As filed with the Securities and Exchange Commission on April 27, 1999
Securities Act Registration No. 2-64625
Investment Company Act Registration No. 811-2927
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 24 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 25 [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):
[X] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 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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<PAGE>
FUND TYPE:
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Money market
INVESTMENT OBJECTIVE:
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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.
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PROSPECTUS: APRIL 28, 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.
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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 invests in Municipal Bonds which are high-quality money market instruments
with remaining maturities of 13 months or less. Under normal circumstances, at
least 80% of the Fund's net assets are invested in money market instruments that
pay income exempt from federal income taxes and which are not preference items
for purposes of the federal alternative minimum tax. 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
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1
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Risk/Return Summary
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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,
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 shows the Fund's performance for each full calendar year of
operation for the last 10 years. The tables provide additional performance
information for the periods indicated. The bar chart and tables 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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2 Prudential Tax-Free Money Fund, Inc. TELEPHONE (800) 225-1852
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Risk/Return Summary
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[GRAPHICAL REPRESENTAION OF GRAPH]
<TABLE>
<CAPTION>
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ANNUAL RETURNS(1)
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1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5.74% 5.42% 4.22% 2.63% 1.86% 2.31% 3.15% 2.84% 3.00% 2.83%
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Best Quarter: 1.50% (2nd quarter of 1989) Worst Quarter: .45% (2nd quarter of 1993)
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</TABLE>
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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 2.83% 2.85% 3.41% 4.29%
IBC Average(2)
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YIELD(1) (AS OF 12/31/98)
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7-Day yield of the 2.74%
Fund
7-Day tax equivalent 4.54%
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.
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3
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Risk/Return Summary
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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) (as a percentage
of the lower of original purchase price or sale
proceeds) None
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 .175%
= TOTAL ANNUAL FUND OPERATING EXPENSES .800%
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:
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1 YR 3 YRS 5 YRS 10 YRS
Fund shares $82 $255 $444 $990
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4 Prudential Tax-Free Money Fund, Inc. TELEPHONE (800) 225-1852
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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 mutual 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.
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5
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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 will 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.
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6 Prudential Tax-Free Money Fund, Inc. TELEPHONE (800) 225-1852
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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.
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7
<PAGE>
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How the Fund Invests
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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.
<TABLE>
<CAPTION>
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INVESTMENT TYPE ----------------------------------------------------------------
% OF FUND'S TOTAL ASSETS RISKS POTENTIAL REWARDS
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<S> <C> <C>
HIGH-QUALITY MONEY MARKET o Credit risk--the risk o Regular interest income
OBLIGATIONS OF MUNICIPAL that the default of an
ISSUERS issuer would leave the o May be more secure than
Fund with unpaid stock and equity
UP TO 100% interest or principal securities because of
identified sources from
o Market risk--the risk which to pay interest
that the obligations may and principal
lose value because
interest rates change
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PRE-REFUNDED BONDS o May be more expensive o May be more secure than
than obligations backed other obligations of
UP TO 25% only by a municipalities municipal issuers
taxing or borrowing because of the escrow of
authority U.S. Government
obligations
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SHARES OF OTHER INVESTMENT o Could result in o May provide additional
COMPANIES duplicate management or diversification
advisory fees
UP TO 10%
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ILLIQUID SECURITIES o May be difficult to o May offer a more
value precisely attractive yield than
widely traded securities
UP TO 10% OF NET ASSETS o May be difficult to sell
at the time or price
desired
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</TABLE>
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8 Prudential Tax-Free Money Fund, Inc. TELEPHONE (800) 225-1852
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How the Fund is Managed
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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 .50% of the
Fund's average net assets.
As of March 31, 1999, PIFM served as the Manager to all 46 of the
Prudential Mutual Funds, and as Manager or administrator to 22 closed-end
investment companies, with aggregate assets of approximately $71.6 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
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9
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How the Fund is Managed
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cost of your investment and may cost you more than paying other types of sales
charges.
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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10 Prudential Tax-Free Money Fund, Inc. TELEPHONE (800) 225-1852
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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.
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 3: Additional Shareholder Services.
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11
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Fund Distributions and Tax Issues
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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.
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12 Prudential Tax-Free Money Fund, Inc. TELEPHONE (800) 225-1852
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<PAGE>
How to Buy, Sell and
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Exchange Shares of the Fund
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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
Purchases of shares of the Fund through Prudential Securities are made through
automatic investment procedures (the Autosweep program). You cannot purchase
shares through Prudential Securities other than through the Autosweep program,
except as specifically provided (that is, you cannot make a manual purchase).
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 that you have selected the Fund as your primary money sweep fund.
For individual retirement accounts (IRAs) and Benefit Plans in the
Autosweep program, all credit balances (that is, immediately available funds) of
$1.00 or more will be invested in the Fund on a daily basis. Prudential
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13
<PAGE>
How to Buy, Sell and
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Exchange Shares of the Fund
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Securities will arrange for the investment of the credit balance in the Fund and
will purchase shares of the Fund equal to that amount. This will occur on the
business day following 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.
For accounts other than IRAs and Benefit Plans, shares of the Fund will be
purchased as follows:
o When your account has a credit balance of $10,000 or more, Prudential
Securities will arrange for the automatic purchase of shares of the
Fund. This will occur on the business day following the availability
of the credit balance
o When your account has a credit balance that results from a securities
sale totaling $1,000 or more, the available cash will be invested in
the Fund on the settlement date
o For all other credit balances of $1.00 or more, shares will be
purchased automatically at least once a month on the last business day
of each month
Purchases through Autosweep are subject to a minimum initial investment of
$1,000, which is waived for certain retirement and employee savings plans and
custodial accounts for the benefit of minors. You will begin earning dividends
on your shares purchased through the Autosweep program on the first business day
after the order is placed. Prudential Securities will purchase shares of the
Fund at the price determined at 4:30 p.m. New York Time on the business day
following the existence of the credit balance, which is the second business day
after the availability of the credit balance. Prudential Securities will 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.
The charges and expenses of the Autosweep program are not reflected in the
Fees and Expenses tables. For information about participating in the Autosweep
program, you should contact your Prudential Securities Financial Advisor.
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14 Prudential Tax-Free Money Fund, Inc. TELEPHONE (800) 225-1852
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How to Buy, Sell and
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Exchange Shares of the Fund
- --------------------------------------------------------------------------------
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
(Pruco) 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 and the Advantage Account, which offers
additional services, such as a debit card and check writing.
The Advantage Account 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 Pruco representative or the Advantage Service Center. The
following discussion assumes that you have selected the Fund as your primary
money sweep fund.
With the Advantage Account as well as the Investor Account for Benefit
Plans and individual retirement accounts (IRAs), all credit balances (that is,
immediately available funds) of $1.00 or more will be invested in the Fund on a
daily basis. Prudential Securities (Pruco's clearing broker), arranges for the
investment of the credit balance in the Fund and will purchase shares of the
Fund equal to that amount. This will occur on the business day following 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.
If you have an Investor Account (non-IRAs), shares of the Fund will be
purchased as follows:
o When your account has a credit balance of $10,000 or more, Prudential
Securities will arrange for the automatic purchase of shares of the
Fund with all cash balances of $1.00 or more. This will occur on the
business day following the availability of the credit balance
o When your account has a credit balance that results from a securities
sale totaling more than $1,000, all cash balances of $1.00 or more
will be invested in the Fund on the business day following the
settlement date
o For all other credit balances of $1.00 or more, shares will be
purchased automatically at least once a month on the last business day
of each month
You will begin earning dividends on your shares purchased through the
Advantage Account Program on the first business day after the order is placed.
Prudential Securities will purchase shares of the Fund at the price determined
at 4:30 p.m. New York Time on the business day following the availability of
- --------------------------------------------------------------------------------
15
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How to Buy, Sell and
- --------------------------------------------------------------------------------
Exchange Shares of the Fund
- --------------------------------------------------------------------------------
the credit balance. Prudential Securities will use and retain the benefit of
credit balances in your account until Fund shares are purchased.
Purchases of, withdrawals from and dividends from the Fund will be shown
on your Advantage Account or Investor Account statement.
The charges and expenses of the Advantage Account Program are not
reflected in the Fees and Expenses tables. For information about participating
in the Advantage Account Program, you should call (800) 235-7637.
MANUAL PURCHASES
You may make a manual purchase (that is, a non-money market sweep purchase) of
Fund shares in either of the following situations:
o You do not participate in a money market sweep program (the Autosweep
program or the Advantage Account Program), or
o You participate in a money market sweep program, but the Fund is not
designated as your primary money market sweep fund.
The minimum initial investment for a manual purchase for shares of
the Fund is $1,000 and the minimum subsequent investment is $100, except that
all minimum investment requirements are waived for certain retirement and
employee savings plans and custodial accounts for the benefit of minors.
