<PAGE>
PROSPECTUS AUGUST 31, 2000
COMMAND Money Fund
COMMAND Tax-Free Fund
COMMAND Government Fund
FUND TYPE Money market
Build on the Rock
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the Funds' shares nor has the SEC determined that this
prospectus is complete or accurate. It is a criminal offense to state otherwise.
[PRUDENTIAL LOGO]
<PAGE>
TABLE OF CONTENTS
-------------------------------------
<TABLE>
<S> <C>
1 RISK/RETURN SUMMARY
1 COMMAND MONEY FUND:
1 Investment Objective and Principal Strategies
2 Principal Risks
2 Evaluating Performance
4 Fees and Expenses
5 COMMAND TAX-FREE FUND:
5 Investment Objective and Principal Strategies
6 Principal Risks
6 Evaluating Performance
8 Fees and Expenses
9 COMMAND GOVERNMENT FUND:
9 Investment Objective and Principal Strategies
10 Principal Risks
10 Evaluating Performance
12 Fees and Expenses
14 HOW THE FUNDS INVEST
14 COMMAND Money Fund: Investment Objective and Policies
16 COMMAND Tax-Free Fund: Investment Objective and Policies
18 COMMAND Government Fund: Investment Objective and Policies
20 Other Investments and Strategies
21 Rating of Fund Shares
21 Investment Risks
23 HOW THE FUNDS ARE MANAGED
23 Boards of Trustees
23 Manager
23 Investment Adviser
24 Distributor
25 FUND DISTRIBUTIONS AND TAX ISSUES
25 Distributions
25 Tax Issues
27 HOW TO BUY AND SELL SHARES OF THE FUNDS
27 How to Buy Shares
29 How to Sell Your Shares
</TABLE>
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COMMAND FUNDS [ICON] (800) 225-1852
<PAGE>
TABLE OF CONTENTS
------------------------------------------------
<TABLE>
<S> <C>
32 FINANCIAL HIGHLIGHTS
32 COMMAND Money Fund
33 COMMAND Tax-Free Fund
33 COMMAND Government Fund
35 THE PRUDENTIAL MUTUAL FUND FAMILY
FOR MORE INFORMATION (Back Cover)
</TABLE>
--------------------------------------------------------------------------------
<PAGE>
RISK/RETURN SUMMARY
-------------------------------------
This prospectus provides information about the COMMAND FUNDS, which consist of
three separate mutual funds--COMMAND MONEY FUND, COMMAND TAX-FREE FUND and
COMMAND GOVERNMENT FUND (each, a Fund and together, the Funds). While the Funds
have some common attributes, each one has its own investment objective and
policies, performance information, and risks. Therefore, some sections of this
prospectus deal with each Fund separately, while other sections address two or
more Funds at the same time.
In sections that refer to one particular Fund, "the Fund," "we," "us" or
"our" refers to that particular Fund.
Shares of each Fund are available for purchase only by participants in the
COMMAND-SM- Account and COMMAND Plus-SM- Account Programs (collectively, the
COMMAND program) which are available through Prudential Securities Incorporated,
and participants in the Prudential BusinessEdge-SM- Account Program (the
BusinessEdge program) which is available through either Prudential Securities
Incorporated or Pruco Securities Corporation.
This section highlights key information about each Fund. Additional
information follows this summary.
COMMAND MONEY FUND:
INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES
Our investment objective is HIGH CURRENT INCOME, PRESERVATION OF CAPITAL AND
MAINTENANCE OF LIQUIDITY. This means we look for investments that we think will
provide a high level of current income. To achieve our objective, we invest in
short-term money market instruments such as obligations issued by the
U.S. Government, commercial paper, asset-backed securities, funding agreements,
variable rate demand notes, bills, notes and other obligations issued by banks,
corporations and other companies, and obligations issued by foreign banks,
companies or foreign governments. The Fund will invest only in instruments with
remaining maturities of thirteen months or less and which are denominated in
U.S. dollars. The Fund may invest in longer-term securities that are accompanied
by demand features, which will shorten the effective maturity of the securities
to thirteen months or less. While we make every effort to achieve our objective
and maintain a net asset value of $1 per share, we can't guarantee success.
-------------------------------------------------------------------
1 COMMAND FUNDS [LOGO] (800) 225-1852
<PAGE>
RISK/RETURN SUMMARY
------------------------------------------------
COMMAND MONEY FUND: PRINCIPAL RISKS
Although we try to invest wisely, all investments involve risk. Since the Fund
invests in debt obligations, there is a risk that the value of a particular
obligation could go down. Debt obligations are generally subject to CREDIT
RISK--the risk that the issuer of a particular security may be unable to make
principal and interest payments when they are due, and MARKET RISK--the risk
that the securities could lose value because interest rates change or investors
lose confidence in the ability of issuers in general to pay back their debt.
With respect to the Fund's investments in asset-backed securities, there is a
risk of prepayment, which means that if the underlying obligations are paid
before they are due, the security may discontinue paying an attractive rate of
income.
The Fund's investment in foreign securities involves additional risks. For
example, foreign banks and companies generally are not subject to regulatory
requirements comparable to those applicable to U.S. banks and companies. In
addition, political developments and changes in currency rates may adversely
affect the value of foreign securities. In all cases, however, we invest only in
U.S. dollar-denominated securities.
There is also a risk that we will sell a security for a price that is higher
or lower than the value attributed to the security through the amortized cost
valuation procedures we follow. Such an event could affect our ability to
maintain a net asset value of $1 per share.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Fund seeks to preserve the value of an investment at
$1 per share, it is possible to lose money by investing in the Fund.
COMMAND MONEY FUND: EVALUATING PERFORMANCE
A number of factors--including risk--affect how the Fund performs. The following
bar chart shows the Fund's performance for each full calendar year of operation
for the last 10 years. The tables below compare the Fund's average annual
returns and yield for the periods indicated with those of a group of similar
funds. The bar chart and tables demonstrate the risk of investing in the Fund by
showing how returns can change. Past performance is not an indication that the
Fund will achieve similar results in the future. For current yield information,
you can call us at (800) 225-1852.
--------------------------------------------------------------------------------
2
<PAGE>
RISK/RETURN SUMMARY
------------------------------------------------
COMMAND MONEY FUND
ANNUAL RETURNS(1) (AS OF 12/31/99)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1990 7.93%
1991 5.90%
1992 3.59%
1993 2.81%
1994 3.92%
1995 5.63%
1996 5.04%
1997 5.20%
1998 5.20%
1999 4.88%
</TABLE>
BEST QUARTER: 1.95% (1st quarter of 1990) WORST QUARTER: 0.68% (2nd quarter of
1993)
COMMAND MONEY FUND
AVERAGE ANNUAL RETURNS(1) (AS OF 12/31/99)
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
<S> <C> <C> <C> <C>
Fund Shares 4.88% 5.19% 5.00% 6.52% (since 2/26/82)
Lipper Average(2) 4.49% 4.95% 4.80% N/A
</TABLE>
COMMAND MONEY FUND
7-DAY YIELD(1) (AS OF 12/31/99)
<TABLE>
<S> <C> <C> <C> <C>
Fund Shares 5.49%
IBC Average(3) 5.15%
</TABLE>
1 THE FUND'S RETURNS ARE AFTER DEDUCTION OF EXPENSES. THE TOTAL RETURN OF THE
FUND'S SHARES FROM 1-1-00 TO 6-30-00 WAS 2.78%.
2 THE LIPPER FUNDS AVERAGE IS BASED UPON THE AVERAGE RETURN OF ALL MUTUAL
FUNDS IN THE LIPPER U.S. TAXABLE MONEY MARKET FUNDS CATEGORY.
3 THE IBC AVERAGE IS BASED UPON THE AVERAGE YIELD OF ALL MUTUAL FUNDS IN THE
INTERNATIONAL BUSINESS COMMUNICATIONS FINANCIAL DATA TAXABLE MONEY MARKET
FUND CATEGORY.
-------------------------------------------------------------------
3 COMMAND FUNDS [LOGO] (800) 225-1852
<PAGE>
RISK/RETURN SUMMARY
------------------------------------------------
COMMAND MONEY FUND: FEES AND EXPENSES
These tables show the fees and expenses that you may pay if you buy and hold
shares of the Fund.
SHAREHOLDER FEES (PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<S> <C>
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price) None
Maximum deferred sales charge (load)
(as a percentage of the lower of original
purchase price or sale proceeds) None
Maximum sales charge (load) imposed on
reinvested dividends and other distributions None
Redemption fees None
Exchange fee None
COMMAND Program annual fee(1) $125(2)
BusinessEdge Program annual fee(1) $185(2)
</TABLE>
ANNUAL FUND OPERATING EXPENSES (DEDUCTED FROM FUND ASSETS)
<TABLE>
<S> <C>
Management fees .359%
+ Distribution and service (12b-1) fees .125%
+ Other expenses .047%
= TOTAL ANNUAL FUND OPERATING EXPENSES .531%
</TABLE>
1 COMMAND AND BUSINESSEDGE ARE FINANCIAL SERVICES PROGRAMS AVAILABLE THROUGH
PRUDENTIAL SECURITIES INCORPORATED AND/OR PRUCO SECURITIES CORPORATION. FOR
MORE INFORMATION, YOU SHOULD CONSULT A PRUDENTIAL SECURITIES FINANCIAL
ADVISOR OR A PRUCO SECURITIES PREFERRED AGENT.
2 THE ANNUAL PROGRAM FEE AS A PERCENTAGE OF AVERAGE NET ASSET IS .02% AND
.03% FOR THE COMMAND AND BUSINESSEDGE PROGRAMS, RESPECTIVELY, AND IS
CALCULATED BY DIVIDING $125 (THE TOTAL FEE FOR THE COMMAND PROGRAM) OR $185
(THE TOTAL FOR THE BUSINESSEDGE PROGRAM), RESPECTIVELY, BY THE AVERAGE
ACCOUNT SIZE IN THE FUND. THE ANNUAL PROGRAM FEE IS NOT PRORATED FOR
PURPOSES OF THIS CALCULATION TO GIVE EFFECT TO COMMAND PROGRAM OR
BUSINESSEDGE PROGRAM PARTICIPANTS WHO ALSO OWN SHARES IN OR SUBSCRIBE TO
VARIOUS SERVICES OFFERED BY THE RESPECTIVE PROGRAMS. A MAJOR PORTION OF THE
ANNUAL PROGRAM FEE IS NOT ATTRIBUTABLE TO THE FUND, BUT RATHER TO NONFUND
SERVICES PROVIDED BY THE PROGRAM.
--------------------------------------------------------------------------------
4
<PAGE>
RISK/RETURN SUMMARY
------------------------------------------------
EXAMPLE
This example will help you compare the cost of investing in the Fund with the
cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time periods
indicated and then sell all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions, your costs would be:
<TABLE>
<CAPTION>
1 YR 3 YRS 5 YRS 10 YRS
<S> <C> <C> <C> <C>
Fund shares $54 $170 $297 $666
</TABLE>
COMMAND TAX-FREE FUND:
INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES
Our investment objective is HIGH CURRENT INCOME THAT IS EXEMPT FROM FEDERAL
INCOME TAXES, CONSISTENT WITH THE MAINTENANCE OF LIQUIDITY AND PRESERVATION OF
CAPITAL. This means we look for investments that we think will provide a high
level of tax-exempt current income. To achieve our objective, we invest in
short-term debt obligations issued by state and local governments, municipal
commercial paper, variable rate demand obligations, and municipal asset-backed
securities. The Fund will invest only in instruments with remaining maturities
of thirteen months or less and which are denominated in U.S. dollars. The Fund
may invest in longer-term securities that are accompanied by demand features,
which will shorten the effective maturity of the securities to thirteen months
or less. While we make every effort to achieve our objective and maintain a net
asset value of $1 per share, we can't guarantee success.
Under normal circumstances, at least 80% of the Fund's net assets are
invested in money market instruments that pay income exempt from federal income
taxes and which are not preference items for purposes of the federal alternative
minimum tax. The Fund may invest up to 20% of its net assets in municipal debt
obligations that may be considered a preference item for purposes of the federal
alternative minimum tax. Shareholders should consult with their tax adviser
regarding the applicability of the federal alternative minimum tax.
-------------------------------------------------------------------
5 COMMAND FUNDS [LOGO] (800) 225-1852
<PAGE>
RISK/RETURN SUMMARY
------------------------------------------------
COMMAND TAX-FREE FUND: PRINCIPAL RISKS
Although we try to invest wisely, all investments involve risk. Since the Fund
invests in debt obligations, there is the risk that the value of a particular
obligation could go down. Debt obligations are generally subject to CREDIT
RISK--the risk that the issuer of a particular security may be unable to make
principal and interest payments when they are due, and MARKET RISK--the risk
that the securities could lose value because interest rates change or investors
lose confidence in the ability of issuers in general to pay back their debt. The
Fund's investment in municipal asset-backed securities are also subject to
PREPAYMENT RISK--the risk that the underlying obligations may be prepaid,
partially or completely, generally during times of falling interest rates, which
could adversely effect yield and could require the Fund to reinvest in lower
yielding obligations.
There is also a risk that we will sell a security for a price that is higher
or lower than the value attributed to the security through the amortized cost
valuation procedures we follow. Such an event could affect our ability to
maintain a net asset value of $1 per share.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Fund seeks to preserve the value of an investment at
$1 per share, it is possible to lose money by investing in the Fund.
COMMAND TAX-FREE FUND: EVALUATING PERFORMANCE
A number of factors--including risk--affect how the Fund performs. The following
bar chart shows the Fund's performance for each full calendar year of operation
for the last 10 years. The tables below compare the Fund's average annual
returns and yield for the periods indicated with those of a group of similar
mutual funds. The bar chart and tables demonstrate the risk of investing in the
Fund by showing how returns can change. Past performance is not an indication
that the Fund will achieve similar results in the future. For current yield
information, you can call us at (800) 225-1852.
--------------------------------------------------------------------------------
6
<PAGE>
RISK/RETURN SUMMARY
------------------------------------------------
COMMAND TAX-FREE FUND
ANNUAL RETURNS(1) (AS OF 12/31/99)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1990 5.53%
1991 4.26%
1992 2.69%
1993 1.93%
1994 2.57%
1995 3.35%
1996 2.93%
1997 3.17%
1998 3.01%
1999 2.80%
</TABLE>
BEST QUARTER: 1.38% (4th quarter of 1990) WORST QUARTER: 0.45% (1st quarter of
1994)
COMMAND TAX-FREE FUND
AVERAGE ANNUAL RETURNS(1) (AS OF 12/31/99)
<TABLE>
<CAPTION>
1 YR 5 YRS 10 YRS SINCE INCEPTION
<S> <C> <C> <C> <C>
Fund Shares 2.80% 3.05% 3.22% 4.00% (since 2/26/82)
Lipper Average(2) 2.68% 3.03% 2.82% N/A
</TABLE>
COMMAND TAX-FREE FUND
7-DAY YIELD(1) (AS OF 12/31/99)
<TABLE>
<S> <C> <C> <C> <C>
Fund Shares 3.86%
IBC Average(3) 3.68%
Tax-equivalent yield of the
Fund(4) 6.83%
</TABLE>
1 THE FUND'S RETURNS ARE AFTER DEDUCTION OF EXPENSES. THE TOTAL RETURN OF THE
FUND'S SHARES FROM 1-1-00 TO 6-30-00 WAS 1.67%.
2 THE LIPPER FUNDS AVERAGE IS BASED UPON THE AVERAGE RETURN OF ALL MUTUAL
FUNDS IN THE LIPPER U.S. NONTAXABLE MONEY MARKET FUNDS CATEGORY.
3 THE IBC AVERAGE IS BASED UPON THE AVERAGE YIELD OF ALL MUTUAL FUNDS IN THE
INTERNATIONAL BUSINESS COMMUNICATIONS FINANCIAL DATA NONTAXABLE MONEY
MARKET FUND CATEGORY.
4 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. IT IS CALCULATED BY DIVIDING THE FUND'S CURRENT YIELD BY THE RESULT
OF ONE MINUS THE MAXIMUM MARGINAL FEDERAL TAX RATE.
-------------------------------------------------------------------
7 COMMAND FUNDS [LOGO] (800) 225-1852
<PAGE>
RISK/RETURN SUMMARY
------------------------------------------------
COMMAND TAX-FREE FUND: FEES AND EXPENSES
These tables show the fees and expenses that you may pay if you buy and hold
shares of the Fund.
SHAREHOLDER FEES (PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<S> <C>
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price) None
Maximum deferred sales charge (load)
(as a percentage of the lower of original
purchase price or sale proceeds) None
Maximum sales charge (load) imposed on
reinvested dividends and other distributions None
Redemption fees None
Exchange fee None
COMMAND Program annual fee(1) $125(2)
BusinessEdge Program annual fee(1) $185(2)
</TABLE>
ANNUAL FUND OPERATING EXPENSES (DEDUCTED FROM FUND ASSETS)
<TABLE>
<S> <C>
Management fees .433%
+ Distribution and service (12b-1) fees .125%
+ Other expenses .019%
= TOTAL ANNUAL FUND OPERATING EXPENSES .577%
</TABLE>
1 COMMAND AND BUSINESSEDGE ARE FINANCIAL SERVICES PROGRAMS AVAILABLE THROUGH
PRUDENTIAL SECURITIES INCORPORATED AND/OR PRUCO SECURITIES CORPORATION. FOR
MORE INFORMATION, YOU SHOULD CONSULT A PRUDENTIAL SECURITIES FINANCIAL
ADVISOR OR A PRUCO SECURITIES PREFERRED AGENT.
2 THE ANNUAL PROGRAM FEE AS A PERCENTAGE OF AVERAGE NET ASSETS IS .71% AND
1.05% FOR THE COMMAND AND BUSINESSEDGE PROGRAMS, RESPECTIVELY, AND IS
CALCULATED BY DIVIDING $125 (THE TOTAL FEE FOR THE COMMAND PROGRAM) OR $185
(THE TOTAL FOR THE BUSINESSEDGE PROGRAM), RESPECTIVELY, BY THE AVERAGE
ACCOUNT SIZE IN THE FUND. THE ANNUAL PROGRAM FEE IS NOT PRORATED FOR
PURPOSES OF THIS CALCULATION TO GIVE EFFECT TO COMMAND PROGRAM OR
BUSINESSEDGE PROGRAM PARTICIPANTS WHO ALSO OWN SHARES IN OR SUBSCRIBE TO
VARIOUS SERVICES OFFERED BY THE RESPECTIVE PROGRAMS. A MAJOR PORTION OF THE
ANNUAL PROGRAM FEE IS NOT ATTRIBUTABLE TO THE FUND, BUT RATHER TO NONFUND
SERVICES PROVIDED BY THE PROGRAM.
--------------------------------------------------------------------------------
8
<PAGE>
RISK/RETURN SUMMARY
------------------------------------------------
EXAMPLE
This example will help you compare the cost of investing in the Fund with the
cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time periods
indicated and then sell all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions, your costs would be:
<TABLE>
<CAPTION>
1 YR 3 YRS 5 YRS 10 YRS
<S> <C> <C> <C> <C>
Fund shares $59 $185 $322 $722
</TABLE>
COMMAND GOVERNMENT FUND:
INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES
Our investment objective is HIGH CURRENT INCOME, PRESERVATION OF CAPITAL AND
MAINTENANCE OF LIQUIDITY. This means we look for investments that we think will
provide a high level of current income. To achieve our objective, we invest in
short-term money market instruments issued by the U.S. Government, its agencies
and intrumentalities, including mortgage-backed securities issued by U.S.
Government agencies. The Fund will invest only in instruments with remaining
maturities of thirteen months or less and which are denominated in
U.S. dollars. The Fund may invest in longer-term securities that are accompanied
by demand features, which will shorten the effective maturity of the securities
to thirteen months or less. While we make every effort to achieve our objective
and maintain a net asset value of $1 per share, we can't guarantee success.
-------------------------------------------------------------------
9 COMMAND FUNDS [LOGO] (800) 225-1852
<PAGE>
RISK/RETURN SUMMARY
------------------------------------------------
COMMAND GOVERNMENT FUND: PRINCIPAL RISKS
Although we try to invest wisely, all investments involve risk. Since the Fund
invests in debt obligations, there is the risk that the value of a particular
obligation could go down. Debt obligations of the U.S. Government are generally
subject of the MARKET RISK--the risk that the securities could lose value
because interest rates change. The Fund's investment in mortgage-backed
securities are also subject to PREPAYMENT RISK--the risk that the underlying
obligations may be prepaid, partially or completely, generally during times of
falling interest rates, which could adversely effect yield and could require the
Fund to reinvest in lower yielding obligations.
There is also a risk that we will sell a security for a price that is higher
or lower than the value attributed to the security through the amortized cost
valuation procedures we follow. Such an event could affect our ability to
maintain a net asset value of $1 per share.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Fund seeks to preserve the value of an investment at
$1 per share, it is possible to lose money by investing in the Fund.
COMMAND GOVERNMENT FUND: EVALUATING PERFORMANCE
A number of factors--including risk--affect how the Fund performs. The following
bar chart shows the Fund's performance for each full calendar year of operation
for the last 10 years. The tables below compare the Fund's average annual
returns and yield for the periods indicated with those of a group of similar
mutual funds. The bar chart and tables demonstrate the risk of investing in the
Fund by showing how returns can change. Past performance is not an indication
that the Fund will achieve similar results in the future. For current yield
information, you can call us at (800) 225-1852.
--------------------------------------------------------------------------------
10
<PAGE>
RISK/RETURN SUMMARY
------------------------------------------------
COMMAND GOVERNMENT FUND
ANNUAL RETURNS(1) (AS OF 12/31/99)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1990 7.75%
1991 5.70%
1992 3.44%
1993 2.68%
1994 3.65%
1995 5.42%
1996 4.89%
1997 5.08%
1998 5.08%
1999 4.75%
</TABLE>
BEST QUARTER: 1.91% (2nd quarter of 1990) WORST QUARTER: 0.65% (2nd quarter of
1993)
COMMAND GOVERNMENT FUND
AVERAGE ANNUAL RETURNS(1) (AS OF 12/31/99)
<TABLE>
<CAPTION>
1 YR 5 YRS 10 YRS SINCE INCEPTION
<S> <C> <C> <C> <C>
Fund Shares 4.75% 5.04% 4.84% 6.16% (since 2/26/82)
Lipper Average(3) 4.47% 4.92% 3.83% N/A
</TABLE>
COMMAND GOVERNMENT FUND
7-DAY YIELD(1) (AS OF 12/31/99)
<TABLE>
<S> <C> <C> <C> <C>
Fund Shares 4.96%
IBC Average(3) 4.97%
</TABLE>
1 THE FUND'S RETURNS ARE AFTER DEDUCTION OF EXPENSES. THE TOTAL RETURN OF THE
FUND'S SHARES FROM 1-1-00 TO 6-30-00 WAS 2.69%.
2 THE LIPPER FUNDS AVERAGE IS BASED UPON THE AVERAGE RETURN OF ALL MUTUAL
FUNDS IN THE LIPPER U.S. GOVERNMENT MONEY MARKET FUNDS CATEGORY.
3 THE IBC AVERAGE IS BASED UPON THE AVERAGE YIELD OF ALL MUTUAL FUNDS IN THE
INTERNATIONAL BUSINESS COMMUNICATIONS FINANCIAL DATA GOVERNMENT MONEY
MARKET FUND CATEGORY.
-------------------------------------------------------------------
11 COMMAND FUNDS [LOGO] (800) 225-1852
<PAGE>
RISK/RETURN SUMMARY
------------------------------------------------
COMMAND GOVERNMENT FUND: FEES AND EXPENSES
These tables show the fees and expenses that you may pay if you buy and hold
shares of the Fund.
SHAREHOLDER FEES (PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<S> <C>
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price) None
Maximum deferred sales charge (load)
(as a percentage of the lower of original
purchase price or sale proceeds) None
Maximum sales charge (load) imposed on
reinvested dividends and other distributions None
Redemption fees None
Exchange fee None
COMMAND Program annual fee(1) $125(2)
BusinessEdge Program annual fee(1) $185(2)
</TABLE>
ANNUAL FUND OPERATING EXPENSES (DEDUCTED FROM FUND ASSETS)
<TABLE>
<S> <C>
Management fees .400%
+ Distribution and service (12b-1) fees .125%
+ Other expenses .052%
= TOTAL ANNUAL FUND OPERATING EXPENSES .577%
</TABLE>
1 COMMAND AND BUSINESSEDGE ARE FINANCIAL SERVICES PROGRAMS AVAILABLE THROUGH
PRUDENTIAL SECURITIES INCORPORATED AND/OR PRUCO SECURITIES CORPORATION. FOR
MORE INFORMATION, YOU SHOULD CONSULT A PRUDENTIAL SECURITIES FINANCIAL
ADVISOR OR A PRUCO SECURITIES PREFERRED AGENT.
2 THE ANNUAL PROGRAM FEE AS A PERCENTAGE OF AVERAGE NET ASSETS IS .99% AND
1.46% FOR THE COMMAND AND BUSINESSEDGE PROGRAMS, RESPECTIVELY, AND IS
CALCULATED BY DIVIDING $125 (THE TOTAL FEE FOR THE COMMAND PROGRAM) OR $185
(THE TOTAL FOR THE BUSINESSEDGE PROGRAM), RESPECTIVELY, BY THE AVERAGE
ACCOUNT SIZE IN THE FUND. THE ANNUAL PROGRAM FEE IS NOT PRORATED FOR
PURPOSES OF THIS CALCULATION TO GIVE EFFECT TO COMMAND PROGRAM OR
BUSINESSEDGE PROGRAM PARTICIPANTS WHO ALSO OWN SHARES IN OR SUBSCRIBE TO
VARIOUS SERVICES OFFERED BY THE RESPECTIVE PROGRAMS. A MAJOR PORTION OF THE
ANNUAL PROGRAM FEE IS NOT ATTRIBUTABLE TO THE FUND, BUT RATHER TO NONFUND
SERVICES PROVIDED BY THE PROGRAM.
