(ICON)
Prudential
Tax-Free
Money
Fund, Inc.
- ------------
ANNUAL
REPORT
Dec. 31, 1998
(LOGO)
<PAGE>
Prudential Tax-Free Money Fund, Inc.
Performance At A Glance.
Municipal money market rates declined sharply in 1998 as
many state
and local governments issued fewer short-term debt
securities and the
Federal Reserve eased monetary policy. Under these market
conditions,
we were very careful to take advantage of the temporary
increases in
tax-exempt money market yields that occurred throughout the
year. As
a result, your Prudential Tax-Free Money Fund provided
competitive
tax-exempt income and maintained its high credit quality and
a stable
$1 net asset value. On December 31, 1998, the Fund's seven-
day current
yield was 2.74%, which was equivalent to a 4.54% taxable
yield for
persons in the 39.6% income tax bracket.
<TABLE>
Fund Facts As of 12/31/98
<CAPTION>
7-Day Net Asset Taxable
Equivalent Yield* Weighted Avg. Net Assets
Current Yld. Value (NAV) @31%
@36% @39.6% Mat. (WAM) (Millions)
<S> <C> <C> <C>
<C> <C> <C> <C>
Tax-Free
Money Fund 2.74% $1 3.97%
4.28% 4.54% 63 Days $199
IBC Financial Data
Tax-Free Money
Fund Avg.** 2.95% $1 4.28%
4.61% 4.88% 44 Days N/A
</TABLE>
Note: Yields will fluctuate from time to time and past
performance is not
indicative of future results. An investment in the Fund is
not insured
or guaranteed by the Federal Deposit Insurance Corporation
or any other
government agency. Although the Fund seeks to preserve the
value of
your investment at $1.00 per share, it is possible to lose
money by
investing in the Fund.
* Some investors may be subject to the federal alternative
minimum
tax (AMT). Income may be subject to state and local taxes.
** International Business Communications (IBC) Financial
Data reports
a seven-day current yield, NAV, and WAM on Mondays. This is
the data
of all funds in the IBC Tax-Free Money Fund category as of
December
28, 1998, the closest date to the end of our reporting
period.
Tax-Free Money Fund Yields Fluctuate At Low Levels.
(GRAPH)
How Investments Compared.
(As of 12/31/98)
(GRAPH)
Source: Lipper, Inc. Financial markets change, so a mutual
fund's
past performance should never be used to predict future
results.
The risks to each of the investments listed above are
different -- we
provide 12-month total return averages for several Lipper
mutual fund
categories to show you that reaching for higher yields means
tolerating
more risk. The greater the risk, the larger the potential
reward or loss.
In addition, we've included historical 20-year average
annual returns.
These returns assume the reinvestment of dividends.
U.S. Growth Funds will fluctuate a great deal. Investors
have received
higher historical total returns from stocks than from most
other
investments. Smaller capitalization stocks offer greater
potential
for long-term growth but may be more volatile
than larger capitalization stocks.
General Bond Funds provide more income than stock funds,
which can
help smooth out their total returns year by year. But their
prices
still fluctuate (sometimes significantly) and their returns
have been
historically lower than those of stock funds. Unlike bond
funds, bonds,
if held to maturity, generally offer a fixed rate of return
and fixed
principal value.
General Municipal Debt Funds invest in bonds issued by state
governments,
state agencies and/or municipalities. This investment
provides income
that is usually exempt from federal and state income taxes.
U.S. Tax-Exempt Money Funds attempt to preserve a constant
share
value and provide tax-free income; they don't fluctuate much
in
price but, historically, their returns have been generally
among
the lowest of the major investment categories.
*19 years for Tax-Exempt Money Funds.
<PAGE>
Colleen Meehan, Fund Manager (PICTURE)
Portfolio
Manager's Report
The Prudential Tax-Free Money Fund seeks high current income
that is
exempt from federal income taxes, consistent with the
stability of
capital and the maintenance of liquidity. The Fund invests
in a
diversified portfolio of high-quality, short-term municipal
bonds
issued by state and local governments, territories and
possessions
of the United States, and by the District of Columbia.
Maturities
can range from one day to a maximum of 13 months. We
purchase
only securities rated in one of the two highest rating
categories
by at least two major rating agencies or, if not rated,
deemed to
be of equivalent quality by our credit research staff. There
can be
no assurance that the Fund will achieve its investment
objective.
The Importance Of WAM.
Weighted average maturity (WAM) takes into account the
maturity
level of each security held by a fund. WAM is the
measurement
tool that determines a fund's sensitivity to changes in
interest
rates. A lengthened WAM enables a fund's yield to remain
higher for a longer period of time during declining interest
rate cycles.
Strategy Session.
Our WAM Remained Longer.
Throughout 1998, we stuck with our strategy of buying higher-
yielding
securities, when available, to keep our Fund's weighted
average
maturity (WAM) longer than that of its competition.
