COMMAND MONEY FUND, 497, 1996-09-03

COMMAND MONEY FUND
497, 1996-09-03

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<PAGE>
COMMAND MONEY FUND

COMMAND TAX-FREE FUND

COMMAND GOVERNMENT FUND

PROSPECTUS DATED AUGUST 28, 1996
________________________________________________________________________________
COMMAND Money Fund (the Money Fund), COMMAND Tax-Free Fund (the Tax-Free Fund)
and the COMMAND Government Fund (the Government Fund), (each a Fund or,
collectively, the Funds) are each open-end, diversified management investment
companies whose shares are offered exclusively to participants in the
COMMAND-SM- Account program (the COMMAND program) of Prudential Securities
Incorporated (Prudential Securities).

The investment objectives of the Money Fund are to seek high current income,
preservation of capital and maintenance of liquidity. The Money Fund seeks to
achieve its objectives by investing in a diversified portfolio of money market
instruments maturing in thirteen months or less. The investment objectives of
the Tax-Free Fund are to seek high current income that is exempt from federal
income taxes, consistent with maintenance of liquidity and preservation of
capital. The Tax-Free Fund seeks to achieve its objectives by investing in a
diversified portfolio of short-term tax-exempt securities issued by states,
municipalities and their instrumentalities and authorities maturing in thirteen
months or less. (Some securities may be subject to the federal Alternative
Minimum Tax.) The investment objectives of the Government Fund are to seek high
current income, preservation of capital and maintenance of liquidity. The
Government Fund seeks to achieve its objectives by investing in a portfolio of
U.S. Government securities maturing in thirteen months or less. See "How the
Funds Invest" and "How the Funds Value Their Shares." There can be no assurance
that any of the Funds will achieve their investment objectives.

AN INVESTMENT IN THE FUNDS IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT ANY OF THE FUNDS WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. See "How the Funds Value
Their Shares."

The address of each Fund is One Seaport Plaza, New York, New York 10292.

This Prospectus sets forth concisely the information about each Fund that a
prospective investor should know before investing. Additional information about
each Fund has been filed with the Securities and Exchange Commission in a
Statement of Additional Information, dated August 28, 1996, which information is
incorporated herein by reference (is legally considered a part of this
Prospectus) and is available without charge upon written request to any of the
Funds at the address noted above.

- --------------------------------------------------------------------------------
INVESTORS ARE ADVISED TO READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE
REFERENCE.
- --------------------------------------------------------------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<PAGE>
FUND HIGHLIGHTS
The following summary is intended to highlight certain information in this
Prospectus and is qualified in its entirety by the more detailed information
appearing elsewhere herein.

WHAT ARE THE COMMAND FUNDS?
Each of the Money Fund, Tax-Free Fund and Government Fund is a mutual fund
whose shares are offered exclusively to participants of the COMMAND program of
Prudential Securities. A mutual fund pools the resources of investors by selling
its shares to the public and investing the proceeds of such sale in a portfolio
of securities designed to achieve its investment objective. Technically, each
Fund is an open-end, diversified management investment company.

WHAT IS EACH FUND'S INVESTMENT OBJECTIVE?
The investment objectives of the Money Fund are to seek high current income,
preservation of capital and maintenance of liquidity. The investment objectives
of the Tax-Free Fund are to seek high current income that is exempt from federal
income taxes consistent with maintenance of liquidity and the preservation of
capital. The investment objectives of the Government Fund are to seek high
current income, preservation of capital and maintenance of liquidity. There can
be no assurance that any of the Funds' investment objectives will be achieved.
See "How the Funds Invest" at page 6.

RISK FACTORS AND SPECIAL CHARACTERISTICS.
It is anticipated that the net asset value of each Fund will remain constant
at $1.00 per share, although this cannot be assured. In order to maintain such
constant net asset value, each Fund will value its portfolio securities at
amortized cost. While this method provides certainty in valuation, it may result
in periods during which the value of a security in a Fund's portfolio, as
determined by amortized cost, is higher or lower than the price the Fund would
receive if it sold such security. See "How the Funds Value Their Shares" at page
17.

WHO MANAGES THE FUNDS?
Prudential Mutual Fund Management, Inc. (PMF or the Manager) is the Manager
of each Fund and is compensated for its services at an annual rate of up to .50%
of the average daily net assets of each of the Money Fund and the Tax-Free Fund
and up to .40% of the average daily net assets of the Government Fund. The
Management Fee is reduced for Fund assets in excess of certain specified levels.
As of July 31, 1996, PMF served as manager or administrator to 64 investment
companies, including 38 mutual funds, with aggregate assets of approximately $52
billion. The Prudential Investment Corporation (PIC or the Subadviser) furnishes
investment advisory services in connection with the management of each Fund
under a Subadvisory Agreement with PMF. See "How the Funds Are Managed--Manager"
at page 14.

WHO DISTRIBUTES THE FUNDS' SHARES?
Prudential Securities Incorporated (Prudential Securities or PSI) acts as
the Distributor of each Fund's shares. Each Fund reimburses Prudential
Securities for expenses related to the distribution of the Fund's shares at an
annual rate of up to .125 of 1% of the Fund's average daily net assets. See "How
the Funds Are Managed--Distributor" at page 15.

HOW DO I PURCHASE SHARES?
Shares of the Funds are offered exclusively to participants in the COMMAND
program who place a minimum of $10,000 in cash and/or securities in a COMMAND
Account, or place a minimum of $2,000 in cash and/or securities in a COMMAND
Essentials account, and meet criteria established by Prudential Securities. For
a more detailed description of the COMMAND program, please see your Prudential
Securities Financial Adviser.

HOW DO I SELL MY SHARES?
Shares may be redeemed automatically by Prudential Securities to satisfy
debit balances in a Securities Account created by activity therein or arising
under the COMMAND program or by you at any time at the net asset value next
determined after the Transfer Agent receives your sell order. See "Shareholder
Guide--How to Sell Your Shares" at page 22.

HOW ARE DIVIDENDS AND DISTRIBUTIONS PAID?
Each Fund expects to declare and pay daily dividends of any net investment
income and short-term capital gains. Dividends and distributions will be
automatically reinvested in additional shares of such Fund at NAV. See "Taxes,
Dividends and Distributions" at page 17.

2
<PAGE>
FUND EXPENSES

<TABLE>
<CAPTION>
MONEY FUND TAX-FREE FUND GOVERNMENT FUND
--------------- --------------- ---------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases......... None None None
Maximum Sales Load Imposed on Reinvested
Dividends...................................... None None None
Deferred Sales Load............................. None None None
Redemption Fees................................. None None None
Exchange Fee.................................... None None None
COMMAND Program Annual Fee...................... $100* $100* $100*
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees................................. .380% .450% .400%
12b-1 Fees+..................................... .125% .125% .125%
.075% .085% .155%
Other Expenses..................................
.58% .66% .68%
Total Fund Operating Expenses.................
.29% .14% .17%
COMMAND Program Annual Fee**....................
.87% .80% .85%
Total Fund Operating Expenses and Account
Charge.......................................
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS
- --------------------------------------------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
Money Fund............................................................... $ 6 $ 19 $ 32
Tax-Free Fund............................................................ $ 7 $ 21 $ 37
Government Fund.......................................................... $ 7 $ 22 $ 38
If the annual program fee were included, you would pay the following expenses on
the same investment:
Money Fund............................................................... $ 9 $ 28 $ 48
Tax-Free Fund............................................................ $ 8 $ 26 $ 44
Government Fund.......................................................... $ 9 $ 27 $ 47

<CAPTION>
EXAMPLE 10 YEARS
- --------------------------------------------------------------------------------- -----------
<S> <C>
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
Money Fund............................................................... $ 73
Tax-Free Fund............................................................ $ 82
Government Fund.......................................................... $ 85
If the annual program fee were included, you would pay the following expenses on
the same investment:
Money Fund............................................................... $ 107
Tax-Free Fund............................................................ $ 99
Government Fund.......................................................... $ 105
</TABLE>

- --------------------------
The above examples are based on data for each Fund's fiscal year ended June
30, 1996. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that an investor in each Fund will bear, whether
directly or indirectly. For more complete descriptions of the various costs and
expenses, see "How the Funds Are Managed."

"Other Expenses" includes operating expenses of a Fund, such as Trustees'
and professional fees, registration fees, reports to shareholders and transfer
agent and custodian fees.
- --------------------------
*Prudential Securities charges an annual program fee of $100 to most
participants in the COMMAND program whether or not they own shares in any of
the Funds. The program fee is $125 for COMMAND Corporate accounts, $60 for
COMMAND Essentials accounts and $60 for COMMAND IRA accounts.
**In accordance with an interpretive position taken by the staff of the
Securities and Exchange Commission (SEC), the annual program fee has been
reflected in the fee table. The annual program fee as a percentage of average
net assets is calculated by dividing $100 (the total fee) by the average
account size in a Fund. The annual program fee is not prorated for purposes of
this calculation to give effect to COMMAND program participants who also own
shares in or subscribe to various other services offered by the program. A
major portion of the annual program fee is not attributable to a Fund, but
rather to non-fund services provided by the program.
+It is currently anticipated that the entire distribution fee will be used to
pay an account servicing fee to financial advisers. See "How the Funds Are
Managed--Distributor."

3
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH OF THE INDICATED PERIODS)
The following financial highlights have been audited by Price Waterhouse
LLP, independent accountants, whose report thereon was unqualified. This
information should be read in conjunction with the financial statements and
notes thereto, which appear in the Statement of Additional Information. The
following financial highlights contain selected data for a share of beneficial
interest outstanding, total return, ratios to average net assets and other
supplemental data for the period indicated. This information is based on data
contained in the financial statements.

MONEY FUND
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------------------------------
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
year......................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Net investment income and net
realized gains............... 0.052 0.050 0.029 0.030 0.046
Dividends and distributions... (0.052) (0.050) (0.029) (0.030) (0.046)
----------- ----------- ----------- ----------- -----------
Net asset value, end of
year......................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
TOTAL RETURN (a):............. 5.30% 5.13% 2.98% 3.01% 4.71%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000)........................ $5,309,842 $4,055,700 $2,448,201 $2,436,672 $2,125,430
Average net assets (000)...... $4,896,794 $3,072,284 $2,570,195 $2,275,532 $2,377,108
Ratios to average net assets:
Expenses, including
distribution fees.......... .58% .59% .59% .61% .64%
Expenses, excluding
distribution fees.......... .46% .47% .47% .48% .51%
Net investment income....... 5.15% 5.09% 2.92% 2.90% 4.57%

1991 1990 1989* 1988 1987
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
year......................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Net investment income and net
realized gains............... 0.069 0.081 0.084 0.065 0.057
Dividends and distributions... (0.069) (0.081) (0.084) (0.065) (0.057)
----------- ----------- ----------- ----------- -----------
Net asset value, end of
year......................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
TOTAL RETURN (a):............. 7.17% 8.42% 8.73% 6.70% 5.85%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000)........................ $2,417,429 $2,668,970 $2,206,469 $1,549,772 $1,382,667
Average net assets (000)...... $2,605,472 $2,680,212 $1,821,521 $1,513,022 $1,354,854
Ratios to average net assets:
Expenses, including
distribution fees.......... .61% .59% .63% .65% .67%
Expenses, excluding
distribution fees.......... .49% .46% .51% .53% .54%
Net investment income....... 6.95% 8.08% 8.40% 6.58% 5.72%
</TABLE>

- ----------------------------------
(a) Total return is calculated assuming a purchase of shares on the first day
and a sale on the last day of each year reported and includes reinvestment
of dividends and distributions.

*See Footnote on next page.
TAX-FREE FUND
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
year......................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Net investment income and net
realized gains............... 0.031 0.032 0.020 0.022 0.035
Dividends and distributions... (0.031) (0.032 ) (0.020) (0.022) (0.035)
------------ ---------- ------------ ------------ ------------
Net asset value, end of
year......................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------ ---------- ------------ ------------ ------------
------------ ---------- ------------ ------------ ------------
TOTAL RETURN (a):............. 3.12% 3.29% 1.98% 2.23% 3.53%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000)........................ $ 1,158,935 $1,055,568 $ 847,602 $ 853,930 $ 729,122
Average net assets (000)...... $ 1,134,257 $ 926,888 $ 908,421 $ 823,517 $ 751,458
Ratios to average net assets:
Expenses, including
distribution fees.......... .66% .66% .65% .68% .69%
Expenses, excluding
distribution fees.......... .54% .54% .53% .55% .56%
Net investment income....... 3.06% 3.05% 1.96% 2.09% 3.47%

1991 1990 1989* 1988 1987
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
year......................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Net investment income and net
realized gains............... 0.049 0.055 0.054 0.043 0.040
Dividends and distributions... (0.049) (0.055) (0.054) (0.043) (0.040)
------------ ------------ ------------ ------------ ------------
Net asset value, end of
year......................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
TOTAL RETURN (a):............. 5.02% 5.66% 5.54% 4.39% 4.07%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000)........................ $ 750,567 $ 714,650 $ 611,631 $ 681,601 $ 692,186
Average net assets (000)...... $ 770,745 $ 699,559 $ 695,347 $ 669,353 $ 684,412
Ratios to average net assets:
Expenses, including
distribution fees.......... .66% .68% .67% .70% .69%
Expenses, excluding
distribution fees.......... .54% .55% .55% .57% .57%
Net investment income....... 4.88% 5.57% 5.46% 4.39% 3.89%
</TABLE>

*See Footnote on next page.

4
<PAGE>
GOVERNMENT FUND
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------------------------------
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
year......................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Net investment income and net
realized gains............... 0.050 0.048 0.028 0.028 0.045
Dividends and distributions... (0.050) (0.048) (0.028) (0.028) (0.045)
----------- ----------- ----------- ----------- -----------
Net asset value, end of
year......................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
TOTAL RETURN (A):............. 5.12% 4.89% 2.86% 2.85% 4.56%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000)........................ $ 487,485 $ 404,295 $ 325,257 $ 381,703 $ 372,988
Average net assets (000)...... $ 477,166 $ 350,458 $ 376,159 $ 380,103 $ 422,639
Ratios to average net assets:
Expenses, including
distribution fees.......... .68% .65% .63% .65% .69%
Expenses, excluding
distribution fees.......... .56% .53% .51% .53% .57%
Net investment income....... 4.97% 4.81% 2.79% 2.74% 4.38%

1991 1990 1989* 1988 1987
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
year......................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Net investment income and net
realized gains............... 0.067 0.079 0.080 0.062 0.055
Dividends and distributions... (0.067) (0.079) (0.080) (0.062) (0.055)
----------- ----------- ----------- ----------- -----------
Net asset value, end of
year......................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
TOTAL RETURN (A):............. 6.90% 8.17% 8.30% 6.38% 5.64%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000)........................ $ 414,978 $ 270,140 $ 181,559 $ 180,338 $ 131,388
Average net assets (000)...... $ 398,971 $ 243,593 $ 175,179 $ 164,798 $ 125,665
Ratios to average net assets:
Expenses, including
distribution fees.......... .65% .66% .71% .72% .77%
Expenses, excluding
distribution fees.......... .53% .53% .58% .59% .64%
Net investment income....... 6.54% 7.70% 7.97% 6.16% 5.46%
</TABLE>

*On October 31, 1988, Prudential Mutual Fund Management, Inc. succeeded The
Prudential Insurance Company of America as investment adviser and since then
has acted as manager of the Fund.

CALCULATION OF YIELD

EACH FUND CALCULATES ITS "CURRENT YIELD" based on the net change, exclusive of
realized and unrealized gains or losses, in the value of a hypothetical account
over a seven calendar day base period. EACH FUND ALSO CALCULATES ITS "EFFECTIVE
ANNUAL YIELD" ASSUMING WEEKLY COMPOUNDING. IN ADDITION, THE TAX-FREE FUND
CALCULATES ITS TAX EQUIVALENT YIELD. Tax-equivalent yield shows the taxable
yield an investor would have to earn from a fully taxable investment in order to
equal the Fund's yield after taxes and is calculated by dividing the Fund's
current or effective yield by the result of one minus the maximum marginal
federal tax rate. The following is an example of the current and effective
annual yield calculation as of June 30, 1996 for each of the Funds and the tax
equivalent yield for the Tax-Free Fund:

<TABLE>
<CAPTION>
GOVERNMENT
MONEY FUND TAX-FREE FUND FUND
------------- ------------- -------------
<S> <C> <C> <C>
Value of hypothetical account at end of period......... $ 1.001052068 $ 1.000686454 $ 1.001043375
Value of hypothetical account at beginning of period... 1.000000000 1.000000000 1.000000000
------------- ------------- -------------
Base period return..................................... $ .001052068 $ .000686454 $ .001043375
------------- ------------- -------------
------------- ------------- -------------
CURRENT YIELD (Base Period Return x (365/7))........... 5.49% 3.58% 5.44%
EFFECTIVE ANNUAL YIELD, assuming daily compounding..... 5.64% 3.64% 5.59%
TAX EQUIVALENT YIELD (current yield DIVIDED BY -- 5.93% --
(1-.396)).............................................
</TABLE>

THE YIELD WILL FLUCTUATE FROM TIME TO TIME AND DOES NOT REPRESENT FUTURE INCOME
OR DIVIDENDS. YIELD IS COMPUTED WITHOUT TAKING INTO CONSIDERATION THE COMMAND
PROGRAM ANNUAL FEE OF $100.

The weighted average life to maturity of each of the Fund's portfolios on
June 30, 1996 was 55 days for the Money Fund, 77 days for the Tax-Free Fund and
51 days for the Government Fund.

5
<PAGE>
Yield is computed in accordance with a standardized formula described in the
Statement of Additional Information. Comparative performance information may be
used from time to time in advertising or marketing each of the Fund's shares,
including data from Lipper Analytical Services, Inc., Morningstar Publications,
Inc., IBC/Donoghue's Money Fund Report, The Bank Rate Monitor, other industry
publications, business periodicals and market indices.

HOW THE FUNDS INVEST

MONEY FUND

INVESTMENT OBJECTIVES AND POLICIES

THE INVESTMENT OBJECTIVES OF THE MONEY FUND ARE TO SEEK HIGH CURRENT INCOME,
PRESERVATION OF CAPITAL AND MAINTENANCE OF LIQUIDITY. THE MONEY FUND SEEKS TO
ACHIEVE THESE OBJECTIVES BY INVESTING PRIMARILY IN A PORTFOLIO OF U.S.
DOLLAR-DENOMINATED MONEY MARKET INSTRUMENTS. THE MONEY FUND SEEKS TO MAINTAIN A
$1.00 SHARE PRICE AT ALL TIMES. TO ACHIEVE THIS, THE MONEY FUND PURCHASES ONLY
SECURITIES WITH REMAINING MATURITIES OF THIRTEEN MONTHS OR LESS AND LIMITS THE
DOLLAR-WEIGHTED AVERAGE MATURITY OF ITS PORTFOLIO TO 90 DAYS OR LESS. THERE CAN
BE NO ASSURANCE THAT THE INVESTMENT OBJECTIVES OF THE MONEY FUND WILL BE
ATTAINED OR THAT THE MONEY FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET
VALUE PER SHARE.

THE INVESTMENT OBJECTIVES OF THE MONEY FUND ARE FUNDAMENTAL POLICIES AND,
THEREFORE, MAY NOT BE CHANGED WITHOUT THE APPROVAL OF THE HOLDERS OF A MAJORITY
OF THE OUTSTANDING VOTING SECURITIES OF THE FUND, AS DEFINED IN THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED (THE INVESTMENT COMPANY ACT). THE MONEY FUND'S
INVESTMENT POLICIES ARE NOT FUNDAMENTAL AND MAY BE CHANGED BY THE TRUSTEES.

The Money Fund will invest in the following money market instruments:

U.S. GOVERNMENT OBLIGATIONS. U.S. Treasury bills and other obligations
issued or guaranteed as to principal and interest by the U.S. Government, its
agencies or instrumentalities. Except for U.S. Treasury securities, these
obligations, even those which are guaranteed by Federal agencies or
instrumentalities, may or may not be backed by the "full faith and credit" of
the United States. In the case of securities not backed by the full faith and
credit of the United States, the Money Fund must look principally to the agency
issuing or guaranteeing the obligation for ultimate repayment, and may not be
able to assert a claim against the United States itself in the event the agency
or instrumentality does not meet its commitments.

BANK OBLIGATIONS. Obligations (including time deposits, certificates of
deposit and bankers' acceptances) of commercial banks, savings banks and savings
and loan associations having, at the time of investment, total assets of $1
billion or more. The Money Fund may invest in U.S. dollar-denominated
obligations of domestic banks, foreign branches of U.S. banks, foreign banks and
U.S. and foreign branches of foreign banks and instruments secured by such
obligations. The Money Fund may invest more than 25% of its total assets in
money market instruments of domestic banks (including U.S. branches of foreign
banks that are subject to the same regulation as U.S. banks and foreign branches
of

6
<PAGE>
domestic banks, provided the domestic bank is unconditionally liable in the
event of the failure of the foreign branch to make payment on its instruments
for any reason). See "Investment Restrictions" in the Statement of Additional
Information.

OTHER MONEY MARKET INSTRUMENTS. Commercial paper, variable amount demand
master notes, bills, notes and other obligations issued by a U.S. company (trust
or corporation), a foreign company or a foreign government, its agencies or
instrumentalities. If such obligations are guaranteed or supported by a letter
of credit issued by a bank, such bank (including a foreign bank) must meet the
requirements set forth under "Bank Obligations" above. If such obligations are
guaranteed or insured by an insurance company or other non-bank entity, such
insurance company must represent a credit of comparable quality as determined by
the Money Fund's investment adviser, under the supervision of the Trustees.

The Money Fund may not invest more than 25% of its net assets in any one
industry except there is no limitation with respect to money market instruments
of domestic banks and obligations of the U.S. Government, its agencies and
instrumentalities, as described above.

The Money Fund intends to hold portfolio securities until maturity; however,
the Money Fund may sell any security at any time in order to meet redemption
requests or if such action, in the judgment of the investment adviser, is
appropriate based on the adviser's evaluation of the issuer or market
conditions.

In selecting portfolio securities for investment by the Money Fund, the
investment adviser considers ratings assigned by major rating services,
information concerning the financial history and condition of the issuer and its
revenue and expense prospects. The Trustees monitor the credit quality of
securities purchased for the Money Fund. If a portfolio security held by the
Money Fund is assigned a lower rating or ceases to be rated, the investment
adviser under the supervision of the Trustees will promptly reassess whether
that security presents minimal credit risks and whether the Money Fund should
continue to hold the security. If a portfolio security no longer presents
minimal credit risks or is in default, the Money Fund will dispose of the
security as soon as reasonably practicable unless the Trustees determine that to
do so is not in the best interest of the Money Fund and its shareholders.

The Money Fund utilizes the amortized cost method of valuation in accordance
with rules of the SEC. See "How the Funds Value Their Shares." Accordingly, the
Money Fund will limit its portfolio investments to those instruments which
present minimal credit risks and which are of "eligible quality," as determined
by the Money Fund's investment adviser under the supervision of the Trustees.
"Eligible quality" means (i) a security (or issuer) rated in one of the two
highest rating categories by at least two nationally recognized statistical
rating organizations assigning a rating to the security or issuer (or, if only
one such rating organization assigned a rating, that rating organization) or
(ii) an unrated security deemed of comparable quality by the Money Fund's
investment adviser under the supervision of the Trustees. For a description of
ratings, see "Description of Securities Ratings" in the Statement of Additional
Information.

As long as the Money Fund utilizes the amortized cost method of valuation,
it will also comply with certain diversification requirements and will invest no
more than 5% of the Money Fund's total assets in "second-tier securities," with
no more than 1% of the Money Fund's total assets in any one issuer of a
second-tier security. A "second-tier security," for this purpose, is a security
of "eligible quality" that does not have the highest rating from at least two
nationally recognized statistical rating organizations assigning a rating to
that security or issuer (or, if only one rating organization assigned a rating,
that rating organization) or an unrated security that is deemed of comparable
quality by the Money Fund's investment adviser under the supervision of the
Trustees.

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<PAGE>
The Money Fund may also purchase certain other investments and is subject to
certain policies as described in "Other Investments and Policies Applicable to
the Funds."
RISKS OF INVESTING IN FOREIGN SECURITIES. Since the Money Fund's portfolio
may contain U.S. dollar-denominated obligations of foreign branches of domestic
banks, foreign banks and domestic branches of foreign banks, an investment in
the Money Fund involves certain additional risks. Such investment risks include
future political and economic developments in the country of the issuer, the
possible imposition of withholding taxes on interest income payable on such
obligations held by the Money Fund, the possible seizure or nationalization of
foreign deposits and the possible establishment of exchange controls or other
foreign governmental laws or restrictions which might affect adversely the
payment of principal and interest on such obligations held by the Money Fund.
The Money Fund will not purchase obligations which the investment adviser
believes, at the time of purchase, will be subject to exchange controls or
withholding taxes; however, there can be no assurance that such laws may not
become applicable to certain of the Money Fund's investments. In addition, there
may be less publicly available information about a domestic branch of a foreign
bank than about a domestic bank, and such branches may not be subject to the
same accounting, auditing and financial recordkeeping standards and requirements
as domestic banks.
TAX-FREE FUND
INVESTMENT OBJECTIVES AND POLICIES
THE INVESTMENT OBJECTIVES OF THE TAX-FREE FUND ARE TO SEEK HIGH CURRENT
INCOME THAT IS EXEMPT FROM FEDERAL INCOME TAXES, CONSISTENT WITH MAINTENANCE OF
LIQUIDITY AND PRESERVATION OF CAPITAL. THE TAX-FREE FUND WILL SEEK TO ACHIEVE
ITS OBJECTIVES BY INVESTING IN A DIVERSIFIED PORTFOLIO OF SHORT-TERM DEBT
OBLIGATIONS ISSUED BY STATES, TERRITORIES AND POSSESSIONS OF THE UNITED STATES
AND BY 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.
Such securities are generally known as "Municipal Bonds" or "Municipal Notes."
Interest on certain Municipal Bonds and Municipal Notes may be a preference item
for purposes of the federal Alternative Minimum Tax. The Tax-Free Fund may
invest up to 20% of its net assets in Municipal Bonds and Municipal Notes, the
interest on which would be a preference item for purposes of the federal
Alternative Minimum Tax. Under normal circumstances, the Tax-Free Fund will
invest at least 80% of its net assets in tax-exempt Municipal Bonds and
Municipal Notes, which are not subject to the federal Alternative Minimum Tax.
THE TAX-FREE FUND SEEKS TO MAINTAIN A $1.00 SHARE PRICE AT ALL TIMES. TO ACHIEVE
THIS THE TAX-FREE FUND INVESTS IN MUNICIPAL BONDS OR NOTES WITH REMAINING
MATURITIES OF THIRTEEN MONTHS OR LESS AND LIMITS THE DOLLAR-WEIGHTED AVERAGE
MATURITY OF ITS PORTFOLIO TO 90 DAYS OR LESS. THERE CAN BE NO ASSURANCE THAT THE
INVESTMENT OBJECTIVES OF THE TAX-FREE FUND WILL BE ATTAINED OR THAT THE TAX-FREE
FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE PER SHARE.
THE INVESTMENT OBJECTIVES OF THE TAX-FREE FUND ARE FUNDAMENTAL POLICIES AND,
THEREFORE, MAY NOT BE CHANGED WITHOUT THE APPROVAL OF THE HOLDERS OF A MAJORITY
OF THE OUTSTANDING VOTING SECURITIES OF THE FUND, AS DEFINED IN THE INVESTMENT
COMPANY ACT. THE TAX-FREE FUND'S INVESTMENT POLICIES ARE NOT FUNDAMENTAL AND MAY
BE CHANGED BY THE TRUSTEES.
The Tax-Free Fund utilizes the amortized cost method of valuation in
accordance with rules of the SEC. See "How the Funds Value Their Shares."
Accordingly, the Tax-Free Fund will limit its portfolio investments to those
Municipal Bonds and Notes which present minimal credit risks and which are of
"eligible quality" (as defined above) as determined by the Tax-Free Fund's
investment adviser under the supervision of the Trustees.

