N-30D 1 mf14973.txt TAX-FREE MONEY -- PROSPECTUS -- JUNE 30, 2001 SEMIANNUAL REPORT JUNE 30, 2001 Prudential Tax-Free Money Fund, Inc. Fund Type Tax-free money market Objective The highest level of current income that is exempt from federal income taxes,consistent with liquidity and the preservation of capital (GRAPHIC) This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus. 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. Prudential Financial is a service mark of Prudential, Newark, NJ, and its affiliates. (LOGO) Build on the Rock INVESTMENT GOALS AND STYLE The Prudential Tax-Free Money Fund, Inc. (the 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 the investment adviser's credit research staff. There can be no assurance that the Fund will achieve its investment objective. Tax-Free Money Fund Yield Comparison (GRAPH) www.prudential.com (800) 225-1852 Performance at a Glance Fund Facts As of 6/30/01
7-Day Net Asset Weighted Avg. Net Assets Current Yield Value (NAV) Mat. (WAM) (Millions) Prudential Tax-Free Money Fund, Inc. 2.41% $1.00 52 Days $183 iMoneyNet, Inc. Tax-Free National Retail Avg.* 2.61% $1.00 35 Days N/A
Taxable Equivalent Yield** As of 6/30/01 Tax Brackets @31% @36% @39.1% Prudential Tax-Free Money Fund, Inc. 3.49% 3.77% 3.96% iMoneyNet, Inc. Tax-Free National Retail Avg.* 3.78% 4.08% 4.29% 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. *iMoneyNet, Inc. reports a seven-day current yield, Net Asset Value (NAV), and Weighted Average Maturity (WAM) on Mondays. This is the data for all funds in the iMoneyNet, Inc. Tax-Free National Retail Average category as of June 25, 2001, the closest date to the end of our reporting period. **Some investors may be subject to the federal alternative minimum tax (AMT). Weighted Average Maturity Comparison (GRAPH) 1 (LOGO) August 14, 2001 DEAR SHAREHOLDER, Faced with a deteriorating U.S. economy and plunging corporate earnings, the Federal Reserve (the Fed) acted decisively in the first half of 2001. Fed officials implemented six short- term rate cuts in an attempt to avert a recession, defined as at least two consecutive quarters of decline in a nation's gross domestic product. Although economic growth had not turned negative by the end of our reporting period, it slowed from 4.1% in 2000 to an annualized pace of 1.0% for the first half of 2001. As would be expected in an environment of aggressive Fed easings, yields on municipal money market securities came down substantially. The primary challenge for the Fund's management team, therefore, was to try to lock in higher yields on securities with longer maturities in advance of the Fed's easing moves. The details of this effort will be explained in the discussion that follows. The Prudential Tax-Free Money Fund's seven-day current yield on June 30, 2001, was 2.41%, the equivalent of a 3.96% taxable yield for investors in the top 39.1% tax bracket. The Fund maintained a $1 net asset value per share. Thank you for your continued confidence in Prudential mutual funds. Sincerely, David R. Odenath, Jr., President Prudential Tax-Free Money Fund, Inc. 2 Prudential Tax-Free Money Fund, Inc. Semiannual Report June 30, 2001 INVESTMENT ADVISER'S REPORT FED CUTS RATES AGGRESSIVELY As we entered 2001, we anticipated the "January effect," a phenomenon that occurs as a result of investors having an abundance of cash on hand to invest from coupon payments, called bonds, and bonds maturing in the first week of January. This surge of buying normally pushes yields down and prices up, creating a relatively unattractive investment environment until demand subsides. To cope with the "January effect", we extended the Fund's weighted average maturity (WAM) before the buying wave hit and thereby locked in favorable yields. (WAM measures a portfolio's sensitivity to changes in the level of interest rates. It considers the maturity and quantity of each security held in a portfolio.) January 2001 was a little different. Not only did the "January effect" appear on schedule, but the Fed also had a little New Year's surprise for investors. Acting between regularly scheduled meetings of its Federal Open Market Committee, the central bank cut the federal funds rate on January 3 by one half of a percentage point, reducing the key rate from 6.50% to 6.00%. (The federal funds rate is what banks charge each other for overnight loans.) The Fund's longer WAM was beneficial as yields, which were falling as anticipated due to the "January effect", declined even further when the Fed made its first move. The Fed implemented another half-point rate cut on January 31. In this widely expected second move, it