-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ATP1HgQRc3Ompww7VknoiHIjBROeP7h1N2NsAoJBC6cNugez8uNlAOO9nsxudskL 9TFchiD+xRsfRzhuL1LXoA== 0000898733-00-000141.txt : 20000310 0000898733-00-000141.hdr.sgml : 20000310 ACCESSION NUMBER: 0000898733-00-000141 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000309 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRUDENTIAL TAX FREE MONEY FUND INC CENTRAL INDEX KEY: 0000311561 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 132993505 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-02927 FILM NUMBER: 564914 BUSINESS ADDRESS: STREET 1: 199 WATER ST CITY: NEW YORK STATE: NY ZIP: 10292 BUSINESS PHONE: 2122142189 MAIL ADDRESS: STREET 1: ONE SEAPORT PLZ STREET 2: ONE SEAPORT PLZ CITY: NEW YORK STATE: NY ZIP: 10292 FORMER COMPANY: FORMER CONFORMED NAME: PRUDENTIAL BACHE TAX FREE MONEY FUND INC DATE OF NAME CHANGE: 19920603 FORMER COMPANY: FORMER CONFORMED NAME: CHANCELLOR TAX FREE MONEY FUND INC DATE OF NAME CHANGE: 19830516 FORMER COMPANY: FORMER CONFORMED NAME: CHANCELLOR TAX EXEMPT DAILY INCOME FUND INC DATE OF NAME CHANGE: 19810811 N-30D 1 PRUDENTIAL TAX-FREE MONEY FUND, INC. (LOGO) Annual Report December 31, 1999 Prudential Tax-Free Money Fund, Inc. (LOGO) A Message from the Fund's President February 3, 2000 (PHOTO) Dear Shareholder, Yields on municipal money market securities fluctuated widely during 1999, buffeted by a periodic imbalance in the supply of, and demand for, these securities, as well as the Federal Reserve's effort to slow U.S. economic growth by repeatedly increasing a key short-term interest rate. Prudential's Money Market Sector team worked to anticipate these changes in U.S. monetary policy, and acted quickly to identify and take advantage of good investment opportunities. As a result, Prudential Tax-Free Money Fund maintained a $1 net asset value per share and provided a competitive tax-exempt return in 1999. The following report takes a closer look at developments in the municipal money market during 1999, and explains how the Fund was positioned accordingly. High-quality investments to help reduce risk Having a conservative, high-quality investment alternative, such as a money market fund, made good sense for most investors amid the highly volatile conditions in financial markets during 1999. Indeed, most investors should have a money market fund. For any of life's unexpected events, it is comforting to have quick access to your money and an investment vehicle that provides safety of principal and liquidity. Thanks for your continued confidence in Prudential mutual funds. Sincerely, John R. Strangfeld PresidentPrudential Tax-Free Money Fund, Inc. Performance Review (PHOTO) (PHOTO) Portfolio managers Joseph Tully (Money Market [Sector] Team Leader) and Richard S. Lynes Investment Goals and Style Prudential Tax-Free Money Fund seeks the highest level of current income that is exempt from federal income taxes, consistent with liquidity and the preservation of capital. The Fund invests in a diversified portfolio of high-quality, short-term municipal bonds issued by state and local governments, territories and possessions of the United States, and by the District of Columbia. Maturities can range from one day to a maximum of 13 months. We purchase only securities rated in one of the two highest rating categories by at least two major rating agencies or, if not rated, deemed to be of equivalent quality by our credit research staff. There can be no assurance that the Fund will achieve its investment objective. Coping with a supply/demand imbalance Participants in the municipal money market had to contend with two major trends throughout 1999--a dwindling supply of eligible securities and the Federal Reserve's repeated efforts to curb U.S. economic growth and avoid higher inflation. Of the two, the risk posed by the shortage of municipal money market securities was of greater concern to us. $36.9 billion in municipal notes were issued in 1999. This total was above the $34.8 billion sold in 1998, but was still well below the $46.3 billion issued in 1997. Meanwhile, assets in tax-free money market funds soared $14.83 billion, or 8.0%, in 1999, according to IBC Financial Data, Inc. Strategically speaking, we aimed to avoid having to invest large amounts of the Fund's money during times when strong demand and a dearth of municipal money market securities drove yields on these securities lower (and their prices higher). Therefore, we moved quickly to take advantage of good buying opportunities, such as those that arose during the tax season of 1999. Tax-season buys enhanced the Fund's yield In late April and early May 1999, portfolio managers (including us) sold municipal money market securities to satisfy shareholder liquidity needs that occurred as cash was withdrawn from mutual funds to pay taxes. Amid this flurry of sales, securities cheapened. We were able to purchase attractively priced, insured municipal bonds maturing in six months to one year as an alternative to the more conventional tax-exempt money market securities. These insured, short-term municipal bonds also provided solid yields to compensate for the fact that they are typically issued in smaller-sized blocks. Most portfolio managers prefer to buy larger blocks of bonds because they are easier to sell. But owning smaller- and moderate-sized blocks of insured short-term bonds worked well for us because we plan to hold them until maturity. FOMC tried to curb U.S. economic growth As the spring of 1999 continued, municipal money market yields climbed even further in anticipation of an increase in the federal funds rate, which is the rate U.S. banks charge each other for overnight loans. The Federal Open Market Committee (FOMC) had recently released a statement indicating it was leaning toward increasing this rate to slow U.S. economic growth and prevent a build-up in inflation. The FOMC tries