Maintaining a
longer WAM for most of the year enabled our Fund's yield to
remain
higher for a longer period of time as tax-exempt money
market yields
declined.
Yields fell (and prices rose), in part, as investor demand
increased
for municipal money market securities while the supply
decreased.
In fact, the Bond Buyer One-Year Note Index -- a popular
gauge of
municipal money market yields -- fell to 3.04%
as of December 31, 1998 from 3.78% at the beginning of the
year.
Short-term borrowing needs of many state and local
governments
declined in 1998 because favorable economic conditions in
the
United States boosted their tax revenues. Therefore the City
of
New York and the states of California and Texas issued fewer
tax-exempt notes, which typically mature in 12 months or
less.
Some state and local governments also preferred to issue
longer-term
debt securities, as opposed to notes, in order to lock in
low yields
for a longer period of time. As a result, the total dollar
volume of
tax-exempt notes in 1998 was down 25% from 1997, according
to
Municipal Market Data. The 1998 total volume was the lowest
in
a decade.
Besides the supply/demand imbalance, tax-exempt money market
yields
also fell along with the Federal funds rate (the rate banks
charge
each other to borrow funds overnight). It was lowered by a
quarter
percentage point on September 29, October 15,
and November 17, leaving the key rate at 4.75%. The Federal
Reserve
cut the key short-term rate to restore confidence in the
U.S. economy
and calm financial markets after a global financial crisis
spread from
Asia to Russia and Latin America in midsummer. Our strategy
of
maintaining a longer WAM benefited the Fund in this market
environment.
<PAGE>
What Went Well.
Locking In Higher Yields.
Keeping the Fund's WAM longer than its competition proved to
be
a real challenge amid the dearth of tax-exempt money market
securities. We had to act quickly to benefit from temporary
jumps in money market yields that occurred during the year.
For example, portfolio managers sold securities to pay for
shareholder redemptions during tax season. Because their
sales
temporarily pushed up money market yields in late April and
early
May, we were able to buy attractively priced tax-exempt
commercial paper as well as notes maturing in six months and
one
year. These purchases lengthened the WAM. As a result, the
Fund
was advantageously positioned to ride out the decline in
interest
rates that typically occurs in early July.
Although tax-exempt money market yields edged slightly lower
as
the Federal funds rate declined, yields temporarily climbed
in
the final weeks of December. Yields rose because portfolio
managers
sold securities to provide shareholders with money to
pay for holiday expenditures. To prepare for this year-end
buying
opportunity and our own shareholder redemptions, we
increased the
Fund's exposure to very short-term securities in November
and
December. This gave us quick access to money in late
December, when we bought tax-exempt commercial paper
maturing
in February and March. These purchases allowed the Fund to
weather
the period of low rates that usually occurs in January.
And Not So Well.
More Would Have Been Better.
In hindsight, we should have purchased even more longer-term
money
market securities in the first six months of 1998 because
yields
were comparatively higher in the first half of the year. Had
we
bought more aggressively from January through June,
we would not have needed to reinvest as much of the Fund's
cash
flow at the substantially lower rates available during the
second
half of the year.
Looking Ahead.
We expect the Federal Reserve to hold monetary policy steady
for
the time being. The central bank has little reason to act as
the
United States continues to benefit from an ideal combination
of
solid economic growth and tame inflation. If the economy
continues
to expand at a brisk pace, we believe the supply of tax-
exempt
money market securities will decline even further. Therefore
we
will try to keep the Fund's WAM longer than that of its
competition
in order to enhance its performance.
Weighted Average Maturity Compared
To The Average Fund.
(GRAPH)
1
<PAGE>
President's Letter February 16,
1999
(PICTURE)
Dear Shareholder:
Many major equity market indexes ended 1998 on the upswing -
- - posting
an unprecedented fourth consecutive year of double-digit
returns -- as
many stocks rebounded off their early October lows. Bond
investors
were also cheered by healthy returns on U.S. Treasuries and
investment-grade corporate debt, as well as certain Western
European bonds.
Unfortunately, the equity market's advance was neither broad
nor deep. It was limited primarily to stocks of larger
companies
with established records of growth. Investors ignored the
stocks
of both undervalued companies and smaller companies in a
"flight to quality" stemming from financial turmoil in Asia
and
fears of a recession in the United States. Accordingly,
growth-style
investors in large-company stocks outperformed value-style
investors
by the widest margins in nearly 24 years -- and not since
the Great
Depression have large-company stocks so outperformed stocks
of
small companies.
The rally in bonds was not universal either. While
government
bonds -- especially Treasuries -- enjoyed strong appeal,
investors
were cool toward lower-rated issues. Highyield bonds,
therefore,
saw yields rise while prices fell.
What We Can Learn From '98
The volatility of 1998 underscores points all investors
should keep
in mind: Financial markets will rise and fall, sometimes
dramatically.