lowered the federal funds rate to 5.50%. KEEPING THE FUND'S WAM LONG The Fund's WAM drifted slightly shorter throughout January, but by early February, we had extended it again. By then, it was clear that the Fed would not be satisfied with the two rate cuts that occurred in January. Indeed, Fed officials also trimmed rates in March, April, May, and June. All were half- point cuts except for the June 27 move. The quarter-point reduction on June 27 left the federal funds rate at 3.75%. In an environment of rapidly falling rates, it was advantageous to maintain a longer-than-average WAM. 3 Prudential Tax-Free Money Fund, Inc. Semiannual Report June 30, 2001 We accomplished this by purchasing longer-term municipal money market securities that kept the Fund's WAM roughly 15 to 25 days longer than its competitive average throughout the period. Accordingly, in February we purchased 90-day tax-exempt commercial paper, as well as annual optional tenders and prerefunded bonds with maturities extending up to one year. (These prerefunded bonds are backed by direct obligations of the U.S. Treasury.) In March, we purchased 120-day commercial paper and escrow-to-maturity bonds maturing at the end of the year. In April, we encountered another seasonal phenomenon, the spike in yields that occurs as a result of tax time redemptions. This increase in yields occurs when shareholders withdraw cash to pay their taxes. Our strategy for this part of the year was to build up sufficient liquidity to meet tax- time outflows. At the same time, higher liquidity provided us with the buying power to take advantage of attractive opportunities, as selling pressure caused yields to rise. During late April and early May, we purchased attractive 180-day commercial paper as well as semiannual tender securities. Near the end of the reporting period, we began to anticipate the "July effect", which typically produces a dip in yields due to the buying of investors who are flush with cash from mid-year coupon payments and maturing securities. As at the beginning of the year, we planned for the "July effect" by lengthening the Fund's WAM so as to avoid locking in the temporarily lower yields. LOOKING AHEAD With the quarter-point rate cut in June, the Fed could be signaling that it is near the end of its current easing cycle. It may implement one or two more rate cuts before the end of the year, but we believe the Fed's aggressive easing will soon have its intended effect, and the economy will begin a new growth cycle. Prudential Tax-Free Money Fund Management Team 4 Prudential Tax-Free Money Fund, Inc. Portfolio of Investments as of June 30, 2001 (Unaudited)
Principal Moody's Interest Maturity Amount Value Description (a) Rating Rate Date (000) (Note 1) ---------------------------------------------------------------------------------------------------------- Alaska 1.1% Anchorage Alaska, G.O., Ser. 91 NR 8.00% 7/01/01 $ 2,000 $ 2,000,000 ---------------------------------------------------------------------------------------- Arizona 0.5% Pima Cnty. Ind. Dev. Auth. Sngl. Fam. Mtge. SP1* 3.45 4/15/02 1,000 1,000,000 ---------------------------------------------------------------------------------------- Colorado 1.1% East Smoky Hill Metro. Dist., Number 2, Q.T.R.M.T. A1* 4.45 12/01/01 2,000 2,000,000 ---------------------------------------------------------------------------------------- Connecticut 1.0% Connecticut Spec. Assmt., Unemployment Comp. Rev. Bds., A.N.N.M.T., Ser 93C VMIG1 4.35 11/15/01 1,800 1,800,000 ---------------------------------------------------------------------------------------- District of Columbia 1.6% Bear, Stearns Muni. Secs. Trust Cert., F.R.D.D., Ser. 92 A1* 3.35 7/02/01 1,300 1,300,000 Dist. Columbia Hsg. Fin. Agcy. Rev. Sngl. Fam. Mtge., Series C SP1+* 3.50 3/25/02 1,600 1,600,000 -------------- 2,900,000 ---------------------------------------------------------------------------------------- Florida 8.9% Florida Cap. Proj. Fin. Auth. Rev. AAAE Airport Proj. NR 4.25 6/01/02 1,000 1,012,101 Florida Cap. Proj. Fin. Auth. Rev., F.R.W.D. Ser. H VMIG1 2.85 7/05/01 4,425 4,425,000 Florida St. Bd. of Ed., Pub. Ed. Cap. Outlay, F.R.D.D., Ser. 102 A1+* 3.35 7/02/01 600 600,000 Bear, Stearns Muni. Secs. Trust Cert., San Antonio, F.R.D.D., Ser. 132 A1* 3.35 7/02/01 300 300,000 Orange Cnty. Hlth. Facs. Auth. Rev., Adventist Hlth. Sys., F.R.W.D., Ser. 171 A1+* 2.93 7/05/01 8,125 8,125,000 Palm Beach Cnty., G.O., Ser. 91 NR 6.60 10/01/01 1,850(d) 1,901,397 -------------- 16,363,498
See Notes to Financial Statements 5 Prudential Tax-Free Money Fund, Inc. Portfolio of Investments as of June 30, 2001 (Unaudited) Cont'd.