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<PAGE>
In selecting Municipal Bonds and Notes for investment by the Tax-Free Fund,
the investment adviser considers ratings assigned by major rating services,
information concerning the financial history and condition of the issuer and its
revenue and expense prospects. If a Municipal Bond or a Municipal Note held by
the Tax-Free Fund is assigned a lower rating or ceases to be rated, the
investment adviser under the supervision of the Trustees will promptly reassess
whether that security continues to present minimal credit risks and whether the
Tax-Free Fund should continue to hold the security in its portfolio. If a
portfolio security no longer presents minimal credit risks or is in default, the
Tax-Free Fund will dispose of the security as soon as reasonably practicable
unless the Trustees determine that to do so is not in the best interests of the
Tax-Free Fund and its shareholders. For a description of ratings, see
"Description of Securities Ratings" in the Statement of Additional Information.

MUNICIPAL BONDS. Municipal Bonds are generally (i) 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 work or (ii) issued in certain instances as
private-activity bonds, by or on behalf of public authorities to obtain funds 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. Such obligations are included within the term Municipal Bonds if the
interest paid thereon qualifies at the time of issuance, in the opinion of the
issuer's bond counsel, as exempt from federal income tax. Other types of
industrial development bonds, the proceeds of which are used for the
construction, equipment, repair or improvement of privately operated industrial
or commercial facilities, may constitute Municipal Bonds, although the current
federal tax laws place substantial limitations on the size of such issues.

Municipal Bonds may be general obligation or revenue bonds. General
obligation bonds are secured by the issuer's pledge of its good 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. 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. 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.

OTHER INVESTMENTS AND POLICIES APPLICABLE TO THE TAX-FREE FUND. The
Tax-Free Fund intends to hold portfolio securities to maturity, except that puts
may be exercised on their expiration date when the exercise price is higher than
the current market price for the underlying security. In addition, the Tax-Free
Fund may dispose of any portfolio security prior to its maturity if, on the
basis of a revised credit evaluation of the issuer or of market conditions, it
believes such disposition advisable. Also, the Tax-Free Fund may sell any
security at any time in order to meet redemption requests. The Tax-Free Fund may
also purchase certain other investments and engage in certain policies as
described in "Other Investments and Policies Applicable to the Funds."

The Tax-Free Fund anticipates being as fully invested as practicable in
Municipal Bonds and Notes; however, because the Tax-Free Fund does not intend to
invest in taxable obligations, there may

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<PAGE>
be occasions when, as a result of maturities of portfolio securities or sales of
Tax-Free Fund shares or in order to meet anticipated redemption requests, the
Tax-Free Fund may hold cash which is not earning income. In addition, there may
be occasions when, in order to raise cash to meet redemptions, the Tax-Free Fund
might be required to sell securities at a loss.

From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on Municipal Bonds and Notes and for providing state and local
governments with federal credit assistance. Reevaluation of the Tax-Free Fund's
investment objectives and structure might be necessary in the future due to
market conditions which may result from future changes in the tax laws.

GOVERNMENT FUND

INVESTMENT OBJECTIVES AND POLICIES

THE INVESTMENT OBJECTIVES OF THE GOVERNMENT FUND ARE TO SEEK HIGH CURRENT
INCOME, PRESERVATION OF CAPITAL AND MAINTENANCE OF LIQUIDITY. THE GOVERNMENT
FUND SEEKS TO ACHIEVE ITS OBJECTIVES BY INVESTING IN A PORTFOLIO OF U.S.
GOVERNMENT SECURITIES INCLUDING OBLIGATIONS ISSUED OR GUARANTEED AS TO PRINCIPAL
AND INTEREST BY THE U.S. GOVERNMENT, OR ITS AGENCIES OR INSTRUMENTALITIES AND
RELATED REPURCHASE AGREEMENTS. UNDER NORMAL CIRCUMSTANCES, THE GOVERNMENT FUND
WILL INVEST AT LEAST 65% OF ITS TOTAL ASSETS IN U.S. GOVERNMENT SECURITIES,
INCLUDING REPURCHASE AGREEMENTS WITH RESPECT TO SUCH SECURITIES. THE GOVERNMENT
FUND SEEKS TO MAINTAIN A $1.00 SHARE PRICE AT ALL TIMES. TO ACHIEVE THIS, THE
GOVERNMENT FUND PURCHASES ONLY SECURITIES WITH REMAINING MATURITIES OF THIRTEEN
MONTHS OR LESS AND LIMITS THE DOLLAR-WEIGHTED AVERAGE MATURITY OF ITS PORTFOLIO
TO 90 DAYS OR LESS. THERE CAN BE NO ASSURANCE THAT THE INVESTMENT OBJECTIVES OF
THE GOVERNMENT FUND WILL BE ATTAINED OR THAT THE GOVERNMENT FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE.

The investment objectives of the Government Fund are fundamental policies
and, therefore, may not be changed without the approval of the holders of a
majority of the outstanding voting securities of the Fund, as defined in the
Investment Company Act. The Government Fund's investment policies are not
fundamental and may be changed by the Trustees.

U.S. TREASURY OBLIGATIONS. The Government Fund will invest in U.S. Treasury
obligations, including bills, notes, bonds and other debt obligations issued by
the U.S. Treasury. These instruments are direct obligations of the U.S.
Government and, as such, are backed by the full faith and credit of the United
States. They differ primarily in their interest rates, the lengths of their
maturities and the dates of their issuances.

OBLIGATIONS ISSUED OR GUARANTEED BY U.S. GOVERNMENT AGENCIES AND
INSTRUMENTALITIES. The Government Fund will invest in obligations issued by
agencies of the U.S. Government or instrumentalities established or sponsored by
the U.S. Government. These obligations, including those which are guaranteed by
federal agencies or instrumentalities, may or may not be backed by the full
faith and credit of the United States. Obligations of the Government National
Mortgage Association, the Farmers Home Administration and the Small Business
Administration are backed by the full faith and credit of the United States. In
the case of obligations not backed by the full faith and credit of the United
States, the Government Fund must look principally to the agency issuing or
guaranteeing the obligation for ultimate repayment and may not be able to assert
a claim against the United States if the agency or instrumentality does not meet
its commitments. Instruments in which the Government Fund may invest which are
not backed by the full faith and credit of the United States include obligations
issued

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<PAGE>
by the Federal Home Loan Banks, the Federal Home Loan Mortgage Corporation, the
Federal National Mortgage Association, the Student Loan Marketing Association,
Resolution Funding Corporation and the Tennessee Valley Authority, each of which
under certain conditions has the right to borrow from the U.S. Treasury to meet
its obligations, and obligations of the Farm Credit System, the obligations of
which may be satisfied only by the individual credit of the issuing agency.

The Government Fund may invest in securities issued or guaranteed by any of
the foregoing entities or by any other agency or instrumentality established or
sponsored by the U.S. Government, and in participation interests in, and
instruments evidencing deposit or safekeeping for, any of the foregoing.

The Government Fund may invest in component parts of U.S. Treasury notes or
bonds, namely, either the corpus (principal) of such Treasury obligations or one
of the interest payments scheduled to be paid on such obligations. These
obligations may take the form of (i) Treasury obligations from which the
interest coupons have been stripped, (ii) the interest coupons that are
stripped, (iii) book-entries at a Federal Reserve member bank representing
ownership of Treasury obligation components or (iv) receipts evidencing the
component parts (corpus or coupons) of Treasury obligations that have not
actually been stripped. Such receipts evidence ownership of component parts of
Treasury obligations (corpus or coupons) purchased by a third party (typically
an investment banking firm) and held on behalf of the third party in physical or
book-entry form by a major commercial bank or trust company pursuant to a
custody agreement with the third party. Investments in such instruments may be
subject to greater fluctuations in price than investments in U.S. Treasury Notes
or bonds as a result of variation in interest rates.

The Government Fund intends normally to hold its portfolio securities to
maturity. Historically, securities issued or guaranteed by the U.S. Government
or its agencies and instrumentalities have involved minimal risk of loss of
principal or interest, if held to maturity.

OTHER INVESTMENTS AND POLICIES APPLICABLE TO THE GOVERNMENT FUND. The
Government Fund may also invest in obligations of the International Bank for
Reconstruction and Development (World Bank), which is technically not a U.S.
Government agency or instrumentality. World Bank obligations are supported by
appropriated but unpaid commitments of its member countries. There is no
assurance that these commitments will be honored in the future. The Government
Fund may also purchase certain other investments and engage in certain policies
as described in "Other Investments and Policies Applicable to the Funds."

OTHER INVESTMENTS AND POLICIES APPLICABLE TO THE FUNDS

LIQUIDITY PUTS. A Fund may also purchase instruments of the types described
above under "Investment Objectives and Policies" for that Fund, with the right
to resell the instruments at an agreed-upon price or yield within a specified
period prior to the maturity date of the instruments. Such a right to resell is
commonly known as a "put," and the aggregate price which a Fund pays for
instruments with a put may be higher than the price that otherwise would be paid
for the instruments. A put may also include the right to demand repayment of
interest and principal. The Tax-Free Fund and Government Fund may also buy
securities with the right to demand principal and interest on a fixed date. For
a more detailed description, see "Investment Objectives and Policies" in the
Statement of Additional Information.

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<PAGE>
Since the value of the put is dependent, in part, on the ability of the put
writer to meet its obligation to repurchase, a Fund's policy is to enter into
put transactions only with such brokers, dealers or financial institutions which
present minimal credit risks. There is a credit risk associated with the
purchase of puts in that the broker, dealer or financial institution might
default on its obligation to repurchase an underlying security. Changes in the
credit quality of these institutions could cause losses to the Fund and affect
its share price. In the event such a default should occur, a Fund is unable to
predict whether all or any portion of any loss sustained could subsequently be
recovered from the broker, dealer or financial institution.

VARIABLE RATE AND FLOATING RATE SECURITIES. Each Fund may invest in
"variable rate" and "floating rate" obligations. The interest rates on such
obligations fluctuate generally with changes in market interest rates and a Fund
is typically able to demand repayment of the principal amount of such
obligations at par plus accrued interest either, in some cases, at specified
intervals of less than one year or, in other cases, upon not less than seven
days' notice. For additional information concerning variable rate and floating
rate obligations, see "Investment Objectives and Policies" in the Statement of
Additional Information.

REPURCHASE AGREEMENTS. The Money Fund and Government Fund may enter into
repurchase agreements, whereby the seller of a security agrees to repurchase
that security from that Fund at a mutually agreed-upon time and price. The
repurchase date is usually within a day or two of the original purchase,
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. Each 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 the instruments declines, a 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 Money
Fund and Government Fund each participate in a joint repurchase account with
other investment companies managed by Prudential Mutual Fund Management, Inc.
pursuant to an order of the SEC. See "Investment Objectives and Policies --
Repurchase Agreements" in the Statement of Additional Information.

BORROWING AND REVERSE REPURCHASE AGREEMENTS. The Money Fund and Government
Fund may each borrow money from banks in an amount equal to no more than 20% of
the value of their total assets (computed at the time the loan is made) for
temporary or emergency purposes or for the clearance of transactions. Borrowing
for purposes other than meeting redemptions may not exceed 5% of the value of a
Fund's total assets less liabilities, except that these borrowing restrictions
do not apply to reverse repurchase agreements engaged in by either Fund. Neither
Fund will purchase securities while borrowings are outstanding. The Tax-Free
Fund may borrow for temporary purposes in amounts not exceeding 5% of its total
assets. See "Investment Objectives and Policies" in the Statement of Additional
Information.

The Money Fund may also invest in securities subject to reverse repurchase
agreements. Reverse repurchase agreements involve the sale of securities held by
the Money Fund with an agreement by the Money Fund to repurchase the securities
at a later date at a fixed price. During the reverse repurchase agreement
period, the Money Fund continues to receive principal and interest payments on
these securities. The Money Fund intends only to use the reverse repurchase
technique when it will be to its

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<PAGE>
advantage to do so. Such transactions are only advantageous if the Money Fund
has an opportunity to earn a greater rate of interest on the cash derived from
the transaction than the interest cost of obtaining that cash. Reverse
repurchase agreements may be considered speculative.

The Money Fund's Custodian will maintain in a separate account cash, U.S.
Government securities or other liquid unencumbered assets, marked-to-market
daily, having a value equal to or greater than the Fund's repurchase
commitments. Reverse repurchase agreements involve the risk that the market
value of the securities retained by the Money Fund may decline below the price
of the securities the Money Fund has sold but is obligated to repurchase under
the agreement. In the event the buyer of securities under a reverse repurchase
agreement files for bankruptcy or becomes insolvent, the Money Fund's use of the
proceeds from the agreement may be restricted pending a determination by the
other party or its trustee or receiver, whether to enforce the Money Fund's
obligation to repurchase the securities. The Tax-Free Fund may borrow from
banks, for temporary investment purposes, in amounts not exceeding 5% of the
market or other fair value of its total assets. See "Investment Restrictions" in
the Statement of Additional Information.

SECURITIES LENDING. The Money Fund and Government Fund may lend their
portfolio securities to brokers or dealers, banks or other recognized
institutional borrowers of securities, provided that the borrower at all times
maintains cash collateral in an amount equal to at least 100% of the market
value of the securities loaned. During the time portfolio securities are on
loan, the borrower will pay the Fund an amount equivalent to any dividends or
interest paid on such securities and the Fund may invest the cash collateral and
earn additional income or it may receive an agreed-upon amount of interest
income from the borrower who has delivered equivalent collateral or secured a
letter of credit. Loans are subject to termination at the option of the Fund or
the borrower. The Fund may pay reasonable administration and custodial fees in
connection with a loan. As a matter of fundamental policy, each Fund cannot lend
more than 10% of its total assets. See "Investment Restrictions" in the
Statement of Additional Information.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. Each Fund may purchase or sell
securities on a when-issued or delayed delivery basis. When-issued or delayed
delivery transactions arise when securities are purchased or sold by a Fund with
payment and delivery taking place in the future in order to secure what is
considered to be an advantageous price and yield to that Fund at the time of
entering into the transaction. 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 fluctuations and no interest accrues to the Fund until
delivery and payment take place. The Funds' Custodian will maintain, in a
segregated account of each Fund, cash, U.S. Government securities or other
liquid unencumbered assets, marked-to-market daily, having a value equal to or
greater than that Fund's purchase commitments. The purchase of securities on a
"when-issued" basis may involve additional risks. For a more detailed
discussion, see "Investment Objectives and Policies--When-Issued and Delayed
Delivery Securities" in the Statement of Additional Information.

ILLIQUID SECURITIES. Each Fund may hold up to 10% of its net assets in
illiquid securities including securities with legal or contractual restrictions
on resale (restricted securities), securities that are

13
<PAGE>
not readily marketable in securities markets either within or outside of the
United States, privately placed commercial paper and, except for the Tax-Free
Fund, repurchase agreements which have a maturity of longer than seven days.
Restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933, as amended (the Securities Act) and privately placed
commercial paper that have a readily available market are not considered
illiquid for purposes of this limitation. Investing in Rule 144A securities
could, however, have the effect of increasing the level of Fund illiquidity to
the extent that qualified institutional buyers become, for a limited time,
uninterested in purchasing these securities. The investment adviser will monitor
the liquidity of such restricted securities under the supervision of the
Trustees. Repurchase agreements subject to demand are deemed to have a maturity
equal to the applicable notice period.

INVESTMENT RESTRICTIONS

Each Fund is subject to certain investment restrictions which, like its
investment objectives, constitute fundamental policies. Fundamental policies
cannot be changed without the approval of the holders of a majority of the
outstanding voting securities of the Fund as defined above. See "Investment
Restrictions" in the Statement of Additional Information.

HOW THE FUNDS ARE MANAGED

THE TRUSTEES, IN ADDITION TO OVERSEEING THE ACTIONS OF THE FUNDS' MANAGER,
SUBADVISER AND DISTRIBUTOR, AS SET FORTH BELOW, DECIDE UPON MATTERS OF GENERAL
POLICY. THE FUNDS' MANAGER CONDUCTS AND SUPERVISES THE DAILY BUSINESS OPERATIONS
OF THE FUNDS. THE FUNDS' SUBADVISER FURNISHES DAILY INVESTMENT ADVISORY
SERVICES.

For the fiscal year ended June 30, 1996, total expenses of each of the
Funds, as a percentage of their respective average net assets, were .58% for the
Money Fund, .66% for the Tax-Free Fund and .68% for the Government Fund. See
"Financial Highlights."

MANAGER

PRUDENTIAL MUTUAL FUND MANAGEMENT, INC. (PMF OR THE MANAGER), ONE SEAPORT
PLAZA, NEW YORK, NEW YORK 10292, IS THE MANAGER OF EACH OF THE FUNDS. PMF WAS
INCORPORATED IN MAY 1987 UNDER THE LAWS OF THE STATE OF DELAWARE.

As of July 31, 1996, PMF served as the manager to 38 open-end investment
companies, constituting all of the Prudential Mutual Funds, and as manager or
administrator to 25 closed-end investment companies with aggregate assets of
approximately $52 billion.

UNDER A MANAGEMENT AGREEMENT WITH EACH OF THE FUNDS, PMF MANAGES THE
INVESTMENT OPERATIONS OF EACH FUND AND ALSO ADMINISTERS EACH FUND'S BUSINESS
AFFAIRS. See "Manager" in the Statement of Additional Information.

UNDER SEPARATE SUBADVISORY AGREEMENTS BETWEEN PMF AND THE PRUDENTIAL
INVESTMENT CORPORATION (PIC OR THE SUBADVISER), PIC FURNISHES INVESTMENT
ADVISORY SERVICES IN CONNECTION WITH THE MANAGEMENT OF EACH OF THE FUNDS AND IS
REIMBURSED BY PMF FOR ITS REASONABLE COSTS AND EXPENSES INCURRED IN PROVIDING
SUCH SERVICES. Under the Management Agreement, PMF continues to have
responsibility for all investment advisory services and supervises PIC's
performance of such services.

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<PAGE>
PMF and PIC are wholly-owned subsidiaries of The Prudential Insurance
Company of America (Prudential), a major diversified insurance and financial
services company.

Under the Management Agreement, the Money Fund pays PMF a fee at an annual
rate of .50 of 1% of the Fund's average daily net assets up to and including
$500 million, .425 of 1% of the next $500 million, .375 of 1% of the next $500
million and .35 of 1% of the Fund's average daily net assets in excess of $1.5
billion; the Tax-Free Fund pays PMF a fee at an annual rate of .50 of 1% of the
Fund's average daily net assets up to $500 million, .425 of 1% of the Fund's
average daily net assets in excess of $500 million and .375 of 1% of the Fund's
average daily net assets in excess of $1 billion; and the Government Fund pays
PMF a fee at an annual rate of .40 of 1% of the Fund's average daily net assets
up to $1 billion and .375 of 1% of the Fund's average daily net assets in excess
of $1 billion.

For the fiscal year ended June 30, 1996, the Money Fund paid management fees
to PMF of .38 of 1% of that Fund's average net assets, the Tax-Free Fund paid
management fees to PMF of .45 of 1% of that Fund's average net assets and the
Government Fund paid management fees to PMF of .40 of 1% of that Fund's average
net assets. See "Manager" in the Statement of Additional Information.

DISTRIBUTOR

PRUDENTIAL SECURITIES INCORPORATED (PRUDENTIAL SECURITIES, PSI OR THE
DISTRIBUTOR), ONE SEAPORT PLAZA, NEW YORK, NEW YORK 10292, IS A CORPORATION
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE AND SERVES AS THE DISTRIBUTOR
OF SHARES OF EACH OF THE FUNDS. IT IS AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF
PRUDENTIAL. PRIOR TO JANUARY 2, 1996, PRUDENTIAL MUTUAL FUND DISTRIBUTORS, INC.
(PMFD), ONE SEAPORT PLAZA, NEW YORK, NEW YORK 10292, ACTED AS DISTRIBUTOR OF
SHARES OF EACH OF THE FUNDS.

UNDER A DISTRIBUTION AND SERVICE PLAN (THE PLAN) ADOPTED BY EACH OF THE
FUNDS (COLLECTIVELY, THE PLANS) UNDER RULE 12B-1 UNDER THE INVESTMENT COMPANY
ACT AND A DISTRIBUTION AGREEMENT (THE DISTRIBUTION AGREEMENT), THE DISTRIBUTOR
INCURS THE EXPENSES OF DISTRIBUTING EACH FUND'S SHARES. These expenses include
account servicing fees paid to, or on account of, financial advisers of
Prudential Securities, account servicing fees paid to, or on account of, other
broker-dealers or financial institutions (other than national banks) which have
entered into agreements with the Distributor, advertising expenses, the cost of
printing and mailing prospectuses to potential investors and indirect and
overhead costs of Prudential Securities associated with the sale of shares,
including lease, utility, communications and sales promotion expenses. The State
of Texas requires that shares of each Fund may be sold in that state only by
dealers or other financial institutions which are registered there as
broker-dealers.

UNDER THE PLANS, EACH FUND REIMBURSES THE DISTRIBUTOR FOR ITS
DISTRIBUTION-RELATED EXPENSES AT AN ANNUAL RATE OF UP TO .125 OF 1% OF THAT
FUND'S AVERAGE DAILY NET ASSETS. SUCH AMOUNTS ARE ACCRUED DAILY AND PAID
MONTHLY. THE ENTIRE DISTRIBUTION FEE MAY BE USED TO PAY ACCOUNT SERVICING FEES.

The Plans provide that they shall continue in effect from year to year
provided that each such continuance is approved annually by a majority vote of
the Trustees, including a majority of the Trustees who are not interested
persons of the Funds and who have no direct or indirect financial interest in
the operation of the Plans or in any agreement related to the Plans. The
Trustees are provided with and review quarterly reports of expenditures under
the Plans.

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<PAGE>
For the fiscal year ended June 30, 1996, Prudential Securities and PMFD
incurred distribution expenses for the Money Fund of $6,120,993, for the
Tax-Free Fund of $1,417,822 and for the Government Fund of $596,460, all of
which were recovered through the distribution fee paid by each Fund to
Prudential Securities and PMFD. The Funds record all payments made under the
Plans as expenses in the calculation of net investment income.

On October 21, 1993, PSI entered into an omnibus settlement with the SEC,
state securities regulators (with the exception of the Texas Securities
Commissioner who joined the settlement on January 18, 1994) and the National
Association of Securities Dealers, Inc. (NASD) to resolve allegations that from
1980 through 1990 PSI sold certain limited partnership interests in violation of
securities laws to persons for whom such securities were not suitable and
misrepresented the safety, potential returns and liquidity of these investments.
Without admitting or denying the allegations asserted against it, PSI consented
to the entry of an SEC Administrative Order which stated that PSI's conduct
violated the federal securities laws, directed PSI to cease and desist from
violating the federal securities laws, pay civil penalties, and adopt certain
remedial measures to address the violations.

Pursuant to the terms of the SEC settlement, PSI agreed to the imposition of
a $10,000,000 civil
penalty, established a settlement fund in the amount of $330,000,000 and
procedures to resolve legitimate claims for compensatory damages by purchasers
of the partnership interests. PSI has agreed to provide additional funds, if
necessary, for the purpose of the settlement fund. PSI's settlement with the
state securities regulators included an agreement to pay a penalty of $500,000
per jurisdiction. PSI consented to a censure and to the payment of a $5,000,000
fine in settling the NASD action.

In October 1994, a criminal complaint was filed with the United States
Magistrate for the Southern District of New York alleging that PSI committed
fraud in connection with the sale of certain limited partnership interests in
violation of federal securities laws. An agreement was simultaneously filed to
defer prosecution of these charges for a period of three years from the signing
of the agreement, provided that PSI complies with the terms of the agreement.
If, upon completion of the three year period, PSI has complied with the terms of
the agreement, no prosecution will be instituted by the United States for the
offenses charged in the complaint. If on the other hand, during the course of
the three year period, PSI violates the terms of the agreement, the U.S.
Attorney can then elect to pursue these charges. Under the terms of the
agreement, PSI agreed, among other things, to pay an additional $330,000,000
into the fund established by the SEC to pay restitution to investors who
purchased certain PSI limited partnership interests.

For more detailed information concerning the foregoing matters, see
"Distributor" in the Statement of Additional Information, a copy of which may be
obtained at no cost by calling 1-800-225-1852.

The Funds are not affected by PSI's financial condition and are entirely
separate legal entities from PSI, which has no beneficial ownership therein and
the Funds' assets which are held by State Street Bank and Trust Company, an
independent custodian, are separate and distinct from PSI.

PORTFOLIO TRANSACTIONS

Prudential Securities may act as a broker for the Funds provided that the
commissions, fees or other remuneration it receives are fair and reasonable. See
"Portfolio Transactions" in the Statement of Additional Information.

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<PAGE>
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT

State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts 02171, serves as Custodian for the Funds' portfolio securities and
cash and, in that capacity, maintains certain financial and accounting books and
records pursuant to an agreement with each of the Funds. Its mailing address is
P.O. Box 1713, Boston, Massachusetts 02205.

Prudential Mutual Fund Services, Inc. (PMFS), Raritan Plaza One, Edison, New
Jersey 08837, serves as Transfer and Dividend Disbursing Agent for the Funds and
in those capacities maintains certain books and records for each of the Funds.
Its mailing address is P.O. Box 15005, New Brunswick, New Jersey 08906-5005.
PMFS is a wholly-owned subsidiary of PMF.