--------------------------------------------------------------------------------
12
<PAGE>
RISK/RETURN SUMMARY
------------------------------------------------
EXAMPLE
This example will help you compare the cost of investing in the Fund with the
cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time periods
indicated and then sell all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions, your costs would be:
<TABLE>
<CAPTION>
1 YR 3 YRS 5 YRS 10 YRS
<S> <C> <C> <C> <C>
Fund shares $59 $185 $322 $722
</TABLE>
-------------------------------------------------------------------
13 COMMAND FUNDS [LOGO] (800) 225-1852
<PAGE>
HOW THE FUNDS INVEST
-------------------------------------
COMMAND MONEY FUND:
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of this Fund is HIGH CURRENT INCOME, PRESERVATION OF
CAPITAL AND MAINTENANCE OF LIQUIDITY. This means we seek investments that will
provide a high level of current income. While we make every effort to achieve
our objective, we can't guarantee success. Our investment objective is a
fundamental investment policy, which means that it cannot be changed without
shareholder approval.
We invest in a diversified portfolio of short-term debt obligations which
include, but are not limited to, obligations issued by the U.S. Government, its
agencies and instrumentalities, as well as commercial paper, asset-backed
securities, funding agreements, variable rate demand notes, bills, notes and
other obligations issued by banks, corporations and other companies (including
trust structures), obligations issued by foreign banks, foreign companies or
foreign governments, and municipal notes.
The Fund invests in high-quality money market instruments to try to provide
investors with current income while maintaining a stable net asset value of
$1 per share. We manage the Fund to comply with specific rules designed for
money market mutual funds. This means that we manage its portfolio to comply
with the requirements of Rule 2a-7 under the Investment Company Act. As such, we
will not acquire any security with a remaining maturity exceeding thirteen
months, and we will maintain a dollar-weighted average portfolio of 90 days or
less. In addition, we will comply with the diversification, quality and other
requirements of Rule 2a-7. This means, generally, that the instruments we
purchase present "minimal credit risk" and are of "eligible quality." "Eligible
quality" for this purpose means a security: (i) rated in one of the two highest
short-term rating categories by at least two nationally recognized statistical
rating organizations (NRSROs) or, if only one NRSRO has rated the security, so
rated by that NRSRO; (ii) rated in one of the three highest long-term rating
categories by at least two NRSROs or, if only one NRSRO has rated the security,
so rated by that NRSRO; or (iii) if unrated, of comparable quality as determined
by the Fund's investment adviser. All securities that we purchase will be
denominated in U.S. dollars but may be issued by a foreign issuer.
COMMERCIAL PAPER is short-term debt obligations of banks, corporations and
other borrowers. The obligations are usually issued by financially strong
businesses and often include a line of credit to protect purchasers of the
obligations. An ASSET-BACKED SECURITY is a loan or note that pays interest based
upon the cash flow of a pool of assets, such as
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14
<PAGE>
HOW THE FUNDS INVEST
------------------------------------------------
mortgages, loans and credit card receivables. CERTIFICATES OF DEPOSIT, TIME
DEPOSITS, BANKERS' ACCEPTANCES and BANK NOTES are obligations issued by or
through a bank. These instruments depend upon the strength of the bank involved
in the borrowing to give investors comfort that the borrowing will be repaid
when promised. FUNDING AGREEMENTS are contracts issued by insurance companies
that guarantee a return of principal, plus some amount of interest. When
purchased by money market funds, funding agreements will typically be short-term
and provide an adjustable rate of interest.
DEBT OBLIGATIONS in general, including those listed above and any others
that we may purchase, are basically written promises to repay a debt. Among the
various types of debt securities we may purchase, the terms of repayment may
vary, as may the commitment of other parties to honor the obligations of the
issuer of the security. We may purchase securities that include DEMAND FEATURES,
which allow us to demand repayment of a debt obligation before the obligation is
due or "matures." This means that longer-term securities can be purchased
because we can demand repayment of the obligation at an agreed price within a
relatively short period of time. This procedure follows the rules applicable to
money market mutual funds.
FOREIGN SECURITIES and foreign markets involve additional risk. Foreign laws
and accounting standards typically are not as strict as they are in the U.S.
Foreign fixed income and currency markets may be less stable than those in
U.S. markets. Changes in the exchange rates of foreign currencies can affect the
value of foreign assets.
The securities that we may purchase may change over time as new types of
money market instruments are developed. We will purchase these new instruments,
however, only if their characteristics and features follow the rules governing
money market mutual funds.
Any of the money market instruments that the Fund may purchase may be
accompanied with the right to resell the instrument prior to the instrument's
maturity. In addition, we may separately purchase rights to resell these
instruments. These rights are referred to as "PUTS" and are acquired by the Fund
to protect against a possible decline in the market value of the securities to
which the puts relate in the event of interest rate fluctuations, to shorten the
effective maturity of the security and to provide the Fund with liquidity to
meet shareholder redemption requests.
The Board of Trustees of the Fund can change investment policies that are
not fundamental. For more information, see "Investment Risks" and the
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15 COMMAND FUNDS [LOGO] (800) 225-1852
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HOW THE FUNDS INVEST
------------------------------------------------
Statement of Additional Information, "Description of the Funds, Their
Investments and Risks." The Statement of Additional Information--which we refer
to as the SAI--contains more information about the Fund.
COMMAND TAX-FREE FUND:
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of this Fund is HIGH CURRENT INCOME THAT IS EXEMPT FROM
FEDERAL INCOME TAXES, CONSISTENT WITH MAINTENANCE OF LIQUIDITY AND PRESERVATION
OF CAPITAL. This means we seek investments that will provide a high level of
tax-exempt current income. While we make every effort to achieve our objective,
we can't guarantee success. Our investment objective is a fundamental investment
policy, which means that it cannot be changed without shareholder approval.
We invest in a diversified portfolio of short-term debt obligations issued
by states, territories and possessions of the United States and the District of
Columbia, and their respective political subdivisions. The interest on these
debt obligations is wholly exempt from federal income tax. The exemption from
federal income tax is supported by an opinion of counsel to the issuer. These
securities are generally known as "Municipal Bonds" or "Municipal Notes."
Municipal Bonds include industrial development bonds issued for various public
purposes and certain private activity bonds where public authorities issue bonds
to fund privately operated facilities, such as housing facilities, sports
facilities, pollution control facilities and parking facilities. Municipal Notes
include the tax anticipation notes, bond anticipation notes and revenue
anticipation notes. Municipal Notes sold in anticipation of collection of taxes,
a bond sale or receipt of other revenues are usually general obligations of the
issuing municipality or agency.
Interest on certain Municipal Bonds and Municipal Notes may be a preference
item for purposes of the federal alternative minimum tax (AMT Paper), which
means that certain investors who receive distributions from the Fund will be
subject to federal income taxes on such distributions. The Fund may invest up to
20% of its net assets in AMT Paper. Under normal circumstances, the Fund will
invest at least 80% of its net assets in Municipal Bonds and Municipal Notes
that are not subject to the federal Alternative Minimum Tax.
The Fund invests in eligible high-quality money market instruments to try to
provide investors with a high level of current tax-exempt income while
maintaining a stable net asset value of $1 per share. We manage the Fund to
comply with specific rules designed for money market mutual funds. This
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16
<PAGE>
HOW THE FUNDS INVEST
------------------------------------------------
means that we manage its portfolio to comply with the requirements of Rule 2a-7
under the Investment Company Act. As such, we will not acquire any security with
a remaining maturity exceeding thirteen months, and we will maintain a
dollar-weighted average portfolio of 90 days or less. In addition, we will
comply with the diversification, quality and other requirements of Rule 2a-7.
This means, generally, that the instruments we purchase present "minimal credit
risk" and are of "eligible quality." "Eligible quality" for this purpose means a
security: (i) rated in one of the two highest short-term rating categories by at
least two nationally recognized statistical rating organizations (NRSROs) or, if
only one NRSRO has rated the security, so rated by that NRSRO; (ii) rated in one
of the three highest long-term rating categories by at least two NRSROs or, if
only one NRSRO has rated the security, so rated by that NRSRO; or (iii) if
unrated, of comparable quality as determined by the Fund's investment adviser.
DEBT OBLIGATIONS in general, including those listed above and any others
that we may purchase, are basically written promises to repay a debt. Among the
various types of debt securities we may purchase, the terms of repayment may
vary, as may the commitment of other parties to honor the obligations of the
issuer of the security. We may purchase securities that are subject to DEMAND
FEATURES, which provide liquidity and allow us to demand repayment of a debt
obligation before the obligation is due or "matures". This means that
longer-term securities can be purchased because we can demand repayment of the
obligation at an agreed price within a relatively short period of time. This
procedure follows the rules applicable to money market mutual funds.
The Fund's investments also include variable rate demand obligations (VRDOs)
and VRDOs in the form of participation interests (Participating VRDOs) in
variable rate tax-exempt obligations held by financial institutions. The VRDOs
in which the Fund may invest are tax-exempt obligations that contain a floating
or variable interest rate adjustment formula and an unconditional right of
demand on the part of the holder to receive payment of the unpaid principal plus
accrued interest on a short notice period. Participating VRDOs provide the Fund
with a specified undivided interest (up to 100%) of the underlying obligations
and the right to demand payment of the unpaid principal plus accrued interest on
the Participating VRDOs from the financial institution on a short notice period.
There is a possibility, because of default or insolvency, that the demand
features of VRDOs or Participating VRDOs may not be honored.
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17 COMMAND FUNDS [LOGO] (800) 225-1852
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HOW THE FUNDS INVEST
------------------------------------------------
The securities that we may purchase may change over time as new types of
money market instruments are developed. We will purchase these new instruments,
however, only if their characteristics and features follow the rules governing
money market mutual funds.
Any of the money market instruments that the Fund may purchase may be
accompanied with the right to resell the instrument prior to the instrument's
maturity. These rights are referred to as "PUTS" and are acquired by the Fund to
protect against a possible decline in the market value of the securities to
which the puts relate in the event of interest rate fluctuations and to shorten
the effective maturity of the security. One form of liquidity puts consists of
an underlying fixed rate municipal bond that is subject to a third party demand
feature or "TENDER OPTION." Tender option bonds are the functional equivalent of
ordinary variable or floating rate obligations.
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 Municipal Notes and for providing state and
local governments with federal credit assistance. Reevaluation of the Fund's
investment objective and structure might be necessary in the future due to
market conditions which may result from future changes in the tax laws.
The Board of Trustees of the Fund can change investment policies that are
not fundamental. For more information, see "Investment Risks" and the Statement
of Additional Information, "Description of the Funds, Their Investments and
Risks." The Statement of Additional Information--which we refer to as the
SAI--contains more information about the Fund.
COMMAND GOVERNMENT FUND:
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of this Fund is HIGH CURRENT INCOME, PRESERVATION OF
CAPITAL AND MAINTENANCE OF LIQUIDITY. This means we seek investments that will
provide a high level of current income. While we make every effort to achieve
our objective, we can't guarantee success. Our investment objective is a
fundamental investment policy, which means that it cannot be changed without
shareholder approval.
The Fund invests in money market instruments issued by the U.S. Government,
its agencies and instrumentalities to try to provide investors with current
income while maintaining a stable net asset value of $1 per share. We manage the
Fund to comply with specific rules designed
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18
<PAGE>
HOW THE FUNDS INVEST
------------------------------------------------
for money market mutual funds. This means that we manage its portfolio to comply
with the requirements of Rule 2a-7 under the Investment Company Act. As such, we
will not acquire any security with a remaining maturity exceeding thirteen
months, and we will maintain a dollar-weighted average portfolio of 90 days or
less. In addition, we will comply with the diversification, quality and other
requirements of Rule 2a-7. This means, generally, that the instruments that we
purchase present "minimal credit risk" and are of "eligible quality." "Eligible
quality" for this purpose includes all short-term debt obligations of the
U.S. Government, its agencies and instrumentalities, in which the Fund may
invest.
Treasury debt obligations are sometimes "stripped" into their component
parts; the Treasury's obligation to make periodic interest payments and its
obligation to repay the amount borrowed. These STRIPPED SECURITIES are sold to
investors separately. Stripped securities do not make periodic interest
payments. They are usually sold at a discount and then redeemed for their face
value on their maturity dates. These securities increase in value when interest
rates fall and lose value when interest rates rise. However, the value of
stripped securities generally fluctuates more in response to interest rate
movements than the value of traditional bonds. The Fund may try to earn money by
buying stripped securities at a discount and either selling them after they
increase in value or holding them until they mature.
DEBT OBLIGATIONS ISSUED OR GUARANTEED BY THE U.S. GOVERNMENT and
government-related entities include debt securities backed by the full faith and
credit of the U.S. Government, like obligations of the Government National
Mortgage Association (GNMA or Ginnie Mae). Debt securities issued by other
government entities, like obligations of the Federal National Mortgage
Association (FNMA or Fannie Mae) and the Student Loan Marketing Association
(SLMA or Sallie Mae), are not backed by the full faith and credit of the
U.S. Government. However, these issuers have the right to borrow from the
U.S. Treasury to meet their obligations. In contrast, the debt securities of
other issuers, like the Farm Credit System, depend entirely upon their own
resources to repay their debt.
The securities that we may purchase may change over time as new types of
money market instruments are developed. We will purchase these new instruments,
however, only if their characteristics and features follow the rules governing
money market mutual funds.
Any of the money market instruments that the Fund may purchase may be
accompanied with the right to resell the instrument prior to the
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19 COMMAND FUNDS [LOGO] (800) 225-1852
<PAGE>
HOW THE FUNDS INVEST
------------------------------------------------
instrument's maturity. In addition, we may separately purchase rights to resell
these instruments. These rights are referred to as "PUTS" and are acquired by
the Fund to protect against a possible decline in the market value of the
securities to which the puts relate in the event of interest rate fluctuations
and to shorten the effective maturity of the security.
The Board of Trustees of the Fund can change investment policies that are
not fundamental. For more information, see "Investment Risks" and the Statement
of Additional Information, "Description of the Funds, Their Investments and
Risks." The Statement of Additional Information--which we refer to as the
SAI--contains more information about the Fund.
OTHER INVESTMENTS AND STRATEGIES
While each Fund invests principally in the securities described above, they may
invest in other securities or use certain investment strategies to increase
returns or protect their assets, if market conditions warrant.
Each Fund intends to participate in one or more JOINT TRADING ACCOUNTS
whereby the Fund, along with other investment companies managed by Prudential
Investments Fund Management LLC, will jointly engage in repurchase agreements
and, subject to the issuance of an order by the Securities and Exchange
Commission, jointly purchase money market instruments. The ability of the Funds
to participate in these joint trading accounts will be conditioned upon
requirements imposed by such order, which may be amended from time to time.
Each Fund intends to use REPURCHASE AGREEMENTS, where a party agrees to sell
a security to a Fund and then repurchase it at an agreed-upon price at a stated
time. This creates a fixed return for a Fund. A Fund will only enter into these
repurchase agreements with parties whom we believe can honor their obligations
in the transactions.
Each Fund may use REVERSE REPURCHASE AGREEMENTS where we borrow money on a
temporary basis by selling a security with an obligation to repurchase it at an
agreed-upon price at a stated time.
Each Fund may purchase money market or other obligations on a "WHEN-ISSUED"
or "DELAYED-DELIVERY" basis. When a Fund makes this type of purchase, the price
and interest rate are fixed at the time of purchase, but delivery and payment
for the obligations take place at a later time. A Fund does not earn interest
income until the date the obligations are delivered.
Each Fund may purchase FLOATING RATE and VARIABLE RATE securities. These
securities pay interest at rates that change periodically to reflect
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<PAGE>
HOW THE FUNDS INVEST
------------------------------------------------
changes in market interest rates. Because these securities adjust the interest
they pay, they may be beneficial when interest rates are rising because of the
additional return a Fund will receive, and they may be detrimental when interest
rates are falling because of the reduction in interest payments to a Fund.
Each Fund also follows certain policies when it BORROWS MONEY (COMMAND Money
Fund and COMMAND Government Fund may each borrow up to 20% of the value of their
respective total assets; COMMAND Tax-Free Fund may borrow up to 5% of the value
of its total assets); LENDS ITS SECURITIES TO OTHERS (COMMAND Money Fund and
COMMAND Government Fund may each lend up to 10% of its total assets, including
collateral received in the transaction; COMMAND Tax-Free Fund may not lend its
securities); and holds ILLIQUID SECURITIES (each Fund may hold up to 10% of its
net assets in securities, including certain restricted securities, which do not
have a readily available market, repurchase agreements with maturities longer
than seven days and, with respect to COMMAND Tax-Free Fund, municipal
asset-backed VRDOs with notice periods for demand of unpaid principal and
accrued interest exceeding seven days). Each Fund is subject to certain
investment restrictions that are fundamental policies, which means they cannot
be changed without shareholder approval. For more information about these
restrictions, see the SAI.
RATING OF FUND SHARES
Duff & Phelps Credit Rating Co. (DCR) or its successors has given COMMAND Money
Fund and COMMAND Government Fund each an AAA rating. According to DCR, the AAA
rating means such Funds' ability to meet redemption requests in a timely manner
for $1.00 per share is strong. This rating is based on such Funds' risk
management procedures, internal control systems, limitations on market risk and
experienced management team.
INVESTMENT RISKS
As noted, all investments involve risk, and investing in the Funds is no
exception. This chart outlines the key risks and potential rewards of the
principal investments each Fund may make. See, "Description of the Funds, Their
Investments and Risks" in the SAI.
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21 COMMAND FUNDS [LOGO] (800) 225-1852
<PAGE>
HOW THE FUNDS INVEST
------------------------------------------------
INVESTMENT TYPE
<TABLE>
<CAPTION>
% OF FUND'S TOTAL ASSETS RISKS POTENTIAL REWARDS
<S> <C> <C>
---------------------------------------------------------------------------------------------------------------------------
HIGH-QUALITY MONEY -- Credit risk--the risk that default of an -- A source of regular interest income
MARKET OBLIGATIONS issuer would leave the Funds with unpaid -- May be more secure than stock and other
interest or principal or, in the case of equity securities since corporate issuers
ALL FUNDS: VRDOs and Participating VRDOs, that the must pay their debts before they pay
UP TO 100% issuer of a put may not be able to meet dividends
its obligation to purchase the underlying
security
-- Market risk--the risk that the obligations
may lose value because interest rates
change or there is a lack of confidence
in a group of borrowers or in an industry
---------------------------------------------------------------------------------------------------------------------------
MONEY MARKET -- Foreign markets, economies and political -- Investors may realize higher returns based
OBLIGATIONS OF systems may not be as stable as in the upon higher interest rates paid on
FOREIGN ISSUERS U.S. foreign investments
(U.S. DOLLAR- -- Differences in foreign laws, accounting -- Increased diversification by expanding the
DENOMINATED) standards, public information and custody allowable choices of high-quality money
and settlement procedures provide less market obligations
COMMAND MONEY FUND: reliable information on foreign
UP TO 100% investments and involve more risk
---------------------------------------------------------------------------------------------------------------------------
ILLIQUID SECURITIES -- May be difficult to value -- May offer a more attractive yield than
-- May be difficult to sell at the time or more widely traded securities
ALL FUNDS: price desired
UP TO 10% OF NET ASSETS
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
HOW THE FUNDS ARE MANAGED
-------------------------------------
BOARDS OF TRUSTEES
Each Board of Trustees oversees the actions of the Manager, Investment Adviser
and Distributor and decides on general policies for the applicable Fund. The
Boards also oversee each Fund's officers who conduct and supervise the daily
business operations of the Funds.
MANAGER
PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC (PIFM)
GATEWAY CENTER THREE, 100 MULBERRY STREET
NEWARK, NEW JERSEY 07102-4077
Under a management agreement with each Fund, PIFM manages each Fund's
investment operations and administers its business affairs. PIFM is also
responsible for supervising the Funds' investment adviser. For the fiscal year
ended June 30, 2000, COMMAND Money Fund, COMMAND Tax-Free Fund and COMMAND
Government Fund paid PIFM management fees of .359%, .433% and .400%,
respectively, of each Fund's average daily net assets.
As of June 30, 2000, PIFM served as the Manager to all 42 of the Prudential
Mutual Funds, and as Manager or administrator to 22 closed-end investment
companies, with aggregate assets of approximately $76 billion.
INVESTMENT ADVISER
The Prudential Investment Corporation (PIC), called Prudential Investments, is
the investment adviser to each Fund and has served as an investment adviser to
investment companies since 1984. Its address is Prudential Plaza, 751 Broad
Street, Newark, New Jersey 07102. PIFM has responsibility for all investment
advisory services, supervises Prudential Investments and pays Prudential
Investments for its services.
Each Fund is a money market mutual fund managed by a portfolio manager
employed by the subadviser, and supported by a group of research analysts.
Prudential Investments Fixed Income Group is organized into teams that
specialize by sector. The Fixed Income Investment Policy Committee, which is
comprised of senior investment staff from each sector team, provides guidance to
the teams regarding duration risk, asset allocations and general risk
parameters. Portfolio managers contribute bottom up security selection within
those guidelines.
DISTRIBUTOR
Prudential Investment Management Services LLC (PIMS) distributes the Funds'
shares under a Distribution Agreement with each Fund. Each Fund also has a
Distribution and Service Plan (the Plan) pursuant to Rule 12b-1
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23 COMMAND FUNDS [LOGO] (800) 225-1852
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HOW THE FUNDS ARE MANAGED
------------------------------------------------
under the Investment Company Act. Under the Plans and the Distribution
Agreement, PIMS pays the expenses of distributing each Fund's shares and
provides certain shareholder support services. Each Fund reimburses PIMS for its
distribution services. These fees--known as 12b-1 fees--are shown in the "Fees
and Expenses" table of each Fund. Because these fees are paid from each Fund's
assets on a continuous basis, over time these fees will increase the cost of
your investment and may cost you more than paying other types of sales charges.
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<PAGE>
FUND DISTRIBUTIONS
AND TAX ISSUES
-------------------------------------
Investors who buy shares of a Fund should be aware of some important tax issues.
For example, each Fund distributes DIVIDENDS of ordinary income and any realized
net CAPITAL GAINS to shareholders. These distributions are subject to taxes,
unless you hold your shares in a 401(k) plan, an Individual Retirement Account
(IRA), or some other qualified or tax-deferred plan or account.
The following briefly discusses some of the important tax issues that should
be considered, but is not meant to be tax advice. For tax advice, please speak
with your tax adviser.
DISTRIBUTIONS
Each Fund distributes DIVIDENDS of any net investment income to shareholders
every month. Dividends received from the COMMAND Money Fund and the COMMAND
Government Fund will be taxed as ORDINARY INCOME, whether or not they are
reinvested in the Fund. The COMMAND Tax-Free Fund intends to invest so that
dividend distributions to you will be exempt from federal income taxation.
Although a Fund is not likely to realize capital gains because of the types
of securities we purchase, any realized net CAPITAL GAINS will be paid to
shareholders (typically once a year). Capital gains are generated when a Fund
sells assets for a profit.
For your convenience, Fund distributions of dividends and capital gains are
automatically reinvested in your account. If you ask us to pay the distributions
in cash, we will wire the distribution to your bank account instead of
purchasing more shares of your Fund. Either way, distributions from the COMMAND
Money Fund and the COMMAND Government Fund will be subject to taxes, unless your
shares are held in a qualified or tax-deferred plan or account.
TAX ISSUES
FORM 1099
Every year, you will receive a Form 1099, which reports the amount of dividends
and capital gains we distributed to you during the prior year. If you own shares
of a Fund as part of a qualified or tax-deferred plan or account, your taxes are
deferred, so you will not receive a Form 1099. However, you will receive a Form
1099 when you take any distributions from your qualified or tax-deferred plan or
account.
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25 COMMAND FUNDS [LOGO] (800) 225-1852
<PAGE>
FUND DISTRIBUTIONS
AND TAX ISSUES
------------------------------------------------
Fund distributions are generally taxable to you in the year they are
received, except when we declare certain dividends in December of a calendar
year but actually pay them in January of the following year. In such cases, the
dividends are treated as if they were paid on December 31 of the prior year.
WITHHOLDING TAXES
If federal law requires you to provide a Fund with your taxpayer identification
number and certifications as to your tax status, and if you fail to do so, or if
you are otherwise subject to backup withholding, we will withhold and pay to the
U.S. Treasury 31% of your distributions. Dividends of net investment income and
short-term capital gains paid to a nonresident foreign shareholder generally
will be subject to a U.S. withholding tax of 30%. This rate may be lower,
depending on any tax treaty the U.S. may have with the shareholder's country.
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26
<PAGE>
HOW TO BUY AND
SELL SHARES OF THE FUNDS
-------------------------------------
HOW TO BUY SHARES
COMMAND AND BUSINESSEDGE ACCOUNTS
Shares of the Funds are available only to participants in the COMMAND Account
and COMMAND Plus Account programs (collectively, the COMMAND programs) who have
placed a minimum of $10,000 in cash and/or securities in the COMMAND program or
who have 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). The shares of the Funds are also
available to participants in the BusinessEdge program who have placed a minimum
of $10,000 in cash and/or securities in their BusinessEdge Account.