to restrain inflation because it hurts nearly every one, but particularly those on fixed incomes whose buying power declines if their incomes are not adjusted for the increase in prices. Bridging over the "July effect" We took advantage of the continued rise in municipal money market yields from mid-May through June 1999 by purchasing securities maturing in six months to one year. In hindsight, the Fund would have derived greater benefit if we had invested more money in June. At that time, yields were higher because many state and local governments issued tax-exempt notes as their budgets were set at their fiscal year ends. Nevertheless, our purchases helped the Fund bridge over the seasonal drop in municipal money market yields that occurred in early July, known as the "July effect." Yields declined as the supply of securities shrank because investors raced to reinvest money received from coupon payments and maturing bonds. The imbalance of supply and demand was strong enough to push yields lower in early July even though the FOMC had just hiked the federal funds rate by a quarter of a percentage point to 5.00% on June 30, 1999. Performance at a Glance
Fund Facts As of 12/31/99 7-Day Net Asset Weighted Avg. Net Assets Current Yield* Value (NAV) Maturity (WAM) (Millions) Prudential Tax-Free Money Fund, Inc. 3.48% $1.00 67 Days $180 IBC Financial Data Tax-Free Money Fund (SB & GP) Avg.** 3.68% $1.00 44 Days N/A
Taxable Equivalent Yield* As of 12/31/99
@31% @36% @39.6% Prudential Tax-Free Money Fund, Inc. 5.04% 5.44% 5.76% IBC Financial Data Tax-Free Money Fund (SB & GP) Avg.** 5.33% 5.75% 6.09%
Note: Yields will fluctuate from time to time, and past performance is not indicative of future results. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. *Some investors may be subject to the federal alternative minimum tax (AMT). ** International Business Communications (IBC) Financial Data reports a seven-day current yield, NAV, and WAM on Mondays. This is the data of all funds in the IBC Tax-Free Money Fund (Stock Broker (SB) & General Purpose (GP)) Average category as of December 27, 1999, the closest date to the end of our reporting period. Tax-Free Money Fund Yield Comparison (GRAPH) 1 Review Cont'd. August brought an increased supply of newly issued municipal money market securities and a second change in monetary policy that lifted the federal funds rate to 5.25%. Both developments helped push municipal money market yields higher, which created many attractive buying opportunities. We purchased one-year notes of Franklin, Wisconsin School District, as well as tax-exempt commercial paper. These purchases helped to lengthen the Fund's weighted average maturity (WAM), which is a measurement tool that determines a portfolio's sensitivity to changes in the level of interest rates. A difficult choice The Fund's WAM remained longer than that of its competition throughout the rest of 1999. Having a longer WAM in October and early November reduced the Fund's buying opportunities because it meant we had less money to invest in higher-yielding securities that became available after the federal funds rate was increased to 5.50% on November 16, 1999. But we stuck with this strategy through December because the longer WAM would help insulate the Fund from the next major seasonal decline in municipal money market yields that typically occurs at the beginning of the new year. (It is known as the "January effect.") In December, we also purchased very short-term securities to enable the Fund to accommodate the normal year-end shareholder liquidity needs and any additional withdrawals that might occur out of concern that computers could malfunction when their internal dates switched from 1999 to 2000. As it turned out, financial markets did not experience any major computer problems as the year changed, and few glitches arose elsewhere. What did emerge in the final few days of 1999 were attractively priced, floating-rate securities that offered yields one to two percentage points higher than normal. Purchasing these securities also enhanced the Fund's yield. Looking Ahead We expect the FOMC to raise the federal funds rate on several occasions in 2000. Because of the U.S. presidential election in November, the changes in monetary policy will probably be front-loaded in the first half of the year. We believe tax-exempt money market yields will generally follow the federal funds rate higher, albeit at a slower pace than yields in the taxable money market. Weighted Average Maturity Compared to the Average Tax-Free Money Fund (GRAPH) 2 Portfolio of Investments as of December 31, 1999 PRUDENTIAL TAX-FREE MONEY FUND, INC. - --------------------------------------------------------------------------------
Moody's Principal Rating Interest Maturity Amount Value Description(a) (Unaudited) Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Alabama--0.4% Homewood Educ. Bldg. Auth., Samford Univ., F.R.D.D., Ser. 1999 VMIG1 4.80% 1/03/00 $ 800 $ 800,000 - ------------------------------------------------------------------------------------------------------------------------------ Arizona--4.7% Salt River Proj. Agricultural Impvt. & Pwr., T.E.C.P., Ser. 80 P-1 3.85 2/10/00 8,500 8,500,000 - ------------------------------------------------------------------------------------------------------------------------------ Arkansas--1.7% Arkansas Hosp. Equip. Fin. Auth., AHA Pooled Fin. Prog., F.R.W.D. Ser. 98A A-1+* 5.60 1/05/00 3,000 3,000,000 - ------------------------------------------------------------------------------------------------------------------------------ Colorado--0.1% Thornton Colorado Sales & Use Tax Rev., Ser. 99 Aaa 4.00 3/01/00 250 250,198 - ------------------------------------------------------------------------------------------------------------------------------ District of Columbia--3.5% Dist. of Columbia, G.O. Var. Rate, F.R.D.D., Ser. 