) 67% of the voting shares represented at a
meeting at which more than 50% of the outstanding voting shares are present in
person or represented by proxy or (ii) more than 50% of the outstanding voting
shares. With respect to the submission of a change in fundamental policy or
investment objective of the Fund, such matters shall be deemed to have been
effectively acted upon with respect to the Fund if a majority of the outstanding
voting securities of the Fund votes for the approval of such matters as provided
above.

The following investment restrictions are fundamental policies of the Fund
and may not be changed except as described above.

The Fund may not:

(1) Invest more than 5% of the market or other fair value of its total
assets in the securities of any one issuer (other than obligations of, or
guaranteed by, the United States Government, its agencies or instrumentalities
or secured by such obligations). See "Municipal Bonds" under "Description of the
Fund, its Investments and Risks" for the definition of an issuer.

(2) Make short sales of securities.

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

(4) Borrow money, except that the Fund may borrow for temporary purposes in
amounts not exceeding 5% of the market or other fair value (taken at the lower
of cost or current value) of its total assets (not including the amount
borrowed). Any such borrowings will be made only from banks. Secured temporary
borrowings may take the form of reverse repurchase agreements, pursuant to which
the Fund would sell portfolio securities for cash and simultaneously agree to
repurchase them at a specified date for the same amount of cash plus an interest
component. The Fund would maintain, in a segregated account with its custodian,
liquid assets equal in value to the amount owed.

(5) Pledge its assets or assign or otherwise encumber them in excess of 10%
of its assets (taken at market or other fair value at the time of pledging) and
then only to secure borrowings effected within the limitations set forth in
restriction (4).

(6) Engage in the underwriting of securities.

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

(8) Make loans of money or securities, except through the purchase of debt
obligations or repurchase agreements.

(9) Purchase securities of other investment companies, except in the open
market involving only customary brokerage commissions and as a result of which
not more than 10% of its total assets (determined at the time of investment)
would be invested in such securities or except in connection with a merger,
consolidation, reorganization or acquisition of assets.

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

B-5

<PAGE>

(11) Purchase industrial revenue bonds if, as a result of such purchase,
more than 5% of total Fund assets would be invested in industrial revenue bonds
where payment of principal and interest are the responsibility of companies with
less than three years of operating history.

Whenever any fundamental investment policy or investment restriction states
a maximum percentage of the Fund's assets, it is intended that if the percentage
limitation is met at the time the action is taken, 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 action within three days to
reduce its borrowings, as required by applicable law.

MANAGEMENT OF THE FUND

(A) DIRECTORS

The Fund has Directors who, in addition to overseeing the actions of the
Fund's Manager, Subadviser, and Distributor, decide upon matters of general
policy.

The Directors also review the actions of the officers of the Fund, who
conduct and supervise the daily business operations of the Fund.

(B) MANAGEMENT INFORMATION--DIRECTORS AND OFFICERS

POSITION WITH PRINCIPAL OCCUPATIONS AND OTHER AFFILIATIONS
NAME, ADDRESS AND AGE (1) THE FUND FOR THE LAST FIVE YEARS
- ------------------------ ------------- ---------------------------------------------
<S> <C> <C>
Edward D. Beach (74) Director President and Director of BMC Fund, Inc., a
closed-end investment company; previously, Vice
Chairman of Broyhill Furniture Industries, Inc.;
Certified Public Accountant; Secretary and
Treasurer of Broyhill Family Foundation, Inc.;
Member of the Board of Trustees of MarsHill
College; and Director of The High Yield Income
Fund, Inc.

Delayne Dedrick Gold (60) Director Marketing and Management Consultant; Director of
The High Yield Income Fund, Inc.

* Robert F. Gunia (52) Director Vice President of Prudential Investments (since
September 1997); Executive Vice President and
Treasurer (since December 1996) of Prudential
Investments Fund Management LLC (PIFM); Senior
Vice President (since March 1987) of Prudential
Securities Incorporated (Prudential Securities);
formerly Chief Administrative Officer (July
1990-September 1996), Director (January
1989-September 1996), and Executive Vice
President, Treasurer and Chief Financial Officer
(June 1987-September 1996) of Prudential Mutual
Fund Management, Inc. (PMF); Vice President and
Director (since May 1989) of The Asia Pacific
Fund, Inc.; Director of The High Yield Income
Fund, Inc.

Don G. Hoff (63) Director Chairman and Chief Executive Officer (since 1980)
of Intertec, Inc. (investments); Chairman and
Chief Executive Officer of The Lamaur
Corporation, Inc.; Director of Innovative Capital
Management, Inc. and The Greater China Fund, Inc;
and Chairman and Director of The Asia Pacific
Fund, Inc.

Robert E. LaBlanc (64) Director President (since 1981) of Robert E. LaBlanc
Associates, Inc. (telecommunications); formerly
General Partner at Salomon Brothers and
Vice-Chairman of Continental Telecom; Director of
Storage Technology Corporation, Titan
Corporation, Salient 3 Communications, Inc. and
Tribune Company; and Trustee of Manhattan College.
</TABLE>

B-6

<PAGE>

POSITION WITH PRINCIPAL OCCUPATIONS AND OTHER AFFILIATIONS
NAME, ADDRESS AND AGE (1) THE FUND FOR THE LAST FIVE YEARS
- ------------------------ ------------- ---------------------------------------------
<S> <C> <C>
* Mendel A. Melzer, CFA (38) Director Chief Investment Officer (since October 1996) of
751 Broad Street Prudential Mutual Funds; formerly Chief Financial
Newark, NJ 07102 Officer (November 1995-September 1996) of
Prudential Investments; Senior Vice President and
Chief Financial Officer of Prudential Preferred
Financial Services (April 1993-November 1995),
Managing Director of Prudential Investment
Advisors (April 1991-April 1993) and Senior Vice
President of Prudential Capital Corporation (July
1989-April 1991); Chairman and Director of
Prudential Series Fund, Inc; and Director of The
High Yield Income Fund, Inc.

Robin B. Smith (59) Director Chairman and Chief Executive Officer (since August
1996) of Publishers Clearing House; formerly
President and Chief Executive Officer (January
1989-August 1996) and President and Chief
Operating Officer (September 1981-December 1988)
of Publishers Clearing House; Director of
BellSouth Corporation, Texaco Inc., Springs
Industries Inc., and Kmart Corporation.

Stephen Stoneburn (55) Director President and Chief Executive Officer (since June
1996) of Quadrant Media Corp. (a publishing
company); formerly President (June 1995-June 1996)
of Argus Integrated Media, Inc.; Senior Vice
President and Managing Director (January
1993-1995) of Cowles Business Media; Senior Vice
President (January 1991-1992) and Publishing Vice
President (May 1989-December 1990) of Gralla
Publications (a division of United Newspapers,
U.K.); and Senior Vice President of Fairchild
Publications, Inc.

Brian M. Storms (44) Director and President, Prudential Investments (October
President 1998-Present); President Prudential Mutual Funds,
Annuities, and Investment Management Services
(September 1996-October 1998); Managing Director,
Fidelity Investments Institutional Services
Company, Inc. (July 1991-September 1996);
President, J.K. Schofield (October 1989-September
1991); Senior Vice President, INVEST Financial
Corporation (September 1982-October 1989).