HOW THE FUNDS VALUE THEIR SHARES

EACH FUND'S NET ASSET VALUE PER SHARE OR NAV IS DETERMINED BY SUBTRACTING ITS
LIABILITIES FROM THE VALUE OF ITS ASSETS AND DIVIDING THE REMAINDER BY THE
NUMBER OF OUTSTANDING SHARES. THE TRUSTEES HAVE FIXED THE SPECIFIC TIME OF DAY
FOR THE COMPUTATION OF EACH OF THE FUND'S NAV TO BE AS OF 4:30 P.M., NEW YORK
TIME, IMMEDIATELY AFTER THE DAILY DECLARATION OF DIVIDENDS.

Each Fund will compute its NAV once daily on the days that the New York
Stock Exchange is open for trading, except on days on which no orders to
purchase, sell or redeem Fund shares have been received or days on which changes
in the value of a Fund's portfolio securities do not materially affect the net
asset value. The New York Stock Exchange is closed on the following holidays:
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.

Each Fund determines the value of its portfolio securities by the amortized
cost method. This method involves valuing an instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price a Fund would receive if it sold the instrument.
During these periods, the yield to an existing shareholder may differ somewhat
from that which could be obtained from a similar fund which marks its portfolio
securities to market each day. For example, during periods of declining interest
rates, if the use of the amortized cost method resulted in a lower value of a
Fund's portfolio on a given day, a prospective investor in the Fund would be
able to obtain a somewhat higher yield and existing shareholders would receive
correspondingly less income. The converse would apply during periods of rising
interest rates. The Trustees have established procedures designed to stabilize,
to the extent reasonably possible, the net asset value of the shares of each
Fund at $1.00 per share.

TAXES, DIVIDENDS AND DISTRIBUTIONS

TAXATION OF THE FUNDS

EACH FUND IS TREATED AS A SEPARATE ENTITY FOR FEDERAL INCOME TAX PURPOSES.
EACH FUND HAS ELECTED TO QUALIFY AND INTENDS TO REMAIN QUALIFIED AS A REGULATED
INVESTMENT COMPANY UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
INTERNAL REVENUE CODE). AS A REGULATED INVESTMENT COMPANY,

17
<PAGE>
A FUND WILL NOT BE SUBJECT TO FEDERAL INCOME TAXES ON ITS INVESTMENT INCOME AND
CAPITAL GAINS, IF ANY, REALIZED DURING ANY YEAR, WHICH IT DISTRIBUTES TO ITS
SHAREHOLDERS, PROVIDED THAT AT LEAST 90% OF ITS NET INVESTMENT INCOME AND NET
SHORT-TERM CAPITAL GAIN EARNED IN THE YEAR IS DISTRIBUTED. SEE "TAXES, DIVIDENDS
AND DISTRIBUTIONS" IN THE STATEMENT OF ADDITIONAL INFORMATION.

The Funds may be subject to tax in certain states where they do business.
Further, in those states which have income tax laws, the tax treatment of the
Funds and of shareholders with respect to distributions by the Funds may differ
from the federal tax treatment.

TAXATION OF SHAREHOLDERS

With respect to the Money Fund and Government Fund, distributions of net
investment income and net short-term capital gains are taxable to the
shareholder as ordinary dividend income regardless of whether the shareholder
receives such distributions in additional shares or in cash. These distributions
will not be eligible for the dividends-received deduction generally allowed to
corporate shareholders. Distributions of net long-term capital gains (i.e., the
excess of net long-term capital gains over net short-term capital losses), if
any, are taxable as long-term capital gains regardless of whether the
shareholder receives such distribution in additional shares or in cash and
regardless of how long the investor has held his or her Fund shares.

Tax-exempt shareholders of the Money Fund and Government Fund will not be
required to pay taxes on amounts distributed to them. Statements as to the tax
status of distributions to shareholders will be mailed annually.

The Tax-Free Fund intends to qualify to pay "exempt-interest dividends" to
its shareholders, by having, at the close of each quarter of its taxable year,
at least 50% of the value of its total assets consist of tax-exempt securities.
An exempt-interest dividend is that part of dividend distributions made by the
Tax-Free Fund which consist of interest received by the Tax-Free Fund on
tax-exempt securities. Shareholders will generally not incur any federal income
tax on the amount of exempt-interest dividends received by them from the
Tax-Free Fund. In view of the Tax-Free Fund's investment policies, it is
expected that all of the Tax-Free Fund's dividends will be exempt-interest
dividends, although it is possible that the Tax-Free Fund may from time to time
realize and distribute net short-term capital gains, market discount or other
minor amounts of taxable income. Such distributions of short-term capital gains,
market discount and other taxable income will be taxable to shareholders
(whether the distributions are received in cash or reinvested in additional
shares) and will not be eligible for the dividends received deduction available
to corporations.

Interest on indebtedness incurred or continued by a shareholder of the
Tax-Free Fund, whether a corporation or an individual, to purchase or carry
shares of the Tax-Free Fund is not deductible. Entities or persons who are
"substantial users" (or related persons) of facilities financed by industrial
development bonds should consult their tax advisers before purchasing shares of
the Fund.

Interest on certain private activity tax-exempt obligations is a preference
item to shareholders for purposes of the Alternative Minimum Tax. In the event
that the Tax-Free Fund invests in such obligations, the portion of an
exempt-interest dividend of the Tax-Free Fund that is allocable to such
obligations will be treated as a preference item to shareholders for purposes of
the Alternative Minimum Tax. Moreover, exempt-interest dividends paid to a
corporate shareholder by the Tax-Free Fund (whether or not from interest on
private activity bonds) will be taken into account (i) in determining the
Alternative Minimum Tax imposed on 75% of the excess of adjusted current
earnings over alternative

18
<PAGE>
minimum taxable income, (ii) in calculating the environmental tax equal to 0.12%
of a corporation's modified alternative minimum taxable income in excess of $2
million and (iii) in determining the foreign branch profits tax imposed on the
effectively connected earnings and profits (with adjustments) of United States
branches of foreign corporations.

The exemption of interest income for federal income tax purposes does not
necessarily result in exemption under the income or other tax laws of any state
or local taxing authority. Thus, shareholders of the Tax-Free Fund may be
subject to state and local taxes on exempt-interest dividends. Shareholders
should consult their tax advisers about the status of dividends from the Fund in
their own states and localities. The Tax-Free Fund will report annually to
shareholders the percentage of interest income, on a state-by-state basis,
received by the Fund during the preceding year.

Any gain or loss realized upon a sale or redemption of shares of the Funds
by a shareholder who is not a dealer in securities will 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. However, any loss realized on a
sale or redemption of shares will be disallowed to the extent the shares
disposed of are replaced (including shares replaced pursuant to a dividend)
within a period of 61 days beginning 30 days before and ending 30 days after the
disposition. Any loss realized by a shareholder upon the sale of shares of the
Funds held for six months or less will be treated as long-term capital loss to
the extent of any long-term capital gain distribution received by the
shareholder. Any loss realized by a shareholder upon the sale of shares of the
Tax-Free Fund held for six months or less will be disallowed to the extent of
any exempt-interest dividends received by the shareholder.

Under the laws of certain states, distributions of net income may be taxable
to shareholders of the Funds 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. Distributions may
be subject to additional state and local taxes.

Shareholders are urged to consult their own tax advisers regarding specific
questions as to federal, state or local taxes. See "Taxes, Dividends and
Distributions" in the Statement of Additional Information.

WITHHOLDING TAXES

Under U.S. Treasury Regulations, the Money Fund and Government Fund are
required to withhold and remit to the U.S. Treasury 31% of dividend and capital
gain income and payments of redemption proceeds and the Tax-Free Fund is
required to withhold and remit to the U.S. Treasury 31% of taxable income and
payments of redemption proceeds on the accounts of those shareholders who fail
to furnish their tax identification numbers on IRS Form W-9 (or IRS Form W-8 in
the case of certain foreign shareholders) with the required certification
regarding the shareholder's status under the Internal Revenue Code. Withholding
at this rate is also required on dividends and capital gains distributions (but
not redemption proceeds) payable to shareholders who are otherwise subject to
backup withholding. Dividends paid to foreign shareholders from taxable net
investment income and net short-term capital gains will generally be subject to
U.S. withholding tax at the rate of 30% (or a lower applicable treaty rate).

DIVIDENDS AND DISTRIBUTIONS

Each Fund will declare a dividend, immediately prior to 4:30 P.M., New York
time, on each day that net asset value per share is determined, of all of its
daily net investment income to shareholders of

19
<PAGE>
record as of 4:30 P.M., New York time, of the preceding business day. The amount
of the dividend may fluctuate from day to day and may be omitted on some days if
net realized losses on portfolio securities exceed a Fund's net investment
income. Dividends are accrued and paid daily in additional full or fractional
shares of the Fund at the net asset value per share determined on the date of
declaration. Each shareholder will receive periodically a summary of his or her
account from Prudential Securities, including information as to dividends paid.
See "General Information--Description of Shares."

Net investment income, for dividend purposes, includes accrued interest and
amortization of discounts and premiums, plus or minus any gains or losses
realized on sales of portfolio securities, less the estimated expenses of a
Fund. The Funds do not expect to realize long-term capital gains or losses.

The Trustees of each Fund may revise the above dividend policy, or postpone
the payment of dividends, if a Fund should have or anticipate any large
unexpected expense, loss or fluctuation in net assets which in the opinion of
the Trustees might have a significant adverse effect on shareholders.

GENERAL INFORMATION

DESCRIPTION OF SHARES

EACH OF THE FUNDS WAS ORGANIZED ON JUNE 5, 1981 AS AN UNINCORPORATED
BUSINESS TRUST UNDER THE LAWS OF MASSACHUSETTS.

The shareholders of each Fund are entitled to one vote for each full share
held (and fractional votes for fractional shares). The Trustees themselves have
the power to alter the number and the terms of office of the Trustees, and they
may at any time lengthen their own terms or make their terms of unlimited
duration (subject to certain removal procedures) and appoint their own
successors, provided that at all times at least a majority of the Trustees has
been elected by the shareholders of the Funds. The voting rights of shareholders
are not cumulative, so that holders of more than 50% of the shares voting can,
if they choose, elect all Trustees being selected, while the holders of the
remaining shares would be unable to elect any Trustees.

THE FUNDS DO NOT INTEND TO HOLD ANNUAL MEETINGS OF SHAREHOLDERS.
SHAREHOLDERS HAVE CERTAIN RIGHTS INCLUDING THE RIGHT TO CALL A MEETING UPON A
VOTE OF 10% OF EACH FUND'S OUTSTANDING SHARES FOR THE PURPOSE OF VOTING ON THE
REMOVAL OF ONE OR MORE OF THE TRUSTEES OR TO TRANSACT ANY OTHER BUSINESS. SEE
"GENERAL INFORMATION--VOTING RIGHTS" IN THE STATEMENT OF ADDITIONAL INFORMATION.

The Declaration of Trust and the By-Laws of each of the Funds are designed
to make each Fund similar in certain respects to a Massachusetts business
corporation. The principal distinction between the two forms relates to
shareholder liability. Under Massachusetts law, shareholders of a business trust
may, under certain circumstances, be held personally liable as partners for the
obligations of a Fund, which is not the case with a corporation. The Declaration
of Trust of each Fund provides that shareholders shall not be subject to any
personal liability for the acts or obligations of that Fund and that every
written obligation, contract, instrument or undertaking made by that Fund shall
contain a provision to the effect that the shareholders are not individually
bound thereunder.

ADDITIONAL INFORMATION

This Prospectus, including the Statement of Additional Information which has
been incorporated by reference herein, does not contain all the information set
forth in the Registration Statement filed by

20
<PAGE>
each of the Funds with the Securities and Exchange Commission under the
Securities Act. Copies of each Registration Statement may be obtained at a
reasonable charge from the SEC or may be examined, without charge, at the office
of the SEC in Washington, D.C. Because this Prospectus relates to each of the
Funds, there is a possibility that one Fund may become liable for any
misstatement, inaccuracy or incomplete disclosure in the Prospectus relating to
any other Fund.

SHAREHOLDER GUIDE

HOW TO BUY SHARES OF THE FUNDS

THE SHARES OF THE FUNDS ARE OFFERED EXCLUSIVELY TO PARTICIPANTS IN THE
COMMAND PROGRAM WHO PLACED A MINIMUM OF $10,000 IN CASH AND/OR SECURITIES IN A
COMMAND ACCOUNT OR PLACED A MINIMUM OF $2,000 IN CASH AND/OR SECURITIES IN A
COMMAND ESSENTIALS ACCOUNT (THE MINIMUM INITIAL INVESTMENT FOR EMPLOYEES OF
PRUDENTIAL AND ITS SUBSIDIARIES AND AFFILIATES IS $2,500). A participant in the
COMMAND program will have any free credit cash balances in his or her Securities
Account invested in shares of one of the Funds, U.S. Treasury Series of the
Prudential Government Securities Trust, the California Money Market Series of
the Prudential California Municipal Fund or the New Jersey Money Market Series,
New York Money Market Series, Connecticut Money Market Series or Massachusetts
Money Market Series of the Prudential Municipal Series Fund (collectively, the
COMMAND Account Funds) depending upon which of the COMMAND Account Funds has
been designated by the participant as his or her Primary COMMAND Fund.
Additional investment vehicles may from time to time become available. Although
a participant will have his or her free credit cash balances invested
automatically in only his or her Primary COMMAND Fund, the participant may
purchase shares in any of the COMMAND Account Funds at any time. A participant
in the COMMAND program has the option to change the designation of his or her
Primary COMMAND Fund at any time by notifying his or her Prudential Securities
Financial Adviser. Upon such notification, shares of the Primary COMMAND Fund
will be redeemed and the proceeds reinvested in shares of the newly-designated
Primary COMMAND Fund.

Purchases of shares of the Primary COMMAND Fund will be made pursuant to the
automatic purchase procedures described below. A purchase of shares of a fund
other than the Primary COMMAND Fund can be made by placing an order with the
participant's Prudential Securities Financial Adviser.

The purchase price for shares of any of the Funds, whether purchased
directly or through the Automatic Purchase Procedures described below, is the
net asset value per share next determined after receipt by a Fund of a purchase
order and payment in proper form (I.E., a free credit cash balance in a
participant's Securities Account, or a check or federal funds wired to
Prudential Securities).

The Funds do not issue physical share certificates. Shares are registered in
the name of Prudential Securities on behalf of its clients and maintained in
book-entry form by the Transfer Agent.

AUTOMATIC PURCHASE PROCEDURES. Free credit cash balances of $1.00 or more
held in a Securities Account will automatically be invested in shares of the
Primary COMMAND Fund as described below. Specifically, an order to purchase
shares of a Primary COMMAND Fund is placed (i) in the case of a free credit cash
balance resulting from the proceeds of a securities sale, on the settlement date
of the securities sale, and (ii) in the case of a free credit cash balance
resulting from a non-trade relating credit

21
<PAGE>
(E.G., receipt of a dividend or interest payment, maturity of a bond or a cash
payment by the participant into his or her Securities Account), on the business
day after the receipt by Prudential Securities of the non-trade related credit.

All shares purchased pursuant to these automatic purchase procedures will
begin earning dividends on the business day after the order is placed.
Prudential Securities will arrange for investment in Fund shares at 4:30 P.M.,
New York time, on the business day the order is placed and cause payment to be
made in federal funds for the shares prior to 4:30 P.M., New York time, on the
next business day. Prudential Securities will have the use of free credit cash
balances until delivery to the Funds.

HOW TO SELL YOUR SHARES

Each Fund is obligated to redeem for cash all full and fractional shares of
that Fund. The redemption price is the net asset value per share next determined
after receipt by the Transfer Agent of proper notice of redemption as described
below. If such notice is received by the Transfer Agent prior to the
determination of net asset value on any day, the redemption will be effective as
of 4:30 P.M., New York time, on such day. Payment of the redemption proceeds
will be made on the same day the redemption becomes effective. If the notice is
received after the net asset value is determined, the redemption will be
effective as of 4:30 P.M., New York time, on the next day that net asset value
is determined, and payment will be made on such next day.

AUTOMATIC REDEMPTION. Redemptions will be automatically effected by
Prudential Securities to satisfy debit balances in a Securities Account created
by activity therein or arising under the COMMAND program, such as those incurred
by use of the Visa-Registered Trademark- Gold Debit Card Account, including ATM
transaction purchases, cash advances and COMMAND Account checks. Each COMMAND
program Securities Account will be automatically scanned for debits each
business day as of the close of business on that day and after application of
any free credit cash balances in the account to such debits, a sufficient number
of shares of the Primary COMMAND Fund and, if necessary, shares of other COMMAND
Account Funds owned by the COMMAND program participant which have not been
selected as his or her primary fund or shares of a participant's money market
funds managed by PMF which are not Primary COMMAND Funds, will be redeemed as of
that business day to satisfy any remaining debits in the Securities Account.
Margin loans will be utilized to satisfy debits remaining after the liquidation
of all Fund shares in a Securities Account, and shares may not be purchased
until all debits, margin loans and other requirements in the Securities Account
are satisfied. In the event of an automatic redemption of shares, the
participant will be entitled to dividends declared on the redeemed shares
through the business day preceding the day on which the redemption is effective.
Participants will not be entitled to dividends declared on the date of
redemption.

MANUAL REDEMPTION. A shareholder may redeem shares of the Primary COMMAND
Funds other than the fund selected as the participant's primary fund by
submitting a written request for redemption directly to Prudential Securities or
by calling his or her Prudential Securities Financial Adviser, who will submit
the request to the Fund's Transfer Agent. The proceeds from a manual redemption
will immediately become free credit cash balances in the participant's COMMAND
program Securities Account and will be automatically invested in the Primary
COMMAND Fund selected as the participant's primary fund. Redemption requests
should not be sent to the Transfer Agent. If inadvertently sent to the Transfer
Agent, they will be forwarded to Prudential Securities. The COMMAND program
requires the written request to be signed by all persons in whose names the
shares are registered,

22
<PAGE>
exactly as their names appear on their COMMAND Account Transaction Statement. In
certain instances, additional documents such as, but not limited to, trust
instruments, death certificates, appointments as executor or administrator or
certificates of corporate authority may be required.

In the event all of a shareholder's shares are redeemed, the proceeds of
such redemption will equal the net asset value of the shares redeemed plus the
amount of all dividends declared up to and including the date of redemption.

A 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 a
Fund of securities owned by it is not reasonably practicable or (b) it is not
reasonably practicable for a 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 a 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.

If the Trustees of a Fund determine that it would be detrimental to the best
interests of the remaining shareholders of that Fund to make payment wholly or
partly in cash, that Fund may pay the redemption price in whole or in part by a
distribution in kind of securities from the portfolio of that Fund, in lieu of
cash in conformity with applicable rules of the SEC. If shares are redeemed in
kind, the redeeming shareholder might incur brokerage costs in converting the
assets into cash. The method of valuing portfolio securities is described under
"How the Funds Value Their Shares," and such valuation will be made as of the
same time the redemption price is determined. Each Fund, however, has elected to
be governed by Rule 18f-1 under the Investment Company Act pursuant to which
each Fund is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of the net asset value of that Fund during any 90-day period for
any one shareholder.

The total value of a shareholder's investment in a Fund at the time of
redemption may be more or less than his or her cost, depending on the value of
the securities held by that Fund at such time and income earned.

Under the COMMAND program, Prudential Securities has the right to terminate
a COMMAND program Securities Account for any reason. In such event, all shares
held in a shareholder's account will be redeemed.

SHAREHOLDER SERVICES

- ACCOUNT CLIENT STATEMENTS. All purchases and redemptions of a Fund's
shares and dividend reinvestments (rounded to the nearest share) will be
confirmed to the shareholder in the Account Client Statement, which is sent
monthly to all COMMAND participants. Prudential Securities may, in the future,
determine that a shareholder will receive only quarterly statements if the only
activity in his or her Securities Account during any quarter is the automatic
reinvestment of dividends declared on Fund shares.

23
<PAGE>
- REPORTS TO SHAREHOLDERS. The fiscal year of each Fund ends on June 30.
Each Fund will send to its shareholders, at least semi-annually, reports showing
the Fund's portfolio and other information. An annual report containing
financial statements audited by independent accountants will be sent to
shareholders each year.

In order to reduce duplicate mailing and printing expenses, the Funds will
provide one annual and semi-annual shareholder report and annual prospectus per
household. Shareholders may request additional copies of such reports by writing
to the appropriate Fund at One Seaport Plaza, New York, New York 10292.

- SHAREHOLDER INQUIRIES. Shareholder inquiries should be addressed to
COMMAND Money Fund, COMMAND Tax-Free Fund or COMMAND Government Fund, at One
Seaport Plaza, New York, New York 10292.

24
<PAGE>
THE PRUDENTIAL MUTUAL FUND FAMILY

Prudential Mutual Fund Management offers a broad range of mutual funds
designed to meet your individual needs. We welcome you to review the investment
options available through our family of funds. For more information on the
Prudential Mutual Funds, including charges and expenses, contact your Prudential
Securities Financial Adviser or Prusec representative or telephone the Funds at
(800) 225-1852 for a free prospectus. Read the prospectus carefully before you
invest or send money.

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 Mortgage Income Fund, Inc.
Prudential Structured Maturity Fund, Inc.
Income Portfolio
The BlackRock Government Income Trust
TAX-EXEMPT BOND FUNDS
Prudential California Municipal Fund
California Series
California Income Series
Prudential Municipal Bond Fund
High Yield Series
Insured Series
Intermediate Series
Prudential Municipal Series Fund
Florida Series
Hawaii Income Series
Maryland Series
Massachusetts Series
Michigan Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
Prudential National Municipals Fund, Inc.
GLOBAL FUNDS
Prudential Europe Growth Fund, Inc.
Prudential Global Genesis Fund, Inc.
Prudential Global Limited Maturity Fund, Inc.
Limited Maturity Portfolio
Prudential Intermediate Global Income Fund, Inc.
Prudential Natural Resources Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Prudential World Fund, Inc.
Global Utility Fund, Inc.
The Global Government Plus Fund, Inc.
The Global Total Return Fund, Inc.

EQUITY FUNDS
Prudential Allocation Fund
Balanced Portfolio
Strategy Portfolio
Prudential Distressed Securities Fund, Inc.
Prudential Equity Fund, Inc.
Prudential Equity Income Fund
Prudential Jennison Fund, Inc.
Prudential Multi-Sector Fund, Inc.
Prudential Small Companies Fund, Inc.
Prudential Utility Fund, Inc.
Nicholas-Applegate Fund, Inc.
Nicholas-Applegate Growth Equity Fund

MONEY MARKET FUNDS
- -TAXABLE MONEY MARKET FUNDS
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

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<PAGE>
No dealer, sales representative of other person has been authorized to give any
information or to make any representation, other than those contained in this
Prospectus, in connection with the offers contained therein, and, if given or
made, such other information or representation must not be relied upon as having
been authorized by the Funds, the Manager or the Distributor to sell or a
solicitation by the Funds, the Manager or the Distributor of any offer to buy in
any jurisdiction in which such offering may not lawfully be made.

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

TABLE OF CONTENTS

<TABLE>
<S> <C>
FUND HIGHLIGHTS........................................................... 2
Risk Factors and Special Characteristics................................ 2
FUND EXPENSES............................................................. 3
FINANCIAL HIGHLIGHTS...................................................... 4
CALCULATION OF YIELD...................................................... 5
HOW THE FUNDS INVEST...................................................... 6
Money Fund.............................................................. 6
Tax-Free Fund........................................................... 8
Government Fund......................................................... 10
Other Investments and Policies
Applicable to the Funds................................................ 11
Investment Restrictions................................................. 14
HOW THE FUNDS ARE MANAGED................................................. 14
Manager................................................................. 14
Distributor............................................................. 15
Portfolio Transactions.................................................. 16
Custodian and Transfer and Dividend Disbursing Agent.................... 17
HOW THE FUNDS VALUE THEIR SHARES.......................................... 17
TAXES, DIVIDENDS AND DISTRIBUTIONS........................................ 17
GENERAL INFORMATION....................................................... 20
Description of Shares................................................... 20
Additional Information.................................................. 20
SHAREHOLDER GUIDE......................................................... 21
How to Buy Shares of the Funds.......................................... 21
How to Sell Your Shares................................................. 22
Shareholder Services.................................................... 23
THE PRUDENTIAL MUTUAL FUND FAMILY......................................... 25
</TABLE>

<TABLE>
<S> <C> <C>
CUSIP Nos.: CMF: 20050F-10-3
CTF: 20050R-10-7
CGF: 20050D-10-8
</TABLE>

COMMAND-SM-
COMMAND Money Fund
COMMAND Tax-Free Fund
COMMAND Government Fund

Prospectus dated August 28, 1996
- ----------------------------------------

THE ENCLOSED PROSPECTUS DESCRIBES THREE FULLY MANAGED MONEY MARKET FUNDS.
SHARES OF THE FUNDS ARE OFFERED EXCLUSIVELY TO PARTICIPANTS IN THE COMMAND
ACCOUNT PROGRAM OF PRUDENTIAL SECURITIES INCORPORATED. INVESTORS SHOULD BE
AWARE THAT THE PRUDENTIAL SECURITIES COMMAND ACCOUNT IS NOT A BANK
ACCOUNT. AS WITH ANY INVESTMENT IN SECURITIES, THE VALUE OF A
SHAREHOLDER'S INVESTMENT IN THE FUNDS WILL FLUCTUATE. THE PRINCIPAL OFFICE
OF EACH FUND IS:
ONE SEAPORT PLAZA, NEW YORK, NEW YORK 10292.

[LOGO]
<PAGE>
COMMAND MONEY FUND
COMMAND TAX-FREE FUND
COMMAND GOVERNMENT FUND

Statement of Additional Information
dated August 28, 1996

COMMAND Money Fund (the Money Fund), COMMAND Tax-Free Fund (the Tax-Free
Fund) and COMMAND Government Fund (the Government Fund) (each a Fund or,
collectively, the Funds) are each open-end, diversified management investment
companies whose shares are offered exclusively to participants in the COMMANDSM
Account program (COMMAND program) of Prudential Securities Incorporated
(Prudential Securities).

The investment objectives of the Money Fund are to seek high current income,
preservation of capital and maintenance of liquidity. The Money Fund seeks to
achieve its objectives by investing in a diversified portfolio of money market
instruments maturing in thirteen months or less. The investment objectives of
the Tax-Free Fund are to seek high current income that is exempt from federal
income taxes, consistent with maintenance of liquidity and preservation of
capital. The Tax-Free Fund seeks to achieve its objectives by investing in a
diversified portfolio of short-term tax-exempt securities issued by states,
municipalities and their instrumentalities and authorities maturing in thirteen
months or less. The investment objectives of the Government Fund are high
current income, preservation of capital and maintenance of liquidity. The
Government Fund seeks to achieve its objectives by investing in a portfolio of
U.S. Government securities maturing in thirteen months or less. See ``How the
Funds Invest" and ``How the Funds Value Their Shares" in the Prospectus.