Because asset classes seldom move in lockstep, owning a mix
of value-
and growth-oriented mutual funds in addition to bond and
money market
funds can help lessen the effects of market volatility.
Generally speaking, long-term success in investment
management comes
from remaining true to an investment discipline -- even when
it is
out of favor. Investors who maintain a long-term perspective
and
don't sell during market lows are more likely to
regain lost ground, and while past events cannot foretell
future
performance, stocks and bonds have produced attractive
returns
ahead of inflation over time.
Thank you for your continued confidence in Prudential mutual
funds.
Sincerely,
Brian M. Storms
President
2
<PAGE>
Portfolio of Investments as
of December 31, 1998 PRUDENTIAL TAX-FREE
MONEY FUND, INC.
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating Interest Maturity Amount
Value
Description(a)
(Unaudited) Rate Date (000)
(Note 1)
<S>
<C> <C> <C> <C> <C>
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
Arkansas--1.5%
Arkansas Hosp. Equip. Fin. Auth. AHA Pooled Fin. Prog.,
F.R.W.D.,
Ser. 98A
A-1+* 4.00% 1/06/99 $ 3,000 $
3,000,000
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
Colorado--3.3%
Colorado Hlth. Facs. Auth. Rev., Frasier Meadows Manor,
F.R.W.D.,
Ser. 94
NR 4.05 1/07/99 6,585
6,585,000
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
District of Columbia--0.4%
Dist. of Columbia, G.O. Var. Rat, F.R.D.D., Ser. 92A-4
VMIG1 5.20 1/04/99 800
800,000
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
Florida--3.4%
Jacksonville Pwr. & Lt. , Lomak Petroleum Inc., T.E.C.P.,
Ser. 94
VMIG1 3.25 1/22/99 3,500
3,500,000
St Lucie County Florida Policy, T.E.C.P., Ser. 94A
VMIG1 3.10 2/16/99 3,200
3,200,000
- ------------
6,700,000
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
Georgia--4.3%
Burke Cnty. Dev. Auth. Poll., Pwr. Plant Vogtle Proj.,
T.E.C.P.,
Ser. 96-1
VMIG1 3.15 1/26/99 5,800
5,800,000
Monroe Cnty. Dev. Auth. Poll., Oglethorpe Pwr. Corp.,
S.E.M.O.T.,
Ser. 96
NR 3.45 5/01/99 2,670
2,670,000
- ------------
8,470,000
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
Illinois--9.5%
Illinois Hlth. Fac. Auth.,
Evanston Hosp. Corp. Proj., A.N.N.M.T., Ser. 92
VMIG1 3.10 11/01/99 3,000
3,000,000
Evanston Hosp., A.N.N.M.T., Ser. 95
VMIG1 3.80 4/30/99 7,000
7,000,000
Kane Cnty. Community Sch. Dist.,T.R.A.N., Ser. 97
NR 4.00 1/15/99 8,900
8,900,660
- ------------
18,900,660
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
Indiana--2.5%
Indiana St. Dev. Fin. Auth. Rev., Edl. Facs., Covenant High
Sch., F.R.W.D., Ser. 96
NR 4.10 1/07/99 5,000
5,000,000
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
Kentucky--6.8%
Kentucky Prop.& Bldg. Comm. Rev., Proj. No. 60
A2 4.50 10/01/99 3,000
3,027,367
Ohio Cnty. Poll. Ctrl. Rev., Big Rivers Elec. Corp. Proj.,
F.R.W.D.,
Ser. 85
VMIG1 4.20 1/06/99 5,000
5,000,000
Ser. 83
VMIG1 4.20 1/06/99 5,500
5,500,000
- ------------
13,527,367
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 3
<PAGE>
Portfolio of Investments as
of December 31, 1998 PRUDENTIAL TAX-FREE
MONEY FUND, INC.
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating Interest Maturity Amount Value
Description(a)
(Unaudited) Rate Date (000) (Note
1)
<S>
<C> <C> <C> <C> <C>
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
Maine--0.9%
Maine Bond Anticipation Note, Ser. 1
NR 4.00% 1/21/99 $ 1,900 $
1,900,406
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
Massachusetts--9.8%
Commonwealth. of Mass., First Chicago Cert., F.R.W.D.S.,
Ser.
