N-30D 1 mf14951.txt COMMAND FUNDS -- 06/30/01 -- ANNUAL ANNUAL REPORT JUNE 30, 2001 COMMAND Money Fund COMMAND Government Fund COMMAND Tax-Free Fund FUND TYPE Money market (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 COMMAND Money Fund and COMMAND Government Fund seek high current income, preservation of capital, and maintenance of liquidity. However, COMMAND Money Fund invests in a diversified portfolio of money market instruments maturing in 13 months or less, while COMMAND Government Fund invests in a portfolio of U.S. government securities maturing in 13 months or less. There can be no assurance that the Funds will achieve their respective investment objectives. COMMAND Tax-Free Fund seeks high current income that is exempt from federal income taxes, consistent with the maintenance of liquidity and preservation of capital. The Fund invests in a diversified portfolio of short-term, tax-exempt securities with maturities of 13 months or less that are issued by states, municipalities, and their agencies (or authorities). Some securities may pay income that is subject to the federal alternative minimum tax (AMT). There can be no assurance that the Fund will achieve its investment objective. Fund Facts As of 6/30/01
7-Day Net Asset Weighted Avg. Net Assets Current Yield Value (NAV) Mat. (WAM) (Millions) COMMAND Money 3.70% $1.00 66 Days $16,408 iMoneyNet, Inc. Taxable Prime Retail Avg.1 3.46% $1.00 61 Days N/A COMMAND Government 3.47% $1.00 65 Days $ 782 iMoneyNet, Inc. Government & Agency Retail Avg.1 3.46% $1.00 49 Days N/A COMMAND Tax-Free 2.53% $1.00 48 Days $ 1,745 iMoneyNet, Inc. Tax-Free National Retail Avg.2 2.61% $1.00 35 Days N/A
Note: Yields will fluctuate from time to time and past performance is not indicative of future results. An investment in the Funds is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Funds. 1 iMoneyNet, Inc. reports a seven-day current yield, NAV, and WAM on Tuesdays. This is the data of all funds in the iMoneyNet, Inc. Taxable Prime Retail Average category and the iMoneyNet, Inc. Gov't & Agency Retail Average category as of June 26, 2001, the closest date to the end of our reporting period. 2 iMoneyNet, Inc. reports a seven-day current yield, NAV, and WAM on Mondays for tax-free money funds. This is the data of 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. (LOGO) August 14, 2001 Dear Shareholder, The disparate performances of U.S. financial markets during our fiscal year that ended June 30, 2001 underscore the importance of having a diversified portfolio of investments. A money market fund providing a single-digit return and stable net asset value (NAV) may serve as part of an overall investment strategy that might help offset the negative returns generated by volatile markets. During the reporting period, money market yields tumbled as the Federal Reserve (the Fed) repeatedly reduced short-term interest rates to stimulate U.S. economic growth. Because yields on money market funds decline with a lag during times when the Fed eases monetary policy, and because of a desire to escape heightened volatility in the stock market, many investors placed cash in money market funds. This trend led to a considerable increase in money market fund assets, particularly in the first quarter of 2001, according to industry data. By analyzing trends in interest rates and in the relative value of various kinds of money market securities, the Money Markets Sector team made decisions that helped COMMAND Money Fund, COMMAND Government Fund, and COMMAND Tax-Free Fund provide competitive yields and maintain their $1-per-share NAVs. We explain conditions in the money markets and each COMMAND Fund's investments on the following pages. Thank you for your continued confidence in Prudential mutual funds. Sincerely, David R. Odenath, Jr., President Command Funds 1 COMMAND Funds COMMAND Money Fund Annual Report June 30, 2001 INVESTMENT ADVISER'S REPORT COMMAND MONEY FUND During our fiscal year that began July 1, 2000, yields on money market securities fell sharply, which drove their prices higher. This trend proceeded at a gradual pace for much of the first half of the reporting period, then accelerated in the second half as the Fed cut short-term interest rates. Fed policymakers had initially left short-term rates unchanged for the rest of 2000 because they hoped economic growth would gradually slow to a more sustainable pace and inflation would remain in check. With the Fed pursuing a steady monetary policy, we bought bank and corporate securities in the summer of 2000 that would mature in three to six months. Our purchases lengthened COMMAND Money Fund's weighted average maturity (WAM) until it was longer than that of its competitive average. (WAM measures a fund's sensitivity to changes in the level of interest rates. It considers the maturity and quantity of each security held by a fund.) COMMAND Money Fund's longer-than-average WAM helped its yield to remain higher for a longer time as money market yields began to decline sharply in December after the Fed hinted that it might ease monetary policy. INVESTING IN A DECLINING-RATE ENVIRONMENT The trend toward lower money market yields intensified in early 2001 because the Fed reduced short-term rates by one half of a percentage point on January 3 and January 31. Fed policymakers acted decisively because economic growth nearly stalled instead of slowing to a more sustainable pace. The Fed hoped that cutting rates would encourage economic activity by making loans more affordable for businesses and individuals. Yields on money market securities maturing in one year are normally higher than yields on securities maturing in three months because of the greater risk associated with longer-term investments. But because the Fed was 2 www.prudential.com (800) 225-1852 expected to continue reducing short-term rates, one-year securities yielded far less than three-month securities in the winter of 2001. This anomaly is known as an inverted money market yield curve. With the unusual shape of the money market yield curve predicting further declines in short-term rates, we primarily bought three-month securities in March that positioned COMMAND Money Fund's WAM slightly longer than average. This strategy helped to insulate COMMAND Money Fund from the steep decline in money market yields that continued because the Fed implemented half-point rate cuts on March 20, April 18, and May 15. Yields also fell as investors fled volatile conditions in the stock market and placed cash in money market funds. The five moves by the Fed led some investors to wonder if it had nearly finished its current round of rate cuts. Therefore, although the overall level of money market yields declined, the shape of the money market yield curve gradually returned to a positive slope in the spring of 2001. (That means that yields on securities maturing in one year were once again higher than yields on securities maturing in three months.) With this development, and given our belief that further rate cuts were forthcoming, we felt more comfortable significantly extending COMMAND Money Fund's WAM in June by purchasing one- year bank securities that offered good relative value. The Fed next acted on June 27, when it reduced rates by a quarter of a percentage point. In a statement announcing this change in monetary policy, the central bank hinted that it was poised to ease credit further if necessary. LOOKING AHEAD We plan to maintain a longer-than-average WAM until there are clear signs that the anticipated economic recovery is under way. This strategy may help COMMAND Money Fund's yield remain higher for a longer time if the Fed cuts rates again and money market yields decline even further. 3 COMMAND Funds COMMAND Government Fund Annual Report June 30, 2001 INVESTMENT ADVISER'S REPORT COMMAND GOVERNMENT FUND The Fed's efforts to revive the U.S. economy along with strong investor demand for a shrinking supply of U.S. Treasury bills drove yields on money market securities lower (and their prices higher) during our fiscal year. In order to lock in yields before they moved sharply lower, we bought federal agency securities during the summer and early autumn of 2000 that would mature in six months to one year. Our purchases positioned the COMMAND Government Fund's weighted average maturity (WAM) significantly longer than that of its competitive average for the remainder of 2000. (WAM measures a fund's sensitivity to changes in the level of interest rates. It takes into account the maturity and quantity of each security held by a fund.) This strategy helped COMMAND Government Fund's yield remain higher for a longer time as money market yields began to decline rapidly in December because the Fed indicated that it was considering cutting short-term interest rates. INVESTING IN A DECLINING-RATE ENVIRONMENT This trend toward lower yields accelerated in 2001 when the Fed reduced rates by one-half of a percentage point on January 3 and January 31. It moved aggressively to stimulate growth because the economy appeared headed for a severe downturn. Yields on government securities maturing in one year are normally higher than yields on government securities maturing in three months due to the greater risk associated with longer-term investments. But because the Fed was expected to continue cutting rates, one-year securities yielded far less than three-month securities. This anomaly is known as an inverted short-term government yield curve. With the unusual shape of the short-term government yield curve predicting further rate cuts, in March 2001, we primarily bought federal agency securities maturing in three months. More half-point reductions in rates occurred 4 www.prudential.com (800) 225-1852 on March 20, April 18, and May 15. These moves led some investors to wonder if the Fed was nearly finished with its current round of rate cuts. Therefore, although the overall level of yields fell, the shape of the short-term government yield curve temporarily assumed a positive slope in the spring of 2001. (That means that yields on one-year securities were once again higher than yields on three-month securities.) With this development, and given our belief that further rate cuts were forthcoming, we felt comfortable extending COMMAND Government Fund's WAM in April by purchasing six-month and one-year federal agency securities. In response to the rate cuts, yields on short-term government securities declined as investors sought shelter from heightened stock market volatility by pouring cash into money funds, many of which invest in U.S. Treasury bills. At the same time, the supply of Treasury bills shrank primarily because the U.S. government eliminated its auction of Treasury bills maturing in one year. Strong demand combined with the dwindling supply of Treasury bills caused their prices to soar and their yields to tumble. Although we chose not to invest directly in Treasury bills, in 2000, we had purchased federal agency securities whose rates adjust periodically based upon the rates of comparable Treasury bills. However, as the voracious appetite for Treasury bills pushed their yields to unattractively low levels, federal agency securities whose rates are tied to Treasury bills also became a less attractive investment alternative. We therefore allowed some of them to mature in 2001. LOOKING AHEAD The Fed cut rates by a quarter of a percentage point on June 27 and hinted it stood ready to ease credit further if necessary. Therefore, we plan to maintain a longer-than-average WAM until there are clear signs that the anticipated economic recovery is under way. This strategy may help COMMAND Government Fund's yield remain higher for a longer time if the Fed lowers rates again and money market yields decline even further. 5 COMMAND Funds COMMAND Tax-Free Fund Annual Report June 30, 2001 INVESTMENT ADVISER'S REPORT COMMAND TAX-FREE FUND Investors in the municipal money market needed to be particularly adroit during our fiscal year. In addition to seasonal periods when demand for securities greatly exceeded their supply, the Fed embarked on an aggressive campaign to ease U.S. monetary policy that drove yields on tax-exempt money market securities sharply lower (and their prices higher). Because we anticipated this trend, we positioned COMMAND Tax-Free Fund so that it was well fortified against this dramatic decline in yields. One of the seasonal supply/demand imbalances occurred in July 2000. A large number of municipal money market securities matured between late June and mid-July, causing billions of dollars of securities to temporarily leave the market. Meanwhile, the proceeds from coupon payments and from matured municipal bonds were paid at the beginning of July. Bondholders often re-invested such monies temporarily in the tax-exempt money market, exacerbating the shortage of securities and the temporary drop in yields known as the "July Effect". Fortunately, we had prepared COMMAND Tax-Free Fund for the "July Effect" by purchasing longer-term, tax-exempt commercial paper prior to the start of our fiscal year when yields were much higher. Our purchases during this time helped prepare the COMMAND Tax-Free Fund for the lower-interest-rate environment that developed in 2001. MANAGING IN A DECLINING-RATE ENVIRONMENT Municipal money market yields declined dramatically in early 2001 for two reasons. First, the Fed cut short-term interest rates on January 3 and January 31, hoping that lower borrowing costs for businesses and individuals could help revitalize a lackluster U.S. economy. Second, many investors put cash received from bond calls, maturing bonds, and coupon payments into tax-exempt money funds, including ours. 6 www.prudential.com (800) 225-1852 We used the new monies to take advantage of buying opportunities in early February because tax-exempt money market yields had rebounded from the bottom and temporarily hovered at higher levels. Our purchases of securities maturing in one year extended COMMAND Tax-Free Fund's weighted average maturity (WAM). WAM measures a fund's sensitivity to changes in the level of interest rates. It considers the maturity and quantity of each security held by a fund. Although yields continued to trend downward, there was another brief period in which tax-exempt money market yields edged moderately higher and provided attractive buying opportunities. It occurred at the end of April, when the supply of municipal money market securities increased as portfolio managers sold them to have cash to meet shareholder redemptions during tax season. We bought attractively priced tax-exempt commercial paper scheduled to mature in August, September, and October of 2001. These investments again extended COMMAND Tax-Free Fund's WAM, which remained longer than average throughout the first six months of 2001. This strategy helped to cushion Command Tax-Free Fund against the impact of falling rates associated with the additional easing of monetary policy. The Fed cut rates again on March 20, April 18, May 15, and June 27. Short-term rates were reduced by a total of 2.75 percentage points. LOOKING AHEAD With the quarter-point cut in June, the Fed could be signaling that it is close to the end of the current easing cycle. It is possible that we will see one or two more rate cuts before the end of 2001, but we believe that the Fed's aggressive easing will soon have its intended effect, and the economy will begin a new growth cycle. Command Funds Management Team 7 COMMAND Account COMMAND Money Fund Portfolio of Investments as of June 30, 2001
Principal Amount (000) Description Value (Note 1) ------------------------------------------------------------------------------------------ Bank Notes 1.2% Bank One NA, $ 70,000 3.97%, 9/6/01 $ 70,002,303 38,000 6.80%, 9/17/01 38,134,437 92,000 Comerica Bank NA, 4.031%, 7/6/01 92,000,071 ------------------ 200,136,811 ------------------------------------------------------------------------------------- Certificates of Deposit--Domestic 18.8% 30,000 ABN AMRO Bank, 4.88%, 9/7/01 29,998,858 44,000 Banca Intesa, 4.68%, 7/10/01 43,999,769 75,000 BA Holding AG, 4.85%, 9/4/01 74,992,780 72,000 Bank of Nova Scotia, 4.28%, 7/2/01 71,999,960 50,000 Barclays Bank PLC, 5.19%, 9/10/01 50,025,989 94,000 Bayerische Hypotheken-und Wechsel-Bank AG, 4.02%, 8/9/01 94,001,747 Canadian Imperial Bank of Commerce, 350,000 4.12%, 5/31/02 349,937,672 50,000 4.055%, 7/12/02 49,995,000 426,000 Deutsche Bank AG, 3.84%, 12/7/01 426,000,000 70,000 Dexia Bank, 5.21%, 8/21/01 70,000,000 91,000 First Tennessee Bank NA, 4.30%, 7/24/01 91,000,000 33,000 First Union National Bank 4.294%, 8/1/01(a) 32,998,033 280,000 J.P. Morgan Chase, 3.80%, 9/12/01 280,000,000 Landesbank Baden Wurttemberg, 64,000 5.38%, 7/26/01 64,004,629 52,000 5.30%, 8/1/01 52,001,308 50,000 5.19%, 8/16/01 49,997,944
8 See Notes to Financial Statements COMMAND Account COMMAND Money Fund Portfolio of Investments as of June 30, 2001 Cont'd.