92A-1 VMIG1 5.15 1/03/00 1,200 1,200,000 Ser. 92A-2 VMIG1 5.15 1/03/00 3,100 3,100,000 Ser. 92A-3 VMIG1 5.15 1/03/00 2,000 2,000,000 ------------ 6,300,000 - ------------------------------------------------------------------------------------------------------------------------------ Florida--4.6% Jacksonville Elec. Auth. Rev., Muni. Sec. Trust, F.R.W.D., Ser. SGA17 A-1+* 5.85 1/05/00 5,000 5,000,000 Orange & Pasco Cntys. Hlth. Facs. Auth., Adventist Hlth. Sys. Sunbelt, F.R.W.D., Ser. 98171 A-1* 5.71 1/06/00 3,300 3,300,000 ------------ 8,300,000 - ------------------------------------------------------------------------------------------------------------------------------ Georgia--4.6% Cobb Cnty. Dev. Auth., Georgia Pwr., Q.T.R.M.T., Ser. 91-1 VMIG1 3.95 2/01/00 8,330 8,330,000 - ------------------------------------------------------------------------------------------------------------------------------ Hawaii--1.2% Honolulu City & Cnty., G.O., Ser. 1990-D NR 6.90 12/01/00 2,000 2,072,598
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 3 Portfolio of Investments as of December 31, 1999 PRUDENTIAL TAX-FREE MONEY FUND, INC. - --------------------------------------------------------------------------------
Moody's Principal Rating Interest Maturity Amount Value Description(a) (Unaudited) Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Illinois--7.7% Illinois Hlth. Fac. Auth., Memorial Med Ctr., Ser. 1989 NR 6.50% 10/01/00 $ 4,740 $ 4,909,100 Illinois Hlth. Fac. Auth., Evanston Hosp. Corp. Proj., A.N.N.M.T., Ser. 92 VMIG1 3.90 10/31/00 3,000 3,000,000 Evanston Hosp., A.N.N.M.T., Ser. 95 VMIG1 3.25 2/29/00 5,000 5,000,000 Bear Stearns Muni. Secs. Trust, Chicago O'Hare Int'l Airport, A.M.T., Ser. 99-83 A-1+* 5.87 1/05/00 1,000 1,000,000 ------------ 13,909,100 - ------------------------------------------------------------------------------------------------------------------------------ Indiana--3.4% Indiana St. Dev. Fin. Auth. Rev., Edl. Facs., Covenant Christian H.S., F.R.W.D., Ser. 96 NR 5.65 1/06/00 5,000 5,000,000 South Bend Eco. Dev. Rev., Dynamic R.E.H.C. Inc., F.R.W.D., A.M.T., Ser. 99 NR 5.60 1/05/00 1,195 1,195,000 ------------ 6,195,000 - ------------------------------------------------------------------------------------------------------------------------------ Kansas--1.4% Kansas Dev. Fin. Auth., Dept. of Comm. & Hsg. Impact, Ser. 99 NR 4.00 6/01/00 2,470 2,472,442 - ------------------------------------------------------------------------------------------------------------------------------ Louisiana--0.7% Plaquemines Parish, British Petroleum, F.R.D.D., A.M.T., Ser. 95 P-1 5.35 1/03/00 1,200 1,200,000 - ------------------------------------------------------------------------------------------------------------------------------ Maryland--1.2% Anne Arundel Cnty., Baltimore Gas & Elec., A.N.N.M.T., Ser. 84 VMIG1 3.52 7/01/00 2,210 2,210,000 - ------------------------------------------------------------------------------------------------------------------------------ Massachusetts--3.3% Mass. St. Hsg. Fin. Agcy., Single Fam. Hsg. Notes, A.M.T., Ser. A MIG1 3.60 6/01/00 1,000 1,000,928 Mass. St. Wtr Poll. Abatement Tr., New Bedford Loan Prog., Ser. 96A NR 5.75 2/01/00 955 956,967 Mass. St. Hlth. & Edl. Facs. Auth. Rev., Boston Univ., Ser. 85H, F.R.W.D. VMIG1 5.35 1/05/00 3,000 3,000,000 Mass. St. Wtr. Res. Auth., Gen. Rev. Bonds, Ser. 90A NR 7.625 4/01/00 1,000 1,030,629 ------------ 5,988,524 - ------------------------------------------------------------------------------------------------------------------------------ Michigan--2.9% Michigan Muni. Bond Auth., Rev. Notes, Ser. 99B-1 SP-1+* 4.25 8/25/00 3,500 3,514,204 Michigan St. Hsg. Dev. Auth., Rental Hsg. Rev., Ser. 92A NR 5.80 4/01/00 1,680 1,689,131 ------------ 5,203,335
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 4 Portfolio of Investments as of December 31, 1999 PRUDENTIAL TAX-FREE MONEY FUND, INC. - --------------------------------------------------------------------------------
Moody's Principal Rating Interest Maturity Amount Value Description(a) (Unaudited) Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Minnesota--4.7% Bloomington Comm. Dev. Rev., 94th Str. Proj., F.R.W.D., Ser. 85 A-1+* 5.50% 1/07/00 $ 4,945 $ 4,945,000 St Paul Hsg. Redev. Auth., Heating Rev., F.R.W.D., Ser. 99D A-1+* 5.50 1/07/00 3,500 3,500,000 ------------ 8,445,000 - ------------------------------------------------------------------------------------------------------------------------------ Mississipi--3.0% Mississippi Hsg. Fin. Corp., Single. Fam. Mtg. Rev., F.R.W.D., Ser. 88 A-1+* 5.55 1/06/00 5,340 5,340,000 - ------------------------------------------------------------------------------------------------------------------------------ Missouri--0.6% Branson, Tax Increment-Street Imprv., Ser. 96 NR 4.65 12/01/00 1,000 1,005,776 - ------------------------------------------------------------------------------------------------------------------------------ New Hampshire--6.1% New Hampshire Bus. Fin. Auth., New England Pwr. Co. Proj., T.E.C.P., Ser. 90A, A.M.T. P-1 3.90 2/15/00 2,000 2,000,000 New England Pwr. Co. Proj., T.E.C.P., Ser. 90B VMIG1 3.90 1/27/00 6,500 6,500,000 Luminescent Systems, F.R.W.D., A.M.T., Ser. 98 A-1* 5.65 1/05/00 2,450 2,450,000 ------------ 10,950,000 - ------------------------------------------------------------------------------------------------------------------------------ New York--5.4% Hempstead Ind. Dev., American Ref. Fuel, F.R.W.D., Ser. 99 A-1* 5.80 1/05/00 3,700 3,700,000 New York St. Local Govt. Asst. Corp., SGA Ref. Bonds, F.R.D.D., Ser. SGA59 A-1+* 4.90 1/03/00 3,500 3,500,000 Niagara Cnty. NY Ind. Dev. Agcy., Solid Waste Disposal Rev., American Ref. Fuel, F.R.W.D., A.M.T., Ser. 94C P-1 6.50 1/05/00 2,500 2,500,000 ------------ 9,700,000 - ------------------------------------------------------------------------------------------------------------------------------ Ohio--6.4% Dublin City, Transp. Sys., Ser. 99 NR 4.10 6/16/00 4,743 4,751,007 East Lake Dev., Astro Model Corp., F.R.W.D., A.M.T., Ser. 96 NR 5.60 1/06/00 2,800 2,800,000 Ohio Hsg. Fin. Agcy., Residential Mtg., A.M.T., Ser. 117(d) A-1+* 3.90 7/20/00 1,000 1,000,000 Multifamily Hsg. Ref., F.R.W.D., Ser. B A-1+* 5.50 1/07/00 3,000 3,000,000 ------------ 11,551,007 - ------------------------------------------------------------------------------------------------------------------------------ Oklahoma--2.2% Morgan Keegan Var. Trust, 10 Willmington Pl. Prog., Tulsa Co. Hsg. Fin. Auth., F.R.W.D. A.M.T., Ser. 99E A-1+* 5.76 1/06/00 2,000 2,000,000 Tulsa Pkg. Auth., Williams Ctr. Proj., S.E.M.M.T., Ser. 87A VMIG1 3.90 5/15/00 2,000 2,000,000 ------------ 4,000,000