Nancy H. Teeters (68) Director Economist; Director of Inland Steel Industries;
formerly, Vice President and Chief Economist of
International Business Machines; Member of the
Board of Governors of the Federal Reserve System;
Governor of the Horace H. Rackham School of
Graduate Studies of the University of Michigan;
Assistant Director of the Committee on the Budget
of the US House of Representatives; Senior Fellow
at the Library of Congress; Senior Fellow at the
Brookings Institution; staff at Office of
Management and Budget, Council of Economic
Advisors and the Federal Reserve Board.

Robert C. Rosselot (38) Secretary Assistant General Counsel (since September 1997)
of PIFM; formerly, partner with the firm of Howard
& Howard, Bloomfield Hills, Michigan (December
1995-September 1997) and Corporate Counsel,
Federated Investors (1990-1995).
</TABLE>

B-7

<PAGE>

POSITION WITH PRINCIPAL OCCUPATIONS AND OTHER AFFILIATIONS
NAME, ADDRESS AND AGE (1) THE FUND FOR THE LAST FIVE YEARS
- ------------------------ ------------- ---------------------------------------------
<S> <C> <C>
Grace C. Torres (39) Treasurer and First Vice President (since December 1996) of PIFM;
Principal First Vice President (since March 1994) of
Financial Prudential Securities; formerly First Vice
and President (March 1994-September 1996), Prudential
Accounting Mutual Fund Management, Inc. and Vice President
Officer (July 1989-March 1994) of Bankers Trust
Corporation.

Stephen M. Ungerman (45) Assistant Vice President and Tax Director (since March 1996)
Treasurer of Prudential Investments; formerly First Vice
President of Prudential Mutual Fund Management,
Inc. (February 1993-September 1996).
</TABLE>

- ------------

(1) Unless otherwise noted, the address for each of the above persons is c/o
Prudential Investments Fund Management LLC, Gateway Center Three, 100
Mulberry Street, Newark, New Jersey 07102-4077.

* "Interested" Director, as defined in the Investment Company Act of 1940, as
amended (Investment Company Act), by reason of his affiliation with
Prudential Securities or PIFM.

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.

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 Board of Directors has adopted a retirement policy which calls for the
retirement of Directors on December 31 of the year in which they reach the age
of 72, except that retirement is being phased in for Directors who were age 68
or older as of December 31, 1993. Under this phase-in provision, Mr. Beach is
scheduled to retire on December 31, 1999.

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 Fund pays each of its Directors who is not an affiliated person of PIFM
annual compensation of $7,000, in addition to certain out-of-pocket expenses.
The amount of compensation paid to each Director may change as a result of the
introduction of additional funds upon which the Director will be asked to serve.

Directors may receive their Directors' fees 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 fees 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 SEC exemptive
order, 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.

B-8

<PAGE>

The following table sets forth the aggregate compensation paid by the Fund
for the fiscal year ended December 31, 1998 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
PIFM (Fund Complex) for the calendar year ended December 31, 1998.

<TABLE>
<CAPTION>
COMPENSATION TABLE

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(2)
----------------- ------------ ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Edward D. Beach--Director ............... $ None N/A $ *
Stephen C. Eyre--Former Director ........ $ None N/A $ *
Delayne D. Gold--Director ............... $ None N/A $ *
Robert F. Gunia (1)--Director ........... -- None N/A --
Don G. Hoff--Director ................... $ None N/A $ *
Robert F. LaBlanc--Director ............. $ None N/A $ *
Mendel A. Melzer (1)--Director .......... -- None N/A --
Richard A. Redeker (1)--Former Director . -- None N/A --
Robin B. Smith--Director ................ $ None N/A $ *
Stephen Stoneburn--Director ............. $ None N/A $ *
Brian M. Storms (1)--Director ........... -- None N/A --
Nancy H. Teeters--Director .............. $ None N/A $ *
</TABLE>

- ----------

* Indicates number of funds/portfolios in Fund Complex (including the Fund)
to which aggregate compensation relates.

(1) Directors who are "interested" do not receive compensation from the Fund
Complex (including the Fund).

(2) Total compensation from all of the funds in the Fund Complex for the
calendar year ended December 31, 1998, including amounts deferred at the
election of Directors under the funds' Deferred Compensation Plans.
Including accrued interest, total deferred compensation amounted to $______
for Robin B. Smith. Currently, Ms. Smith has agreed to defer some of her
fees at the T-Bill rate and other fees at the Fund rate.

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

As of April __, 1999, the Directors and officers of the Fund, as a group,
beneficially owned less than 1% of the outstanding shares of Common Stock of the
Fund.

As of April __, 1999, the beneficial owners, directly or indirectly, of
more than 5% of the outstanding common stock of the Prudential Tax-Free Money
Fund, Inc. were:

As of April __, 1999, Prudential Securities was the record holder for other
beneficial owners of ______ Class A shares of the Fund, representing
approximately __% of the shares then outstanding. 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.

INVESTMENT ADVISORY AND OTHER SERVICES

(A) INVESTMENT ADVISER

The manager of the Fund is Prudential Investments Fund Management LLC (PIFM
or the Manager), Gateway Center Three, 100 Mulberry Street, Newark, New Jersey
07102-4077. PIFM serves as manager to all of the other investment companies
that, together with the Fund, comprise the Prudential Mutual Funds. See "How the
Fund is Managed--Manager" in the Prospectus. As of January 31, 1999, PIFM
managed and/or administered open-end and closed-end management investment
companies with assets of approximately $___ billion. According to the Investment
Company Institute, as of ______________, 1998, the Prudential Mutual Funds were
the largest family of mutual funds in the United States.

PIFM is a subsidiary of Prudential Securities Incorporated. Prudential
Mutual Fund Services LLC (PMFS or the Transfer Agent), a wholly-owned subsidiary
of PIFM, serves as the transfer agent for the Prudential Mutual Funds and, in
addition, provides customer service, recordkeeping and management and
administration services to qualified plans.

B-9

<PAGE>

Pursuant to the Management Agreement with the Fund (the Management
Agreement), PIFM, 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 and other
assets. In connection therewith, PIFM is obligated to keep certain books and
records of the Fund. PIFM 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 (the Custodian),
and PMFS, the Fund's transfer and dividend disbursing agent. The management
services of PIFM for the Fund are not exclusive under the terms of the
Management Agreement and PIFM is free to, and does, render management services
to others.

For its services, PIFM receives, pursuant 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 $1.5 billion and .375 of 1% of the Fund's average daily net assets in excess
of $1.5 billion. The fee is computed daily and payable monthly. The Management
Agreement also provides that in the event the expenses of the Fund (including
the fees payable to PIFM, 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 PIFM will be reduced by the amount of such excess.
Reductions in excess of the total compensation payable to PIFM will be paid by
PIFM to the Fund. Currently, the Fund believes that there are no such expense
limitations.

In connection with its management of the corporate affairs of the Fund
pursuant to the Management Agreement, PIFM bears the following expenses:

(a) the salaries and expenses of all personnel of PIFM and the Fund,
except the fees and expenses of Directors who are not affiliated persons of
PIFM or the Fund's investment adviser;

(b) all expenses incurred by PIFM or by the Fund in connection with
managing the ordinary course of the Fund's business, other than those
assumed by the Fund, as described below; and

(c) the costs and expenses payable to The Prudential Investment
Corporation, doing business as Prudential Investments (PI), pursuant to the
subadvisory agreement between PIFM and PI (the Subadvisory Agreement).