Principal Amount (000) Description Value (Note 1) ------------------------------------------------------------------------------------------ Merita Bank PLC, $ 128,000 5.26%, 8/1/01 $ 128,001,074 55,000 4.735%, 9/20/01 55,000,000 433,000 Paribas, 4.56%, 9/21/01 433,000,000 270,000 Rabobank Nederland, 4.105%, 7/5/02 269,973,515 Svenska Handelsbanken AB, 71,000 5.28%, 7/31/01 71,001,109 42,000 4.11%, 7/8/02 42,000,000 255,000 UBS AG, 4.135%, 6/3/02 254,965,647 ------------------ 3,084,895,034 ------------------------------------------------------------------------------------- Certificates of Deposit - Eurodollar 9.9% 200,000 Abbey National Treasury Services PLC, 3.77%, 9/18/01 200,030,269 65,000 Bank Brussels Lambert, 5.31%, 7/2/01 65,000,035 Barclays Bank PLC, 80,000 3.79%, 9/14/01 80,014,546 100,000 3.775%, 12/14/01 100,000,000 200,000 3.79%, 12/14/01 200,008,689 193,000 Citibank NA, 6.10%, 7/3/01 193,000,729 168,000 Commerzbank, 3.75%, 12/19/01 168,039,163 200,000 Deutsche Bank AG, 4.57%, 9/27/01 200,000,000 37,000 KBC Bank NV, 5.38%, 7/26/01 37,002,637 50,000 Landesbank Baden Wurttemberg, 5.21%, 1/31/02 50,002,611 325,000 Westdeutsche Landesbank, 4.38%, 7/2/01 325,000,000 ------------------ 1,618,098,679
See Notes to Financial Statements 9 COMMAND Account COMMAND Money Fund Portfolio of Investments as of June 30, 2001 Cont'd.
Principal Amount (000) Description Value (Note 1) ------------------------------------------------------------------------------------------ Certificates of Deposit - Yankee 9.5% $ 45,000 Bank of Nova Scotia, 5.72%, 7/5/01 $ 45,000,000 190,000 Bayerische Hypotheken-und Wechsel-Bank AG, 4.05%, 8/16/01 190,000,000 201,000 Commerzbank, 4.75%, 7/23/01 201,000,000 275,000 Dexia Bank, 3.80%, 9/13/01 275,000,000 35,000 Landesbank Baden Wurttemberg, 4.24%, 7/27/01 34,999,186 60,000 Lloyds Bank PLC, 3.92%, 8/30/01 60,002,971 50,000 Norddeutsche Landesbank, 4.40%, 7/20/01 50,000,000 200,000 Paribas, 3.78%, 12/14/01 200,000,000 300,000 Societe Generale, 4.00%, 8/16/01 300,000,000 200,000 UBS AG, 7.125%, 7/5/01 199,999,069 ------------------ 1,556,001,226 ------------------------------------------------------------------------------------- Commercial Paper 39.0% 8,674 Allianz of America, Inc., 3.75%, 8/15/01 8,633,341 67,000 American General Finance Corp., 4.20%, 9/14/01 66,413,750 35,000 American Home Products Corp., 3.80%, 8/9/01 34,855,917 Amsterdam Funding Corp., 50,000 4.30%, 7/2/01 49,994,028 86,841 4.15%, 7/9/01 86,760,913 34,000 BAE Systems Holdings, Inc., 3.73%, 8/23/01 33,813,293 55,000 Banc One Financial Corp., 3.73%, 8/22/01 54,703,672
10 See Notes to Financial Statements COMMAND Account COMMAND Money Fund Portfolio of Investments as of June 30, 2001 Cont'd.
Principal Amount (000) Description Value (Note 1) ------------------------------------------------------------------------------------------ $ 194,000 BankAmerica Corp., 4.99%, 7/27/01 $ 193,300,845 22,299 Barton Capital Corp., 3.90%, 7/27/01 22,236,191 BBL North America Funding Corp., 12,000 4.59%, 7/11/01 11,984,700 100,000 4.59%, 7/13/01 99,847,000 4,116 3.75%, 7/24/01 4,106,139 50,000 BCI Funding Corp., 5.09%, 8/16/01 49,674,806 53,000 BHF Finance, Inc., 3.79%, 12/3/01 52,135,143 33,000 Black Forest Funding Corp., 3.73%, 7/27/01 32,911,102 Blue Ridge Asset Funding Corp., 24,030 3.95%, 7/12/01 24,000,997 30,125 3.71%, 7/25/01 30,050,491 90,000 BNP Paribas Finance Inc., 3.81%, 9/4/01 89,380,875 64,000 BOSCH, 4.28%, 7/20/01 63,855,431 Brahms Funding Corp., 65,563 4.04%, 7/16/01 65,452,636 131,000 4.00%, 7/19/01 130,738,000 Caisse Nationale Des Caisses, 88,000 4.36%, 7/19/01 87,808,160 110,000 4.27%, 7/24/01 109,699,914 50,000 4.36%, 7/24/01 49,860,722 Centric Capital Corp., 74,547 3.88%, 7/13/01 74,450,586 15,000 4.26%, 7/23/01 14,960,950 100,000 3.83%, 7/30/01 99,691,472 100,000 CIT Group, Inc., 3.78%, 9/10/01 99,254,500
See Notes to Financial Statements 11 COMMAND Account COMMAND Money Fund Portfolio of Investments as of June 30, 2001 Cont'd.
Principal Amount (000) Description Value (Note 1) ------------------------------------------------------------------------------------------ Clipper Receivables Corp., $ 10,488 3.88%, 7/11/01 $ 10,476,696 16,512 3.88%, 7/12/01 16,492,424 67,000 3.96%, 7/12/01 66,918,930 Commerzbank, 38,000 4.78%, 9/4/01 37,672,039 100,000 4.78%, 9/7/01 99,097,111 40,000 Corporate Asset Funding Co., 3.80%, 7/23/01 39,907,111 47,000 Danske Corp., 3.79%, 11/21/01 46,292,428 75,000 Den Norske Bank, 3.78%, 11/6/01 73,992,000 91,000 Dexia CLF Finance Co., 4.58%, 7/11/01 90,884,228 25,105 Dover Corp., 3.80%, 7/23/01 25,046,701 50,000 Dresdner U.S. Finance, Inc., 4.10%, 10/24/01 49,345,139 227,321 Edison Asset Securitization LLC, 3.71%, 7/26/01 226,735,333 Enterprise Funding Corp., 7,772 5.17%, 7/31/01 7,738,516 69,053 3.80%, 8/15/01 68,724,998 Falcon Asset Securitization Corp., 200,090 3.99%, 7/10/01 199,890,410 50,000 3.70%., 9/17/01 49,599,167 74,000 Fleet Funding Corp., 3.93%, 7/18/01 73,862,668 Ford Motor Credit Co., 100,000 4.25%, 7/13/01 99,858,000 34,000 4.25%, 7/20/01 33,923,736 Forrestal Funding Master Trust, 80,000 3.96%, 7/12/01 79,903,200 50,000 3.95%, 7/17/01 49,912,222 124,789 3.80%, 7/26/01 124,459,696 29,000 3.77%, 7/27/01 28,921,039
12 See Notes to Financial Statements COMMAND Account COMMAND Money Fund Portfolio of Investments as of June 30, 2001 Cont'd.
Principal Amount (000) Description Value (Note 1) ------------------------------------------------------------------------------------------ $ 15,000 Fortis Funding LLC, 3.69%, 7/24/01 $ 14,964,637 GE Capital International Funding, 172,000 3.71%, 7/26/01 171,556,861 150,000 3.71%, 8/16/01 149,288,917 50,000 4.45%, 9/21/01 49,493,194 General Electric Capital Corp., 161,000 4.22%, 7/20/01 160,641,417 200,000 3.70%, 8/16/01 199,054,445 51,000 General Re Corp., 4.07%, 10/26/01 50,325,397 Halifax PLC, 32,000 3.75%, 8/2/01 31,893,333 46,000 3.71%, 9/10/01 45,663,421 40,000 Homeside Lending, Inc. 3.78%, 8/2/01 39,865,600 100,000 International Nederlanen U.S. Fund Corp., 3.95%, 7/11/01 99,890,278 40,185 Intrepid Funding Master Trust, 3.99%, 7/12/01 40,136,008 Landes Bank, 17,000 4.28%, 7/5/01 16,991,916 30,000 4.23%, 7/25/01 29,915,400 123,321 Lone Star Funding LLC, 3.78%, 7/23/01 123,036,128 48,646 Market Street Funding Corp., 3.96%, 7/12/01 48,587,138 25,000 Nationwide Building Society, 5.14%, 7/24/01 24,917,903 66,000 Old Line Funding Corp., 3.88%, 7/16/01 65,893,300 PNC Funding Corp., 150,000 3.85%, 7/11/01 149,839,584 66,000 3.76%, 7/27/01 65,820,773 Sao Paulo U.S. Finance Company, 50,000 4.23%, 7/20/01 49,888,375 50,000 5.15%, 7/27/01 49,814,028 20,000 3.96%, 8/15/01 19,901,000
See Notes to Financial Statements 13 COMMAND Account COMMAND Money Fund Portfolio of Investments as of June 30, 2001 Cont'd.