If you make a manual purchase through Prudential Securities,
Prudential Securities will place your order for shares of the Fund on the
business day after the purchase order is received for settlement that day, which
is the second business day after receipt of the purchase order by Prudential
Securities. Prudential Securities may use and retain the benefit of credit
balances in a client's brokerage account until monies are delivered to the Fund
(Prudential Securities delivers federal funds on the business day after
settlement).
If you make a manual purchase through the Fund's Distributor, through
your broker or dealer (other than Prudential Securities) or directly from the
Fund, shares will be purchased at the net asset value next determined after
receipt of your order and payment in proper form. When your payment is received
by 4:30 p.m., New York Time, shares will be purchased that day and you will
begin to earn dividends on the following business day. If you purchase shares
through a broker or dealer, your broker or dealer will forward your order and
payment to the Fund. You should contact your broker or dealer for information
about services that they may provide, including an automatic sweep feature.
Transactions in Fund shares may be subject to postage and
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16 Prudential Tax-Free Money Fund, Inc. TELEPHONE (800) 225-1852
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<PAGE>
How to Buy, Sell and
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Exchange Shares of the Fund
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other charges imposed by your broker or dealer. Any such charge is retained by
your broker or dealer and is not sent to the Fund.
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.
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17
<PAGE>
How to Buy, Sell and
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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.
HOW TO SELL YOUR SHARES
You can sell your shares of the Fund 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
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18 Prudential Tax-Free Money Fund, Inc. TELEPHONE (800) 225-1852
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<PAGE>
How to Buy, Sell and
- --------------------------------------------------------------------------------
Exchange Shares of the Fund
- --------------------------------------------------------------------------------
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.
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.
- --------------------------------------------------------------------------------
19
<PAGE>
How to Buy, Sell and
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Exchange Shares of the Fund
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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 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
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20 Prudential Tax-Free Money Fund, Inc. TELEPHONE (800) 225-1852
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<PAGE>
How to Buy, Sell and
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Exchange Shares of the Fund
- --------------------------------------------------------------------------------
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 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.
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21
<PAGE>
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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.
<TABLE>
<CAPTION>
- ----------------------------------------
FUND SHARES (FISCAL YEAR ENDED 12-31)
- ------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income and net realized
gains .028 .030 .028 .031 .023
Dividends and distributions to
shareholders (.028) (.030) (.028) (.031) (.023)
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN(1) 2.83% 3.00% 2.84% 3.15% 2.31%
- ------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000) $199,165 $329,812 $333,808 $387,651 $487,290
RATIOS TO AVERAGE NET ASSETS:
Net investment income 2.80% 2.97% 2.83% 3.14% 2.26%
Expenses .80% .78% .80% .85% .75%
- ------------------------------------------------------------------------------------------------------
</TABLE>
1 TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS AND ANY OTHER DISTRIBUTIONS.
IT IS CALCULATED ASSUMING SHARES ARE PURCHASED ON THE FIRST DAY AND SOLD ON
THE LAST DAY OF EACH PERIOD REPORTED.
- --------------------------------------------------------------------------------
22 Prudential Tax-Free Money 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
- --------------------------------------------------------------------------------
24 Prudential Tax-Free Money Fund, Inc. TELEPHONE (800) 225-1852
- --------------------------------------------------------------------------------
<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
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
MF103A
[logo] Printed on Recycled Paper
<PAGE>
PRUDENTIAL TAX-FREE MONEY FUND, INC.
Statement of Additional Information
Dated April 28, 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 28, 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-12
Purchase and Redemption of Fund Shares B-12
Net Asset Value B-14
Taxes, Dividends and Distributions B-14
Calculation of Yield B-16
Financial Statements B-17
Report of Independent Accountants B-25
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.
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.
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
B-3
<PAGE>
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.
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 10% 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.
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
B-4
<PAGE>
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 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.
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--Other Matters" 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.
In addition, the Fund may not purchase any security (other than obligations
of the U.S. Government, its agencies and instrumentalities) if as a result 25%
or more of the value of the Fund's total assets (determined at the time of
investment) would be invested in the securities of one or more issuers
conducting their principal business activities in the same industry.
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
<TABLE>
<CAPTION>
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) President Vice President of Prudential Investments (since
and Director 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>
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATIONS AND OTHER AFFILIATIONS
NAME, ADDRESS AND AGE (1) THE FUND FOR THE LAST FIVE YEARS
- ------------------------ ------------- ---------------------------------------------
<S> <C> <C>
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.
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).
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.
B-7
<PAGE>
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 $750, 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.
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 ............... $ 750 None N/A $135,000(44/71)*
Stephen C. Eyre--Former Director ........ $ 750 None N/A $ 45,000(14/77)*
Delayne D. Gold--Director ............... $ 750 None N/A $135,000(44/71)*
Robert F. Gunia (1)--Director ........... -- None N/A --
Don G. Hoff--Director ................... $ 750 None N/A $ 45,000(14/17)*
Robert F. LaBlanc--Director ............. $ 750 None N/A $ 45,000(14/17)*
Mendel A. Melzer (1)--Former Director ... -- None N/A --
Richard A. Redeker (1)--Former Director . -- None N/A --
Robin B. Smith--Director ................ $ 750 None N/A $ 90,000(32/41)*
Stephen Stoneburn--Director ............. $ 750 None N/A $ 45,000(14/17)*
Brian M. Storms (1)--Former Director .... -- None N/A --
Nancy H. Teeters--Director .............. $ 750 None N/A $ 90,000(26/47)*
</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
$116,225 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.
B-8
<PAGE>
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 March 31, 1999, PIFM managed
and/or administered open-end and closed-end management investment companies with
assets of approximately $71.6 billion. According to the Investment Company
Institute, as of November 30, 1998, the Prudential Mutual Funds were the 58th
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.
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).
B-9
<PAGE>
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 $1,389,197, $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 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.
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.
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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 and PIMS
collectively received payments of $347,299, under the Plan. It is estimated that
all this amount was spent on commission credits to Prudential Securities and
Prusec for payments of account servicing fees to financial advisers and an
allocation of overhead and other branch office distribution-related expenses.
The term "overhead and other branch office distribution-related expenses"
represents (a) the expenses of operating 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.
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.
(C) OTHER SERVICE PROVIDERS
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 accountants and in that capacity audits
the Fund's annual financial statements. PricewaterhouseCoopers LLP provides
audit services, 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."
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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.
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.
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<PAGE>
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.
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. 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.
B-13
<PAGE>
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 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
B-14
<PAGE>
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 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.
B-15
<PAGE>
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 2.74% and 2.78%, respectively. The tax equivalent yield
for the Fund based on the 7 days ended December 31, 1998 was 4.54%.
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.
B-16
<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. B-17
<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. B-18
<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. B-19
<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. B-20
<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. B-21
<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. B-22
<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.
- --------------------------------------------------------------------------------
B-23
<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. B-24
<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.
- --------------------------------------------------------------------------------
B-25
<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.
I-1
<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.
I-2
<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).
(iii) Distribution Agreement between the Registrant and Prudential
Investment Management Services LLC*
(iv) Form of Dealer Agreement*
(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) (i) 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).
(ii) Amended and Restated Distribution and Service Plan*
(n) Financial Data Schedule for the fiscal year ended December 31, 1998
filed for electronic purposes as Exhibit 27.*
(o) Not applicable
- ----------
*Filed herewith.
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)(iii) 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).
C-2
<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.
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH PIFM PRINCIPAL OCCUPATIONS
- ---------------- ------------------ ---------------------
<S> <C> <C>
William V. Healey Executive Vice President, Executive Vice President, Secretary and General
Secretary and General Counsel, PIFM
Counsel
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
John V. Scicutella Officer-in-Charge,Acting Acting President, PMF&A; Officer-in-Charge, Acting President,
President, Chief Executive Chief Executive Officer and Chief Operating
Officer and Chief Officer, PIFM
Operating Officer
</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.
<TABLE>
<CAPTION>
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
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
- ------- ----------- ------------
Robert F. Gunia ............... President President and
Director
John R. Strangfeld ............ Executive Vice President None
William V. Healy............... Senior Vice President, Secretary None
Chief Legal Officer
Kevin Frawley ................. Senior Vice President None
and Chief Compliance
Officer
Margaret Deverell.............. Vice President and Chief None
Financial Officer
Brian Henderson................ Senior Vice President and None
Chief Operating Officer
(1) The address of each person named is Prudential Plaza, 751 Broad Street,
Newark, New Jersey 07102, unless otherwise indicated.
(c) Registrant has no principal underwriter who is not an affiliated
person of the Registrant.
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 certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment to the
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Newark, and State of New Jersey, on the 27th day of April, 1999.
PRUDENTIAL TAX-FREE MONEY FUND, INC.