Under the terms of the Management Agreement, the Fund is responsible for the
payment of the following expenses, including (a) the fees payable to the
Manager, (b) the fees and expenses of Directors who are not affiliated with PMF
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, if any, and any issue or transfer taxes
chargeable to the Fund in connection with its securities 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 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, including
the preparation and printing of the Fund's registration statements and
prospectuses for such purposes, and paying the fees and expenses of notice
filings made in accordance with state securities laws, (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 expenses.

The Management Agreement also provides that PIFM will not be liable for any
error of judgment or for any loss suffered by the Fund in connection with the
matters to which the Management Agreement relates, except a loss resulting from
a breach of fiduciary duty with respect to the receipt of compensation for
services or 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 (as defined in the Investment
Company Act), 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 the date of execution only so long as such continuance is
specifically approved at least annually in accordance with the requirements of
the Investment Company Act.

For the fiscal years ended December 31, 1998, 1997, and 1996, PIFM received
management fees of $______, $1,699,125 and $2,016,151, respectively.

PIFM has entered into the Subadvisory Agreement with PI, a wholly-owned
subsidiary of Prudential. The Subadvisory Agreement provides that PI furnish
investment advisory services in connection with the management of the Fund. In
connection

B-10

<PAGE>

therewith, PI is obligated to keep certain books and records of the Fund. PIFM
continues to have responsibility for all investment advisory services pursuant
to the Management Agreement and supervises PI's performance of such services. PI
is reimbursed by PIFM for the reasonable costs and expenses incurred by PI in
furnishing services to PIFM.

The Subadviser maintains a corporate credit unit which provides credit
analysis and research on taxable fixed-income securities, including money market
instruments. The portfolio manager consults routinely with the credit unit in
managing the Fund's portfolio. The credit unit, with a staff including 7 credit
analysts, reviews on an ongoing basis commercial paper issuers, commercial
banks, non-bank financial institutions and issuers of other taxable fixed-income
obligations. Credit analysts have broad access to research and financial
reports, data retrieval services and industry analysts. They maintain
relationships with the management of corporate issuers and from time to time
visit companies in whose securities the Fund may invest.

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, PIFM or PI 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 by the Board of Directors at least
annually in accordance with the requirements of the Investment Company Act.

(B) PRINCIPAL UNDERWRITER, DISTRIBUTOR AND RULE 12B-1 PLAN

Prudential Investment Management Services LLC (PIMS or the Distributor),
Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077, acts
as the distributor of the shares of the Fund. Prior to July 1, 1998, Prudential
Securities Incorporated (Prudential Securities, also referred to as the
Distributor), One Seaport Plaza, New York, New York 10292, served as the
distributor of the Fund's shares. In January 1999, more than __% of the
outstanding voting shares of the Fund were owned by clients of Prudential
Securities.

Pursuant to the Fund's Distribution Agreement, the Fund has agreed to
indemnify the Distributor to the extent permitted by applicable law against
certain liabilities under the federal securities laws.

DISTRIBUTION AND SERVICE PLAN

Under the Fund's Distribution and Service Plan (the Plan) and Distribution
Agreement, the Fund pays the Distributor a distribution and service fee of up to
0.125% of the average daily net assets of the Class A shares of the Fund,
computed daily and payable monthly. Under the Plan, the Fund is required to pay
the distribution and service fee regardless of the expenses incurred by the
Distributor.

For the fiscal year ended December 31, 1998, Prudential Securities received
payments of $____, and PIMS received payments of $____, under the Plan. It is
estimated that these amounts were spent on: (i) account servicing fee credits to
Prudential Securities branch offices for payments of account servicing fees to
account executives (__% or $____) and (__% or $____), respectively, and (ii) an
allocation of overhead and other branch office distribution-related expenses ( %
or $____) and (__% or $____), respectively. The term "overhead and other branch
office distribution-related expenses" represents (a) the expenses of operating
branch offices of Prudential Securities and Pruco Securities Corporation
(Prusec), an affiliated broker-dealer, in connection with the sale of Fund
shares, including lease costs, the salaries and employee benefits of operations
and sales support personnel, utility costs, communications costs and the costs
of stationery and supplies, (b) the costs of client sales seminars, (c) travel
expenses of mutual fund sales coordinators to promote the sale of Fund shares
and (d) other incidental expenses relating to branch promotion of Fund sales.

The Plan continues in effect from year to year, provided that each such
continuance is approved at least annually by a vote of the Board of Directors,
including a majority of the Directors who are not interested persons of the Fund
and who have no direct or indirect financial interest in the Plan or in any
agreement relating to the Plan (the Rule 12b-1 Directors), 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 Rule
12b-1 Directors or by the vote of the holders of a majority of the outstanding
Class A voting securities of the Fund on not more than 30 days' written notice
to any other party to the Plan. The Plan may not be amended to increase
materially the amounts to be spent for the services described therein without
shareholder approval, and all material amendments must also 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 the Distributor. 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
shall be committed to the Rule 12b-1 Directors.

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Pursuant to the Distribution Agreement, the Fund has agreed to indemnify
the Distributor to the extent permitted by applicable law against certain
liabilities under the Securities Act of 1933, as amended.

NASD MAXIMUM SALES CHARGE RULE. Pursuant to rules of the NASD, the
Distributor is required to limit aggregate initial sales charges, deferred sales
charges and asset-based sales charges to 6.25% of total gross sales of the
Fund's Class A shares. Interest charges on unreimbursed distribution expenses
equal to the prime rate plus one percent per annum may be added to the 6.25%
limitation. Sales from the reinvestment of dividends and distributions are not
included in the calculation of the 6.25% limitation. The annual asset-based
sales charge on Class A shares of the Fund may not exceed .75 of 1% per class.
The 6.25% limitation applies to Class A shares rather than on a per shareholder
basis. If aggregate sales charges were to exceed 6.25% of the total gross sales
of Class A shares, all sales charges on Class A shares would be suspended.

State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts 02171, serves as Custodian for the Fund's portfolio securities,
and in that capacity maintains cash and certain financial and accounting books
and records pursuant to an agreement with the Fund.

Prudential Mutual Fund Services LLC (PMFS), Raritan Plaza One, Edison, New
Jersey 08837, serves as the Transfer and Shareholder Servicing Agent of the
Fund. It is a wholly-owned subsidiary of PIFM. 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. In connection with services rendered to the Fund, PMFS receives an
annual fee ($9.50) per shareholder account, a new account set up fee ($2.00) for
each manually-established account and a monthly inactive zero balance account
fee ($0.20) per shareholder account plus its out-of-pocket expenses, including
but not limited to postage, stationery, printing, allocable communications and
other costs.

PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, New York
10036, serves as the Fund's independent public accountants and in that capacity
audits the Fund's annual financial statements. PricewaterhouseCoopers LLP
provides audit services, accounting assistance, and consultation in connection
with Securities and Exchange Commission filings. The financial information for
the Fund provided under "Financial Statements" for the fiscal year ended
December 31, 1998 has been audited by PricewaterhouseCoopers LLP, whose report
is also included under "Financial Statements."

BROKERAGE ALLOCATION AND OTHER PRACTICES

The Manager is responsible for decisions to buy and sell securities for the
Fund, the selection of brokers and dealers to effect the transactions and the
negotiation of brokerage commissions, if any. For purposes of this section the
term "Manager" includes the Subadviser. The Fund does not normally incur any
brokerage commission expense on such transactions. In the market for money
market instruments, 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. On occasion, certain money market
instruments may be purchased directly from an issuer, in which case no
commissions or discounts are paid.

