-----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, Jokprsxru5ClRygr1IpOShB3YHS5j2RgUzGgdnamcW69D33Ppv13DMqfHbDKSMQc frgzCGJ9YXvHYJVUDoSfFg== 0000898733-02-000053.txt : 20020414 0000898733-02-000053.hdr.sgml : 20020414 ACCESSION NUMBER: 0000898733-02-000053 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020222 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRUDENTIAL TAX FREE MONEY FUND INC CENTRAL INDEX KEY: 0000311561 IRS NUMBER: 132993505 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-02927 FILM NUMBER: 02556150 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: CHANCELLOR TAX FREE MONEY FUND INC DATE OF NAME CHANGE: 19830516 FORMER COMPANY: FORMER CONFORMED NAME: PRUDENTIAL BACHE TAX FREE MONEY FUND INC DATE OF NAME CHANGE: 19920603 FORMER COMPANY: FORMER CONFORMED NAME: CHANCELLOR TAX EXEMPT DAILY INCOME FUND INC DATE OF NAME CHANGE: 19810811 N-30D 1 mf15324.txt TAX-FREE MONEY FUND 12-31-2001 ANNUAL REPORT ANNUAL REPORT DECEMBER 31, 2001 PRUDENTIAL Tax-Free Money Fund, Inc. FUND TYPE Money market OBJECTIVE The highest level of current income that is exempt from federal income taxes, consistent with liquidity and the preservation of capital 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 The Prudential Insurance Company of America, Newark, NJ, and its affiliates. (Logo) Prudential Financial Prudential Tax-Free Money Fund, Inc. Performance at a Glance 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 the District of Columbia. Maturities can range from one day to a maximum of 13 months. There can be no assurance that the Fund will achieve its investment objective. (Line Graph) Money Market Fund Yield Comparison www.PruFN.com (800) 225-1852 Annual Report December 31, 2001 Fund Facts As of 12/31/01
7-Day Net Asset Weighted Avg. Net Assets Current Yield Value (NAV) Mat. (WAM) (Millions) Prudential Tax-Free Money Fund, Inc. 1.14% $1.00 68 Days $168 iMoneyNet, Inc. Tax-Free National Retail Avg.* 1.30% $1.00 39 Days N/A
Taxable Equivalent Yield** As of 12/31/01
Tax Brackets @31% @36% @39.1% Prudential Tax-Free Money Fund, Inc. 1.65% 1.78% 1.87% iMoneyNet, Inc. Tax-Free National Retail Avg.* 1.88% 2.03% 2.13%
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, NAV, and WAM on Mondays. This is the data for all funds in the iMoneyNet, Inc. Tax-Free National Retail Average category as of December 31, 2001, the end of our reporting period. **Some investors may be subject to the federal alternative minimum tax (AMT). (Line Graph) Weighted Average Maturity Comparison 1 (Logo) Prudential Financial February 7, 2002 DEAR SHAREHOLDER, The year 2001 was an extraordinary period in the money markets. Total assets in U.S. money market funds (including funds that invest in either taxable or tax-exempt securities) soared well above $2 trillion, according to industry data. At the same time, money market yields declined sharply as the Federal Reserve (the Fed) engineered its most aggressive easing campaign in decades to reverse an economic downturn in the United States. In such an uncertain economic environment, it is not surprising that many investors sought the comparative safety provided by money market funds. The primary challenge for the Prudential Tax-Free Money Fund's management team was to lock in higher yields on money market securities with longer maturities in advance of the Fed's repeated reductions in short-term interest rates. The discussion that follows explains the team's investment strategy in detail. The Prudential Tax-Free Money Fund's seven-day current yield was 1.14% on December 31, 2001, the equivalent of a 1.87% 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. Annual Report December 31, 2001 INVESTMENT ADVISER'S REPORT INVESTING IN A FALLING-INTEREST-RATE ENVIRONMENT A sharp decline in municipal money market yields drove our investment strategy in 2001. This trend persisted throughout the year as the Fed waged one of its most aggressive campaigns in decades to ease monetary policy. It reduced short-term interest rates 11 times, pushing them below 2% for the first time in 40 years. By sharply lowering borrowing costs for businesses and consumers, the Fed hoped to set the stage for an economic recovery in the United States where the economy had slid into a recession for the first time in 10 years. In a falling-interest-rate environment, the most effective approach is to position a portfolio's weighted average maturity (WAM) longer than average. (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.) Having a longer than average WAM helps a portfolio's yield remain higher for a longer period of time as municipal money market yields decline. We employed this strategy throughout the year. For example, we lengthened the Fund's WAM in early February 2001 by purchasing tax-exempt commercial paper that matured in 90 days, bonds that gave us the option to sell them back to their issuer in one year at our purchase price, and prerefunded bonds maturing in one year or less. (These prerefunded bonds were backed by direct obligations of the U.S. Treasury.) To maintain the longer than average WAM, in March 2001 we purchased tax-exempt commercial paper that matured in 120 days, and escrowed to maturity bonds that mature in one year. Interest and principal payments on these bonds are backed by U.S. Treasury securities that are held in an escrow account. 