98B
VMIG1 4.23 1/06/99 3,250
3,250,000
Massachusetts Ind. Fin. Agcy. Ind. Rev., Ocean Spray
Cranberry, A.N.N.O.T., Ser. 84
NR 3.35 10/15/99 4,500
4,500,000
Quincy Mass., Bond Anticipation Note, Ser. 98
NR 4.10 5/21/99 5,500
5,506,709
State of Massachussetts Cons. Loans, Ser. 89-A
Aaa 7.00 2/01/99 6,300
6,317,628
- ------------
19,574,337
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
Minnesota--2.6%
Bloomington Coml. Dev. Rev., 94th Street Assoc. Proj.,
F.R.W.D., Ser. 85
A-1+* 3.55 1/04/99 5,105
5,105,000
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
Mississipi--3.8%
Mississippi Hsg. Fin. Corp. Sngl. Fam. Mtge., F.R.W.D.S.,
Ser. 88
A-1+* 4.15 1/07/99 7,510
7,510,000
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
Missouri--1.3%
Missouri Dev. Fin. Bd. Science City, F.R.D.D., Ser 97B
VMIG1 5.25 1/04/99 2,500
2,500,000
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
New Hampshire--1.5%
New Hampshire Bus. Fin. Auth., New England Pwr. Co. Proj.,
T.E.C.P., Ser. 90A
P-1 3.15 2/09/99 2,000
2,000,000
New Hampshire State Ed. & Hlth. Fac. College Issue, Ser. 95
NR 7.50 1/15/99 994
1,034,601
- ------------
3,034,601
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
New York--2.5%
New York St. Power Auth. Rev., T.E.C.P., Ser. 2
P-1 3.10 2/12/99 5,000
5,000,000
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
Ohio--3.0%
EastLake Indl. Dev. Rev., Astro Model Dev. Corp., F.R.W.D.,
Ser. 96
NR 4.15 1/07/99 3,000
3,000,000
Ohio Hsg. Fin. Agcy., Multifamily Hsg. Rev., F.R.W.D., Ser.
B A-1+* 4.15 1/08/99 3,000
3,000,000
- ------------
6,000,000
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
Oklahoma--3.9%
Tulsa Pkg. Auth. Rev., Williams Ctr. Proj., S.E.M.M.T., Ser.
87A
VMIG1 3.15 5/17/99 7,740
7,740,000
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 4
<PAGE>
Portfolio of Investments as
of December 31, 1998 PRUDENTIAL TAX-FREE
MONEY FUND, INC.
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating Interest Maturity Amount Value
Description(a)
(Unaudited) Rate Date (000) (Note
1)
<S>
<C> <C> <C> <C> <C>
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
Oregon--7.1%
Oregon St Hsg. & Comm. Serv. Dept. Mtge. Rev., A.N.N.M.T.
Single Family Mtge. Ser. H
VMIG1 3.10% 12/01/99 $ 2,025 $
2,025,000
Single Family Mtge. Ser. I
VMIG1 3.15 12/01/99 4,500
4,500,000
Oregon St. Econ. Dev. Rev., KRC Western Inc. Proj.,
F.R.W.D.,
Ser. 178
Aa2 4.20 1/07/99 7,650
7,650,000
- ------------
14,175,000
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
Pennsylvania--0.5%
Allegheny Cnty., Greater Pitt. Intr'l Airport, Ser. 90A
Aaa 7.05 1/01/00 1,000
1,037,280
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
South Carolina--5.5%
South Carolina Pub. Svc. Auth., T.E.C.P.
P-1 3.25 1/15/99 11,000
11,000,000
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
South Dakota--5.6%
Brookings SD, Cert. of Part. Q.T.R.M.T., Ser. 97
NR 3.85 3/11/99 3,655
3,655,000
South Dakota Housing Development Authority Home Ownership
Mrtg., A.N.N.M.T., Ser. 98
MIG1 3.20 12/02/99 3,000
3,000,000
South Dakota Hsg. Dev. Auth. Hsg. Rev., F.R.W.D., Ser. 98
NR 4.35 1/07/99 4,450
4,450,000
- ------------
11,105,000
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
Texas--11.5%
Greater Texas Stu. Ln. Rev. Rfdg., A.N.N.M.T., Ser. 96A
VMIG1 3.60 3/01/99 5,000
5,000,000
Gulf Coast Ind. Dev. Auth., Citgo Petro. Proj., F.R.D.D.,
Ser. 94
VMIG1 5.25 1/04/99 1,000
1,000,000
Houston Water & Sewer Sys. Rev., F.R.W.D.S. , Ser. SG-73
A1+* 4.15 1/06/99 5,600
5,600,000
Houston G.O., T.E.C.P., Ser. B
P-1 3.20 1/13/99 7,500
7,500,000
Waxahachie Texas Ind. Dev. Auth. Rev., F.R.W.D., Ser. 98
Aa3 4.10 1/06/99 3,850
3,850,000
- ------------
22,950,000
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
Utah--4.4%
Intermountain Pwr. Agy.,
Q.T.R.O.T.S., Ser. A
VMIG1 3.50 2/01/99 2,350
2,350,000
T.E.C.P., Ser. B
A-1* 3.10 2/18/99 4,400
4,400,000
Utah Wtr. Fin. Agy. Rev., Pooled Loan Fin. Prog.