/s/ Robert F. Gunia
----------------------------------------
(ROBERT F. GUNIA, 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 April 27, 1999
- ---------------------------
EDWARD D. BEACH
/s/ Delayne D. Gold Director April 27, 1999
- ---------------------------
DELAYNE D. GOLD
/s/ Robert F. Gunia President April 27, 1999
- --------------------------- and Director
ROBERT F. GUNIA
/s/ Don G. Hoff Director April 27, 1999
- ---------------------------
DON G. HOFF
/s/ Robert E. LaBlanc Director April 27, 1999
- ---------------------------
ROBERT E. LABLANC
/s/ Robin B. Smith Director April 27, 1999
- ---------------------------
ROBIN B. SMITH
/s/ Stephen Stoneburn Director April 27, 1999
- ---------------------------
STEPHEN STONEBURN
/s/ Nancy H. Teeters Director April 27, 1999
- ---------------------------
NANCY H. TEETERS
/s/ Grace C. Torres Treasurer, Principal Financial April 27, 1999
- --------------------------- and Accounting Officer
GRACE C. TORRES
<PAGE>
EXHIBIT INDEX
(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).
(iii) Distribution Agreement between the Registrant and Prudential
Investment Management Services LLC*
(iv) Form of Dealer Agreement*
(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) (i) 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).
(ii) Amended and Restated Distribution and Service Plan*
(n) Financial Data Schedule for the fiscal year ended December 31, 1998
filed for electronic purposes as Exhibit 27.*
(o) Not applicable
- ----------
*Filed herewith.
PRUDENTIAL TAX-FREE MONEY FUND, INC.
DISTRIBUTION AGREEMENT
Agreement made as of June 1, 1998, between Prudential Tax-Free Money
Fund, Inc. (the Fund), and Prudential Investment Management Services LLC, a
Delaware limited liability company (the Distributor).
WITNESSETH
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the Investment Company Act), as a diversified, open-end,
management investment company and it is in the interest of the Fund to offer its
shares for sale continuously;
WHEREAS, the shares of the Fund may be divided into classes
and/or series (all such shares being referred to herein as Shares) and the Fund
currently is authorized to offer Class A Shares;
WHEREAS, the Distributor is a broker-dealer registered under the
Securities Exchange Act of 1934, as amended, and is engaged in the business of
selling shares of registered investment companies either directly or through
other broker-dealers;
WHEREAS, the Fund and the Distributor wish to enter into an agreement
with each other, with respect to the continuous offering of the Fund's Shares
from and after the date hereof in order to promote the growth of the Fund
and facilitate the distribution of its Shares; and
WHEREAS, the Fund has adopted a plan (or plans) of distribution pursuant
to Rule 12b-1 under the Investment Company Act with respect to certain of its
classes and/or series of Shares (the Plans) authorizing payments by the Fund to
the Distributor with respect to the distribution of such classes and/or series
of Shares and the maintenance of related shareholder accounts.
NOW, THEREFORE, the parties agree as follows:
Section 1. APPOINTMENT OF THE DISTRIBUTOR
The Fund hereby appoints the Distributor as the principal
underwriter and distributor of the Shares of the Fund to sell Shares to the
public on behalf of the Fund and the Distributor hereby accepts such appointment
and agrees to act hereunder. The Fund hereby agrees during the term of this
Agreement to sell Shares of the Fund through the Distributor on the terms and
conditions set forth below.
<PAGE>
Section 2. EXCLUSIVE NATURE OF DUTIES
Except with respect to a period of time (not to exceed 60 days) during
which the Distributor and Prudential Securities Incorporated will serve as
co-distributors of the Fund in the transition of distribution services from
Prudential Securities Incorporated to the Distributor, the Distributor shall be
the exclusive representative of the Fund to act as principal underwriter and
distributor of the Fund's Shares, provided that:
2.1 The exclusive rights granted to the Distributor to sell Shares of
the Fund shall not apply to Shares of the Fund issued in connection with the
merger or consolidation of any other investment company or personal holding
company with the Fund or the acquisition by purchase or otherwise of all (or
substantially all) the assets or the outstanding shares of any such company by
the Fund.
2.2 Such exclusive rights shall not apply to Shares issued by the Fund
pursuant to reinvestment of dividends or capital gains distributions or through
the exercise of any conversion feature or exchange privilege.
2.3 Such exclusive rights shall not apply to Shares issued by the Fund
pursuant to the reinstatement privilege afforded redeeming shareholders.
2.4 Such exclusive rights shall not apply to purchases made through the
Fund's transfer and dividend disbursing agent in the manner set forth in the
currently effective Prospectus of the Fund. The term "Prospectus" shall mean the
Prospectus and Statement of Additional Information included as part of the
Fund's Registration Statement, as such Prospectus and Statement of Additional
Information may be amended or supplemented from time to time, and the term
"Registration Statement" shall mean the Registration Statement filed by the Fund
with the Securities and Exchange Commission and effective under the Securities
Act of 1933, as amended (Securities Act), and the Investment Company Act, as
such Registration Statement is amended from time to time.
Section 3. PURCHASE OF SHARES FROM THE FUND
3.1 The Distributor shall have the right to buy from the Fund on behalf
of investors the Shares needed, but not more than the Shares needed (except for
clerical errors in transmission) to fill unconditional orders for Shares placed
with the Distributor by investors or registered and qualified securities dealers
and other financial institutions (selected dealers).
3.2 The Shares shall be sold by the Distributor on behalf of the Fund
and delivered by the Distributor or selected dealers, as described in Section
6.4 hereof, to investors at the offering price as set forth in the Prospectus.
2
<PAGE>
3.3 The Fund shall have the right to suspend the sale of any or all
classes and/or series of its Shares at times when redemption is suspended
pursuant to the conditions in Section 4.3 hereof or at such other times as may
be determined by the Board. The Fund shall also have the right to suspend the
sale of any or all classes and/or series of its Shares if a banking moratorium
shall have been declared by federal or New Jersey authorities.
3.4 The Fund, or any agent of the Fund designated in writing by the
Fund, shall be promptly advised of all purchase orders for Shares received by
the Distributor. Any order may be rejected by the Fund; provided, however, that
the Fund will not arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of Shares. The Fund (or its agent) will confirm
orders upon their receipt, will make appropriate book entries and upon receipt
by the Fund (or its agent) of payment therefor, will deliver deposit receipts
for such Shares pursuant to the instructions of the Distributor. Payment shall
be made to the Fund in New York Clearing House funds or federal funds. The
Distributor agrees to cause such payment and such instructions to be delivered
promptly to the Fund (or its agent).
Section 4. REPURCHASE OR REDEMPTION OF SHARES BY THE FUND
4.1 Any of the outstanding Shares may be tendered for redemption at any
time, and the Fund agrees to repurchase or redeem the Shares so tendered in
accordance with its Declaration of Trust as amended from time to time, and in
accordance with the applicable provisions of the Prospectus. The price to be
paid to redeem or repurchase the Shares shall be equal to the net asset value
determined as set forth in the Prospectus. All payments by the Fund hereunder
shall be made in the manner set forth in Section 4.2 below.
4.2 The Fund shall pay the total amount of the redemption price as
defined in the above paragraph pursuant to the instructions of the Distributor
on or before the seventh day subsequent to its having received the notice of
redemption in proper form. The proceeds of any redemption of Shares shall be
paid by the Fund as follows: (i) in the case of Shares subject to a contingent
deferred sales charge, any applicable contingent deferred sales charge shall be
paid to the Distributor, and the balance shall be paid to or for the account of
the redeeming shareholder, in each case in accordance with applicable provisions
of the Prospectus; and (ii) in the case of all other Shares, proceeds shall be
paid to or for the account of the redeeming shareholder, in each case in
accordance with applicable provisions of the Prospectus.
4.3 Redemption of any class and/or series of Shares or payment may be
suspended at times when the New York Stock Exchange is closed for other than
customary weekends and holidays, when trading on said Exchange is restricted,
when an emergency exists as a result of which disposal by the Fund of securities
owned by it is not reasonably practicable or it is not reasonably practicable
for the Fund fairly to determine the value of its net assets, or during any
other period when the Securities and Exchange Commission, by order, so permits.
3
<PAGE>
Section 5. DUTIES OF THE FUND
5.1 Subject to the possible suspension of the sale of Shares as provided
herein, the Fund agrees to sell its Shares so long as it has Shares of the
respective class and/or series available.
5.2 The Fund shall furnish the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of Shares, and this shall
include one certified copy, upon request by the Distributor, of all financial
statements prepared for the Fund by independent public accountants. The Fund
shall make available to the Distributor such number of copies of its Prospectus
and annual and interim reports as the Distributor shall reasonably request.
5.3 The Fund shall take, from time to time, but subject to the necessary
approval of the Board and the shareholders, all necessary action to fix the
number of authorized Shares and such steps as may be necessary to register the
same under the Securities Act, to the end that there will be available for sale
such number of Shares as the Distributor reasonably may expect to sell. The Fund
agrees to file from time to time such amendments, reports and other documents as
may be necessary in order that there will be no untrue statement of a material
fact in the Registration Statement, or necessary in order that there will be no
omission to state a material fact in the Registration Statement which omission
would make the statements therein misleading.