3 Prudential Tax-Free Money Fund, Inc. Annual Report December 31, 2001 TAX TIME AFFORDS GOOD INVESTMENT OPPORTUNITIES Tax season in the municipal money market began as usual in late April and lasted through early May. During this time, tax-exempt money market yields temporarily spiked higher as portfolio managers sold securities to provide shareholders with cash to pay their taxes. Our strategy was to build up sufficient liquidity to meet tax-time outflows. Building up higher liquidity also provided us with the buying power to take advantage of attractive investment opportunities that occurred as selling pressure caused yields to rise. To that end, we purchased commercial paper that matured in 180 days, as well as securities with a semiannual tender option. WEATHERING THE "JULY EFFECT" The next major development in the municipal money market was the "July effect," which typically produces a dip in yields. Investors drove yields on securities lower (and their prices higher) as they rushed to reinvest cash from mid-year coupon payments, bond calls, and maturing securities. We prepared for the "July effect" by purchasing one-year prerefunded bonds in June to extend the Fund's WAM. This strategy enabled us to avoid having to invest at unattractive levels when the "July effect" temporarily pushed yields lower. By late August 2001, the Fed had eased monetary policy seven times, leaving some market participants wondering whether the central bank had nearly finished its round of rate cuts. This uncertainty about rates, combined with a heavy supply of newly issued securities in August and September, caused the decline in municipal money market yields to stall. The September 11 terrorist attacks on the United States further encouraged this wait-and-see attitude in the market. We, however, viewed the situation as a buying opportunity and locked in yields on Merrimack County, New Hampshire tax anticipation notes, that matured at the end of 2001 and prepared the Fund to meet year-end outflows. We also purchased Boise, Idaho, Housing Authority notes that mature in April 2002, just in time for tax season. Finally, we invested in Cedar Springs, Michigan, State Aid notes that mature in one year. 4 www.PruFN.com (800) 225-1852 These purchases were well-timed since tax-exempt money market yields slid considerably lower later in the year. The sharp decline in yields resumed as the Fed not only eased monetary policy at an intermeeting move in mid- September, but continued to cut rates during its regularly scheduled meetings in October, November, and December. Altogether, Fed policymakers reduced the federal funds rate (the rate banks charge each other for overnight loans) a total of 4.75 percentage points in 2001, from 6.50% to 1.75%. We began to build up liquidity again in November to meet anticipated year-end redemptions. For a brief interval in November, there was further speculation that the Fed might have finished its cycle of easing monetary policy. As yields hovered in a range, moving neither sharply lower nor higher, we invested in securities such as prerefunded bonds of Alaska Energy Authority that mature in eight months. These purchases prepared the Fund to ride out the "January effect," which is similar to the "July effect" as both produce a temporary drop in yields when investors hurry to reinvest monies received from matured securities, interest payments, and bond calls in the municipal money market. LOOKING AHEAD We expect the Fed's aggressive short-term rate cuts to revive economic growth in the United States during 2002. Because the Fund is advantageously positioned, we can afford to adopt a wait-and-see attitude before employing any strategy to lengthen or shorten its WAM. Meanwhile, many state and local governments face budget shortfalls in 2002 due to declining tax revenues. This situation underscores the need to continue our conservative approach to selecting investments for the Fund. Prudential Tax-Free Money Fund Management Team 5 Prudential Tax-Free Money Fund, Inc. Portfolio of Investments as of December 31, 2001
Moody's Principal Rating Interest Maturity Amount Value Description (a) (Unaudited) Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------ Alaska 1.2% Alaska Energy Auth. Util. Rev., Ser. 92 NR 6.75% 7/01/02 $ 2,000(d) $ 2,086,365 - ---------------------------------------------------------------------------------------- Arizona 1.2% Maricopa Cnty. Uni. Sch. Dist. No. 48, Ser. 92 NR 6.00 7/01/02 1,000(d) 1,029,078 Pima Cnty. Ind. Dev. Auth. Sngl. Fam. Mtge., A.M.T. SP1+* 3.45 4/15/02 1,000 1,000,000 -------------- 2,029,078 - ---------------------------------------------------------------------------------------- California 2.8% Calif. St. Comm. Dev. Auth. Rev. Kaiser Perm. Ser. A VMIG2 2.30 1/03/02 1,000 1,000,000 Santa Rosa Hsg. Auth. Rev., Apple Creek Apts., Ser. 1612, A.N.N.M.T. A1+* 2.55 9/01/02 3,640 3,640,000 -------------- 4,640,000 - ---------------------------------------------------------------------------------------- Colorado 1.7% Denver City & Cnty. Airport Rev. Ser. A NR 7.25 11/15/02 750(d) 798,247 East Smoky Hill Met. Dist. Number 2, A.N.N.M.T. A1* 2.00 12/01/02 2,000 2,000,000 -------------- 2,798,247 - ---------------------------------------------------------------------------------------- District of Columbia 1.9% Dist. Columbia Hsg. Fin. Agcy. Rev. Sngl. Fam. Mtge., Ser. C, A.M.T. SP1+* 3.50 3/25/02 1,600 1,600,000 Ser. 99, A.N.N.O.T. A1+* 1.87 12/01/02 1,550 1,550,000 -------------- 3,150,000 - ---------------------------------------------------------------------------------------- Florida 5.9% Florida Cap. Proj. Fin. Auth. Rev., Airport Proj. NR 4.25 6/01/02 1,000 1,005,455
6 See Notes to Financial Statements Prudential Tax-Free Money Fund, Inc. Portfolio of Investments as of December 31, 2001 Cont'd.