Principal Moody's Interest Maturity Amount Value Description (a) Rating Rate Date (000) (Note 1) ---------------------------------------------------------------------------------------------------------- Georgia 2.1% De Kalb Cnty. Hsg. Auth. Multi Fam. Hsg. Rev., F.R.W.D. A1* 2.98% 7/05/01 $ 1,310 $ 1,310,000 Stephens Cnty. Dev. Auth. Ind. Dev. Rev., Caterpillar Inc. Proj., F.R.W.D. P-1 2.98 7/05/01 1,000 1,000,000 Stephens Cnty. Dev. Auth. Solid Waste, Disp. Facs. Rev., F.R.W.D. P-1 2.98 7/05/01 1,520 1,520,000 -------------- 3,830,000 ---------------------------------------------------------------------------------------- Idaho 1.1% Boise Cnty. Hsg. Auth. Rev., B.A.N. NR 4.70 10/01/01 2,000 2,000,000 ---------------------------------------------------------------------------------------- Illinois 8.9% Chicago Pub. Bldg., Comm. Bldg. Rev., Ser. C NR 5.00 2/01/02 1,000 1,009,404 Illinois Edl. Facs. Auth. Rev. P1 3.25 10/04/01 5,000 5,000,000 Illinois Hlth. Facs. Auth. Rev., Evanston Hosp. Corp. Prog., Ser. 95, A.N.N.M.T., VMIG1 3.40 8/15/01 5,000 5,000,000 Servant Cor. Falcon II, F.R.W.D., Ser. 96A A-1* 2.80 7/05/01 3,100 3,100,000 Illinois, Ser. A43, F.R.W.D. VMIG1 2.80 7/05/01 2,295 2,295,000 -------------- 16,404,404 ---------------------------------------------------------------------------------------- Indiana 6.9% Indiana Ed. Facs. Auth., Wesleyan Univ., F.R.W.D., Ser. 93 NR 2.80 7/05/01 4,000 4,000,000 Indiana Hlth. Fac. Fin. Auth. Hosp. Rev., Floyd Memorial Hosp. Proj. NR 6.63 2/15/02 2,500(d) 2,604,281 Indiana Trans. Fin. Auth., Hwy. Rev., Ser. 11, F.R.D.D. A1+* 3.35 7/02/01 3,200 3,200,000 Saint Joseph Cnty. Hosp. Auth. Fac. Rev., St. Joseph Med. Ctr., Ser. 91 NR 6.60 12/01/01 1,750(d) 1,772,812
6 See Notes to Financial Statements Prudential Tax-Free Money Fund, Inc. Portfolio of Investments as of June 30, 2001 (Unaudited) Cont'd.
Principal Moody's Interest Maturity Amount Value Description (a) Rating Rate Date (000) (Note 1) ---------------------------------------------------------------------------------------------------------- South Bend Econ. Dev. Rev., Dynamic R.E.H.C., Inc. Proj., F.R.W.D. NR 2.95% 7/05/01 $ 1,165 $ 1,165,000 -------------- 12,742,093 ---------------------------------------------------------------------------------------- Iowa 0.6% Iowa Great Lakes San Dist. NR 4.20 6/01/02 500 504,924 Sioux City Water Rev. Ref. NR 4.25 6/01/02 540 545,548 -------------- 1,050,472 ---------------------------------------------------------------------------------------- Kentucky 5.3% Henderson Cnty. Rev., Kentucky Hosp. Assoc. Hlth. Facs., F.R.W.D., Ser. A VMIG1 2.85 7/05/01 6,075 6,075,000 Leitchfield Ind. Bldg. Rev., Styline Inds. Inc. Proj., F.R.W.D., A.M.T., Ser. 99 A1+* 2.90 7/05/01 3,555 3,555,000 -------------- 9,630,000 ---------------------------------------------------------------------------------------- Louisiana 6.4% Calcasieu Parish Ind. Dev. Brd., Citgo Corp., F.R.D.D., A.M.T., Ser. 96 VMIG1 3.45 7/02/01 500 500,000 Jefferson Parish Sch. Brd. Sales and Use Tax Rev., F.R.W.D., Ser. A38 VMIG1 2.80 7/05/01 3,785 3,785,000 Louisiana Loc. Govt. Envir. Facs., LCDA Ln. Fin. Proj., F.R.W.D., Ser. A VMIG1 2.85 7/05/01 7,500 7,500,000 -------------- 11,785,000 ---------------------------------------------------------------------------------------- Maine 2.8% Lewiston Ind. Dev. Rev., Diamond Tpke. Assoc., F.R.W.D. A1+* 2.95 7/05/01 4,200 4,200,000 York Maine Rev. Stonewall Realty, F.R.W.D., Ser. 99 VMIG1 3.20 7/05/01 975 975,000 -------------- 5,175,000
See Notes to Financial Statements 7 Prudential Tax-Free Money Fund, Inc. Portfolio of Investments as of June 30, 2001 (Unaudited) Cont'd.