The COMMAND programs are available through Prudential Securities
Incorporated. The BusinessEdge program is available through either Prudential
Securities Incorporated or Pruco Securities Corporation. For purposes of this
section, the COMMAND program and the BusinessEdge program are individually
referred to as a "Program" and collectively referred to as the "Programs."
The Programs allow you to designate a money market fund as your primary
money sweep fund for the Program. This sweep feature allows you to have free
credit balances in your Program securities account automatically invested in one
of the Funds, the 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 Account Funds), depending on
which of the Account Funds has been designated by the participant as his or her
primary money sweep fund.
AUTOMATIC PURCHASE PROCEDURES
With each Program, all credit balances (that is, immediately available funds) of
$1 or more will be invested in the primary money sweep fund on a daily basis.
Prudential Securities arranges for the investment of the credit balance in the
primary money sweep fund and will purchase shares of the primary money sweep
fund equal to that amount. This will occur on the business day following the
availability of the credit balance. Prudential Securities may use and retain the
benefit of credit balances in your account until shares are purchased.
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27 COMMAND FUNDS [LOGO] (800) 225-1852
<PAGE>
HOW TO BUY AND
SELL SHARES OF THE FUNDS
------------------------------------------------
Shares of the primary money sweep fund, including any of the Funds, will be
purchased as follows:
-- When your account has a credit balance of $10,000 or more, Prudential
Securities will arrange for the automatic purchase of shares with all
cash balances of $1 or more. This will occur on the business day
following the availability of the credit balance
-- When your account has a credit balance that results from a securities
sale totaling more than $1,000, all cash balances of $1 or more will
be invested on the business day following the settlement date
-- For all other credit balances of $1 or more, shares will be purchased
automatically at least once a month on the last business day of each
month
You will begin earning dividends on your shares purchased through the
Program on the first business day after the order is placed. Prudential
Securities will purchase shares of the Fund at the price determined at
4:30 p.m., New York time, on the business day following the availability of the
credit balance. Prudential Securities will use and retain the benefit of credit
balances in your account until shares are purchased.
Purchases of, withdrawals from and dividends from the primary money sweep
fund will be shown on your Program statement. Under either the COMMAND program
or the BusinessEdge program, Prudential Securities or Pruco Securities has the
right to terminate a Program securities account for any reason. If this occurs,
all shares held in a shareholder's account will be redeemed.
UNDERSTANDING THE PRICE YOU'LL PAY
When you invest in a mutual fund, you buy shares of a Fund. Shares of a money
market mutual fund, like the Funds, are priced differently than shares of common
stock and other securities.
The price you pay for each share of a Fund is based on the share value. The
share value of a mutual fund--known as the NET ASSET VALUE or NAV--is determined
by a simple calculation: it's the total value of the Fund (assets minus
liabilities) divided by the total number of shares outstanding. In determining
NAV, the Funds value their securities using the amortized cost method. Each Fund
seeks to maintain a NAV of $1 at all
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<PAGE>
HOW TO BUY AND
SELL SHARES OF THE FUNDS
------------------------------------------------
times. Your broker may charge you a separate or additional fee for purchases of
shares.
We determine the NAV of our shares once each business day at 4:30 p.m., New
York time, on days that the New York Stock Exchange is open for trading. We do
not determine NAV on days when we have not received any orders to purchase, sell
or exchange Fund shares, or when changes in the value of a Fund's portfolio do
not affect the NAV.
ADDITIONAL SHAREHOLDER SERVICES
As a Fund shareholder, you can take advantage of the following services and
privileges:
AUTOMATIC REINVESTMENT. As we explained in the Fund Distributions and Tax Issues
section, each Fund pays out--or distributes--its net investment income and
capital gains to all shareholders. For your convenience, we will automatically
reinvest your distributions in your Fund at NAV.
REPORTS TO SHAREHOLDERS. Every year we will send you an annual report (along
with an updated prospectus) and a semi-annual report, which contain important
financial information about your Fund. To reduce Fund expenses, we will send one
annual shareholder report, one semi-annual shareholder report and one annual
prospectus per household, unless you instruct us or your broker otherwise.
HOW TO SELL YOUR SHARES
When you sell shares of a Fund--also known as REDEEMING your shares--the price
you will receive will be the NAV next determined after Prudential Securities or
Pruco Securities receives your order to sell. We must receive your order to sell
by 4:15 p.m., New York time, to process the sale on that day.
AUTOMATIC REDEMPTION
Shares of your primary money sweep fund may be automatically redeemed to cover
any deficit in your account. A deficit in your COMMAND program account or your
BusinessEdge program account may result from activity arising under either
Program, such as debit balances incurred by use of the
Visa-Registered Trademark- Gold Account, including Visa purchases, cash advances
and Visa
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29 COMMAND FUNDS [LOGO] (800) 225-1852
<PAGE>
HOW TO BUY AND
SELL SHARES OF THE FUNDS
------------------------------------------------
Account checks. Debit balances for Visa purchases are payable on the 25th day of
each month or, if that day is a weekend or holiday, on the preceding business
day. Participants in the BusinessEdge program may also effect an automatic
redemption of Fund shares by using their BusinessEdge Visa-Registered Trademark-
Debit Card Account.
Your Program securities account will be automatically scanned for deficits
each day and, if there is insufficient cash in your account, we will redeem an
appropriate number of shares of your primary money sweep fund and, if necessary,
shares of other money market funds that you own in the Program but which are not
designated as your primary money sweep fund, to satisfy any remaining deficit.
Margin loans will be utilized to satisfy any deficits in your account after all
of your shares in a Fund and other money market funds you own are redeemed.
Shares of a Fund may not be purchased until all deficits and overdrafts in your
account are satisfied.
You are entitled to any dividends declared on the redeemed shares through
the day before the redemption is made. Dividends declared on the redemption date
will be retained by Prudential Securities, which has advanced monies to satisfy
deficits in your account. The amount redeemed will be the nearest dollar amount
necessary to cover deficits from securities transactions or to honor your
redemption requests.
MANUAL REDEMPTION
You may make manual redemptions (that is, a non-money market sweep redemption)
of shares of a Fund other than the fund selected as your primary money sweep
fund under the COMMAND program or the BusinessEdge program. To complete a manual
redemption, you should submit a written request for redemption directly to the
Distributor or by calling your Prudential Securities Financial Advisor or Pruco
Securities Preferred Agent. The proceeds from a manual redemption will
immediately become a free cash balance in your Program securities account and
will automatically be invested in the fund that you have selected as your
primary money sweep fund. Each Program requires that the written redemption
request be signed by all persons in whose name the shares are registered,
exactly as their names appear on the Program account client statement. In
certain instances, additional documents such as trust instruments, death
certificates, appointments as executor or administrator or certificates of
corporate authority may be requested.
--------------------------------------------------------------------------------
30
<PAGE>
HOW TO BUY AND
SELL SHARES OF THE FUNDS
------------------------------------------------
RESTRICTIONS ON SALES
There are certain times when you may not be able to sell shares of a Fund, or
when we may delay paying you the proceeds from a sale. This may happen during
unusual market conditions or emergencies when the Fund can't determine the value
of its assets or sell its holdings. For more information, see the SAI, "Purchase
and Redemption of Fund Shares."
REDEMPTION IN KIND
If the sales of shares of a Fund you make during any 90-day period reach the
lesser of $250,000 or 1% of the value of that Fund's net assets, we can then
give you securities from that Fund's portfolio instead of cash. If you want to
sell the securities for cash, you would have to pay the costs charged by a
broker.
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31 COMMAND FUNDS [LOGO] (800) 225-1852
<PAGE>
FINANCIAL HIGHLIGHTS
-------------------------------------
The financial highlights below are intended to help you evaluate each Fund's
financial performance for the past 5 years. The TOTAL RETURN in the chart
represents the rate that a shareholder earned on an investment in the Fund,
assuming reinvestment of all dividends and other distributions. The information
is for shares of the Fund for the periods indicated.
Review this chart with the financial statements and report of independent
accountants which appear in the SAI. Additional performance information is
contained in the annual report, which you can receive at no charge, as described
on the back cover of this prospectus.
The financial highlights were audited by PricewaterhouseCoopers LLP,
independent accountants. Their reports were unqualified.
COMMAND MONEY FUND (FISCAL YEARS ENDED 6-30)
<TABLE>
<CAPTION>
PER SHARE OPERATING
PERFORMANCE 2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income and net
realized gains .053 .048 .052 .049 .052
Dividends and
distributions to
shareholders (.053) (.048) (.052) (.049) (.052)
Net asset value,
end of year $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN(1) 5.42% 4.85% 5.31% 5.06% 5.30%
------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL
DATA 2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF
YEAR (000) $13,489,038 $12,246,946 $9,090,289 $6,629,903 $5,309,842
RATIOS TO AVERAGE
NET ASSETS:
Net investment
income 5.32% 4.73% 5.19% 4.97% 5.15%
Expenses .53% .54% .54% .57% .58%
</TABLE>
1. TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. IT IS
CALCULATED ASSUMING SHARES ARE PURCHASED ON THE FIRST DAY AND SOLD ON THE
LAST DAY OF EACH PERIOD REPORTED.
--------------------------------------------------------------------------------
32
<PAGE>
FINANCIAL HIGHLIGHTS
------------------------------------------------
COMMAND TAX-FREE FUND (FISCAL YEARS ENDED 6-30)
<TABLE>
<CAPTION>
PER SHARE OPERATING
PERFORMANCE 2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income and net
realized gains .032 .027 .031 .030 .031
Dividends and
distributions to
shareholders (.032) (.027) (.031) (.030) (.031)
Net asset value,
end of year $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN(1) 3.19% 2.77% 3.16% 3.05% 3.12%
-----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL
DATA 2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------------
NET ASSETS, END OF
YEAR (000) $1,429,087 $1,476,732 $1,332,985 $1,129,513 $1,156,935
RATIOS TO AVERAGE
NET ASSETS:
Net investment
income 3.15% 2.72% 3.11% 3.00% 3.06%
Expenses .58% 0.59% 0.60% 0.64% 0.66%
</TABLE>
1. TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. IT IS
CALCULATED ASSUMING SHARES ARE PURCHASED ON THE FIRST DAY AND SOLD ON THE
LAST DAY OF EACH PERIOD REPORTED.
COMMAND GOVERNMENT FUND (FISCAL YEARS ENDED 6-30)
<TABLE>
<CAPTION>
PER SHARE OPERATING
PERFORMANCE 2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income and net
realized gains .051 .046 .051 .049 .050
Dividends and
distributions to
shareholders (.051) (.046) (.051) (.049) (.050)
Net asset value,
end of year $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN(1) 5.23% 4.74% 5.20% 4.97% 5.12%
--------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL
DATA 2000 1999 1998 1997 1996
--------------------------------------------------------------------------------------------------------
NET ASSETS, END OF
YEAR (000) $687,364 $714,390 $608,727 $528,469 $487,485
RATIOS TO AVERAGE
NET ASSETS:
Net investment
income 5.12% 4.63% 5.08% 4.84% 4.97%
Expenses .58% .56% .56% .63% .68%
</TABLE>
1. TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. IT IS
CALCULATED ASSUMING SHARES ARE PURCHASED ON THE FIRST DAY AND SOLD ON THE
LAST DAY OF EACH PERIOD REPORTED.
-------------------------------------------------------------------
33 COMMAND FUNDS [LOGO] (800) 225-1852
<PAGE>
[This page has been left blank intentionally.]
--------------------------------------------------------------------------------
34
<PAGE>
THE PRUDENTIAL MUTUAL FUND FAMILY
-------------------------------------
Prudential offers a broad range of mutual funds designed to meet your individual
needs. For information about these funds, contact your financial adviser or call
us at (800) 225-1852. Please read the applicable prospectus carefully before you
invest or send money.
STOCK FUNDS
PRUDENTIAL EMERGING GROWTH FUND, INC.
PRUDENTIAL EQUITY FUND, INC.
PRUDENTIAL EQUITY INCOME FUND
PRUDENTIAL INDEX SERIES FUND
PRUDENTIAL SMALL-CAP INDEX FUND
PRUDENTIAL STOCK INDEX FUND
THE PRUDENTIAL INVESTMENT PORTFOLIOS, INC.
PRUDENTIAL JENNISON GROWTH FUND
PRUDENTIAL JENNISON EQUITY OPPORTUNITY FUND
PRUDENTIAL REAL ESTATE SECURITIES FUND
PRUDENTIAL SECTOR FUNDS, INC.
PRUDENTIAL FINANCIAL SERVICES FUND
PRUDENTIAL HEALTH SCIENCES FUND
PRUDENTIAL TECHNOLOGY FUND
PRUDENTIAL UTILITY FUND
PRUDENTIAL SMALL COMPANY VALUE FUND, INC.
PRUDENTIAL TAX-MANAGED FUNDS
PRUDENTIAL TAX-MANAGED EQUITY FUND
PRUDENTIAL TAX-MANAGED SMALL-CAP FUND, INC.
PRUDENTIAL 20/20 FOCUS FUND
NICHOLAS-APPLEGATE FUND, INC.
NICHOLAS-APPLEGATE GROWTH EQUITY FUND
TARGET FUNDS
LARGE CAPITALIZATION GROWTH FUND
LARGE CAPITALIZATION VALUE FUND
SMALL CAPITALIZATION GROWTH FUND
SMALL CAPITALIZATION VALUE FUND
ASSET ALLOCATION/BALANCED FUNDS
PRUDENTIAL BALANCED FUND
PRUDENTIAL DIVERSIFIED FUNDS
CONSERVATIVE GROWTH FUND
MODERATE GROWTH FUND
HIGH GROWTH FUND
THE PRUDENTIAL INVESTMENT PORTFOLIOS, INC.
PRUDENTIAL ACTIVE BALANCED FUND
GLOBAL FUNDS
GLOBAL STOCK FUNDS
PRUDENTIAL EUROPE GROWTH FUND, INC.
PRUDENTIAL INDEX SERIES FUND
PRUDENTIAL EUROPE INDEX FUND
PRUDENTIAL PACIFIC INDEX FUND
PRUDENTIAL NATURAL RESOURCES FUND, INC.
PRUDENTIAL PACIFIC GROWTH FUND, INC.
PRUDENTIAL WORLD FUND, INC.
PRUDENTIAL GLOBAL GROWTH FUND
PRUDENTIAL INTERNATIONAL VALUE FUND
PRUDENTIAL JENNISON INTERNATIONAL GROWTH FUND
GLOBAL UTILITY FUND, INC.
TARGET FUNDS
INTERNATIONAL EQUITY FUND
GLOBAL BOND FUNDS
PRUDENTIAL GLOBAL TOTAL RETURN FUND, INC.
PRUDENTIAL INTERNATIONAL BOND FUND, INC.
-------------------------------------------------------------------
35 COMMAND FUNDS [LOGO] (800) 225-1852
<PAGE>
-------------------------------------------------------------------
BOND FUNDS
TAXABLE BOND FUNDS
PRUDENTIAL GOVERNMENT INCOME FUND, INC.
PRUDENTIAL GOVERNMENT SECURITIES TRUST
SHORT-INTERMEDIATE TERM SERIES
PRUDENTIAL HIGH YIELD FUND, INC.
PRUDENTIAL HIGH YIELD TOTAL RETURN FUND, INC.
PRUDENTIAL INDEX SERIES FUND
PRUDENTIAL BOND MARKET INDEX FUND
PRUDENTIAL SHORT-TERM CORPORATE BOND FUND, INC.
INCOME PORTFOLIO
PRUDENTIAL TOTAL RETURN BOND
FUND, INC.
TARGET FUNDS
TOTAL RETURN BOND FUND
TAX-EXEMPT BOND FUNDS
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA SERIES
CALIFORNIA INCOME SERIES
PRUDENTIAL MUNICIPAL BOND FUND
HIGH INCOME SERIES
INSURED SERIES
PRUDENTIAL MUNICIPAL SERIES FUND
FLORIDA SERIES
MASSACHUSETTS SERIES
NEW JERSEY SERIES
NEW YORK SERIES
NORTH CAROLINA SERIES
OHIO SERIES
PENNSYLVANIA SERIES
PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
MONEY MARKET FUNDS
TAXABLE MONEY MARKET FUNDS
CASH ACCUMULATION TRUST
LIQUID ASSETS FUND
NATIONAL MONEY MARKET FUND
PRUDENTIAL GOVERNMENT SECURITIES TRUST
MONEY MARKET SERIES
U.S. TREASURY MONEY MARKET SERIES
PRUDENTIAL SPECIAL MONEY MARKET FUND, INC.
MONEY MARKET SERIES
PRUDENTIAL MONEYMART ASSETS, INC.
TAX-FREE MONEY MARKET FUNDS
PRUDENTIAL TAX-FREE MONEY FUND, INC.
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA MONEY MARKET SERIES
PRUDENTIAL MUNICIPAL SERIES FUND
CONNECTICUT MONEY MARKET SERIES
MASSACHUSETTS MONEY MARKET SERIES
NEW JERSEY MONEY MARKET SERIES
NEW YORK MONEY MARKET SERIES
COMMAND FUNDS
COMMAND MONEY FUND
COMMAND GOVERNMENT FUND
COMMAND TAX-FREE FUND
INSTITUTIONAL MONEY MARKET FUNDS
PRUDENTIAL INSTITUTIONAL LIQUIDITY PORTFOLIO, INC.
INSTITUTIONAL MONEY MARKET SERIES
--------------------------------------------------------------------------------
36
<PAGE>
FOR MORE INFORMATION
Please read this prospectus before you invest in a Fund and keep it for future
reference. For information or shareholder questions contact
PRUDENTIAL MUTUAL FUND SERVICES LLC
P.O. BOX 8098
PHILADELPHIA, PA 19101
(800) 225-1852
(732) 482-7555 (Calling from outside the U.S.)
Outside Brokers should contact
PRUDENTIAL INVESTMENT MANAGEMENT
SERVICES LLC
P.O. BOX 15035
NEW BRUNSWICK, NJ 08906
(800) 778-8769
Visit Prudential's website at
http://www.prudential.com
Additional information about the Funds can be obtained without charge and can be
found in the following documents
STATEMENT OF ADDITIONAL INFORMATION (SAI)
(incorporated by reference into this prospectus)
ANNUAL REPORT
SEMI-ANNUAL REPORT
You can also obtain copies of Fund documents from the Securities and Exchange
Commission as follows
BY MAIL
Securities and Exchange Commission
Public Reference Section
Washington, DC 20549-0102
BY ELECTRONIC REQUEST
[email protected]
(The SEC charges a fee to copy documents.)
IN PERSON
Public Reference Room in
Washington, DC
(For hours of operation, call
1-202-942-8090)
VIA THE INTERNET
on the EDGAR Database at
http://www.sec.gov
CUSIP Numbers NASDAQ Symbols
COMMAND Money Fund
20050F-10-3 CDMXX
COMMAND Tax-Free Fund
20050R-10-7 CDFXX
COMMAND Government Fund
20050D-10-8 CGMXX
Investment Company Act File
Nos
COMMAND Money Fund
811-3253
COMMAND Tax-Free Fund
811-3252
COMMAND Government Fund
811-3251
CFP
[RECYCLED LOGO]
Printed on Recycled Paper
<PAGE>
COMMAND MONEY FUND
COMMAND TAX-FREE FUND
COMMAND GOVERNMENT FUND
Statement of Additional Information
dated August 31, 2000
COMMAND Money Fund, COMMAND Tax-Free Fund and COMMAND Government Fund are
open-end, diversified management investment companies (each, a Fund and
collectively, the Funds). Shares of each Fund are available for purchase only by
participants in the COMMAND-SM- Account and COMMAND Plus-SM- Account Programs
(collectively, the COMMAND program) which are available through Prudential
Securities Incorporated, and participants in the Prudential
BusinessEdge-SM-Account Program (the BusinessEdge program), which is available
through either Prudential Securities Incorporated or Pruco Securities
Corporation.
The investment objective of COMMAND Money Fund is high current income,
preservation of capital and maintenance of liquidity. The investment objective
of COMMAND Tax-Free Fund is high current income that is exempt from federal
income taxes, consistent with the maintenance of liquidity and preservation of
capital. The investment objective of COMMAND Government Fund is high current
income, preservation of capital and maintenance of liquidity. There can be no
assurance that any Fund's investment objective will be achieved. See "How the
Funds Invest" in the Prospectus and "Description of the Funds, Their Investments
and Risks" below.
The Funds' address is Gateway Center Three, 100 Mulberry Street, Newark, New
Jersey 07102-4077 and their telephone number is (800) 225-1852.
This Statement of Additional Information sets forth information about each
of the Funds. In sections that refer to a particular Fund, "the Fund", "we",
"us" or "our" refers to that particular Fund. This Statement of Additional
Information is not a prospectus and should be read in conjunction with the
combined Prospectus of the Funds, dated August 31, 2000, a copy of which may be
obtained from the Funds upon request.
Investors should be aware that the COMMAND Program and the BusinessEdge
Program accounts are not bank accounts. As with any investment in securities,
the value of a participant's investment in the COMMAND Program or the
BusinessEdge Program will fluctuate.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
The Funds' History...................................................... B-2
Description of the Funds, Their Investments and Risks................... B-2
Investment Restrictions................................................. B-7
Management of the Funds................................................. B-10
Control Persons and Principal Holders of Securities..................... B-13
Investment Advisory and Other Services.................................. B-13
Brokerage Allocation and Other Practices................................ B-17
Securities and Organization............................................. B-18
Purchase and Redemption of Fund Shares.................................. B-19
Net Asset Value......................................................... B-20
Taxes, Dividends and Distributions...................................... B-20
Calculation of Yield.................................................... B-22
Issuance of Fund Shares for Securities.................................. B-23
Description of Securities Ratings....................................... B-23
Financial Statements - COMMAND Money Fund............................... B-26
Report of Independent Accountants....................................... B-40
Financial Statements - COMMAND Tax-Free Fund............................ B-41
Report of Independent Accountants....................................... B-60
Financial Statements - COMMAND Government Fund.......................... B-61
Report of Independent Accountants....................................... B-70
Appendix I - General Investment Information............................. I-1
</TABLE>
CFSAI
<PAGE>
THE FUNDS' HISTORY
Each of the Funds was organized under the laws of Massachusetts on June 5,
1981, as an unincorporated business trust.
DESCRIPTION OF THE FUNDS, THEIR INVESTMENTS AND RISKS
(a) CLASSIFICATION. Each Fund is an open-end, diversified management investment
company.
(b) INVESTMENT STRATEGIES AND RISKS.
The investment objective of COMMAND Money Fund is high current income,
preservation of capital and maintenance of liquidity. The investment objective
of COMMAND Tax-Free Fund is high current income that is exempt from federal
income taxes, consistent with the maintenance of liquidity and preservation of
capital. The investment objective of COMMAND Government Fund is high current
income, preservation of capital and maintenance of liquidity. There can be no
assurance that any Fund's investment objective will be achieved. While the
principal investment policies and strategies for seeking to achieve each Fund's
objective are described in the Prospectus, a Fund may from time to time also
utilize the securities, instruments, policies and strategies described below in
seeking to achieve its objective. A Fund may not be successful in achieving its
objective and you may lose money.
MUNICIPAL DEBT OBLIGATIONS (COMMAND TAX-FREE FUND)
COMMAND Tax-Free Fund may purchase municipal debt obligations which include,
but are not limited to, those described below. The Fund intends to invest in
securities that are currently available, or which may be developed in the
future, and are appropriate to allow the Fund's investment adviser to pursue the
Fund's investment objectives.
MUNICIPAL BONDS. 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. 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.
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. Some
municipal revenue bonds also include bonds issued through or on behalf of public
authorities in order to obtain funds with which to provide privately operated
housing facilities, sports facilities, pollution control facilities, convention
or trade show facilities, industrial, port or parking facilities and facilities
for water supply, gas, electricity or waste disposal. The bonds typically are
revenue bonds and generally do not carry the pledge of the issuing authority's
credit.
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. Municipal Notes sold in
anticipation of collection of taxes, a bond sale, or receipt of other revenues,
are usually general obligations of the issuing municipality or agency.
Municipal Notes also include tax-exempt or municipal commercial paper, which
is likely to be issued to meet seasonal working capital needs of a municipality
or interim construction financing and to be paid from general revenues of the
municipality or refinanced with long-term debt. In most cases, municipal
commercial paper may be backed by letters of credit, lines of credit, lending
agreements, note repurchase agreements or other credit facility agreements
offered by banks or other institutions.
The 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.
B-2
<PAGE>
The Fund will treat an investment in a municipal security refunded with
escrowed U.S. Government securities as U.S. Government securities for purposes
of the diversification requirements of Rule 2a-7 under the Investment Company
Act of 1940, as amended (the Investment Company Act).
MUNICIPAL ASSET BACKED SECURITIES. The Fund may purchase municipal asset
backed securities. These securities are debt obligations, often issued through a
trust or other investment vehicles that are backed by municipal debt obligations
and accompanied by a liquidity facility to comply with Rule 2a-7. These trusts
or other investment vehicles represent investment companies. The Fund's
investment in securities of such issuers are subject to limitations imposed by
the Investment Company Act. The Fund may not invest more than 10% of its assets
in all such entities and may not acquire more than 3% of the voting securities
of any single such entity.
BANK OBLIGATIONS (COMMAND MONEY FUND)
The COMMAND Money Fund may invest in 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 COMMAND 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 COMMAND 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 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).