Moody's Principal Rating Interest Maturity Amount Value Description (a) (Unaudited) Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------ Orange Cnty. Hlth. Facs. Auth. Rev. Adventist Hlth. Sys., F.S.A., F.R.W.D, Ser. 171 A1+* 1.81% 1/03/02 $ 8,925 $ 8,925,000 -------------- 9,930,455 - ---------------------------------------------------------------------------------------- Georgia 2.3% De Kalb Cnty. Hsg. Auth. Multi. Fam. Hsg. Rev., F.R.W.D., A.M.T. A1* 1.91 1/03/02 1,310 1,310,000 Stephens Cnty. Dev. Auth. Ind. Dev. Rev., Caterpillar Inc. Proj., F.R.W.D., A.M.T. P1 1.91 1/03/02 2,520 2,520,000 -------------- 3,830,000 - ---------------------------------------------------------------------------------------- Idaho 1.8% Boise Cnty. Hsg. Auth. Rev., A.M.T. NR 2.35 4/01/02 3,000 3,000,000 - ---------------------------------------------------------------------------------------- Illinois 7.3% Chicago Pub. Bldg. Comm. Bldg. Rev., Ser. 99C, F.G.I.C. NR 5.00 2/01/02 1,000 1,001,356 Illinois Hlth. Fac. Auth. Rev. Resurrection Hlth. F.R.D.D., Ser. 99A VMIG1 1.90 1/02/02 1,400 1,400,000 Evanston Hosp. Corp. Prog., Ser. 95 VMIG1 2.55 1/31/02 5,000 5,000,000 Servant Cor. Falcon II, A.M.T., F.R.W.D., Ser. 96A A1+* 1.80 1/02/02 3,100 3,100,000 Illinois, Ser. A43, A.M.B.A.C., F.R.W.D. VMIG1 1.71 1/02/02 1,695 1,695,000 -------------- 12,196,356 - ---------------------------------------------------------------------------------------- Indiana 5.0% Indiana Ed. Facs. Auth., Wesleyan Univ., F.R.W.D., Ser. 93 NR 1.80 1/03/02 3,700 3,700,000
See Notes to Financial Statements 7 Prudential Tax-Free Money Fund, Inc. Portfolio of Investments as of December 31, 2001 Cont'd.
Moody's Principal Rating Interest Maturity Amount Value Description (a) (Unaudited) Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------ Indiana Hlth. Fac. Fin. Auth. Hosp. Rev. Floyd Memorial Hosp. Proj. NR 6.63% 2/15/02 $ 2,500(d) $ 2,560,667 New Albany Floyd Cnty. Sch. Bldg. Corp., M.B.I.A. NR 5.00 1/15/02 1,025 1,026,090 South Bend Econ. Dev. Rev. Dynamic R.E.H.C., Inc. Proj., F.R.W.D., Ser. 99, A.M.T. NR 1.95 1/02/02 1,145 1,145,000 -------------- 8,431,757 - ---------------------------------------------------------------------------------------- Iowa 0.6% Iowa Great Lakes San Dist., Ser. 2001, A.M.B.A.C. NR 4.20 6/01/02 500 502,219 Sioux City Water Rev. Ref., Ser. 2001, M.B.I.A. NR 4.25 6/01/02 540 542,501 -------------- 1,044,720 - ---------------------------------------------------------------------------------------- Kentucky 6.0% Henderson Cnty. Rev., Hosp. Assoc. Hlth. Facs., F.R.W.D., Ser. 2000A VMIG1 1.85 1/02/02 6,075 6,075,000 Kentucky Prop. & Bldgs. Comm. Rev. Proj. No. 55, M.B.I.A. NR 4.50 9/01/02 1,000 1,016,402 Leitchfield Ind. Bldg. Rev., Styline Inds. Inc. Proj., F.R.W.D., A.M.T., Ser. 99 A1+* 1.75 1/03/02 3,000 3,000,000 -------------- 10,091,402 - ---------------------------------------------------------------------------------------- Louisiana 7.6% Jefferson Parish Sch. Brd. Sales and Use Tax Rev., M.B.I.A., F.R.W.D., Ser. A38 VMIG1 1.71 1/02/02 3,760 3,760,000 Louisiana Hsg. Fin. Agcy. Sngl. Fam. Mtge. Rev., A.N.N.O.T., A.M.T. NR 2.11 11/01/02 500 500,000 Louisiana Loc. Govt. Envir. Facs. Ln. Fin. Proj. Ser A, F.R.W.D. VMIG1 1.85 1/02/02 7,500 7,500,000
8 See Notes to Financial Statements Prudential Tax-Free Money Fund, Inc. Portfolio of Investments as of December 31, 2001 Cont'd.
Moody's Principal Rating Interest Maturity Amount Value Description (a) (Unaudited) Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------ Louisiana Pub. Facs. Auth. Rev. Loyala Univ. Proj., Ser. L5 NR 5.50% 10/01/02 $ 1,000 $ 1,021,200 -------------- 12,781,200 - ---------------------------------------------------------------------------------------- Maine 2.9% Lewiston Ind. Dev. Rev., Diamond Tpke. Assoc., F.R.W.D., A.M.T. A1+* 1.80 1/03/02 3,900 3,900,000 York Maine Rev., Stonewall Realty Proj., F.R.W.D., Ser. 99, A.M.T. VMIG1 2.15 1/03/02 975 975,000 -------------- 4,875,000 - ---------------------------------------------------------------------------------------- Massachusetts 4.3% Mass. Muni. Wholesale Elec. Co. Pwr. Supp. Sys. Rev., Ser. 2B, M.B.I.A. NR 6.50 7/01/02 2,000 2,043,792 Mass. St. Dev. Fin. Agcy. Res. Rec. A1* 1.95 1/02/02 1,600 1,600,000 Mass. St. Hlth. & Edu. Facs. Auth. Rev., Partners Hlthcare, Ser. B NR 3.85 7/01/02 1,000 1,008,351 Mass. St. Ind. Fin. Agcy. Rev. Peterson Amer. Corp. Proj., F.R.W.D., A.M.T., Ser. 96 NR 1.95 1/02/02 400 400,000 Mass. St., G.O., F.S.A., F.R.W.D. VMIG1 1.81 1/03/02 2,170 2,170,000 -------------- 7,222,143 - ---------------------------------------------------------------------------------------- Michigan 8.4% Cedar Springs Pub. Sch. Dist. NR 3.13 8/22/02 1,500 1,505,529 Detroit Swr. Disp. Rev., Merlots, F.G.I.C., F.R.W.D., Ser. I VMIG1 1.71 1/02/02 5,000 5,000,000 Michigan St. Job Dev. Auth. Rev., Frankenmuth Bavarian Inn, Ser. A, F.R.M.D. NR 2.00 2/19/02 1,100 1,100,000
See Notes to Financial Statements 9 Prudential Tax-Free Money Fund, Inc. Portfolio of Investments as of December 31, 2001 Cont'd.