This Statement of Additional Information sets forth information about the
Funds. This Statement of Additional Information is not a prospectus and should
be read in conjunction with the Prospectus of the Funds dated August 28, 1996, a
copy of which may be obtained from the Funds, One Seaport Plaza, New York, New
York 10292. The telephone number is (800) 225-1852.

Investors should be aware that the Prudential Securities COMMAND Account is
not a bank account. As with any investment in securities, the value of a
shareholder's investment in the Funds will fluctuate.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
CROSS-REFERENCE
TO PAGE IN
PAGE PROSPECTUS
--------- -------------------
<S> <C> <C>
General Information...................................................................... B-2 20
The Funds.............................................................................. B-2 20
Description of Shares.................................................................. B-2 20
Voting Rights.......................................................................... B-3 20
Investment Objectives and Policies....................................................... B-3 6
Investment Restrictions.................................................................. B-7 14
Money Fund............................................................................. B-8 13
Tax-Free Fund.......................................................................... B-9 13
Government Fund........................................................................ B-11 13
Trustees and Officers.................................................................... B-12 14
Manager.................................................................................. B-15 14
Distributor.............................................................................. B-18 15
Calculation of Yield..................................................................... B-20 5
Portfolio Transactions................................................................... B-20 16
Taxes, Dividends and Distributions....................................................... B-21 17
Custodian, Transfer and Dividend Disbursing Agent and Independent Accountants............ B-21 17
Reports to Shareholders.................................................................. B-22 24
Description of Securities Ratings........................................................ B-23 --
COMMAND Money Fund
Financial Statements................................................................... B-25 --
Report of Independent Accountants...................................................... B-32 --
COMMAND Government Fund
Financial Statements................................................................... B-33 --
Report of Independent Accountants...................................................... B-37 --
COMMAND Tax-Free Fund
Financial Statements................................................................... B-38 --
Report of Independent Accountants...................................................... B-46 --
Notes to Financial Statements............................................................ B-47 --
Appendix--General Investment Information................................................. App-1 --
Appendix--Information Relating to The Prudential......................................... App-2 --
</TABLE>
<PAGE>
GENERAL INFORMATION

THE FUNDS

COMMAND Money Fund (Money Fund), COMMAND Tax-Free Fund (Tax-Free Fund) and
COMMAND Government Fund (Government Fund) (collectively, the Funds) were each
organized as an unincorporated business trust under the laws of Massachusetts on
June 5, 1981. The Declaration of Trust and the By-Laws of each of the Funds are
designed to make the Funds similar in most respects to a Massachusetts business
corporation. The principal distinction between the two forms relates to
shareholder liability. Under Massachusetts law, shareholders of such a trust
may, under certain circumstances, be held personally liable as partners for the
obligations of a Fund, which is not the case with a corporation. Each
Declaration of Trust provides that shareholders shall not be subject to any
personal liability for the acts or obligations of the Fund and that every
written obligation, contract, instrument or undertaking made by the Fund shall
contain a provision to the effect that the shareholders are not personally
liable thereunder.

Massachusetts counsel for the Funds has advised the Funds that no personal
liability will attach to the shareholders under any undertaking containing such
provision when adequate notice of such provision is given, except possibly in a
few jurisdictions. With respect to all types of claims in the latter
jurisdictions and with respect to tort claims, contract claims where the
provision referred to is omitted from the undertaking, claims for taxes and
certain statutory liabilities in other jurisdictions, a shareholder of a Fund
may be held personally liable to the extent that claims are not satisfied by
such Fund. However, upon payment of any such liability, the shareholder will be
entitled to reimbursement from the general assets of such Fund. The Trustees
intend to conduct the operations of each Fund in such a way so as to avoid, to
the extent possible, ultimate liability of the shareholders for liabilities of
such Fund.

The Declaration of Trust of each of the Funds further provides that no
Trustee, officer, employee or agent of the Fund is liable to the Fund or to a
shareholder, nor is any Trustee, officer, employee or agent liable to any third
person in connection with the affairs of the Fund, except as such liability may
arise from the bad faith, willful misfeasance, gross negligence or reckless
disregard of the duties of such Trustee, officer, employee or agent. It also
provides that all third persons shall look solely to Fund property for
satisfaction of claims arising in connection with the affairs of the Fund. With
the exceptions stated, the Declaration of Trust provides that a Trustee,
officer, employee or agent is entitled to be indemnified against all liabilities
arising in connection with the affairs of the Fund.

Each Fund shall continue without limitation of time subject to the
provisions in the Declaration of Trust concerning termination by action of the
shareholders or by action of the Trustees upon notice to the shareholders.

DESCRIPTION OF SHARES

The Declaration of Trust of each of the Funds permits the Trustees to issue
an unlimited number of full and fractional shares of a single class and to
divide or combine the shares into a greater or lesser number of shares without
thereby changing the proportionate beneficial interests in the Fund. Each share
represents an equal proportional interest in the Fund with each other share.
Upon liquidation of the Fund, by either Trustee or shareholder action,
shareholders are entitled to share pro rata in the net assets of the Fund
available for distribution to shareholders. Shares have no pre-emptive or
conversion rights. The rights of redemption are described elsewhere herein.
Shares are fully paid and non-assessable by the Fund.

Pursuant to the Declaration of Trust of each of the Funds, the Trustees may
also authorize the creation of additional series of shares (the proceeds of
which would be invested in separate, independently managed portfolios) and
additional classes of shares within any series (which would be used to
distinguish among the rights of different categories of shareholders, as might
be required by future regulations or other unforeseen circumstances); however,
the Trustees have not authorized any such additional series or classes of
shares.

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VOTING RIGHTS

The shareholders of the Funds are entitled to one vote for each full share
held (and fractional votes for fractional shares). The Trustees themselves have
the power to alter the number and the terms of office of the Trustees, and they
may at any time lengthen their own terms or make their terms of unlimited
duration (subject to certain removal procedures) and appoint their own
successors, provided that always at least a majority of the Trustees has been
elected by the shareholders of the Funds. The voting rights of shareholders are
not cumulative, so that holders of more than 50% of the shares voting can, if
they choose, elect all Trustees being selected, while the holders of the
remaining shares would be unable to elect any Trustees. It is the intention of
the Funds not to hold annual meetings of shareholders. The Trustees may call
special meetings of shareholders for action by shareholder vote as may be
required by the Investment Company Act of 1940, as amended (the Investment
Company Act), or the respective Declarations of Trust.

Each Fund may reduce the number of its outstanding shares in order to
maintain a constant net asset value of $1.00 per share. The shareholders of each
Fund will be deemed, by their investment in such Fund, to have agreed to a
proportionate reduction of their shares.

As defined in the Investment Company Act and as used herein, the term
"majority" of the outstanding voting shares of each Fund means the vote of (a)
67% or more of the Fund's 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 (b) more than 50% of the Fund's outstanding voting shares, whichever
is less.

INVESTMENT OBJECTIVES AND POLICIES

The Money Fund, Tax-Free Fund and Government Fund each operates as a
separate fund with its own investment objectives and policies. The investment
objectives of the Money Fund are to seek high current income, preservation of
capital and maintenance of liquidity. The investment objectives of the Tax-Free
Fund are to seek high current income that is exempt from federal income taxes,
consistent with maintenance of liquidity and preservation of capital. The
investment objectives of the Government Fund are to seek high current income,
preservation of capital and maintenance of liquidity. For a further description
of the investment objectives and policies of each Fund, see "How the Funds
Invest" in the Prospectus.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. From time to time, in the
ordinary course of business, the Money Fund, Tax-Free Fund or Government Fund
may purchase securities on a when-issued or delayed delivery basis, I.E.,
delivery and payment can take place a month or more after the date of the
transaction. At the time a Fund makes the commitment to purchase securities on a
when-issued or delayed delivery basis, it will record the transaction and
thereafter reflect the value, each day, of such securities in determining its
net asset value. Each Fund will make commitments for such when-issued
transactions only with the intention of actually acquiring the securities and,
to facilitate such acquisitions, the custodian bank will maintain, in a separate
account of each Fund, cash, U.S. Government securities or other liquid
unencumbered assets, marked-to-market daily, having a value equal to or greater
than the Fund's purchase commitments. On the delivery dates for such
transactions, each Fund will meet its obligations from maturities or sales of
the securities held in the separate account and/or from then-available cash
flow. If a Fund chooses to dispose of the right to acquire a when-issued
security prior to its acquisition, it could, as with the disposition of any
other portfolio obligation, incur a gain or loss due to market fluctuation. No
when-issued commitments will be made if, as a result, more than 15% of a Fund's
net assets would be committed. There is a risk that the securities may not be
delivered and the Fund may incur a loss.

REPURCHASE AGREEMENTS. The Government Fund's and Money Fund's repurchase
agreements will be collateralized by U.S. Government obligations. Each Fund will
enter into repurchase transactions only with parties meeting creditworthiness
standards approved by the Fund's Trustees. Each Fund's investment adviser will
monitor the creditworthiness of

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such parties, under the general supervision of the Trustees. In the event of a
default or bankruptcy by a seller, realization of the collateral by the Fund may
be delayed or limited and the Fund would promptly seek to liquidate the
collateral. To the extent that the proceeds from any sale of such collateral
upon a default in the obligation to repurchase are less than the repurchase
price, the Fund will suffer a loss.

The Government Fund and Money Fund participate in a joint repurchase account
with other investment companies managed by Prudential Mutual Fund Management,
Inc. (PMF), pursuant to an order of the Securities and Exchange Commission
(SEC). On a daily basis, any uninvested cash balances of each Fund may be
aggregated with those of such investment companies and invested in one or more
repurchase agreements. Each Fund participates in the income earned or accrued in
the joint account based on the percentage of its investment.

The Government Fund and the Money Fund may invest in repurchase agreements,
without limit, consistent with applicable regulations.

LENDING OF PORTFOLIO SECURITIES. The Money Fund or Government Fund may each
lend its portfolio securities to broker-dealers, banks and other recognized
institutional borrowers of securities, provided that the borrower at all times
maintains cash or equivalent collateral or secures a letter of credit in favor
of the Fund equal in value to at least 100% of the market value of the
securities loaned. During the time portfolio securities are on loan, the
borrower pays the Money Fund or Government Fund an amount equivalent to any
interest paid on such securities, and the Money Fund or Government Fund may
invest the cash collateral and earn additional income, or the Fund may receive
an agreed-upon amount of interest income from the borrower who has delivered
equivalent collateral or secured a letter of credit. Loans are subject to
termination at the option of the Money Fund or Government Fund or the borrower,
respectively. The Money Fund or Government Fund may pay reasonable
administrative and custodial fees in connection with a loan and may pay a
negotiated portion of the interest earned on the cash or equivalent collateral
to the borrower or placing broker. The Money Fund or Government Fund will make
loans of portfolio securities only under the direction of the Fund's Trustees
and in accordance with guidelines established by the SEC, or otherwise in
accordance with any applicable rule or order of the SEC. As a matter of
fundamental policy, each of the Money Fund and the Government Fund will not lend
more than 10% of the value of its total assets.

ILLIQUID SECURITIES. The Funds may not hold more than 10% of their net
assets in illiquid securities, including securities that are illiquid by virtue
of the absence of a readily available market or legal or contractual
restrictions on resale and repurchase agreements which have a maturity of longer
than seven days, provided that the Tax-Free Fund may not invest in repurchase
agreements. 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 and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered

B-4
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security can be readily resold or on 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 of 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 new 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 and commercial paper and municipal lease obligations for which
there is a readily available market will not be deemed to be illiquid. The
investment adviser will monitor the liquidity of such restricted securities
subject to the supervision of the Trustees. In reaching liquidity decisions, the
investment adviser will consider, INTER ALIA, the following factors: (1) the
frequency of trades and quotes for the security; (2) the number of dealers
wishing to purchase or sell the security and the number of other potential
purchasers; (3) dealer undertakings to make a market in the security; and (4)
the nature of the security and the nature of the marketplace trades (E.G., the
time needed to dispose of the security, the method of soliciting offers and the
mechanics of the transfer). In addition, in order for commercial paper that is
issued in reliance on Section 4(2) of the Securities Act to be considered
liquid, (i) 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 (ii) it must not
be ``traded flat" (I.E., without accrued interest) or in default as to principal
or interest. With respect to municipal lease obligations, the investment adviser
also considers: (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. Repurchase agreements subject to demand
are deemed to have a maturity equal to the notice period.

PURCHASE OF MUNICIPAL BONDS AND NOTES. The Tax-Free Fund will invest in
Municipal Bonds and Notes with short-term maturities, as described in the
Prospectus under "How the Funds Invest--Tax-Free Fund--Investment Objectives and
Policies."

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 may also include private-activity
bonds issued by or on behalf of public authorities to obtain funds 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.
Such obligations are included within the term Municipal Bonds if the interest
paid thereon qualifies at the time of issuance, in the opinion of the issuer's
bond counsel, as exempt from federal income tax. Other

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types of industrial development bonds, the proceeds of which are used for the
construction, equipment, repair or improvement of privately operated industrial
or commercial facilities, may constitute Municipal Bonds, although the current
federal tax laws place substantial limitations on the size of such issues. These
bonds are typically 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. 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.

Each of the Funds may purchase floating rate and variable rate securities.
Investments in floating or variable rate securities normally provide that the
rate of interest is set as a specific percentage of a designated base rate, such
as rates on Treasury bonds or bills or the prime rate at a major commercial
bank, and that the purchaser can demand payment of the obligation at specified
intervals or after a specified notice period (in each case of less than one
year) at par plus accrued interest, which amount may be more or less than the
amount paid for them. Variable rate securities provide for a specified periodic
adjustment in the interest rate, while floating rate securities have an interest
rate which changes whenever there is a change in the designated base interest
rate. Usually such securities are secured by credit arrangements provided by
banks and insurance companies. The quality of the bank, insurance company or
other underlying credit of the issuer, as the case may be, must meet the
investment quality requirements described under "How the Funds Invest--Other
Investments and Policies Applicable to the Funds--Variable Rate and Floating
Rate Securities" in the Prospectus.

For purposes of diversification and concentration under the Investment
Company Act, the identification of the issuer of Municipal Bonds or Notes
depends on the terms and conditions of the obligation. If the assets and
revenues of an agency, authority, instrumentality or other political subdivision
are separate from those of the government creating the subdivision and the
obligation is backed only by the assets and revenues of the subdivision, such
subdivision would be regarded as the sole issuer. Similarly, in the case of an
industrial development 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.

The Tax-Free 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

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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 Tax-Free Fund will
not, however, invest more than 25% of its total assets in securities of
governmental units in any one state, territory or possession of the United
States other than in industrial development and pollution control obligations.
See "Investment Restrictions" below.

PUTS. The Tax-Free Fund may purchase Municipal Bonds or Notes together with
the right to resell the Bonds or Notes at an agreed-upon price or yield within a
specified period prior to the maturity date of the Bonds or Notes. Similarly,
the Government Fund and the Money Fund may purchase securities together with the
right to resell the securities at an agreed-upon price or yield within a
specified period prior to the maturity date of the security. Such a right to
resell is commonly known as a "put," and the aggregate price which the Tax-Free
Fund pays for Municipal Bonds or Notes with puts and which the Government Fund
and the Money Fund pay for securities with puts may be higher than the price
which otherwise would be paid for the Bonds or Notes or securities, as the case
may be. Consistent with the investment objectives of each Fund and subject to
the supervision of the Trustees, the purpose of this practice is to permit each
Fund to be fully invested while preserving the necessary liquidity to meet
unusually large redemptions and to purchase at a later date securities other
than those subject to the put. Puts 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 each Fund's 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 investment adviser revises its
evaluation of the creditworthiness of the issuer of the underlying security. In
determining whether to exercise puts prior to their expiration date and in
selecting which puts to exercise in such circumstances, the investment adviser
considers, among other things, the amount of cash available to each Fund, the
expiration dates of the available puts, 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 each Fund's portfolio.

Each Fund values instruments and Notes which are subject to puts at
amortized cost; no value is assigned to the put. The cost of the put is carried
as an unrealized loss from the time of purchase until it is exercised or
expires.

Since the value of the put is dependent on the ability of the put writer to
meet its obligation to repurchase, each Fund's policy is to enter into put
transactions only with such brokers, dealers or financial institutions which
present minimal credit risks. There is a credit risk associated with the
purchase of puts in that the broker, dealer or financial institution might
default on its obligation to repurchase an underlying security. In the event
such a default should occur, each Fund is unable to predict whether all or any
portion of any loss sustained could subsequently be recovered from the broker,
dealer or financial institution.

The Tax-Free Fund has received an exemptive order from the SEC which permits
the Fund to purchase puts from broker-dealers.

INVESTMENT RESTRICTIONS

Each of the Funds has adopted certain investment restrictions which cannot
be changed without the approval of the holders of a majority of the outstanding
voting securities of the Fund as defined in the Investment Company Act.

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MONEY FUND

The investment restrictions of the Money Fund provide that the Money Fund
may not:

1. Borrow money, except from banks for temporary or emergency purposes,
including the meeting of redemption requests, which might otherwise require the
untimely disposition of securities, and borrowing in the aggregate may not
exceed 20%, and borrowing for purposes other than meeting redemptions may not
exceed 5%, of the value of the Money Fund's total assets (including the amount
borrowed) less liabilities (not including the amount borrowed) at the time the
borrowing is made, except that these borrowing restrictions do not apply to
reverse repurchase agreements. The Money Fund will not purchase securities while
borrowings are outstanding;

2. Make loans to others, except through the purchase of debt obligations,
repurchase agreements and loans of portfolio securities limited to 10% of the
value of the Money Fund's total assets;

3. Purchase or sell real estate or real estate mortgage loans; however, the
Money Fund may purchase marketable securities issued by companies which invest
in real estate or interests therein;

4. Purchase securities on margin or sell short;

5. Pledge, hypothecate, mortgage or otherwise encumber its assets, except
in an amount up to 10% of the value of its net assets but only to secure
permitted borrowings of money;

6. Issue senior securities as defined in the Investment Company Act except
insofar as the Money Fund may be deemed to have issued a senior security by
reason of (a) entering into any repurchase agreement or reverse repurchase
agreement; (b) permitted borrowings of money; or (c) purchasing securities on a
when-issued or delayed delivery basis;

7. Purchase or sell commodities or commodity futures contracts, or oil,
gas, or mineral exploration or development programs;

8. Underwrite securities of other issuers;

9. Purchase warrants, or write, purchase or sell puts, calls, straddles,
spreads or combinations thereof, except that the Money Fund may purchase
instruments together with the right to resell such instruments;

10. Purchase the securities of any other investment company, except in
connection with a merger, consolidation, reorganization or acquisition of
assets;

11. Purchase securities of any issuer for the purpose of exercising control
or management;

12. Purchase securities, other than obligations of U.S. Government agencies
or instrumentalities, of any issuer having a record, together with predecessors,
of less than three years' continuous operation, if, immediately after such
purchase, more than 5% of the value of the Money Fund's total assets would be
invested in such securities;

13. Purchase any securities, other than obligations of the U.S. Government,
its agencies or instrumentalities, if, as a result, with respect to 75% of the
value of the Money Fund's total assets, more than 5% of the value of the Money
Fund's total assets would be invested in the securities of a single issuer;

14. Purchase any securities (other than obligations of the U.S. Government,
its agencies and instrumentalities) if as a result 25% or more of the value of
the Money 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, provided that there is no limitation
with respect to money market instruments of domestic banks. For purposes of this

B-8
<PAGE>
exception, domestic banks shall include all banks which are organized under the
laws of the United States or a state (as defined in the Investment Company Act),
U.S. branches of foreign banks that are subject to the same regulations as U.S.
banks and foreign branches of domestic banks (as permitted by SEC regulation);
and

15. Enter into reverse repurchase agreements if, as a result thereof, the
Money Fund's obligations with respect to reverse repurchase agreements would
exceed one-third of the Money Fund's net assets (defined to be total assets,
taken at market value, less liabilities other than reverse repurchase
agreements).

In order to comply with certain state ``blue sky" restrictions, the Money
Fund will not as a matter of operating policy, (i) purchase securities of any
issuer if, to the knowledge of the Money Fund, any officer or Trustee of the
Money Fund or any officer or director of the adviser owns more than 1/2 of 1% of
the outstanding securities of such issuer and such officers, Trustees and
directors who own more than 1/2 of 1% own in the aggregate more than 5% of the
outstanding securities of such issuer.

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 investment is made, 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 prompt action
to reduce its borrowings, as required by applicable law. Loans of portfolio
securities and reverse repurchase agreements will not cumulatively exceed
one-third of the Fund's net assets.

The Trustees of Money Fund have proposed that Investment Restriction numbers
9 and 12 be eliminated. The proposals will be submitted to Money Fund
shareholders of record as of August 9, 1996, at a special meeting to be held on
or about October 30, 1996. If the proposal to eliminate investment restriction
number 9 is approved, a change in the Fund's future use of options will not
require shareholder approval. If the proposal is approved, the Fund does not
presently intend to write puts or calls, such as those listed on national
securities exchanges or traded in the over-the-counter market, or engage in
trading strategies involving puts, calls, straddles, spreads or combinations,
which are in any event currently prohibited by Rule 2a-7. The Trustees have
determined that if the proposal to eliminate investment restriction number 12 is
approved, a non-fundamental policy (a policy that may be changed without
shareholder approval) will be adopted which will state that in order to comply
with certain "blue sky" restrictions, the Fund will not as a matter of operating
policy: Purchase any security if as a result the Fund would then have more than
5% of its total assets (determined at the time of the investment) invested in
securities of companies (including predecessors) having a record of less than
three years continuous operations, except that the Fund may invest in the
securities of any U.S. Government agency or instrumentality, and in any security
guaranteed by such an agency or instrumentality.

TAX-FREE FUND

The investment restrictions of the Tax-Free Fund provide that the Tax-Free
Fund may not:

1. With respect to 75% of its total assets, invest more than 5% of the
value of its total assets in the securities of a single issuer (other than
obligations of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities or secured by such obligations);

2. Concentrate more than 25% of its total assets in securities of
governmental units located in any one state, territory or possession of the
United States. The Tax-Free Fund may invest more than 25% of its total assets in
industrial development and pollution control obligations whether or not the
users of facilities financed by such obligations are in the same industry;

3. Make short sales of securities;

B-9
<PAGE>
4. Purchase securities on margin, except for such short-term credits as are
necessary for the clearance of transactions;

5. Issue senior securities, except by purchasing securities on a
when-issued or delayed delivery basis, or borrow money, except that the Tax-Free
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. The Tax-Free Fund would maintain, in a segregated account with
its custodian, liquid assets equal in value to the amount owed. The Tax-Free
Fund will not purchase securities while borrowings are outstanding;

6 .Pledge its assets or assign or otherwise encumber them in excess of 10%
of its net assets (taken at market or other fair value at the time of pledging)
and then only to secure permitted borrowings of money;

7. Engage in the underwriting of securities;

8. Purchase or sell real estate or real estate mortgage loans, although it
may purchase Municipal Bonds or Notes secured by interests in real estate;

9. Make loans of money or securities. The purchase of a portion of an issue
of publicly distributed debt securities is not considered the making of a loan;

10. Purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of assets;

11. Invest for the purpose of exercising control or management of another
company;

12. Write, purchase or sell puts, calls, or combinations thereof, except
that it may obtain rights to resell Municipal Bonds and Notes, as set forth
under "How the Funds Invest--Tax-Free Fund--Investment Objectives and Policies"
in the Prospectus and in this Statement of Additional Information;

13. Purchase industrial revenue bonds if, as a result of such purchase, more
than 5% of total Tax-Free 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; and

14. Purchase or sell commodities or commodity futures contracts, or oil,
gas, or mineral exploration or development programs.

The Tax-Free Fund has reserved freedom to invest more than 25% of its total
assets in industrial development and pollution control obligations whether or
not the users of facilities financed by such obligations are in the same
industry. See Investment Restriction No. 2. The Tax-Free Fund, however, will not
invest more than 25% of the value of its assets in obligations of private (I.E.,
non-governmental) issuers in the same industry.

In order to comply with certain state "blue sky" restrictions, the Tax-Free
Fund will not as a matter of operating policy, (i) purchase or retain the
securities of any issuer if, to the knowledge of the Tax-Free Fund, officers or
Trustees of the Tax-Free Fund or officers or directors of the investment adviser
responsible for investment decisions concerning the Tax-Free Fund beneficially
owning individually more than 1/2 of 1% of the securities of such issuer
together beneficially own more than 5% of the securities of such issuer and (ii)
invest more than 5% of its total assets in securities of unseasoned issuers,
including their predecessors, which have been in operation for less than three
years.

B-10
<PAGE>
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 prompt action to reduce its
borrowings, as required by applicable law.

The Trustees of the Tax-Free Fund have proposed that Investment Restriction
number 10 be modified. The proposal will be submitted to Tax-Free shareholders
of record as of August 9, 1996, at a special meeting to be held on or about
October 30, 1996. If the proposal is approved, investment restriction number 10
will read as follows: Invest in securities of other investment companies, except
by purchases 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 as part
of a merger, consolidation, or other acquisition.

GOVERNMENT FUND

The investment restrictions of the Government Fund provide that the
Government Fund may not:

1. Borrow money, except from banks for temporary or emergency purposes,
including the meeting of redemption requests which might otherwise require the
untimely disposition of securities; borrowing in the aggregate may not exceed
20%, and borrowing for purposes other than meeting redemptions may not exceed
5%, of the value of the Government Fund's total assets (including the amount
borrowed), less liabilities (not including the amount borrowed) at the time the
borrowing is made; the Government Fund will not purchase securities while
borrowings are outstanding;

2. Pledge, hypothecate, mortgage or otherwise encumber its assets, except
in an amount up to 10% of the value of its net assets but only to secure
permitted borrowings of money;

3. Make loans to others, except through the purchase of the debt
obligations and repurchase agreements and loans of portfolio securities referred
to under "How the Funds Invest--Other Investments and Policies Applicable to the
Funds--Securities Lending." Loans of portfolio securities will be limited to 10%
of the value of the Government Fund's total assets and will be made according to
guidelines established by the Trustees, including maintenance of collateral of
the borrower equal at all times to the current market value of the securities
loaned;

4. Purchase or sell real estate or real estate mortgage loans;

5. Purchase securities on margin or sell short;

6. Purchase or sell commodities or commodity futures contracts, or oil,
gas, or mineral exploration or development programs;

7. Underwrite securities of other issuers;

8. Purchase warrants, or write, purchase or sell puts, calls, straddles,
spreads or combinations thereof, except that the Government Fund may purchase
instruments together with the right to resell such instruments;

9. Purchase the securities of any other investment company, except in
connection with a merger, consolidation, reorganization or acquisition of
assets; and

10. Issue senior securities as defined in the Investment Company Act except
insofar as the Government Fund may be deemed to have issued a senior security by
reason of: (a) entering into any repurchase agreement; (b) permitted borrowings
of money; or (c) purchasing securities on a when-issued or delayed delivery
basis.