5.4 The Fund shall use its best efforts to notify such states as the
Distributor and the Fund may approve of its intention to sell any appropriate
number of its Shares; provided that the Fund shall not be required to amend its
Articles of Incorporation or By-Laws to comply with the laws of any state, to
maintain an office in any state, to change the terms of the offering of its
Shares in any state from the terms set forth in its Registration Statement, to
qualify as a foreign corporation in any state or to consent to service of
process in any state other than with respect to claims arising out of the
offering of its Shares. Any such notification may be withheld, terminated or
withdrawn by the Fund at any time in its discretion. As provided in Section 9
hereof, the expense of notification and maintenance of notification shall be
borne by the Fund. The Distributor shall furnish such information and other
material relating to its affairs and activities as may be required by the Fund
in connection with such notifications.
Section 6. DUTIES OF THE DISTRIBUTOR
6.1 The Distributor shall devote reasonable time and effort to effect
sales of Shares, but shall not be obligated to sell any specific number of
Shares. Sales of the Shares shall be on the terms described in the Prospectus.
The Distributor may enter into like arrangements with other investment
companies. The Distributor shall compensate the selected dealers as set forth in
the Prospectus.
4
<PAGE>
6.2 In selling the Shares, the Distributor shall use its best efforts in
all respects duly to conform with the requirements of all federal and state laws
relating to the sale of such securities. Neither the Distributor nor any
selected dealer nor any other person is authorized by the Fund to give any
information or to make any representations, other than those contained in the
Registration Statement or Prospectus and any sales literature approved by
appropriate officers of the Fund.
6.3 The Distributor shall adopt and follow procedures for the
confirmation of sales to investors and selected dealers, the collection of
amounts payable by investors and selected dealers on such sales and the
cancellation of unsettled transactions, as may be necessary to comply with the
requirements of Securities Exchange Act Rule 10b-10 and the rules of the
National Association of Securities Dealers, Inc. (NASD).
6.4 The Distributor shall have the right to enter into selected dealer
agreements with registered and qualified securities dealers and other financial
institutions of its choice for the sale of Shares, provided that the Fund shall
approve the forms of such agreements. Within the United States, the Distributor
shall offer and sell Shares only to such selected dealers as are members in good
standing of the NASD or are institutions exempt from registration under
applicable federal securities laws. Shares sold to selected dealers shall be for
resale by such dealers only at the offering price determined as set forth in the
Prospectus.
Section 7. PAYMENTS TO THE DISTRIBUTOR
7.1 With respect to classes and/or series of Shares which impose a
front-end sales charge, the Distributor shall receive and may retain any portion
of any front-end sales charge which is imposed on such sales and not reallocated
to selected dealers as set forth in the Prospectus, subject to the limitations
of Rule 2830 of the Conduct Rules of the NASD. Payment of these amounts to the
Distributor is not contingent upon the adoption or continuation of any
applicable Plans.
7.2 With respect to classes and/or series of Shares which impose a
contingent deferred sales charge, the Distributor shall receive and may retain
any contingent deferred sales charge which is imposed on such sales as set forth
in the Prospectus, subject to the limitations of Rule 2830 of the Conduct Rules
of the NASD. Payment of these amounts to the Distributor is not contingent upon
the adoption or continuation of any Plan.
5
<PAGE>
Section 8. PAYMENT OF THE DISTRIBUTOR UNDER THE PLAN
8.1 The Fund shall pay to the Distributor as compensation for services
under any Plans adopted by the Fund and this Agreement a distribution and
service fee with respect to the Fund's classes and/or series of Shares as
described in each of the Fund's respective Plans and this Agreement.
8.2 So long as a Plan or any amendment thereto is in effect, the
Distributor shall inform the Board of the commissions and account servicing fees
with respect to the relevant class and/or series of Shares to be paid by the
Distributor to account executives of the Distributor and to broker-dealers,
financial institutions and investment advisers which have dealer agreements with
the Distributor. So long as a Plan (or any amendment thereto) is in effect, at
the request of the Board or any agent or representative of the Fund, the
Distributor shall provide such additional information as may reasonably be
requested concerning the activities of the Distributor hereunder and the costs
incurred in performing such activities with respect to the relevant class and/or
series of Shares.
Section 9. ALLOCATION OF EXPENSES
The Fund shall bear all costs and expenses of the continuous offering of
its Shares (except for those costs and expenses borne by the Distributor
pursuant to a Plan and subject to the requirements of Rule 12b-1 under the
Investment Company Act), including fees and disbursements of its counsel and
auditors, in connection with the preparation and filing of any required
Registration Statements and/or Prospectuses under the Investment Company Act or
the Securities Act, and all amendments and supplements thereto, and preparing
and mailing annual and periodic reports and proxy materials to shareholders
(including but not limited to the expense of setting in type any such
Registration Statements, Prospectuses, annual or periodic reports or proxy
materials). The Fund shall also bear the cost of expenses of making notice
filings for the Shares for sale, and, if necessary or advisable in connection
therewith, of qualifying the Fund as a broker or dealer, in such states of the
United States or other jurisdictions as shall be selected by the Fund and the
Distributor pursuant to Section 5.4 hereof and the cost and expense payable to
each such state for continuing notification therein until the Fund decides to
discontinue such notification pursuant to Section 5.4 hereof. As set forth in
Section 8 above, the Fund shall also bear the expenses it assumes pursuant to
any Plan, so long as such Plan is in effect.
Section 10. INDEMNIFICATION
10.1 The Fund agrees to indemnify, defend and hold the Distributor, its
officers and directors and any person who controls the Distributor within the
meaning of Section 15 of the Securities Act, free and harmless from and against
any and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any
reasonable counsel fees incurred in connection
6
<PAGE>
therewith) which the Distributor, its officers, members or any such controlling
person may incur under the Securities Act, or under common law or otherwise,
arising out of or based upon any untrue statement of a material fact contained
in the Registration Statement or Prospectus or arising out of or based upon any
alleged omission to state a material fact required to be stated in either
thereof or necessary to make the statements in either thereof not misleading,
except insofar as such claims, demands, liabilities or expenses arise out of or
are based upon any such untrue statement or omission or alleged untrue statement
or omission made in reliance upon and in conformity with information furnished
by the Distributor to the Fund for use in the Registration Statement or
Prospectus; provided, however, that this indemnity agreement shall not inure to
the benefit of any such officer, member or controlling person unless a court of
competent jurisdiction shall determine in a final decision on the merits, that
the person to be indemnified was not liable by reason of willful misfeasance,
bad faith or gross negligence in the performance of its duties, or by reason of
its reckless disregard of its obligations under this Agreement (disabling
conduct), or, in the absence of such a decision, a reasonable determination,
based upon a review of the facts, that the indemnified person was not liable by
reason of disabling conduct, by (a) a vote of a majority of a quorum of
directors or directors who are neither "interested persons" of the Fund as
defined in Section 2(a)(19) of the Investment Company Act nor parties to the
proceeding, or (b) an independent legal counsel in a written opinion. The Fund's
agreement to indemnify the Distributor, its officers and members and any such
controlling person as aforesaid is expressly conditioned upon the Fund's being
promptly notified of any action brought against the Distributor, its officers or
members, or any such controlling person, such notification to be given by letter
or telegram addressed to the Fund at its principal business office. The Fund
agrees promptly to notify the Distributor of the commencement of any litigation
or proceedings against it or any of its officers or directors in connection with
the issue and sale of any Shares.
10.2 The Distributor agrees to indemnify, defend and hold the Fund, its
officers and directors and any person who controls the Fund, if any, within the
meaning of Section 15 of the Securities Act, free and harmless from and against
any and all claims, demands, liabilities and expenses (including the cost of
investigating or defending against such claims, demands or liabilities and any
reasonable counsel fees incurred in connection therewith) which the Fund, its
officers and directors or any such controlling person may incur under the
Securities Act or under common law or otherwise, but only to the extent that
such liability or expense incurred by the Fund, its directors or officers or
such controlling person resulting from such claims or demands shall arise out of
or be based upon any alleged untrue statement of a material fact contained in
information furnished by the Distributor to the Fund for use in the Registration
Statement or Prospectus or shall arise out of or be based upon any alleged
omission to state a material fact in connection with such information required
to be stated in the Registration Statement or Prospectus or necessary to make
such information not misleading. The Distributor's agreement to indemnify the
Fund, its officers and directors and any such controlling person as aforesaid,
is expressly
7
<PAGE>
conditioned upon the Distributor's being promptly notified of any action brought
against the Fund, its officers and directors or any such controlling person,
such notification being given to the Distributor at its principal business
office.
Section 11. DURATION AND TERMINATION OF THIS AGREEMENT
11.1 This Agreement shall become effective as of the date first above
written and shall remain in force for two years from the date hereof and
thereafter, but only so long as such continuance is specifically approved at
least annually by (a) the Board of the Fund, or by the vote of a majority of the
outstanding voting securities of the applicable class and/or series of the Fund,
and (b) by the vote of a majority of those directors who are not parties to this
Agreement or interested persons of any such parties and who have no direct or
indirect financial interest in this Agreement or in the operation of any of the
Fund's Plans or in any agreement related thereto (Independent directors), cast
in person at a meeting called for the purpose of voting upon such approval.