OBLIGATIONS ISSUED OR GUARANTEED BY THE U.S. GOVERNMENT, ITS AGENCIES AND
INSTRUMENTALITIES (COMMAND MONEY FUND AND COMMAND GOVERNMENT FUND)
Obligations issued or guaranteed as to principal and interest by the U.S.
Government may be acquired by COMMAND Money Fund and COMMAND Government Fund in
the form of custodial receipts that evidence ownership of future interest
payments, principal payments or both on certain United States Treasury notes or
bonds. Such notes and bonds are held in custody by a bank on behalf of the
owners. These custodial receipts are known by various names, including "Treasury
Receipts," "Treasury Investment Growth Receipts" (TIGRs) and "Certificates of
Accrual on Treasury Securities" (CATS).
The Funds may also invest in Treasury Inflation Protected Securities, known
as "TIPS," if these securities are deemed to comply with the requirements of
Rule 2a-7.
OTHER INVESTMENTS (APPLICABLE TO THE COMMAND GOVERNMENT FUND)
The COMMAND Government Fund may also invest in obligations of the
International Bank for Reconstruction and Development (World Bank), which is 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.
FLOATING RATE AND VARIABLE RATE SECURITIES
Each Fund may purchase "floating rate" and "variable rate" securities.
Investments in floating or variable rate securities normally will involve
securities which provide a rate that is set as a spread to a designated base
rate or index rate, such as rates on Treasury bills or LIBOR (London Interbank
Offered Rate) index, and, in some cases, that the purchaser can demand payment
of the obligation at specified intervals or after a specified notice period (in
each case a period of less than thirteen months) at par plus accrued interest.
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 rate or index rate.
DEMAND FEATURES AND/OR GUARANTEES
Each Fund may purchase securities subject to demand features and/or
guarantees. A demand feature supporting a money market fund instrument can be
relied upon in a number of respects. First, the demand feature can be relied
upon to SHORTEN THE MATURITY of the underlying instrument. Second, the demand
feature, if unconditional, can be used to EVALUATE THE CREDIT QUALITY of the
underlying security. This means that the credit quality of the underlying
security can be based solely on the credit quality of the unconditional demand
feature supporting that security.
B-3
<PAGE>
A GUARANTEE is a form of unconditional credit support that may include, for
example, bond insurance, a letter of credit, and an unconditional demand
feature. A Fund holding a security subject to a guarantee may determine the
credit quality of the underlying security solely on the basis of the credit
quality of the supporting guarantee.
Each Fund may invest in securities directly issued by, or supported by, a
demand feature provider or guarantor. Rule 2a-7 under the Investment Company Act
currently limits each Fund's investment in demand features and guarantees that
are "second tier securities" under the Rule; that is, those securities that are
rated in the second highest category by a specified number of rating
organizations. Specifically, Rule 2a-7 provides that a money market fund cannot
invest more than 5% of its total assets in securities directly issued by or
supported by second tier demand features or guarantees that are issued by the
same entity. Each Fund is limited to invest no more than 5% of its total assets
in second tier securities, with no more than 1% of its total assets or one
million dollars, whichever is greater, in any single second tier issuer. If the
limitations described in Rule 2a-7 are changed, each of the Funds will comply
with the amended limitation.
LENDING OF SECURITIES (COMMAND MONEY FUND AND COMMAND GOVERNMENT FUND)
Consistent with applicable regulatory requirements, COMMAND Money Fund and
COMMAND Government Fund may lend its portfolio securities to brokers, dealers
and financial institutions, provided that outstanding loans of each Fund do not
exceed in the aggregate 10% of the value of the respective Fund's total assets
and provided that such loans are callable at any time by such Fund and are at
all times secured by cash or U.S. Government securities that are equal to at
least the market value, determined daily, of the loaned securities. The
advantage of such loans is that a Fund continues to receive payments in lieu of
the interest on the loaned securities, while at the same time earning interest
either directly from the borrower or on the cash collateral which will be
invested in short-term obligations. Any voting rights, or rights to consent,
relating to the securities loaned pass to the borrower. However, if a material
event affecting the investment occurs, such loans will be called so securities
may be voted by one or more of the Fund, as applicable.
A loan may be terminated by the borrower on one business day's notice or by
a Fund at any time. If the borrower fails to maintain the requisite amount of
collateral, the loan automatically terminates, and the Fund could use the
collateral to replace the securities while holding the borrower liable for any
excess of replacement cost over the value of the collateral. As with any
extensions of credit, there are risks of delay in recovery and in some cases
loss of rights in the collateral should the borrower of the securities fail
financially. However, these loans of portfolio securities will only be made to
firms determined to be creditworthy pursuant to procedures approved by the Board
of Trustees of the applicable Fund. On termination of the loan, the borrower is
required to return the securities to the Fund, and any gain or loss in the
market price during the loan would inure to that Fund.
Each Fund will pay reasonable finders', administrative and custodial fees in
connection with a loan of its securities or may share the interest earned on
collateral with the borrower.
ILLIQUID SECURITIES
Each of the Funds may not hold more than 10% of its 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. If a Fund
were to exceed this limit, the Fund's investment adviser would take reasonable
measures to reduce the Fund's holdings in illiquid securities to no more than
10% of its net assets within seven days, including the sale of such securities.
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 securities having a demand
feature of longer than seven days, 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. 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.
B-4
<PAGE>
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 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 securities.
Rule 144A under the Securities Act allows for a broader institutional
trading market for securities otherwise subject to restriction on resale to the
general public. Rule 144A establishes a "safe harbor" from the registration
requirements of the Securities Act for resales of certain securities to
qualified institutional buyers.
Restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act and commercial paper for which there is a readily available
market will not be deemed to be illiquid under procedures established by the
Board of Trustees. The investment adviser will monitor the liquidity of such
restricted securities subject to the supervision of the Board of 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. Repurchase agreements and variable
rate demand obligations (VRDOs) subject to a demand right are deemed to have a
maturity equal to the notice period.
BORROWING
COMMAND Money Fund and COMMAND Government Fund may each borrow (including
through entering reverse repurchase agreements) up to 20% of the value of its
total assets (computed at the time the loan is made) from banks for temporary,
extraordinary or emergency purposes. COMMAND Tax-Free Fund may borrow (including
through entering reverse repurchase agreements) up to 5% of the value of its
total assets (computed at the time the loan is made) from banks for temporary,
extraordinary or emergency purposes. A Fund will not purchase portfolio
securities if its borrowings (other than permissible securities loans) exceed 5%
of its total assets.
REPURCHASE AGREEMENTS
Each Fund may purchase securities and concurrently enter into "repurchase
agreements" with the seller, pursuant to which the seller agrees to repurchase
such securities at a specified price within a specified time (generally seven
days or less). The repurchase agreements provide that the Fund will sell the
underlying instruments back to the dealer or the bank at the specified price and
at a fixed time in the future, usually not more than seven days from the date of
purchase. The difference between the purchase price and the resale price
represents the interest earned by the Fund, which is unrelated to the coupon
rate or maturity of the purchased security. Repurchase agreements will at all
times be fully collateralized in an amount at least equal to the resale price
which, in the case of COMMAND Government Fund and COMMAND Money Fund, will be
U.S. Government obligations. Such collateral will be held by the Fund's
Custodian or a sub-custodian in a tri-party repurchase agreement, either
physically or in a book-entry account.
A Fund will enter into repurchase transactions only with parties which meet
creditworthiness standards approved by the Fund's Board of Trustees. Each Fund's
investment adviser monitors the creditworthiness of such parties under the
general supervision of the Board of Trustees. In the event of a default or
bankruptcy by a seller, the Fund will promptly seek to liquidate the collateral.
To the extent that the proceeds upon sale of such collateral upon a default in
the obligation to repurchase are less than the resale price, the Fund will
suffer a loss if the financial institution that is a party to the repurchase
agreement petitions for bankruptcy or becomes subject to the U.S. Bankruptcy
Code because the law regarding the rights of a Fund is unsettled. As a result,
under these circumstances, there may be a restriction on the Fund's ability to
sell the collateral, and the Fund could suffer a loss.
B-5
<PAGE>
Each Fund may participate in a joint trading account with other investment
companies managed by Prudential Investments Fund Management LLC (PIFM or the
Manager) pursuant to an order of the Securities and Exchange Commission (SEC).
The order allows the Fund, along with other investment companies managed by
PIFM, to jointly engage in repurchase agreement transactions. Pursuant to the
order, on a daily basis, any uninvested cash balances of a Fund may be
aggregated with those of such other 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. In
connection with transactions in repurchase agreements with U.S. financial
institutions, it is each Fund's policy that its custodian or designated
sub-custodians, as the case may be, under triparty repurchase agreements, take
possession of the underlying collateral securities, the value of which equals or
exceeds the resale price of the agreement. 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 Fund
may be delayed or limited.
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements have the characteristics of borrowing and
involve the sale of securities held by a Fund with an agreement to repurchase
the securities at a specified price, date and interest payment. Each Fund
intends only to use the reverse repurchase technique when it will be to its
advantage to do so. These transactions are only advantageous if the 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. A Fund may be unable
to realize earnings from the use of the proceeds equal to or greater than the
interest required to be paid. The use of reverse repurchase agreements may
exaggerate any increase or decrease in the value of the Fund's portfolio. The
Fund's Custodian will maintain in a segregated account cash or other liquid
assets maturing not later than the expiration of the reverse repurchase
agreements having a value equal to or greater than such commitments.
PUTS
The COMMAND Tax-Free Fund may purchase Municipal Bonds or Municipal 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 COMMAND Government Fund and the COMMAND 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 COMMAND Tax-Free Fund pays for Municipal Bonds or
Municipal Notes with puts and which the COMMAND Government Fund and the COMMAND
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 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
B-6
<PAGE>
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 COMMAND Tax-Free Fund has received an exemptive order from the SEC which
permits the Fund to purchase puts from broker-dealers.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
Each Fund may purchase 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
the Fund at the time of entering into the transaction. Each Fund will limit such
purchases to those which the date of delivery and payment falls within 90 days
of the date of the commitment. A Fund will make commitments to purchase such
when-issued securities only with the intention of actually acquiring the
securities. The Funds' Custodian will segregate cash or other liquid assets
having a value equal to or greater than a Fund's purchase commitments. If a Fund
chooses to dispose of the when-issued security prior to its receipt of, and
payment for, the security, it could, as with the disposition of any other
portfolio security, incur a gain or loss due to market fluctuations. The
securities so purchased are subject to market fluctuation and no interest
accrues to the purchaser during the period between purchase and settlement.
INVESTMENT RESTRICTIONS
The following restrictions are fundamental policies. Fundamental policies
are those which cannot be changed without the approval of the holders of a
majority of the outstanding voting securities of a Fund. A "majority of the
outstanding voting securities," when used in this Statement of Additional
Information, means the lesser of (i) 67% of the voting shares represented at a
meeting at which more than 50% of the outstanding voting shares are present in
person or represented by proxy or (ii) more than 50% of the outstanding voting
shares.
COMMAND MONEY FUND
The investment restrictions of the COMMAND Money Fund provide that the 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 COMMAND 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 COMMAND 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 COMMAND Money Fund's total assets;
3. Purchase or sell real estate or real estate mortgage loans; however, the
COMMAND 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 COMMAND 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;
B-7
<PAGE>
8. Underwrite securities of other issuers;
9. Purchase the securities of any other investment company, except in
connection with a merger, consolidation, reorganization or acquisition of
assets;
10. Purchase securities of any issuer for the purpose of exercising control
or management;
11. 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 COMMAND Money Fund's total assets, more than 5% of the value of the
COMMAND Money Fund's total assets would be invested in the securities of a
single issuer;
12. 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 COMMAND 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 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
13. Enter into reverse repurchase agreements if, as a result thereof, the
COMMAND Money Fund's obligations with respect to reverse repurchase agreements
would exceed one-third of the COMMAND Money Fund's net assets (defined to be
total assets, taken at market value, less liabilities other than reverse
repurchase agreements).
For purposes of investment limitation number 11, the COMMAND Money Funds'
compliance with the diversification requirements of Rule 2a-7 under the
Investment Company Act is deemed to constitute compliance with the stated
diversification restriction, which reflects the requirements of Section 5(b)(1)
of the Investment Company Act.
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 action within
three days 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.
COMMAND TAX-FREE FUND
The investment restrictions of the COMMAND Tax-Free Fund provide that the
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 COMMAND 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;
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 COMMAND
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 COMMAND Tax-Free Fund would maintain, in a
segregated account with its custodian, liquid assets equal in value to the
amount owed. The COMMAND Tax-Free Fund will not purchase securities while
borrowings are outstanding;
B-8
<PAGE>
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. 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 acquisition;
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 in
the Prospectus and/or in this Statement of Additional Information;
13. Purchase industrial revenue bonds if, as a result of such purchase, more
than 5% of total COMMAND 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.
For purposes of investment limitation number 1, the COMMAND Tax-Free Funds'
compliance with the diversification requirements of Rule 2a-7 under the
Investment Company Act is deemed to constitute compliance with the stated
diversification restriction, which reflects the requirements of Section 5(b)(1)
of the Investment Company Act.
The COMMAND 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 COMMAND 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.
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 action within
three days to reduce its borrowings, as required by applicable law.
COMMAND GOVERNMENT FUND
The investment restrictions of the COMMAND Government Fund provide that the
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 COMMAND Government Fund's total assets (including the
amount borrowed), less liabilities (not including the amount borrowed) at the
time the borrowing is made; the COMMAND 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." Loans of portfolio
securities
B-9
<PAGE>
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 the securities of any other investment company, except in
connection with a merger, consolidation, reorganization or acquisition of
assets; and
9. Issue senior securities as defined in the Investment Company Act except
insofar as the COMMAND 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.
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 a Fund's asset coverage for
borrowings falls below 300%, the Fund will take action to reduce its borrowings
within three days, as required by applicable law. Loans of portfolio securities
will not cumulatively exceed one-third of the Fund's net assets.
MANAGEMENT OF THE FUNDS
(a) TRUSTEES
Each Fund has Trustees who, in addition to overseeing the actions of each
Fund's Manager, Subadviser, and Distributor, decide upon matters of general
policy.
The Trustees also review the actions of the officers of each Fund, who
conduct and supervise the daily business operations of the Fund.
(b) MANAGEMENT INFORMATION-TRUSTEES AND OFFICERS
<TABLE>
<CAPTION>
POSITION
WITH THE PRINCIPAL OCCUPATIONS
NAME, ADDRESS AND AGE (1) TRUST AND OTHER AFFILIATIONS
------------------------------ ------------- --------------------------------------------------
<S> <C> <C>
Delayne Dedrick Gold (61) Trustee Marketing and Management Consultant.
*Robert F. Gunia (53) Trustee and Executive Vice President and Chief Administrative
Vice Officer (since June 1999) of Prudential
President Investments; Corporate Vice President (since
September 1997) of the Prudential Insurance
Company of America (Prudential); Executive Vice
President and Treasurer (since December 1996) of
Prudential Investments Fund Management LLC (PIFM);
President (since April 1999) of Prudential
Investment Management Services LLC (PIMS);
formerly Senior Vice President (March 1987-May
1999) of Prudential Securities Incorporated
(Prudential Securities); formerly Chief
Administrative Officer (July 1990-September 1996),
Director (January 1989-September 1996), and
Executive Vice President, Treasurer and Chief
Financial Officer (June 1987-September 1996) of
Prudential Mutual Fund Management, Inc. (PMF).
</TABLE>
B-10
<PAGE>
<TABLE>
<CAPTION>
POSITION
WITH THE PRINCIPAL OCCUPATIONS
NAME, ADDRESS AND AGE (1) TRUST AND OTHER AFFILIATIONS
------------------------------ ------------- --------------------------------------------------
<S> <C> <C>
Robert E. LaBlanc (65) Trustee President (since 1981) of Robert E. LaBlanc
Associates, Inc. (telecommunications); formerly
General Partner at Salomon Brothers; and
Vice-Chairman of Continental Telecom; Director of
Storage Technology Corporation, Titan Corporation,
Salient 3 Communications, Inc. and Tribune
Company; and Trustee of Manhattan College.
*David R. Odenath, Jr. (43) Trustee Officer in Charge, President, Chief Executive
Officer and Chief Operating Officer (since June
1999) of PIFM; Senior Vice President (since June
1999) of Prudential; Senior Vice President (August
1993 - May 1999) of PaineWebber Group, Inc.
Robin B. Smith (60) Trustee Chairman and Chief Executive Officer (since
August 1996) of Publishers Clearing House;
formerly President and Chief Executive Officer
(January 1988-August 1996) and President and Chief
Operating Officer (September 1981-December 1988)
of Publishers Clearing House; Director of
BellSouth Corporation, Texaco Inc., Springs
Industries Inc., and Kmart Corporation.
Langdon R. Stevenson (65) Trustee Independent Contractor to the American Birding
Association; Director, Point Reyes Bird
Observatory; former Treasurer and Development
Director of American Birding Association Inc.;
faculty member (economics and history) Hackley
School, Tarrytown, New York; Senior Vice President
(1985-1989) and Director (1978-1986) of Prudential
Securities; President of P-B Trade Finance Ltd.
(1985-1987).
Stephen Stoneburn (56) Trustee President and Chief Executive Officer (since
June 1996) of Quadrant Media Corp. (a publishing
company); formerly President
(June 1995-June 1996) of Argus Integrated
Media, Inc.; Senior Vice President and Managing
Director (January 1993-1995) of Cowles Business
Media; Senior Vice President (January 1991-1992)
and Publishing Vice President
(May 1989-December 1990) of Gralla Publications (a
division of United Newspapers, U.K.); and Senior
Vice President of Fairchild Publications, Inc.
*John R. Strangfeld (46) Trustee and Chief Executive Officer, Chairman, President and
President Director of The Prudential Investment Corporation
(since January 1990); Executive Vice President of
the Prudential Global Asset Management Group of
Prudential (since February of 1998); Chairman of
Pricoa Capital Group (since August 1989); Chief
Executive Officer of Private Asset Management
Group of Prudential
(November 1994-December 1998).
Nancy H. Teeters (70) Trustee Economist; formerly Director of Inland Steel
Industries (July 1989-1999); formerly, Vice
President and Chief Economist (July 1984-July
1990) of International Business Machines
Corporation; formerly, Governor of Federal Reserve
System (1978-1984).
Clay T. Whitehead (61) Trustee President (since May 1983) of National Exchange
Inc. (new business development firm).
</TABLE>
B-11
<PAGE>
<TABLE>
<CAPTION>
POSITION
WITH THE PRINCIPAL OCCUPATIONS
NAME, ADDRESS AND AGE (1) TRUST AND OTHER AFFILIATIONS
------------------------------ ------------- --------------------------------------------------
<S> <C> <C>
Robert C. Rosselot (40) Secretary Assistant General Counsel (since September 1997)
of PIFM; formerly, partner with the law firm of
Howard & Howard, Bloomfield Hills, Michigan
(December 1995-September 1997) and Corporate
Counsel (September 1990-December 1995) of
Federated Investors.
Grace C. Torres (41) Treasurer and First Vice President (since December 1996) of
Principal PIFM; First Vice President (since March 1994) of
Financial and Prudential Securities; formerly First Vice
Accounting President (March 1994-September 1996) of
Officer Prudential Mutual Fund Management, Inc. and Vice
President (July 1989-March 1994) of Bankers Trust
Corporation.
</TABLE>
------------
(1) Unless otherwise noted, the address for each of the above persons is c/o
Prudential Investments Fund Management LLC, Gateway Center Three, 100
Mulberry Street, Newark, New Jersey 07102-4077.
* "Interested" Trustee of the Funds, as defined in the Investment Company Act
of 1940.
Trustees and officers of the Funds are also trustees, directors and officers
of some or all of the other investment companies distributed by PIMS.
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 75.
Pursuant to the Management Agreements with each Fund, the Manager pays all
compensation of officers and employees of the Fund, as well as the fees and
expenses of all Trustees of the Fund, who are affiliated persons of the Manager.
Each Fund pays each of its Trustees who is not an affiliated person of PIFM
or the Funds' Subadviser annual compensation as follows: COMMAND Money Fund:
$11,714, COMMAND Tax-Free Fund: $3,171 and COMMAND Government Fund: $2,657, in
addition to certain out-of-pocket expenses. Trustees who serve on Fund
Committees may receive additional compensation. The amount of annual
compensation paid to each Trustee may change as a result of the introduction of
additional funds upon whose boards the Trustee may be asked to serve.
Trustees may receive their Trustee's fees pursuant to a deferred fee
agreement with the Funds. Under the terms of the agreement, each Fund accrues
daily the amount of such Trustee's fees in installments which accrue interest at
a rate equivalent to the prevailing rate applicable to 90-day U.S. Treasury
Bills at the beginning of each calendar quarter or pursuant to an SEC exemptive
order, at the daily rate of return of the Fund (the Fund Rate). Each Fund's
obligation to make payments of deferred Trustees' fees, together with interest
thereon, is a general obligation of the Fund.
The following table sets forth the aggregate compensation paid by the Funds
to the Trustees who are not affiliated with the Manager for the fiscal year
ended June 30, 2000, and the aggregate compensation paid to such Trustees for
service on the Funds' Boards and that of all other funds managed by PIFM (Fund
Complex) for the calendar year ended December 31, 1999.
B-12
<PAGE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
APPROXIMATE
COMPENSATION FROM
FUNDS AND
AGGREGATE PRUDENTIAL FUND
COMPENSATION COMPLEX PAID TO
NAME AND POSITION FROM FUNDS TRUSTEES(2)
----------------------------------------------------------------------------- ------------ -----------------
<S> <C> <C>
Edward D. Beach - Former Trustee............................................. $10,475 $142,500 (43/70)*
Delayne D. Gold - Trustee.................................................... $19,375 $144,500 (43/70)*
Robert F. Gunia(1) - Trustee................................................. -- --
Don G. Hoff - Former Trustee................................................. -- $22,500 (14/17)*
Robert E. LaBlanc - Trustee.................................................. $19,375 $61,250 (20/39)*
David R. Odenath, Jr.(1) - Trustee........................................... -- --
Robin B. Smith(2) - Trustee.................................................. $20,850 $96,000 (32/44)*
Langdon R. Stevenson - Trustee............................................... $15,975 $11,000 (3/3)*
Stephen Stoneburn - Trustee.................................................. $19,375 $61,250 (20/39)*
John R. Strangfeld, Jr.(1) - Trustee......................................... -- --
Nancy H. Teeters - Trustee................................................... $22,100 $97,000 (25/43)*
Clay T. Whitehead - Trustee.................................................. $16,625 $77,000 (36/66)*
</TABLE>
------------
* Indicates number of funds/portfolios in Prudential Fund Complex (including
the Funds) to which aggregate compensation relates.
(1) Trustees who are "interested" do not receive compensation from the Funds or
any fund in the Fund Complex.
(2) Total compensation from all the funds in the Prudential Fund Complex for the
calendar year ended December 31, 1999, including amounts deferred at the
election of Trustees under the funds' deferred compensation plans. Including
accrued interest, total deferred compensation amounted to $156,478 for
Trustee Robin B. Smith. Currently, Ms. Smith has agreed to defer some of her
fees at the T-Bill rate and other fees at the Fund Rate.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of August 18, 2000, the Trustees and officers of each Fund, as a group,
owned less than 1% of the outstanding shares of beneficial interest of each of
the Funds and there were no beneficial owners of greater than 5% of the
outstanding shares of any Fund.
As of August 18, 2000, Prudential Securities was record holder of
14,527,941,128 shares (or 100%), 1,517,605,452 shares (or 100%) and 699,711,762
shares (or 100%) of the outstanding shares of COMMAND Money Fund, COMMAND
Tax-Free Fund and COMMAND Government 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.
INVESTMENT ADVISORY AND OTHER SERVICES
(a) INVESTMENT ADVISER
The manager of each of the Funds is Prudential Investments Fund Management
LLC (PIFM or the Manager), Gateway Center Three, 100 Mulberry Street, Newark,
New Jersey 07102-4077. PIFM serves as manager to all of the other investment
companies that, together with the Funds, comprise the Prudential Mutual Funds.
See "How the Funds are Managed" in the Prospectus. As of June 30, 2000, PIFM
managed and/or administered open-end and closed-end management investment
companies with assets of approximately $76 billion. According to the Investment
Company Institute, as of September 30, 1999, the Prudential Mutual Funds were
the 20th largest family of mutual funds in the United States.
Prudential Mutual Fund Services LLC (PMFS or the Transfer Agent), an
affiliate of PIFM, serves as the transfer agent and dividend distribution agent
for the Prudential Mutual Funds and, in addition, provides customer service,
recordkeeping and management and administrative services to qualified plans.
B-13
<PAGE>
Pursuant to the Management Agreement with each Fund (the Management
Agreement), PIFM, subject to the supervision of the Funds' Boards of Trustees
and in conformity with the stated policies of the Funds, manages both the
investment operations of each Fund and the composition of each Fund's portfolio,
including the purchase, retention, disposition and loan of securities and other
assets. In connection therewith, PIFM is obligated to keep certain books and
records of the Funds. PIFM has hired the Prudential Investment Corporation,
doing business as Prudential Investments, (PI, the Investment Adviser or the
Subadviser), to provide subadvisory services to the Funds. PIFM also administers
the Funds' corporate affairs and, in connection therewith, furnishes each Fund
with office facilities, together with those ordinary clerical and bookkeeping
services which are not being furnished by State Street Bank and Trust Company,
the Funds' custodian, and PMFS. The management services of PIFM for the Funds
are not exclusive under the terms of the Management Agreements and PIFM is free
to, and does, render management services to others.