Principal Moody's Interest Maturity Amount Value Description (a) Rating Rate Date (000) (Note 1) ---------------------------------------------------------------------------------------------------------- Massachusetts 7.9% Mass. Bay Trans. Auth., Gen. Trans. Sys., F.R.W.D., Ser. 220 VMIG1 2.83% 7/05/01 $ 5,380 $ 5,395,606 Mass. St. Hlth. and Ed. Fac. Auth. Rev., SGA 97, F.R.W.D. A1+* 2.83 7/05/01 2,910 2,910,000 Mass. St. Consld. Ln., Ser. A VMIG1 3.45 7/19/01 2,170 2,170,000 Seekonk, B.A.N. NR 4.45 10/19/01 4,025 4,025,693 -------------- 14,501,299 ---------------------------------------------------------------------------------------- Michigan 6.9% Detroit Sewage Disp. Rev., Merlots, F.R.W.D., Ser. I VMIG1 2.80 7/05/01 5,000 5,000,000 Michigan St. Bldg. Auth. Rev., Ser. 90 NR 6.25 10/01/01 1,000 1,008,456 Ser. 1200 NR 6.38 10/01/01 1,000(d) 1,027,647 Walled Lake Consld. Sch. Dist. Muni. Trust Cert., F.R.W.D., Ser. 18 VMIG1 2.83 7/05/01 5,575 5,575,000 -------------- 12,611,103 ---------------------------------------------------------------------------------------- Minnesota 2.6% Bloomington Comm. Dev. Rev., 94th Str. Assoc. Proj., F.R.W.D., Ser. 85 A1+* 2.80 7/06/01 4,775 4,775,000 ---------------------------------------------------------------------------------------- Mississipi 1.9% Mississippi Hsg. Fin. Corp. Sngl. Fam. Mtge., F.R.W.D., Ser. 88 A1+* 2.88 7/05/01 3,485 3,485,000 ---------------------------------------------------------------------------------------- Nevada 0.8% Clark Cnty. Trans. Impvt., Ser. 92A NR 6.00 6/01/02 1,500(d) 1,543,103 ---------------------------------------------------------------------------------------- New Jersey 2.7% Jersey City, G.O., B.A.N. SP1+* 4.60 9/14/01 5,000 5,001,968
8 See Notes to Financial Statements Prudential Tax-Free Money Fund, Inc. Portfolio of Investments as of June 30, 2001 (Unaudited) Cont'd.
Principal Moody's Interest Maturity Amount Value Description (a) Rating Rate Date (000) (Note 1) ---------------------------------------------------------------------------------------------------------- Ohio 1.4% East Lake Ind. Dev. Rev., Astro Model Dev. Corp., F.R.W.D., Ser. 96 NR 2.95% 7/05/01 $ 2,600 $ 2,600,000 ---------------------------------------------------------------------------------------- Oklahoma 1.0% Tulsa Pkg. Auth. Rev., Williams Ctr. Proj., S.E.M.M.T., Ser. 87 A VMIG1 3.10 11/15/01 1,800 1,800,000 ---------------------------------------------------------------------------------------- Rhode Island 0.4% Rhode Island Desp. Econ. Protection Corp. Spc. Oblig., Ser. 91A NR 7.10 8/01/01 700(d) 715,470 ---------------------------------------------------------------------------------------- South Carolina 2.8% South Carolina St. Pub. Svc. Auth. Rev. Merlots, F.R.W.D., Ser. L VMIG1 2.80 7/05/01 5,090 5,090,000 ---------------------------------------------------------------------------------------- South Dakota 1.9% Grant Cnty. Poll. Cntrl. Rev. Ref., Otter Tail Pwr. Co. Proj., F.R.W.D. VMIG1 2.95 7/06/01 2,400 2,400,000 South Dakota Stud. Ln. Fin. Corp. Ln. Rev., Ser. 94A NR 6.45 8/01/01 1,000(d) 1,021,491 -------------- 3,421,491 ---------------------------------------------------------------------------------------- Tennessee 2.8% Sevier Cnty. Pub. Bldg. Auth. Local Gov., Pub. Imprv. Proj., F.R.D.D. VMIG1 3.35 7/02/01 3,200 3,200,000 Shelby Cnty. Hlth. Ed., Baptist Mem. Hosp. A1+* 3.35 7/27/01 2,000 2,000,000 -------------- 5,200,000 ---------------------------------------------------------------------------------------- Texas 5.2% Beaumont Texas Pub. Impv., Ser. 92 NR 6.25 3/01/02 1,000(d) 1,020,831
See Notes to Financial Statements 9 Prudential Tax-Free Money Fund, Inc. Portfolio of Investments as of June 30, 2001 (Unaudited) Cont'd.