Moody's Principal Rating Interest Maturity Amount Value Description (a) (Unaudited) Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------ Michigan St Bldg. Auth. Rev., A.N.N.O.T. Ser. 516(e) VMIG1 2.90% 7/11/02 $ 995 $ 995,000 Walled Lake Consld. Sch. Dist. Muni. Trust Ctrs., F.R.W.D.(e) VMIG1 1.76 1/03/02 5,575 5,575,000 -------------- 14,175,529 - ---------------------------------------------------------------------------------------- Minnesota 2.7% Bloomington Comm. Dev. Rev., 94th Str. Assoc. Proj., F.R.W.D., Ser. 85 A1+* 1.75 1/04/02 4,585 4,585,000 - ---------------------------------------------------------------------------------------- Mississippi 1.7% Mississippi Hsg. Fin. Corp., Sngl. Fam. Mtge., F.R.W.D., Ser. 88 A1+* 1.81 1/03/02 2,835 2,835,000 - ---------------------------------------------------------------------------------------- Missouri 1.0% City of O'Fallon Certs. A.M.B.A.C., Ser. 99 NR 5.75 12/01/02 605 624,046 St. Louis Muni. Fin. Corp. Leasehold Rev., A.M.B.A.C., 1993 Ser. A NR 5.30 7/15/02 1,000 1,012,807 -------------- 1,636,853 - ---------------------------------------------------------------------------------------- Nebraska 0.4% Nebraska Pub. Pwr Dist. Rev., Ser. 95A NR 6.00 1/01/03 650(d) 675,210 - ---------------------------------------------------------------------------------------- Nevada 0.9% Clark Cnty. Trans., Improv., Ser. 92A NR 6.00 6/01/02 1,500(d) 1,519,429 - ---------------------------------------------------------------------------------------- New Jersey 3.4% Jersey City, G.O., B.A.N. SP1+* 3.00 9/13/02 4,000 4,011,433 Newark, B.A.N. NR 3.40 10/01/02 1,650 1,662,660 -------------- 5,674,093
10 See Notes to Financial Statements Prudential Tax-Free Money Fund, Inc. Portfolio of Investments as of December 31, 2001 Cont'd.
Moody's Principal Rating Interest Maturity Amount Value Description (a) (Unaudited) Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------ New Mexico 0.4% Santa Fe, Rev., St. Vincent Hospital, Ser. 85 NR 7.50% 7/01/02 $ 690(d) $ 706,935 - ---------------------------------------------------------------------------------------- Ohio 1.4% East Lake Ind. Dev. Rev., Astro Model Dev. Corp., F.R.W.D., A.M.T., Ser. 96 NR 1.95 1/03/02 2,355 2,355,000 - ---------------------------------------------------------------------------------------- Oklahoma 1.1% Tulsa Pkg. Auth. Rev., Williams Ctr. Proj., S.E.M.M.T., Ser. 87A VMIG1 2.00 5/15/02 1,800 1,800,000 - ---------------------------------------------------------------------------------------- Rhode Island 2.4% Rhode Island Hlth. & Edu. Bldg. Corp., St. Mary Academy, F.R.D.D. A1+* 2.00 1/02/02 4,000 4,000,000 - ---------------------------------------------------------------------------------------- South Carolina 3.0% South Carolina St Pub. Svc. Auth. Rev. Merlots, F.R.W.D., Ser. L VMIG1 1.71 1/02/02 5,090 5,090,000 - ---------------------------------------------------------------------------------------- South Dakota 1.4% Grant Cnty. Poll. Cntrl. Rev. Otter Tail Pwr. Co. Proj., M.B.I.A., F.R.W.D. VMIG1 1.90 1/04/02 2,400 2,400,000 - ---------------------------------------------------------------------------------------- Texas 3.2% Angelina & Neches River Auth., Teec, Inc. Proj., Ser. 84E, F.R.D.D. P1 1.95 1/02/02 1,000 1,000,000 Beaumont Pub. Impv. Bd., Ser. 92 NR 6.25 3/01/02 1,000(d) 1,005,058 Brazos River Harbor Nav. Dist., Merey St. Proj., F.R.D.D., A.M.T. VMIG1 2.00 1/02/02 400 400,000
See Notes to Financial Statements 11 Prudential Tax-Free Money Fund, Inc. Portfolio of Investments as of December 31, 2001 Cont'd.
Moody's Principal Rating Interest Maturity Amount Value Description (a) (Unaudited) Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------ Harris Cnty. Toll Rd. Sr. Lein Rev., Ser. 92A NR 6.50% 8/15/02 $ 1,780(d) $ 1,857,738 Mc Kinney Ind. Sch. Dist., Sch. Bld. Tax NR 4.25 2/15/02 1,200 1,202,098 -------------- 5,464,894 - ---------------------------------------------------------------------------------------- Virginia 0.7% Richmond Met. Auth. Expwy. Rev. Bd. F.G.I.C., Ser. 92A NR 5.85 7/15/02 850 863,782 Virginia St., G.O., Ser. 97 NR 5.00 6/01/02 250 253,077 -------------- 1,116,859 - ---------------------------------------------------------------------------------------- Washington 6.6% King Cnty. Dir. Assoc. PI zero 3/4/02 7,310 7,289,638 Newman Roaring Fork, A.M.T. Ms. Homecorp., Ser. 14, S.E.M.M.T.(e) VMIG1 2.00 5/30/02 480 480,000 Durham Co., Ser. 8, F.R.W.D.(e) A1+* 1.91 1/03/02 1,430 1,430,000 Port Pasco Econ. Dev. Var. Douglas Fruit Co. Inc. Proj. F.R.W.D., A.M.T., Ser. 96 A1* 1.95 1/03/02 1,735 1,735,000 Port Pasco Ltd. Tax G.O., F.S.A., A.M.T., Ser. A NR 3.25 8/01/02 125 125,176 -------------- 11,059,814 - ---------------------------------------------------------------------------------------- West Virginia 1.2% West Virginia Hosp. Fin. Auth. Rev. Pooled Ln. Prog., F.R.W.D., Ser. 82 VMIG1 1.75 1/02/02 1,970 1,970,000 - ---------------------------------------------------------------------------------------- Wisconsin 9.0% Cedarburg Sch. Dist. T.R.A.N. NR 2.75 9/06/02 1,000 1,002,322 Dane Cnty. Ref. Prom. Note, G.O., Ser. C NR 4.00 5/01/02 2,350 2,354,908 Elmbrook Sch. Dist. G.O., T.R.A.N. NR 3.13 8/21/02 800 805,034
12 See Notes to Financial Statements Prudential Tax-Free Money Fund, Inc. Portfolio of Investments as of December 31, 2001 Cont'd.
