<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Cash Accumulation Trust
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
PRUDENTIAL MUTUAL FUNDS & ANNUITIES
GATEWAY CENTER THREE
NEWARK, NJ 07102
------------------------
October 29, 1997
Dear Shareholder:
Enclosed is a proxy statement asking you to vote in favor of several
proposals relating to the management and operation of your Fund--the National
Money Market Fund. We are pleased to inform you that, if approved, the Fund
would offer reduced expenses for its shareholders. Specifically, the Fund's
total annual operating expenses would decline from .65 of 1% of the average
daily net assets of the Fund as of September 30, 1997 to estimated total annual
operating expenses of .62 of 1% of average daily net assets of the Fund for the
fiscal year ending September 30, 1998.
The great majority of the shareholders in the Fund, a series of the Cash
Accumulation Trust (the Trust), are managed account customers of Prudential
Securities Incorporated (Prudential Securities). Prudential Investments Fund
Management LLC (PIFM), an affiliate of Prudential Securities, has requested, and
the Trustees of the Trust have approved, a proposal that the Trust become part
of the Prudential Mutual Funds (PMF) by electing a new Board of Trustees,
changing the Manager to PIFM, and changing the Subadviser to The Prudential
Investment Corporation.
A meeting of your Trust is being held on December 11, 1997 to consider these
proposals and to transact any other business that may properly come before the
meeting. The enclosed proxy statement contains detailed information about each
of the proposals relating to your Fund and the Trust, and we recommend that you
read it carefully. However, we have also attached some Questions and Answers
that we hope will assist you in evaluating the proposals.
Prudential Investments Management LLC has retained an outside proxy
solicitation firm to assist us with any necessary follow-up. If we have not
received your vote as the meeting date approaches, you may receive a telephone
call from Shareholder Communications Corporation to ask for your vote. We hope
that their telephone call does not inconvenience you.
If you have more than one account holding Fund shares (e.g., an individual
account AND an IRA), you will receive multiple copies of this Proxy Statement
and proxy cards for each of your Fund accounts. Please vote each proxy card you
receive.
Thank you for your attention to this matter. We look forward to serving you
in the Prudential Mutual Funds.
Very truly yours,
[SIGNATURE]
BRIAN M. STORMS
PRESIDENT
Prudential Mutual Funds & Annuities
PROXY CARDS FOR YOUR FUND ARE ENCLOSED ALONG WITH THE PROXY STATEMENT.
PLEASE VOTE YOUR SHARES TODAY BY SIGNING AND RETURNING THE ENCLOSED PROXY
CARD IN THE POSTAGE PREPAID ENVELOPE PROVIDED. THE BOARD OF YOUR TRUST
RECOMMENDS THAT YOU VOTE "FOR" THE NOMINEES FOR BOARD MEMBER AND "FOR"
EACH PROPOSAL.
<PAGE>
QUESTIONS AND ANSWERS
<TABLE>
<S> <C>
Q: WHAT IS THE PURPOSE OF THE PROXY SOLICITATION?
A: The purpose of the proxy is to ask you to vote on three primary issues:
- to elect ten new Board Members of Cash Accumulation Trust (the Trust);
- to change the investment manager and investment adviser for your Fund--the
National Money Market Fund; and
- to ratify the selection of your Trust's independent accountants for the current
year.
Q: WHY IS MY BOARD RECOMMENDING A NEW BOARD FOR THE TRUST?
A: The great majority of beneficial owners of shares in the Fund, a series of the Trust,
are managed account customers of Prudential Securities Incorporated (Prudential
Securities). Prudential Investments Fund Management LLC (PIFM) has requested that the
Trust become part of the Prudential Mutual Funds (PMF) by electing a new Board of
Trustees, changing the Manager to PIFM, and changing the Subadviser to The Prudential
Investment Corporation. The Trust's Board of Trustees adopted the recommendations of
PIFM and nominated ten individuals drawn primarily from an existing PMF Board
specializing in money market fund matters. Eight of the individual Board nominees are
independent of Prudential. Said differently, if the shareholders approve the proposal
and the nominees are elected, Prudential affiliates will become the investment
managers for the Fund, whose shareholders are mostly Prudential Securities' clients.
Q: WILL THE PROPOSED CHANGES RESULT IN LOWER MANAGEMENT FEES?
A: Yes. The management fees charged to the Fund will decline from .42 of 1% of the
Fund's average daily net assets for the fiscal year ending September 30, 1997 to .39
of 1% of the Fund's average daily net assets for the fiscal year ending September 30,
1998. Overall, estimated total operating expenses will decline to .62 of 1% of the
Fund's average daily net assets for the fiscal year ending September 30, 1998.
Q: WILL THE PROPOSED CHANGES RESULT IN LOWER TRUSTEES' FEES?
A: Yes. It is anticipated by PIFM that Trustees' fees will be lower than they are
currently.
Q: IF I HAVE DELEGATED VOTING AUTHORITY TO PRUDENTIAL SECURITIES (OR MY THIRD PARTY
INVESTMENT MANAGER), WHY AM I BEING ASKED TO VOTE?
A. Even if you have delegated voting authority to Prudential Securities, one of its
affiliates, or an investment manager unaffiliated with Prudential Securities, your
vote is specifically being solicited because of the relationship between the delegate
and the proposed new investment managers. Your vote will constitute acceptance of
proxy voting responsibility with respect to this proxy or if you do not vote, the
vote will default to your investment manager.
Q: WHY AM I RECEIVING MORE THAN ONE PROXY STATEMENT OR MORE THAN ONE MAILING?
A: If you hold shares in more than one account, for example, in an individual account
AND in an IRA, you will receive multiple proxy statements. Each proxy card should be
voted and returned.
Q: WHAT ARE MY BOARD'S RECOMMENDATIONS?
A: The Board of the Trust has recommended that you vote "FOR" the nominees for Board
Members and "FOR" each other proposal in the enclosed proxy statement.
</TABLE>
THE ENCLOSED PROXY STATEMENT CONTAINS MORE DETAILED INFORMATION ABOUT THE
PROPOSALS RELATING TO YOUR FUND AND THE TRUST. PLEASE READ IT CAREFULLY.
<PAGE>
CASH ACCUMULATION TRUST
------------------------
840 NEWPORT CENTER DRIVE
NEWPORT BEACH, CA 92660
------------------------
NOTICE OF
MEETING OF SHAREHOLDERS
TO BE HELD ON
DECEMBER 11, 1997
------------------------
To The Shareholders:
A Meeting of the holders of shares of beneficial interest of the Cash
Accumulation Trust (CAT or the Trust) will be held on December 11, 1997, at
11:00 a.m., Eastern Standard Time, at the offices of PIMCO Advisors L.P., 2187
Atlantic Street, Stamford, CT, for the purpose of considering the following
proposals:
(1) To elect ten new members to the CAT Board of Trustees;
(2) (a) To approve a New Management Agreement with Prudential Investments
Fund Management LLC; and
(b) To approve a New Subadvisory Agreement with The Prudential
Investment Corporation;
(3) To ratify the selection of Price Waterhouse LLP as CAT's independent
public accountants for the current fiscal year; and
(4) To transact such other business as may properly come before the meeting
and any adjournments thereof.
You are entitled to vote at the meeting, and at any adjournments thereof, if
you owned shares of the Trust at the close of business on October 20, 1997. If
you attend the meeting, you may vote your shares in person. IF YOU DO NOT EXPECT
TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY
CARD IN THE ENCLOSED POSTAGE PAID ENVELOPE.
By order of the Board of Trustees,
NEWTON B. SCHOTT, JR.
CLERK
October 29, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN AND PROMPTLY
RETURN THE ENCLOSED PROXY IN THE ENCLOSED SELF-ADDRESSED ENVELOPE. WE ASK
YOUR COOPERATION IN MAILING IN YOUR PROXY PROMPTLY.
<PAGE>
CASH ACCUMULATION TRUST
------------------------
840 NEWPORT CENTER DRIVE
NEWPORT BEACH, CA 92660
------------------------
PROXY STATEMENT
MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 11, 1997
------------------------
This proxy statement is being furnished by the Board of Trustees (the Board)
of the Cash Accumulation Trust (CAT or the Trust) to holders of shares of
beneficial interest (Shares) of the Trust in connection with its solicitation of
proxies to be used at a Meeting of CAT Shareholders (Meeting) to be held on
December 11, 1997, at 11:00 a.m., Eastern Standard Time, or any adjournment(s)
thereof, at the offices of PIMCO Advisors L.P., 2187 Atlantic Street, Stamford,
CT (PALP). This proxy statement is being mailed to shareholders on or about
October 31, 1997.
A majority of the Shares entitled to vote at the close of business on
October 20, 1997 (Record Date), represented in person or by proxy, must be
present for the transaction of business at the Meeting (a quorum). In the
absence of a quorum or in the event that a quorum is present at the Meeting but
sufficient votes to approve any of the proposals are not received, the persons
named as proxies may propose one or more adjournments of the Meeting to permit
further solicitation of proxies. Any adjournment will require the affirmative
vote of a majority of those Shares represented at the Meeting in person or by
proxy. The persons named as proxies will vote those proxies that they are
entitled to vote FOR any proposal in favor of such an adjournment and will vote
those proxies required to be voted AGAINST any proposal against such
adjournment. A shareholder vote may be taken on one or more of the proposals in
this proxy statement prior to any such adjournment if sufficient votes have been
received and it is otherwise appropriate.
If a proxy that is properly executed and returned is accompanied by
instructions to withhold authority to vote (an abstention) or represents a
broker "non-vote" (that is, a proxy from a broker or nominee indicating that
such person has not received instructions from the beneficial owner or other
person entitled to vote Shares on a particular matter with respect to which the
broker or nominee does not have discretionary power), the Shares represented
thereby, with respect to matters to be determined by a plurality or majority, as
the case may be, of the votes cast on such matters, will be considered present
for purposes of determining the existence of a quorum for the transaction of
business, but, not being cast, will have no effect on the outcome of such
matters. With respect to matters requiring the affirmative vote of a specified
percentage of the total shares outstanding, an abstention or broker non-vote
will be considered present for purposes of determining a quorum but will have
the effect of a vote against such matters. Accordingly, abstentions and broker
non-votes will have no effect on Proposal Nos. 1 and 3, for which the required
vote is a plurality or majority, respectively, of the votes cast, but
effectively will be a vote against adjournment and against Proposal Nos. 2(a)
and 2(b), which each requires a "vote of majority of the outstanding voting
securities" of the National Money Market Fund as defined under the Investment
Company Act of 1940 (1940 Act).
The individuals named as proxies on the enclosed proxy card will vote in
accordance with your direction as indicated thereon, if your proxy card is
received properly executed by you or by your duly appointed agent or
attorney-in-fact. If your card is properly executed and you give no voting
instructions,
1
<PAGE>
your Shares will be voted FOR the nominees named herein for the Board and FOR
the remaining proposals described in this proxy statement and referenced on the
proxy card. If any nominee for the Board should withdraw or otherwise become
unavailable for election, your Shares will be voted in favor of such other
nominee or nominees as the Board may recommend. You may revoke any proxy by
giving another proxy or by letter or telegram revoking the initial proxy. To be
effective, your revocation must be received by the Clerk of the Trust at 2187
Atlantic St., Stamford, CT prior to the Meeting and must indicate your name and
account number or social security number. In addition, if you attend the Meeting
in person you may, if you wish, vote by ballot at the Meeting, thereby canceling
any proxy previously given.