In order to comply with certain state ``blue sky" restrictions, the Fund
will not as a matter of policy invest more than 5% of its total assets in
securities of unseasoned issuers, including their predecessors, which have been
in operation for less than three years.

B-11
<PAGE>
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 investment is made, 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 prompt action to reduce its
borrowings, as required by applicable law. Loans of portfolio securities and
reverse repurchase agreements will not cumulatively exceed one-third of the
Fund's net assets.

The Trustees of Government Fund have proposed that Investment Restriction
number 8 be eliminated. The proposal will be submitted to Government Fund
shareholders of record as of August 9, 1996, at a special meeting to be held on
or about October 30, 1996. If the proposal is approved, a change in the Fund's
future use of options will not require shareholder approval. If the proposal is
approved, the Fund does not presently intend to write puts or calls, such as
those listed on national securities exchanges or traded in the over-the-counter
market, or engage in trading strategies involving puts, calls, straddles,
spreads or combinations, which are in any event currently prohibited by Rule
2a-7.

TRUSTEES AND OFFICERS

<TABLE>
<CAPTION>
POSITION PRINCIPAL OCCUPATIONS
NAME, ADDRESS AND AGE WITH FUNDS DURING PAST FIVE YEARS
- ------------------------------ ------------- --------------------------------------------------
<S> <C> <C>
Edward D. Beach (71) Trustee President and Director of BMC Fund, Inc., a
c/o Prudential Mutual closed-end investment company; prior thereto Vice
Fund Management, Inc. Chairman of Broyhill Furniture Industries, Inc.;
One Seaport Plaza Certified Public Accountant; Secretary and
New York, NY Treasurer of Broyhill Family Foundation, Inc.;
Member of the Board of Trustees of Mars Hill
College; President, Treasurer and Director of
First Financial Fund, Inc. and The High Yield Plus
Fund, Inc.

Delayne D. Gold (58) Trustee Marketing and Management Consultant.
c/o Prudential Mutual
Fund Management, Inc.
One Seaport Plaza
New York, NY

*Harry A. Jacobs, Jr. (73) Trustee Senior Director (since January 1986) of Prudential
One Seaport Plaza Securities; formerly Interim Chairman and Chief
New York, NY Executive Officer (June- September 1993) of PMF;
Chairman of the Board of Prudential Securities
(1982-1985) and Chairman of the Board and Chief
Executive Officer of Bache Group Inc. (1977-1982);
Director of The First Australia Fund, Inc., The
First Australia Prime Income Fund, Inc. and
Trustee of The Trudeau Institute.

*Richard A. Redeker (53) President and President, Chief Executive Officer and Director
One Seaport Plaza Trustee (since October 1993) of PMF; Executive Vice
New York, NY President, Director and Member of the Operating
Committee (since October 1993) of Prudential
Securities; Director (since October 1993) of
Prudential Securities Group, Inc. (PSG); Executive
Vice President, The Prudential Investment
Corporation (since July 1994); Director
</TABLE>

- ------------
* "Interested" Trustee, as defined in the Investment Company Act.

B-12
<PAGE>
<TABLE>
<CAPTION>
POSITION PRINCIPAL OCCUPATIONS
NAME, ADDRESS AND AGE WITH FUNDS DURING PAST FIVE YEARS
- ------------------------------ ------------- --------------------------------------------------
<S> <C> <C>
(since January 1994) of Prudential Mutual Fund
Distributors, Inc. (PMFD) and Prudential Mutual
Fund Services, Inc. (PMFS); formerly Senior
Executive Vice President and Director of Kemper
Financial Services, Inc. (September 1978-September
1993); Director and President of The High Yield
Plus Fund, Inc.
Stanley E. Shirk (80) Trustee Certified Public Accountant and a former Senior
c/o Prudential Mutual Fund Partner of the accounting firm of KPMG Peat
Management, Inc. Marwick; former Management and Accounting
One Seaport Plaza Consultant for the Association of Bank Holding
New York, NY Companies, Washington, D.C. and the Bank
Administration Institute, Chicago, IL; Director of
The High Yield Plus Fund, Inc.
Langdon R. Stevenson (61) Trustee Treasurer and Development Director of American
c/o Prudential Mutual Fund Birding Association Inc.; faculty member
Management, Inc. (economics and history) Hackley School, Tarrytown,
One Seaport Plaza New York; formerly Senior Vice President
New York, NY (1985-1989) and Director (1978-1986) of Prudential
Securities; President of P-B Trade Finance Ltd.
(1985-1987).
Stephen Stoneburn (53) Trustee President and Chief Executive Officer of Quadrant
c/o Prudential Mutual Fund Media Corp. (a publishing company)(since June
Management, Inc. 1996; formerly President, Argus Integrated Media,
One Seaport Plaza Inc. (June 1995-June 1996); formerly Senior Vice
New York, NY President and Managing Director, Cowles Business
Media (January 1993-1995); prior thereto Senior
Vice President (January 1991-December 1992) and
Publishing Vice President (May 1989-December 1990)
of Gralla Publications, a division of United
Newspapers, U.K.; formerly Senior Vice President
of Fairchild Publications, Inc.
Nancy H. Teeters (66) Trustee Economist; formerly, Vice President and Chief
c/o Prudential Mutual Fund Economist (March 1986-June 1990) of International
Management, Inc. Business Machines Corporation; former Member of
One Seaport Plaza the Board of Governors of the Horace H. Rackham
New York, NY School of Graduate Studies of the University of
Michigan; Director, Inland Steel Corporation
(since July 1991) and First Financial Fund, Inc.
David S. Towner (63) Trustee Consultant
c/o Prudential Mutual Fund
Management, Inc.
One Seaport Plaza
New York, NY
Robert F. Gunia (49) Vice Director (since January 1989), Chief
c/o Prudential Mutual Fund President Administrative Officer (since July 1990) and
Management, Inc. Executive Vice President, Treasurer and Chief
One Seaport Plaza Financial Officer (since June 1987) of PMF;
New York, NY Comptroller of the Money Management Group of The
Prudential Insurance Company of America
(Prudential)(since 1996); Senior Vice President
(since March 1987) of Prudential Securities;
Executive Vice President,
</TABLE>

B-13
<PAGE>
<TABLE>
<CAPTION>
POSITION PRINCIPAL OCCUPATIONS
NAME, ADDRESS AND AGE WITH FUNDS DURING PAST FIVE YEARS
- ------------------------------ ------------- --------------------------------------------------
<S> <C> <C>
Treasurer and Comptroller (since March 1991) of
PMFD; Director (since June 1987) of PMFS; Vice
President and Director of The Asia Pacific Fund,
Inc. (since May 1989).
Grace C.Torres (37) Treasurer and First Vice President (since March 1994) of PMF;
One Seaport Plaza Principal First Vice President (since March 1994) of
New York, NY Financial and Prudential Securities; Vice President of Bankers
Accounting Trust (July 1989-March 1994).
Officer
Stephen M. Ungerman (43) Assistant First Vice President (since February 1993) of PMF;
One Seaport Plaza Treasurer Tax Director of the Money Management Group and the
New York, NY Private Asset Group of The Prudential Insurance
Company of America (since March 1996); prior
thereto, Senior Tax Manager at Price Waterhouse
LLP.
S. Jane Rose (50) Secretary Senior Vice President (since January 1991) and
One Seaport Plaza Senior Counsel (since June 1987) of PMF; Senior
New York, NY Vice President and Senior Counsel of Prudential
Securities (since July 1992); formerly Vice
President and Associate General Counsel of
Prudential Securities.
Ellyn C. Vogin (35) Assistant Vice President and Associate General Counsel of
One Seaport Plaza Secretary Prudential Securities and PMF (since March 1995);
New York, NY prior thereto, associated with the law firm of
Fulbright & Jaworski L.L.P.
</TABLE>

Trustees and officers of each 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 each
Fund, while the Trustees, in addition to their functions set forth under
"Manager" and "Distributor," review such actions and decide on general policy.

The Trustees have nominated a new slate of Trustees for each Fund which will
be submitted to shareholders of record as of August 9, 1996 at a special meeting
to be held in or about October 1996.

Each Fund pays each Trustee who is not an affiliated person of the Manager
annual compensation as follows: COMMAND Government Fund, $7,000, COMMAND Money
Fund, $9,000 and COMMAND Tax-Free Fund, $8,000, in addition to certain
out-of-pocket expenses.

The Trustees have adopted a retirement policy which calls for the retirement
of Trustees on December 31 of the year in which they reach the age of 72, except
that retirement is being phased in for Trustees who were age 68 or older as of
December 31, 1993. Under this phase-in provision, Messrs. Beach, Jacobs and
Shirk are scheduled to retire on December 31, 1999, 1998 and 1997, respectively.

Trustees may receive their Trustees' fees pursuant to a deferred fee
agreement with the Fund. Under the terms of each agreement, each Fund accrues
daily the amount of each Trustees' fee 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 at the daily rate of each Fund.
Payment of the interest so accrued is also deferred and accruals become payable
at the option of each Trustee. Each Fund's obligation to make payments of
deferred Trustees' fees, together with interest thereon, is a general obligation
of each Fund.

B-14
<PAGE>
The following table sets forth the aggregate compensation paid by the Funds
for the fiscal year ended June 30, 1996 to the Trustees who are not affiliated
with the Manager and the aggregate compensation paid to such Trustees for
service on the Funds' Boards and the Board of any other investment companies
managed by Prudential Mutual Fund Management, Inc. (Fund Complex) for the
calendar year ended December 31, 1995.

<TABLE>
<CAPTION>
COMPENSATION TABLE
- ------------------------------------------------------------------------------------------------------------------------
PENSION OR
RETIREMENT TOTAL COMPENSATION
AGGREGATE BENEFITS ACCRUED ESTIMATED ANNUAL FROM FUNDS AND FUND
COMPENSATION AS PART OF FUND AND FUND BENEFITS COMPLEX PAID TO
NAME AND POSITION FROM FUNDS EXPENSES UPON RETIREMENT TRUSTEES
- ------------------------------------------ ------------ ----------------- ------------------- ----------------------
<S> <C> <C> <C> <C>
Edward D. Beach, Trustee.................. $ 24,000 None N/A $ 183,500(22)*(43)**
Delayne Dedrick Gold, Trustee............. $ 24,000 None N/A $ 183,250(24)*(45)**
Stanley E. Shirk, Trustee................. $ 24,000 None N/A $ 79,000(10)*(19)**
Langdon R. Stevenson, Trustee............. $ 24,000 None N/A $ 24,000(3)*(3)**
Stephen Stoneburn, Trustee................ $ 24,000 None N/A $ 44,875(7)*(7)**
Nancy H. Teeters, Trustee................. $ 24,000 None N/A $ 107,500(13)*(31)**
David S. Towner, Trustee(1)............... $ 24,000 None N/A $ 24,000(3)*(3)**
</TABLE>

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

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

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

(1) All compensation from the Fund for the fiscal year ended June 30, 1996
represents deferred compensation. Aggregate compensation from the Funds for
the fiscal year ended June 30, 1996, including accrued interest, amounted to
approximately $28,159. Aggregate compensation from the Fund Complex for the
calendar year ended December 31, 1995, including accrued interest, amounted
to $28,701.

As of August 9, 1996, the Trustees and officers of each Fund, as a group,
owned less than 1% of the outstanding shares of each Fund and there were no
beneficial owners of greater than 5% of the outstanding shares of any Fund.

As of August 9, 1996, Prudential Securities was record holder of 517,925,703
shares (or 100%), 5,612,690,994 shares (or 100%) and 1,198,131,106 shares (or
100%) of the outstanding shares of the COMMAND Government Fund, COMMAND Money
Fund and COMMAND Tax-Free Fund, respectively. 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.

MANAGER

The manager of each of the Funds is Prudential Mutual Fund Management, Inc.
(PMF or the Manager), One Seaport Plaza, New York, New York 10292. PMF serves as
manager of all of the other investment companies that, together with the Funds,
comprise the Prudential Mutual Funds. See "How the Funds Are Managed--Manager"
in the Prospectus. As of July 31, 1996, PMF managed and/or administered open-end
and closed-end management investment companies with assets of approximately $52
billion. According to the Investment Company Institute, as of December 31, 1995,
the Prudential Mutual Funds were the 13th largest family of mutual funds in the
United States.

PMF is a subsidiary of Prudential Securities Incorporated and The Prudential
Insurance Company of America (Prudential). PMF has three wholly-owned
subsidiaries: Prudential Mutual Fund Distributors, Inc., Prudential Mutual Fund

B-15
<PAGE>
Services, Inc. (PMFS or the Transfer Agent) and Prudential Mutual Fund
Investment Management, Inc. PMFS serves as the transfer agent for the Prudential
Mutual Funds and, in addition, provides customer service, record keeping and
management and administration services to qualified plans.

Pursuant to a management agreement with each Fund, PMF, subject to the
supervision of the Trustees and in conformity with each Fund's stated policies,
is responsible for managing the investment operations of the Funds and the
composition of the Funds' portfolios, including the purchase, retention and
disposition of securities. PMF is obligated to keep certain books and records in
connection therewith. PMF also administers the Funds' business affairs and, in
connection therewith, furnishes the Funds with office facilities, together with
those ordinary clerical and bookkeeping services which are not being furnished
by State Street Bank and Trust Company, the Funds' custodian, and Prudential
Mutual Fund Services, Inc. (PMFS or the Transfer Agent), the Funds' transfer and
dividend disbursing agent. The management services of PMF to the Funds are not
exclusive under the terms of the Management Agreements and PMF is free to, and
does, render management services to others.

The Funds pay PMF for the services performed and the facilities furnished by
PMF fees computed daily and payable monthly as follows: Money Fund pays fees at
an annual rate of .50 of 1% of average daily net assets up to and including $500
million, .425 of 1% of the next $500 million and .375 of 1% of the next $500
million; and .35 of 1% of the Fund's average daily net assets in excess of $1.5
billion. The Government Fund pays a fee at an annual rate of .40 of 1% of the
Fund's average daily net assets up to and including $1 billion and .375 of 1% of
the Fund's average daily net assets in excess of $1 billion. The Tax-Free Fund
pays a fee at an annual rate of .50 of 1% of the Fund's average daily net assets
up to $500 million, .425 of 1% of the Fund's average daily net assets of the
next $500 million and .375 of 1% of the Fund's average daily net assets in
excess of $1 billion. In the event the expenses of the Funds (including the fees
of the Manager but excluding interest, taxes, brokerage commissions,
distribution fees, litigation and indemnification expenses and other
extraordinary expenses) for any fiscal year exceed the lowest applicable annual
expense limitation established and enforced pursuant to the statutes or
regulations of any jurisdictions in which shares of the Funds are then qualified
for offer and sale, the Manager will reduce its fee by the amount of such
excess, or, if such reduction exceeds the compensation payable to the Manager,
the Manager will pay to the Fund the amount of such reduction which exceeds the
amount of such compensation. Any such reductions or payments will be made
monthly and are subject to readjustment during the year. Currently, the most
restrictive of such annual limitations is believed to be 2 1/2% of each Fund's
average daily net assets up to $30 million, 2% of the next $70 million and
1 1/2% of such assets in excess of $100 million.

In connection with the services it renders, PMF bears the following
expenses:

(a) the salaries and expenses of all personnel of the Funds and the Manager,
except the fees and expenses of Trustees who are not affiliated persons of the
Manager or the Funds' investment adviser;

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

(c) the costs and expenses payable to The Prudential Investment Corporation
(PIC) pursuant to each Subadvisory Agreement.

Under the terms of the Management Agreements, each Fund is responsible for
the payment of the following expenses, including (a) the fee payable to the
Manager, (b) the fees and expenses of Trustees who are not affiliated with PMF
or PIC, (c) the fees and certain expenses of each 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
each Fund and of pricing each Fund's shares, (d) the fees and expenses of the
Fund's legal counsel and independent accountants, (e) brokerage commissions 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

B-16
<PAGE>
trade association of which the Fund is a member, (h) the cost of share
certificates representing shares of the Fund, (i) the cost of fidelity,
directors and officers and errors and omissions insurance, (j) the fees and
expenses involved in registering and maintaining registration of the Fund and of
its shares with the SEC, registering the Fund and qualifying its shares under
state securities laws, including the preparation and printing of the Fund's
registration statements and prospectuses for such purposes, (k) allocable
communications expenses with respect to investor services and all expenses of
shareholders' and Trustees' meetings and of preparing, printing and mailing
reports 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 fees.

The Management Agreements provide that PMF will not be liable to the Funds
for any error of judgment by the Manager or for any loss sustained by the Funds
except in the case of a breach of fiduciary duty with respect to the receipt of
compensation for services (in which case any award of damages will be limited as
provided in the Investment Company Act) or of wilful misfeasance, bad faith,
gross negligence or reckless disregard of duty on the part of the Manager. Each
Management Agreement also provides that it will terminate automatically if
assigned and that it may be terminated without penalty by either party upon no
more than 60, nor less than 30, days' written notice. The Management Agreements
will continue in effect from year to year so long as such continuance is
specifically approved at least annually in conformity with the Investment
Company Act. The Management Agreements were last approved by the Trustees,
including all of the Trustees who are not interested persons as defined in the
Investment Company Act, on April 10, 1996 and by a majority of the outstanding
shares of the Government Fund and Tax-Free Fund on August 18, 1988 and by a
majority of the outstanding shares of the Money Fund on October 18, 1988.

For the fiscal years ended June 30, 1996, 1995, and 1994, the Money Fund
paid PMF management fees of $18,388,779, $12,002,993 and $10,245,686,
respectively. For the fiscal years ended June 30, 1996, 1995, and 1994, the
Tax-Free Fund paid PMF management fees of $5,128,465, $4,314,275, and
$4,235,795, respectively. For the fiscal years ended June 30, 1996, 1995, and
1994, the Government Fund paid PMF management fees of $1,908,673, $1,401,832 and
$1,504,635, respectively.

For each of the Funds, PMF has entered into a separate subadvisory agreement
with The Prudential Investment Corporation (PIC), a wholly-owned subsidiary of
Prudential (the Subadvisory Agreement). Under each Subadvisory Agreement, PIC
has agreed to furnish investment advisory services in connection with the
management of each of the Funds. In connection therewith, PIC is obligated to
keep certain books and records for each of the Funds. PMF continues to have
responsibility for all investment advisory services pursuant to the Management
Agreements and supervises PIC's performance of those services. PIC is reimbursed
by PMF for the reasonable costs and expenses incurred by PIC in furnishing those
services. Investment advisory services are provided to each Fund by a unit of
the subadviser, known as Prudential Mutual Fund Investment Management.

The Subadvisory Agreements were last approved by the Trustees, including a
majority of the Trustees who are not interested persons as defined in the
Investment Company Act, on April 10, 1996; the shareholders of the Government
Fund and Tax-Free Fund approved their respective Subadvisory Agreements on
August 18, 1988 and the shareholders of the Money Fund approved their
Subadvisory Agreement on October 18, 1988.

Each Subadvisory Agreement provides that it will terminate in the event of
its assignment or upon the termination of the respective Management Agreement.
Each Subadvisory Agreement may be terminated by the Fund, PMF or PIC upon not
less than 30 days' or more than 60 days' written notice. Each 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 at least annually in accordance with the requirements of the Investment
Company Act.

B-17
<PAGE>
DISTRIBUTOR

On April 10, 1996, the Trustees of each of the Funds approved the
continuance of a Distribution and Service Plan on behalf of each Fund as well as
a Distribution Agreement for each Fund with Prudential Securities Incorporated
(Prudential Securities or PSI), One Seaport Plaza, New York, New York 10292.
Prudential Securities is an indirect wholly-owned subsidiary of Prudential. The
services it provides to each of the Funds are described in the Prospectus. See
``How the Funds Are Managed--Distributor." Prior to January 2, 1996, Prudential
Mutual Fund Distributors, Inc. (PMFD), One Seaport Plaza, New York, New York
10292, acted as distributor of the shares of each of the Funds.

PLANS OF DISTRIBUTION

Pursuant to Rule 12b-1, a Distribution and Service Plan for each of the
Funds (collectively, the Plans) was last approved by the vote of a majority of
the Trustees, including a majority of the Trustees who are not interested
persons of each Fund and who have no direct or indirect financial interest in
the operation of the Plans or in any agreements related to the Plans (the Rule
12b-1 Trustees) at a meeting called for the purpose of voting on such Plans, on
April 10, 1996. Under each Fund's Distribution and Service Plan and Distribution
Agreement with Prudential Securities, each Fund pays Prudential Securities, as
distributor, a distribution fee of up to 0.125% of the average daily net assets
of each Fund, computed daily and payable monthly, to reimburse Prudential
Securities for distribution expenses.

For the fiscal year ended June 30, 1996, Prudential Securities and PMFD
incurred distribution expenses in the aggregate of $6,120,993 for the Money
Fund, $596,460 for the Government Fund and $1,417,822 for the Tax-Free Fund, all
of which was recovered through the distribution fees paid by the Funds to PMFD.
It is estimated that of the distribution fees received by Prudential Securities
and PMFD for each Fund for the fiscal year ended June 30, 1996, commission
credits to Prudential Securities branch offices for payments of commissions to
account executives amounted to approximately 80% ($4,504,000) for the Money
Fund; 80% ($440,000) for the Government Fund; and 80% ($1,041,000) for the
Tax-Free Fund; and overhead and other branch office distribution-related
expenses amounted to approximately 20% ($1,126,000) for the Money Fund;
approximately 20% ($109,000) for the Government Fund; and approximately 20%
($260,000) for the Tax-Free Fund.

The term "overhead and other branch office distribution-related expenses"
represents (a) the expenses of operating Prudential Securities branch offices in
connection with the sale of the Fund's 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 the Fund's shares and (d) other incidental
expenses relating to branch promotion of the Fund's sales.

Pursuant to the Plans, the Trustees are provided at least quarterly with
written reports of the amounts expended under the Plans and the purposes for
which such expenditures were made. The Trustees review such reports on a
quarterly basis.

The Plans provide that they will continue in effect from year to year,
provided each such continuance is approved annually by a vote of the Trustees of
each of the Funds in the manner described above. The Plans may not be amended to
increase materially the amount to be spent for the services described therein
without approval of the shareholders of the respective Funds, and all material
amendments of the Plans must also be approved by the Trustees in the manner
described above. The Plans may be terminated at any time, without payment of any
penalty, by vote of a majority of the Rule 12b-1 Trustees, or by a vote of a
majority of the outstanding voting securities of the Funds (as defined in the
Investment Company Act) on not more than 30 days' written notice to any other
party to the Plans. The Plans will automatically terminate in the event of an
assignment (as defined in the Investment Company Act). So long as the Plans are
in effect, the selection and nomination of Trustees who are not interested
persons of the Funds shall be committed to the discretion of the Trustees who
are not interested persons. The Trustees have determined that, in their
judgment, there

B-18
<PAGE>
is a reasonable likelihood that the Plans will benefit the Funds and their
shareholders. In the Trustees' quarterly review of the Plans, they consider the
continued appropriateness of such Plans and the level of compensation provided
therein. Each Distribution Agreement provides that it will terminate
automatically if assigned and that it may be terminated without penalty by
either party upon no more than 60 days', nor less than 30 days', written notice.

In the respective Distribution Agreements, the Funds have agreed to
indemnify Prudential Securities to the extent permitted by applicable law
against certain liabilities under the Securities Act. On November 3, 1995, the
Trustees approved the transfer of the Distribution Agreement for shares of each
of the Funds with PMFD to Prudential Securities.

On October 21, 1993, PSI entered into an omnibus settlement with the SEC,
state securities regulators in 51 jurisdictions and the NASD to resolve
allegations that PSI sold interests in more than 700 limited partnerships (and a
limited number of other types of securities) from January 1, 1980 through
December 31, 1990, in violation of securities laws to persons for whom such
securities were not suitable in light of the individuals' financial condition or
investment objectives. It was also alleged that the safety, potential returns
and liquidity of the investments had been misrepresented. The limited
partnerships principally involved real estate, oil and gas producing properties
and aircraft leasing ventures. The SEC Order (i) included findings that PSI's
conduct violated the federal securities laws and that an order issued by the SEC
in 1986 requiring PSI to adopt, implement and maintain certain supervisory
procedures had not been complied with; (ii) directed PSI to cease and desist
from violating the federal securities laws and imposed a $10 million civil
penalty; and (iii) required PSI to adopt certain remedial measures including the
establishment of a Compliance Committee of its Board of Directors. Pursuant to
the terms of the SEC settlement, PSI established a settlement fund in the amount
of $330,000,000 and procedures, overseen by a court approved Claims
Administrator, to resolve legitimate claims for compensatory damages by
purchasers of the partnership interests. PSI has agreed to provide additional
funds, if necessary, for that purpose. PSI's settlement with the state
securities regulators included an agreement to pay a penalty of $500,000 per
jurisdiction. PSI consented to a censure and to the payment of a $5,000,000 fine
in settling the NASD action. In settling the above referenced matters, PSI
neither admitted nor denied the allegations asserted against it.

On January 18, 1994, PSI agreed to the entry of a Final Consent Order and a
Parallel Consent Order by the Texas Securities Commissioner. The firm also
entered into a related agreement with the Texas Securities Commissioner. The
allegations were that the firm had engaged in improper sales practices and other
improper conduct resulting in pecuniary losses and other harm to investors
residing in Texas with respect to purchases and sales of limited partnership
interests during the period of January 1, 1980 through December 31, 1990.
Without admitting or denying the allegations, PSI consented to a reprimand,
agreed to cease and desist from future violations, and to provide voluntary
donations to the State of Texas in the aggregate amount of $1,500,000. The firm
agreed to suspend the creation of new customer accounts, the general
solicitation of new accounts, and the offer for sale of securities in or from
PSI's North Dallas office to new customers during a period of twenty consecutive
business days, and agreed that its other Texas offices would be subject to the
same restrictions for a period of five consecutive business days. PSI also
agreed to institute training programs for its securities salesmen in Texas.

On October 27, 1994, Prudential Securities Group, Inc. (PSG) and PSI entered
into agreements with the United States Attorney deferring prosecution (provided
PSI complies with the terms of the agreement for three years) for any alleged
criminal activity related to the sale of certain limited partnership programs
from 1983 to 1990. In connection with these agreements, PSI agreed to add the
sum of $330,000,000 to the fund established by the SEC and executed a
stipulation providing for a reversion of such funds to the United States Postal
Inspection Service. PSI further agreed to obtain a mutually acceptable outside
director to sit on the Board of Directors of PSG and the Compliance Committee of
PSI. The new director also serves as an independent ``ombudsman" whom PSI
employees can call anonymously with complaints about ethics and compliance.
Prudential Securities shall report any allegations or instances of criminal
conduct and

B-19
<PAGE>
material improprieties to the new director. The new director submits compliance
reports which identify all such allegations or instances of criminal conduct and
material improprieties every three months and will continue to do so for a
three-year period.