Moody's Principal Rating Interest Maturity Amount Value Description (a) (Unaudited) Rate Date (000) (Note 1) - ------------------------------------------------------------------------------------------------------------ Madison Prom. Notes, G.O., Ser. A NR 4.05% 5/01/02 $ 400 $ 401,026 Milton Ind. Dev. Rev. New England Extrusion Proj., F.R.W.D., A.M.T., Ser. 98 A1+* 1.90 1/03/02 2,000 2,000,000 Mukwonago Sch. Dist., G.O., T.R.A.N. NR 2.80 9/19/02 1,250 1,251,124 Whitewater Ind. Dev. Rev., Trek Bicycle, F.R.W.D., A.M.T., Ser. 95 NR 1.85 1/03/02 3,000 3,000,000 Wisconsin St. G.O., F.S.A., F.R.W.D. VMIG1 1.81 1/03/02 4,245 4,245,000 -------------- 15,059,414 -------------- Total Investments 101.4% (cost $170,230,753(c)) 170,230,753 Liabilities in excess of other assets (1.4)% (2,301,581) -------------- Net Assets 100% $ 167,929,172 -------------- --------------
See Notes to Financial Statements 13 Prudential Tax-Free Money Fund, Inc. Portfolio of Investments as of December 31, 2001 Cont'd. (a) The following abbreviations are used in portfolio descriptions: A.M.B.A.C.--American Municipal Bond Assurance Corporation. A.M.T.--Alternate Minimum Tax A.N.N.M.T.--Annual Mandatory Tender A.N.N.O.T.--Annual Mandatory Tender(b) B.A.N.--Bond Anticipation Notes F.G.I.C.--Financial Guaranty Insurance Company F.R.D.D.--Floating Rate (Daily) Demand Note(b) F.R.M.D.--Floating Rate (Monthly) Demand Note(b) F.R.W.D.--Floating Rate (Weekly) Demand Note(b) F.S.A.--Financial Security Assurance G.O.--General Obligation M.B.I.A.--Municipal Bond Insurance Association 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. (e) Private placement restricted as to resale and does not have a readily available market: the aggregate cost of such securities is $8,480,000. The aggregate value of $8,480,000 is approximately 5.0% 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. 14 See Notes to Financial Statements Prudential Tax-Free Money Fund, Inc. Statement of Assets and Liabilities
December 31, 2001 - --------------------------------------------------------------------------------------- ASSETS Investments, at amortized cost which approximates market value $ 170,230,753 Cash 1,036,741 Receivable for Fund shares sold 2,121,769 Interest receivable 1,142,578 Prepaid expenses and other assets 35,245 ----------------- Total assets 174,567,086 ----------------- LIABILITIES Payable for investments purchased 1,001,185 Payable for Fund shares reacquired 5,371,664 Dividends payable 140,611 Management fee payable 77,876 Accrued expenses 27,109 Distribution fee payable 19,469 ----------------- Total liabilities 6,637,914 ----------------- NET ASSETS $ 167,929,172 ----------------- ----------------- Net assets were comprised of: Common Stock, $.01 par value $ 1,680,246 Paid-in capital in excess of par 166,248,926 ----------------- Net assets, December 31, 2001 $ 167,929,172 ----------------- ----------------- Net asset value, offering price and redemption price per share ($167,929,172 / 168,024,642 shares) $1.00 ----------------- -----------------
See Notes to Financial Statements 15 Prudential Tax-Free Money Fund, Inc. Statement of Operations
Year Ended December 31, 2001 - --------------------------------------------------------------------------------------- NET INVESTMENT INCOME Income Interest $ 5,567,583 ----------------- Expenses Management fee 914,763 Distribution fee 228,691 Transfer agent's fees and expenses 121,000 Legal fees and expenses 90,000 Reports to shareholders 81,000 Custodian's fees and expenses 66,000 Registration fees 46,000 Audit fee 26,000 Directors' fees 8,000 Miscellaneous 5,090 ----------------- Total expenses 1,586,544 Less: custodian fee credit (960) ----------------- Net expenses 1,585,584 ----------------- Net investment income 3,981,999 NET REALIZED GAIN ON INVESTMENTS Net realized gain on investment transactions 96,417 ----------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 4,078,416 ----------------- -----------------
16 See Notes to Financial Statements Prudential Tax-Free Money Fund, Inc. Statement of Changes in Net Assets
Year Ended December 31, -------------------------------------- 2001 2000 - ----------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS Operations Net investment income $ 3,981,999 $ 5,969,252 Net realized gain on investment transactions 96,417 -- ----------------- ----------------- Net increase in net assets resulting from operations 4,078,416 5,969,252 ----------------- ----------------- Dividends and distributions to shareholders (4,078,416) (5,969,252) ----------------- ----------------- Fund share transactions (at $1 per share) Proceeds from shares sold(a) 463,802,391 602,574,421 Net asset value of shares issued to shareholders in reinvestment of dividends and distributions 3,896,427 5,660,329 Cost of shares reacquired (466,295,904) (621,595,449) ----------------- ----------------- Net increase (decrease) in net assets from Fund share transactions 1,402,914 (13,360,699) ----------------- ----------------- Total increase (decrease) 1,402,914 (13,360,699) NET ASSETS Beginning of year 166,526,258 179,886,957 ----------------- ----------------- End of year $ 167,929,172 $ 166,526,258 ----------------- ----------------- ----------------- -----------------