AAA 4.40 10/01/99 2,000
2,020,487
- ------------
8,770,487
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 5
<PAGE>
Portfolio of Investments as
of December 31, 1998 PRUDENTIAL TAX-FREE
MONEY FUND, INC.
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating Interest Maturity Amount Value
Description(a)
(Unaudited) Rate Date (000) (Note
1)
<S>
<C> <C> <C> <C> <C>
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
Virginia--1.0%
Hopewell Ind. Dev. Auth. Rev., F.R.D.D., Ser. 90A
P-1 5.30% 1/04/99 $ 600 $
600,000
Southampton Cnty. Ind. Dev. Auth. Rev. Hudson Pwr. Proj.,
F.R.D.D., Ser. 90A
VMIG1 5.30 1/04/99 1,400
1,400,000
- ------------
2,000,000
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
Wisconsin--4.5%
Whitewater Ind. Dev. Rev., Trek Bicycle Proj., F.R.W.D.,
Ser.
95
NR 4.25 1/07/99 4,055
4,055,000
Wisconsin Hsg & Econ. Dev. Auth., Eagle Trust, Q.T.R.O.T.S.,
Ser. 4901
(cost $4,995,000, date purchased 9/1/98)(d)
A-1+* 3.25 3/01/99 4,995
4,995,000
- ------------
9,050,000
Total Investments--101.1%
(cost $201,435,138(c))
201,435,138
Liabilities in excess of other assets--(1.1)%
(2,269,931)
- ------------
Net Assets--100%
$199,165,207
- ------------
- ------------
</TABLE>
- ---------------
(a) The following abbreviations are used in portfolio
descriptions:
A.N.N.M.T.--Annual Mandatory Tender(b)
A.N.N.O.T.--Annual Optional Tender(b)
F.R.D.D.--Floating Rate (Daily) Demand Note(b)
F.R.W.D.--Floating Rate (Weekly) Demand Note(b)
F.R.W.D.S.--Floating Rate (Weekly) Demand Note
Synthetic(b)
G.O.--General Obligation
Q.T.R.M.T.--Quarterly Tax & Reserve Mandatory Tender(b)
Q.T.R.O.T.S.--Quarterly Synthetic Optional Tender(b)
S.E.M.M.T.--Semi-Annual Mandatory Tender(b)
S.E.M.O.T.--Semi-Monthly Optional Tender Offer(b)
T.E.C.P.--Tax-Exempt Commercial Paper
(b) For purposes of amortized cost valuation, the maturity
date of these
instruments is considered to be the later of the next
date on which the
security can be redeemed at par, or the next date on
which the rate of
interest is adjusted.
(c) The cost basis for federal income tax purposes is
substantially the same as
that used for financial statement purposes.
(d) Indicates illiquid security restricted as to resale and
does not have a
readily available market; the aggregate cost of such
securities is
$4,995,000.
* Standard & Poor's Rating.
NR--Not Rated by Moody's or Standard & Poor's.
The Fund's current Statement of Additional Information
contains a description of
Moody's and Standard and Poor's ratings.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 6
<PAGE>
Statement of Assets and Liabilities PRUDENTIAL TAX-
FREE MONEY FUND, INC.
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Assets
December 31, 1998
- -----------------
<S>
<C>
Investments, at amortized cost which approximates market
value.......................................... $
201,435,138
Receivable for Fund shares
sold........................................................
................. 13,475,031
Interest
receivable..................................................
................................... 1,739,105
Prepaid
expenses....................................................
.................................... 6,837
- -----------------
Total
assets......................................................
................................... 216,656,111
- -----------------
Liabilities
Payable for Fund shares
reacquired..................................................
.................... 16,025,325
Payable for Investments
purchased...................................................
.................... 1,037,867
Accrued
expenses....................................................
.................................... 157,674
Dividends
payable.....................................................
.................................. 121,209
Management fee
payable.....................................................
............................. 93,862
Bank
overdraft...................................................
....................................... 50,117
Distribution fee
payable.....................................................
........................... 4,850
- -----------------
Total
liabilities.................................................
................................... 17,490,904
- -----------------
Net
Assets......................................................
........................................ $
199,165,207
- -----------------
- -----------------
Net assets were comprised of:
Common Stock, $.01 par
value.......................................................
.................. $ 1,992,595
Paid-in capital in excess of
par.........................................................
............ 197,172,612
- -----------------
Net assets, December 31,
1998........................................................
................... $ 199,165,207
- -----------------
- -----------------
Net asset value, offering price and redemption price
per share ($199,165,207 / 199,259,486
shares).....................................................
... $1.00
- -----------------
- -----------------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 7
<PAGE>
PRUDENTIAL TAX-FREE MONEY FUND, INC.