The Funds pay PIFM for the services performed and the facilities furnished
by PIFM fees computed daily and payable monthly as follows: COMMAND 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, .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. COMMAND Tax-Free 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 Fund's average daily net
assets in excess of $1 billion. COMMAND Government Fund pays fees at an annual
rate of .40% of 1% of 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.
In connection with its management of the business affairs of the Funds
pursuant to the Management Agreements, PIFM 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 PIFM
or the Funds' investment adviser;
(b) all expenses incurred by PIFM 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 investment adviser pursuant to
subadvisory agreements on behalf of the Funds between PIFM and PI (the
Subadvisory Agreements).
Under the terms of the Management Agreement, each Fund is responsible for
the payment of certain expenses, including (a) the fees or reimbursements
payable to the Manager, (b) the fees and expenses of Trustees who are not
affiliated with PIFM or each Fund's Subadviser, (c) the fees and certain
expenses of each Fund's Custodian and Transfer 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 charges and expenses of each Fund's legal counsel and independent
accountants, (e) brokerage commissions, if any, and any issue or transfer taxes
chargeable to each Fund in connection with its securities transactions, (f) all
taxes and trust fees payable by a Fund to governmental agencies, (g) the fees of
any trade association of which a Fund is a member, (h) the cost of share
certificates, if any, representing, and/or non-negotiable share deposit receipts
evidencing, shares of a Fund, (i) the cost of fidelity and liability insurance,
(j) the fees and expenses involved in registering and maintaining registration
of the Fund and of its shares with the Commission, including the preparation and
printing of the Fund's registration statements and prospectuses for such
purposes, and paying the fees and expenses of notice filings made in accordance
with state securities laws, (k) allocable communications expenses with respect
to investor services and all expenses of shareholders' and Trustees' meetings
and of preparing, printing and mailing reports, proxy statements and
prospectuses to shareholders, (l) litigation and indemnification expenses and
other extraordinary expenses not incurred in the ordinary course of a Fund's
business and (m) distribution fees.
Each Management Agreement also provides that PIFM will not be liable for any
error of judgment or any loss suffered by a Fund in connection with the matters
to which the Management Agreement relates except in the case of a breach of
fiduciary duty with respect to the receipt of compensation for services (in
which case any award for damages will be limited as provided in the Investment
Company Act) or a loss resulting from willful misfeasance, bad faith, gross
negligence or reckless disregard of duty. The Management Agreement provides that
it will terminate automatically if assigned (as defined in the Investment
Company Act), and that it may be terminated without penalty by either party upon
B-14
<PAGE>
not more than 60 days' nor less than 30 days' written notice. The Management
Agreement provides that it will continue in effect for a period of more than two
years from its execution only so long as such continuance is specifically
approved at least annually in accordance with the requirements of the Investment
Company Act.
PIFM has entered into Subadvisory Agreements with PI. The Subadvisory
Agreements provide that PI furnish investment advisory services in connection
with the investment management of the Funds. In connection therewith, PI is
obligated to keep certain books and records of the Funds. PIFM continues to have
responsibility for all investment advisory services pursuant to the Management
Agreement and supervises PI's performance of such services. PI is reimbursed by
PIFM for the reasonable costs and expenses incurred by PI in furnishing those
services.
PIFM pays PI for the services performed and the facilities furnished by PI
fees computed daily and payable monthly as follows: COMMAND Money fund pays fees
at an annual rate of .250% of 1% of average daily net assets up to and including
$500 million, .191 of 1% of the next $500 million, .150 of 1% of the next $500
million, and .123 of 1% of the Fund's average daily net assets in excess of $1.5
billion. COMMAND Tax-Free Fund pays fees at an annual rate of .250 of 1% of
average daily net assets up to and including $500 million, .191 of 1% of the
next $500 million, and .150 of 1% of the Fund's average daily net assets in
excess of $1 billion. COMMAND Government Fund pays fees at an annual rate of
.200 of 1% of average daily net assets up to and including $1 billion, and .169
of 1% of the Fund's average daily net assets in excess of $1 billion.
The Subadviser maintains a corporate credit unit which provides credit
analysis and research on taxable fixed-income securities including money market
instruments. The portfolio manager consults routinely with the credit unit in
managing the Funds. The credit unit reviews on an ongoing basis commercial paper
issuers, commercial banks, non-bank financial institutions and issuers of other
taxable fixed-income obligations. Credit analysts have broad access to research
and financial reports, data retrieval services and industry analysts. They
maintain relationships with the management of corporate issuers and from time to
time visit companies in whose securities the Funds may invest.
Each Subadvisory Agreement provides that it will terminate in the event of
its assignment (as defined in the Investment Company Act) or upon the
termination of the applicable Management Agreement. Each Subadvisory Agreement
may be terminated by the Fund, PIFM or PI upon not more than 60 days' nor less
than 30 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.
The Management Agreement between each Fund and PIFM and the Subadvisory
Agreements between PIFM and PIC were last approved by the Board of Trustees of
each Fund, including a majority of the Trustees who are not parties to the
contracts or interested persons of any such parties, as defined in the
Investment Company Act, on May 23, 2000 and by a majority of the outstanding
shares of COMMAND Government Fund and COMMAND Tax-Free Fund on August 18, 1988
and by a majority of the outstanding shares of COMMAND Money Fund on
October 18, 1988.
For the fiscal years ended June 30, 2000, 1999 and 1998, COMMAND Money Fund
paid PIFM management fees of $47,374,169, $43,127,743 and $29,026,767,
respectively. For the fiscal years ended June 30, 2000, 1999 and 1998, COMMAND
Tax-Free Fund paid PIFM management fees of $6,557,570, $6,685,127 and
$5,671,955, respectively. For the fiscal years ended June 30, 2000, 1999 and
1998, COMMAND Government Fund paid PIFM management fees of $2,858,618,
$2,959,117 and $2,250,774, respectively.
(b) PRINCIPAL UNDERWRITER AND DISTRIBUTOR
Prudential Investment Management Services LLC (PIMS or the Distributor),
Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077, acts
as the distributor of the shares of the Fund. PIFM and PI, which are affiliated
persons of the Funds, are affiliates of PIMS.
B-15
<PAGE>
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
May 23, 2000. Under each Fund's Distribution and Service Plan and Distribution
Agreement, each Fund pays the 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 the Distributor for its distribution-related expenses.
For the fiscal year ended June 30, 2000, the Distributor incurred
distribution expenses of $16,472,918 for the Money Fund, $893,318 for the
Government Fund and $1,894,190 for the Tax-Free Fund, all of which was recovered
through the distribution fees paid by the Funds. It is estimated that of the
distribution fees received by the Distributor from each Fund for the fiscal year
ended June 30, 2000, commission credits to Prudential Securities branch offices
for payments of commissions to account executives amounted to approximately 80%
($13,178,334) for the Money Fund; 80% ($714,654) for the Government Fund; and
80% ($1,515,352) for the Tax-Free Fund; and overhead and other branch office
distribution-related expenses amounted to approximately 20% ($3,294,584) for the
Money Fund; approximately 20% ($178,664) for the Government Fund; and
approximately 20% ($378,838) 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 with and will review at
least quarterly, written reports of the amounts expended under the Plans and the
purposes for which such expenditures were made.
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 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 the Distributor to the extent permitted by applicable law against
certain liabilities under the Securities Act.
(c) OTHER SERVICE PROVIDERS
State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts 02171, serves as Custodian for each Fund's portfolio securities,
and in that capacity maintains cash and certain financial and accounting books
and records pursuant to an agreement with each Fund.
Prudential Mutual Fund Services LLC (PMFS), 194 Wood Avenue South, Iselin,
New Jersey 08853, serves as the Transfer Agent of each Fund. It is a
wholly-owned subsidiary of PIFM. PMFS provides customary transfer agency
services to the Funds, including the handling of shareholder communications, the
processing of shareholder transactions, the maintenance of shareholder account
records, payment of dividends and distributions and related functions. In
connection with the transfer agency services rendered by PMFS to the Funds, PMFS
receives an annual fee per shareholder account, a
B-16
<PAGE>
new account set-up fee for each manually established account and a monthly
inactive 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, 2000, fees of approximately $4,181,400, $178,200
and $101,100 were incurred by COMMAND Money Fund, COMMAND Tax-Free Fund and
COMMAND Government Fund, respectively, for such services.
PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, New York
10036, serves as each Fund's independent public accountants, and in that
capacity audits the annual financial statements of each Fund.
CODES OF ETHICS
Each Fund's Board of Trustees has adopted a Code of Ethics. In addition, the
Manager, Subadviser and Distributor have each adopted a Code of Ethics
(collectively, the Codes). The Codes permit personnel subject to the Codes to
invest in securities, including securities that may be purchased or held by the
Funds. However, the protective provisions of the Codes prohibit certain
investments and limit such personnel from making investments during periods when
the Funds are making such investments. The Codes are on public file with, and
are available from, the Securities and Exchange Commission.
BROKERAGE ALLOCATION AND OTHER PRACTICES
The Manager is responsible for decisions to buy and sell securities for the
Funds, the selection of brokers and dealers to effect the transactions and the
negotiation of brokerage commissions, if any. (For purposes of this section, the
term "Manager" includes the Subadviser.) The Funds do not normally incur any
brokerage commission expense on such transactions. In the market for money
market instruments, securities are generally traded on a "net" basis, with
dealers acting as principal for their own accounts without a stated commission,
although the price of the security usually includes a profit to the dealer. In
underwritten offerings, securities are purchased at a fixed price which includes
an amount of compensation to the underwriter, generally referred to as the
underwriter's concession or discount. On occasion, certain money market
instruments may be purchased directly from an issuer, in which case no
commissions or discounts are paid. Portfolio securities may not be purchased
from any underwriting or selling syndicate of which the Distributor, or an
affiliate (including Prudential Securities), during the existence of the
syndicate, is a principal underwriter (as defined in the Investment Company
Act), except in accordance with rules of the SEC. The Funds will not deal with
the Distributor or its affiliates on a principal basis.
In placing orders for portfolio securities of the Funds, the Manager is
required to give primary consideration to obtaining the most favorable price and
efficient execution. This means that the Manager will seek to execute each
transaction at a price and commission, if any, which provide the most favorable
total cost or proceeds reasonably attainable under the circumstances. While the
Manager generally seeks reasonably competitive spreads or commissions, the Funds
will not necessarily be paying the lowest spread or commission available. Within
the framework of this policy, the Manager may consider research and investment
services provided by brokers or dealers who effect or are parties to portfolio
transactions of the 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 for
such other accounts, whose aggregate assets are far 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 advisory fee it pays to the Manager
by any amount that may be attributed to the value of such services.
Subject to the above considerations, Prudential Securities, as an affiliate
of the Funds, may act as a securities broker (or futures commission merchant)
for the Funds. In order for Prudential Securities to effect any portfolio
transactions for the Funds, the commissions, fees or other remuneration received
by Prudential Securities must be reasonable and fair compared to the
commissions, fees or other remuneration paid to other brokers in connection with
comparable transactions involving similar securities being purchased or sold
during a comparable period of time. This standard would
B-17
<PAGE>
allow Prudential Securities to receive no more than the remuneration which would
be expected to be received by an unaffiliated broker in a commensurate
arm's-length transaction. Furthermore, the Board of Trustees of each Fund,
including a majority of the Trustees who are not "interested" persons, has
adopted procedures which are reasonably designed to provide that any
commissions, fees or other remuneration paid to Prudential Securities are
consistent with the foregoing standard. Brokerage transactions with Prudential
Securities are also subject to such fiduciary standards as may be imposed by
applicable law.
The Funds are required to disclose their holdings of securities of their
regular brokers and dealers (as defined under Rule 10b-1 of the Investment
Company Act) and their parents during their most recent fiscal year. As of
June 30, 2000, the Funds held such securities as follows: (1) COMMAND Money Fund
-Credit Suisse First Boston $135,002,765; Goldman, Sachs & Co. $588,000,000;
Merrill Lynch, Pierce Fenner & Smith, Inc. $62,671,787; Morgan (J.P.) & Co.,
Inc. $200,000,000; Morgan Stanley Dean Witter $96,519,850 and (2) COMMAND
Government Fund - Goldman, Sachs & Co. $25,000,000; Morgan (J.P.) & Co., Inc.
$38,992,000; Morgan Stanley Dean Witter $30,000,000; Salomon Smith Barney Inc.
$36,033,000.
SECURITIES AND ORGANIZATION
Each Fund is authorized to issue an unlimited number of full and fractional
shares of beneficial interest. Each share of a Fund represents an equal
proportionate interest in that Fund with each other share of that Fund and is
entitled to a proportionate interest in the dividends and distributions from
that Fund. Upon termination of a Fund, whether pursuant to liquidation of the
Fund or otherwise, shareholders of that Fund are entitled to share pro rata in
the net assets of the Fund then available for distribution to such shareholders.
Shareholders have no preemptive rights.
A copy of the Agreement and Declaration of Trust (the Declaration of Trust)
establishing each Fund is on file with the Secretary of State of the
Commonwealth of Massachusetts. Each Declaration of Trust provides for the
perpetual existence of the applicable Fund. The Fund, however, may be terminated
at any time by a vote of at least two-thirds of the outstanding shares or by the
Trustees upon written notice to the shareholders. Upon termination of a Fund,
after paying or otherwise providing for all charges, taxes, expenses and
liabilities, whether due or accrued or anticipated, of the Fund as may be
determined by the Trustees, the Fund shall, in accordance with such procedures
as the Trustees consider appropriate, reduce the remaining assets to
distributable form in cash or shares or other securities, or any combination
thereof, and distribute the proceeds to the shareholders of the Fund, ratably
according to the number of shares of such Fund held by the several shareholders
of the Fund on the date of termination.
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.
Each Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, nothing in
each Declaration of Trust protects a Trustee against any liability to which the
Trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct of
his office. Each Declaration of Trust provides for indemnification by the Fund
of the Trustees and the officers of the Fund except with respect to any matter
as to which any such person did not act in good faith in the reasonable belief
that his action was in or not opposed to the best interests of the Fund. Such
person may not be indemnified against any liability to the Fund or the Fund's
shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
B-18
<PAGE>
The Funds will not normally hold annual shareholders' meetings. At such time
as less than a majority of the Trustees have been elected by the shareholders,
the Trustees then in office will call a shareholders' meeting for the election
of Trustees. In addition, Trustees may be removed from office by a written
consent signed by the holders of two-thirds of the outstanding shares and filed
with the Funds' Custodian or by a vote of the holders of two-thirds of the
outstanding shares at a meeting duly called for the purpose, which meeting shall
be held upon written request of the holders of not less than 10% of the
outstanding shares. Upon written request by ten or more shareholders, who have
been such for at least six months and who hold shares constituting 1% of the
outstanding shares, stating that such shareholders wish to communicate with the
other shareholders for the purpose of obtaining the signatures necessary to
demand a meeting to consider removal of a Trustee, each Fund has undertaken to
provide a list of shareholders or to disseminate appropriate materials (at the
expense of the requesting shareholders).
Except as otherwise disclosed in the Prospectus and in this Statement of
Additional Information, the Trustees shall continue to hold office and may
appoint their successors.
PURCHASE AND REDEMPTION OF FUND SHARES
Shares of each Fund may be purchased at a price equal to the next determined
net asset value (NAV) per share. The procedures for the purchase and redemption
of shares of a Fund are described in the Prospectus.
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 (or, in the case of a Roth IRA, the avoidance of
federal income tax on such income). 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. The Tax-Free Fund may not be
a suitable investment for an IRA.
TAX-DEFERRED COMPOUNDING(1)
<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>
------------
(1)The 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
a traditional IRA account will be subject to tax when withdrawn from the
account. Distributions from a Roth IRA which meet the conditions required under
the Internal Revenue Code will not be subject to tax upon withdrawal from the
account.
COMMAND-SM- AND BUSINESSEDGE-SM- ACCOUNT PROGRAMS
Shares of the Funds are offered exclusively to participants in the COMMAND
Account program (the COMMAND program) and the Prudential BusinessEdge Program
(the BusinessEdge 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 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.
B-19
<PAGE>
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. For information regarding products
and services available through the COMMAND program, please contact your
Prudential Securities Financial Adviser.
The BusinessEdge program offers a comprehensive money management system to
businesses, designed to optimize cash flow and invest idle cash. Products and
services offered through the BusinessEdge program, and the associated fees, and
waivers or reductions thereto, are subject to change. For information regarding
the BusinessEdge program, please contact your Prudential Securities Financial
Adviser or your Pruco Securities Preferred Agent.
From time to time, the Distributor, Prudential Securities or Pruco
Securities may advertise the COMMAND program or BusinessEdge program and their
component features and other products and services available through the COMMAND
program or BusinessEdge 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.
NET ASSET VALUE
Each Fund's NAV per share is determined by subtracting its liabilities from
the value of its assets and dividing the remainder by the number of outstanding
shares.
Each Fund uses the amortized cost method of valuation to determine the value
of its portfolio securities. In that regard, each Fund's Board of Trustees has
determined to maintain a dollar-weighted average portfolio maturity of 90 days
or less, to purchase only instruments having remaining maturities of thirteen
months or less, and to invest only in securities determined by the investment
adviser under the supervision of the Board of Trustees to be of minimal credit
risk and to be of "eligible quality" in accordance with regulations of the SEC.
The remaining maturity of an instrument held by a Fund that is subject to a put
is deemed to be the period remaining until the principal amount can be recovered
through the exercise of a right of demand or, in the case of a variable rate
instrument, the next interest reset date, if longer. The value assigned to the
put is zero. The Board of Trustees also has established procedures designed to
stabilize, to the extent reasonably possible, each Fund's price per share, as
computed for the purpose of sales and redemptions, at $1.00. Such procedures
will include review of each Fund's portfolio holdings by the Board, at such
intervals as deemed appropriate, to determine whether the Fund's NAV calculated
by using available market quotations deviates from $1.00 per share based on
amortized cost. The extent of any deviation will be examined by the Board, and
if such deviation exceeds 1/2 of 1%, the Board will promptly consider what
action, if any, will be initiated. In the event the Board of Trustees determines
that a deviation exists which may result in material dilution or other unfair
results to investors or existing shareholders, the Board will take such
corrective action as it regards necessary and appropriate, including the sale of
portfolio instruments prior to maturity to realize gains or losses, the
shortening of average portfolio maturity, the withholding of dividends or the
establishment of NAV per share by using available market quotations.
Each Fund computes its NAV at 4:30 p.m., New York time, on each day the New
York Stock Exchange (the Exchange) is open for trading. In the event the
Exchange closes early on any business day, the NAV of a Fund's shares shall be
determined at a time between such closing and 4:30 p.m., New York time. The
Exchange is closed on the following holidays: New Year's Day, Martin Luther King
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day.
TAXES, DIVIDENDS AND DISTRIBUTIONS
Each Fund has elected to qualify, and each Fund intends to remain qualified,
as a regulated investment company under Subchapter M of the Internal Revenue
Code of 1986, as amended. This relieves each Fund (but not its shareholders)
from paying federal income tax on income which is distributed to shareholders,
and, if a Fund did realize long-term capital gains, permits net capital gains of
the fund (i.e., the excess of net long-term capital gains over net short-term
capital losses) to be treated as long-term capital gains of the shareholders,
regardless of how long shareholders have held their shares in the Fund.
Qualification as a regulated investment company requires, among other
things, that (a) at least 90% of a fund's annual gross income (without reduction
for losses from the sale or other disposition of securities or foreign
currencies) be
B-20
<PAGE>
derived from interest, dividends, payments with respect to securities loans, and
gains from the sale or other disposition of securities or options thereon, or
other income (including, but not limited to, gains from options) derived with
respect to its business of investing in such securities; (b) a fund must
diversify its holdings so that, at the end of each quarter of the taxable year,
(i) at least 50% of the market value of a fund's assets is represented by cash,
U.S. Government obligations and other securities limited in respect of any one
issuer to an amount not greater than 5% of the market value of the fund's assets
and 10% of the outstanding voting securities of such issuer, and (ii) not more
than 25% of the value of its assets is invested in the securities of any one
issuer (other than U.S. Government obligations) and (c) the fund must distribute
to its shareholders at least 90% of its net investment income and net short-term
gains (i.e., the excess of net short-term capital gains over net long-term
capital losses) in each year.
Gains or losses on sales of securities by a Fund will be treated as
long-term capital gains or losses if the securities have been held by it for
more than one year. None of the Funds anticipate realizing long-term capital
gains. Other gains or losses on the sale of securities will be short-term
capital gains or losses. In addition, debt securities acquired by a Fund may be
subject to original issue discount and market discount rules.
Each Fund is required to distribute 98% of its ordinary income in the same
calendar year in which it is earned. Each Fund is also required to distribute
during the calendar year 98% of the capital gain net income it earned during the
twelve months ending on October 31 of such calendar year, as well as all
undistributed ordinary income and undistributed capital gain net income from the
prior year or the twelve-month period ending on October 31 of such prior year,
respectively. To the extent it does not meet these distribution requirements, a
Fund will be subject to a non-deductible 4% excise tax on the undistributed
amount. For purposes of this excise tax, income on which a Fund pays income tax
is treated as distributed. Each Fund intends to make timely distributions in
order to avoid this excise tax. For the purposes of this excise tax, dividends
declared in December payable to shareholders of record on a specified date in
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.
Dividend distributions to shareholders from the COMMAND Tax-Free Fund (the
Tax-Free Fund) will be exempt from federal income taxation (though not
necessarily exempt from state and local taxation) provided that 50% or more of
the value of the Tax-Free Fund's assets at the end of each quarter is invested
in state, municipal and other bonds whose interest payments are excluded from
gross income for federal income tax purposes and provided that the Fund mails a
notice to shareholders that properly designates the dividend as an exempt
interest dividend.
It is anticipated that the NAV per share of each Fund will remain constant.
However, if the NAV per share fluctuates, a shareholder may realize gain or loss
upon the disposition of a share. Any gain or loss realized upon a sale or
redemption of shares by a shareholder who is not a dealer in securities will
generally be treated as long-term capital gain or loss if the shares have been
held for more than one year and otherwise as short-term capital gain or loss.
Any such loss, however, although otherwise treated as short-term capital loss,
will be treated as long-term capital loss to the extent of any capital gain
distributions received by the shareholder, if the shares have been held for six
months or less. Futhermore, certain rules may apply which would limit the
ability of the shareholder to recognize any loss if, for example, the
shareholder replaced the shares, including shares purchased pursuant to dividend
reinvestment, within 30 days of the disposition of the shares. In such cases the
basis of the shares acquired will be readjusted to reflect the disallowed loss.
Because none of the Funds' net income is expected to arise from dividends on
common or preferred stock, none of the Funds' distributions to shareholders will
be eligible for the dividends received deduction for corporations under the
Internal Revenue Code.
Interest on indebtedness incurred or continued by a shareholder to purchase
or carry shares of the Tax-Free Fund is not deductible. Exempt-interest
dividends attributable to interest on certain "private activity" tax-exempt
obligations are a preference item for computing the alternative minimum tax for
both individuals and corporations. Moreover, exempt-interest dividends
attributable to interest on tax-exempt obligations, whether or not private
activity bonds, that are received by corporations, (i) will be taken into
account in determining the alternative minimum tax imposed on 75% of the excess
of adjusted current earnings over alternative minimum taxable income and (ii) in
determining the foreign branch profits tax
B-21
<PAGE>
imposed on the effectively connected earnings and profits (with adjustments) of
United States branches of foreign corporations. Entities or persons who are
"substantial users" (or related persons) of facilities financed by private
activity bonds should consult their tax advisers before purchasing shares of the
Tax-Free Fund.
Shareholders who have held their shares of the Tax-Free Fund for six months
or less may be subject to a disallowance of losses from the sale or exchange of
those shares to the extent of any exempt-interest dividends received by the
shareholder with respect to the shares and if such losses are not disallowed,
they will be treated as long-term capital losses to the extent of any
distributions of long-term capital gains received by the shareholder with
respect to such shares.
Shareholders will be notified annually by the Funds as to the federal tax
status of distributions made by the Fund.
Interest income from the Tax-Free Fund that is exempt from federal income
taxation may not be exempt from taxation under the laws of a particular state or
local taxing authority. The Tax-Free Fund will report annually to its
shareholders the percentage and source, on a state-by-state basis, of interest
income on municipal bonds or notes received by the Tax-Free Fund during the
preceding year.
Dividends and distributions subject to federal income taxation may also be
subject to state and local taxes. Furthermore, under the laws of certain states,
distributions of net income from the Funds may be taxable to shareholders as
income even though a portion of such distributions may be derived from interest
on U.S. obligations which, if realized directly, would be exempt from state
income taxes. Shareholders are advised to consult their tax advisors concerning
the application of state and local taxes.
Each Fund is organized as a Massachusetts business trust. Under current law,
so long as the Funds qualify for federal income tax treatment as described
above, it is believed that no Fund should be liable for any income or franchise
tax in the Commonwealth of Massachusetts.
CALCULATION OF YIELD
Each Fund will prepare a current quotation of yield daily. The yield quoted
will be the simple annualized yield for an identified seven calendar day period.
The yield calculation will be based on a hypothetical account having a balance
of exactly one share at the beginning of the seven-day period. The base period
return will be the change in the value of the hypothetical account during the
seven-day period, including dividends declared on any shares purchased with
dividends on the shares, but excluding any capital changes, divided by the value
of the account at the beginning of the base period. The yield will vary as
interest rates and other conditions affecting money market instruments change.