- ------------------------------ (a) For the year ended December 31, 2001, includes shares issued in connection with the acquisition of Connecticut Money Market Series and Massachusetts Money Market Series. See Notes to Financial Statements 17 Prudential Tax-Free Money Fund, Inc. Notes to Financial Statements 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 of valuation 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. All securities are valued as of 4:15 p.m., New York time. Securities Transactions and Net Investment Income: Securities transactions are recorded on the trade date. Realized gains (losses) on sales of securities are calculated on the identified cost basis. The Fund amortizes premiums and accretes discounts on purchases of portfolio securities as adjustments to interest income. Interest income is recorded on the accrual basis. Expenses are recorded on the accrual basis which may require the use of certain estimates by management. 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 income and capital gains, if any, to its shareholders. Therefore, no federal income tax provision is required. Dividends: The Fund declares daily dividends from net investment income and net realized short-term capital gains. Payment of dividends is made monthly. Income distributions and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. 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. 18 Prudential Tax-Free Money Fund, Inc. Notes to Financial Statements Cont'd. Note 2. Agreements The Fund has a management agreement with Prudential Investments LLC ('PI' or 'Manager'). Pursuant to a subadvisory agreement between PI and Prudential Investment Management, Inc. ('PIM' or 'Subadviser'), PIM furnishes investment advisory services in connection with the management of the Fund. Under the subadvisory agreement, PIM, subject to the supervision of PI, is responsible for managing the assets of the Fund in accordance with its investment objective and policies. PI pays for the services of PIM, the cost of 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 PI 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. PI, PIM and PIMS are indirect, wholly-owned subsidiaries of The Prudential Financial, Inc. ('Prudential'). 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 year ended December 31, 2001, the Fund incurred fees of approximately $114,100 for the services of PMFS. As of December 31, 2001, approximately $9,200 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. Acquisition of Prudential Municipal Series Fund Connecticut Money Market Series and Prudential Municipal Series Fund Massachusetts Money Market Series On June 27, 2001, the Fund acquired all the assets of the 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 June 14, 2001. The acquisition was accomplished by a tax-free exchange of 6,544,440 shares of the Fund (valued at $6,544,440) for shares of Connecticut 19 Prudential Tax-Free Money Fund, Inc. Notes to Financial Statements Cont'd. 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 Fund. The aggregate net assets of the Fund and Connecticut Money Market Series immediately before the acquisition were $177,745,143 and $6,544,440, respectively. On July 19, 2001, the Fund acquired all the 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 Fund (valued at $6,141,531) for 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 Fund. The aggregate net assets of the Fund and Massachusetts Money Market Series immediately before the acquisition were $192,198,105 and $6,141,531, respectively. 20 ANNUAL REPORT DECEMBER 31, 2001 PRUDENTIAL TAX-FREE MONEY FUND, INC. - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS Prudential Tax-Free Money Fund, Inc. Financial Highlights
Year Ended December 31, 2001 - --------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of year $ 1.00 Net investment income and realized gains .023 Dividends and distributions to shareholders (.023) ----------------- Net asset value, end of year $ 1.00 ----------------- ----------------- TOTAL RETURN(a): 2.26% RATIOS/SUPPLEMENTAL DATA: Net assets, end of year (000) $ 167,929 Average net assets (000) $ 182,953 Ratios to average net assets: Expenses, including distribution and service (12b-1) fees .87% Expenses, excluding distribution and service (12b-1) fees .74% Net investment income 2.18%
- ------------------------------ (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. 22 See Notes to Financial Statements Prudential Tax-Free Money Fund, Inc. Financial Highlights Cont'd.