Statement of Operations
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income December 31,
1998
<S> <C>
Income
Interest.............................. $10,011,696
----------------
- -
Expenses
Management fee........................ 1,389,197
Distribution fee...................... 347,299
Transfer agent's fees and expenses.... 264,000
Custodian's fees and expenses......... 73,000
Reports to shareholders............... 49,000
Registration fees..................... 45,000
Audit fee and expenses................ 26,000
Legal fees and expenses............... 25,000
Directors' fees and expenses.......... 12,000
Insurance............................. 3,500
Miscellaneous......................... 1,676
----------------
- -
Total expenses..................... 2,235,672
Less: custodian fee credit............ (7,883)
----------------
- -
Net expenses....................... 2,227,789
----------------
- -
Net investment income.................... 7,783,907
----------------
- -
Realized Gain on Investments
Net realized gain on investment
transactions 10,290
----------------
- -
Net Increase in Net Assets
Resulting from Operations................ $ 7,794,197
----------------
- -
----------------
- -
</TABLE>
PRUDENTIAL TAX-FREE MONEY FUND, INC.
Statement of Changes in Net Assets
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Increase (Decrease) Year Ended December 31,
in Net Assets 1998 1997
<S> <C> <C>
Operations
Net investment income....... $7,783,907.... $
10,097,274
Net realized gain on
investment
transactions............. 10,290 --
------------- ----------
- -----
Net increase in net assets
resulting from
operations............... 7,794,197
10,097,274
------------- ----------
- -----
Dividends and distributions to
shareholders................ (7,794,197)
(10,097,274)
------------- ----------
- -----
Fund share transactions
(at $1 per share)
Proceeds from shares
subscribed............... 776,364,363
1,046,969,468
Net asset value of shares
issued to shareholders in
reinvestment of dividends
and distributions........ 7,493,041
9,663,288
Cost of shares reacquired... (914,504,317)
(1,060,629,324)
------------- ----------
- -----
Net decrease in net assets
from Fund share
transactions............. (130,646,913)
(3,996,568)
------------- ----------
- -----
Total decrease................. (130,646,913)
(3,996,568)
Net Assets
Beginning of year.............. 329,812,120
333,808,688
------------- ----------
- -----
End of year.................... $ 199,165,207 $
329,812,120
------------- ----------
- -----
------------- ----------
- -----
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 8
<PAGE>
Notes to Financial Statements PRUDENTIAL TAX-
FREE MONEY FUND, INC.
- ------------------------------------------------------------
- --------------------
Prudential Tax-Free Money Fund, Inc. (the 'Fund') is
registered under the
Investment Company Act of 1940 as a diversified, open-end
management investment
company. The investment objective of the Fund is to attain
the highest level of
current income that is exempt from federal income taxes,
consistent with
liquidity and preservation of capital. The Fund will invest
in short-term
tax-exempt debt securities of state and local governments.
The ability of the
issuers of the securities held by the Fund to meet their
obligations may be
affected by economic or political developments in a specific
state, industry or
region.
- ------------------------------------------------------------
Note 1. Accounting Policies
The following is a summary of significant accounting
policies followed by the
Fund in the preparation of its financial statements.
Securities Valuation: Portfolio securities are valued at
amortized cost, which
approximates market value. The amortized cost method
involves valuing a security
at its cost on the date of purchase and thereafter assuming
a constant
amortization to maturity of any discount or premium.
Securities Transactions and Net Investment Income:
Securities transactions are
recorded on the trade date. Realized gains and losses on
sales of investments
are calculated on an identified cost basis. Interest income
is recorded on an
accrual basis. The cost of portfolio securities for federal
income tax purposes
is substantially the same as for financial reporting
purposes. Expenses are
recorded on the accrual basis which may require the use of
certain estimates by
management.
Federal Income Taxes: It is the Fund's policy to continue to
meet the
requirements of the Internal Revenue Code applicable to
regulated investment
companies and to distribute all of its net investment income
to its
shareholders. For this reason, no federal income tax
provision is required.
Dividends: The Fund declares dividends daily from net
investment income and net
realized gains, if any. Payment of dividends is made
monthly.
Custody Fee Credits: The Fund has an arrangement with its
custodian bank,
whereby uninvested monies earn credits which reduce the fees
charged by the
custodian.
Note 2. Agreements
The Fund has a management agreement with Prudential
Investments Fund Management
LLC ('PIFM'). Pursuant to this agreement, PIFM has
responsibility for all
investment advisory services and supervises the subadviser's
performance of such
services. PIFM has entered into a subadvisory agreement with
Prudential
Investment Corporation ('PIC'); PIC furnishes investment
advisory services in
connection with the management of the Fund. PIFM pays for
the cost of the
subadviser's services, the compensation of officers of the
Fund, occupancy and
certain clerical and bookkeeping costs of the Fund. The Fund
bears all other
costs and expenses.