Principal Moody's Interest Maturity Amount Value Description (a) Rating Rate Date (000) (Note 1) ---------------------------------------------------------------------------------------------------------- Brazos River Harbor Nav. Dist., Dow Chemical Co., F.R.D.D., Ser. 97 P-1 3.50% 7/02/01 $ 600 $ 600,000 Clipper Tax Exempt Cert. of Part., A.M.T., Ser. 1 VMIG1 3.60 12/14/01 1,000 1,000,000 Baxter Cnty., A.M.T., Ser. 3 VMIG1 3.50 12/14/01 2,000 2,000,000 Gulf Coast Wste. Disp. Auth. Facs. Rev., Bayer Corp., F.R.D.D., Ser. 97 P-1 3.45 7/02/01 500 500,000 Bear, Stearns Muni. Secs. Trust Cert., Harris Co. Toll Rd. Sub., F.R.D.D., Ser. 126 A1* 3.35 7/02/01 1,100 1,100,000 Bear, Stearns Muni. Secs. Trust Cert., F.R.D.D., Ser. 115 A1* 3.35 7/02/01 3,300 3,300,000 -------------- 9,520,831 ---------------------------------------------------------------------------------------- Vermont 1.2% Vermont Ind. Dev. Auth. Rev. Var., Burlington Pptys. Proj., F.R.W.D., Ser 88 A1+* 2.95 7/05/01 2,200 2,200,000 ---------------------------------------------------------------------------------------- Virginia 0.8% Fairfax Cnty. Ind. Dev. Auth. Rev., Fairfax Hosp. Sys. Proj., Ser. A NR 6.50 8/15/01 550(d) 563,040 Richmond Met. Auth. Expwy. Rev. Ref., Ser. A NR 5.85 7/15/02 850 876,787 -------------- 1,439,827 ---------------------------------------------------------------------------------------- Washington 2.1% Bear, Stearns Muni. Secs. Trust Cert., Cen., Puget Sound Reg. Trans. Auth., F.R.D.D., Ser. 101 A1* 3.35 7/02/01 1,295 1,295,000 Port Pasco Econ. Dev. Var., Douglas Fruit Company, Inc. Proj., F.R.W.D., Ser. 96 A1* 2.95 7/05/01 1,735 1,735,000 Washington St. Motor Vehicle Fuel A1* 5.00 7/01/01 500 500,000
10 See Notes to Financial Statements Prudential Tax-Free Money Fund, Inc. Portfolio of Investments as of June 30, 2001 (Unaudited) Cont'd.
Principal Moody's Interest Maturity Amount Value Description (a) Rating Rate Date (000) (Note 1) ---------------------------------------------------------------------------------------------------------- Washington St. Hsg. Fin. Comm. Multi. Fam. Rev., F.R.D.D., Ser. 99A A1* 3.45% 7/02/01 $ 400 $ 400,000 -------------- 3,930,000 ---------------------------------------------------------------------------------------- Wisconsin 9.8% Dane Cnty. Ref. Prom. Note, Ser. C NR 4.00 5/01/02 2,350 2,362,435 Madison Prom. Notes, Ser. A NR 4.05 5/01/02 400 402,599 Milton Ind. Dev. Rev. New England Extrusion Proj., F.R.W.D., Ser 98 A1+* 3.00 7/05/01 2,000 2,000,000 New Berlin Sch. Dist., T.R.A.N. NR 4.50 9/14/01 1,850 1,850,361 West Allis, T.R.A.N. NR 4.50 9/21/01 2,000 2,000,427 Whitewater Ind. Dev. Rev., Trek Bicycle, F.R.W.D., Ser. 95 NR 3.00 7/05/01 3,375 3,375,000 Wisconsin St. Muni. Trust Certf., F.R.W.D. VMIG1 2.88 7/05/01 4,245 4,245,000 Wisconsin St. Hlth. and Edl. Facs. Auth. Rev. Auth. Rev., St. Lukes Med. Ctr., Ser. 91 NR 6.60 8/15/01 1,745 1,749,556 -------------- 17,985,378 -------------- Total Investments 100.5% (cost $184,500,937)(c) 184,500,937 Liabilities in excess of other assets (0.5)% (1,020,466) -------------- Net Assets 100% $ 183,480,471 -------------- --------------
See Notes to Financial Statements 11 Prudential Tax-Free Money Fund, Inc. Portfolio of Investments as of June 30, 2001 (Unaudited) Cont'd. (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.--Bond Anticipation Notes 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 Monthly Tender S.E.M.M.T.--Semi-Annual Mandatory Tender T.R.A.N.--Tax and Revenue Anticipation Note (b) For purposes of amortized cost valuation, the maturity date of these instruments is considered to be the later of the next date on which the security can be redeemed at par, or the next date on which the rate of interest is adjusted. (c) The cost basis for federal income tax purposes is substantially the same as that used for financial statement purposes. (d) Prerefunded issues are secured by escrowed cash and direct U.S. government guaranteed obligations. * 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. 12 See Notes to Financial Statements Prudential Tax-Free Money Fund, Inc. Statement of Assets and Liabilities (Unaudited)
June 30, 2001 --------------------------------------------------------------------------------------- ASSETS Investments, at amortized cost which approximates market value $ 184,500,937 Cash 23,141 Receivable for Fund shares sold 2,413,860 Interest receivable 1,881,267 Prepaid expenses and other assets 25,145 ------------- Total assets 188,844,350 ------------- LIABILITIES Payable for Fund shares reacquired 5,117,143 Accrued expenses 81,552 Dividends payable 77,143 Management fee payable 70,433 Distribution fee payable 17,608 ------------- Total liabilities 5,363,879 ------------- NET ASSETS $ 183,480,471 ------------- ------------- Net assets were comprised of: Common Stock, $.01 par value $ 1,835,759 Paid-in capital in excess of par 181,644,712 ------------- Net assets, June 30, 2001 $ 183,480,471 ------------- ------------- Net asset value, offering price and redemption price per share ($183,480,471 / 183,575,940 shares) $1.00 ------------- -------------