Yield also depends on the quality, length of maturity and type of instruments in
a Fund's portfolio, and its operating expenses. Each Fund also may prepare an
effective annual yield computed by compounding the unannualized seven-day period
return as follows: by adding 1 to the unannualized seven-day period return,
raising the sum to a power equal to 365 divided by 7, and subtracting 1 from the
result.
Effective yield = [(base period return + 1) TO THE POWER OF 365/7]-1
The yield and effective yield of each Fund based on the 7 days ended
June 30, 2000 were 6.08% and 6.24%, respectively, for COMMAND Money Fund, 3.97%
and 4.04%, respectively, for COMMAND Tax-Free Fund and 5.88% and 6.03%,
respectively, for COMMAND Government Fund.
COMMAND 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. COMMAND Tax-Free Fund's 7-day tax
equivalent yield as of June 30, 2000 was 7.02%.
Comparative performance information may be used from time to time in
advertising or marketing each Fund's shares, including data from Lipper
Analytical Services, Inc., Morningstar Publications, Inc., IBC Financial
Data, Inc., The Bank Rate Monitor, other industry publications, business
periodicals and market indices.
B-22
<PAGE>
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. Actual yields will depend upon not only changes in
interest rates generally during the period in which the investment in a Fund is
held, but also on changes in the Fund's expenses. Yield does not take into
account any federal or state income taxes.
ISSUANCE OF FUND SHARES FOR SECURITIES
Transactions involving the issuance of shares of a Fund for securities
(rather than cash) will be limited to: (i) reorganizations, (ii) statutory
mergers, or (iii) other acquisitions of portfolio securities that: (a) meet the
investment objective and policies of the Fund, (b) are liquid and not subject to
restrictions on resale, (c) have a value that is readily ascertainable via
listing on or trading in a recognized United States or international exchange or
market, and (d) is approved by the Fund's investment adviser.
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. Obligations
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. Obligations 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. Obligations rated A
have a strong capacity to pay principal and interest, although they are somewhat
more susceptible to the adverse effects of changes in circumstances and economic
conditions. The BBB rating, which is the lowest "investment grade" security
rating by Standard & Poor's, indicates an adequate capacity to pay principal and
interest. Whereas they normally exhibit adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay principal and interest for 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.
B-23
<PAGE>
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.
ADVERTISING. Advertising materials for the Funds may include biographical
information relating to their portfolio manager(s), and may include or refer to
commentary by the Funds' manager(s) concerning investment style, investment
discipline, asset growth, current or past business experience, business
capabilities, political, economic or financial conditions and other matters of
general interest to investors. Advertising materials for the Funds also may
include mention of The Prudential Insurance Company of America, its affiliates
and subsidiaries, and reference the assets, products and services of those
entities.
From time to time, advertising materials for the Funds may include
information concerning retirement and investing for retirement, may refer to the
approximate number of Fund shareholders and may refer to Lipper rankings or
Morningstar ratings, other related analysis supporting those ratings, other
industry publications, business periodicals and market indices. In addition,
advertising materials may reference studies or analyses performed by the manager
or its affiliates. Advertising materials for sector funds, funds that focus on
market capitalizations, index funds and international/global funds may discuss
the potential benefits and risks of that investment style. Advertising materials
for fixed income funds may discuss the benefits and risks of investing in the
bond market including discussions of credit quality, duration and maturity.
B-24
<PAGE>
COMMAND ACCOUNT COMMAND Money Fund
Portfolio of Investments as of June 30, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) DESCRIPTION VALUE (NOTE 1)
<S> <C> <C>
------------------------------------------------------------------------------------
BANK NOTES 7.0%
American Express Centurion Bank
$ 122,000 7.01%, 7/3/00(a) $ 122,000,000
Bank of America N.A.
8,000 6.32%, 7/25/00 8,000,000
Citicorp
19,000 6.684%, 8/02/00(a) 19,000,000
Comerica Bank N.A.
67,000 6.661%, 7/3/00(a) 66,992,022
92,000 6.656%, 7/6/01 92,005,264
40,000 6.573%, 6/7/01 39,988,789
First Chicago Corp.
50,000 6.441%, 5/1/01(a) 49,998,619
First Union National Bank
138,000 6.283%, 7/21/00(a) 138,000,000
128,000 7.09%, 12/22/00 128,000,000
Key Bank N.A.
13,000 6.331%, 7/17/00(a) 13,000,420
National City Bank
90,000 6.55%, 1/31/01 89,974,932
U.S. Bank N.A.
36,000 6.698%, 7/19/00(a) 35,998,974
146,000 6.581%, 7/21/00(a) 145,996,069
------------------
948,955,089
-------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT - YANKEE 16.2%
Bank of Montreal
150,000 6.58%, 7/17/00 150,000,000
Bank Scotland New York Institutional Certificate
95,000 7.13%, 6/29/01 94,955,354
Banque Nationale De Paris
120,000 6.81%, 10/6/00 120,000,000
Canadian Imperial Bank of Commerce
44,042 6.58%, 7/12/00 44,042,000
85,000 6.60%, 7/24/00 85,000,000
240,000 6.75%, 9/19/00 240,000,000
200,000 7.30%, 5/14/01 200,000,000
</TABLE>
See Notes to Financial Statements
B-26
<PAGE>
COMMAND ACCOUNT COMMAND Money Fund
Portfolio of Investments as of June 30, 2000 Cont'd.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) DESCRIPTION VALUE (NOTE 1)
------------------------------------------------------------------------------------
<S> <C> <C>
Credit Suisse First Boston ,Inc.
$ 135,000 6.74%, 9/14/00 $ 135,002,765
Deutsche Bank
250,000 6.075%, 11/24/00 249,928,445
45,000 6.75%, 2/22/01 44,986,204
National Westminster Bank PLC
33,200 6.10%, 11/27/00 33,171,755
Toronto Dominion Bank
200,000 6.30%, 8/7/00 200,000,000
39,000 6.22%, 8/15/00 38,994,143
UBS AG
68,000 6.38%, 12/20/00 67,984,752
200,000 7.125%, 7/5/01 199,914,081
Westpac Banking Corp.
179,000 6.69%, 10/4/00(a) 178,965,154
46,000 6.22%, 11/30/00 45,985,398
50,000 6.52%, 1/29/01 49,986,204
------------------
2,178,916,255
-------------------------------------------------------------------------------------
COMMERCIAL PAPER 47.3%
Abbey National North America
195,000 6.20%, 9/11/00 192,582,000
Alliance & Leicester
68,000 6.61%, 9/15/00 67,051,098
American General Finance Corp.
75,000 6.20%, 8/8/00 74,509,167
AT&T Corp.
138,688 6.59%, 9/5/00 137,012,418
Banc One Financial Corp.
150,000 6.065%, 8/3/00 149,166,062
46,222 6.18%, 8/18/00 45,841,131
20,000 6.90%, 9/25/00(a) 20,016,043
100,000 6.79%, 11/27/00 97,189,694
Bank One Australia Ltd.
4,369 6.62%, 7/21/00 4,352,932
47,000 6.69%, 8/22/00 46,545,823
Bank Scotland Treasury Services PLC
60,000 6.62%, 9/11/00 59,205,600
</TABLE>
See Notes to Financial Statements
B-27
<PAGE>
COMMAND ACCOUNT COMMAND Money Fund
Portfolio of Investments as of June 30, 2000 Cont'd.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) DESCRIPTION VALUE (NOTE 1)
------------------------------------------------------------------------------------
<S> <C> <C>
BankAmerica Corp.
$ 100,000 6.06%, 8/3/00 $ 99,444,500
91,000 6.05%, 8/14/00 90,327,106
74,000 6.71%, 9/13/00 72,979,334
Barton Capital Corp.
30,358 6.60%, 7/10/00 30,307,909
16,562 6.60%, 7/21/00 16,501,273
11,351 6.60%, 7/24/00 11,303,137
BASF AG
20,000 6.62%, 9/26/00 19,680,033
Baus Funding LLC
65,000 6.62%, 9/14/00 64,103,542
Bell Atlantic Financial Services, Inc.
17,517 6.66%, 8/24/00 17,342,005
Bishops Gate Resident
39,000 6.57%, 7/18/00 38,879,002
Black Forest Corp.
16,000 6.57%, 7/5/00 15,988,320
20,000 6.62%, 7/5/00 19,985,289
30,000 6.60%, 7/17/00 29,912,000
Blue Ridge Asset Funding Corp.
55,000 6.57%, 7/12/00 54,889,587
15,000 6.60%, 7/25/00 14,934,000
Bradford & Bingley Building Society
75,000 6.18%, 7/17/00 74,794,000
Brahms Funding Corp.
174,000 6.705%, 7/28/00 173,124,997
British Telecommunications PLC
187,000 6.67%, 8/16/00 185,406,241
CBA Delaware Finance, Inc.
95,000 6.05%, 8/14/00 94,297,528
50,000 6.08%, 9/7/00 49,425,778
Centric Capital Corp.
13,000 6.23%, 8/28/00 12,869,516
7,223 6.65%, 8/30/00 7,142,945
5,500 6.65%, 9/25/00 5,412,626
</TABLE>
See Notes to Financial Statements
B-28
<PAGE>
COMMAND ACCOUNT COMMAND Money Fund
Portfolio of Investments as of June 30, 2000 Cont'd.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) DESCRIPTION VALUE (NOTE 1)
------------------------------------------------------------------------------------
<S> <C> <C>
Ciesco, L.P.
$ 118,000 6.55%, 7/21/00 $ 117,570,611
99,000 6.55%, 7/27/00 98,531,675
Citicorp
91,013 6.55%, 7/27/00 90,582,458
Clipper Receivables Corp.
50,000 6.57%, 7/12/00 49,899,625
87,000 6.57%, 7/13/00 86,809,470
Countrywide Home Loan, Inc.
30,000 6.76%, 7/14/00 29,926,767
66,000 6.69%, 8/25/00 65,325,425
Den Norske Bank
94,212 6.63%, 9/5/00 93,066,853
Dexia CLF Finance Co.
57,000 6.58%, 7/20/00 56,802,052
44,000 6.55%, 7/27/00 43,791,856
Falcon Asset Securitization Corp.
110,000 6.62%, 8/14/00 109,109,978
Forrestal Funding Master Trust
6,478 6.62%, 7/11/00 6,466,088
139,000 6.19%, 7/17/00 138,617,596
158,000 6.09%, 8/10/00 156,930,867
Fortis Funding LLC
20,000 6.60%, 8/1/00 19,886,333
GE Capital International Funding, Inc.
45,000 6.52%, 7/14/00 44,894,050
General Electric Capital Corp.
18,535 6.55%, 7/5/00 18,521,511
195,000 6.12%, 8/10/00 193,674,000
42,000 6.04%, 8/15/00 41,682,900
143,000 6.75%, 2/27/01 136,538,187
General Electric Capital Services, Inc.
50,000 6.75%, 2/27/01 47,740,625
General Motors Acceptance Corp.
300,000 6.57%, 7/5/00 299,781,000
23,654 6.57%, 7/6/00 23,632,416
100,000 6.15%, 7/24/00 99,607,083
</TABLE>
See Notes to Financial Statements
B-29
<PAGE>
COMMAND ACCOUNT COMMAND Money Fund
Portfolio of Investments as of June 30, 2000 Cont'd.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) DESCRIPTION VALUE (NOTE 1)
------------------------------------------------------------------------------------
<S> <C> <C>
GTE Corp.
$ 15,000 6.62%, 7/5/00 $ 14,988,967
31,960 6.58%, 7/13/00 31,889,901
50,000 6.60%, 7/19/00 49,835,000
9,030 6.60%, 7/20/00 8,998,546
81,500 6.60%, 7/24/00 81,156,342
8,500 6.62%, 7/25/00 8,462,487
22,750 6.65%, 7/25/00 22,649,142
91,462 6.62%, 7/27/00 91,024,710
41,500 6.62%, 7/28/00 41,293,952
18,538 6.62%, 8/1/00 18,432,323
77,000 6.62%, 8/3/00 76,532,738
Hartford Financial Services Group, Inc.
47,000 6.62%, 7/14/00 46,887,135
47,000 6.62%, 7/31/00 46,740,717
Homeside Lending, Inc.
5,513 6.56%, 7/7/00 5,506,972
36,600 6.57%, 7/18/00 36,486,449
20,000 6.35%, 7/24/00 19,918,861
Invensys PLC
8,964 6.85%, 7/17/00 8,936,710
Merrill Lynch & Co., Inc.
63,000 6.05%, 8/1/00 62,671,787
Morgan Stanley Dean Witter
97,000 6.60%, 7/28/00 96,519,850
National Rural Utilities Cooperative Finance
Corp.
30,000 6.12%, 7/17/00 29,918,400
50,000 6.15%, 7/17/00 49,863,333
6.65%, 8/7/00(c)
41,000 (cost $41,000,000; purchased 6/26/00) 41,000,000
Nationwide Anglia Building Society
150,000 6.62%, 9/8/00 148,096,750
142,166 6.62%, 9/11/00 140,283,722
New Center Asset Trust
31,000 6.56%, 7/28/00 30,847,480
Northern Rock PLC
20,000 6.70%, 7/21/00 19,925,556
</TABLE>
See Notes to Financial Statements
B-30
<PAGE>
COMMAND ACCOUNT COMMAND Money Fund
Portfolio of Investments as of June 30, 2000 Cont'd.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) DESCRIPTION VALUE (NOTE 1)
------------------------------------------------------------------------------------
<S> <C> <C>
Preferred Receivables Funding Corp.
$ 11,000 6.60%, 7/19/00 $ 10,963,700
58,000 6.62%, 8/3/00 57,648,037
Receivables Capital Corp.
4,493 6.60%, 7/6/00 4,488,881
Salomon Smith Barney Holdings, Inc.
109,000 6.55%, 7/7/00 108,881,008
21,545 6.62%, 9/11/00 21,259,744
40,056 6.62%, 9/20/00 39,459,366
200,000 6.62%, 9/21/00 196,984,222
Southern Co.
30,000 6.60%, 7/10/00 29,950,500
26,640 6.65%, 7/19/00 26,551,422
27,028 6.65%, 7/26/00 26,903,183
Southtrust Bank National Associates
45,000 6.30%, 8/28/00 45,000,703
Sweetwater Capital Corp.
30,203 6.58%, 7/7/00 30,169,877
1,986 6.58%, 7/10/00 1,982,733
8,545 6.58%, 7/13/00 8,526,258
27,218 6.58%, 7/17/00 27,138,402
Thunder Bay Funding, Inc.
5,979 6.60%, 7/6/00 5,973,519
Travelers Insurance Co.
6.32%, 7/6/00(a)(c)
46,000 (cost $46,000,000; purchased 7/6/99) 46,000,000
Tribune Co.
141,000 6.57%, 8/1/00 140,202,292
Unifunding, Inc.
38,000 6.60%, 7/24/00 37,839,767
Variable Funding Capital Corp.
100,000 6.65%, 7/28/00 99,501,250
</TABLE>
See Notes to Financial Statements
B-31
<PAGE>
COMMAND ACCOUNT COMMAND Money Fund
Portfolio of Investments as of June 30, 2000 Cont'd.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) DESCRIPTION VALUE (NOTE 1)
------------------------------------------------------------------------------------
<S> <C> <C>
Wells Fargo & Co.
$ 1,244 6.60%, 7/18/00 $ 1,240,123
Westpac Capital Corp.
20,000 6.17%, 7/14/00 19,955,439
------------------
6,377,400,318
-------------------------------------------------------------------------------------
LOAN PARTICIPATIONS 2.7%
ALCOA, Inc.
96,299 6.59%, 7/7/00 96,299,000
6.62%, 7/18/00(c)
198,000 (cost $198,000,000; purchased 6/15/00) 198,000,000
International Lease Finance Corp.
75,000 6.65%, 7/5/00 75,000,000
------------------
369,299,000
-------------------------------------------------------------------------------------
OTHER CORPORATE OBLIGATIONS 22.7%
Abbey National Treasury Services PLC
202,000 6.248%, 7/24/00(a) 201,992,535
43,000 5.92%, 8/7/00 42,998,334
Bank One Corp.
46,000 6.69%, 8/9/00(a) 46,000,000
36,000 6.86%, 8/17/00(a) 36,000,000
68,000 6.85%, 8/21/00(a) 68,000,000
Centex Home Mortgage LLC
6.791%, 10/20/00(a)(c)
47,000 (cost $47,000,000; purchased 12/8/99) 47,000,000
CIT Group, Inc.
206,000 6.676%, 10/16/00(a) 205,703,146
Conseco Finance Vehicle Trust
75,233 6.811%, 1/5/01(a) 75,233,314
DaimlerChrysler North America Holdings, Inc.
193,000 6.534%, 7/6/00(a) 192,996,563
Dover Corp.
50,000 6.848%, 2/28/01(a) 50,000,000
Ford Motor Credit Co.
287,000 6.729%, 8/18/00(a) 286,969,505
344,000 6.77%, 10/2/00(a) 343,914,630
</TABLE>
See Notes to Financial Statements
B-32
<PAGE>
COMMAND ACCOUNT COMMAND Money Fund
Portfolio of Investments as of June 30, 2000 Cont'd.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) DESCRIPTION VALUE (NOTE 1)
------------------------------------------------------------------------------------
<S> <C> <C>
Goldman, Sachs & Co.
$ 588,000 6.924%, 9/15/00(a) $ 588,000,000
Restructured Asset Securities
6.736%, 7/6/00(a)(c)
248,000 (cost $248,000,000; purchased 9/2/00) 248,000,000
Morgan (J.P.) & Co., Inc.
200,000 6.64%, 3/16/01(a) 200,000,000
Short Term Repackaged Asset Trust 1998-E
6.749%, 7/18/00(a)(c)
148,000 (cost $148,000,000; purchased 9/11/98) 148,000,000
Strategic Money Market Trust 1999-A
286,000 6.40%, 7/13/00(a) 286,000,000
------------------
3,066,808,027
-------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY INSTRUMENTALITY OBLIGATIONS - NON-DISCOUNT 2.9%
Federal Home Loan Banks
390,000 6.189%, 7/5/00(a) 389,847,120
------------------
TOTAL INVESTMENTS 98.8%
(AMORTIZED COST $13,331,225,809(b)) 13,331,225,809
Other assets in excess of liabilities 1.2% 157,812,301
------------------
NET ASSETS 100% $ 13,489,038,110
------------------
------------------
</TABLE>
------------------------------
(a) Variable rate instrument. 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 was adjusted.
(b) The cost for federal income tax purposes is substantially the same as for
financial reporting purposes.
(c) Indicates illiquid securities restricted as to resale. The aggregate cost of
such securities was $728,000,000. The aggregate value of $728,000,000 was
approximately 5.4% of net assets.
See Notes to Financial Statements
B-33
<PAGE>
COMMAND ACCOUNT COMMAND Money Fund
Portfolio of Investments as of June 30, 2000 Cont'd.
<TABLE>
<CAPTION>
The industry classification of portfolio holdings and other assets in excess
of liabilities as a percentage of net assets as of June 30, 2000 was as
follows:
<S> <C>
Commercial Banks....................................................... 46.7%
Motor Vehicle Parts.................................................... 9.2
Security Brokers & Dealers............................................. 9.0
Asset Backed Securities................................................ 8.1
Telephone & Communications............................................. 5.8
Short-Term Business Credit............................................. 5.1
Federal Credit Agencies................................................ 3.6
Bank Holding Companies - Domestic...................................... 3.1
Multi-Media............................................................ 2.2
Mortgage Bankers....................................................... 1.2
Newspaper Publishing................................................... 1.0
Life Insurance......................................................... 0.8
Fire & Marine Casualty Insurance....................................... 0.7
Electrical Services.................................................... 0.6
Equipment Rental & Leasing............................................. 0.6
Personal Credit Institutions........................................... 0.6
Construction Equipment................................................. 0.4
Chemicals and Allied Products.......................................... 0.1
-----
98.8
Other assets in excess of liabilities.................................. 1.2
-----
100.0%
-----
-----
</TABLE>
See Notes to Financial Statements
B-34
<PAGE>
COMMAND ACCOUNT COMMAND Money Fund
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
JUNE 30, 2000
<S> <C>
--------------------------------------------------------------------------------
ASSETS
Investments, at amortized cost which approximates market value $13,331,225,809
Cash 7,418,290
Receivable for Fund shares sold 339,000,651
Interest receivable 60,045,485
Prepaid expenses 85,787
---------------
TOTAL ASSETS 13,737,776,022
---------------
LIABILITIES
Payable for Fund shares repurchased 242,888,807
Management fee payable 4,009,407
Accrued expenses and other liabilities 1,101,209
Distribution fee payable 738,489
---------------
TOTAL LIABILITIES 248,737,912
---------------
NET ASSETS $13,489,038,110
---------------
---------------
Net assets were comprised of:
Shares of beneficial interest, at par $ 134,890,381
Paid-in capital in excess of par 13,354,147,729
---------------
Net assets, June 30, 2000 $13,489,038,110
---------------
---------------
Net asset value, offering price and redemption price per share
($13,489,038,110 DIVIDED BY 13,489,038,110 shares of beneficial interest
($.01 par value) issued and outstanding) $ 1.00
---------------
---------------
</TABLE>
See Notes to Financial Statements
B-35
<PAGE>
COMMAND ACCOUNT COMMAND Money Fund
Statement of Operations
<TABLE>
<CAPTION>
YEAR
ENDED
JUNE 30, 2000
<S> <C>
---------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Interest and discount earned $ 771,478,343
-------------
Expenses
Management fee 47,374,169
Distribution fee 16,472,918
Transfer agent's fees and expenses 4,182,000
Reports to shareholders 800,000
Registration fees 530,000
Custodian's fees and expenses 300,000
Insurance expense 144,000
Trustees' fees and expenses 60,000
Audit fee 30,000
Legal fees and expenses 16,000
Miscellaneous 29,312
-------------
TOTAL EXPENSES 69,938,399
-------------
NET INVESTMENT INCOME 701,539,944
-------------
REALIZED LOSS ON INVESTMENTS
Net realized loss on investment transactions (31,937)
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 701,508,007
-------------
-------------
</TABLE>
See Notes to Financial Statements
B-36
<PAGE>
COMMAND ACCOUNT COMMAND Money Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
2000 1999
---------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income $ 701,539,944 $ 566,116,045
Net realized loss on investment
transactions (31,937) --
---------------- ----------------
Net increase in net assets resulting
from operations 701,508,007 566,116,045
---------------- ----------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS
(NOTE 1) (701,508,007) (566,116,045)
---------------- ----------------
FUND SHARE TRANSACTIONS (AT $1 PER SHARE)
Net proceeds from shares subscribed 66,034,737,099 56,589,927,827
Net asset value of shares issued in
reinvestment of dividends and
distributions 701,483,686 566,116,045
Cost of shares reacquired (65,494,128,592) (53,999,386,826)
---------------- ----------------
Net increase in net assets from Fund
share transactions 1,242,092,193 3,156,657,046
---------------- ----------------
Total increase 1,242,092,193 3,156,657,046
NET ASSETS
Beginning of year 12,246,945,917 9,090,288,871
---------------- ----------------
End of year $ 13,489,038,110 $ 12,246,945,917
---------------- ----------------
---------------- ----------------
</TABLE>
See Notes to Financial Statements
B-37
<PAGE>
COMMAND ACCOUNT COMMAND Money Fund
Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30, 2000
--------------------------------------------------------------------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR $ 1.000
Net investment income and net realized gains 0.053
Dividends and distributions to shareholders (0.053)
----------------
Net asset value, end of year $ 1.000
----------------
----------------
TOTAL RETURN(a): 5.42%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) $ 13,489,038
Average net assets (000) $ 13,178,334
Ratios to average net assets:
Expenses, including distribution and service (12b-1) fees .53%
Expenses, excluding distribution and service (12b-1) fees .41%
Net investment income 5.32%
</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
B-38
<PAGE>
COMMAND ACCOUNT COMMAND Money Fund
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------------------------
1999 1998 1997 1996
--------------------------------------------------------------
<S> <C> <C> <C>
$ 1.000 $ 1.000 $ 1.000 $ 1.000
0.048 0.052 0.049 0.052
(0.048) (0.052) (0.049) (0.052)
----------- ---------- ---------- ----------
$ 1.000 $ 1.000 $ 1.000 $ 1.000
----------- ---------- ---------- ----------
----------- ---------- ---------- ----------
4.85% 5.31% 5.06% 5.30%
$12,246,946 $9,090,289 $6,629,903 $5,309,842
$11,965,069 $7,936,219 $6,078,525 $4,896,794
.54% .54% .57% .58%
.41% .42% .44% .46%
4.73% 5.19% 4.97% 5.15%
</TABLE>
See Notes to Financial Statements
B-39
<PAGE>
COMMAND ACCOUNT COMMAND Money Fund
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, 2000, 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 accounting principles generally accepted in the United States.
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 auditing standards generally accepted in the United States, 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, 2000 by correspondence with the custodian, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
August 18, 2000
See Notes to Financial Statements
B-40
<PAGE>
COMMAND ACCOUNT COMMAND Tax-Free Fund
Portfolio of Investments as of June 30, 2000
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT
(UNAUDITED) (000) DESCRIPTION(a) VALUE (NOTE 1)
<C> <C> <S> <C>
-------------------------------------------------------------------------------------
ARIZONA 0.3%
Maricopa Cnty., St. Joseph's Care
Ctr., Prerefunded,
NR $ 3,800 7.75%, 7/1/00, Ser. 90A $ 3,876,000
-------------------------------------------------------------------------------------
CALIFORNIA 1.7%
California Higher Ed. Ln. Auth.