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 provide the most favorable
total cost or proceeds reasonably attainable under 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 this policy, the Manager may 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 companies 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 those of the
Fund, and the services furnished by such brokers may be used by the Manager in
providing investment management for the Fund. While such services are useful and
important in supplementing its own research and facilities, the Manager believes
that the value of such services is not determinable and does not significantly
reduce expenses. The Fund does not reduce the fee it pays to the Manager by any
amount that may be attributed to the value of such services. The Fund will not
effect any securities transactions with or through Prudential Securities as
broker or dealer.

During the fiscal years ended December 31, 1998, 1997 and 1996, the Fund
paid no brokerage commissions.

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<PAGE>

SECURITIES AND ORGANIZATION

The Fund is authorized to issue three billion shares of common stock, $.01
par value per share, divided into two classes, designated Class A and Class Z
common stock. Of the authorized shares of common stock of the Fund, 1.5 billion
shares consist of Class A shares and 1.5 billion shares consist of Class Z
shares.

Currently, the Fund offers only Class A shares. Shares of the Fund, when
issued, are fully paid, nonassessable fully transferable and redeemable at the
option of the shareholder. 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 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 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% or more
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.

PURCHASE AND REDEMPTION OF FUND SHARES

PURCHASE OF SHARES

The Fund reserves the right to reject any initial or subsequent purchase
order (including an exchange) and the right to limit investments in the Fund
solely to existing or past shareholders of the Fund.

Shares of the Fund may be purchased by investors through the Distributor,
by brokers that have entered its agreements to sell Fund shares, or directly
through Prudential Mutual Fund Services LLC (PMFS). Shares may also be purchased
through Prudential Securities or 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.

REOPENING AN ACCOUNT

Subject to the minimum investment restrictions, an investor may reopen an
account, without filing a new application form, at any time during the calendar
year the account is closed, provided that the information on the old form is
still applicable.

REDEMPTION OF SHARES

Investors who purchase shares directly from Prudential Mutual Fund Services
LLC (PMFS or the Transfer Agent) 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 equal to or greater than $500. The payee of the check
may cash or deposit it like any other check drawn on a bank. When such a 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 a shareholder's
account in the Fund 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
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 10 calendar days after receipt of the purchase check by PMFS.
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 assess a service charge to establish a checking
account and to order checks. State Street, PMFS and the Fund 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 LLC, Attention: Redemption
Services, P.O. Box 15010, New Brunswick, New Jersey 08906-5010, or telephone
(800) 225-1852 (toll-free). Check redemption is not available to investors for
whom Prudential Securities has purchased shares.

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<PAGE>

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. A signature guarantee is not required under Expedited Redemption
once the authorization form is properly completed and returned. The Expedited
Redemption privilege may be used only to redeem shares in an amount of $200 or
more, except that, if an account for which Expedited Redemption is requested has
a NAV 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 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. See "Shareholder Guide--How to Sell
Your Shares" in the Prospectus. The Fund does not forward redemption proceeds
with respect to shares purchased by check until at least 10 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 Fund Services LLC, at the
address set forth above.

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. 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.

REGULAR REDEMPTION. Shareholders may redeem their shares by sending to PMFS,
at the address set forth above, a written request, accompanied by duly endorsed
stock 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.

REDEMPTION IN KIND

If the Board of Directors determines that it would be detrimental to the
best interests of the remaining shareholders of the Fund to make payment wholly
or partly in cash, the Fund may pay the redemption price in whole or in part by
a distribution in kind of securities from the investment portfolio of the Fund,
in lieu of cash, in conformity with applicable rules of the SEC. Any such
securities will be readily marketable and will be valued in the same manner as
in a regular redemption. If your shares are redeemed in kind, you would incur
transaction costs in converting the assets into cash. The Fund, however, has
elected to be governed by Rule 18f-1 under the Investment Company Act pursuant
to which the Fund is obligated to redeem shares solely in cash up to the lesser
of $250,000 or 1% of the net asset value of the Fund during any 90-day period
for any one shareholder.

RESTRICTIONS ON SALE

The Fund may suspend the right of redemption or postpone the date of payment
for a period of up to seven days. Suspensions or postponements may not exceed
seven days except (1) for any period (a) during which the New York Stock
Exchange is closed other than customary weekend and holiday closings or (b)
during which trading on the New York Stock Exchange is restricted; (2) for any
period during which an emergency exists as a result of which (a) disposal by the
Fund of securities owned by it is not reasonably practicable or (b) it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets; or (3) for such other periods as the SEC may by order permit for the
protection of shareholders of the Fund. The SEC by rules and regulations
determines the conditions under which (i) trading shall be deemed to be
restricted and (ii) an emergency is deemed to exist within the meaning of clause
(2) above.

NET ASSET VALUE

The Fund's net asset value per share is determined by subtracting its
liabilities from the value of its assets and dividing the remainder by the
number of outstanding shares.

The Fund uses the amortized cost method of valuation to determine the value
of its portfolio securities. In that regard, the Fund's Board of Directors has
determined to maintain a dollar-weighted average portfolio maturity of 90 days
or less, to purchase only instruments having remaining maturities of thirteen
months or less, and to invest only in securities determined by the investment
adviser under the supervision of the Board of Directors to be of minimal credit
risk and to be of "eligible quality" in

B-14

<PAGE>

accordance with regulations of the SEC. The remaining maturity of an instrument
held by the Fund that is subject to a put is deemed to be the period remaining
until the principal amount can be recovered through demand or, in the case of a
variable rate instrument, the next interest reset date, if longer. The value
assigned to the put is zero. The Board of Directors also 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 will include review of a Fund's portfolio holdings by the Board,
at such intervals as deemed 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, and 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 of
Directors 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 as it regards necessary and appropriate,
including the sale of portfolio instruments prior to maturity to realize gains
or losses, the shortening of average portfolio maturity, the withholding of
dividends or the establishment of net asset value per share by using available
market quotations.

The Fund computes its net asset value at 4:30 PM New York time, on each day
the New York Stock Exchange (the Exchange) is open for trading. 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 PM
New York time. The Exchange is closed on the following holidays: New Year's Day,
Martin Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.

TAXES, DIVIDENDS AND DISTRIBUTIONS

The Fund has elected to qualify, and the Fund intends to remain qualified,
as a regulated investment company under Subchapter M of the Internal Revenue
Code of 1986, as amended. This relieves a fund (but not its shareholders) from
paying federal income tax on income which is distributed to shareholders, and,
if a fund did realize long-term capital gains, permits net capital gains of the
fund (i.e., the excess of net long-term capital gains over net short-term
capital losses) to be treated as long-term capital gains of the shareholders,
regardless of how long shareholders have held their shares in that fund.

Qualification as a regulated investment company requires, among other
things, that (a) at least 90% of a fund's annual gross income (without reduction
for losses from the sale or other disposition of securities or foreign
currencies) be derived from interest, dividends, payments with respect to
securities loans, and gains from the sale or other disposition of securities or
options thereon, or other income (including, but not limited to, gains from
options) derived with respect to its business of investing in such securities;
(b) a fund must diversify its holdings so that, at the end of each quarter of
the taxable year, (i) at least 50% of the market value of a fund's assets is
represented by cash, U.S. Government obligations and other securities limited in
respect of any one issuer to an amount not greater than 5% of the market value
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 obligations) and (c)
the fund must distribute to its shareholders at least 90% of its net investment
income and net short-term gains (I.E., the excess of net short-term capital
gains over net long-term capital losses) in each year.