See Notes to Financial Statements 13 Prudential Tax-Free Money Fund, Inc. Statement of Operations (Unaudited)
Six Months Ended June 30, 2001 ---------------------------------------------------------------------------------------- NET INVESTMENT INCOME Income Interest $ 3,181,397 ------------- Expenses Management fee 436,487 Distribution fee 109,122 Transfer agent's fees and expenses 63,000 Reports to shareholders 34,000 Custodian's fees and expenses 27,000 Registration fees 26,000 Legal fees and expenses 25,000 Audit fee 13,000 Directors' fees and expenses 4,000 Miscellaneous 489 ------------- Total expenses 738,098 ------------- Net investment income 2,443,299 ------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 2,443,299 ------------- -------------
14 See Notes to Financial Statements Prudential Tax-Free Money Fund, Inc. Statement of Changes in Net Assets (Unaudited)
Six Months Year Ended Ended June 30, 2001 December 31, 2000 ---------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS Operations Net investment income $ 2,443,299 $ 5,969,252 ------------- ----------------- Net increase in net assets resulting from operations 2,443,299 5,969,252 ------------- ----------------- Dividends and distributions to shareholders (2,443,299) (5,969,252) ------------- ----------------- Fund share transactions (at $1 per share) Proceeds from shares sold(a) 263,174,770 602,574,421 Net asset value of shares issued to shareholders in reinvestment of dividends and distributions 2,381,984 5,660,329 Cost of shares reacquired (248,602,541) (621,595,449) ------------- ----------------- Net increase (decrease) in net assets from Fund share transactions 16,954,213 (13,360,699) ------------- ----------------- Total increase (decrease) 16,954,213 (13,360,699) ------------- ----------------- NET ASSETS Beginning of period 166,526,258 179,886,957 ------------- ----------------- End of period $ 183,480,471 $ 166,526,258 ------------- ----------------- ------------- -----------------
------------------------------ (a) For the six months ending June 30, 2001, includes shares issued in connection with acquisition of Connecticut Money Market Series (Note 4). See Notes to Financial Statements 15 Prudential Tax-Free Money Fund, Inc. Notes to Financial Statements (Unaudited) 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 The Prudential Investment Management, Inc. ('PIM'), formerly known as Prudential Investments Corporation, 16 Prudential Tax-Free Money Fund, Inc. Notes to Financial Statements (Unaudited) Cont'd. furnishes investment advisory services in connection with the management of the Fund. PIFM pays for the services of PIM, 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 to 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 compensated 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, PIM 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'), an affiliate of PIFM and an indirect wholly owned subsidiary of Prudential, serves as the Fund's transfer agent and during the six months ended June 30, 2001, the Fund incurred fees of approximately $58,100 for the services of PMFS. As of June 30, 2001, approximately $10,300 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. Note 4. Reorganization On June 27, 2001, the Tax-Free Money Fund acquired all the net assets of Prudential Municipal Series Fund Connecticut Money Market Series ('Connecticut Money Market Series') pursuant to a plan of reorganization approved by Connecticut Money Market Series shareholders on May 21, 2001. The acquisition was accomplished by a tax-free exchange of 6,544,440 shares of the Tax-Free Money Fund (valued at $6,544,440 in the aggregate for 6,544,440 shares of Connecticut Money Market Series outstanding on June 27, 2001. Connecticut Money Market Series net assets at that date $6,544,440 were combined with those of the Tax-Free Money Fund. The aggregate net assets of the Tax-Free Money Fund and Connecticut Money Market Series immediately before the acquisition were $177,840,612 and $6,544,440, respectively. 17 Prudential Tax-Free Money Fund, Inc. Notes to Financial Statements (Unaudited) Cont'd. Note 5. Subsequent Event On July 19, 2001, the Tax-Free Money Fund acquired all the net assets of the Prudential Municipal Series Fund Massachusetts Money Market Series ('Massachusetts Money Market Series') pursuant to a plan of reorganization approved by Massachusetts Money Market Series shareholders on July 9, 2001. The acquisition was accomplished by a tax-free exchange of 6,141,531 shares of the Tax-Free Money Fund (valued at $6,141,531 in the aggregate for 6,141,531 shares of Massachusetts Money Market Series outstanding on July 19, 2001. Massachusetts Money Market Series net assets at that date $6,141,531, were combined with those of the Tax-Free Money Fund. The aggregate net assets of the Tax-Free Money Fund and Massachusetts Money Market Series immediately before the acquisition were $197,861,339 and $6,141,531, respectively. 18 Prudential Tax-Free Money Fund, Inc. Financial Highlights Prudential Tax-Free Money Fund, Inc. Financial Highlights (Unaudited)