Rev., Student Ln. Rev., A.N.N.O.T.,
VMIG1 24,000 4.40%, 7/1/01, Ser. 87B 24,000,000
-------------------------------------------------------------------------------------
COLORADO 1.6%
Colorado Hlth. Fac. Auth. Rev.,
PSL Healthcare Sys.,
Prerefunded,
NR 3,950 8.50%, 2/15/01, Ser. 1991B 4,127,815
Denver City & Cnty. Rev.,
Sngl. Fam. Hsg. Mtge, A.M.T.
SP1+* 6,000 4.45%, 5/15/01, Ser. 00C 6,000,000
Roaring Fork Muni. Prods. LLC,
F.R.W.D., A.M.T.,
A1+* 7,635 5.02%, 7/6/00, Ser. 00-7 7,635,000
Wheat Ridge Ind. Dev. Rev., Var.
Adolph Coors Co. Proj.,
F.R.W.D., A.M.T.,
A1+* 5,000 4.95%, 7/5/00, Ser. 1993 5,000,000
---------------
22,762,815
-------------------------------------------------------------------------------------
CONNECTICUT 0.2%
Connecticut Spec. Assmt.,
Unemploy. Comp. Rev.,
A.N.N.O.T.,
VMIG1 3,200 4.35%, 7/1/01, Ser. 93C 3,200,000
-------------------------------------------------------------------------------------
FLORIDA 5.5%
Jacksonville Elec. Auth., Elec.
Sys. Rev., F.R.W.D.,
M.E.R.L.O.T.,
VMIG1 4,705 4.89%, 7/5/00, Ser. 00FF 4,705,000
Orange Cnty., Hlth. Fac. Auth.,
Hosp. Assoc. Hlth. Facs. Ln.,
F.R.W.D.,
VMIG1 30,000 5.10%, 7/5/00, Ser. 00A 30,000,000
</TABLE>
See Notes to Financial Statements
B-41
<PAGE>
COMMAND ACCOUNT COMMAND Tax-Free Fund
Portfolio of Investments as of June 30, 2000 Cont'd.
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT
(UNAUDITED) (000) DESCRIPTION(a) VALUE (NOTE 1)
-------------------------------------------------------------------------------------
<C> <C> <S> <C>
Adventist Hlth. Sys. Sunbelt,
F.R.W.D.,
A1+* $ 37,975 4.99%, 7/6/00, Ser. 98171 $ 37,975,000
Sunshine St. Gov't. Fin. Com.,
Rev. Notes, T.E.C.P.
A1+* 5,245 4.55%, 7/21/00, Ser. A 5,245,000
---------------
77,925,000
-------------------------------------------------------------------------------------
GEORGIA 6.4%
Burke Cnty. Georgia Dev. Auth.,
Oglethorpe Pwr. Corp., T.E.C.P.
VMIG1 9,000 4.40%, 7/19/00, Ser. 98 9,000,000
VMIG1 10,800 4.15%, 9/14/00, Ser.98B 10,800,000
Cobb Cnty. Ind. Dev. Auth.,
Inst. of Nuclear Pwr., F.R.W.D.,
CPS1 17,410 4.80%, 7/5/00, Ser. 98 17,410,000
Cobb Cnty. Multifam. Hsg. Rev.,
Post Bridge Proj., F.R.W.D.,
A1+* 10,000 4.75%, 7/5/00, Ser. 96 10,000,000
Terrell Mill II Assoc., F.R.W.D.,
A1+* 10,600 4.85%, 7/6/00, Ser. 93 10,600,000
De Kalb Cnty. Hosp. Auth. Rev.,
De Kalb Med. Ctr., F.R.W.D.,
VMIG1 12,500 4.80%, 7/6/00, Ser. 1999B 12,500,000
Fulton Cnty. Dev. Auth.,
Siemen's Energy, Inc., F.R.W.D.,
VMIG1 7,750 4.85%, 7/6/00, Ser. 94 7,750,000
Gwinett Cnty. Dev. Auth.,
Wesleyan Sch. Proj., F.R.W.D.,
CPS1 10,000 4.80%, 7/5/00, Ser. 99 10,000,000
Macon Bibb Cnty. Hosp. Auth.
Rev., Central Georgia Sr.
Hlth.-Carlyle Pl., F.R.D.D.,
VMIG1 3,500 4.65%, 7/3/00, Ser. 00 3,500,000
---------------
91,560,000
</TABLE>
See Notes to Financial Statements
B-42
<PAGE>
COMMAND ACCOUNT COMMAND Tax-Free Fund
Portfolio of Investments as of June 30, 2000 Cont'd.
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT
(UNAUDITED) (000) DESCRIPTION(a) VALUE (NOTE 1)
-------------------------------------------------------------------------------------
<C> <C> <S> <C>
ILLINOIS 16.1%
Chicago Illinois Rev.,
Homestart Prog., F.R.W.D.
VMIG1 $ 10,000 4.85%, 7/6/00 Ser. 00A $ 10,000,000
Chicago,
Sr. Lein Wtr. Rev., F.R.W.D.,
M.E.R.L.O.T.,
VMIG1 14,385 4.89%, 7/5/00, Ser. 00TT 14,385,000
Stockyards Ind. Proj., F.R.W.D.,
A1+* 13,030 4.85%, 7/5/00, Ser. 96A 13,030,000
Cook Cnty. Illinois Cons. High
Sch. Dist., Gen. Oblig.,
NR 2,170 4.70%, 12/1/00, Ser. 99 2,176,596
Gurnee Ind. Dev. Rev.,
Sterigenics
Int'l. Proj., F.R.W.D., A.M.T.,
A-1* 6,890 4.95%, 7/5/00, Ser. 96 6,890,000
Illinois Dev. Fin. Auth. Rev.,
Adventist Hlth. Sys.
NR 2,055 4.50%, 11/15/00, Ser. 2000A 2,056,483
American College of Surgeons,
F.R.W.D.,
A1+* 15,200 4.85%, 7/7/00, Ser. 96 15,200,000
Illinois Ed. Fac. Auth. Rev.,
Univ. of Chicago, T.E.C.P.,
P1 25,000 4.10%, 10/20/00 25,000,000
Illinois Hlth. Facs. Auth.,
Central Baptist Home, F.R.W.D.
VMIG1 13,300 4.75%, 7/6/00, Ser. 1999 B 13,300,000
Evanston Hosp. Corp. Prog.,
A.N.N.M.T.,
VMIG1 25,000 3.90%, 10/31/00, Ser. 92 25,000,000
VMIG1 20,000 4.25%, 1/31/01, Ser. 95 20,000,000
Riverside Hlth. Sys., F.R.W.D.,
VMIG1 12,500 4.80%, 7/6/00, Ser. 94C 12,500,000
Servant Cor Falcon II, F.R.W.D.,
A-1* 14,000 4.85%, 7/5/00, Ser. 96A 14,000,000
</TABLE>
See Notes to Financial Statements
B-43
<PAGE>
COMMAND ACCOUNT COMMAND Tax-Free Fund
Portfolio of Investments as of June 30, 2000 Cont'd.
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT
(UNAUDITED) (000) DESCRIPTION(a) VALUE (NOTE 1)
-------------------------------------------------------------------------------------
<C> <C> <S> <C>
Illinois Hsg. Dev. Auth. Rev.,
Homeowner Mtge., F.R.W.D.,
M.E.R.L.O.T., A.M.T.,
VMIG1 $ 10,000 4.94%, 7/5/00, Ser. 00V $ 10,000,000
Peoria Cnty., Rev., Caterpillar
Inc. Proj., F.R.W.D., A.M.T.
P1 4,300 4.95%, 7/6/00, Ser. 00 4,300,000
Univ. of Illinois Brd. of
Trustees, Aux. Fac. Sys.,
F.R.W.D., M.E.R.L.O.T.,
VMIG1 3,500 4.89%, 7/5/00, Ser. 00S 3,500,000
Wheeling Multifam. Hsg. Rev.,
Woodland Creek II, F.R.W.D.,
SP1+ 17,655 4.85%, 7/7/00, Ser. 90 17,655,000
Woodridge & Dupage Cntys.,
Multifam. Hsg. Rev., Hinsdale
Lake Terr. Apts., F.R.W.D.,
A1+* 20,760 4.85%, 7/7/00, Ser. 90 20,760,000
---------------
229,753,079
-------------------------------------------------------------------------------------
INDIANA 1.3%
Elkhart Com. Sch., T.A.T.W.,
NR 7,500 4.70%, 12/29/00 7,514,640
Fort Wayne Swg. Works,
NR 1,000 4.00%, 8/1/00, Ser. 98B 1,000,410
Indiana Hlth. Fac. Fin.,
Sisters of St. Francis Hlth.
Svcs.,
NR 1,430 5.00%, 11/1/00, Ser. 1997A 1,433,942
Tippecanoe Cnty. Ind. Poll. Ctrl.
Rev., Caterpillar, Inc. Proj.,
F.R.W.D., A.M.T.,
P1 8,750 4.95%, 7/6/00, Ser. 91 8,750,000
---------------
18,698,992
</TABLE>
See Notes to Financial Statements
B-44
<PAGE>
COMMAND ACCOUNT COMMAND Tax-Free Fund
Portfolio of Investments as of June 30, 2000 Cont'd.
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT
(UNAUDITED) (000) DESCRIPTION(a) VALUE (NOTE 1)
-------------------------------------------------------------------------------------
<C> <C> <S> <C>
IOWA 0.6%
Sergeant Bluff Ind. Dev. Auth.,
Sioux City Brick & Tile Proj.,
F.R.W.D., A.M.T.,
NR $ 8,480 5.00%, 7/6/00, Ser. 96C $ 8,480,000
-------------------------------------------------------------------------------------
KANSAS 0.7%
Mission Kansas Multifam. Rev.,
Ref. Hsg., The Falls Apts.
Proj., F.R.W.D., A.M.T.
A1+* 9,350 4.94%, 7/6/00, Ser. 99 9,350,000
-------------------------------------------------------------------------------------
KENTUCKY 0.7%
Henderson Cnty. Ind. Dev. Rev.,
Eastern Alloys of KY LLC Proj.,
F.R.W.D., A.M.T.,
A1+* 5,500 4.95%, 7/6/00, Ser. 99 5,500,000
Kentucky Hsg. Corp., Hsg. Rev.,
S.E.M.M.T., A.M.T.,
MIG1 5,000 4.40%, 12/1/00, Ser. 00D 5,000,000
---------------
10,500,000
-------------------------------------------------------------------------------------
LOUISIANA 3.1%
Calcasieu Parish Pub. Trust
Auth., Sngl. Fam. Mtge., A.M.T.,
MIG1 5,000 4.50%, 12/1/00, Ser. 00A 5,000,000
New Orleans Ind. Dev. Brd., 3700
Orleans LLC Proj., F.R.W.D.,
A.M.T.,
A1+* 14,000 4.97%, 7/6/00, Ser. 2000 14,000,000
Roaring Fork Municipal Prods.
LLC., F.R.W.D., A.M.T.,
VMIG1 14,590 5.02%, 7/6/00, Ser. 00-2 14,590,000
Shreveport Louisiana, Gen.
Oblig.,
NR 2,600 5.00%, 5/1/01, Ser. 99A 2,611,497
</TABLE>
See Notes to Financial Statements
B-45
<PAGE>
COMMAND ACCOUNT COMMAND Tax-Free Fund
Portfolio of Investments as of June 30, 2000 Cont'd.
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT
(UNAUDITED) (000) DESCRIPTION(a) VALUE (NOTE 1)
-------------------------------------------------------------------------------------
<C> <C> <S> <C>
W. Baton Rouge Parish Dist.
#,
Dow Chemical Co. Proj.,
F.R.D.D., A.M.T.,
P1 $ 8,800 4.75%, 7/3/00, Ser. 94A $ 8,800,000
---------------
45,001,497
-------------------------------------------------------------------------------------
MARYLAND 2.2%
Anne Arundel Cnty.,
Baltimore Gas & Electric,
A.N.N.O.T.,
VMIG1 6,000 4.50%, 7/1/01, Ser. 84 6,000,000
Maryland St. Hlth. & High. Ed.
Facs. Auth., Univ. of Maryland
Med. Sys., F.R.W.D.,
A-1* 11,600 4.75%, 7/5/00, Ser. 99 11,600,000
Maryland Econ. Dev. Corp.,
CHF-College Park LLC, F.R.W.D.,
VMIG1 6,000 4.90%, 7/6/00, Ser. 2000A 6,000,000
Roaring Fork Municipal Prods.
LLC., F.R.W.D., A.M.T.,
A1+* 7,550 5.02%, 7/6/00, Ser. 00-11 7,550,000
---------------
31,150,000
-------------------------------------------------------------------------------------
MASSACHUSETTS 1.4%
Mass. St. Hlth. & Ed. Facs. Auth.
Rev., Univ. Hospital, Prerefunded,
NR 6,000 7.25%, 7/1/00, Ser. C 6,120,000
Mass. St. Hsg. Fin. Agcy.,
Sngl. Fam. Hsg. Rev. Notes,
A.M.T.,
MIG1 7,500 4.90%, 6/1/01, Ser. C-1 7,500,000
Sngl. Fam. Hsg. Rev. Notes,
MIG1 6,105 4.85%, 6/1/01, Ser. C-2 6,105,000
---------------
19,725,000
-------------------------------------------------------------------------------------
MICHIGAN 2.3%
East Detroit Pub. Schs.,
S.A.A.N.,
NR 5,400 4.50%, 8/24/00, Ser. 2000 5,396,874
Michigan Mun. Bond Auth., Rev.
Notes,
SP-1+* 10,000 4.25%, 8/25/00, Ser. 98B-1 10,009,418
</TABLE>
See Notes to Financial Statements
B-46
<PAGE>
COMMAND ACCOUNT COMMAND Tax-Free Fund
Portfolio of Investments as of June 30, 2000 Cont'd.
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT
(UNAUDITED) (000) DESCRIPTION(a) VALUE (NOTE 1)
-------------------------------------------------------------------------------------
<C> <C> <S> <C>
Michigan Strategic Fund,
Dow Chemical Co. Proj.,
F.R.D.D., A.M.T.,
P1 $ 16,000 4.75%, 7/3/00, Ser. 99 $ 16,000,000
Michigan St. Hosp. Fin. Auth.
Rev., Botsford Oblig. Grp.,
NR 2,080 4.20%, 2/15/01, 98A 2,079,363
---------------
33,485,655
-------------------------------------------------------------------------------------
MINNESOTA 2.0%
Bloomington Port Auth. Tax Rev.,
Ref. Mall of America, F.R.W.D.
VMIG1 18,000 4.85%, 7/6/00, Ser. 99B 18,000,000
Dakota Cnty. Com. Dev. Agcy.,
Sngl. Fam. Mtge., Rev. Ref.,
A.M.T.,
SP1+* 7,500 4.30%, 4/1/01, Ser. 00C 7,500,000
Minneapolis Spec. Sch.
Dist. No. 1, Gen. Oblig.,
NR 2,900 5.00%, 2/1/01, Ser. 97 2,912,261
---------------
28,412,261
-------------------------------------------------------------------------------------
MISSISSIPPI 0.3%
Mississippi St. Lease Rev.,
Carlyle Cap. Mkt. Cert.,
NR 4,280 4.25%, 10/15/00, Ser. 99A 4,280,000
-------------------------------------------------------------------------------------
MISSOURI 2.1%
Kansas City Ind. Dev. Auth.
KC Air Cargo Svcs. Proj.,
F.R.W.D., A.M.T.,
A-1* 7,300 4.90%, 7/6/00, Ser. 00 7,300,000
Roaring Fork Municipal Prods.
LLC., F.R.W.D., A.M.T.,
A-1+* 22,530 5.02%, 7/6/00, Ser. OO3 22,530,000
---------------
29,830,000
</TABLE>
See Notes to Financial Statements
B-47
<PAGE>
COMMAND ACCOUNT COMMAND Tax-Free Fund
Portfolio of Investments as of June 30, 2000 Cont'd.
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT
(UNAUDITED) (000) DESCRIPTION(a) VALUE (NOTE 1)
-------------------------------------------------------------------------------------
<C> <C> <S> <C>
NEW JERSEY 1.8%
Jersey City, Sch. Promissory Notes,
MIG1 $ 20,100 4.50%, 3/2/01 $ 20,138,669
Montclair Township, B.A.N.,
NR 2,200 5.35%, 5/18/01 2,208,281
New Jersey Econ. Dev. Auth. Ref.
Rev., 865 Centennial Ave. Proj.,
F.R.W.D., A.M.T.,
A1+* 3,000 4.92%, 7/6/00, Ser. 85 3,000,000
---------------
25,346,950
-------------------------------------------------------------------------------------
NEW MEXICO 0.8%
Roaring Fork Municipal Prods LLC,
F.R.W.D., A.M.T.,
A1+* 12,255 5.02%, 7/6/00, Ser. 00-1 12,255,000
-------------------------------------------------------------------------------------
NEW YORK 0.1%
New York Local Gov't. Ass't.
Corp., Mun. Secs. Trust Rcpts.,
F.R.D.D.,
A1+* 1,500 4.65%, 7/3/00, Ser. SGA59 1,500,000
-------------------------------------------------------------------------------------
NORTH CAROLINA 0.8%
North Carolina Ed. Fac. Fin.
Agcy. Rev., Warren Wilson Coll.,
F.R.W.D.,
CPS1 12,040 4.80%, 7/6/00, Ser. 98 12,040,000
-------------------------------------------------------------------------------------
OHIO 6.6%
Clinton Cnty. Hosp. Rev.,
Ohio Hosp. Cap. Fin., F.R.W.D.,
A1+* 28,000 4.85%, 7/5/00, Ser. 98 28,000,000
Franklin Cnty. Hosp. Rev., Sub.,
Doctors Ohio Hlth. Corp.,
F.R.W.D.,
VMIG1 9,800 4.83%, 7/6/00, Ser. 1998 9,800,000
Greene Cnty. Ltd., Tax Certs.,
MIG1 16,740 4.50%, 3/2/01, Ser. 2000A 16,772,117
Lorain Cnty., Elyria United
Methodist Vlge. Prog., F.R.W.D.,
A-1* 6,830 4.80%, 7/6/00, Ser. 99 6,830,000
</TABLE>
See Notes to Financial Statements
B-48
<PAGE>
COMMAND ACCOUNT COMMAND Tax-Free Fund
Portfolio of Investments as of June 30, 2000 Cont'd.
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT
(UNAUDITED) (000) DESCRIPTION(a) VALUE (NOTE 1)
-------------------------------------------------------------------------------------
<C> <C> <S> <C>
Medina Cnty. Hsg. Rev.,
Oaks at Medina Proj., F.R.W.D.,
NR $ 10,055 4.80%, 7/6/00 $ 10,055,000
Ohio Hsg. Fin. Agcy., Res. Mtge.,
F.R.W.D., M.E.R.L.O.T., A.M.T.,
VMIG1 5,000 4.94%, 7/5/00, Ser. 00AA 5,000,000
Multifam. Hsg. Ref.,
10 Wilmington Pl. Prog.,
F.R.W.D.,
A1+* 5,945 4.85%, 7/7/00, Ser. B 5,945,000
Res. Mtge., A.N.N.O.T., A.M.T.,
3.90%, 7/20/00, Ser. 117
(cost $11,910,000; purchased
A1+ 11,910+ 8/17/99) 11,910,000
---------------
94,312,117
-------------------------------------------------------------------------------------
OKLAHOMA 0.8%
Muskogee Ind. Trust,
Muskogee Mall Proj., F.R.W.D.,
VMIG1 5,100 5.10%, 7/5/00, Ser. 85 5,100,000
Tulsa Pkg. Auth. Rev.,
Williams Ctr. Proj., S.E.M.M.T.,
VMIG1 6,700 4.75%, 11/15/00, Ser. 87A 6,700,000
---------------
11,800,000
-------------------------------------------------------------------------------------
OREGON 0.2%
Oregon St., Veterans Welfare,
MIG1 3,000 4.30%, 4/1/01, Ser. 79B 3,000,000
-------------------------------------------------------------------------------------
PENNSYLVANIA 4.4%
Dauphin Cnty. Gen. Auth. Rev.,
All Hlth. Pooled Fin. Prog.,
F.R.W.D.,
A1+* 10,000 4.85%, 7/5/00, Ser. B 10,000,000
Ed. & Hlth. Prog., F.R.W.D.,
VMIG1 32,660 4.85%, 7/6/00, Ser. 97 32,660,000
Emmaus Gen. Auth. Rev.,
Loan Prog., F.R.W.D.,
A-1* 20,000 4.85%, 7/6/00, Ser. 2000A 20,000,000
---------------
62,660,000
</TABLE>
See Notes to Financial Statements
B-49
<PAGE>
COMMAND ACCOUNT COMMAND Tax-Free Fund
Portfolio of Investments as of June 30, 2000 Cont'd.
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT
(UNAUDITED) (000) DESCRIPTION(a) VALUE (NOTE 1)
-------------------------------------------------------------------------------------
<C> <C> <S> <C>
SOUTH CAROLINA 2.2%
South Carolina Pub. Svcs. Auth.,
T.E.C.P.,
P1 $ 17,150 4.35%, 10/2/00 $ 17,150,000
Spartanburg Cnty. Sch. Dist. No.
7, B.A.N.,
MIG1 14,000 4.75%, 2/15/01, Ser. 2000 14,046,103
---------------
31,196,103
-------------------------------------------------------------------------------------
SOUTH DAKOTA 4.3%
Grant Cnty., Otter Tail Pwr. Co.
Proj., F.R.W.D.,
VMIG1 8,000 5.00%, 7/7/00, Ser. 1993 8,000,000
South Dakota Hsg. Dev. Auth.,
Homeownership Mtge.,
MIG1 5,315 3.40%, 7/7/00, Ser. 99E 5,315,000
MIG1 22,000 3.45%, 7/7/00, Ser. 99F, A.M.T. 22,000,000
MIG1 6,000 3.75%, 9/28/00, Ser. 99J 6,000,000
South Dakota Hlth. & Ed. Fac.
Auth.,
Sioux Valley Hosp. & Hlth. Sys.,
F.R.W.D.,
VMIG1 20,000 4.85%, 7/7/00, Ser. 2000 20,000,000
---------------
61,315,000
-------------------------------------------------------------------------------------
TENNESSEE 5.2%
Dickson Cnty., Renaissance
Learning Ctr. Rev., F.R.W.D.,
CPS1 16,000 4.80%, 7/5/00, Ser. 97 16,000,000
Morgan Keegan Mun. Prods. Inc.,
Trust Rcpts, F.R.W.D., A.M.T.
A1+* 18,810 5.07%, 7/6/00, Ser. 2000A 18,810,000
Sumner Cnty. Hlth. Ed. &
Hsg. Bd. Rev., Hosp.
Alliance Pooled, F.R.W.D.,
A1+* 40,000 4.90%, 7/6/00, Ser. 99A 40,000,000
---------------
74,810,000
</TABLE>
See Notes to Financial Statements
B-50
<PAGE>
COMMAND ACCOUNT COMMAND Tax-Free Fund
Portfolio of Investments as of June 30, 2000 Cont'd.
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT
(UNAUDITED) (000) DESCRIPTION(a) VALUE (NOTE 1)
-------------------------------------------------------------------------------------
<C> <C> <S> <C>
TEXAS 16.5%
Bexar Cnty. Hsg. Fin. Corp.,
Perrin Park Apt., F.R.W.D.,
A.M.T.,
VMIG1 $ 10,375 5.00%, 7/6/00, Ser. 96 $ 10,375,000
Brazos River Harbor Nav. Dist.
Rev.,
Dow Chemical Co. Proj.,
T.E.C.P.,
P1 15,900 4.25%, 7/12/00, Ser. 91 15,900,000
City of Houston, Wtr. & Swr.,
T.E.C.P.,
P1 10,400 4.40%, 8/17/00, Ser. A 10,400,000
Collin Cnty. Hsg. Fin. Corp.
Multifam.
Hsg. Rev., Huntington Apts.
Proj., F.R.W.D.,
A1+* 6,155 4.92%, 7/6/00, Ser. 96 6,155,000
Desoto Ind. Dev. Auth., Solar
Turbines Inc. Proj., F.R.W.D.,
P1 7,050 4.90%, 7/6/00, Ser. 2000 7,050,000
Edgemere-NW Sr. Hsg. Corp.,
F.R.W.D.,
A1+* 10,000 4.78%, 7/6/00, Ser. 99D 10,000,000
Guadalupe Blanco River Auth.,
The BOC Group, Inc., F.R.W.D.,
CPSI 10,000 4.80%, 7/6/00, Ser. 1993 10,000,000
North Central Texas Hlth. Fac.
Dev., Methodist Hosp. of Dallas,
T.E.C.P.,
VMIG1 37,800 4.85%, 8/8/00, Ser. 98 37,800,000
VMIG1 15,000 4.70%, 8/11/00, Ser. 98 15,000,000
San Antonio Elec. & Gas,
T.E.C.P.,
P1 10,000 4.38%, 10/5/00, Ser. A 10,000,000
San Antonio Wtr. Sys. Rev.,
F.R.W.D., M.E.R.L.O.T.,
VMIG1 10,420 4.89%, 7/5/00, Ser. 00VV 10,420,000
South Plains Hsg. Fin. Corp.,
Homeownership Rev.,
A.N.N.O.T., A.M.T.,
VMIG1 7,900 4.25%, 12/1/00, Ser. 00A 7,900,000
</TABLE>
See Notes to Financial Statements
B-51
<PAGE>
COMMAND ACCOUNT COMMAND Tax-Free Fund
Portfolio of Investments as of June 30, 2000 Cont'd.