As of the Record Date, the Trust had 668,250,758 Shares issued and
outstanding, all of which were shares of the National Money Market Fund (the
Fund). The Record Date determines which shareholders are entitled to notice of,
and to vote at, the Meeting. As of this record date, Prudential Securities
Incorporated, One Seaport Plaza, New York, New York 10292 (PSI) was the record
owner of 667,817,842 Shares (or 99.9% of the Shares) of the Fund.
COPIES OF THE FUND'S MOST RECENT ANNUAL AND SEMI-ANNUAL REPORTS, INCLUDING
FINANCIAL STATEMENTS, MAY BE OBTAINED WITHOUT CHARGE BY WRITING CAT C/O
SHAREHOLDER SERVICES INC., P.O. BOX 5866, DENVER, CO 80217, OR BY CALLING (800)
426-0107 (TOLL FREE).
Each full Share of the Trust outstanding is entitled to one vote, and each
fractional Share outstanding is entitled to a proportionate share of one vote,
with respect to each matter to be voted upon by the shareholders of the Trust.
Information about the vote necessary with respect to each proposal is discussed
below in connection with the proposal.
GENERAL OVERVIEW
PSI has informed the Trust that as of the Record Date 99.9% of the Fund's
shares were held by customers of PSI, an indirect, wholly-owned subsidiary of
Prudential Insurance Company of America (Prudential). The Fund serves primarily
as a temporary cash sweep vehicle for certain customer accounts for which PSI
serves as an investment adviser. A portion of these accounts is subject to
fiduciary and prohibited transaction requirements imposed by the Employee
Retirement Income Securities Act of 1974 and similar provisions of the Internal
Revenue Code (ERISA accounts) constituting approximately 38% of the outstanding
shares of the Fund (ERISA shares).
Currently, all Fund services are rendered by persons who are unaffiliated
with PSI and its affiliates. Prudential Investments Fund Management, LLC (PIFM),
a subsidiary of PSI, however, proposed to the Board that PIFM and certain other
affiliates of Prudential assume responsibility for Fund investment management
and subadvisory services, on the basis of the agreements and for the fees
described in this proxy statement (the New Arrangements). PIFM advised the Board
that the proposed fees would lower expense ratios for all Fund shareholders. As
a result of these changes in investment management and subadvisory services,
PIFM and its affiliates also have advised the Board of the Trust that with
respect to ERISA shares PSI will establish an alternative arrangement consistent
with ERISA regulations. PSI anticipates that the ERISA shares that it will
redeem will be reinvested into this alternative arrangement at or about the time
of effectiveness of the New Arrangements.
2
<PAGE>
The following table sets forth the Fund's actual annual operating expenses
(with examples) before any redemption of ERISA shares and the Fund's pro forma
expenses (with examples) after redemption of ERISA shares by PSI:
<TABLE>
<CAPTION>
PRO FORMA FISCAL
1998 (AFTER
REDEMPTION OF
FISCAL 1997 STATUS ERISA SHARES BY
OF THE FUND PSI)*
------------------ ------------------
<S> <C> <C>
AVERAGE NET ASSETS FOR THE FISCAL
YEAR
ENDED SEPTEMBER 30, 1997......... $690,855,235 $427,224,877
ANNUAL OPERATING EXPENSES
Management Fees.................. 0.42% 0.39%
12b-1 Fees....................... 0.10 0.10
Other Expenses................... 0.13 0.13
--- ---
TOTAL OPERATING EXPENSES........... 0.65% 0.62%
--- ---
--- ---
</TABLE>
- ------------------------
* As determined by PIFM.
EXAMPLES
ACTUAL EXPENSES:
<TABLE>
<CAPTION>
ONE THREE FIVE 10
YEAR YEARS YEARS YEARS
------ ------ ------ ------
<S> <C> <C> <C> <C>
You would pay the following expenses on
a $1,000 investment, assuming: (1) five
percent annual return, and (2)
redemption at the end of each time
period:................................ $ 7 $ 21 $ 36 $ 81
</TABLE>
PRO FORMA:
<TABLE>
<CAPTION>
ONE THREE FIVE 10
YEAR YEARS YEARS YEARS
------ ------ ------ ------
<S> <C> <C> <C> <C>
You would pay the following expenses on
a $1,000 investment, assuming: (1) five
percent annual return, and (2)
redemption at the end of each time
period:................................ $ 6 $ 20 $ 35 $ 77
</TABLE>
The purpose of the foregoing table is to assist shareholders in
understanding the existing and proposed expenses to be borne directly or
indirectly by the shareholders of the Fund. PSI and its affiliates may impose
other changes in connection with investment advisory services provided directly
to shareholders. The figures shown in the Examples are entirely hypothetical.
They are not representations of past or future performance or expenses; actual
performance and/or expenses may be more or less than shown.
After careful deliberations as set forth in detail below, the Board
considered and approved, subject to shareholder approvals, Proposal Nos. 1, 2(a)
and 2(b) of this proxy statement. The New Arrangements require the approval of
shareholders--the approval by Fund shareholders of a new management agreement
with PIFM (the Proposed Manager) and a new subadvisory agreement with The
Prudential Investment Corporation (PIC or the Proposed Subadviser), doing
business as Prudential Investments, another wholly-owned subsidiary of
Prudential (Proposal Nos. 2(a) and 2(b)). In addition, the New Arrangements
contemplate that Trust shareholders elect a new Board of Trustees (New Board)
(Proposal No. 1). BECAUSE EACH OF THESE PROPOSALS IS AN INTEGRAL PART OF THE NEW
ARRANGEMENTS, THE EFFECTIVENESS OF
3
<PAGE>
EACH OF THESE PROPOSALS IS CONDITIONED ON SHAREHOLDER APPROVAL OF ALL SUCH
PROPOSALS. PIFM has indicated that other changes, which do not require
shareholder approval, will be proposed to and may be implemented by the New
Board.
If the nominees for Trustee are elected and the new management and
subadvisory agreements are approved, shareholders should expect that the current
officers of the Trust would resign and the New Board would elect new Trust
officers who are affiliated with PIFM. In addition, PIFM has indicated that it
will propose that the New Board approve new agreements with those service
providers that typically service all funds managed or administered by PIFM.
These service providers are PSI, as distributor, Prudential Mutual Fund Services
LLC, as transfer and service agent, and State Street Bank and Trust Company, as
custodian. The Board has not evaluated the level of services to be provided by
any of these anticipated service providers or the related costs.
Proposal No. 3 is the ratification of the selection of the Trust's current
independent accountants. This is a routine matter for the consideration of all
shareholders of the Trust and is unrelated to the proposed New Arrangements.
ELECTION OF TRUSTEES
PROPOSAL NO. 1
The Board has nominated ten new individuals (Nominees) for election to the
New Board. Under this Proposal No. 1, shareholders are being asked to elect each
of these Nominees. Pertinent information about each Nominee is set forth in the
listing below. Each Nominee has indicated a willingness to serve if elected. If
elected, each Nominee will hold office until the next meeting of shareholders at
which Board Members are elected and until his or her successor is elected and
qualified. The Trust has not generally held meetings of shareholders unless the
election of Trustees is required under the 1940 Act.
In evaluating the Nominees, the Trustees took into account their background
and experience, including the fact that the Nominees for CAT's Board constitute
one of the four different boards of directors and trustees (clusters) that serve
substantially all of the Prudential Mutual Funds. The cluster on which the
Nominees serve is currently comprised of 7 money market funds and 5 other funds
within the Prudential Mutual Funds (Cluster II). The Board also took into
account the familiarity of the Nominees with the issues relating to this type of
fund and to investing in money market securities as well as their careers in
business, finance, marketing and other areas.
Eight of the ten Nominees would not be "interested persons" of the Trust
(Proposed Independent Trustees). Independent Trustees are charged with special
responsibilities, among other things, to approve advisory, distribution and
similar agreements between CAT and its investment adviser and its other service
providers. In the course of their duties, Board Members must review and
understand financial and technical material and must be willing to devote
substantial amounts of time to their duties. Due to the demands of service on
the boards, independent nominees may need to reject other attractive
opportunities. Each of the Proposed Independent Trustees already serves as an
Independent Board Member for one or more funds within the Prudential Mutual
Funds. CAT's Declaration of Trust provides that CAT will indemnify its Board and
officers against liabilities and expenses incurred in connection with litigation
in which they may be involved because of their offices with CAT, except if it is
determined in the manner specified in the Declaration of Trust that they have
not acted in good faith in the reasonable belief that their actions were in the
best interests of the Trust or that such indemnification would relieve any
officer or Trustee of any liability to CAT or its shareholders by reason of
willful misfeasance, bad faith, gross
4
<PAGE>
negligence or reckless disregard of his or her duties. CAT, at its expense, will
provide liability insurance for the benefit of its New Board and officers, as it
has for the current Board and officers, and pursuant to an agreement between
PALP and PIFM, PIFM has agreed to cause CAT to furnish such insurance through
2002 for the current Board and officers.
PIFM has advised the Trust that if the Proposed Independent Trustees are
elected, based upon the experience of the Prudential Mutual Funds, the Trustees'
fees are anticipated to be like those adopted by other funds within the
Prudential Mutual Funds, i.e., each Proposed Independent Trustee would be paid
by the Trust an annual fee of $3,000, in addition to certain out-of-pocket
expenses, but no additional compensation would be paid for serving on committees
or attending meetings. The aggregate annual compensation payable to each
Independent Trustee in Cluster II is fixed at $45,000. Therefore, the addition
of another fund such as CAT (or a portfolio thereof) to Cluster II operates to
reduce the fee payable to the Independent Trustees by each fund in Cluster II.
Interested Trustees would continue to receive no trustees' fees from CAT.
Trustees would continue to be reimbursed for any expenses incurred in attending
meetings of the Trust and for other incidental expenses. CAT's Board fees are
subject to the approval of the New Board upon its election; shareholders are not
being asked to vote on these fees. Thereafter, Board fees may be reviewed
periodically and changed by the Board.
The following table sets forth information concerning fees paid during the
Trust's fiscal year ended September 30, 1997 to each Trustee during such fiscal
year:
<TABLE>
<CAPTION>
TOTAL COMPENSATION PAID
AGGREGATE TO
COMPENSATION TRUSTEES FROM CAT
NAME OF TRUSTEE FROM CAT FUND COMPLEX(4)
- ------------------------------------------------------------------------ ------------- -------------------------
<S> <C> <C>
E. Philip Cannon(1)..................................................... $ 5,325 $ 53,250
Donald P. Carter(1)(2).................................................. $ 6,150 $ 61,500
Gary A. Childress(1).................................................... $ 5,325 $ 53,250
William D. Cvengros(3).................................................. $ -- $ --
Gary L. Light(1)(2)..................................................... $ 5,475 $ 54,750
Richard L. Nelson(1)(2)................................................. $ 4,300 $ 72,000
Lyman W. Porter(1)...................................................... $ 4,150 $ 69,500
Robert A. Prindiville(3)................................................ $ -- $ --
Alan Richards(1)........................................................ $ 4,525 $ 74,250
Joel Segall(1).......................................................... $ 5,225 $ 52,250
W. Bryant Stooks(1)(2).................................................. $ 5,325 $ 53,250
Gerald M. Thorne(1)(2).................................................. $ 5,325 $ 53,250
Stephen J. Treadway(3).................................................. $ -- $ --
</TABLE>
- ------------------------
(1) Member of Nominating Committee.