11.2 This Agreement may be terminated at any time, without the payment
of any penalty, by a majority of the independent directors or by vote of a
majority of the outstanding voting securities of the applicable class and/or
series of the Fund, or by the Distributor, on sixty (60) days' written notice to
the other party. This Agreement shall automatically terminate in the event of
its assignment.
11.3 The terms "affiliated person," "assignment," "interested person"
and "vote of a majority of the outstanding voting securities", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
Section 12. AMENDMENTS TO THIS AGREEMENT
This Agreement may be amended by the parties only if such amendment is
specifically approved by (a) the Board of the Fund, or by the vote of a majority
of the outstanding voting securities of the applicable class and/or series of
the Fund, and (b) by the vote of a majority of the independent directors cast in
person at a meeting called for the purpose of voting on such amendment.
Section 13. SEPARATE AGREEMENT AS TO CLASSES AND/OR SERIES
The amendment or termination of this Agreement with respect to any class
and/or series shall not result in the amendment or termination of this Agreement
with respect to any other class and/or series unless explicitly so provided.
8
<PAGE>
Section 14. GOVERNING LAW
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of New Jersey as at the time in effect and
the applicable provisions of the Investment Company Act. To the extent that the
applicable law of the State of New Jersey, or any of the provisions herein,
conflict with the applicable provisions of the Investment Company Act, the
latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year above written.
Prudential Investment Management Services LLC
By:
-----------------------------------------
Jonathan M. Greene
Executive Vice President
Prudential Tax-Free Money Fund, Inc.
By:
-----------------------------------------
Richard A. Redeker
President
DEALER AGREEMENT
PRUDENTIAL INVESTMENT MANAGEMENT SERVICES LLC
Prudential Investment Management Services LLC ("Distributor") and
_________________ ("Dealer") have agreed that Dealer will participate in the
distribution of shares ("Shares") of all the funds and series thereof (as they
may exist from time to time) comprising the Prudential Mutual Fund Family (each
a "Fund" and collectively the "Funds") and any classes thereof for which
Distributor now or in the future serves as principal underwriter and
distributor, subject to the terms of this Dealer Agreement ("Agreement"). Any
such additional Funds will be included in this Agreement upon Distributor's
written notification to Dealer.
1. LICENSING
a. Dealer represents and warrants that it is: (i) a broker-dealer
registered with the Securities and Exchange Commission ("SEC"); (ii) a member in
good standing of the National Association of Securities Dealers, Inc. ("NASD");
and (iii) licensed by the appropriate regulatory agency of each state or other
jurisdiction in which Dealer will offer and sell Shares of the Funds, to the
extent necessary to perform the duties and activities contemplated by this
Agreement.
b. Dealer represents and warrants that each of its partners,
directors, officers, employees, and agents who will be utilized by Dealer with
respect to its duties and activities under this Agreement is either
appropriately licensed or exempt from such licensing requirements by the
appropriate regulatory agency of each state or other jurisdiction in which
Dealer will offer and sell Shares of the Funds.
c. Dealer agrees that: (i) termination or suspension of its
registration with the SEC; (ii) termination or suspension of its membership with
the NASD; or (iii) termination or suspension of its license to do business by
any state or other jurisdiction or federal regulatory agency shall immediately
cause the termination of this Agreement. Dealer further agrees to immediately
notify Distributor in writing of any such action or event.
d. Dealer agrees that this Agreement is in all respects subject
to the Conduct Rules of the NASD and such Conduct Rules shall control any
provision to the contrary in this Agreement.
e. Dealer agrees to be bound by and to comply with all applicable
state and federal laws and all rules and regulations promulgated thereunder
generally affecting the sale or distribution of mutual fund shares.
2. ORDERS
a. Dealer agrees to offer and sell Shares of the Funds (including
those of each of its classes) only at the regular public offering price
applicable to such Shares and in effect at the time of each transaction. The
procedures relating to all orders and the handling of each order (including the
manner of computing the net asset value of Shares and the effective time of
orders
A-1
<PAGE>
received from Dealer) are subject to: (i) the terms of the then current
prospectus and statement of additional information (including any supplements,
stickers or amendments thereto) relating to each Fund, as filed with the SEC
("Prospectus"); (ii) the new account application for each Fund, as supplemented
or amended from time to time; and (iii) Distributor's written instructions and
multiple class pricing procedures and guidelines, as provided to Dealer from
time to time. To the extent that the Prospectus contains provisions that are
inconsistent with this Agreement or any other document, the terms of the
Prospectus shall be controlling.
b. Distributor reserves the right at any time, and without notice
to Dealer, to suspend the sale of Shares or to withdraw or limit the offering of
Shares. Distributor reserves the unqualified right not to accept any specific
order for the purchase or sale of Shares.
c. In all offers and sales of the Shares to the public, Dealer is
not authorized to act as broker or agent for, or employee of, Distributor, any
Fund or any other dealer, and Dealer shall not in any manner represent to any
third party that Dealer has such authority or is acting in such capacity.
Rather, Dealer agrees that it is acting as principal for Dealer's own account or
as agent on behalf of Dealer's customers in all transactions in Shares, except
as provided in Section 3.i. hereof. Dealer acknowledges that it is solely
responsible for all suitability determinations with respect to sales of Shares
of the Funds to Dealer's customers and that Distributor has no responsibility
for the manner of Dealer's performance of, or for Dealer's acts or omissions in
connection with, the duties and activities Dealer provides under this Agreement.
d. All orders are subject to acceptance by Distributor in its
sole discretion and become effective only upon confirmation by Distributor.
e. Distributor agrees that it will accept from Dealer orders
placed through a remote terminal or otherwise electronically transmitted via the
National Securities Clearing Corporation ("NSCC") Fund/Serv Networking program,
provided, however, that appropriate documentation thereof and agreements
relating thereto are executed by both parties to this Agreement, including in
particular the standard NSCC Networking Agreement and any other related
agreements between Distributor and Dealer deemed appropriate by Distributor, and
that all accounts opened or maintained pursuant to that program will be governed
by applicable NSCC rules and procedures. Both parties further agree that, if the
NSCC Fund/Serv Networking program is used to place orders, the standard NSCC
Networking Agreement will control insofar as there is any conflict between any
provision of the Dealer Agreement and the standard NSCC Networking Agreement.
3. DUTIES OF DEALER
a. Dealer agrees to purchase Shares only from Distributor or from
Dealer's customers.
b. Dealer agrees to enter orders for the purchase of Shares only
from Distributor and only for the purpose of covering purchase orders Dealer has
already received from its customers or for Dealer's own bona fide investment.
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<PAGE>
c. Dealer agrees to date and time stamp all orders received by
Dealer and promptly, upon receipt of any and all orders, to transmit to
Distributor all orders received prior to the time described in the Prospectus
for the calculation of each Fund's net asset value so as to permit Distributor
to process all orders at the price next determined after receipt by Dealer, in
accordance with the Prospectus. Dealer agrees not to withhold placing orders for
Shares with Distributor so as to profit itself as a result of such inaction.
d. Dealer agrees to maintain records of all purchases and sales
of Shares made through Dealer and to furnish Distributor or regulatory
authorities with copies of such records upon request. In that regard, Dealer
agrees that, unless Dealer holds Shares as nominee for its customers or
participates in the NSCC Fund/Serv Networking program, at certain matrix levels,
it will provide Distributor with all necessary information to comply properly
with all federal, state and local reporting requirements and backup and
nonresident alien withholding requirements for its customer accounts including,
without limitation, those requirements that apply by treating Shares issued by
the Funds as readily tradable instruments. Dealer represents and agrees that all
Taxpayer Identification Numbers ("TINs") provided are certified, and that no
account that requires a certified TIN will be established without such certified
TIN. With respect to all other accounts, including Shares held by Dealer in
omnibus accounts and Shares purchased or sold through the NSCC Fund/Serv
Networking program, at certain matrix levels, Dealer agrees to perform all
federal, state and local tax reporting with respect to such accounts, including
without limitation redemptions and exchanges.
e. Dealer agrees to distribute or cause to be delivered to its
customers Prospectuses, proxy solicitation materials and related information and
proxy cards, semi-annual and annual shareholder reports and any other materials
in compliance with applicable legal requirements, except to the extent that
Distributor expressly undertakes to do so in writing.
f. Dealer agrees that if any Share is repurchased by any Fund or
is tendered for redemption within seven (7) business days after confirmation by
Distributor of the original purchase order from Dealer, Dealer shall forfeit its
right to any concession or commission received by Dealer with respect to such
Share and shall forthwith refund to Distributor the full concession allowed to
Dealer or commission paid to Dealer on the original sale. Distributor agrees to
notify Dealer of such repurchase or redemption within a reasonable time after
settlement. Termination or cancellation of this Agreement shall not relieve
Dealer from its obligation under this provision.
g. Dealer agrees that payment for Shares ordered from Distributor
shall be in Fed Funds, New York clearinghouse or other immediately available
funds and that such funds shall be received by Distributor by the earlier of:
(i) the end of the third (3rd) business day following Dealer's receipt of the
customer's order to purchase such Shares; or (ii) the settlement date
established in accordance with Rule 15c6-1 under the Securities Exchange Act of
1934, as amended. If such payment is not received by Distributor by such date,
Dealer shall forfeit its right to any concession or commission with respect to
such order, and Distributor reserves the right, without notice, forthwith to
cancel the sale, or, at its option, to sell the Shares ordered back to the Fund,
in which case Distributor may hold Dealer responsible for any loss, including
loss of profit, suffered by Distributor resulting from Dealer's failure to make
payment as aforesaid. If a purchase is made by check, the purchase is deemed
made upon conversion of the purchase instrument into Fed Funds, New York
clearinghouse or other immediately available funds.