CALCULATION OF YIELD

Each Fund will prepare a current quotation of yield from time to time. 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 share but excluding any capital
changes. Yield for the Funds will vary based on a number of factors including
changes in market conditions, the level of interest rates and the level of Fund
income and expenses. Each Fund may also 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 Tax-Free 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 taxable securities. The Fund's 7-day tax equivalent
yield as of June 30, 1996 was 5.71%.

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/Donoghue's Money
Fund Report, The Bank Rate Monitor, other industry publications, business
periodicals and market indices.

Each Fund's yield fluctuates, and an annualized yield quotation is not a
representation by a Fund as to what an investment in the Fund will actually
yield for any given period.

PORTFOLIO TRANSACTIONS

The Manager is responsible for decisions to buy and sell securities for the
Funds and for arranging the execution of portfolio transactions. For purposes of
this section, the term "Manager" includes the "Subadviser." The Manager
purchases portfolio securities for each Fund from dealers, underwriters and
issuers. Any sales of portfolio securities made prior to maturity are made to
dealers and issuers. The Funds do not normally incur any brokerage commission
expense on such transactions. The instruments purchased by the Funds 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. Securities purchased in underwritten offerings
include a fixed amount of compensation to the underwriter, generally referred to
as the underwriter's concession or discount. When securities are purchased or
sold directly from or to an issuer, no commissions or discounts are paid. The
Funds will not deal with Prudential Securities in any transaction in which
Prudential Securities acts as principal. There were no brokerage commissions
paid by the Funds during the fiscal years ended June 30, 1996, 1995 and 1994.

The policy of the Funds regarding purchases and sales of securities for
their respective portfolios is that primary consideration will be given to
obtaining the most favorable price and efficient execution of transactions. This
means that the Manager will seek to execute each transaction at a price and
commission, if any, which provide the most favorable

B-20
<PAGE>
total cost or proceeds reasonably attainable under the circumstances. While the
Manager generally seeks reasonably competitive spreads or commissions, the Funds
will not necessarily be paying the lowest spread or commission available. Within
the framework of the policy of obtaining best price and execution, the Manager
may consider research and investment services provided by brokers or dealers who
effect or are parties to portfolio transactions of the Funds, 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 Funds 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
larger than the Funds, and the services furnished by such brokers may be used by
the Manager in providing investment management for the Funds. 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 Funds do not reduce
the fees they pay to the Manager by any amount that may be attributable to the
value of such services.

TAXES, DIVIDENDS AND DISTRIBUTIONS

Each Fund has elected to qualify and intends to remain qualified as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended (the Code).

Qualification as a regulated investment company under the Code requires,
among other things, that a Fund (a) derive at least 90% of its annual gross
income (without offset for losses from the sale or other disposition of
securities or foreign currencies) from interest, payments with respect to
securities loans, dividends and gains from the sale or other disposition of
securities of foreign currencies and certain financial futures, options and
forward contracts; (b) derive less than 30% of its gross income from gains from
the sale or other disposition of securities or options thereon held for less
than three months; and (c) diversify its holdings so that, at the end of each
quarter of the taxable year, (i) at least 50% of the value of the Fund's assets
is represented by cash, U.S. Government securities 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 securities).

The Internal Revenue Code imposes a 4% nondeductible excise tax to the
extent the Funds do not meet certain minimum distribution requirements by the
end of each calendar year. The Funds intend 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.

CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT AND
INDEPENDENT ACCOUNTANTS

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

B-21
<PAGE>
Prudential Mutual Fund Services, Inc. (PMFS), Raritan Plaza One, Edison, New
Jersey 08837, serves as Transfer and Dividend Disbursing Agent and in those
capacities maintains certain books and records for each Fund. PMFS is a wholly-
owned subsidiary of PMF. PMFS provides customary transfer agency services to
each 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. For these
services, PMFS receives an annual fee per shareholder account, a new account
set-up fee for each manually established account and a monthly inactive zero
balance account fee per shareholder account. PMFS is also reimbursed for its
out-of-pocket expenses, including but not limited to postage, stationery,
printing, allocable communications expenses, and other costs. For the fiscal
year ended June 30, 1996, fees of approximately $1,700,000, $80,000 and $190,000
were incurred by COMMAND Money Fund, COMMAND Government Fund and COMMAND
Tax-Free Fund, respectively, for such services.

Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York,
serves as each of the Fund's independent accountants, and in that capacity
audits each Fund's annual financial statements.

REPORTS TO SHAREHOLDERS

The fiscal year of each Fund ends on June 30. Each Fund will send to its
shareholders, at least semi-annually, reports showing the Fund's portfolio and
other information. An annual report, containing financial statements audited by
independent accountants, will be sent to shareholders each year.

SHAREHOLDER INVESTMENT ACCOUNT

TAX-DEFERRED RETIREMENT ACCOUNTS

INDIVIDUAL RETIREMENT ACCOUNTS. An individual retirement account (IRA)
permits the deferral of federal income tax on income earned in the account until
the earnings are withdrawn. The following chart represents a comparison of the
earnings in a personal savings account with those in an IRA, assuming a $2,000
annual contribution, an 8% rate of return and a 39.6% federal income tax bracket
and shows how much more retirement income can accumulate within an IRA as
opposed to a taxable individual savings account.

TAX-DEFERRED COMPOUNDING1

<TABLE>
<CAPTION>
CONTRIBUTIONS PERSONAL
MADE OVER: SAVINGS IRA
- ----------- ----------------------- ----------
<S> <C> <C>
10 years $ 26,165 $ 31,291
15 years 44,675 58,649
20 years 68,109 98,846
25 years 97,780 157,909
30 years 135,346 244,692
</TABLE>

- ------------
1The chart is for illustrative purposes only and does not represent the
performance of any Fund or any specific investment. It shows taxable versus
tax-deferred compounding for the periods and on the terms indicated. Earnings in
the IRA account will be subject to tax when withdrawn from the account.

COMMANDSM ACCOUNT PROGRAM

Shares of the Funds are offered exclusively to participants in the COMMAND
Account program (the COMMAND program). The COMMAND program is an integrated
financial services program of Prudential Securities that offers Prudential
Securities' clients the use of their assets by linking together several
components: (i) a securities account, (ii) an automatic investment sweep into
one or more mutual funds (including the Funds) or a Federal Deposit Insurance
Corporation insured savings account and (iii) a COMMAND
Visa-Registered Trademark- Gold Debit Card. Other COMMAND program features

B-22
<PAGE>
include, among others, direct deposit and bill pay services and a dividend
reinvestment program with respect to common stocks traded on the New York and
American Stock Exchanges and with respect to NASDAQ stocks in which Prudential
Securities makes a principal market.

The COMMAND program offers various other products or services. From time to
time, the COMMAND program annual fee and/or the fee associated with a particular
product or service may be waived or reduced. Currently, Prudential Securities
may waive or reduce fees for clients who participate in the COMMAND program for
the following products or services: the Valued Investor Program-C- (VIP),
Transfer on Death Account (TOD), Dividend Reinvestment Program, Prudential
Securities OnlineSM and Flexible Reserve Program. Products and services offered
through the COMMAND program, and the associated fees, and waivers or reductions
thereto, are subject to change. For information regarding products and services
available through the COMMAND program, please contact your Prudential Securities
Financial Adviser.

From time to time, Prudential Securities may advertise the COMMAND program
and its component features and other products and services available through the
COMMAND program. Such advertisements may include information about the
performance of market indices, whether or not related to the Funds performance
(E.G. the S&P 500), and other performance data.

DESCRIPTION OF SECURITIES RATINGS

CORPORATE AND TAX-EXEMPT BOND RATINGS

The four highest ratings of Moody's Investors Service (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 to be considered as "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 company 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 company ranks in the lower end of its generic
rating category. The foregoing ratings for tax-exempt bonds are sometimes
presented in parentheses 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 corporate or municipal debt are AAA, AA, A and BBB. Debt 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. Debt 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 degrees. Debt rated A have a strong capacity to pay
principal and interest, although they are

B-23
<PAGE>
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 debt in
this category than for debt 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 debt being rated and indicates that payment of debt service
requirements is largely or 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 short-term obligations are MIG 1, MIG 2, MIG 3
and MIG 4. Short-term obligations 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. Short-term obligations bearing the designation MIG 2 are
judged to be of high quality, with margins of protection which are ample
although not so large as in the preceding group. Short-term obligations
designated MIG 3 are judged to be of favorable quality, but lack the undeniable
strength of the preceding grades because liquidity and cash flow protection may
be narrow and market access for refinancing is likely to be less well
established. Short-term obligations designated MIG 4 are judged to be of
adequate quality. Though protection commonly regarded as required of an
investment security is present, and such obligations are not distinctly or
predominantly speculative, there is specific risk.

The ratings of Standard & Poor's for municipal notes are SP-1, SP-2 and
SP-3. The designation "SP-1" indicates a very strong or 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.

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 short-term debt ratings are opinions of the ability of issuers to
repay punctually senior debt obligations having an original maturity not
exceeding one year. Moody's employs the following three designations, all judged
to be investment grade, to indicate the relative repayment ability of rated
issuers: Prime-1, superior ability; Prime-2, strong ability; and Prime-3,
acceptable ability.

Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt considered short-term in the relevant
market. Ratings are graded into several categories, ranging from "A-1" for the
highest quality obligations to "D" for the lowest. The "A-1" designation
indicates that the degree of safety regarding timely payment is 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 satisfactory. However, the relative degree of safety is not as high
as for issues designated "A-1." The "A-3" designation indicates that the
capacity for timely payment is adequate. 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
speculative capacity for timely payment. Issues rated "C" are regarded as having
a doubtful capacity for payment. Issues rated "D" are in payment default and the
rating is used when interest or principal payments are not made on the date due,
even if the applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grace period.

B-24
<PAGE>
COMMAND MONEY FUND Portfolio of Investments
June 30, 1996
<TABLE>
<CAPTION>
Principal
Amount Value
(000) Description (Note 1)
<C> <S> <C>
Bank Notes--3.9%
American Express Centurion
Bank
$ 18,000(a) 5.45047%, 7/15/96.......... $ 17,996,738
20,000(a) 5.46609%, 7/15/96.......... 19,996,844
22,000(a) 5.43484%, 7/19/96.......... 21,996,946
Bank of America, Illinois
17,000 5.80%, 5/13/97............. 16,995,640
Bank of New York
8,000 4.95%, 8/16/96............. 7,994,986
FCC National Bank
5,000 5.03%, 7/2/96.............. 4,999,982
33,000 5.77%, 4/15/97............. 32,985,028
First National Bank of
Chicago
20,000 5.50%, 10/3/96............. 20,000,000
Huntington National Bank
7,000 4.48%, 10/14/96............ 6,973,946
Nationsbank Texas
6,000 5.50%, 7/10/96............. 6,000,038
NBD Bank, Michigan
20,000 5.32%, 7/29/96............. 19,999,143
United States National
Bank of Oregon
31,000 5.32%, 7/30/96............. 30,998,702
--------------
Total Bank Notes
(amortized cost
$206,937,993)............ 206,937,993
--------------
Certificates of Deposit--Domestic--0.2%
Barnett Bank of South
Florida
13,088 5.39%, 7/8/96
(amortized cost
$13,087,814)............. 13,087,814
--------------
Certificates of Deposit--Eurodollar--1.8%
Bayerische Hypotheken-und
Weschel-Bank
10,000 5.34%, 9/18/96............. 9,998,649
Bayerische Landesbank
Girozentrale
$ 9,000 5.10%, 7/5/96.............. $ 8,999,683
10,000 5.43%, 10/18/96............ 10,000,295
Bayerische Vereinsbank
15,000 5.34%, 9/26/96............. 14,997,655
5,000 5.41%, 10/2/96............. 5,000,115
Morgan Guaranty Trust Co.
5,000 5.18%, 9/4/96.............. 4,997,145
Rabobank Nederland
8,000 5.12%, 9/3/96.............. 7,995,608
Societe Generale
4,000 5.21%, 7/31/96............. 3,999,197
Toronto Dominion Bank
11,000 5.34%, 7/31/96............. 10,999,406
20,000 5.34%, 8/28/96............. 19,997,758
--------------
Total Certificates of
Deposit--Eurodollar
(amortized cost
$96,985,511)............. 96,985,511
--------------
Certificates of Deposit--Yankee--4.7%
Commerzbank
57,000 5.31%, 7/1/96.............. 57,000,000
Deutsche Bank
45,000 5.53%, 4/2/97.............. 44,896,381
Dresdner Bank
6,000 5.13%, 11/22/96............ 5,989,472
Landesbank Hessen-Thuringen
Girozentrale
35,000 5.70%, 4/29/97............. 34,960,143
Societe Generale
34,000 5.34%, 7/1/96.............. 34,000,000
70,500 5.34%, 7/2/96.............. 70,500,034
--------------
Total Certificates of
Deposit--Yankee
(amortized cost
$247,346,030)............ 247,346,030
--------------
</TABLE>

See Notes to Financial Statements appearing on page B-47.
B-25

<PAGE>
COMMAND MONEY FUND
<TABLE>
<CAPTION>
Principal
Amount Value
(000) Description (Note 1)
<C> <S> <C>
Commercial Paper--62.2%
A. H. Robins Co., Inc.
$ 30,000 5.32%, 7/23/96............. $ 29,902,467
ABN-Amro N.A. Finance, Inc.
11,000 5.30%, 8/26/96............. 10,909,311
American Brands, Inc.
6,960 5.35%, 7/29/96............. 6,931,039
American Express Credit
Corp.
50,000 5.28%, 7/15/96............. 49,897,333
American Honda Finance
Corp.
10,000 5.35%, 7/8/96.............. 9,989,597
7,000 5.50%, 7/9/96.............. 6,991,444
17,000 5.35%, 7/10/96............. 16,977,263
6,000 5.34%, 7/23/96............. 5,980,420
24,000 5.48%, 8/26/96............. 23,795,413
Aristar, Inc.
12,387 5.40%, 7/8/96.............. 12,373,994
4,000 5.40%, 7/9/96.............. 3,995,200
Associates Corp. of North
America
37,000 5.30%, 7/9/96.............. 36,956,422
50,000 5.30%, 7/12/96............. 49,919,028
45,000 5.40%, 7/29/96............. 44,811,000
75,000 5.38%, 8/19/96............. 74,450,792
Avco Financial Services,
Inc.
50,000 5.35%, 7/10/96............. 49,933,125
BankAmerica Corp.
150,000 5.31%, 8/19/96............. 148,915,875
Barnett Bank, Inc.
11,000 5.42%, 7/9/96.............. 10,986,751
Bell Atlantic Network
Funding Corp.
6,536 5.40%, 7/12/96............. 6,525,216
BellSouth
Telecommunications, Inc.,
16,000 5.32%, 7/8/96.............. 15,983,449
Beneficial Corp.
$ 50,000 5.38%, 8/20/96............. $ 49,626,389
25,000 5.38%, 8/21/96............. 24,809,458
BHF Finance, Inc.
6,000 5.25%, 7/26/96............. 5,978,125
Bradford & Bingley
Building Society
22,000 5.35%, 7/12/96............. 21,964,036
Caterpillar Inc.
7,000 5.32%, 8/15/96............. 6,953,450
Caterpillar Financial
Services Corp.
8,000 5.25%, 9/19/96............. 7,906,667
6,000 5.35%, 10/10/96............ 5,909,942
6,000 5.33%, 11/7/96............. 5,885,405
Ciesco, L.P.
46,000 5.38%, 8/8/96.............. 45,738,771
CIT Group Holdings, Inc.
66,000 5.28%, 7/16/96............. 65,854,800
23,000 5.33%, 8/12/96............. 22,856,978
45,000 5.33%, 8/13/96............. 44,713,513
35,000 5.38%, 8/22/96............. 34,728,011
50,000 5.38%, 8/23/96............. 49,603,972
Coca-Cola Enterprises, Inc.
9,000 5.40%, 7/16/96............. 8,979,750
Corporate Asset Funding
Co., Inc.
9,000 5.30%, 7/18/96............. 8,977,475
Corporate Receivables Corp.
15,000 5.29%, 7/23/96............. 14,951,508
25,000 5.29%, 7/24/96............. 24,915,507
21,800 5.32%, 7/25/96............. 21,722,683
27,100 5.30%, 8/19/96............. 26,904,504
Countrywide Home Loan, Inc.
5,150 5.42%, 7/18/96............. 5,136,819
31,000 5.40%, 7/23/96............. 30,897,700
9,000 5.42%, 7/25/96............. 8,967,480
9,700 5.42%, 7/26/96............. 9,663,490
24,000 5.43%, 8/20/96............. 23,819,000
19,000 5.43%, 8/22/96............. 18,850,977
</TABLE>

See Notes to Financial Statements appearing on page B-47.
B-26

<PAGE>
COMMAND MONEY FUND
<TABLE>
<CAPTION>
Principal
Amount Value
(000) Description (Note 1)
<C> <S> <C>
Commercial Paper--(cont'd)
CXC, Inc.
$ 24,400 5.29%, 7/9/96.............. $ 24,371,316
7,581 5.35%, 7/11/96............. 7,569,734
25,000 5.29%, 7/17/96............. 24,941,222
25,000 5.35%, 7/18/96............. 24,936,840
16,000 5.34%, 7/19/96............. 15,957,280
Enterprise Funding Corp.
5,067 5.32%, 7/1/96.............. 5,067,000
13,000 5.37%, 7/25/96............. 12,953,460
10,100 5.40%, 7/31/96............. 10,054,550
6,053 5.41%, 8/8/96.............. 6,018,434
6,447 5.41%, 8/12/96............. 6,406,309
Falcon Asset Securitization
Corp.
5,000 5.38%, 7/22/96............. 4,984,308
Finova Capital Corp.
10,490 5.42%, 7/9/96.............. 10,477,365
8,000 5.45%, 7/16/96............. 7,981,833
4,500 5.45%, 7/17/96............. 4,489,100
26,000 5.43%, 7/22/96............. 25,917,645
7,800 5.47%, 7/22/96............. 7,775,112
4,000 5.45%, 7/23/96............. 3,986,678
9,000 5.37%, 7/30/96............. 8,961,068
33,000 5.47%, 8/19/96............. 32,754,306
First Data Corp.
17,569 5.45%, 7/30/96............. 17,491,867
Ford Motor Credit Co.
59,000 5.30%, 7/9/96.............. 58,930,511
65,000 5.31%, 7/12/96............. 64,894,537
96,000 5.38%, 8/19/96............. 95,297,013
28,000 5.38%, 8/22/96............. 27,782,409
General Electric Capital
Corp.
35,000 5.33%, 8/12/96............. 34,782,358
69,000 5.33%, 8/16/96............. 68,530,072
60,000 5.39%, 8/27/96............. 59,487,950
General Motors Acceptance
Corp.
78,000 5.34%, 9/13/96............. 77,143,820
78,000 5.34%, 9/16/96............. 77,109,110
GTE Corp.
$ 17,000 5.39%, 7/15/96............. $ 16,964,366
18,000 5.42%, 7/26/96............. 17,932,250
19,000 5.43%, 7/30/96............. 18,916,891
Heller Financial, Inc.
10,000 5.46%, 7/8/96.............. 9,989,383
34,000 5.48%, 7/16/96............. 33,922,367
6,000 5.44%, 7/22/96............. 5,980,960
16,000 5.49%, 7/29/96............. 15,931,680
Household Finance Corp.
38,000 5.38%, 8/20/96............. 37,716,056
IBM Credit Corp.
37,000 5.29%, 7/10/96............. 36,951,068
ITT Industries, Inc.
7,000 5.35%, 7/8/96.............. 6,992,718
9,000 5.37%, 7/9/96.............. 8,989,260
12,000 5.35%, 7/15/96............. 11,975,033
Lehman Brothers Holdings,
Inc.
139,295 5.55%, 7/8/96.............. 139,144,677
Merrill Lynch & Co., Inc.
80,000 5.40%, 7/15/96............. 79,832,000
Mitsubishi International
Corp.
27,000 5.46%, 7/18/96............. 26,930,385
Morgan Stanley Group, Inc.
93,000 5.30%, 7/8/96.............. 92,904,158
39,071 5.29%, 7/9/96.............. 39,025,070
Newell Company
5,000 5.42%, 7/22/96............. 4,984,192
Nomura Holdings America,
Inc.
47,000 5.67%, 7/1/96.............. 47,000,000
Norwest Financial, Inc.
12,000 5.35%, 7/10/96............. 11,983,950
11,000 5.34%, 7/11/96............. 10,983,683
NYNEX Corp.
3,783 5.34%, 7/22/96............. 3,771,216
15,000 5.40%, 7/22/96............. 14,952,750
21,000 5.42%, 7/22/96............. 20,933,605
20,000 5.44%, 7/22/96............. 19,936,533
</TABLE>

See Notes to Financial Statements appearing on page B-47.
B-27

<PAGE>
COMMAND MONEY FUND
<TABLE>
<CAPTION>
Principal
Amount Value
(000) Description (Note 1)
<C> <S> <C>
Commercial Paper--(cont'd)
Philip Morris Cos., Inc.
$ 14,000 5.30%, 7/19/96............. $ 13,962,900
20,000 5.39%, 7/25/96............. 19,928,133
38,000 5.38%, 8/20/96............. 37,716,056
PNC Funding Corp.
28,000 5.40%, 7/11/96............. 27,958,000
Preferred Receivables
Funding Corp.
19,175 5.35%, 7/12/96............. 19,143,654
40,000 5.37%, 7/15/96............. 39,916,467
21,875 5.35%, 7/18/96............. 21,819,735
42,000 5.37%, 7/24/96............. 41,855,905
8,225 5.37%, 8/15/96............. 8,169,790
17,050 5.30%, 8/22/96............. 16,919,473
Rank Xerox Capital (Europe)
PLC
4,138 5.30%, 7/1/96.............. 4,138,000
Riverwoods Funding Corp.
17,000 5.28%, 7/8/96.............. 16,982,547
Sears Roebuck Acceptance
Corp.
16,000 5.40%, 7/25/96............. 15,942,400
Smith Barney, Inc.
15,000 5.36%, 7/2/96.............. 14,997,767
25,640 5.38%, 7/11/96............. 25,601,682
Sony Capital Corporation
7,000 5.32%, 7/9/96.............. 6,991,724
Special Purpose Accounts
Receivables Coop Corp.
10,000 5.40%, 7/9/96.............. 9,988,000
Transamerica Corp.
27,000 5.28%, 7/8/96.............. 26,972,280
Transamerica Finance Corp.
11,430 5.29%, 9/5/96.............. 11,319,148
Travelers/Aetna Property
Casualty Corp.
18,000 5.35%, 7/10/96............. 17,975,925
16,000 5.35%, 7/11/96............. 15,976,222
US West Communications,
Inc.
$ 5,000 5.40%, 7/2/96.............. $ 4,999,250
WCP Funding, Inc.
5,000 5.40%, 7/25/96............. 4,982,000
21,000 5.30%, 8/7/96.............. 20,885,608
Westpac Capital Corp.
34,000 5.35%, 7/2/96.............. 33,994,947
Whirlpool Financial Corp.
47,500 5.40%, 7/22/96............. 47,350,375
--------------
Total Commercial Paper
(amortized cost
$3,300,726,995).......... 3,300,726,995
--------------
Loan Participations--0.9%
Englehard Corp.
37,000 5.4275%, 7/8/96............ 37,000,000
Morgan Stanley Group, Inc.
11,000 5.42%, 7/15/96............. 11,000,000
--------------
Total Loan Participations
(amortized cost
$48,000,000)............. 48,000,000
--------------
Other Corporate Obligations--14.1%
Associates Corp. of North
America
3,100 9.70%, 5/1/97.............. 3,198,806
Ford Motor Credit Co.,
5,000 9.10%, 7/5/96.............. 5,001,890
10,000 14.00%, 7/5/96............. 10,008,262
4,000 9.05%, 7/23/96............. 4,007,657
General Motors Acceptance
Corp.
38,000(a) 5.44%, 7/1/96.............. 37,994,188
2,500 8.80%, 7/3/96.............. 2,500,346
4,000 8.625%, 7/15/96............ 4,003,805
6,000 8.25%, 8/1/96.............. 6,010,753
39,000(a) 5.50438%, 8/2/96........... 38,997,061
11,000(a) 5.5161%, 8/21/96........... 10,999,543
5,000 8.20%, 9/13/96............. 5,022,605
5,000 7.65%, 2/3/97.............. 5,072,811
9,000 6.10%, 3/31/97............. 9,026,564
</TABLE>

See Notes to Financial Statements appearing on page B-47.
B-28

<PAGE>
COMMAND MONEY FUND
<TABLE>
<CAPTION>
Principal
Amount Value
(000) Description (Note 1)
<C> <S> <C>
Other Corporate Obligations--(cont'd)
Goldman, Sachs Group, L.P.
$ 52,000(a)(c) 5.625%, 8/23/96............ $ 52,000,000
216,000(a)(c) 5.70703%, 11/22/96......... 216,000,000
International Lease Finance
Corp.
4,250 8.75%, 8/15/96............. 4,263,980
5,600 5.875%, 2/1/97............. 5,617,710
Merrill Lynch & Co., Inc.
72,000(a) 5.4375%, 7/2/96............ 71,994,678
10,000(a) 5.48875%, 7/24/96.......... 9,999,434
Morgan Stanley Group, Inc.
18,000(a) 5.66016%, 7/15/96.......... 18,000,000
33,000(a) 5.625%, 8/15/96............ 33,000,000
Philip Morris Cos., Inc.
9,000 8.875%, 7/1/96............. 9,000,000
SMM Trust Notes 1995-O
10,910(a) 5.49609%, 7/15/96.......... 10,909,486
SMM Trust Notes 1995-Q
174,000(a) 5.49609%, 7/15/96.......... 173,991,478
--------------
Total Other Corporate
Obligations
(amortized cost
$746,621,057)............ 746,621,057
--------------
U.S. Government Agencies--8.5%
Federal Farm Credit Bank
19,585 5.75%, 8/1/96.............. 19,582,220
Federal National Mortgage
Association
82,000(a) 5.495%, 7/1/96............. 82,000,000
67,000(a) 5.495%, 7/1/96............. 66,978,262
50,000 5.48%, 4/24/97............. 49,874,089
United States Treasury
Notes
110,000 6.875%, 2/28/97............ 111,218,741
50,000 6.625%, 3/31/97............ 50,490,116
50,000 6.875%, 3/31/97............ 50,615,338
20,000 6.125%, 5/31/97............ 20,051,789
--------------
Total U.S. Government
Agencies
(amortized cost
$450,810,555)............ $ 450,810,555
--------------
Repurchase Agreements(b)--3.7%
$ 75,201 Goldman Sachs & Co.,
5.55%, dated 6/28/96, due
7/2/96 in the amount of
$75,247,374 (cost
$75,201,000) value of the
collateral including
accrued
interest--$76,705,020)... 75,201,000
124,329 Morgan Stanley & Co.,
5.41%, dated 6/24/96, due
7/1/96 in the amount of
$124,459,787 (cost
$124,329,000) value of
the
collateral including
accrued
interest--$127,633,487)... 124,329,000
--------------
Total Repurchase
Agreements
(amortized cost
$199,530,000)............ 199,530,000
--------------
Total Investments--100.0%
(amortized cost
$5,310,045,955).......... 5,310,045,955
Liabilities in excess of
other assets............. (204,045)
--------------
Net Assets--100%........... $5,309,841,910
--------------
--------------
</TABLE>

- ---------------
(a) The maturity date presented for these instruments is 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.
(b) Repurchase agreements are collateralized by U.S. Treasury or Federal agency
obligations.
(c) Indicates a security restricted as to resale.