Year Ended December 31, - ------------------------------------------------------------------------------------- 2000 1999 1998 1997 - ------------------------------------------------------------------------------------- $ 1.00 $ 1.00 $ 1.00 $ 1.00 .034 .025 .028 .030 (.034) (.025) (.028) (.030) - ---------------- ---------------- ---------------- ---------------- $ 1.00 $ 1.00 $ 1.00 $ 1.00 - ---------------- ---------------- ---------------- ---------------- - ---------------- ---------------- ---------------- ---------------- 3.42% 2.56% 2.83% 3.00% $166,526 $179,887 $199,165 $329,812 $176,759 $202,718 $277,839 $339,825 .80% .81% .80% .78% .68% .69% .68% .66% 3.38% 2.51% 2.80% 2.97%
See Notes to Financial Statements 23 Prudential Tax-Free Money Fund, Inc. Report of Independent Accountants To the Board of Directors and Shareholders 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, 2001, 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 of America. 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 of America, 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, 2001 by correspondence with the custodian provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York February 15, 2002 24 Prudential Tax-Free Money Fund, Inc. Federal Income Tax Information (Unaudited) We are required by the Internal Revenue Code to advise you within 60 days of the Fund's fiscal year end (December 31, 2001) 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, 2001, dividends paid from net investment income of $.023 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. 25 Prudential Tax-Free Money Fund, Inc. www.PruFN.com (800) 225-1852 Management of the Fund (Unaudited) Information pertaining to the Directors of the Fund is set forth below. Directors who are not deemed to be 'interested persons' of the Fund as defined in the Investment Company Act of 1940, as amended (the Investment Company Act or the 1940 Act) are referred to as 'Independent Directors.' Directors who are deemed to be 'interested persons' of the Fund are referred to as 'Interested Directors.' 'Fund Complex' consists of the Fund and any other investment companies managed by Prudential Investments LLC. Independent Directors
Term of Office Position and Length of Name, Address** and Age With Fund Time Served ------------------------------------------------------------------------- Delayne Dedrick Gold (63) Director since 1983 Robert E. La Blanc (67) Director since 1996 Robin B. Smith (62) Director since 1996 Stephen Stoneburn (58) Director since 1996 Nancy H. Teeters (71) Director since 1985 Number of Principal Occupations Overseen by Name, Address** and Age During Past 5 Years Director ------------------------------------------------------------------------------------------ Delayne Dedrick Gold (63) Marketing Consultant. 89 Robert E. La Blanc (67) President (since 1981) of Robert E. 74 La Blanc Associates, Inc. (telecommunications); formerly General Partner at Salomon Brothers and Vice-Chairman of Continental Telecom. Trustee of Manhattan College. Robin B. Smith (62) Chairman and Chief Executive Officer 69 (since August 1996) of Publishers Clearing House (publishing), formerly President and Chief Executive Officer (January 1988 - August 1996) of Publishers Clearing House. Stephen Stoneburn (58) President and Chief Executive Officer 74 (since June 1996) of Quadrant Media Corp. (a publishing company); formerly President (June 1995 - June 1996) of Argus Integrated Media, Inc.; Senior Vice President and Managing Director (January 1993 - 1995) of Cowles Business Media and Senior Vice President of Fairchild Publications, Inc. (1975 - 1989). Nancy H. Teeters (71) Economist; formerly Vice President 72 and Chief Economist of International Business Machines Corporation; formerly Director of Inland Steel Industries (July 1984-1999); formerly Governor of the Federal Reserve (September 1978 - June 1984). Other Directorships Held Name, Address** and Age by the Director**** ------------------------------------------------------------- Delayne Dedrick Gold (63) Robert E. La Blanc (67) Director of Storage Technology Corporation (since 1979) (technology), Titan Corporation (electronics, since 1995), Salient 3 Communications, Inc. (since 1995) (technology) and Chartered Semiconductor Ltd. (Singapore) (since 1998); Director (since 1999) of First Financial Fund, Inc. and Director (since April 1999) of The High Yield Plus Fund, Inc. Robin B. Smith (62) Director of BellSouth Corporation (since 1992), and Kmart Corporation (retail) (since 1996). Stephen Stoneburn (58) Nancy H. Teeters (71)
26 27 Prudential Tax-Free Money Fund, Inc. www.PruFN.com (800) 225-1852 Management of the Fund (Unaudited) Cont'd.
Term of Office Position and Length of Name, Address** and Age With Fund Time Served ------------------------------------------------------------------------- Clay T. Whitehead (63) Director since 1999 Number of Portfolios in Fund Complex Principal Occupations Overseen by Name, Address** and Age During Past 5 Years Director ------------------------------------------------------------------------------------------- Clay T. Whitehead (63) President (since 1983) of National 91 Exchange Inc. (new business development firm). Other Directorships Held Name, Address** and Age by the Director**** ----------------------------------------------------------- Clay T. Whitehead (63)
Interested Directors
Term of Office Position and Length of Name, Address** and Age With Fund Time Served ------------------------------------------------------------------------- *David R. Odenath, Jr. (44) President and since 1999 Director *Robert F. Gunia (55) Vice President since 1996 and Director Number of Principal Occupations Overseen by Name, Address** and Age During Past 5 Years Director ------------------------------------------------------------------------------------------ *David R. Odenath, Jr. (44) President, Chief Executive Officer 115 and Chief Operating Officer (since June 1999) of PI; Senior Vice President (since June 1999) of Prudential; formerly Senior Vice President (August 1993-May 1999) of PaineWebber Group, Inc. *Robert F. Gunia (55) Executive Vice President and Chief 112 Administrative Officer (since June 1999) of Prudential Investments LLC (PI); Executive Vice President and Treasurer (since January 1996) of PI; President (since April 1999) of Prudential Investment Management Services LLC (PIMS); Corporate Vice President (since September 1997) of The Prudential Insurance Company of America (Prudential); formerly Senior Vice President (March 1987-May 1999) of Prudential Securities Incorporated (Prudential Securities); formerly Chief Administrative Officer (July 1989-September 1996), Director (January 1989-September 1996) and Executive Vice President, Treasurer and Chief Financial Officer (June 1987-December 1996) of Prudential Mutual Fund Management, Inc. (PMF). Other Directorships Held Name, Address** and Age by the Director**** --------------------------------------------------------------- *David R. Odenath, Jr. (44) *Robert F. Gunia (55) Vice President and Director (since May 1989) of The Asia Pacific Fund, Inc.; Vice President and Director (since May 1992) of Nicholas-Applegate Fund, Inc.
28 29 Prudential Tax-Free Money Fund, Inc. www.PruFN.com (800) 225-1852 Management of the Fund (Unaudited) Cont'd.