Gains or losses on sales of securities by the Fund will be treated as
long-term capital gains or losses if the securities have been held by it for
more than one year. The Fund does not anticipate realizing long-term capital
gains or losses. Other gains or losses on the sale of securities will be
short-term capital gains or losses. In addition, debt securities acquired by the
Fund may be subject to original issue discount and market discount rules.

The Fund is required to distribute 98% of its ordinary income in the same
calendar year in which it is earned. The Fund is also required to distribute
during the calendar year 98% of the capital gain net income it earned during the
twelve months ending on October 31 of such calendar year, as well as all
undistributed ordinary income and undistributed capital gain net income from the
prior year or the twelve-month period ending on October 31 of such prior year,
respectively. To the extent it does not meet these distribution requirements,
the Fund will be subject to a non-deductible 4% excise tax on the undistributed
amount. For purposes of this excise tax, income on which the Fund pays income
tax is treated as distributed. The Fund intends to make timely distributions in
order to avoid this excise tax. For this purpose, dividends declared in October,
November and December payable to shareholders of record on a specified date in
October, November and December and paid in the following January will be treated
as having been received by shareholders on December 31 of the calendar year in
which declared. Under this rule, therefore, a shareholder may be taxed in the
prior year on dividends or distributions actually received in January of the
following year.

It is anticipated that the net asset value per share of the Fund will remain
constant. However, if the net asset value per share fluctuates, a shareholder
may realize gain or loss upon the disposition of a share. Distributions of net
investment income and net short-term gains will be taxable to the shareholder at
ordinary income rates regardless of whether the shareholder receives such
distributions in additional shares or cash. Any gain or loss realized upon a
sale or redemption of shares by a shareholder who is not a dealer in securities
will generally be treated as long-term capital gain or loss if the shares have
been held for more than one year and otherwise as short-term capital gain or
loss. Any such loss, however, although otherwise treated as short-term capital
loss, will be long-term capital loss to the extent of any capital gain
distributions received by the shareholder, if the shares have

B-15

<PAGE>

been held for six months or less. Furthermore, certain rules may apply which
would limit the ability of the shareholder to recognize any loss if, for
example, the shareholder replaced the shares (including shares purchased
pursuant to dividend reinvestment) within 30 days of the disposition of the
shares. In such a case the basis of the shares acquired will be readjusted to
reflect the disallowed loss. 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. Because none of the Fund's net income is anticipated to
arise from dividends on common or preferred stock, none of its distributions to
shareholders will be eligible for the dividends received deduction for
corporations under the Internal Revenue Code. Shareholders will be notified
annually by the Fund as to the federal tax status of distributions made by the
Fund.

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. Exempt-interest dividends attributable to interest on certain
"private activity" tax-exempt obligations are a preference item for computing
the alternative minimum tax for both individuals and corporations. Moreover,
exempt-interest dividends attributable to interest on tax-exempt obligations,
whether or not private activity bonds, that are received 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 and (ii) in determining the foreign branch profits tax imposed on the
effectively connected earnings and profits (with adjustments) of United States
branches of foreign corporations. 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 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 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.

Under the laws of certain states, distributions of net income may be taxable
to shareholders as income even though a portion of such distributions may be
derived from interest on U.S. Government obligations which, if realized
directly, would be exempt from state income taxes. Shareholders are advised to
consult their tax advisers concerning the application of state and local taxes.

CALCULATION OF YIELD

The Fund will prepare a current quotation of yield daily. 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 shares, but excluding any capital changes, divided by the value
of the account at the beginning of the base period. 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 also may prepare an
effective annual yield computed by compounding the unannualized seven-day period
return as follows: by adding 1 to the unannualized seven-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.

The yield and effective yield for the Fund based on the 7 days ended
December 31, 1998 were __% and __%, respectively. The tax equivalent yield for
the Fund based on the 7 days ended December 31, 1998 was __%.

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., IBC Financial Data,
Inc., The Bank Rate Monitor, other industry publication, business periodicals
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. Actual yields will depend upon not only changes in
interest rates generally during the period in which the investment in a Fund is
held, but also in changes in the Fund's expenses. Yield does not take into
account any federal or state income taxes.

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<PAGE>

APPENDIX I

DESCRIPTION OF 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.

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<PAGE>

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.

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 or 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.

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<PAGE>

APPENDIX II

INFORMATION RELATING TO PRUDENTIAL

Set forth below is information relating to The Prudential Insurance Company
of America (Prudential) and its subsidiaries as well as information relating to
the Prudential Mutual Funds. See "How the Fund Is Managed--Manager" in the
Prospectus. The data will be used in sales materials relating to the Prudential
Mutual Funds. Unless otherwise indicated, the information is as of December 31,
1996 and is subject to change thereafter. All information relies on data
provided by The Prudential Investment Corporation (PlC) or from other sources
believed by the Manager to be reliable. Such information has not been verified
by the Fund.

INFORMATION ABOUT PRUDENTIAL

The Manager and PIC (1) are subsidiaries of Prudential, which is one of the
largest diversfied financial services institutions in the world and, based on
total assets, the largest insurance company in North America as of December
31,1996. Principal products and services include life and health insurance,
other healthcare products, property and casualty insurance, securities
brokerage, asset management, investment advisory services and real estate
brokerage. Prudential (together with its subsidiaries) employs almost 81,000
persons worldwide, and maintains a sales force of approximately 11,500 agents
and nearly 6,400 financial advisors. Prudential is a major issuer of annuities,
including variable annuities. Prudential seeks to develop innovative products
and services to meet consumer needs in each of its business areas. Prudential
uses the Rock of Gibraltar as its symbol. The Prudential rock is a recognized
brand name throughout the world.

INSURANCE. Prudential has been engaged in the insurance business since
1875. It insures or provides financial services to nearly 50 million people
worldwide. Long one of the largest issuers of individual life insurance, the
Prudential has 22 million life insurance policies in force today with a face
value of $1 trillion. Prudential has the largest capital base ($12.1 billion) of
any life insurance company in the United States. Prudential provides auto
insurance for approximately 1.6 million cars and insures approximately 1.2
million homes.

MONEY MANAGEMENT. The Prudential is one of the largest pension fund
managers in the country, providing pension services to 1 in 3 Fortune 500 firms.
It manages $36 billion of individual retirement plan assets, such as 401(k)
plans. As of December 31,1996, Prudential had more than $332 billion in assets
under management. Prudential Investments, a business group of Prudential (of
which Prudential Mutual Funds is a key part), manages over $211 billion in
assets of institutions and individuals. In PENSIONS AND INVESTMENTS, May 12,
1996, Prudential was ranked third in terms of total assets under management.

REAL ESTATE. The Prudential Real Estate Affiliates, the fourth largest real
estate brokerage network in the United States, has more than 37,000 brokers and
agents across the United States.(2)

HEALTHCARE. Over two decades ago, the Prudential introduced the first
federally-funded, for-profit HMO in the country. Today, approximately 4.6
million Americans receive healthcare from a Prudential managed care membership.

FINANCIAL SERVICES. The Prudential Bank, a wholly-owned subsidiary of the
Prudential, has nearly $1 billion in assets and serves nearly 1.5 million
customers across 50 states.

INFORMATION ABOUT THE PRUDENTIAL MUTUAL FUNDS

As of December 31, 1997, Prudential Investments Fund Management LLC is the
eighteenth largest mutual fund company in the country, with over 2.5 million
shareholders invested in more than 50 mutual fund portfolios and variable
annuities with more than 3.7 million shareholder accounts.