See Notes to Financial Statements appearing on page B-47.
B-29

<PAGE>
COMMAND MONEY FUND
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Assets June 30, 1996
--------------
<S> <C>
Investments, at amortized cost which approximates market value.......................... $5,310,045,955
Cash.................................................................................... 17,195
Receivable for Fund shares sold......................................................... 99,132,844
Interest receivable..................................................................... 22,232,249
Prepaid expenses........................................................................ 181,076
--------------
Total assets.......................................................................... 5,431,609,319
--------------
Liabilities
Payable for Fund shares repurchased..................................................... 118,302,308
Management fee payable.................................................................. 1,644,045
Accrued expenses and other liabilities.................................................. 959,626
Distribution fee payable................................................................ 861,430
--------------
Total liabilities..................................................................... 121,767,409
--------------
Net Assets
Applicable to 5,309,841,910 shares of beneficial interest ($.01 par value) issued and
outstanding;
unlimited number of shares authorized................................................. $5,309,841,910
--------------
--------------
Net asset value, offering price and redemption price per share ($5,309,841,910 /
5,309,841,910 shares)................................................................. $1.00
--------------
--------------
</TABLE>

See Notes to Financial Statements appearing on page B-47.
B-30

<PAGE>
COMMAND MONEY FUND
Statement of Operations
<TABLE>
<CAPTION>
Year Ended
June 30,
Net Investment Income 1996
--------------
<S> <C>
Income
Interest............................. $ 280,999,825
--------------
Expenses
Management fee....................... 18,388,779
Distribution fee..................... 6,120,993
Registration fees.................... 1,815,000
Transfer agent's fees and expenses... 1,700,000
Custodian's fees and expenses........ 220,000
Reports to shareholders.............. 150,000
Insurance expense.................... 93,000
Trustees' fees and expenses.......... 63,000
Audit fee and expenses............... 41,000
Legal fees and expenses.............. 15,000
Miscellaneous........................ 3,044
--------------
Total expenses..................... 28,609,816
--------------
Net investment income.................. 252,390,009
--------------
Realized gain on Investments
Net realized gain on investment
transactions......................... 125,755
--------------
Net Increase in Net Assets
Resulting from Operations.............. $ 252,515,764
--------------
--------------
</TABLE>

COMMAND MONEY FUND
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended June 30,
Increase in -----------------------------------
Net Assets 1996 1995
---------------- ----------------
<S> <C> <C>
Operations
Net investment
income............. $ 252,390,009 $ 156,370,915
Net realized gain
on investment
transactions..... 125,755 307,047
---------------- ----------------
Net increase in net
assets resulting
from
operations....... 252,515,764 156,677,962
---------------- ----------------
Dividends and
distributions to
shareholders....... (252,515,764) (156,677,962)
---------------- ----------------
Fund share
transactions (at $1
per share)
Net proceeds from
shares
subscribed....... 24,708,980,727 16,966,514,286
Net asset value of
shares issued to
shareholders in
reinvestment of
dividends and
distributions.... 252,515,764 156,677,962
Cost of shares
reacquired....... (23,707,354,464) (15,515,692,996)
---------------- ----------------
Net increase in net
assets from Fund
share
transactions..... 1,254,142,027 1,607,499,252
---------------- ----------------
Total increase....... 1,254,142,027 1,607,499,252
Net Assets
Beginning of year.... 4,055,699,883 2,448,200,631
---------------- ----------------
End of year.......... $ 5,309,841,910 $ 4,055,699,883
---------------- ----------------
---------------- ----------------
</TABLE>

See Notes to Financial Statements appearing on page B-47.
B-31

<PAGE>
COMMAND MONEY FUND
Financial Highlights
<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year..................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Net investment income and net realized gains........... 0.052 0.050 0.029 0.030 0.046
Dividends and distributions to shareholders............ (0.052) (0.050) (0.029) (0.030) (0.046)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year........................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
TOTAL RETURN(a):....................................... 5.30% 5.13% 2.98% 3.01% 4.71%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000).......................... $5,309,842 $4,055,700 $2,448,201 $2,436,672 $2,125,430
Average net assets (000)............................... $4,896,794 $3,072,284 $2,570,195 $2,275,532 $2,377,108
Ratios to average net assets:
Expenses, including distribution fees................ .58% .59% .59% .61% .64%
Expenses, excluding distribution fees................ .46% .47% .47% .48% .51%
Net investment income................................ 5.15% 5.09% 2.92% 2.90% 4.57%
</TABLE>

- ---------------
(a) Total return is calculated assuming a purchase of shares on the first day
and a sale on the last day of each year reported and includes reinvestment
of dividends and distributions.

See Notes to Financial Statements appearing on page B-47.

REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders and Trustees of
Command Money Fund
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 Command Money Fund (the ``Fund'')
at June 30, 1996, 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 June
30, 1996 by correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York

August 9, 1996
B-32

<PAGE>
COMMAND GOVERNMENT FUND Portfolio of Investments
June 30, 1996
<TABLE>
<CAPTION>
Principal
Amount Value
(000) Description (Note 1)
<C> <S> <C>
U. S. Government Agencies--58.9%
Federal Farm Credit Bank
$ 10,000 5.19%, 7/10/96................ $ 9,987,025
4,000 5.75%, 8/1/96................. 3,999,432
------------
13,986,457
------------
Federal Home Loan Bank
15,000(a) 5.25%, 7/2/96................. 14,995,745
400 7.81%, 7/17/96................ 400,465
1,850 8.00%, 7/25/96................ 1,853,510
2,820 7.39%, 8/2/96................. 2,823,548
1,900 6.125%, 8/5/96................ 1,901,821
1,800 6.875%, 11/18/96.............. 1,811,328
------------
23,786,417
------------
Federal Home Loan Mortgage
Corporation
15,000 5.27%, 9/5/96................. 14,855,075
------------
Federal National Mortgage
Association
20,000(a) 5.25969%, 7/1/96.............. 19,982,919
21,600(a) 5.27%, 7/1/96................. 21,596,860
20,500(a) 5.2775%, 7/1/96............... 20,496,429
15,500(a) 5.495%, 7/1/96................ 15,498,378
2,870 5.59%, 7/1/96................. 2,870,000
13,245 8.00%, 7/10/96................ 13,252,946
5,000 5.02%, 7/24/96................ 4,983,964
2,050 4.94922%, 8/15/96............. 2,049,662
5,000(a) 4.325%, 9/4/96................ 4,988,758
10,000 5.26%, 9/9/96................. 9,897,722
1,000 8.625%, 9/10/96............... 1,005,622
7,000 5.60%, 11/1/96................ 6,996,365
16,250 5.71%, 5/20/97................ 16,235,351
------------
139,854,976
------------
Student Loan Marketing
Association
2,500(a) 5.37%, 7/1/96................. $ 2,498,207
8,000(a) 6.08%, 7/1/96................. 8,000,000
3,000(a) 5.39%, 7/2/96................. 2,999,390
2,525(a) 5.69%, 7/2/96................. 2,525,410
13,090 7.56%, 12/9/96................ 13,202,767
------------
29,225,774
------------
United States Treasury Notes
10,000 6.125%, 7/31/96............... 10,009,145
14,000 7.875%, 7/31/96............... 14,032,156
3,000 6.875%, 10/31/96.............. 3,011,186
5,000 6.875%, 2/28/97............... 5,055,397
10,000 6.625%, 3/31/97............... 10,089,355
5,000 6.50%, 4/30/97................ 5,031,147
18,000 6.50%, 5/15/97................ 18,118,345
------------
65,346,731
------------
Total U. S. Government
Agencies
(amortized cost
$287,055,430)............... 287,055,430
------------
Repurchase Agreements(b)--41.0%
45,655 CS First Boston Corp.,
5.40%, dated 06/24/96, due
07/01/96 in the amount of
$45,702,938 (cost
$45,655,000), value of
collateral including accrued
interest--$46,903,521....... 45,655,000
49,600 Morgan Stanley & Co.,
5.41%, dated 06/24/96, due
07/01/96 in the amount of
$49,652,176 (cost
$49,600,000), value of
collateral including accrued
interest--$50,610,662....... 49,600,000
</TABLE>

See Notes to Financial Statements appearing on page B-47.
B-33

<PAGE>
COMMAND GOVERNMENT FUND
<TABLE>
<CAPTION>
Principal
Amount Value
(000) Description (Note 1)
<C> <S> <C>
Repurchase Agreements--(cont'd)
$ 15,333 Nomura Securities
International, Inc.,
5.42%, dated 06/27/96, due
07/01/96 in the amount of
$15,342,234 (cost
$15,333,000),
value of collateral
including accrued
interest--$15,649,310....... $ 15,333,000
20,251 Bear, Stearns & Co.,
5.40%, dated 06/25/96, due
07/02/96 in the amount of
$20,272,264 (cost
$20,251,000), value of
collateral including accrued
interest--$20,856,278....... 20,251,000
15,000 Nomura Securities
International, Inc.,
5.40%, dated 06/25/96, due
07/02/96 in the amount of
$15,015,750 (cost
$15,000,000),
value of collateral
including accrued
interest--$15,309,441....... 15,000,000
1,437 Goldman Sachs & Co.,
5.55%, dated 06/28/96, due
07/02/96 in the amount of
$1,437,886 (cost
$1,437,000), value of
collateral including accrued
interest--$1,465,741........ 1,437,000
5,000 UBS Securities Inc.,
5.37%, dated 06/26/96, due
07/03/96 in the amount of
$5,005,221 (cost
$5,000,000), value of
collateral including accrued
interest--$5,102,166........ 5,000,000
$ 47,500 Smith Barney, Inc.,
5.32%, dated 06/03/96, due
07/08/96 in the amount of
$47,745,681 (cost
$47,500,000), value of
collateral including accrued
interest--$48,450,977....... $ 47,500,000
------------
Total Repurchase Agreements
(amortized cost
$199,776,000)............... 199,776,000
------------
Total Investments--99.9%
(amortized cost
$486,831,430)............... 486,831,430
Other assets in excess of
liabilities--0.1%........... 653,280
------------
Net Assets--100%.............. $487,484,710
------------
------------
</TABLE>

See Notes to Financial Statements appearing on page B-47.
B-34

<PAGE>
COMMAND GOVERNMENT FUND
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Assets June 30, 1996
-------------
<S> <C>
Investments, at amortized cost which approximates market value............................ $ 486,831,430
Cash...................................................................................... 2,811
Receivable for Fund shares sold........................................................... 5,186,549
Interest receivable....................................................................... 4,275,050
Prepaid expenses.......................................................................... 17,043
-------------
Total assets............................................................................ 496,312,883
-------------
Liabilities
Payable for Fund shares repurchased....................................................... 8,188,869
Accrued expenses and other liabilities.................................................... 395,544
Management fee payable.................................................................... 163,750
Distribution fee payable.................................................................. 80,010
-------------
Total liabilities....................................................................... 8,828,173
-------------
Net Assets
Applicable to 487,484,710 shares of beneficial interest (.01 par value) issued and
outstanding;
unlimited number of shares authorized................................................... $ 487,484,710
-------------
-------------
Net asset value, offering price and redemption price per share
($487,484,710 divided by 487,484,710 shares)............................................ $1.00
-------------
-------------
</TABLE>

See Notes to Financial Statements appearing on page B-47.
B-35

<PAGE>
COMMAND GOVERNMENT FUND
Statement of Operations
<TABLE>
<CAPTION>
Year Ended
June 30,
Net Investment Income 1996
-------------
<S> <C>
Income
Interest.............................. $ 27,002,532
-------------
Expenses
Management fee........................ 1,908,673
Distribution fee...................... 596,460
Registration fees..................... 428,000
Custodian's fees and expenses......... 100,000
Transfer agent's fees and expenses.... 80,000
Trustee's fees and expenses........... 49,000
Reports to shareholders............... 45,000
Audit fee and expenses................ 36,000
Legal fees and expenses............... 20,000
Insurance expense..................... 10,200
Miscellaneous......................... 6,726
-------------
Total expenses...................... 3,280,059
-------------
Net investment income................... 23,722,473
-------------
Realized gain on Investments
Net realized gain on investment
transactions.......................... 60,771
-------------
Net Increase in Net Assets
Resulting from Operations............... $ 23,783,244
-------------
-------------
</TABLE>

COMMAND GOVERNMENT FUND
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended June 30,
Increase in ---------------------------------
Net Assets 1996 1995
--------------- ---------------
<S> <C> <C>
Operations
Net investment
income............... $ 23,722,473 $ 16,865,588
Net realized gain on
investment
transactions....... 60,771 49,296
--------------- ---------------
Net increase in net
assets resulting
from operations.... 23,783,244 16,914,884
--------------- ---------------
Dividends and
distributions to
shareholders......... (23,783,244) (16,914,884)
--------------- ---------------
Fund share transactions
(at $1 per share)
Net proceeds from
shares
subscribed......... 2,100,249,743 1,851,317,527
Net asset value of
shares issued to
shareholders in
reinvestment of
dividends and
distributions...... 23,783,244 16,914,884
Cost of shares
reacquired........... (2,040,843,422) (1,789,194,124)
--------------- ---------------
Net increase in net
assets from Fund
share
transactions....... 83,189,565 79,038,287
--------------- ---------------
Total increase......... 83,189,565 79,038,287
Net Assets
Beginning of year...... 404,295,145 325,256,858
--------------- ---------------
End of year............ $ 487,484,710 $ 404,295,145
--------------- ---------------
--------------- ---------------
</TABLE>

See Notes to Financial Statements appearing on page B-47.
B-36

<PAGE>
COMMAND GOVERNMENT FUND
Financial Highlights
<TABLE>
<CAPTION>
Year Ended June 30,
----------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year............................ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Net investment income and net realized gains.................. .050 .048 0.028 0.028 0.045
Dividends and distributions to shareholders................... (.050) (.048) (0.028) (0.028) (0.045)
-------- -------- -------- -------- --------
Net asset value, end of year.................................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL RETURN(a)............................................... 5.12% 4.89% 2.86% 2.85% 4.56%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000)................................. $487,485 $404,295 $325,257 $381,703 $372,988
Average net assets (000)...................................... $477,168 $350,458 $376,159 $380,103 $422,639
Ratios to average net assets:
Expenses, including distribution fees....................... .68% .65% .63% .65% .69%
Expenses, excluding distribution fees....................... .56% .53% .51% .53% .57%
Net investment income....................................... 4.97% 4.81% 2.79% 2.74% 4.38%
</TABLE>

See Notes to Financial Statements appearing on page B-47.

REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders and Trustees of
Command Government Fund
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 Command Government Fund (the
``Fund'') at June 30, 1996, 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 June
30, 1996 by correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York

August 9, 1996
B-37

<PAGE>
COMMAND TAX-FREE FUND Portfolio of Investments
June 30, 1996
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (a) (Note 1)
<C> <C> <S> <C>
ARIZONA--1.3%
Pima Cnty. Ind. Dev.
Auth.,
F.R.W.D.,
3.65%, 7/5/96, Ser.
A-1+* $ 14,945 96B................... $ 14,945,000
--------------
ARKANSAS--0.7%
Arkansas Dev. Fin.
Auth., Sngl. Family
Mtge. Rev.,
A.N.N.O.T.,
3.80%, 2/28/97, Ser.
A-1+* 7,585 96D................... 7,585,000
--------------
CALIFORNIA--3.1%
California Higher Ed.
Ln. Auth. Inc.,
Student Ln. Rev.,
A.N.N.M.T.,
3.95%, 7/1/97, Ser.
VIMG1 25,000 87A................... 25,000,000
California Student Ln.
Marketing Corp.,
Student Ln. Rev.
Rfdg., A.N.N.M.T.,
3.90%, 11/1/96, Ser.
VMIG1 10,800 93A................... 10,800,000
--------------
35,800,000
--------------
COLORADO--4.3%
Avon Cnty. Ind. Dev.
Rev., Beaver Creek
Proj., F.R.M.D.,
3.90%, 7/15/96, Ser.
P-1 9,000 84.................... 9,000,000
Colorado Hsg. Fin.
Auth., Eagle Trust,
F.R.W.D.S.,
3.49%, 7/5/96, Ser.
A-1* 19,700 94C................... 19,700,000
Colorado Student Oblig.
Bond
Auth., Student Ln.
Rev., F.R.W.D.,
3.40%, 7/3/96, Ser.
VMIG1 10,500 90A................... 10,500,000
Denver City & Cnty.
Airport Rev.,
F.R.W.D.,
3.85%, 7/3/96, Ser.
VMIG1 11,000 91B................... 11,000,000
--------------
50,200,000
--------------
CONNECTICUT--1.8%
Connecticut Hsg. Fin.
Auth., A.N.N.M.T.,
VMIG1 $ 15,000 3.60%, 4/10/97.......... $ 14,995,322
Connecticut Spec.
Assmt., A.N.N.M.T.,
3.90%, 7/1/97, Ser.
VMIG1 5,500 93C................... 5,500,000
--------------
20,495,322
--------------
DISTRICT OF COLUMBIA--1.4%
Dist. of Columbia Hsg.
Fin. Agcy., Carmel
Plaza, F.R.W.D.,
3.35%, 7/4/96, Ser.
VMIG1 8,830 91.................... 8,830,000
Dist. of Columbia Rev.,
Gen. Oblig. F.R.D.D.,
3.80%, 7/1/96, Ser.
VMIG1 7,100 92A-5................. 7,100,000
--------------
15,930,000
--------------
FLORIDA--1.6%
Miami Hlth. Facs. Auth.
Rev., Miami Jewish
Home & Hosp.,
F.R.W.D.,
3.35%, 7/3/96, Ser.
CPS1 6,600 92.................... 6,600,000
Putnam Cnty. Dev. Auth.,
Seminole Elec. Proj.,
S.E.M.O.T.,
3.25%, 9/15/96, Ser.
P-1 11,755 84H-4................. 11,755,000
--------------
18,355,000
--------------
GEORGIA--5.7%
Burke Cnty. Dev. Auth.,
Oglethorpe Pwr. Corp.,
3.85%, 12/26/96, Ser.
NR 13,070 95.................... 13,070,000
</TABLE>

See Notes to Financial Statements appearing on page B-47.
B-38

<PAGE>
COMMAND TAX-FREE FUND
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (a) (Note 1)
<C> <C> <S> <C>
GEORGIA--(cont'd)
Clayton Cnty. Hsg.
Auth., Multifamily
Hsg. Rev., F.R.W.D.,
3.55%, 7/3/96, Ser.
A-1* $ 6,655 89.................... $ 6,655,000
Fulton Cnty. Dev. Auth.
Rev., Robert W.
Woodruff Art Center,
F.R.W.D.,
3.40%, 7/4/96, Ser.
CPS1 22,500 93.................... 22,500,000
Georgia Oblig. Bond,
A.N.N.O.T.3,
3.60%, 4/1/97, Ser.
AAA 15,900 95C................... 15,900,000
Roswell Hsg. Auth., Post
Canyon Proj.,
F.R.W.D.,
3.25%, 7/3/96, Ser.
A-1+* 7,500 96.................... 7,500,000
--------------
65,625,000
--------------
ILLINOIS--13.3%
Cook Cnty. Cap. Equip.
Proj., S.E.M.M.T.,
VMIG1 15,750 3.40%, 8/6/96, Ser. B... 15,750,000
Cook Cnty., Public
Safety, S.E.M.M.T.,
VMIG1 35,400 3.40%, 8/6/96, Ser. B... 35,400,000
Gurnee Ind. Dev. Rev.,
Sterigenics Intl.
Proj., F.R.W.D.,
3.75%, 7/3/96, Ser.
A-1* 7,750 96.................... 7,750,000
Illinois Dev. Fin. Auth.
Poll., Commonwealth
Edison Co., F.R.W.D.,
3.35%, 7/3/96, Ser.
P-1 10,000 94C................... 10,000,000
Illinois Dev. Fin. Auth.
Rev.,
Multifamily Hsg.,
F.R.W.D.,
4.00%, 7/5/96, Ser.
A-1* 18,900 92.................... 18,900,000
Illinois Hlth. Fac.
Auth. Rev., Servant
Cor. Falcon II,
F.R.W.D.,
3.70%, 7/3/96, Ser.
A-1+* $ 13,500 96A................... $ 13,500,000
Evanston Hosp. Corp.
Proj., S.E.M.M.T.,
3.35%, 12/2/96, Ser.
VMIG1 12,000 92.................... 12,000,000
Evanston Hosp. Corp.
Prog., A.N.N.M.T.,
3.75%, 5/15/97, Ser.
VMIG1 18,000 95.................... 18,000,000
Illinois Hlth. Facs.
Auth. Rev., Children's
Mem. Hosp.,
S.E.M.M.T.,
3.60%, 8/20/96, Ser.
VMIG1 15,000 90A................... 15,000,000
Wheeling Multifamily
Hsg. Rev., Woodland
Creek II, F.R.W.D.,
3.45%, 7/5/96, Ser.
SP-1+* 8,000 90.................... 8,000,000
--------------
154,300,000
--------------
INDIANA--1.5%
Indiana Ed. Fac. Auth.,
Wesleyan Univ.
F.R.W.D.,
3.40%, 7/4/96, Ser.
NR 10,000 93.................... 10,000,000
Indiana Hlth. Fac. Fin.
Auth. Rev., Baptist
Homes of Indiana,
F.R.W.D.,
3.40%, 7/4/96, Ser.
NR 7,825 95.................... 7,825,000
--------------
17,825,000
--------------
IOWA--2.5%
Louisa Cnty. Poll. Ctrl.
Rev., Mid-American
Energy, F.R.W.D.,
3.50%, 7/3/96, Ser.
VMIG1 20,000 85.................... 20,000,000
</TABLE>

See Notes to Financial Statements appearing on page B-47.
B-39

<PAGE>
COMMAND TAX-FREE FUND
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (a) (Note 1)
<C> <C> <S> <C>
IOWA--(cont'd)
Sergeant Bluff Ind. Dev.
Rev., Sioux City Brick
& Tile Proj.,
F.R.W.D.,
3.60%, 7/4/96, Ser.
NR $ 9,100 96.................... $ 9,100,000
--------------
29,100,000
--------------
KENTUCKY--2.2%
Louisville & Jefferson
Cnty., F.R.W.D.,
3.65%, 7/5/96, Ser.
A-1* 26,000 96A................... 26,000,000
--------------
LOUISIANA--3.7%
Calcasieu Parish Ind.
Dev. Board, Citgo
Corp., F.R.D.D.,
3.80%, 7/1/96, Ser.
VMIG1 2,000 94.................... 2,000,000
Louisiana Hsg. Fin.
Agcy. Rev., Sngl.
Family, A.N.N.M.T.,
MIG1 12,000 3.80%, 4/15/97.......... 12,000,000
Louisiana Pub. Facs.
Auth., Hosp. Equip.
Rev., F.R.W.D.,
3.60%, 7/3/96, Ser.
VMIG1 6,900 85A................... 6,900,000
West Baton Rouge Parish
Ind. Dist. #3 Rev.,
Dow Chemical Co.
Proj., F.R.D.D.,
3.80%, 7/1/96, Ser.
P-1 10,500 93.................... 10,500,000
3.80%, 7/1/96, Ser.
P-1 6,000 94A................... 6,000,000
3.80%, 7/1/96, Ser.
P-1 5,600 95.................... 5,600,000
--------------
43,000,000
--------------
MARYLAND--0.6%
Maryland Econ. Dev.
Corp., F.R.W.D.,
3.35%, 7/4/96, Ser.
A-1* 7,500 95.................... 7,500,000
--------------
MASSACHUSETTS--4.3%
Massachusetts Bay
Transit. Auth.,
3.75%, 2/28/97, Ser.
MIG2 $ 17,000 A..................... $ 17,016,821
Massachusetts Hsg.
Fin. Agcy.,
Sngl. Family Hsg. Rev.,
Q.T.R.O.T.3,
AAA 11,245 3.60%, 9/1/96, Ser. 5... 11,245,000
Revere Hsg. Auth.,
Waters Edge Proj.,
F.R.W.D.,
4.00%, 7/5/96, Ser.
A-1* 22,000 91C................... 22,000,000
--------------
50,261,821
--------------
MICHIGAN--1.5%
Michigan Strategic Fund
Poll.,
General Motors Proj.,
F.R.W.D.,
3.55%, 7/2/96, Ser.
VMIG2 16,825 85.................... 16,825,000
--------------
MINNESOTA--2.2%
Bloomington Comm. Dev.
Rev., Fltg. Rate 94th
Street Assoc. Proj.
F.R.W.D.,
3.45%, 7/5/96, Ser.
A-1+* 6,300 85.................... 6,300,000
Bloomington Port Auth.
Tax Rev., F.R.W.D.,
3.45%, 7/5/96, Ser.
VMIG1 15,000 95A................... 15,000,000
Minnesota Hsg. Fin.
Agcy., A.N.N.M.T.,
3.50%, 12/12/96, Ser.
VMIG1 3,600 95M................... 3,600,000
--------------
24,900,000
--------------
MISSISSIPPI--0.7%
Harrison Cnty. Poll.
Ctrl. Rev.,
Mississippi Pwr. Co.
Proj., F.R.W.D.,
3.35%, 7/3/96, Ser.
A-1* 8,000 92.................... 8,000,000
--------------
</TABLE>