(2) Member of the Audit Committee. This Committee's responsibilities include
review of financial and accounting controls and procedures, recommendations
as to the selection of the independent accountants, and review of the scope
of the audit.
(3) Trustee is an Interested Trustee and receives no compensation from the Trust
or the Fund Complex.
(4) Includes compensation received by each of the Trustees for services as
Trustees of PIMCO Funds: Multi-Manager Series (PFMMS) and PIMCO Advisors
Funds (which ceased operations in January
5
<PAGE>
1997) and also includes compensation received by Messrs. Nelson, Porter and
Richards for services as Trustees of Pacific Select Fund, each of which is
part of the same "Fund Complex" as is the Trust and also includes amounts
deferred at the election of certain Trustees as follows: Carter--$13,250;
Cannon--$50,250; Segall--$52,250; Thorne--$53,250; and Porter--$41,500.
As of the Record Date, the Trust believes that the officers, Trustees and
Nominees as a group owned less than 1% of the outstanding shares of the Fund.
During the fiscal year ended September 30, 1997, the Trust had 4 board
meetings, 2 audit committee meetings and no nominating committee meetings of the
Board. With respect to such fiscal year, all Trustees attended 100% of the
aggregate of meetings of the Board and committees on which he served during his
tenure, with the exception of Mr. Cvengros, who attended 50% of such meetings.
The following table has been provided to the Trust by PIFM, and it sets
forth the aggregate compensation paid to the Nominees for the calendar year
ended December 31, 1996 for service on the Boards of all funds within the
Prudential Mutual Funds. The Nominees have no affiliation with CAT or PALP or
its affiliates, have not served on the Board of any fund in the Fund Complex and
have received no compensation from the Fund Complex.
<TABLE>
<CAPTION>
APPROXIMATE
COMPENSATION
FROM PRUDENTIAL
AGGREGATE MUTUAL FUNDS
COMPENSATION PAID TO
NAME AND POSITION FROM CAT NOMINEES(2)
- ------------------------------------------------------------------------------ --------------- ------------------
<S> <C> <C>
Edward D. Beach............................................................... $ -- $ 166,000(21/39)*
Stephen C. Eyre............................................................... $ -- $ 34,250(4/5)*
Delayne D. Gold............................................................... $ -- $ 175,308(21/42)*
Robert F. Gunia(1)............................................................ $ -- $ --
Don G. Hoff................................................................... $ -- $ 50,042(5/7)*
Robert F. LaBlanc............................................................. $ -- $ 34,542(4/4)*
Mendel A. Melzer(1)........................................................... $ -- $ --
Robin B. Smith................................................................ $ -- $ 89,957(11/20)*
Stephen Stoneburn............................................................. $ -- $ 30,375(4/6)*
Nancy H. Teeters.............................................................. $ -- $ 103,583(11/28)*
</TABLE>
- ------------------------
* Indicates number of funds/portfolios within the Prudential Mutual Funds to
which aggregate compensation relates. (Commencing with calendar year 1997,
each of the Proposed Independent Trustees is being paid an aggregate annual
fee of $45,000 for Cluster II).
(1) Robert F. Gunia and Mendel A. Melzer, who will be "interested persons"
(Proposed Interested Trustees), do not receive directors' or trustees' fees
from any fund within the Prudential Mutual Funds and will not receive such
fees from CAT.
(2) Total compensation from all the funds within the Prudential Mutual Funds for
the calendar year ended December 31, 1996, includes amounts deferred at the
election of the Nominees under the funds' deferred compensation plans. Total
deferred compensation, including accrued interest, during 1996 amounted to
$109,294 for Nominee Robin B. Smith. Currently, Ms. Smith has agreed to
defer some of her fees at the T-Bill rate and other fees at the daily rate
of return of the relevant Prudential Mutual Fund.
6
<PAGE>
NAME, AGE, BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS AND OTHER
DIRECTORSHIPS OF NOMINEES
(AS FURNISHED BY PIFM):
EDWARD D. BEACH (72), President and Director of BMC Fund, Inc., a closed-end
investment company; Certified Public Accountant and Secretary and Treasurer of
Broyhill Family Foundation, Inc.; Member of the Board of Trustees of Mars Hill
College; Director of The High Yield Income Fund, Inc.; and Director or Trustee
of 37 funds within the Prudential Mutual Funds.
STEPHEN C. EYRE (74), Executive Director of The John A. Hartford Foundation,
Inc. (charitable foundation) (since May 1985); Director of Faircom, Inc.;
Trustee Emeritus of Pace University; and Director or Trustee of 12 funds within
the Prudential Mutual Funds.
DELAYNE DEDRICK GOLD (59), Marketing and Management Consultant and Director
or Trustee of 37 funds within the Prudential Mutual Funds.
*ROBERT F. GUNIA (50), Comptroller (since May 1996) of Prudential
Investments; Executive Vice President and Treasurer (since December 1996) of
PIFM; Senior Vice President (since March 1987) of PSI; Vice President and
Director of Nicholas-Applegate Fund, Inc. and The Asia Pacific Fund, Inc.
Formerly, Chief Administrative Officer (July 1990 - September 1996), Director
(January 1989 - September 1996) and Executive Vice President, Treasurer and
Chief Financial Officer (June 1987 - September 1996) of Prudential Mutual Fund
Management, Inc. (PMF), predecessor to PIFM. Director of the High Yield Income
Fund, Inc. and Director or Trustee of 37 funds within the Prudential Mutual
Funds.
DON G. HOFF (61), Chairman and Chief Executive Officer (since 1980) of
Intertec, Inc. (investments); Chairman and Chief Executive Officer of the Lamaur
Corporation; Director of Innovative Capital Management Inc. and The Greater
China Fund, Inc.; Chairman and Director of The Asia Pacific Fund, Inc.; and
Director or Trustee of 12 funds within the Prudential Mutual Funds.
ROBERT E. LABLANC (63), President of Robert E. LaBlanc Associates, Inc.
(telecommunications) since 1981. Formerly, General Partner at Salomon Brothers
and Vice Chairman of Continental Telecom. Director of Salient 3 Communications,
Inc., Storage Technology Corporation, Titan Corporation and Tribune Company;
Trustee of Manhattan College and Director or Trustee of 12 funds within the
Prudential Mutual Funds.
*MENDEL A. MELZER (36), Chief Investment Officer (since October 1996) of
Prudential Investments and Vice President of PIC. Formerly, Chief Financial
Officer (November 1995 - October 1996) of Prudential Investments; Senior Vice
President and Chief Financial Officer of Prudential Preferred Financial Services
(April 1993 - November 1995); Managing Director of Prudential Investment
Advisors (April 1991 - April 1993). Chairman and Director of Prudential Series
Fund, Inc. and Director of The High Yield Income Fund, Inc. and Director or
Trustee of 37 funds within the Prudential Mutual Funds.
ROBIN B. SMITH (58), Chairman and Chief Executive Officer (since August
1996) of Publishers Clearing House. Formerly, President and Chief Executive
Officer (January 1989 - August 1996) and President and Chief Operating Officer
(September 1981 - December 1988) of Publishers Clearing House. Director of
BellSouth Corporation, Texaco Inc., Spring Industries Inc., KMart Corporation
and Director or Trustee of 26 funds within the Prudential Mutual Funds.
- ------------------------
* A Proposed Interested Trustee by reason of, INTER ALIA, his affiliation with
PIFM, the Proposed Manager; and PIC, the Proposed Subadviser.
7
<PAGE>
STEPHEN STONEBURN (54), President and Chief Executive Officer of Quadrant
Media Corp. (a publishing company) (since June 1996). Formerly, President of
Argus Integrated Media, Inc. (June 1995 - June 1996); Senior Vice President and
Managing Director of Cowles Business Media (January 1993 - 1995); Senior Vice
President (January 1991 - 1992) of Gralla Publications (a division of United
Newspapers, U.K.); Director or Trustee of 12 funds within the Prudential Mutual
Funds.
NANCY H. TEETERS (67), Economist. Formerly, Vice President and Chief
Economist of International Business Machines Corporation (March 1986 - June
1990) and Member of the Board of Governors of the Horace H. Rackhan School of
Graduate Studies of the University of Michigan. Director of Inland Steel
Corporation (since July 1991) and Director or Trustee of 23 funds within the
Prudential Mutual Funds.
For comparable information regarding the current members of the Board and
the executive officers of the Trust, see Exhibit A to this proxy statement.
REQUIRED VOTE
For the election of each Trustee, the affirmative vote of a plurality of the
votes cast by shareholders of the Trust is required, provided a quorum is
present (and a majority of shares of the Trust shall constitute a quorum for
purposes of this Proposal). However, because this Proposal is an integral part
of the New Arrangements, the effectiveness of this Proposal is conditioned on
shareholder approval of Proposals 2(a) and 2(b).
THE BOARD, INCLUDING ITS INDEPENDENT TRUSTEES, RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" EACH OF THE NOMINEES UNDER PROPOSAL NO. 1.
------------------------
APPROVAL OF PROPOSED MANAGEMENT AGREEMENT
AND PROPOSED SUBADVISORY AGREEMENT
PROPOSAL NO. 2
INTRODUCTION
The Board is proposing to replace PIMCO Advisors L.P., 800 Newport Center
Drive, Suite 100, Newport Beach, CA 92660 (PALP or the Current Manager), with
Prudential Investments Fund Management LLC, Gateway Center Three, 100 Mulberry
Street, Newark, NJ 07102-4077 (PIFM or the New Manager), as Manager. PIFM is a
wholly-owned subsidiary of Prudential and manages each fund within the
Prudential Mutual Funds.
On October 22, 1997, the Board, including a majority of the Independent
Trustees, voted to approve a new management agreement between CAT and PIFM (the
Proposed Management Agreement), subject to shareholder approval sought herein.
On the same date, the Board voted to terminate the Current Management Agreement
(as defined below) between CAT and PALP, effective upon the effective date of
both the Proposed Management Agreement and the Proposed Subadvisory Agreement
(as defined below), and the Trust will give notice to such effect to PALP. In
approving the Proposed Management Agreement, the Board considered a number of
factors, including PIFM's and PIC's performance, quality of personnel, depth of
management, the lower management fees that the Fund would pay and the lower
estimated total annual operating expenses for the Fund (all as shown in the
table above in "General Overview.")
8
<PAGE>
Management services to the Fund pursuant to the Proposed Management
Agreement would be similar to the management services required to be provided to
the Fund pursuant to the management agreement in effect between CAT and PALP
dated as of November 16, 1994 (the Current Management Agreement), except that
the Proposed Management Agreement provides for a lower fee rate, has a minimum
30 day termination notice period and is governed by New York law; whereas, the
Current Management Agreement has a 60 day termination notice period and no
governing law provision.
In connection with the replacement of the Current Manager, the Board
recommends for shareholder approval the replacement of Columbus Circle
Investors, One Station Place, Stamford Place, Stamford, CT 06902 (CCI or the
Current Subadviser), with The Prudential Investment Corporation, Gateway Center
Three, 100 Mulberry Street, Newark, NJ 07102-40077, doing business as Prudential
Investments (PIC or the Proposed Subadviser), as subadviser. On October 22,
1997, the Board, including a majority of the Independent Trustees, voted to
approve a new subadvisory agreement between PIFM and PIC for the Fund (Proposed
Subadvisory Agreement), subject to shareholder approval also sought herein. On
the same date, the Board voted to terminate the Current Subadvisory Agreement
(as defined below) between PALP and CCI, effective upon the effective date of
both the Proposed Management Agreement and the Proposed Subadvisory Agreement,
and the Trust will give notice to such effect. The terms of the Proposed
Subadvisory Agreement differ from the terms of the Current Subadvisory Agreement
as discussed below.