The management fee paid PIFM is computed daily and payable
monthly, at an annual
rate of .50 of 1% of the Fund's average daily net assets up
to $750 million,
.425 of 1% of the next $750 million of average daily net
assets and .375 of 1%
of average daily net assets in excess of $1.5 billion.
The Fund had a distribution agreement with Prudential
Securities Incorporated
('PSI'), which acted as the distributor of the Fund through
May 31, 1998.
Prudential Investment Management Services LLC ('PIMS')
became the distributor of
the Fund effective June 1, 1998 and is serving the Fund
under the same terms and
conditions as under the agreement with PSI. The Fund
compensated PSI and PIMS
for distributing and servicing the Fund's shares pursuant to
the plan of
distribution at an annual rate of .125 of 1% of the Fund's
average daily net
assets. The distribution fee is accrued daily and payable
monthly.
PSI, PIFM, PIC and PIMS are indirect, wholly owned
subsidiaries of The
Prudential Insurance Company of America.
- ------------------------------------------------------------
Note 3. Other Transactions With Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), a wholly owned
subsidiary of PIFM,
serves as the Fund's transfer agent and during the year
ended December 31, 1998,
the Fund incurred fees of approximately $195,000 for the
services of PMFS. As of
December 31, 1998, approximately $13,000 of such fees were
due to PMFS. Transfer
agent fees and expenses in the Statement of Operations
include certain
out-of-pocket expenses paid to nonaffiliates.
- ------------------------------------------------------------
- --------------------
9
<PAGE>
Financial Highlights PRUDENTIAL TAX-
FREE MONEY FUND, INC.
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Year Ended December 31,
- -----------------------------------------------
1998 1997 1996 1995
<S>
<C> <C> <C> <C>
- -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
year.......................................... $ 1.00
$ 1.00 $ 1.00 $ 1.00
Net investment income and realized
gains.................................... .028
.030 .028 .031
Dividends and distributions to
shareholders................................. (.028)
(.030) (.028) (.031)
- -------- -------- -------- --------
Net asset value, end of
year................................................ $
1.00 $ 1.00 $ 1.00 $ 1.00
- -------- -------- -------- --------
- -------- -------- -------- --------
TOTAL
RETURN(a):..................................................
.......... 2.83% 3.00% 2.84%
3.15%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000)...............................................
$199,165 $329,812 $333,808 $387,651
Average net assets
(000)....................................................
$277,839 $339,825 $403,230 $470,370
Ratios to average net assets:
Expenses, including distribution
fee..................................... .80%
.78% .80% .85%
Expenses, excluding distribution
fee..................................... .68%
.66% .67% .72%
Net investment
income....................................................
2.80% 2.97% 2.83% 3.14%
<CAPTION>
1994
<S>
<C>
- --------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
year.......................................... $ 1.00
Net investment income and realized
gains.................................... .023
Dividends and distributions to
shareholders................................. (.023)
- --------
Net asset value, end of
year................................................ $
1.00
- --------
- --------
TOTAL
RETURN(a):..................................................
.......... 2.31%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000)...............................................
$487,290
Average net assets
(000)....................................................
$644,481
Ratios to average net assets:
Expenses, including distribution
fee..................................... .75%
Expenses, excluding distribution
fee..................................... .63%
Net investment
income....................................................
2.26%
</TABLE>
- ---------------
(a) Total return is calculated assuming a purchase of shares
on the first day
and a sale on the last day of each period reported and
includes reinvestment
of dividends and distributions.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 10
<PAGE>
Report of Independent Accountants PRUDENTIAL TAX-
FREE MONEY FUND, INC.
- ------------------------------------------------------------
- --------------------
To the Shareholders and Board of Directors of
Prudential Tax-Free Money Fund, Inc.
In our opinion, the accompanying statement of assets and
liabilities, including
the portfolio of investments, and the related statements of
operations and of
changes in net assets and the financial highlights present
fairly, in all
material respects, the financial position of Prudential Tax-
Free Money Fund,
Inc. (the 'Fund') at December 31, 1998, the results of its
operations for the
year then ended, the changes in its net assets for each of
the two years in the
period then ended and the financial highlights for each of
the five years in the
period then ended, in conformity with generally accepted
accounting principles.
These financial statements and financial highlights
(hereafter referred to as
'financial statements') are the responsibility of the Fund's
management; our
responsibility is to express an opinion on these financial
statements based on
our audits. We conducted our audits of these financial
statements in accordance
with generally accepted auditing standards which require
that we plan and
perform the audit to obtain reasonable assurance about
whether the financial
statements are free of material misstatement. An audit
includes examining, on a
test basis, evidence supporting the amounts and disclosures
in the financial
statements, assessing the accounting principles used and
significant estimates
made by management, and evaluating the overall financial
statement presentation.
We believe that our audits, which included confirmation of
securities at
December 31, 1998 by correspondence with the custodian and
brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
February 12, 1999
Tax Information (Unaudited) PRUDENTIAL TAX-
FREE MONEY FUND, INC.