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT
(UNAUDITED) (000) DESCRIPTION(a) VALUE (NOTE 1)
-------------------------------------------------------------------------------------
<C> <C> <S> <C>
Tarrant Cnty. Hlth. Fac. Dev.,
Adventist Hlth. Sys., F.R.W.D.,
VMIG1 $ 12,490 4.78%, 7/6/00, Ser. 96A $ 12,490,000
Texas St., T.R.A.N.,
MIG1 72,000 4.50%, 8/31/00, Ser. 1999A 72,029,131
---------------
235,519,131
-------------------------------------------------------------------------------------
UTAH 0.6%
Davis Cnty., Hsg. Auth. Rev.,
Fox Creek Apts., F.R.W.D.,
A-1* 4,240 4.80%, 7/5/00, Ser. 97A 4,240,000
Utah Cnty.,T.R.A.N.,
NR 4,000 4.75%, 12/28/00, Ser. 2000 4,010,544
---------------
8,250,544
-------------------------------------------------------------------------------------
VIRGINIA 0.3%
Virginia Hsg. Dev. Auth.,
Commonwealth Mtge., F.R.W.D.,
M.E.R.L.O.T., A.M.T.,
VMIG1 5,000 4.94%, 7/5/00, Ser. 00CC 5,000,000
-------------------------------------------------------------------------------------
WASHINGTON 1.7%
Washington Hsg. Fin. Comm.,
Mills Plains Crossing Proj.,
F.R.W.D.,
A1+* 5,900 5.10%, 7/4/00, Ser. 88 5,900,000
Washington St. Hlth. Care Fac.,
Sisters of St. Joseph of Peace,
F.R.W.D.,
VMIG1 17,800 4.75%, 7/6/00, Ser. 93 17,800,000
---------------
23,700,000
-------------------------------------------------------------------------------------
WISCONSIN 2.5%
Greenfield Sch. Dist.,
T.R.A.N.,
NR 4,000 4.25%, 9/29/00 4,004,065
Janesville Sch. Dist.,
T.R.A.N.,
NR 3,000 4.25%, 10/5/00 3,003,180
</TABLE>
See Notes to Financial Statements
B-52
<PAGE>
COMMAND ACCOUNT COMMAND Tax-Free Fund
Portfolio of Investments as of June 30, 2000 Cont'd.
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT
(UNAUDITED) (000) DESCRIPTION(a) VALUE (NOTE 1)
-------------------------------------------------------------------------------------
<C> <C> <S> <C>
Milwaukee Redev. Auth., Historic
Third Ward Pkg., F.R.W.D.,
NR $ 4,290 4.65%, 7/6/00 $ 4,290,000
Sheboygan Sch. Dist., T.R.A.N.,
NR 5,000 4.10%, 8/30/00 5,002,691
Wausau Sch. Dist., T.R.A.N.,
NR 6,300 4.10%, 9/22/00 6,304,956
West Allis-West Milwaukee Sch.
Dist.,
T.R.A.N.,
MIG1 4,300 4.10%, 9/21/00 4,303,158
Wisconsin Hsg. Eco. Dev. Auth.,
Ownership Rev.,
3.90%, 10/5/00, Ser. 122
(cost $8,395,000; purchased
VMIG1 8,395+ 10/7/99) 8,395,000
---------------
35,303,050
-------------------------------------------------------------------------------------
WYOMING 2.9%
Converse Cnty. Poll., Conv. Ref.,
Pacificorp, F.R.W.D.,
VMIG1 22,485 4.95%, 7/5/00, Ser. 92 22,485,000
Lincoln Cnty. Poll., Conv. Ref.,
Pacificorp,
VMIG1 19,000 4.90%, 7/5/00, Ser. 91 19,000,000
---------------
41,485,000
---------------
TOTAL INVESTMENTS 100.2%
(Cost $1,431,483,194**) 1,431,483,194
Liabilities in excess of other
assets (0.2%) (2,395,736)
---------------
NET ASSETS 100% $ 1,429,087,458
---------------
---------------
</TABLE>
See Notes to Financial Statements
B-53
<PAGE>
COMMAND ACCOUNT COMMAND Tax-Free Fund
Portfolio of Investments as of June 30, 2000 Cont'd.
------------------------------
(a) The following abbreviations are used in portfolio descriptions:
A.M.T.--Alternative Minimum Tax.
A.N.N.M.T.--Annual Mandatory Tender.
A.N.N.O.T.--Annual Option Tender.
B.A.N.--Bond Anticipation Note.
F.R.D.D.--Floating Rate (Daily) Demand Note(b).
F.R.W.D.--Floating Rate (Weekly) Demand Note(b).
M.E.R.L.O.T.--Municipal Exempt Receipt - Liquid Optional Tender.
S.A.A.N.--State Aid Anticipation Notes.
S.E.M.M.T.--Semi-Annual Mandatory Tender.
T.A.T.W.--Tax Anticipation Time Warrants.
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.
** The cost for federal income tax purposes is substantially the same as for
financial reporting purposes.
+ Indicates an illiquid security restricted as to resale. The aggregate cost of
such securities is $20,305,000. The aggregate value of $20,305,000 is
approximately 1.4% of net assets.
NR--Not Rated by Moody's or Standard & Poor's.
See Notes to Financial Statements
B-54
<PAGE>
COMMAND ACCOUNT COMMAND Tax-Free Fund
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
JUNE 30,
2000
--------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at amortized cost which approximates market value $1,431,483,194
Cash 35,537
Receivable for investments sold 36,738,978
Receivable for Fund shares sold 17,151,389
Interest receivable 13,598,876
Prepaid expenses 16,551
--------------
TOTAL ASSETS 1,499,024,525
--------------
LIABILITIES
Payable for investments purchased 51,720,568
Payable for Fund shares repurchased 17,354,141
Management fee payable 527,503
Accrued expenses and other liabilities 254,286
Distribution fee payable 80,569
--------------
TOTAL LIABILITIES 69,937,067
--------------
NET ASSETS $1,429,087,458
--------------
--------------
Net assets were comprised of:
Shares of beneficial interest, at par $ 14,290,875
Paid-in capital in excess of par 1,414,796,583
--------------
Net assets, June 30, 2000 $1,429,087,458
--------------
--------------
Net asset value, offering price and redemption price per share
($1,429,087,458 DIVIDED BY 1,429,087,458 shares of beneficial
interest ($.01 par value) issued and outstanding) $1.00
--------------
--------------
</TABLE>
See Notes to Financial Statements
B-55
<PAGE>
COMMAND ACCOUNT COMMAND Tax-Free Fund
Statement of Operations
<TABLE>
<CAPTION>
YEAR
ENDED
JUNE 30, 2000
<S> <C>
---------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Interest and discount earned $56,539,257
-------------
Expenses
Management fee 6,557,570
Distribution fee 1,894,190
Transfer agent's fees 178,500
Reports to shareholders 74,000
Audit fee 28,000
Trustees' fees and expenses 22,000
Insurance expense 17,500
Legal fees and expenses 14,000
Miscellaneous 19,742
-------------
TOTAL EXPENSES 8,805,502
Less: custodian fee credit (Note 1) (60,117)
-------------
Net expenses 8,745,385
-------------
NET INVESTMENT INCOME 47,793,872
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $47,793,872
-------------
-------------
</TABLE>
See Notes to Financial Statements
B-56
<PAGE>
COMMAND ACCOUNT COMMAND Tax-Free Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
2000 1999
----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income $ 47,793,872 $ 42,127,942
Net realized gain on investment
transactions -- 16,415
--------------- ---------------
Net increase in net assets resulting from
operations 47,793,872 42,144,357
--------------- ---------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
(NOTE 1) (47,793,872) (42,144,357)
--------------- ---------------
FUND SHARE TRANSACTIONS (AT $1 PER SHARE)
Net proceeds from shares subscribed 5,489,719,243 5,590,973,138
Net asset value of shares issued in
reinvestment of dividends and
distributions 47,791,827 42,144,357
Cost of shares reacquired (5,585,155,129) (5,489,371,232)
--------------- ---------------
Net increase (decrease) in net assets from
Fund share transactions (47,644,059) 143,746,263
--------------- ---------------
Total increase (decrease) (47,644,059) 143,746,263
NET ASSETS
Beginning of year 1,476,731,517 1,332,985,254
--------------- ---------------
End of year $ 1,429,087,458 $ 1,476,731,517
--------------- ---------------
--------------- ---------------
</TABLE>
See Notes to Financial Statements
B-57
<PAGE>
COMMAND ACCOUNT COMMAND Tax-Free Fund
Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30,
2000
<S> <C>
--------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR $ 1.000
Net investment income and net realized gains .032
Dividends and distributions to shareholders (.032)
----------
Net asset value, end of year $ 1.000
----------
----------
TOTAL RETURN(a) 3.19%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) $1,429,087
Average net assets (000) $1,515,352
Ratios to average net assets:
Expenses, including distribution fees .58%
Expenses, excluding distribution fees .46%
Net investment income 3.15%
</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
B-58
<PAGE>
COMMAND ACCOUNT COMMAND Tax-Free Fund
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------------------
1999 1998 1997 1996
-------------------------------------------------------
<S> <C> <C> <C>
$ 1.000 $ 1.000 $ 1.000 $ 1.000
0.027 0.031 0.030 0.031
(0.027) (0.031) (0.030) (0.031)
---------- ---------- ---------- ----------
$ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
2.77% 3.16% 3.05% 3.12%
$1,476,732 $1,332,985 $1,129,513 $1,156,935
$1,549,367 $1,279,188 $1,181,084 $1,134,257
.59% .60% .64% .66%
.46% .47% .51% .54%
2.72% 3.11% 3.00% 3.06%
</TABLE>
See Notes to Financial Statements
B-59
<PAGE>
COMMAND ACCOUNT COMMAND Tax-Free Fund
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, 2000, 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 accounting principles generally accepted in the United States.
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 auditing standards generally accepted in the United States, 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, 2000 by correspondence with the custodian and brokers,
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
August 18, 2000
See Notes to Financial Statements
B-60
<PAGE>
COMMAND ACCOUNT COMMAND Government Fund
Portfolio of Investments as of June 30, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) DESCRIPTION VALUE (NOTE 1)
<S> <C> <C>
------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES 79.1%
FEDERAL FARM CREDIT BANK 0.9%
$ 1,000 5.66%, 8/11/00 $ 999,428
5,000 5.85%, 12/1/00 4,995,005
------------------
5,994,433
-------------------------------------------------------------------------------------
FEDERAL HOME LOAN BANK 42.4%
26,000 6.61%, 7/3/00(a) 25,994,480
26,000 6.51%, 7/4/00(a) 25,997,010
31,500 6.13%, 7/5/00(a) 31,494,377
52,000 6.189%, 7/5/00(a) 51,979,616
23,000 6.23%, 7/5/00(a) 23,000,000
11,000 6.24%, 7/5/00(a) 10,995,284
11,000 6.31%, 7/5/00(a) 10,999,713
25,000 6.54%, 7/5/00(a) 25,012,559
5,500 5.66%, 7/6/00 5,500,100
13,000 6.465%, 7/12/00(a) 12,999,805
3,000 5.48%, 7/13/00 2,999,327
8,000 5.875%, 9/7/00 7,999,361
5,500 Zero Coupon, 9/15/00 5,435,418
1,010 5.01%, 9/21/00 1,007,917
5,000 5.705%, 10/6/00 4,997,526
8,000 5.915%, 10/13/00 7,998,000
10,500 6.04%, 10/25/00 10,462,091
11,000 5.965%, 12/1/00 10,994,521
8,000 6.52%, 3/28/01 7,995,503
8,000 6.625%, 4/6/01 7,994,435
------------------
291,857,043
-------------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION 1.1%
7,640 5.99%, 12/6/00 7,635,407
</TABLE>
See Notes to Financial Statements
B-61
<PAGE>
COMMAND ACCOUNT COMMAND Government Fund
Portfolio of Investments as of June 30, 2000 Cont'd.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) DESCRIPTION VALUE (NOTE 1)
------------------------------------------------------------------------------------
<S> <C> <C>
FEDERAL NATIONAL MORTGAGE ASSOCIATION 28.3%
$ 19,250 6.485%, 7/3/00(a) $ 19,235,089
13,000 6.845%, 7/3/00(a) 12,995,919
26,000 6.89%, 7/3/00(a) 25,998,881
11,000 6.37%, 7/5/00(a) 10,998,518
15,500 6.485%, 8/9/00(a) 15,498,431
8,000 5.80%, 8/17/00 7,999,021
18,000 6.515%, 8/17/00(a) 17,992,549
3,500 6.66%, 9/6/00(a) 3,499,731
1,585 5.97%, 10/2/00 1,585,223
9,500 5.90%, 12/1/00 9,491,456
1,910 8.25%, 12/18/00 1,922,588
5,690 5.89%, 12/22/00 5,685,338
18,700 6.47%, 2/16/01 18,651,491
10,000 5.65%, 3/5/01 9,930,334
27,000 6.224%, 3/6/01 26,990,827
6,000 6.52%, 3/16/01 5,993,397
------------------
194,468,793
-------------------------------------------------------------------------------------
STUDENT LOAN MARKETING ASSOCIATION 6.4%
13,000 6.895%, 7/3/00(a) 12,998,952
26,000 6.54%, 7/5/00(a) 25,994,724
5,000 6.505%, 2/7/01 4,999,396
------------------
43,993,072
------------------
Total U.S. Government Agencies
(amortized cost $543,948,748) 543,948,748
------------------
</TABLE>
See Notes to Financial Statements
B-62
<PAGE>
COMMAND ACCOUNT COMMAND Government Fund
Portfolio of Investments as of June 30, 2000 Cont'd.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) DESCRIPTION VALUE (NOTE 1)
------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS(b) 18.9%
$ 25,000 Goldman, Sachs & Co., 6.50%, dated 6/13/00, due
7/12/00 in the amount of $25,130,903 (cost
$25,000,000), value of collateral including
accrued interest-$25,500,000 $ 25,000,000
38,992 Morgan (J.P.) Securities Inc., 6.80%, dated
6/30/00, due 7/5/00 in the amount of $39,028,826
(cost $38,992,000), value of collateral
including accrued interest-$39,771,840 38,992,000
30,000 Morgan Stanley Dean Witter, 6.65%, dated 6/28/00,
due 7/5/00 in the amount of $30,038,792 (cost
$30,000,000), value of collateral including
accrued interest-$30,810,209 30,000,000
36,033 Salomon Smith Barney, Inc., 6.68%, dated 6/29/00,
due 7/3/00 in the amount of $36,059,744 (cost
$36,033,000), value of collateral including
accrued interest-$36,753,660 36,033,000
------------------
Total Repurchase Agreements (amortized cost
$130,025,000) 130,025,000
------------------
TOTAL INVESTMENTS 98.0%
(AMORTIZED COST $673,973,748(c)) 673,973,748
Other assets in excess of liabilities 2.0% 13,390,008
------------------
NET ASSETS 100% $ 687,363,756
------------------
------------------
</TABLE>
------------------------------
(a) Variable rate instrument. 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) The cost for federal income tax purposes is substantially the same as for
financial reporting purposes.
See Notes to Financial Statements
B-63
<PAGE>
COMMAND ACCOUNT COMMAND Government Fund
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
JUNE 30, 2000
<S> <C>
---------------------------------------------------------------------------------
ASSETS
Investments, excluding repurchase agreements, at amortized cost
which approximates market value $ 543,948,748
Repurchase agreements 130,025,000
Receivable for Fund shares sold 39,911,482
Interest receivable 6,509,520
Prepaid expenses 7,197
-------------
TOTAL ASSETS 720,401,947
-------------
LIABILITIES
Payable for Fund shares repurchased 32,535,222
Accrued expenses and other liabilities 238,859
Management fee payable 226,642
Distribution fee payable 37,468
-------------
TOTAL LIABILITIES 33,038,191
-------------
NET ASSETS $ 687,363,756
-------------
-------------
Net assets were comprised of:
Shares of beneficial interest, at par $ 6,873,637
Paid-in capital in excess of par 680,490,119
-------------
Net assets, June 30, 2000 $ 687,363,756
-------------
-------------
Net asset value, offering price and redemption price per share
($687,363,756 DIVIDED BY 687,363,756 shares of beneficial interest
($.01 par value) issued and outstanding) $1.00
-------------
-------------
</TABLE>
See Notes to Financial Statements
B-64
<PAGE>
COMMAND ACCOUNT COMMAND Government Fund
Statement of Operations
<TABLE>
<CAPTION>
YEAR
ENDED
JUNE 30, 2000
<S> <C>
---------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Interest and discount earned $40,725,071
-------------
Expenses
Management fee 2,858,618
Distribution fee 893,318
Transfer agent's fees and expenses 102,000
Registration fees 79,000
Custodian's fees and expenses 75,000
Reports to shareholders 43,000
Audit fee 27,000
Legal fees and expenses 18,000
Trustees' fees and expenses 17,000
Insurance expense 9,000
Miscellaneous 1,129
-------------
TOTAL EXPENSES 4,123,065
-------------
NET INVESTMENT INCOME 36,602,006
-------------
REALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions 23,360
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $36,625,366
-------------
-------------
</TABLE>
See Notes to Financial Statements
B-65
<PAGE>
COMMAND ACCOUNT COMMAND Government Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------
2000 1999
<S> <C> <C>
----------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income $ 36,602,006 $ 34,224,418
Net realized gain on investment
transactions 23,360 22,602
--------------- ---------------
Net increase in net assets resulting from
operations 36,625,366 34,247,020
--------------- ---------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
(NOTE 1) (36,625,366) (34,247,020)
--------------- ---------------
FUND SHARE TRANSACTIONS (AT $1 PER SHARE)
Net proceeds from shares subscribed 3,360,155,858 3,282,787,339
Net asset value of shares issued in
reinvestment of dividends and
distributions 36,624,690 34,247,020
Cost of shares reacquired (3,423,806,329) (3,211,372,225)
--------------- ---------------
Net increase (decrease) in net assets from
Fund share transactions (27,025,781) 105,662,134
--------------- ---------------
Total increase (decrease) (27,025,781) 105,662,134
NET ASSETS
Beginning of year 714,389,537 608,727,403
--------------- ---------------
End of year $ 687,363,756 $ 714,389,537
--------------- ---------------
--------------- ---------------
</TABLE>
See Notes to Financial Statements
B-66
<PAGE>
COMMAND ACCOUNT
FINANCIAL
HIGHLIGHTS
B-67
<PAGE>
COMMAND ACCOUNT COMMAND Government Fund
Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30,
2000
<S> <C>
--------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR $ 1.000
Net investment income and net realized gains 0.051
Dividends and distributions to shareholders (0.051)
----------
Net asset value, end of year $ 1.000
----------
----------
TOTAL RETURN(a) 5.23%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) $687,364
Average net assets (000) $714,655
Ratios to average net assets:
Expenses, including distribution and service (12b-1) fees .58%
Expenses, excluding distribution and service (12b-1) fees .45%
Net investment income 5.12%
</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
B-68
<PAGE>
COMMAND ACCOUNT COMMAND Government Fund
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------------------
1999 1998 1997 1996
-------------------------------------------------------
<S> <C> <C> <C>
$ 1.000 $ 1.000 $ 1.000 $ 1.000
0.046 0.051 0.049 0.050
(0.046) (0.051) (0.049) (0.050)
---------- ---------- ---------- ----------
$ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
4.74% 5.20% 4.97% 5.12%
$714,390 $608,727 $528,469 $487,485
$739,779 $562,693 $534,580 $477,168
.56% .56% .63% .68%
.44% .44% .51% .56%
4.63% 5.08% 4.84% 4.97%
</TABLE>
See Notes to Financial Statements
B-69
<PAGE>
COMMAND ACCOUNT COMMAND Government Fund
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, 2000, 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 accounting principles generally accepted in the United
States. 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 auditing standards generally accepted in the United States,
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, 2000 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
August 18, 2000
See Notes to Financial Statements
B-70
<PAGE>
COMMAND ACCOUNT
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 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 POLICIES
The following is a summary of significant generally accepted accounting policies
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. The Funds may hold up to 10% of their
net assets in illiquid securities, including those which are restricted as to
disposition under securities law ("restricted securities"). None of the issues
of restricted securities held by the Funds at June 30, 2000 include registration
rights under which the Fund may demand registration by the issuer.
REPURCHASE AGREEMENTS: 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
B-71
<PAGE>
COMMAND ACCOUNT
Notes to Financial Statements Cont'd.
underlying collateral securities, the value of which exceeds the principal
amount of the repurchase transaction, including accrued interest. To the extent
that any repurchase agreement exceeds one business day, the value of collateral
is marked to market on a daily basis to ensure adequacy of the collateral. 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. 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, less the estimated expenses of the Fund applicable to the dividend
period.
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. The cost of portfolio
securities for federal income tax purposes is substantially the same as for
financial reporting purposes.
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.
CUSTODY FEE CREDITS: The COMMAND Tax-Free Fund has an arrangement with
its custodian bank, whereby uninvested money earns credits which reduce the fees
charged by the custodian.
NOTE 2. AGREEMENTS
Each Fund has a management agreement with Prudential Investments Fund Management
LLC (PIFM). Pursuant to this agreement, PIFM has responsibility for all
investment advisory services and supervises the subadviser's performance of such
services. PIFM has entered into a Subadvisory Agreement with The Prudential
Investment Corporation ("PIC"). The Subadvisory Agreement provides that the
subadviser will furnish investment advisory services in connection with the
management of the Fund. In connection therewith, the Subadviser is obligated to
keep certain books and records of the Fund. PIFM continues to have
responsibility for all investment advisory services
B-72
<PAGE>
COMMAND ACCOUNT
Notes to Financial Statements Cont'd.
pursuant to the Management Agreement and supervises the Subadviser's performance
of such services. PIFM pays for the services of PIC, the cost of the
subadviser'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.
The management fee paid to PIFM 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>
Effective January 1, 2000, PIC is paid by PIFM on the following basis
(computed daily and payable monthly):
<TABLE>
<CAPTION>
AVERAGE DAILY COMMAND COMMAND COMMAND
NET ASSETS MONEY GOVERNMENT TAX-FREE
--------------------- -------- ----------- --------
<S> <C> <C> <C>
First $500 million .250% .200% .250%
Second $500 million .191% .200% .191%
Third $500 million .150% .169% .150%
Excess of $1.5
billion .123% .169% .150%
</TABLE>
Prior to January 1, 2000, PIC was reimbursed by PIFM for reasonable costs
and expenses incurred in furnishing investment advisory services.
Each Fund has a distribution agreement with Prudential Investment
Management Services LLC ("PIMS") which acts as the distributor of the shares of
each Fund. Each Fund compensates PIMS for distributing and servicing each Fund's
shares, pursuant to the plan of distribution at an annual rate of .125 of 1% of
the average daily net assets of each Fund's shares. The distribution fees are
accrued daily and payable monthly.
PIFM, PIC and PIMS are wholly owned subsidiaries of The Prudential
Insurance Company of America.
B-73
<PAGE>
COMMAND ACCOUNT
Notes to Financial Statements Cont'd.
NOTE 3. OTHER TRANSACTIONS WITH AFFILIATES
Prudential Mutual Fund Services LLC (PMFS), a wholly owned subsidiary of PIFM,
serves as the Funds' transfer agent. During the year ended June 30, 2000 the
Funds incurred fees for the services of PMFS of approximately:
<TABLE>
<S> <C>
COMMAND Money $4,181,400
COMMAND Government $ 101,100
COMMAND Tax-Free $ 178,200
</TABLE>
As of June 30, 2000, the following amounts were due to PMFS from the
Funds:
<TABLE>
<S> <C>
COMMAND Money $ 370,400
COMMAND Government $ 8,300
COMMAND Tax-Free $ 14,700
</TABLE>
B-74
<PAGE>
COMMAND ACCOUNT
Federal Income Tax Information (Unaudited)
COMMAND TAX-FREE FUND:
We are required by the Internal Revenue Code to advise you within 60 days
of the COMMAND Tax-Free Fund's fiscal year-end (June 30, 2000) as to the federal
tax status of dividends and distributions paid by the Fund during such fiscal
year. Accordingly, we are advising you that for the year ended June 30, 2000,
dividends paid from net investment income totaling $.032 per share were all
federally tax-exempt interest dividends.
COMMAND GOVERNMENT FUND AND COMMAND MONEY FUND:
IMPORTANT NOTICE FOR CERTAIN SHAREHOLDERS
We are required by Massachusetts, Missouri and Oregon to inform you that
dividends which have been derived from interest on federal obligations are not
taxable to shareholders providing the mutual fund meets certain requirements
mandated by the respective state's taxing authorities. We are pleased to report
that 58% and 2% of the dividends paid by the COMMAND Government Fund and COMMAND
Money Fund, respectively, qualify for such deduction.
For more detailed information regarding your state and local taxes, you
should contact your tax advisor or the state/local taxing authorities.
B-75
<PAGE>
APPENDIX I--GENERAL INVESTMENT INFORMATION
The following terms are used in mutual fund investing.
ASSET ALLOCATION
Asset allocation is a technique for reducing risk and 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
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.
STANDARD DEVIATION
Standard deviation is an absolute (non-relative) measure of volatility
which, for a mutual fund, depicts how widely the returns varied over a certain
period of time. When a fund has a high standard deviation, its range of
performance has been very wide, implying greater volatility potential. Standard
deviation is only one of several measures of a fund's volatility.
I-1
<PAGE>
(This page has been left blank intentionally.)
B-25