THE CURRENT MANAGER AND THE TERMS OF THE CURRENT MANAGEMENT AGREEMENT
PALP serves as Current Manager of CAT pursuant to the Current Management
Agreement. PALP is a Delaware limited partnership organized in September 1987
and registered as an investment adviser under the Investment Advisers Act of
1940. The Current Management Agreement dated November 16, 1994 was last approved
by the Board, including a majority of the Independent Trustees, on December 17,
1996 and was last approved on October 28, 1994 by the Fund's shareholders in
connection with a change in control of the Fund's Current Manager. The Current
Manager's sole general partner, PIMCO Partners, G.P., 800 Newport Center Drive,
Newport Beach, CA 92660 has two partners; (i) an indirect wholly-owned
subsidiary of Pacific Life Insurance Company, 700 Newport Center Drive, Newport
Beach, CA 92660; and (ii) PIMCO Partners, L.L.C., 840 Newport Center Drive,
Newport Beach, CA 92660, a limited liability company, all of the interests of
which are held directly by the Managing Directors of Pacific Investment
Management Company who are: William H. Gross, Dean S. Meiling, James F. Muzzy,
William F. Podlich III, Frank B. Rabinovitch, Brent R. Harris, John L. Hague,
William S. Thompson, Jr., William C. Powers, David H. Edington, Benjamin L.
Trosky, William R. Benz, II, and Lee R. Thomas, III (collectively, the Managing
Directors). PIMCO Partners, G.P. has substantially delegated its management and
control of the Current Manager to an Equity Board and an Operating Board of the
Current Manager. The activities of the Current Manager are controlled by its
Operating Board except that certain non-routine or extraordinary actions may not
be effected by the Operating Board without the approval of the Current Manager's
Equity Board. The Operating Board has in turn delegated the authority to manage
day-to-day operations and policies to an Operating Committee. Because of the
ability to designate a majority of the members of the Operating Board, Pacific
Investment Management Company and the Managing Directors could be said to
control the Current Manager, although Pacific Investment Management Company and
the Managing Directors disclaim such authority.
The Current Management Agreement provides that PALP, subject to the
supervision of the Board and in conformity with the stated policies of the Fund,
is to furnish continuously an investment program for the Fund and to make
investment decisions and place all orders for the purchase and sale of portfolio
9
<PAGE>
securities on behalf of the Fund. Under the Current Management Agreement, PALP
is authorized, subject to its supervision and review, to delegate certain of
these responsibilities to a third party. Pursuant to this authority, PALP has
delegated day-to-day investment management of the Fund to CCI, an affiliate of
PALP. CCI provides these services to the Fund pursuant to a subadvisory
agreement with PALP dated November 16, 1994 (the Current Subadvisory Agreement)
as discussed below. Subject to the control of the Trustees, the Current Manager
or the sub-adviser also manages, supervises and conducts the other affairs and
business of the Trust and of the Fund, furnishes office space and equipment,
provides certain clerical services (excluding determination of the net asset
value of the Fund, trust accounting services supplied by Oppenheimer Management
Corporation and shareholder accounting services) and pays all salaries, fees and
expenses of officers and Trustees of the Trust who are affiliated with the
Current Manager.
Under the Current Management Agreement, the Fund pays PALP a monthly fee
based on the level of the Fund's average daily net asset value at the following
annual rates: 0.425% of the first $500 million of net assets, 0.400% of the next
$500 million of net assets, 0.375% of the next $500 million of net assets,
0.350% of the next $500 million of net assets and 0.325% of amounts in excess of
$2 billion.
For the fiscal years ended September 30, 1995, 1996 and 1997, the Fund paid
the Manager $2,915,606, $2,560,734 and $2,886,449, respectively, for its
services under the Current Management Agreement.
The Current Management Agreement provides that it will continue in force for
one year from its date of execution, and from year to year thereafter, but only
so long as its continuance is approved at least annually by (i) the vote, cast
in person at a meeting called for that purpose, of a majority of Independent
Trustees; and (ii) the majority vote of the full Board of Trustees or the vote
of a majority of the outstanding shares of the Fund. The Current Management
Agreement automatically terminates on assignment, and is terminable by either
the Fund or the Current Manager on not more than 60 days' written notice to the
other party.
The Current Management Agreement provides that the Current Manager shall not
be subject to any liability in connection with the performance of its services
thereunder in the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations and duties.
THE PROPOSED MANAGEMENT AGREEMENT
Under the Proposed Management Agreement, PIFM would replace PALP as Manager
for the Trust and the management fee charged by PIFM would be lower for the Fund
than the management fee charged by PALP under the Current Management Agreement.
The form of the Proposed Management Agreement is included in this proxy
statement as Exhibit B.
Pursuant to the Proposed Management Agreement, PIFM, subject to the
supervision of the Board, and in conformity with the stated policies of the
Trust, would act as Manager of CAT and manage both the investment operations of
the Trust and the composition of the Fund's portfolio, including the purchase,
retention, disposition and loan of securities. In connection therewith, PIFM is
obligated to keep certain books and records of the Fund. Under the Proposed
Management Agreement, PIFM will also administer CAT's business affairs and, in
connection therewith will furnish CAT with office facilities, together with
clerical and bookkeeping services.
Under the Proposed Management Agreement and in connection with the
management of the business affairs of CAT, PIFM will bear the following
expenses: (a) the salaries and expenses of all personnel of CAT and the Proposed
Manager, except the fees and expenses of Trustees who are not affiliated persons
of
10
<PAGE>
PIFM or the Fund's investment adviser; (b) all expenses incurred by PIFM or by
CAT in connection with managing the ordinary course of CAT's business, other
than those assumed by CAT, as described below; and (c) the costs and expenses
payable to PIC pursuant to the Proposed Subadvisory Agreement.
Under the terms of the Proposed Management Agreement, CAT is responsible for
the payment of the following expenses, including (a) the fees payable to the
Proposed Manager, (b) the fees and expenses of Trustees who are not affiliated
with the Proposed Manager or the Proposed Subadviser, (c) the fees and certain
expenses of CAT's Custodian and Transfer and Servicing Agent, including the cost
of providing records to the Proposed Manager in connection with its obligation
of maintaining required records of the Fund and of pricing the Fund's shares,
(d) the charges and expenses of CAT's legal counsel and independent accountants,
(e) brokerage commissions, if any, and any issue or transfer taxes chargeable to
CAT in connection with its securities transactions, (f) all taxes and trust fees
payable by CAT to governmental agencies, (g) the fees of any trade association
of which CAT is a member, (h) the cost of share certificates, if any,
representing, and/or non-negotiable share deposit receipts evidencing, shares of
CAT, (i) the cost of fidelity and directors and officers and errors and
omissions insurance, (j) the fees and expenses involved in registering and
maintaining registration of CAT and of its shares with the SEC, including the
preparation and printing of CAT's registration statements and prospectuses for
such purposes, and paying the fees and expenses of notice filings made in
accordance with state securities laws, (k) allocable communications expenses
with respect to investor services and all expenses of shareholders' and
Trustees' meetings and of preparing, printing and mailing reports, proxy
statements and prospectuses to existing shareholders, (l) litigation and
indemnification expenses and other extraordinary expenses not incurred in the
ordinary course of CAT's business and (m) any expenses assumed by the Fund
pursuant to a distribution plan adopted under Rule 12b-1 of the 1940 Act.
The Proposed Management Agreement also provides that PIFM will not be liable
for any error of judgment or any loss suffered by the Trust in connection with
the matters to which the Proposed Management Agreement relates, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith, gross negligence or reckless disregard of duty. The Proposed Management
Agreement provides that it will terminate automatically if assigned, and that it
may be terminated at any time, without penalty, by either party upon not more
than 60 days' nor less than 30 days' written notice. The Proposed Management
Agreement provides that it will continue in effect for a period of more than two
years from its execution only so long as such continuance is specifically
approved at least annually in accordance with the requirements of the 1940 Act.
For services performed pursuant to the Proposed Management Agreement, PIFM
will receive a fee at an annual rate of the average daily net assets of the Fund
of .390% of the first $1 billion of net assets; .375% of the next $500 million
of net assets; .350% of the next $500 million of net assets; and .325% of net
assets in excess of $2 billion. This fee will be computed daily and payable
monthly. Had the Proposed Management Agreement been in effect for the fiscal
years ended September 30, 1995, 1996 and 1997, the Fund would have paid the
Proposed Manager $2,720,841, $2,374,841, and $2,694,335, respectively, for
services under the Proposed Management Agreement, a 6.7%, 7.2% and 6.7%
decrease, respectively, from the fees paid to the Current Manager under the
Current Management Agreement. PIFM has agreed that to the extent the Fund's
total operating expenses for the fiscal year ending September 30, 1998 exceed
.62 of 1% of the Fund's average net assets, PIFM will reimburse the Fund for
certain expenses up to an aggregate amount of $100,000 to the extent necessary
to reduce such total operating expenses to .62 of 1%.
11
<PAGE>
INFORMATION ABOUT PIFM (as furnished to the Trust by the Proposed Manager)
The Proposed Manager is organized as a New York limited liability company.
It is a subsidiary of Prudential Securities Incorporated, an indirect, wholly
owned subsidiary of The Prudential Insurance Company of America (Prudential).
PIFM serves as manager to all of the other investment companies that, together
with CAT, will comprise the Prudential Mutual Funds.
As of September 30, 1997, PIFM managed and/or administered 41 open-end
investment companies and 22 closed-end investment companies with combined assets
of approximately $59.9 billion. According to the Investment Company Institute,
as of June 30, 1997, the Prudential Mutual Funds was the 16th largest family of
mutual funds in the United States. As of September 30, 1997, PIFM had more than
$25 billion of money market assets under management. (See Exhibit C for the
name, size and advisory fee rate for each of these money market funds.)
PIFM currently maintains its principal place of business at Gateway Center
Three, 100 Mulberry Street, Newark, New Jersey 07102-4077. Certain information
regarding the principal executive officers of PIFM is set forth below. Except as
otherwise indicated, the address of each person is Gateway Center Three, 100
Mulberry Street, Newark, New Jersey 07102.
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITIONS WITH PIFM PRINCIPAL OCCUPATIONS
- -------------------- --------------------------------- ---------------------------------
<S> <C> <C>
Thomas A. Early Executive Vice President, Vice President and General
Secretary and General Counsel Counsel of Prudential Mutual
Funds & Annuities (PMF&A) and
Executive Vice President,
Secretary and General Counsel
of PIFM
Robert F. Gunia Executive Vice President and Comptroller of Prudential
Treasurer Investments; Executive Vice
President and Treasurer of
PIFM; and Senior Vice President
of PSI
Neil A. McGuinness Executive Vice President Executive Vice President of PMF&A
and Executive Vice President of
PIFM
Brian Storms President, Chief Executive President of PMF&A;
Officer and Chief Operating Officer-in-Charge, President,
Officer Chief Executive Officer and
Chief Operating Officer of PIFM
Robert J. Sullivan Executive Vice President Executive Vice President of PMF&A
and Executive Vice President of
PIFM
</TABLE>
THE CURRENT SUBADVISER AND THE TERMS OF THE CURRENT SUBADVISORY AGREEMENT
As described above, the Current Management Agreement authorizes the Current
Manager to delegate certain of its responsibilities to a third party. Pursuant
to the Current Subadvisory Agreement
12
<PAGE>
between PALP and Columbus Circle Investors (CCI), CCI serves as the Current
Subadviser and is responsible for portfolio investment decisions for the Fund.