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<PAGE>
h. Dealer agrees that it: (i) shall assume responsibility for any
loss to the Fund caused by a correction to any order placed by Dealer that is
made subsequent to the trade date for the order, provided such order correction
was not based on any negligence on Distributor's part; and (ii) will immediately
pay such loss to the Fund upon notification.
i. Dealer agrees that in connection with orders for the purchase
of Shares on behalf of any IRAs, 401(k) plans or other retirement plan accounts,
by mail, telephone, or wire, Dealer shall act as agent for the custodian or
trustee of such plans (solely with respect to the time of receipt of the
application and payments), and Dealer shall not place such an order with
Distributor until it has received from its customer payment for such purchase
and, if such purchase represents the first contribution to such a retirement
plan account, the completed documents necessary to establish the retirement
plan. Dealer agrees to indemnify Distributor and its affiliates for any claim,
loss, or liability resulting from incorrect investment instructions received by
Distributor from Dealer.
j. Dealer agrees that it will not make any conditional orders for
the purchase or redemption of Shares and acknowledges that Distributor will not
accept conditional orders for Shares.
k. Dealer agrees that all out-of-pocket expenses incurred by it
in connection with its activities under this Agreement will be borne by Dealer.
l. Dealer agrees that it will keep in force appropriate broker's
blanket bond insurance policies covering any and all acts of Dealer's partners,
directors, officers, employees, and agents adequate to reasonably protect and
indemnify the Distributor and the Funds against any loss which any party may
suffer or incur, directly or indirectly, as a result of any action by Dealer or
Dealer's partners, directors, officers, employees, and agents.
m. Dealer agrees that it will maintain the required net capital
as specified by the rules and regulations of the SEC, NASD and other regulatory
authorities.
4. DEALER COMPENSATION
a. On each purchase of Shares by Dealer from Distributor, the
total sales charges and dealer concessions or commissions, if any, payable to
Dealer shall be as stated on Schedule A to this Agreement, which may be amended
by Distributor from time to time. Distributor reserves the right, without prior
notice, to suspend or eliminate such dealer concession or commissions by
amendment, sticker or supplement to the then current Prospectus for each Fund.
Such sales charges and dealer concessions or commissions, are subject to
reduction under a variety of circumstances as described in each Fund's then
current Prospectus. For an investor to obtain any reduction, Distributor must be
notified at the time of the sale that the sale qualifies for the reduced sales
charge. If Dealer fails to notify Distributor of the applicability of a
reduction in the sales charge at the time the trade is placed, neither
Distributor nor any Fund will be liable for amounts necessary to reimburse any
investor for the reduction that should have been effected. Dealer acknowledges
that no sales charge or concession or commission will be paid to Dealer on the
reinvestment of dividends or capital gains reinvestment or on Shares acquired in
exchange for Shares of another Fund, or class thereof, having the same
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sales charge structure as the Fund, or class thereof, from which the exchange
was made, in accordance with the Prospectus.
b. In accordance with the Funds' Prospectuses, Distributor or any
affiliate may, but is not obligated to, make payments to dealers from
Distributor's own resources as compensation for certain sales that are made at
net asset value ("Qualifying Sales"). If Dealer notifies Distributor of a
Qualifying Sale, Distributor may make a contingent advance payment up to the
maximum amount available for payment on the sale. If any of the Shares purchased
in a Qualifying Sale are redeemed within twelve (12) months of the end of the
month of purchase, Distributor shall be entitled to recover any advance payment
attributable to the redeemed Shares by reducing any account payable or other
monetary obligation Distributor may owe to Dealer or by making demand upon
Dealer for repayment in cash. Distributor reserves the right to withhold
advances to Dealer, if for any reason Distributor believes that it may not be
able to recover unearned advances from Dealer.
c. With respect to any Fund that offers Shares for which
distribution plans have been adopted under Rule 12b-1 under the Investment
Company Act of 1940, as amended ("Rule 12b-1 Plans"), Distributor also is
authorized to pay the Dealer continuing distribution and/or service fees, as
specified in Schedule A and the relevant Fund Prospectus, with respect to Shares
of any such Fund, to the extent that Dealer provides distribution, marketing,
administrative and other services and activities regarding the promotion of such
Shares and the maintenance of related shareholder accounts.
d. In connection with the receipt of distribution fees and/or
service fees under Rule 12b-1 Plans applicable to Shares purchased by Dealer's
customers, Distributor directs Dealer to provide enhanced shareholder services
such as: processing purchase and redemption transactions; establishing
shareholder accounts; and providing certain information and assistance with
respect to the Funds. (Redemption levels of shareholder accounts assigned to
Dealer will be considered in evaluating Dealer's continued ability to receive
payments of distribution and/or service fees.) In addition, Dealer agrees to
support Distributor's marketing efforts by, among other things, granting
reasonable requests for visits to Dealer's office by Distributor's wholesalers
and marketing representatives, including all Funds covered by a Rule 12b-1 Plan
on Dealer's "approved," "preferred" or other similar product lists, if
applicable, and otherwise providing satisfactory product, marketing and sales
support. Further, Dealer agrees to provide Distributor with supporting
documentation concerning the shareholder services provided, as Distributor may
reasonably request from time to time.
e. All Rule 12b-1 Plan distribution and/or servicing fees shall
be based on the value of Shares attributable to Dealer's customers and eligible
for such payment, and shall be calculated on the basis of and at the rates set
forth in the compensation schedule then in effect. Without prior approval by a
majority of the outstanding shares of a Fund, the aggregate annual fees paid to
Dealer pursuant to any Rule 12b-1 Plan shall not exceed the amounts stated as
the "annual maximums" in each Fund's Prospectus, which amount shall be a
specified percent of the value of the Fund's net assets held in Dealer's
customers' accounts that are eligible for payment pursuant to the Rule 12b-1
Plans (determined in the same manner as each Fund uses to compute its net assets
as set forth in its then current Prospectus).
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<PAGE>
f. The provisions of any Rule 12b-1 Plan between the Funds and
the Distributor shall control over this Agreement in the event of any
inconsistency. Each Rule 12b-1 Plan in effect on the date of this Agreement is
described in the relevant Fund's Prospectus. Dealer hereby acknowledges that all
payments under Rule 12b-1 Plans are subject to limitations contained in such
Rule 12b-1 Plans and may be varied or discontinued at any time.
5. REDEMPTIONS, REPURCHASES AND EXCHANGES
a. The Prospectus for each Fund describes the provisions whereby
the Fund, under all ordinary circumstances, will redeem Shares held by
shareholders on demand. Dealer agrees that it will not make any representations
to shareholders relating to the redemption of their Shares other than the
statements contained in the Prospectus and the underlying organizational
documents of the Fund, to which it refers, and that Dealer will pay as
redemption proceeds to shareholders the net asset value, minus any applicable
deferred sales charge or redemption fee, determined after receipt of the order
as discussed in the Prospectus.
b. Dealer agrees not to repurchase any Shares from its customers
at a price below that next quoted by the Fund for redemption or repurchase,
i.e., at the net asset value of such Shares, less any applicable deferred sales
charge, or redemption fee, in accordance with the Fund's Prospectus. Dealer
shall, however, be permitted to sell Shares for the account of the customer or
record owner to the Funds at the repurchase price then currently in effect for
such Shares and may charge the customer or record owner a fair service fee or
commission for handling the transaction, provided Dealer discloses the fee or
commission to the customer or record owner. Nevertheless, Dealer agrees that it
shall not under any circumstances maintain a secondary market in such
repurchased Shares.
c. Dealer agrees that, with respect to a redemption order it has
made, if instructions in proper form, including any outstanding certificates,
are not received by Distributor within the time customary or the time required
by law, the redemption may be canceled forthwith without any responsibility or
liability on Distributor's part or on the part of any Fund, or Distributor, at
its option, may buy the shares redeemed on behalf of the Fund, in which latter
case Distributor may hold Dealer responsible for any loss, including loss of
profit, suffered by Distributor resulting from Distributor's failure to settle
the redemption.
d. Dealer agrees that it will comply with any restrictions and
limitations on exchanges described in each Fund's Prospectus, including any
restrictions or prohibitions relating to frequent purchases and redemptions
(i.e., market timing).