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 5 Portfolio of Investments as of December 31, 1999 PRUDENTIAL TAX-FREE MONEY FUND, INC. - --------------------------------------------------------------------------------
Moody's Principal Rating Interest Maturity Amount Value Description(a) (Unaudited) Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Oregon--2.0% Oregon Hsg. & Comm. Serv. Dept., Mtge. Rev. Bonds, Single Family Mtge., A.M.T., Ser. 99D MIG1 3.20% 4/13/00 $ 1,500 $ 1,500,000 Single Family Mtge., Ser. 99G MIG1 3.45 6/29/00 2,000 2,000,000 ------------ 3,500,000 - ------------------------------------------------------------------------------------------------------------------------------ Pennsylvania--5.0% Allegheny Cnty., Greater Pitt. Int'l Airport, Ser. 90A Aaa 7.05 1/01/00 1,000 1,000,000 Lancaster Cnty. Hosp. Auth., Luthercare Proj., F.R.W.D. Ser. 99 A-1* 5.75 1/06/00 6,500 6,500,000 Temple Univ., Univ. Funding Notes, Ser. 1999 MIG1 3.15 5/12/00 1,500 1,500,000 ------------ 9,000,000 - ------------------------------------------------------------------------------------------------------------------------------ South Dakota--1.9% South Dakota Hsg. Dev. Auth., Homeownership Mtg., Ser. 99-J MIG1 3.75 9/28/00 2,025 2,025,000 South Dakota Hsg. Dev. Auth., Hsg. Dev. Rev., F.R.W.D., Ser. 98 NR 5.70 1/06/00 1,350 1,350,000 ------------ 3,375,000 - ------------------------------------------------------------------------------------------------------------------------------ Texas--9.2% Guadalupe Blanco River Auth., BOC Group Inc., F.R.W.D., Ser. 1993 CPS1 4.00 1/06/00 3,800 3,800,000 Gulf Coast Waste Disp. Auth. Env. Fac. Rev., F.R.D.D. Amoco Oil Co., Ser. 96, A.M.T. P-1 5.35 1/03/00 1,400 1,400,000 Amoco Oil Co. Proj., Ser. 98, A.M.T. VMIGI 5.35 1/03/00 1,200 1,200,000 Bayer Corp. Ser. 97, A.M.T. P-1 5.40 1/03/00 1,800 1,800,000 Houston, T.E.C.P., Ser. B P-1 3.80 1/21/00 3,000 3,000,000 Ser. A P-1 3.90 1/25/00 2,400 2,400,000 San Antonio Elec. & Gas Rev., Munic. Secs. Trust Rcpts., F.R.W.D., Ser. SGA48 A-1+* 5.85 1/05/00 3,000 3,000,000 ------------ 16,600,000 - ------------------------------------------------------------------------------------------------------------------------------ Virginia--3.8% Fairfax Cnty. Econ Dev. Auth., LEHM-Resource Recovery, Q.T.R.O.T.S., A.M.T., Ser. 99A15(d) VMIG1 3.95 2/01/00 4,000 4,000,000 Southampton Cnty. Ind. Dev. Auth., Hadson Pwr. Proj., F.R.D.D., A.M.T., Ser. 90A VMIG1 5.45 1/03/00 2,800 2,800,000 ------------ 6,800,000
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 6 Portfolio of Investments as of December 31, 1999 PRUDENTIAL TAX-FREE MONEY FUND, INC. - --------------------------------------------------------------------------------
Moody's Principal Rating Interest Maturity Amount Value Description(a) (Unaudited) Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------------------------ Wisconsin--8.7% Franklin Public School Dist. NR 4.00% 8/30/00 $ 5,400 $ 5,409,314 Wausau School Dist. NR 4.10 9/22/00 2,000 2,005,024 Whitewater Ind. Dev. Rev., Trek Bicycle, F.R.W.D., A.M.T., Ser. 95 NR 5.70 1/06/00 3,840 3,840,000 Wisconsin Hsg. & Econ. Dev. Auth., Home Ownership Rev., A.N.N.O.T., Ser. 122(d) VMIG1 3.90 10/05/00 1,300 1,300,000 Wisconsin St. Hlth. & Ed. Fac. Auth., SSM Health Care, T.E.C.P., Ser. 98B A-1+* 3.65 2/16/00 3,000 3,000,000 ------------ 15,554,338 Total Investments--100.4% (cost $180,552,318(c)) 180,552,318 Liabilities in excess of other assets--(0.4)% (665,361) ------------ Net Assets--100% $179,886,957 ------------ ------------
- --------------- (a) The following abbreviations are used in portfolio descriptions: A.M.T.--Alternate Minimum Tax A.N.N.M.T.--Annual Mandatory Tender(b) A.N.N.O.T.--Annual Optional Tender(b) F.R.D.D.--Floating Rate (Daily) Demand Note(b) F.R.W.D.--Floating Rate (Weekly) Demand Note(b) G.O.--General Obligation Q.T.R.M.T.--Quarterly Tax and Reserve Mandatory Tender(b) Q.T.R.O.T.S.--Quarterly Synthetic Optional Tender(b) S.E.M.M.T.--Semi-Annual Mandatory Tender(b) T.E.C.P.--Tax-Exempt Commercial Paper (b) For purposes of amortized cost valuation, the maturity date of these instruments is considered to be the later of the next date on which the security can be redeemed at par, or the next date on which the rate of interest is adjusted. (c) The cost basis for federal income tax purposes is substantially the same as that used for financial reporting purposes. (d) Indicates a restricted security; the aggregate cost of such securities is $6,300,000 which represents approximately 3.5% of net assets. * Standard & Poor's Rating. NR--Not Rated by Moody's or Standard & Poor's. The Fund's current Statement of Additional Information contains a description of Moody's and Standard and Poor's ratings. - -------------------------------------------------------------------------------- See Notes to Financial Statements. 7 Statement of Assets and Liabilities PRUDENTIAL TAX-FREE MONEY FUND, INC. - --------------------------------------------------------------------------------