CCI is a Delaware general partnership with the Current Manager and a
wholly-owned subsidiary of the Current Manager as its only partners, and is an
investment adviser registered under the Investment Advisers Act of 1940. CCI's
address is One Station Place, Stamford, CT 06902. The Current Subadvisory
Agreement was last approved on October 28, 1994 by the shareholders in
connection with the above-referenced change in control of the Fund's Current
Manager and was last approved by the Board, including a majority of the
Independent Trustees, on December 17, 1996.
Under the Current Subadvisory Agreement, the Current Manager pays CCI a
monthly fee at the annual rate of 0.05% of the Fund's average daily net assets
for its services as the Fund's subadviser. Under the Current Subadvisory
Agreement, subject always to the control of the Trustees of the Trust, CCI's
obligation is to furnish continuously an investment program for the Fund, to
make investment decisions on behalf of the Fund and to place all orders for the
purchase and sale of portfolio securities and all other investments for the
Fund. In performing its duties under the Current Subadvisory Agreement, CCI is
subject to the control of the Trustees, the policies determined by the Trustees
and the Current Manager, the provisions of the Trust's Declaration of Trust and
By-Laws and the relevant investment objectives, policies and restrictions stated
in the Prospectus.
The Current Subadvisory Agreement continues in force with respect to the
Fund for two years from the date thereof, and from year to year thereafter, but
only so long as its continuance is approved at least annually by (i) the vote,
cast in person at a meeting called for that purpose, of a majority of
Independent Trustees, and (ii) the majority vote of either the full Board of
Trustees or the vote of the majority of the outstanding shares of the Fund. The
Current Subadvisory Agreement automatically terminates on assignment. The
Current Subadvisory Agreement is terminable upon notice by the Trust at any
time, may be terminated by the Current Manager on not less than 60 days' written
notice to CCI and may be terminated by CCI on not less than 180 days' written
notice to the Current Manager.
THE PROPOSED SUBADVISORY AGREEMENT
The Proposed Subadvisory Agreement between PIFM and PIC provides that PIC
will furnish investment advisory services in connection with the management of
the Fund. The form of the Proposed Subadvisory Agreement is included in this
proxy statement as Exhibit D.
Pursuant to the Proposed Subadvisory Agreement, PIC, subject to the
supervision of PIFM and the Board and in conformity with the stated policies of
the Fund, will manage the investment operations of the Fund and the composition
of the Fund's portfolio, including the purchase, retention and disposition
thereof. PIC will provide supervision of the Fund's investments and will
determine from time to time what investments and securities will be purchased,
retained, or sold or loaned by the Fund, and what portion of the assets will be
invested or held as cash. In addition, PIC will maintain all books and records
with respect to the Fund's portfolio transactions required to be maintained
pursuant to the 1940 Act. PIFM will have responsibility for all investment
advisory services provided to CAT pursuant to the Proposed Management Agreement
and will oversee and review PIC's performance of its duties under the Proposed
Subadvisory Agreement. PIFM will reimburse PIC for all reasonable costs and
expenses incurred by PIC, determined in a manner acceptable to PIFM, in
furnishing PIC's services. The investment advisory services of PIC to the Fund
are not exclusive under the terms of the Proposed Subadvisory Agreement and PIC
is free to, and does, render investment advisory services to others.
13
<PAGE>
The Proposed Subadvisory Agreement provides that PIC shall not be liable for
any error of judgment or for any loss suffered by the Trust or PIFM in
connection with the matters to which the Proposed Subadvisory Agreement relates,
except a loss resulting from willful misfeasance, bad faith or gross negligence
on PIC's part in the performance of its duties or from its reckless disregard of
its obligations and duties under the Proposed Subadvisory Agreement. The
Proposed Subadvisory Agreement provides that the agreement shall terminate
automatically if assigned or upon termination of the Proposed Management
Agreement, and that it may be terminated at any time, without penalty, by the
Trust, by PIFM or PIC upon not more than 60 days' nor less than 30 days' written
notice. The Proposed Subadvisory Agreement provides that it will continue in
effect for a period of more than two years from its execution only so long as
such continuance is specifically approved at least annually in accordance with
the requirements of the 1940 Act.
The Proposed Subadviser has advised the Trust that PIC maintains a corporate
credit unit which provides credit analysis and research on taxable fixed-income
securities including money market instruments. In approving the Proposed
Subadvisory Agreement, the Trustees also took into account that the portfolio
manager consults routinely with the credit unit in managing portfolios. The
credit unit, with a staff including 7 credit analysts, reviews on an ongoing
basis commercial paper issuers, commercial banks, non-bank financial
institutions and issuers of other taxable fixed-income obligations. Credit
analysts have broad access to research and financial reports, data retrieval
services and industry analysts. They maintain relationships with the management
of corporate issuers and from time to time visit companies in whose securities
the Fund may invest.
INFORMATION ABOUT PIC (as furnished to the Trust by the Proposed Subadviser)
PIC was organized in June 1984 under the laws of the State of New Jersey.
PIC, doing business as Prudential Investments, currently serves as the
investment adviser to substantially all of the other funds within the Prudential
Mutual Funds. PIC is a wholly owned subsidiary of Prudential with its principal
place of business at Prudential Plaza, 751 Broad Street, Newark, New Jersey
07102-3777. Certain information regarding the directors and executive officers
of PIC is set forth below. Except as otherwise indicated, the address of each
person is Prudential Plaza, Newark, New Jersey 07102.
<TABLE>
<CAPTION>
NAME POSITIONS WITH PIC PRINCIPAL OCCUPATION
- -------------------- --------------------------------- ---------------------------------
<S> <C> <C>
E. Michael Caulfield Chairman of the Board, President Chief Executive Officer of
and Chief Executive Officer and Prudential Investments
Director
Jonathan M. Greene Senior Vice President and President--Investment Management
Director of Prudential Investments
John R. Strangfeld Vice President and Director President of Private Asset
Management Group of Prudential
</TABLE>
The Fund's Current Manager and Current Subadviser are responsible for
placing portfolio transactions for the Fund. The Fund's portfolio transactions
are usually principal transactions directly with issuers or with the major
underwriters for, and dealers in, money market instruments. No brokerage
commissions are paid on such transactions, but the price paid to underwriters or
dealers normally includes an
14
<PAGE>
underwriter's spread or dealer's markup. No portfolio transactions have been
handled by the Trust's current distributor and PIFM has indicated that no such
portfolio transactions would be handled by any affiliate of PIFM. The primary
consideration in placing portfolio transactions is prompt execution at the most
favorable price. Subject to this consideration, particular broker/dealers may be
selected for research or statistical and other services. Research services
provided by broker/dealers may be used by the Trust's Current Manager and
Current Subadviser in servicing all of their accounts, not just the Trust. PIFM
and PIC have indicated that they will place the Trust's portfolio transactions
in accordance with substantially the same policies as the Current Manager and
Current Subadviser.
RECOMMENDATION OF THE BOARD
The Board, including its Independent Trustees, recommends that shareholders
approve the Proposed Management Agreement and the Proposed Subadvisory
Agreement. In recommending the approval of the Proposed Management Agreement and
the Proposed Subadvisory Agreement, the Board had considered a number of factors
such as PIFM's and PIC's performance, quality of personnel, depth of management,
the Fund's lower fees and costs under these agreements, its lower total
operating expenses, and PIFM's and PIC's experience with managing money market
funds. If shareholders approve Proposal Nos. 2(a) and 2(b), the Proposed
Management Agreement would be executed by CAT and PIFM as soon as reasonably
practicable after such shareholder approval. In addition, PIFM would delegate
day-to-day investment management of the Fund to PIC. Accordingly, the Proposed
Subadvisory Agreement would be executed by PIFM and PIC as soon as reasonably
practicable.
REQUIRED VOTE
Shareholders must vote separately to approve each of the Proposed Management
Agreement and the Proposed Subadvisory Agreement. Each of these proposed
agreements, however, is an integral part of the New Arrangements; therefore, the
effectiveness of each such agreement is conditional on shareholder approval of
both such agreements and Proposal 1. Accordingly, in the event that shareholders
of the Fund do not elect the Nominees and approve both the Proposed Management
Agreement and the Proposed Subadvisory Agreement, each of the Current Management
Agreement and the Current Subadvisory Agreement would remain in effect.
Adoption of each of Proposal Nos. 2(a) and 2(b) will require the approval of
a "vote of a majority of the outstanding voting securities" of the Fund, as
defined in the 1940 Act. Under the 1940 Act, a "vote of a majority of the
outstanding voting securities" of the Fund is defined as the lesser of (i) 67%
of the Fund's outstanding shares represented at a meeting at which more than 50%
of the outstanding shares are present in person or represented by proxy, or (ii)
more than 50% of the Fund's outstanding shares.
THE BOARD, INCLUDING ITS INDEPENDENT TRUSTEES, RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" PROPOSAL NOS. 2(A) AND 2(B).
------------------------
15
<PAGE>
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
PROPOSAL NO. 3
Shareholders of CAT are asked to ratify the Board's selection of independent
public accountants for the Trust. The accountants for CAT audit CAT's financial
statements for each fiscal year.
During the last fiscal year, Price Waterhouse LLP served as the independent
public accountants for CAT. The Board has selected Price Waterhouse LLP to
continue to serve in that capacity for the current fiscal year ending September
30, 1998, subject to ratification by shareholders of CAT at the Meeting.
Representatives of the accountants are not expected to be present at the
Meeting, but will be available to answer any questions or make any statements
should any matters arise requiring their presence. Price Waterhouse LLP has
informed CAT that it has no material direct or indirect financial interest in
CAT.
The persons named in the accompanying proxy will vote FOR ratification of
the selection of Price Waterhouse LLP unless contrary instructions are given.
REQUIRED VOTE
Approval of Proposal No. 3 requires a vote of a majority of the Shares
voted.
THE BOARD, INCLUDING ITS INDEPENDENT TRUSTEES, RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" PROPOSAL NO. 3.
------------------------
ADDITIONAL INFORMATION
The solicitation of proxies, the cost of which will be borne by PIFM, will
be made primarily by mail, but also may include telephone or oral communications
by regular employees of PIFM who will not receive any compensation therefor from
PIFM. In addition, PIFM advises that it has retained, at its own expense,
Shareholder Communications Corporation to assist in the solicitation of proxies
(the Proxy Solicitation Firm). The cost of solicitation by the Proxy
Solicitation Firm is not expected to exceed $35,000 in fees. Proxies may be
recorded pursuant to (i) electronically transmitted instructions or (ii)
telephone instructions obtained through procedures reasonably designed to verify
that the instructions have been authorized.
SHAREHOLDER PROPOSALS
Any shareholder who wishes to submit a proposal to be considered at the
Trust's next meeting of shareholders should send the proposal to the Trust at
its address as set forth from time to time on its prospectus, so as to be
received within a reasonable time before the Board makes the solicitation
relating to such meeting, in order to be included in the proxy statement and
form of proxy relating to such meeting. Shareholder proposals that are submitted
in a timely manner will not necessarily be included in the Trust's proxy
materials. Inclusion of such proposals is subject to limitations under the
federal securities laws.