Six Months Ended June 30, 2001 --------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 1.00 Net investment income and realized gains .014 Dividends and distributions to shareholders (.014) ------------- Net asset value, end of period $ 1.00 ------------- ------------- TOTAL RETURN(a): 1.42% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000) $ 183,480 Average net assets (000) $ 176,042 Ratios to average net assets: Expenses, including distribution and service (12b-1) fees .85%(b) Expenses, excluding distribution and service (12b-1) fees .72%(b) Net investment income 2.80%(b)
------------------------------ (a) Total return is calculated assuming a purchase of shares on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions. Total returns for less than a full year are not annualized. (b) Annualized. 20 See Notes to Financial Statements Prudential Tax-Free Money Fund, Inc. Financial Highlights (Unaudited) Cont'd.
Year Ended December 31, ---------------------------------------------------------------------------------------------------------- 2000 1999 1998 1997 1996 ---------------------------------------------------------------------------------------------------------- $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 .034 .025 .028 .030 .028 (.034) (.025) (.028) (.030) (.028) ---------------- ---------------- ---------------- ---------------- ---------------- $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- 3.42% 2.56% 2.83% 3.00% 2.84% $166,526 $179,887 $199,165 $329,812 $333,808 $176,759 $202,718 $277,839 $339,825 $403,230 .80% .81% .80% .78% .80% .68% .69% .68% .66% .67% 3.38% 2.51% 2.80% 2.97% 2.83%
See Notes to Financial Statements 21 Prudential Tax-Free Money Fund, Inc. Prudential Mutual Funds Prudential offers a broad range of mutual funds designed to meet your individual needs. For information about these funds, contact your financial professional or call us at (800) 225-1852. Read the prospectus carefully before you invest or send money. STOCK FUNDS Large Capitalization Stock Funds Prudential 20/20 Focus Fund Prudential Equity Fund, Inc. Prudential Stock Index Fund Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund Prudential Value Fund Target Funds Large Capitalization Growth Fund Large Capitalization Value Fund The Prudential Investment Portfolios, Inc. Prudential Jennison Growth Fund Small- to Mid-Capitalization Stock Funds Nicholas-Applegate Fund, Inc. Nicholas-Applegate Growth Equity Fund Prudential Small Company Fund, Inc. Prudential Tax-Managed Small-Cap Fund, Inc. Prudential U.S. Emerging Growth Fund, Inc. Target Funds Small Capitalization Growth Fund Small Capitalization Value Fund The Prudential Investment Portfolios, Inc. Prudential Jennison Equity Opportunity Fund Sector Stock Funds Prudential Natural Resources Fund, Inc. Prudential Real Estate Securities Fund Prudential Sector Funds, Inc. Prudential Financial Services Fund Prudential Health Sciences Fund Prudential Technology Fund Prudential Utility Fund Global/International Stock Funds Global Utility Fund, Inc. Prudential Europe Growth Fund, Inc. Prudential Pacific Growth Fund, Inc. Prudential World Fund, Inc. Prudential Global Growth Fund Prudential International Value Fund Prudential Jennison International Growth Fund Target Funds International Equity Fund Strategic Partners Series Strategic Partners Focused Growth Fund* Strategic Partners New Era Growth Fund* Strategic Partners Focused Value Fund* BALANCED/ALLOCATION FUNDS Prudential Diversified Funds Conservative Growth Fund Moderate Growth Fund High Growth Fund The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund www.prudential.com (800) 225-1852 BOND FUNDS Taxable Bond Funds Prudential Government Income Fund, Inc. Prudential High Yield Fund, Inc. Prudential High Yield Total Return Fund, Inc. Prudential Short-Term Corporate Bond Fund, Inc. Income Portfolio Prudential Total Return Bond Fund, Inc. Target Funds Total Return Bond Fund Tax-Free 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 New Jersey Series New York Series Pennsylvania Series Prudential National Municipals Fund, Inc. Global/International Bond Funds Prudential Global Total Return 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 Institutional Liquidity Portfolio, Inc. Institutional Money Market Series Prudential MoneyMart Assets, Inc. Special Money Market Fund, Inc. Tax-Free Money Market Funds Prudential California Municipal Fund California Money Market Series Prudential Municipal Series Fund New Jersey Money Market Series New York Money Market Series Prudential Tax-Free Money Fund, Inc. Other Money Market Funds COMMAND Government Fund COMMAND Money Fund COMMAND Tax-Free Fund * Not currently exchangeable with the Prudential mutual funds. Prudential Tax-Free Money Fund, Inc. 