Assets December 31, 1999 ----------------- Investments, at amortized cost which approximates market value.......................................... $ 180,552,318 Cash.................................................................................................... 94,526 Receivable for Fund shares sold......................................................................... 3,625,664 Interest receivable..................................................................................... 1,459,269 Prepaid expenses........................................................................................ 7,270 ----------------- Total assets......................................................................................... 185,739,047 ----------------- Liabilities Payable for Investments purchased....................................................................... 3,827,042 Payable for Fund shares reacquired...................................................................... 1,688,085 Accrued expenses........................................................................................ 156,382 Dividends payable....................................................................................... 89,213 Management fee payable.................................................................................. 80,492 Distribution fee payable................................................................................ 10,876 ----------------- Total liabilities.................................................................................... 5,852,090 ----------------- Net Assets.............................................................................................. $ 179,886,957 ----------------- ----------------- Net assets were comprised of: Common Stock, $.01 par value......................................................................... $ 1,799,812 Paid-in capital in excess of par..................................................................... 178,087,145 ----------------- Net assets, December 31, 1999........................................................................... $ 179,886,957 ----------------- ----------------- Net asset value, offering price and redemption price per share ($179,886,957 / 179,981,236 shares)........................................................ $1.00 ----------------- -----------------
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 8 PRUDENTIAL TAX-FREE MONEY FUND, INC. Statement of Operations - ------------------------------------------------------------
Year Ended Net Investment Income December 31, 1999 Income Interest.............................. $ 6,726,641 ----------------- Expenses Management fee........................ 1,013,590 Distribution fee...................... 253,397 Transfer agent's fees and expenses.... 160,000 Custodian's fees and expenses......... 63,000 Registration fees..................... 54,000 Reports to shareholders............... 45,000 Audit fee and expenses................ 26,000 Legal fees and expenses............... 15,000 Directors' fees and expenses.......... 11,000 Miscellaneous......................... 4,275 ----------------- Total expenses..................... 1,645,262 Less: custodian fee credit............ (15,728) ----------------- Net expenses....................... 1,629,534 ----------------- Net investment income.................... 5,097,107 ----------------- Realized Gain on Investments Net realized gain on investment transactions.......................... 3 ----------------- Net Increase in Net Assets Resulting from Operations................ $ 5,097,110 ----------------- -----------------
PRUDENTIAL TAX-FREE MONEY FUND, INC. Statement of Changes in Net Assets - ------------------------------------------------------------
Increase (Decrease) Year Ended December 31, in Net Assets 1999 1998 Operations Net investment income.......... $ 5,097,107 $ 7,783,907 Net realized gain on investment transactions................ 3 10,290 ------------ ------------ Net increase in net assets resulting from operations... 5,097,110 7,794,197 ------------ ------------ Dividends and distributions to shareholders................... (5,097,110) (7,794,197) ------------ ------------ Fund share transactions (at $1 per share) Proceeds from shares sold...... 604,058,962 776,364,363 Net asset value of shares issued to shareholders in reinvestment of dividends and distributions........... 4,896,169 7,493,041 Cost of shares reacquired...... (628,233,381) (914,504,317) ------------ ------------ Net decrease in net assets from Fund share transactions..... (19,278,250) (130,646,913) ------------ ------------ Total decrease.................... (19,278,250) (130,646,913) Net Assets Beginning of year................. 199,165,207 329,812,120 ------------ ------------ End of year....................... $179,886,957 $199,165,207 ------------ ------------ ------------ ------------
- -------------------------------------------------------------------------------- See Notes to Financial Statements. 9 Notes to Financial Statements PRUDENTIAL TAX-FREE MONEY FUND, INC. - -------------------------------------------------------------------------------- Prudential Tax-Free Money Fund, Inc. (the 'Fund') is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. The investment objective of the Fund is to attain the highest level of current income that is exempt from federal income taxes, consistent with liquidity and preservation of capital. The Fund will invest in short-term tax-exempt debt securities of state and local governments. The ability of the issuers of the securities held by the Fund to meet their obligations may be affected by economic or political developments in a specific state, industry or region. - ------------------------------------------------------------ Note 1. Accounting Policies The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. Securities Valuation: Portfolio securities are valued at amortized cost, which approximates market value. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of any discount or premium. Securities Transactions and Net Investment Income: Securities transactions are recorded on the trade date. Realized gains and losses on sales of investments are calculated on an identified cost basis. Interest income is recorded on an accrual basis. The cost of portfolio securities for federal income tax purposes is substantially the same as for financial reporting purposes. Expenses are recorded on the accrual basis which may require the use of certain estimates by management. Federal Income Taxes: It is the Fund's policy to continue to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its net investment income to its shareholders. For this reason, no federal income tax provision is required. Dividends: The Fund declares dividends daily from net investment income and net realized gains, if any. Payment of dividends is made monthly. Custody Fee Credits: The Fund has an arrangement with its custodian bank, whereby uninvested monies earn credits which reduce the fees charged by the custodian. Note 2. Agreements The Fund has a management agreement with Prudential Investments Fund Management LLC ('PIFM'). Pursuant to this agreement, PIFM has responsibility for all investment advisory services and supervises the subadviser's performance of such services. PIFM has entered into a subadvisory agreement with Prudential Investment Corporation ('PIC'); PIC furnishes investment advisory services in connection with the management of the Fund. PIFM pays for the cost of the subadviser's services, the compensation of officers of the Fund, occupancy and certain clerical and bookkeeping costs of the Fund. The Fund bears all other costs and expenses. The management fee paid PIFM is computed daily and payable monthly, at an annual rate of .50 of 1% of the Fund's average daily net assets up to $750 million, .425 of 1% of the next $750 million of average daily net assets and .375 of 1% of average daily net assets in excess of $1.5 billion. The Fund has a distribution agreement with Prudential Investment Management Services LLC ('PIMS'). The Fund compensates PIMS for distributing and servicing the Fund's shares pursuant to the plan of distribution at an annual rate of .125 of 1% of the Fund's average daily net assets. The distribution fee is accrued daily and payable monthly. PIFM, PIC and PIMS are indirect, wholly owned subsidiaries of The Prudential Insurance Company of America. - ------------------------------------------------------------ Note 3. Other Transactions With Affiliates Prudential Mutual Fund Services LLC ('PMFS'), a wholly owned subsidiary of PIFM, serves as the Fund's transfer agent and during the year ended December 31, 1999, the Fund incurred fees of approximately $144,800 for the services of PMFS. As of December 31, 1999, approximately $10,800 of such fees were due to PMFS. Transfer agent fees and expenses in the Statement of Operations include certain out-of-pocket expenses paid to nonaffiliates. - -------------------------------------------------------------------------------- 10 Financial Highlights PRUDENTIAL TAX-FREE MONEY FUND, INC. - --------------------------------------------------------------------------------
Year Ended December 31, ------------------------------------------------------------ 1999 1998 1997 1996 1995 -------- -------- -------- -------- -------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of year................................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Net investment income and realized gains........................... .025 .028 .030 .028 .031 Dividends and distributions to shareholders........................ (.025) (.028) (.030) (.028) (.031) -------- -------- -------- -------- -------- Net asset value, end of year....................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- TOTAL RETURN(a):................................................... 2.56% 2.83% 3.00% 2.84% 3.15% RATIOS/SUPPLEMENTAL DATA: Net assets, end of year (000)...................................... $179,887 $199,165 $329,812 $333,808 $387,651 Average net assets (000)........................................... $202,718 $277,839 $339,825 $403,230 $470,370 Ratios to average net assets: Expenses, including distribution fee............................ .81% .80% .78% .80% .85% Expenses, excluding distribution fee............................ .69% .68% .66% .67% .72% Net investment income........................................... 2.51% 2.80% 2.97% 2.83% 3.14%
- --------------- (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. 11 Report of Independent Accountants PRUDENTIAL TAX-FREE MONEY FUND, INC. - -------------------------------------------------------------------------------- To the Shareholders and Board of Directors of Prudential Tax-Free Money Fund, Inc. In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Prudential Tax-Free Money Fund, Inc. (the 'Fund') at December 31, 1999, 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 December 31, 1999 by correspondence with the custodian and brokers, provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP 1177 Avenue of the Americas New York, New York February 14, 2000 Tax Information (Unaudited) PRUDENTIAL TAX-FREE MONEY FUND, INC. - -------------------------------------------------------------------------------- We are required by the Internal Revenue Code to advise you within 60 days of the Fund's fiscal year end (December 31, 1999) as to the federal tax status of dividends paid by the Fund during such fiscal year. Accordingly, we are advising you that in the fiscal year ended December 31, 1999, dividends paid from net investment income of $.025 were all federally tax-exempt interest dividends. Information with respect to the state taxability of your investment in the Fund was sent to you under separate