- ------------------------------------------------------------
- --------------------
We are required by the Internal Revenue Code to advise you
within 60 days of the
Fund's fiscal year end (December 31, 1998) as to the federal
tax status of
dividends paid by the Fund during such fiscal year.
Accordingly, we are advising
you that in the fiscal year ended December 31, 1998,
dividends paid from net
investment income of $.03 were federally tax-exempt interest
dividends.
Information with respect to the state taxability of your
investment in the Fund
was sent to you under separate cover.
- ------------------------------------------------------------
- --------------------
11
<PAGE>
Getting The Most From Your Prudential Mutual Fund.
When you invest through Prudential Mutual Funds, you receive
financial
advice through a Prudential Securities financial advisor or
Prudential/Pruco Securities registered representative. Your
advisor
or representative can provide you with the following
services:
There's No Reward Without Risk; But Is This Risk Worth It?
Your financial advisor or registered representative can help
you
match the reward you seek with the risk you can tolerate.
And risk
can be difficult to gauge --sometimes even the simplest
investments
bear surprising risks. The educated investor knows that
markets
seldom move in just one direction -- there are times when a
market
sector or asset class will lose value or provide little in
the way
of total return. Managing your own expectations is easier
with help
from someone who understands the markets and who knows you!
Keeping Up With The Joneses.
A financial advisor or registered representative can help
you wade
through the numerous mutual funds available to find the ones
that
fit your own individual investment profile and risk
tolerance. While
the newspapers and popular magazines are full of advice
about
investing, they are aimed at generic groups of people or
representative
individuals, not at you personally. Your financial advisor
or
registered representative will review your investment
objectives
with you. This means you can make financial decisions based
on the
assets and liabilities in your current portfolio and your
risk
tolerance -- not just based on the current investment fad.
Buy Low, Sell High.
Buying at the top of a market cycle and selling at the
bottom are
among the most common investor mistakes. But sometimes it's
difficult
to hold on to an investment when it's losing value every
month. Your
financial advisor or registered representative can answer
questions
when you're confused or worried about your investment, and
remind
you that you're investing for the long haul.
<PAGE>
Getting The Most From Your Prudential Mutual Fund.
How many times have you read these letters -- or other
financial
materials -- and stumbled across a word that you don't
understand?
Many shareholders have run into the same problem. We'd like
to
help. So we'll use this space from time to time to explain
some
of the words you might have read, but not understood. And if
you
have a favorite word that no one can explain to your
satisfaction, please write to us.
Basis Point: 1/100th of 1%. For example, one-half of one
percent
is 50 basis points.
Collateralized Mortgage Obligations (CMOs): Mortgage-backed
bonds
that separate mortgage pools into different maturity
classes,
called tranches. These instruments are sensitive to changes
in
interest rates and homeowner refinancing activity. They
are subject to prepayment and maturity extension risk.
Derivatives: Securities that derive their value from other
securities. The rate of return of these financial
instruments
rises and falls -- sometimes very suddenly -- in response to
changes in some specific interest rate, currency, stock, or
other
variable.
Discount Rate: The interest rate charged by the Federal
Reserve
on loans to member banks.
Federal Funds Rate: The interest rate charged by one bank to
another on overnight loans.
Futures Contract: An agreement to purchase or sell a
specific
amount of a commodity or financial instrument at a set price
at
a specified date in the future.
Leverage: The use of borrowed assets to enhance return. The
expectation is that the interest rate charged on borrowed
funds will be lower than the return on the investment. While
leverage can increase profits, it can also magnify losses.
Liquidity: The ease with which a financial instrument (or
product)
can be bought or sold (converted into cash) in the financial
markets.
Price/Earnings Ratio: The price of a share of stock divided
by the
earnings per share for a 12-month period.
Option: An agreement to purchase or sell something, such as
shares
of stock, by a certain time for a specified price. An option
need
not be exercised.
Spread: The difference between two values; often used to
describe
the difference between "bid" and "asked" prices of a
security,
or between the yields of two similar maturity bonds.
Yankee Bond: A bond sold by a foreign company or government
in the
U.S. market and denominated in U.S. dollars.
<PAGE>
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
http://www.prudential.com
Directors
Edward D. Beach
Delayne Dedrick Gold
Robert F. Gunia
Don G. Hoff
Robert E. LaBlanc
Mendel A. Melzer, CFA
Robin B. Smith
Stephen Stoneburn
Brian M. Storms
Nancy H. Teeters
Officers
Brian M. Storms, President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
Robert C. Rosselot, Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
Distributor
Prudential Investment Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
The views expressed in this report and information about the
Fund's portfolio holdings are for the period covered by this
report and are subject to change thereafter.
This report is not authorized for distribution to
prospective
investors unless preceded or accompanied by a current
prospectus.
74436P103 MF103E