Principal Amount (000) Description Value (Note 1) ------------------------------------------------------------------------------------------ Sheffield Receivables Corp., $ 50,656 3.91%, 7/9/01 $ 50,611,986 93,000 3.73%, 7/25/01 92,768,740 64,000 3.82%, 7/31/01 63,796,267 30,070 3.83%, 9/5/01 29,858,858 155,000 Societe Generale, 3.96%, 8/14/01 154,249,800 49,550 Sony Capital Corp., 3.80%, 7/27/01 49,414,013 Swedbank, 71,000 4.23%, 7/25/01 70,799,780 25,000 3.74%, 8/15/01 24,883,125 10,900 3.86%, 9/5/01 10,822,864 18,885 Sweetwater Capital Corp., 3.71%, 7/25/01 18,838,291 Telstra Corp. Ltd., 50,000 4.26%, 7/24/01 49,863,916 22,000 4.26%, 7/31/01 21,921,900 8,000 3.96%, 8/2/01 7,971,840 60,975 3.96%, 8/7/01 60,726,832 15,625 Textron Financial Corp., 3.78%, 7/11/01 15,608,594 35,330 Thunder Bay Funding, Inc., 3.90%, 7/16/01 35,272,589 Triple A One Funding Corp., 32,229 4.25%, 7/3/01 32,221,390 43,205 3.75%, 7/18/01 43,128,491 Tulip Funding Corp., 48,892 4.28%, 7/23/01 48,764,120 55,000 3.70%, 9/18/01 54,553,431 212,261 UBS AG, 4.25%, 7/2/01 212,235,941 45,840 Variable Funding Capital Corp., 3.70%, 9/12/01 45,496,073 50,000 Verizon Network Funding Corp., 4.17%, 8/16/01 49,733,583
14 See Notes to Financial Statements COMMAND Account COMMAND Money Fund Portfolio of Investments as of June 30, 2001 Cont'd.
Principal Amount (000) Description Value (Note 1) ------------------------------------------------------------------------------------------ Volkswagon of America, $ 42,624 3.90%, 7/16/01 $ 42,554,736 3,353 3.68%, 7/25/01 3,344,774 68,000 Windmill Funding Corp., 4.15%, 7/9/01 67,937,289 ------------------ 6,394,987,642 ------------------------------------------------------------------------------------- Loan Participations 0.1% Georgia Power Co., 3.89%, 8/10/01(c) 22,000 (cost $22,000,000; Purchased 6/21/01) 22,000,000 ------------------------------------------------------------------------------------- Other Corporate Obligations 18.9% Allstate Life Insurance Co., 4.484%, 8/1/01(a)(c) 84,000 (cost $84,000,000; purchased 5/1/01) 84,000,000 101,000 Associates Corp. of North America, 4.919%, 7/3/01(a) 101,020,695 51,300 Bank One Corp., 4.201%, 7/9/01(a) 51,360,003 Bank One NA, 39,000 4.79%, 7/13/01(a) 39,002,319 12,000 4.44%, 7/31/01(a) 12,007,677 65,000 Bishop Gate Residential Mortgage, 4.001%, 7/20/01(a) 65,000,000 206,000 CIT Group, Inc. 4.694%, 7/16/01(a) 205,988,282 GE Capital International Funding, 3.931%, 7/20/01(a)(c) 93,000 (cost $93,000,000; Purchased 7/20/00) 93,000,000 593,000 Goldman Sachs & Co., 4.04%, 9/17/01(a) 593,000,000 42,000 J.P. Morgan Chase, 3.82%, 9/24/01 42,032,679 Merrill Lynch & Co., Inc., 78,000 4.025%, 7/9/01(a) 78,000,000
See Notes to Financial Statements 15 COMMAND Account COMMAND Money Fund Portfolio of Investments as of June 30, 2001 Cont'd.
Principal Amount (000) Description Value (Note 1) ------------------------------------------------------------------------------------------ $ 138,000 3.951%, 7/11/01(a) $ 137,977,359 10,000 4.091%, 7/11/01(a) 10,004,472 50,000 4.751%, 7/11/01(a) 50,022,117 45,000 3.99%, 7/13/01 44,999,072 21,000 3.99%, 7/16/01 21,000,390 25,000 4.394%, 8/1/01(a) 25,013,874 40,000 4.656%, 8/27/01(a) 40,077,924 131,000 3.888%, 9/10/01(a) 131,000,000 Metropolitan Life Insurance Co., 4.956%, 7/2/01(a)(c) 60,000 (cost $60,000,000; Purchased 10/24/00) 60,000,000 4.394%, 8/1/01(a)(c) 58,000 (cost $58,000,000; Purchased 2/7/01) 58,000,000 Morgan Stanley, 297,000 4.005%, 7/16/01(a) 297,000,000 32,300 4.465%, 7/30/01(a) 32,333,607 9,952 Nissan Auto Receivables, 5.523%, 8/15/01 9,952,040 66,000 People's Gas Light & Coke Co., 4.06%, 9/13/01 66,019,898 189,000 Restructured Asset Securities, 4.02%, 7/13/01 189,000,000 Short-Term Repackaged Asset Trust, 1998-E, 4.00%, 7/18/01(c) 114,000 (cost $114,000,000; Purchased 8/18/00) 114,000,000 35,000 Strategic Money Market Trust, 3.91%, 9/13/01 35,000,000 Travelers Property Casualty Co., 4.203%, 8/16/01(a)(c) 25,000 (cost $25,000,000; Purchased 2/16/01) 25,000,000 321,000 Unilever Capital Corp., 3.97%, 9/7/01 321,000,000 United of Omaha Life Insurance Co., 4.093%, 9/5/01(a)(c) 30,000 (cost $30,000,000; Purchased 12/5/00) 30,000,000 49,000 Wells Fargo & Co., 4.46%, 7/26/01 49,065,874 ------------------ 3,110,878,282
16 See Notes to Financial Statements COMMAND Account COMMAND Money Fund Portfolio of Investments as of June 30, 2001 Cont'd.
Principal Amount (000) Description Value (Note 1) ------------------------------------------------------------------------------------------ U.S. Government Agency & Instrumentality Obligations 2.4% Federal Home Loan Banks $ 69,000 6.75%, 2/1/02 $ 69,986,395 75,000 4.98%, 2/5/02 74,991,000 200,000 Federal Home Loan Mortgage Discount Notes, 5.05%, 7/13/01 199,663,333 36,500 Federal National Mortgage Association, 6.52%, 10/15/01 36,778,283 ------------------ 381,419,011 ------------------ Total Investments 99.8% (amortized cost $16,368,416,685(b)) 16,368,416,685 Other assets in excess of liabilities 0.2% 39,169,619 ------------------ Net Assets 100% $ 16,407,586,304 ------------------ ------------------
------------------------------ The following abbreviations are used in portfolio descriptions: AB--Aktiebolag (Swedish Stock Company). AG--Aktiengesellschaft (German Stock Company). LLC--Limited Liability Company. NA--National Association (National Bank). NV--Naamloze Vennootschap (Dutch Corporation). PLC--Public Limited Company (British Corporation). (a) Variable rate instrument. The maturity date presented for 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. (b) The cost for federal income tax purposes is substantially the same as for financial reporting purposes. (c) Indicates illiquid securities restricted as to resale. The aggregate cost of such securities was $486,000,000. The aggregate value of $486,000,000 was approximately 3.0% of net assets. See Notes to Financial Statements 17 COMMAND Account COMMAND Money Fund Portfolio of Investments as of June 30, 2001 Cont'd. The industry classification of portfolio holdings and other assets in excess of liabilities as a percentage of net assets as of June 30, 2001 was as follows: Commercial Banks....................................................... 57.3% Asset Backed Securities................................................ 12.0 Security Brokers & Dealers............................................. 8.9 Short-Term Business Credit............................................. 8.4 Federal Credit Agencies................................................ 2.3 Bank Holding Companies - Domestic...................................... 2.0 Food Products.......................................................... 1.9 Life Insurance......................................................... 1.5 Telephone & Communications............................................. 1.4 Motor Vehicle Parts.................................................... 1.1 Personal Credit Institutions........................................... 1.0 Fire & Marine Casualty Insurance....................................... 0.5 Electrical Services.................................................... 0.4 Records, Tapes & Disks................................................. 0.3 Mortgage Bankers....................................................... 0.2 Pharmaceutical......................................................... 0.2 Construction Equipment................................................. 0.2 Paper & Allied Products................................................ 0.1 Aircraft & Parts....................................................... 0.1 ----- 99.8 Other assets in excess of liabilities.................................. 0.2 ----- 100.0% ----- -----
18 See Notes to Financial Statements COMMAND Account COMMAND Money Fund Statement of Assets and Liabilities
June 30, 2001 -------------------------------------------------------------------------------------- ASSETS Investments, at amortized cost which approximates market value $16,368,416,685 Receivable for Fund shares sold 252,440,396 Interest receivable 82,061,317 Prepaid expenses 65,851 --------------- Total assets 16,702,984,249 --------------- LIABILITIES Payable to custodian 18,992 Payable for Fund shares repurchased 287,299,729 Management fee payable 4,858,199 Distribution fee payable 1,698,378 Accrued expenses and other liabilities 1,501,882 Dividends payable 20,765 --------------- Total liabilities 295,397,945 --------------- NET ASSETS $16,407,586,304 --------------- --------------- Net assets were comprised of: Shares of beneficial interest, at par $ 164,075,863 Paid-in capital in excess of par 16,243,510,441 --------------- Net assets, June 30, 2001 $16,407,586,304 --------------- --------------- Net asset value, offering price and redemption price per share ($16,407,586,304 /16,407,586,304 shares of beneficial interest ($.01 par value) issued and outstanding) $1.00 --------------- ---------------
See Notes to Financial Statements 19 COMMAND Account COMMAND Money Fund Statement of Operations
Year Ended June 30, 2001 --------------------------------------------------------------------------------------- NET INVESTMENT INCOME Income Interest and discount earned $ 937,613,658 ------------- Expenses Management fee 55,653,826 Distribution fee 19,429,938 Transfer agent's fees and expenses 4,692,000 Reports to shareholders 1,225,000 Registration fees 1,000,000 Custodian's fees and expenses 500,000 Trustees' fees and expenses 106,000 Audit fee 30,000 Legal fees and expenses 30,000 Miscellaneous 171,415 ------------- Total expenses 82,838,179 ------------- Net investment income 854,775,479 ------------- REALIZED GAIN ON INVESTMENTS Net realized gain on investment transactions 428,857 ------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 855,204,336 ------------- -------------
20 See Notes to Financial Statements COMMAND Account COMMAND Money Fund Statement of Changes in Net Assets
Year Ended June 30, ------------------------------------ 2001 2000 --------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS Operations Net investment income $ 854,775,479 $ 701,539,944 Net realized gain (loss) on investment transactions 428,857 (31,937) ---------------- ---------------- Net increase in net assets resulting from operations 855,204,336 701,508,007 ---------------- ---------------- Dividends and distributions to shareholders (Note 1) (855,204,336) (701,508,007) ---------------- ---------------- Fund share transactions (at $1 per share) Net proceeds from shares subscribed 65,341,831,220 66,034,737,099 Net asset value of shares issued in reinvestment of dividends and distributions 855,162,002 701,483,686 Cost of shares reacquired (63,278,445,028) (65,494,128,592) ---------------- ---------------- Net increase in net assets from Fund share transactions 2,918,548,194 1,242,092,193 ---------------- ---------------- Total increase 2,918,548,194 1,242,092,193 NET ASSETS Beginning of year 13,489,038,110 12,246,945,917 ---------------- ---------------- End of year $ 16,407,586,304 $ 13,489,038,110 ---------------- ---------------- ---------------- ----------------
See Notes to Financial Statements 21 COMMAND Account COMMAND Money Fund Financial Highlights
Year Ended June 30, 2001 ---------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of year $ 1.000 Net investment income and net realized gains 0.055 Dividends and distributions to shareholders (0.055) ---------------- Net asset value, end of year $ 1.000 ---------------- ---------------- TOTAL RETURN(a): 5.72% RATIOS/SUPPLEMENTAL DATA: Net assets, end of year (000) $ 16,407,586 Average net assets (000) $ 15,543,950 Ratios to average net assets: Expenses, including distribution and service (12b-1) fees .53% Expenses, excluding distribution and service (12b-1) fees .41% Net investment income 5.50%
------------------------------ (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 COMMAND Account COMMAND Money Fund Financial Highlights Cont'd.