16
<PAGE>
OTHER BUSINESS
Management knows of no business to be presented at the Meeting other than
the matters set forth in this proxy statement, but should any other matter
requiring a vote of shareholders arise, the proxies will vote according to their
best judgment in the interest of the Trust.
By order of the Board of Trustees,
NEWTON B. SCHOTT, JR.
CLERK
October 29, 1997
IT IS IMPORTANT THAT YOU EXECUTE AND RETURN YOUR PROXY PROMPTLY.
17
<PAGE>
EXHIBIT A
CURRENT TRUSTEES AND EXECUTIVE OFFICERS
NAME, AGE, BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS AND OTHER
DIRECTORSHIPS OF TRUSTEES OF THE BOARD:
E. PHILIP CANNON 57, Trustee of the Trust (since 1987) and PIMCO Funds:
Multi-Manager Series (PFMMS); Headmaster of John's School, Houston, Texas.
Formerly, Trustee of PIMCO Advisors Funds (PAF), General Partner of J.B.
Poindexter & Co., Houston, Texas (private partnership), and Partner of Iberia
Petroleum Company (oil and gas production). Mr. Cannon was a director of WNS
Inc., a retailing company which filed a petition in bankruptcy within the last
five years.
DONALD P. CARTER 70, Trustee of the Trust (since 1983) and PFMMS.
Formerly, Trustee of PAF, Chairman, Executive Vice President and Director of
Cunningham & Walsh, Inc., Chicago (advertising agency).
GARY A. CHILDRESS 63, Trustee of the Trust (since 1993) and PFMMS;
Chairman and Director of Bellefonte Lime Company, Inc.; Chief Executive Officer
of Woodings & Verona Toolworks Inc. Mr. Childress is a partner in Genlime, L.P.,
a private limited partnership, which has filed a petition in bankruptcy within
the last five years. Formerly, Trustee of PAF.
*WILLIAM D. CVENGROS 48, Trustee of the Trust (since 1994); Chairman of the
Board of PFMMS; Chief Executive Officer, President, and member of the Operating
Board, Operating Committee, and Equity Board of PIMCO Advisors L.P.; Director of
PIMCO Funds Distribution Company (PFDCO). Formerly, Trustee of PAF, President of
PFMMS, and Director, Vice Chairman, and Chief Investment Officer of Pacific Life
Insurance Company.
GARY L. LIGHT 60, Trustee of the Trust (since 1984) and PFMMS; President,
E.V.A. Investors Inc. (Private Investments); Director of The Somerset Group,
Inc.; Consultant to and, prior to March, 1987, Executive Vice President of
Mayflower Corporation (trucking and transportation); and Vice Chairman and Chief
Financial Officer of Sofamor Danek (medical devices). Formerly, Trustee of PAF.
RICHARD L. NELSON 67, Trustee of the Trust (since 1997), PFMMS and Pacific
Select Fund; President of Nelson Financial Consultants; Director of Wynn's
International, Inc.; and Trustee of Pacific Select Fund. Formerly, Partner of
Ernst & Young.
LYMAN W. PORTER 67, Trustee of the Trust (since 1997), PFMMS and Pacific
Select Fund; Professor of Management at the University of California, Irvine.
*ROBERT A. PRINDIVILLE 62, Trustee of the Trust (since 1983) and PFMMS.
Formerly, Trustee of PAF; President and Director of Thomson Advisory Group Inc.;
Director and Chairman of PFDCO; and Executive Vice President of PIMCO Advisors
L.P.
ALAN RICHARDS 67, Trustee of the Trust (since 1997), PFMMS and Pacific
Select Fund; President of Alan Richards Consulting, Inc.; and Director of
Western National Corporation. Formerly, President, Chief Executive Officer and
Director of E.F. Hutton Insurance Group, Inc.; Chairman of the Board, Chief
- ------------------------
* Trustee is an "interested person" of the Trust by reason of his affiliation
with the Trust's investment adviser, distributor or both.
A-1
<PAGE>
Executive Officer and President of E.F. Hutton Life Insurance Company; and
Director, E.F. Hutton & Company, Inc.
JOEL SEGALL 74, Trustee of the Trust (since 1983) and PFMMS. Formerly,
Trustee of PAF; President and University Professor of Bernard M. Baruch College
and The City University of New York; Deputy Under Secretary for International
Affairs of United States Department of Labor; Professor of Finance of University
of Chicago; and Board of Managers of Coffee, Sugar and Cocoa Exchange.
W. BRYANT STOOKS 57, Trustee of the Trust (since 1993) and PFMMS;
President of Bryant Investments, Ltd.; Director of American Agritec LLC.
Formerly, Trustee of PAF, President; Senior Vice President, Director and Chief
Executive Officer of Archirodon Group Inc. and Partner of Arthur Andersen & Co.
GERALD M. THORNE 59, Trustee of the Trust (since 1993) and PFMMS and
Director of UPI Inc.; Kaytee Inc.; and American Orthodontics Corp. Formerly,
Trustee of PAF, President and Director of Firstar National Bank of Milwaukee;
Chairman, President and Director of Firstar National Bank of Sheboygan; and
Director of Bando-McGlocklin.
*STEPHEN J. TREADWAY 50, Trustee of the Trust (since 1997) and PFMMS;
President and Chief Executive Officer of the Trust and PFMMS; Executive Vice
President of PIMCO Advisors L.P.; and Director, Chairman and President of PFDCO.
Formerly, Executive Vice President of Smith Barney Inc.
NAME, AGE, BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS OF EXECUTIVE OFFICERS
OF THE TRUST:
STEPHEN J. TREADWAY 50, Trustee (since 1997), President and Chief
Executive Officer of the Trust (since 1997); Trustee, President and Chief
Executive Officer of PFMMS; Executive Vice President of PIMCO Advisors L.P.; and
Director, Chairman and President of PFDCO. Formerly, Executive Vice President of
Smith Barney Inc.
R. WESLEY BURNS 38, Vice President of the Trust (since 1995); Executive
Vice President of PFMMS; President of PIMCO Funds: Pacific Investment Management
Series (PIMS); and Executive Vice President of Pacific Investment Management
Company (Pacific Investment Management). Formerly, Vice President of PAF.
NEWTON B. SCHOTT, JR. 55, Vice President and Clerk of the Trust (since
1983); Vice President and Secretary of PFMMS; Director, Executive Vice
President, Chief Administrative Officer and Secretary of PFDCO. Formerly, Senior
Vice President-Legal and Secretary of PIMCO Advisors L.P.; and Vice President
and Clerk of PAF.
JOHN P. HARDAWAY 40, Treasurer of the Trust (since 1995); Treasurer of
PFMMS and PIMS; Vice President and Manager of Fund Operations of Pacific
Investment Management. Formerly, Treasurer of PAF.
After the election, it is expected that the current officers of CAT will
resign and the New Board will elect new officers.
- ------------------------
* Trustee is an "interested person" of the Trust by reason of his affiliation
with the Trust's investment adviser, distributor or both.
A-2
<PAGE>
EXHIBIT B
FORM OF MANAGEMENT AGREEMENT
CASH ACCUMULATION TRUST
(NATIONAL MONEY MARKET FUND)
Agreement made this day of , 1997 between Cash Accumulation
Trust, a Massachusetts business trust (the Fund), and Prudential Investments
Fund Management LLC, a New York limited liability company (the Manager).
W I T N E S S E T H
WHEREAS, the Fund is a diversified, open-end management investment company
registered under the Investment Company Act of 1940, as amended (the 1940 Act);
and
WHEREAS, the Fund desires to retain the Manager to render or contract to
obtain as hereinafter provided investment advisory services to the Fund on
behalf of its series, the National Money Market Fund (NMMF), and the Fund also
desires to avail itself of the facilities available to the Manager with respect
to the administration of its day to day business affairs, and the Manager is
willing to render such investment advisory and administrative services;
NOW, THEREFORE, the parties agree as follows:
1. The Fund hereby appoints the Manager to act as manager of the Fund and
administrator of its business affairs for the period and on the terms set forth
in this Agreement. The Manager accepts such appointment and agrees to render the
services herein described, for the compensation herein provided. The Manager is
authorized to enter into an agreement with The Prudential Investment Corporation
(PIC) pursuant to which PIC shall furnish to NMMF the investment advisory
services in connection with the management of NMMF (the Subadvisory Agreement).
The Manager will continue to have responsibility for all investment advisory
services furnished pursuant to the Subadvisory Agreement.
2. Subject to the supervision of the Trustees of the Fund, the Manager
shall administer the Fund's business affairs and, in connection therewith, shall
furnish the Fund with office facilities and with clerical, bookkeeping and
recordkeeping services at such office facilities and, subject to Section 1
hereof and the Subadvisory Agreement, the Manager shall manage the investment
operations of NMMF and the composition of NMMF's portfolio, including the
purchase, retention and disposition thereof, in accordance with NMMF's
investment objectives, policies and restrictions as stated in the Prospectus
(hereinafter defined) and subject to the following understandings:
(a) The Manager shall provide supervision of NMMF's investments and
determine from time to time what investments or securities will be
purchased, retained, sold or loaned by NMMF, and what portion of the assets
will be invested or held uninvested as cash.
(b) The Manager, in the performance of its duties and obligations under
this Agreement, shall act in conformity with the Declaration of Trust
(hereinafter defined) and By-Laws of the Fund and the Prospectus
(hereinafter defined) of NMMF and with the instructions and directions of
the Trustees of the Fund and will conform to and comply with the
requirements of the 1940 Act and all other applicable federal and state laws
and regulations.
B-1
<PAGE>
(c) The Manager shall determine the securities to be purchased or sold
by NMMF and will place orders pursuant to its determinations with or through
such persons, brokers or dealers (including but not limited to Prudential
Securities Incorporated) in conformity with the policy with respect to
brokerage as set forth in the Fund's Registration Statement and NMMF's
Prospectus (hereinafter defined) or as the Trustees may direct from time to
time. In providing NMMF with investment supervision, it is recognized that
the Manager will give primary consideration to securing the most favorable
price and efficient execution. Consistent with this policy, the Manager may
consider the financial responsibility, research and investment information
and other services provided by brokers or dealers who may effect or be a
party to any such transaction or other transactions to which other clients
of the Manager may be a party. It is understood that Prudential Securities
Incorporated may be used as principal broker for securities transactions but
that no formula has been adopted for allocation of NMMF's investment
transaction business. It is also understood that it is desirable for NMMF
that the Manager have access to supplemental investment and market research
and security and economic analysis provided by brokers and that such brokers
may execute brokerage transactions at a higher cost to NMMF than may result
when allocating brokerage to other brokers on the basis of seeking the most
favorable price and efficient execution. Therefore, the Manager is
authorized to pay higher brokerage commissions for the purchase and sale of
securities for NMMF to brokers who provide such research and analysis,
subject to review by the Fund's Trustees from time to time with respect to
the extent and continuation of this practice. It is understood that the
services provided by such broker may be useful to the Manager in connection
with its services to other clients.
On occasions when the Manager deems the purchase or sale of a security
to be in the best interest of NMMF as well as other clients of the Manager
or the Subadviser, the Manager, to the extent permitted by applicable laws
and regulations, may, but shall be under no obligation to, aggregate the
securities to be so sold or purchased in order to obtain the most favorable
price or lower brokerage commissions and efficient execution. In such event,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by the Manager in the manner it
considers to be the most equitable and consistent with its fiduciary
obligations to NMMF and to such other clients.