cover. - -------------------------------------------------------------------------------- 12 Getting the Most from Your Prudential Mutual Fund How many times have you read these reports--or other financial materials-- and stumbled across a word that you don't understand? Many shareholders have run into the same problem. We'd like to help. So we'll use this space from time to time to explain some of the words you might have read, but not understood. And if you have a favorite word that no one can explain to your satisfaction, please write to us. Basis Point: 1/100th of 1%. For example, one-half of one percent is 50 basis points. Collateralized Mortgage Obligations (CMOs): Mortgage-backed bonds that separate mortgage pools into different maturity classes, called tranches. These instruments are sensitive to changes in interest rates and homeowner refinancing activity. They are subject to prepayment and maturity extension risk. Derivatives: Securities that derive their value from other securities. The rate of return of these financial instruments rises and falls--sometimes very suddenly--in response to changes in some specific interest rate, currency, stock, or other variable. Discount Rate: The interest rate charged by the Federal Reserve on loans to member banks. Federal Funds Rate: The interest rate charged by one bank to another on overnight loans. Futures Contract: An agreement to purchase or sell a specific amount of a commodity or financial instrument at a set price at a specified date in the future. Leverage: The use of borrowed assets to enhance return. The expectation is that the interest rate charged on borrowed funds will be lower than the return on the investment. While leverage can increase profits, it can also magnify losses. Liquidity: The ease with which a financial instrument (or product) can be bought or sold (converted into cash) in the financial markets. Price/Earnings Ratio: The price of a share of stock divided by the earnings per share for a 12-month period. Option: An agreement to purchase or sell something, such as shares of stock, by a certain time for a specified price. An option need not be exercised. Spread: The difference between two values; often used to describe the difference between "bid" and "asked" prices of a security, or between the yields of two similar maturity bonds. Yankee Bond: A bond sold by a foreign company or government in the U.S. market and denominated in U.S. dollars. Getting the Most from Your Prudential Mutual Fund Some mutual fund shareholders won't ever read this--they don't read annual and semiannual reports. It's quite understandable. These annual and semiannual reports are prepared to comply with federal regulations, and are often written in language that is difficult to understand. So, when most people run into those particularly daunting sections of these reports, they don't read them. We think that's a mistake. At Prudential Mutual Funds, we've made some changes to our report to make it easier to understand and more pleasant to read. We hope you'll find it profitable to spend a few minutes familiarizing yourself with your investment. Here's what you'll find in the report: Performance at a Glance Since an investment's performance is often a shareholder's primary concern, we present performance information in two different formats. You'll find it first on the "Performance at a Glance" page where we compare the Fund and the comparable average calculated by Lipper, Inc., a nationally recognized mutual fund rating agency. We report both the cumulative total returns and the average annual total returns. The cumulative total return is the total amount of income and appreciation the Fund has achieved in various time periods. The average annual total return is an annualized representation of the Fund's performance. It gives you an idea of how much the Fund has earned in an average year for a given time period. Under the performance box, you'll see legends that explain the performance information, whether fees and sales charges have been included in returns, and the inception dates for the Fund's share classes. See the performance comparison charts at the back of the report for more performance information. Please keep in mind that past performance is not indicative of future results. Portfolio Manager's Report The portfolio manager, who invests your money for you, reports on successful--and not-so-successful--strategies in this section of your report. Look for recent purchases and sales here, as well as information about the sectors the portfolio manager favors, and any changes that are on the drawing board. Portfolio of Investments This is where the report begins to appear technical, but it's really just a listing of each security held at the end of the reporting period, along with valuations and other information. Please note that sometimes we discuss a security in the Portfolio Manager's Report that doesn't appear in this listing because it was sold before the close of the reporting period. Statement of Assets and Liabilities The balance sheet shows the assets (the value of the Fund's holdings), liabilities (how much the Fund owes), and net assets (the Fund's equity, or holdings after the Fund pays its debts) as of the end of the reporting period. It also shows how we calculate the net asset value per share for each class of shares. The net asset value is reduced by payment of your dividend, capital gain, or other distribution, but remember that the money or new shares are being paid or issued to you. The net asset value fluctuates daily, along with the value of every security in the portfolio. Statement of Operations This is the income statement, which details income (mostly interest and dividends earned) and expenses (including what you pay us to manage your money). You'll also see capital gains here--both realized and unrealized. Statement of Changes in Net Assets This schedule shows how income and expenses