6. MULTIPLE CLASSES OF SHARES
Distributor may, from time to time, provide Dealer with written
guidelines or standards relating to the sale or distribution of Funds offering
multiple classes of Shares with different sales charges and distribution-related
operating expenses.
7. FUND INFORMATION
a. Dealer agrees that neither it nor any of its partners,
directors, officers, employees, and agents is authorized to give any information
or make any representations
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<PAGE>
concerning Shares of any Fund except those contained in the Fund's then current
Prospectus or in materials provided by Distributor.
b. Distributor will supply to Dealer Prospectuses, reasonable
quantities of sales literature, sales bulletins, and additional sales
information as provided by Distributor. Dealer agrees to use only advertising or
sales material relating to the Funds that: (i) is supplied by Distributor, or
(ii) conforms to the requirements of all applicable laws or regulations of any
government or authorized agency having jurisdiction over the offering or sale of
Shares of the Funds and is approved in writing by Distributor in advance of its
use. Such approval may be withdrawn by Distributor in whole or in part upon
written notice to Dealer, and Dealer shall, upon receipt of such notice,
immediately discontinue the use of such sales literature, sales bulletins and
advertising. Dealer is not authorized to modify or translate any such materials
without Distributor's prior written consent.
8. SHARES
a. Distributor acts solely as agent for the Fund and Distributor
shall have no obligation or responsibility with respect to Dealer's right to
purchase or sell Shares in any state or jurisdiction.
b. Distributor shall periodically furnish Dealer with information
identifying the states or jurisdictions in which it is believed that all
necessary notice, registration or exemptive filings for Shares have been made
under applicable securities laws such that offers and sales of Shares may be
made in such states or jurisdictions. Distributor shall have no obligation to
make such notice, registration or exemptive filings with respect to Shares in
any state or jurisdiction.
c. Dealer agrees not to transact orders for Shares in states or
jurisdictions in which it has been informed that Shares may not be sold or in
which it and its personnel are not authorized to sell Shares.
d. Distributor shall have no responsibility, under the laws
regulating the sale of securities in the United States or any foreign
jurisdiction, with respect to the qualification or status of Dealer or Dealer's
personnel selling Fund Shares. Distributor shall not, in any event, be liable or
responsible for the issue, form, validity, enforceability and value of such
Shares or for any matter in connection therewith.
e. Dealer agrees that it will make no offers or sales of Shares
in any foreign jurisdiction, except with the express written consent of
Distributor.
9. INDEMNIFICATION
a. Dealer agrees to indemnify, defend and hold harmless
Distributor and the Funds and their predecessors, successors, and affiliates,
each current or former partner, officer, director, employee, shareholder or
agent and each person who controls or is controlled by Distributor from any and
all losses, claims, liabilities, costs, and expenses, including attorney fees,
that may be assessed against or suffered or incurred by any of them howsoever
they arise, and as they are incurred, which relate in any way to: (i) any
alleged violation of any statute or
A-7
<PAGE>
regulation (including without limitation the securities laws and regulations of
the United States or any state or foreign country) or any alleged tort or breach
of contract, related to the offer or sale by Dealer of Shares of the Funds
pursuant to this Agreement (except to the extent that Distributor's negligence
or failure to follow correct instructions received from Dealer is the cause of
such loss, claim, liability, cost or expense); (ii) any redemption or exchange
pursuant to instructions received from Dealer or its partners, affiliates,
officers, directors, employees or agents; or (iii) the breach by Dealer of any
of its representations and warranties specified herein or the Dealer's failure
to comply with the terms and conditions of this Agreement, whether or not such
action, failure, error, omission, misconduct or breach is committed by Dealer or
its predecessor, successor, or affiliate, each current or former partner,
officer, director, employee or agent and each person who controls or is
controlled by Dealer.
b. Distributor agrees to indemnify, defend and hold harmless
Dealer and its predecessors, successors and affiliates, each current or former
partner, officer, director, employee or agent, and each person who controls or
is controlled by Dealer from any and all losses, claims, liabilities, costs and
expenses, including attorney fees, that may be assessed against or suffered or
incurred by any of them which arise, and which relate to any untrue statement of
or omission to state a material fact contained in the Prospectus or any written
sales literature or other marketing materials provided by the Distributor to the
Dealer, required to be stated therein or necessary to make the statements
therein not misleading.
c. Dealer agrees to notify Distributor, within a reasonable time,
of any claim or complaint or any enforcement action or other proceeding with
respect to Shares offered hereunder against Dealer or its partners, affiliates,
officers, directors, employees or agents, or any person who controls Dealer,
within the meaning of Section 15 of the Securities Act of 1933, as amended.
d. Dealer further agrees promptly to send Distributor copies of
(i) any report filed pursuant to NASD Conduct Rule 3070, including, without
limitation quarterly reports filed pursuant to Rule 3070(c), (ii) reports filed
with any other self-regulatory organization in lieu of Rule 3070 reports
pursuant to Rule 3070(e) and (iii) amendments to Dealer's Form BD.
e. Each party's obligations under these indemnification
provisions shall survive any termination of this Agreement.
10. TERMINATION; AMENDMENT
a. In addition to the automatic termination of this Agreement
specified in Section 1.c. of this Agreement, each party to this Agreement may
unilaterally cancel its participation in this Agreement by giving thirty (30)
days prior written notice to the other party. In addition, each party to this
Agreement may terminate this Agreement immediately by giving written notice to
the other party of that other party's material breach of this Agreement. Such
notice shall be deemed to have been given and to be effective on the date on
which it was either delivered personally to the other party or any officer or
member thereof, or was mailed postpaid or delivered to a telegraph office for
transmission to the other party's designated person at the addresses shown
herein or in the most recent NASD Manual.
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<PAGE>
b. This Agreement shall terminate immediately upon the
appointment of a Trustee under the Securities Investor Protection Act or any
other act of insolvency by Dealer.
c. The termination of this Agreement by any of the foregoing
means shall have no effect upon transactions entered into prior to the effective
date of termination and shall not relieve Dealer of its obligations, duties and
indemnities specified in this Agreement. A trade placed by Dealer subsequent to
its voluntary termination of this Agreement will not serve to reinstate the
Agreement. Reinstatement, except in the case of a temporary suspension of
Dealer, will only be effective upon written notification by Distributor.
d. This Agreement is not assignable or transferable and will
terminate automatically in the event of its "assignment," as defined in the
Investment Company Act of 1940, as amended and the rules, regulations and
interpretations thereunder. The Distributor may, however, transfer any of its
duties under this Agreement to any entity that controls or is under common
control with Distributor.
e. This Agreement may be amended by Distributor at any time by
written notice to Dealer. Dealer's placing of an order or accepting payment of
any kind after the effective date and receipt of notice of such amendment shall
constitute Dealer's acceptance of such amendment.
11. DISTRIBUTOR'S REPRESENTATIONS AND WARRANTIES
Distributor represents and warrants that:
a. It is a limited liability company duly organized and existing
and in good standing under the laws of the state of Delaware and is duly
registered or exempt from registration as a broker-dealer in all states and
jurisdictions in which it provides services as principal underwriter and
distributor for the Funds.
b. It is a member in good standing of the NASD.
c. It is empowered under applicable laws and by Distributor's
charter and by-laws to enter into this Agreement and perform all activities and
services of the Distributor provided for herein and that there are no
impediments, prior or existing, regulatory, self-regulatory, administrative,
civil or criminal matters affecting Distributor's ability to perform under this
Agreement.
d. All requisite actions have been taken to authorize Distributor
to enter into and perform this Agreement.
12. ADDITIONAL DEALER REPRESENTATIONS AND WARRANTIES
In addition to the representations and warranties found elsewhere
in this Agreement, Dealer represents and warrants that:
a. It is duly organized and existing and in good standing under
the laws of the state, commonwealth or other jurisdiction in which Dealer is
organized and that Dealer will
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<PAGE>
not offer Shares of any Fund for sale in any state or jurisdiction where such
Shares may not be legally sold or where Dealer is not qualified to act as a
broker-dealer.
b. It is empowered under applicable laws and by Dealer's
organizational documents to enter into this Agreement and perform all activities
and services of the Dealer provided for herein and that there are no
impediments, prior or existing, regulatory, self-regulatory, administrative,
civil or criminal matters affecting Dealer's ability to perform under this
Agreement.
c. All requisite actions have been taken to authorize Dealer to
enter into and perform this Agreement.
d. It is not, at the time of the execution of this Agreement,
subject to any enforcement or other proceeding with respect to its activities
under state or federal securities laws, rules or regulations.
13. SETOFF; DISPUTE RESOLUTION; GOVERNING LAW
a. Should any of Dealer's concession accounts with Distributor
have a debit balance, Distributor shall be permitted to offset and recover the
amount owed from any other account Dealer has with Distributor, without notice
or demand to Dealer.
b. In the event of a dispute concerning any provision of this
Agreement, either party may require the dispute to be submitted to binding
arbitration under the commercial arbitration rules and procedures of the NASD.