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, we've made some changes to our mutual funds 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 the 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. www.prudential.com (800) 225-1852 INVESTMENT ADVISER'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 "Investment Adviser's Report" section 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. Prudential Tax-Free Money Fund, Inc. Getting the Most from Your Prudential Mutual Fund STATEMENT OF CHANGS 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 important, 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. INDEPENDENTt ACCOUNTANT'S REPORT Once a year, an independent accountant looks over our books and certifies that the financial statements are fairly presented in accordance with generally accepted accounting principles. TAX INFORMATION This is information that 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. www.prudential.com (800) 225-1852 PERFORMANCE COMPARISON These charts are included in the annual report and are required by the Securities Exchange Commission. Performance is presented here as the return on 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. Prudential Tax-Free Money Fund, Inc. Getting the Most from Your Prudential Mutual Fund When you invest through Prudential Mutual Funds, you receive financial advice from a Prudential Securities Financial Advisor or Pruco Securities registered representative. Your financial professional can provide you with the following services: THERE'S NO REWARD WITHOUT RISK; BUT IS THIS RISK WORTH IT? Your financial professional can help you match the reward you seek with the risk you can tolerate. Risk can be difficult to gauge--sometimes even the simplest investments bear surprising risks. The educated investor knows that markets seldom move in just one direction. There are times when a market sector or asset class will lose value or provide little in the way of total return. Managing your own expectations is easier with help from someone who understands the markets, and who knows you! KEEPING UP WITH THR JONESES A financial professional can help you wade through the numerous available mutual funds to find the ones that fit your individual investment profile and risk tolerance. While the newspapers and popular magazines are full of advice about investing, they are aimed at generic groups of people or representative individuals--not at you personally. Your financial professional will review your investment objectives with you. This means you can make financial decisions based on the assets and liabilities in your current portfolio and your risk tolerance--not just based on the current investment fad. BUY LOW, SELL HIGH Buying at the top of a market cycle and selling at the bottom are among the most common investor mistakes. But sometimes it's difficult to hold on to an investment when it's losing value every month. Your financial professional can answer questions when you're confused or worried about your investment, and should remind you that you're investing for the long haul. www.prudential.com (800) 225-1852 FOR MORE INFORMATION Prudential Mutual Funds Gateway Center Three 100 Mulberry Street Newark, NJ 07102-4077 (800) 225-1852 --------------------------------------- Directors Delayne Dedrick Gold Robert F. Gunia Robert E. LaBlanc David R. Odenath, Jr. Judy A. Rice Robin B. Smith Stephen Stoneburn Nancy H. Teeters Clay T. Whitehead Officers David R. Odenath, Jr., President Robert F. Gunia, Vice President Judy A. Rice, Vice President Grace C. Torres, Treasurer Jonathan D. Shain, Secretary William V. Healey, Assistant Secretary Manager Prudential Investments Fund Management LLC Gateway Center Three 100 Mulberry Street Newark, NJ 07102-4077 Investment Adviser Prudential Investment Management, Inc. Prudential Plaza Newark, NJ 07102-3777 Distributor Prudential Investment Management Services LLC Gateway Center Three, 14th Floor 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 8098 Philadelphia, PA 19101 Independent Accountants PricewaterhouseCoopers LLP 1177 Avenue of the Americas New York, NY 10036 Legal Counsel Sullivan & Cromwell 125 Broad Street New York, NY 10004 --------------------------------------- Cusip Number 74436P103 --------------------------------------- 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. The accompanying financial statements as of June 30, 2001, were not audited and, accordingly, no opinion is expressed on them. (LOGO) Prudential Mutual Funds Gateway Center Three 100 Mulberry Street Newark, NJ 07102-4077 (800) 225-1852 MF103E2 74436P103 (LOGO) Printed on Recycled Paper