The Prudential Mutual Funds have over 30 portfolio managers who manage over
$55 billion in mutual fund and variable annuity assets. Some of Prudential's
portfolio managers have over 20 years of experience managing investment
portfolios.

- ----------

(1) Prudentlal Investments, a business group of PIC, serves as the Subadviser
to substantially all of the Prudential Mutual Funds. Wellington Management
Company serves as the subadviser to Global Utility Fund, Inc.,
Nicholas-Applegate Capital Management as the subadviser to
Nicholas-Applegate Fund, Inc., Jennison Associates Capital Corp. as the
subadviser to Prudential Jennison Series Fund, Inc. and Prudential Active
Balanced Fund, a portfolio of Prudential Dryden Fund and Mercator Asset
Management L.P. as subadviser to International Stock Series is a portfolio
of Prudential World Fund, Inc. and BlackRock Financial Management Inc. as
subadviser to The BlackRock Government Income Trust. There are multiple
subadvisers for The Target Portfolio Trust.

(2) As of December 31, 1996.

II-1

<PAGE>

From time to time, there may be media coverage of portfolio managers and
other investment professionals associated with the Manager and the Subadviser in
national and regional publications, on television and in other media.
Additionally, indivldual mutual fund portfolios are frequently cited in surveys
conducted by national and regional publications and media organizations such as
THE WALL STREET JOURNAL, THE NEW YORK TIMES, BARRON'S and USA TODAY.

EQUITY FUNDS. FORBES magazine listed Prudential Equity Fund among twenty
mutual funds on its Honor Roll in its mutual fund issue of August 28,1995.
Honorees are chosen annually among mutual funds (excluding sector funds) which
are open to new investors and have had the same management for at least five
years. FORBES considers, among other criteria, the total return of a mutual fund
in both bull and bear markets as well as a fund's risk profile. Prudential
Equity Fund is managed with a "value" investment style by PIC. In 1995,
Prudential Securities introduced Prudential Jennison Growth Fund, a growth-style
equity fund managed by Jennison Associates Capital Corp., a premier
institutional equity manager and a subsidiary of Prudential.

HIGH YIELD FUNDS. Investing in high yield bonds is a complex and research
intensive pursuit. A separate team of high yield bond analysts monitor
approximately 167 issues held in the Prudential High Yield Fund (currently the
largest fund of its kind in the country) along with 100 or so other high yield
bonds, which may be considered for purchase.(3) Non-investment grade bonds, also
known as junk bonds or high yield bonds, are subject to a greater risk of loss
of principal and interest including default risk than higher-rated bonds.
Prudential high yield portfolio managers and analysts meet face-to-face with
almost every bond issuer in the High Yield Fund's portfolio annually, and have
additional telephone contact throughout the year.

Prudential's portfolio managers are supported by a large and sophisticated
research organization. Fourteen investment grade bond analysts monitor the
financial viability of approximately 1,750 different bond issuers in the
investment grade corporate and municipal bond markets--from IBM to small
municipalities, such as Rockaway Township, New Jersey. These analysts consider
among other things sinking fund provisions and interest coverage ratios.

Prudential's portfolio managers and analysts receive research services from
almost 200 brokers and market service vendors. They also receive nearly 100
trade publications and newspapers--from PULP and PAPER FORECASTER to WOMEN'S
WEAR DAILY--to keep them informed of the industries they follow.

Prudential Mutual Funds' traders scan over 100 computer monitors to collect
detailed information on which to trade. From natural gas prices in the Rocky
Mountains to the results of local municipal elections, a Prudential portfolio
manager or trader is able to monitor it if it's important to a Prudential Mutual
Fund.

Prudential Mutual Funds trade approximately $31 billion in U.S. and foreign
government securities a year. PlC seeks information from government policy
makers. In 1995, Prudential's portfolio managers met with several senior U.S.
and foreign government officials, on issues ranging from economic conditions in
foreign countries to the viability of index-linked securities in the United
States.

Prudential Mutual Funds' portfolio managers and analysts met with over
1,200 companies in 1995, often with the Chief Executive Officer (CEO) or Chief
Financial Officer (CFO). They also attended over 250 industry conferences.

Prudential Mutual Funds' global equity managers conducted many of their
visits overseas, often holding private meetings with a company in a foreign
language (our global equity managers speak 7 different languages, including
Mandarin Chinese).

TRADING DATA.(4) On an average day, Prudential Mutual Funds' U.S. and
foreign equity trading desks traded $77 million in securities representing over
3.8 million shares with nearly 200 different firms. Prudential Mutual Funds'
bond trading desks traded $157 million in government and corporate bonds on an
average day. That represents more in daily trading than most bond funds tracked
by Lipper even have in assets.(5) Prudential Mutual Funds' money market desk
traded $3.2 billion in money market securities on an average day, or over $800
billion a year. They made a trade every 3 minutes of every trading day. In 1994,
the Prudential Mutual Funds effected more than 40,000 trades in money market
securities and held on average $20 billion of money market securities.(6)

- ----------

(3) As of December 31,1995. The number of bonds and the size of the Fund are
subject to change.

(4) Trading data represents average daily transactions for portfolios of the
Prudential Mutual Funds for which PIC serves as the subadviser, portfolios
of the Prudential Series Fund and institutional and non-U.S. accounts
managed by Prudential Mutual Fund Management LLC, a division of PIC, for
the year ended December 31, 1995.

(5) Based on 669 funds in Lipper Analytical Services categories of Short U.S.
Treasury, Short U.S. Government, Intermediate U.S. Treasury, Intermediate
U.S. Government, Short Investment Grade Debt, Intermediate Investment Grade
Debt, General U.S. Treasury, General U.S. Government and Mortgage funds.

(6) As of December 31, 1994.

II-2

<PAGE>

Based on complex-wide data, on an average day, over 7,250 shareholders
telephoned Prudential Mutual Fund Services LLC, the Transfer Agent of the
Prudential Mutual Funds, on the Prudential Mutual Funds' toll-free number. On an
annual basis, that represents approximately 1.8 million telephone calls
answered.

INFORMATION ABOUT PRUDENTIAL SECURITIES

Prudential Securities is the fifth largest retail brokerage firm in the
United States with approximately 6,000 financial advisors. It offers to its
clients a wide range of products, including Prudential Mutual Funds and
Annuities. As of December 31, 1997, assets held by Prudential Securities for its
clients approximated $235 billion.

During 1997, approximately 29,000 new customer accounts were opened each
month at PSI.(7)

Prudential Securities has a two-year Financial Advisor training program
plus advanced education programs, including Prudential Securities "university,"
which provides advanced education in a wide array of investment areas.
Prudential Securities is the only Wall Street firm to have its own in-house
Certified Financial Planner (CFP) program. In the December 1995 issue of
REGISTERED REP, an industry publication, Prudential Securities Financial Advisor
Training program, received a grade of A- (compared to an industry average of
B+).

In 1995, Prudential Securities' equity research team ranked 8th in
INSTITUTIONAL INVESTOR magazine's 1995 "All America Research Team" survey. Three
Prudential Securities analysts were ranked as first-team finishers.(8)

In addition to training, Prudential Securities provides its financial
advisors with access to firm economists and market analysts. It has also
developed proprietary tools for use by financial advisors, including the
Financial Architect, a state-of-the-art asset allocation software program which
helps Financial Advisors to evaluate a client's objectives and overall financial
plan, and a comprehensive mutual fund information and analysis system that
compares different mutual funds.