Year Ended June 30, --------------------------------------------------------------- 2000 1999 1998 1997 --------------------------------------------------------------- $ 1.000 $ 1.000 $ 1.000 $ 1.000 0.053 0.048 0.052 0.049 (0.053) (0.048) (0.052) (0.049) ----------- ----------- ---------- ---------- $ 1.000 $ 1.000 $ 1.000 $ 1.000 ----------- ----------- ---------- ---------- ----------- ----------- ---------- ---------- 5.42% 4.85% 5.31% 5.06% $13,489,038 $12,246,946 $9,090,289 $6,629,903 $13,178,334 $11,965,069 $7,936,219 $6,078,525 .53% .54% .54% .57% .41% .41% .42% .44% 5.32% 4.73% 5.19% 4.97%
See Notes to Financial Statements 23 COMMAND Account COMMAND Money Fund Report of Independent Accountants To the Shareholders and Trustees of COMMAND Money Fund In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of COMMAND Money Fund (the 'Fund') at June 30, 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 June 30, 2001 by correspondence with the custodian, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York August 14, 2001 24 See Notes to Financial Statements COMMAND Account COMMAND Government Fund Portfolio of Investments as of June 30, 2001
Principal Amount (000) Description Value (Note 1) ------------------------------------------------------------------------------------------ U.S. Government Agencies 98.5% Federal Farm Credit Bank 1.9% $ 14,630 5.875%, 7/2/01 $ 14,629,622 ------------------------------------------------------------------------------------- Federal Home Loan Bank 27.1% 18,000 3.89%, 7/2/01(a) 17,997,927 14,000 3.89%, 7/2/01(a) 13,998,948 2,000 6.875%, 7/3/01 2,000,001 1,000 5.655%, 7/10/01 999,773 54,500 4.52%, 7/12/01(a) 54,489,504 8,000 3.73%, 7/18/01(a) 7,999,739 41,500 4.589%, 7/19/01(a) 41,491,464 13,000 3.67%, 7/23/01(a) 12,998,572 11,000 3.70%, 7/25/01(a) 11,000,000 2,120 5.50%, 8/13/01 2,216,648 100 7.39%, 8/22/01 100,109 500 6.255%, 8/24/01 500,224 300 5.43%, 9/17/01 299,276 8,000 6.50%, 9/19/01 7,998,607 4,500 4.16%, 5/14/02 4,496,699 15,000 4.25%, 6/7/02 14,992,336 4,000 5.18%, 6/28/02 4,038,871 8,000 6.875%, 7/18/02 8,249,326 6,000 3.90%, 7/19/02 6,000,000 ------------------ 211,868,024 ------------------------------------------------------------------------------------- Federal Home Loan Mortgage Corporation 9.2% 30,000 3.70%, 8/17/01(a) 29,998,300 5,500 4.40%, 5/8/02 5,498,535 13,000 4.15%, 5/15/02 12,998,301 11,587 5.50%, 5/15/02 11,668,864 2,000 4.20%, 5/16/02 1,997,864 10,000 4.25%, 5/29/02 9,997,158 ------------------ 72,159,022 ------------------------------------------------------------------------------------- Federal National Mortgage Association 44.9% 28,000 3.84%, 7/2/01(a) 28,000,000 50,000 3.845%, 7/2/01(a) 50,000,000 30,000 3.85%, 7/2/01(a) 29,997,222 36,750 3.86%, 7/2/01(a) 36,750,000 1,600 3.97%, 7/5/01(a) 1,599,846 2,000 6.85%, 7/13/01 2,001,094 1,500 6.71%, 7/24/01 1,499,886
See Notes to Financial Statements 25 COMMAND Account COMMAND Government Fund Portfolio of Investments as of June 30, 2001 Cont'd.
Principal Amount (000) Description Value (Note 1) ------------------------------------------------------------------------------------------ $ 5,500 6.10%, 8/10/01 $ 5,508,036 17,000 4.143%, 9/4/01(a) 16,997,200 27,225 4.46%, 9/13/01 26,975,407 50,500 3.76%, 9/18/01(a) 50,500,000 26,500 6.64%, 9/18/01 26,502,582 26,000 6.40%, 9/27/01 26,119,676 500 6.58%, 10/2/01 499,961 215 5.00%, 10/29/01 213,942 4,000 4.37%, 1/11/02 3,905,802 1,500 5.31%, 1/16/02 1,500,772 6,000 5.35%, 1/18/02 6,005,214 11,325 6.70%, 5/6/02 11,526,603 25,000 4.03%, 6/28/02 25,000,000 ------------------ 351,103,243 ------------------------------------------------------------------------------------- Student Loan Marketing Association 15.4% 14,000 3.881%, 7/3/01(a) 13,997,808 53,000 3.901%, 7/3/01(a) 52,994,183 27,000 3.901%, 7/3/01(a) 26,999,608 22,000 3.95%, 7/3/01(a) 22,000,561 5,000 3.971%, 7/3/01(a) 5,000,298 ------------------ 120,992,458 ------------------------------------------------------------------------------------- Repurchase Agreement(b) 0.9% 7,003 Goldman Sachs & Co., 4.09% dated 6/29/01 due 7/3/01 in the amount of $7,006,182 value of collateral including accrued interest $7,143,061 (cost $7,003,000) 7,003,000 ------------------ Total Investments 99.4% (amortized cost $777,755,369(c)) 777,755,369 Other assets in excess of liabilities 0.6% 4,484,451 ------------------ Net Assets 100% $ 782,239,820 ------------------ ------------------
------------------------------ (a) Variable rate instrument. The maturity date presented for these instruments is the later of the next date on which the security can be redeemed at par or the next date on which the rate of interest is adjusted. (b) Repurchase agreements are collateralized by U.S. Treasury or Federal agency obligations. (c) The cost for federal income tax purposes is substantially the same as for financial reporting purposes. 26 See Notes to Financial Statements COMMAND Account COMMAND Government Fund Statement of Assets and Liabilities
June 30, 2001 --------------------------------------------------------------------------------------- ASSETS Investments, at amortized cost which approximates market value $ 777,755,369 Receivable for Fund shares sold 29,698,409 Interest receivable 5,398,722 Prepaid expenses 6,119 ------------- Total assets 812,858,619 ------------- LIABILITIES Payable to custodian 1,258 Payable for Fund shares repurchased 30,037,905 Management fee payable 262,375 Accrued expenses and other liabilities 229,074 Distribution fee payable 81,992 Dividends payable 6,195 ------------- Total liabilities 30,618,799 ------------- NET ASSETS $ 782,239,820 ------------- ------------- Net assets were comprised of: Shares of beneficial interest, at par $ 7,822,398 Paid-in capital in excess of par 774,417,422 ------------- Net assets, June 30, 2001 $ 782,239,820 ------------- ------------- Net asset value, offering price and redemption price per share ($782,239,820 / 782,239,820 shares of beneficial interest ($.01 par value) issued and outstanding) $1.00 ------------- -------------
See Notes to Financial Statements 27 COMMAND Account COMMAND Government Fund Statement of Operations
Year Ended June 30, 2001 --------------------------------------------------------------------------------------- NET INVESTMENT INCOME Income Interest and discount earned $44,396,560 ------------- Expenses Management fee 3,026,862 Distribution fee 945,894 Transfer agent's fees and expenses 104,000 Custodian's fees and expenses 78,000 Reports to shareholders 55,000 Registration fees 43,000 Audit fee 27,000 Legal fees and expenses 16,000 Trustees' fees and expenses 11,000 Miscellaneous 12,492 ------------- Total expenses 4,319,248 ------------- Net investment income 40,077,312 ------------- REALIZED GAIN ON INVESTMENTS Net realized gain on investment transactions 93,318 ------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $40,170,630 ------------- -------------
28 See Notes to Financial Statements COMMAND Account COMMAND Government Fund Statement of Changes in Net Assets
Year Ended June 30, ---------------------------------- 2001 2000 ---------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS Operations Net investment income $ 40,077,312 $ 36,602,006 Net realized gain on investment transactions 93,318 23,360 --------------- --------------- Net increase in net assets resulting from operations 40,170,630 36,625,366 --------------- --------------- Dividends and distributions to shareholders (Note 1) (40,170,630) (36,625,366) --------------- --------------- Fund share transactions (at $1 per share) Net proceeds from shares subscribed 3,387,649,746 3,360,155,858 Net asset value of shares issued in reinvestment of dividends and distributions 40,163,958 36,624,690 Cost of shares reacquired (3,332,937,640) (3,423,806,329) --------------- --------------- Net increase (decrease) in net assets from Fund share transactions 94,876,064 (27,025,781) --------------- --------------- Total increase (decrease) 94,876,064 (27,025,781) NET ASSETS Beginning of year 687,363,756 714,389,537 --------------- --------------- End of year $ 782,239,820 $ 687,363,756 --------------- --------------- --------------- ---------------
See Notes to Financial Statements 29 COMMAND Account COMMAND Government Fund Financial Highlights
Year Ended June 30, 2001 ---------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of year $ 1.000 Net investment income and net realized gains 0.054 Dividends and distributions to shareholders (0.054) ---------------- Net asset value, end of year $ 1.000 ---------------- ---------------- TOTAL RETURN(a) 5.52% RATIOS/SUPPLEMENTAL DATA: Net assets, end of year (000) $782,240 Average net assets (000) $756,716 Ratios to average net assets: Expenses, including distribution and service (12b-1) fees .57% Expenses, excluding distribution and service (12b-1) fees .45% Net investment income 5.30%
------------------------------ (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. 30 See Notes to Financial Statements COMMAND Account COMMAND Government Fund Financial Highlights Cont'd.
Year Ended June 30, ------------------------------------------------------- 2000 1999 1998 1997 ------------------------------------------------------- $ 1.000 $ 1.000 $ 1.000 $ 1.000 0.051 0.046 0.051 0.049 (0.051) (0.046) (0.051) (0.049) ---------- ---------- ---------- ---------- $ 1.000 $ 1.000 $ 1.000 $ 1.000 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- 5.23% 4.74% 5.20% 4.97% $687,364 $714,390 $608,727 $528,469 $714,655 $739,779 $562,693 $534,580 .58% .56% .56% .63% .45% .44% .44% .51% 5.12% 4.63% 5.08% 4.84%
See Notes to Financial Statements 31 COMMAND Account COMMAND Government Fund Report of Independent Accountants To the Shareholders and Trustees of COMMAND Government Fund In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of COMMAND Government Fund (the 'Fund') at June 30, 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 June 30, 2001 by correspondence with the custodian, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York August 14, 2001 32 See Notes to Financial Statements COMMAND Account COMMAND Tax-Free Fund Portfolio of Investments as of June 30, 2001
Moody's Principal Rating Amount (Unaudited) (000) Description(a) Value (Note 1) ----------------------------------------------------------------------------------------- ALABAMA 1.7% Mobile Ind. Dev. Rev. Bd., Alabama Pwr. Co., A.M.T., F.R.D.D., VMIG1 $ 4,400 3.55%, 7/2/01, Ser. 2001A $ 4,400,000 Montgomery Ind. Dev. Bd., Poll. Ctrl. Rev., General Electric Co. Proj., T.E.C.P., P1 25,500 2.70%, 8/7/01, Ser. 90 25,500,000 --------------- 29,900,000 ------------------------------------------------------------------------------------- ARIZONA 0.6% Roaring Fork Municipal Prods. LLC, F.R.W.D., A.M.T., VMIG1 10,780 2.93%, 7/5/01, Ser. 00-20 10,780,000 ------------------------------------------------------------------------------------- ARKANSAS 0.5% Arkansas Hosp. Equip. Fin. Auth. Rev., AHA Pooled Fin. Prog., F.R.W.D., A-1+* 8,000 2.85%, 7/5/01, Ser. 98A 8,000,000 ------------------------------------------------------------------------------------- CALIFORNIA 2.7% California Higher Ed. Ln. Auth. Rev., Student Ln. Rev., A.N.N.M.T., VMIG1 24,000 2.62%, 7/2/00, Ser. 87B 24,000,000 Student Ln. Rev., A.N.N.O.T., VMIG1 24,000 4.40%, 7/1/02, Ser. 87B 24,000,000 --------------- 48,000,000 ------------------------------------------------------------------------------------- COLORADO 3.1% Adams Cnty. Hosp. Rev., Platte Valley Med. Cntr. B, F.R.W.D., A-1* 10,225 2.77%, 7/5/01, Ser. 1411 10,225,000 Arapahoe Cnty. Multifam. Hsg. Rev., Hunters Run Proj., F.R.W.D., VMIG1 25,600 2.90%, 7/5/01, Ser. 91 25,600,000 Denver City & Cnty., Sngl. Fam. Mtge. Rev., Metro Mayors Caucus, A.M.T., SP1+* 2,290 3.30%, 6/1/02, Ser. 01C 2,290,000
See Notes to Financial Statements 33 COMMAND Account COMMAND Tax-Free Fund Portfolio of Investments as of June 30, 2001 Cont'd.