translate into changes in net assets. The Fund is required to pay out the bulk of its income to shareholders every year, and this statement shows you how we do it--through dividends and distributions--and how that affects the net assets. This statement also shows how money from investors flowed into and out of the Fund. Notes to Financial Statements This is the kind of technical material that can intimidate readers, but it does contain useful information. The Notes provide a brief history and explanation of your Fund's objectives. In addition, they outline how Prudential Mutual Funds prices securities. The Notes also explain who manages and distributes the Fund's shares and, more importantly, how much they are paid for doing so. Finally, the Notes explain how many shares are outstanding and the number issued and redeemed over the period. Financial Highlights This information contains many elements from prior pages, but on a per-share basis. It is designed to help you understand how the Fund performed, and to compare this year's performance and expenses to those of prior years. Independent Auditor's Report Once a year, an outside auditor looks over our books and certifies that the information is fairly presented and complies with generally accepted accounting principles. Tax Information This is information which we report annually about how much of your total return is taxable. Should you have any questions, you may want to consult a tax adviser. Performance Comparison These charts are included in the annual report and are required by the Securities Exchange Commission. Performance is presented here as a hypothetical $10,000 investment in the Fund since its inception or for 10 years (whichever is shorter). To help you put that return in context, we are required to include the performance of an unmanaged, broad-based securities index as well. The index does not reflect the cost of buying the securities it contains or the cost of managing a mutual fund. Of course, the index holdings do not mirror those of the Fund--the index is a broad-based reference point commonly used by investors to measure how well they are doing. A definition of the selected index is also provided. Investors cannot invest directly in an index. The Prudential Mutual Fund Family Prudential offers a broad range of mutual funds designed to meet your individual needs. For information about these funds, contact your financial adviser or call us at (800) 225-1852. Read the prospectus carefully before you invest or send money. STOCK FUNDS Prudential Emerging Growth Fund, Inc. Prudential Equity Fund, Inc. Prudential Equity Income Fund Prudential Index Series Fund Prudential Small-Cap Index Fund Prudential Stock Index Fund The Prudential Investment Portfolios, Inc. Prudential Jennison Growth Fund Prudential Jennison Growth & Income Fund Prudential Mid-Cap Value Fund Prudential Real Estate Securities Fund Prudential Sector Funds, Inc. Prudential Financial Services Fund Prudential Health Sciences Fund Prudential Technology Fund Prudential Utility Fund Prudential Small-Cap Quantum Fund, Inc. Prudential Small Company Value Fund, Inc. Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund 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 Developing Markets Fund Prudential Developing Markets Equity Fund Prudential Latin America Equity Fund Prudential Europe Growth Fund, Inc. Prudential Global Genesis Fund, Inc. Prudential Index Series Fund Prudential Europe Index Fund Prudential Pacific Index Fund Prudential Natural Resources Fund, Inc. Prudential Pacific Growth Fund, Inc. Prudential World Fund, Inc. 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. BOND FUNDS Taxable Bond Funds Prudential Diversified Bond Fund, Inc. Prudential Government Income Fund, Inc. Prudential Government Securities Trust Short-Intermediate Term Series Prudential High Yield Fund, Inc. Prudential High Yield Total Return Fund, Inc. Prudential Index Series Fund Prudential Bond Market Index Fund Prudential Structured Maturity Fund, Inc. Income Portfolio 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 Prudential Mutual Funds Gateway Center Three 100 Mulberry Street Newark, NJ 07102-4077 (800) 225-1852 visit our website at www.prudential.com Fund Symbol CUSIP 74436P103 Directors Delayne Dedrick Gold Robert F. Gunia Robert E. LaBlanc David R. Odenath, Jr. Robin B. Smith Stephen Stoneburn John R. Strangfeld Nancy H. Teeters Clay T. Whitehead Officers John R. Strangfeld, President Robert F. Gunia, Vice President Grace C. Torres, Treasurer Robert C. Rosselot, Secretary Stephen M. Ungerman, Assistant Treasurer Manager Prudential Investments Fund Management LLC Gateway Center Three 100 Mulberry Street Newark, NJ 07102-4077 Investment Adviser The Prudential Investment Corporation Prudential Plaza Newark, NJ 07102-3777 Distributor Prudential Investment Management Services LLC Gateway Center Three 100 Mulberry Street Newark, NJ 07102-4077 Custodian State Street Bank and Trust Company One Heritage Drive North Quincy, MA 02171 Transfer Agent Prudential Mutual Fund Services LLC P.O. Box 15005 New Brunswick, NJ 08906 Independent Accountants PricewaterhouseCoopers LLP 1177 Avenue of the Americas New York, NY 10036 Legal Counsel Sullivan & Cromwell 125 Broad Street New York, NY 10004 The views expressed in this report and information about the Fund's portfolio holdings are for the period covered by this report and are subject to change thereafter. This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus. (ICON) Printed on Recycled Paper Fund Symbol CUSIP 74436P103 visit our website at www.prudential.com The views expressed in this report and information about the Fund's portfolio holdings are for the period covered by this report and are subject to change thereafter. This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus. MF103E (ICON) Printed on Recycled Paper -----END PRIVACY-ENHANCED MESSAGE-----