Standard & Poor's rates Prudential Securities Incorporated BBB+ with a
"Stable Outlook."

For more complete information about any of the Prudential Mutual Funds,
including charges and expenses, call your Prudential Securities financial
adviser or Pruco/Prudential representative for a free prospectus. Read it
carefully before you invest or send money.

- ----------

(7) As of December 31, 1997.

(8) On an annual basis, INSTITUTIONAL INVESTOR magazine surveys more than 700
institutional money managers, chief investment officers and research
directors, asking them to evaluate analysts in 76 industry sectors. Scores
are produced by taking the number of votes awarded to an individual analyst
and weighing them based on the size of the voting institution. In total,
the magazine sends its survey to approximately 2,000 institutions and a
group of European and Asian institutions.

II-3

<PAGE>

PART C

OTHER INFORMATION

ITEM 23. EXHIBITS.

(a) Restated Articles of Incorporation, incorporated by reference to
Exhibit 1 to Post-Effective Amendment No. 21 to the Registration
Statement on Form N-1A filed via EDGAR on February 26, 1997 (File
No. 2-64625).

(b) By-Laws of the Registrant as amended, incorporated by reference to
Exhibit 2 to Post-Effective Amendment No. 21 to the Registration
Statement on Form N-1A filed via EDGAR on February 26, 1997 (File
No. 2-64625).

(c) Instruments defining rights of holders of the securities being
offered, incorporated by reference to Exhibits(a) and (b) above.

(d) (i) 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).

(ii) Subadvisory Agreement between Prudential Mutual Fund Management
and The Prudential Investment Corporation, incorporated by reference
to Exhibit 5(b) to Post-Effective Amendment No. 21 to the
Registration Statement on Form N-1A filed via EDGAR on February 26,
1997 (File No. 2-64625).

(e) (i) Amended Distribution and Service Agreement between the
Registrant and Prudential Mutual Fund Distributors, Inc.,
incorporated by reference to Exhibit 6(b) to Post-Effective
Amendment No. 19 to Registration Statement on Form N-1A filed via
EDGAR on May 31, 1995 (File No. 2-64625).

(ii) Amended Distribution Agreement dated January 1, 1996,
incorporated by reference to Exhibit 6(c) to Post-Effective
Amendment No. 20 to the Registration Statement on Form N-1A filed
via EDGAR on February 28, 1996 (File No. 2-64625).

(f) Not applicable.

(g) Custodian Agreement between the Registrant and State Street Bank and
Trust Company, incorporated by reference to Exhibit 8 to
Post-Effective Amendment No. 21 to the Registration Statement on
Form N-1A filed via EDGAR on February 26, 1997 (File No. 2-64625).

(h) Transfer Agency and Service Agreement, dated January 1, 1988,
between the Registrant and Prudential Mutual Fund Services,
incorporated by reference to Exhibit 9 to Post-Effective Amendment
No. 21 to the Registration Statement on Form N-1A filed via EDGAR on
February 26, 1997 (File No. 2-64625).

(i) Opinion of Counsel to Pre-Effective Amendment No. 1 to Registration
Statement on Form N-1, incorporated by reference to Exhibit 10 to
Post-Effective Amendment No. 21 to the Registration Statement on
Form N-1A filed via EDGAR on February 26, 1997 (File No. 2-64625).

(j) Consent of Independent Accountants.**

(k) Not applicable

(l) Not appliable

(m) Distribution and Service Plan of Registrant, incorporated by
reference to Exhibit 15 to Post-Effective Amendment No. 21 to the
Registration Statement on Form N-1A filed via EDGAR on February 26,
1997 (File No. 2-64625).

(n) Financial Data Schedule for the fiscal year ended December 31, 1997
filed for electronic purposes as Exhibit 27.*

(o) Not applicable

- ----------

*Filed herewith.

**To be filed by amendment

C-1

<PAGE>

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.

None.

ITEM 25. INDEMNIFICATION.

As permitted by Section 17(h) and (i) of the Investment Company Act of
1940, as amended (the 1940 Act) and pursuant to Article VII of the Fund's
Articles of Incorporation (Exhibit (a) to the Registration Statement), officers,
directors, employees and agents of the Registrant will not be liable to the
Registrant, any stockholder, officer, director, employee, agent or other person
for any action or failure to act, except for bad faith, willful misfeasance,
gross negligence or reckless disregard of duties, and those individuals may be
indemnified against liabilities in connection with the Registrant, subject to
the same exceptions, as provided by Article VII of the By-Laws (Exhibit (b) to
the Registration Statement). Section 2-418 of Maryland General Corporation Law
permits indemnification of directors who acted in good faith and reasonably
believed that the conduct was in the best interests of the Registrant. As
permitted by Section 17(i) of the 1940 Act, pursuant to Section 10 of the
Distribution Agreement (Exhibit (e)(ii) 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, as amended (Securities Act) may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the 1940 Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in connection with the successful defense
of any action, suit or proceeding) is asserted against the Registrant by such
director, officer or controlling person in connection with the shares being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1940 Act and will be governed by the final
adjudication of such issue.

The Registrant maintains an insurance policy insuring its officers and
directors against liabilities, and certain costs of defending claims against
such officers and directors, to the extent such officers and directors are not
found to have committed conduct constituting willful misfeasance, bad faith,
gross negligence or reckless disregard in the performance of their duties. The
insurance policy also insures the Registrant against the cost of indemnification
payments to officers and directors under certain circumstances.

Section 9 of the Management Agreement (Exhibit (d)(i) to the Registration
Statement) and Section 4 of the Subadvisory Agreement (Exhibit 5(d)(ii) to the
Registration Statement) limit the liability of Prudential Investments Fund
Management LLC (PIFM) 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 remains
in effect and is consistently applied.

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

(i) Prudential Investments Fund Management LLC.

See "How the Fund is Managed-Manager" in the Prospectus constituting Part A
of this Post-Effective Amendment to the Registration Statement and "Investment
Advisory and Other Services--Investment Adviser" in the Statement of Additional
Information constituting Part B of this Post-Effective Amendment to the
Registration Statement.

The business and other connections of the officers of PIFM are listed in
Schedules A and D of Form ADV of PIFM 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, 1995).

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<PAGE>

The business and other connections of PIFM's directors and principal
executive officers are set forth below. Except as otherwise indicated, the
address of each person is Gateway Center Three, 100 Mulberry Street, Newark, New
Jersey 07102.

NAME AND ADDRESS POSITION WITH PIFM PRINCIPAL OCCUPATIONS
- ---------------- ------------------ ---------------------
<S> <C> <C>
Frank W. Giordano Executive Vice President, Executive Vice President, Secretary and General
Secretary and General Counsel, PIFM; Senior Vice President, Prudential
Counsel Securities Incorporated (Prudential Securities)

Robert F. Gunia Executive Vice President Vice President, Prudential Investments, a division
and Treasurer of The Prudential Insurance Company of America;
Executive Vice President and Treasurer, PIFM;
Senior Vice President, Prudential Securities

Neil A. McGuiness Executive Vice President Executive Vice President and Director of Marketing,
Prudential Mutual Funds & Annuities (PMF&A);
Executive Vice President, PIFM

Brian M. Storms Officer-in-Charge, President, PMF&A; Officer-in-Charge, President,
President, Chief Executive Chief Executive Officer and Chief Operating
Officer and Chief Officer, PIFM
Operating Officer

Robert J. Sullivan Executive Vice President Executive Vice President, PMF&A; Executive Vice
President, PIFM
</TABLE>

(ii) The Prudential Investment Corporation (PIC)

See "How the Fund is Managed--Investment Adviser" in the Prospectus
constituting Part A of this Post-Effective Amendment to the Registration
Statement and "Investment Advisory and Other Services--Investment Advisers" in
the Statement of Additional Information constituting Part B of this
Post-Effective Amendment to the Registration Statement.