Moody's Principal Rating Amount (Unaudited) (000) Description(a) Value (Note 1) ----------------------------------------------------------------------------------------- NBC Metropolitan Dist., G.O., A-1* $ 2,700 4.30%, 12/1/01, Ser. 00 $ 2,700,000 Roaring Fork Municipal Prods. LLC, F.R.W.D., A.M.T., A-1+* 7,595 2.93%, 7/5/01, Ser. 00-7 7,595,000 Wheat Ridge Ind. Dev. Rev., Var. Adolph Coors Co. Proj., F.R.W.D., A.M.T., A-1+* 5,000 2.90%, 7/5/01, Ser. 1993 5,000,000 --------------- 53,410,000 ------------------------------------------------------------------------------------- CONNECTICUT 0.2% Connecticut Spec. Assmt., Unemploy. Comp. Rev., A.N.N.O.T., F.G.I.C., VMIG1 3,200 4.35%, 7/1/01, Ser. 93C 3,200,000 ------------------------------------------------------------------------------------- DELAWARE 0.5% Delaware Econ. Dev. Auth. Rev. Delmarva Pwr. & Light Co., A.M.T., VMIG1 8,000 3.65%, 7/2/01, Ser. 87A 8,000,000 ------------------------------------------------------------------------------------- DISTRICT OF COLUMBIA 2.1% District Columbia Hsg. Fin. Agcy., Sngl. Fam. Mtge. Rev., A.M.T., SP1+* 11,400 3.50%, 3/25/02, Ser. 2001C 11,400,000 Metropolitan Airport Auth., A.M.T., T.E.C.P., A-1+* 24,000 3.40%, 8/22/01, Ser. 99A 24,000,000 Mun. Secs. Trust, F.S.A., A-1* 1,100 3.35%, 7/2/01, Ser. 00-92 1,100,000 --------------- 36,500,000 ------------------------------------------------------------------------------------- FLORIDA 8.7% Alachua Cnty. Hsg. Fin. Auth., University Cove Apts. Proj., F.R.W.D., A.M.T., VMIG1 4,620 2.95%, 7/5/01, Ser. 2001 4,620,000
34 See Notes to Financial Statements COMMAND Account COMMAND Tax-Free Fund Portfolio of Investments as of June 30, 2001 Cont'd.
Moody's Principal Rating Amount (Unaudited) (000) Description(a) Value (Note 1) ----------------------------------------------------------------------------------------- Capital Proj. Fin. Auth. Florida Rev., AAAE Airports Proj., F.R.W.D., VMIG1 $ 26,565 2.85%, 7/4/01, Ser. H $ 26,565,000 Florida St. Brd. of Ed. Pub. Ed., S.G.A., F.R.D.D., A-1+* 1,800 3.35%, 7/2/01, Ser. 102 1,800,000 Highlands Cnty. Hlth. Fac. Auth., Adventist Hlth. Sys., M.B.I.A., F.R.W.D., VMIG1 8,100 2.77%, 7/5/01, Ser. 2000A 8,100,000 Orange Cnty., Hlth. Fac. Auth., Adventist Hlth. Sys. Sunbelt, F.R.W.D., F.S.A., A-1+* 52,375 2.93%, 7/5/01, Ser. 98171 52,375,000 Hosp. Assoc. Hlth. Facs. Ln., F.R.W.D., VMIG1 48,400 2.85%, 7/5/01, Ser. 00A 48,400,000 Sunshine St. Gov't. Fin. Com. Paper, Rev. Notes, T.E.C.P., A-1+* 10,000 2.80%, 8/9/01, Ser. C 10,000,000 --------------- 151,860,000 ------------------------------------------------------------------------------------- GEORGIA 2.4% Burke Cnty. Dev. Auth., Oglethorpe Pwr. Corp., T.E.C.P., A.M.B.A.C., VMIG1 12,000 2.70%, 8/7/01, Ser. 98 12,000,000 Cobb Cnty. Ind. Dev. Auth., Inst. of Nuclear Pwr., F.R.W.D., CPS1 10,000 2.70%, 7/4/01, Ser. 98 10,000,000 Cobb Cnty. Multifam. Hsg. Rev., Terrell Mill II Assoc., F.R.W.D., A-1+* 10,600 2.80%, 7/5/01, Ser. 93 10,600,000 Gwinett Cnty. Dev. Auth., Wesleyan Sch. Proj., F.R.W.D., CPS1 10,000 2.70%, 7/4/01, Ser. 99 10,000,000 --------------- 42,600,000 ------------------------------------------------------------------------------------- HAWAII 0.2% Hawaii St., G.O., NR 3,000 6.00%, 9/1/01, Ser. CK 3,013,124
See Notes to Financial Statements 35 COMMAND Account COMMAND Tax-Free Fund Portfolio of Investments as of June 30, 2001 Cont'd.
Moody's Principal Rating Amount (Unaudited) (000) Description(a) Value (Note 1) ----------------------------------------------------------------------------------------- IDAHO 0.5% Boise City Hsg. Auth. Rev., A.M.T., B.A.N., F.G.I.C., NR $ 8,000 4.70%, 10/1/01, Ser. 2000 $ 8,000,000 ------------------------------------------------------------------------------------- ILLINOIS 15.4% Chicago, M.E.R.L.O.T., A.M.B.A.C., VMIG1 13,000 2.80%, 7/4/01, Ser. A43 13,000,000 Sr. Lein Wtr. Rev., F.R.W.D., M.E.R.L.O.T., VMIG1 14,385 2.80%, 7/5/01, Ser. 00TT 14,385,000 Stockyards Ind. Proj., F.R.W.D., A-1+* 12,400 2.75%, 7/4/01, Ser. 96A 12,400,000 Gurnee Ind. Dev. Rev., Sterigenics Int'l. Proj., F.R.W.D., A.M.T., A-1* 6,460 2.85%, 7/5/01, Ser. 96 6,460,000 Illinois Dev. Fin. Auth. Rev., A.M.B.A.C., F.R.W.D., VMIG1 5,000 2.85%, 7/4/01, Ser. 99A 5,000,000 VMIG1 22,000 2.85%, 7/4/01, Ser. 99B 22,000,000 American College of Surgeons, F.R.W.D., A-1+* 15,200 2.80%, 7/6/01, Ser. 96 15,200,000 Evanston Hosp. Corp., F.R.W.D., VMIG1 8,000 2.15%, 7/3/01, Ser. 2001A 8,000,000 Illinois Ed. Fac. Auth. Rev., Univ. of Chicago, T.E.C.P., P1 25,000 3.10%, 8/16/01 25,000,000 P1 15,000 3.25%, 10/4/01 15,000,000 Illinois Hlth. Fac. Auth., Evanston Hosp. Corp. Prog., 2.80%, 5/15/02, Ser. 92 VMIG1 34,000 A.N.N.M.T. 34,000,000 VMIG1 20,000 3.40%, 8/15/01, Ser. 95 T.E.C.P. 20,000,000 Central Baptist Home, VMIG1 7,100 2.77%, 7/5/01, Ser. 1999 B 7,100,000 Illinois Hsg. Dev. Auth. Rev., Homeowner Mtge., F.R.W.D., M.E.R.L.O.T., A.M.T., VMIG1 11,985 2.85%, 7/5/01, Ser. 00V 11,985,000
36 See Notes to Financial Statements COMMAND Account COMMAND Tax-Free Fund Portfolio of Investments as of June 30, 2001 Cont'd.
Moody's Principal Rating Amount (Unaudited) (000) Description(a) Value (Note 1) ----------------------------------------------------------------------------------------- Mun. Secs. Trust, Illinois Toll Hwy. Auth., F.S.A., F.R.W.D., A-1* $ 11,700 2.73%, 7/4/01, Ser. 98-67 $ 11,700,000 Peoria Cnty. Sewage Fac. Rev., Caterpillar, Inc. Proj., A.M.T., F.R.W.D., P1 4,300 2.93%, 7/5/01, Ser. 00 4,300,000 SSM Health Care, M.B.I.A., A-1+* 4,410 3.10%, 7/23/01, Ser. 98B 4,410,000 Wheeling Multifam. Hsg. Rev., Woodland Creek II, F.R.W.D., F.S.A., SP1+* 17,655 2.80%, 7/6/01, Ser. 90 17,655,000 Woodridge, Dupage & Will Cntys., Multifam. Hsg. Rev., Hinsdale Lake Terr. Apts., F.R.W.D., F.S.A., A-1+* 20,760 2.80%, 7/6/01, Ser. 90 20,760,000 --------------- 268,355,000 ------------------------------------------------------------------------------------- INDIANA 1.8% Mount Vernon, Gen. Electric Co. Proj., T.E.C.P., P1 6,900 2.80%, 8/8/01, Ser. 89A 6,900,000 Porter Cnty., Temp. Loan Warrants, NR 5,000 3.80%, 12/31/01 5,008,503 St. Joseph Cnty. Hosp. Fac., Memorial Hosp. of South Bend, NR 10,000 7.00%, 8/15/01, Ser. 91A (c) 10,241,845 Tippecanoe Cnty., Poll. Ctrl. Rev., Caterpillar, Inc. Proj., F.R.W.D., A.M.T., P1 8,750 2.88%, 7/5/01, Ser. 91 8,750,000 --------------- 30,900,348
See Notes to Financial Statements 37 COMMAND Account COMMAND Tax-Free Fund Portfolio of Investments as of June 30, 2001 Cont'd.
Moody's Principal Rating Amount (Unaudited) (000) Description(a) Value (Note 1) ----------------------------------------------------------------------------------------- IOWA 0.9% Iowa Fin. Auth. Solid Waste Disposal Rev., Cedar River Paper Co., A.M.T., F.R.D.D., A-1+* $ 7,100 3.35%, 7/2/01, Ser. 95A $ 7,100,000 Sergeant Bluff Ind. Dev. Rev., Sioux City Brick & Tile Proj., F.R.W.D., A.M.T., NR 8,480 2.95%, 7/5/01, Ser. 96C 8,480,000 --------------- 15,580,000 ------------------------------------------------------------------------------------- KANSAS 0.1% Johnson Cnty. Unified Sch. Dist., A.M.B.A.C., NR 1,700 5.50%, 9/1/01, Ser. 1994 1,706,528 ------------------------------------------------------------------------------------- KENTUCKY 1.0% Henderson Cnty. Ind. Dev. Rev., Eastern Alloys of KY LLC Proj., F.R.W.D., A.M.T., A-1+* 5,300 2.95%, 7/5/01, Ser. 99 5,300,000 Kentucky Hospital Assoc. Hlth. Fac. Loan, F.R.W.D., VMIG1 12,700 2.85%, 7/5/01, Ser. 2000A 12,700,000 --------------- 18,000,000 ------------------------------------------------------------------------------------- LOUISIANA 4.0% Calcasieu Parish Ind. Dev. Brd., Citgo. Corp., F.R.D.D., A.M.T., VMIG1 2,400 3.45%, 7/2/01, Ser. 94 2,400,000 Louisiana Loc. Gov. Env. Fac., Comm. Dev. Auth., Loan Fin. Prog., F.R.W.D., VMIG1 22,500 2.85%, 7/5/01, Ser. 2001A 22,500,000 Louisiana St., G.O., F.G.I.C., NR 2,000 6.00%, 8/1/01, Ser. 96A 2,004,605 G.O., NR 1,000 6.50%, 5/1/02, Ser. 1992A(c) 1,049,196
38 See Notes to Financial Statements COMMAND Account COMMAND Tax-Free Fund Portfolio of Investments as of June 30, 2001 Cont'd.