(d) The Manager shall maintain all books and records with respect to
NMMF's portfolio transactions and shall render to the Fund's Trustees such
periodic and special reports as the Trustees may reasonably request.
(e) The Manager shall be responsible for the financial and accounting
records to be maintained by NMMF (including those being maintained by the
Fund's Custodian).
(f) The Manager shall provide the Fund's Custodian on each business day
with information relating to all transactions concerning NMMF's assets.
(g) The investment management services of the Manager to NMMF under this
Agreement are not to be deemed exclusive, and the Manager shall be free to
render similar services to others.
3. The Fund has delivered to the Manager copies of each of the following
documents and will deliver to it all future amendments and supplements, if any:
(a) Agreement and Declaration of Trust of the Fund, as filed with The
Commonwealth of Massachusetts (such Agreement and Declaration of Trust, as
in effect on the date hereof and as amended from time to time, is herein
called the "Declaration of Trust");
B-2
<PAGE>
(b) By-Laws of the Fund (such By-Laws, as in effect on the date hereof
and as amended from time to time, are herein called the "By-Laws");
(c) Certified resolutions of the Trustees of the Fund authorizing the
appointment of the Manager and approving the form of this Agreement;
(d) Registration Statement under the 1940 Act and the Securities Act of
1933, as amended, on Form N-1A (the Registration Statement), as filed with
the Securities and Exchange Commission (the Commission) relating to NMMF and
its shares of beneficial interest and all amendments thereto;
(e) Notification of Registration of the Fund under the 1940 Act on Form
N-8A as filed with the Commission and all amendments thereto; and
(f) Prospectus of NMMF (such Prospectus and Statement of Additional
Information, as currently in effect and as amended or supplemented from time
to time, being herein called the "Prospectus").
4. The Manager shall authorize and permit any of its officers and employees
who may be elected as trustees or officers of the Fund to serve in the
capacities in which they are elected. All services to be furnished by the
Manager under this Agreement may be furnished through the medium of any such
officers or employees of the Manager.
5. The Manager shall keep the Fund's books and records required to be
maintained by it pursuant to paragraph 2 hereof. The Manager agrees that all
records which it maintains for the Fund are the property of the Fund and it will
surrender promptly to the Fund any such records upon the Fund's request,
provided however that the Manager may retain a copy of such records. The Manager
further agrees to preserve for the periods prescribed by Rule 31a-2 under the
1940 Act any such records as are required to be maintained by the Manager
pursuant to Paragraph 2 hereof.
6. During the term of this Agreement, the Manager shall pay the following
expenses:
(i) the salaries and expenses of all personnel of the Fund and the
Manager except the fees and expenses of trustees who are not affiliated
persons of the Manager or the Fund's investment adviser,
(ii) all expenses incurred by the Manager or by the Fund in
connection with managing the ordinary course of the Fund's business as
required in this Agreement other than those assumed by the Fund herein,
and
(iii) the costs and expenses payable to PIC pursuant to the
Subadvisory Agreement.
The Fund assumes and will pay the expenses described below:
(a) the fees and expenses incurred by the Fund in connection with the
management of the investment and reinvestment of the Fund's assets,
(b) the fees and expenses of trustees who are not affiliated persons of
the Manager or the Fund's investment adviser and out-of-pocket travel
expenses for all trustees and other expenses incurred by the Fund in
connection with Board meetings, including out-of-pocket travel expenses of
any officer of the Fund attending the meeting in an official capacity,
(c) the fees and expenses of the Custodian that relate to (i) the
custodial function and the recordkeeping connected therewith, (ii) preparing
and maintaining the general accounting records of
B-3
<PAGE>
the Fund and the providing of any such records to the Manager useful to the
Manager in connection with the Manager's responsibility for the accounting
records of the Fund pursuant to Section 31 of the 1940 Act and the rules
promulgated thereunder, (iii) the pricing of the shares of the Fund,
including the cost of any pricing service or services which may be retained
pursuant to the authorization of the Trustees of the Fund, and (iv) for both
mail and wire orders, the cashiering function in connection with the
issuance and redemption of the Fund's securities,
(d) the fees and expenses of the Fund's Transfer and Dividend Disbursing
Agent, which may be the Custodian, that relate to the maintenance of each
shareholder account,
(e) the charges and expenses of legal counsel and independent
accountants for the Fund,
(f) brokers' commissions and any issue or transfer taxes chargeable to
the Fund in connection with its securities transactions,
(g) all taxes and trust fees payable by the Fund to federal, state or
other governmental agencies,
(h) the fees of any trade associations of which the Fund may be a
member,
(i) the cost of share certificates, if any, representing, and/or
non-negotiable share deposit receipts evidencing, shares of the Fund,
(j) the cost of fidelity, directors and officers and errors and
omissions insurance,
(k) the fees and expenses involved in registering and maintaining
registration of the Fund and of its shares with the Securities and Exchange
Commission, registering the Fund as a broker or dealer and paying notice
filing fees under state securities laws, including the preparation and
printing of the Fund's registration statements, prospectuses and statements
of additional information for filing under federal and state securities laws
for such purposes,
(l) allocable communications expenses with respect to investor services
and all expenses of shareholders' and trustees' meetings and of preparing,
printing and mailing proxy statements, prospectuses and reports to
shareholders in the amount necessary for distribution to the existing
shareholders,
(m) litigation and indemnification expenses and other extraordinary
expenses not incurred in the ordinary course of the Fund's business, and
(n) any expenses assumed by the Fund pursuant to a Plan of Distribution
adopted in conformity with Rule 12b-1 under the 1940 Act.
7. For the services provided and the expenses assumed pursuant to this
Agreement, NMMF will pay to the Manager as full compensation therefor a fee
based on its average daily net assets at the following annual rates: 0.390% of
the first $1 billion of net assets; 0.375% of the next $500 million of net
assets; 0.350% of the next $500 million of net assets; and 0.325% of net assets
in excess of $2 billion. This fee will be computed daily and will be paid to the
Manager monthly.
8. The Manager shall not be liable for any error of judgment or for any
loss suffered by the Fund in connection with the matters to which this Agreement
relates, except a loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services (in which case any award of damages
shall be limited to the period and the amount set forth in Section 36(b)(3) of
the 1940 Act) or loss resulting
B-4
<PAGE>
from willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
9. This Agreement shall continue in effect for a period of more than two
years from the date hereof only so long as such continuance is specifically
approved at least annually in conformity with the requirements of the 1940 Act;
provided, however, that this Agreement may be terminated by the Fund at any
time, without the payment of any penalty, by the Trustees of the Fund or by vote
of a majority of the outstanding voting securities (as defined in the 1940 Act)
of NMMF, or by the Manager at any time, without the payment of any penalty, on
not more than 60 days' nor less than 30 days' written notice to the other party.
This Agreement shall terminate automatically in the event of its assignment (as
defined in the 1940 Act).
10. Nothing in this Agreement shall limit or restrict the right of any
officer or employee of the Manager who may also be a trustee, officer or
employee of the Fund to engage in any other business or to devote his or her
time and attention in part to the management or other aspects of any business,
whether of a similar or dissimilar nature, nor limit or restrict the right of
the Manager to engage in any other business or to render services of any kind to
any other corporation, firm, individual or association.
11. Except as otherwise provided herein or authorized by the Trustees of the
Fund from time to time, the Manager shall for all purposes herein be deemed to
be an independent contractor and shall have no authority to act for or represent
the Fund in any way or otherwise be deemed an agent of the Fund.
12. During the term of this Agreement, the Fund agrees to furnish the
Manager at its principal office all prospectuses, proxy statements, reports to
shareholders, sales literature, or other material prepared for distribution to
shareholders of NMMF or the public, which refer in any way to the Manager, prior
to use thereof and not to use such material if the Manager reasonably objects in
writing within five business days (or such other time as may be mutually agreed)
after receipt thereof. In the event of termination of this Agreement, the Fund
will continue to furnish to the Manager copies of any of the above mentioned
materials which refer in any way to the Manager. Sales literature may be
furnished to the Manager hereunder by first-class or overnight mail, facsimile
transmission equipment or hand delivery. The Fund shall furnish or otherwise
make available to the Manager such other information relating to the business
affairs of the Fund as the Manager at any time, or from time to time, reasonably
requests in order to discharge its obligations hereunder.
13. This Agreement may be amended by mutual consent, but the consent of the
Fund must be obtained in conformity with the requirements of the 1940 Act.
14. Any notice or other communication required to be given pursuant to this
Agreement shall be deemed duly given if delivered or mailed by registered mail,
postage prepaid, (1) to the Manager at Gateway Center Three, 100 Mulberry
Street, Newark, NJ 07102-4077, Attention: Secretary; or (2) to the Fund at
Gateway Center Three, 100 Mulberry Street, Newark, NJ 07102-4077, Attention:
President.
15. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.
16. NMMF may use any name including the word "Prudential" only for so long
as this Agreement or any extension, renewal or amendment hereof remains in
effect, including any similar agreement with any organization which shall have
succeeded to the Manager's business as Manager or any extension, renewal or
amendment thereof remains in effect. At such time as such an agreement shall no
longer be in effect, NMMF will (to the extent that it lawfully can) cease to use
such a name or any other name indicating that
B-5
<PAGE>
it is advised by, managed by or otherwise connected with the Manager, or any
organization which shall have so succeeded to such businesses. In no event shall
NMMF use any name including the word "Prudential" if the Manager's function is
transferred or assigned to a company of which The Prudential Insurance Company
of America does not have control.
A copy of the Declaration of Trust of the Fund is on file with the Secretary
of The Commonwealth of Massachusetts, and notice is hereby given that this
Agreement is executed on behalf of the Trustees of the Fund as Trustees and not
individually and that the obligations of this Agreement are not binding upon any
of the Trustees or shareholders individually, but are binding only upon the
assets and property of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
CASH ACCUMULATION TRUST
on behalf of the National Money Market
Fund
BY
-------------------------------------------------------------------------
PRUDENTIAL INVESTMENTS FUND
MANAGEMENT LLC
BY
-------------------------------------------------------------------------
B-6
<PAGE>
EXHIBIT C
CURRENT PIFM AND PIC-ADVISED MONEY MARKET FUNDS
<TABLE>
<CAPTION>
ADVISORY ADVISORY
ASSETS FEE RATE FEE RATE
<S> <C> <C> <C> <C>
------------ ----------------------------------- -------------
(INCLUDING
(000) ANY
9/30/97 FEE WAIVERS)
TAXABLE MONEY MARKET FUNDS:
Command Government Fund......................... $ 535,697 First $1.0 million .400% .400%
Excess of $1.0 billion .375%
Command Money Fund.............................. $ 7,244,859 First $500 million .500% .371%
Second $500 million .425%
Third $500 million .375%
Excess of $1.5 billion .350%
Prudential MoneyMart Assets, Inc................ $ 7,159,352 First $50 million .500% .301%
Excess of $50 million .300%
Prudential Special Money Market Fund, Inc....... $ 211,753 .500% .500%
TAX-FREE MONEY MARKET FUNDS:
Command Tax-Free Fund........................... $ 1,160,640 First $500 million .500% .449%
Second $500 million .425%
Excess of $1.0 billion .375%
Prudential Tax-Free Money Fund, Inc............. $ 320,977 First $750 million .500% .500%
Second $750 million .425%
Excess of $1.5 billion .375%
INSTITUTIONAL MONEY MARKET FUND:
Prudential Institutional Liquidity Portfolio,
Inc........................................... $ 636,061 .20% .150%
</TABLE>
C-1
<PAGE>
EXHIBIT D
FORM OF SUBADVISORY AGREEMENT
CASH ACCUMULATION TRUST
(NATIONAL MONEY MARKET FUND)
Agreement made as of this day of , 1997 between Prudential
Investments Fund Management LLC, a New York limited liability company (PIFM or
the Manager), and The Prudential Investment Corporation, a New Jersey
Corporation (the Subadviser).