Term of Office Position and Length of Name, Address** and Age With Fund Time Served ------------------------------------------------------------------------- *Judy A. Rice (54) Vice President since 2000 and Director Number of Portfolios in Fund Complex Principal Occupations Overseen by Name, Address** and Age During Past 5 Years Director ------------------------------------------------------------------------------------------- *Judy A. Rice (54) Executive Vice President (since 1999) 111 of Prudential Investments; formerly various positions to Senior Vice President (1992-1999) of Prudential Securities; and various positions to Managing Director (1975-1992) of Salomon Smith Barney; Member of Board of Governors of the Money Management Institute; Member of the Prudential Securities Operating Council and a Member of the Board of Directors for the National Association for Variable Annuities. Other Directorships Held Name, Address** and Age by the Director**** ------------------------------------------------------------ *Judy A. Rice (54)
Information pertaining to the officers of the Fund is set forth below. Officers
Term of Office Position and Length of Name, Address** and Age With Fund Time Served ------------------------------------------------------------------------- Grace C. Torres (42) Treasurer and since 1995 Principal Financial and Accounting Officer Jonathan D. Shain (43) Secretary since 2001 Principal Occupations Name, Address** and Age During Past 5 Years ---------------------------------------------------------------------- Grace C. Torres (42) Senior Vice President (since January 2000) of PI; formerly First Vice President (December 1996-January 2000) of PI and First Vice President (March 1993-1999) of Prudential Securities. Jonathan D. Shain (43) Vice President and Corporate Counsel (since August 1998) of Prudential; formerly Attorney with Fleet Bank, N.A. (January 1997 - July 1988) and Associate Counsel (August 1994 - January 1997) of New York Life Insurance Company.
30 31 Prudential Tax-Free Money Fund, Inc. www.PruFN.com (800) 225-1852 Management of the Fund (Unaudited) Cont'd.
Term of Office Position and Length of Name, Address** and Age With Fund Time Served ------------------------------------------------------------------------- William V. Healey (48) Assistant since 2000 Secretary Principal Occupations Name, Address** and Age During Past 5 Years ----------------------------------------------------------------------- William V. Healey (48) Vice President and Associate General Counsel (since 1998) of Prudential; Executive Vice President, Secretary and Chief Legal Officer (since February 1999) of Prudential Investments LLC; Senior Vice President, Chief Legal Officer and Secretary (since December 1998) of Prudential Investment Management Services LLC; Executive Vice President, Chief Legal Officer and Secretary (since February 1999) of Prudential Mutual Fund Services LLC; Director (since June 1999) of ICI Mutual Insurance Company; prior to August 1998, Associate General Counsel of the Dreyfus Corporation (Dreyfus), a subsidiary of Mellon Bank, N.A. (Mellon Bank), and an officer and/or director of various affiliates of Mellon Bank and Dreyfus.
- ------------------ * 'Interested' Director, as defined in the Investment Company Act, by reason of affiliation with the Manager, the Subadviser or the Distributor. ** Unless otherwise noted, the address of the Directors and Officers is c/o: Prudential Investments LLC, Gateway Center Three, 100 Mulberry Street, 9th Floor, Newark, New Jersey 07102-4077. *** There is no set term of office for Directors and Officers. The Independent Directors have adopted a retirement policy, which calls for the retirement of Directors on December 31 of the year in which they reach the age of 75. The table shows the number of years for which they have served as Director or Officer. **** This column includes only directorships of companies required to report to the SEC under the Securities and Exchange Act of 1934 (i.e., 'public companies') or other investment companies registered under the Act.
Additional information about the Fund's Directors is included in the Fund's Statement of Additional Information which is available without charge, upon request, by calling (800) 225-1852 or (732) 482-7555 (Calling from outside the U.S.) 32 33 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. PRUDENTIAL MUTUAL FUNDS Stock Funds Large Capitalization Stock Funds Prudential 20/20 Focus Fund Prudential Equity Fund, Inc. Prudential Index Series Fund Prudential Stock Index Fund Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund Prudential 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. 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 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 Balanced/Allocation Fund The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund 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. Municipal Bond Funds Prudential California Municipal Fund California Series California Income Series Prudential Municipal Bond Fund High Income Series Insured Series www.PruFN.com (800) 225-1852 Prudential Municipal Series Fund Florida Series New Jersey Series New York Series Pennsylvania Series Prudential National Municipals Fund, Inc. Global/International Bond Fund 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. Municipal 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 Tax-Free Money Market Funds Command Tax-Free Fund Prudential Tax-Free Money Fund, Inc. Other Money Market Funds COMMAND Government Fund COMMAND Money Fund Special Money Market Fund, Inc.* Money Market Series STRATEGIC PARTNERS MUTUAL FUNDS** Strategic Partners Asset Allocation Funds Strategic Partners Conservative Growth Fund Strategic Partners Moderate Growth Fund Strategic Partners High Growth Fund Strategic Partners Style Specific Funds Strategic Partners Large Capitalization Growth Fund Strategic Partners Large Capitalization Value Fund Strategic Partners Small Capitalization Growth Fund Strategic Partners Small Capitalization Value Fund Strategic Partners International Equity Fund Strategic Partners Total Return Bond Fund Strategic Partners Opportunity Funds Strategic Partners Focused Growth Fund Strategic Partners New Era Growth Fund Strategic Partners Focused Value Fund Special Money Market Fund, Inc.* Money Market Series * This Fund is not a direct purchase money fund and is only an exchangeable money fund. ** Not 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.PruFN.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 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 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. INDEPENDENT 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.PruFN.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. FOR MORE INFORMATION Prudential Mutual Funds Gateway Center Three 100 Mulberry Street Newark, NJ 07102-4077 (800) 225-1852 Visit Prudential's website at: www.PruFN.com DIRECTORS Delayne Dedrick Gold Robert F. Gunia Robert E. La Blanc 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 LLC Gateway Center Three 100 Mulberry Street Newark, NJ 07102-4077 INVESTMENT ADVISER Prudential Investment Management, Inc. Gateway Center Two Newark, NJ 07102 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 Mutual funds are not bank guaranteed or FDIC insured, and may lose value. CUSIP Number 74436P103 MF103E IFS-A068658 -----END PRIVACY-ENHANCED MESSAGE-----