Moody's Principal Rating Amount (Unaudited) (000) Description(a) Value (Note 1) ----------------------------------------------------------------------------------------- New Orleans Ind. Dev. Brd., 3700 Orleans LLC Proj., F.R.W.D., A.M.T., A-1+* $ 10,000 2.88%, 7/5/01, Ser. 2000 $ 10,000,000 Parish of Ascension Rev., Shell Oil Co. Proj., A.M.T., F.R.D.D., VMIG1 2,400 3.45%, 7/2/01, Ser. 2000 2,400,000 Roaring Fork Municipal Prods. LLC, F.R.W.D., A.M.T., VMIG1 14,055 2.93%, 7/5/01, Ser. 00-2 14,055,000 W. Baton Rouge Parish Ind. Dist. Pound3, Dow Chemical Co. Proj., T.E.C.P., P1 15,000 2.85%, 8/8/01, Ser. 91 15,000,000 --------------- 69,408,801 ------------------------------------------------------------------------------------- MAINE 0.2% York Rev., Stonewall Realty LLC Proj., F.R.W.D., A.M.T., VMIG1 2,770 3.20%, 7/5/01, Ser. 99 2,770,000 ------------------------------------------------------------------------------------- MARYLAND 0.4% Roaring Fork Municipal Prods. LLC, Prince George's Cnty. Hsg. Auth., F.R.W.D., A.M.T., A-1+* 7,550 2.93%, 7/5/01, Ser. 00-11 7,550,000 ------------------------------------------------------------------------------------- MASSACHUSETTS 1.4% Clipper Tax Exempt Trust, A.N.N.O.T., M.B.I.A., 3.50%, 12/14/01, Ser. 2001(e) (cost $5,000,000; purchased VMIG1 5,000 2/15/01) 5,000,000 Commonwealth of MA, G.O., VMIG1 9,000 3.45%, 7/19/01, Ser. ZTC9 9,000,000 Mass. St. Dev. Fin. Agcy., Semass Proj., A.M.T., F.R.W.D., A-1* 4,800 3.10%, 7/4/01, Ser. A 4,800,000 A-1* 2,540 3.10%, 7/4/01, Ser. B 2,540,000 Seekonk, B.A.N., NR 3,000 4.45%, 10/19/01 3,009,225 --------------- 24,349,225
See Notes to Financial Statements 39 COMMAND Account COMMAND Tax-Free Fund Portfolio of Investments as of June 30, 2001 Cont'd.
Moody's Principal Rating Amount (Unaudited) (000) Description(a) Value (Note 1) ----------------------------------------------------------------------------------------- MICHIGAN 1.3% Michigan Strategic Fund, Dow Chemical Co. Proj., F.R.D.D., A.M.T., P1 $ 8,100 3.50%, 7/2/01, Ser. 99 $ 8,100,000 Michigan, G.O., Sch. Loan Bd., VMIG1 4,000 3.20%, 10/3/01, Ser. 2001A 4,000,000 Walled Lake Consld. Sch. Dist., G.O., F.R.W.D., VMIG1 10,000 2.83%, 7/5/01, Ser. ZTC18 10,000,000 --------------- 22,100,000 ------------------------------------------------------------------------------------- MINNESOTA 1.2% Bloomington Port Auth. Tax Rev., Ref. Mall of America, F.R.W.D., F.S.A. VMIG1 18,000 2.80%, 7/5/01, Ser. 99B 18,000,000 St. Paul Hsg. & Redev. Auth., Heating Rev., F.R.W.D., A-1+* 3,500 2.80%, 7/6/01, Ser. 99D 3,500,000 --------------- 21,500,000 ------------------------------------------------------------------------------------- MISSISSIPPI 1.3% Harrison Cnty. Poll. Ctrl. Rev., Mississippi Pwr. Co. Proj., F.R.D.D., A-1* 6,450 3.40%, 7/2/01, Ser. 92 6,450,000 Mississippi Dev. Bank Special Oblig., M.E.R.L.O.T., F.R.W.D., A-1+* 7,500 2.80%, 7/5/01, Ser. A16 7,500,000 Roaring Fork Municipal Prods. LLC, Mississippi Home Corp., A.M.T., F.R.W.D., VMIG1 8,670 2.93%, 7/5/01, Ser. 00-18 8,670,000 --------------- 22,620,000 ------------------------------------------------------------------------------------- MISSOURI 1.8% Capital Proj. Fin. Auth., M.B.I.A., NR 1,500 4.25%, 6/1/02, Ser. I 1,518,152
40 See Notes to Financial Statements COMMAND Account COMMAND Tax-Free Fund Portfolio of Investments as of June 30, 2001 Cont'd.
Moody's Principal Rating Amount (Unaudited) (000) Description(a) Value (Note 1) ----------------------------------------------------------------------------------------- Kansas City Ind. Dev. Auth., KC Air Cargo Svcs. Proj., F.R.W.D., A.M.T., A-1* $ 7,300 2.83%, 7/5/01, Ser. 00 $ 7,300,000 Roaring Fork Municipal Prods. LLC, F.R.W.D., A.M.T., A-1* 21,790 2.93%, 7/5/01, Ser. 003 21,790,000 --------------- 30,608,152 ------------------------------------------------------------------------------------- NEVADA 0.3% Clark Cnty., Trans. Improv. Bonds, A.M.B.A.C., NR 5,000 6.00%, 6/1/02, Ser. 1992A(c) 5,143,677 ------------------------------------------------------------------------------------- NEW JERSEY 2.1% Jersey City, G.O., B.A.N., SP1+* 21,500 4.60%, 9/14/01 21,508,461 Montgomery Twp., G.O., B.A.N., NR 4,155 3.75%, 2/5/02 4,164,625 Trenton, G.O., M1G1 5,000 3.625%, 12/20/01 5,005,154 Upper Deerfield Twp., Brd. of Ed., NR 6,172 3.50%, 8/8/01 6,172,635 --------------- 36,850,875 ------------------------------------------------------------------------------------- NEW MEXICO 0.7% Roaring Fork Municipal Prods. LLC, F.R.W.D., A.M.T., A-1+* 12,125 2.93%, 7/5/01, Ser. 00-1 12,125,000 ------------------------------------------------------------------------------------- OHIO 7.4% Clinton Cnty. Hosp. Rev., Ohio Hosp. Cap. Fin., F.R.W.D., A-1+* 32,300 2.85%, 7/5/01, Ser. 98 32,300,000 Cuyahoga Cnty. Hosp. Rev., W. O. Walker Ctr. Inc., A.M.B.A.C., F.R.W.D., A-1* 11,690 2.77%, 7/5/01, Ser. 98II 11,690,000
See Notes to Financial Statements 41 COMMAND Account COMMAND Tax-Free Fund Portfolio of Investments as of June 30, 2001 Cont'd.
Moody's Principal Rating Amount (Unaudited) (000) Description(a) Value (Note 1) ----------------------------------------------------------------------------------------- Dublin, City Sch. Dist., B.A.N., MIG1 $ 4,600 3.215%, 12/12/01, Ser. 2001 $ 4,606,952 Eastlake Ind. Dev. Rev., Astro Model Dev. Corp. Proj., F.R.W.D., A.M.T., NR 2,910 2.95%, 7/5/01, Ser. 96 2,910,000 Granville Exmp. Village Sch. Dist., B.A.N., NR 7,000 3.59%, 12/6/01, Ser. 01 7,012,996 Mahoning Cnty. Hosp. Fac. Rev., Forum Hlth. Oblig. Grp. B, F.R.W.D., M.B.I.A. VMIG1 10,000 2.75%, 7/5/01, Ser. 97B 10,000,000 Mason, City Sch. Dist., B.A.N., MIG1 37,135 3.81%, 9/17/01, Ser. 2001B 37,175,606 Ohio Elem. & Sec. Ed. Cap. Fac., F.S.A., NR 5,000 5.00%, 12/1/01, Ser. 97B 5,034,714 Ohio Hsg. Fin. Agcy., Multifam. Hsg. Rev., 10 Wilmington Pl. Prog., F.R.W.D., F.S.A., A-1+* 8,945 2.80%, 7/6/01, Ser. B 8,945,000 Pickerington Local Sch. Dist., B.A.N., MIG1 10,000 3.20%, 12/14/01, Ser. 01 10,011,565 --------------- 129,686,833 ------------------------------------------------------------------------------------- OKLAHOMA 1.2% Oklahoma Dev. Fin. Auth. Rev., Samuel Roberts Noble Inc., NR 2,800 5.00%, 5/1/02, Ser. 2001 2,848,334 Rural Enterprises of Oklahoma Inc., OK Gov. Fin. Proj., F.R.W.D., VMIG1 12,000 2.85%, 7/5/01, Ser. 2000A 12,000,000 Tulsa Pkg. Auth. Rev., Williams Ctr. Proj., S.E.M.M.T., VMIG1 6,040 3.10%, 11/15/01, Ser. 87A 6,040,000 --------------- 20,888,334
42 See Notes to Financial Statements COMMAND Account COMMAND Tax-Free Fund Portfolio of Investments as of June 30, 2001 Cont'd.
Moody's Principal Rating Amount (Unaudited) (000) Description(a) Value (Note 1) ----------------------------------------------------------------------------------------- OREGON 0.8% Oregon St. Hlth. Hsg. Ed., & Cult. Fac. Auth., Peacehealth, F.R.W.D., M.B.I.A. VMIG1 $ 14,600 2.76%, 7/5/01, Ser. 1998 $ 14,600,000 ------------------------------------------------------------------------------------- PENNSYLVANIA 1.1% Delaware River Port Auth. PA & NJ Rev., M.E.R.L.O.T., F.G.I.C., F.R.W.D., VMIG1 2,500 2.70%, 7/5/01, Ser. 00-B4 2,500,000 Emmaus Gen. Auth. Rev., Loan Prog., F.R.W.D., F.S.A., A-1+* 6,400 2.76%, 7/5/01, Ser. 2000A 6,400,000 Lancaster Cnty. Hosp. Auth. Rev., Willow Valley Lakes, F.R.W.D., M.B.I.A., A-1+* 9,735 2.76%, 7/5/01, Ser. 1998B 9,735,000 Univ. of Pittsburgh, M.B.I.A., NR 970 6.25%, 6/1/02, Ser. 1992B(c) 1,015,262 --------------- 19,650,262 ------------------------------------------------------------------------------------- RHODE ISLAND 0.4% Rhode Island St., G.O., Consolidated Capital Dev. Loan, NR 3,455 4.25%, 9/1/01, Ser. 98A 3,455,293 Consolidated Capital Dev. Loan, M.B.I.A., NR 4,100 5.50%, 8/1/01 4,107,577 --------------- 7,562,870 ------------------------------------------------------------------------------------- SOUTH CAROLINA 1.1% Columbia Wtrwks. & Swr. Sys. Rev., NR 3,850 6.50%, 2/1/02, Ser. 91 3,929,869 Lexington Cnty. Hlth. Svcs. Dist. Hosp. Rev., Dist. Inc. Hosp. Rev., F.S.A., NR 4,275 6.75%, 10/1/01, Ser. 91(c) 4,396,067
See Notes to Financial Statements 43 COMMAND Account COMMAND Tax-Free Fund Portfolio of Investments as of June 30, 2001 Cont'd.