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 in Prudential Plaza, Newark, NJ 097102.

NAME AND ADDRESS POSITION WITH PIC PRINCIPAL OCCUPATIONS
- ---------------- ----------------- ---------------------
<S> <C> <C>

E. Michael Caulfield Chairman of the Board, Chief Executive Officer of Prudential Investments
President and Chief Executive
Officer and Director

Jonathan M. Greene Senior Vice President and President-Investment Management of Prudential
Director Investments; Senior Vice President and Director,
PIC

John R. Strangfeld Vice President and Director President of Private Asset Management Group of
Prudential; Senior Vice President, Prudential; Vice
President and Director, PIC
</TABLE>

ITEM 27. PRINCIPAL UNDERWRITERS

(A) PRUDENTIAL INVESTMENT MANAGEMENT SERVICES LLC

Prudential Investment Management Services LLC is distributor for Prudential
Government Securities Trust, The Target Portfolio Trust, Cash Accumulation
Trust, Command Government Fund, Command Money Fund, Command Tax-Free Fund,
Global Utility Fund, Inc., Nicholas-Applegate Fund, Inc. (Nicholas-Applegate
Growth Equity Fund), Prudential Balanced Fund, Prudential California Municipal
Fund, Prudential Developing Markets Fund, Prudential Distressed Securities Fund,
Inc., Prudential Diversified Bond Fund, Inc., Prudential Diversified Funds,
Prudential Emerging Growth Fund, Inc., Prudential Equity Fund, Inc., Prudential
Equity Income Fund, Prudential Europe Growth Fund, Inc., Prudential Global
Genesis Fund, Inc., Prudential Global Limited Maturity Fund, Inc., The Global
Total Return Fund, Inc., Prudential High Yield Fund, Inc., Prudential Index
Series Fund, Prudential MoneyMart Assets Inc., Prudential Natural Resources
Fund, Inc., Prudential Government Income Fund, Inc., Prudential High Yield Total
Return Fund, Inc., Prudential International Bond Fund, Inc., Prudential
Institutional Liquidity Portfolio, Inc., Prudential Intermediate Global Income
Fund, Inc., The Prudential Investment Portfolios, Inc., Prudential Mid-Cap Value
Fund, Prudential Municipal Bond Fund, Prudential Municipal Series Fund,
Prudential National Municipals Fund, Inc., Prudential Pacific Growth Fund, Inc.,
Prudential Real Estate Securities Fund, Prudential Small-Cap Quantum Fund, Inc.,
Prudential Small Company Value Fund, Inc., Prudential Special Money Market Fund,
Inc., Prudential Tax-Managed Equity Fund, Prudential Structured Maturity Fund,
Inc., Prudential Tax-Free Money Fund, Inc., Prudential 20/20 Focus Fund,
Prudential Utility Fund, Inc. and Prudential World Fund, Inc.

C-3

<PAGE>

(b) Information concerning the officers and directors of Prudential
Investment Management Services LLC is set forth below.

POSITIONS AND POSITIONS AND
OFFICES WITH OFFICES WITH
NAME(1) UNDERWRITER REGISTRANT
- ------- ----------- ------------

E. Michael Caufield ........... President None

Mark R. Fetting ............... Executive Vice President None

Jonathan M. Greene ............ Executive Vice President None

Jean D. Hamilton .............. Executive Vice President None

Ronald P. Joelson ............. Executive Vice President None

Brian M. Storms ............... Executive Vice President None

John R. Strangfeld ............ Executive Vice President None

Mario A. Mosse ................ Senior Vice President and None
Chief Operating Officer

Scott S. Wallner .............. Vice President, Secretary and None
Chief Legal Officer

Michael G. Williamson ......... Vice President, Comptroller and None
Chief Financial Officer

C. Edward Chaplin ............. Treasurer None 1995.

(1) The address of each person named is Prudential Plaza, 751 Broad Street,
Newark, New Jersey 07102, unless otherwise indicated.

ITEM 28. 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, Gateway Center Three, 100 Mulberry
Street, Newark, New Jersey 07102-4077, and Prudential Mutual Fund Services LLC,
Raritan Plaza One, Edison, New Jersey 08837. Documents required by Rules
31a-1(b)(4), (5), (6), (7), (9), (10) and (11) and 31a-1(d) and (f) will be kept
at Gateway Center Three, Newark, New Jersey 07102-4077, 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 LLC.

ITEM 29. 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 caption "Investment Advisory and Other Services" in the Statement of
Additional Information, constituting Parts A and B, respectively, of this
Post-Effective Amendment to the Registration Statement, Registrant is not a
party to any management-related service contract.

ITEM 30. UNDERTAKINGS

Not applicable.

C-4

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Newark, and
State of New Jersey, on the 26th day of February, 1999.

PRUDENTIAL TAX-FREE MONEY FUND, INC.

/s/ Brian M. Storms
----------------------------------------
(BRIAN M. STORMS, 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.

SIGNATURE TITLE DATE
- --------- ----- ----

/s/ Edward D. Beach Director February 26, 1999
- ---------------------------
EDWARD D. BEACH

/s/ Delayne D. Gold Director February 26, 1999
- ---------------------------
DELAYNE D. GOLD

/s/ Robert F. Gunia Director February 26, 1999
- ---------------------------
ROBERT F. GUNIA

/s/ Don G. Hoff Director February 26, 1999
- ---------------------------
DON G. HOFF

/s/ Robert E. LaBlanc Director February 26, 1999
- ---------------------------
ROBERT E. LABLANC

/s/ Mendel A. Melzer Director February 26, 1999
- ---------------------------
MENDEL A. MELZER

/s/ Robin B. Smith Director February 26, 1999
- ---------------------------
ROBIN B. SMITH

/s/ Stephen Stoneburn Director February 26, 1999
- ---------------------------
STEPHEN STONEBURN

/s/ Brian M. Storms President and Director February 26, 1999
- ---------------------------
BRIAN M. STORMS

/s/ Nancy H. Teeters Director February 26, 1999
- ---------------------------
NANCY H. TEETERS

/s/ Grace C. Torres Treasurer, Principal Financial February 26, 1999
- --------------------------- and Accounting Officer
GRACE C. TORRES

<PAGE>

EXHIBIT INDEX

(c) Instruments defining rights of holders of the securities being
offered, incorporated by reference to Exhibits (a) and (b) above.

(e) (i) Amended Distribution and Service Agreement between the
Registrant and Prudential Mutual Fund Distributors, Inc.
Incorporated by reference to Exhibit 6(b) to Post-Effective
Amendment No. 19 to Registration Statement on Form N-1A filed via
EDGAR on May 31, 1995 (File No. 2-64625).

(f) Not applicable.

(j) Consent of Independent Accountants.**

(k) Not applicable

(l) Not appliable

(n) Financial Data Schedule for the fiscal year ended December 31, 1997
filed for electronic purposes as Exhibit 27.*

(o) Not applicable

- ----------

*Filed herewith.

**To be filed by amendment

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