See Notes to Financial Statements appearing on page B-47.
B-40

<PAGE>
COMMAND TAX-FREE FUND
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (a) (Note 1)
<C> <C> <S> <C>
MISSOURI--3.4%
Missouri Environ. Impvt.
& Energy Res. Auth.,
Union Elec. Co.,
A.N.N.O.T.,
3.65%, 6/1/97, Ser.
P1 $ 6,095 84A................... $ 6,086,799
Missouri Hlth. Ed. Schl.
Dist.,
4.50%, 8/19/96, Ser.
SP-1+* 25,000 95H................... 25,017,635
St. Charles Cnty. Ind.
Dev. Auth., Cedar
Ridge Apts., F.R.W.D.,
3.35%, 7/3/96, Ser.
A-1+* 8,595 88A................... 8,595,000
--------------
39,699,434
--------------
NEBRASKA--0.9%
Nebraska Pub. Pwr. Dist.
Rev., T.E.C.P.,
3.70%, 8/29/96, Ser.
P-1 10,000 B..................... 10,000,000
--------------
NEW HAMPSHIRE--0.9%
New Hampshire Fin. Auth.
Poll. Ctrl., New
England Pwr. Co.,
T.E.C.P.,
3.55%, 9/3/96, Ser.
VMIG1 10,000 90B................... 10,000,000
--------------
NEW JERSEY--2.5%
Jersey City, B.A.N.,
SP-1* 4,000 4.25%, 9/27/96.......... 4,003,810
Jersey City, New Jersey
School Promissory
Notes
SP-1+* 24,400 3.75%, 3/7/97........... 24,472,440
--------------
28,476,250
--------------
NEW YORK--4.8%
Nassau County, B.A.N.,
4.00%, 8/15/96, Ser.
MIG1 22,770 95H................... 22,787,496
New York City Gen.
Oblig., T.E.C.P.,
3.40%, 8/14/96, Ser.
VMIG1 13,000 94H-2................. 13,000,000
New York City Unltd.
Tax, JPM Putters-DERV,
F.R.W.D.S.,
3.50%, 7/4/96, Ser.
VMIG1 $ 19,800 33.................... $ 19,800,000
--------------
55,587,496
--------------
NORTH CAROLINA--1.1%
Cabarrus Cnty. Ind.
Facs. Auth., Poll.
Ctrl. Rev., Philip
Morris Proj.,
F.R.W.D.,
3.35%, 7/3/96, Ser.
P-1 5,000 92.................... 5,000,000
North Carolina Eastern
Mun. Pwr., Catawba
Proj., T.E.C.P.,
P-1 7,561 3.70%, 7/15/96.......... 7,561,000
--------------
12,561,000
--------------
OHIO--1.9%
Ohio Hsg. Agcy. Res.
Mtg. Rev., A.N.N.M.T.,
3.40%, 3/3/97, Ser.
A-1+* 14,000 96A-3................. 14,000,000
Toledo-Lucas Cnty.,
Convntn. & Visitors
Bureau, M.T.H.O.T.,
3.55%, 8/1/96, Ser.
VMIG1 8,215 88.................... 8,215,000
--------------
22,215,000
--------------
OKLAHOMA--0.5%
Muskogee Mall Proj.,
F.R.W.D.,
3.70%, 7/3/96, Ser.
VMIG1 5,600 85.................... 5,600,000
--------------
OREGON--1.7%
Oregon Hsg. & Comm.
Svcs. Dept.,
Sngl. Family Mtg.
Prog., A.N.N.M.T.,
3.85%, 5/15/97, Ser.
MIG1 5,000 96C................... 5,000,000
</TABLE>

See Notes to Financial Statements appearing on page B-47.
B-41

<PAGE>
COMMAND TAX-FREE FUND
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (a) (Note 1)
<C> <C> <S> <C>
OREGON--(cont'd)
Oregon Peace Hlth. Hsg.
Ed. & Cult., F.R.W.D.,
3.30%, 7/5/96, Ser.
A-1+* $ 14,500 95.................... $ 14,500,000
--------------
19,500,000
--------------
PENNSYLVANIA--1.3%
Pennsylvania Higher Ed.
Auth., Student Ln.
Rev. F.R.W.D.,
3.40%, 7/3/96, Ser.
VMIG1 14,750 95A................... 14,750,000
--------------
RHODE ISLAND--1.7%
Rhode Island Student Ln.
Auth., F.R.W.D.,
3.45%, 7/3/96, Ser.
A-1+* 20,000 96-2.................. 20,000,000
--------------
SOUTH CAROLINA--1.2%
York Cnty. Poll. Ctrl.
Rev., Electric Proj.,
S.E.M.O.T.,
3.25%, 9/15/96, Ser.
VMIG1 14,120 84N-6................. 14,120,000
--------------
TENNESSEE--0.9%
Montgomery Cnty. Pub.
Bldg., F.R.W.D.,
3.35%, 7/4/96, Ser.
A-1* 11,000 95.................... 11,000,000
--------------
TEXAS--9.8%
Bexar County Hsg. Fin.
Corp.,
Windridge Apts.,
F.R.W.D.,
3.35%, 7/4/96, Ser.
A-1+* 6,270 95.................... 6,270,000
City of Houston Texas
Water Sewer T.E.C.P.,
3.75%, 9/12/96, Ser.
P-1 10,000 A..................... 10,000,000
DeSoto Ind. Dev. Auth.,
Nat'l. Svc. Inds. Inc.
Proj., F.R.W.D.,
3.40%, 7/4/96, Ser.
CPS1 7,150 91.................... 7,150,000
Greater East Texas
Student Ln. Rev.,
A.N.N.O.T.,
3.85%, 5/1/97, Ser.
VMIG1 $ 11,650 95A................... $ 11,650,000
Houston Gen. Oblig.,
T.E.C.P.,
3.60%, 10/10/96, Ser.
P-1 10,100 A..................... 10,100,000
San Antonio Elec. & Gas
Rev., T.E.C.P.,
P-1 19,100 3.60%, 8/7/96, Ser. A... 19,100,000
P-1 15,000 3.25%, 8/8/96, Ser. A... 15,000,000
P-1 13,000 3.45%, 8/8/96, Ser. A... 13,000,000
Texas Public Fin. Auth.
Rev.,
T.E.C.P.,
3.70%, 11/14/96, Ser.
P-1 11,000 B..................... 11,000,000
Trinity River Auth.
Poll. Coll. Util.,
Texas Elec. Util. Co.,
F.R.D.D.,
VMIG1 10,500 3.80%, 7/1/96, Ser.
96A................... 10,500,000
--------------
113,770,000
--------------
UTAH--6.7%
Davies Cnty., T.R.A.N.,
4.50%, 12/31/96, Ser.
NR 6,000 96.................... 6,022,078
Intermountain Pwr. Auth.
Supply Rev.,
A.N.N.O.T.,
3.93%, 6/16/97, Ser.
VMIG1 14,500 85E................... 14,500,000
Intermountain Pwr. Auth.
Supply Rev.,
S.E.M.O.T.,
3.35%, 9/16/96, Ser.
VMIG1 15,000 85E................... 15,000,000
Salt Lake City Rev.,
T.E.C.P.,
3.65%, 8/6/96, Ser.
VMIG1 17,100 90.................... 17,100,000
Utah Board Regents
Student Ln. Rev.,
F.R.W.D.,
3.40%, 7/3/96, Ser.
SP-1+* 20,100 96A................... 20,100,000
</TABLE>

See Notes to Financial Statements appearing on page B-47.
B-42

<PAGE>
COMMAND TAX-FREE FUND
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (a) (Note 1)
<C> <C> <S> <C>
UTAH--(cont'd)
Utah Cnty., T.R.A.N.,
NR $ 5,000 4.50%, 12/31/96......... $ 5,018,392
--------------
77,740,470
--------------
VIRGINIA--3.8%
Chesterfield Cnty. Ind.
Dev. Auth., Philip
Morris Proj.,
F.R.W.D.,
P1 8,500 3.35%, 7/3/96........... 8,500,000
Harrisonburg Redev. &
Hsg. Auth., Multifamly
Hsg. Rev., F.R.W.D.,
3.35%, 7/4/96, Ser.
VMIG1 13,000 91A................... 13,000,000
King George Cnty.,
Birchwood Pwr. Proj.,
F.R.D.D.,
4.00%, 7/1/96, Ser.
A-1+* 5,200 94B................... 5,200,000
Virginia Elec. Pwr. Co.
Proj., T.E.C.P.,
3.70%, 8/5/96, Ser.
VMIG1 17,600 87A................... 17,600,000
--------------
44,300,000
--------------
WASHINGTON--0.3%
Washington Hsg. Fin.
Comm., Canyon Lakes II
Proj., F.R.D.D.,
3.90%, 7/1/96, Ser.
VMIG1 3,000 94.................... 3,000,000
--------------
WEST VIRGINIA--0.8%
West Virginia Public
Energy Auth. Rev.,
T.E.C.P.,
3.50%, 8/5/96, Ser.
A-1+* $ 9,000 89A................... $ 9,000,000
--------------
Total Investments--96.6%
(cost $1,117,966,793)... 1,117,966,793
Other assets in excess
of
liabilities--3.4%..... 38,968,644
--------------
Net Assets--100%........ $1,156,935,437
--------------
--------------
</TABLE>

- ---------------
(a) The following abbreviations are used in portfolio descriptions:
A.N.N.M.T.--Annual Mandatory Tender.
A.N.N.O.T.--Annual Optional Tender.
A.N.N.O.T.3--Annual Third Party Optional Tender.
B.A.N.--Bond Anticipation Note.
F.R.D.D.--Floating Rate (Daily) Demand Note(b).
F.R.M.D.--Floating Rate (Monthly) Demand Note(b).
F.R.W.D.--Floating Rate (Weekly) Demand Note(b).
F.R.W.D.S.--Floating Rate Weekly Demand--Synthetic Note(b).
M.T.H.O.T.--Monthly Optional Tender.
Q.T.R.O.T.3--Quarterly Third Party Optional Tender.
S.E.M.M.T.--Semi-Annual Mandatory Tender.
S.E.M.O.T.--Semi-Annual Optional Tender.
T.E.C.P.--Tax Exempt Commercial Paper.
T.R.A.N.--Tax and Revenue Anticipation Note.
(b) For purposes of amortized cost valuation, the maturity date of Floating Rate
Demand Notes 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.
* Standard & Poor's rating.
NR--Not Rated by Moody's or Standard & Poor's.

See Notes to Financial Statements appearing on page B-47.
B-43

<PAGE>
COMMAND TAX-FREE FUND
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Assets June 30, 1996
--------------
<S> <C>
Investments, at amortized cost which approximates market value.......................... $1,117,966,793
Cash.................................................................................... 53,070
Receivable for investments sold......................................................... 47,002,436
Receivable for Fund shares sold......................................................... 34,952,477
Interest receivable..................................................................... 7,706,184
Prepaid expenses........................................................................ 39,250
--------------
Total assets.......................................................................... 1,207,720,210
--------------
Liabilities
Payable for investments purchased....................................................... 30,500,000
Payable for Fund shares repurchased..................................................... 19,113,736
Accrued expenses and other liabilities.................................................. 547,006
Management fee payable.................................................................. 434,833
Distribution fee payable................................................................ 189,198
--------------
Total liabilities..................................................................... 50,784,773
--------------
Net Assets
Applicable to 1,156,935,437 shares of beneficial interest ($.01 par value) issued and
outstanding;
unlimited number of shares authorized................................................. $1,156,935,437
--------------
--------------
Net asset value, offering price and redemption price per share ($1,156,935,437 /
1,156,935,437 shares)................................................................. $1.00
--------------
--------------
</TABLE>

See Notes to Financial Statements appearing on page B-47.
B-44

<PAGE>
COMMAND TAX-FREE FUND
Statement of Operations
<TABLE>
<CAPTION>
Year Ended
June 30,
Net Investment Income 1996
-------------
<S> <C>
Income
Interest............................ $ 42,209,382
-------------
Expenses
Management fee...................... 5,128,465
Distribution fee.................... 1,417,822
Registration fees................... 425,000
Transfer agent's fees and
expenses............................ 190,000
Custodian's fees and expenses....... 160,000
Trustees' fees and expenses......... 56,000
Audit fee and expenses.............. 41,000
Reports to shareholders............. 40,000
Insurance expense................... 25,800
Legal fees and expenses............. 20,000
Miscellaneous....................... 11,492
-------------
Total expenses.................... 7,515,579
Less: custodian fee credit........ (61,424)
-------------
Net expenses...................... 7,454,155
-------------
Net investment income................. 34,755,227
-------------
Realized gain on Investments
Net realized gain on investment
transactions........................ 14,814
-------------
Net Increase in Net Assets
Resulting from Operations............. $ 34,770,041
-------------
-------------
</TABLE>

COMMAND TAX-FREE FUND
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended June 30,
Increase in ---------------------------------
Net Assets 1996 1995
--------------- ---------------
<S> <C> <C>
Operations
Net investment
income............... $ 34,755,227 $ 28,248,472
Net realized gain on
investment
transactions....... 14,814 45
--------------- ---------------
Net increase in net
assets resulting
from operations.... 34,770,041 28,248,517
--------------- ---------------
Dividends and
distributions to
shareholders......... (34,770,041) (28,248,517)
--------------- ---------------
Fund share transactions
(at $1 per share)
Net proceeds from
shares
subscribed......... 4,980,375,440 4,346,712,584
Net asset value of
shares issued to
shareholders in
reinvestment of
dividends and
distributions...... 34,770,041 28,248,517
Cost of shares
reacquired........... (4,913,777,690) (4,166,995,198)
--------------- ---------------
Net increase in net
assets from Fund
share
transactions....... 101,367,791 207,965,903
--------------- ---------------
Total increase......... 101,367,791 207,965,903
Net Assets
Beginning of year...... 1,055,567,646 847,601,743
--------------- ---------------
End of year............ $ 1,156,935,437 $ 1,055,567,646
--------------- ---------------
--------------- ---------------
</TABLE>

See Notes to Financial Statements appearing on page B-47.
B-45

<PAGE>
COMMAND TAX-FREE FUND
Financial Highlights
<TABLE>
<CAPTION>
Year Ended June 30,
------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year...................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Net investment income and net realized gains............ 0.031 0.032 0.020 0.022 0.035
Dividends and distributions to shareholders............. (0.031) (0.032) (0.020) (0.022) (0.035)
---------- ---------- -------- -------- --------
Net asset value, end of year............................ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- ---------- -------- -------- --------
---------- ---------- -------- -------- --------
TOTAL RETURN(a)......................................... 3.12% 3.29% 1.98% 2.23% 3.53%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000)........................... $1,156,935 $1,055,568 $847,602 $853,930 $729,122
Average net assets (000)................................ $1,134,257 $ 926,888 $908,421 $823,517 $751,458
Ratios to average net assets:
Expenses, including distribution fees................. .66% .66% .65% .68% .69%
Expenses, excluding distribution fees................. .54% .54% .53% .55% .56%
Net investment income................................. 3.06% 3.05% 1.96% 2.09% 3.47%
</TABLE>

See Notes to Financial Statements appearing on page B-47.

REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees of
Command Tax-Free Fund
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 Command Tax-Free Fund (the
``Fund'') at June 30, 1996, 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 June
30, 1996 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.

PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York

August 9, 1996
B-46

<PAGE>

COMMAND FUNDS
Notes to Financial Statements

Command Money Fund, Command Government Fund, and Command Tax-Free Fund (each
a ``Fund'' and collectively, the Funds ) are each registered under the
Investment Company Act of 1940 as an open-end, diversified management investment
company whose shares are offered exclusively to participants in the Prudential
Securities Command Account Program of Prudential Securities Incorporated
(Prudential Securities). The Command Money Fund seeks high current income,
preservation of capital and maintenance of liquidity by investing in a
diversified portfolio of money market instruments maturing in 13 months or less.
The Command Government Fund seeks high current income, preservation of capital
and maintenance of liquidity by investing in a portfolio of U.S. government
securities maturing in 13 months or less. The Command Tax-Free Fund seeks high
current income that is exempt from federal income taxes, consistent with the
preservation of capital and maintenance of liquidity. The Fund invests in a
diversified portfolio of short-term, tax-exempt securities with maturities of 13
months or less that are issued by states, municipalities and their agencies (or
authorities). Some securities may be subject to the federal alternative minimum
tax (AMT). The Funds invest in a portfolio of money market instruments maturing
in 13 months or less whose ratings are within the two highest ratings categories
by a nationally recognized statistical rating agency or, if not rated, are of
comparable quality. The ability of the issuers of the securities held by the
Funds to meet their obligations may be affected by economic and/or political
developments in a specific industry, state or region.

Note 1. Accounting The following is a summary
Policies of significant accounting poli-
cies followed by the Funds in the preparation of
their 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. If the amortized cost
method is determined not to represent fair value, the value shall be determined
by or under the direction of the Board of Trustees. All securities are valued as
of 4:30 p.m., New York time.
In connection with transactions in repurchase agreements, it is the Funds'
policy that its custodian or designated subcustodians, as the case may be under
triparty repurchase agreements, take possession of the underlying collateral
securities, the value of which exceeds the principal amount of the repurchase
transaction, including accrued interest. If the seller defaults and the value of
the collateral declines or if bankruptcy proceedings are commenced with respect
to the seller of the security, realization of the collateral by the Funds may be
delayed or limited.
Securities Transactions and Investment Income: Securities transactions are
recorded on the trade date. Realized gains and losses on sales of investments
are calculated on the identified cost basis. Interest income is recorded on the
accrual basis. Expenses are recorded on the accrual basis which may require the
use of certain estimates by management. The cost of portfolio securities for
federal income tax purposes is substantially the same as for financial reporting
purposes.
Federal Income Taxes: Each Fund intends to continue to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its net income to its shareholders.
Therefore, no federal income tax provision is required.
Dividends: Each Fund declares all of its net investment income as dividends
daily to its shareholders of record at the time of such declaration. Dividends
are reinvested daily into additional full and fractional shares of the
respective Fund at the net asset value per share determined on the date of
declaration. Net investment income for dividend purposes includes accrued
interest and amortization of premiums and discounts, plus or minus any gains or
losses realized on sales of portfolio securities, and less the estimated
expenses of the Fund applicable to the dividend period.
Custody Fee Credits: The Command Tax-Free Fund has an arrangement with its
custodian bank, whereby uninvested money earn credits which reduce the fees
charged by the custodian.

Note 2. Agreements Each Fund has a manage-
ment agreement with Prudential Mutual Fund
Management, Inc. (PMF). Pursuant to this agreement PMF has responsibility for
all investment advisory services and supervises the subadviser's performance of
such services. PMF has entered into a subadvisory agreement with the Prudential
Investment Corporation (PIC); PIC furnishes investment advisory services in
connection with the management of the Funds. PMF pays for the cost of the
subadvisor's services, the compensation of officers of the Funds, occupancy and
certain clerical and bookkeeping costs of the Funds. The Funds bear all other
costs and expenses.
B-47

<PAGE>
The management fee paid PMF is computed daily and payable monthly on the
following basis:
<TABLE>
<CAPTION>
Average Daily Command Command Command
Net Assets Money Government Tax-Free
- ------------------------------------ ------- ---------- -------
<S> <C> <C> <C>
First $500 million.................. .500% .400% .500%
Second $500 million................. .425% .400% .425%
Third $500 million.................. .375% .375% .375%
Excess of $1.5 billion.............. .350% .375% .375%
</TABLE>

Each Fund had a distribution agreement with Prudential Mutual Fund
Distributors, Inc. (``PMFD''), which acted as the distributor of the shares of
each Fund through January 1, 1996. Effective January 2, 1996, Prudential
Securities Incorporated (``PSI'') became the distributor of the shares of each
Fund and is serving each Fund under the same terms and conditions as under the
arrangement with PMFD. The Funds compensated PMFD for distributing and servicing
each Fund's shares pursuant to a plan of distribution at an annual rate of .125
of 1% of each respective Fund's average daily net assets. The distribution fee
is accrued daily and paid monthly.
PMFD is a wholly-owned subsidiary of PMF; Prudential Securities, PMF and PIC
are (indirect) wholly-owned subsidiaries of The Prudential Insurance Company of
America.

Note 3. Other Prudential Mutual Fund Ser-
Transactions vices, Inc. (PMFS), a wholly-
with Affiliates owned subsidiary of PMF,
serves as the Funds' transfer agent. During the
year ended June 30, 1996 the Funds incurred fees for the services of PMFS of
approximately:
<TABLE>
<S> <C>
Command Money.................................. $1,648,000
Command Government............................. $ 78,000
Command Tax-Free............................... $ 183,000
</TABLE>

As of June 30, 1996, the following amounts were due to PMFS from the Funds:
<TABLE>
<S> <C>
Command Money.................................... $151,532
Command Government............................... $ 6,756
Command Tax-Free................................. $ 15,245
</TABLE>

B-48
<PAGE>
APPENDIX A--GENERAL INVESTMENT INFORMATION

The following terms are used in mutual fund investing.

ASSET ALLOCATION

Asset allocation is a technique for reducing risk, providing balance. Asset
allocation among different types of securities within an overall investment
portfolio helps to reduce risk and to potentially provide stable returns, while
enabling investors to work toward their financial goal(s). Asset allocation is
also a strategy to gain exposure to better performing asset classes while
maintaining investment in other asset classes.

DIVERSIFICATION

Diversification is a time-honored technique for reducing risk, providing
"balance" to an overall portfolio and potentially achieving more stable returns.
Owning a portfolio of securities mitigates the individual risks (and returns) of
any one security. Additionally, diversification among types of securities
reduces the risks (and general returns) of any one type of security.

DURATION

Debt securities have varying levels of sensitivity to interest rates. As
interest rates fluctuate, the value of a bond (or a bond portfolio) will
increase or decrease. Longer-term bonds are generally more sensitive to changes
in interest rates. When interest rates fall, bond prices generally rise.
Conversely, when interest rates rise, bond prices generally fall.

Duration is an approximation of the price sensitivity of a bond (or a bond
portfolio) to interest rate changes. It measures the weighted average maturity
of a bond's (or a bond portfolio's) cash flows, I.E., principal and interest
rate payments. Duration is expressed as a measure of time in years--the longer
the duration of a bond (or a bond portfolio), the greater the impact of interest
rate changes on the bond's (or the bond portfolio's) price. Duration differs
from effective maturity in that duration takes into account call provisions,
coupon rates and other factors. Duration measures interest rate risk only and
not other risks, such as credit risk and, in the case of non-U.S. dollar
denominated securities, currency risk. Effective maturity measures the final
maturity dates of a bond (or a bond portfolio).

MARKET TIMING
Market timing--buying securities when prices are low and selling them when
prices are relatively higher--may not work for many investors because it is
impossible to predict with certainty how the price of a security will fluctuate.
However, owning a security for a long period of time may help investors offset
short-term price volatility and realize positive returns.

POWER OF COMPOUNDING

Over time, the compounding of returns can significantly impact investment
returns. Compounding is the effect of continuous investment on long-term
investment results, by which the proceeds of capital appreciation (and income
distributions, if elected) are reinvested to contribute to the overall growth of
assets. The long-term investment results of compounding may be greater than that
of an equivalent initial investment in which the proceeds of capital
appreciation and income distributions are taken in cash.

A-1
<PAGE>
APPENDIX--INFORMATION RELATING TO THE 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 "Management of the Fund--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,
1995 and is subject to change thereafter. All information relies on data
provided by The Prudential Investment Corporation (PIC) 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 diversified financial services institutions in the world and, based on
total assets, the largest insurance company in North America as of December 31,
1995. Its primary business is to offer a full range of products and services in
three areas: insurance, investments and home ownership for individuals and
families; health-care management and other benefit programs for employees of
companies and members of groups; and asset management for institutional clients
and their associates. Prudential (together with its subsidiaries) employs more
than 92,000 persons worldwide, and maintains a sales force of approximately
13,000 agents and 5,600 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 more than 50 million people
worldwide--one of every five people in the United States. Long one of the
largest issuers of individual life insurance, the Prudential has 19 million life
insurance policies in force today with a face value of $1 trillion. Prudential
has the largest capital base ($11.4 billion) of any life insurance company in
the United States. The Prudential provides auto insurance for more than 1.7
million cars and insures more than 1.4 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. In July 1995, INSTITUTIONAL INVESTOR ranked Prudential the third largest
institutional money manager of the 300 largest money management organizations in
the United States as of December 31, 1994. As of December 31, 1995, Prudential
had more than $314 billion in assets under management. Prudential's Money
Management Group (of which Prudential Mutual Funds is a key part) manages over
$190 billion in assets of institutions and individuals.

REAL ESTATE. The Prudential Real Estate Affiliates, the fourth largest real
estate brokerage network in the United States, has more than 34,000 brokers and
agents and more than 1,100 offices in the United States.(2)

HEALTHCARE. Over two decades ago, the Prudential introduced the first
federally-funded, for-profit HMO in the country. Today, almost 5 million
Americans receive healthcare from a Prudential managed care membership.

FINANCIAL SERVICES. The Prudential Bank, a wholly-owned subsidiary of the
Prudential, has nearly $3 billion in assets and serves nearly 1.5 million
customers across 50 states.

INFORMATION ABOUT THE PRUDENTIAL MUTUAL FUNDS

Prudential Mutual Fund Management is one of the sixteen largest mutual fund
companies 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)Prudential Mutual Fund Investment Management, a unit 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 subadviser to Nicholas-Applegate Fund,
Inc., Jennison Associates Capital Corp. as the subadviser to Prudential Jennison
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, 1994.

A-2
<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, individual 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 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 the 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. PIC 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 Fund 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 by
Lipper even have in assets.(5) Prudential Mutual Funds' money market desk traded
$3.2 billion in money market

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(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 Mutual Funds for which PIC serves as the subadviser, portfolios
of the Prudential Series Fund and institutional and non-US accounts managed by
Prudential Mutual Fund Investment Management, a division of PIC, for the year
ended December 31, 1995.

(5)Based on 669 funds in Lipper Analytical Services catagories 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.

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<PAGE>
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)

Based on complex-wide data, on an average day, over 7,250 shareholders
telephoned Prudential Mutual Fund Services, Inc., 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 SERVICES

Prudential Securities is the fifth largest retail brokerage firm in the
United States with approximately 5,600 financial advisors. It offers to its
clients a wide range of products, including Prudential Mutual Funds and
annuities. As of December 31, 1995, assets held by Prudential Securities for its
clients approximated $168 billion. During 1994, over 28,000 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
programs 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. Five
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 ArchitectSM, 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 the different mutual funds.

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.

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(6)As of December 31, 1994.

(7)As of December 31, 1994.

(8)In 1995, INSTITUTIONAL INVESTOR magazine surveyed more than 700
institutional money managers, chief investment officers and research directors,
asking them to evaluate analysts in approximately 80 industry sectors. Scores
were produced by taking the number of votes awarded to an individual analyst and
weighting them based on the size of the voting institution. In total, the
magazine sent its survey to more than 2,000 institutions, including a group of
European and Asian instititions. This survey is conducted annually.

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