Moody's Principal Rating Amount (Unaudited) (000) Description(a) Value (Note 1) ----------------------------------------------------------------------------------------- Lexington Cnty. Joint Mun. Wtr. & Swr. Sys., B.A.N., NR $ 7,500 4.50%, 4/25/02, Ser. 2001A $ 7,568,097 South Carolina Pub. Svcs. Auth., T.E.C.P., P1 3,500 2.75%, 8/8/01 3,500,000 --------------- 19,394,033 ------------------------------------------------------------------------------------- SOUTH DAKOTA 0.5% Grant Cnty., Otter Tail Pwr. Co. Proj., F.R.W.D., VMIG1 8,000 2.95%, 7/6/01, Ser. 1993 8,000,000 ------------------------------------------------------------------------------------- TENNESSEE 11.6% Dickson Cnty., Renaissance Learning Ctr. Proj., F.R.W.D., CPS1 15,300 2.70%, 7/4/01, Ser. 97 15,300,000 Morgan Keegan Mun. Prods. Inc., Hsg. Dev. Agcy., A.M.T., F.R.W.D., A-1+* 74,145 2.98%, 7/5/01, Ser. CN1 74,145,000 Metro Nashville Airport Auth., F.G.I.C., A-1+* 60,000 3.60%, 7/19/01, Ser. 2001A 60,000,000 Shelby Cnty. Hlth. Ed. & Hsg. Fac. Bd. Rev., Baptist Mem. Hosp. Proj., T.E.C.P., A-1+* 8,000 3.35%, 7/27/01, Ser. 2000 8,000,000 Sumner Cnty. Hlth. Ed.& Hsg. Bd. Rev., Hosp. Alliance Pool, F.R.W.D., A-1+* 45,000 2.80%, 7/5/01, Ser. 99A 45,000,000 --------------- 202,445,000 ------------------------------------------------------------------------------------- TEXAS 12.1% Bexar Cnty. Hsg. Fin. Corp., Perrin Park Apt., F.R.W.D., A.M.T., VMIG1 10,375 2.91%, 7/5/01, Ser. 96 10,375,000
44 See Notes to Financial Statements COMMAND Account COMMAND Tax-Free Fund Portfolio of Investments as of June 30, 2001 Cont'd.
Moody's Principal Rating Amount (Unaudited) (000) Description(a) Value (Note 1) ----------------------------------------------------------------------------------------- Brazos River Harbor Nav. Dist. Rev., Dow Chemical Co. Proj., F.R.D.D., A.M.T., P1 $ 100 3.50%, 7/2/01, Ser.92 A $ 100,000 Dow Chemical Co. Proj., T.E.C.P., F.R.W.D., P1 15,900 3.45%, 7/17/01, Ser. 91 15,900,000 P1 18,700 3.20%, 7/23/01, Ser. 91 18,700,000 Merey Sweeny Proj., A.M.T., F.R.D.D., VMIG1 900 3.45%, 7/2/01, Ser. 2001A 900,000 Clipper Tax Exempt Trust, Bexar Cty., A.N.N.O.T., M.B.I.A., 3.50%, 12/14/01, Ser. 01-3(e) (cost $8,000,000; purchased VMIG1 8,000 2/1/01) 8,000,000 Clipper Tax Exempt Trust, Texas, Dept. Hsg. & Cmty. Affairs, A.M.T., A.N.N.O.T., 3.60%, 12/14/01, Ser. 01-1(e) (cost $5,000,000; purchased VMIG1 5,000 2/1/01) 5,000,000 Collin Cnty. Hsg. Fin. Corp. Multifam. Hsg. Rev., Huntington Apts. Proj., F.R.W.D., A-1+* 6,155 2.83%, 7/5/01, Ser. 96 6,155,000 Desoto Ind. Dev. Auth., Solar Turbines Inc. Proj., F.R.W.D., P1 7,050 2.80%, 7/5/01, Ser. 2000 7,050,000 Gulf Coast Ind. Dev. Auth., Amoco Oil Co. Proj., A.M.T., F.R.D.D., VMIG1 1,800 3.45%, 7/2/01, Ser. 93 1,800,000 Harlingen Hsg. Fin. Corp. Sngl. Fam., A.N.N.M.T., SP1+* 5,000 4.50%, 1/15/02, Ser. 00A 5,000,000 Harris Cnty. Texas, Toll Road & Sub Lien, M.B.I.A., NR 3,250 Zero Coupon, 8/15/01, Ser. 99A 3,238,567 Mesquite Ind. Sch. Dist., NR 2,000 Zero Coupon, 8/15/01, Ser. 93 1,992,965
See Notes to Financial Statements 45 COMMAND Account COMMAND Tax-Free Fund Portfolio of Investments as of June 30, 2001 Cont'd.
Moody's Principal Rating Amount (Unaudited) (000) Description(a) Value (Note 1) ----------------------------------------------------------------------------------------- Mun. Secs. Trust, Harris Cnty. Toll Road & Sub Lien, F.R.D.D., 3.35%, 7/2/01, Ser. 126(e) (cost $20,800,000; purchased A-1* $ 20,800 4/26/01) $ 20,800,000 North Central Texas Hlth. Fac. Dev., Methodist Hosp. of Dallas, A.M.B.A.C., T.E.C.P., VMIG1 42,100 2.90%, 7/13/01, Ser. 98 42,100,000 Port Corpus Christi Ind. Dev. Corp. Env. Fac., Citgo Petroleum Corp. Proj., A.M.T., F.R.D.D., VMIG1 1,000 3.45%, 7/2/01, Ser. 98-2 1,000,000 San Antonio Elec. & Gas Rev., Mun. Secs., F.R.W.D., A-1+* 3,920 2.73%, 7/4/01, Ser. SGA 48 3,920,000 P1 2,200 2.75%, 8/8/01, Ser. A 2,200,000 San Antonio Wtr. Sys. Rev., F.R.W.D., M.E.R.L.O.T., VMIG1 10,420 2.80%, 7/5/01, Ser. 00VV 10,420,000 Texas St., Superconducting Super Collider, F.G.I.C., Zero Coupon, 4/1/02, Ser. NR 2,750 1992C(c) 2,691,411 T.R.A.N., MIG1 34,700 5.25%, 8/31/01, Ser. 00 34,808,742 Texas St., Pub. Fin. Auth., A.M.B.A.C., NR 9,000 Zero Coupon, 10/1/01, Ser. 1992A 8,937,198 --------------- 211,088,883 ------------------------------------------------------------------------------------- UTAH 1.2% Logan Ind. Dev. Rev., Tek Tool & Plastics Inc. Proj., A.M.T., F.R.W.D., A-1* 5,000 2.83%, 7/5/01, Ser. 2000 5,000,000 Salt Lake Cnty., T.R.A.N., NR 12,000 3.50%, 12/28/01, Ser. 2001 12,049,456 Utah Cnty, T.R.A.N., NR 3,150 4.00%, 12/28/01 3,165,940 --------------- 20,215,396
46 See Notes to Financial Statements COMMAND Account COMMAND Tax-Free Fund Portfolio of Investments as of June 30, 2001 Cont'd.
Moody's Principal Rating Amount (Unaudited) (000) Description(a) Value (Note 1) ----------------------------------------------------------------------------------------- VERMONT 0.1% Vermont Hsg. Fin. Agcy., Sngl. Fam. Hsg., MIG1 $ 2,000 4.30%, 9/7/01, Ser. 11C $ 2,002,917 ------------------------------------------------------------------------------------- VIRGINIA 0.3% Louisa Ind. Dev. Auth., Poll. Ctrl. Rev., T.E.C.P., VMIG1 4,000 2.90%, 8/10/01, Ser. 84 4,000,000 Virginia St. Pub. Sch. Auth., NR 1,305 5.00%, 8/1/01, Ser. 98A 1,307,285 --------------- 5,307,285 ------------------------------------------------------------------------------------- WASHINGTON 0.3% Port of Pasco Econ. Dev. Corp., Douglas Fruit Co., A.M.T., F.R.W.D., A-1* 3,825 2.95%, 7/5/01, Ser. 96 3,825,000 Thurston Cnty. Sch. Dist. No. 3, F.S.A., NR 1,730 5.00%, 12/1/01, Ser. 01 1,740,890 --------------- 5,565,890 ------------------------------------------------------------------------------------- WEST VIRGINIA 0.9% WV Hosp. Fin. Auth. Rev., Pooled Loan Prog., F.R.W.D., VMIG1 16,530 2.80%, 7/4/01, Ser. A 16,530,000 ------------------------------------------------------------------------------------- WISCONSIN 4.5% Appleton Sch. Dist., T.R.A.N., NR 10,985 4.75%, 9/28/01 10,994,749 Chippewa Falls Sch. Dist., T.R.A.N., NR 4,400 4.70%, 9/28/01, Ser. 00 4,402,552 Janesville Sch. Dist., T.R.A.N., NR 6,000 4.65%, 10/4/01 6,003,749 Menasha Joint Sch. Dist., T.R.A.N., NR 3,900 4.50%, 10/1/01 3,900,756
See Notes to Financial Statements 47 COMMAND Account COMMAND Tax-Free Fund Portfolio of Investments as of June 30, 2001 Cont'd.