WHEREAS, the Manager has entered into a Management Agreement, dated
, 1997 (the Management Agreement), with Cash Accumulation Trust (the
Fund), a Massachusetts business trust and a diversified open-end management
investment company registered under the Investment Company Act of 1940 (the 1940
Act), pursuant to which PIFM will act as Manager of a series of the Fund, namely
the National Money Market Fund (NMMF).
WHEREAS, PIFM desires to retain the Subadviser to provide investment
advisory services to NMMF in connection with the management of NMMF and the
Subadviser is willing to render such investment advisory services.
NOW, THEREFORE, the Parties agree as follows:
1. (a) Subject to the supervision of the Manager and of the Trustees of
the Fund, the Subadviser shall manage the investment operations of NMMF and the
composition of NMMF's portfolio, including the purchase, retention and
disposition thereof, in accordance with the Fund's investment objectives,
policies and restrictions as stated in its Prospectus (such Prospectus and
Statement of Additional Information as currently in effect and as amended or
supplemented from time to time, being herein called the "Prospectus"), and
subject to the following understandings:
(i) The Subadviser shall provide supervision of NMMF's investments
and determine from time to time what investments and securities will be
purchased, retained, sold or loaned by NMMF, and what portion of the
assets will be invested or held uninvested as cash.
(ii) In the performance of its duties and obligations under this
Agreement, the Subadviser shall act in conformity with the Agreement and
Declaration of Trust and By-Laws of the Fund and the Prospectus of NMMF
and with the instructions NMMF and directions of the Manager and of the
Trustees of the Fund and will conform to and comply with the requirements
of the 1940 Act, the Internal Revenue Code of 1986 and all other
applicable federal and state laws and regulations.
(iii) The Subadviser shall determine the securities to be purchased
or sold by NMMF and will place orders with or through such persons,
brokers or dealers (including but not limited to Prudential Securities
Incorporated) to carry out the policy with respect to brokerage as set
forth in the Fund's Registration Statement and NMMF's Prospectus or as
the Trustees may direct from time to time. In providing NMMF with
investment supervision, it is recognized that the Subadviser will give
primary consideration to securing the most favorable price and efficient
execution. Within the framework of this policy, the Subadviser may
consider the financial responsibility, research and investment
information and other services provided by brokers or dealers who may
effect or be a party to any such transaction or other transactions to
which the Subadviser's other clients may be a party. It is understood
that Prudential Securities Incorporated
D-1
<PAGE>
may be used as principal broker for securities transactions but that no
formula has been adopted for allocation of NMMF's investment transaction
business. It is also understood that it is desirable for NMMF that the
Subadviser have access to supplemental investment and market research and
security and economic analysis provided by brokers who may execute
brokerage transactions at a higher cost to NMMF than may result when
allocating brokerage to other brokers on the basis of seeking the most
favorable price and efficient execution. Therefore, the Subadviser is
authorized to place orders for the purchase and sale of securities for
NMMF with such brokers, subject to review by the Fund's Trustees from
time to time with respect to the extent and continuation of this
practice. It is understood that the services provided by such brokers may
be useful to the Subadviser in connection with the Subadviser's services
to other clients.
On occasions when the Subadviser deems the purchase or sale of a
security to be in the best interest of NMMF as well as other clients of
the Subadviser, the Subadviser, to the extent permitted by applicable
laws and regulations, may, but shall be under no obligation to, aggregate
the securities to be sold or purchased in order to obtain the most
favorable price or lower brokerage commissions and efficient execution.
In such event, allocation of the securities so purchased or sold, as well
as the expenses incurred in the transaction, will be made by the
Subadviser in the manner the Subadviser considers to be the most
equitable and consistent with its fiduciary obligations to NMMF and to
such other clients.
(iv) The Subadviser shall maintain all books and records with
respect to NMMF's portfolio transactions required by subparagraphs
(b)(5), (6), (7), (9), (10) and (11) and paragraph (f) of Rule 31a-1
under the 1940 Act and shall render to the Fund's Trustees such periodic
and special reports as the Trustees may reasonably request.
(v) The Subadviser shall provide the Fund's Custodian on each
business day with information relating to all transactions concerning
NMMF's assets and shall provide the Manager with such information upon
request of the Manager.
(vi) The investment management services provided by the Subadviser
hereunder are not to be deemed exclusive, and the Subadviser shall be
free to render similar services to others.
(b) The Subadviser shall authorize and permit any of its directors,
officers and employees who may be elected as trustees or officers of the
Fund to serve in the capacities in which they are elected. Services to be
furnished by the Subadviser under this Agreement may be furnished through
the medium of any of such directors, officers or employees.
(c) The Subadviser shall keep the Fund's books and records required to
be maintained by the Subadviser pursuant to paragraph 1(a) hereof and shall
timely furnish to the Manager all information relating to the Subadviser's
services hereunder needed by the Manager to keep the other books and records
of the Fund required by Rule 31a-1 under the 1940 Act. The Subadviser agrees
that all records which it maintains for the Fund are the property of the
Fund and the Subadviser will surrender promptly to the Fund any of such
records upon the Fund's request, provided however that the Subadviser may
retain a copy of such records. The Subadviser further agrees to preserve for
the periods prescribed by Rule 31a-2 of the Commission under the 1940 Act
any such records as are required to be maintained by it pursuant to
paragraph 1(a) hereof.
2. The Manager shall continue to have responsibility for all services to be
provided to the Fund pursuant to the Management Agreement and shall oversee and
review the Subadviser's performance of its duties under this Agreement.
D-2
<PAGE>
3. The Manager shall reimburse the Subadviser for reasonable costs and
expenses incurred by the Subadviser determined in a manner acceptable to the
Manager in furnishing the services described in paragraph 1 hereof.
4. The Subadviser shall not be liable for any error of judgment or for any
loss suffered by the Fund or the Manager in connection with the matters to which
this Agreement relates, except a loss resulting from willful misfeasance, bad
faith or gross negligence on the Subadviser's part in the performance of its
duties or from its reckless disregard of its obligations and duties under this
Agreement.
5. This Agreement shall continue in effect for a period of more than two
years from the date hereof only so long as such continuance is specifically
approved at least annually in conformity with the requirements of the 1940 Act;
provided, however, that this Agreement may be terminated by the Fund at any
time, without the payment of any penalty, by the Trustees of the Fund or by vote
of a majority of the outstanding voting securities (as defined in the 1940 Act)
of NMMF, or by the Manager or the Subadviser at any time, without the payment of
any penalty, on not more than 60 days' nor less than 30 days' written notice to
the other party and to the Fund. This Agreement shall terminate automatically in
the event of its assignment (as defined in the 1940 Act) or upon the termination
of the Management Agreement.
6. Nothing in this Agreement shall limit or restrict the right of any of
the Subadviser's directors, officers, or employees who may also be a trustee,
officer or employee of the Fund to engage in any other business or to devote his
or her time and attention in part to the management or other aspects of any
business, whether of a similar or a dissimilar nature, nor limit or restrict the
Subadviser's right to engage in any other business or to render services of any
kind to any other corporation, firm, individual or association.
7. During the term of this Agreement, the Manager agrees to furnish the
Subadviser at its principal office all prospectuses, proxy statements, reports
to shareholders, sales literature or other material prepared for distribution to
shareholders of the Fund or the public, which refer to the Subadviser in any
way, prior to use thereof and not to use material if the Subadviser reasonably
objects in writing five business days (or such other time as may be mutually
agreed) after receipt thereof. Sales literature may be furnished to the
Subadviser hereunder by first-class or overnight mail, facsimile transmission
equipment or hand delivery.
8. This Agreement may be amended by mutual consent, but the consent of the
Fund must be obtained in conformity with the requirements of the 1940 Act.
9. This Agreement shall be governed by the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
PRUDENTIAL INVESTMENTS
FUND MANAGEMENT LLC
BY
-------------------------------------------------------------------------
THE PRUDENTIAL INVESTMENT
CORPORATION
BY
-------------------------------------------------------------------------
D-3
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
P R O X Y CASH ACCUMULATION TRUST
840 NEWPORT CENTER DRIVE
NEWPORT BEACH, CALIFORNIA 92660
PROXY FOR A MEETING OF SHAREHOLDERS, DECEMBER 11, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby appoints Stephen J. Treadway, R. Wesley Burns and
Newton B. Schott, Jr., and each of them separately, as Proxies, each with the
power of substitution, and hereby authorizes each of them to represent and to
vote, as designated below, all the shares of beneficial interest of Cash
Accumulation Trust held of record by the undersigned on October 20, 1997 at the
Meeting of Shareholders to be held on December 11, 1997, or any adjournment
thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSAL NOS. 1, 2(A), 2(B) AND 3 AND IF ANY OTHER BUSINESS IS
PRESENTED AT THE MEETING, IN THE BEST JUDGMENT OF THE PERSONS NAMED AS PROXIES
HEREIN.
PLEASE VOTE, DATE AND SIGN BELOW AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
/X/ PLEASE MARK VOTES AS IN THIS EXAMPLE PLACE "X" ONLY IN ONE BOX
The Board of Trustees recommends you vote FOR Proposal Nos. 1, 2(a), 2(b)
and 3
<TABLE>
<S> <C> <C> <C> <C>
1. Election of Trustees / / For All / / Withhold All / / For All Except As Listed Below
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Edward D. Beach Stephen C. Eyre Delayne D. Gold Robert F. Gunia Don G. Hoff
Robert F. LaBlanc Mendel A. Melzer Robin B. Smith Stephen Stoneburn Nancy H. Teeters
</TABLE>
<TABLE>
<S> <C> <C>
List
Exceptions:
------------------------------------------------- -------------------------------------------------
------------------------------------------------- -------------------------------------------------
</TABLE>
Voting Instructions: Mark your vote (For, Against, Abstain) IN THE BOX
<TABLE>
<S> <C>
2(a). Approval of New Management Agreement with Prudential Investments Fund Management LLC
</TABLE>
/ / FOR / / AGAINST / / ABSTAIN
<TABLE>
<S> <C>
2(b). Approval of Proposed Subadvisory Agreement with The Prudential Investment Corporation
</TABLE>
/ / FOR / / AGAINST / / ABSTAIN
BECAUSE PROPOSAL NOS. 1, 2(A) AND 2(B) ARE RELATED PROPOSALS, THE
EFFECTIVENESS OF EACH OF THESE PROPOSALS IS CONDITIONED ON SHAREHOLDER APPROVAL
OF ALL SUCH PROPOSALS.
<TABLE>
<S> <C>
3. Ratification of the selection of Price Waterhouse LLP as independent accountants of the Trust for the fiscal year
ending September 30, 1998.
</TABLE>
/ / FOR / / AGAINST / / ABSTAIN
<TABLE>
<S> <C>
- -----------------------------------------------------------
Date
- -----------------------------------------------------------
Signature
- -----------------------------------------------------------
Signature if Held Jointly
</TABLE>
PLEASE BE SURE TO SIGN AND DATE THIS PROXY