The parties agree that, to the extent permitted under such arbitration rules and
procedures, the arbitrators selected shall be from the securities industry.
Judgment upon any arbitration award may be entered by any state or federal court
having jurisdiction.
c. This Agreement shall be governed and construed in accordance
with the laws of the state of New Jersey, not including any provision which
would require the general application of the law of another jurisdiction.
14. INVESTIGATIONS AND PROCEEDINGS
The parties to this Agreement agree to cooperate fully in any
securities regulatory investigation or proceeding or judicial proceeding with
respect to each's activities under this Agreement and promptly to notify the
other party of any such investigation or proceeding.
15. CAPTIONS
All captions used in this Agreement are for convenience only, are
not a party hereof, and are not to be used in construing or interpreting any
aspect hereof.
16. ENTIRE UNDERSTANDING
This Agreement contains the entire understanding of the parties
hereto with respect to the subject matter contained herein and supersedes all
previous agreements. This Agreement shall be binding upon the parties hereto
when signed by Dealer and accepted by Distributor.
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<PAGE>
17. SEVERABILITY
Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law.
If, however, any provision of this Agreement is held under applicable law to be
invalid, illegal, or unenforceable in any respect, such provision shall be
ineffective only to the extent of such invalidity, and the validity, legality
and enforceability of the remaining provisions of this Agreement shall not be
affected or impaired in any way.
18. ENTIRE AGREEMENT
This Agreement contains the entire understanding of the parties
hereto with respect to the subject matter contained herein and supersedes all
previous agreements and/or understandings of the parties. This Agreement shall
be binding upon the parties hereto when signed by Dealer and accepted by
Distributor.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year set forth below.
PRUDENTIAL INVESTMENT MANAGEMENT
SERVICES LLC
By: ________________________________
Name:_________________________________
Title:__________________________________
Date:__________________________________
DEALER: _____________________________
By: ________________________________
(Signature)
Name: _________________________________
Title: _________________________________
Address:________________________________
Telephone: _____________________________
NASD CRD # __________________________
Prudential Dealer # _______________________
(Internal Use Only)
Date: _________________________________
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 24 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
February 12, 1999, relating to the financial statements and financial highlights
of Prudential Tax-Free Money Fund, Inc., which appears in such Statement of
Additional Information, and to the incorporation by reference of our report into
the Prospectus which constitutes part of this Registration Statement. We also
consent to the reference to us under the heading "Investment Advisory and Other
Services" in such Statement of Additional Information and to the reference to us
under the heading "Financial Highlights" in such Prospectus.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
April 27, 1999
PRUDENTIAL TAX-FREE MONEY FUND, INC.
Amended and Restated
Distribution and Service Plan
(Class A Shares)
INTRODUCTION
The Distribution and Service Plan (the Plan) set forth below which is
designed to conform to the requirements of Rule 12b-1 under the Investment
Company Act of 1940 (the Investment Company Act) and Rule 2830 of the Conduct
Rules of the National Association of Securities Dealers, Inc. (NASD) has been
adopted by Prudential Tax-Free Money Fund, Inc. (the Fund) and by Prudential
Investment Management Services LLC, the Fund's distributor (the Distributor).
The Fund has entered into a distribution agreement pursuant to which the
Fund will employ the Distributor to distribute Class A shares issued by the Fund
(Class A shares). Under the Plan, the Fund intends to pay to the Distributor, as
compensation for its services, a distribution and service fee with respect to
Class A shares.
A majority of the Board of Directors of the Fund, including a majority
of those Directors who are not "interested persons" of the Fund (as defined in
the Investment Company Act) and who have no direct or indirect financial
interest in the operation of this Plan or any agreements related to it (the Rule
12b-1 Directors, have determined by votes cast in person at a meeting called for
the purpose of voting on this Plan that there is a reasonable likelihood that
adoption and continuation of this Plan will benefit the Fund and its
shareholders. Expenditures under this Plan by the Fund for Distribution
Activities (defined below) are primarily intended to result in the sale of Class
A shares of the Fund within the meaning of paragraph (a)(2) of Rule 12b-1
promulgated under the Investment Company Act.
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<PAGE>
The purpose of the Plan is to create incentives to the Distributor
and/or other qualified broker-dealers and their account executives to provide
distribution assistance to their customers who are investors in the Fund, to
defray the costs and expenses associated with the preparation, printing and
distribution of prospectuses and sales literature and other promotional and
distribution activities and to provide for the servicing and maintenance of
shareholder accounts.
THE PLAN
The material aspects of the Plan are as follows:
1. DISTRIBUTION ACTIVITIES
The Fund shall engage the Distributor to distribute Class A shares of
the Fund and to service shareholder accounts using all of the facilities of the
Distributor's distribution network, including sales personnel and branch office
and central support systems, and also using such other qualified broker-dealers
and financial institutions as the Distributor may select, including Prudential
Securities Incorporated (Prudential Securities) and Pruco Securities Corporation
(Prusec). Services provided and activities undertaken to distribute Class A
shares of the Fund are referred to herein as "Distribution Activities."
2. PAYMENT OF SERVICE FEE
The Fund shall pay to the Distributor as compensation for providing
personal service and/or maintaining shareholder accounts a service fee of .125
of 1% per annum of the average daily net assets of the Class A shares (service
fee). The Fund shall calculate and accrue daily amounts payable by the Class A
shares of the Fund hereunder and shall pay such amounts monthly or at such other
intervals as the Board of Directors may determine.
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<PAGE>
3. PAYMENT FOR DISTRIBUTION ACTIVITIES
The Fund shall pay to the Distributor as compensation for its services a
distribution fee, together with the service fee (described in Section 2 hereof),
of .125 of 1% per annum of the average daily net assets of the Class A shares of
the Fund for the performance of Distribution Activities. The Fund shall
calculate and accrue daily amounts payable by the Class A shares of the Fund
hereunder and shall pay such amounts monthly or at such other intervals as the
Board of Directors may determine. Amounts payable under the Plan shall be
subject to the limitations of Rule 2830 of the NASD Conduct Rules.
4. QUARTERLY REPORTS; ADDITIONAL INFORMATION
An appropriate officer of the Fund will provide to the Board of
Directors of the Fund for review, at least quarterly, a written report
specifying in reasonable detail the amounts expended for Distribution Activities
(including payment of the service fee) and the purposes for which such
expenditures were made in compliance with the requirements of Rule 12b-1. The
Distributor will provide to the Board of Directors of the Fund such additional
information as the Board shall from time to time reasonably request, including
information about Distribution Activities undertaken or to be undertaken by the
Distributor.
The Distributor will inform the Board of Directors of the Fund of the
commissions and account servicing fees to be paid by the Distributor to account
executives of the Distributor and to broker-dealers and financial institutions
which have dealer agreements with the Distributor.
3
<PAGE>
5. EFFECTIVENESS; CONTINUATION
The Plan shall not take effect until it has been approved by a vote of a
majority of the outstanding voting securities (as defined in the Investment
Company Act) of the Class A shares of the Fund.
If approved by a vote of a majority of the outstanding voting securities
of the Class A shares of the Fund, the Plan shall, unless earlier terminated in
accordance with its terms, continue in full force and effect thereafter for so
long as such continuance is specifically approved at least annually by a
majority of the Board of Directors of the Fund and a majority of the Rule 12b-1
Directors by votes cast in person at a meeting called for the purpose of voting
on the continuation of the Plan.
6. TERMINATION
This Plan may be terminated at any time, without the payment of any
penalty, by a majority of the Rule 12b-1 Directors or by vote of a majority of
the outstanding voting securities (as defined in the Investment Company Act) of
the Class A shares of the Fund, or by the Distributor, on sixty (60) days'
written notice to the other party. This Plan shall automatically terminate in
the event of its assignment.
7. AMENDMENTS
The Plan may not be amended to change the combined service and
distribution fees to be paid as provided for in Sections 2 and 3 hereof so as to
increase materially the amounts payable under this Plan unless such amendment
shall be approved by the vote of a majority of the outstanding voting securities
(as defined in the Investment Company Act) of the Class A shares of the Fund.
All material amendments of the Plan shall be approved by a majority of the Board
of Directors of the Fund and a majority of the Rule 12b-1 Directors by votes
cast in person at a meeting called for the purpose of voting on the Plan.
4
<PAGE>
8. RULE 12B-1 DIRECTORS
While the Plan is in effect, the selection and nomination of the
Directors shall be committed to the discretion of the Rule 12b-1 Directors.
9. RECORDS
The Fund shall preserve copies of the Plan and any related agreements
and all reports made pursuant to Section 4 hereof, for a period of not less than
six years from the date of effectiveness of the Plan, such agreements or
reports, and for at least the first two years in an easily accessible place.
Dated: June 1, 1998
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<NAME> PRUDENTIAL TAX FREE MONEY FUND, INC.
<S> <C>
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