Moody's Principal Rating Amount (Unaudited) (000) Description(a) Value (Note 1) ----------------------------------------------------------------------------------------- Mequon & Theinsville Sch. Dist., T.R.A.N., NR $ 11,000 4.50%, 9/28/01, Ser. 00-01 $ 11,003,075 Neenah Joint Sch. Dist., T.R.A.N., NR 4,700 4.41%, 8/30/01 4,700,224 New Berlin Sch. Dist., T.R.A.N., NR 8,000 4.50%, 9/14/01 8,001,562 Stevens Point, G.O., NR 1,510 3.50%, 6/1/02, Ser. 01 1,518,052 Wausau Sch. Dist., T.R.A.N. NR 2,700 4.625%, 9/24/01 2,701,349 West Allis- West Milwaukee Sch. Dist., T.R.A.N., NR 8,500 4.50%, 9/21/01 8,501,817 West Bend Sch. Dist., T.R.A.N., NR 1,860 3.50%, 10/15/01, Ser. 01 1,860,524 Wisconsin St., G.O., F.R.W.D., F.S.A., VMIG1 15,500 2.88%, 7/5/01, Ser. ZTC20 15,500,000 --------------- 79,088,409 --------------- Total Investments 100.6% (cost $1,754,856,842(b)) 1,754,856,842 Liabilities in excess of other assets (0.6%) (10,041,034) --------------- Net Assets 100% $ 1,744,815,808 --------------- ---------------
48 See Notes to Financial Statements COMMAND Account COMMAND Tax-Free Fund Portfolio of Investments as of June 30, 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.--Alternative Minimum Tax. A.N.N.M.T.--Annual Mandatory Tender. A.N.N.O.T.--Annual Option Tender. B.A.N.--Bond Anticipation Note. F.G.I.C>--Financial Guaranty Insurance Company. F.R.D.D.--Floating Rate (Daily) Demand Note(d). F.R.W.D.--Floating Rate (Weekly) Demand Note(d). F.S.A.--Financial Security Assurance. G.O.--General Obligation. M.B.I.A.--Municipal Bond Insurance Association. M.E.R.L.O.T.--Municipal Exempt Receipt - Liquid Optional Tender. S.E.M.M.T.--Semi-Annual Mandatory Tender. T.E.C.P.--Tax Exempt Commercial Paper. T.R.A.N.--Tax and Revenue Anticipation Note. (b) The cost for federal income tax purposes is substantially the same as for financial reporting purposes. (c) Prerefunded issues are secured by escrowed cash and/or direct U.S. guaranteed obligations. (d) For purposes of amortized cost valuation, the maturity date of Floating Rate Demand Notes is considered to be the later of the next date on which the security can be redeemed at par or the next date on which the rate of interest is adjusted. (e) Indicates illiquid securities restricted as to resale. The aggregate cost of such securities was $38,800,000. The aggregate value of $38,800,000 was approximately 2.2% of net assets. * Standard & Poor's rating. NR--Not Rated by Moody's or Standard & Poor's. See Notes to Financial Statements 49 COMMAND Account COMMAND Tax-Free Fund Statement of Assets and Liabilities
June 30, 2001 -------------------------------------------------------------------------------------- ASSETS Investments, at amortized cost which approximates market value $1,754,856,842 Cash 306,835 Receivable for Fund shares sold 24,240,262 Interest receivable 13,148,004 Prepaid expenses 14,140 -------------- Total assets 1,792,566,083 -------------- LIABILITIES Payable for investments purchased 32,001,747 Payable for Fund shares repurchased 14,919,063 Management fee payable 607,019 Distribution fee payable 178,367 Accrued expenses and other liabilities 42,763 Dividends payable 1,316 -------------- Total liabilities 47,750,275 -------------- NET ASSETS $1,744,815,808 -------------- -------------- Net assets were comprised of: Shares of beneficial interest, at par $ 17,448,158 Paid-in capital in excess of par 1,727,367,650 -------------- Net assets, June 30, 2001 $1,744,815,808 -------------- -------------- Net asset value, offering price and redemption price per share ($1,744,815,808 / 1,744,815,808 shares of beneficial interest ($.01 par value) issued and outstanding) $1.00 -------------- --------------
50 See Notes to Financial Statements COMMAND Account COMMAND Tax-Free Fund Statement of Operations
Year Ended June 30, 2001 --------------------------------------------------------------------------------------- NET INVESTMENT INCOME Income Interest and discount earned $62,320,079 ------------- Expenses Management fee 6,876,295 Distribution fee 2,000,432 Transfer agent's fees and expenses 174,000 Registration fees 76,000 Reports to shareholders 50,000 Custodian fees and expenses 35,000 Audit fee 28,000 Trustees' fees and expenses 16,000 Legal fees and expenses 16,000 Miscellaneous 20,974 ------------- Total expenses 9,292,701 Less: custodian fee credit (Note 1) (143,800) ------------- Net expenses 9,148,901 ------------- Net investment income 53,171,178 ------------- REALIZED GAIN ON INVESTMENTS Net realized gain on investment transactions 4,034 ------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $53,175,212 ------------- -------------
See Notes to Financial Statements 51 COMMAND Account COMMAND Tax-Free Fund Statement of Changes in Net Assets
Year Ended June 30, ---------------------------------- 2001 2000 ---------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS Operations Net investment income $ 53,171,178 $ 47,793,872 Net realized gain on investment transactions 4,034 -- --------------- --------------- Net increase in net assets resulting from operations 53,175,212 47,793,872 --------------- --------------- Dividends and distributions to shareholders (Note 1) (53,175,212) (47,793,872) --------------- --------------- Fund share transactions (at $1 per share) Net proceeds from shares subscribed 5,491,229,037 5,489,719,243 Net asset value of shares issued in reinvestment of dividends and distributions 53,177,112 47,791,827 Cost of shares reacquired (5,228,677,799) (5,585,155,129) --------------- --------------- Net increase (decrease) in net assets from Fund share transactions 315,728,350 (47,644,059) --------------- --------------- Total increase (decrease) 315,728,350 (47,644,059) NET ASSETS Beginning of year 1,429,087,458 1,476,731,517 --------------- --------------- End of year $ 1,744,815,808 $ 1,429,087,458 --------------- --------------- --------------- ---------------
52 See Notes to Financial Statements COMMAND Account Financial Highlights ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' COMMAND Account COMMAND Tax-Free Fund Financial Highlights
Year Ended June 30, 2001 ---------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of year $ 1.000 Net investment income and net realized gains 0.034 Dividends and distributions to shareholders (0.034) ---------------- Net asset value, end of year $ 1.000 ---------------- ---------------- TOTAL RETURN(a) 3.42% RATIOS/SUPPLEMENTAL DATA: Net assets, end of year (000) $1,744,816 Average net assets (000) $1,600,345 Ratios to average net assets: Expenses, including distribution and service (12b-1) fees .57% Expenses, excluding distribution and service (12b-1) fees .45% Net investment income 3.32%
------------------------------ (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. 54 See Notes to Financial Statements COMMAND Account COMMAND Tax-Free Fund Financial Highlights Cont'd.
Year Ended June 30, ------------------------------------------------------- 2000 1999 1998 1997 ------------------------------------------------------- $ 1.000 $ 1.000 $ 1.000 $ 1.000 0.032 0.027 0.031 0.030 (0.032) (0.027) (0.031) (0.030) ---------- ---------- ---------- ---------- $ 1.000 $ 1.000 $ 1.000 $ 1.000 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- 3.19% 2.77% 3.16% 3.05% $1,429,087 $1,476,732 $1,332,985 $1,129,513 $1,515,352 $1,549,367 $1,279,188 $1,181,084 .58% .59% .60% .64% .46% .46% .47% .51% 3.15% 2.72% 3.11% 3.00%
See Notes to Financial Statements 55 COMMAND Account COMMAND Tax-Free Fund Report of Independent Accountants To the Shareholders and Trustees of COMMAND Tax-Free Fund In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of COMMAND Tax-Free Fund (the 'Fund') at June 30, 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 June 30, 2001 by correspondence with the custodian, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York August 14, 2001 56 See Notes to Financial Statements COMMAND Account Notes to Financial Statements COMMAND Money Fund, COMMAND Government Fund and COMMAND Tax-Free Fund (each a 'Fund' and collectively, the 'Funds') are each registered under the Investment Company Act of 1940 as an open-end, diversified management investment company whose shares are offered exclusively to participants in the Prudential Securities COMMAND Account Program of Prudential Securities Incorporated (Prudential Securities). The COMMAND Money Fund seeks high current income, preservation of capital and maintenance of liquidity by investing in a diversified portfolio of money market instruments maturing in 13 months or less. The COMMAND Government Fund seeks high current income, preservation of capital and maintenance of liquidity by investing in a portfolio of U.S. government securities maturing in 13 months or less. The COMMAND Tax-Free Fund seeks high current income that is exempt from federal income taxes, consistent with the preservation of capital and maintenance of liquidity. The Fund invests in a diversified portfolio of short-term, tax-exempt securities with maturities of 13 months or less that are issued by states, municipalities and their agencies (or authorities). Some securities may be subject to the federal alternative minimum tax (AMT). The Funds invest in a portfolio of money market instruments whose ratings are within the two highest ratings categories by a nationally recognized statistical rating agency or, if not rated, are of comparable quality. The ability of the issuers of the securities held by the Funds to meet their obligations may be affected by economic and/or political developments in a specific industry, state or region. Note 1. Accounting Policies The following is a summary of significant generally accepted accounting policies followed by the Funds in the preparation of their financial statements. Securities Valuation: Portfolio securities are valued at amortized cost, which approximates market value. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of any discount or premium. If the amortized cost method is determined not to represent fair value, the value shall be determined by or under the direction of the Board of Trustees. All securities are valued as of 4:30 p.m., New York time. The Funds may hold up to 10% of their net assets in illiquid securities, including those which are restricted as to disposition under securities law ('restricted securities'). None of the issues of restricted securities held by the Funds at June 30, 2001 include registration rights under which the Fund may demand registration by the issuer. Repurchase Agreements: In connection with transactions in repurchase agreements, it is the Funds' policy that its custodian or designated subcustodians, as the case may be under triparty repurchase agreements, take possession of the 57 COMMAND Account Notes to Financial Statements Cont'd. underlying collateral securities, the value of which exceeds the principal amount of the repurchase transaction, including accrued interest. To the extent that any repurchase agreement exceeds one business day, the value of collateral is marked-to-market on a daily basis to ensure adequacy of the collateral. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Funds may be delayed or limited. Securities Transactions and Investment Income: Securities transactions are recorded on the trade date. Realized gains and losses on sales of investments are calculated on the identified cost basis. Interest income is recorded on the accrual basis. Expenses are recorded on the accrual basis, which may require the use of certain estimates by management. Net investment income for dividend purposes includes accrued interest and amortization of premiums and discounts, plus or minus any gains or losses realized on sales of portfolio securities, less the estimated expenses of the Fund applicable to the dividend period. Federal Income Taxes: Each Fund intends to continue to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its net income to its shareholders. Therefore, no federal income tax provision is required. The cost of portfolio securities for federal income tax purposes is substantially the same as for financial reporting purposes. Dividends: Each Fund declares all of its net investment income as dividends daily to its shareholders of record at the time of such declaration. Dividends are reinvested daily into additional full and fractional shares of the respective Fund at the net asset value per share determined on the date of declaration. Custody Fee Credits: The COMMAND Tax-Free Fund has an arrangement with its custodian bank, whereby uninvested money earns credits which reduce the fees charged by the custodian. Note 2. Agreements Each Fund has a management agreement with Prudential Investments Fund Management LLC (PIFM). Pursuant to this agreement, PIFM has responsibility for all investment advisory services and supervises the subadviser's performance of such services. PIFM has entered into a Subadvisory Agreement with Prudential Investment Management, Inc. ('PIM'), formerly known as The Prudential Investment Corporation. The Subadvisory Agreement provides that the subadviser will furnish investment advisory services in connection with the management of the Fund. In connection therewith, the subadviser is obligated to keep certain books and records of the Fund. PIFM continues to have responsibility for all investment advisory services pursuant to the 58 COMMAND Account Notes to Financial Statements Cont'd. Management Agreement and supervises the subadviser's performance of such services. PIFM pays for the services of PIM, the compensation of officers of the Funds, occupancy and certain clerical and bookkeeping costs of the Funds. The Funds bear all other costs and expenses. The management fee paid to PIFM is computed daily and payable monthly on the following basis:
Average Daily COMMAND COMMAND COMMAND Net Assets Money Government Tax-Free --------------------- -------- ----------- -------- First $500 million .500% .400% .500% Second $500 million .425% .400% .425% Third $500 million .375% .375% .375% Excess of $1.5 billion .350% .375% .375%
Each Fund has a distribution agreement with Prudential Investment Management Services LLC ('PIMS') which acts as the distributor of the shares of each Fund. Each Fund compensates PIMS for distributing and servicing each Fund's shares, pursuant to the plan of distribution at an annual rate of .125 of 1% of the average daily net assets of each Fund's shares. The distribution fees are accrued daily and payable monthly. PIFM, PIM and PIMS are indirect, wholly-owned subsidiaries of The Prudential Insurance Company of America ('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 Funds' transfer agent. During the year ended June 30, 2001 the Funds incurred fees for the services of PMFS of approximately: COMMAND Money $4,692,000 COMMAND Government $ 98,600 COMMAND Tax-Free $ 173,900
As of June 30, 2001, the following amounts were due to PMFS from the Funds: COMMAND Money $ 402,000 COMMAND Government $ 8,000 COMMAND Tax-Free $ 15,000
59 COMMAND Account Federal Income Tax Information (Unaudited) COMMAND TAX-FREE FUND: We are required by the Internal Revenue Code to advise you within 60 days of the COMMAND Tax-Free Fund's fiscal year-end (June 30, 2001) as to the federal tax status of dividends and distributions paid by the Fund during such fiscal year. Accordingly, we are advising you that for the year ended June 30, 2001, dividends paid from net investment income totaling $.034 per share were all federally tax-exempt interest dividends. COMMAND GOVERNMENT FUND AND COMMAND MONEY FUND: IMPORTANT NOTICE FOR CERTAIN SHAREHOLDERS We are required by Massachusetts, Missouri and Oregon to inform you that dividends which have been derived from interest on federal obligations are not taxable to shareholders, provided the mutual fund meets certain requirements mandated by the respective state's taxing authorities. We are pleased to report that 53% and 3% of the dividends paid by the COMMAND Government Fund and COMMAND Money Fund, respectively, qualify for such deduction. For more detailed information regarding your state and local taxes, you should contact your tax advisor or the state/local taxing authorities. 60 COMMAND Funds 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 THE 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. 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.prudential.com Trustees 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 Fund Symbols Cusip NASDAQ COMMAND Money Fund 20050F103 CDMXX COMMAND Tax-Free Fund 20050R107 CDFXX COMMAND Gov't Fund 20050D108 CGMXX CFA (LOGO) Printed on Recycled Paper